Full opinion text
OPINION FRANCIS J. BOYLE, Senior District Judge. This litigation arose out of the sale of KOVR-TV, a Sacramento, California, television station, to Anchor Media Television, Inc. of Delaware and KOVR of Delaware, Inc., collectively referred to as “Anchor.” The sellers were Narragansett Television Company of California, Inc. (“NTV”), and its shareholders, Narragansett First Fund (“NFF”), Edwin Pfeiffer, John E. Franks, and The Prudential Insurance Company of America. The sale was governed by a merger agreement and an indemnity escrow agreement', which established a $5 million escrow account to deal with claims that might arise from the sale of the television station. After Anchor, filed suit in California claiming breach of contract and fraud, Fleet National Bank (“Fleet”) filed the present suit as an inter-pleader action, seeking a determination by this Court as to whom the escrow account money should be paid. Fleet interpleaded Anchor as well as the various Narragansett Cross-defendants. Anchor filed erossclaims against the Narragansett Cross-defendants seeking. $5 million for breach • of contractual representations, warranties and covenants' under the Merger Agreement and an additional $38 million for fraud. Anchor claimed to have been fraudulently induced to pay too high a price for KOVR. Cross-defendant Edwin Pfeiffer, manager of KOVR, brought a cross-claim against Anchor for breach of his employment contract with Anchor. After a three-week jury trial, the jury returned a verdict for Anchor of $4.5 million on Anchor’s breach of contract claims, $14.5 million on Anchor’s fraud claims, and $1 million in punitive damages. The jury found for Anchor on Pfeiffer’s breach of contract claim. Cross-defendants have moved, for a judgment notwithstanding the verdict under Federal Rule of Civil.Procedure 50(b) and, alternatively, for a new trial under Federal Rule of Civil Procedure 59. After careful consideration and for the reasons detailed below, the Court grants Cross-defendants a new trial on Anchor’s breach of contract claims and grants Cross-defendants Edwin Pfeiffer and NCI a new trial on Anchor’s claim of fraud. The Court also grants Cross-defendants Pfeiffer and NCI a new trial with respect to the jury’s award of punitive damages unless Anchor accepts a remittitur of all such damages. The Court denies the remainder of the Narragansett Cross-defendant’s motion for judgment n.o.v. or new trial. FACTS Depending upon which parties’ version of the story is believed, the $162 million purchase price of KOVR represented either a grossly excessive price caused by blatant misrepresentations on the part of the sellers or a bad deal on the part of a wealthy purchaser who sorely desired a television station in Sacramento, California. The facts, which were vigorously disputed at trial, can be summarized as follows. Anchor Media is a company that owns and operates several radio and television stations around the country. Its President and Chief Executive Officer is Alan Henry. The Robert M. Bass Group, a company with diversified investments, is the manager shareholder of Anchor Media. Both Anchor Media and the Robert ‘M. Bass Group share ownership in the various media properties that are purchased by Anchor Media. Anchor Media had unsuccessfully attempted to purchase KOVR as part of a plan to buy television stations in capital cities several years before the sale of KOVR which is at issue in the present litigation. The then-owner of KOVR summarily dismissed Anchor’s offer of approximately $95 million for KOVR and instead sold KOVR to NFF for $104 million. At this juncture, a brief foray into the complex web of the Narragansett Cross-defendants would be helpful. NFF is a limited partnership, formed in 1982, with the Narragansett Management Partners. Narragansett Management Partners contracted with Narragansett Capital, Inc. (“NCI”) to perform investment advisory services for NFF. NCI, which was the principle entity managing NFF’s investment in KOVR, received a management fee for this service. Jonathan Nelson, who fprmed NCI in 1986, served as one of five managing directors of NCI. Nelson also .served as Executive Vice President and Co-Chairman of the Board of Directors of NTV, a corporation whose principle asset was KOVR. The shareholders of NTV were NFF, Edwin Pfeiffer, John E. Franks, and The Prudential Insurance Company of America. At trial, Nelson testified that although it may have appeared to the public as though NCI controlled KOVR, in actuality there was no such control. Nelson, however, had boasted in a 1988 trade press article that by 1990, NCI expected to “control” a diversified media empire, including KOVR. Furthermore, a draft of the press release concerning the sale of KOVR to Anchor sent by Nelson to Alan Henry on October 28,1988 described NTV as a “unit” of NCI. According to Nelson, NFF purchased KOVR as a long-term investment of five to seven years. After only two years, however, NFF, on the advice of Nelson, decided to sell KOVR. Nelson testified that he made the decision to sell KOVR in 1988 after receiving an unsolicited offer of approximately $180 million early that year. Prices of television stations had escalated dramatically in the 1980’s, and Nelson believed that the onslaught of cable television and the looming recession might decrease the value of KOVR in the future. Nelson contacted Goldman Sachs to act as a broker in the sale of KOVR. Although Nelson testified that he was acting in his capacity as Director of NTV when he contacted Goldman Sachs, a May 17, 1988 letter , from Tom Murphy of Goldman Sachs indicates that Goldman Sachs initially thought it was doing business with NCI. In any case, the final brokerage agreement is between NTV and Goldman Sachs. Pursuant to that agreement, the sale of KOVR would be accomplished through an auction process. Pfeiffer, the manager of KOVR, provided KOVR’s financial information to Goldman Sachs, which eventually sent the information to prospective bidders. Nelson admitted at trial that, by providing this' information, Pfeiffer was acting in the interests of the selling shareholders, which were co-extensive with the interests of NCI. Based on the actual financial data from January through June 30, 1988 and projected revenue for the rest of the year, Goldman Sachs estimated that KOVR’s profits for the entire year would.be $13,638 million. Alan Henry testified that he learned through trade press articles in early 1988 that KOVR was for sale again and that NTV was looking for a price of $200 million. In August of 1988, Henry received a book from Goldman Sachs describing KOVR. At this time, Anchor remained interested in purchasing television stations in capital cities, such as Sacramento. There was considerable dispute at trial as to whether Robert Bass also desired to purchase KOVR in order to protect his large investment in the America Savings Bank of Stockton, California. David Bonderman, the Chief Operating Officer of the Robert M. Bass Group, first testified that there was no synergy between the bank and the television station, but.later changed his testimony after being confronted with his deposition testimony that Mr. Bass sought to purchase KOVR 'to protect his interest in the bank. Henry, however, denied any such strategy. In any case, Anchor officials began a due diligence investigation to determine whether to submit a bid on the station. There was considerable testimony at trial as to the extent of this investigation. Larry damage, the Senior Vice-President of Anchor, described in detail the steps he took to evaluate the quality of KOVR’s programming and the desirability of the Sacramento market, damage described meetings with senior personnel at KOVR in which they discussed promotion plans, equipment competition, and news strategy, damage also reviewed budget information, program schedules, and other operational material. In assessing the Sacramento market, damage read trade publications about the market and spoke to colleagues in the television industry around the country, including an Anchor employee who had' formerly worked at a competitor station in Sacramento, damage also spoke with presidents of national representative firms that sell advertising time on behalf of local stations. Thus, as damage testified, Anchor was “getting a lot of fresh information about what was going on.” 