Oracle Corporation et al v. SAP AG et al

Filing 819

Declaration of Tharan Gregory Lanier in Support of 818 Reply in Support of Defendants' Motion for Partial Summary Judgment (FILED PURSUANT TO D.I. 810) filed by SAP AG, SAP America Inc, Tomorrownow Inc. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3, # 4 Exhibit 4, # 5 Exhibit 5, # 6 Exhibit 6, # 7 Exhibit 7, # 8 Exhibit 8, # 9 Exhibit 9, # 10 Exhibit 10, # 11 Exhibit 11, # 12 Exhibit 12, # 13 Exhibit 13, # 14 Exhibit 14, # 15 Exhibit 15, # 16 Exhibit 16, # 17 Exhibit 17, # 18 Exhibit 18, # 19 Exhibit 19, # 20 Exhibit 20, # 21 Exhibit 21, # 22 Exhibit 22, # 23 Exhibit 23, # 24 Exhibit 24, # 25 Exhibit 25, # 26 Exhibit 26, # 27 Exhibit 27, # 28 Exhibit 28, # 29 Exhibit 29, # 30 Exhibit 30, # 31 Exhibit 31, # 32 Exhibit 32, # 33 Exhibit 33, # 34 Exhibit 34)(Related document(s) 810 ) (Froyd, Jane) (Filed on 8/27/2010) Modified on 8/30/2010 (vlk, COURT STAFF).

Oracle Corporation et al v. SAP AG et al

Doc. 819 Att. 26

EXHIBIT 26

Dockets.Justia.com

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Ian C. Ballon (CSB #141819) Cindy Hamilton (CSB #217951) GREENBERG TRAURIG LLP 1900 University Avenue, 5th Floor East Palo Alto, CA 94303 Tel.: [phone] Email: [e-mail] Steven M. Schneebaum Admitted pro hac vice GREENBERG TRAURIG LLP 2101 L Street, N.W. Washington, D.C. 20037 Tel.: [phone] Email: [e-mail] Attorneys for Defendant and Counter-Claimant ROYAL CANIN USA, INC.

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

PET FOOD EXPRESS LTD., Plaintiff, v. ROYAL CANIN USA INC., Defendant.

Case No. C09-01483 (MEJ) ANSWER AND COUNTERCLAIM OF ROYAL CANIN USA INC. DEMAND FOR JURY TRIAL

ROYAL CANIN USA INC. Counter-Claimant, v. PET FOOD EXPRESS LTD., Counter-Defendant.

ANSWER AND COUNTERCLAIM CASE NO. C09-01483 (MEJ)
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ANSWER Defendant Royal Canin USA, Inc. ("RCUSA"), respectfully answers the Complaint of Plaintiff Pet Food Express, Ltd. ("PFE"), herein as follows: First Affirmative Defense The Complaint fails to state a claim for which relief can be granted. Second Affirmative Defense The alleged contract on the basis of which suit is brought, as construed by Plaintiff, is illegal and unenforceable under the laws of the State of California. Third Affirmative Defense In the alternative, if the contract is not unenforceable, then Plaintiff's fundamental breach(es) of the contract entitled Defendant to consider it repudiated, and freed Defendant from any further obligations thereunder. Fourth Affirmative Defense Plaintiff is estopped from recovery by its own conduct. Fifth Affirmative Defense Plaintiff is barred from recovery by the doctrine of unclean hands. In addition, Defendant RCUSA answers the individual paragraphs of the Complaint as follows: 1. This paragraph contains conclusions of law to which no answer is required; to the

extent that an answer is required it is denied. 2. This paragraph contains conclusions of law to which no answer is required; to the

extent that an answer is required it is denied. 3. paragraph. 4. Denied. It is averred affirmatively that Defendant is and has at all relevant times been Defendant is without knowledge sufficient to admit or deny the allegations of this

a Delaware corporation with principal place of business in Missouri. 5. 6. Admitted. Admitted. -1371834589v1

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7. 8.

Denied. It is admitted that, at a meeting on March 25, 2009, Defendant's General Manager Joe

Flanigan indicated that he would not pay PFE an amount that PFE claimed was owed. The remainder of the paragraph is denied. 9. 10. 11. 12. Denied. Denied. Defendant incorporates the answers to ¶¶ 1-10, supra, as if fully set forth herein. Denied.

