JMP Securities LLC v. Altair Nanotechnologies Inc.

Filing 50

Order by Hon. Samuel Conti granting 37 Motion for Judgment on the Pleadings.(sclc2, COURT STAFF) (Filed on 7/23/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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JMP SECURITIES LLP,
Plaintiff,
v.

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For the Northern District of California

United States District Court

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ALTAIR NANOTECHNOLOGIES INC.,

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Defendant.

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Case No. 11-4498 SC
ORDER GRANTING DEFENDANT'S
SECOND MOTION FOR JUDGMENT
ON THE PLEADINGS

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I.

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INTRODUCTION
Now before the Court is the Second Motion for Judgment on the

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Pleadings brought by Defendant Altair Nanotechnologies Inc.

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("Altair") against Plaintiff JMP Securities LLP ("JMP").

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37 ("2d MJP"), 42 ("2d Opp'n"), 45 ("2d Reply").

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moving papers supply a choice-of-law analysis that they omitted

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when briefing Altair's First Motion for Judgment on the Pleadings.

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ECF Nos. 21 ("1st MJP"), 23 ("1st Opp'n"), 26 ("1st Reply").

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instant motion is suitable for determination without oral argument.

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Civ. L.R. 7-1(b).

ECF Nos.

The parties'

The

As set forth below, the Court GRANTS the motion.

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II.

BACKGROUND
This Order assumes familiarity with the Court's March 14, 2012

denial of Altair's First Motion for Judgment on the Pleadings.

ECF

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No. 30 ("1st Order").1

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anticipated entering into a substantial financial transaction,

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though the timing and nature of the transaction were uncertain.

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July 8, 2010, Altair hired JMP to serve as its financial advisor

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for the transaction.

The parties formalized their relationship in

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a written Agreement.

ECF No. 1 ("Compl.") Ex. A ("Agr.").

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Agreement provided JMP with a retainer fee.

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with a contingent fee, payable after a completed transaction.

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size of this fee would be determined by (1) the type of transaction

To summarize, Altair, a technology company,

On

The

It also provided JMP
The

United States District Court

For the Northern District of California

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that Altair consummated and (2) with whom.

JMP would receive a

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certain percentage fee if Altair was sold to or merged with another

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company (the "sale/merger" fee)2 and another, higher percentage fee

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if Altair secured a "strategic investment."

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fee would be discounted if Altair's partner in the transaction was

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Yintong Energy Company Limited ("Yintong") or one of its corporate

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affiliates.

In both cases, JMP's

1st Order at 3-4 (citing and summarizing provisions).

In addition to its fee-setting provisions, the Agreement

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included two more clauses that are relevant to this motion.

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the Agreement contains a choice-of-law clause stating that it

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"shall be governed by and construed in accordance with the internal

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laws of the State of New York without giving effect to any

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principles of conflicts of law."

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incorporates an attached Indemnification Agreement indemnifying JMP

Agr. at 5.

First,

Second, the Agreement

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JMP Sec. LLP v. Altair Nanotechnologies Inc., 11-4498 SC, 2012 WL
892157, 2012 U.S. Dist. LEXIS 34549 (N.D. Cal. Mar. 14, 2012).

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In actuality, two fee provisions apply in the sale/merger
context: a flat fee in case of complete sale or merger and a
"gross-up provision" in case of partial sale or merger. Agr. at 2,
3. Because the distinction is irrelevant here, the Court treats
the sale/merger scenario as providing a single fee.

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against claims "relating to or arising out of" the Agreement.

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Ex. A ("Indem. Agr.") at A-1.
In July 2011, Altair and Yintong completed a transaction

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which, all parties concede, was covered by the Agreement.

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$57.5 million changed hands.

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allegedly has not yet made good on its promise to pay JMP the

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contingent fee.

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of transaction Altair completed and, therefore, on the size of

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JMP's fee.

United States District Court

Id. ¶ 31.

Compl. ¶ 30.

Roughly

Nevertheless, Altair

The parties cannot agree on what type

In September 2011, JMP sued Altair for (1) breach of contract,

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For the Northern District of California

Agr.

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(2) promissory estoppel, (3) fraud, and (4) negligent

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misrepresentation.

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claim is actually two claims in one.

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of the fee owed to JMP under the Agreement (the "fee claim"); JMP

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pled this claim using three alternative theories of breach, each

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related to a different fee-setting provision in the Agreement.

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¶¶ 41-43.

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reimbursement from Altair for JMP's attorney fees in this lawsuit

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(the "attorney fee claim").

Compl. ¶¶ 39-64.

JMP's breach of contract
The first concerns the size

Id.

The second concerns JMP's alleged contractual right to

Id. ¶ 44.

In November 2011, Altair brought a motion for judgment on the

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pleadings which challenged JMP's attorney fee, promissory estoppel,

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fraud, and negligent misrepresentation claims, as well as two of

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the three theories underpinning the fee claim.3

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motion.

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as a straightforward matter of contract interpretation, they also

JMP opposed the

Notably, although the parties' papers described the case

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The Court left all three theories undisturbed, 1st Order at 21,
and Altair (properly) has not renewed its challenge to the fee
claim in this motion. Accordingly, the fee claim may proceed as
pled in the Complaint.

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hinted that it might be something more.

First, both parties used

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New York law to brief the breach of contract claims (that is, the

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fee and attorney fee claims) but California law to brief the other

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claims, despite the clause in the Agreement selecting New York law.

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Second, the briefs contained a series of footnotes in which the

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parties gestured toward conflict-of-law issues without ever really

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joining them.

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case presented no conflicts of law -- but that, if it did, the

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conflict would favor their side.

To summarize, the parties assured the Court that the

1st MJP at 16 n.4; 1st Opp'n at

United States District Court

For the Northern District of California

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14 n.7, 15 n.8, 21 n.14; 1st Reply at 8 n.3, 9 n.4.

