Global Epoint, Inc. v. Gtech Corporation
Filing
85
MEMORANDUM AND ORDER granting in part and denying in part 58 Motion for Partial Summary Judgment; granting in part and denying in part 65 Motion for Partial Summary Judgment. So Ordered by Chief Judge William E. Smith on 11/05/14. (Jackson, Ryan)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
___________________________________
)
)
)
Plaintiff,
)
)
v.
)
)
GTECH CORPORATION,
)
)
Defendant.
)
___________________________________)
GLOBAL EPOINT, INC.,
C.A. No. 11-197 S
MEMORANDUM AND ORDER
WILLIAM E. SMITH, Chief Judge.
In 2001, Plaintiff Global ePoint, Inc. (“Global”) sold its
lottery
assets
to
Defendant
GTECH
Corporation’s
(“GTECH”)
predecessor, Interlott Technologies, Inc. (“Interlott”). 1
time
the
deal
closed,
Global
received
an
initial
At the
payment
of
$13.5 million, and was entitled to receive additional payments
of up to $15 million over the course of the next five years, if
revenues and profits from these lottery assets reached certain
benchmarks.
Global claims that GTECH reneged on the agreement
by failing to make all but a fraction of these payments; GTECH,
in
turn,
claims
that
the
requisite
benchmarks
were
reached, and that it owes Global nothing.
1
GTECH admits it is bound by the contract at issue.
never
Both parties have moved for partial summary judgment.
Nos. 58 and 65.)
Motion
for
Partial
(ECF
For the reasons set forth below, Global’s
Summary
Judgment
is
GRANTED
IN
PART
AND
DENIED IN PART and GTECH’s Motion for Partial Summary Judgment
is GRANTED IN PART AND DENIED IN PART. 2
I.
Background 3
In the late 1990s, Global developed a mechanism it called a
“helical separator” for use in instant lottery ticket vending
machines.
(Pl.’s Statement of Undisputed Facts (“Pl.’s SUF”)
¶ 2, ECF No. 59.)
perforation,
This mechanism cuts lottery tickets along a
separating
the
dispensing them as requested.
by
Global
employed
Counterpoint.
this
tickets
(Id.)
technology
(Id. at ¶ 5.)
from
one
another,
and
Two machines manufactured
–
the
Playpoint
and
the
The Playpoint was a free-standing
model, while the appropriately-named Counterpoint was designed
to sit on the counter of a store.
(Id.)
GTECH offered a
competing product called the EDS-Q, which also perforated and
dispensed tickets.
(Id. at ¶ 22.)
2
Global and GTECH agree that summary judgment should be
granted concerning the existence of a contract between the two
entities
and
Global’s
performance
under
that
contract.
Additionally, the parties agree that summary judgment is
appropriate regarding the inapplicability of the following
affirmative defenses: laches, estoppel, waiver, statute of
limitations and failure to mitigate. Therefore, Global’s Motion
for Summary Judgment is GRANTED as to these issues.
3
Except where noted, none of the facts are in dispute.
2
In the 2001 deal with Interlott, Global sold the helical
separator technology, and the right to produce the machines that
utilized it.
(Id. at ¶ 9.)
Global and Interlott memorialized
the terms of this sale in an Asset Purchase Agreement.
¶¶
8-9.)
In
2003,
Interlott
merged
with
GTECH,
(Id. at
and
GTECH
expressly assumed Interlott’s responsibilities under the Asset
Purchase Agreement.
Two
(Id. at ¶ 53.)
provisions
of
the
Asset
Purchase
Agreement,
the
Deferred Payment Component and the Percentage Payment Component,
are
in
issue
circumstances
Global.
in
this
under
case,
which
because
future
they
payments
establish
must
be
made
the
to
The Court begins by outlining the contours of these
important (and confusing) provisions.
A.
The Deferred Payment Component
The
Deferred
Payment
Component
required
that
GTECH
pay
Global $150,000 per month for 60 months, which amount could be
decreased based on gross profits earned each quarter.
SUF
¶
10
and
Ex.
3.)
To
determine
whether
GTECH
(Pl.’s
properly
modified the payment, GTECH was required to provide “[quarterly]
statement[s] of the gross profits earned by [GTECH] . . . both
from a combination of contract extensions and future orders from
existing lottery customers of [Global] under [Global’s] lottery
contracts
conveyed
Agreement.” (Id.)
to
[GTECH]
under
the
Asset
Purchase
Section 4.7 of the Asset Purchase Agreement
3
identified the contracts transferred as part of the sale.
(Id.
at ¶ 13.)
Additionally,
the
Deferred
Payment
Component
defined
“existing lottery customers” to
include customers pursuant to public competitive bids
that have been submitted prior to Closing, if, after
the effective date of this Agreement, an award is made
to [Global] or to [GTECH] pursuant to [Global’s] bid,
and [GTECH] enters into a contract with such customer
either directly or by assignment from [Global], in
either case pursuant to such outstanding bid.
(Id. at ¶ 10.)
Finally, under the Deferred Payment Component,
GTECH agreed that, during the five-year period in which it was
making
deferred
reasonable
best
payments,
efforts
to
it
would
procure
“exercise
contract
commercially
extensions
and
future orders from existing lottery customers of [Global] under
[Global’s] lottery contracts conveyed to [GTECH] under the Asset
Purchase Agreement.”
(Pl.’s SUF Ex. 3 at 63.)
B.
