Caviglia et al v. Rowe International Corporation, et al

Filing 73

ORDER by Judge Joseph C. Spero granting in part and denying in part 46 Defendant's Motion for Summary Judgment; denying 55 Plaintiffs' Motion for Partial Summary Judgment. (jcslc2S, COURT STAFF) (Filed on 2/26/2016)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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RICK CAVIGLIA, et al.,

Case No. 14-cv-04834-JCS

Plaintiffs,
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v.
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ROWE INTERNATIONAL
CORPORATION, et al.,

United States District Court
Northern District of California

Re: Dkt. Nos. 46, 55

Defendants.

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ORDER REGARDING CROSS
MOTIONS FOR SUMMARY
JUDGMENT

I.

INTRODUCTION

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Plaintiffs Rick Caviglia, Clayton Chrisman, Ricci Romagnesi, and Tom Pigoski bring this

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action alleging that Defendants Rowe International Corporation and AMI Entertainment Network,

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LLC (collectively, ―AMI‖) breached a contract to pay Plaintiffs royalties on jukeboxes sold by

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AMI that share certain features with a line of jukeboxes that Plaintiffs designed and marketed

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before AMI bought the assets of Plaintiffs‘ now-defunct company in 2008. The dispute turns

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primarily on the interpretation of a contract provision setting the scope of AMI‘s royalty

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obligations. Plaintiffs and AMI each move for summary judgment, each asserting that the contract

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is either unambiguous on its face or amenable to only one interpretation in light of the evidence in

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the record. The Court held a hearing on February 19, 2016. AMI‘s Motion is GRANTED in part

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as to Plaintiffs‘ claims that AMI failed to adequately market Plaintiffs‘ products, a claim that

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Plaintiffs now concede is time barred. As discussed below, however, the meaning of the

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contract‘s royalties provision is ambiguous, and a jury, weighing the extrinsic evidence, could find

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for either party on that issue. Both motions for summary judgment are therefore DENIED as to

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Plaintiffs‘ claims regarding royalties.1

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All parties have consented to the jurisdiction of the undersigned magistrate judge for all
purposes pursuant to 28 U.S.C. § 636(c).

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II.

BACKGROUND

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A.

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This case arises from a dispute over whether Plaintiffs are entitled to royalties under their

Overview

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contract with AMI, which provides for royalties for each ―Vision Jukebox‖ sold by AMI.

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Agreement § 2.2.2 The key question is whether AMI‘s line of NGX jukeboxes constitute ―Vision

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Jukeboxes‖ within the meaning of the Agreement. That term is defined as follows:
[T]he term ―Vision Jukebox‖ shall mean each Jukebox sold by
[AMI] that[:]

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(i)

is a part of the Vision product family of jukeboxes, which is
comprised of the Vision, InnoVision, and EconoVision
jukeboxes; or

(ii)

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incorporates the Vision modular cabinet and is compatible
with the Vision ―skins‖ concept embodied in the product
designs included in the Purchased Assets.

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United States District Court
Northern District of California

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Id. § 2.2(d) (line breaks added). Plaintiffs argue that the NGX product line falls within the

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meaning of subsection 2.2(d)(ii), as incorporating ―the Vision modular cabinet‖ and compatible

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with ―the Vision ‗skins‘ concept.‖ Those terms are not defined in the Agreement.
Both parties assert that the relevant portion of the Agreement is unambiguous. As

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discussed in the remainder of the Order, both parties are mistaken.

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B.

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Factual Background
1. View and the Vision Jukebox

Plaintiffs are four individuals who formed a company, non-party View Interactive

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Entertainment Worldwide (―View‖), to develop and market kits to convert older CD-based

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jukeboxes to modern digital music jukeboxes. Caviglia Decl. (dkt. 58) ¶ 2. Later, View

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developed its own digital jukebox called the Vision. Id. ¶¶ 9–10. Two of the Vision‘s selling

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points were a modular internal design and the ability to customize its external appearance through

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The Agreement appears in the record as Exhibit E to the declaration of Rick Caviglia, Exhibit
7 to AMI‘s compendium of evidence (dkt. 62). AMI filed versions of its compendium with both
its Motion and its Opposition. Because the two compendia are identical except for the addition of
new exhibits to the latter version, all citations to the compendium refer to the version filed with
AMI‘s Opposition.
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easily replaceable ―skins.‖ See id. ¶ 11.
The modular design addressed a number of concerns of jukebox operators,3 including that:

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(1) operators were forced to purchase jukeboxes with features they did not need; (2) jukeboxes

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were heavy and difficult to install; and (3) servicing damaged or defective components was

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difficult, sometimes requiring jukeboxes to be removed from their locations for off-site

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maintenance and repairs. See id. ¶¶ 6–8. The Vision‘s modular design allowed components such

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as amplifiers, payment interfaces, and computers to be quickly removed and replaced, thus

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allowing an operator to customize the jukebox for that operators‘ needs, allowing a single person

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to install the jukebox (because components could be removed during installation and reattached
after the jukebox was mounted to the wall), and allowing for easier maintenance (because

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United States District Court
Northern District of California

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defective components could be removed and replaced on site). See id. ¶ 11; Glapinski Report at

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2–3.