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assurances had the opposite of their intended effect and spurred

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the Court to undertake sua sponte the choice-of-law analysis that

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the parties seemed pointedly to be avoiding.

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These apparent

1st Order at 8-15.

With one exception, the Court determined that JMP's claims

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were governed by the substantive law of New York.

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Because the parties had briefed the fee claim using New York law,

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the Court applied that body of law, ultimately denying Altair's

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motion with respect to that claim.

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the promissory estoppel, fraud, and negligent misrepresentation

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claims, the Court determined that, by briefing California rather

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than New York law, the parties had failed to place the correct

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rules of decision before the Court.

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the moving party and therefore bore the burden of persuasion, the

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Court denied Altair's motion with respect to those claims.

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Finally, with respect to the attorney fee claim, the Court

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determined that the parties had not adequately briefed the issue of

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which law applied.

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Altair's motion with respect to that claim.

Id. at 12-14.

Id. at 15-20.

Id. at 15.

Id. at 15.

With respect to

Because Altair was

Id.

The Court therefore denied

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Id. at 14.

Now Altair has filed a Second Motion for Judgment on the

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Pleadings.

The instant motion explicitly articulates the steps of

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the choice-of-law analysis that the last motion omitted, then

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refers the Court to the first round of briefing for the merits.

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With the choice-of-law analysis now fully briefed, the Court can

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determine whether Altair is entitled to judgment on the pleadings.

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III. DISCUSSION
A.

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As a preliminary matter, JMP challenges Altair's right to

United States District Court

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For the Northern District of California

JMP's Procedural Challenge

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bring the instant motion, saying it is merely a motion for

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reconsideration filed under a different name.

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this district, motions to reconsider an interlocutory order in a

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civil case: may only be filed after seeking and receiving the leave

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of the Court; may not duplicate arguments made the first time

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around; and must be based on a showing that either (1) the parties

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excusably erred as to the material facts or controlling law,

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despite reasonable diligence, (2) the law or facts have materially

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changed since the order issued, or (3) the court manifestly failed

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to consider a material fact or dispositive argument presented to

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it.

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instant motion is both substantively and procedurally improper:

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substantively improper because Altair offers new arguments that it

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could have but did not make, and procedurally improper because

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Altair did not seek leave to file it.

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Altair's motion in summary fashion in the interests of judicial

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economy and finality.

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Civ. L.R. 7-9.

2d Opp'n at 3-5.

In

JMP argues that, under this standard, the

JMP urges the Court to deny

2d Opp'n at 5.

The Court concludes, however, that the values of economy and

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finality are better served by considering Altair's motion than by

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summarily rejecting it.

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and read the instant motion as one for reconsideration, the Court

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would be inclined to grant it.

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to be that the Court erred in concluding that New York substantive

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law applied to all of JMP's claims, though Altair, understandably

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but unnecessarily, seems reluctant to say this in so many words.

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See, e.g., 2d Reply at 6.

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conducting a choice-of-law analysis omitted by the parties.

First, if the Court were to do as JMP asks

The Court takes Altair's position

The Court reached its conclusion after
These

United States District Court

For the Northern District of California

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parties are not, of course, the first people ever to dodge choice-

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of-law issues, which can be difficult, even arcane.

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Capital Corp. v. Grove Properties Co., 126 Cal. App. 4th 204, 214-

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15 (Cal. Ct. App. 2005) (criticizing courts who have "simply passed

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over" required choice-of-law analysis).

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in the next section, the Court is persuaded that its earlier

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choice-of-law analysis is worth revisiting.

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See, e.g., ABF

For the reasons detailed

Given that reality, as well as the failure of both parties

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(not just Altair) to articulate the choice-of-law issues raised in

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this case, the Court is inclined to take the instant motion on its

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own terms.

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by either party's initial papers, and the Court does not discern

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any improper purpose behind Altair's filing of the instant motion.

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On the contrary, the motion serves the useful purpose of narrowing

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the issues for trial or possible settlement, and Altair has been

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careful only to supplement its previous briefing in conformity with

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guidance provided by the Court.

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The issues briefed here were not adequately considered

Summary denial at this point would only result in wasteful and
empty formality, since denying the motion likely would prod Altair

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to file a motion for reconsideration, which the Court would be

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inclined to grant.

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the administration of justice, not complicate it.

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rules do nothing to limit the Court's "inherent procedural power to

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reconsider, rescind, or modify an interlocutory order for cause

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seen by it to be sufficient."

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Santa Monica Baykeeper, 254 F.3d 882, 889 (9th Cir. 2001) (citing

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Melancon v. Texaco, Inc., 659 F.2d 551, 553 (5th Cir. 1981); Fed.

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R. Civ. P. 54(b)).

The Court's local rules are meant to streamline
Moreover, those

City of Los Angeles, Harbor Div. v.

In the extremely unusual circumstances of this

United States District Court

For the Northern District of California

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case, punctilious enforcement of the local rule's technical

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requirements would do more harm than good; accordingly, the Court

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declines to dismiss the instant motion in summary fashion and

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instead proceeds to its substance.4

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B.

Choice of Law

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As the Court recognized in its earlier Order, when confronted

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with a choice-of-law question, a federal district court sitting in

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diversity must use the choice-of-law rules of its forum state to

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determine which state's substantive law to apply.

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10 (citing Fields v. Legacy Health Sys., 413 F.3d 943, 950 (9th

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Cir. 2005)).

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law rules.

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courts applying California's choice-of-law rules follow Nedlloyd

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Lines B.V. v. Superior Court, 3 Cal. 4th 459 (Cal. 1992).

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Court followed the Nedlloyd analysis in the First Order.

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Court reached the question of which claims fell within the scope of

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the Agreement's choice-of-law clause, the Court cited Nedlloyd for

1st Order at 9-

This Court therefore applies California's choice-of-

When a contract contains a choice-of-law provision,

This
When the

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Nothing in this Order should be construed to create any sort of
exception to or expansion of Civil Local Rule 7-9.