The Percentage Payment Component
The
second
key
provision
is
the
“Percentage
Payment
Component,” which required that for the five years following the
closing of the transaction, GTECH would “deliver to [Global] a
statement
Revenues.”
of
Applicable
Revenues
and
Applicable
(Pl.’s SUF ¶ 11 and Ex. 4.)
Counterpoint
The Asset Purchase
Agreement defined “applicable revenues” as “revenues generated
by new sales or leases, other than revenues included in the
4
calculation
of
Counterpoint
the
and
Deferred
other
Payment
Component,
[Global]-designed
(Pl.’s SUF ¶ 12 and Ex. 4.)
of
lottery
Playpoint,
equipment.”
The Percentage Payment Component
required GTECH to make payments of 10 percent of these revenues
until a cap of $3 million was reached.
(Id.)
If that initial
$3 million cap was reached, GTECH was then required to make
additional
payments
of
10
percent
of
revenues
only
on
Counterpoint machines sold, to a maximum of an additional $3
million.
(Id.)
GTECH further agreed to “continue to market
Playpoint and Counterpoint units (‘PC Units’)” during this fiveyear period “by offering in connection with new procurements as
to
which
the
specifications,
PC
such
units
meet
equipment
to
applicable
prospective
procurement
customers
of
[GTECH] at gross profit margins that are no greater than those
at which [GTECH’s] similar or competitive equipment is offered
to the same customer in connection with such procurement.”
(Id.
at ¶ 11 and Ex 4.)
The proper scope of the Deferred Payment Component, and
whether GTECH made payments under the Deferred Payment Component
and Percentage Payment Component as required, are the central
questions in this case.
To answer these questions, the Court
must delve into the meaning of the Asset Purchase Agreement and
GTECH’s actions in several states and around the world.
5
C.
Illinois
The State of Illinois awarded Global a lottery contract in
1994.
(Pl.’s
SUF
¶
57.)
contract several times.
Global
and
Illinois
(Id. at ¶ 58.)
amended
the
When Global sold its
assets to GTECH’s predecessor, Interlott, the Third Amendment to
the Illinois contract was operative. (Id.)
The Fourth Amendment
extended the agreement by one year from July 1, 2001 to June 30,
2002, and, among other things, included a 60-month lease term on
all lottery machines leased by Illinois, measured from their
date
of
installation.
(Id.
at
¶
59.)
Several
amendments
followed, culminating with a Seventh Amendment to the contract
between GTECH and Illinois, which again extended the agreement
by one year from July 1, 2003 to June 30, 2004, and included the
same 60-month lease on all lottery machines from their date of
installation. 4
Seventh
(Id. at ¶ 61.)
Amendment
to
the
Unlike its predecessors, this
Illinois
contract
contained
no
provision permitting an additional amendment, but it also did
not preclude further amendment.
Facts
(“Def.’s
SUF”)
¶
52,
(Def.’s Statement of Undisputed
ECF
No.
66;
Pl.’s
Statement
of
Disputed Facts (“Pl.’s SDF”) ¶ 52, ECF No. 76.)
4
Machines put into service under the Fourth, Fifth, Sixth,
and Seventh Amended Agreements would all have different lease
termination dates, since the 60-month term was measured from
their respective dates of installation.
6
By May 2004, 745 machines using Global’s technology were
operating
in
amendments.
Illinois
GTECH
under
(and
its
this
1994
predecessor,
contract
Interlott)
and
its
included
gross profits from this contract with the Illinois Lottery to
calculate the Deferred Payment Component from August 2001 to May
2004.
(Pl.’s SUF ¶ 65.)
On January 13, 2004, the Illinois lottery issued a request
for proposal (“RFP”).
successful
bidder
(Id. at ¶ 62.)
would
set
forth
This RFP dictated that a
a
plan
for
delivering
and
installing as many as 2,000 perforated instant lottery ticket
machines.
(Id. at ¶ 62.)
The successful bidder would also be
required “to conduct a thorough and comprehensive assessment of
the [Illinois Lottery’s] current process for the self-service
sale
of
instant
lottery
tickets,
and
provide
the
[Illinois
Lottery] with recommendations to maximize sales revenue for the
[Illinois Lottery] and the successful vendor.”
(Id. at ¶ 62.)
The Illinois Lottery chose GTECH’s bid and entered into an
agreement
Seventh
(Id.
at
with
GTECH
Amendment
¶
63.)
to
effective
the
This
July
Illinois
2004
1,
2004
Lottery
contract
–
the
contract
called
upon
day
the
expired.
GTECH
to
temporarily remove from service the 745 machines then operating
in Illinois, which used Global technology, and upgrade them.
(Id. at ¶ 64.)
After these upgrades were completed, Illinois
continued making lease payments on these 745 machines in the
7
same
amount
as
it
Illinois contract.
did
under
the
(Id. at ¶ 64.)
Seventh
Amendment
to
the
Ultimately, under this 2004
contract, GTECH supplied the Illinois lottery with 1,973 instant
lottery ticket vending machines, in addition to the 745 machines
it upgraded.
(Def.’s SUF ¶ 38.)
GTECH did not include the
gross profits from the new machines or the upgraded machines in
future Deferred Payment Component calculations after May 2004.
(Def.’s Statement of Disputed Facts & Supplemental Undisputed
Facts (“Def.’s SDF”) Ex. J at GTECH00270, ECF No. 68-16.) 5
D.
Maryland
After Global and Interlott entered into the Asset Purchase
Agreement, but before the deal closed, Global entered into a
contract with the Maryland State Lottery for the purchase of 50
Counterpoint machines.
(Pl.’s SUF ¶ 18.)
