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`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF NEW YORK
`_______________________________________________
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`ASSEMBLY POINT AVIATION, INC.,
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`Plaintiff,
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`1:13-CV-298
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`OF COUNSEL
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`JOHN J. HENRY, ESQ.
`ROBERT S. ROSBOROUGH, IV, ESQ.
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`v.
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`RICHMOR AVIATION, INC.,
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`Defendant.
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`_______________________________________________
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`APPEARANCES
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`WHITEMAN OSTERMAN &
`HANNA LLP
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`One Commerce Plaza
`Suite 1900
`Albany, New York 12260
`Attorneys for Plaintiff
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`TABNER, RYAN & KENIRY, LLP
`18 Corporate Woods Boulevard
`Albany, New York 12211-2605
`Attorneys for Defendant
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` WILLIAM RYAN, JR., ESQ.
`BRIAN M. QUINN, ESQ.
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`SCULLIN, Senior Judge
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`MEMORANDUM-DECISION AND ORDER
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`I. INTRODUCTION
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`Pending before the Court is Plaintiff's motion for judgment as a matter of law pursuant to
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`Rule 50 of the Federal Rules of Civil Procedure or, in the alternative, for a new trial pursuant to
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`Rule 59 of the Federal Rules of Civil Procedure. See Dkt. No. 102.
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`Case 1:13-cv-00298-FJS-DJS Document 109 Filed 05/19/17 Page 2 of 12
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`II. BACKGROUND
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`Plaintiff owns a Gulfstream IV aircraft ("Aircraft"). Defendant maintains, services,
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`provides crews for, and brokers charter flights on third parties' aircraft. In January of 2001,
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`Plaintiff and Defendant entered into a lease agreement whereby Defendant would procure charter
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`flights on the Aircraft in exchange for a 15% commission of the resulting charter revenue.
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`Specifically, the lease provided that Defendant would "remit 85% of the charter rate per hour
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`flown" to Plaintiff. The Lease incorporated by reference the parties' Management Agreement.
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`The Management Agreement defines the term "Flight Hour" to mean "the time of take-off to
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`landing (i.e., wheels up to wheels-down), as recorded time on the Aircraft hour meter, or, if
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`nonfunctional for any reason, as indicated in the journey log entries."
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`The parties do not dispute that they intended the Lease to limit Plaintiff's payment to
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`hours that the Aircraft was actually in the air during a charter flight. Nor do the parties dispute
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`that Plaintiff received payment for all hours that the Aircraft actually flew. Rather, the critical
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`issue in this case is whether the parties orally modified the Lease to provide that Defendant
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`would remit to Plaintiff payment for unused flight hours accrued through a contract Defendant
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`entered into with Sportsflight Air., Inc. ("SFA").
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`In early 2002, Defendant explained that he had arranged an opportunity whereby
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`Plaintiff's aircraft could be leased to the United States government for a high volume of charter
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`flights. Defendant's prospective client was SFA, a subcontractor that would in turn charter the
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`Aircraft to the government. Defendant reported to Plaintiff that SFA agreed to guarantee 250
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`hours during the first six months. SFA thereafter had the option to renew month-to-month for a
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`Case 1:13-cv-00298-FJS-DJS Document 109 Filed 05/19/17 Page 3 of 12
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`minimum of fifty flight hours per month. The SFA contract, while identifying the Aircraft by its
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`registration number, does not mention Plaintiff.
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`Plaintiff asserts that it agreed to forego certain of its rights under the Lease because
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`Defendant represented that chartering the Aircraft to SFA would entitle Plaintiff to revenue for a
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`guaranteed minimum number of flight hours per month even if the Aircraft did not fly those
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`hours. According to Plaintiff, the parties made the following oral agreement in connection with
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`the SFA contract: first, Plaintiff and Defendant agreed that Plaintiff would subordinate its access
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`priority to the Aircraft for the duration of the SFA contract; second, they agreed that SFA would
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`receive a discounted charter rate of $4,900 per hour, as opposed to the Lease's stated rate of
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`$5,100.
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`For several years Defendant chartered airplanes for SFA and was paid for the actual flight
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`time, but not for the difference between the actual time and the minimum monthly amount.
