MICHAEL L. ECKSTEIN
STEVEN A. BECNEL STRATUS SYSTEMS, INC.
MICHAEL L. ECKSTEIN MICHAEL L. ECKSTEIN, ECKSTEIN LAW FIRM, A PROFESSIONAL CORPORATION, AND STRATUS REALTY, L.L.C
STEVEN A. BECNEL AND KRISTINE M. BECNEL
FROM CIVIL DISTRICT COURT, ORLEANS PARISH NO. 2002-02069 C\W
2002-02253, 2003-06270, DIVISION "L" Honorable Kern
A. Reese, Judge.
Minor Pipes, III Eric J. Drury, Steven William Usdin BARRASSO
USDIN KUPPERMAN FREEMAN & SARVER, LLC. COUNSEL FOR
E. Bullington, Guy E. Wall, Jonathan R. Cook, Sara M. Lewis
WALL, BULLINGTON & COOK, L.L.C. COUNSEL FOR
composed of Judge Edwin A. Lombard, Judge Daniel L. Dysart,
Judge Paula A. Brown
A. BROWN JUDGE.
matter involves the enforceability of the terms of a
settlement agreement. Appellants, Steven A. Becnel ("Mr.
Becnel") and Stratus Systems, Inc.
("Stratus"), appeal the district court's
judgment granting the Motion to Enforce Settlement Agreement
and Consent Judgment, and the Motion for Declaratory Relief
filed on behalf of appellee, Michael L. Eckstein ("Mr.
Eckstein"). For the reasons that follow, we affirm the
AND PROCEDURAL HISTORY
1992, Mr. Becnel and Mr. Eckstein formed Stratus to sell Mr.
Becnel's safety inventions. Mr. Eckstein, an attorney,
financed a portion of the endeavor and provided legal advice.
Beginning in 1997, a dispute arose as to the percentage of
Mr. Eckstein's ownership interest, fees Mr. Eckstein
claimed he was owed for legal work, and whether Mr. Eckstein
had breached any fiduciary and ethical duties owed to
Stratus. Both parties filed suit. In August 2005, Mr. Becnel,
Stratus, and Mr. Eckstein signed a Settlement Agreement, a
License Agreement, a Product Transfer Agreement, and a
Consent Judgment (collectively, the "Agreement").
In part, the Agreement: (1) transferred the rights to the
"Halkey-Roberts Inflator" and the exclusive license of
all non-military sales of the "Universal
Inflator" to Mr. Eckstein; and (2) gave Stratus
exclusive rights to all military applications of the
Universal Inflator. Moreover, the Agreement required Stratus
to pay Mr. Eckstein eight percent of the Total Gross Revenue
Receipts ("TGRRs") of the Universal Inflator for a
ten-year period, beginning on the date on which the first
sale was made. It also gave Mr. Eckstein the right to audit
Stratus' records in the event he reasonably believed
TGRRs reported on Stratus' federal tax returns are
inaccurate. In February 2016, Mr. Eckstein filed a
Motion to Enforce Settlement Agreement and Consent Judgment
("Motion to Enforce"), complaining that Mr. Becnel
and Stratus (hereinafter, collectively, "Stratus")
had violated the terms of the Agreement over the ensuing
years. He requested that Stratus: (1) submit to an audit and
pay the associated costs; (2) provide all current design and
patent information-also known as
"deliverables"-related to products that Eckstein
owns and is entitled to sell; (3) cease and desist sales in the
non-military market; (4) reimburse Mr. Eckstein for any
non-military sales; and (5) pay attorney's fees
associated with filing the Motion to Enforce. Mr. Eckstein
alleged that his review showed Stratus' TGRRs
"numbers didn't add up" and Stratus'
internal audit had revealed errors which resulted in
additional royalty payments of over $100, 000.00. He
represented that, in violation of the Agreement, Stratus had
refused to supply him with updated versions of the Universal
Inflator and the Halkey-Roberts Inflator. Mr. Eckstein also
requested that Stratus be ordered to produce records of any
non-military sales premised on his contention that Stratus
had violated the Agreement by selling the Universal Inflator
to non-military customers.
opposition, Stratus maintained that Mr. Eckstein filed the
Motion to Enforce solely because the royalty payments he was
owed stemming from the date of the first sale of the
Universal Inflator were scheduled to expire in February 2017.