At that time, the
Maryland Lottery did not award its lottery contracts through a
public
bidding
process.
(Id.)
Throughout
the
timeframe
pertinent to this case, GTECH included the gross profits from
5
The parties’ dispute over when GTECH ceased reporting
gross profit data from Illinois appears to be pure semantics.
(Compare Pl.’s Statement of Undisputed Facts (“Pl.’s SUF”) ¶ 67,
ECF No. 59 (claiming GTECH stopped reporting gross profits from
the Illinois Lottery in May 2004), with Def.’s Statement of
Disputed Facts and Supplemental Undisputed Facts (“Def.’s SDF”)
¶ 67, ECF No. 68, (claiming that GTECH included May 2004
revenues but ceased reporting revenues thereafter).)
The Court
has examined the relevant evidence, which establishes beyond a
doubt that GTECH included Illinois revenues from May 2004, but
did not include revenues for June 2004 or any date thereafter.
(Def.’s SDF Ex. J at GTECH00270.)
8
this Maryland agreement in the Deferred Payment Component, as
opposed to the Percentage Payment Component.
(Pl.’s SUF Ex. 48
at No. 22.)
E.
France
One of the contracts transferred from Global to GTECH’s
predecessor
under
the
Asset
Purchase
Agreement
was
contract with Editec relating to the French Lottery.
¶ 13 and Ex. 5.)
a
2001
(Pl.’s SUF
Editec served as a kind of middleman, first
between the French lottery and Global, and later, between the
French lottery and Interlott.
The contract between Global and
Editec ran for a three-year term and automatically renewed for
successive
one-year
terms
unless
notice to cancel the contract. 6
either
party
gave
(Pl.’s SDF ¶ 87.)
In 2003, the French Lottery issued an RFP.
¶ 25.)
and
written
(Def.’s SUF
GTECH’s predecessor, Interlott, responded to the RFP,
ultimately
won
the
contract
with
the
French
Lottery
to
produce 575 instant lottery ticket vending machines in 2005.
(Id. ¶¶ 25-26.)
these
575
GTECH did not include the gross profits from
machines
in
its
Deferred
Payment
Component
calculations.
6
Global has also provided a copy of a 1999 contract between
it, the French Lottery and Editec. (Pl.’s Statement of Disputed
Facts (“Pl.’s SDF”) Ex. L, ECF No. 76.) This contract set forth
the terms under which the French Lottery could order lottery
machines from Global until December 31, 2001.
(Id. at Article
2.1; Article 17.)
9
F.
Other States
From December 2001 to May 2003, GTECH or its predecessor
submitted responses to RFPs to seven different lotteries – the
District of Columbia Lottery, the Michigan Lottery, the Ohio
Lottery, the Maryland Lottery, the Arizona Lottery, the Texas
Lottery, and a portion of the Pennsylvania Lottery.
¶¶ 24, 28, 32, 36, 40, 44 and 48.)
evidence
showing
that
it
offered
(Pl.’s SUF
GTECH has not produced
Counterpoint
or
Playpoint
machines to any of these lotteries.
II.
Standard of Review
Summary judgment will only be granted where “there is no
genuine
dispute
as
to
any
material
fact
and
entitled to judgment as a matter of law.”
56(a).
the
movant
is
Fed. R. Civ. P.
In the summary-judgment context, the Court must view
evidence in the light most favorable to the non-moving party,
and
must
draw
party's favor.
(1st Cir. 2011).
all
reasonable
inferences
in
the
non-moving
DeLia v. Verizon Commc'ns Inc., 656 F.3d 1, 3
Here, the parties have cross moved for summary
judgment on two issues, but have separately moved for summary
judgment
on
other
issues.
When
examining
cross-motions
for
summary judgment the applicable standard does not change, and
the court must “consider each motion separately, drawing all
inferences in favor of each non-moving party in turn.”
Green
Mountain Realty Corp. v. Leonard, 750 F.3d 30, 38 (1st Cir.
10
2014) (quoting D&H Therapy Assocs., LLC v. Boston Mut. Life Ins.
Co., 640 F.3d 27, 34 (1st Cir. 2011)).
“A genuine issue of fact exists where the evidence is such
that a reasonable jury could return a verdict for the nonmoving
party.”
Taylor v. Am. Chemistry Council, 576 F.3d 16, 24 (1st
Cir. 2009) (internal citation and quotation marks omitted).
The
fact that both sides have moved for summary judgment does not
mean that the parties agree that no questions of fact exist.
Green Mountain Realty, 750 F.3d at 38.
Finally, the court must
recognize that summary judgment has a dual nature.
The moving
party bears the initial burden of demonstrating a lack of a
material issue of fact, which shifts the burden to the nonmoving party, who then must show that the trier of fact could
rule in his favor with respect to each issue.
Borges ex rel.
S.M.B.W. v. Serrano-Isern, 605 F.3d 1, 5 (1st Cir. 2010).
III. Discussion
The parties agree that Ohio law governs the Asset Purchase
Agreement.
Under Ohio law, a party asserting a claim for breach
of contract must prove the existence of the contract, its own
performance under the contract, breach by the other party and
damages.
See, e.g., Prime Props. Ltd. P'ship v. Badah Ents.,
No. 99827, 2014 WL 265501, at *3 (Ohio Ct. App. Jan. 23, 2014).
Additionally,
when
the
party
asserting
a
breach
of
contract
seeks future profits, it must prove that the profits were within
11
the contemplation of the parties, that the loss of profits was
the probable result of the breach and that future profits are
not too speculative.