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`During this time, Defendant paid Plaintiff 85% of the revenue for the hours SFA chartered the
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`Aircraft; however, the invoices reflecting these payments did not mention the unused flight
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`hours.
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`Defendant subsequently sent SFA an invoice in the fall of 2006 for unused flight time for
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`which SFA had guaranteed payment as part of its 50-hour monthly minimum. Defendant gave
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`SFA a discount of some 305 hours to account for flights that the Aircraft was chartered to third
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`parties and accordingly not available for SFA's use. When SFA failed to pay Defendant's 2006
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`invoice, Defendant sued SFA in Supreme Court, Columbia County, to recover the value of the
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`unused flight hours. After prevailing in a bench trial, then-Plaintiff Richmor obtained a
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`judgment that was adjusted to $874,650; the parties subsequently settled for $775,000. See
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`Richmor Aviation, Inc. v. Sportsflight Air, Inc., 82 A.D.3d 1423, 1426-27 (3d Dep't 2011).
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`Case 1:13-cv-00298-FJS-DJS Document 109 Filed 05/19/17 Page 4 of 12
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`After Defendant settled the state-court litigation with SFA, Plaintiff demanded that
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`Defendant pay it the entire settlement because the settlement represented less than 85% of the
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`total value of the unused flight time. Mr. Richards, Defendant's President, testified that he
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`considered gifting a portion of the state-court settlement to Plaintiff; however Plaintiff never
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`received any proceeds from the state-court settlement.
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`Plaintiff then commenced this action seeking, among other things, payment of at least
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`"$2,047,514, together with contract interest, costs[,] and attorneys' fees." See Dkt. No. 1,
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`Complaint, at ¶¶ 66-75. According to Plaintiff, this amount represented the total value of unused
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`flight time accrued under the SFA contract. After the Court's partial grant of Defendant's motion
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`to dismiss, see Dkt. No. 24, Plaintiff's single remaining cause of action was for breach of
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`contract.
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`The parties then cross-moved for summary judgment pursuant to Rule 56 of the Federal
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`Rules of Civil Procedure. See Dkt. Nos. 55, 58. The Court denied both parties' motions after
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`finding that there were genuine factual disputes as to whether the parties orally modified the
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`original lease and whether the account stated defense applied.
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`Thereafter, a jury trial commenced, at the end of which, the jury found as follows: (1) the
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`parties orally modified their contract to provide that Defendant remit 85% of the SFA contract's
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`proceeds, including all money related to unused flight hours, to Plaintiff; and (2) Defendant's
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`account stated defense applied. As a result of the jury's findings, the Court entered judgment in
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`Defendant's favor. Plaintiff then timely filed the pending motion for judgment as a matter of law
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`or, in the alternative, for a new trial.
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`Case 1:13-cv-00298-FJS-DJS Document 109 Filed 05/19/17 Page 5 of 12
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`III. DISCUSSION
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`A. Motion for a new trial
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`1. Standard of review
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`A court may grant a new trial "for any reason for which a new trial has heretofore been
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`granted in an action at law in federal court[.]" Fed. R. Civ. P. 59(a)(1)(A). The grounds that
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`may justify a new trial include, among others, a verdict that is against the weight of the evidence,
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`see Raedle v. Credit Agricole Indosuez, 670 F.3d 411, 417 (2d Cir. 2012), and non-harmless
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`errors in jury instructions, see United States v. Kozeny, 667 F.3d 122, 130 (2d Cir. 2011), or
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`verdict sheets, see Armstrong ex rel. Armstrong v. Brookdale Univ. Hosp. & Med. Ctr., 425 F.3d
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`126, 136 (2d Cir. 2005).
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`"'[A] decision is against the weight of the evidence . . . if and only if the verdict is [(1)]
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`seriously erroneous or [(2)] a miscarriage of justice.'" Raedle, 670 F.3d at 417-18 (quoting
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`Farrior, 277 F.3d at 635) (other citation omitted). Furthermore, "a motion for a new trial may be
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`granted even if there is substantial evidence to support the jury's verdict." United States v.
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`Landau, 155 F.3d 93, 104 (2d Cir. 1998) (citations omitted). "Also . . . a trial judge considering
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`a motion for a new trial 'is free to weigh the evidence himself and need not view it in the light
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`most favorable to the verdict winner.'" Id. (quoting Bevevino, 574 F.2d at 684).
