Synnex Corporation v. Wattles

Filing 142

ORDER by Judge Yvonne Gonzalez Rogers granting 124 Plaintiff's Motion for Summary Judgment (fs, COURT STAFF) (Filed on 11/14/2012)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SYNNEX CORPORATION,

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Plaintiff,

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Case No.: 11-cv-01496-YGR
ORDER GRANTING PLAINTIFF’S MOTION
FOR SUMMARY JUDGMENT

vs.

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MARK J. WATTLES,

Northern District of California

United States District Court

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Defendant.

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Pending before the Court is Plaintiff’s motion for summary judgment. On March 9, 2011,

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Plaintiff Synnex Corporation (“Synnex”) brought this action for breach of contract against Defendant

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Mark J. Wattles (“Wattles”) based on a guaranty agreement. (Dkt. No. 1 (“Complaint” or

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“Compl.”).)1 Synnex filed a Motion for Summary Judgment on August 20, 2012. (Dkt. No. 124

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(“Motion” or “Mot.”); Dkt. No. 107 (original Motion).) Wattles filed his Response in Opposition to

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Plaintiff Synnex Corporation’s Motion for Summary Judgment on September 18, 2012. (Dkt. No.

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121 (“Opposition” or “Opp.”).) On September 25, 2012, Synnex filed its Reply in Support of Motion

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for Summary Judgment. (Dkt. No. 122 (“Reply”).) The Court held oral argument on October 30,

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2012. (Dkt. No. 131.)

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Having carefully considered the papers submitted and the pleadings in this action, the

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arguments of counsel, and for the reasons set forth below, the Court GRANTS Plaintiff’s Motion for

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Summary Judgment.

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Wattles filed a Counterclaim against Synnex on May 9, 2011, alleging breach of the covenant of good faith
and fair dealing, civil conspiracy, and declaratory relief/rescission. (Dkt. No. 12.) The pending Motion for
Summary Judgment does not address any of the Counterclaims.

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I.

FACTUAL AND PROCEDURAL BACKGROUND

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Defendant Wattles served as the chairman of Ultimate Acquisition Partners LP, which did

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business as Ultimate Electronics (“Ultimate”), a retail electronics store. (Videotape Deposition of

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Mark J. Wattles (“Wattles Dep.”) 20:10–21:15, attached as Ex. A to Declaration of Ryan E. Warren,

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Esq. to Defendant Mark J. Wattles’ Response and Responsive Separate Statement in Opposition to

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Plaintiff Synnex Corporation’s Motion for Summary Judgment (“Warren Decl.”) (Dkt. Nos. 128 and

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121-1).) In 2009, Ultimate entered into a contract with Hewlett Packard (“HP”), whereby HP agreed

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to invest $100 million in Ultimate in exchange for (1) a 25% stake in Ultimate, and (2) Ultimate’s

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guaranteed sales of a certain number of HP’s products (“HP Deal”). In order to create a competitor to
Best Buy, HP agreed to distribute the $100 million in three installments of $50 million, $30 million,

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United States District Court
Northern District of California

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and $20 million. (Wattles Dep. 68:24–69:10.) Funding was contingent on Ultimate’s success in

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opening a certain minimum number of stores and each store’s success in selling a certain number of

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HP products. (See Wattles Dep. 24:17–22; Warren Decl., Ex. C (Contribution Agreement) (Dkt. No.

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121-3) §§ 1.2(b)–(e).) The parties further agreed that the terms of the deal would remain confidential.

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(Contribution Agreement § 5.1; Wattles Dep. 68:24–69:3.)2
The HP Deal consisted of three contracts: the Launch Agreement, Contribution Agreement,

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and Reseller Agreement. (Wattles Dep. 26:8–28:24.) The Reseller Agreement provided that HP

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would sell its products directly to Ultimate. (Warren Decl., Ex. B (Reseller Agreement) (Dkt. No.