Telxon Corp. v. Smart Media of Del., Inc.,
Nos. 22098, 22099, 2005 WL 2292800, at *37 (Ohio Ct. App. Sept.
21, 2005).
Global and GTECH agree that a contract existed and that
Global performed under the contract.
Thus, the instant dispute
focuses on whether a breach of the contract occurred, and if
proximate
cause
has
been
established
showing
that
damages
resulted from any breach.
A.
Meaning of the Contract
Before analyzing whether GTECH breached the Asset Purchase
Agreement, it must first be determined whether the agreement may
be interpreted at this stage at all.
Whereas an unambiguous
contract may be interpreted as a matter of law, Mark-It Place
Foods, Inc. v. New Plan Excel Realty Trust, Inc., 156 Ohio App.
3d 65, 83 (Ohio Ct. App. 2004), “whe[n] an ambiguity resides in
the language of the contract, or the language of the contract is
unclear,
determining
the
intent
of
the
parties
becomes
a
question of fact for the trier of fact at trial,” rendering
summary judgment inapplicable.
Van Beusecum v. Cont'l Builders,
No. 06-CAE-01-008, 2004 WL 3090232, at *5 (Ohio Ct. App. Dec.
27, 2004); see also Davis v. Loopco Indus., Inc., 609 N.E.2d
144, 145 (Ohio 1993) (“[I]f a term cannot be determined from the
12
four corners of a contract, factual determination of intent or
reasonableness may be necessary to supply the missing term.”).
“[A] contract is unambiguous if it can be given a definite legal
meaning.”
Westfield Ins. Co. v. Galatis, 797 N.E.2d 1256, 1261
(Ohio 2003).
The Asset Purchase Agreement is unambiguous and thus may be
interpreted
whole,
now.
giving
The
effect
Court
to
the
has
examined
intent
of
the
the
contract
parties.
as
a
Martin
Marietta Magnesia Specialties, L.L.C. v. Pub. Utils. Comm’n, 954
N.E.2d 104, 110 (Ohio 2011).
Global and GTECH disagree about
the meaning of the portion of the Deferred Payment Component
that required GTECH to deliver “a statement of the gross profits
earned
by
GTECH
.
.
.
both
from
a
combination
of
contract
extensions and future orders from existing lottery customers of
[Global] under [Global’s] lottery contracts conveyed to [GTECH]
under the Asset Purchase Agreement” and thereafter for GTECH to
“deliver
the
Deferred
Payments
for
each
month
during
the
quarter, calculated as described below.”
Global claims that this portion of the Deferred Payment
Component
required
GTECH
to
account
for
contracts from all existing Global customers. 7
7
future
orders
and
Global’s proposed
Global and GTECH both argue that the Deferred Payment
Component is unambiguous, and yet, both parties seek to
introduce parol evidence to clarify its meaning.
Because the
Court finds that the Deferred Payment Component is unambiguous,
13
construction, however, ignores the express qualifying language
of the Deferred Payment Component.
As GTECH correctly notes,
the contract requires GTECH to account for contract extensions
and future orders “from existing lottery customers of [Global]
under [Global’s] lottery contract conveyed to [GTECH] under the
Asset Purchase Agreement.”
By its plain language, the Asset
Purchase Agreement expressly limits its application solely to
the contracts that it conveyed, which are set forth in Section
4.7(a)(1)(A).
These, and only these contracts, as well as their
extensions, fall under the Deferred Payment Component under the
provision’s plain language.
Therefore, the Court will move on to determining the merits
of the parties’ respective motions for partial summary judgment
applying this reading of the Asset Purchase Agreement.
B.
Breach of Deferred Payment Component
Global
has
moved
for
summary
judgment
broadly
on
the
question of whether GTECH breached the terms of the Deferred
Payment Component.
During oral argument, Global clarified its
position,
that
which
is
GTECH
owes
money
Payment Component due to improper accounting.
under
the
Deferred
Because questions
of fact remain, Global’s Motion for Summary Judgment on this
question is DENIED.
it need not rely upon this evidence. See Sunoco, Inc. (R & M)
v. Toledo Edison Co., 953 N.E.2d 285, 296 (Ohio 2011).
14
To support its position, Global relies on a report from a
GTECH
economic
expert,
the
who
Deferred
concludes
Payment
that
GTECH
Component.
owes
Global
$257,845
under
(Pl.’s
SUF
¶ 105.)
This GTECH report bolsters, to some extent, the report
of Global’s economic expert, who also concluded that GTECH owes
Global under the Deferred Payment Component. 8
Global misconstrues the import of GTECH’s expert report.
While clearly the report is an admission by GTECH, the expert
report
does
not
by
itself
conclusively
breached the Deferred Payment Component.
establish
that
GTECH
Bianco v. Hultsteg AB,
No. 05 C 0538, 2009 WL 347002, at *12 (N.D. Ill. Feb. 5, 2009)
(holding that statement within expert report is not a judicial
admission, but is instead an admission by party). 9
Additionally, GTECH counters both of these expert reports
by pointing to a series of gross profit statements, which GTECH
claims justify its unwillingness to remit additional payments to
Global.
(See Def.’s SDF Ex. J.)
Global fails to provide any
additional evidence that would allow the Court to ignore this
series
of
quarterly
gross
profit
statements.
(See
id.)
8
Global’s expert concluded that GTECH owed $8,970,605 under
the Deferred Payment Component.
Because Global has not moved
for summary judgment with respect to a specific amount of
damages, this discrepancy may be overlooked.
9
Global is free to use this admission against GTECH moving
forward.
