Sandhaus' business dealings with DSPI and SFC are similar to the facts in Directors Guild. There the court held the principal and a sibling corporation jointly and severally liable for the contracting corporation's judgment. A similar result is justified in this case. Accordingly, defendants Sandhaus and SFC are jointly and severally liable under the 1978 Letter.
III. Weinreich's Work on the Silver System was Sufficient to Entitle Him to Recover under the 1978 Letter
Defendants contend that Weinreich's work on the Silver system was not competent, and thus he is not entitled to recovery under the 1978 Letter as a consequence of his failure to perform pursuant to the agreement. The same argument is used by the Defendants in seeking recovery under their counter-claims. A party to a contract can expect performance with "reasonable care and competence owed generally by practitioners in the particular trade or profession." Milau Assoc., Inc. v. North Ave. Dev. Corp., 42 N.Y.2d 482, 398 N.Y.S.2d 882, 885, 368 N.E.2d 1247 (1977).
In 1978, the laser light show business was in its infancy. As Sandhaus testified, a year earlier he had evaluated approximately eight entities that were creating laser light show systems; he found none of them responsible, and thus worked with Metz and Weinreich to create their own system. Essentially, they were starting a new venture in uncharted territory.
The parties concede that there were several problems with the Silver system, such as the tilting mechanism and the silver housing. Indeed, the system was not used by its intended client, Foreigner. Nonetheless, the Silver system was used at various venues, including the Xenon disco and the Waldorf-Astoria. More importantly, Sandhaus continued to work with Weinreich for more than a year after Foreigner rejected the Silver system. It is simply not credible that Sandhaus would continue to work with someone for another year after determining that his services were incompetent. Accordingly, Weinreich's performance in connection with the Silver system was reasonable, given the state of the laser light show business at that time. For the same reasons, Defendants' counter-claims are dismissed.
IV. The 2000 System is Similar or Derivative of the Silver System: the 360 System is Not
The 1978 Letter provided that Weinreich would be entitled to one-third the net profits of all products that are similar to or derivative of the Silver system. Not surprisingly, the parties disagree as to the meaning of the phrase "similar or derivative." Weinreich urges a broad interpretation while the Defendants maintain that a narrow reading is appropriate.
In construing contractual provisions, courts must initially determine if the language is ambiguous. Language in a contract is "ambiguous if it is reasonably susceptible of more than one interpretation." Burger King Corp. v. Horn & Hardart Co., 893 F.2d 525, 527 (2d Cir. 1990). Moreover, "language whose meaning is otherwise plain is not ambiguous merely because the parties urge different interpretations in the litigation." Metropolitan Life Ins. Co. v. RJR Nabisco, Inc., 906 F.2d 884, 889 (2d Cir. 1990) (citations omitted). Reference to an extrinsic standard that makes the meaning clear is appropriate. See Mar Oil, 982 F.2d at 840. Neither the terms "similar" nor "derivative" are ambiguous in this context. Both terms are readily defined by reference to a standard dictionary. Webster's Ninth New Collegiate Dictionary 342, 1098 (1985) defines similar as: "1: having characteristics in common . . . 2: alike in substance or essentials." Derivative is defined as: "1: formed by derivation 2: made up of or marked by derived elements."
Both the 2000 system and the Empire State Building system are similar to and derivative of the Silver system. The 360 system and all other systems developed after 1982 are not.
Both the Silver system and the 2000 system are substantially similar: the basic design function and the optical path geometry of the two systems were the same, and they both have nearly identical components, except to the extent that the 2000 has certain improved features. Significantly, the functioning of the galvanometers -- which direct the laser beams -- are nearly identical in both systems. The Empire State Building system was also similar to the Silver system. In fact, the evidence indicates that the Empire State Building system was simply a modified 2000.
In contrast, the 360 system was a significant departure from the Silver and 2000 systems. Unlike the prior laser light show systems developed by DSPI and SFC, the 360 could project a figure over 360 degrees without an image rotation problem. This was a significant development that was due to an entirely new assembly for the galvanometers. As O'Brien stated:
Unlike the [Silver or 2000 systems], which use one or several parallel pairs of fixed galvos for simultaneous projection from a stationary projector box, the new 360 series uses only one pair of galvos mounted in an elaborately articulated assembly. The galvos rotate in tilt motion as a pair together on a subassembly. In addition, this entire subassembly, rotates 360 degrees on the pan axis, hence the name 360 series. Ex. AF, at P 12.
As such, the 360 was not similar since the galvanometer characteristic between this system and the prior systems were not at all in common. Moreover, the 360 was not derivative since the galvanometer assembly, which is a significant element of these systems, was entirely new.
V. Damages for Breach of the 1978 Letter
Pursuant to the 1978 Letter, Weinreich is entitled to one-third the net profits of the Silver and 2000 systems. Certain calculations are not in dispute. For the Silver system, the profits are a negative $ 20,289.20. The parties, however, strenuously contest the calculation of the net profits for the 2000 series.
