Shenzhenshi Haitiecheng Science and Technology Co., Ltd. v. Rearden LLC et al

Filing 52

ORDER by Judge Samuel Conti denying 35 Motion for Summary Judgment; denying 37 Motion for Summary Judgment (sclc1, COURT STAFF) (Filed on 10/15/2015)

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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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SHENZHENSHI HAITIECHENG SCIENCE ) Case No. CV 15-cv-00797-SC
AND TECHNOLOGY CO., LTD.,
)
) ORDER DENYING DEFENDANTS'
Plaintiff,
) MOTION FOR SUMMARY JUDGMENT
)
v.
)
)
REARDEN, LLC; REARDEN MOVA, LLC; )
MO2, LLC; MOVA, LLC,
)
)
Defendants.
)
)

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Defendants Rearden, LLC; Rearden MOVA, LLC; MO2, LLC; and

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MOVA, LLC (collectively "Defendants" or "Rearden") have filed a

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motion for summary judgment on Defendants' counterclaim for

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declaratory relief.

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briefed and suitable for disposition without oral argument per

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Local Rule 7-1(b).

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motion is DENIED.

ECF No. 35 ("Mot.").

The motion is fully

For the reasons provided below, Defendants'

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I. BACKGROUND
This case is about who owns MOVA, a set of hardware, software,

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and intellectual property used for facial motion capture in motion

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pictures and video games (the "MOVA Assets").

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The relevant players

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in this dispute are Greg LaSalle ("LaSalle") and Stephen Perlman

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("Perlman").

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LaSalle and Perlman have known each other for over forty

dealings and were friends.

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by Perlman's companies -- first Rearden, then OnLive, and then

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Rearden again -- where he helped develop the MOVA Assets.

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United States District Court

years.

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For the Northern District of California

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During that time, they engaged in a number of business

OnLive went out of business, and the MOVA Assets were transferred

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to a company called OL2.

From 2000 to 2013, LaSalle was employed

In 2012,

After OnLive went out of business,

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LaSalle transferred from OnLive to Rearden at which point he signed

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an employment contract, the interpretation of which is central to

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this litigation.

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and Inventions Agreement ("PIIA") in which LaSalle committed to

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assign Rearden all "proprietary information" acquired by him during

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his employment.

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Information" as information which has "commercial value in the

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Company's Business," including intellectual property.

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The contract included a Proprietary Information

ECF No. 38-3.

The PIIA defines "Proprietary

Id.

In September 2012, OL2's CEO, Gary Lauder ("Lauder"),

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contacted Perlman and offered to transfer the MOVA Assets to

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Rearden at no charge.

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nobody would pay for it and that [OL2] should just give [the MOVA

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Assets] to [LaSalle and his business partner Ken Pearce]."

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44-3; see also 43-5 at REARDEN 000106 ("I suggest you transfer the

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assets to [LaSalle and Pearce] through some means, and let them

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have a go at it . . . I don’t see any way to monetize it

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meaningfully."); 43-7 at REARDEN 000099 ("[G]iving [the MOVA

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Assets] to [LaSalle and Pearce] not only is a reasonable thing to

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do for their careers, but it is fair for them to derive what

Perlman replied that he "did not want it,

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ECF No.

MOVA Assets to LaSalle, Perlman told Lauder, "This was really the

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right thing to do . . . I'll help [LaSalle and Pearce] with the

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legal resources to set up a company to hold the assets, but I'll

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leave it to them to put it together and drive it forward."

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43-5 at REARDEN 000104.

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LaSalle to an attorney to help set up a company and negotiate with

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benefit they can from it . . . .").

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For the Northern District of California

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After OL2 agreed to sell the

OL2.

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lawyer representing LaSalle that "this transaction is between

ECF No.

A few weeks later, Perlman introduced

During the negotiations, Perlman stated in writing to the

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[LaSalle] and OL2, and I [Perlman] am not a party involved.

I'm

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just offering suggestions and information to the extent it is

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helpful."

ECF No. 44-13 at SHST0000057.

LaSalle subsequently established a company called MO2 and

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acquired the MOVA Assets on February 11, 2013.