15
Global’s expert certainly refutes these calculations, but GTECH
currently stands by them, despite the statements of its economic
expert.
Thus, these reports establish that questions of fact
remain on this issue, and summary judgment is inappropriate.
The Illinois Lottery 10
C.
Issuing an RFP potentially marks a landmark moment in a
government
procurement.
The
question
here
is
whether
the
contract that resulted from the Illinois RFP process in January
2004 was a new contract between GTECH and the state, or the
modification of an already existing contract.
is
close,
the
Court
finds
that
the
RFP
While this issue
resulted
in
a
new
contractual relationship between GTECH and Illinois, which began
when
a
new
contract
became
effective
on
July
1,
2004.
Therefore, for the reasons outlined in more detail below, with
respect to whether GTECH breached the Deferred Payment Component
by ceasing to report financial data from the Illinois Lottery at
the end of May 2004, Global’s Motion for Summary Judgment is
GRANTED
IN
PART
AND
DENIED
IN
PART,
and
GTECH’s
Motion
for
Summary Judgment is GRANTED IN PART AND DENIED IN PART.
10
The Court has not considered GTECH’s argument that the
Illinois Lottery was statutorily required to enter into a new
contract in 2004 because this argument was raised for the first
time in GTECH’s reply brief. Riendeau v. Astrue, No. 09-149 ML,
2010 WL 1490817, at *3 n.6 (D.R.I. Mar. 12, 2010) report and
recommendation adopted, No. 09-149 ML, 2010 WL 1486499 (D.R.I.
Apr. 13, 2010) (holding argument is waived when raised for first
time in reply brief).
16
In 1994, the Illinois Lottery issued an initial RFP, and
Global was the successful bidder.
Thereafter, Global and the
Illinois Lottery entered into a contract, which the Illinois
lottery and the parties amended a total of seven times.
transferred
its
rights
and
obligations
under
the
Global
Illinois
contract to Interlott in the Asset Purchase Agreement.
GTECH
later assumed Interlott’s responsibilities under the contract.
The
Seventh
contract,
Amendment
from
July
to
1,
the
2003
contract
extended
to
1,
July
the
2004.
existing
Under
the
amendments to the Illinois contract, the 745 lottery machines in
use in Illinois by 2004 were subject to five year-leases.
While the Seventh Amendment was in effect, the Illinois
Lottery issued a new RFP in January 2004, which called upon
bidders
to
devise
a
plan
for
providing
up
to
2,000
instant
lottery vending machines in Illinois, and to develop a strategy
for what to do with the existing 745 lottery machines then in
use.
GTECH won this bid, provided nearly 2,000 instant lottery
machines and refurbished all 745 existing machines.
Global now
claims GTECH did not properly compensate it 1) for the contract
entered into in response to the 2004 RFP or 2) for the 745
refurbished machines.
When the parties do not dispute the underlying facts, the
determination
of
question of law.
whether
a
breach
of
contract
occurred
is
a
Pettit v. Glenmoor Country Club, Inc., No.
17
2013CA000108, 2014 WL 1340098, at *3 (Ohio Ct. App. Mar. 10,
2014).
with
The crux of this dispute is whether the 2004 contract
the
Illinois
Lottery
was
an
extension
contract or an entirely new contract. 11
of
the
previous
A contract modification
does not destroy the underlying contract, and thus a modified
contract would require GTECH to pay Global under the Deferred
Payment Component.
obligations
that
Conversely, a new contract terminates the
exist
under
the
prior
contract,
and
would
result in little to no payment due under the Deferred Payment
Component.
“A modification of a contract is a change in one or more
respects which introduces new elements into the details of the
contract and cancels others but leaves the general purpose and
effect undisturbed.”
Int'l Bus. Lists, Inc. v. Am. Tel. & Tel.
Co., 147 F.3d 636, 641 (7th Cir. 1998) (interpreting Illinois
law).
“[T]he essential requirements for contract formation and
modification
consideration.”
are
identical:
Genzyme
Corp.
offer,
v.
acceptance,
Disc.
Drugs
Wis.,
and
Inc.,
No. 08 C 5151, 2010 WL 744275, at *4 (N.D. Ill. Feb. 26, 2010).
To determine whether a contract was modified or a new contract
created,
“the
issue
existing
agreement,
is
but
not
whether
rather
11
changes
whether
were
existing
made
rights
to
an
were
While the Asset Purchase Agreement is to be interpreted
under Ohio law, the contract with the Illinois Lottery is
interpreted in accordance with Illinois law.
18
significantly altered.”
Transworld Sys., Inc. v. Ohio Univ.,
No. 2003-01873-AD, 2003 WL 22905242, at *5 (Ohio Ct. Cl. Nov.
26, 2003); see also McKay Nissan, Ltd. v. Nissan Motor Corp. in
U.S.A.,
764
F.
Supp.
1318,
1319
(N.D.
Ill.
1991)
(“[T]he
modifications must effect a material alteration of the parties'
rights and obligations before it can be said that the parties
intended a new contract or agreement.”).
recognizes
that
an
RFP
signals
a
Importantly, Global
new
development
in
a
contractual relationship with a public entity, distinct from a
contract extension.
(Def.’s SUF ¶ 121.)
By issuing an RFP,
instead of merely negotiating an amendment with GTECH as it had
seven
times
willingness
prior,
to
end
the
the
Illinois
1994
Lottery
contract. 12
expressed
Following
its
GTECH’s
successful bid, GTECH and the Illinois lottery then entered into
a
new
contract,
which
ended
the
1994
contract.