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The Vision‘s ―skins‖ allowed an operator to remove the outer covering of the jukebox by

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unscrewing several nuts, and then install a new covering either to change the jukebox‘s aesthetic

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or to replace a worn or damaged ―skin.‖ Caviglia Decl. ¶ 11; Glapinski Report at 4. An article

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describing the Vision in RePlay Magazine, a trade publication, described the ―skin‖ feature as

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follows:
―The niftiest feature is the skin, which can be totally changed
around,‖ noted Caviglia. ―It can be a wooden front, a molded plastic
front, a modern look, a branded McDonald‘s juke, etc. You can
literally have face fronts sitting in your shop and change them on
location as you need to with a nutdriver.‖

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This will allow operators to keep location owners looking for new
jukeboxes happy while keeping reinvestment costs down.

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Id. Ex. C. Later, when explaining the features and components of the Vision to AMI after the
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parties reached the Agreement at issue in this case, Caviglia wrote that ―[n]ew skins allow for
‗new jukebox model‘ released more often without the cost to develop an entire new unit,‖ and
noted that skins ―[c]an be made to fit location decor,‖ including various eras, styles, and brands.

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In the jukebox industry, operators contract with bars and other establishments for the
operators to install and maintain jukeboxes on the premises of those establishments, with the
operators and the establishments sharing revenue from the jukeboxes. Caviglia Decl. ¶ 4.
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Caviglia Decl. Ex. G at DEF007377.
Plaintiffs believed the modular design and ―skins‖ concept to be unique among then-

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existing jukeboxes. AMI Compendium (dkt. 62) Ex. 17 (Romagnesi Dep.) 53:14–20; id. Ex. 19

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(Caviglia Dep.) 44:21–45:10, 64:17–65:4; id. Ex. 20 (Chrisman Dep.) 87:22–88:14; see also

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Caviglia Decl. ¶ 14.4 There is evidence, however, that some preexisting jukeboxes (including

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some produced by AMI) incorporated similar features. See, e.g., Jarema Opp‘n Decl. (dkt. 61)

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¶¶ 27–28; AMI Compendium Ex. 27 at COE pp. 476–775 (report by AMI‘s expert witness John

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Schultz describing other jukeboxes with similar features); id. Ex. 31 (documentation for AMI‘s

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NiteStar jukebox describing modular components).
View introduced the Vision at a trade show in 2006. Caviglia Decl. ¶ 10. Digital

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United States District Court
Northern District of California

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jukeboxes require software in order to function, and View—which did not have the capability to

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develop its own software—originally partnered with non-party Ecast to provide software for the

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Vision. See id. ¶ 15; AMI Compendium Ex. 18 (Pigowski Dep.) 83:11–12. ―At some time in

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2007, changes made by Ecast required View to search for another software provider to drive [the

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Vision jukebox].‖ Caviglia Decl. ¶ 15. Specifically, Ecast ―kept threatening to pull the software

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from [View‘s Vision jukebox] because [Ecast] wanted to go into their own manufacturing

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business.‖ AMI Compendium Ex. 18 (Pigowski Dep.) 83:12–14.
View manufactured and sold only 100 to 150 Vision jukeboxes. Id. 82:19−20. At least

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Caviglia states in his deposition that ―[a]t the time Plaintiffs introduced the Vision Jukebox,
all of AMI/Rowe‘s jukeboxes utilized the traditional non-modular jukebox design. These
jukeboxes did not include any of the attributes of Plaintiffs‘ Vision Jukebox, i.e., no easily
changeable cosmetic ‗skins,‘ . . . and no modularity that would enable easy service access and/or
upgradeable components.‖ Caviglia Decl. ¶ 14. AMI objects to this paragraph for lack of
foundation and personal knowledge, and as improper opinion testimony. AMI Opp‘n at 24−25.
The Court agrees that Caviglia has not established a foundation for comprehensive knowledge of
AMI‘s product line, but nevertheless finds the paragraph admissible to show that Caviglia was not
aware of products with those features. Given that Caviglia had been a jukebox operator for
several years at that time, his lack of knowledge of such products could be relevant to (although
likely not dispositive of) the extent to which replaceable skins and modular components had been
adopted in the industry.
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AMI‘s compendia of evidence include page numbers that run consecutively across all
exhibits. Where an exhibit either includes multiple documents with separate page numbering
schemes (as here) or does not have internal page numbers, this Order cites the page numbers that
AMI added for the compendia, designated herein as ―COE pp.‖ In contrast, where a citation to
internal page numbers would be unambiguous, as with an exhibit that consists solely of a
deposition transcript, this Order uses the internal page number.
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one Plaintiff, Tom Pigowski, did not consider the Vision ―commercially successful‖ because

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Plaintiffs ―didn‘t sell [very] many,‖ id. 82:14−16, although Plaintiff Caviglia states that View

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gained ―significant interest for the Vision Jukebox in the market, and quickly sold its first 100

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production units‖ before Ecast ceased partnering with View to provide software for the Vision,

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Caviglia Opp‘n Decl. (dkt. 66) ¶ 6. By October 25, 2007, View had ―closed [its] doors‖ and

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stopped selling jukeboxes. AMI Compendium Ex. 19 (Caviglia Dep.) 154:8−25 & Ex. 4 thereto.
Plaintiffs developed concepts for two additional jukeboxes that they did not bring to

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market before View shut down: the EconoVision (similar to the Vision but ―without a skin‖), and

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the InnoVision (―a partially empty Vision that could be completed by populating the cabinet [with

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components] from an older CD jukebox‖). Caviglia Decl. ¶ 17.

