Cruz v. Cockrell et al

Filing 67

ORDER denying 59 Motion for Summary Judgment. Signed by Judge G Murray Snow on 01/19/2018. (KAS)

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WO

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Jacob A. Cruz,

No. CV-16-01283-PHX-GMS
Plaintiff,

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v.

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ORDER

Atlee A. Cockrell, et al.,

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Defendants.
Atlee A. Cockrell,
Counterclaimant,

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v.

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Jacob A. Cruz, et al.,

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Counterdefendants.

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Pending before the Court is Defendants’/Counterclaimant’s Motion for Summary

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Judgment on their Counterclaim. (Doc. 59). For the reasons stated below, the Court

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denies the motion.

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BACKGROUND

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Plaintiff Jacob Cruz and Defendant Atlee Alan Cockrell first met in 2011 as

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hitting coaches for the Arizona Diamondbacks. Prior to their meeting, both claim to have

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developed an idea for a baseball training device where a player attaches a “Chuckit Cup”

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(a plastic toy used to pick up and fling balls for a pet dog) to the barrel of a baseball bat.

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In September 2013, Mr. Cruz and Mr. Cockrell entered an oral agreement to develop and

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sell the hitting cup device, and they formed a “joint partnership . . . as two dudes with a

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passion for hitting and with an invention to simplify the art of hitting.” (Doc. 60, Exh. 9,

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p. 255). Although both parties make different claims concerning the details of their oral

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agreement, Mr. Cruz alleges that the contract required him to develop the device into a

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marketable product, and it required Mr. Cockrell to file a patent request, draft a business

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agreement, and market the product. The two agreed to evenly split all proceeds. As part

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of their agreement, Mr. Cruz alleges that he admonished Mr. Cockrell to not represent the

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hitting device as Mr. Cockrell’s idea.

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On January 6, 2014, Mr. Cockrell filed a patent application for the hitting device

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and listed himself as a joint inventor with Mr. Cruz. In May 2014, Mr. Cockrell proposed

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to add his wife, Polly Cockrell, as a third partner, and although Mr. Cruz initially

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objected, he eventually agreed that Mrs. Cockrell should focus on accounting for the

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partnership. In August 2014, the hitting cup device, now named the Line Drive Pro

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Trainer, was ready for production, and Mr. Cruz ordered 5,000 hitting cups from the

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manufacturer. During this same time period, and without informing Mr. Cruz, Mr.

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Cockrell formed his own company and Mrs. Cockrell formed her own company. Without

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notifying Mr. Cruz, Mr. Cockrell placed an order for 2,500 Line Drive Pro Trainers to be

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sent to his own company and billed to his wife’s company. The manufacturer refused

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and notified Mr. Cruz of the request. Soon thereafter, Mr. Cruz filed a request to remove

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Mr. Cockrell as a co-inventor, and the U.S. Patent Office eventually granted a design

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patent for the Line Drive Pro Trainer to Mr. Cruz. On February 15, 2015, Mr. Cruz sent

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Mr. Cockrell a letter intending to terminate their business agreement, and Mr. Cruz did

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not distribute any profits from sales of the Line Drive Pro Trainer.

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Mr. Cruz filed a lawsuit alleging breach of contract, fraud, tortious interference

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with a business relation, and other related claims. (Docs. 1, 29). In his answer to the

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complaint, Mr. Cockrell filed a counterclaim alleging breach of contract, breach of

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implied covenant of good faith and fair dealing, breach of fiduciary duty, and tortious

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interference. (Doc. 30). Mr. Cockrell filed the present motion for summary judgment for

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his counterclaims. He specifically requests summary judgment concerning six different

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issues:

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(1)

market, and sell the baseball hitting cup device;

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(2)

(3)

Whether Mr. Cruz breached his fiduciary duty in the partnership by failing

to pay Mr. Cockrell a portion of earnings from the sale of Line Drive Pro Trainer;

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Whether the partnership still owns the Line Drive Pro Trainer after the

purported termination of the partnership;

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Whether Mr. Cruz and Mr. Cockrell formed a partnership to develop,

(4)

Whether Mr. Cruz breached oral and written contracts relating to the

baseball hitting cup device;

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(5)

Whether Mr. Cruz breached his duty to deal in good faith;

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(6)

Whether Mr. Cruz tortuously interfered with Mr. Cockrell’s business

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expectancies.