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121-2) §§ 7(A)–(G).) The Reseller Agreement also contained payment and security terms but did not

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require Wattles to sign a personal guaranty. (See id. § 6.)
After executing the three HP agreements, HP Senior Vice-President John Soloman

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(“Soloman”) informed Wattles that HP would not sell its products directly to Ultimate as the Reseller

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Agreement required. (Wattles Dep. 29:7–32:6.) Instead, Ultimate would have to purchase HP

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2

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Wattles claims that section 5.1 of the Contribution Agreement provides a general nondisclosure agreement
that prevented either party from discussing the terms of the HP Deal with anyone else. However, the text of the
provision cited does not prohibit any and all disclosures. Instead, it merely states that “neither the Company
nor the Investor shall issue any press release or other public statement relating to this Agreement or the Related
Agreements or the transactions contemplated hereby or thereby without the prior approval of the other party.”
(See Contribution Agreement § 5.1.)
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products from HP’s exclusive distributor, Synnex (via New Age Electronics).3 (Wattles Dep. 29:7–

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32:6.) In order to buy the product directly from Synnex, Ultimate and Synnex entered into a Credit

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Application Agreement. (RSS No. 1.)4 Within a few months after the HP Deal was executed, and as

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part of the extension of credit, Synnex required a personal guaranty from Wattles. (Wattles Dep.

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34:5–20.)

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Wattles contacted HP’s Soloman to complain, arguing no personal guaranty should be

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required. (Wattles Dep. 35:6-16.) Soloman replied that the guaranty was somewhat irrelevant

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because (i) it was a temporary measure until HP had implemented the necessary systems to permit

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direct sales to Ultimate and (ii) HP had provided $50 million in cash. (Id. 35:2–36:1 (Soloman told
Wattles he should not “worry about it”).) Wattles “fundamentally agreed” with Soloman’s

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United States District Court
Northern District of California

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assessment, and thereupon signed the personal guaranty for $5.7 million (“Initial Guaranty”). (Id.)

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Wattles understood that he was personally at risk for any unpaid payments by Ultimate to Synnex.

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(Id. 39:2–14.) Wattles had signed numerous other personal guarantees with respect to other

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electronics and appliance vendors, including Sony, Sharp, Samsung, Toshiba, Panasonic, and

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Whirlpool, among others. (Id. 36:2–24, 37:4–8.)
Sometime in mid-2010, HP provided Ultimate with an additional $30 million in capital.

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Thereafter, Synnex asked Wattles to increase the amount of his guaranty to $15 million. (Wattles

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Dep. 51:5–16.) Wattles tried to contact Todd Bradley (to whom Soloman reported) but,

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characteristically, he did not respond. (Id. 57:12–24.) Lacking time, Wattles did not further

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investigate the consequences of refusing to sign the new guaranty. (Wattles Dep. 72:20–73:4.)

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Wattles executed the Unconditional Continuing Guaranty (“Continuing Guaranty”), dated July 28,

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2010, guaranteeing personal liability to Synnex and its affiliates for up to $15 million. (RSS No. 3;

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New Age Electronics is a wholly-owned division of Synnex. In this Order, the term “Synnex” describes both
Plaintiff Synnex and New Age.
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As used in this Order, “RSS No. #” refers to material facts and responses set forth in Defendant Mark J.
Wattles’ Responsive Separate Statement in Opposition to Plaintiff Synnex Corporation’s Motion for Summary
Judgment. (Dkt. No. 127.) Unless otherwise noted, the references to the material fact numbers or responses
include the evidence supporting the same.

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Declaration of Simon Leung (“Leung Decl.”) (Dkt. No. 107-4) ¶ 4 and Ex. 2 (Unconditional

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Continuing Guaranty); Wattles Dep. 51:5–11.)

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By December 2010, Ultimate owed Synnex a balance of $11,121,728.00. (RSS No. 4; Leung

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Decl. ¶ 5 and Ex. 5.)5 Synnex agreed to a payment plan under which Ultimate would pay $1,700,000

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per week, subject to fluctuation based upon continuing sales and adjustments. (RSS No. 4; Leung

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Decl. ¶ 5 and Ex. 5.) Ultimate paid the agreed amounts from December 3, 2010 to January 6, 2011.

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(RSS No. 4; Leung Decl. ¶ 5 and Ex. 5.) On January 14, 2011, Ultimate failed to make its weekly

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payment. (RSS No. 5; Leung Decl. ¶ 6.) On January 19, 2011, Synnex issued a written demand to

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Wattles for immediate payment of Ultimate’s outstanding liability of $5,653,826.73. (RSS No. 6.)