In answer to the Prayer for Relief, Defendant denies all allegations therein contained, and avers that Plaintiff is not entitled to relief. COUNTERCLAIM (For Declaratory Judgment and Restitution) Pursuant to Rule 13(a), Federal Rules of Civil Procedure, for its Counterclaim against Counter-Defendant PFE, Counter-Claimant RCUSA respectfully represents to the Court as follows: Jurisdiction and Venue 1. This Court has jurisdiction over the Counterclaim by virtue of 28 U.S.C. § 1332, in

that Counter-Claimant and Counter-Defendant are corporate citizens of different States, and the amount in controversy exceeds $75,000, exclusive of interest and costs. 2. This Court is the proper venue for this Action under 28 U.S.C. § 1391, in that

Counter-Defendant has its principal place of business in this judicial District, and a substantial portion of the facts and circumstances giving rise to the claim occurred here. Parties 3. Counter-Claimant RCUSA is a Delaware corporation, with its headquarters and

principal place of business in St. Charles, Missouri. RCUSA is a manufacturer and distributor of premium petfood and petcare products. It is a member of the Royal Canin group of companies, whose headquarters is in Aimargues, France. 4. Defendant PFE is a California corporation with headquarters in San Leandro,

California. PFE runs a chain of petfood retail outlets in northern California.
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Facts In 2004, Counter-Claimant and Counter-Defendant signed a document styled

"Amended and Restated Retailer Agreement," which is attached as Exhibit I to PFE's Complaint herein ("the 2004 Agreement"). 6. Among the provisions of the 2004 Agreement were the following:

6. Promotional Allowance. In consideration for PFE's undertakings, starting with PFE's purchases of RCUSA's products in 2004, RCUSA shall grant PFE a promotional allowance of Fifteen Percent (15%) of the net invoice amount of each invoice, as a deduction against each invoice. 7. Termination. RCUSA shall have the right to terminate this Agreement on thirty (30) days written notice at any time in the event (i) PFE fails to perform its duties and obligations that materially effect sales in the Territory after RCUSA has given PFE 30 days written notice to cure such failure and PFE fails to cure such default; (ii) PFE's purchases of the Products in any calendar year do not exceed the purchases of the Products for the preceding calendar year by at least $1.00 based on RC's list chain pricing prior to the Promotional Allowance deduction; (iii) the ownership of PFE is changed in a manner that will result in an adverse effect on RCUSA's business within the Territory. 8. Market Development Allowance. So long as PFE is in compliance with its duties and obligations, RCUSA shall pay PFE an annual market development allowance funded by RCUSA each year in the amount of five percent (5%) of the aggregate annual dollar volume of Products shipped by RCUSA into the Territory directly and of Products shipped by RCUSA to distribution facilities outside the Territory where such Products are sold at retail within the Territory, based upon RCUSA's wholesale price for the Products. The Territory shall include any new county or counties in which PFE opens an Outlet before the end of the applicable calendar year, so long as such Outlet is comprised of at least 2,000 square feet and is intended to operate as a permanent, as opposed to temporary or seasonal, location. Such allowance, if any, shall be payable on or before March 15 of each year and shall be accompanied by a written statement from RCUSA setting forth the calculations used in making such payment. 9. Confidentiality. PFE acknowledges and agrees that all data in this agreement constitute RCUSA's "Confidential Information". As an inducement to RCUSA to enter into and perform its obligations under this Agreement, PFE agrees to keep all of the Confidential Information in the strictest confidence and shall not use or disclose to third parties any of the Confidential Information, except as expressly authorized in the course of performing its duties hereunder. 7. The "promotional allowance" and "marketing development allowance" ("MDA")

provisions of the 2004 Agreement were intended to be kept confidential, and were in fact not disclosed to third parties until Counter-Defendant initiated this lawsuit. Neither the promotional allowance nor the MDA was made available to other purchasers from Counter-Claimant on terms equivalent to those set forth in the 2004 Agreement, including purchasers that compete with Pet Food Express. 8. Payments to Counter-Defendant reflecting the "promotional allowance" and the MDA
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as defined in the 2004 Agreement were unearned in whole or in part. Indeed, under paragraph 8 of the 2004 Agreement, Counter-Defendant is entitled to be paid the MDA calculated as 5% of the total sales of RCUSA products to any and all retailers in the Territory. 9. Counter-Defendant's claimed entitlement to payment of the MDA under the 2004

