CIGNEX Datamatics, Inc. v. Lam Research Corporation

Filing 94

MEMORANDUM OPINION. Signed by Judge Maryellen Noreika on 2/26/2019. (dlw)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
CIGNEX DATAMATICS, INC.,
Plaintiff,
v.
LAM RESEARCH CORPORATION,
Defendant.

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C.A. No. 17-320 (MN)

MEMORANDUM OPINION
Christopher P. Simon, David G. Holmes, CROSS & SIMON, LLC, Wilmington, DE – attorneys for
Plaintiff
Theodore A. Kittila, James G. McMillan, III, HALLORAN FARKAS + KITTILA LLP, Wilmington,
DE – attorneys for Defendants

February 26, 2019
Wilmington, Delaware

NOREIKA, U.S. DISTRICT JUDGE:
This case arises out of a contract dispute between Plaintiff Cignex Datamatics, Inc.
(“Plaintiff” or “Cignex”) and Defendant Lam Research Corporation (“Defendant” or “Lam”).
Presently before the Court is Lam’s motion for “summary judgment finding against CIGNEX on
its Complaint.” (D.I. 74, 75). For the reasons set forth below, Defendant’s motion for summary
judgment is GRANTED-IN-PART and DENIED-IN-PART.
I.

BACKGROUND
Cignex “is a commercial open-source consulting company that provides a wide variety of

clients with services and products such as open source enterprise portals, content management, big
data analytics, and e-commerce solutions.” (D.I. 1 ¶ 5). Lam “is in the business of designing,
developing, marketing, selling and supporting equipment that is used by semiconductor
manufacturers to make semiconductor chips. As part of its business, [Lam] operates numerous
computer and software platforms, which are integral to its business.” (D.I. 8 at 4). Lam has a
website, www.mylam.com, on which it “provides secure, online access for its personnel,
customers and technicians to its library of technical manuals and other proprietary documents
related to its products.” (D.I. 75 at 1-2). In October of 2014, Lam and Cignex entered into a
“Contract for Independent Contractor or Consultant Services” (“the Agreement”) for Cignex to
“work on the overhaul and development of the MyLam.com portal.” (D.I. 77 at 3).
The Agreement was apparently a standard form agreement provided by Lam to its vendors.
Section 1 of the Agreement states, “The Description of Work . . . describes the services that the
Contractor will perform and the fees which Company will pay in return.” (D.I. 75-1 at App 11).
Section 2 of the Agreement states, “[Cignex] will begin work on the date written above and, unless
terminated sooner, the Contract will end when the services are completed, as shown on Exhibit

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A.” (Id.). Exhibit A of the Agreement – Description of Work – “describes the services that
[Cignex] will perform and the fees which [Lam] will pay in return.” (Id.). Exhibit A contains the
notation “Software Integration, and POC, for MyLam/PK Redesign Project,” indicating that
Cignex was to do work for the MyLam/PK Redesign Project. (D.I. 75-1 at App 15). The remainder
of the exhibit, including the signature blocks, is blank. (Id.).
Pursuant to the Agreement, Cignex prepared a “proof of concept” for the project. (D.I. 75
at 2). Lam paid Cignex $10,000 upon completion of the proof of concept. (Id.). Thereafter, in
consultation with Lam, Cignex prepared a Statement of Work, which Lam signed on January 16,
2015 and Cignex signed on January 19, 2015. (D.I. 75-1 at App 31-48). The Statement of Work
outlined the scope of work that Cignex would perform for Lam. On the first page, it refers to
“Terms and Conditions” as “Time and Material.” (D.I. 75-1 at App 31).
During the contract period, Cignex invoiced Lam on a monthly basis for work and
materials, and in response to invoices, Lam paid more than $665,000. There were numerous
problems and delays in the project (though which party is at fault is disputed). At some point,
however, Lam expressed dissatisfaction with Cignex’s work and stopped paying. Even after Lam
stopped paying, Cignex continued to work with Lam on the project. Ultimately, Lam severed the
relationship and refused to pay the outstanding amounts due. Cignex brought this suit to recover
a balance of $434,096.71 due to it for work performed, and Cignex also seeks interest and
attorneys’ fees. (D.I. 1 at 4). Lam counterclaimed, seeking to recover the amounts already paid
to Cignex. (D.I. 8). Lam now seeks summary judgment on Cignex’s breach of contract claim.
(D.I. 75).

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II.