This
new
contract went into effect on July 1, 2004 and was not covered by
the Deferred Payment Component because it was not transferred
under Section 4.7(a)(1)(A).
Therefore, GTECH was not required
to include profits from the nearly 2,000 new lottery machines
12
That the Seventh Amendment, unlike its predecessors,
contained no provision permitting an additional amendment adds
more credence to the conclusion that Illinois clearly sought to
end the 1994 contractual relationship in 2004. Global does not
seriously dispute this point. Instead, Global merely points out
that the Seventh Amendment did not preclude further extensions.
19
put into service under this July 1, 2004 contract, and summary
judgment will enter in GTECH’s favor on this issue.
As a fallback position, Global argues that in the event
that the Court were to find that the 2004 contract marked the
beginning of a new contractual relationship between GTECH and
the
Illinois
Illinois
Lottery,
should
continue
Payment Component.
that
these
never
745
to
machines
be
counted
already
toward
in
the
use
in
Deferred
In support of this position, Global argues
machines
officially
the
were
subject
terminated,
to
5-year
despite
terminable on 90 days’ notice in writing.
Ex. DD ¶ 11; Exs. EE-HH.)
leases
these
that
leases
were
being
(Def.’s SDF ¶ 131 and
Global notes that the 2004 contract
entered into by Illinois and GTECH required that, “[f]or the
balance of the lease term” 13 of each of these machines, Illinois
pay GTECH “the compensation payable pursuant to the [Seventh
Amended Agreement].”
would
have
been
the
(Pl.’s SUF Ex. 35 at ¶ 9.)
expiration
of
each
machine’s
Upon what
respective
lease term, Illinois would be bound by new payment terms.
(Id.)
According to Global, these two terms of the 2004 contract prove
that the leases on these 745 machines remained intact.
The Court’s finding that Illinois and GTECH entered into a
new contract in July 2004 forecloses Global’s fallback argument.
13
The machines had varied lease termination dates since
each machine’s 5-year lease terms ran from the date of its
installation.
20
Global’s entitlement to future payments derives from the 1994
contract with Illinois that it transferred to Interlott as part
of
the
Asset
Purchase
Agreement.
The
leases
on
these
machines are a part of the amendments to that contract.
SUF Ex. 35.)
745
(Pl.’s
The 2004 contract entered into by Illinois and
GTECH terminated the 1994 contract, and as a result, severed the
leases on these 745 machines and Global’s entitlement to future
payments related to them.
These machines were then governed by
new leases created by the 2004 contract.
That this new agreement called for Illinois to make the
same payment to GTECH as the earlier lease does not mean it was
a continuation of that lease.
Instead, the borrowing of that
payment term came within the larger context of GTECH attempting
to preserve a relationship with the Illinois Lottery, after the
Illinois Lottery had issued an RFP.
Therefore, the Deferred
Payment Component did not require GTECH to include gross profits
from the 745 machines already in use in Illinois after July 1,
2004, and summary judgment shall enter in GTECH’s favor on this
issue.
Because the new contract began on July 1, 2004, GTECH was
required to include gross profits from these 745 machines before
July
1,
2004.
The
undisputed
record
establishes
that
GTECH
ceased making payments under the Seventh Amended contract at the
end of May 2004.
(Pl.’s SDF Ex. J at GTECH00270.)
21
Thus, GTECH
was bound to make a payment for June 2004 under the Deferred
Payment Component for the 745 machines then in use.
to do so.
(Id.)
It failed
Therefore, summary judgment shall enter in
Global’s favor regarding GTECH’s breach of the Deferred Payment
Component in June 2004 for failing to include these 745 machines
in its Deferred Payment Component calculations.
For the reasons stated above, Global’s Motion for Summary
Judgment regarding whether GTECH breached the Deferred Payment
Component in Illinois will be granted in part and denied in
part.
GTECH’s Motion for Summary Judgment regarding whether
GTECH breached the Deferred Payment Component in Illinois will
be granted in part and denied in part.
D.
The Maryland Lottery
Next, Global argues that GTECH should not have included the
purchase of 50 Counterpoint machines in the Deferred Payment
Component
as
it
did,
but
instead
should
have
included
the
purchase of these machines in the Percentage Payment Component.
Global seeks summary judgment on this issue.
Because questions
of fact remain regarding whether these machines were properly
accounted
for,
Global’s
Motion
for
Summary
Judgment
in
this
respect is DENIED.
After
Agreement,
purchased
Global
but
50
and
before
Interlott
the
Counterpoint
deal
units.
22
signed
closed,
After
the
the
Asset
Purchase
Maryland
Lottery
these
machines
were
deployed
income
within
and
Maryland,
expenses
associated
Deferred Payment Component.
lottery
contracts
Interlott
were
and
with
GTECH
these
included
machines
the
in
the
Under the Asset Purchase Agreement,
included
in
the
Deferred
Payment
Component if they were transferred pursuant to Section 4.7 of
the agreement or “public competitive bids [were] submitted prior
to the Closing” and “an award [was] made to [Global] or to
[GTECH] pursuant to [Global’s] bid, and [GTECH] enter[ed] into a
contract with such customer either directly or by assignment
from [Global]. . . .”
under Section 4.7.
Lottery
awarded
its
No contract with Maryland was transferred
During the timeframe at issue, the Maryland
contracts
without
a
competitive
bidding
process, and thus, according to Global. this purchase would not
fall within the Deferred Payment Component.