Agreement is predicated on RCUSA's sales to two or more purchasers. 10. Counter-Claimant's sales to Counter-Defendant, and to one or more other purchasers

that compete with Counter-Defendant, are made in interstate commerce. 11. Since the inception of the 2004 Agreement, Counter-Claimant credited Counter-

Defendant with "promotional allowance" amounts, pursuant to the provisions of paragraph 6 of the 2004 Agreement, in the aggregate amount of $1,406,118.57. 12. For each year between the inception of the 2004 Agreement and 2007, Counter-

Claimant credited Counter-Defendant with MDA amounts, pursuant to the provisions of paragraph 8 of the 2004 Agreement, in the aggregate amount of $559,721. 13. In early 2009, Counter-Defendant demanded that Counter-Claimant remit the MDA

payment for 2008, which RCUSA refused to pay on the grounds that it was discriminatory as between Pet Food Express and other customers that compete with Pet Food Express. 14. On March 26, 2009, PFE filed suit against RCUSA in Superior Court for Alameda

County, Case No. RG09443440. The complaint claimed that RCUSA had not only breached but terminated and repudiated the 2004 Agreement, and sought damages of $300,000. 15. The State court complaint indicated that a copy of the contract ­ that is to say, the

2004 Agreement ­ was attached. 16. On April 6, 2009, PFE filed its Complaint in the instant case in this Court. The

Complaint is essentially identical to the one filed less than two weeks earlier in State Court, raising the same claims and seeking essentially the same relief (damages of "at least $320,000"). Again, the Complaint had a copy of the 2004 Agreement attached. 17. On April 17, 2009, Defendant removed the State case to this Court, where it was

assigned Case No. 3:09-CV-01704-MEJ. The two cases were, at Defendant's instance, "related."

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18.

On May 5, 2009, counsel for RCUSA wrote to counsel for PFE, declaring that

Counter-Defendant had violated the confidentiality provisions of the 2004 Agreement, and asserting the right, in view of the fundamental breach, to deem the 2004 Agreement repudiated. In the alternative, counsel informed PFE that a unilateral change in procedures regarding store visits adopted and announced by Counter-Defendant on March 30, 2009, also constituted a breach of the 2004 Agreement, and that RCUSA would invoke its right to terminate the 2004 Agreement if the breach was not cured in 30 days. 19. As of the date of filing of this Counterclaim, PFE's breaches of the 2004 Agreement Count I: Declaratory Judgment 20. Counter-Claimant RCUSA repeats and realleges ¶¶ 1-19, supra, as if fully set forth

have not been rectified.

21.

The 2004 Agreement, and in particular the "Promotional Allowance" and "Market

Development Allowance" provisions thereof as construed by Counter-Defendant, are unenforceable under California law. Specifically, both provisions violate the California Business and Professions Code, § 17045, which declares that The secret payment or allowance of rebates, refunds, commissions, or unearned discounts, whether in the form of money or otherwise, or secretly extending to certain purchasers special services or privileges not extended to all purchasers purchasing upon like terms and conditions, to the injury of a competitor and where such payment or allowance tends to destroy competition, is unlawful. 22. Both the promotional allowance and the MDA are "secret payment[s] or allowance of

rebates, refunds, commissions, . . . in the form of money," or are "unearned discounts," in whole or in part, within the meaning of California Business and Professions Code, § 17045. 23. Both the promotional allowance and the MDA constitute "secretly extending to certain

purchasers special services or privileges not extended to all purchasers purchasing upon like terms and conditions," within the meaning of California Business and Professions Code, § 17045. 24. Both the promotional allowance and the MDA give Counter-Defendant a competitive

advantage over its competitors, to the detriment of such competitors, thereby "tending to destroy
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competition" within the meaning of California Business and Professions Code, § 17045. 25. By virtue of its inconsistency with California Business and Professions Code, § 17045,

according to California Business and Professions Code, § 17051, the 2004 Agreement "is an illegal contract and no recovery thereon shall be had." 26. In addition, the promotional allowance and the MDA constitute "unlawful, unfair or

fraudulent business act[s] or practice[s] within California Business and Professions Code, § 17200, and enforcement of the 2004 Agreement would be contrary to the public policy of this State. 27. Counter-Defendant solicited the aforesaid violations of the California Business and

