VCA Cenvet, Inc. v. Village Veterinary Centers, Inc. et al

Filing 26

ORDER denying 15 Motion for Partial Summary Judgment. Signed by Judge William S. Duffey, Jr. on 8/31/12. (jdb)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
VCA CENVET, INC.,
Plaintiff,
v.

1:11-cv-3119-WSD

VILLAGE VETERINARY
CENTERS, INC. n/k/a THE
VILLAGE VETS DECATUR, INC.,
and THE VILLAGE VETS
LILBURN-STONE MOUNTAIN,
INC.,
Defendants.

OPINION AND ORDER
This matter is before the Court on Village Veterinary Centers, Inc. n/k/a The
Village Vets Decatur, Inc. (“TVV-Decatur”) and The Village Vets Lilburn-Stone
Mountain, Inc.’s (“TVV-Lilburn,” collectively “Defendants”) Motion for Partial
Summary Judgment [15].1

1

Defendants have moved to dismiss this action on the ground that Plaintiff is not
the real party in interest and, alternatively, seek summary judgment on the breach
of contract claim in Plaintiff’s Complaint. Because the Complaint alleges a single
breach of contract claim on which Defendants seek summary judgment, it is a
misnomer to state their motion as one for “partial” summary judgment.

I.

BACKGROUND
On July 9, 2010, Defendants entered into a Lab Services Agreement (the

“Agreement”) with “VCA Professional Animal Laboratories, Inc., a California
corporation (d/b/a Antech Diagnostics) [(“VCA PAL”)].”2 (Ex. A to Aff. of
William R. Draper, Jr., DVM (the “Agreement”) at 1). The Agreement provided
that Defendants would “cause all veterinary diagnostic and clinical laboratory
services (“Laboratory Services”) that are to be performed for and on behalf of
[Defendants’] Animal Hospital(s), to be performed by a veterinary diagnostic
laboratory owned by Antech (an “Antech Lab”).”3 (Id. ¶ 1.1) (emphasis omitted).
The term of the Agreement was for eighty-four (84) months. (Id. at 1). The

2

VCA PAL is a company that provides veterinary laboratory services in the
western United States. VCA Cenvet, Inc. (“VCA Cenvet” or “Plaintiff”) is a
company that provides veterinary laboratory services in the eastern United States.
Both VCA PAL and VCA Cenvet conduct business using, in some form, the
common name of Antech. Because VCA PAL and VCA Cenvet both have done
business using the Antech name and the parties’ references to Antech do not
consistently distinguish between VCA PAL and VCA Cenvet, to avoid confusion,
the Court will refer to VCA PAL and VCA Cenvet, rather than Antech.
3
Defendants could: (1) use other laboratories provided the fees paid to other
laboratories did not exceed 10% of all fees paid to VCA PAL; (2) use other
laboratories “to perform any services that a Antech Lab cannot perform;” and, (3)
“use laboratory equipment owned by [Defendants] and located at the Animal
Hospital premises.” (Agreement ¶¶ 1.1.1-1.1.3).
2

Agreement included a requirement that Defendants pay a Minimum Average
Annual Fee:
[Defendants] are required to utilize [VCA PAL] to provide
Laboratory Services (defined below) required by Animal
Hospital(s) in an amount equal to an average of $114,000 per
year during the Term (the “Minimum Average Annual Fee”),
in accordance with the provisions of Section 1 below.
Notwithstanding the foregoing, the obligations of [Defendants]
with respect to the Minimum Annual Average Fee may be met so
long as the amount paid by [Defendants] to [VCA PAL] for
Laboratory Services ordered during the Term hereof is at least
$798,000.
(Id.).
Defendants also obtained a $108,000 loan (the “Loan”) as part of the
Agreement. (Id.). While Defendants were required to make annual payments on
the Loan during the term of the Agreement, the annual loan payments were
forgiven so long as Defendants complied with certain conditions under the
Agreement, such as purchasing a minimum level of laboratory services from VCA
PAL. (Id. ¶ 3.2). Defendants also received, as part of the Agreement, $76,200 in
funds from VCA PAL to pay for certain laboratory equipment. (Ex. C to Aff. of
William R. Draper, Jr., DVM at 2).
Defendants were considered to be in default on the Loan if they failed to: (1)
make their annual loan payments; (2) comply with the requirement to cause all
veterinary services to be performed by VCA PAL’s laboratories; or, (3) timely pay
3

