Nuance Communications, Inc. v. International Business Machines Corporation

Filing 269

ORDER MEMORANDUM granting in part and denying in part 233 Motion to Strike document from the record. IT IS HEREBY ORDERED as follows: This is a contract case under New York law. The case was tried non-jury. Currently before the Court is the adm issibility of certain pieces of evidence that the Court admitted subject to motions to strike. Principally, the parties dispute the admissibility of several pieces of extrinsic evidence. Extrinsic evidence includes (1) "the acts and circumstance s surrounding execution of the ambiguous term," (2) "conversations, negotiations and agreements made prior to or contemporaneous with the execution of a written [agreement]," and (3) "the parties' course of conduct throughout the life of the contract. GE Funding Cap. Mkt. Servs., Inc. v. Neb. Inv. Fin. Auth., No. 15-1069, 2017 WL 2880555, at *4 (S.D.N.Y. July 6, 2017) (alteration in original), affd, 767 F. App'x 110 (2d Cir. 2019). IBM moves to strike several state ments made by Nuances witnesses because they contain hearsay, are not based on personal knowledge, or are irrelevant. IBM's Mot. Strike, ECF No. 235. Nuance responds that IBM has waived these objections by not raising them during trial. Nuance&# 039;s Resp. to Mot. Strike, ECF No. 240. IBM did not forfeit the objections raised in this motion to strike by not raising them at trial because the Court indicated that it would allow evidence to come into the record subject to motions to strike. Ex . Objs. Order, ECF No. 225; see United States v. Asare, No. 15-cv-3556, 2019 WL 10854305, at *3 (S.D.N.Y. June 17, 2019) ("[T]he law favors admission of evidence in non-jury trials[,] and [the Court's] own practice for bench trials is to ta ke evidence subject to a subsequent motion to strike" (quoting Refinement Int'l Co. v. Eastbourne N.V., 815 F. Supp. 738, 740 (S.D.N.Y. 1993)), aff'd, 25 F.3d 105 (2d Cir. 1994). IBM's motion is denied in part as it relates to sta tements by Nuance executives about Nuance's pre-contractual (or contemporaneous with execution) expectations of the meaning of the SLA, see Petro Decl. 11; Trial Tr. 107:10-108:18, 108:23- 109:10, Feb. 18, 2020; Bloom Decl. 27, and granted in part as it relates to statements concerning Nuance's post-contractual understanding of the meaning of certain clauses in the SLA, see Petro Decl. 14-15. The pre-contractual statements are not offered for the truth of the matter, but to demonstr ate Nuance executives' purpose in entering into the agreement. See United States v. Leonard-Allen, 739 F.3d 948, 954 (7th Cir. 2013). These statements tend to show that Nuance's primary purpose in the deal was to obtain commercially usable code and this purpose was communicated to IBM. Thus, these statements are relevant in construing the contract. See Restatement (Second) of Contracts § 202 (Am. L. Inst. 1981); accord Rockland Exposition, Inc. v. All. of Auto. Serv. Providers of N.J., 706 F. Supp. 2d 350, 359 (S.D.N.Y. 2009). Accordingly, the Court will rule on each specific statement as follows: as further set forth herein. IT IS SO ORDERED. (Signed by Judge Eduardo C Robreno on 2/16/2021) (kv)

Case 7:16-cv-05173-ECR Document 269 Filed 02/16/21 Page 1 of 10

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
NUANCE COMMUNICATIONS, INC.,
Plaintiff,
v.
INTERNATIONAL BUSINESS MACHINES
CORP.,
Defendant.

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CIVIL ACTION
NO. 16-5173

ORDER MEMORANDUM
EDUARDO C. ROBRENO, J.