Plaintiff bears the burden of proving damages. Manshul Constr. Corp. v. Dormitory Authority, 79 A.D.2d 383, 386, 436 N.Y.S.2d 724, 728 (1st Dep't 1981).
According to the Defendants' calculations for the 1978 to 1981 period, total income for the 2000 system was $ 1,664,818.28, and total costs were $ 1,734,216.56, leaving a negative balance of $ 69,398.28. As set forth above, costs should be deducted by $ 160,050.02, leaving a total cost of $ 1,574,166.54, and income should be increased by $ 3,410.00, for a total income of $ l,668,228.28.
Consequently, the net profits of the 2000 system were $ 94,061.74. From this amount should be deducted the negative balance from the Silver system of $ 20,289.20, for a total net profit of $ 73,772.54. Weinreich is entitled to one-third this amount, $ 24,590.85, minus the draw on profits he previously received. Weinreich was advanced $ 14,875.00, of which $ 10,700.00 should be deducted for work on the Kiss project. The total draw is thus $ 4,175.00, and the total amount that Weinreich is entitled to is $ 20,415.85 for the 1978 to 1981 period.
Weinreich also seeks damages for the use of the 2000 system after 1981. Based on the Court's finding above, Weinreich is entitled to one-third the sum of the following: $ 82,875.00 for income received by SFC for the first five months of 1982; $ 25,625.00, which represents one-sixteenth of the income received from the Knoxville Worlds Fair show;
$ 13,750.00, which -- for the same reasons as the indoor show at Knoxville -- represents one-fourth of the amount received for the show in Sao Paulo, Brazil; $ 5,334.88, for an earlier 2000 sale to Palace Management; and $ 7,500.00, which represents one-half of the revenue generated by the New York Harbor show in July 1982. The total income for all these projects is $ 135,084.88. For post-1981 uses of the 2000 system, seventy-five percent of the total income equals the net profit, according to the Sandhaus allocation referred to in footnote 13 above. The net profit is thus $ 101,313.66. One-third of this total is $ 33,771.22.
Weinreich's total damages under the breach of contract cause of action are $ 54,187.07. Pursuant to N.Y. Civ. Prac. L. & R. § 5001 (a) & (b) (McKinney 1992) ("CPLR"), Weinreich is entitled to interest on the breach of contract damages. The interest rate is six percent for pre-June 25, 1981 damages, and nine percent thereafter. CPLR § 5004. The interest is to be computed when the damages were incurred, "or upon all of the damages from a single reasonable date." CPLR § 5001 (b). For the 1978 to 1981 period, an appropriate date for the interest to begin to be computed is June 30, 1980. For the 1982 and 1983 period, the interest should begin to be computed on June 30, 1982.
VI. The Quantum Meruit Cause of Action
Plaintiff Weinreich also seeks recovery under quantum meruit from the Defendants for work performed on projects other than the Silver system. In connection with the 2000 system, Weinreich contends -- without citing to any authority -- that he is entitled to quantum meruit for the work he did on this system, even though he is receiving one-third of the net profits under the 1978 Letter. It is well settled that recovery in quantum meruit is unavailable where an express contract covers the subject matter. Yonkers v. Otis Elevator Co., 844 F.2d 42, 48 (2d Cir. 1988). The 1978 Letter does not address Weinreich's work on systems subsequent to the Silver system. However, courts can imply terms in a contract, either in fact or in law:
"Implied terms have been divided into three categories: (1) terms that the parties intended, (2) terms that the parties would have intended had they thought about it and (3) terms that are fair. The first involves a search for the parties' intention, the second involves a search for the parties' hypothetical intention, the third has nothing to do with the parties' intention, except that the court will generally not imply a term in the face of the parties' expressed intent to the contrary . . . . "Implied in law" or "constructive" terms . . . include the second and third categories. Yonkers, 844 F.2d at 46 (quoting Hadjlyannakis, The Parol Evidence Rule and Implied Terms: The Sounds of Silence, 54 Fordham L. Rev. 35, 38 n. 22 (1985)).
At trial, neither party proffered evidence concerning the first category of implied terms. Consequently, the Court considers whether a provision concerning the 2000 system is implied in law under either the second or third category for the 1978 Letter. During 1978 and 1979 the parties -- and especially Weinreich
-- acted as joint venturers. Although this collaboration never came to fruition, had "they thought about it," 844 F.2d at 46, the parties would have provided that Weinreich was entitled to one-third of the net profits from the 2000 system as well. More importantly, in any event the parties would not have provided that Weinreich was entitled to one-third of the profits and an hourly wage for work performed in connection with the 2000 system. For the same reasons, such a provision is fair as well. Accordingly, Weinreich may not recover an amount in quantum meruit for the work he did on the 2000 system.