invoices for laboratory services. (Agreement ¶ 3.3). In the event of default, the
Agreement defined the amounts due and payable by Defendants to VCA PAL.
(Id.).
Section 5 of the Agreement defined the circumstances for termination of the
Agreement by the parties before the agreed expiration date. (Id. ¶ 5). The
Agreement allowed VCA PAL to terminate the Agreement with thirty (30) days
notice if Defendants defaulted on the Loan or were otherwise in material breach of
the terms and provisions of the Agreement. (Id.). Defendants also were permitted
to terminate the Agreement with thirty (30) days notice if VCA PAL: “(i) fails to
deliver the Laboratory Services in a reasonably prompt manner, (ii) the Laboratory
Services are rendered poorly or lack quality in [Defendants’] reasonable judgment,
or (iii) [VCA PAL] otherwise materially breaches this Agreement.” (Id.).
The Agreement provided that Defendants were required to “provide written
notice to [VCA PAL] setting forth its concern in reasonable detail” in the event
they were “not satisfied with the quality of Laboratory Services provided by an
Antech Lab.” (Id. ¶ 1.2). VCA PAL was allowed the opportunity to remedy any
of the concerns stated. (Id.). If the remedial action taken by VCA PAL was not
satisfactory to Defendants, the parties agreed to submit the issue “for binding
arbitration to the Atlanta office of the American Arbitration Association, or to an

4

equivalent arbitrator located in the Atlanta metropolitan area which is mutually
acceptable to both parties.” (Id.).
In the event of a termination by Defendants under the Agreement,
Defendants were required to pay “all outstanding (and prorated, as applicable)
principal of the Loan and accumulated interest thereon within sixty (60) days of
such written notice (not including previously forgiven or discharged principal and
interest).” (Id. ¶ 5).
The Agreement further provided that:
[VCA PAL] may not assign this Agreement without the prior
consent of [Defendants], not to be unreasonably withheld,
conditioned, or delayed. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and assigns. No provision of this Agreement may be
waived unless in writing signed by all of the parties to this
Agreement, and the waiver of any one provision of this
Agreement shall not be deemed to be a waiver of any other
provision. This Agreement may be amended only by a written
agreement executed by all of the parties to this Agreement. This
Agreement shall be governed by and construed both as to validity
and performance and enforced in accordance with the laws of the
State of California without giving effect to the choice of law
principles thereof.
(Id. ¶ 8).
On June 13, 2011, Defendants sent a letter to VCA PAL which stated:
Thank you for providing [Defendants] with laboratory services
pursuant to the Agreement. Pursuant to Section 5 of the
Agreement, by this written notice, [Defendants] hereby elect to
5

terminate the Agreement. Thirty (30) days following the date of
this notice, the Agreement will no longer be effective. We will
remit the unamortized portion of the Loan (as defined in the
Agreement) and the unamortized portion of certain other
concessions provided by [VCA PAL] pursuant to the Agreement
no later than sixty (60) days following the date of this notice.
(Ex. B to Aff. of William R. Draper, Jr., DVM).
On July 7, 2011, Defendants sent VCA PAL a check in the amount of
$211,770, which they asserted was the unamortized portion of the Loan and the
unamortized portion of certain other concessions previously provided by VCA
PAL pursuant to the Agreement. (Ex. C to Aff. of William R. Draper, Jr., DVM at
1). Defendants claimed that:
This payment reflects the total liability due from [Defendants] to
[VCA PAL] under this Agreement as a result of the termination
of the Agreement prior to the completion of its term. No further
obligation or payment is or shall be due from [Defendants] to
[VCA PAL] following the Termination Date [of July 13, 2011].
Deposit of, negotiation, or otherwise obtaining the funds
represented by the check enclosed with this letter shall be
deemed to be [VCA PAL]’s acceptance of the termination of the
Agreement as of the Termination Date and acknowledgement
that no further liability or monies shall be owed by [Defendants]
to [VCA PAL].
(Id.).
VCA PAL never deposited, negotiated, or otherwise obtained the funds
represented by Defendants’ check. (Pl.’s Statement of Additional Facts ¶ 22).

