Warfield et al v. Advnt Biotechnologies LLC et al

Filing 177

ORDER granting 149 Motion for Summary Judgment; denying 171 Motion to Strike. Signed by Judge David G Campbell on 9/5/2008.(NVJ)

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

Lawrence J. Warfield, as Trustee for Osborn Scientific Group, Inc., Plaintiff, vs. AdVnt Biotechnologies, LLC, et al., Defendants.

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Consolidated Actions: No. CV-06-0904-PHX-DGC (Lead Case) No. CV-06-2787-PHX-DGC No. CV-06-2788-PHX-DGC ORDER

On November 20, 2006, AdVnt Biotechnologies, LLC ("AdVnt") filed a third-party complaint against Defendants Martin and Ann Schroeder and The Emmes Group, Inc. (collectively, "Schroeder"). Dkt. #1 (Case No. 06-2787). The complaint alleges that Schroeder, a former consultant for Osborn Scientific Group, Inc. ("OSG"), intentionally made false statements in 2004-2005 that induced or caused the breach of a contract between OSG and AdVnt. Id. The complaint asserts two causes of action ­ misrepresentation and tortious interference with contract. Id. The Court previously dismissed the misrepresentation claim. Dkt. #24 (Case No. 06-2787). Schroeder has now filed a motion for summary judgment on the tortious interference claim. Dkt. #149. For the reasons that follow, the Court will grant the motion.1

The parties' requests for oral argument are denied because the issue have been thoroughly briefed and argument will not aid the Court's decisional process. See Mahon v. Credit Bur. of Placer County, Inc., 171 F.3d 1197, 1200 (9th Cir. 1999).

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I.

Legal Standard. Summary judgment is appropriate if the evidence, viewed in the light most favorable

to the nonmoving party, "show[s] that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). "Only disputes over facts that might affect the outcome of the suit . . . will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The disputed evidence must be "such that a reasonable jury could return a verdict for the nonmoving party." Id. at 248. II. Discussion. To establish a prima facie case of intentional interference with contract, a plaintiff must prove: (1) the existence of a valid contract, (2) the defendant's knowledge of the contract, (3) intentional interference causing a breach of the contract, (4) resulting damage to the party whose contractual relationship has been disrupted, and (5) that the defendant acted improperly. Wells Fargo Bank v. Arizona Laborers, 38 P.3d 12, 31 (2002). Schroeder argues that AdVnt cannot prove any of these elements. See Dkt. #149.2 "Essential to the right of recovery is the existence of a contractual relationship between the plaintiff and a party other than the defendant." Am. Family Mut. Ins. Co. v. Zavala, 302 F. Supp. 2d 1108, 1118 (D. Ariz. 2003). Schroder contends that AdVnt cannot satisfy this requirement because the OSG-AdVnt contract was executory, was not assumed by the Trustee, and therefore was rejected and breached by operation of bankruptcy law long before Schroeder is alleged to have interfered. See Dkt. #149 at 5-6. AdVnt responds by asserting that the contract was not executory. An executory contract is "defined in the bankruptcy context as a contract in which the obligations of both the bankrupt and the other party to the contract are so far unperformed that the failure of either to complete performance would constitute a material breach." In re Imperial Credit

Schroeder's papers violate the font and type size requirements of the Court's local rules. See LRCiv 7.1(b)(1). Schroeder's counsel is reminded to comply with these rules in the future.
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Indus., Inc., 527 F.3d 959, 974 (9th Cir. 2008) (internal quotes and citation omitted). AdVnt agrees that it had paid only $25,000 of the $50,000 purchase price as of December 11, 2003 ­ the date of OSG's bankruptcy. Dkt. #159, ¶ 11. Because failure to pay the remaining half of the purchase price clearly would have constituted a material breach of the contract, AdVnt's side of the contract was executory. Schroeder argues that OSG's side was also substantially unperformed as of December 11, 2003, because OSG had not yet delivered the SOPs needed to make the product AdVnt had purchased from OSG. Dkt. ##149 at 6; 150, ¶¶ 4-7. In response, AdVnt does not dispute that the SOPs were undelivered as of the bankruptcy filing date. Dkt. #159, ¶¶ 4-7. Nor could it, for AdVnt repeatedly has asserted in this litigation that it did not receive the SOPs and that it was required to invest substantial sums of money recreating the SOPs with the aid of third parties. See, e.g., AdVnt's Answer, Counterclaim and Third-Party Complaint ("Counterclaim") in Bankruptcy Case No. 03-21672-GBN, Adversary No. 2:06ap-00087-GBN, Dkt. #11 at 25; Dkt. #20 at 3; Dkt. #150-2 at 10 (answer to interrogatory 3); Dkt. #150-3 at 6 (response to RAF 33). Indeed, this is the basis for AdVnt's Counterclaim against the Trustee. See Counterclaim ¶¶ 1-10. AdVnt instead responds to Schroeder's motion by arguing that AdVnt did not learn of the failure to deliver the SOPs until late 2004, and its cause of action for the failure therefore did not accrue until that date. Dkt. #158 at 5. The relevant question for purposes of this motion, however, is not when AdVnt learned that OSG had failed to perform the contract, but whether OSG had performed when the bankruptcy was filed on December 11, 2003. AdVnt repeatedly has asserted that it had not. Because both OSG and AdVnt had failed to perform substantial parts of the contract as of December 11, 2003, the contract clearly was executory. See Imperial Credit, 527 F.3d at 974. The remaining portions or Schroder's argument are not disputed. AdVnt admits that an order for relief was entered by the bankruptcy court on January 23, 2004. Dkt. #159, ¶ 10. AdVnt further admits that the contact was not assumed or rejected by the Trustee within 60
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days of the order of relief. Id. ¶ 15. By operation of bankruptcy law, therefore, the contract was deemed rejected and breached as of December 11, 2003. See 11 U.S.C. § 365(d)(1), (g)(1). Because the contract was rejected and breached well before Schroeder is alleged to have interfered with it, AdVnt's claim for intentional interference fails. conclusion, the Court need not address Schroeder's other arguments. IT IS ORDERED: 1. 2. 3. Defendants' motion for summary judgment (Dkt. #149) is granted. Schroeder's motion to strike (Dkt. #171) is denied under LRCiv 7.2(m) The Court will set a final pretrial conference by separate order. Given this

DATED this 5th day of September, 2008.

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