February 16, 2021

AND NOW, this 16th day of February, 2021, upon
consideration of certain pieces of evidence offered by the
parties during trial, which the Court admitted subject to
motions to strike, IT IS HEREBY ORDERED as follows:
This is a contract case under New York law. The case was
tried non-jury. Currently before the Court is the admissibility
of certain pieces of evidence that the Court admitted subject to
motions to strike. Principally, the parties dispute the
admissibility of several pieces of extrinsic evidence. Extrinsic
evidence includes (1) “the acts and circumstances surrounding
execution of the ambiguous term,” (2) “conversations,
negotiations and agreements made prior to or contemporaneous
with the execution of a written [agreement],” and (3) “the

Case 7:16-cv-05173-ECR Document 269 Filed 02/16/21 Page 2 of 10

parties' course of conduct throughout the life of the contract.”
GE Funding Cap. Mkt. Servs., Inc. v. Neb. Inv. Fin. Auth., No.
15-1069, 2017 WL 2880555, at *4 (S.D.N.Y. July 6, 2017)
(alteration in original), aff’d, 767 F. App’x 110 (2d Cir.
2019).
1. IBM’s Motion to Strike
IBM moves to strike several statements made by Nuance’s
witnesses because they contain hearsay, are not based on
personal knowledge, or are irrelevant. IBM’s Mot. Strike, ECF
No. 235. Nuance responds that IBM has waived these objections by
not raising them during trial. Nuance’s Resp. to Mot. Strike,
ECF No. 240. IBM did not forfeit the objections raised in this
motion to strike by not raising them at trial because the Court
indicated that it would allow evidence to come into the record
subject to motions to strike. Ex. Objs. Order, ECF No. 225; see
United States v. Asare, No. 15-cv-3556, 2019 WL 10854305, at *3
(S.D.N.Y. June 17, 2019) (“[T]he law favors admission of
evidence in non-jury trials[,] and [the Court’s] own practice
for bench trials is to take evidence subject to a subsequent
motion to strike” (quoting Refinement Int’l Co. v. Eastbourne
N.V., 815 F. Supp. 738, 740 (S.D.N.Y. 1993)), aff’d, 25 F.3d 105
(2d Cir. 1994).
a. Meaning of the SLA

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IBM’s motion is denied in part as it relates to statements
by Nuance executives about Nuance’s pre-contractual (or
contemporaneous with execution) expectations of the meaning of
the SLA, see Petro Decl. ¶ 11; Trial Tr. 107:10-108:18, 108:23109:10, Feb. 18, 2020; Bloom Decl. ¶ 27, and granted in part as
it relates to statements concerning Nuance’s post-contractual
understanding of the meaning of certain clauses in the SLA, see
Petro Decl. ¶¶ 14-15. The pre-contractual statements are not
offered for the truth of the matter, but to demonstrate Nuance
executives’ purpose in entering into the agreement. See United
States v. Leonard-Allen, 739 F.3d 948, 954 (7th Cir. 2013).
These statements tend to show that Nuance’s primary purpose in
the deal was to obtain commercially usable code and this purpose
was communicated to IBM. Thus, these statements are relevant in
construing the contract. See Restatement (Second) of Contracts §
202 (Am. L. Inst. 1981); accord Rockland Exposition, Inc. v.
All. of Auto. Serv. Providers of N.J., 706 F. Supp. 2d 350, 359
(S.D.N.Y. 2009). Accordingly, the Court will rule on each
specific statement as follows:
Statement

Ruling on IBM’s

Rationale

motion
Petro Decl. ¶
11

Denied

Non-hearsay (precontractual/contemporaneous
understanding); relevant

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Trial Tr.
107:10-108:18,
Feb. 18, 2020
Trial Tr.
108:23-109:10,
Feb. 18, 2020
Bloom Decl. ¶
27

Denied

Petro Decl. ¶
14
Petro Decl. ¶
15

Non-hearsay (precontractual/contemporaneous
understanding); relevant
Non-hearsay (precontractual/contemporaneous
understanding); relevant
Non-hearsay (precontractual/contemporaneous
understanding); relevant
Post-contractual
understanding
Post-contractual
understanding