6

On September 14, 2011, VCA Cenvet filed this action for damages resulting
from Defendants alleged breach of the Agreement. VCA Cenvet is a whollyowned subsidiary of VCA PAL. (Decl. of Michael Wayne Everett (“Everett
Decl.”) ¶ 6). In its Complaint, VCA Cenvet claims that VCA PAL assigned the
Agreement to it. (Compl. ¶ 6).
On October 4, 2011, Defendants filed their Answers to VCA Cenvet’s
Complaint. Defendants assert that “[t]here has not been a valid assignment of the
contract to Plaintiff;” Plaintiff “has failed to obtain the consent of [Defendants] to
the assignment;” and, Defendants did not consent to any assignment of the
Agreement to VCA Cenvet. (Defs.’ Answers at 1-2). Defendants further allege, as
a defense, that the Laboratory Services provided to them under the Agreement
were not performed in a quality manner. (Id. at 2).
On November 21, 2011, Defendants filed their Motion for Partial Summary
Judgment. Defendants assert that:
(1) Plaintiff VCA Cenvet, Inc. is not the real party in interest and
did not obtain a valid assignment of the July 9, 2010 Lab
Services Agreement at issue in the case or any purported cause of
action related to a purported breach of the Agreement; and (2) No
matter who the real party in interest is, even assuming for
argument’s sake that Defendants breached the contract (which is
denied), the total amount of damages Plaintiff (or the party in real
interest) can recover are limited by the express terms of the
parties’ agreement.

7

(Defs.’ Mot. for Partial Summ. J. at 1-2). In Defendants’ Statement of Undisputed
Facts, they assert that VCA PAL “never obtained the consent of [Defendants] to
the assignment of the Agreement or any cause of action related to it.” (Defs.’
Statement of Undisputed Facts (“DSUF”) ¶ 6).
Plaintiff admits that, prior to its Complaint being filed, it did not notify
Defendants of a transfer or assignment of the Agreement to VCA Cenvet from
VCA PAL. (Pl.’s Opp’n to Defs.’ Mot. for Summ. J. at 9; Pl.’s Resp. to DSUF
¶ 6). Plaintiff also admits that VCA PAL did not obtain Defendants’ consent to an
assignment of the Agreement or any cause of action based on it. (Id.). Plaintiff
claims there was a “transfer” of the Agreement to VCA Cenvet from VCA PAL
because:
After the Agreement was executed, [VCA PAL] management
realized that, for a Georgia customer, Cenvet should have been
the contracting party instead of PAL. Thus, the Agreement was
transferred from PAL to Cenvet. There is no formal agreement
memorializing this transfer because it is simply an intra-company
transfer between a parent and subsidiary, and both companies are
under the common ownership of VCA.
(Pl.’s Opp’n to Defs.’ Mot. for Summ. J. at 9; Everett Decl. ¶ 7).
Plaintiff asserts that any intra-company transfer it made was valid and
effective to transfer rights under the Agreement because “[u]nder California law,
an anti-assignment clause will not bar an assignee from enforcing an assignment if

8

the assignment merely reflects a change in the assignor’s legal structure which
does not prejudice the other party.” (Pl.’s Opp’n to Defs.’ Mot. for Summ. J. at
11). Plaintiff claims this “intra-company transfer” constituted an assignment of
rights under the Agreement from VCA PAL to VCA Cenvet—giving it a right to
bring this action.4 (Id. at 2, 10-11, 13-14; Everett Decl. ¶ 7).
Defendants contend that they were entitled to terminate the Agreement
based on their independent determination that VCA PAL’s services were poor or
lacked quality, that the only monies owed upon such termination were the amounts
specified in the Agreement, and, in any event, “Plaintiff is not the proper party to
recover the damages.” (Defs.’ Reply in Supp. of Mot. for Summ. J. at 2-12).
II.