Perlman, however,

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asserted that Rearden owned the MOVA Assets by operation of the

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PIIA which stated that any "proprietary information" that LaSalle

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acquired while he was employed by Rearden would be assigned to

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Rearden.

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resigned his position shortly thereafter.

After several heated discussions with Perlman, LaSalle

On May 8, 2013, LaSalle, through his company MO2, sold the

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MOVA Assets to Plaintiff Shenzhenshi Haitiecheng Science and

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Technology Co., LTD ("Shenzhenshi").

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Shenzhenshi filed its complaint in this suit.

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Shenzhenshi asks the Court to declare that Shenzhenshi owns the

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MOVA Assets and that Rearden does not have any ownership interest.

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On April 1, 2015, Rearden filed its answer and counterclaim, asking

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the Court to declare that Rearden owns the MOVA Assets.

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On February 20, 2015,
Among other claims,

Now before

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the Court is Rearden's motion for summary judgment on its

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counterclaim for declaratory relief.

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II. LEGAL STANDARD

there is no genuine dispute as to any material fact and the movant

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is entitled to judgment as a matter of law."

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United States District Court

Entry of summary judgment is proper "if the movant shows that

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For the Northern District of California

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56(a).

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party must either produce evidence negating an essential element of

Fed. R. Civ. P.

"In order to carry its burden of production, the moving

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the nonmoving party's claim or defense or show that the nonmoving

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party does not have enough evidence of an essential element to

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carry its ultimate burden of persuasion at trial."

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Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1102 (9th

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Cir. 2000).

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all justifiable inferences are to be drawn in his favor."

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v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

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should be entered against a party that fails to make a showing

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sufficient to establish the existence of an element essential to

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its case.

Nissan Fire &

"The evidence of the nonmovant is to be believed, and
Anderson

Summary judgment

Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

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III. DISCUSSION

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Rearden claims that the Court should declare, as a matter of

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law, that Rearden is the sole owner of the MOVA Assets given that

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(1) the PIIA clearly states that LaSalle assigned all rights in

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future-acquired proprietary information to Rearden during the term

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of his employment, and (2) the PIIA is fully integrated with a no

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response, Shenzhenshi asserts various grounds on which it believes

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the Court should deny Rearden's motion: (1) the PIIA does not

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govern because the MOVA Assets are outside of Rearden's business;

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(2) the PIIA does not apply because LaSalle's business -- MO2 --

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acquired MOVA, not LaSalle himself; (3) the PIIA was modified by

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signed writings in the form of emails sent by Perlman; (4) the PIIA

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oral modification and an antiwaiver1 clause.

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For the Northern District of California

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was modified orally once the oral modifications were fully

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executed; (5) the PIIA is illegal and unenforceable; (6) Rearden

Mot. at 1.

In

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waived any right to the MOVA assets through words and conduct; (7)

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Rearden is estopped from claiming that the transfer from OL2 to

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LaSalle was for Rearden's benefit; (8) Rearden has unclean hands;

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and (9) Rearden's counterclaim is barred by the doctrine of laches.

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Opp'n at 17-25.

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regarding waiver and estoppel establish genuine disputes of

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material fact fatal to Rearden's motion.

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any findings as to Shenzhenshi's other arguments, however.

As explained below, Shenzhenshi's arguments

The Court does not make

"Waiver is the intentional relinquishment of a known right

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after full knowledge of the facts . . . [and] does not require any

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act or conduct by the other party.

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claim of waiver is the intention of the party who allegedly

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relinquished the known legal right."

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Brokerage, Inc., 80 Cal. App. 4th 666, 678 (2000) (citations

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omitted).

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demonstrated through words or conduct.

Thus, the pivotal issue in a

Old Republic Ins. Co. v. FSR

A party's intent to waive a contractual right can be
See Biren v. Equality

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Antiwaiver provisions -- also known as "no-oral waiver"
provisions -- require a signed writing before a party will be
deemed to have waived a contract term through words or conduct
alone.

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Emergency Medical Group, Inc., 102 Cal. App. 4th 125, 141 (2002);

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see also Wagner v. Glendale Adventist Med. Ctr., 216 Cal. App. 3d

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1379, 1388 (1989) (finding waiver where a party "behaved in a

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manner antithetical to one or more terms of an express written

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contract").

