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Paul, Weiss secured a significant appellate victory for audiovisual and multimedia company Cypress Technology Co. when the Ninth Circuit reversed a $26 million verdict in a breach of contract case brought by OWLink Technology.

OWLink, a manufacturer of video, audio and control signal transmitting technology, entered into an exclusive business management agreement (EBMA) with Cypress in 2014, under which Cypress would serve as the supplier of certain products for third party Crestron Electronics, with OWLink serving as the middleman. The EBMA also provided that Cypress and Creston would enter into a separate agreement, known as the ODM contract, and that if the ODM was terminated, the EBMA would also be terminated. In 2020, Creston terminated the ODM with Cypress, entering into a new agreement with Cypress a short time later. When Cypress reminded OWLink that the termination of the ODM had also terminated the EBMA, OWLink sued for breach of contract in California state court in February 2021.

The case was removed to the Central District of California in April 2021, culminating in a trial in July 2023 in which the jury awarded more than $26 million in damages to OWLink on the premise that the EBMA was not validly terminated. The district court denied Cypress鈥檚 post-trial motions for judgment as a matter of law and for a new trial. Paul, Weiss was retained for the appeal.

On appeal, we argued that the district court erred because the question of whether the EBMA was validly terminated was a pure question of contract interpretation that should have been resolved as a matter of law instead of submitted to the jury, and that the court compounded the error with a faulty jury instruction on whether, under California law, the ODM contract was 鈥渋ncorporated by reference鈥� in the EBMA. The errors warranted a full new trial, we asserted.

In a 2-1 decision, the Ninth Circuit reversed, vacated and remanded the case for a new trial, finding that the language of the EBMA was clear that a termination of the ODM contract鈥攅ven for just a minute鈥攚ould also terminate the EBMA. The panel also held that OWLink attempted to circumvent the plain language of the EBMA by suggesting that there was never truly a termination of the ODM because the relationship between Cypress and Creston continued with a new contract; and that OWLink is not 鈥渄efenseless鈥� to Cypress and Creston cutting it out of the relationship, as it claimed to be, because under the EBMA, OWLink can recover two years鈥� worth of the value of contract.

The Paul, Weiss team included litigation partner Kannon Shanmugam.