Linde, LLC v. Valley Protein, LLC et al
Filing
76
ORDER GRANTING IN PART Plaintiff's 52 Motion for Summary Judgment; Status Conference to be held August 20, 2019 at 9:30 a.m. in Courtroom 5 before the undersigned, signed by District Judge Dale A. Drozd on 7/11/2019. (Martin-Gill, S)
1
2
3
4
5
6
7
8
9
UNITED STATES DISTRICT COURT
10
FOR THE EASTERN DISTRICT OF CALIFORNIA
11
12
LINDE, LLC,
13
14
15
No. 1:16-cv-00527-DAD-EPG
Plaintiff,
v.
ORDER GRANTING IN PART PLAINTIFFS’
MOTION FOR SUMMARY JUDGMENT
VALLEY PROTEIN, LLC,
(Doc. No. 52)
16
Defendant.
17
18
19
VALLEY PROTEIN, LLC,
Counter-claimant,
20
21
22
23
v.
LINDE, LLC,
Counter-defendant.
24
25
This matter is before the court on plaintiff and counter-defendant Linde, LLC’s (“Linde”)
26
motion for summary judgment, or in the alternative for partial summary judgment, filed on
27
August 7, 2018. (Doc. No. 52.) Defendant and counter-claimant Valley Protein, LLC (“Valley
28
1
1
Protein”) filed an opposition on September 4, 2018. (Doc. No. 53.) Linde filed its reply on
2
September 11, 2018. (Doc. No. 58.) On September 18, 2018, the court held a hearing on the
3
motion at which attorney Adam Scott Hamburg appeared for Linde, and attorney Russell K. Ryan
4
appeared for Valley Protein. Having considered the parties’ briefing and heard from counsel, the
5
court will grant Linde’s motion for summary judgment in part.
6
BACKGROUND
7
The facts of this case are as follows, and are undisputed except where noted. On January
8
27, 2011, Linde and Valley Protein entered into a Product Supply Agreement (the “2011
9
Agreement”), in which Valley Protein agreed to purchase from Linde its requirements for CO2 for
10
its meat processing plant located at 1828 E. Hedges Avenue, Fresno, CA 93703 (the “Plant”).
11
(Doc. No. 52-5 (“UMF”) at ¶ 1.) The 2011 Agreement also contained an Application Equipment,
12
Ancillary Equipment, and Services Term Sheet, wherein Valley Protein agreed to lease a Cryoline
13
(Cryowave) Tunnel 48-30 (the “2011 Freezer”) from Linde (the “2011 Rental Agreement”). (Id.
14
at ¶ 2.) In addition, the 2011 Agreement contained an Application Equipment, Ancillary
15
Equipment, and Services Rider (the “2011 Equipment Rider”), which provided that Valley
16
Protein was obligated to keep the 2011 Freezer clean at all times, and to “maintain the [2011
17
Freezer] in a good and fully functional condition, in accordance with any written instructions
18
provided by Linde.” (Id.) Further, the 2011 Equipment Rider stated that Valley Protein “is solely
19
responsible for determining the suitability, compatibility, and use of the [2011 Freezer].” (Id.)
20
By early 2012, Valley Protein realized that it was not meeting its target conversion rates
21
using the 2011 Freezer.1 (Id. at ¶ 6.) In addition, by October 1, 2012, Valley Protein’s
22
production increased due to additional business it acquired, and there is some evidence that it was
23
unable to fully meet this increased demand due to the 2011 Freezer malfunctioning. (Id. at ¶ 7;
24
Doc. No. 54 (“DMF”) at ¶ 7.) Although it is undisputed that Valley Protein did not lose
25
customers as a result of these malfunctions, Valley Protein contends that “it did lose business.”
26
(DMF at ¶ 7.) In September 2014, Valley Protein was awarded a new contract with Safeway,
27
28
1
The court understands “target conversion rate” to refer to the freezer’s efficiency, specifically
the amount of CO2 that was needed to operate it.
2
1
because of which it sought ways to improve and expand its freezing operations. (UMF at ¶ 8.)
2
To that end, Valley Protein’s president Robert Coyle contacted Michael Iannelli, a sales manager
3
employed by Linde, to inquire whether Linde possessed any newer technology or equipment that
4
would permit Valley Protein to increase its production rate and reduce its CO2 consumption.
5
(Doc. No. 52-1 (“Iannelli Decl.”) at ¶ 9; Doc. No. 52-2 at 17–18.) On September 4, 2014, Linde
6
engineer Amanda Guzman contacted Coyle with a questionnaire to enable Linde to identify the
7
appropriate equipment that would suit Valley Protein’s needs. (UMF at ¶ 9; Iannelli Decl. at
8
¶ 11; Doc. No. 52-2 at 20–21.) On September 29, 2014, Coyle returned this questionnaire to Ms.
9
Guzman. (Iannelli Decl. at ¶ 12; Doc. No. 52-2 at 23–31.) According to the questionnaire, Coyle
10
represented to Linde that the “desired production rate” was 3,500 pounds of poultry per hour.
11
(Iannelli Decl. at ¶ 12; Doc. No. 52-2 at 25–31).
12
There is some lack of clarity about what occurred next. Iannelli stated his understanding
13
that Valley Protein originally requested the ability to process 3,500 pounds of poultry per hour, as
14
indicated in the questionnaire, but “ultimately ended up” increasing that requirement to 5,000
15
pounds of poultry per hour. (Doc. No. 57-2 at 12.) In addition, Coyle stated that in October
16
2014, he received assurances from Ms. Guzman, one of Linde’s engineers, that Linde’s new
17
equipment would process 5,000 pounds of poultry per hour. (Doc. No. 56 (“Coyle Decl.”) at ¶ 9.)
18
However, there does not appear to be any evidence that Valley Protein conveyed to Linde that the
19
capability to process 5,000 pounds of poultry per hour was a requirement in October 2014: Coyle
20
stated that information was not conveyed to Linde until at least November 5. (Doc. No. 52-4 at
21
19.) In addition, Iannelli stated that he was unaware of this 5,000-pound requirement as of
22
September or October, implying that he was made aware of it only later. (Doc. No. 57-2 at 12.)
23
Effective November 1, 2014, Linde and Valley Protein entered into a new agreement,
24
referred to as the “2014 Agreement.”2 (UMF at ¶ 11.) The 2014 Agreement included the Product
25
Supply Agreement, which contained the following provisions relevant to this action:
26
27
28
2
For ease of reference, this order will refer collectively to all agreements entered into on
November 1, 2014 as “the 2014 Agreement.” However, as the court’s analysis below reflects, the
“agreement” is in fact composed of multiple separate contracts.
3
1
9. Warranty, Sole Remedies, and Limitation of Damages.
2
...
3
(e) Statute of Limitations. A Party must commence an action for a
breach of contract within one year after the action has accrued.
4
...
5
15. General Provisions.
6
...
7
(b) Entire Agreement. Each Term Sheet, in conjunction with the
terms specified in this document and the related Riders: (1)
constitutes a separate contract between the Parties; (2) constitutes all
of the terms of the contract between the Parties regarding its subject
matter; and (3) supersedes and terminates all previous agreements
between the Parties regarding this agreement’s subject matter. Any
term contained in a delivery document used by Linde, or a purchase
order, confirmation, or acknowledgement used by Valley Protein,
that conflicts with, is different from, or is additional to, the terms of
this agreement is not part of the contract between the parties.
8
9
10
11
12
13
(UMF at ¶ 11; Doc. No. 52-2 at 35, 37–38.) In addition, the 2014 Agreement included an
14
Application Equipment, Ancillary Equipment and Services Term Sheet and accompanying Rider
15
(the “2014 Rental Agreement”), wherein Valley Protein agreed to lease a Spiral Freezer 20-175S
16
from Linde (UMF at ¶ 13; Doc. No. 52-2 at 45–55.) The 2014 Agreement also contained a Bulk
17
Term Sheet and Rider, pursuant to which Valley Protein agreed to purchase its CO2 gas
18
requirements exclusively from Linde. (UMF at ¶ 12; Doc. No. 52-2 at 40–44.) The Bulk Term
19
Sheet also authorized Linde to charge Valley Protein a fuel surcharge for the delivery of the CO2
20
gas. (UMF at ¶ 12; Doc. No. 52-2 at 43.)
According to the Coyle Declaration, a few weeks after the 2014 Agreement was executed,
21
22
Iannelli contacted Coyle and advised him the equipment that served as the core of the 2014
23
Agreement had been “mis-engineered,” and was only capable of processing less than 2,000
24
pounds of poultry per hour. (Coyle Decl. at ¶ 12.) Iannelli acknowledged that the new equipment
25
was insufficient to meet Valley Protein’s needs and asked for a “do-over,” agreeing to release
26
Valley Protein from the 2014 Agreement. (Id.; Doc. No. 57-2 at 30–31.) According to Coyle,
27
having equipment sufficient to meet its poultry production requirements “was an absolutely
28
/////
4
1
essential requirement and the primary and perhaps sole reason Valley Protein entered in the 2014
2
Agreement.” (Coyle Decl. at ¶ 12.) Linde does not appear to contest this version of events.
3
On December 1, 2014, Coyle sent an email to Iannelli, which stated in relevant part that
4
Valley Protein would “like to rescind the contract we signed previously requesting an extension
5
of the contract date and the new equipment, the [2014 Freezer.]” (UMF at ¶ 14; Iannelli Decl. at
6
¶ 16; Doc. No. 52-2 at 57.) Iannelli responded by email the same day, agreeing to let Valley
7
Protein rescind the 2014 Rental Agreement, but declining to accept Valley Protein’s request to
8
rescind the 2014 Agreement as a whole. (UMF at ¶ 15; Iannelli Decl. at ¶ 17.) On December 12,
9
2014, Valley Protein entered into an Equipment Lease Agreement with Linde’s competitor, Air
10
Liquide, for a Spiral Freezer Model MB1-30-0550-09. (UMF at ¶ 17.) Concurrently, Valley
11
Protein also executed a Product Supply Agreement with Air Liquide to obtain CO2 from Air
12
Liquide, despite Iannelli’s email to Coyle notifying him that “Linde does not accept [Valley
13
Protein’s] request to rescind the contract renewal of the CO2 agreement.” (Id.; Doc. No. 52-2 at
14
57.) On January 25, 2015, Coyle sent a Termination Notice to Iannelli, wherein Coyle notified
15
Linde that Valley Protein would not be renewing the 2011 Product Supply Agreement. (UMF at
16
¶ 18; Iannelli Decl. at ¶ 18; Doc. No. 52-2 at 59–60.) In response to Coyle’s email, Iannelli again
17
advised Coyle that Linde and Valley Protein had a valid supply agreement for CO2 that was
18
renewed in November 2014, and that according to the terms of that agreement, Valley Protein
19
was obligated to obtain its CO2 from Linde for the term of five years after that date. (UMF at
20
¶ 19; Iannelli Decl. at ¶¶ 19–20; Doc. No. 52-2 at 59–60.) On February 1, 2016, Valley Protein
21
notified Linde that it would no longer be purchasing its CO2 from Linde. (UMF at ¶ 20; Iannelli
22
Decl. at ¶ 22; Doc. No. 52-2 at 64.)
23
In addition to moving for summary judgment as to its own claims, Linde also moves for
24
summary judgment in its favor as to Valley Protein’s counter-claims for breach of contract,
25
breach of the covenant of good faith and fair dealing, intentional misrepresentation, negligent
26
misrepresentation, and unfair competition. These allegations center primarily on alleged
27
malfunctioning of the 2011 Freezer. (See Doc. No. 29 at ¶¶ 11–15.) In addition to those
28
allegations, Valley Protein alleges that between mid-2014 and the beginning of 2016, Linde
5
1
obtained the CO2 delivered to the Plant from its competitor’s plant in Pixley, California, as
2
opposed to Richmond, California. (UMF at ¶ 22.) Linde admits that it sometimes improperly
3
billed Valley Protein a surcharge that was based on the transportation of the gas from Richmond
4
to the Plant. (Id.) Valley Protein characterizes this as a breach of the 2011 Agreement (See Doc.
5
No. 53 at 11), while Linde contends that it was “merely an oversight,” and that Linde
6
subsequently reimbursed Valley Protein for any unwarranted transportation surcharges. (Doc.
7
No. 52 at 17–18.)
