Ordinance Technologies Incorporated v. Raytheon Company

Filing 153

ORDER: The Motion to File Exhibits and Unredacted Briefs Under Seal 143 is GRANTED. The Clerk of Court shall file the deposition transcript excerpts of Thomas Bootes, Matthew Buchanan, and Stephen Cardy, together with the unredacted version of Ra ytheon's Reply and Response to OTNA's Statement of Facts 146 and 147 UNDER SEAL. The Motion for Summary Judgment on Plaintiff's Third Claim for Relief 95 is GRANTED. The parties shall file a Joint Pre-Trial Statement as to th e pending counterclaim for a declaratory judgment on or before April 17, 2015. Alternatively, the parties shall submit a status report explaining why a Joint Pre-Trial Statement should not be filed at this time on or before April 17, 2015. Signed by Judge Cindy K Jorgenson on 3/13/2015.(ALS)

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1 WO 2 3 4 5 6 7 IN THE UNITED STATES DISTRICT COURT 8 FOR THE DISTRICT OF ARIZONA 9 10 ORDNANCE TECHNOLOGIES (NORTH AMERICA) INC., 11 Plaintiff, 12 vs. 13 RAYTHEON COMPANY, 14 Defendant. 15 16 RAYTHEON COMPANY AND RAYTHEON MISSILE SYSTEMS, 17 Counterclaimants, 18 vs. 19 20 ORDNANCE TECHNOLOGIES (NORTH AMERICAN) INC., Counter-defendant. 21 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) No. CV 12-386-TUC-CKJ ORDER 22 23 Pending before the Court is Defendant's Motion for Summary Judgment on Plaintiff’s 24 Third Claim for Relief (Doc. 95).1 Argument was presented to the Court on January 30, 25 2015. 26 27 28 1 Defendant’s Motion for Sanctions (Doc. 116) is addressed in a separate order. 1 2 I. Factual and Procedural Background 3 Ordinance Technologies (North America), Inc. (collectively, with its predecessor in 4 interest Ordinance Technologies (UK) Limited, “OTNA”) alleges it owns the proprietary and 5 intellectual rights to the design of the Laser Multiple Warhead System (“LMWS”). 6 Complaint (Doc. 1), p. 1-2. 7 The parties state that OTNA worked with Raytheon Missile Systems (collectively, 8 with Raytheon Company, “Raytheon”), beginning in the early 1990s, on Multi 9 Warhead/Multi Mission Warhead programs. OTNA has alleged it invested considerable 10 sums on the research and development of warhead design, modeling and business 11 development with the understanding it would remain the Warhead System Design Authority 12 on the Multi Warhead/Multi Mission Warhead programs and that any intellectual property 13 rights it created would remain the property of OTNA. However, by virtue of multiple 14 agreements between OTNA and Raytheon, Raytheon was, and is, knowledgeable about 15 numerous aspects of OTNA’s business including trade secrets and OTNA alleges that 16 Raytheon was obligated to refrain from using and/or misappropriating OTNA’s trade secrets. 17 The parties agree OTNA and Raytheon entered into a Technical Assistance 18 Agreement (“TAA”), in which Raytheon agreed to provide OTNA with technical data and 19 defense services related to the integration of the LMWS for use in the Tactical Tomahawk 20 Cruise Missile. The TAA was amended in 2005 (“Amended TAA”). The Amended TAA 21 stated that Raytheon held no rights to the proprietary data at issue in this case and that OTNA 22 the full ownership rights of proprietary data at issue in this case. 23 The Complaint states that OTNA’s “concerns first began to rise” about Raytheon’s 24 alleged improper use of proprietary data in 2005. Complaint, ¶ 22. OTNA sent 25 correspondence to Raytheon in November 2005, which included the following: 26 11/16/2005 Email from OTNA principal Stephen Cardy [(“Cardy”] to Raytheon Sr. 27 Design Engineer Matt Buchanan [(“Buchanan”)]: 28 “OTL intend (sic) to fulfill its current contractual and legal obligations to -2- 1 2 3 4 5 6 7 8 9 10 11 Raytheon. . . . We will also be seeking formal undertakings regarding use of [OTNA] proprietary data provided to Raytheon. It is OTL's wish to resolve the current situation. . . .” 