Digital Ally, Inc. v. Z3 Technology, LLC

Filing 289

MEMORANDUM AND ORDER denying 287 Motion to Alter Judgment; denying 287 Motion for New Trial. Signed by Magistrate Judge K. Gary Sebelius on 9/14/2012. (bh)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
DIGITAL ALLY, INC.,
Plaintiff and Counterdefendant,
v.
Z3 TECHNOLOGY, LLC,
Defendant and Counterplaintiff.

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Case No. 09-2292-KGS

MEMORANDUM AND ORDER
This matter comes before the Court upon Digital Ally, Inc.’s Motion to Amend or Alter
Judgment Entered July 3, 2012 and for New Trial or, in the Alternative, Remittitur (ECF No.
287). For the reasons stated below, the motion is denied.
I.

Background
On November 1, 2008, Plaintiff Digital Ally, Inc. (“Digital”) and Z3 Technology, LLC

(“Z3”) entered into a contract entitled Production License Agreement PLA-2008.10.31 (“PLA2008”). PLA-2008 called for Z3 to design a DM355 module for use in Digital’s products and
then manufacture and deliver to Digital 1,000 units along with the necessary software. On
January 2, 2009, Digital and Z3 entered into a second contract entitled Software/Hardware
Design and Production License Agreement (“PLA-2009”). Under PLA-2009, Z3 agreed to
design, manufacture, and deliver to Digital DM365 hardware modules and related software
components.

Robert Haler, Digital’s former Executive Vice President of Engineering and

Production, executed the contract on behalf of Digital.

On June 8, 2009, Digital filed this lawsuit against Z3 asserting that Z3 breached PLA2008 by delivering non-conforming DM355 modules.1 Digital also sought a declaration that
PLA-2009 was rescinded and/or was void because Haler lacked authority to execute the contract
on behalf of Digital.2
On November 4, 2009, Z3 filed an Amended Counterclaim asserting three claims against
Digital.3 In Count I, Z3 asserted that Digital breached PLA-2009; in Count II, Z3 asserted that
Digital breached PLA-2008; and in Count III, Z3 asserted that Digital misappropriated Z3’s trade
secrets in violation of the Nebraska Trade Secrets Act.4
On December 9, 2009, Z3 filed a Third-Party Complaint against Haler.5 Z3’s Third-Party
Complaint had two counts. In Count I, Z3 asserted a breach of warranty claim against Haler. Z3
alleged that by signing PLA-2009, Haler expressly or impliedly warranted to Z3 that he had
authority to obligate Digital on the contract by his signature. In essence, Count I of Z3’s ThirdParty Complaint against Haler sought alternative relief to Count I of Z3’s Counterclaim against
Digital. In other words, if the Court determined that PLA-2009 void for lack of authority, then
Z3 sought breach-of-contract damages against Haler personally.
In Count II, Z3 asserted a tort claim of negligence against Haler. Z3 asserted that Haler
(1) negligently failed to comply with Digital’s Signature Authorities Policy; (2) negligently
represented to Z3 that he had authority to bind Digital to the contract by his signature; and/or (3)
negligently led Z3 to believe, by his words and/or actions, that he had authority to bind Digital to

1

Compl., ECF No. 1.

2

Id.

3

Am. Countercl., ECF No. 62.

4

Id.