8
As a result of what Linde contends was Valley Protein’s breach of the 2014 Agreement,
9
Linde asserts damages in the form of lost profits totaling $963,084.00. (UMF at ¶ 23.) Linde
10
also asserts that at the time Valley Protein breached the 2014 Agreement, Valley Protein had a
11
past due balance for CO2 totaling $38,963.89, and that this amount remains unpaid. (Id. at ¶ 24.)
12
LEGAL STANDARD
13
Summary judgment is appropriate when the moving party “shows that there is no genuine
14
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
15
Civ. P. 56(a).
16
In summary judgment practice, the moving party “initially bears the burden of proving the
17
absence of a genuine issue of material fact.” In re Oracle Corp. Sec. Litig., 627 F.3d 376, 387
18
(9th Cir. 2010) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). The moving party
19
may accomplish this by “citing to particular parts of materials in the record, including
20
depositions, documents, electronically stored information, affidavits or declarations, stipulations
21
(including those made for purposes of the motion only), admissions, interrogatory answers, or
22
other materials” or by showing that such materials “do not establish the absence or presence of a
23
genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.”
24
Fed. R. Civ. P. 56(c)(1)(A), (B). When the non-moving party bears the burden of proof at trial, as
25
plaintiff does here, “the moving party need only prove that there is an absence of evidence to
26
support the non-moving party’s case.” Oracle Corp., 627 F.3d at 387 (citing Celotex, 477 U.S. at
27
325); see also Fed. R. Civ. P. 56(c)(1)(B). Indeed, summary judgment should be entered, after
28
adequate time for discovery and upon motion, against a party who fails to make a showing
6
1
sufficient to establish the existence of an element essential to that party’s case, and on which that
2
party will bear the burden of proof at trial. See Celotex, 477 U.S. at 322. “[A] complete failure of
3
proof concerning an essential element of the nonmoving party’s case necessarily renders all other
4
facts immaterial.” Id. at 322–23. In such a circumstance, summary judgment should be granted,
5
“so long as whatever is before the district court demonstrates that the standard for the entry of
6
summary judgment . . . is satisfied.” Id. at 323.
7
If the moving party meets its initial responsibility, the burden then shifts to the opposing
8
party to establish that a genuine issue as to any material fact actually does exist. See Matsushita
9
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). In attempting to establish the
10
existence of this factual dispute, the opposing party may not rely upon the allegations or denials
11
of its pleadings but is required to tender evidence of specific facts in the form of affidavits or
12
admissible discovery material in support of its contention that the dispute exists. See Fed. R. Civ.
13
P. 56(c)(1); Matsushita, 475 U.S. at 586 n.11; Orr v. Bank of Am., NT & SA, 285 F.3d 764, 773
14
(9th Cir. 2002) (“A trial court can only consider admissible evidence in ruling on a motion for
15
summary judgment.”). The opposing party must demonstrate that the fact in contention is
16
material, i.e., a fact that might affect the outcome of the suit under the governing law, see
17
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); T.W. Elec. Serv., Inc. v. Pac. Elec.
18
Contractors Ass’n, 809 F.2d 626, 630 (9th Cir. 1987), and that the dispute is genuine, i.e., the
19
evidence is such that a reasonable jury could return a verdict for the non-moving party, see
20
Anderson, 477 U.S. at 250; Wool v. Tandem Computs. Inc., 818 F.2d 1433, 1436 (9th Cir. 1987).
21
In the endeavor to establish the existence of a factual dispute, the opposing party need not
22
establish a material issue of fact conclusively in its favor. It is sufficient that “the claimed factual
23
dispute be shown to require a jury or judge to resolve the parties’ differing versions of the truth at
24
trial.” T.W. Elec. Serv., 809 F.2d at 631. Thus, the “purpose of summary judgment is to ‘pierce
25
the pleadings and to assess the proof in order to see whether there is a genuine need for trial.’”
26
Matsushita, 475 U.S. at 587 (citations omitted).
27
28
“In evaluating the evidence to determine whether there is a genuine issue of fact,” the
court draws “all inferences supported by the evidence in favor of the non-moving party.” Walls v.
7
1
Cent. Contra Costa Cty. Transit Auth., 653 F.3d 963, 966 (9th Cir. 2011). It is the opposing
2
party’s obligation to produce a factual predicate from which the inference may be drawn. See
3
Richards v. Nielsen Freight Lines, 602 F. Supp. 1224, 1244–45 (E.D. Cal. 1985), aff’d, 810 F.2d
4
898, 902 (9th Cir. 1987). Finally, to demonstrate a genuine issue, the opposing party “must do
5
more than simply show that there is some metaphysical doubt as to the material facts. . . . Where
6
the record taken as a whole could not lead a rational trier of fact to find for the non-moving party,
7
there is no ‘genuine issue for trial.’” Matsushita, 475 U.S. at 587 (citation omitted).
8
“‘When as is the case here, the moving party is a plaintiff, he or she must adduce
9
admissible evidence on all matters as to which he or she bears the burden of proof.’” Grimmway
10
Enters., Inc. v. PIC Fresh Glob., Inc., 548 F. Supp. 2d 840, 845 (E.D. Cal. 2008) (quoting Zands
11
v. Nelson, 797 F. Supp. 805, 808 (S.D. Cal. 1992)); see also S. Cal. Gas Co. v. City of Santa Ana,
12
336 F.3d 885, 888 (9th Cir. 2003) (noting that because plaintiffs are “the party with the burden of
13
persuasion at trial, the Gas Company must establish ‘beyond controversy every essential element
14
of its’ Contract Clause claim.” (quoting William W. Schwarzer, et al., California Practice Guide:
15
Federal Civil Procedure Before Trial § 14:124–127 (2001))).
16
DISCUSSION
17
As noted above, Linde moves for summary judgment on all of its causes of action: breach
18
of contract, breach of the implied covenant of good faith and fair dealing, account stated, and
19
goods and services rendered. (Doc. No. 52 at 2–3.) In addition, Linde also moves for summary
20
judgment in its favor on Valley Protein’s counter-claims for breach of contract, breach of the
21
covenant of good faith and fair dealing, intentional misrepresentation, negligent misrepresentation
22
and unfair competition, respectively.
23
A.
24
Choice of Law
Before turning to the individual claims at issue, the court first addresses the parties’
25
choice-of-law dispute. Linde filed its motion for summary judgment under California law. (See
26
generally Doc. No. 52.) However, in its opposition, Valley Protein points out that both the 2011
27
Agreement and the 2014 Agreement specifically provide that New Jersey law “governs all
28
matters pertaining to the validity, construction, and effect” of the Agreements. (Doc. No. 53 at
8
1
16–17.) Linde disputes whether New Jersey law applies, but nonetheless devotes much of its
2
reply to rearguing its motion under New Jersey law. (Doc. No. 58 at 6, 8–17.)
3
District courts sitting in diversity apply the substantive law of the state in which they sit.
4
Mason & Dixon Intermodal, Inc. v. Lapmaster Int’l LLC, 632 F.3d 1056, 1060 (9th Cir. 2011). In
5
such circumstances, district courts look to the law of the forum state when making choice of law
6
determinations. Hoffman v. Citibank (S. Dakota), N.A., 546 F.3d 1078, 1082 (9th Cir. 2008). In
7
making these determinations, the California Supreme Court has adopted the approach outlined in
8
§ 187(2) of the Restatement (Second) of Conflict of Laws. See Nedlloyd Lines B.V. v. Superior
9
Court, 3 Cal. 4th 459, 464–66 (1992). Under this rubric, courts are instructed to first determine
10
whether (1) the chosen state has a substantial relationship to the parties or their transaction, or (2)
11
there is any other reasonable basis for the parties’ choice of law. Id. at 466. If neither of these
12
tests is met, the inquiry ends, and the court need not enforce the parties’ choice of law. Id.
13
However, if one of these tests is satisfied, the court must next determine whether the chosen
14
state’s law is contrary to a fundamental policy of California. Id. If there is no such conflict, the
15
court enforces the parties’ choice of law. If there is a conflict, the court must determine whether
16
California has a “materially greater interest than the chosen state in the determination of the
17
particular issue.” Id. If California’s interest is materially greater, California law applies despite
18
the choice of law provision. Id. The burden of demonstrating the existence of a fundamental
19
policy of California rests with the party opposing application of the choice of law provision, as
20
does the burden of demonstrating that California has a materially greater interest in the outcome
21
of the case than the chosen state. Wash. Mut. Bank, FA v. Superior Court, 24 Cal. 4th 906, 917
22
(2001).
23
New Jersey plainly has a substantial relationship to the parties. As alleged in Linde’s
24
complaint, Linde is a limited liability company organized under the laws of Delaware with its
25
principal place of business in New Jersey. (Doc. No. 1 at ¶ 1.) Accordingly, for purposes of
26
diversity jurisdiction, Linde is a citizen of New Jersey. (Id.) This is sufficient to establish a
27
substantial relationship between the chosen state and the parties. See Restatement (Second) of
28
/////
9
1
Conflict of Laws § 187 cmt. f (Am. Law. Inst. 1971) (finding a substantial relationship where
2
“one of the parties is domiciled or has his principal place of business” in the chosen state).
3
Next, the court must determine whether the chosen state’s law is contrary to a
4
fundamental policy of California. Neither party has identified any differences between California
5
and New Jersey law that are relevant to this action, and the court is unaware of any “fundamental
6
policies” of California that are implicated by the facts of this case. The burden on this point rests
7
with Linde as the party seeking to apply California law notwithstanding the parties’ choice of law
8
provision. See Wash. Mut. Bank, 24 Cal. 4th at 917. Because Linde has failed to carry that
9
burden, this court will apply New Jersey law in addressing the breach of contract claims.
10
However, to say that New Jersey law applies to the breach of contract claims is not to say
11
that New Jersey law also applies to the remaining claims in this action. On the contrary, courts
12
routinely recognize that a valid choice-of-law provision contained in a contract does not
13
necessarily govern the entire relationship between the parties. “The question of whether [the
14
choice-of-law] clause is ambiguous as to its scope . . . is a question of contract interpretation that
15
in the normal course should be determined pursuant to [the selected forum’s law.]” Nedlloyd
16
Lines, 3 Cal. 4th at 469 n.7; see also Cannon v. Wells Fargo Bank N.A., 917 F. Supp. 2d 1025,
17
1051 (N.D. Cal. 2013) (examining Florida law, the law specified in the choice-of-law provision,
18
to determine whether a contractual choice-of-law provision covers related tort claims). The court
19
will therefore consult New Jersey law to determine the breadth of the choice-of-law provisions
20
here.
21
The parties have provided no briefing on this issue—indeed, plaintiff Linde did not
22
recognize the existence of a choice-of-law issue in seeking summary judgment under California
23
law despite the existence of the New Jersey choice-of-law provision. However, the court’s
24
research has revealed some, albeit limited, authority addressing how New Jersey law would apply
25
to the provision at issue here. After conducting a thorough survey of the relevant law, a New
26
Jersey district court recently concluded that “New Jersey principles of statutory construction
27
would counsel a narrow reading of the choice-of-law provision [at issue].” Portillo v. Nat’l
28
Freight, Inc., 323 F. Supp. 3d 646, 655 (D.N.J. 2018). In Portillo, the choice-of-law provision
10
1
stated that the agreement “shall be interpreted in accordance with, and governed by, the laws of
2
the United States and, of the State of New Jersey.” Id. at 648. The court noted that the phrase
3
“governed by” could be interpreted to encompass more than the breach of contract claim, and that
4
some courts have construed it in that manner. See, e.g., Nat’l Seating & Mobility, Inc. v. Parry,
5
No. C 10-02782 JSW, 2012 WL 2911923, at *2 (N.D. Cal. July 16, 2012) (finding that a choice-
6
of-law provision stating that the agreement would be “governed by and construed in accordance”
7
with Tennessee law was “broad enough to encompass the breach of contract, the tort claims, and
8
the UCL claim”). Nonetheless, the district court in Portillo concluded that New Jersey law did
9
not sweep so broadly and the court is persuaded by that analysis of this issue. See Portillo, 323 F.
10
11
Supp. 3d at 655–58.