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the proposition that it encompassed all claims "arising from or

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related to" the Agreement, regardless of whether they were

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characterized as contract or tort claims and including "tortious

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breaches of duties emanating from the agreement."

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(quoting Nedlloyd, 3 Cal. 4th at 470).5

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Court held that all four of JMP's claims were governed by the

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Agreement's choice-of-law clause and therefore would be decided

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under the substantive law of New York state.

1st Order at 14

Applying this rule, the

Id. at 15.

In its second motion, Altair points out that, under

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United States District Court

For the Northern District of California

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California's choice-of-law rules, the scope of the claims covered

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by a choice-of-law agreement "is a matter that ordinarily should be

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determined under the law designated therein."

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Bank, FA v. Superior Court, 24 Cal. 4th 906, 916 n.3 (2001) (citing

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Nedlloyd, 3 Cal. 4th at 469 n.7).

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Supreme Court interpreted the scope of a contract's choice-of-law

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clause.

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neither briefed nor requested judicial notice of that

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jurisdiction's laws.

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the scope of the choice-of-law clause should be determined by Hong

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Kong law, but, given that it did not have Hong Kong law before it,

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the court used California law instead.

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n.7; see also Restatement (Second) of Conflict of Laws § 136 cmt. h

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(1971).

Washington Mut.

In Nedlloyd, the California

The clause selected Hong Kong law, but the parties had

The Nedlloyd court held that the question of

Nedlloyd, 3 Cal. 4th at 469

In short, the Nedlloyd court applied California law only

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As set forth more fully in Section III.C.4 infra, JMP's fraud and
negligent misrepresentation claims are based on Altair's alleged
promise and subsequent refusal to pay JMP a certain fee; the
promises were, according to JMP, either frauds or negligent
misrepresentations. See Compl. ¶¶ 51-64. Thus, JMP's fraud and
negligent misrepresentation claims rest on Altair's alleged
tortious breaches of Altair's contractual duty to pay JMP the
promised fee.

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because it did not have the correct body of law before it.
Altair argues that Nedlloyd therefore counsels this Court to

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use New York law to determine the scope of the Agreement's choice-

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of-law clause, because, unlike in Nedlloyd, the parties have placed

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the applicable New York law before the Court.

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does not dispute this point, and the Court agrees with it.

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scope of a contract's choice-of-law clause is determined by the

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body of law identified in the agreement, unless the agreement

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specifies a different scope.

2d MJP at 8.

JMP
The

Washington Mut., 24 Cal. 4th at 916

United States District Court

For the Northern District of California

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n.3; see also Batchelder v. Kawamoto, 147 F.3d 915, 918 n.2 (9th

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Cir. 1998).

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case identifies New York law and does not specify otherwise, the

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Court applies New York law to determine which of JMP's claims the

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Agreement covers.

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Accordingly, because the Agreement at issue in this

New York differs from California in its approach to

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determining the scope of a choice-of-law clause.

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California approach, all claims "arising from or related to" a

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contract are covered by the contract's choice-of-law clause,

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regardless of whether they are characterized as contract or tort

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claims.

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distinguishes between these types of claims: "Under New York law,

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choice-of-law clauses are deemed to apply only to claims that are

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based on rights conferred by the agreement."

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08-2118 SBA, 2009 WL 2871049, at *4 (N.D. Cal. Sept. 2, 2009)

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(citing Fin. One Pub. Co. Ltd. v. Lehman Bros. Special Fin., Inc.,

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414 F.3d 325, 335 ("Fin. One") (2d Cir. 2005)).

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claims arising from tortious breaches of contractual duties are,

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under New York law, not covered by the contract's choice-of-law

Nedlloyd, 3 Cal. 4th at 470.

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Under the

But the New York approach

Sarandi v. Breu, C

This means that

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clause.

See Fin. One, 414 F.3d at 335.

Even claims based on the

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contract law doctrine of promissory estoppel are regarded as extra-

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contractual (because promissory estoppel applies only in the

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absence of an enforceable contract) and therefore fall outside the

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scope of a contract's choice-of-law provision.

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Maint. Co. v. Fortune Oil & Gas, Inc., 02 CV. 7666 (LBS), 2005 WL

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1123735, at *4 (S.D.N.Y. May 11, 2005) (applying New York law).

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Under these rules, it is clear that only those claims based on

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Altair's alleged breaches of rights conferred by the Agreement fall

Nat'l Oil Well

United States District Court

For the Northern District of California

10

within the scope of the Agreement's choice-of-law clause.

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Accordingly, the Court holds that JMP's fee claim and (because JMP

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alleges that it is based on rights conferred by the Agreement)

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attorney fee claim fall within the scope of the Agreement's clause

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selecting New York law.

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estoppel, fraud, and negligent misrepresentation claims do not.

JMP's extra-contractual promissory

This holding raises two subordinate questions.

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First, does

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any conflict of law prevent the Court from applying New York law to

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the fee and attorney fee claims?

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apply to the extra-contractual claims, which state's law does?

Second, if New York law does not

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The Court answers the first question in the negative: No

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conflict with California law prevents the Court from applying New

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York law to the fee claim and attorney fee claim.

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Court determined that the parties had raised the possibility of

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such a conflict and that Altair had not completed the analysis that

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would allow the Court to determine whether the possibility was a

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reality.

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4-5.

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of unilateral attorney fee provisions: California has a fundamental

1st Order at 12-13.

Previously, the

Altair has since done so.

2d MJP at

In brief, California and New York conflict in their treatment

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allows them.

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unilateral attorney fee provisions is in conflict with New York

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law.

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found such a provision here, being bound by California's choice-of-

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law rules (see Fields, 413 F.3d at 950), the Court would be

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required to enforce California's fundamental policy against such

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clauses.