Granted

Denied
Denied

Granted

b. Updates and failure to commercialize DeepQA
IBM’s motion is granted as it relates to statements about
the updates that were provided to Nuance and Nuance’s failure to
commercialize because the witnesses were not qualified as
experts to provide an opinion as to why Nuance was unable to
commercialize based on the updates they were provided. See Trial
Tr. 579:13-16, Feb. 20, 2020; Ricci Decl. ¶¶ 31-32, 34.
Accordingly, the Court will rule on each specific statement as
follows:
Statement

Ruling on IBM’s motion

Rationale

Trial Tr.
579:13-16, Feb.
20, 2020 1
Ricci Decl. ¶ 31

Granted

Not qualified as an
expert

Granted

Ricci Decl. ¶ 32

Granted

Not qualified as an
expert
Not qualified as an
expert

To the extent the Court’s current ruling is inconsistent with the prior
ruling during trial, see Trial Tr. 574-579, Feb. 20, 2020, the current ruling
supersedes the prior ruling. The prior ruling to the contrary has now been
revisited and is overruled.
1

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Ricci Decl. ¶ 34

Granted

Not qualified as an
expert

c. IBM’s assurances
IBM’s motion is granted as it relates to statements by
Nuance witnesses that IBM assured Nuance it was receiving and
would receive all updates. See Petro Decl. ¶ 19; Bloom Decl. ¶
35. These statements are hearsay within hearsay because the
witnesses are testifying about what others at Nuance said IBM
said, and the second level is not admissible under any
exception. These statements are offered for the truth of the
matter asserted—i.e., that IBM assured Nuance it would receive
all updates. Accordingly, the Court will rule on each specific
statement as follows:
Statement

Ruling on IBM’s motion

Rationale

Petro Decl. ¶ 19
Bloom Decl. ¶ 35

Granted
Granted

Hearsay
Hearsay

d. Meaning of prior agreement
IBM’s motion is denied in part as to statements about the
parties’ understanding before or at the time they entered into
the SLA concerning the meaning of the prior RTTS (Real Time
Translation Services), see Bloom Decl. ¶ 22; Trial Tr. 231:6-8,
Feb. 19, 2020. These statements are not hearsay and are relevant
because they tend to show Nuance’s pre-contractual or
contemporaneous understanding of the SLA since the parties
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considered and took some language from the RTTS and incorporated
it into the SLA.
However, IBM’s motion is granted in part as to the
statement about Nuance’s understanding of the RTTS after the SLA
was entered into, see Petro Decl. ¶ 17. Accordingly, the Court
will rule on each specific statement as follows:
Statement

Ruling on IBM’s

Rationale

motion
Bloom Decl. ¶
22

Denied

Trial Tr.
231:6-8, Feb.
19, 2020
Petro Decl. ¶
17

Non-hearsay (precontractual/contemporaneous
understanding); relevant
Non-hearsay (precontractual/contemporaneous
understanding); relevant
Post-contractual
understanding

Denied
Granted

2. IBM’s Motion to Admit Exhibits
IBM’s motion to admit three exhibits into evidence (DX-14,
DX-70, and DX-116), consisting of emails where Nuance employees
refer to IBM Research (as opposed to referring to IBM), is
granted. The exhibits are admitted because there is sufficient
circumstantial evidence for a reasonable jury to conclude these
exhibits are what they purport to be: emails between Nuance
employees internally, and emails between Nuance employees and
IBM employees. Accordingly, the Court will rule on each specific
exhibit as follows:
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Statement