Applying New Jersey’s rules governing the scope of choice-of-law provisions here, the
12
court concludes that the provision in this case extends only to the parties’ breach of contract
13
claims. By their terms, the choice-of-law provisions at issue here apply to matters “pertaining to
14
the validity, construction, and effect of [the agreements.]” (Doc. No. 52-2 at 7, 38.) Compared
15
with other choice-of-law provisions which courts have been called upon to consider, this
16
language is quite narrow. See, e.g., Country Visions, Inc. v. MidSouth LLC, No. 2:15-cv-01740-
17
TLN-CKD, 2016 WL 1614585, at *2 (E.D. Cal. Apr. 22, 2016) (“Both parties agree to submit to
18
exclusive jurisdiction in California and further agree that any cause of action arising under this
19
Agreement shall be brought in an appropriate federal or state court located in California.”)
20
(emphasis added); Brigham Young Univ. v. Pfizer, Inc., No. 2:06-CV-890 TS, 2012 WL 918744,
21
at *1 (D. Utah Mar. 16, 2012) (“The validity, interpretation and performance of this Agreement
22
and any dispute connected herewith shall be governed and construed in accordance with the laws
23
of the State of Missouri.”) (emphasis added); Van Gundy v. P.T. Freeport Indonesia, 50 F. Supp.
24
2d 993, 994 (D. Mont. 1999) (“Included in the offer was a choice of law provision which stated
25
that all disputes arising out of the employment relationship would be governed by Louisiana
26
law.”) (emphasis added). As the court interprets the choice-of-law provisions here, they are
27
cabined solely to the contracts themselves, and do not indicate that resolution of any other
28
disputes will be “governed by” New Jersey law. See Bd. of Educ. of Twp. of Cherry Hill v.
11
1
Human Res. Microsystems, Inc., No. CIV. 09-5766 JBS/JS, 2010 WL 3882498, at *4 (D.N.J.
2
Sept. 28, 2010) (“Generally, when a choice-of-law provision is intended to apply not only to
3
interpretation and enforcement of the contract but also to any claims related to the contract, the
4
language used is broader.”). Thus, although it may ultimately make little difference in the final
5
analysis and resolution of the issues before it, the court will apply New Jersey law only to the
6
breach of contract claims and will apply California law to the parties’ remaining claims.
7
B.
8
9
Linde’s Breach of Contract Claim
Linde first seeks summary judgment on its breach of contract claim as it relates to the
2014 Agreement. To prevail on a breach of contract claim, a party must prove (1) the existence
10
of a valid contract between the parties, (2) the opposing party’s failure to perform a defined
11
obligation under the contract, and (3) that the breach caused the claimant to sustain damages.
12
EnviroFinance Grp. v. Envtl. Barrier Co., 113 A.3d 775, 787 (N.J. App. Div. 2015). Linde
13
contends that these elements are all satisfied here as a matter of law. As for the existence of a
14
valid contract, the 2014 Agreement was executed on November 1, 2014. (UMF at ¶ 11.) Under
15
the terms of the 2014 Agreement, Valley Protein was required to purchase all of its CO2
16
exclusively from Linde for five years, but instead began purchasing CO2 from Linde’s competitor,
17
Air Liquide. (Id. at ¶¶ 12, 17.) The failure to purchase CO2 from Linde led directly to Linde’s
18
lost sales volume, causing the damages it now seeks to recover. (Id. at ¶ 23.)
19
Valley Protein does not directly challenge these contentions in its opposition but rather
20
asserts that it is entitled to rescission of the contract. Rescission is a remedy founded on
21
“considerations of equity,” the object of which is to “restore the parties to the status quo ante and
22
prevent the party who is responsible for the misrepresentation from gaining a benefit.” Rutgers
23
Cas. Ins. v. LaCroix, 946 A.2d 1027, 1034–35 (N.J. 2008). In support of this argument, Valley
24
Protein contends that Linde’s representations about the production capacity of its equipment
25
amounted to an equitable fraud, providing the basis for rescission of the contract. Under New
26
Jersey law, “equitable fraud provides a basis for a party to rescind a contract.” First Am. Title
27
Ins. v. Lawson, 827 A.2d 230, 237 (N.J. 2003) (citing Jewish Ctr. of Sussex Cty. v. Whale, 432
28
A.2d 521 (N.J. 1981)). “‘In general, equitable fraud requires proof of (1) a material
12
1
misrepresentation of a presently existing or past fact; (2) the maker’s intent that the other party
2
rely on it; and (3) detrimental reliance by the other party.’” Id. (quoting Liebling v. Garden State
3
Indem., 767 A.2d 515, 518 (N.J. App. Div. 2001)). Rescission voids the contact, meaning that it
4
is considered “null from the beginning” and treated as if it does not exist. Id.
5
The parties agree that a rescission occurred as to at least some portion of the 2014
6
Agreement, as evidenced by Iannelli’s email to Coyle agreeing to Valley Protein rescinding the
7
agreement to rent the 2014 Freezer. (UMF at ¶ 15; Iannelli Decl. at ¶ 17; Doc. No. 52-2 at 57.)
8
Iannelli confirmed this rescission at his deposition. (Doc. No. 57-2 at 34.) The parties’ dispute
9
centers on the scope of that rescission—namely, whether that rescission was effective only as to
10
the rental of the 2014 Freezer, or whether it amounted to a rescission of the entire 2014
11
Agreement. Linde contends that the rescission was only with respect to the rental of the 2014
12
Freezer, while Valley Protein argues that this rescission nullified the parties’ entire 2014
13
Agreement. If the entire 2014 Agreement was nullified as Valley Protein suggests, it was free to
14
purchase its CO2 from sources other than Linde.
15
As stated above, the 2014 Agreement was comprised of several components: The Product
16
Supply Agreement, the Bulk Rider, the Bulk Term Sheet, the Application Equipment, Ancillary
17
Equipment, and Services Rider, and the Application Equipment, Ancillary Equipment, and
18
Services Term Sheet. (Doc. No. 52-2 at 33–55.) The 2014 Freezer was rented to Valley Protein
19
pursuant to the Application Equipment, Ancillary Equipment, and Services Rider and Term Sheet
20
and Rider, whereas Valley Protein’s agreement to purchase its CO2 requirements was contained
21
in the Bulk Rider and Term Sheet. (See id.) The Product Supply Agreement specifies that “Each
22
Term Sheet, in conjunction with the terms specified in this document and the related Riders . . .
23
constitutes a separate contract between the parties.” (UMF at ¶ 11; Doc. No. 52-2 at 38.) Linde
24
therefore contends that although it agreed to rescind the Application Equipment, Ancillary
25
Equipment, and Services Rider and Term Sheet, it did not rescind the Bulk Term Sheet and Rider.
26
If the Bulk Term Sheet and Rider remained in force, as Linde argues, Valley Protein remained
27
obligated to purchase its CO2 requirements from Linde.
28
/////
13
1
Valley Protein contests this conclusion, arguing that all of the agreements constituted a
2
single contract. (See Doc. No. 53 at 18–19.) As evidence of this, Valley Protein points to
3
Iannelli’s deposition, in which Iannelli testified that he understood all three documents “to be
4
integrated and [to] form essentially the application equipment, ancillary equipment and services
5
term sheet.” (Doc. No. 57-2 at 19.) In addition, Iannelli also acknowledged at deposition that
6
Linde did not offer rental of the 2014 Freezer separate and apart from the CO2, but that they were
7
offered only as a package. (Id. at 14–15.) Iannelli further understood that the only reason Valley
8
Protein entered into the agreement to purchase CO2 was because Valley Protein was interested in
9
renting the 2014 Freezer. (Id. at 27–28.) Relying on this testimony, Valley Protein contends that
10
11
all of the agreements signed by the parties in 2014 were a single contract.
The court must resolve the question of whether the various agreements constituted
12
multiple contracts or were instead just one contract. See Bosshard v. Hackensack Univ. Med.
13
Ctr., 783 A.2d 731, 740 (N.J. App. Div. 2001) (“The interpretation of the terms of a contract are
14
decided by the court as a matter of law unless the meaning is both unclear and dependent on
15
conflicting testimony.”); Great Atl. & Pac. Tea Co. v. Checchio, 762 A.2d 1057, 1061 (N.J. App.
16
Div. 2000) (“The construction of a written contract is usually a legal question for the court, but
17
where there is uncertainty, ambiguity or the need for parol evidence in aid of interpretation, then
18
the doubtful provision should be left to the jury.”). In interpreting the terms of a contact, courts
19
“should give contractual terms their plain and ordinary meaning unless specialized language is
20
used peculiar to a particular trade, profession, or industry.” Kieffer v. Best Buy, 14 A.3d 737, 743
21
(N.J. 2011) (internal quotation marks and citations omitted). A contract provision is ambiguous
22
“if the terms of the contract are susceptible to at least two reasonable alternative interpretations,”
23
Schor v. FMS Financial Corp., 814 A.2d 1108, 1112 (N.J. App. Div. 2002) (brackets omitted)
24
(quoting Nester v. O’Donnell, 693 A.2d 1214, 1220 (N.J. App. Div. 1997)), but “a court should
25
not torture the language of a contract to create ambiguity.” Nester, 693 A.2d at 1220; see also
26
Kieffer, 14 A.3d at 743 (noting that it is not the court’s task “to rewrite a contract for the parties
27
better than or different from the one they wrote for themselves”). However, “[e]ven when the
28
contract on its face is free from ambiguity, evidence of the situation of the parties and the
14
1
surrounding circumstances and conditions is admissible in aid of interpretation.” Great Atl. &
2
Pac. Tea Co., 762 A.2d at 1061.
3
As the court interprets the language at issue here, the agreement for Linde to provide
4
Valley Protein with CO2 and the agreement for Linde to rent the 2014 Freezer to Valley Protein
5
were not merely separate transactions within the same contract. Instead, according to the plain
6
language of the Product Supply Agreement, they constituted separate contracts altogether. (See
7
Doc. No. 52-2 at 38) (“Each Term Sheet, in conjunction with the terms specified in this document
8
and the related Riders . . . constitutes a separate contract between the parties.”) (emphasis
9
added). In the court’s view this clear language is susceptible of only one reasonable
10
interpretation—namely, that the Application Equipment, Ancillary Equipment, and Services
11
Rider and Term Sheet was an entirely separate contract from the Bulk Rider and Term Sheet.
12
Although the parties devote some of their briefing to the issue of whether the 2014 Agreement
13
was partially rescinded, partial rescission does not apply where, as here, the 2014 Agreement was
14
composed of multiple, distinct contracts.3 Partial rescission is available only with respect to
15
different transactions within the same contract. See Bonnco Petrol, 560 A.2d at 662. The fact
16
that Linde and Valley Protein agreed to rescind one contract could not and did not effectuate a
17
rescission of an entirely separate contract.
18
The court acknowledges that portions of Iannelli’s deposition testimony arguably evince a
19
contrary understanding of these agreements. It is also relevant that, as Iannelli testified, it was
20
“standard practice in the industry” to rent freezing equipment and purchase CO2 or nitrogen from
21
the same company. (Doc. No. 57-2 at 28.) However, such extrinsic statements may be
22
considered only to “aid in interpretation,” and may not be considered “for the purpose of
23
changing the writing.” Great Atl. & Pac. Tea Co., 762 A.2d at 1061. Here, the written
24
3
25
26
27
28
Partial rescission of a contract is disfavored under New Jersey law. See County of Morris v.
Fauver, 707 A.2d 958, 966 (N.J. 1998) (“As a general rule, rescission ‘must be exercised in toto
and is to be applied to the contract in its entirety with the result that what has been done is wholly
undone and no contract provisions remain in force to bind either of the parties’”) (quoting
Merickel v. Erickson Stores Corp., 95 N.W.2d 303, 306 (Minn. 1959)). “Only where a contract is
severable into different transactions may one of those separate transactions be avoided.” Id.; see
also Bonnco Petrol, Inc. v. Epstein, 560 A.2d 655, 662 (N.J. 1989).
15
1
agreement of the parties itself is clear: although entered into at the same time and between the
2
same parties, the Application Equipment, Ancillary Equipment, and Services Rider and Term
3
Sheet was a separate contract from the Bulk Rider and Term Sheet.