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the Agreement contemplates only indemnification from the costs of

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United States District Court

policy against unilateral attorney fee provisions, while New York

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For the Northern District of California

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third-party suits and does not give rise to a unilateral right to

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attorney fees in "intra-party" litigation.

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determines that the Agreement does not provide either party with a

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unilateral right to attorney fees, the Court agrees with the

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parties that the merits of JMP's attorney fee claim should be

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determined under New York law.6

Hence, California's fundamental policy regarding

See ABF Capital, 126 Cal. App. 4th at 223.

If the Court

However, the Court concludes that the plain language of

Because the Court

Turning to the second question -- which state's laws apply to

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the extra-contractual claims if not New York's law -- the Court

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determines that California law applies.

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effective choice-of-law agreement, California choice-of-law rules

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permit a court to apply the decisional rules of its forum state

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"unless a party litigant timely invokes the law of a foreign

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state."

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marks omitted).

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respect to the extra-contractual claims.

In the absence of an

Washington Mut., 24 Cal. 4th at 919 (internal quotation
Here, JMP has not timely invoked foreign law with
During the first round of

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26
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6

Both parties seek application of New York law to the attorney fee
claim. 2d Opp'n at 8 ("Altair does not dispute that the Agreement
is governed by New York law . . . ."), 2d Reply at 2 ("JMP does not
dispute that applying New York law regarding whether an indemnity
provision permits the recovery of attorneys' fees presents no
conflict with a fundamental policy of California.").

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briefing, JMP joined Altair in briefing these claims using

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California law, and JMP has done the same in briefing this motion.

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See 1st Opp'n at 14-16; 2d Opp'n at 6-7.

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deems JMP to have acquiesced in the application of California law

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to the extra-contractual claims.

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F.3d 1177, 1184 (9th Cir. 2009).

7

Therefore, the Court

See Hatfield v. Halifax PLC, 564

Having ascertained that New York law applies to JMP's

fee claim that already has survived a challenge from Altair) and

10

United States District Court

contract-based claims (i.e., its attorney fee claim, as well as the

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For the Northern District of California

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that California law applies to the extra-contractual claims, the

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Court now proceeds to the merits of Altair's Second Motion for

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Judgment on the Pleadings.

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C.

Motion for Judgment on the Pleadings
1.

14

Legal Standard

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"After the pleadings are closed -- but early enough not to

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delay trial -- a party may move for judgment on the pleadings."

17

Fed. R. Civ. P. 12(c).

18

the moving party clearly establishes on the face of the pleadings

19

that no material issue of fact remains to be resolved and that it

20

is entitled to judgment as a matter of law."

21

Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1550 (9th Cir.

22

1989).

23

to the same standard of review as a motion to dismiss, and thus the

24

pleading must contain sufficient factual matter, accepted as true,

25

to state a claim to relief that is plausible on its face.

26

v. Rowley, 569 F.3d 40, 44 (2d Cir. 2009); see also Cafasso, U.S.

27

ex rel. v. General Dynamics C4 Systems, Inc., 637 F.3d 1047, 1055

28

n.4 (9th Cir. 2011) (citing Johnson).

"Judgment on the pleadings is proper when

Hal Roach Studios,

Moreover, a motion for judgment on the pleadings is subject

12

Johnson

A claim is plausible on its

1

face when the plaintiff pleads "factual content that allows the

2

court to draw the reasonable inference that the defendant is liable

3

for the misconduct alleged."

4

1949 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556

5

(2007)).
2.

6
7

Ashcroft v. Iqbal, 129 S. Ct. 1937,

Attorney Fees

JMP bases its breach of contract claim for attorney fees on

8

the four corners of the Agreement, including the incorporated

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Indemnification Agreement, both of which JMP attached to the

United States District Court

For the Northern District of California

10

Complaint.

11

judgment on the pleadings because it only requires the Court to

12

interpret the effect of the contract's undisputed terms.

13

Roach Studios, 896 F.2d at 1550; see also Wright & Miller, 5C Fed.

14

Prac. & Proc. Civ. § 1367 (3d ed.).

15

the Agreement or Indemnification Agreement provides JMP with a

16

right to have Altair pay JMP's attorney fees arising from the

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instant, intra-party litigation (as compared to a lawsuit filed by

18

a third party).

19

JMP's attorney fee claim is therefore amenable to

See Hal

The only question is whether

The Court concludes that neither does.

The Court reaches this conclusion in reliance on Hooper

20

Associates, Ltd. v. AGS Computers, Inc., 74 N.Y.2d 487 (1989).

21

that case, the high court of the state of New York noted that under

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New York law the general rule is that "attorney's fees are

23

incidents of litigation" and that parties therefore bear their own

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attorney fees unless there is a legal reason to do otherwise.

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Hooper, 74 N.Y.2d at 491.

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observed that

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28

In

Beginning from this premise, the court

[w]hen a party is under no legal duty to indemnify, a
contract assuming that obligation must be strictly
construed to avoid reading into it a duty which the

13

1
2
3
4
5

parties did not intend to be assumed. The promise should
not be found unless it can be clearly implied from the
language and purpose of the entire agreement and the
surrounding facts and circumstances.
Inasmuch as a
promise by one party to a contract to indemnify the other
for attorney's fees incurred in litigation between them
is contrary to the well-understood rule that parties are
responsible for their own attorney's fees, the court
should not infer a party's intention to waive the benefit
of the rule unless the intention to do so is unmistakably
clear from the language of the promise.

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7
8
9

Hooper, 74 N.Y.2d at 491-92 (citations omitted).
In this case, nothing in the language of the Agreement or the
incorporated Indemnity Agreement, or in the facts and circumstances

United States District Court

For the Northern District of California

10

surrounding the execution of the Agreement, "unmistakably" shows

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that the parties intended to give JMP a contractual right to

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recover attorney fees from Altair if the fees arose from litigation

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between them.