DISCUSSION
A.

Defendants’ challenge to Plaintiff’s standing to bring this action

The threshold question before the Court is whether Plaintiff has standing to
bring this action and, thus, whether the Court has jurisdiction over the claims
asserted. VCA Cenvet’s claims are based upon the Agreement that Defendants
entered into with VCA PAL. Defendants have challenged VCA Cenvet’s standing
to assert its breach of contract claim because it is not a party to the Agreement.

4

Plaintiff has not provided any evidence of the assignment beyond the conclusory
statement contained in an affidavit by VCA’s Vice President and Co-General
Counsel. (Everett Decl. ¶ 7).
9

Defendants further assert that the Agreement was not validly assigned from VCA
PAL to VCA Cenvet because the Agreement requires Defendants’ consent to any
assignment, and consent here was not obtained prior to VCA Cenvet filing its
Complaint.
VCA Cenvet asserts that, based on the corporate relationship between VCA
PAL and VCA Cenvet, Plaintiff was not, under California law, required to comply
with the consent to assignment clause in the Agreement. VCA Cenvet claims that
the Agreement was assigned at some point from VCA PAL to VCA Cenvet, and
that, based on this transfer, VCA Cenvet became the real party in interest to the
Agreement with standing to assert its breach of contract claims against Defendants.
The Court must first address the standing and related real party in interest issues.
B.

Standing and real party in interest requirements

The doctrines of standing and real party in interest are distinct, both of
which here bear on “who possesses a sufficient interest in the action to be entitled
to be heard on the merits.” 6A Charles Alan Wright, Arthur R. Miller, & Mary
Kay Kane, Federal Practice and Procedure § 1542 (3d ed. 2012) (hereinafter,
“Wright & Miller”); see also Whelan v. Abell, 953 F.2d 663, 672 (D.C. Cir. 1992)
(“Standing and real-party-in-interest questions do overlap to the extent that both
ask whether the plaintiff has a personal interest in the controversy.”). A plaintiff in

10

federal court is required to have standing and must be the real party in interest. 6A
Wright & Miller § 1542.
Article III of the Constitution requires a plaintiff suing in federal court to
have standing to assert its claims. Sprint Commc’ns Co. v. APCC Servs., Inc., 554
U.S. 269, 273 (2008). To have Article III standing, a plaintiff must establish: (1)
an injury in fact; (2) causation, or a fairly traceable connection between the injury
and the defendant’s conduct; and (3) redressability. Id. (citing Lujan v. Defenders
of Wildlife, 504 U.S. 555, 560-61 (1992)). Article III standing “must be
determined as of the time at which the plaintiff’s complaint is filed.” Focus on the
Family v. Pinellas Suncoast Transit Auth., 344 F.3d 1263, 1275 (11th Cir. 2003);
see Utah Ass’n of Cntys. v. Bush, 455 F.3d 1094, 1101 & n.6 (10th Cir. 2006)
(alleged injury could not serve as basis for standing where it occurred after
amended complaint had been filed).
“The party invoking federal jurisdiction bears the burden of proving
standing.” See Common Cause/Georgia v. Billups, 554 F.3d 1340, 1349 (11th Cir.
2009) (quoting Bischoff v. Osceola Cnty., Fla., 222 F.3d 874, 878 (11th Cir.
2000)). A court must carefully conduct the standing inquiry and “should not
speculate concerning the existence of standing” because it lacks “the power to
create jurisdiction by embellishing a deficient allegation of injury.” See