4
Because the Bulk Rider and Term Sheet were not rescinded, Valley Protein remained
5
under a contractual obligation to purchase its CO2 gas requirements from Linde unless it can
6
establish some other basis to avoid that obligation. Valley Protein suggests that the doctrine of
7
equitable fraud provides such a basis. (Doc. No. 53 at 17.) “‘[E]quitable fraud requires proof of
8
(1) a material misrepresentation of a presently existing or past fact; (2) the maker’s intent that the
9
other party rely on it; and (3) detrimental reliance by the other party.’” First Am. Title Ins., 827
10
A.2d at 237 (quoting Liebling, 767 A.2d at 518). A review of the evidence before the court on
11
summary judgment establishes that with respect to the Bulk Rider and Term Sheet, no reasonable
12
juror could find the existence of an equitable fraud that would entitle Valley Protein to rescission
13
of the Bulk Rider and Term Sheet. At deposition, Coyle testified that with respect to surcharges
14
charged by Linde for the delivery of CO2 gas to Valley Protein, no Linde employee ever made
15
false or misleading statements regarding where the CO2 gas was being delivered from. (Doc. No.
16
52-4 at 30:3–5.) Coyle also testified that any overcharging for delivery of CO2 gas amounted
17
only to an “honest mistake.” (Id. at 31:3–5.) Based upon this testimony, the court finds no
18
evidence supporting a claim of equitable fraud with respect to the Bulk Rider and Term Sheet.
19
By failing to comply with the terms of the Bulk Rider and Term Sheet, Valley Protein breached
20
that contract.
21
With respect to damages, Linde claims that as a result of this breach, it has suffered lost
22
profits totaling $963,084.00. (UMF at ¶ 23.) In support of this claimed loss amount, Linde has
23
submitted an exhibit prepared by Iannelli and attached to his Declaration. (Doc. No. 52-2 at 66–
24
68.) Iannelli states that this projection provides an estimate of Linde’s gross margins if Valley
25
Protein had continued to purchase its CO2 gas from Linde through 2018, as required under the
26
Bulk Rider and Term Sheet. (Iannelli Decl. at ¶ 24.) Valley Protein objects to this evidence on
27
the ground that Iannelli’s projections lack foundation, are not based on personal knowledge, and
28
amount to nothing more than speculation. (Doc. No. 55 at ¶ 8.)
16
1
“Under contract law, a party who breaches a contract is liable for all of the natural and
2
probable consequences of the breach of that contract.” Pickett v. Lloyd’s, 621 A.2d 445, 454
3
(N.J. 1993). “Lost profits are one measure of compensatory damages that may be recoverable in
4
a breach of contract action, if they can be established with a reasonable degree of certainty.” RSB
5
Lab. Servs., Inc. v. BSI, Corp., 847 A.2d 599, 608 (N.J. App. Div. 2004). Notably, “[p]ast
6
experience of an ongoing, successful business provides a reasonable basis for the computation of
7
lost profits with a satisfactory degree of definiteness.” V.A.L. Floors, Inc. v. Westminster Cmtys.,
8
Inc., 810 A.2d 625, 631 (N.J. App. Div. 2002). Accordingly, Valley Protein’s objections to this
9
evidence are overruled.
10
Iannelli’s projections are neither speculative nor lacking in foundation; rather, they are
11
extrapolations based on the prior dealings of the parties, which New Jersey courts have explicitly
12
held to be a proper basis for calculating lost profits. See Weiss v. Revenue Bldg. & Loan Ass’n,
13
182 A. 891, 893 (N.J. 1936) (“[P]ast experience has demonstrated the success of the enterprise
14
and provides a reasonably certain basis for the calculation of plaintiff’s probable loss consequent
15
upon the breach of the contract to lease.”); V.A.L. Floors, Inc., 810 A.2d at 631. Nor do these
16
calculations lack personal knowledge. Iannelli is a sales manager employed by Linde (Iannelli
17
Decl. at ¶ 1) and would be expected to be intimately familiar with sales calculations. This is
18
particularly so with respect to Linde’s dealings with Valley Protein, since Iannelli was involved in
19
forming the 2014 Agreement and has reviewed all of Linde’s records pertaining to its contractual
20
relationship with Valley Protein. (Id. at ¶¶ 2, 9–13.) Under these circumstances, the court finds
21
that Iannelli’s projections provide a “reasonable basis for the computation of lost profits.” V.A.L.
22
Floors, Inc., 810 A.2d at 631. Moreover, Valley Protein has not submitted any evidence of its
23
own on summary judgment that would call these lost profit calculations into question.
24
Accordingly, the court will grant summary judgment in favor of Linde on Linde’s breach
25
of contract claim, both with respect to liability and damages.
26
C.
27
28
Linde’s Claim for Breach of Implied Covenant of Good Faith and Fair Dealing
Next, the court addresses Linde’s motion for summary judgment with regard to its claim
against Valley Protein for breach of the implied covenant of good faith and fair dealing.
17
1
“The [implied] covenant of good faith and fair dealing [is] implied by law in every
2
contract.” Durell v. Sharp Healthcare, 183 Cal. App. 4th 1350, 1369 (2010). “In order to
3
establish a breach of the covenant of good faith and fair dealing, a plaintiff must show: (1) the
4
parties entered into a contract; (2) the plaintiff fulfilled his obligations under the contract; (3) any
5
conditions precedent to the defendant’s performance occurred; (4) the defendant unfairly
6
interfered with the plaintiff’s rights to receive the benefits of the contract; and (5) the plaintiff
7
was harmed by the defendant’s conduct.” In re Yahoo! Inc. Customer Data Sec. Breach Litig.,
8
No. 16-MD-02752-LHK, 2017 WL 3727318, at *48 (N.D. Cal. Aug. 30, 2017). Notably, to
9
succeed on such a claim, it is not “necessary that the party’s conduct be dishonest.” Carma
10
Developers (Cal.), Inc. v. Marathon Dev. Cal., Inc., 2 Cal. 4th 342, 373 (1992).
11
Linde’s motion only briefly addresses whether it should be granted summary judgment on
12
this claim. Linde’s argument appears to be premised on the notion that summary judgment is
13
proper because “[t]he elements of Linde’s claim for breach of the implied covenant of good faith
14
and fair dealing are identical to its breach of contract claim.” (Doc. No. 52 at 23.) Thus, in
15
Linde’s view, because summary judgment in its favor is proper on its breach of contract claim for
16
the reasons discussed above, it is also proper with respect to its claim of breach of the implied
17
covenant of good faith and fair dealing. Linde’s argument is not persuasive in this regard. To be
18
sure, Linde is correct that under California law, “a breach of the implied covenant of good faith is
19
a breach of the contract.” Carson v. Mercury Ins. Co., 210 Cal. App. 4th 409, 429 (2012) (citing
20
Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal. App. 3d 1371, 1393 (1990)). The converse,
21
however, is not necessarily true—that is, a breach of contract does not automatically give rise to
22
liability for breach of the implied covenant of good faith and fair dealing. Indeed, the California
23
Court of Appeal has clarified that while “breach [of the covenant of good faith and fair dealing]
24
will always result in a breach of the contract, . . . a breach of a consensual (i.e., an express or
25
implied-in-fact) contract term will not necessarily constitute a breach of the covenant.” Careau &
26
Co., 222 Cal. App. 3d at 1393–94. Because the court finds Linde’s argument unpersuasive, and
27
because Linde offers no other basis upon which to grant summary judgment on its claim for
28
/////
18
1
breach of the implied covenant of good faith and fair dealing, Linde’s motion will be denied as to
2
this claim.
3
D.
4
Linde’s Claim for Account Stated
Next, the court addresses Linde’s motion for summary judgment on its account stated
5
claim. “An account stated is an agreement, based on prior transactions between the parties, that
6
all items of the account are true and that the balance struck is due and owing from one party to the
7
other.” Trafton v. Youngblood, 69 Cal. 2d 17, 25 (1968). “The essential elements of an account
8
stated are: (1) previous transactions between the parties establishing the relationship of debtor
9
and creditor; (2) an agreement between the parties, express or implied, on the amount due from
10
the debtor to the creditor; (3) a promise by the debtor, express or implied, to pay the amount due.”
11
Zinn v. Fred R. Bright Co., 271 Cal. App. 2d 597, 600 (1969). As evidence of an account stated,
12
Linde claims that between January 14, 2016 and February 4, 2016, Linde issued a total of twenty-
13
two invoices to Valley Protein for CO2 that was delivered to Valley Protein, totaling $38,963.89.
14
(UMF at ¶ 24.)
15
As addressed above, under the terms of the 2014 Agreement, Valley Protein agreed to
16
purchase its CO2 gas requirements from Linde. (UMF at ¶ 12; Iannelli Decl. at ¶ 15.) Linde has
17
submitted an invoice for each delivery, as well as its demand letter sent to Valley Protein
18
requesting payment for those deliveries. (Doc. No. 52-2 at 70–71.) Valley Protein does not
19
appear to dispute that those deliveries occurred, nor does it dispute that it has not paid for the CO2
20
gas delivered. Instead, Valley Protein’s opposition to Linde’s motion in this regard is limited to
21
the argument that it was relieved of its obligation to pay by virtue of rescission of the 2014
22
Agreement. As discussed above, the court has rejected this argument. Finding no material issue
23
of fact in dispute with respect to this claim, Linde’s motion for summary judgment on its account
24
stated claim will be granted in the amount of $38,963.89.
25
E.
26
Goods and Services Rendered
Next, the court addresses Linde’s cause of action for goods and services rendered. “A
27
common count for Goods and Services Rendered ‘is a simplified form of pleading normally used
28
to aver the existence of various forms of monetary indebtedness.’” Ever Win Int’l Corp. v.
19
1
Premier Accessory Grp., No. 2:15-CV-07208-RGK (JCx), 2016 WL 11263125, at *4 (C.D. Cal.
2
Sept. 22, 2016) (quoting McBride v. Boughton, 123 Cal. App. 4th 379, 394 (2004)); see also
3
McBride, 123 Cal. App. 4th at 394 (noting that “[a] common count is not a specific cause of
4
action”); Martini E Ricci Iamino S.P.A.--Consortile Societa Agricola v. Trinity Fruit Sales Co.,
5
30 F. Supp. 3d 954, 975 (E.D. Cal. 2014) (“Under California law, ‘common counts’ are general
6
pleadings that seek to recover money owed without necessarily specifying the nature of the
7
claim.”). “The only essential allegations of a common count are (1) the statement of indebtedness
8
in a certain sum, (2) the consideration, i.e., goods sold, work done, etc., and (3) nonpayment.”
9
Farmers Ins. Exch. v. Zerin, 53 Cal. App. 4th 445, 460 (1997). Common counts are frequently
10
coextensive with other causes of action pleaded in a complaint: “[w]hen a common count is used
11
as an alternative way of seeking the same recovery demanded in a specific cause of action, and is
12
based on the same facts, the common count is demurrable if the cause of action is demurrable.”
13
McBride, 123 Cal. App. 4th at 394.
14
Linde’s complaint demonstrates that its common count claim is based on the same facts as
15
its claim for account stated, namely that Linde delivered CO2 and equipment to Valley Protein for
16
which it has not been paid. (Doc. No. 1 at ¶ 31–34.) Once more, Valley Protein’s only
17
opposition to Linde’s motion for summary judgment is based on its argument that the 2014
18
Agreement was rescinded. Because the court has already found that Linde is entitled to summary
19
judgment on its claim for account stated, and because the common count claim is coextensive
20
with it, the court will also grant Linde’s motion for summary judgment as to the common count
21
claim. However, in light of the court’s award of $38,963.89 on Linde’s account stated claim, the
22
court finds that Linde will be fully compensated for Valley Protein’s failure to pay for the CO2
23
delivery. Any further award of damages would overcompensate Linde. Accordingly, while
24
summary judgment for Linde will be granted as to this claim, no additional damages will be
25
awarded with respect to it.
26
F.
Valley Protein’s Counter-claims for Breach of Contract
27
Next, the court addresses the counter-claim for breach of contract brought by Valley
28
Protein in which Valley Protein contends that Linde breached the provisions of the 2011 and 2014
20
1
Agreements. As noted, Linde also moves for summary judgment in its favor on this claim
2
brought by Valley Protein.4
3
As both parties acknowledge, the 2011 Agreement contained a provision requiring that
4
“[a] Party must commence an action for a breach of contract within one year after the action has
5
accrued.” (UMF at ¶ 1.) The default statute of limitations for actions to enforce a breach of
6
contract in New Jersey is six years from the time the cause of action accrued. N.J. Stat. Ann.
7
§ 2A:14-1. However, “[c]ontract provisions limiting the time parties may bring suit have been
8
held to be enforceable, if reasonable.” Eagle Fire Prot. Corp. v. First Indem. of Am. Ins., 678
9
A.2d 699, 704 (N.J. 1996).