14

JMP and Altair intended the Indemnification Agreement to cover

15

claims between themselves.

16

"general language indemnifying any breach," which "is not specific

17

enough to allow the court to infer that the parties intended the

18

indemnification of counsel fees in an action on the contract."

19

Foster Poultry Farms Inc. v. Suntrust Bank, 355 F. Supp. 2d 1145,

20

1152 (E.D. Cal. 2004) (applying New York law) (internal quotation

21

marks and citations omitted).

22

In other words, there is no reliable evidence that

The Indemnity Agreement contains merely

JMP argues that, read as a whole, the Indemnification

23

Agreement clearly gives JMP a right to intra-party indemnification

24

because it contains not only general indemnification language but

25

also provisions that specifically target third-party claims.

26

According to JMP, the Court can only give effect to all the

27

language of the contract by reading the general language to cover

28

claims between the contracting parties while the more specific

14

1

language covers third-party claims.

1st Opp'n at 13.

This

2

argument rests on a faulty premise: While it is true that the

3

Indemnification Agreement clearly contemplates third-party claims,

4

that is not enough.

5

parties specifically contemplated intra-party claims and

6

affirmatively determined to indemnify a party for attorney fees

7

arising from such claims.

8

Poultry, 355 F. Supp. 2d at 1152.

9

language amidst general language does not overcome the presumption

There must be some further indication that the

Hooper, 74 N.Y.2d at 492; Foster
The mere presence of specific

United States District Court

For the Northern District of California

10

against intra-party indemnification, by implication as it were.

11

"Language providing indemnification for action on the contract must

12

be expressly present."

13

Reading the Indemnification Agreement in its entirety and examining

14

the circumstances surrounding the drafting of the Agreement, the

15

Court finds nothing that rises to the required level of

16

specificity.

17

Indemnification Agreement covers only third-party claims.

Foster Poultry, 355 F. Supp. 2d at 1152.

The Court therefore concludes that the

18

JMP cites to a line of New York cases where courts read

19

contracts in the manner urged by JMP here, but the cases are

20

distinguishable.

21

facts or contract language that unmistakably demonstrated that the

22

parties had distinguished between third-party and intra-party

23

actions and affirmatively opted to provide a right of indemnity in

24

the latter case.

25

Inc. v. Fine Host Corp., 418 F.3d 168, 177-79 (2d Cir. 2005)

26

(drafting history showed intent to provide intra-party

27

indemnification); Pfizer, Inc. v. Stryker Corp., 348 F. Supp. 2d

28

131, 145-46 (S.D.N.Y. 2004) (indemnification for breach of warranty

In each one, the court encountered particular

See Mid-Hudson Catskill Rural Migrant Ministry,

15

1

of representation did same); Promuto v. Waste Mgmt., Inc., 44 F.

2

Supp. 2d 628, 650-52 (S.D.N.Y. 1999) (explicit cap on damages in

3

action between the parties did same).7

4

within or outside the four corners of the Agreement that reliably

5

indicates a similar intent here.

JMP identifies nothing

On the contrary, as Altair points out, the Indemnification

6
7

Agreement's inclusion of both notice-of-claim and assumption-of-

8

defense clauses evinces an intent to cover only third-party claims.

9

1st MJP at 15.

To apply these provisions to litigation between the

United States District Court

For the Northern District of California

10

parties would be absurd: JMP would be required to provide Altair

11

with notice that JMP had sued Altair, and Altair would be

12

presumptively entitled to select JMP's counsel and control JMP's

13

litigation of the case.

14

signaled that they did not intend the indemnification agreement to

15

apply to intra-party lawsuits.8

16

7

17
18
19
20
21
22
23
24
25
26
27
28

By including these provisions, the parties

See Goshawk Dedicated Ltd. v. Bank

JMP also cites to Sagittarius Broad. Corp. v. Evergreen Media
Corp., 243 A.D.2d 325 (N.Y. App. Div. 1997). In that case, a New
York state appellate panel distinguished Hooper and found a right
to intra-party indemnification. However, the panel's terse, threeparagraph opinion does not reproduce the contract language upon
which it relied. Nor does the panel's one-sentence analysis of the
contract provide reliable clues. See id. at 326 ("Here, the first
sentence of the subject clause cannot reasonably be interpreted as
limited to third-party claims, particularly in view of the second
portion of that clause, which clearly pertains to third-party
actions, thereby rendering the first part mere surplusage were it
only applicable, as defendant maintains, to third-party actions.").
The Court can give Sagittarius no weight because the Court cannot
discern whether the contract at issue there resembles the one here.
8

JMP points to these very provisions to support its position,
saying that they "explicitly apply only to actions 'brought against
any Indemnified Person'" and therefore support a reading that the
Indemnification Agreement contemplates both third-party and intraparty lawsuits. 1st Opp'n at 13 (quoting Indem. Agr. at A-1)
(emphasis in original). Assuming arguendo that this language is as
explicit as JMP says it is, the Indemnification Agreement defines
"Indemnified Person" as, in short, JMP. Indem. Agr. at A-1. JMP
is the plaintiff in this lawsuit, hence the instant action is not
one "against" JMP. JMP's argument fails on its own terms, then,

16

1

of New York, 06 CIV. 13758 (MHD), 2010 WL 1029547, at *6 (S.D.N.Y.

2

Mar. 15, 2010).

3

Indemnification Agreement's having explicitly contemplated the

4

possibility of third-party actions in the form of private

5

securities litigation.

This conclusion is further supported by the

Id. at *7; Indem. Agr. at A-1.

Lastly, JMP argues that even if the Indemnification Agreement

6

does.