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Wattles received the demand but has made no payments to Synnex. (RSS No. 7.)
On January 26, 2011, Ultimate filed a petition for Chapter 11 bankruptcy in the United States

United States District Court
Northern District of California

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Bankruptcy Court for the District of Delaware. (RSS No. 8.) Pursuant to the Continuing Guaranty,

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Wattles’ obligation remained in force and effect notwithstanding Ultimate’s bankruptcy petition. (See

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RSS No. 10.)

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By its Motion, Synnex contends the Court should find that Wattles liable for $5,653,826.73,

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plus reasonable attorney’s fees and costs. (RSS No. 14; Leung Decl. ¶ 13.) In total, Synnex seeks an

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entry of judgment for $ 5,695,734.01. (Mot. at 14.) Wattles opposes the motion on the grounds that

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questions of material fact exist as to whether the guaranty agreement is void for duress and/or lack of

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consideration. (Opp. at 6–10.)

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II.

EVIDENTIARY ISSUES

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At oral argument, Wattles’ counsel argued that summary judgment should be denied because

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Synnex failed to properly authenticate its evidence in support of its Motion. The Court has reviewed

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the record and determined the evidence was properly authenticated. The initial confusion arose

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because both parties attached their underlying evidence en masse as exhibits to their briefs. (Dkt. No.

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5

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Although Wattles disputes RSS Nos. 4 and 5, he presents no evidence that substantively disputes the amount
owed, the payment schedule, that payments were made under the schedule, or when the payments ceased. (See
RSS Nos. 4 and 5.) In fact, Wattles’ testimony indicates he has no personal knowledge of the specific amounts
owed by Ultimate to Synnex at the time of the bankruptcy filing. (Wattles Dep. 61:9–15, 62:6–8; see responses
to RSS Nos. 4 and 5 (“he does not have a general idea of the amount”).)

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125.) As to Synnex’s evidence, the Leung Declaration—which was filed as Exhibit 10 to the brief

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and authenticates Exhibits 1–2 and 5–7—was buried within Synnex’s exhibits and was not filed in

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accordance with common practices in this district. In response to numerous explicit requests from the

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Court that Synnex authenticate its evidence (see Dkt. Nos. 125 and 130), Synnex failed to direct the

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Court to the Leung Declaration until oral argument. Upon review of the Leung Declaration, Exhibits

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1–2 and 5–7 have been properly authenticated. The Court finds no authentication of Synnex’s Exhibit

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3 (Videotape Deposition of Mark J. Wattles), but Wattles’ counsel has authenticated a copy of the

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same transcript with his own evidence. Synnex’s Exhibit 4 (Mark J. Wattles’ Response to First Set of

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Requests for Admission) has not been authenticated, but based on a lack of objection to the document

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in the Responsive Separate Statement (see RSS No. 3), the Court finds no objection to the authenticity

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United States District Court
Northern District of California

1

of this exhibit. For these reasons, the Court will consider Synnex’s evidence in deciding this Motion.

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The same is true of Wattles’ evidence in support of his Opposition, based on Wattles’ counsel’s

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declaration and lack of objection thereto. (Dkt. No. 128.)

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III.

DISCUSSION

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A.

Standard for Motion for Summary Judgment under Fed. R. Civ. P. 56

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Summary judgment is appropriate when no genuine dispute as to any material fact exists and

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the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). A party seeking

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summary judgment bears the initial burden of informing the court of the basis for its motion, and of

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identifying those portions of the pleadings, depositions, discovery responses, and affidavits that

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demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317,

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323 (1986). Material facts are those that might affect the outcome of the case. Anderson v. Liberty

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Lobby, Inc., 477 U.S. 242, 248 (1986). The “mere existence of some alleged factual dispute between

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the parties will not defeat an otherwise properly supported motion for summary judgment; the

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requirement is that there be no genuine issue of material fact.” Id. at 247–48 (dispute as to a material

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fact is “genuine” if there is sufficient evidence for a reasonable jury to return a verdict for the non-

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moving party).