11/17/2005 Letter from Stephen Cardy to Matt Buchanan: “I would suggest that Raytheon review the TAA content in full as if this is a ‘formal’ US DOD approved document the legal position of OTL is without question. . . . OTL have not withheld design data, manufacturing data or modelling data and very much regarded the program as a team effort and did not perceive Raytheon as a competitor in terms of the warhead system or elements of it. It may be that OTL has been commercially naive but now there is an opportunity to identify where exactly OTL sits regarding the program.” 01/09/2006 Email from Stephen Cardy to Matt Buchanan: “I have had meetings with OTL staff and our legal advisors. . . . As you are aware OTL spent some 2 years defending its IPR [intellectual property rights] against claims from SEI Italy. . . . Following discussions with our legal advisors on the current position, their advice was that we should explore some form of arbitration with Raytheon rather than enter into another potential lengthy legal conflict.” 12 Raytheon Statement of Facts (“RSOF”), Exs. 5-7 (Docs. 97-5, 97-6, 97-7). 13 During his deposition, Cardy testified that, in 2005, Raytheon had not breached an 14 agreement, but that there were concerns over trusting Raytheon. Cardy Depo. (Doc. 147-1), 15 35:5-9. Cardy clarified that the concern was that Raytheon “[w]as going to violate the 16 TAA.” Cardy Depo. (Doc. 147-1), 37:6. In a declaration subsequently provided by Cardy, 17 Cardy summarized the circumstances in which he sent the aforementioned correspondence. 18 Cardy stated: “At the time I sent this correspondence, neither myself nor anyone else at OTL 19 believed that Raytheon was in breach of any contract between OTL and Raytheon, including 20 the Amended TAA. Rather, I was seeking an understanding regarding OTL’s future role 21 with Raytheon in the MWS space.” Cardy dec. (Doc. 108-1), pp. 3-4. 22 On May 18, 2012, OTNA filed an action against Raytheon Company alleging claims 23 of (Count 1) Statutory Misappropriation of Trade Secrets, (Count 2) Common Law 24 Misappropriation of Trade Secrets, (Count 3) Breach of Contract, (Count 4) Breach of 25 Implied Contract, (Count 5) Breach of Implied Covenant of Good Faith and Fair Dealing, 26 (Count 6) Unjust Enrichment, (Count 7) Conversion, (Count 8) Interference with Contract 27 or Business Expectancy, (Count 9) Unfair Competition, and (Count 10) a violation of the 28 -3- 1 Lanham Act. Complaint (Doc. 1). Raytheon filed an Answer and Counterclaim (Doc. 13) 2 on September 13, 2012. 3 On May 30, 2013, Raytheon filed a Motion for Summary Adjudication of the First, 4 Second and Fourth Through Tenth Claims for Relief and/or For Partial Judgment on the 5 Pleadings (Doc. 35). The Court granted this motion on February 26, 2014. OTNA’s Count 6 Three alleging a Breach of Contract is the only remaining claim from OTNA’s Complaint. 7 On January 3, 2014, this Court determined that the Count Three Breach of Contract claim 8 as alleged in the Complaint includes only the TAA and the Amended TAA. 9 On June 18, 2014, a Motion for Summary Judgment on Plaintiff’s Third Claim for 10 Relief was filed by Raytheon (Doc. 95). OTNA has filed an Opposition (Doc. 108) and 11 Raytheon has filed a Reply (Doc. 145). Argument was presented to the Court on January 30, 12 2015. 13 14 II. Motion for Summary Judgment Standard and Controverting Statement of Facts 15 The parties have each made objections to the other party’s statements of facts. A 16 motion for summary judgment is to set forth the specific facts (with reference to a specific 17 admissible portion of the record where the fact may be found) on which a party relies 18 separately from the memorandum of law. L.R.Civ. 56.1. Furthermore, the specific facts are 19 to be set forth in serial fashion and not in narrative form. Id. 20 Summary judgment may be granted if the movant shows “there is no genuine issue 21 as to any material fact and that the moving party is entitled to judgment as a matter of law.” 22 Fed.R.Civ.P. 56(c). The disputed facts must be material. Celotex Corp. v. Catrett, 477 U.S. 23 317, 322-23 (1986). Therefore, the nonmoving party must demonstrate a dispute “over facts 24 that might affect the outcome of the suit under the governing law” to preclude entry of 25 summary judgment. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248 (1986). A dispute 26 over material facts must be genuine. Id. A dispute about a material fact is genuine if “the 27 evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. 28 A party opposing a properly supported summary judgment motion must set forth -4- 1 specific facts demonstrating a genuine issue for trial. Id. Mere allegation and speculation 2 are not sufficient to create a factual dispute for purposes of summary judgment. Witherow 3 v. Paff, 52 F.3d 264, 266 (9th Cir. 1995) (per curiam); see also Matsushita Elec. Indus. Co. 4 v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (the non-moving party “‘must do more 5 than simply show that there is some metaphysical doubt as to the material facts’”). “If the 6 evidence is merely colorable or is not significantly probative, summary judgment may be 7 granted.” Anderson, 477 U.S. at 249-50. However, the evidence of the nonmoving party is 8 to be believed and all justifiable inferences are to be drawn in his favor. Id. at 255. 9 However, the relevant facts are to be determined and inferences drawn in favor of the 10 nonmoving party “to the extent supportable by the record[.]” Scott v. Harris, 550 U.S. 372 11 n. 8 (2007). 12 The Court is not to make credibility determinations with respect to the evidence 13 offered and is required to draw all inferences in a light most favorable to the non-moving 14 party. T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630-31 (9th 15 Cir. 1987), citing Matsushita Elec., 475 U.S. at 587 (1986). Summary judgment is not 16 appropriate "where contradictory inferences may reasonably be drawn from undisputed 17 evidentiary facts[.]" Hollingsworth Solderless Terminal Co. v. Turley, 622 F.2d 1324 (9th 18 Cir. 1980). 19 Further, declarations and other evidence that would not be admissible may be stricken. 20 FDIC v. New Hampshire Ins. Co., 953 F.2d 478, 484 (9th Cir. 1991). As pointed out by 21 Raytheon, when a declaration grossly contradicts the allegations of the Complaint, the 22 evidence, and the declarant’s own sworn testimony, such a declaration may be a sham. 23 Burrell v. Star Nursery, Inc., 170 F.3d 951, 954 (9th Cir. 1999) (holding that the plaintiff 24 sought to create “sham issues of fact” for the first time in her affidavit and directly 25 contradicted her prior deposition testimony); Christopher v. Spectra Elec. Services, Inc., No. 26 CV-12-00345–PHX–DGC, 2012 WL 5471779, **1-2 (D.Ariz., Nov. 09, 2012) (“a party 27 cannot create an issue of fact to avoid summary judgment by submitting an affidavit that 28 flatly contradicts prior sworn testimony”). -5- 1 The Court will not specifically address each dispute, but will only consider admissible 2 evidence that is supported by specific facts that may show a genuine issue of material fact 3 in resolving the issues. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 4 2505, 2510 (1986). As to the Cardy deposition and declaration, the Court finds the 5 statements regarding the statute of limitations issue are not directly contradictory. In the 6 deposition, Cardy stated that Raytheon had not breached an agreement, but that there were 7 concerns over trusting Raytheon. This statement is consistent with Cardy’s statement in the 8 declaration that OTNA did not believe Raytheon was in breach of any contract at the time 9 of the correspondence. However, to any extent Cardy’s declaration contradicts his deposition 10 testimony, the Court will not consider those portions of his declaration in ruling on the 11 pending motion. 12 13 III. Statute of Limitations 14 The parties agree that a six year statute of limitations applies to the breach of contract 15 claim. A.R.S. § 12-548. Raytheon argues that OTNA’s conduct in November 2005 alleging 16 the improper use of proprietary data establishes that OTNA believed it had a claim as of late 17 2005 and early 2006. OTNA asserts the references to proprietary issues were in the context 18 of an ongoing discussion between the parties about performance under the contract. 