10
Multiple courts in New Jersey have found contract provisions imposing one-year
11
limitations on breach of contract actions to be reasonable. See, e.g., id.; Weinroth v. N.J. Mfrs.
12
Ass’n Fire Ins., 189 A. 73, 75 (N.J. 1937); A.J. Tenwood Assocs. v. Orange Senior Citizens Hous.
13
Co., 491 A.2d 1280, 1284 (N.J. App. Div. 1985). Valley Protein directs the court to one contrary
14
case, but the court finds it to be readily distinguishable in light of the facts here. See Rodriguez v.
15
Raymours Furniture Co., 138 A.3d 528 (N.J. 2016). In Rodriguez, an employment application
16
contained a provision requiring the applicant, if hired, to bring any employment-related cause of
17
action against the employer within six months of the challenged employment action and to waive
18
any statute of limitations to the contrary. Id. at 529–30. An employee brought an action against
19
his former employer, alleging a violation of New Jersey’s Law Against Discrimination which
20
claim was governed by a two-year statute of limitations. Id. at 530. In finding the application’s
21
six-month limitations period to be unreasonable, the New Jersey Supreme Court noted that the
22
Law Against Discrimination “exists for the good of all the inhabitants of New Jersey,” and
23
therefore “concerns more than a purely private cause of action affecting only private interests.”
24
4
25
26
27
28
The parties dispute whether the 2011 Agreement remained in force following execution of the
2014 Agreement. Linde contends that the 2014 Agreement amounts to a novation, which
“substitutes a new contract and extinguishes the old one.” Wells Reit II-80 Park Plaza, LLC v.
Dir., Div. of Taxation, 999 A.2d 489, 497 (N.J. App. Div. 2010). By contrast, Valley Protein
argues that “the 2011 Agreement arguably remained in effect.” (Doc. No. 53 at 9.) The court
acknowledges this dispute but need not reach this issue since Linde’s counter-claim for breach of
contract may be disposed of on alternative grounds, as explained below.
21
1
Id. at 538. Because of these competing public policy considerations, the Supreme Court declined
2
to enforce the contractual limitation period. However, such considerations are absent here, and
3
Valley Protein has offered no further argument as to how the holding in Rodriguez should compel
4
the court to reject the limitations period agreed to by the parties under the circumstances of this
5
case. Accordingly, the court finds that the one-year statute of limitations contained within the
6
2011 Agreement is reasonable and must be applied.
7
According to Valley Protein’s counter-claim, Linde breached the 2011 Agreement by
8
failing to provide Valley Protein with an adequate freezer, as it was required to do. (See Doc. No.
9
29 at ¶ 27.) However, the counter-claim indicates that Valley Protein became aware of that
10
inadequacy no later than September of 2014. (Id. at ¶¶ 13–14 (stating that by 2014, the freezing
11
equipment provided by Linde had become “inoperable”).) By the terms of the 2011 Agreement,
12
Valley Protein had until September of 2015 to bring causes of action based on a breach of a 2011
13
Agreement. See County of Morris, 707 A.2d at 972 (under New Jersey law, “a cause of action
14
will not accrue until the injured party discovers, or by exercise of reasonable diligence and
15
intelligence should have discovered, facts which form the basis of a cause of action”). However,
16
Valley Protein’s claim for breach of contract was not brought until February 2017, far after the
17
one-year limitations period had expired. (Doc. No. 29.)
18
The same logic holds true with respect to the 2014 Agreement. The evidence before the
19
court on summary judgment establishes that Valley Protein was dissatisfied with the freezer
20
provided by Linde under that Agreement no later than December 2014. (UMF at ¶ 14; Iannelli
21
Decl. at ¶ 16; Doc. No. 52-2 at 57.) This dissatisfaction is what prompted Valley Protein to
22
attempt to rescind that Agreement. Therefore, Valley Protein had until December 2015 to sue for
23
breach of contract. Its counter-claim, brought in February 2017, falls far outside of that filing
24
deadline.
25
Thus, even if Valley Protein is correct that the 2011 Agreement remained in force, its
26
claim for breach of that contract is time-barred. The court will therefore grant summary judgment
27
in favor of Linde on Valley Protein’s counter-claims for breach of contract.
28
/////
22
1
G.
Valley Protein’s Claim for Breach of the Implied Covenant of Good Faith and Fair
2
Dealing
3
Next, the court addresses Valley Protein’s counter-claim for breach of the implied
4
covenant of good faith and fair dealing. The relevant California law governing this claim has
5
already been discussed above. Valley Protein contends that Linde breached the covenant with
6
respect to the 2011 Agreement by providing it with faulty equipment, and then by refusing to
7
properly maintain that equipment. (Doc. No. 29 at ¶ 34.) Valley Protein also contends that Linde
8
breached the covenant with respect to the 2014 Agreement by “failing to comply with its
9
obligation to provide poultry-freezing equipment sufficient to meet Valley Protein’s needs.” (Id.
10
at ¶ 35.) As with Valley Protein’s claim for breach of contract, Linde argues that this cause of
11
action is time-barred. (Doc. No. 52 at 29–30.)
12
California mandates a four-year statute of limitations for actions for breach of the implied
13
covenant of good faith and fair dealing. Frazier v. Metro. Life Ins., 169 Cal. App. 3d 90, 102
14
(1985) (citing Cal. Civ. Proc. Code § 337). Moreover, under normal circumstances, “plaintiff’s
15
ignorance of the cause of action, or of the identity of the wrongdoer, does not toll the statute.”
16
Neel v. Magana, Olney, Levy, Cathcart & Gelfand, 6 Cal. 3d 176, 187 (1971). However, to avoid
17
the often-harsh consequences of this rule, California courts also recognize the “discovery rule,”
18
under which the statute of limitations begins to run “when plaintiff either (1) actually discovered
19
his injury and its negligent cause or (2) could have discovered injury and cause through the
20
exercise of reasonable diligence.” Apr. Enters., Inc. v. KTTV, 147 Cal. App. 3d 805, 826 (1983)
21
(internal quotation marks omitted).
22
Here, having reviewed Valley Protein’s counter-claim and the evidence before the court
23
on summary judgment, the court concludes that the applicable statute of limitations bars some of
24
Valley Protein’s theories of recovery. As noted, in its counter-claim Valley Protein alleges
25
breaches of the covenant of good faith and fair dealing with respect to both the 2011 and 2014
26
Agreements. Moreover, within those two agreements, Valley Protein advances multiple
27
allegations which could potentially form the basis of a misrepresentation claim. (See generally
28
Doc. No. 29 at 34–47.) For instance, with respect to the 2011 Agreement, Valley Protein asserts
23
1
that Linde breached the covenant of good faith and fair dealing by “failing to supply Valley
2
Protein with modern, reliable, and efficient poultry-freezing equipment and instead providing
3
equipment that was unreliable, obsolete and often inoperable.” (Id. at ¶ 34(a).) Valley Protein
4
also alleges a breach of the covenant for “failing to maintain the poultry-freezing equipment as it
5
was required to do pursuant to the terms of the 2011 Agreement.” (Id. at ¶ 34(c).) Thus, as pled
6
by Valley Protein, multiple theories of liability are contained within this cause of action.
7
The evidence before the court on summary judgment—which Valley Protein does not
8
dispute (see Doc. No. 54 at 8)—demonstrates that Valley Protein President Robert Coyle was
9
aware by early 2012 that the poultry-freezing equipment provided by Linde was not meeting its
10
target CO2 conversion rate. (Doc. No. 52-4 at 142:25, 143:1–5.) Applying California’s discovery
11
rule, the statute of limitations is tolled until that date. Nonetheless, because Valley Protein’s
12
counter-claim for breach of the covenant of good faith and fair dealing was not filed until
13
February 2017, any recovery under this theory of liability is barred by the applicable four-year
14
statute of limitations which expired by early 2016.
15
However, with respect to whether Valley Protein’s remaining theories of liability on this
16
claim remain viable, Linde has not pointed to any evidence presented on summary judgment
17
demonstrating that those theories are time-barred as a matter of law. It is conceivable that other
18
evidence may exist in the record demonstrating that these remaining theories of liability are also
19
foreclosed by the applicable statute of limitations. However, Linde has not cited to any such
20
evidence in its motion, and the court declines to comb through the record to find support for
21
Linde’s motion. See Indep. Towers of Wash. v. Washington, 350 F.3d 925, 929 (9th Cir. 2003)
22
(“Our adversarial system relies on the advocates to inform the discussion and raise the issues to
23
the court.”). Accordingly, the court finds that Valley Protein’s counter-claim for breach of the
24
implied covenant of good faith and fair dealing is time-barred only as to Valley Protein’s claim
25
that Linde breached the implied covenant of good faith and fair dealing with respect to the issue
26
of the CO2 conversion rate.
27
Regardless of the theory of liability relied upon by Valley Protein, however, Valley
28
Protein’s claim for breach of the implied covenant of good faith and fair dealing fails for a
24
1
separate reason. The California Supreme Court has held that where a claim for breach of the
2
implied covenant of good faith and fair dealing is based upon the same breaches as those alleged
3
in a breach of contract claim, the good faith and fair dealing claim fails as a matter of law. Guz v.
4
Bechtel Nat’l, Inc., 24 Cal. 4th 317, 327 (2000) (“[W]here breach of an actual term is alleged, a
5
separate implied covenant claim, based on the same breach, is superfluous.”). Thus, district
6
courts in California routinely dismiss claims for breach of the implied covenant of good faith and
7
fair dealing where those allegations essentially repeat those already made in a breach of contract
8
claim. See, e.g., Tryfonas v. Splunk, Inc., No. 17-CV-01420-HSG, 2018 WL 534287, at *2 (N.D.
9
Cal. Jan. 24, 2018) (dismissing plaintiff’s claim for breach of the covenant of good faith and fair
10
dealing as duplicative because “[p]laintiff’s claim . . . relies on the same acts as his claim for
11
breach of contract”); Tam v. Qualcomm, Inc., 300 F. Supp. 3d 1130, 1146 (S.D. Cal. 2018) (“[A]
12
plaintiff may bring both a breach of contract claim and a claim for breach of the implied covenant
13
of good faith and fair dealing, but when both causes of action cite the same underlying breach, the
14
implied covenant claim is superfluous.”); Landucci v. State Farm Ins., 65 F. Supp. 3d 694, 716
15
(N.D. Cal. 2014) (citing the decision in Guz for the proposition that “although . . . a plaintiff may
16
bring both a breach of contract claim and a claim for breach of the implied covenant of good faith
17
and fair dealing, . . . when both causes of action cite the same underlying breach, the implied
18
covenant cause of action will be superfluous with the contract cause of action”).
19
A review of Valley Protein’s counter-claim reveals that the claim for breach of the
20
implied covenant of good faith and fair dealing is based on the same conduct as the breach of
21
contract claim. In fact, the factual allegations contained within each cause of action are identical.
22
(Compare Doc. No. 29 at ¶¶ 27, 30, with id. at ¶¶ 34–35.) Therefore, under California law,
23
Valley Protein’s claim for breach of the implied covenant of good faith and fair dealing must fail.
24
The court accordingly will grant summary judgment in Linde’s favor on Valley Protein’s counter-
25
claim for breach of the implied covenant of good faith and fair dealing.
26
H.
Valley Protein’s Claims for Intentional and Negligent Misrepresentation
27
The court next addresses Valley Protein’s counter-claims for intentional and negligent
28
misrepresentation, respectively. Linde argues that it is entitled to summary judgment on these
25
1
claims since they are barred by the applicable statute of limitations and, alternatively, because
2
Valley Protein cannot establish these claims as a matter of law. (Doc. No. 52 at 31–33.) Linde
3
also argues that these claims are barred by the economic loss rule. (Id. at 33.)
4
To establish a claim for intentional misrepresentation a plaintiff must plead and prove:
5
“(1) a misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of
6
falsity (or scienter); (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5)
7
resulting damage.” Robinson Helicopter Co. v. Dana Corp., 34 Cal. 4th 979, 990 (2004) (citing
8
Lazar v. Superior Court, 12 Cal. 4th 631, 638 (1996)). Meanwhile, “[n]egligent
9
misrepresentation is a form of deceit, the elements of which consist of (1) a misrepresentation of a
10
past or existing material fact, (2) without reasonable grounds for believing it to be true, (3) with
11
intent to induce another’s reliance on the fact misrepresented, (4) ignorance of the truth and
12
justifiable reliance thereon by the party to whom the misrepresentation was directed, and (5)
13
damages.” Fox v. Pollack, 181 Cal. App. 3d 954, 962 (1986).