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Where the moving party will have the burden of proof at trial, it must affirmatively
demonstrate that no reasonable trier of fact could find other than for the moving party. Soremekun v.

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1

Thri Payless, Inc., 509 F.3d 978, 984 (9th Cir. 20
ifty
007). Where the non-mo
e
oving party b
bears the

2

burd of proof at trial, the moving part can prevai merely by demonstrati that the n
den
f
ty
il
y
ing
non-moving
g

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part lacks evid
ty
dence to supp its case. Soremekun v. Thrifty P
port
n
Payless, Inc, 509 F.3d at 984. If the

4

mov
ving party meets its initia burden, th opposing party must t
m
al
he
then set out “
“specific fac showing a
cts”
g

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genu issue fo trial in ord to defeat the motion. Id. (quoting Anderson, 477 U.S. at 250). The
uine
or
der
g
,
t

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oppo
osing party’s evidence must be more than “mere colorable but must b “significa
m
e
ely
e”
be
antly

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prob
bative.” Id. at 249–50. Further, that party may n rest upon mere alleg
F
t
not
n
gations or den
nials of the

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adve party’s evidence, bu instead mu produce admissible e
erse
ut
ust
evidence tha shows a ge
at
enuine issue of

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mate
erial fact exi for trial. Nissan Fire & Marine Ins. Co. v. F
ists
Fritz Cos., In 210 F.3d 1099, 1102
nc.,
d
2–
03 (9th Cir. 200 Nelson v. Pima Cmty College D
(
00);
v
y.
Dist., 83 F.3d 1075, 1081
d
1–1082 (9th Cir. 1996)

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United States District Court
Northern District of California

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(“m allegatio and specu
mere
on
ulation do no create a fa ctual dispute Arpin v. Santa Clara Valley
ot
e”);
a

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Tran Agency, 261 F.3d 912, 922 (9th Cir. 2001) (
nsp.
h
(“conclusory allegations unsupporte by factual
y
s
ed
l

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data are insuffic
a
cient to defea [defendan
at
nts’] summar judgment motion”).
ry

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When de
eciding a sum
mmary judgm motion a court mu view the evidence in the light mo
ment
n,
ust
ost

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favo
orable to the non-moving party and draw all just
g
d
tifiable infere
ences in its f
favor. Ande
erson, 477 U.S.

16

at 25 Hunt v. City of Los Angeles, 638 F.3d 703, 7 (9th Cir. 2011). How
55;
C
A
8
709
.
wever, in de
etermining

17

whe
ether to grant or deny sum
t
mmary judgm
ment, it is no a court’s t
ot
task “to scou the record in search of a
ur
d

18

genu issue of triable fact.” Keenan v. Allan, 91 F
uine
f
v
F.3d 1275, 1279 (9th Cir 1996) (inte
r.
ernal

19

quot
tations omitt
ted). Rather a court is entitled to “r
r,
e
rely on the n
nonmoving p
party to ident with
tify

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reas
sonable parti
icularity the evidence tha precludes summary ju
at
udgment.” S id.; Carm v. San
See
men

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Fran
ncisco Unifi Sch. Dist 237 F.3d 1026, 1031 (
ied
t.,
1
(9th Cir. 200 (“The dis
01)
strict court n
need not

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exam the ent file for ev
mine
tire
vidence esta
ablishing a g
genuine issue of fact, wh the evide
e
here
ence is not set

23

forth in the oppo
h
osing papers with adequ reference so that it could conve
s
uate
es
eniently be fo
found.”)

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25
26
27
28

B.