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Northern District of California

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2. Sale to AMI
Plaintiffs‘ perception that Ecast was not a reliable software supplier for the Vision

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motivated them to seek to sell their business. AMI Compendium Ex. 18 (Pigowski Dep.) 83:5–22.

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Plaintiff Pigowski had a prior relationship with AMI, so Plaintiffs viewed AMI as the primary

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potential buyer, and Pigowski made the initial contact with AMI. See id. 85:7–11; Caviglia Decl.

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¶ 16.6 Plaintiffs also reached out to AMI‘s competitor TouchTunes, but ―the primary

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communication was with AMI.‖ Caviglia Decl. ¶ 16.
AMI decided to purchase View‘s assets, including the Vision, in part as an effort to capture

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new customers. AMI Compendium Ex. 25 (Maas Dep.) 97:9−100:10. Certain Plaintiffs were

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resistant to the terms that AMI offered. See AMI Compendium Ex. 18 at COE pp. 147−150

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(email thread among Plaintiffs, included as Exhibit 4 to the deposition of Thomas Pigowski). The

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parties nevertheless reached an agreement and executed a non-binding letter of intent on

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November 30, 2007 for AMI to ―buy all of View‘s assets, including inventory, intellectual

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property, goodwill, and drawings and prototypes‖ for $250,000, plus a royalty of $400 per unit for

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the first 1,500 Vision jukeboxes sold by AMI and $250 per unit thereafter. Caviglia Decl. ¶ 18 &

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Ex. D.

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According to Caviglia, AMI had also previously approached Plaintiffs about partnering with
or buying out View. AMI Compendium Ex. 19 (Caviglia Dep.) 101:8−12.
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Although Plaintiffs were represented by a lawyer during the negotiations, some discussions

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took place directly between Plaintiff Clayton Chrisman and AMI‘s representative Brandon

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Bezzant. See Chrisman Decl. (dkt. 56) ¶¶ 2−4 & Ex. A. Chrisman states in his declaration that

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―one of the primary concerns we articulated to representatives from AMI/Rowe was that we did

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not believe royalty payments be limited [sic] to just the Vision Jukebox (which included the

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Vision, the InnoVision, or the EconoVision[)],‖ but rather that royalties should apply to ―any

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products that were derivative of the Vision Jukebox.‖ Id. ¶ 3. Plaintiffs feared that AMI ―would

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try to use the core concepts of the Vision Jukebox on another jukebox that they called something

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different.‖ Id. Chrisman states that he ―personally articulated‖ this concern to AMI
representatives, including ―both verbally and in an email for Mr. Bezzant.‖ Id. ¶¶ 3−4. An email

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United States District Court
Northern District of California

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that Chrisman sent to Bezzant in February of 2008 in response to a contract proposal stated that

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the proposal‘s purported ―impli[cation] that that if Rowe removed the ‗View‘ brand name, they

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wouldn‘t have to pay us a royalty . . . needs to be fixed.‖ Id. Ex. A. That email also refers twice

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to ―Vision-derivative‖ products. Id. In an effort to address the issue, Plaintiffs proposed a

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revision to the contract that included the word ―concept‖ in the definition of the term ―Vision

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Jukebox.‖ See id. ¶ 5 & Ex. B. AMI accepted that change. Id. ¶ 5; see also Agreement

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§ 2.2(d)(ii).

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The parties signed the final Agreement in March of 2008. Caviglia Decl. ¶ 19 & Ex. E.

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As set forth above, the Agreement provides that Plaintiffs shall receive royalties on AMI‘s sales of

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―Vision Jukeboxes,‖ defined as a jukebox that either ―(i) is a part of the Vision product family of

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jukeboxes, which is comprised of the Vision, InnoVision, and EconoVision jukeboxes; or

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(ii) incorporates the Vision modular cabinet and is compatible with the Vision ‗skins‘ concept

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embodied in the product designs included in the Purchased Assets.‖ Agreement § 2.2(d)

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(emphasis added).

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Bezzant testified at his deposition that he understood the term ―Vision modular cabinet‖ to

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mean ―the cabinet of the dimensions, materials, [and] specification . . . used in the Vision.‖ AMI

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Compendium Ex. 26 (Bezzant Dep.) 67:1−7. He did not recall any discussion of whether the

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royalty provision would apply to a cabinet with different dimensions, but did recall Plaintiffs‘
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concern that AMI might sell a rebranded Vision jukebox or a jukebox with the same cabinet but

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different internal components in an effort to avoid paying royalties. Id. 67:14−23. According to

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Bezzant, the ―core of their concept was that that one cabinet could be used interchangeably across

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models and that the operator‘s collection of skins, inventory of skins, could be used across all of

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the jukeboxes in his fleet so that he could easily swap out the appearance without having to

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actually move the jukebox.‖ Id. 67:23−68: 4. Bezzant testified that the addition of the word

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―concept‖ to the provision relating to skins was intended to preclude AMI from avoiding royalties

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if it designed new skins (with new colors or patterns) compatible with the Vision jukebox, a

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concern that Clayton purportedly articulated to Bezzant. Id. 63:1−19.