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jury.

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(1954).

United States District Court

For the Northern District of California

Black v. Arnold Best Co., 124 Cal. App. 2d 378, 384-85

Equitable estoppel is separate from, though similar to, the

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Finally, waiver is normally a question of fact for the

doctrine of waiver.

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As Witkin explains,

[a] valid claim of equitable estoppel consists of the
following elements: (a) a representation or concealment
of material facts (b) made with knowledge, actual or
virtual, of the facts (c) to a party ignorant, actually
and permissibly, of the truth (d) with the intention,
actual or virtual, that the ignorant party act on it, and
(e) that party was induced to act on it."

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13 Witkin, Summary 10th (2005) Equity, § 191, p. 527.

Thus, unlike

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the doctrine of waiver, equitable estoppel requires certain acts or

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conduct by both parties.

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the part of the party who is asserting it.

In particular, it requires reliance on

Shenzhenshi has presented evidence that Perlman knew about

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LaSalle's desire to obtain the MOVA Assets for LaSalle's own

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benefit, actively encouraged LaSalle to acquire the MOVA Assets,

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expressly disclaimed any interest in acquiring the MOVA Assets on

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Rearden's behalf, and explicitly stated that he was not a party to

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the transaction between OL2 and LaSalle.

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at REARDEN 000106, 43-7 at REARDEN 000099, 43-5 at REARDEN 000104,

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44-13 at SHST0000057.

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that Perlman clearly communicated through his words and actions

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that he was not going to enforce the assignment provisions of the

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PIIA.

See ECF Nos. 44-3, 43-5

In short, Shenzhenshi's evidence suggests

Further, the evidence suggests that LaSalle relied on

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Perlman's words and actions to his detriment, ultimately causing

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LaSalle to resign his position at Rearden.
Rearden argues that Perlman could not have waived Rearden's

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antiwaiver provision in the PIIA.

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"No . . . waiver of any rights under this Agreement will be

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effective unless in a writing signed by the CEO of the Company and

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right to the assignment of the MOVA Assets because of the

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For the Northern District of California

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[LaSalle]."

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provision, however, is not dispositive because the antiwaiver

ECF No. 38-3.

Section M of the PIIA states,

The presence of an antiwaiver

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provision can itself be waived through words or conduct.

See,

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e.g., Gould v. Corinthian Colleges, Inc., 192 Cal. App. 4th 1176,

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1180 (2011) (finding that "an antiwaiver provision would militate

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against a finding of waiver under most circumstances" but such a

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clause is waived where enforcement of the clause in light of the

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party's conduct would be "absurd" or "unconscionable").
Shenzhenshi's evidence suggests that Perlman either expressly

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or impliedly waived the antiwaiver provision of the PIIA when he

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encouraged LaSalle to purchase the MOVA Assets for LaSalle's own

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benefit.

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MOVA Assets from OL2 to LaSalle, Perlman cannot then point to the

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antiwaiver provision to claim the MOVA Assets for himself.

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result would be inequitable, "absurd," and "unconscionable."

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id.

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After encouraging and facilitating the transfer of the

Such a
See

In sum, even if the Court were to assume that the PIIA

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encompasses the MOVA Assets and that the effect of the PIIA was to

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assign ownership of the MOVA Assets to Rearden upon LaSalle's

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acquisition from OL2 -- a finding that the Court does not make --

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there is, at the very least, a genuine dispute of material fact as

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to whether Perlman's words and actions were so antithetical to

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Rearden's right to assignment as to constitute waiver and/or

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estoppel.

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Rearden's motion, the Court need not address Shenzhenshi's other

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arguments as to why Rearden's motion ought to be denied.

Because this is a sufficient basis on which to deny

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IV. CONCLUSION

United States District Court

For the Northern District of California

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For the foregoing reasons, Defendants' motion for summary

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judgment on Defendants' counterclaim for declaratory relief is

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DENIED.

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IT IS SO ORDERED.

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Dated: October __, 2015

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UNITED STATES DISTRICT JUDGE

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