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`2. Account stated jury instruction
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`Plaintiff's motion for a new trial focuses on Defendant's account stated defense and
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`whether and how it applies to this case. In short, Plaintiff argues that the jury's verdict is
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`inherently contradictory, thus seriously erroneous, because it found that the parties modified their
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`contract while at the same time finding that the account stated defense applied. As a first step in
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`Case 1:13-cv-00298-FJS-DJS Document 109 Filed 05/19/17 Page 6 of 12
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`its analysis, the Court must consider the applicable legal principles that govern an account stated
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`defense.
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`a. Account stated
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`"'An account stated is an agreement between parties to an account based upon prior
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`transactions between them with respect to the correctness of the account items and balance due.'"
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`Seacon Corp. v. Cellect, LLC, No. 6:06-CV-1022, 2009 WL 2495949, *4 (N.D.N.Y. Aug. 12,
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`2009) (quotation omitted). "An agreement as to the amount due is implied where an invoice is
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`received and kept without objection made within a reasonable time." Id. (emphasis added).
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`However, a claim or defense based on account stated "fails where there has not been an account
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`rendered, or where there is a dispute as to whether the account is accurate." Id.; see also Seneca
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`Pipe & Paving Co., Inc. v. South Seneca Cent. Sch. Dist., 83 A.D.3d 1540, 1542 (4th Dep't 2011)
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`(finding that a plaintiff failed to prove an account stated claim where the defendant "asked for a
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`break-down" of what was due and refused to pay part of an invoice). "The failure to object raises
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`a presumption of correctness which may be rebutted by proof of any circumstances tending to a
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`contrary inference[.]" James Talcott, Inc. v. U.S. Tel. Co., 52 A.D.2d 197, 200 (1st Dep't 1976)
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`(citation omitted).
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`Importantly for the present purposes, "an account stated cannot be made an instrument to
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`create liability when none otherwise exists[.]" Martin H. Bauman Assocs., Inc. v. H & M Int'l
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`Transport, Inc., 171 A.D.2d 479, 485 (1st Dep't 1991). Rather, an account stated "assumes the
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`existence of some indebtedness between the parties or an express agreement to treat the
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`statement in question as an account stated[.]" Id. (citation omitted). In that regard, "'[a]n
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`account stated is an agreement, independent of the underlying agreement, regarding the amount
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`due on past transactions.'" Duane Reade v. Cardinal Health, Inc., 21 A.D.3d 269, 269-70 (1st
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`Case 1:13-cv-00298-FJS-DJS Document 109 Filed 05/19/17 Page 7 of 12
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`Dep't 2005) (quotation omitted). Moreover, "a claim for an account stated may not be utilized
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`simply as another means to attempt to collect under a disputed contract." Bauman Assocs., 171
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`A.D.2d at 485. If a party "can prove an enforceable contract, then it will be able to recover under
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`[that] cause of action," and the account stated defense will not apply. Id.
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`With these standards in mind, an important principle appears. An account stated must be
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`in reference to an underlying contract. In other words, the account stated doctrine may set the
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`terms of an underlying contract but it cannot create or void a contract on its own. This principle
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`was on display in Media Tenor Int'l AG v. Medco Health Solutions, Inc., No. 13 Civ. 7223, 2014
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`WL 2933215 (S.D.N.Y. June 27, 2014), a case on which Plaintiff relies heavily. In Media
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`Tenor, the parties entered into an agreement to "engage in a set of transactions and [their
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`agreement] set[] the amount due for those transactions." Id. at *8. After the agreement was
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`terminated, the plaintiff sought to recover for an account stated based on invoices that it had sent
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`to the defendant pursuant to the agreement and that the defendant had retained without objection.