Economic Duress
E
D
1.
1

Summ
mary of the Arguments
s

Synnex conte
S
ends summa judgment is appropriate given tha Wattles en
ary
t
at
ntered into th
he
Con
ntinuing Gua
aranty, agree to be perso
ed
onally liable for any unp amounts due to Syn
e
paid
nnex from
Ultimate, and sp
pecific amou are now due and ow
unts
w
wing. (Mot. a 12–14.) W
at
Wattles asser only that he
rts

6

1

exec
cuted the gua
aranty out of a fear of lo
osing his bus
siness, which would have resulted ha he breach
h
ad
hed

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the HP Deal. (O at 9.) Wattles furth argues th Synnex ex
H
Opp.
W
her
hat
xploited its k
knowledge o confidenti
of
ial

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term of the HP Deal to coerce him to si the perso
ms
ign
onal guarant
tees. (Id. at 8–9.) Faced with no
d

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reas
sonable altern
native and his business on the line, W
h
o
Wattles conc
cludes that, u
under Califo
ornia law, the
e

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reco presents a question of fact as to whether he a
ord
o
w
acted under e
economic du
uress. (Id. at 9-10.) In
t

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resp
ponse, Synne counters that Wattles cannot show duress based on the fac in the rec
ex
t
w
cts
cord.

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Spec
cifically, Synnex empha
asizes that it was HP who allegedly m
o
made misrep
presentations to Wattles (if
s

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anyo
one), and tha Wattles si
at
igned the gua
arantees with
thout any alleged coercio from Syn
on
nnex itself.

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(Rep at 4–5.)
ply
2.
2

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United States District Court
Northern District of California

10

Law of Economi Duress
ic

A guaranty is subject to ordinary def
s
o
fenses to con
ntract format
tion includin economic
ng

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dure
ess. Econom duress do not requi an unlaw act, but m come in play upo the doing of
mic
oes
ire
wful
may
nto
on

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a wr
rongful act which is suff
w
ficiently coer
rcive “to cau a reasona
use
ably prudent person face with no
t
ed

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reas
sonable altern
native to suc
ccumb to the perpetrator pressure.” See Perez v. Uline, Inc 157 Cal.
e
r’s
”
c.,

15

App 4th 953 (C Ct. App. 2007); Thom
p.
Cal.
mpson Cran & Truckin Co. v. Eym
ne
ng
man, 123 Ca App. 2d
al.

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904, 908 (Cal. Ct. App. 1954). “A party pleading ec
C
y
conomic dur must ha had no re
ress
ave
easonable

17

alter
rnative to the contract it seeks to avo
e
oid.” CrossT
Talk Produc
ctions, Inc. v. Jacobson, 65 Cal. App.
.

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4th 631, 644 (Cal. Ct. App. 1998). If a reasonable a
alternative w available economic duress cannot
was
e,

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be established. Id.
e

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Whether a party acte under dur is norma a questio of fact, an courts in California
r
ed
ress
ally
on
nd

21

appl an objecti standard to determine if a reason
ly
ive
e
nable alternat was ava
tive
ailable. See Thompson

22

Crane, 123 Cal. App. 2d at 910. Genera
ally, courts o
only apply th doctrine o economic duress
he
of
c

23

uctantly and “only as a la resort to correct explo
“
ast
c
oitation of bu
usiness circu
umstances w
when
relu

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conv
ventional alt
ternatives an remedies are unavailin
nd
ng.” Rich & Whillock, I v. Ashton Development
Inc.

25

Inc., 157 Cal. App. 3d 1154 1159 (Cal. Ct. App. 19
A
4,
984).

26

While th law allows for a certai degree of subjectivity in determin
he
in
f
y
ning whether a contract is
r
i

27

void
dable for dur
ress, the cent
tury-old doc
ctrine require the party c
es
claiming dur to show some
ress
w

28

wrongful act on the part of the alleged perpetrator. See McTigu v. Arctic Ic Cream Su
t
p
ue
Ice
upply Co., 20
0

7

1

Cal. App. 708, 719 (Cal. Ct. App. 1912) (party’s ref
.
7
)
fusal to relea horses so as assets of a delivery
ase
old

2

busi
iness until th purchaser paid $350 for expenses incurred in horses’ care held to be d
he
f
e
duress as a

3

third
d-party, not the corporat
t
te-seller, had incurred th e debt); Steff v. Refrig
d
ffen
geration Disc Corp., 91
c.