9

in full: "Whether or not there is a closing of the Transaction, you

10

United States District Court

does not provide an attorney fee provision, the Agreement itself

8

For the Northern District of California

7

[Altair] will reimburse us [JMP] periodically upon our request for

11

our reasonable expenses incurred in connection with the

12

Transaction, including, without limitation, the reasonable fees and

13

expenses of legal counsel and travel expenses."

14

is mere boilerplate, and it falls short of the sort of

15

unmistakable, clear, explicit language required by Hooper.

16

clause indemnifying the party for 'reasonable counsel fees' that is

17

not exclusively or unequivocally referable to claims between the

18

parties themselves, is insufficiently clear to overcome the general

19

rule" that attorney fees are incidents of litigation.

20

Investments, LP v. Bank of New York Mellon, 09 CIV. 1154 (PKC),

21

2009 WL 4906096, at *2 (S.D.N.Y. Dec. 14, 2009) (quoting Hooper, 74

22

N.Y.2d at 492) (internal quotation marks omitted).

23

1st Opp'n at 14.

The sentence on which JMP relies provides,

Agr. at 3.

This

"A

Broadhurt

Under New York law, nothing in the Agreement or in the

24

Indemnification Agreement provides JMP with a contractual right to

25

indemnification for attorney fees incurred in the instant

26

litigation.

27
28

Accordingly, Altair's Second Motion for Judgment on

because the Court must strictly construe the Indemnification
Agreement "to avoid reading into it a duty which the parties did
not intend to be assumed." Hooper, 74 N.Y.2d at 491.

17

1

the Pleadings is GRANTED with respect to JMP's attorney fee claim.

2

That claim is DISMISSED WITH PREJUDICE.
3.

3
4

Promissory Estoppel

The Court now turns to JMP's extra-contractual claims, and

5

hence to California law, beginning with JMP's claim for promissory

6

estoppel.

7
8
9

United States District Court

For the Northern District of California

10
11

Promissory estoppel requires: (1) a promise that is clear
and unambiguous in its terms; (2) reliance by the party
to whom the promise is made; (3) the reliance must be
reasonable and foreseeable; and (4) the party asserting
the estoppel must be injured by his or her reliance. The
purpose of this doctrine is to make a promise that lacks
consideration (in the usual sense of something bargained
for and given in exchange) binding under certain
circumstances.

12

Boon Rawd Trading Int'l Co., Ltd. v. Paleewong Trading Co., Inc.,

13

688 F. Supp. 2d 940, 953 (N.D. Cal. 2010) (citations omitted).

14

Under this standard, JMP's claim for promissory estoppel must fail

15

because no party disputes that the promises at issue here were

16

supported by consideration.

17

is based in large part on Altair's failure to pay the contractually

18

required consideration.

19

law, the same allegations that give rise to a breach of contract

20

claim cannot also "give rise to a claim for promissory estoppel, as

21

the former [is] predicated on a promise involving bargained-for

22

consideration, while the latter is predicated on a promise

23

predicated on reliance in lieu of such consideration."

24

Investor, AG v. FonJax, Inc., C 08-01812 SBA, 2008 WL 4344581, at

25

*3 (N.D. Cal. Sept. 22, 2008).

Indeed, JMP's breach of contract claim

See Compl. ¶¶ 40-43.

Under California

Co-

26

Here, JMP argues that the allegations giving rise to its

27

promissory estoppel claim are different from those supporting its

28

claim for breach of contract.

1st Opp'n at 16.

18

JMP points to the

1

allegations that it (1) prepared a Fairness Opinion for Altair and

2

(2) acted as a placement agent in a small securities offering by

3

Altair, one much smaller than JMP would usually undertake.

4

Compl. ¶¶ 27, 49, 54; see also Compl. Ex. B-3 at 81-86 ("Fairness

5

Op.").

6

Agreement called for JMP to prepare a Fairness Opinion for Altair.

7

1st Opp'n at 16 n.10 (citing Agr. at 1).

8

Agreement called for JMP to provide a Fairness Opinion only if

9

Altair undertook a sale or merger -- not if Altair undertook a

Id.;

Beginning with the Fairness Opinion, JMP concedes that the

But JMP states that the

Id. at 16.

Altair

United States District Court

For the Northern District of California

10

strategic investment, as JMP says it did.

11

responds that, because the transaction was in fact a sale or merger

12

under the Agreement, JMP did nothing more than perform its duties

13

under the Agreement in rendering the Fairness Opinion.

14

at 10.

1st Reply

15

This dispute demonstrates why JMP's claim for promissory

16

estoppel is barred by its breach of contract claim: The only thing

17

at issue here is under which provision of the contract JMP will be

18

paid for its services, not whether there was a contract for

19

services at all or whether the promises contained in the contract

20

were supported by consideration.

21

strategic investment, as JMP contends, or a sale or merger, as

22

Altair contends, JMP promised to provide financial services for a

23

percentage-based fee.

24

Agreement shows that the parties purposely left the definition of

25

which services JMP would provide open-ended.

26

provides: "You [Altair] have engaged us [JMP] to advise you

27

concerning opportunities for maximizing shareholder value, and we

28

will render to you such services as we mutually agree are necessary

Whether the transaction was a

See Agr. at 1.

19

A careful reading of the

Id.

The Agreement

The Agreement then gives examples of some of the services JMP may

3

agree to be "necessary or appropriate"; the list ends with the

4

example of JMP "advis[ing]" Altair "on matters related to

5

investments or acquisitions."

6

pertained to a sale, merger, or strategic investment, there can be

7

no serious doubt that JMP rendered it pursuant to the Agreement, in

8

consideration for Altair's promise to pay under the Agreement.

9

same reasoning applies to JMP's agreement to provide placement-

10

United States District Court

or appropriate in connection with these opportunities."

2

For the Northern District of California

1

agent services: There is no allegation that this service was not

11

"mutually agree[d]" to be "necessary or appropriate in connection

12

with" JMP's engagement by Altair.