Stratus argued that Mr. Eckstein was not entitled to any
records of non-military sales because Mr. Eckstein had
offered no proof that Stratus had made any such sales.
Specifically, Stratus maintained that the only identifiable
non-military customer, Switlik Parachute Company
("Switlik"), had bought the Universal Inflator for
military applications, which Stratus argued was allowed by
the Agreement. Stratus added that the Agreement's terms
prohibited the assessment of any personal liability against
Mr. Eckstein's demand for an audit, Stratus alleged that
the dispute was resolved when Mr. Eckstein consented to and
accepted payment as a result of the internal Stratus audit
completed in the years 2011 through 2012. As such, Mr.
Eckstein was only entitled to an audit for 2014-at his own
expense. Stratus further maintained it had already complied
with Mr. Eckstein's demands for deliverables. In
conclusion, Stratus requested a declaration that the
Universal Inflator royalties owed to Mr. Eckstein should
terminate on February 1, 2017-the date it alleged was the
tenth year after the first sale of the Universal Inflator to
the United States Navy (the "Navy") for $84,
district court heard argument on the Motion to Enforce on
September 23, 2016. At the conclusion of the hearing, the
district court orally granted Mr. Eckstein's audit
request, with payment for the audit to take place in
accordance with the Agreement. The district court ordered
Stratus to produce, for an in camera inspection,
documentation of all sales to any non-military customers of
the Universal Inflator and Halkey Roberts Inflator. The
district court also instructed Stratus to provide the
deliverables-even if they had previously been provided as
Stratus claimed-and requested a written judgment that
reflected its orders.
February 13, 2017, before a written judgment was signed, Mr.
Eckstein filed a motion for declaratory relief, which the
district court heard on May 19, 2017. In this motion, Mr.
Eckstein asserted that he was entitled to royalties through
January 28, 2022, as the first sale date for the Universal
Inflator was January 28, 2012-not February 1, 2007, as
claimed by Stratus. Mr. Eckstein argued that the $84, 649.58
payment the Navy made to Stratus on February 1, 2007, was not
for an actual sale of the Universal Inflator units; instead,
the payment was only a reimbursement of Stratus'
expenses. Mr. Eckstein contended the military requires a
product to successfully complete its qualification testing
program before the product is approved for sale; and in
exchange, the military pays the costs the proposed seller
incurs in developing the product for qualification testing.
Thus, the Navy's February 1, 2007 payment was a standard
reimbursement for Stratus' qualification testing
development costs. Mr. Eckstein further argued that the
Universal Inflator passed the military's qualification
testing on December 30, 2011, and Stratus' first sale of
the qualified Universal Inflator to the military market did
not occur until January 28, 2012. Consequently, Mr. Eckstein
argues he is owed royalty payments until 2022.
countered that the February 1, 2007 payment meets the legal
definition of a sale and Mr. Eckstein should be precluded
from contesting that date as the first sale date because he
received royalty payments from that transaction. Stratus
conceded, however, that no other "sales" were made
between 2007 and 2011. While Stratus acknowledged that it did
not receive official written notification that the Universal
Inflator had successfully completed the Navy's testing
program until December 30, 2011, it argued the Navy verbally
qualified the Universal Inflator for sale in 2010. After
receiving verbal qualification, Stratus maintained it made
seven sales of the qualified, producible units in 2011,
commencing on January 31, 2011.
