Patsystems (Na) LLC v. the Trend Exchange, Inc., 695 F. App'x 206

Patsystems sued Trend Exchange for breach based on a Software License, Hosting and Support Agreement; the district court entered judgment for Patsystems.
Trend appealed, challenging pretrial evidentiary rulings and the district court’s refusal to allow certain defenses at trial.
At trial Patsystems moved in limine to exclude testimony of an alleged oral agreement that contradicted the written, fully integrated contract.
The district court also precluded Trend from presenting evidence that Patsystems cut off services and never restored them, finding Trend had not properly raised that defense in the pretrial order.
The district court barred Trend from invoking the contract’s limitation-of-damages clause (Clause 11.2) on the ground that it was an unpled affirmative defense.
The Ninth Circuit affirmed exclusion under the parol evidence rule, reversed the preclusion of evidence about cessation of services, held Clause 11.2 is not an affirmative defense, and remanded for a new trial.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether parol evidence contradicting an integrated contract should be admitted	Exclude oral understandings that contradict payment terms; contract is fully integrated	Admit evidence of prior oral understanding to explain parties’ intent	Affirmed: parol evidence excluded under the parol evidence rule
Whether Trend could present evidence that Patsystems ceased services and never restored them	Patsystems implicitly argues Trend failed to preserve that theory	Trend argued its pretrial denials of performance embraced that issue	Reversed: trial court abused discretion; Trend may present evidence Patsystems did not fully perform
Whether Clause 11.2 (limitation of damages) is an affirmative defense that must be pled	Patsystems argued Trend waived the clause by not pleading it as an affirmative defense	Trend argued limitation is a contractual legal issue, not an affirmative defense, and was timely raised	Reversed: Clause 11.2 is not an affirmative defense; Trend timely raised it and may assert it on remand
Whether pretrial order enforcement properly excluded issues not explicitly listed	Pretrial order should control scope to prevent surprise	Trend argued pretrial denials should be liberally construed to include performance defenses	Reversed in part: pretrial order must be liberally construed; exclusion of performance evidence was an abuse of discretion

United States v. Alvirez, 831 F.3d 1115 (9th Cir. 2016) (abuse-of-discretion review for motions in limine)
Day v. Am. Seafoods Co., 557 F.3d 1056 (9th Cir. 2009) (de novo review of parol evidence rule application)
Cleary v. News Corp., 30 F.3d 1255 (9th Cir. 1994) (parol evidence rule excludes prior oral agreements that contradict integrated contract)
Miller v. Safeco Title Ins. Co., 758 F.2d 364 (9th Cir. 1985) (standard for reviewing enforcement of pretrial orders)
Trujillo v. Uniroyal Corp., 608 F.2d 815 (10th Cir. 1979) (pretrial order should facilitate merits, not defeat parties on technicalities)
Taylor v. United States, 821 F.2d 1428 (9th Cir. 1987) (limitation of liability is not an affirmative defense; may be raised as a legal issue)