5

Third-Party Compl., ECF No. 75.
2

the contract by his signature.6 As a component of its damages, Z3 sought the attorney fees and
expenses that it incurred in defending against Digital’s claim for rescission of PLA-2009 based
upon Haler’s alleged lack of authority.7
In May 2011, Haler and Z3 entered into a Settlement and Release Agreement
(“Settlement Agreement”) whereby Haler and Z3 settled Z3 claims for $137,500.8 The Settlement
Agreement recites that Z3 incurred attorney fees and expenses in litigating Digital’s claims
against Z3. It further provides that Haler would deliver $137,500 in payment of Z3’s “Attorneys
Fee Damages” and that Z3 would receive no payment under the Settlement Agreement for its
contract damages against Digital.
On March 29, 2012, the Court granted in part Z3’s Motion for Summary Judgment on
Count I of its Counterclaim against Digital.9 The Court determined that PLA-2009 was a valid
and enforceable agreement that was breached by Digital. The Court determined as a matter of
law that Z3 was entitled to recover $175,000 in unpaid engineering fees and $270,000 for unpaid
royalties from Digital as a result of Digital’s breach. The Court was unable to resolve on
summary judgment all of the damages sought by Z3 and concluded that Z3’s claim for lost profits
caused by Digital’s failure to order a certain minimum number of modules was an issue for the
finder of fact at trial.

6

See Pretrial Order at 17, ECF No. 148.

7

Id. at 35.

8

Settlement & Release Agreement, ECF No. 216.

9

Mem & Order, ECF No. 194.

3

Z3 had also sought summary judgment on Count II of its Counterclaim against Digital.
The Court denied in part this aspect of Z3 motion because the Court was unable to determine as a
matter of law which party breached PLA-2008.
This case was tried to a jury in late June and early July 2012. The jury awarded $100,000
to Z3 for its lost profits on PLA-2009.10 As to PLA-2008, the jury determined that Z3 breached
the hardware warranty and awarded $30,000 to Digital.11 The jury also determined that Digital
breached PLA-2008 by failing to pay $15,000 in fees that were due on the contract and awarded
$15,000 to Z3.12
In the current motion, Digital contends that the amount of the judgment entered against it
on PLA-2009 should be reduced by $137,500 --- the amount of Z3’s settlement with Haler --- to
avoid Z3 receiving a double recovery for the same injury.13 Digital also asserts that it is entitled
to a new trial, or in the alternative, remittitur because the jury’s verdict in favor of both Digital
and Z3 for breach of the same contract, PLA-2008, is irreconcilably inconsistent.
II.

Analysis
A.

Digital Waived Any Affirmative Defense of Setoff by Failing to Preserve the
Issue in the Court’s Pretrial Order.

Fed. R. Civ. P. 8(c) states that in responding to a pleading, a party must affirmatively
state any avoidance or affirmative defense. Rule 8 enumerates some, but not all, affirmative
defenses, including accord and satisfaction and payment. A setoff based upon a settlement with

10

Jury Verdict, ECF No. 267.

11

Id.

12

Id.

13

Digital has made this argument to the Court on two prior occasions, and the Court has rejected it both times.
4

a third-party is also an affirmative defense.14 The purpose of pleading an affirmative defense is
to provide the opposing party with fair notice.15
The Court entered a final Pretrial Order in this case on May 9, 2011.16 A pretrial order
supersedes the pleadings and controls the subsequent course of litigation.17 Failure to preserve
an affirmative defense in the final pretrial order is considered a waiver of the defense.18
Digital argues that its defense of setoff, based upon Z3’s settlement with Haler, was
preserved in the Court’s Pretrial Order. To support its argument, Digital relies upon the section
entitled “Defenses,” which includes the following sentence: “Z3’s claims are barred, in their
entirety, by its own prior and supervening breaches of contract and by Digital’s rights of setoff
and/or recoupment.”19
This statement reflects that Digital was seeking to setoff any damages that Digital
incurred as a result of Z3’s purported breach of the contracts, not the amount of any settlement
with Haler. This is evidenced by the specific reference to Z3’s breaches of contract in the
sentence discussing setoff. Then, in the section of the Pretrial Order entitled “Essential Elements
of Digital’s Affirmative Defenses,” Digital describes Z3’s purported “supervening breach” but
14

Roberts v. Korn, 420 F. Supp. 2d 1196, 1199 (D. Kan. 2006) (contentions that plaintiff had been fully
compensated by other defendants is an affirmative defense); Joseph V. Edeskuty & Assocs. v. Jacksonville Kraft
Paper Co., 702 F. Supp. 741, 749 (D. Minn. 1988) (setoff is an affirmative defense).
15

Falley v. Friends Univ., 787 F. Supp. 2d 1255, 1257 (D. Kan. 2011).