Instead, Global
argues that the sale of 50 machines to Maryland should have
counted as a new sale for which it should have been compensated
under the Percentage Payment Component, which required GTECH to
remit
funds
associated
with
the
sale
of
new
Playpoint
and
Counterpoint machines to Global.
While Global’s position has merit, it falls short at this
point for two reasons.
First, as GTECH notes, Global’s initial
Complaint in this action stated that the Maryland Lottery should
be
included
in
the
Deferred
Payment
opposite position it now takes.
23
Component
–
(Def.’s SDF ¶ 161.)
the
exact
While the
filing of an amended complaint typically renders the original
complaint “dead letter,” Connectu LLC v. Zuckerberg, 522 F.3d
82,
91
(1st
statements
Cir.
made
2008),
in
the
under
“certain
superseded
circumstances,”
complaint
“may
be
the
party
admissions, usable as such, despite the subsequent amendment of
the complaint.”
(1st
Cir.
InterGen N.V. v. Grina, 344 F.3d 134, 144-45
2003).
These
“certain
circumstances”
typically
involve situations similar to those here, where a party’s theory
of the case changes in its amendment, as opposed to situations
where its theory is merely amplified through amendment.
Wiseman
v. Reposa, 463 F.2d 226, 227 (1st Cir. 1972) (holding original
complaint was admission where it alleged an accident occurred on
a different date than the amended complaint); Raulie v. United
States, 400 F.2d 487, 526 (10th Cir. 1968) (“Thus, while an
amended pleading by a litigant in which he assumes a position in
respect of a matter of objective fact at direct variance with an
original
pleading
earlier
filed
by
him
in
an
action,
is
effective to supersede the original pleading in respect of the
making up of issues, the earlier pleading may, nevertheless, in
the
trial
upon
the
facts,
be
exposed
as
evidence
of
the
declaration by the pleader, at an earlier date, of the factual
reality.”); see also 6 Charles Alan Wright, Arthur R. Miller, &
24
Mary Kay Kane, Federal Practice and Procedure § 1476 (3d ed.
2010). 14
Because of the amendment to the Complaint, “the superseded
portion ceases to be a conclusive judicial admission; but it
still
remains
as
a
statement
once
seriously
made
by
an
authorized agent, and as such it is competent evidence of the
facts
stated,
though
controvertible,
like
any
extrajudicial admission made by a party or his agent.”
other
Kunglig
Jarnvagsstyrelsen v. Dexter & Carpenter, Inc., 32 F.2d 195, 198
(2d Cir. 1929).
the
original
Put another way, “[a]s a matter of pleading,
complaint
ha[s]
disappeared.
against interest, it ha[s] not.”
Importantly,
“a
district
court
As
an
admission
Wiseman, 463 F.2d at 227.
may
consider
a
statement
or
allegation in a superseded complaint as rebuttable evidence when
determining whether summary judgment is proper.”
W. Run Student
Hous. Assocs. LLC v. Huntington Nat’l Bank, 712 F.3d 165, 173
(3d Cir. 2013).
Second,
Global’s
answers
to
interrogatories
state
that
Maryland should be included in the Deferred Payment Component.
(Def.’s
SDF
¶
163.)
A
district
14
court
may
properly
consider
This is not to say that Global is judicially estoppped
from asserting its new position.
“Absent some sign of unfair
advantage—and none exists here—the mere retraction of statements
made in an original complaint does not justify the invocation of
judicial estoppel.”
InterGen N.V. v. Grina, 344 F.3d 134, 145
(1st Cir. 2003).
25
answers to interrogatories at summary judgment.
56(c).
Global’s
answers
evidentiary admissions.
to
Fed. R. Civ. P.
interrogatories
constitute
Bianco, 2009 WL 347002, at *12.
Global
explains that its answers to interrogatories came at an early
point
in
the
litigation
and
argues
that
a
party
should
be
permitted to change its answer to interrogatories as it learns
more
about
shortcomings.
the
case.
This
argument
suffers
from
two
Crucially, to date, Global has not moved to amend
its answers to interrogatories, even though it is permitted to
do so.
See 8B Charles Alan Wright, Arthur R. Miller, & Richard
L. Marcus, Federal Practice and Procedure § 2181 (3d ed. 2010)
(“[I]t has been held that the court has discretion to allow
answers to interrogatories to be amended.”).
Additionally, if
Global believed that the interrogatory request came too early in
the litigation, it could have requested to provide its answers
at a later time.
Fed. R. Civ. P. 33(a)(2); 8B Wright, Miller, &
Marcus, supra § 2167.
Taking into account all of the evidence presently before
the Court, questions of fact remain on this issue, and summary
judgment is inappropriate.
For that reason, Global’s Motion for
Summary Judgment on this issue will be denied.
E.
French Lottery
As discussed in Section III.C, supra, the issuance of an
RFP that results in a new contract signals a change in the
26
relationship between a governmental entity and a company that
provides it with goods and services.
entered
into
an
agreement
under
In 2001, Global and Editec
which
Editec
would
serve
as
Global’s distributor in France.
(Pl.’s SDF ¶ 13.)
The contract
between
for
term,
Global
and
Editec
ran
a
three-year
which
automatically renewed for additional successive one-year terms
unless
either
party
(Pl.’s SDF ¶ 87.)
provided
written
notice
of
cancellation.
GTECH apparently never provided Editec with
written notice that the agreement between the two companies had
ended.
Global, Editec and the French lottery entered into a
contract in 1999.
transferred
as
Global and GTECH agree that this contract was
part
of
the
Asset
Purchase
Agreement.