4

Cal. App. 2d 494, 500 (Cal. Ct. App. 19
.
949) (finding economic d
g
duress where defendant forced
e

5

mor
rtgagor to pa unearned interest to se
ay
i
ecure a relea of the mo
ase
ortgage wher the mortg
re
gagor needed to
d

6

sell the property to avoid for
y
reclosure); McNichols v Nelson Val Bldg. Co 97 Cal. A
M
v.
lley
o.,
App. 2d 721,

7

pp.
uress found where party refused to r
y
remove a wr
rongfully file lis penden
ed
ns
724 (Cal. Ct. Ap 1950) (du

8

as a means of ex
xacting the conveyance of other prop
c
o
perty as a co
ondition to d
dismissing th action);
he

9

mirlian v. Ott 139 Cal. App. 486, 49 (Cal. Ct. App. 1934) (finding dur where a party record
to,
A
96
ress
ded
Ezm
an in
nvalid conve
eyance and refused to remove the re sulting cloud on title unless the gran paid par
r
d
ntee
rt

11

United States District Court
Northern District of California

10

of th proceeds of a pending sale to said party); Tho
he
g
d
ompson Cran 123 Cal. App. 2d at 9 (paymen
ne,
908
nt

12

reco
overable for duress wher one party wrongfully r
re
w
refused to file a protest w the Treasury in order
with

13

to co
oerce the tax
xpayer to sig a continge
gn
ency agreem for addi
ment
itional fees).

14

Econom duress req
mic
quires both knowledge o the affecte party’s ec
k
of
ed
conomic circ
cumstances and
a

15

actu induceme thereof. See Steinma v. Malame 185 Cal. App. 4th 15
ual
ent
an
ed,
550, 1558–59 (Cal. Ct.

16

App 2010); Lou
p.
uisville Title Ins. Co. v. Surety Title & Guaranty Co., 60 Cal App. 3d 78 801 & 80
e
S
y
l.
81,
05

17

(Cal Ct. App. 1976). Typic
l.
cally, it is no duress for a party to th
ot
hreaten eithe to refuse t proceed
er
to

18

unde a contract or civil litig
er
t
gation. Nesb Fruit Pro
bitt
oducts, Inc. v. Del Mont Beverage Co., 177 Ca
te
al.

19

App 2d 353, 36 (Cal. Ct. App. 1960) (citing Sistro v. Anders
p.
61
A
(
om
son, 51 Cal. App. 2d 213 221 (Cal. Ct.
3,

20

App 1942); Ma
p.
arshall v. Pac
ckard-Bell Co., 106 Cal . App. 2d 77 774 (Cal. Ct. App. 19
C
70,
.
951); Leeper v.
r

21

Belt
trami, 53 Ca 2d 195, 20
al.
05–06 (1959
9)).

22

3.
3

Appl
lication

23

As summariz above, Wattles argue duress on the theory t Synnex leveraged its
A
zed
W
es
n
that
s

24

know
wledge of th confidenti terms of the HP Deal to force Wa
he
ial
t
l
attles to agre to the gua
ee
arantees. (Op
pp.

25

at 8–
–9.) Specifi
ically, Wattles contends that Synnex principal A
x
Adam Carroll (“Carroll”) knew that
l
)

26

Ultimate was required to pu
urchase minim
mum quantit of HP pr
ties
roducts to sa
atisfy require
ements of th
he

27

HP Deal and exp
ploited that knowledge to time the g
t
guaranty dem
mands. (Wat
ttles Dep. 42
2:20–43:23,

28

8

1

54:19–55:5, 71:20–72:1.)6 Wattles maintains that he had “no choice” but to sign both guarantees

2

because Ultimate would have been in breach of its obligations to HP, from whom Ultimate already

3

had received $80 million. (Id. 40:13–25.) Wattles further claims he attempted to address the issue

4

with HP to no avail, as Soloman (who had been his HP contact) was no longer involved with the

5

business relationship and it was unclear who had assumed his authority. (Id. 56:11–25.)
Wattles relies heavily on Rich & Whillock, Inc. v. Ashton Development, Inc. for the

6
7

proposition that entering into certain unfavorable contracts, when faced with the imminent collapse of

8

one’s business as the sole alternative, may be grounds for economic duress. That case involved an

9

action to recover a balance due for rock and excavation work. Rich & Whillock, 157 Cal. App. 3d at
1156. After signing an initial agreement to complete excavation work for the defendant, plaintiff