LEGAL STANDARDS
Pursuant to Rule 56(a) of the Federal Rules of Civil Procedure, “[t]he court shall grant

summary judgment if the movant shows that there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.” The moving party bears the burden of
demonstrating the absence of a genuine issue of material fact. See Matsushita Elec. Indus. Co.,
Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585-86 (1986). An assertion that a fact is not – or is –
genuinely disputed must be supported by citing to “particular parts of materials in the record,
including depositions, documents, electronically stored information, affidavits or declarations,
stipulations (including those made for purposes of the motion only), admissions, interrogatory
answers, or other materials,” or by “showing that the materials cited do not establish the absence
or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to
support the fact.” Fed. R. Civ. P. 56(c)(1)(A) & (B). If the moving party has carried its burden,
the nonmovant must then “come forward with specific facts showing that there is a genuine issue
for trial.” Matsushita, 475 U.S. at 587 (internal quotation marks omitted). The Court will “draw
all reasonable inferences in favor of the nonmoving party, and it may not make credibility
determinations or weigh the evidence.” Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133,
150 (2000).
To defeat a motion for summary judgment, the nonmoving party must “do more than
simply show that there is some metaphysical doubt as to the material facts.” Matsushita, 475 U.S.
at 586; see also Podobnik v. U.S. Postal Serv., 409 F.3d 584, 594 (3d Cir. 2005) (party opposing
summary judgment “must present more than just bare assertions, conclusory allegations or
suspicions to show the existence of a genuine issue”) (internal quotation marks omitted). The
“mere existence of some alleged factual dispute between the parties will not defeat an otherwise

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properly supported motion for summary judgment” – a factual dispute is genuine only where “the
evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). “If the evidence is merely colorable, or is not
significantly probative, summary judgment may be granted.” Id. at 249-50 (internal citations
omitted); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Thus, the “mere existence
of a scintilla of evidence” in support of the nonmoving party’s position is insufficient to defeat a
motion for summary judgment; there must be “evidence on which the jury could reasonably find”
for the nonmoving party. Anderson, 477 U.S. at 252.
III.

DISCUSSION
A.

Claim for Breach of Contract

The thrust of the dispute for summary judgment is whether the totality of the agreement
between the parties (including the Agreement with exhibits, proof of concept and Statement of
Work) required completion of the project before payment was due or whether it was a time and
materials contract pursuant to which Cignex would be paid for labor and expenses incurred. Lam
asserts that the Agreement “expressly and unambiguously obligates CIGNEX to complete the
Project.” (D.I. 75 at 9). Lam notes that “Section 1 of the Agreement states, ‘The Description of
Work . . . describes the services that the Contractor will perform and the fees which Company will
pay in return’” and that Exhibit A, which contains the “Description of Work,” contemplated
completion of software integration for the project. (Id.). In Lam’s view, Cignex did not complete
the project and, thus, Lam is not required to pay Cignex. Cignex, on the other hand, asserts that
the agreement is a time and materials contract under which it would be paid for labor and expenses
incurred during the project. Cignex points to provisions in the Statement of Work and to the
parties’ course of dealing to support its argument.

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In addressing issues of contract interpretation, the Court must “give effect to the plainmeaning of [a] contract’s terms and provisions.” LCY Chemical Corp. v. Kraton Performance
Polymers, Inc., No. 14-1279 (GMS), 2015 WL 4486783, at *2 (D. Del. July 23, 2015) (quoting
Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159-60 (Del. 2010)). If contractual language “is
plain and clear on its face, i.e., it[] . . . conveys an unmistakable meaning, the writing itself is the
sole source for gaining an understanding of intent.” Choupak v. Rivkin, No. 7000 VCL, 2015 WL
1589610, at *18 (Del. Ch. Apr. 6, 2015) (quoting City Investing Co. Liquid. Tr. v. Cont’l Cas. Co.,
624 A.2d 1191, 1198 (Del. 1993)). If, however, the terms are ambiguous, extrinsic evidence may
be considered to determine the parties’ intentions. See AT&T Corp. v. Lillis, 953 A.2d 241, 253
(Del. 2008). Ambiguity exists “when the provisions in controversy are reasonably or fairly
susceptible of different interpretations or may have two or more different meanings.” Markow v.
Synageva Biopharma Corp., No. N15C-06-152 WCC, 2016 WL 1613419, at *5 (Del. Super. Ct.
Mar. 3, 2016) (internal quotations omitted). When provisions of a contract are ambiguous, “factual
issues requiring consideration of extrinsic evidence to determine the intended meaning of the
provision in light of the expectations of the contracting parties” preclude summary judgment.
Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1229 (Del. 1997).
Here, the contract terms are ambiguous and factual issues preclude the grant of summary
judgment. Indeed, as the parties have pointed out, there are references to both time and materials
and suggestions of completion of the project in the various documents. Moreover, the extrinsic
evidence, including testimony from the parties’ representatives and the course of conduct between
the parties raises issues of fact as the parties’ expectations.

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B.

Charge for Alfresco Subscription

Cignex’s claim for $434,096.71 includes a $58,000 charge for a subscription for Alfresco
software. (D.I. 75-1 at App 230). Lam asserts that Cignex has not proven breach for failure to
pay the Alfresco charge. In its Answering Brief (D.I. 77), Cignex offers no response – and in fact
never mentions Alfresco. The undisputed evidence before the Court is that Cignex is not a party
to the licensing agreement between Alfresco and Lam (D.I. 75-1 at App 280-283) and that Lam
was not obligated to pay Cignex for Alfresco. Moreover, there is no evidence that Cignex paid
the $58,000 despite invoicing that amount to Lam. Based on these undisputed facts, the Court will
grant Lam’s request for summary judgment that Cignex cannot recover the $58,000 based on the
alleged Alfresco license fee.
An appropriate Order will follow.

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