13

a small securities offering, as a client perquisite or otherwise,

14

falls squarely within the Agreement's expansive definition of JMP's

15

bargained-for performance.

16

Id.

Agr. at 1.

Whether the Fairness Opinion

The

Serving as a placement agent for

Both of the detrimental acts alleged by JMP, then, were JMP's

17

required performance under the contract.

No party disputes that

18

JMP's promise to perform under the contract is supported by

19

consideration.

20

purpose of the doctrine of promissory estoppel is to permit a court

21

of equity to excuse the absence of consideration for an otherwise

22

enforceable promise.

23

240, 249 (1969) (doctrine of promissory estoppel appropriate "if

24

injustice can be avoided only by its enforcement").

25

of promissory estoppel simply does not apply to the circumstances

26

of this case.

27

the time the promisor made his promise and that performance was

28

bargained for, the doctrine is inapplicable.").

The only question is how much consideration.

The

See Youngman v. Nevada Irr. Dist., 70 Cal. 2d

The doctrine

Id. ("If the promisee's performance was requested at

20

1

Altair raises several other grounds for dismissing JMP's

2

promissory estoppel claim, but the Court need not reach them.

3

Court GRANTS Altair's motion with respect to JMP's promissory

4

estoppel claim.

5

PREJUDICE.
4.

6

The

Accordingly, that claim is DISMISSED WITH

Fraud and Negligent Misrepresentation

7

In addition to its two claims sounding in contract, JMP brings

8

two claims sounding in tort: fraud and negligent misrepresentation.

9

Under California law, these torts have essentially the same

United States District Court

For the Northern District of California

10

elements, except for the tortfeasor's requisite state of mind: The

11

former requires scienter while the latter requires only

12

negligence.9

13

two tort claims are

substantially identical except for the state-

14

of-mind allegations.

Compare Compl. ¶ 56 (alleging scienter) with

15

id. ¶ 61 (alleging negligence).

16

claims are barred for the same reason, independent of any state-of-

17

mind allegations.

Not surprisingly, the allegations underlying JMP's

As explained below, both tort

To summarize, JMP alleges that Altair misrepresented to JMP on

18
19

numerous occasions that Altair would pay JMP the higher fee

20

associated with a strategic investment when all along Altair knew

21

that it would not.

22

particular services in reliance on these alleged falsehoods,

23

namely, the Fairness Opinion and placement-agent services discussed

24

in the previous section.

Compl. ¶¶ 25-26, 51-64.

JMP says it rendered

Id. ¶ 54.

25
26
27
28

9

In addition to the requisite state of mind, both require
misrepresentation, justifiable reliance, and damages. Compare
Robinson Helicopter Co., Inc. v. Dana Corp., 34 Cal. 4th 979, 990
(2004) (fraud) with Glenn K. Jackson Inc. v. Roe, 273 F.3d 1192,
1201 n.2 (9th Cir. 2001) (negligent misrepresentation).

21

Altair says that it is entitled to judgment on the pleadings

1
2

with respect to JMP's tort claims because both claims are barred by

3

California's economic loss rule.10

4

loss rule, in summary, "is that no tort cause of action will lie

5

where the breach of duty is nothing more than a violation of a

6

promise which undermines the expectations of the parties to an

7

agreement."

8

00537 MHP, 2009 WL 2084154, at *4 (N.D. Cal. July 13, 2009).

9

rule serves to prevent every breach of a contract from giving rise

The Court agrees.

The economic

Oracle USA, Inc. v. XL Global Services, Inc., C 09This

United States District Court

For the Northern District of California

10

to tort liability and the threat of punitive damages: "Quite

11

simply, the economic loss rule prevents the law of contract and the

12

law of tort from dissolving one into the other."

13

Helicopter, 34 Cal. 4th at 988 (internal quotation marks and

14

brackets omitted).

Robinson

15

While the economic loss rule is simple to grasp in the

16

abstract, particular applications sometimes can be "conceptually

17

difficult."

18

Menezes, 21 Cal. 4th 543, 551-52 (1999) (listing multiple

19

exceptions to rule).

20

application of the rule.

21

underpinning a straightforward claim for breach of a commercial

22

contract and recast them as torts.

23

nothing more than Altair's alleged failure to make good on its

United, 660 F. Supp. 2d at 1180; see also Erlich v.

This case, however, presents a direct
Put simply, JMP has taken the allegations

The tort claims consist of

24
25
26
27
28

10

Altair also challenges JMP's tort claims as insufficiently pled
under Rule 9(b)'s heightened pleading standard for fraud. That
standard obviously applies to JMP's fraud claim, and also applies
to its negligent misrepresentation claim. United Guar. Mortg.
Indem. Co. v. Countrywide Fin. Corp., ("United") 660 F. Supp. 2d
1163, 1179 (C.D. Cal. 2009). Because the Court disposes of the
claims on other grounds, the Court need not consider this challenge
and assumes that the tort claims are sufficiently pled.

22

1

contractual promises.

2

both torts, JMP points to its having rendered the Fairness Opinion

3

and served as Altair's placement agent.

4

these acts constitute nothing more than JMP's usual performance

5

under the Agreement.

6

"contemplate[d] a broad range of possible services that may be

7

provided by JMP," the range being limited only by the parties'

8

mutual agreement.

9

In pleading the reliance element shared by

But, as explained above,

As JMP concedes in its Complaint, the parties

Compl. ¶ 11.

JMP argues that Robinson Helicopter removes its tort claims

United States District Court

For the Northern District of California

10

from the scope of the economic loss rule.

11

First, this Court, like others in California, doubts that Robinson

12

Helicopter has any application outside the products liability

13

context in which it was decided. United, 660 F. Supp. 2d at 1183;

14

Oracle USA, 2009 WL 2084154, at *6.

15

loss rule seems particularly suited to commercial transactions.