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`These invoices covered the months of August, September, and October 2010. The defendant,
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`however, had cancelled its contract with the plaintiff in early September pursuant to a clause that
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`allowed cancellation upon providing 30 days' notice. There was, however, a remaining issue
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`with respect to whether the cancellation was proper. In that regard, in granting summary
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`judgment to the defendant on the plaintiff's account stated claim, the court reasoned that, "[i]f
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`[the plaintiff] were to lose its contract claims at trial [(i.e., the proper cancellation claims)], it
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`would not be entitled to the amount due under its invoices." Id. (citation omitted). In other
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`words, if the defendant properly cancelled the contract, the un-objected to invoice was a legal
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`nullity because it had been received after the contract had been cancelled. The Court explained,
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`"[the plaintiff] argues that the existence of the underlying agreement does not bar, and is in fact
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`Case 1:13-cv-00298-FJS-DJS Document 109 Filed 05/19/17 Page 8 of 12
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`necessary for, an account stated claim. This is true. But the underlying agreement here also
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`defines the amount due. Because it does, the account stated claims must be dismissed." Id.
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`(emphasis added). In essence, the court concluded that a party could not rely on an account
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`stated claim when there was an underlying contract that clearly set forth the parties' obligations.
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`Therefore, the Media Tenor court held that the plaintiff could not use the mere act of sending an
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`invoice to void the terms of the parties' underlying agreement. See id.
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`b. Jury instruction
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`Plaintiff argues that the Court should order a new trial because its jury instructions
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`improperly included an instruction regarding the account stated defense. "A jury instruction is
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`erroneous if it misleads the jury as to the correct legal standard or does not adequately inform the
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`jury on the law." Anderson v. Branen, 17 F.3d 552, 556 (2d Cir. 1994) (citations omitted). An
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`erroneous instruction requires a new trial unless the error is harmless. See id. (citation omitted).
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`An error is harmless only if the court is convinced that the error did not influence the jury's
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`verdict. However, "[a] new trial is warranted if, taken as a whole, the jury instructions gave a
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`misleading impression or inadequate understanding of the law." Plagianos v. Am. Airlines, Inc.,
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`912 F.2d 57, 59 (2d Cir. 1990) (citation omitted).
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`In its charge to the jury, the Court explained the doctrine of account stated as follows:
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`Finally, Defendant has raised the defense of "account stated" to Plaintiff's breach-
`of-contract claim. Under this defense, a party may waive its right to sue for
`breach of contract where the party receives an invoice and does not object to its
`accuracy or completeness within a reasonable time. This means that when an
`account which has been rendered remains unquestioned for more than a
`reasonable time after its receipt, such is evidence that the account stated has been
`accepted as correct. However, an account stated defense fails if you were to find
`that the account rendered was not intended by the parties to cover the revenues
`from hours guaranteed by the contract between Defendant and SFA.
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`Case 1:13-cv-00298-FJS-DJS Document 109 Filed 05/19/17 Page 9 of 12
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`See Dkt. No. 98 at 10.
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`In the first instance, the Court finds that its use of the phrase "waive its rights" might
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`have misled or confused the jury. An account stated claim is not about a party waiving its rights,
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`rather it "'is an agreement between parties to an account based upon prior transactions between
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`them with respect to the correctness of the account items and balance due.'" Seacon Corp., 2009
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`WL 2495949, at *4 (quotation omitted). In other words, a party's silence implies the correctness
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`of a received account, see id.; but it does not void a liability that was otherwise due, see, e.g.,
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`Media Tenor, 2014 WL 2933215, at *8; see also Restatement (Second) of Contracts § 282 cmnt.
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`c (1981) (stating that an account stated "operates as an admission of its contents for evidentiary
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`purposes").
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`Moreover, in hindsight, the Court finds that its jury instruction may have been too vague.
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`For example, it stated that "an account stated defense fails if you were to find that the account
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`rendered was not intended by the parties to cover the revenues from hours guaranteed by the
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`contract between Defendant and SFA." See Dkt. No. 98 at 10. Moreover, this lack of specificity
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`in the jury instruction was compounded in the jury verdict form. In that regard, the jury's verdict
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`begs the question of whether the jury understood how the doctrine of account stated applied.
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`The jury, in response to the question,
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`Did Plaintiff prove by a preponderance of the evidence that Plaintiff and
`Defendant modified the original written Lease such that Defendant was to pay 85
`percent of the revenues that were due to Defendant under its contract with SFA
`regardless of whether the aircraft actually flew?
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`responded, "Yes." See Dkt. No. 99 at 1. That should have ended the matter. However, the
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`verdict form directed the jury to proceed to Question 2, which asked, "Does Defendant's account-
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`stated defense apply?", to which the jury again responded, "Yes." See id. at 2.