11

United States District Court
Northern District of California

10

discovered that rock blasting would be necessary to complete the job. Id. Because the terms of the

12

excavation agreement specifically excluded blasting, plaintiff informed defendant of the additional

13

amount due for the extra work. Id. Defendant agreed to the increased price. Once the final balance

14

was due, defendant refused to pay, claiming his company was out of money. Id. Defendant offered

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plaintiff a settlement for little more than 75% of the amount due and told plaintiff it could either

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accept or sue the defendant for the full balance. Id. Throughout their discussions, plaintiff repeatedly

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emphasized that as a new, small company, the job at issue had forced them to incur significant

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liabilities and failure to pay would destroy the company. Id. Given the choice of accepting the

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settlement or losing their company, plaintiff relented, accepted the lower amount, and signed a

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release, but later sued to void the release for duress and recover the unpaid balance. Id.
The Rich & Whillock court held for plaintiff on the basis that it signed the release under

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economic duress. Id. at 1160. The core of the decision focused on the Court’s finding that

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At oral argument, Wattles’ counsel suggested that Carroll “bragged” to Wattles about his knowledge of the
confidential HP Deal. However, no evidence supports counsel’s characterization. By contrast, Wattles
testified merely that Carroll “described the transaction” to him. (Wattles Dep. 43:2.) Carroll knew that
“Hewlett-Packard had invested capital in [Ultimate] and that Hewlett-Packard had minimum purchase
requirements in order for [Ultimate] to continue to get capital from Hewlett-Packard” (id. 43:19–23), and that
Ultimate and Synnex “had to get things moving very quickly.” (See generally Wattles Dep. 42:20–44:10.)
Even construing in the light most favorable to Wattles that Carroll was “intimately familiar” with the HPUltimate relationship, knowledge itself does not constitute “bragging.” (Id. 54:19–55:5.)

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defendant’s refusal to pay and subsequent settlement offer were not made in good faith. Id. The

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following factors persuaded the Court: (1) defendant never disputed the amount owed; (2) defendant

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was fully aware that plaintiff was a new company, overextended to creditors and subcontractors and

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faced with imminent bankruptcy if not paid; (3) plaintiff strenuously protested defendant’s course of

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tactics; and (4) plaintiff succumbed only to avoid economic disaster and the adverse ripple effects of

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its bankruptcy on those to whom it was indebted. Id. at 1160–61.

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Here, Rich & Whillock is distinguishable. The evidence in this case indicates that Synnex
merely requested the guarantees as a condition of extending credit, a common business practice when

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a borrower’s creditworthiness is suspect. Wattles admits that Ultimate was suffering from negative

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cash flows, as shown in Ultimate’s application for credit from Synnex, in which Ultimate agreed to

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United States District Court
Northern District of California

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release two years’ worth of financial statements. (See Leung Decl. ¶ 3 and Ex. 1 (Credit Application

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Agreement) at 3.) Further, Wattles concedes that a demand for a personal guaranty was far from

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unusual with respect to Ultimate’s business. Wattles had signed personal guarantees with at least nine

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other Ultimate suppliers. (Wattles Dep. 36:2–24, 37:4–8.) Wattles himself admitted that he

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“fundamentally agreed” with Soloman’s perspective on the need for the Initial Guaranty and, on that

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basis, he signed. (Wattles Dep. 35:9–36:1.) Wattles’ self-serving arguments notwithstanding, Wattles

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has not proffered probative evidence that Synnex requested the guarantees for any reason other than

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one based upon Ultimate’s financial history.

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Additionally, with respect to the Initial Guaranty, Wattles testified at his deposition that it was

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HP’s Soloman, not anyone from Synnex, who told Wattles the guaranty was of no concern and

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assured him that it was only temporary. (Wattles Dep. 35:2–36:1.) Aside from Wattles’ assertion that

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Synnex somehow exploited its knowledge of the HP Deal, the record shows no facts of coercive or

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otherwise wrongful conduct on Synnex’s part. With respect to the Continuing Guaranty, Wattles

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testified that he increased the amount of the personal guaranty to $15 million in response to Synnex’s

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“threat” to cease its credit extension to Ultimate. (Wattles Dep. 53:15–54:18, 73:18–74:4.) However,

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as discussed above, without more, a party may enforce the terms of a valid contract or threaten

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litigation. Nesbitt Fruit Products, Inc., 177 Cal. App. 2d at 361.