14
The court first turns to the Coyle Declaration, the evidence relied upon by Valley Protein
15
in opposing summary judgment as to this claim. In that declaration, submitted under penalty of
16
perjury, Coyle averred that “[a]t the time the 2011 Agreement was executed in January 2011,
17
Linde’s Vice President of Western Markets, Michael Beckman, represented that the equipment
18
provided to Valley Protein by Linde was high quality, reliable, and efficient.” (Coyle Decl. at
19
¶ 5.) The Coyle Declaration also states that during the course of the 2011 Agreement, Valley
20
Protein discovered that the freezer provided by Linde was outdated, obsolete, and frequently
21
inoperable. (Id. at ¶ 6.) In his declaration Coyle lists a variety of misrepresentations Linde made
22
to Valley Protein, relating to the size and capabilities of the equipment, the age of the equipment,
23
and how much CO2 the equipment would use. (Id. at ¶ 8.) Coyle declares that these
24
representations and promises induced Valley Protein to enter into the 2011 Agreement, and that
25
absent those representations, Valley Protein would not have done so. (Id.) Linde acknowledges,
26
at least implicitly, the Coyle Declaration would create a triable issue of fact as to whether Linde
27
employees made material misrepresentations to Valley Protein. However, Linde argues that
28
/////
26
1
Coyle’s declaration is self-serving and contradicted by his own deposition testimony, because of
2
which the court should disregard it. (Doc. No. 58 at 15.)
3
At the outset, the court observes that many of the statements made in Coyle’s declaration
4
filed in opposition to summary judgment are markedly different from the testimony he gave at his
5
deposition. Whereas his declaration attributed at least some of the misrepresentations to Linde
6
employee Michael Beckman, Coyle at his deposition testified that he never had any conversations
7
with Michael Beckman, and that in fact he was unfamiliar with any Linde employee with that
8
name. (Compare Coyle Decl. at ¶ 5, with Doc. No. 52-4 at 6.) In addition, while Coyle’s
9
declaration lists numerous alleged misrepresentations by Linde employees that induced Valley
10
Protein to enter into the 2011 Agreement, Coyle testified at his deposition that all such statements
11
made by Linde employees were accurate at the time they were made to the best of his knowledge.
12
(Compare Coyle Decl. at ¶¶ 5, 8, with Doc. No. 52-4 at 25.) Finally, when questioned at his
13
deposition whether he believed any Linde employee had ever made any misleading statements to
14
him regarding the equipment at issue, Coyle responded, “knowingly, no.” (Doc. No. 52-4 at
15
26:5–7.)
16
“‘The general rule in the Ninth Circuit is that a party cannot create an issue of fact by an
17
affidavit contradicting his prior deposition testimony.’” Van Asdale v. Int’l Game Tech., 577 F.3d
18
989, 998 (9th Cir. 2009) (quoting Kennedy v. Allied Mut. Ins., 952 F.2d 262, 266 (9th Cir. 1991)).
19
This rule, known as the sham affidavit rule, “prevents a party who has been examined at length on
20
deposition from raising an issue of fact simply by submitting an affidavit contradicting his own
21
prior testimony, which would greatly diminish the utility of summary judgment as a procedure for
22
screening out sham issues of fact.” Yeager v. Bowlin, 693 F.3d 1076, 1080 (9th Cir. 2012)
23
(internal quotation marks and brackets omitted). As courts have acknowledged, this rule is at
24
least somewhat in tension with normal procedures employed in connection with summary
25
judgment motions, in which courts are prohibited from making credibility determinations or
26
weighing conflicting evidence. See Van Asdale, 577 F.3d at 998. Accordingly, the sham
27
affidavit rule is to be employed sparingly, and only when “the inconsistency between a party’s
28
deposition testimony and subsequent affidavit [is] clear and unambiguous.” Id. at 998–99.
27
1
Here, the court finds that Coyle’s declaration submitted in opposition to summary
2
judgment cannot logically be reconciled with his deposition testimony. Coyle testified that
3
Beckman was not involved at all with negotiations leading to the 2011 Agreement and that sworn
4
testimony simply cannot be squared with Coyle’s statement in his declaration that Beckman
5
“represented that the equipment provided to Valley Protein by Linde was high quality, reliable,
6
and efficient.” (Coyle Decl. at ¶ 5.) Nor can the court credit the alleged misrepresentations
7
leading up to the execution of the 2011 Agreement set forth in Coyle’s declaration in light of his
8
deposition testimony that all statements made by Linde employees were accurate at the time they
9
were made. Because Coyle’s deposition is clearly and unambiguously inconsistent with his later
10
declaration submitted in support of the opposition to summary judgment, the court will disregard
11
Coyle’s declaration to the extent it is in conflict with his sworn deposition testimony.
12
Coyle’s deposition testimony affirmatively establishes that, in his opinion, any false
13
statements made to Valley Protein were not knowingly made by Linde employees. As noted,
14
under California law, a party must establish “knowledge of falsity” in order to prevail on an
15
intentional misrepresentation claim. Robinson Helicopter Co., 34 Cal. 4th at 990. Linde has thus
16
satisfied its burden of “produc[ing] evidence negating an essential element of the nonmoving
17
party’s case.” See Nissan Fire & Marine Ins. v. Fritz Cos., 210 F.3d 1099, 1106 (9th Cir. 2000).
18
The burden therefore shifts to Valley Protein to establish that a genuine issue of disputed fact
19
actually does exist with respect to this claim. See Matsushita, 475 U.S. at 586. However, in
20
opposing summary judgment on its intentional misrepresentation claim, Valley Protein has relied
21
solely on Coyle’s declaration to create a triable issue of fact. (Doc. No. 53 at 25–26.) As a sham
22
affidavit, Coyle’s declaration fails to establish the existence of a genuinely disputed factual issue
23
with respect to the knowingness of the alleged misrepresentations. The undersigned therefore
24
/////
25
/////
26
/////
27
/////
28
/////
28
1
finds that summary judgment in favor of Linde is warranted as to Valley Protein’s counter-claim
2
for intentional misrepresentation.5
3
By contrast, a party need not prove that a false statement was “knowing” in order to
4
prevail on a claim for negligent misrepresentation. Small v. Fritz Cos., 30 Cal. 4th 167, 173
5
(2003) (“The tort of negligent misrepresentation does not require scienter or intent to defraud.”).
6
Therefore, the court will next consider Linde’s argument that Valley Protein’s misrepresentation
7
claims are barred by the economic loss doctrine. The California Supreme Court recently
8
discussed the economic loss rule, stating as follows:
9
Economic loss consists of damages for inadequate value, costs of
repair and replacement of [a] defective product or consequent loss of
profits—without any claim of personal injury or damages to other.
Simply stated, the economic loss rule provides: Where a purchaser’s
expectations in a sale are frustrated because the product he bought is
not working properly, his remedy is said to be in contract alone, for
he has suffered only “economic” losses. This doctrine hinges on a
distinction drawn between transactions involving the sale of goods
for commercial purposes where economic expectations are protected
by commercial and contract law, and those involving the sale of
defective products to individual consumers who are injured in a
manner which has traditionally been remedied by resort to the law of
torts. The economic loss rule requires a purchaser to recover in
contract for purely economic loss due to disappointed expectations,
unless he can demonstrate harm above and beyond a broken
contractual promise. Quite simply, the economic loss rule prevents
the law of contract and the law of tort from dissolving one into the
other.
10
11
12
13
14
15
16
17
18
19
Robinson Helicopter, 34 Cal. 4th at 988 (emphasis added).
20
At its heart, this rule requires a plaintiff to rely on the law of contracts and implied and
21
express warranties to recover based upon any defect in the product sold to plaintiff, rather than
22
resort to tort law. When applied to product liability suits, one may still sue for damage to
23
24
25
26
27
28
5
While the court finds that this particular statement within Coyle’s declaration must be
disregarded under the sham affidavit rule, it does not follow that all statements contained within it
must also be disregarded. For instance, Coyle states in his declaration that Linde’s engineer,
Amanda Guzman, represented in October 2014 that the poultry-freezing equipment to be
provided under the 2014 Agreement would be capable of processing 5,000 pounds of poultry per
hour. (Coyle Decl. at ¶ 9.) Although the evidence establishes that Linde was unaware that a
5,000-pound-per-hour processing capacity was a requirement for Valley Protein at the time the
2014 Agreement was executed (see Doc. No. 52-4 at 19), that does not affirmatively prove that
the statement contained within the Coyle declaration was never made.
29
1
property other than the product under the economic loss rule, but losses to the allegedly defective
2
product itself are barred as “economic” losses. Jimenez v. Superior Court of San Diego Cty., 29
3
Cal. 4th 473, 456 (2002). The economic loss rule has also been applied to bar general negligence
4
claims. See Robinson Helicopter, 34 Cal. 4th at 989 (citing Aas v. Superior Court, 24 Cal. 4th
5
627, 640 (2000) and Seely v. Liberty Mut. Fire Ins., 63 Cal. 2d 41, 45 (1965)).
6
In Robinson Helicopter, the California Supreme Court noted other exceptions to the
7
economic loss rule besides those carved out for certain products liability cases. Thus, the court
8
recognized that aside from cases involving physical injury or damage to other property, plaintiffs
9
may also recover for “breach of the covenant of good faith and fair dealing in insurance contracts;
10
for wrongful discharge in violation of fundamental public policy; or where the contract was
11
fraudulently induced.” Id. at 989–90 (emphasis added). “In each of these cases, the duty that
12
gives rise to tort liability is either completely independent of the contract or arises from conduct
13
which is both intentional and intended to harm.” Id. at 990 (citations and quotations omitted).
14
“Focusing on intentional conduct gives substance to the proposition that a breach of contract is
15
tortious only when some independent duty arising from tort law is violated.” Id. However, if
16
“every negligent breach of a contract gives rise to tort damages the limitation would be
17
meaningless, as would the statutory distinction between tort and contract remedies.” Id. Thus,
18
the focus for the California Supreme Court in Robinson Helicopter centered on the intentional
19
nature of the defendant’s behavior, because courts should only apply tort remedies to contract
20
suits “when the conduct in question is so clear in its deviation from socially useful business
21
practices that the effect of enforcing such tort duties will be to aid rather than discourage
22
commerce.” Id. at 991–92 (citations and quotations omitted). “California also has a legitimate
23
and compelling interest in preserving a business climate free of fraud and deceptive practices,”
24
and therefore fraudulent conduct cannot be considered a “socially useful business practice.” Id. at
25
992 (citations and quotations omitted).
26
No published Ninth Circuit opinion nor California Supreme Court decision has analyzed
27
how the exceptions to the economic loss rule identified in Robinson Helicopter apply to claims of
28
negligent misrepresentation which, by their very nature, occupy the space between negligence
30
1
and fraud claims. However, two unpublished Ninth Circuit decisions have suggested negligent
2
misrepresentation claims are not barred by the economic loss rule. See Hannibal Pictures, Inc. v.
3
Sonja Prods. LLC, 432 Fed. App’x 700, 701 (9th Cir. 2011) (holding that a jury verdict in favor
4
of a negligent misrepresentation claim was not precluded by the economic loss rule where “one
5
party has lied to the other”); Kalitta Air, L.L.C. v. Cent. Texas Airborne Sys., Inc., 315 Fed. App’x
6
603, 607 (9th Cir. 2008) (holding that negligent misrepresentation is a “species of fraud” under
7
California law, for which “economic loss is recoverable”). A third unpublished Ninth Circuit
8
decision reached a contrary holding. See Astrium S.A.S. v. TRW, Inc., 197 Fed. App’x 575, 577
9
(9th Cir. 2006) (citing Robinson Helicopter for the proposition that the economic loss rule barred
10
recovery for fraud and negligent misrepresentation “because, even if fraud were shown, there is
11
no showing that people or property were placed at risk or that Astrium was exposed to ‘personal
12
damages’ beyond economic losses”); accord Crystal Springs Upland Sch. v. Fieldturf USA, Inc.,
13
219 F. Supp. 3d 962, 969 n.3 (N.D. Cal. 2016) (recognizing this split of authority).6
14
Numerous district courts in California have considered this issue, reaching varying
15
conclusions. See, e.g., Shahinian v. Kimberly-Clark Corp., No. CV 14-8390 DMG(SHx), 2015
16
WL 4264638, at *8 (C.D. Cal. July 10, 2015); UMG Recordings, Inc. v. Glob. Eagle Entm’t, Inc.,
17
117 F. Supp. 3d 1092, 1104 (C.D. Cal. 2015); Ladore v. Sony Comput. Entm’t Am., LLC, 75 F.
18
Supp. 3d 1065, 1074–76 (N.D. Cal. 2014); Tasion Commc’ns, Inc. v. Ubiquiti Networks, Inc., No.