19 OTNA points out the correspondence does not accuse Raytheon of a breach of 20 contract and, in fact, reaffirms the contract. OTNA argues that a breach of contract cause of 21 action does not accrue until a plaintiff discovers or should have discovered by reasonable 22 diligence circumstances establishing breach. Gust, Rosenfeld & Henderson v. Prudential Ins. 23 Co. of America, 182 Ariz. 586, 588 (1995). At a minimum, OTNA argues that triable issues 24 of fact exist which preclude summary judgment on the statute of limitations issue. Gust, 182 25 Ariz. at 591 (“When discovery occurs and a cause of action accrues are usually and 26 necessarily questions of fact for the jury.”). 27 OTNA asserts that the correspondence was addressing concerns as to the results of 28 a field “sled test” at Pendine in November 2005 (“Pendine test”) and cost increases and -6- 1 expenses (and their allocation). Further, OTNA asserts the parties continued performing 2 under the contract. Additionally, the correspondence and the subsequent conduct of the 3 parties shows an ongoing contractual relationship that was expected to continue. Impliedly, 4 this is as opposed to a relationship that was terminated because of a belief of a breach of 5 contract. OTNA asserts the evidence shows that, after the correspondence, Raytheon 6 reassured OTNA of an ongoing relationship, the parties continued to work together. In other 7 words, OTNA asserts it “had no knowledge of any breach of contract, because in fact that 8 contract was not breached, and was instead reaffirmed by word and deed at the time.” 9 Raytheon asserts that the results of Pendine test are not material because OTNA 10 admits this test was conducted under a separate contract. However, consideration of the 11 context of the correspondence is appropriate. Although Raytheon asserts the Cardy 12 declaration should be disregarded because it contradicts his deposition testimony, other 13 evidence supports OTNA’s argument. The deposition testimony of Buchanan indicates 14 discussions occurred between Raytheon and OTNA as to ongoing responsibilities. The 15 allegations in the Complaint show that OTNA had concerns about Raytheon’s use of OTNA 16 proprietary data and had asked Raytheon in November 2005 if Raytheon had passed on 17 OTNA propriety data. See e.g. Complaint, Doc. 1, ¶¶ 22 and 23. 18 Raytheon asserts the Complaint and the correspondence establishes OTNA knew of 19 Raytheon’s alleged use of proprietary data. For example, the Complaint refers to Raytheon 20 briefings that used OTNA proprietary data. However, the Complaint does not clarify what 21 type of briefings are being referred to – such reference in a briefing presented only to 22 Raytheon and OTNA personnel working jointly on a project may have different ramifications 23 than including such a reference in legal documents or presentations to third parties. 24 Raytheon also asserts the Court previously determined that OTNA knew of the alleged 25 misappropriation. See February 26, 2014, Order, Doc. 85, pp. 7-9. However, the Court’s 26 statements in that Order were referring to knowledge of OTNA as expressed in a 2009 27 infringement letter, not knowledge as allegedly expressed in the 2005 correspondence. 28 In the Complaint, OTNA refers to concerns of OTNA as to Raytheon’s use of -7- 1 proprietary data. Complaint, Doc. 1, ¶ 22. This shows that OTNA had suspicions as to 2 Raytheon’s use of proprietary data. The Court of Appeals of Arizona has stated that the 3 “discovery rule is not intended to allow plaintiffs to ignore their suspicions and postpone 4 their investigations. Indeed, plaintiffs have a ‘duty to investigate with due diligence to 5 discover the necessary facts.’” Forrer v. Johansen, 1 CA–CV 10–0712, 2011 WL 3209844 6 *3 (Ariz.App. July 28, 7 correspondence is even more conclusive. For example, the correspondence refers to the use 8 of OTNA propriety data provided to Raytheon. RSOF, Ex. 5, November 16, 2005 Email 9 from Cardy to Buchanan (Doc. 97-5). The correspondence also refers to discussions with 10 legal counsel as to whether OTNA should pursue legal action or arbitration. RSOF, Ex. 7, 11 January 9, 2006 Email from Cardy to Buchanan (Doc. 97-7). 