Ruling on IBM’s motion

Rationale

DX-14
DX-70
DX-116

Granted
Granted
Granted

Properly authenticated
Properly authenticated
Properly authenticated

3. Proffers of Admissions
Both parties proffer 30(b)(6) deposition testimony as
corporate admissions. 2 To the extent this testimony is admitted,
it will constitute the testimony of the designating corporation,
but it is not conclusive on an issue and can be contradicted or
explained by other testimony. See State Farm Mut. Auto. Ins. Co.
v. New Horizont, Inc., 250 F.R.D. 203, 212 (E.D. Pa. 2008)
(“[T]estimony of a Rule 30(b)(6) representative, although
admissible against the party that designates the representative,
is not a judicial admission absolutely binding on that party.”
(quoting 8A Charles Alan Wright, Arthur R. Miller & Richard L.
Marcus, Federal Practice and Procedure § 2103 (Supp. 2007)));
accord A & E Prods. Grp., L.P. v. Mainetti USA Inc., No. 01–cv10820, 2004 WL 345841, at *7 (S.D.N.Y. Feb. 25, 2004).
a. Nuance’s Proffers
Nuance proffers the 30(b)(6) deposition testimony of two
IBM witnesses, Mr. Reardon and Mr. Brown. IBM only objects to a
portion of the Brown testimony. See Brown Dep. 208:21-209:4.
The Court notes that a recent amendment to Rule 30(b)(6) of the Federal
Rules of Civil Procedure, requiring parties to meet and confer about the
scope of 30(b)(6) witness designations, will hopefully obviate similar
disputes in the future.

2

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This objection is sustained and the testimony will be excluded
as outside the scope of Brown’s designation to testify on the
topic of the division of DeepQA source code within IBM.
Accordingly, the Court will rule on each proffer as follows:
Statement

Ruling on Nuance’s Proffers

Rationale

Reardon Dep.
Brown Dep. 94:1796:4
Brown Dep. 208:21209:4

Admitted
Admitted

Within scope
Within scope

Excluded

Outside scope

IBM’s counter-designations for Reardon’s testimony will also be
admitted.
b. IBM’s Proffers
IBM proffers the 30(b)(6) deposition testimony of two
Nuance witnesses. 3 See McCann Dep.; Stubley Dep. All the
testimony not challenged as outside the scope of the 30(b)(6)
designation is admitted, together with the counter-designations
provided by Nuance. Additionally, Nuance’s objections to several
pieces of testimony as outside the scope of the relevant
30(b)(6) designation are overruled because none of the testimony
is outside the scope of the relevant 30(b)(6) designation.
Accordingly, the Court will rule on each proffer as follows:
Statement

Ruling on IBM’s Proffers

Rationale

The parties’ arguments are largely about the proper characterization of
the testimony, and to the extent there are disputes about what the testimony
says, they will be resolved, to the extent they are relevant, in the findings
of fact.

3

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McCann Dep.
Stubley Dep.

Admitted
Admitted

Within scope
Within scope

4. Other Outstanding Objections
There are several outstanding objections to exhibits
(PX054, PX090, PX114, PX138, PX151, and DX010) and testimony
(McCann Dep. 167:6-14, 236:21-237:04). To the extent the
outstanding objections are made on the basis of relevance,
foundation, or completeness, the objections are overruled. See
Exs. Objs. Order, ECF No. 225. To the extent the objections are
made on another basis, the Court rules on those objections as
follows:
Statement

Ruling on Objection

Rationale

PX054
PX090

Sustained
Overruled

PX114

Sustained

PX138
PX151

Sustained
Overruled

DX010

Overruled

McCann Dep.
167:6-10,
167:12-14
McCann Dep.
167:10-12
(“and I
believe Paul
Ricci said
this to Manoj
Saxena as
well”)
McCann Dep.
236:21-237:04

Overruled

Hearsay
Non-hearsay; opposing
party statement
Hearsay within
hearsay
Hearsay
Non-hearsay; opposing
party statement
Non-hearsay; shows
state of mind
Not speculative

Sustained

Speculative

Sustained

Leading question
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AND IT IS SO ORDERED.

DATE: __2/16/2021__________

____________________
EDUARDO C. ROBRENO

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