'damage also spoke with Christopher Pike, the station manager of KOVR about commercial activity in general, but did not specifically ask about the amount of time during which KOVR ran commercials, damage nevertheless testified that based on his review of information and conversations with KOVR staff concerning revenue, projections and business in general, he thought that KOVR was operating the station in the customary-manner. damage, however, acknowledged that pri- or to submitting a bid, neither he nor any other Anchor official asked to see any program logs of KOVR. A program log is an official record certified by an operator on duty of what a station actually broadcasts on a particular day at a particular time. According to damage, these logs provide a lot of minutia and fine detail unnecessary in evaluating the quality of a television station, damage and Henry, both of whom had been involved in a number of station acquisitions, testified that they had never examined program logs prior to an acquisition. Anchor’s accounting firm, Deloitte, Has-kins & Sells, however, did examine a random sampling of program logs in connection with their audit of KOVR’s books and records. The accountants’ limited review, however, was not meant to uncover overcommercialization or improper programming. Instead, the accountants tested the validity of various records by comparing them with a random sampling of program logs to determine whether an advertisement aired at the time indicated on the records. Patrick Murphy, Anchor’s Vice-President of Finance, who had worked for Deloitte, Haskins & Sells as a CPA prior to employment with Anchor, testified that program logs are not in the area of finance review. According to Murphy, Anchor’s financial investigation of KOVR confirmed that KOVR was well run. Larry damage also testified that he didn’t watch prime time during his two visits to Sacramento in August and October because the network programs prime time. Prime time, therefore, has little relevance to how efficiently a particular network affiliate operates. For a similar reason, damage neglected to watch the station at 9:58 p.m. to see if the station was broadcasting the ABC news-brief. According to damage, this brief news teaser ordinarily is carried by every ABC affiliate in the country; therefore, there was no need to watch the newsbrief during his visits to Sacramento. What both damage and Henry did concentrate their investigation on during their visits to Sacramento was the local news, which apparently is a virtual barometer of the quality of a television station.- Henry testified that he watched the news at 5 pm on August 16, 1988, in Pfeiffer’s office in Sacramento. During this news period, three television sets played the three network stations simultaneously. Based on observations of color, lighting and appearances of anchors, Henry thought that the KOVR news, which had the lowest ranking among the three networks, needed an overhaul. When asked the reason for KOVR’s low ranking, Pfeiffer said that it was due to a very competitive market. During this August 16 viewing of the news, Henry also noticed “clutter,” which he defined for the jury as “the refrigerator break, too many commercials.” Henry testified that when he asked Pfeiffer at this time how many commercials KOVR ran in the 5 pm news hour, Pfeiffer responded “16.” Upon his return to Anchor’s headquarters in Florida, Henry, obviously still concerned with the clutter he saw in Sacramento, asked damage to get a “snapshot of the station’s commercial practices.” In response to Henry’s request, on September 23, 1988 Tom Murphy of Goldman Sachs faxed a request to Lila Luna, Pfeiffer’s assistant at KOVR, asking for certain information, including information about the level of commercials. Luna gathered the relevant information from Chris Pike and sent it to Goldman Sachs without reviewing it. Goldman Sachs then relayed the information to Henry on that same day. The information sent to Henry by Goldman Sachs oh September 23, 1988, included the allegedly false day part summary. This day part summary reported the number of commercials run by KOVR in July and- August of 1988. According to Henry, based on his review of the data in'the day part summary prior to submitting a bid, he thought that KOVR was substantially undercommercialized. At trial, both Henry and David Ulrickson, the general sales manager at KOVR since March of 1989, testified that the numbers in the day part summary were false. There was, however, a great deal of confusion at trial between even Ulrickson and Henry as to the proper method of calculating daily commercial minutes for a particular time period based on the day part summary. • Ulrickson testified that the 305 units of commercials in July of 1988 for the 11-11:30 p.m. news period indicated only 4j£ or 5 minutes of commercials run per day in this time period. This number of minutes is substantially below the 7 minutes of commercials, which Anchor argued was the norm for this time period. Henry had several different versions, one which directly contradicted Ulrickson’s testimony, as to what the day part summary reflected. Initially, he testified that the 305 units reported for July 1988 equalled about 8 minutes of commercials per day for the 11 p.m. new period, a quantity that does not indicate undercommercialization. He based this calculation on a comparison with a 337 unit figure that appeared in a March 1989 summary of sales by day part for this same 11-11:30 p.m. time period. According to Henry’s initial interpretation, the March 1989 day part summary indicated 9 minutes of commercials run in that half-hour news period. Henry, however, later changed his testimony and said that the 337 unit figure for the late news in March of 1989 was based on 30-second units and equalled only 5.4 minutes, and that the 305 unit figure from the July of 1988 day part summary equalled 4.9 minutes. Although the trial record does not bear out this observation, Henry testified that his original calculation was wrong only because he couldn’t find the division key on his calculator and the opposing attorney shut him up. Aside from the confusion as to what the figures in the day part summary of' 1988 actually represented, Henry also had difficulty explaining why Anchor was still using the allegedly false 1988 numbers to make comparisons by which to judge how well KOVR was doing in 1989. Henry, however, had never seen the documents that made these comparisons and didn’t know whether the 1988 figures reflected funded 30-second