19
C-13-1803-EMC, 2013 WL 4530470, at *3–9 (N.D. Cal. Aug. 26, 2013); NuCal Foods, Inc. v.
20
Quality Egg LLC, 918 F. Supp. 2d 1023, 1030 (E.D. Cal. 2013); Castro Valley Union 76, Inc. v.
21
Vapor Sys. Techs., Inc., No. C 11-0299 PJH, 2012 WL 5199458, at *4 (N.D. Cal. Oct. 22, 2012);
22
United Guar. Mortg. Indem. Co. v. Countrywide Fin. Corp., 660 F. Supp. 2d 1163, 1179 (C.D.
23
Cal. 2009); Barrier Specialty Roofing & Coatings, Inc. v. ICI Paints N. Am., Inc., No. CV F 07-
24
1614-LJO-TAG, 2008 WL 2724876, at *5–6 (E.D. Cal. July 11, 2008). One district court has
25
observed that “reasonable minds can and do disagree on the applicability of the economic loss
26
rule to negligent representation claims, and this issue is ripe to be revisited by the California
27
28
6
Citation to these unpublished Ninth Circuit opinions is appropriate pursuant to Ninth Circuit
Rule 36-3(b).
31
1
Supreme Court.” Broomfield v. Craft Brew All., Inc., No. 17-CV-01027-BLF, 2017 WL
2
3838453, at *9 (N.D. Cal. Sept. 1, 2017), on reconsideration in part, 2017 WL 5665654 (N.D.
3
Cal. Nov. 27, 2017).
4
Because this question is one of state law, this court is obligated to resolve it as the court
5
believes the California Supreme Court would. Astaire v. Best Film & Video Corp., 116 F.3d
6
1297, 1300 (9th Cir. 1997), as amended, 136 F.3d 1208 (9th Cir. 1998). “In the absence of a
7
controlling California Supreme Court decision, [the court] must predict how the California
8
Supreme Court would decide the issue, using intermediate appellate court decisions, statutes, and
9
decisions from other jurisdictions as interpretive aids.” Gravquick A/S v. Trimble Navigation Int’l
10
Ltd., 323 F.3d 1219, 1222 (9th Cir. 2003). As the above-cited cases demonstrate, both district
11
courts and panels of the Ninth Circuit have arrived at differing conclusions. However, having
12
reviewed all of these decisions, the court finds the opinion in Lincoln General Insurance Co. v.
13
Access Claims Administrators, Inc., No. CIV. S-07-1015 LKK/EFB, 2007 WL 2492436 (E.D.
14
Cal. Aug. 30, 2007) to be persuasive. In confronting this issue in that case, Judge Karlton held
15
that the economic loss rule bars negligent misrepresentation claims where the allegation runs
16
“closely parallel” to a concurrent breach of contract claim. Lincoln Gen. Ins. Co., 2007 WL
17
2492436, at *8. Rather than adopting a bright-line rule that negligent misrepresentation claims
18
either are or are not barred by the economic loss rule, this analysis examines the factual basis of
19
the claim to determine whether, as a practical matter, the negligent misrepresentation claim is in
20
actuality a breach of contract claim in disguise. This approach is in keeping with that employed
21
by the California Supreme Court in Robinson Helicopter, where that court concluded that the
22
fraud and intentional misrepresentation claims were not barred “because they were independent
23
of Dana’s breach of contract.” Robinson Helicopter, 34 Cal. 4th at 991.7 Accordingly, the court
24
7
25
26
27
28
California courts undertake a similarly functional analysis in other areas. For instance, in
determining whether a particular cause of action sounds in tort or contract, California courts
eschew a more formalistic approach in favor of an examination of “the quintessence of the
action.” Voth v. Wasco Pub. Util. Dist., 56 Cal. App. 3d 353, 356 (1976) (“Whether an action is
contractual or tortious depends upon the nature of the right sued upon, and not the form of the
pleading or the relief demanded.”); accord Amtower v. Photon Dynamics, Inc., 158 Cal. App. 4th
1582, 1602 (2008).
32
1
will compare Valley Protein’s counter-claims for breach of contract and negligent
2
misrepresentation to determine whether they are predicated on the same or similar factual
3
allegations. See Bret Harte Union High Sch. Dist. v. FieldTurf, USA, Inc., No. 1:16-cv-00371-
4
DAD-SMS, 2016 WL 3519294, at *5 (E.D. Cal. June 27, 2016) (declining to dismiss plaintiff’s
5
negligent representation claim despite the additional allegation of a breach of contract claim
6
because the negligent representation allegations “are, by nature, different”); Tasion Commc’ns,
7
2013 WL 4530470, at *9 (collecting cases and noting that “courts have nonetheless dismissed
8
negligent misrepresentation claims as barred by the economic loss rule where the complained-of
9
misrepresentations were simply those made in the course of forming the contract”). If Valley
10
Protein’s breach of contract and negligent misrepresentation claims are predicated on the same or
11
similar factual allegations, summary judgment in Linde’s favor as to the negligent
12
misrepresentation claim is appropriate.
13
Here, Valley Protein’s breach of contract claim is based on the following factual
14
allegations: (1) Linde’s failure to supply Valley Protein with modern, reliable, and efficient
15
poultry-freezing equipment; (2) causing Valley Protein to use significantly more CO2 gas than
16
was necessary; (3) failing to properly maintain its poultry-freezing equipment; (4) improperly
17
charging Valley Protein fuel surcharge and delivery fees by delivering CO2 gas from Richmond,
18
CA instead of Pixley, CA; and (5) failing to deliver the poultry-freezing equipment it was
19
obligated to provide under the 2014 Agreement. (Doc. No. 29 at ¶¶ 27, 30.) Its negligent
20
misrepresentation claim is based on alleged misrepresentations that (1) Linde would provide
21
Valley Protein with modern, reliable, and efficient equipment that would satisfy Valley Protein’s
22
needs; (2) Linde would deliver CO2 gas from Pixley, CA rather than Richmond, CA; and (3)
23
Linde would supply Valley Protein with poultry-freezing equipment sufficient to meet Valley
24
Protein’s production needs in connection with the 2014 Agreement. (Id. at ¶¶ 49, 54, 56.) An
25
examination and comparison of these claims reveals that not only do they “closely parallel” one
26
another, they are effectively identical. Valley Protein’s negligent misrepresentation claim plainly
27
seeks to redress the same grievances as the breach of contract claim, namely the economic
28
damages Valley Protein allegedly suffered as a result of entering into the 2011 and 2014
33
1
Agreements. Under such circumstances, the economic loss rule limits Valley Protein to recovery
2
under contract law rather than tort law. See JMP Sec. LLP v. Altair Nanotechnologies Inc., 880 F.
3
Supp. 2d 1029, 1043 (N.D. Cal. 2012) (dismissing claims for fraud and negligent
4
misrepresentation after finding those claims “consist of nothing more than Altair’s alleged failure
5
to make good on its contractual promises”). Summary judgment in Linde’s favor is therefore also
6
appropriate as to Valley Protein’s claim for negligent misrepresentation.
7
I.
8
Valley Protein’s Claims for Unfair Competition
Finally, the court addresses Valley Protein’s counter-claim under California Business and
9
Professions Code § 17200, commonly referred to as the Unfair Competition Law (“UCL”). Linde
10
argues that this counter-claim is also time-barred, that Valley Protein has not raised a triable issue
11
of fact with respect to the claim, and that Valley Protein is not entitled to any of the remedies
12
available under the UCL.
13
The UCL prohibits “unfair competition,” which is defined as including “any unlawful,
14
unfair or fraudulent business act or practice.” Cal. Bus. & Prof. Code § 17200. This language is
15
broad, and deliberately so. As the California Supreme Court has observed,
16
17
18
19
The Legislature intended by this sweeping language to permit
tribunals to enjoin on-going wrongful business conduct in whatever
context such activity might occur. Indeed, the section was
intentionally framed in its broad, sweeping language, precisely to
enable judicial tribunals to deal with the innumerable new schemes
which the fertility of man’s invention would contrive.
20
Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 163, 181 (1999) (internal
21
quotation marks, brackets, and ellipses omitted); see also Rubin v. Green, 4 Cal. 4th 1187, 1200
22
(1993) (stating that the law “embraces anything that can properly be called a business practice
23
and that at the same time is forbidden by law”).
24
Notably, courts give independent effect to each of the three prongs of § 17200. With
25
respect to the “unlawful” prong, § 17200 “borrows violations of other laws and treats them as
26
unlawful practices that the unfair competition law makes independently actionable.” De La Torre
27
v. CashCall, Inc., 5 Cal. 5th 966, 980 (2018) (internal quotation marks omitted). As to the
28
“unfair” prong, § 17200 makes clear that “a practice may be deemed unfair even if not
34
1
specifically proscribed by some other law.” Cel-Tech Commc’ns, 20 Cal. 4th at 180. “In other
2
words, a practice is prohibited as ‘unfair’ or ‘deceptive’ even if not ‘unlawful’ and vice versa.”
3
State Farm Fire & Cas. Co. v. Superior Court, 45 Cal. App. 4th 1093, 1102 (1996), abrogated on
4
other grounds by Cel-Tech Commc’ns, 20 Cal. 4th at 184–85. Finally, California courts
5
recognize a distinct cause of action under the “fraudulent” prong of § 17200. Under this prong,
6
“it is necessary only to show that the plaintiff was likely to be deceived, and suffered economic
7
injury as a result of the deception.” Zhang v. Superior Court, 57 Cal. 4th 364, 380 (2013) (citing
8
Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 322 (2011) and In re Tobacco II Cases, 46 Cal.
9
4th 298, 312 (2009)). Although the scope of relief under this provision is broad, the available
10
remedies are limited. “Prevailing plaintiffs are generally limited to injunctive relief and
11
restitution . . . [and] Plaintiffs may not receive damages, much less treble damages, or attorneys
12
fees.” Cel-Tech Commc’ns, 20 Cal. 4th at 179.
13
With respect to whether Valley Protein’s claim filed in February of 2017 is time-barred,
14
the analysis set forth above in addressing the breach of the implied covenant of good faith and fair
15
dealing claim applies to this cause of action as well. As with that cause of action, claims brought
16
under the UCL are subject to a four-year statute of limitations. Cal. Bus. & Prof. Code § 17208.
17
Again, the undisputed evidence before the court on summary judgment demonstrates that Valley
18
Protein was aware by early 2012 that the equipment provided by Linde was not meeting its target
19
CO2 conversion rate. (Doc. No. 52-4 at 142:25, 143:1–5.) Even accounting for tolling because of
20
California’s discovery rule, any recovery under this theory of liability is barred by the four-year
21
statute of limitations which would have expired by early 2016. However, the court finds no basis
22
to apply the statute of limitations with respect to Valley Protein’s other theories of recovery with
23
respect to this claim for the same reasons explained above in addressing Valley Protein’s counter-
24
claim for breach of the covenant of good faith and fair dealing.
25
The court next addresses whether Valley Protein is entitled to the relief sought. For
26
violation of § 17200, Valley Protein’s counter-claim seeks injunctive relief, restitution, and
27
attorneys’ fees. (Doc. No. 29 at 18–19.) A plaintiff must demonstrate standing “with respect to
28
each form of relief sought, whether it be injunctive relief, damages, or civil penalties.” See Bates
35
1
v. United Parcel Serv., Inc., 511 F.3d 974, 985 (9th Cir. 2007) (en banc); see also Haro v.
2
Sebelius, 747 F.3d 1099, 1108 (9th Cir. 2013) (citing DaimlerChrysler Corp. v. Cuno, 547 U.S.
3
332, 352 (2006)).