He may, however, seek quantum meruit for work done on other projects. To recover in quantum meruit, a party "must establish performance of his services in good faith, acceptance of the services by persons to whom such services were rendered, expectation of compensation, and the reasonable value of such services." Paper Corp. of United States v. Schoeller Technical Papers, Inc., 773 F. Supp. 632, 640-41 (S.D.N.Y. 1991) (citing Martin H. Bauman Assocs. v. H&M Int'l Transp., Inc., 171 A.D.2d 479, 567 N.Y.S.2d 404 (1st Dep't 1991)). Plaintiff bears the burden of proof in quantum meruit actions. Miller v. Maryland Casualty Co., 114 Misc. 2d 713, 452 N.Y.S.2d 309, 311 (N.Y. Civ. Ct. 1982).
Based on the evidence presented, Weinreich has met the first three prongs of the quantum meruit test. Weinreich performed services for the Defendants at various times from April 1978 to September 1979. During this time, it is not disputed that Weinreich worked on various projects for the Defendants. These services were accepted by the Defendants and despite the present complaints about the quality of these services, and despite the failure of the Silver system, Sandhaus again worked with Weinreich on the 2000 system and the Kiss project, thus recognizing in fact the experimental nature of the work being performed.
The third prong of the quantum meruit test has also been met. Throughout their collaboration, Weinreich believed that he, Sandhaus and Metz would be joint venturers. Ultimately, this venture never materialized. It is reasonable to conclude that Weinreich would nonetheless expect to be compensated. Indeed, it is inconceivable that Weinreich would have worked for the Defendants at various times over eighteen months for free.
Weinreich's difficulty in recovering under quantum meruit is the fourth prong, a reasonable value for the services rendered. Specifically, the evidence presented does not support Weinreich's contention that he should be compensated at $ 60.00 an hour for work allegedly performed for the Defendants for forty hours a week for 78 weeks. To begin with, the work Weinreich did on the 2000 system is covered by the 1978 Letter and thus recovery under quantum meruit is not appropriate. The primary evidence presented in support of Weinreich's contention that he worked full time for 78 weeks is his own testimony, which was not credible on this issue.
Weinreich neither kept time records nor ever billed the Defendants for work he allegedly performed. Moreover, Weinreich was unable to specify how much time he spent on any particular project on any particular day. In contrast, in Paolangeli v. Thaler, 187 A.D.2d 881, 882, 590 N.Y.S.2d 316, 317 (3rd Dep't 1992), the court dismissed defendant's contention that there had been a failure to prove reasonable value of service when the plaintiff proffered detailed daily records of his work.
Accordingly, Weinreich has not carried his burden to prove that he worked full time for eighteen months.
However, as detailed below, there were specific projects that Weinreich worked on during this eighteen month period in which the evidence supports a quantum meruit recovery. For these projects, a reasonable per hour rate is $ 25.00. This amount is based on contemporaneous work that Weinreich performed for the Defendants. For instance, Weinreich was paid $ 250.00 to work for the Defendants on a Bulova project for one day. Similarly, the evidence shows -- and Weinreich does not dispute -- that he worked for approximately three months on the Kiss project, for which he was paid $ 10,700.00. These two projects indicate that Weinreich was paid approximately $ 25.00 per hour for the work he did for the Defendants.
There are certain projects for which Weinreich has already been paid, and thus is not entitled to any further compensation. These projects are: the Foreigner centerfold, for which he was paid $ 500.00; the Bulova project, for which he was paid $ 250.00; and the Washington Hilton project, for which he was paid $ 250.00. In addition, Weinreich was paid $ 10,700.00 for the Kiss project.
The evidence does support the conclusion that Weinreich be compensated for specific projects that he worked on. In May 1978, Weinreich worked on the Laser Tinker Bell project. The evidence indicates that the project was designed and fabricated very quickly, and that Weinreich delivered it to the client in Philadelphia. Appropriate payment for this project is $ 400.00, representing two days work. In January 1979, Weinreich worked "a little bit" with Metz on a laser video report. An appropriate payment for this project is $ 100.00, representing a half day of work. At about the same time, Weinreich worked on a trade show booth and brochure, and also attended one of the trade shows. Except for testimony about attendance at the trade show, no evidence was introduced concerning the amount of time spent on these projects. An appropriate payment would be $ 1000.00, representing five days work.
Weinreich also seeks quantum meruit recovery for three separate projects concerning certain laser effects: a color chopper, a beam stealer and a laser chaser. Recovery is not appropriate for the work done on these projects since they were all intended to be components of the 2000 system.
In sum, Weinreich is entitled to $ 1,500.00 in quantum meruit. Weinreich is also entitled to interest on the quantum meruit damages. See Govern & McDowell v. McDowell & Walker, Inc., 75 A.D.2d 979, 428 N.Y.S.2d 367, 368 (3rd Dep't 1980). The interest rate is six percent for pre-June 25, 1981 damages, and nine percent thereafter. CPLR § 5004. The interest is to be computed when the damages were incurred, "or upon all of the damages from a single reasonable date." CPLR § 5001 (b). An appropriate time for this interest to begin to be computed is June 30, 1979.
Judgment against the Defendants will be entered awarding Weinreich the sum of $ 55,687.07, and interest on that amount as set forth above. Settle judgment on notice.
It is so ordered.
New York N. Y.
April 28, 1994
ROBERT W. SWEET