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`Unfortunately, the jury's verdict in this case leads to the untenable conclusion that a blank
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`invoice, at least with regard to the terms of the oral modification, accepted for a long period of
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`time effectively canceled an otherwise operative contract, the oral modification. However,
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`neither party produced any evidence that substantiated the jury's finding that the invoices
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`represented the accounts stated under the oral modification.1 See Seacon Corp., 2009 WL
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`2495949, at *4 (stating that a claim or defense based upon account stated "fails where there has
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`not been an account rendered" (emphasis added)). For example, Defendant's owner stated that
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`SFA had not paid him for the unused flight hours, and it was only after Defendant settled with
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`SFA in state court that it was ever paid for these hours. See Trial Trans. at 294 (stating that the
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`monthly invoices listed only "the hours that were flown, the expenses that we paid during that
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`month, and the revenue that we would have generated during that month"); see also id. at 78
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`(when asked if the minimum hours would be included on the invoice, Mr. Gilmour responded,
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`"No").
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`That being said, the account stated defense did have a place in this trial. In that regard,
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`the doctrine of account stated may be used "by a defendant seeking to prevent the reopening of a
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`paid account[.]" In re Rockefeller Ctr. Properties, 241 B.R. 804, 819 (Bankr. S.D.N.Y. 1999).
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`Defendant could properly use the doctrine as evidence that the invoices were accurate reflections
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`of the parties' agreement and that, therefore, there was no oral modification of the lease. In other
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`words, in this case, the account stated defense could have applied to confirm the contents of the
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`parties' original agreement, thereby negating the inference that the parties had orally modified
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`their contract. However, the defense could not be used to defeat an agreement that was already
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`1 Indeed, Defendant's position was that "there was no oral modification." See Trial Trans. at 335
`(Defendant's summation).
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`Case 1:13-cv-00298-FJS-DJS Document 109 Filed 05/19/17 Page 11 of 12
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`binding.2 See Media Tenor, 2014 WL 2933215, at *8. Thus, the Court concludes that, in both its
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`jury instructions and the verdict form, the Court should have explained more clearly that the jury
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`could find either that the parties orally modified their lease or that the account stated represented
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`the only obligations between the parties. By permitting the jury to answer both questions in the
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`affirmative, the verdict form allowed for the possibility of an internally inconsistent verdict,
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`which is exactly what occurred here.
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`Based on the foregoing, the Court concludes that "the jury instructions gave a misleading
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`impression or inadequate understanding of the law." Plagianos, 912 F.2d at 59 (citation
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`omitted). Accordingly, the Court grants Plaintiff's motion for a new trial.
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`B. Motion for judgment as a matter of law
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`Plaintiff alternatively moves for judgment as a matter of law. However, because a review
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`of the record clearly shows that both parties offered sufficient evidence at trial such that a
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`reasonable jury could have ruled in either party's favor, the Court denies Plaintiff's motion for
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`judgment as a matter of law.
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`IV. CONCLUSION
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`Having reviewed the entire file in this matter, the parties' submissions, and the applicable
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`law, and for the above-stated reasons, the Court hereby
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`ORDERS that Plaintiff's motion for judgment as a matter of law pursuant to Rule 50 of
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`the Federal Rules of Civil Procedure, see Dkt. No. 102, is DENIED; and the Court further
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`2 The jury's verdict appears to be more akin to a finding that Plaintiff's claim was barred because
`a significant amount of time had elapsed between when the SFA contract began and when
`Plaintiff first asserted its rights to recover.
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`Case 1:13-cv-00298-FJS-DJS Document 109 Filed 05/19/17 Page 12 of 12
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`ORDERS that Plaintiff's motion for a new trial pursuant to Rule 59 of the Federal Rules
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`of Civil Procedure is GRANTED; and the Court further
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`ORDERS that the judgment in this case, see Dkt. No. 100, is VACATED; and the Court
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`further
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`ORDERS that counsel shall participate in a telephone conference with the Court on June
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`19, 2017, at 11:00 a.m. to schedule a date for a new trial in this matter. The Court will provide
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`counsel with the telephone number for the conference prior to the scheduled date.
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`IT IS SO ORDERED.
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`Dated: May 19, 2017
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`Syracuse, New York
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