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DISCUSSION
I.

Legal Standard

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The Court grants summary judgment when the movant “shows that there is no

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genuine dispute as to any material fact and the movant is entitled to judgment as a matter

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of law.” Fed. R. Civ. P. 56(a). In making this determination, the Court views the

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evidence “in a light most favorable to the non-moving party.”

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Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995). “[A] party seeking summary judgment

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always bears the initial responsibility of informing the district court of the basis for its

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motion, and identifying those portions of [the record] which it believes demonstrate the

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absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323

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(1986). The party opposing summary judgment “may not rest upon the mere allegations

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or denials of [the party's] pleadings, but . . . must set forth specific facts showing that

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there is a genuine issue for trial.” Fed. R. Civ. P. 56(e); see Matsushita Elec. Indus. Co.

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v. Zenith Radio Corp., 475 U.S. 574, 586–87 (1986); Brinson v. Linda Rose Joint

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Venture, 53 F.3d 1044, 1049 (9th Cir. 1995). Substantive law determines which facts are

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Warren v. City of

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material, and “[o]nly disputes over facts that might affect the outcome of the suit under

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the governing law will properly preclude the entry of summary judgment.” Anderson v.

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Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “A fact issue is genuine ‘if the evidence is

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such that a reasonable jury could return a verdict for the nonmoving party.’” Villiarimo

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v. Aloha Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002) (quoting Anderson, 477

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U.S. at 248).

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II.

Partnership Claims

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In Arizona, a partnership is formed when two or more persons agree to carry on a

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business for profit as co-owners. Ariz. Rev. Stat. § 29-1012(A). Property belongs to the

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partnership if acquired in the name of the partnership, and property is presumed to be

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partnership property if it is purchased with partnership assets, even if it is not acquired in

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the name of the partnership. Ariz. Rev. Stat. § 29-1014. Property acquired in the name

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of a partner is presumed to be separate property when the title does not reference the

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partnership and partnership assets were not used to purchase the property. Id. Individual

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partners do not own property that the partnership acquires. Ariz. Rev. Stat. § 29-1013.

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Although Mr. Cruz and Mr. Cockrell at least intended to form a partnership, and

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both thought they had done so, they now dispute the terms of the partnership, the

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ownership of the Line Drive Pro Trainer, and whether Mr. Cruz and/or Mr. Cockrell

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violated his fiduciary duties. Mr. Cockrell claims that the scope of the partnership

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included ownership of the Line Drive Pro Trainer. As support for his argument, he refers

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to the role that he played in developing the final product, the multiple statements where

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Mr. Cruz refers to the device as “our product”, and the funds that he and his wife

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provided to pay for part of the manufacture. (Doc. 59 at 7). Mr. Cruz, however,

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maintains that he explicitly specified that the product would remain his invention, that the

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role of the partnership was limited only to bring Mr. Cruz’s idea to market, and that the

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purpose of the partnership did not include ownership of the invention. (Doc. 63, Exh. 1

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at 2). Additionally, as support for this claim that Mr. Cruz alone owns the intellectual

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property for the Line Drive Pro Trainer, he shows that the United States Patent Office

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issued a design patent to Mr. Cruz for the Line Drive Pro Trainer, and not to Mr. Cockrell

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or the partnership. (Doc. 63. Exh. 1 at 4).

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No evidence conclusively establishes the details of either party’s version of the

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partnership agreement over the other’s. Because partnership property “is presumed to be

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separate property when the title does not reference the partnership[,]” Ariz. Rev. Stat. §

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29-1014, a reasonable jury could find that the partnership does not own the final product.

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Similar to a contract, “[t]he terms of [an] oral partnership agreement are

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determined by the parties’ intent as indicated by their conduct and statements.” Rhue v.

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Dawson, 173 Ariz. 220, 227 (App. Ct. 1992) (citations omitted). Wrongful conduct or

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material breach of the partnership agreement may dissolve the partnership. Id. at 228; see

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also Ariz. Rev. Stat. § 29-1014. Concerning Mr. Cruz’s duties to the partnership, as

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discussed in section III, infra, Mr. Cruz has identified various facts that suggest that Mr.