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3. AMI‟s Marketing and Discontinuation of the Vision

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Northern District of California

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After purchasing View‘s assets and beginning to market the Vision, AMI received

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feedback that operators did not want to buy a jukebox that was incompatible with the components

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used in other AMI jukeboxes. AMI Compendium Ex. 22 (Margold Dep.) 51:9−52:20. AMI

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developed a new version of the Vision designed to incorporate standard AMI components, which

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it called the Vision 2. Caviglia Decl. ¶ 22; Maas Opp‘n Decl. (dkt. 61-3) ¶ 9. AMI continued to

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advertise the Vision 2‘s modular components (which allowed for simplified maintenance and

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upgrades) and customizable skins. Caviglia Decl. ¶ 22 & Ex. H (Vision 2 promotional flyer). The

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Vision 2 used a slightly different cabinet than the original Vision. Id. ¶ 22 (noting that the Vision

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2 used a larger screen, which ―naturally changed the dimensions of the cabinet); AMI Opp‘n (dkt.

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61) at 12 (describing the Vision 2 as having ―slightly larger dimensions‖).

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AMI sold few if any Vision jukeboxes at the full retail price. AMI Compendium Ex. 22

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(Margold Dep.) 90:13−25. In total, AMI produced 150 Vision or Vision 2 jukeboxes, of which it

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shipped approximately 147—many for free ―as part of various promotions.‖ Maas Opp‘n Decl.

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¶ 15. AMI paid Plaintiffs royalties on the Vision-branded jukeboxes that AMI sold, including the

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Vision 2. See Caviglia Decl. ¶ 24. AMI ultimately concluded that ―it did not make commercial

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sense to continue marketing the Vision products‖ and discontinued them. Maas Opp‘n Decl. ¶ 14.

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AMI‘s last sale of a Vision jukebox occurred in March of 2010. Id. ¶ 15; see also AMI

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Compendium Ex. 14 (spreadsheet of Vision sales).
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4. The NGX Line of Jukeboxes

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Around the end of 2009, AMI began developing the NGX line of jukeboxes, seeking a

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lower-cost product than its existing jukeboxes. AMI Compendium Ex. 21 (Jarema Dep.)

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62:17−24, 74:4−13. According to Jarema, the NGX was inspired by and derived from a game

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system that AMI was developing called PhotoHunt XL. Id. 62:25−63:20. By rotating the

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PhotoHunt XL device‘s screen from landscape to portrait orientation, and adding an amplifier and

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pre-amp to the existing components such as the core computer, AMI would ―basically have a

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jukebox.‖ Id. 63:13−20. The NGX was introduced in February or March of 2011. Jarema Opp‘n

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Decl. ¶ 13; Caviglia Decl. ¶ 25.
Like the Vision, the NGX is based around a cabinet containing modular components and

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Northern District of California

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its appearance can be customized using easily replaceable skins. See generally Glapinski Report.

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The NGX differs from the Vision in other ways, including that the cabinet is a different size and

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shape, not all components are contained in the same cabinet (there is a separate, smaller cabinet

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for the payment module), the screen is larger, and its skins are optional rather than necessary,

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include lights, and can alter the functionality of the jukebox. See AMI Compendium Ex. 27 at

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COE p. 478 (report of John Schultz). Other than the fact that both are at least vaguely rectangular,

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mount on a wall, and feature touch screens, the two jukeboxes do not look particularly similar—

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mostly owing to the different sizes and aspect ratios of their screens, since the remainder of each

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jukebox‘s appearance is highly dependent on the choice of customizable skins. See AMI

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Compendium Ex. 30 at 587 (presentation slide featuring photographs of both jukeboxes side by

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side).

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In an April 2011 article in the Vending Times, a trade publication, AMI touted the modular

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design of the NGX, which the article characterized as ―a distinct departure from AMI‘s Rowe

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jukeboxes.‖ Caviglia Decl. Ex. K at 69. The article quotes AMI‘s creative director AJ Russo as

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stating: ―For the first time, you open the box and you‘ll see a very clean and simple arrangement.‖

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Id. Also like the Vision, the NGX could be installed by a single person, id. at 68, however that

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capability derived from the ability to remove the cabinet door to reduce weight rather than

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removing modular components as with the Vision. Jarema Opp‘n Decl. ¶ 25
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AMI also marketed the NGX based on the flexibility afforded by offering different ―skins.‖

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The 2011 Vending Times article quotes Steve Jarema, AMI‘s director of hardware engineering, as

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follows:

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One of the things first happens with operators is they get demands
by location owners to freshen the look of the juke, so once a year,
they have to lug a new box in. . . . With NGX skins, all they have to
do is that the face off the juke and go from one look to a completely
different look.

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Caviglia Decl. Ex. K at 68–69. Another trade publication, Play Meter, published a story featuring

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the NGX and quoting AMI‘s president and CEO Mike Maas as follows:

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If you are an operator and you are competing, you have to win the
location and keep the location. We wanted to give the operators the
tools to do both. We thought, ―Wouldn‘t it be nice if you offered the
location a choice: old fashioned: modern, or a look that fits the
decor?[‖] Skins do that; they are a selling tool for operators. . . .
Locations want something new and fresh, but changes are
complicated and expensive.