16

Cf. Robinson Helicopter, 34 Cal. 4th at 988 (rule "hinges on a

17

distinction drawn between transactions involving the sale of goods

18

for commercial purposes where economic expectations are protected

19

by commercial and contract law, and those involving the sale of

20

defective products to individual consumers who are injured in a

21

manner which has traditionally been remedied by resort to the law

22

of torts"); United, 660 F. Supp. 2d at 1180 ("[T]he rule is

23

particularly strong when a party alleges 'commercial activities

24

that negligently or inadvertently went awry.'") (quoting Robinson

25

Helicopter, 34 Cal. 4th at 991 n.7).

26

The Court disagrees.

On the contrary, the economic

Second, the Robinson Helicopter court expressly described its

27

holding as being "limited to a defendant's affirmative

28

misrepresentations on which a plaintiff relies and which expose a

23

1

plaintiff to liability for personal damages independent of the

2

plaintiff's economic loss."

3

JMP offers no allegations that it has been exposed to liability for

4

"personal damages," nor could it in the context of this commercial

5

transaction for financial advisory services.

6

falls outside the ambit of Robinson Helicopter.

7

2009 WL 2084154, at *6 ("The only harm to [plaintiff] was its

8

failure to receive payment; therefore, there is no physical injury

9

or possibility of physical injury resulting from [defendant's]

34 Cal. 4th at 993 (emphasis added).

Therefore, this case
See Oracle USA,

United States District Court

For the Northern District of California

10

conduct.

11

[plaintiff] to liability to any third party for personal damages or

12

any other type of loss.

13

damages was key to Robinson Helicopter's holding that the economic

14

loss rule did not bar tort remedies in that case.").

15

simply failed to allege any conduct "which is independent from the

16

various promises made by the parties in the course of their

17

contractual relationship."

18

Nothing that [defendant] has allegedly done has exposed

The exposure to liability for personal

JMP has

Id. at *4.

Lastly, policy considerations do not favor excusing JMP from

19

the economic loss rule.

The rule generally means that courts

20

"enforce the breach of a contractual promise through contract law,

21

except when the actions that constitute the breach violate a social

22

policy that merits the imposition of tort remedies."

23

Helicopter, 34 Cal. 4th at 991-92 (internal brackets omitted).

24

"[C]ourts should be careful to apply tort remedies only when the

25

conduct in question is so clear in its deviation from socially

26

useful business practices that the effect of enforcing such tort

27

duties will be to aid rather than discourage commerce."

28

(internal brackets, ellipses, and quotation marks omitted).

24

Robinson

Id. at 992
Here,

1

Altair's alleged conduct is not so clearly deviant as to warrant

2

the imposition of tort remedies.

3

JMP comes down to a dispute over whether JMP will be paid a 1.5

4

percent commission or a 4 percent commission; JMP's assertions of

5

tortious conduct come down essentially to a claim that Altair not

6

only broke its promises, but did so in bad faith.

7

action will not lie on those facts.

8

Rapidpak-MP Equip., Inc., --- F. Supp. 2d ---, 1:11-CV-00030 AWI,

9

2012 WL 1207152, at *7 (E.D. Cal. Apr. 11, 2012).

The dispute between Altair and

A tort cause of

Foster Poultry Farms v. Alkar-

This is because

United States District Court

For the Northern District of California

10

the fraudulent misrepresentations alleged by JMP are "also alleged

11

to be a stand-alone contract."

12

the economic loss doctrine to preserve the policies underlying

13

contract law from being overwhelmed by those underlying tort law.

14

Id.

15

bringing suit can allege that the breaching party never intended to

16

meet its obligations.

17

this one would collapse the carefully-guarded distinction between

18

contract and tort law."

19

*7) (ellipses and brackets omitted).

Id.

Such claims must be barred by

"Virtually any time a contract has been breached, the party

To allow fraud claims in actions such as

Id. (quoting Oracle, 2009 WL 2084154, at

The Court perceives no way that JMP could save its fraud or

20
21

negligent misrepresentation claims by amending its pleading.

22

However they are framed, they come within the scope of the economic

23

loss rule.

24

with respect to JMP's claims for fraud and negligent

25

misrepresentation.

26

///

27

///

28

///

Accordingly, the Court GRANTS Altair's Second Motion

Those claims are DISMISSED WITH PREJUDICE.

25

1

IV.

CONCLUSION
For the foregoing reasons, the Court GRANTS Altair's Second

2
3

Motion for Judgment on the Pleadings.

4

PREJUDICE JMP's breach of contract claim insofar as it is premised

5

on a contractual right for attorney fees arising from the Agreement

6

or the incorporated Indemnification Agreement.

7

DISMISSES WITH PREJUDICE JMP's promissory estoppel, fraud, and

8

negligent misrepresentation claims.

9

March 14, 2011 Order, JMP's breach of contract claim for fees

United States District Court

For the Northern District of California

10

The Court DISMISSES WITH

The Court also

As set forth in the Court's

provided by the Agreement remains undisturbed.
JMP's prayer for punitive damages was based solely on its

11
12

fraud and negligent misrepresentation claims.

Compl. at 11.

13

Because those claims have been dismissed, the Court STRIKES JMP's

14

prayer for punitive damages.
The Court previously vacated the case management conference

15
16

set for June 8, 2012.

ECF No. 49.

Having reviewed the parties'

17

joint case management statement, ECF No. 48 ("CMS"), the Court

18

determines that no case management conference is needed at this

19

time.

20

modified herein.

21

January 25, 2013.

22

2013.

The last day for hearing dispositive motions is December 21,

23

2012.

The discovery cutoff in this matter is September 28, 2012.

The Court APPROVES the schedule proposed by the parties, as
CMS ¶ 17.

Trial in this matter is set for

The pretrial conference is set for January 18,

24
25

IT IS SO ORDERED.

26
27
28

23
Dated: July ____, 2012
UNITED STATES DISTRICT JUDGE

26