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Cockrell breached the partnership agreement. Mr. Cockrell presents no legal authority to

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suggest that a partner who breaches the partnership agreement is still entitled to his share

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of partnership profits.

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Mr. Cockrell bears the burden at trial to prove the issues in his counterclaim, and

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as the movant of the present motion, he bears the burden to inform the district court of the

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basis for his motion and identify the portions of the record that demonstrate the absence

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of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. at 323. Although

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Mr. Cockrell points to various facts to support his argument that the partnership owes

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him fifty percent of its proceeds, he has failed to show that the undisputed facts are a

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sufficient basis for summary judgment under Arizona partnership law. Therefore, the

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Court denies Mr. Cockrell’s motion for summary judgment concerning the scope of the

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partnership, whether the partnership owns Line Drive Pro Trainer, and whether Mr. Cruz

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breached his fiduciary duties.

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III.

Contractual Claims

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To succeed on a claim for breach of contract, the party requesting relief “has the

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burden of proving the existence of the contract, its breach and the resulting damages.”

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Graham v. Asbury, 112 Ariz. 184, 185 (1975). In Arizona, “[a] contract is ‘a bargain in

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which there is a manifestation of mutual assent to the exchange and a consideration.’”

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Johnson v. Earnhardt’s Gilbert Dodge, 212 Ariz. 381, 384 (2006) (quoting Restatement

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(Second) of Contracts § 17(1) (1981)). If one party breaches the contract, the party not at

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fault may either rescind the contract, refuse to recognize the breach and compel

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performance, or treat the breach as terminating the contract and sue for damages.

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Weatherford v. Adams, 31 Ariz. 187, 195–96 (1926). The victim of material breach is

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excused from further performance under the contract. Zancanaro v. Cross, 85 Ariz. 394,

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400 (1959).

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The undisputed facts show that Mr. Cruz and Mr. Cockrell arrived at an agreement

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that shared at least some common objectives.

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deposition testimony and subsequent text messages to show that the two agreed to jointly

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sell the hitting cup device and evenly split any profits. (Doc. 60 ¶¶ 9–11; Doc. 63 ¶23).

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And, Mr. Cruz and Mr. Cockrell demonstrated their contract by working together to

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develop and market the hitting cup product.

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notwithstanding their contract, Mr. Cruz adequately sets forth facts that suggest that Mr.

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Cockrell breached their agreement, and this breach may have excused Mr. Cruz’s

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performance. Unbeknownst to Mr. Cruz, Mr. Cockrell and his wife each formed their

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own separate limited liability companies, and without notifying Mr. Cruz, Mr. Cockrell

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ordered 2,500 Line Drive Pro Trainers from the manufacturer to be shipped to Mr.

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Cockrell’s company and billed to his wife’s company. (Doc. 63 ¶¶ 41–42). Mr. Cruz

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also states that their contract included the agreement that Mr. Cruz would own the patent

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to the hitting device, and Mr. Cockrell violated their oral agreement when he listed

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himself as the first inventor in their patent application. (Doc. 63 ¶¶ 24–26).

Mr. Cockrell points to Mr. Cruz’s

(Doc. 63, Exhs. 2, 5).

However,

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Viewing the contractual issues in a light most favorable to Mr. Cruz, Mr. Cockrell

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breached the oral agreement. The question of whether Mr. Cockrell’s actions constitute

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material breach that subsequently excused Mr. Cruz’s further performance is a legitimate

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question for trial. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. at

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586–87. Therefore, the Court denies Mr. Cockrell’s motion for summary judgment

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concerning breach of contract, Mr. Cruz’s duty to deal in good faith, and Mr. Cruz’s

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tortious interference with business expectancies.

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CONCLUSION
As described above, Mr. Cruz has sufficiently identified material questions of fact
to defeat Defendants’/Counter-Claimant’s Motion for Summary Judgment.
IT IS HEREBY ORDERED that Defendants’/Counter-Claimant’s Motion for
Summary Judgment (Doc. 59) is denied.
Dated this 19th day of January, 2018.

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Honorable G. Murray Snow
United States District Judge

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