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Northern District of California

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Id. Ex. M at 60.
Each ―skin‖ for the NGX consisted essentially of a decorative frame that fit around the

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perimeter of the jukebox. See AMI Compendium Ex. 21 (Jarema Dep.) 76:21−77:25. Most of the

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NGX skins incorporated lights, although AMI also at one point offered custom wooden skins that

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did not have lights. Id. 80:4−13. As with the Vision, different skins have the potential to

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significantly alter the look and feel of the NGX. See AMI Compendium Ex. 30 at COE p. 583

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(presentation slide featuring photographs of different NGX skins). Certain NGX skins also had

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the capability to interface with the jukebox and change the colors and content of the jukebox‘s

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digital display. Jarema Opp‘n Decl. ¶ 16. Purportedly unlike the Vision,7 the NGX is fully

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functional without a skin, and 30% of AMI‘s NGX sales have not included a skin. Id. ¶¶ 17,

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23−24. NGX skins can be installed or removed without tools, id. ¶ 24, although locking the skin

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or removing a locked skin requires a tool, Glapinki Report at 4.

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AMI developed three additional variations of the NGX: the NGX Mini, the NGX

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FacePlace, and the NGX Grand. The NGX Mini has a smaller screen, and the parties appear to

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Whether the Vision can operate without a skin is disputed. See Caviglia Opp‘n Decl. ¶ 7.
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dispute whether it uses skins at all. Compare Jarema Opp‘n Decl. ¶ 18, with Glapinski Report at

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4. The NGX FacePlace is a standard NGX that incorporates a printer and a camera built into the

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skin to allow for photo booth capabilities. Jarema Opp‘n Decl. ¶ 19. The NGX Grand is a

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standard NGX housed in a floor stand that also includes speakers to allow for portable, plug-in

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operation. Id. From 2011 through January of 2015, AMI sold 10,373 units total across its four

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NGX product lines, the overwhelming majority of which were either the original NGX or the

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NGX Mini. Griffin Opp‘n Decl. (dkt. 67) ¶ 4 & Ex. C.

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III.

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ANALYSIS
A.

Legal Standard for Summary Judgment

Summary judgment on a claim or defense is appropriate ―if the movant shows that there is

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Northern District of California

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no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of

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law.‖ Fed. R. Civ. P. 56(a). Once the movant has made this showing, the burden then shifts to the

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party opposing summary judgment to designate ―specific facts showing there is a genuine issue for

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trial.‖ Id. ―[T]he inquiry involved in a ruling on a motion for summary judgment . . . implicates

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the substantive evidentiary standard of proof that would apply at the trial on the merits.‖

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Anderson v. Liberty Lobby Inc., 477 U.S. 242, 252 (1986). On summary judgment, the court

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draws all reasonable factual inferences in favor of the non-movant, Scott v. Harris, 550 U.S. 372,

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378 (2007), but where a rational trier of fact could not find for the non-moving party based on the

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record as a whole, there is no ―genuine issue for trial‖ and summary judgment is appropriate.

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Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986).

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Here, both parties have moved for summary judgment or adjudication as to at least certain

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issues. In considering AMI‘s Motion the Court draws all reasonable inferences in favor of

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Plaintiffs, and in considering Plaintiffs‘ Motion the Court draws all reasonable inferences in favor

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of AMI.

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B.

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California law calls for fairly liberal use of extrinsic evidence to determine the meaning of

Contract Interpretation Under California Law

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a contract: ―Even if a contract appears unambiguous on its face, a latent ambiguity may be

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exposed by extrinsic evidence which reveals more than one possible meaning to which the
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language of the contract is yet reasonably susceptible.‖ Morey v. Vannucci, 64 Cal. App. 4th 904,

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912 (1998) (citing Pac. Gas & Elec. Co. v. G.W. Thomas Drayage & Rigging Co., 69 Cal. 2d 33,

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40 & n.8 (1968); Pac. Gas & Elec. Co. v. Zuckerman, 189 Cal. App. 3d 1113 (1987)). ―If the

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court decides, after considering this evidence, that the language of a contract, in the light of all the

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circumstances, is ‗fairly susceptible of either one of the two interpretations contended for . . . ,‘

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extrinsic evidence relevant to prove either of such meanings is admissible.‖ G.W. Thomas

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Drayage, 69 Cal. 2d at 40 (quoting Balfour v. Fresno Canal & Irrigation Co., 109 Cal. 221, 225,

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(1895)) (citations omitted). ―Indeed, it is reversible error for a trial court to refuse to consider

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such extrinsic evidence on the basis of the trial court‘s own conclusion that the language of the

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contract appears to be clear and unambiguous on its face.‖ Morey, 64 Cal. App. 4th at 912.
Under California law, conflicting extrinsic evidence as to a contract‘s meaning may require

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Northern District of California

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resolution by a jury, and thus be inappropriate for resolution on a motion for summary judgment.

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See id. at 912–13. ―As trier of fact, it is the jury‘s responsibility to resolve any conflict in the

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extrinsic evidence properly admitted to interpret the language of a contract.‖ Id. at 913 (citing

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Med. Operations Mgmt., Inc. v. Nat’l Health Labs., Inc., 176 Cal. App. 3d 886, 891–92 & n.4

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1986)).
Plaintiff‟s Claims Regarding Royalties Present Genuine Issues of Material Fact

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C.

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Plaintiffs‘ claims primarily turn on whether the NGX is a ―Vision Jukebox‖ within the

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meaning of the Agreement‘s royalty provision. Plaintiffs do not assert that the NGX is ―part of

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the Vision product family of jukeboxes,‖ but instead focus their argument on subsection (ii) of the

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―Vision Jukebox‖ definition, asserting that the NGX ―[1] incorporates the Vision modular cabinet

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and [2] is compatible with the Vision ‗skins‘ concept.‖ See Agreement § 2.2(d); Pls.‘ Mot. at

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16−22; Pls.‘ Opp‘n at 16−24; Pls.‘ Reply at 2−9.