Professions Code, in violation of § 17047 of that Code, which prohibits retailers from soliciting payments in violation of § 17045. Wherefore, Counter-Claimant RCUSA seeks a declaratory judgment that the 2004 Agreement is unenforceable under the laws and public policy of the State of California. Count II: Declaratory Judgment 28. herein. 29. To the extent that the promotional allowance and the MDA were earned, the 2004 Counter-Claimant RCUSA repeats and realleges ¶¶ 1-19, supra, as if fully set forth

Agreement, as construed by Counter-Defendant, would require Counter-Claimant to pay Pet Food Express consideration that was not made available "on proportionally equal terms to all other customers competing in the distribution" of Counter-Claimant's products, in violation of section 2(d) of the Robinson-Patman Act, 15 U.S.C. § 13(d). 30. To the extent that any portions of the promotional allowance and the MDA were not

earned, the 2004 Agreement, as construed by Counter-Defendant, would give rise to price discrimination in favor of Pet Food Express, in violation of section 2(a) of the Robinson-Patman Act, 15 U.S.C. § 13(a). The knowing inducement or receipt of a prohibited discrimination in price constitutes a violation by Counter-Defendant of section 2(f) of the Robinson-Patman Act, 15 U.S.C. § 13(f). /// ///
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Wherefore, Counter-Claimant seeks a declaratory judgment that the 2004 Agreement is unenforceable under the laws of the United States, to wit, the Robinson-Patman Act, 15 U.S.C. § 13 et seq. Count III: Rescission and Restitution 31. Counter-Claimant RCUSA repeats and realleges ¶¶ 1-19, supra, as if fully set forth

32.

In the years since the inception of the 2004 Agreement, Counter-Claimant has credited

to Counter-Defendant a total of no less than $1,406,119 in discounts pursuant to the "promotional allowance," and has paid to Counter-Claimant a total of no less than $559,721 reflecting the MDA, for a total of $1,965,840. 33. Payment of the "promotional allowance" and MDA is impermissible under California

law, and it is contrary to public policy to permit Counter-Defendant to retain a benefit obtained through an unenforceable contract. Counter-Defendant's solicitation, inducement, or receipt of such payments and discounts is specifically prohibited by the California Business and Professions Code and the Robinson-Patman Act. 34. On information and belief, Counter-Claimant alleges that PFE has used the

"promotional allowance" credits and the MDA payments to generate windfall profits to which it is not entitled. Wherefore, this Court should order the rescission of the 2004 Agreement, and the disgorgement and restitution by PFE of the profits it has made by virtue of payments unenforceable under California and federal law. Prayer for Relief For all of the foregoing reasons, Counter-Claimant Royal Canin USA, Inc., respectfully prays that this Honorable Court: 1. 2. ASSUME jurisdiction over this matter; DECLARE that the 2004 Agreement, and in particular its "promotional allowance"

and "market development allowance" provisions are unenforceable under California Business and Professions Code §§ 17045 and 17200, as well as under the public policy of this State;
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3.

DECLARE that the 2004 Agreement, and in particular its "promotional allowance"

and "market development allowance" provisions are unenforceable under the Robinson-Patman Act, 15 U.S.C. § 13 et seq.; 4. 5. ORDER that the 2004 Agreement is rescinded; ORDER that Counter-Defendant restore to Counter-Claimant the sums credited and

paid pursuant to the 2004 Agreement, aggregating no less than $1,965,840; 6. fees; and 7. GRANT such other relief as to the Court shall seem just and equitable. AWARD Counter-Claimant its costs of suit herein, including reasonable attorneys

11 DATED: May 26, 2009 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Respectfully submitted, /s/ Cindy Hamilton Attorneys for Defendant and Counter-Claimant ROYAL CANIN USA, INC.

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