Ariba, Inc. v. National Grid Corporation of the Philippines

Filing 41

ORDER RE: 24 AWARDING DAMAGES. Signed by Judge Richard Seeborg on 12/30/2010. (Attachments: # 1 Appendix Judgment) (rslc3, COURT STAFF) (Filed on 12/30/2010)

Ariba, Inc. v. National Grid Corporation of the Philippines

Doc. 41

1 2 3 4 5 6 7 8 9 10

*E-Filed 12/30/2010*

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION ARIBA, INC., Plaintiff, No. C 09-4495 RS ORDER AWARDING DAMAGES

United States District Court

11
For the Northern District of California

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

v.

NATIONAL GRID CORPORATION OF THE PHILIPPINES, Defendant. ____________________________________/ I. INTRODUCTION On October 21, 2010, this Court granted plaintiff Ariba's motion for summary judgment on contract liability against defendant National Grid Corporation of the Philippines ("NGCP"). Finding that Ariba had not supplied any legal basis for the damages requested, the Court directed and the parties provided supplemental briefing on the question of damages. For the reasons stated below, Ariba is entitled to $570,403 in damages from NGCP. As provided for in the parties' contract, Ariba is also entitled to reasonable attorney fees and costs. II. RELEVANT FACTS This case is a straightforward contract dispute. The facts were detailed in the Prior Order and need only be summarized here. What matters is that in May of 2009, NGCP's acting president
NO. C 09-4495 RS ORDER

Dockets.Justia.com

1 2 3 4 5 6 7 8 9 10

and CEO, Dr. Walter Brown, signed a contract to purchase a software license from Ariba. That agreement contemplated a purchase price of $792,000. Part of the total cost represented the licensing fee; the other portion represented a three-year service plan. The agreement also provided that, upon receipt of NGCP's payment, Ariba would deliver the product (or, in reality, disburse a password) so that NGCP could begin to use the software. The date settled upon for payment in full and delivery was June 22, 2009. Late payment was further subject to interest assessed at a rate of 1.5 percent per month or ten percent per annum, whichever was greater. That date came and went without payment. Accordingly, NGCP never paid any amount of the purchase price and Ariba never delivered the software. In the Prior Order, this Court found as a matter of law that NGCP breached its contractual obligation. The question that remains is whether there is a disputed issue of material fact as to the appropriate measure of damages. Ariba argues here that it is entitled to the full value of the contract, plus interest calculated at a rate of 10 percent per annum for a period of one year and 191 days (or roughly 1.523 years): $912,643.75. In the alternative, it argues it should at least recover the value of its expected profit, or the portion of the contract price that excludes the servicing fee. With interest, Ariba calculates that this alternative amount totals $730,115.51. NGCP disagrees that Ariba is entitled to the full value of the contract price, as Ariba never performed its obligation under the contract and has not advanced a theory entitling it to specific performance. While NGCP does agree that Ariba, as the injured party, may recover its expected benefit, and while it agrees that the licensing fee represents this benefit, NGCP argues that the licensing fee is actually lower than Ariba represents. NGCP insists this number is only $495,000. With interest assessed at the rate and for the period of time Ariba suggests, this figure climbs to $570,403. III. LEGAL STANDARD Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The party who seeks
NO. C 09-4495 RS ORDER

United States District Court

11
For the Northern District of California

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

2

1 2 3 4 5 6 7 8 9 10

summary judgment bears the initial responsibility of identifying an absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party satisfies this initial burden, it shifts to the non-moving party to present specific facts showing that there is a genuine issue for trial. Fed. R. Civ. P. 56(e); Celotex, 477 U.S. at 324. "Only disputes over facts that might affect the outcome of the suit under governing law" are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A genuine issue exists if the non-moving party presents evidence from which a reasonable fact-finder, viewing the evidence in the light most favorable to that party, could resolve the material issue in his or her favor. Id. at 248-49. IV. DISCUSSION 1. California Civil Code Section 3302 Ariba argues it is entitled to recover the full value of its contract with NGCP and, for support, points to California Civil Code section 3302. That section provides that, "[t]he detriment caused by the breach of an obligation to pay money only, is deemed to be the amount due by the terms of the obligation, with interest thereon." To bring it within the section, Ariba characterizes NGCP's obligation as one "to pay money only." Ariba then points to a 1998 district court case interpreting that section in the context of a software licensing dispute. See RSA Data Security, Inc. v. I-Link, Ltd., No. 97-4738, 1998 WL 827415 (N.D. Cal. Nov. 25, 1998). Although Ariba asks this Court to apply the reasoning employed there to this software licensing contract, NGCP highlights a key factual difference that makes section 3302 applicable in RSA Data, but unworkable here. In the RSA Data case, the plaintiff agreed to license its encryption software to defendant ILink. The parties' agreement provided that upon delivery of the software, I-Link was to provide payment in two forms: "object code license fees" and "prepayment license fees." The latter apparently was due in installments, regardless of whether or not I-Link was able to incorporate the software into a product distributed to third parties for profit (the former fees kicked in if this scenario materialized). I-Link never paid any of the "prepayment" installments. It argued that because it was never able to distribute a final product to third parties, it had no obligation to make the "prepayments." The court disagreed and granted RSA Data's summary judgment motion.
NO. C 09-4495 RS ORDER