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This Order addresses each of the two requirements of subsection (ii) in turn. For Plaintiffs

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to be entitled to summary judgment in their favor, they most show that they are entitled to

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summary judgment on both prongs—i.e., drawing all reasonable inferences in AMI‘s favor, the

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evidence nevertheless establishes both that the NGX incorporates the Vision modular cabinet and

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that it is compatible with the Vision ―skins‖ concept. For AMI to obtain summary judgment, it
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must show only that it is entitled to summary judgment on either prong—i.e., drawing all

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reasonable inferences in Plaintiffs‘ favor, there is either no evidence that the NGX incorporates

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the Vision modular cabinet concept or no evidence that it is compatible with the Vision ―skins‖

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concept. For the reasons stated below, the Court holds that there are genuine issues of material

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fact as to both requirements, and summary judgment is not warranted for either party.
1. Whether the NGX “Incorporates the Vision Modular Cabinet”

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The term ―Vision modular cabinet‖ is integral to the Agreement‘s definition of a ―Vision

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Jukebox,‖ but is not itself defined. While each party claims that its favored definition of the

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―Vision modular cabinet‖ is unambiguous, they differ sharply in what the term means. See Pls.‘
Mot. at 16 (―It cannot seriously be disputed that the NGX incorporates the Vision modular cabinet.

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The ‗modular cabinet‘ is not a reference to an actual, physical cabinet [but rather] to the fact that

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all jukebox components within the cabinet are modular in nature.‖); AMI Reply at 5 (―[R]equiring

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the incorporation of the ‗Vision modular cabinet‘ means, by any reasonable interpretation, that a

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different cabinet with modular components . . . would not suffice.‖).8

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a. Plaintiffs Are Not Entitled to Summary Judgment on This Issue
AMI‘s proposed definition—that the ―Vision modular cabinet‖ refers to the specifications

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of the physical cabinet used in the Vision—is certainly plausible. If that is the meaning of the

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contract, there is no dispute that the NGX uses a physically different cabinet from the Vision, and

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thus would not fall within the royalty provision.
As a matter of plain language, it is not a stretch to interpret the word ―cabinet‖ as referring

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to a physical cabinet. And looking to extrinsic evidence, Brandon Bezzant testified that during

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negotiations, the reason Plaintiffs sought to include subsection 2.2(d)(ii) in the Agreement was to

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prevent AMI from avoiding royalties by introducing a jukebox with a new name and perhaps new

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components, but the same physical cabinet and skins as the Vision. AMI Compendium Ex. 26

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26
27
28

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AMI‘s counsel argued at the hearing that because Plaintiffs ―conceded‖ that the contract was
unambiguous, there is no factual dispute as to its meaning, and extrinsic evidence need not be
considered. That each party is convinced that its respective interpretation is correct is not a
concession. Rather than demonstrating that the contract is unambiguous, the parties‘ divergent
positions tend to suggest the opposite.
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(Bezzant Dep.) 65:7−67:7. The email that Chrisman sent to Bezzant during negotiations is

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consistent with Bezzant‘s testimony regarding the nature of Plaintiffs‘ concern. See Chrisman

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Decl. Ex. A (―Also, the way it‘s currently written implies that if Rowe removed the ‗View‘ brand

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name, they wouldn‘t have to pay us a royalty . . . .‖). If a jury credits Bezzant‘s testimony and

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interprets the email as a complete statement of Plaintiffs‘ concern, the jury could conclude that the

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―Vision modular cabinet‖ referred to the physical cabinet used in the Vision.

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Plaintiffs‘ arguments to the contrary are not sufficient to warrant summary judgment in
their favor. Plaintiffs contend that AMI acknowledged that the ―modular cabinet‖ provision was

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broader than the specific physical cabinet by paying royalties on sales of the Vision 2, which used

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a slightly different physical cabinet. See Pls.‘ Mot. at 17−18; Pls.‘ Reply at 5. AMI contends that

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Northern District of California

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it paid royalties for the Vision 2 because it believed that model fell within § 2.2(d)(i) as a ―part of

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the Vision product family of jukeboxes,‖ not within § 2.2(d)(ii) as incorporating the Vision

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modular cabinet. AMI Opp‘n at 21. Although Plaintiffs are correct that the Vision 2 was not one

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of the three defined members of the product family, Pls.‘ Reply at 5, it is plausible that AMI

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would have determined that the spirit of § 2.2(d)(i) incorporated a jukebox that bore both the

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―Vision‖ name and a strong resemblance to the original Vision. As neither party cites any

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evidence in the record actually addressing why AMI paid royalties for the Vision 2, the Court

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cannot say that such payments indisputably evince an understanding by AMI that the ―modular

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cabinet‖ provision was broader than the physical cabinet used in the Vision.

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Plaintiffs also argue that the fact that the modular design was an important selling point of

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the Vision supports their interpretation, that the parties intended the term ―Vision modular

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cabinet‖ to refer to the principle of housing modular components in a single main cabinet. While

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the Court concludes that such an interpretation is also possible, it does not negate the possibility of

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a jury crediting AMI‘s alternative view.