2011) (citations omitted). Further, the language of the 12 While when a cause of action accrues is usually a question of fact for a jury, Gust, 182 13 Ariz. at 591, the issue should be decided as a matter of law when the evidence is insufficient 14 to dispute the accrual of the statute of limitations. See generally Rhoads v. Harvey 15 Publications, Inc., 145 Ariz. 142, 700 P.2d 840 (App. 1984). Although other issues were 16 raised in the correspondence, the 2005 and 2006 emails make clear that OTNA had 17 concluded that Raytheon had improperly used the proprietary data. 18 deposition testimony and declaration indicate that neither he nor anyone at OTNA believed 19 Raytheon was in breach of any contract, the language of the correspondence indicates that 20 he (and others at OTNA) believed Raytheon had improperly used proprietary data. In other 21 words, OTNA knew of Raytheon’s conduct or the facts giving rise to the claim when Cardy 22 sent the correspondence. See e.g. Matusik v. Dorn, 157 Ariz. 249, 251, 758 P.2d 346, 349 23 (App. 1988) (“the cause of action does not accrue until the plaintiff knows, or in the exercise 24 of reasonable diligence should know, of the injury”); Logerquist v. Danforth, 188 Ariz. 16, 25 932 P.2d 281 (App. 1996); see also Little v. State, 225 Ariz. 466, 240 P.3d 861, 864 (App. 26 2010). Although Cardy’s 27 Furthermore, contrary to OTNA’s assertion, that the relationship continued between 28 Raytheon and OTNA does not support OTNA’s implication that the correspondence only -8- 1 confirmed and clarified that ongoing relationship. Rather, as stated by another district court: 2 [Plaintiff] was certainly entitled to make this decision – that is, to decline to sue (or to even ask questions about its suspicions) in order to maintain its business relationship with [Defendant], and to wait instead . . . But this decision has consequences for statute of limitations purposes. 3 4 AT Engine Controls Ltd. V. Goodrich Pump & Engine Control Systems, Inc., No. 3:10-cv5 01539 (JAM), 2014 WL 7270160 (D.Conn. 2014) (without discussion, appears to agree 6 claim for breach of contract for use of proprietary data is permitted).2 7 As a matter of law, the three emails establish that OTNA knew by no later than 8 January 9, 2006, when Cardy informed Buchanan that OTNA preferred to arbitrate 9 intellectual property disputes rather than engaging in a lengthy legal dispute, that it had 10 discovered (or should have discovered with reasonable diligence) a claim against Raytheon 11 regarding Raytheon’s use of the proprietary data. The statute of limitations had expired when 12 the Complaint was filed on May 18, 2012. Summary judgment in favor of Raytheon as to 13 Count III, the breach of contract claim, is appropriate. 14 15 Accordingly, IT IS ORDERED: 16 1. The Motion to File Exhibits and Unredacted Briefs Under Seal (Doc. 143 is 17 GRANTED. The Clerk of Court shall file the deposition transcript excerpts of Thomas 18 Bootes, Matthew Buchanan, and Stephen Cardy, together with the unredacted version of 19 Raytheon’s Reply and Response to OTNA’s Statement of Facts (Docs. 146 and 147) 20 UNDER SEAL. 21 2. The Motion for Summary Judgment on Plaintiff’s Third Claim for Relief (Doc. 22 95) is GRANTED. 23 24 25 26 27 28 2 OTNA could have alternatively chose to terminate the agreement with Raytheon. See e.g., PharMetrics, Inc. v. Source Healthcare Analytics, Inc., 21 Mass.L.Rptr. 526 (Mass Super. 2006) (right to terminate agreement if confidential information is disclosed inappropriately). -9- 1 3. The parties shall file a Joint Pre-Trial Statement as to the pending counterclaim 2 for a declaratory judgment on or before April 17, 2015. Alternatively, the parties shall 3 submit a status report explaining why a Joint Pre-Trial Statement should not be filed at this 4 time on or before April 17, 2015. 5 DATED this 13th day of March, 2015. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 10 -

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