commercials. The September 23, 1988 letter from Goldman Sachs in response to Henry’s request for information on commercialization also included actual financial figures through August of 1988, as well as the 1988 pacing report, which forecasted the amount of revenue that KOVR was expected to generate for the remainder of the year. Henry was interested in the pacing information because he was skeptical as to whether KOVR would meet the $13,678 million cash flow figure estimated in the Goldman Sachs book. When damage spoke to Pfeiffer about the target cash flow estimate in October, Pfeiffer agreed that the station would not reach the target number. Based upon information supplied by KOVR through Goldman Sachs, including operating revenue figures and pacing information, Anchor developed its projection of cash flow for KOVR in 1988. According to Anchor’s witnesses, this calculation was crucial because Anchor predicated KOVR’s purchase price on the basis of the- cash flow times a multiplier. Cash flow is the excess cash at the end of the year after all expenses have been deducted. The multiplier is simply a number used to project out the total purchase price based on cash flow. According to Anchor’s witnesses, cash flow is the key determining factor in valuing a television station. Although Cross-defendant Jonathan Nelson testified that he would not' use cash flow to determine the purchase price for a television station, he admitted that cash flow would be important information for some purchasers and that many people in the television industry relate cash flow to purchase price. Furthermore, Lila Luna testified that Pfeiffer had asked her to prepare cash flow projections for the year because the station would sell for a certain multiple times cash flow. In late September of 1988, Anchor was fine-tuning its cash flow numbers, which var- • ied from $11 million to $12.2 million. According to Anchor’s witnesses, the final cash flow number utilized in formulating their bid was $11,505 million. Although cash flow is, to a certain extent, objectively determinable, the determination of a multiplier is a judgement call. According to David Bonderman, the Chief Operating Officer of the Robert M. Bass Group, multipliers in the television industry ranged from 11 to 16 in 1988. Because Sacramento is a long-term growth market in the fastest growing state, Anchor started off in the upper end of the multiple range. Henry also testified that a higher multiplier seemed necessary since the buyers of the last major television station in Buffalo, New York, which has poorer market characteristics than Sacramento, had used a multiple of 13. Anchor then reduced the multiplier to take into' account special programming, such as the Super Bowl and political advertising, that may have increased revenue in 1988. According to Anchor’s witnesses, the final multiplier used in formulating their bid for KOVR was 13.6. This number conflicts with a figure that appeared in a March 7, 1990 “Partial Summary of Claim,” prepared under Patrick Murphy’s direction, which indicates that the multiplier to be used in the lawsuit would be 14.1. Murphy, however, testified that the 14.1 figure had nothing to do with the initial bid and that he prepared it only because he was curious as to what the multiplier would be based on the final bid of $162 million. This final bid of $162 million is not the result of the $11,505 million cash flow times the multiplier of 13.6, which would yield a bid of about $156 million. Instead, according to Anchor’s witnesses, the initial bid scenario of $156 million, based on cash flow times a multiplier, was increased to the final bid of $162 million in several stages. First, Robert Bass authorized Henry to increase the bid by $5 million because Bass liked the Sacramento market and was willing to add $5 million in order to ensure a successful bid. There was also testimony that Bass authorized the additional $5 million in order to protect his interest in the Stockton bank that he was about to acquire. Anchor thereafter sent a letter to Goldman Sachs on September 28, 1988, containing Anchor’s initial bid of $161 million. Because Anchor did not receive an immediate response, Henry sent Tom Murphy of Goldman Sachs a letter with a cut-off date, after which the bid would no longer be valid. By this action, Henry hoped to “slam dunk the auction process.” In other words, Henry hoped to get out of the auction process as quick as possible because auctions can increase the price of a station as potential purchasers bid against one another. Other than that, Henry testified that “slam dunk” had nothing to do with the purchase price of KOVR. After the Narragansett cross-defendants requested several extensions on Anchor’s deadline, Henry sent Goldman Sachs another letter with another cut-off date. About one hour after that deadline passed, Mr. Gensler of Goldman Sachs called Henry and.said that the $161 million was inadequate and that the Narragansett cross-defendants would sell the station for $172 million. Henry thereafter offered an additional $1 million to arrive at the final bid of $162 million. At trial, the Narragansett cross-defendants attempted to attack the credibility of Anchor’s version of the development of its bid for KOVR. Specifically, a memo prepared on September 27, 1988, the day before Anchor submitted its initial bid of $161 million, indicates that the “acquisition price” for KOVR was $148 million. Both Larry Clam-age and Patrick Murphy, however, testified that $148 million was merely a financing number, representing the amount borrowed in order to purchase the station. According to Clamage, it was only one of several scenarios that Anchor contemplated over the course of several days, and it was not the amount that Anchor proposed to pay for KOVR. In attacking the veracity of Anchor’s story, the Narragansett cross-defendants also introduced portions of David Bonderman’s deposition . testimony. This deposition indicates that Anchor’s bid was increased from the mid $150’s to $162 million in three stages: 1) the additional $5 million because of Bass’s interest in the Stockton bank; 2) an additional $2 million; and 3) an additional $1 million after the conversation with Mr. Gensler. At trial, however, Bonderman explained that the $2 million was part of a possible earn-out to be included either within the $156 million or the $5 million. This earn-out was contemplated because Henry did not think the $13,638 million cash flow figure in the Goldman Sachs book was attainable. Bass suggested that Anchor put an earn-out number on it; in other words, if Anchor'achieved a cash flow of $13,638 million in 1989, Anchor would pay the Narragansett cross-defendants a $2 million earn-out bonus. Because Henry didn’t like the idea, it was abandoned. In any case, Jonathan Nelson recommended that the Narragansett cross-defendants accept Anchor’s bid of $162 million. Apparently, Pfeiffer also thought that the bid should be accepted, because he told Lila Luna that if KOVR did not accept the high bid of what Luna recalled as approximately $165 million, that it would be at least several years before the station would be able to sell for that amount again. Pfeiffer asked Luna to prepare scenarios to justify this position. Pfeiffer also indicated that he was disappointed with the bids, and that he had been looking forward to the sale of the station because he stood to. make a lot of money. In fact, $3 or $4 