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Moreover, even if a jury accepts a definition based on the organization of the cabinet‘s

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contents rather than its physical shape and size, there is room for further interpretation as to

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whether such a definition encompasses the NGX. If the term was intended to cover a design in

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which most of the components are modular and housed in an easily accessible cabinet, the NGX
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might meet that definition. But if (as one possibility) all of the components must be modular and

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housed in a single cabinet, the NGX would not qualify because its payment module is located in a

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separate cabinet. Once again, the ultimate determination will depend on a jury‘s view of the

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parties‘ intent based on the record as a whole. Because there is a genuine issue of fact as to

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whether the parties intended the term ―Vision modular cabinet‖ to include a jukebox design like

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the NGX, Plaintiffs‘ Motion for Summary Judgment must be DENIED.

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b. AMI Is Also Not Entitled to Summary Judgment on This Issue
AMI contends that the physical cabinet is the only permissible interpretation of the ―Vision

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modular cabinet‖ provision. The Court disagrees. The use of the word ―modular‖ creates the

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possibility that the phrase refers to the cabinet‘s layout rather than the physical cabinet itself,

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Northern District of California

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particular if a jury credits Caviglia‘s testimony that ―there is nothing about the physical cabinet

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itself that is modular. It is the internal components of the cabinet that are modular, and that carry

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with them all the benefits of modularity.‖ Caviglia Opp‘n Decl. ¶ 5.9 If the jury credits

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Chrisman‘s testimony that he informed AMI of Plaintiffs‘ concern that royalties should attach to

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―any products that were derivative of the Vision Jukebox,‖ Chrisman Decl. ¶ 3, that could also

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support an inference that AMI knew that Plaintiffs believed the ―Vision modular cabinet‖

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provision in the final contract encompassed the design concept rather than merely the

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specifications of the physical cabinet. See Cal. Civ. Code § 1649 (―If the terms of a promise are in

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any respect ambiguous or uncertain, it must be interpreted in the sense in which the promisor

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believed, at the time of making it, that the promisee understood it.‖).
In support of its view that the provision can only refer to the physical cabinet, AMI relies

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in part on Caviglia‘s deposition testimony, which AMI construes as an admission on this point:

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At deposition, Caviglia unequivocally differentiated between a
―Vision modular cabinet‖ and ―Vision modular components‖ stating
that the ―Vision modular components‖ are what the cabinet is
comprised of, and the cabinet is what ―houses the components.‖

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AMI objects to this paragraph of Caviglia‘s declaration. The Court agrees that portions of
the paragraph not quoted here constitute an improper legal conclusion, but finds Caviglia‘s
experience developing the Vision to be a sufficient foundation for testimony as to which portions
of it were modular.
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AMI Reply at 7 (citing AMI Compendium Ex. 19 (Caviglia Dep.) 125:25−126:7). But Caviglia‘s

2

testimony that ―[t]he Vision modular components are what the cabinet is comprised of,‖

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Compendium Ex. 19 (Caviglia Dep.) 125:25−126:7, is consistent with Plaintiffs‘ position that the

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term ―Vision modular cabinet‖ means more than a physical cabinet (which would not be

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―comprised of‖ components, but rather of the plastic or metal from which it was made), and

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instead encompasses the concept of housing modular components primarily in a single cabinet.

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AMI also argues, essentially, that it is not plausible that the parties intended the broader
meaning that Plaintiffs put forward now, because if the term means ―any modular cabinet,‖ then

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―in this era, all jukeboxes fit that requirement.‖ AMI Mot. at 22. Even if that is so, it is not clear

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that the modular concept embodied by the Vision and NGX jukeboxes was as common when the

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Northern District of California

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parties entered the Agreement. Although at least one preexisting Rowe jukebox was advertised as

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having ―[m]odular component construction for easy removal and replacement,‖ AMI

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Compendium Ex. 31 (NiteStar product description), there is evidence to suggest that the ―modular

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cabinet‖ concept had not been widely adopted. Caviglia‘s declaration indicates that despite his

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experience in the industry, he was not aware of other jukeboxes using the modular approach of the

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Vision—instead, repairs often required moving an entire jukebox off site rather than merely

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replacing a component. Caviglia Decl. ¶¶ 6−9. Industry press coverage of both the Vision and the

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NGX presented their simple modular cabinet configurations as innovative. Id. Ex. C at 132−33

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(RePlay Magazine article describing the modular approach of the Vision); id. Ex. K at 69

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(Vending Times article characterizing the NGX as ―a distinct departure from AMI‘s Rowe

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jukeboxes‖ and quoting an AMI employee as stating that ―[f]or the first time, you open the box

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and you‘ll see a very clean and simple arrangement.‖ (emphasis added)).

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Further, even if the ―Vision modular cabinet‖ provision were so broad as to encompass

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many products on the market, the Agreement did not require AMI to pay royalties on every

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jukebox encompassing that feature, but instead only on jukeboxes that both encompassed the

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Vision modular cabinet and were compatible with the Vision ―skins‖ concept addressed below.