16

Pretrial Order, ECF No. 148.

17

Weyerhaeuser Co. v. Brantley, 510 F.3d 1256, 1267 (10th Cir. 2007); Hullman v. Bd. of Trustees of Pratt Cmty.
Coll., 950 F.2d 665, 667 (10th Cir. 1991).
18

Kay-Cee Enters., Inc. v. Amoco Oil Co., 45 F. Supp. 2d 840, 846 (D. Kan. 1999) (defendant waived affirmative
defense by failing to preserve issue in pretrial order and failing to timely seek amendment); see also Creative
Consumer Concepts, Inc. v. Kreisler, 563 F.3d 1070, 1076 (10th Cir. 2009) (“The general rule is that a party waives
its right to raise an affirmative defense at trial when the party fails to raise the defense in its pleadings.”); Roberts,
420 F. Supp. 2d at 1199 (defendant waived affirmative defense by failing to raise it until after trial was concluded).
19

Pretrial Order at 20, ECF No. 148.
5

does not refer to a setoff from a potential settlement with Haler. There is no reference to a setoff
from a potential settlement with Haler in any portion of the final Pretrial Order, including the
legal or factual issues to be resolved. As a result, the Court concludes that the “setoff” claimed
by Digital referred to damages incurred as a result of Z3’s purported breaches of the contracts
and did not provide Z3 with fair notice of any setoff defense based upon any possible future
settlement with Haler.
The final Pretrial Order was entered on May 9, 2011, before the settlement with Haler
was completed. At the very least, Digital was on notice as of June 22, 2011 – less than a month
after the Settlement Agreement was executed -- that Haler and Z3 had reached a settlement.20
But Digital never moved for an order amending the final Pretrial Order to include setoff from the
settlement with Haler as an affirmative defense.
The Court concludes that the affirmative defense of setoff as it relates to the Settlement
Agreement between Z3 and Haler was waived. Digital simply waited too long before attempting
to raise the defense in this case.
B.

Even Assuming Digital Did Not Waive its Affirmative Defense of Setoff, Digital
Has Not Demonstrated It is Entitled to a Setoff.

Even if the Court did not find waiver, it would not reach a different result. Digital cites
Nebraska and Kansas law to support its argument that it is entitled to a full dollar-for-dollar
setoff for everything paid to settle Z3’s claims against Haler. The Court does not need to decide
whether Nebraska or Kansas law applies to this issue because the law appears to be the same in
both jurisdictions.
As summarized by the Kansas Supreme Court
Kansas has not varied from a rule that limits a plaintiff to only one
recovery for a wrong. This rule has been applied throughout the years in
20

Joint Mot. to Dismiss Third-Party Action Pursuant to Settlement by Third Party Def. Robert Haler, ECF No. 164.
6

situations where partial payments have been made by multiple tortfeasors.
A pro tanto credit has been granted to prevent a plaintiff from receiving a
double recovery.21
In other words, under the “one satisfaction rule,” when the conduct of multiple
defendants results in a single injury with common damages, and one of the defendants settles
with the plaintiff, the amount of the settlement is credited against the amount that may be
recovered from the non-settling defendants.22
Similarly, in Nebraska, “a party may not have double recovery for a single injury, or be
made ‘more than whole’ by compensation which exceeds the actual damages sustained. . . .
Where several claims are asserted against several parties for redress of the same injury, only one
satisfaction can be had.”23 In other words, a plaintiff shall not be compensated with an award
that, when combined with the settlement, exceeds the amount that it could prove.24
Thus, the issue is whether the Settlement Agreement between Haler and Z3 compensated
Z3 for the same damages that were awarded to Z3 for Digital’s breach of PLA-2009.25 In
determining whether the Settlement Agreement and the judgment on PLA-2009 represent
common damages, the Court may look to the text of the Settlement Agreement.26

21

York v. InTrust Bank, N.A., 962 P.2d 405, 432 (Kan. 1998).