United States District Court

11
For the Northern District of California

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

3

1 2 3 4 5 6 7 8 9 10

Relying on section 3302, the court held that a breach of an obligation to pay money entitled the party to whom performance was due recovery of the "amount due [under] the terms of the obligation, with interest thereon." Civ. Code § 3302. As NGCP accurately points out, of course, NGCP's obligation under the instant contract was not quite the same. Although it was obligated to pay money, Ariba was in turn required to deliver the software. Unlike the plaintiff in RSA Data, who had already delivered its encryption software to I-Link, Ariba never released its software to NGCP. The instant contract did not really involve a pure obligation to pay money; accordingly, NGCP insists section 3302 is not quite the right lens through which the Court ought to look when fashioning a recovery. Because the purchase price assumed delivery and particularly because that price compensated Ariba for services it never performed, NGCP argues awarding the full purchase price would unfairly overcompensate Ariba. NGCP's point is well-taken. 2. California Civil Code Section 3300 NGCP argues that the Court should look instead to California Civil Code section 3300 (and Ariba concedes that, should the Court disagree with its section 3302 analysis, it should turn instead to section 3300). Section 3300 provides that, "[f]or the breach of an obligation arising from contract, the measure of damages, except where otherwise expressly provided by this code, is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom." Both parties appear to agree that this number represents Ariba's expected profit, as this would place Ariba in the position it would have held had the contract been performed as planned. Both also agree that Ariba's expected profit is coextensive with the portion of the purchase price that represents the licensing fee, but excludes the servicing fee. The parties also agree that Ariba is entitled to interest. In its supplemental brief, Ariba requests interest at a rate of 10 percent per annum for a period of one year and 191 days. NGCP disputes neither figure. Ariba and NGCP merely disagree as to how much of the full contract price comprised the licensing fee.

United States District Court

11
For the Northern District of California

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

NO. C 09-4495 RS ORDER

4

1 2 3 4 5 6 7 8 9 10

Specifically, Ariba insists the licensing fee represents 80 percent of the total purchase price, or $633,600. NGCP disagrees and contends the licensing fee is actually only $495,000. While this is a disputed fact, the correct amount is easily gleaned from a perusal of the contract documents. Ariba points to the "express terms of the Ariba Order Form," and NGCP cites to "the Ariba Invoice dated June 22, 2009." Examination of both documents demonstrates that NGCP has made the correct mathematical calculation. The document NGCP references is an invoice sent from Ariba to NGCP, dated June 22, 2009, and indicating that upon payment of $792,000, Ariba would distribute the software. The invoice further breaks the $792,000 figure into two components: a licensing fee of $495,000 and a three-year servicing fee of $297,000. The purchase agreement Ariba invokes does not make such a breakdown, but does state that the servicing fee per annum would represent 20 percent of the licensing costs for the first three years. In its supplemental motion, Ariba erroneously calculated the licensing fee as 80 percent of the total purchase price, or $633,600. As NGCP correctly points out, in contrast, twenty percent of the licensing fee ($495,000) is $99,000. Multiplied by three (the number of years of servicing fees contemplated), the servicing costs total $297,000. Added together, the licensing fee ($495,000) and three years' worth of servicing costs ($297,000) amounts to $792,000, or in other words, the agreed upon total purchase price. Accordingly, Ariba is entitled to recover the $495,000 of profit it would have received from the licensing fee, plus interest calculated at the rate agreed to by contract. At a rate of 10 percent, assessed over a period of one year and 191 days, this sum mounts to $570,403. Finally, Ariba moved in its original motion for an award of reasonable attorney's fees and costs. It is not disputed that the purchase agreement provided for such recovery, and Ariba is entitled to receive it. Cal. Civ. Code. § 1717. Accordingly, Ariba may file a petition seeking an award of such fees and costs. V. CONCLUSION For the reasons discussed above, NGCP is liable to Ariba in the amount of $495,000 plus interest, to be calculated at a rate of 10 percent for a term of one year and 191 days, as well as reasonable attorney fees and costs incurred in prosecuting this lawsuit. IT IS SO ORDERED.
NO. C 09-4495 RS ORDER

United States District Court

11
For the Northern District of California

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

5

1 2 3 4 5 6 7 8 9 10 Dated: 12/30/2010 RICHARD SEEBORG
UNITED STATES DISTRICT JUDGE

United States District Court

11
For the Northern District of California

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
NO. C 09-4495 RS ORDER

6