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Whether a jury would believe that AMI intended to pay Plaintiffs royalties on every jukebox

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incorporating a modular cabinet design similar to the Vision is not the issue, because the cabinet
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provision was not the only criteria for royalties.
Finally, Plaintiffs offer a report by their expert witness Edward Glapinski that includes his

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conclusion that ―both the NGX and NGX [M]ini incorporate the Vision modular cabinet,‖ based

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on considerations including similarities in the standard components used, the options for

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customization, and the ease of service. Glapinski Report at 2−3. AMI does not object to

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Glapinski‘s report and has not moved to exclude it under the standard for expert testimony set by

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the Federal Rules of Civil Procedure and described in Daubert v. Merrell Dow Pharmaceuticals,

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Inc., 509 U.S. 579 (1993). It is not the Court‘s role on a motion for summary judgment to assess

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the weight or credibility that Glapinski‘s opinions deserve. If Glapinski testifies to the same
conclusions at trial, a jury crediting that testimony could conclude that the NGX and the NGX

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Mini ―incorporate the Vision modular cabinet.‖

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A party‘s case ―need not be a slam dunk‖ to survive a motion for summary judgment.

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Dawson v. New Life Cmty. Servs., No. 5:13-CV-00881-PSG, 2014 WL 2508533, at *4 (N.D. Cal.

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June 3, 2014). Crediting Plaintiffs‘ evidence and drawing reasonable inferences in their favor, a

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jury could find that the NGX‘s modular cabinet design falls within the ―Vision modular cabinet‖

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provision of the Agreement even though the cabinets are not identical. AMI‘s Motion for

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Summary Judgment is therefore DENIED as to this issue.

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2. Whether the NGX “Is Compatible with the Vision „Skins‟ Concept”

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The second part of the royalties test at issue, whether a jukebox ―is compatible with the

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Vision ‗skins‘ concept embodied in the product designs,‖ is plainly ambiguous. See Agreement

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§ 2.2(d)(ii). Any number of concepts are embodied in the Vision‘s skins, ranging from the

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concept of adding color to a jukebox to the concept of covering internal electronics, and the

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Agreement itself provides no guidance as to which concept it refers. Turning to extrinsic evidence

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regarding the nature of the Vision and its selling points, it is fairly clear that the concept at issue

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relates to skins that an operator can easily replace on site to customize or refurbish the appearance

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of a jukebox. But whether that is enough (which would encompass the NGX), or whether the

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parties intended a narrower concept such as a skin that bolts onto a jukebox using nuts, a skin that

28

fits over fixed lighting features on a jukebox, or even a skin that attaches the Vision‘s particular
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cabinet (none of which would include the NGX) will require a jury to parse the parties‘ intent

2

based on conflicting and countervailing extrinsic evidence. Such evidence likely includes, but is

3

not limited to, the nature of the concerns that Plaintiffs expressed to AMI when Plaintiffs proposed

4

adding the word ―concept‖—whether, as Chrisman states, he told AMI‘s representatives that

5

Plaintiffs intended to ensure that AMI would pay royalties for products derived from the Vision,

6

or whether, as Brezzant testified, Plaintiffs were merely concerned with the risk that AMI would

7

rebrand a jukebox essentially identical to the Vision. The Court cannot resolve those issues on a

8

motion for summary judgment by either party.

9

D.

Plaintiffs‟ Claims Regarding AMI‟s Marketing Efforts Is Time Barred

Both of Plaintiffs‘ claims—for breach of contract and breach of the covenant of good faith

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United States District Court
Northern District of California

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and fair dealing—include allegations regarding AMI‘s alleged failure to market the Vision

12

jukebox as required by the Agreement. See FAC ¶¶ 37, 42. Under the Agreement, AMI‘s

13

obligation to market the Vision terminated on the later of March 10, 2010 (two years after the

14

closing date) or the end of any calendar quarter in which AMI sold fewer than fifty Vision

15

jukeboxes. Agreement § 2.2(g). The undisputed evidence indicates that AMI never sold more

16

than fifty Visions in a quarter during the initial two year period, Maas Opp‘n Decl. ¶ 15, so the

17

marketing commitment terminated on March 10, 2010.10
The statute of limitations for breach of a written contract in California is four years. Cal.

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19

Civ. Proc. Code § 337. Because any breach of AMI‘s marketing obligation must have occurred no

20

later than when the obligation expired on March 10, 2010, the deadline to bring a claim for breach

21

of that obligation was, at the latest, March 10, 2014. Plaintiffs did not file this action until

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October 30, 2014. See Compl. (dkt. 1). In their Opposition to AMI‘s Motion, Plaintiffs make

23

clear that they ―do not oppose partial summary judgment as to their claim for failure to use

24

reasonable efforts to market the Vision Jukebox on the sole ground that such claim is time-

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27
28

10

Even if the NGX is ultimately found to be a ―Vision Jukebox‖ within the meaning of the
Agreement, the Agreement includes no provision to renew AMI‘s marketing obligation if AMI
resumes selling Vision Jukeboxes after that obligation expires. See Agreement § 2.2(g); cf. id.
§ 2.2(j) (making clear that AMI‘s obligation to pay royalties would continue under such
circumstances, but not addressing AMI‘s marketing obligation).
17

1

barred.‖ Pls.‘ Opp‘n at 13. Defendants‘ Motion is therefore GRANTED as to that issue.

2

IV.

3

CONCLUSION
For the reasons stated above, both parties‘ Motions for Summary Judgment are DENIED,

4

except that AMI‘s Motion is GRANTED IN PART as to Plaintiffs‘ claims regarding AMI‘s

5

marketing efforts.

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9

IT IS SO ORDERED.
Dated: February 26, 2016
______________________________________
JOSEPH C. SPERO
Chief Magistrate Judge

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United States District Court
Northern District of California

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