Stratus reiterated that Mr. Becnel should be relieved from
all personal exposure arising out of the Agreement's
enforcement as the Agreement itself expressly releases him
from liability; and, Mr. Eckstein agreed that the relief
sought pertained only to Stratus, not to any personal
liability on the part of Mr. Becnel.
conclusion of the hearing, the district court orally reasoned
on the record that its interpretation of the
"royalties" clause showed that actual sales of the
Universal Inflator began in 2011, when the first seven sales
of the certified units were made. The district court also
found that Mr. Becnel had no personal liability for the
royalty payments. The parties consented to have one judgment
to reflect the district court's rulings from both the
September 23, 2016 and the May 19, 2017 hearings.
20, 2017, the district court rendered written judgment in
favor of Mr. Eckstein and ordered that: (1) the parties
evenly share the initial costs of the audit for the years
2008 through 2016, with reimbursement to be paid to the
prevailing party pursuant to the Agreement; (2) Stratus
provide the district court with an in camera
inspection of all Universal Inflator documents regarding
sales to non-military customers; and (3) Stratus give Mr.
Eckstein certain items for the updated versions of the
Universal Inflator. The district court further found that
Stratus-not Mr. Becnel personally-owes royalties to Mr.
Eckstein through March 14, 2021, and any personal liability
of Mr. Becnel is governed by Louisiana statutory law and the
terms of the Agreement, which was not before the Court at the
this judgment, this appeal followed.
alleges the following assignments of error:
1) The district court erred in ruling that the royalties owed
to Mr. Eckstein on sales of the Universal Inflator continue
until March 14, 2021, instead of February 1, 2017.
2) The district court erred in requiring that Stratus provide
Mr. Eckstein with new sample units of the Universal Inflator
and new data packages and drawings.
3) The district court erred in ruling that Mr. Eckstein is
entitled to an audit for the years 2008, 2009, 2011-2013, and
4) The district court erred in ruling that Stratus must
advance one-half of the costs for an audit, rather than
concluding that Mr. Eckstein must advance the audit costs
subject to reimbursement if the results are in his favor.
5) The district court erred in ruling that Stratus must
provide the court with documentation of sales of the
Universal Inflator to customers other than the U.S. Military.
6) The district court erred in refusing to declare that Mr.
Becnel is not personally liable under the Settlement
7) The district court erred in not awarding attorney's
fees, expenses, and costs to Stratus and Mr. Becnel.
standard of review of a motion to enforce settlement is the
manifest error/clearly wrong standard. Reed v. 7631
Burthe Street, LLC, 2017-0476, p. 10 (La.App. 4 Cir.
12/28/17), 234 So.3d 1201, 1208. A district court's
judgment regarding the existence, validity and scope of a
compromise or settlement agreement hinges on its finding of
the parties' intent-an inherently factual finding.
dispute arising out of whether or not the language of a
contract is ambiguous is an issue of law subject to de
novo review. See Orleans Parish School Board v. City
of New Orleans, 1996-2664, p. 4 (La.App. 4 Cir. 9/3/97),
700 So.2d 870, 873. However, "[i]n the interpretation of
contracts, the trial court's interpretation of the
contract is a finding of fact subject to the manifest error
rule." French Quarter Realty v. Gambel,
2005-0933, p. 3 (La.App. 4 Cir. 12/28/05), 921 So.2d 1025,
1028 (quoting Grabert v. Greco, 1995-1781, p. 4
(La.App. 4 Cir. 2/29/96), 670 So.2d 571, 573)). In applying
the manifest error review standard to the district
court's interpretation of the contract, the appellate
court may not substitute its own view of the evidence for the
district court's view or disturb the district court's
fact findings so long as its findings are reasonable.
Gambel, 2005-0933, p. 3, 921 So.2d at 1028.
scope of appellate review in a declaratory judgment is
whether or not the district court abused its discretion in
granting or denying relief. See Delta Administrative
Services, L.L.C. v. Limousine Livery, Ltd., 2015-0110,
p. 6 (La.App. 4 Cir. 6/17/15), 216 So.3d 906, 910. We now
apply these precepts to Stratus' assignments of error.
Payments/Sale of ...