Rocket Dog Brands, LLC v. GMI Corporation
Filing
78
ORDER DENYING WITHOUT PREJUDICE DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AND GRANTING PLAINTIFF'S RULE 54(d) MOTION 49 61 (Illston, Susan) (Filed on 9/17/2013)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
United States District Court
For the Northern District of California
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No. C 12-4643 SI
ROCKET DOG BRANDS, LLC,
ORDER DENYING WITHOUT
PREJUDICE DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT AND
GRANTING PLAINTIFF’S RULE 54(d)
MOTION
Plaintiff,
v.
GMI CORP.,
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Defendant.
/
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Defendant’s motion for summary judgment and plaintiff’s motion for relief pursuant to Federal
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Rule of Civil Procedure 54(d) were scheduled for a hearing on September 13, 2012. Pursuant to Civil
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Local Rule 7-1(b), the Court determined that these matters are appropriate for resolution without oral
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argument, and VACATED the hearing. For the reasons set forth below, the Court DENIES defendant’s
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motion for summary judgment without prejudice and GRANTS plaintiff’s motion for relief under Rule
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54(d).
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DISCUSSION
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Defendant/counter-claimant moves for summary judgment on plaintiff/counter-defendant’s
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claims for breach of contract and breach of the covenant of good faith and fair dealing. The complaint
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alleges that defendant breached the parties’ license agreement in numerous ways, including by failing
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to pay all royalties due to plaintiff and by failing to fulfill its obligations regarding advertising
expenditures. Compl. ¶ 25. Plaintiff terminated the agreement in June 2012.
Defendant acknowledges that discovery is in its early stages,1 but contends that the Court can
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grant summary judgment because the undisputed facts and the provisions of the license agreement show
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that defendant did not breach the parties’ license agreement. Defendant contends that there was no
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breach because (1) it did not default on royalty payments because it paid plaintiff sufficient royalties
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so as to keep a running positive balance on its royalty payment obligations; (2) defendant’s April 30,
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2012 royalty payment, which was due on April 30, 2012 and received by plaintiff on May 1, 2012, was
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timely made because defendant wired that payment at 4:45 pm on April 30, 2012; (3) the contract
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provisions regarding acceleration of unpaid royalty payments in the event of a default in defendant’s
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“payment obligations” was not triggered because defendant had a positive balance on its royalty
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United States District Court
For the Northern District of California
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payments, its April 30, 2012 royalty payment was timely, and “payment obligations” in this context only
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applied to royalty payments, not advertising expenditures; (4) the accelerated royalties provision is an
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unenforceable penalty under California law because it results in a payment of $680,000 that is “so
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utterly disproportionate to whatever de minimis damages Rocket Dog would have suffered”; and (5)
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plaintiff is not entitled to any contract damages beyond unpaid royalty payments and advertising
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expenditures because the parties waived all other types of damages and specified that termination of the
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contract was the only remedy.
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Plaintiff opposes summary judgment and has filed a motion for relief pursuant to Federal Rule
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of Civil Procedure 54(d). Plaintiff contends that the Court cannot resolve as a matter of law the
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numerous issues of contract interpretation and issues of fact raised by defendant’s motion, and plaintiff
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asserts that its outstanding discovery requests are relevant to these questions. Plaintiff argues that there
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are disputed material facts regarding whether the contract provisions regarding acceleration were
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triggered, such as whether the parties intended “payment obligations” to include advertising
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expenditures or only royalty payments. Plaintiff also argues that there are factual disputes regarding
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the amounts and timeliness of several of defendant’s royalty payments, and plaintiff disputes that
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defendant had a running positive balance on its royalty payments. Plaintiff also argues that defendant
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has not submitted any evidence showing that the acceleration provisions did not bear a reasonable
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Defendant moved for a stay of discovery when it filed the instant motion for summary
judgment. The Court denied that motion.
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relationship to the range of harm that was reasonably anticipated at the time the parties entered into the
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contract. Finally, plaintiff argues that there are disputes of fact as to whether the parties intended to
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waive direct or general contract damages, as opposed to waiving indirect, special or exemplary damages.
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On this record, the Court finds that summary judgment is inappropriate. Defendant contends that
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the disputed terms of the contract are clear and unambiguous, and therefore that the Court need not
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consider extrinsic evidence to interpret the contract. However, “[t]he test of admissibility of extrinsic
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evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain
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and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which
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United States District Court
For the Northern District of California
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the language of the instrument is reasonably susceptible.” Pacific Gas & Elec. Co. v. G. W. Thomas
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Drayage & Rigging Co., 69 Cal.2d 33, 37 (1968). “[R]ational interpretation requires at least a
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preliminary consideration of all credible evidence offered to prove the intention of the parties. . . . If
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the court decides, after considering this evidence, that the language of a contract, in the light of all the
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circumstances, ‘is fairly susceptible of either one of the two interpretations contended for . . .,’ extrinsic
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evidence relevant to prove either of such meanings is admissible.” Id. at 39-40 (internal citations
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omitted). In light of the relatively early stage of discovery in this case, the contract interpretations
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advanced by plaintiff, and the factual disputes regarding, inter alia, whether defendant had a running
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positive balance on its revenue payments, the Court finds it prudent to DENY defendant’s motion for
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summary judgment without prejudice to renewal on a fuller factual record and to GRANT plaintiff’s
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motion for relief under Rule 54(d).
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CONCLUSION
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For the reasons set forth above, the Court DENIES defendant’s motion for summary judgment
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without prejudice and GRANTS plaintiff’s motion for relief under Rule 54(d). Docket Nos. 49 and 61.
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IT IS SO ORDERED.
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SUSAN ILLSTON
UNITED STATES DISTRICT JUDGE
Dated: September 17, 2013
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