22

See Hess Oil Virgin Islands Corp. v. UOP, Inc., 861 F.2d 1197, 1208 (10th Cir. 1988).

23

Vowers & Sons, Inc. v. Strasheim, 576 N.W.2d 817, 825 (Neb. 1998).

24

Nebraska Plastics, Inc. v. Holland Colors Americas, Inc., No. 4:01CV603, 2004 WL 627077, at *8 (D. Neb. Mar.
29, 2004).
25

See Hess Oil Virgin Islands Corp., 861 F.2d at 1208.

26

See id.; Friedland v. TIC - The Industrial Co., 566 F.3d 1203, 1210–11 (10th Cir. 2009).

7

In its Third-Party Complaint, Z3 sought damages against Haler on two claims: (1) breach
of warranty; and (2) negligence.27 As an element of its damages, Z3 sought to recover its costs
and attorney’s fees and expenses incurred in defending against Digital’s claim for rescission of
PLA-2009.28 More specifically, Z3 contended that Haler’s negligent failure to comply with
Digital’s Signature Authorities Policy caused Z3 to incur extensive attorney’s fees and expenses
in defending Digital’s suit to rescind or declare PLA-2009 void.
The Settlement Agreement between Z3 and Haler states that Z3 incurred attorneys’ fees
and expenses in litigating Digital’s claims against Z3.29 The Settlement Agreement further
provides that Haler would deliver $137,500 in payment of Z3’s “Attorneys Fee Damages” and
that Z3 would receive no payment under the Settlement Agreement for its contract damages
against Digital. According to the terms of the Settlement Agreement, the payment to Z3 was to
compensate Z3 solely for its attorney fees, and Z3 received nothing in settlement for its breachof-contract damages
In contrast, the Court and jury awarded damages against Digital to compensate Z3 for
Digital’s breach of PLA-2009. In other words, Z3 was awarded damages to put it in the same
position it would have been had Digital performed PLA-2009. Z3 did not seek attorney fees
from Digital, and Z3 was not awarded any attorney fees from Digital for Digital’s breach of PLA2009.

Thus, under the terms of the Settlement Agreement, the amount paid by Haler

27

See also Pretrial Order at 17, ECF No. 148.

28

Id. at 15, 35.

29

Settlement & Release Agreement, ECF No. 216.
8

compensated Z3 for different damages than the damages assessed against Digital for breach of
PLA-2009.30
Digital argues that regardless of how the parties allocated the payment from Haler in the
Settlement Agreement, Digital is entitled to a setoff because there has been no finding
establishing that Z3 was actually entitled to recover attorney fees from Haler. In other words,
Digital apparently contends that the Court or jury must have found for Z3 as to each element of
its negligence claim against Haler.
Digital cites no authority for the proposition that it is entitled to a credit unless Z3 proves
that it would have prevailed against Haler had the claim not settled. To be sure, Digital cites
authority indicating that a court or jury must make certain factual findings before a party can be
awarded attorney fees on a negligence claim.31 But the cases cited by Digital are in a different
procedural posture than this litigation and are merely reciting the elements that must be proven to
support an award of attorney fees at trial or on summary judgment. It is undisputed that if Haler
and Z3 had not settled, then Z3 would have had to prove the elements necessary to recover
attorney’s fees from Haler. But the issue here is whether Digital is entitled to a setoff for the
amount of the settlement with Haler. The cases cited by Digital do not address setoff under the
“one satisfaction rule” and have no relevance in determining what, if anything, Z3 must
demonstrate to defeat Digital’s setoff defense.
Adopting Digital’s argument would put Z3 in the position of having to prove each
element of its negligence claim against Haler despite having settled the claim.