million of the purchase price was distributed to Pfeiffer as a shareholder of NTV. The Narragansett cross-defendants formally accepted Anchor’s final bid of $162 million. Following the suggestion of Goldman Sachs, the sale was structured as a merger. According to the Plan and Agreement of Merger (“Merger Agreement”), dated October 12, 1988, an Anchor subsidiary was merged into the then-owner of KOVR, NTV. As a result, Anchor became the owner of KOVR and its corporate parent, NTV. The purchase price was paid by Anchor to the former shareholders of NTV, with NCI as the designated “Shareholder Representative” for all former shareholders of NTV. Section 8.2 of the Merger Agreement sets out the Narragansett cross-defendants’ basic indemnification obligation. ,It provides: [T]he Shareholders, acting through the Shareholder Representative as their agent, shall indemnify and hold harmless Parent, Merger Subsidiary and the Surviving Corporation [Anchor] for any loss, cost, liability, damage and expense ... arising from or in connection with any misrepresentation or breach of a representation, warranty or covenant ... in this Agreement. The specific representations and warranties that could give rise to this indemnification obligation are set forth in § 4 of the Merger Agreement. Several of the representations in § 4 involve the integrity of KOVR’s financial statements and accounting procedures.' For example, in § 4.1(d), KOVR represented that the financial statements of KOVR for January through August of 1988 delivered to Anchor “fairly present the financial position, results of operations and changes in the financial position of [KOVR] as of the dates and for the periods indicated.” KOVR further represented in ■§ 4.1(j) that the financial records of KOVR had been “maintained in accordance with good business practices.” In' § 4.1(f), entitled “Absence of Certain Changes or Events,” KOVR warranted that since the date of the unaudited financial statements for the eight month period that ended August 31, 1988, KOVR had not entered into any “commitment, contractual obligation or transaction other than in the ordinary course of business.” The only other representations relevant to this litigation are set out in § 4.1(p). This provision warrants that a disclosure letter provided by KOVR contained an accurate list of contracts to which KOVR was a party. According to § 4.1(p), each of these contracts, including KOVR’s network affiliation agreement with ABC, was “in full force and effect and valid and enforceable ... and [KOVR has not] in any material respect breached any term or condition of any of the Contracts.” Several key Anchor officials testified at trial that these representations are, particularly important in a short-bid process in which a thorough examination of all a seller’s documents would be unwieldy. According to damage, “it would have literally [been] impossible to ferret out every tiny detail of the operation of [KOVR] So [sic] what we wanted to have was their assurance as credible, honest businessmen and broadcasters that they were going to run the station in the. proper fashion.”. The Merger Agreement also contained covenants as to KOVR’s operation of the station after the signing of the Merger Agreement and prior to Anchor assuming control of the station. In § 5.1(a), KOVR covenanted that it would operate KOVR •“only in the usual, regular and ordinary manner and to the extent consistent with such operations, use its best efforts to ... preserve its ... television network affiliations intact....” KOVR further promised in § 5.1(e) to “conduct the business and operations of the Station diligently and in the ordinary course in substantially the same manner as heretofore conducted.” KOVR also promised to deliver to Anchor financial statements for the months of September through December of 1988. These financial statements were to be prepared “in accordance with generally accepted accounting principles applied on a basis consistent with prior periods.” Aside from the representations, warranties and covenants in the Merger Agreement, Pfeiffer also signed a separate “Officer’s Certificate” on January 25, 1989, certifying that “[a]ll representations and warranties of the Company contained in the [Merger] Agreement were true and correct ...” and that KOVR had “complied in all material respects with all covenants ... under the Agreement.” Section 8.5 of the Merger Agreement establishes an obligation to give notice and engage in dispute resolution in order to recover for claims of damages under'§ 8.2 of the Agreement. Specifically, § 8.5 provides: If Parent or the Surviving Corporation (an “Indemnified Party”) believes that it has suffered or incurred any Damages ... and if a claim in respect thereof is to be made against the Shareholder Representative (an “Indemnifying Party”) under Section 8.2, such Indemnified Party shall give notice within 15 business days thereof to the Indemnifying Party describing such Damages, all, with reasonable particularity and containing a reference to the provisions of this Agreement in respect of which such Damages shall have occurred. Promptly after any such notice has been given the parties shall endeavor to resolve any disputes with respect to the matters set forth in such notice to determine whether any Damages which have been claimed are to be paid ... and, if so, the amount which is to be paid. If the Indemnifying Party and Indemnified Party cannot reach agreement within 30 business days after such notice has been given then ... either party may resort to ... judicial proceedings. Although § 8.2 of the Merger Agreement grants Anchor rights against the former shareholders of KOVR for breaches of representations, warranties, and covenants, the former shareholders’ contractual liability was limited by an Indemnity Escrow Agreement, annexed to the Merger Agreement. In accordance with both agreements, $5 million of the $162 million purchase price, which would otherwise have been paid to the former shareholders upon closing of the sale, was set aside in a special escrow account. The Indemnity Escrow Agreement, dated January 25, 1989, was signed by Anchor, Fleet National Bank (“Fleet”), as escrow agent, and NCI, as shareholder representative. According to this agreement,' unless Anchor presented Claims to the escrow fund pursuant to the terms of both agreements, Fleet was to disburse one-half of the $5 million to NCI as shareholder representative on July 26, 1989, and the balance on December 26, 1989. Anchor assumed control of KOVR on January 25, 1989. Not long thereafter, Anchor began to realize that perhaps its cash flow analysis of KOVR- had been improperly skewed upward. Sometime in January, Patrick Murphy discovered an addendum to KOVR’s 1988 contract with Nielsen fyledia Research (“Nielsen”). Nielsen is a rating service that monitors audience viewership of a television station. On the last page of KOVR’s contract with Nielsen, there is a notation to “see attached letter dated 4/7/88.” The letter changed the rate structure of the Nielsen contract to allow for lower payments in 1988 and higher payments in 1989, thereby increasing KOVR’s cash flow in 1988 by shifting expenses to 1989. The box of contracts sent by KOVR to Anchor prior to Anchor’s bid did not contain this letter. Mr. Murphy, however, could not recall making any effort to obtain this letter prior to January. In March or April of 1989, the new general manager of KOVR, Michael