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While Wattles claims that Synnex exploited its knowledge of the HP Deal to time its guaranty

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requests so as to ensure Wattles complied, he never protested or questioned the conduct to anyone at

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Synnex. Further, he has not shown that Synnex was ever aware that Ultimate was faced with

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imminent bankruptcy if Wattles did not sign the guarantees. No reasonable juror would consider

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Wattle’s lack of protest and interaction with Synnex before signing the guarantees to resemble, in any

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way, the type of strenuous protest which had occurred in Rich & Whillock or to support the defense of

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economic duress. See 157 Cal. App. 3d at 1160–61.

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C.

Lack of Consideration

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As an additional defense, Wattles argues in a footnote—and with little elaboration—that the
guaranty agreement lacked consideration and is therefore unenforceable under Cal. Civ. Code section

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United States District Court
Northern District of California

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1550.7 (Opp. at 9 n.3.) Specifically, he argues that Synnex was merely obligating to do what third-

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party HP was already required to do under its own agreements with Ultimate—namely, to provide

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products to Ultimate. (Id.) Synnex did not respond to this argument in its Reply. However, at oral

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argument, Plaintiff’s counsel responded that Synnex’s extension of credit in exchange for the

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guaranty represents sufficient consideration.
Wattles is correct that “[a] promise is not enforceable unless consideration was given in

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exchange for the promise.” US Ecology, Inc. v. State of California, 92 Cal. App. 4th 113, 128–29

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(Cal. Ct. App. 2001) (citing Passante v. McWilliam 53 Cal. App. 4th 1240, 1247 (Cal. Ct. App.

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1997)). Generally, a promise to perform a pre-existing legal duty is not legally sufficient

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consideration. Id. (citing Bailey v. Breetwor, 206 Cal. App. 2d 287, 291–292 (Cal. Ct. App. 1962)).

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Consideration must be an act or promise-in-return, bargained for and given in exchange for the initial

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promise. Simmons v. Cal. Institute of Technology, 34 Cal. 2d 264, 272 (1949).

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The Court finds that because Wattles provided his guaranty in exchange for an extension of

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credit from Synnex, the requirement of consideration is satisfied. Synnex was not a party to the HP

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Deal, and therefore had no obligation to extend credit to Ultimate. (See Wattles Dep. 76:1–10

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(“generally credit applications are being filled out for the purpose of extending credit to a retailer”).)

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Consequently, by agreeing to extend credit to Ultimate in exchange for Wattles’ personal guaranty,

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Cal. Civ. Code section 1550 states “it is essential to the existence of a contract that there should be . . .
sufficient cause or consideration.”
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Synnex provided sufficient consideration. Accordingly, Wattles has not presented any triable issue of

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fact regarding the lack of consideration.

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III.

DAMAGES
Synnex seeks an entry of judgment against Wattles for $5,695,734.01. (Mot. at 14.) That

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amount is inclusive of Wattles’ outstanding liability to Synnex ($5,653,826.73), Synnex’s attorney’s

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fees ($34,710) and costs ($7,197.28). (Opp. at 14; RSS Nos. 12 and 14–15.) Wattles has presented

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no facts disputing the amount of Ultimate’s, and by extension, his outstanding obligations. (See

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Responses in RSS.) Accordingly, the Court finds Wattles concedes the actual amount due of

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$5,653,826.73. However, in order to obtain reasonable attorney’s fees, costs, and/or expenses,
Synnex must comply with all applicable procedures set forth in the Local Rules.

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United States District Court
Northern District of California

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IV.

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CONCLUSION
For the reasons set forth above, the Court GRANTS Plaintiff’s Motion for Summary Judgment

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and awards damages totaling $5,653,826.73.

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This Order terminates Dkt. No. 124.

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IT IS SO ORDERED.

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Dated: November 14, 2012
___________________________________________
YVONNE GONZALEZ ROGERS
UNITED STATES DISTRICT COURT JUDGE

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