4
The matter of attorneys’ fees is easily resolved since such fees are not recoverable under
5
§ 17200. Cel-Tech Commc’ns, 20 Cal. 4th at 179. Nor has Valley Protein demonstrated its
6
entitlement to injunctive relief. Linde asserts in its motion that Valley Protein and Linde are not
7
presently engaged in any business relationship, and there is no evidence before the court
8
indicating to the contrary. (Doc. No. 52 at 35.) Thus, any injunctive relief Valley Protein seeks is
9
necessarily prospective in nature. Indeed, Valley Protein’s counter-claim indicates that it seeks
10
injunctive relief “prohibiting Linde from engaging in such false, deceptive and fraudulent conduct
11
in the future.” (Doc. No. 29 at ¶ 63) (emphasis added). However, to have standing to seek
12
injunctive relief, the threat of injury to plaintiffs “must be actual and imminent, not conjectural or
13
hypothetical.” Summers v. Earth Island Inst., 555 U.S. 488, 493 (2009). “In other words, the
14
‘threatened injury must be certainly impending to constitute injury in fact’ and ‘allegations of
15
possible future injury are not sufficient.’” Davidson v. Kimberly-Clark Corp., 889 F.3d 956, 967
16
(9th Cir. 2018) (quoting Clapper v. Amnesty Int’l USA, 568 U.S. 398, 409 (2013)). Past wrongs
17
do not by themselves amount to real and immediate threats of injury. See San Diego Cty. Gun
18
Rights Comm. v. Reno, 98 F.3d 1121, 1126 (9th Cir. 1996); see also O’Shea v. Littleton, 414 U.S.
19
488, 495–96 (1974) (“Past exposure to illegal conduct does not in itself show a present case or
20
controversy regarding injunctive relief . . . if unaccompanied by any continuing, present adverse
21
effect”). However, “past wrongs are evidence bearing on whether there is a real and immediate
22
threat of repeated injury.” O’Shea, 414 U.S. at 496. “In addition, the claimed threat of injury
23
must be likely to be redressed by the prospective injunctive relief.” Bates, 511 F.3d at 985–86.
24
Valley Protein’s brief in opposition to summary judgment does not respond to Linde’s argument
25
that injunctive relief is foreclosed here. (See Doc. No. 53 at 27–28.) Having reviewed the
26
evidence submitted on summary judgment, the court agrees with Linde that Valley Protein has
27
not demonstrated any “certainly impending” harm. Rather, the evidence establishes that Valley
28
Protein began purchasing CO2 from Air Liquide, and that its business relationship with Linde has
36
1
terminated. Under these circumstances, the court finds that injunctive relief is unavailable to
2
Valley Protein.
3
Finally, the court looks to whether Valley Protein is entitled to restitution damages.
4
California Business & Professions Code § 17203 provides that restitution is an available remedy
5
under the UCL “to restore to any person in interest any money or property, real or personal,
6
which may have been acquired by means of such unfair competition.” Linde argues that Valley
7
Protein is not entitled to restitution because it “has not alleged and cannot establish that Linde has
8
obtained money from Valley Protein to which it was not entitled, nor has it established that it
9
gave up money that it was otherwise entitled to keep.” (Doc. No. 52 at 36.) At bottom, this
10
amounts to an assertion that Valley Protein’s UCL counter-claim fails on the merits. The court
11
therefore turns to Linde’s alternative argument that Valley Protein’s UCL claim fails as a matter
12
of law, whether couched as unlawful, unfair, or fraudulent.
13
Under the unlawful prong of the UCL, “a violation of another law is a predicate for stating
14
a cause of action under the UCL’s unlawful prong.” Berryman v. Merit Prop. Mgmt., Inc., 152
15
Cal. App. 4th 1544, 1554 (2007). Although Valley Protein’s counter-claim alleges generally that
16
“Linde engaged in, and continues to engage in, unlawful and unfair claims practices [sic] as
17
alleged herein,” it does not identify which law Linde has allegedly violated. (Doc. No. 29 at
18
¶ 62.) Likewise, in its opposition to Linde’s motion for summary judgment Valley Protein has
19
failed to point to any violation of law. The only possible such violations are the common law
20
causes of action asserted in Valley Protein’s counter-claim, discussed above. However, “a
21
common law violation . . . is insufficient” as a predicate for a UCL claim under the unlawful
22
prong of the statute. Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1044 (9th
23
Cir. 2010) (citing Allied Grape Growers v. Bronco Wine Co., 203 Cal. App. 3d 432, 450–54
24
(1988)). Finding no other basis to support a claim under the unlawful prong of the UCL, the
25
court will grant Linde’s motion for summary judgment with respect to the unlawful prong of
26
Valley Protein’s UCL claim.
27
28
Next, the court considers whether Linde is entitled to summary judgment on Valley
Protein’s UCL claim brought under the fraudulent prong of the statute. A business practice is
37
1
“fraudulent” under the UCL if members of the public are likely to be deceived. Davis v. HSBC
2
Bank Nev., N.A., 691 F.3d 1152, 1169 (9th Cir. 2012) (citing Puentes v. Wells Fargo Home
3
Mortg., Inc., 160 Cal. App. 4th 638 (2008)). “A UCL claim based on the fraudulent prong can be
4
based on representations that deceive because they are untrue, but also those which may be
5
accurate on some level, but will nonetheless tend to mislead or deceive . . . A perfectly true
6
statement couched in such a manner that it is likely to mislead or deceive the consumer, such as
7
by failure to disclose other relevant information, is actionable under the UCL.” Morgan v. AT&T
8
Wireless Servs., Inc., 177 Cal. App. 4th 1235, 1255 (2009).
9
Here, Valley Protein has not come forward on summary judgment with any evidence of
10
harm to the general public resulting from Linde’s misrepresentations. A plaintiff must plead and
11
prove harm to the public as a prerequisite to succeed on a UCL claim under the fraudulent prong.
12
See, e.g., Travelers Prop. Cas. Co. of Am. v. Centex Homes, No. 11-3638-SC, 2013 WL 4528956,
13
at *5 (N.D. Cal. Aug. 26, 2013) (dismissing plaintiff’s claim under the fraudulent prong with
14
prejudice and noting that “both private individuals and corporations must show that the alleged
15
wrongdoing has some impact on the general public”); Med. Instrument Dev. Labs. v. Alcon Labs.,
16
No. C 05-1138 MJJ, 2005 WL 1926673, at *5 (N.D. Cal. Aug. 10, 2005) (“Plaintiff fails to allege
17
in its Complaint that any ‘members of the public are likely to be deceived’ by Defendant’s
18
allegedly fraudulent conduct.”). Here, Valley Protein appears to base its UCL claim entirely on
19
Linde’s conduct in relation to the 2011 and 2014 Agreements. (See Doc. No. 53 at 27) (“In the
20
case at hand, there are facts that support claims for unfair business practices, both in the
21
fraudulent conduct used to include [sic] Valley Protein into the 2011 Agreement as well as the so-
22
called ‘mistake’ made by Linde on the sizing of the freezing equipment in connection with the
23
2014 Agreement[.]”). However, there is no evidence before the court on summary judgment
24
evincing that those Agreements caused any harm to the public. Indeed, Valley Protein has not put
25
forward evidence that Linde ever communicated to the public in any way. In essence, Valley
26
Protein “is trying to use the UCL fraud prong to vindicate its contractual . . . rights.” Travelers
27
Prop. Cas. Co. of Am., 2013 WL 4528956, at *5. Because of this, Linde is entitled to judgment
28
in its favor with respect to Valley Protein’s claim under the fraudulent prong of the UCL. See
38
1
Capella Photonics, Inc. v. Cisco Sys., Inc., 77 F. Supp. 3d 850, 865 (N.D. Cal. 2014) (dismissing
2
the defendant’s UCL counter-claim brought under the fraudulent prong after finding that the
3
defendant “does not allege that members of the public have been deceived by [plaintiff’s] alleged
4
fraudulent misrepresentations about the strength of its patent rights”).
5
Finally, the court considers whether summary judgment is warranted in favor of Linde
6
under the unfair prong of Valley Protein’s UCL claim. In the wake of the California Supreme
7
Court’s decision in Cel-Tech, appellate courts have been split regarding the proper test to be
8
employed in determining whether a business practice is “unfair.” Under one line of cases, an
9
unfair business practice occurs “when that practice offends an established public policy or when
10
the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to
11
consumers.” Graham v. Bank of Am., N.A., 226 Cal. App. 4th 594, 612 (2014). A second line of
12
cases considers the factors for unfairness set forth in section 5 of the Federal Trade Commission
13
Act: “‘(1) the consumer injury must be substantial; (2) the injury must not be outweighed by any
14
countervailing benefits to consumers or competition; and (3) it must be an injury that consumers
15
themselves could not reasonably have avoided.’” Id. at 613 (quoting Camacho v. Auto. Club of S.
16
Cal., 142 Cal. App. 4th 1394, 1403 (2006)). Yet a third line of cases holds that “a plaintiff
17
alleging an unfair business practice must show the defendant’s conduct is tethered to an
18
underlying constitutional, statutory or regulatory provision, or that it threatens an incipient
19
violation of an antitrust law, or violates the policy or spirit of an antitrust law.” Id. (internal
20
quotation marks and brackets omitted).8
21
Regardless of the correct test, however, “where the unfair business practices alleged under
22
the unfair prong of the UCL overlap entirely with the business practices addressed in the
23
fraudulent and unlawful prongs of the UCL, the unfair prong of the UCL cannot survive if the
24
claims under the other two prongs of the UCL do not survive.” Hoai Dang v. Samsung Elecs.
25
Co., No. 14-CV-00530-LHK, 2018 WL 6308738, at *10 (N.D. Cal. Dec. 3, 2018); Hadley v.
26
27
28
8
Neither Linde nor Valley Protein acknowledge that a split of authority exists on this point nor
have they briefed the issue of which test this court should adopt. In the absence of any briefing
addressing this point, the court declines to resolve the question of what test should properly apply.
39
1
Kellogg Sales Co., 243 F. Supp. 3d 1074, 1104–05 (N.D. Cal. 2017) (same). Here, Valley Protein
2
makes no distinction between its UCL claims, whether alleged under the unlawful, unfair, or
3
fraudulent prongs. Because the undersigned has already found that Linde is entitled to summary
4
judgment with respect to Valley Protein’s claims under the unlawful and fraudulent prongs, the
5
court finds that summary judgment is also appropriate in favor of Linde with respect to the unfair
6
prong.
7
CONCLUSION
8
For the reasons set forth above,
9
1.
Linde’s motion for summary judgment (Doc. No. 52) is granted with respect to its
10
breach of contract claim, with damages to be awarded in the amount of
11
$963,084.00;
12
2.
13
breach of the implied covenant of good faith and fair dealing;
14
3.
15
Linde’s motion for summary judgment is granted with respect to its claim for
account stated, with damages to be awarded in the amount of $38,963.89;
16
4.
17
Linde’s motion for summary judgment is granted with respect to its claim for
goods and services rendered;
18
5.
19
Linde’s motion for summary judgment is granted with respect to Valley Protein’s
counter-claim for breach of contract;
20
6.
21
Linde’s motion for summary judgment is granted with respect to Valley Protein’s
counter-claim for breach of the implied covenant of good faith and fair dealing;
22
7.
23
Linde’s motion for summary judgment is granted with respect to Valley Protein’s
counter-claim for intentional misrepresentation;
24
8.
25
Linde’s motion for summary judgment is granted with respect to Valley Protein’s
counter-claim for negligent misrepresentation;
26
9.
27
28
Linde’s motion for summary judgment is denied with respect to its claim for
Linde’s motion for summary judgment is granted with respect to Valley Protein’s
counter-claim for violation of California’s Unfair Competition Law;
/////
40
1
10.
2
The total amount to be awarded to Linde, LLC on its claims for breach of contract
and account stated against Valley Protein, LLC is $1,002,047.89; and
3
11.
A status conference to be held on August 20, 2019 at 9:30 a.m. in Courtroom 5
4
before the undersigned, telephonic appearance authorized, to address the
5
remaining claim in this action.9 However, if the court receives a notice of
6
voluntary dismissal from plaintiff as to its remaining claim for breach of the
7
implied covenant of good faith and fair dealing prior thereto, the status conference
8
will be vacated and judgment will be entered in accordance with this order.
9
10
IT IS SO ORDERED.
11
Dated:
12
July 11, 2019
UNITED STATES DISTRICT JUDGE
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
9
If the parties are unavailable on August 20, 2019 at 9:30 a.m., they are directed to contact
Courtroom Deputy Jami Thorp at (559) 499-5652, or JThorp@caed.uscourts.gov, within ten days
of service of this order to reschedule the status conference to a mutually agreeable date.
41
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?