Fiorelli, noticed that the station was broadcasting local commerrials in place of the ABC newsbrief. Anchor reinstated the newsbrief and ' commenced an investigation to determine if this was a “widespread practice.” By reviewing the program logs for 1988, Anchor discovered that KOVR had covered the newsbrief on 304 days in 1988. According to Anchor’s witnesses, covering the newsbrief was a violation of KOVR’s ABC Affiliate Agreement. The Affiliate Agreement between NTV and ABC recognizes two categories of programs — “Network Sponsored Programs” and “Network Sustaining Cooperative and Spot Carrier Programs.” Network sponsored programs are defined in Article 1, paragraph B.l as “network programs which contain one or more commercial announcements paid for on behalf of one or more ABC Network advertisers.” Under Article II, paragraph C of the Agreement, KOVR was free to accept or reject network sponsored programs offered by the network. Once KOVR decided to accept a program, however, paragraph 1(B)(1)(b) required KOVR “to broadcast network sponsored programs in their entirety, including but not limited to the network commercial announcements, network identifications, program promotional material or credit announcements contained in such programs which you accept, without interruption or deletion or addition of any kind.” According to Anchor, the ABC newsbrief was part of a network sponsored program, and KOVR was required to broadcast the newsbrief if it accepted the program during which the news-brief would air. damage testified that an affiliate learns the exact contents of a network sponsored program, all of which it must broadcast once it accepts a program, from the offering twx from the network to the affiliate. The ABC President, Mark Mandala, corroborated this testimony and stated that covering the ABC newsbrief was a violation of ABC policy because “it didn’t confirm to the TWX.” The TWXs sent by ABC to KOVR in 1988, described the programs accepted by KOVR as, for example, “Moonlighting/ABC Newsbrief.” The Court, however, did not permit the actual TWXs to be introduced into evidence because Anchor had failed to include the documents on its pretrial exhibit list. The Narragansett cross-defendants argued at trial that the ABC newsbrief was a network sustaining program. Paragraph I.B.2 of the Affiliate Agreement states that ABC will from time to time offer the affiliate “live or recorded network programs or spot carrier programs.” The Affiliate Agreement, however, does not specifically define “network sustaining program.” At trial, damage defined a network sustaining program as a program that does not contain commercials, such as a Sunday morning religious program or a Presidential address. Although the newsbrief does not contain commercials, damage specifically testified that the news-brief was not a sustaining program within the meaning of the Affiliate Agreement. The Narragansett cross-defendants introduced evidence suggesting that-the ABC Affiliate Relations Department did not consider covering the ABC newsbrief in 1988 to be a violation of the Affiliate Agreement. ABC kept track of whether its affiliates were broadcasting what they agreed to broadcast by subscribing to BAR Reports. If a BAR Report indicated that a station was not broadcasting what it had agreed to broadcast, the ABC Affiliate Relations Department would investigate and take appropriate action, including talking to the station and eliminating' compensation for the period. BAR Reports for 15 of the top 75 ABC affiliates were entered into evidence. These reports indicate that át least 14 stations, including 2 stations owned by Anchor, did “not clear” the ABC newsbrief in 1988. In each instance, the BAR Reports contained a notation indicating that the practice did not constitute a discrepancy. During this time, ABC never notified KOVR that it was violating ABC policies, practices or the Affiliate Agreement by not clearing the newsbrief. In fact, ABC renewed the Affiliation Agreement with KOVR after Anchor assumed control of the station in January 1989. In addition, a letter dated October 10, 1989, from Kristen Gerlach, Senior Attorney, Law and Regulation for ABC, was admitted into evidence. The Gerlach letter states that “up until five or six months ago a station’s covering the newsbrief with a :30 local commercial was not considered to be a discrepancy requiring action by the District Director (if the clearance report indicated that the station was not carrying the newsbrief). Thus, in the Report covering the week ending 1/31/88, the fact that KOVR-TV did not carry newsbriefs was noted by the Manager, Affiliate Communications, along with the notation ‘No discrep.’” The Gerlach letter also stated that after September, 1987, the ABC newsbrief beeame a sustaining program. Prior to that time, the newsbrief had contained between 8 and 15 seconds of commercial time. According to Gerlach, “[effective with the new season in September 1987, the newsbrief was reduced from one minute to :30 seconds and became sustaining (i.e., no commercial time was sold within the newsbrief by the network).” It is precisely this time period, September of 1987, when KOVR began covering the ABC newsbrief with commercials. According to several staff members who testified at trial, Chris Pike first announced that he wanted to cover the newsbrief during a September 23, 1987 meeting. A staff member who had glanced at, but not read the Affiliate Agreement said he thought covering the newsbrief would be a violation of that agreement. According to this staff member, Pfeiffer told him not to worry about it. KOVR thereafter began covering the newsbrief and continued to do so throughout 1988, At trial, Anchor claimed that KOVR’s practice of covering the newsbrief in 1988 produced $493,000 of revenue to which KOVR was not entitled. David Ulrickson, KOVR’s general sales manager since March 1989, calculated this number using actual invoices for the commercials that aired in place of the newsbrief in 1988. According to Anchor, the additional revenue derived from covering the newsbrief improperly inflated KOVR’s purchase price by $6,704,800, which is equal to $493,000 multiplied by 13.6. Anchor’s post-closing investigation of KOVR’s program logs for 1988 also revealed that KOVR had been broadcasting in excess of what Anchor, argued was the industry norm for the number of commercials run at particular time periods. According to several Anchor witnesses, these norms were: 14 minutes for the 5-6 p.m. news hour; 7% minutes for the 11-11:30 p.m. news; 3 thirty-second commercials at the 8 p.m. break; and 3 thirty-second commercials at the 11 p.m. break. Anchor’s review of KOVR’s program logs revealed that in 1988 KOVR aired an average of 17% minutes of commercials during the 5-6 p.m. news hour and 9% minutes of commercials during the 11-11:30 p.m. news period. Furthermore, KOVR exceeded 90 seconds of commercial time at - the 8 p.m. break on approximately 280 days and at the 11 p.m. break on 81 days. Uh’ickson testified that this overcommercialization improperly inflated KOVR’s revenue by $1,450,000 in 1988. According to Ulrickson, KOVR’s overeommercialization during the 5-6 p.m. news program yielded $607,000 of undue revenue, and overeommercialization during the 11-11:30 p.m. news program produced $346,000 of undue revenue. Ulrickson derived these figures by multiplying the number of commercial spots that exceeded the so-called norm by the