11

Hollywood Mobile Estates Ltd. v. Seminole Tribe of Fla., 641 F.3d 1259, 1265
(11th Cir. 2011) (citing Allen v. Wright, 468 U.S. 737, 752 (1984); DiMaio v.
Democratic Nat’l Comm., 520 F.3d 1299, 1301 (11th Cir. 2008), and quoting
Elend v. Basham, 471 F.3d 1199, 1206 (11th Cir. 2006)). “If at any point in the
litigation the plaintiff ceases to meet all three requirements for constitutional
standing, the case no longer presents a live case or controversy, and the federal
court must dismiss the case for lack of subject matter jurisdiction.” Fla. Wildlife
Fed’n, Inc. v. S. Fla. Water Mgmt. Dist., 647 F.3d 1296, 1302 (11th Cir. 2011).
The real party in interest requirement comes from the Federal Rules of Civil
Procedure, which state that “[a]n action must be prosecuted in the name of the real
party in interest.” Fed. R. Civ. P. 17(a)(1).5 “In other words, the action must be
brought by the person entitled under the governing substantive law to enforce the
asserted right.” Whelan, 953 F.2d at 672. Unlike standing, an objection that a
plaintiff is not the real party in interest may be waived and should be asserted by
the objecting party reasonably promptly. See id.6
5

Several courts have observed that Rule 17’s real party in interest requirement is
essentially the same as the principle of prudential standing that a litigant cannot sue
in federal court to enforce the rights of third parties. See, e.g., Rawoof v. Texor
Petro. Co., 521 F.3d 750 (7th Cir. 2008).
6
The Court finds Defendants raised their objection reasonably promptly. Within
the first two months of this litigation, Defendants filed their Motion for Partial
Summary and asserted that “Plaintiff VCA Cenvet, Inc. is not the real party in
12

In lawsuits involving private rights, the standing analysis is usually
subsumed within the overlapping real party in interest issue. Whelan, 953 F.2d at
672. “The modern function of the [real party in interest rule] . . . is simply to
protect the defendant against a subsequent action by the party entitled to recovery,
and to ensure generally that the judgment will have its proper effect as res
judicata.” Fed. Deposit Ins. Corp. v. Main Hurdman, 655 F. Supp. 259, 267 (E.D.
Cal. 1987) (citing Advisory Committee Notes to 1966 Amendment to Fed. R. Civ.
P. 17). A failure to have an interest in the litigation at the time of filing a
complaint generally equates to a lack of standing. See Focus on the Family, 344
F.3d at 1275. Federal Rule of Civil Procedure 17’s real party in interest
requirement, which, in part, promotes judicial economy, allows “that even when
[a] claim is not assigned until after the action is instituted, the assignee is the real
party in interest and can maintain the action.” See Infodek, Inc. v. Meredith-Webb
Printing Co., 830 F. Supp. 614, 620-21 (N.D. Ga. 1993) (citing cases); see also
Main Hurdman, 655 F. Supp. at 267 (citing 6C Wright & Miller § 1545). Where
an assignment is alleged, “the court must assure itself that a valid assignment has

interest and did not obtain a valid assignment of the July 9, 2010 Lab Services
Agreement at issue in the case or any purported cause of action related to a
purported breach of the Agreement.” (Defs.’ Mot. for Partial Summ. J. at 1).
13

been made.” Main Hurdman, 655 F. Supp. at 267 (quoting 6C Wright & Miller
§ 1545).
Thus,
[i]n an action involving an assignment, the court typically must
consider two issues. First, it must determine exactly what has
been assigned to make certain that the plaintiff-assignee is the
real party in interest with regard to the particular claim involved
in the action. . . . Second, the court must assure itself that a valid
assignment has been made.
6A Wright & Miller § 1545.
C.