The Court

disagrees with Digital’s approach. Rather, the Court believes that as the party asserting an
30

Cf. Friedland v. TIC - The Industrial Co., 566 F.3d 1203, 1210–11 (10th Cir. 2009) (concluding in part that the
settlement agreement compensated plaintiff for the same damages because the settlement agreement did not allocate
the damages).
31

See, e.g., Essex Contracting, Inc. v. Jefferson Cnty., 277 S.W.3d 647, 657-58 (Mo. 2009).
9

affirmative defense, Digital has the burden of proving that it is entitled to the setoff. In other
words, Digital has the burden to demonstrate that the settlement amount from Haler and the
judgment against Digital represent a single injury with common damages and/or that Z3 was
precluded from seeking attorney’s fees from Haler under Nebraska or Missouri law. Digital has
failed to do so.
In both Nebraska and Missouri,32 a plaintiff may recover his attorneys’ fees and expenses
as a result of litigation with a separate party caused by a defendant’s tort under the collateral
litigation rule or exception.33 The Nebraska Supreme Court has phrased the rule as follows:
“One who through the tort of another has been required to act in
the protection of his interests by bringing or defending an action
against a third person is entitled to recover reasonable
compensation for loss of time, attorney fees and other expenditures
thereby suffered or incurred in the earlier action.”34
Missouri courts have summarized the law as follows:
“[T]he general rule in Missouri is that attorneys’ fees are
recoverable only when a statute specifically authorizes recovery or
when attorneys' fees are provided for by contract.” However, an
exception to the rule is often called the “collateral litigation”
exception. “Where the natural and proximate result of a wrong or
breach of duty is to involve the wronged party in collateral
litigation, reasonable attorneys’ fees necessarily and in good faith
incurred in protecting himself from the injurious consequence
thereof are proper items of damages.” For the collateral litigation
exception to be applicable, the plaintiff must have incurred
attorneys’ fees in a different cause of action, involving a different
party, caused by a breach of duty by the defendant.
32

Digital contends that either Nebraska or Missouri law applied to Z3’s claims against Haler. The Court does not
need to resolve this issue because the result is the same under either state’s law.
33

Woollen v. State, 593 N.W.2d 729, 744 (Neb. 1999) (relying on the Restatement (Second) of Torts and concluding
that plaintiff’s attorney’s fees for defending a suit occasioned by defendant’s tort are compensable damages); St.
Louis Cnty. v. Taylor-Morley, Inc., 923 S.W.2d 507, 512 (Mo. Ct. App. 1996) (recognizing collateral litigation
exception to American Rule barring recovery of attorney fees in tort cases); see also Dairy Farmers of Am., Inc. v.
Travelers Ins. Co., 391 F.3d 936, 944–45 (8th Cir. 2004) (recognizing the availability of attorney fees as an element
of damages for certain tort actions in Missouri).
34

Woollen, 593 N.W.2d at 744 (quoting Restatement (Second) of Torts § 914).
10

The exception for collateral litigation proximately caused by the
tortious acts is also merely a matter of common sense in
accordance with traditional principles allowing recovery of
damages proximately caused by the negligent act. The plaintiffs
must prove the breach of duty, and further must prove the damages
proximately flowing from the breach. There is no hypertechnical
formula about fees that may be recovered as an element of
damages; neither is it an esoteric concept embedded in the shrouds
of legal history. It is simply a logical exception to the general rule,
and the Restatement has sought to state the principle.35
Z3’s allegations against Haler fall within the collateral litigation exception. Z3 alleged
that Haler negligently failed to comply with Digital’s Signature Authorities Policy; (2)
negligently represented to Z3 that he had authority to bind Digital to the contract by his signature;
and/or (3) negligently led Z3 to believe, by his words and/or actions, that he had authority to bind
Digital to the contract by his signature. As result, Z3 contends that it incurred extensive attorney
fees and expenses in defending Digital’s suit to rescind or declare PLA-2009 void.
In an attempt to demonstrate that Z3 could not recover attorney fees, Digital argues that
neither Missouri nor Nebraska permit the recovery of attorney fees upon claims of simple
negligence of the kind asserted by Z3 against Haler. In support of this argument, Digital cites
Gurley v. Montgomery First National Bank.36 In that case, the Missouri Court of Appeals
addressed an exception for reimbursement of attorney fees ordered by a court of equity to
balance the harms/benefits and determined that a simple negligent misrepresentation claim was
not sufficiently unusual to invoke the exception. But Gurley does not apply here. It does not
address or even mention the collateral litigation exception.
Moreover, the authorities from Missouri that address the collateral ligation exception do
not prohibit its application to claims of ordinary negligence. For example, in Collier v. Manring,
35