average rate for the particular time period. Ulriekson determined the average rate by dividing the total amount of revenue for the particular time period by the number of commercials run during that period. Ulrickson testified that he did not consider actual invoices because there was no way to determine when an advertiser purchased particular commercial time, and the date of purchase would determine the commercial rate. Ulrickson utilized actual invoices, however, to calculate the $352,000 of additional revenue from overeommercialization at the 8 p.m. break and the $115,800 of additional revenue from overeommercialization at the 11 p.m. break. On cross-examination, Ulrickson acknowledged that in actual practice, if he sold four 30-second commercials and was only able to run three, he would drop the lowest priced commercial, because most commercials are preemptable and the station had the right not to run any preemptable commercials. Ulrickson further acknowledged that he easily could have determined which commercial run during each time period was the cheapest. In any case, based upon Ulrickson’s calculations, Anchor claimed that KOVR’s over commercialization during 1988 inflated its cash flow by $1,450,000; thereby causing Anchor to pay $19,720,000. Anchor’s problems with respect to the newly purchased KOVR extended beyond alleged improper inflation of cash flow. After Anchor assumed control, it replaced Pfeiffer with Michael Fiorelli. Pfeiffer was to remain for three months in the role of a consultant. According to his Consulting and Advisory Services Agreement with Anchor, dated January 25,1989, Pfeiffer was required to devote reasonable efforts and such time as shall be necessary to provide requested advisory and consulting services.” Several Anchor officials, however, testified that they were unable to reach Pfeiffer and that he didn’t return phone calls. Anchor, therefore, terminated the consulting agreement and withheld payments from Pfeiffer. There was also testimony that Anchor terminated the agreement because it believed that Pfeiffer had breached a separate non-competition agreement. This non-competition agreement, also dated January 25, 1989, along with an alleged January 20,1989 oral employment agreement between Anchor and Chris Pike is the subject of a California lawsuit filed by Anchor on March 9, 1989. The California lawsuit named Pfeiffer, Pike, NCI, NFF, and Narragansett Management Partners as defendants. The California action alleged that Anchor was fraudulently induced to enter into the Merger Agreement and further claimed that the Merger Agreement was breached by reason of an alleged conspiracy to cause Pike to quit his new employment with Anchor. Based upon claims in that lawsuit, on March 20, 1989, Anchor sent notice to NCI as shareholder representative that it was claiming indemnity -under § 8 of the Merger Agreement. On May 12,1989, Anchor sent a letter to Fleet, enclosing a copy of the California complaint and stating that the letter along with the complaint constituted notice of claim to the escrow agent and to the shareholder representative pursuant to § 3(a) of the Indemnity Escrow Agreement. The May 12 letter stated that Anchor was claiming damages in excess of the entire escrow fund and directed Fleet not to release any portion of the fund. NCI disputed the -validity of both of these notices. In June 1989, Fleet filed the present inter-pleader action seeking a determination by this Court as to how to disburse the $5 million escrow account. By letter dated August 29, 1989, Anchor gave notice of a claim to the escrow fund,, arising from KOVR’s covering of the ABO newsbrief. Thereafter, Anchor sent notice, dated September 12, 1989, claiming a breach of the Merger Agreement. by virtue of KOVR’s alleged overcommercialization. . Neither of these notices refer to the provisions of the Merger Agreement that Anchor claims to have been violated.- On August 2, 1990, this Court- ordered the parties to interplead their claims for funds held under- the Indemnity Escrow Agreement. Anchor did not interplead any of the claims from the California lawsuit. After a three-week jury trial in April of 1991, the jury returned a $4.5 million verdict for -Anchor on its breach of contract claim. The jury found Cross-defendants Edwin Pfeiffer and NCI liable for $19 million for fraud and $1 million for punitive damages. The jury rejected Pfeiffer’s claim of breach of contract. - Judgment Notwithstanding the Verdict and Motion for a New Trial After the jury returned its verdict for Anchor, Cross-defendants moved for judgment n.o.v. and, in the alternative, for a new trial. The standard governing judgment n.o.v. -is restrictive. A district court .may grant a motion for judgment n.o.v. if “the evidence could lead a reasonable person to only one conclusion,” that the moving party is entitled to judgment. Conway v. Electro Switch Corp., 825 F.2d 593, 598 (1st Cir.1987). In making this determination, a district court “may not consider the credibility of witnesses, resolve conflicts in testimony, or evaluate the weight, of the evidence.” Wagenmann v. Adams, 829 F.2d 196, 200 (1st Cir.1987). The court is compelled, therefore, “to uphold the verdict unless the facts and inferences, when viewed in the light most favorable to the party for whom the jury held, point so strongly and overwhelmingly in favor of the movant that a reasonable jury could not have arrived at this conclusion.” Chedd-Angier Production Co. v. Omni Publications Int’l, Ltd., 756 F.2d 930, 934 (1st Cir.1985). The standard for a new trial motion is also a difficult one to meet. A trial judge may not set aside- a jury verdict merely because he or she would have reached a different conclusion. Coffran v. Hitchcock Clinic, Inc., 683 F.2d 5, 6 (1st Cir.), cert. denied, 459 U.S. 1087, 103 S.Ct. 571, 74 L.Ed.2d 933 (1982). Instead, a trial judge may set aside a verdict and grant a new trial if “the verdict is against the clear weight of the evidence, or is based upon evidence which is false, or will result in a miscarriage of justice.” Borras v. SeaLand Serv., Inc., 586 F.2d 881, 886 (1st Cir.1978) (citation omitted). Cross-defendants raise a plethora of arguments in support of their motion for judgment n.o.v. or, in the altezmative, a new trial. These arguments' can be broken down as follows. First, Cross-defendants argue that the Court’s missing witness instruction was improper-. Second, Cross-defendants árgue that Anchor’s breach of contract claims should be dismissed based upon its failure to comply with the notice and dispute resolution provisions in the Merger Agreement. Third, Cross-defendants assert that Anchor failed to prove any breach of warranty or covenant. Fourth, Cross-defendants argue that Anchor failed to prove fraud with respect to over-commercialization of the ABC newsbrief. Fifth, Cross-defendants assert that there is no basis to hold NCI and Pfeiffer liable for fraud under alter ego, conspiracy or agency theories. Sixth, Cross-defendants assert that there was no basis for the jury’s awaz’d of punitive damages. Seventh, Cross-defendants argue that the jury’s verdict is irreconcilably inconsistent. Finally, Cross-defendants argue that Pfeiffer is entitled to judgment n.o.v. or, alternatively, to a new trial on his breach of contract claim. A. Missing Witness Instruction Because several key witnesses, including Pfeiffer, Pike, Bass, and Fiorelli, failed to testify at trial, the jury was