Critically, however, this contract expired by its own terms on
December 31, 2001.
17.)
(Pl.’s SDF Ex. L at Article 2.1, Article
No evidence in the record indicates that this contract was
ever extended.
In 2003, the French Lottery issued an RFP for new lottery
machines.
Editec,
GTECH’s predecessor responded to the RFP, without
and
ultimately
agreement
with
production
of
machines.
the
575
won
French
new
the
contract,
lottery
instant
(Def.’s SUF ¶¶ 25-26.)
in
lottery
entering
June
2005
ticket
into
for
an
the
dispensing
Global now claims that the
2005 contract with the French lottery should have been included
in the Deferred Payment Component.
27
Global’s position overlooks the impact of the new contract
entered into as a result of the RFP as discussed in Section
III.C, supra,
and
that
the
1999
contract
conveyed
under
Asset Purchase Agreement expired by its own terms.
the
The 2005
contract was not conveyed in the Asset Purchase Agreement and
need not have been included in the Deferred Payment Component.
For
the
foregoing
reasons,
GTECH’s
Motion
for
Summary
Judgment regarding the French Lottery will be granted.
F.
Other States
Finally,
Payment
Global
Component
claims
by
that
failing
GTECH
to
breached
market
the
the
Deferred
Counterpoint
and
Playpoint lottery machines in connection with future procurement
opportunities.
It is undisputed that GTECH or its predecessor
bid on contracts with seven different lotteries from December
2001 to May 2003. (Pl.’s SUF ¶¶
In
none
of
these
bids
Counterpoint machines.
breached
the
“continue
to
did
GTECH
include
Playpoint
or
Therefore, according to Global, GTECH
Percentage
market
24, 28, 32, 36, 40, 44 and 48.)
Payment
Playpoint
Component
and
by
Counterpoint
failing
units
to
(‘PC
Units’)” during the five-year period covered by the Percentage
Payment
Component
procurements
procurement
as
“by
to
offering
which
specifications
the
such
in
PC
connection
units
equipment
with
new
meet
applicable
to
prospective
customers of Buyer at gross profit margins that are no greater
28
than those at which Buyer's similar or competitive equipment is
offered
to
the
same
customer
in
connection
with
such
procurement.” (Pl.’s SUF ¶ 11 and Ex. 4.)
GTECH claims that Global has completely failed to present
evidence
that
its
failure
to
offer
proximate cause of Global’s damages.
summary
judgment.
Because
the
these
machines
was
the
Both sides have moved for
Court
agrees
that
Global
has
failed to prove causation, GTECH’s Motion for Summary Judgment
concerning its marketing efforts will be GRANTED and Global’s
Motion for Summary Judgment is DENIED.
Global’s claim that GTECH failed to market its products
seeks lost profits that Global claims it would have earned if
not
for
GTECH’s
wrongful
conduct.
“[L]ost
profits
may
be
recovered only if: (1) foreseeable - the profits were within the
contemplation of the parties at the time the contract was made;
(2) proximately caused - the loss of profits was the probable
result of the breach of contract; and (3) the profits are not
too remote or speculative - they may be shown with reasonable
certainty.”
Telxon, 2005 WL 2292800, at *37; see also Charles
R. Combs Trucking, Inc. v. Int'l Harvester Co., 466 N.E.2d 883,
887 (Ohio 1984) (same).
“Proximate cause requires that the loss
of profits is the probable result of the breach of contract.
Otherwise stated, the damages must have been directly caused by
29
the wrongful breach, not by something else.”
Texlon, 2005 WL
2292800, at *37.
“Both the existence and the amount of lost profits must be
demonstrated with reasonable certainty to be recoverable.”
Bobb
Forest Prods., Inc. v. Morbark Indus., Inc., 783 N.E.2d 560, 579
(Ohio Ct. App. 2002) (internal citations omitted).
“A fact is
‘reasonably certain’ if it is probable or more likely than not.”
Id.
The absence of evidence proving proximate cause means an
award of damages would be speculative.
DeMuesy v. Haimbaugh,
No. 91AP-212, 1991 WL 281411, at *11 (Ohio Ct. App. Dec. 31,
1991).
A plaintiff has the burden of proving proximate cause.
It
may satisfy this burden in the same way plaintiffs are able to
prove lost profits generally.
Cf. AGF, Inc. v. Great Lakes Heat
Treating Co., 555 N.E.2d 634, 638 (Ohio 1990).
This can be done
through expert testimony, economic data, and other means.
at
640.
Here,
damages,
but
Instead,
Global
Global
has
not
simply
has
an
expert
given
an
opinion
states
that
its
who
on
has
opined
proximate
machines
Id.
about
cause.
would
have
satisfied the requirements listed by the respective lotteries,
and assumes damages as a result. 15
15
Global has fallen short in
Practically speaking, Global could have retained an
expert to opine about whether the Playpoint and Counterpoint
machines would have satisfied the RFPs from the various states
Global has identified.
30
its
proof
proximate
GTECH’s
by
offering
cause
Motion
except
for
only
supposition,
for
supposition.
Summary
Judgment
and
with
no
For
evidence
that
respect
of
reason,
to
its
Motion
for
marketing efforts is granted.
IV.
Conclusion
For
the
reasons
stated
above,
Plaintiff’s
Partial Summary Judgment is GRANTED IN PART AND DENIED IN PART
and Defendant’s Motion for Partial Summary Judgment is GRANTED
IN PART AND DENIED IN PART.
IT IS SO ORDERED.
William E. Smith
Chief Judge
Date: November 5, 2014
31
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?