Collier v. Manring, 309 S.W.3d 848, 853 (Mo. Ct. App. 2010) (internal citations omitted).

36

Gurley v. Montgomery First Nat’l Bank, 160 S.W.3d 863, 871 (Mo. Ct. App. 2005).
11

the Missouri Court of Appeals described the elements as follows: a plaintiff must show (1) a
breach of duty; (2) that undertaking the collateral litigation was the natural and proximate result
of the defendant's alleged wrong or breach of duty; (3) that the fees were necessarily and in good
faith incurred to protect the plaintiff from injury; and (4) that the amount of the fees (attributable
specifically to the litigation to correct any legal problem caused by the alleged breach of duty)
was reasonable in light of the circumstances and necessities of the situation.37 There is no
suggestion by the Court of Appeals that a plaintiff must show conduct beyond a breach of duty in
an ordinary negligence case.
Further, Digital cites no Nebraska law supporting its argument. None of the Nebraska
authorities reviewed by the Court suggest that the collateral litigation exception does not apply to
ordinary negligence claims. A plaintiff must demonstrate simply that a “tort of another” caused
it to incur attorney’s fees in another cause of action against a different defendant.38
Digital also contends that for litigation to be “collateral” it must be brought in a separate
case. The Court does not believe the applicability of the collateral litigation exception turns on
whether Z3 asserted its claim against Haler as a third-party complaint in this lawsuit or filed a
separate suit against Haler. Indeed, in Collier39 – a case cited by Digital -- the Missouri Court of
Appeals rejected the very argument being made by Digital. In Collier, the Court of Appeals held
that the district court erred in determining that litigation was not collateral simply because the
counts were contained in one petition, rather than two separate cases.40 The issue is whether
Haler’s alleged breach caused Z3 to incur attorney fees in a different cause of action, involving a
37

Collier v. Manring, 309 S.W.3d 848, 854 (Mo. Ct. App. 2010).

38

Woollen, 593 N.W.2d at 744.

39

Collier, 309 S.W.3d at 853-54.

40

Id.
12

different party. Z3 alleged that Haler’s negligence caused Z3 to incur attorney fees to defend
against a separate action (declaratory action to declare PLA-2009 void) brought by a different
party (Digital).
Relying on Tetherow v. Wolfe, Digital also apparently asserts that under Nebraska law,
before Z3 can recover its attorney fees, Z3 must demonstrate that it “lost” the litigation with
Digital because of Haler’s alleged negligence.41

But Tetherow does not stand for this

proposition. In Tetherow, the party seeking attorney fees had lost the prior litigation, but the
Nebraska Supreme Court in no way indicated that this was a prerequisite to recovery and made
only a passing reference to this fact.
Digital has not demonstrated that it is entitled to a setoff for the amount of the settlement
with Haler. The Court believes that the settlement agreement with Haler compensated Z3 for
different damages than those awarded to Z3 for Digital’s breach of PLA-2009.
C.

There is No Basis to Disturb the Jury Verdict on the $15,000 Award to Z3 for
Breach of PLA-2008.