instructed that it could draw a negative inference from that failure to testify. Cross-defendants object to the missing witness instruction with respect to Pfeiffer because portions of Pfeiffer’s deposition were read to the jury. According to Cross-defendants, Pfeiffer was therefore available to both parties and not a missing witness. Cross-defendants’ argument miscomprehends the import of the term “available” under the law regarding missing witnesses. In the First Circuit, a missing witness instruction is permissible if an absent witness is available to the party against whom the negative inference is drawn and the absent witness is’ “favorably disposed” toward that party. United States v. Ariza-Ibarra, 651 F.2d 2, 16 (1st Cir.), cert. denied, 454 U.S. 895, 102 S.Ct. 392, 70 L.Ed.2d 209 (1981). There is no basis for a missing witness instruction, however, if the witness is equally available to both parties and not favorably disposed toward the nonproducing party. United States v. St. Michael’s Credit Union, 880 F.2d 579, 597 (1st Cir.1989). Thus, Pfeiffer’s availability to Anchor would preclude the jury from drawing an adverse inference against Pfeiffer only if Pfeiffer was not favorably disposed toward himself. The absurdity of this proposition is fairly blatant. It was certainly reasonable for the jury to find that Pfeiffer was both available to testify on his own behalf and that Pfeiffer was “favorably disposed” towaz’d himself. Accordingly, the jury was entitled to draw a negative inference from Pfeiffer’s failure to testify at trial. B. Notice and Dispute Resolution The Narragansett cross-defendants urge the Court to dismiss Anchor’s breach of contract claims based upon Anchor’s alleged failure to comply with the notice and dispute resolution provisions of- the Merger Agreement. Anchor was required to notify NCI of any claims to the escrow fund within fifteen business days after it “believes it has suffered or incurred any Damages” as a result of any breach of the Merger Agreement. Anchor was also required to describe the damage, the amount of damage, if known, the method of damage computation, and the provision of the Merger Agreement that was violated. The evidence is that Anchor first filed suit in California Superior Court on March 9, 1989, without giving notice. On March 20, 1989, Anchor gave notice to NCI of a claim to the escrow fund based on allegations in the California lawsuit. The Narragansett cross-defendants urge that this notice was defective because Anchor filed- suit prior to giving such notice. The Cross-defendants therefore argue that at least with respect to one-half of the escrow fund, which should have been disbursed on July 26, 1989, the jury’s verdict must be overturned. The California lawsuit, however, did not involve claims with respect to the ABC news-brief and overcommercialization that are asserted in the present litigation. Instead, the California suit revolved around Chris Pike’s employment with Anchor as well as various other alleged breaches of the Merger Agreement. Because the California action did not involve the specific claims at issue in this lawsuit, any defects in notice for the California action have no relevance to the present action. The Narragansett cross-defendants next argue that a jury could not have reasonably found that Anchor notified NCI of any claims to the escrow fund within fifteen business days after it believed it had suffered damages as a result of any breach of the Merger Agreement. There is no dispute that Anchor discovered the covers of the ABC newsbrief and the overcommercialization in March or April of 1989. Nonetheless, Anchor gave no notice of claims regarding the ABC newsbrief and over commercialization until August and September, months later. According to Cross-defendants, this lapse of several months is proof that Anchor’s notice was untimely. Section 8.5 of the Merger Agreement, however, does not set forth an objective standard requiring Anchor to provide notice when it discovers facts that may give rise to a violation of the Merger Agreement. To the contrary, § 8.5 sets forth a subjective standard and expressly states that, before any obligation to provide notice arises, Anchor must “believe” that it has suffered “damages.” The jury could have reasonably found that Anchor’s knowledge in the spring of 1989 of KOVR’s covers of the ABC newsbrief and overcommercialization did not amount to a belief by Anchor that a breach of representation or covenant caused it to suffer a monetary loss. There was substantial evidence at trial that, upon learning of these practices, Anchor commenced a detailed investigation to determine their pervasiveness. According to Anchor, this investigation involved reviewing every program log from 1988, totalling over 23,000 pages of logs. Cross-defendants attack the veracity of this story, particularly with respect to the covering of the ABC newsbrief, which appears on one page from each day’s logs. Although this Court may find Cross-defendants’ argument somewhat persuasive, the jury was entitled to find credible the testimony of the Anchor witnesses that Anchor did not come to a “belief’ that it incurred “damages” with respect to the ABC newsbrief until August and with respect to overcommercialization until September. The issues of the form of Anchor’s notice and Anchor’s failure to engage in dispute resolution are more troublesome. Anchor’s August and September notices did not ■ describe the provisions of the Merger Agreement that were allegedly violated, as required by § 8.5 of the Merger Agreement. Moreover, there is no evidence that Anchor attempted to resolve any dispute over matters contained in the notices for thirty days after the notices were issued, as required by § 8.5. The jury, however, could have reasonably found that Anchor’s failure to follow the precise contours of the requirements in § 8.B were “slight or unimportant omissions” and not a material breach of the Merger Agreement, when viewed in the context of Anchor’s total obligations under the Agreement. In sum, although it is clear that Anchor’s compliance with § 8.5 of the Merger Agreement is far from perfect, a jury could have reasonably found that. Anchor substantially performed its obligations under the Merger Agreement. Moreover, the jury verdict on this issue was not against the clear weight of the evidence and will not result in manifest injustice. Thus, there is an insufficient basis to grant either judgment n.o.v. or a new trial on this issue. See Payton v. Abbott Labs, 780 F.2d 147, 153 (1st Cir.1985) (a trial judge may not act as a thirteenth juror and set aside a verdict merely because he or she would have reached a different conclusion). C. Breach of Representations, Warranties, and Covenants in the Merger Agreement Three claims of breach of representations, warranties and covenants went to the jury. First, Anchor claimed that Cross-defendants breached the Merger Agreement by covering the ABC newsbrief with local commercials. Second, Anchor claimed that the Merger Agreement was violated because KOVR ran too many commercials in contravention of customary broadcasting practice. Third, Anchor alleged that Cross-defendants violated the Merger Agreement by not disclosing an addendum to a contract with Nielsen ratings service. In order to recover for breach of representation, a party must prove: 1) that the representation was material; 2) that the material representation was false; 3) that the representation was made to induce the party to enter into the contract; 4) that the party justifiably relied on the representation; and 5) that the party suffered damages as a result of its reliance on the false representation. See Norton v. Poplos, 443 A.2d 1, 6 (Del.Supr.1982). With respect to the covers of the ABC newsbrief, Anchor claimed that Cross-defendants violated' the representation in § 4.1(p) of' the Merger Agreement that KOVR had not in any material respect breached any term or condition of the ABC Affiliate Agreement. Cross-defendants, however, assert that covering the ABC newsbrief with local commercials in 1988 was not a violation of the ABC Affiliate Agreement. Cross-defendants first urge that the Court should have construed the ABC Affiliate Agreement as a matter of law. According to Cross-defendants, the Affiliate Agreement is a contract of adhesion that should be construed against ABC, the party who drafted it. The fallacy of this argument is fairly obvious. ABC is not a party to this action. There is no general rule requiring a court to construe a contract of adhesion against a nonparty to the contract, such as Anchor. The ABC Affiliate Agreement, which provides that it is to be governed by New York law, does not define whether an ABC newsbrief is part of a network sponsored program, in’ which case it must be broadcast once an affiliate accepts the program, or whether it is a network sustaining program. Where, as here, terms are not defined in a contract, it is for the jury to determine whether there has been a breach of contract. See, e.g., Fashion House, Inc. v. K mart Corp., 892 F.2d 1076, 1083 (1st Cir.1989). There was sufficient evidence for a jury to find that covering the ABC newsbrief with commercials was a breach of the ABC Affiliate Agreement and, therefore, that the . representation in the Merger Agreement that KOVR had not breached the ABC Affiliate Agreement was false. Both Larry Clam-age, a man with considerable experience operating ABC affiliates, and Mark Mandala, the President of ABC, testified that an affiliate learns the exact content of a network sponsored program, all of which it was required to broadcast, from the offering twx from the network to the affiliate. Both witnesses further testified that based on the offering twx from ABC, the ABC newsbrief was part of the 9:00, 9:00 or 9-11:00 p.m. network sponsored program.’ Accordingly, KOVR, by agreeing to broadcast that ABC program, was obligated under the ABC affiliate agreement to broadcast the 9:58 pm newsbrief. Mr. Mandala further testified that it was a “serious violation” of ABC policy and practice to broadcast local commercials in place of the ABC newsbrief. Cross-defendants argue, in effect, that the BAR Reports and the Gerlach letter are conclusive evidence that in 1988 the ABC newsbrief was a network sustaining program, which KOVR was free to cover with commercials. The BAR Reports indicate that ABC did not consider there to be a discrepancy when KOVR covered the newsbrief as long as KOVR said that it was not going to carry the newsbrief. The Gerlach letter, written by a Senior Attorney for ABC, confirms this interpretation. Moreover, the Gerlach letter expressly states that in 1988 the ABC news-brief was a network sustaining program. Cross-defendants also point out that Larry damage testified that a network sustaining program is one which contains no commercials, and the ABC newsbrief contains no commercials. Although this Court deciding the matter de novo might agree with Cross-defendants’ interpretation of the ABC Affiliate. Agreement, the evidence is not so substantial as to require the Court to grant a judgment n.o.v. or a new trial. Several of Anchor’s witnesses, including the President of ABC, testified that the ABC newsbrief was part of a network sponsored program. Thus, there was ample basis in the record fqr the jury to reject Cross-defendants’ arguments concerning the BAR Reports and the Gerlach letter and conclude that Cross-defendants made false representations concerning their compliance with the ABC Affiliate Agreement. See Putnam Resources v. Pateman, 757 F.Supp. 157, 162 (D.R.I.1991) (“[jjuries are peculiarly adept at assessing the weight to be given to testimony.”), aff'd in part, rev’d in part, 958 F.2d 448 (1st Cir.1992). There was also sufficient evidence for a jury to find that the representation in the Merger Agreement concerning KOVR’s compliance with the ABC Affiliate Agreement was material, that it induced Anchor to execute the contract, and that Anchor’s reliance on the representation was justified. Anchor officials specifically testified to the importance of the representations in the Merger Agreement in the context of a short-bid process. According to' David Bonderman, the warranty as to compliance with contracts was particularly important because KOVR’s relationship with the network is critical in ensuring KOVR’s success. Furthermore, under Delaware law, there is no affirmative duty to investigate the truth of a statement made by a party to a contract. See Joseph Bancroft & Sons Co., Inc. v. Development Corp., 1990 WL 63825 *2 1990 Del.Super. LEXIS 169, at 4 (May 2, 1990). Thus, the jury was entitled to find that Anchor justifiably relied on the representation in the Merger Agreement as long as the falsity of the representation should not have been obvious to Anchor. Cross-defendants stridently argue that Anchor should have been aware of KOVR’s covers of the ABC newsbrief because the covers were clearly marked in the program logs and further broadcast to hundreds of thousands of viewers every night. Although there is some logical appeal to Cross-defendants’ argument, the jury was entitled to believe Anchor’s witnesses, who testified that review of the substantive content of program logs and viewing of prime time television are not a normal part of due diligence in purchasing a television station. As such, KOVR’s covering of the ABC newsbrief should not have been obvious to Anchor, and the jury was entitled to find that Anchor’s reliance of the representation in the Merger Agreement concerning compliance with the ABC Affiliate Agreement was justifiable. There was also sufficient evidence for a jury to find that Anchor was damaged as a result of the breach of representation in the Merger Agreement regarding compliance with the ABC Affiliate Agreement. There is no dispute that ABC never withheld any compensation from Anchor despite the fact that KOVR had allegedly breached the Affiliate Agreement in 1988. In fact, ABC renewed the Affiliate Agreement with Anchor in 1989 at the exact same rate of compensation paid to NTV. Accordingly, Cross-defendants argue that Anchor did not suffer any damage of the kind that would proximately result from a breach of the ABC Affiliate Agreement. Anchor’s damages, however, arose not from its relationship with ABC, but from the direct impact the misrepresentation concerning compliance with the ABC Affiliate Agreement had on the amount Anchor paid for KOVR. The jury was entitled to find that broadcasting local commercials in place of the ABC newsbrief produced additional revenue to which KOVR was not entitled. This additional revenue caused Anchor to pay $6,704,800 more for the television station than it otherwise would have paid. There was sufficient evidence, therefore, for the jury to find that these damages proximately flowed from the alleged breach of the ABC Affiliate Agreement. Cross-defendant