Digital also asserts that it is entitled to a new trial, or in the alternative, remittitur because
the jury’s verdict in favor of both Digital and Z3 for breach of the same contract (PLA-2008) is
irreconcilably inconsistent.
This issue turns on whether the jury returned a general verdict or a special verdict. The
hallmark of a general verdict is that it requires the jury to announce the “ultimate legal result of
each claim.”42 In other words, a general verdict “permits the jury to decide who wins.”43 A

41

Tetherow v. Wolfe, 392 N.W.2d 374, 379 (Neb. 1986).

42

Johnson v. Ablt Trucking Co., Inc., 412 F.3d 1138, 1142 (10th Cir. 2005).

43

Id.
13

special verdict, by contrast, presents the jury with specific questions of fact.44 After the jury
returns its verdict, the court applies the law to the facts found by the jury and enters judgment
accordingly.45
The Court concludes the jury returned a general verdict in this case. The verdict form
required the jury to identify only whether a party breached the contract, and if so, the amount of
damages.46 The jury determined the ultimate result of each claim without any further work by
the Court other than the entry of judgment on the verdict. The verdict form in this case is similar
to the one at issue in Thompson v. State Farm Fire & Casualty Co., which the Tenth Circuit held
to be a general verdict.47 In Thompson, the first part of the verdict form asked the jury whether
“the plaintiffs . . . should recover on their contract claim against the defendant.”48 The Court
determined that this question was plainly a general verdict, and subsequent questions regarding
damages and bad faith were accompanying interrogatories.49 Similar to the verdict in Thompson,
the verdict form in this case established which party should recover.
As conceded by Digital in its motion, a party waives a claim of inconsistent verdicts
based on a general jury verdict form under Fed. R. Civ. P. 49(b) if not raised before the jury is
discharged.50 Here, counsel for Digital never objected to the verdict form prior to the jury being

44

Id.

45

Id.

46

Jury Verdict, ECF No. 267.

47

Thompson v. State Farm Fire & Cas. Co., 34 F.3d 932, 945 (10th Cir. 1994).

48

Id. at 945.

49

Id. at 944-45.

50

Heno v. Sprint/United Mgmt. Co., 208 F.3d 847, 851 (10th Cir. 2000); Bartee v. Michelin N. Am., Inc., 374 F.3d
906, 911 (10th Cir. 2004); Fed. R. Civ. P. 49(b)(4).
14

discharged. Accordingly, the Court concludes that Digital has waived any argument that the
verdict was irreconcilably inconsistent.
Further, the Court does not believe there is anything inconsistent about the jury’s verdict.
The jury found that Digital breached PLA-2008 by not paying the $15,000 contract balance and
that Z3 breached the hardware warranty with regard to the delivered modules – two separate
provisions of the contract. The jury found that Digital could recover for breach of warranty, but
that it had to pay the balance owed on the contract.
As Digital points out, before a party can recover for breach of contract, it must
demonstrate that it substantially performed its obligations under the contract. Digital argues that
the jury could not possibly have concluded that Z3 substantially performed under PLA-2008
because it also found that Z3 breached the hardware warranty. Jury Instruction No. 11 informed
the jury that substantial performance meant that Z3 made a good faith effort to live up to its part
of the contract and any deviations were relatively minor and unimportant.51 The jury appears to
have concluded that Z3 made a good faith effort to perform the contract and that the deviations
show by Digital at trial were relatively minor in the jury’s view. Indeed, the jury awarded
Digital only 19% of the total $155,000 contract price. In short, the jury reasonably could have
concluded that both Z3 and Digital substantially performed under the contract but were still
liable to each other for breach of minor performance obligations.
Accordingly,
IT IS THEREFORE ORDERED that Digital Ally, Inc.’s Motion to Amend or Alter
Judgment Entered July 3, 2012 and for New Trial or, in the Alternative, Remittitur (ECF No.
287) is hereby denied.

51

Jury Instruction No. 11, ECF No. 262.
15

IT IS SO ORDERED.
Dated this 14th day of September, 2012 at Topeka, Kansas.
s/ K. Gary Sebelius
K. Gary Sebelius
U.S. Magistrate Judge

16