Validity of assignments and enforceability of consent to assignment
clauses under California law

“An assignment is a ‘transfer or setting over of property, or of some right or
interest therein, from one person to another . . . .’” Noble v. Draper, 73 Cal. Rptr.
3d 3, 12 (Cal. Dist. Ct. App. 2008) (quoting Ballentine’s Law Dictionary (3d ed.
1969)).
An assignment requires very little by way of formalities and is
essentially free from substantive restrictions. “[I]n the absence of
[a] statute or a contract provision to the contrary, there are no
prescribed formalities that must be observed to make an effective
assignment. It is sufficient if the assignor has, in some fashion,
manifested an intention to make a present transfer of his rights to
the assignee.” Generally, interests may be assigned orally, and
assignments need not be supported by any consideration.
Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court, 209 P.3d
937, 943 (Cal. 2009) (internal citation omitted).
14

“In determining whether an assignment has been made, ‘the intention of the
parties as manifested in the instrument is controlling.’” Cal. Ins. Guar. Ass’n v.
Workers’ Comp. Appeals Bd., 138 Cal. Rptr. 3d 24, 28 (Cal. Dist. Ct. App. 2012)
(quoting Nat’l Reserve Co. of Am. v. Metro. Trust Co. of Cal., 112 P.2d 598, 602
(Cal. 1941)). “If from the entire transaction and the conduct of the parties it clearly
appears that the intent of the parties was to pass title to the [property], then an
assignment will be held to have taken place.” Recorded Picture Co. v. Nelson
Entm’t, Inc., 61 Cal. Rptr. 2d 742, 753 (Cal. Dist. Ct. App. 1997) (quoting
McCown v. Spencer, 87 Cal. Rptr. 213, 219 (Cal. Dist. Ct. App. 1970)). “A
complete assignment passes legal title to the assignee who is the real party in
interest and may sue in his or her real name.” Cal. Ins. Guar. Ass’n, 138 Cal. Rptr.
3d at 28.
Consent to assignment clauses generally are valid and enforceable under
California law, with some exceptions. See Henkel Corp. v. Hartford Accident &
Indem. Co., 62 P.3d 69, 74-75 (Cal. 2003). Consent to assignment clauses do not
apply to assignments between corporate entities where there is common ownership
of “all the corporate stock” of the assignor and assignee corporation, and where the
assignment does not affect the interests of the parties protected by the consent to
assignment clause. See State v. McNamara Corp. Ltd., 104 Cal. Rptr. 822, 826

15

(Cal. Dist. Ct. App. 1972); Sexton v. Nelson, 39 Cal. Rptr. 407, 413 (Cal. Dist. Ct.
App. 1964) (“Where a transfer results merely from a change in the legal form of a
business and does not affect the interests of the party protected by the
nonassignable provisions of the lease, a breach of that provision does not occur.”).
California law also permits a party to transfer rights in a cause of action for breach
of contract to another party without regard to a consent to assignment clause. See
Henkel, 62 P.3d at 75; Baum v. Duckor, Spradling & Metzger, 84 Cal. Rptr. 2d
703, 708-09 (Cal. Dist. Ct. App. 1999); Balfour, Guthrie & Co. v. Hansen, 38 Cal.
Rptr. 525, 534 (Cal. Dist. Ct. App. 1964).
The parties have filed supplemental briefings regarding the enforceability of
the consent to assignment clause in the Agreement under California law [24, 25].
It is undisputed that VCA Cenvet is a wholly-owned subsidiary of VCA PAL and
that both VCA Cenvet and VCA PAL are under the overall common ownership of
VCA Antech, Inc. (Everett Decl. ¶¶ 3-6). The Court thus now considers, under
the circumstances here, if Plaintiff is the real party in interest with standing to
prosecute this action.
Plaintiff and its counsel have represented to the Court that, in light of an
error in naming the contracting party in the Agreement, VCA PAL assigned the
Agreement and VCA PAL’s rights and obligations under it to Plaintiff. Under

16

California law, this transfer between corporate entities with common ownership is
enforceable, even if done informally as it appears to have been done here. See
Amalgamated Transit Union, 209 P.3d at 943; McNamara Corp. Ltd., 104 Cal.
Rptr. at 826; Sexton, 39 Cal. Rptr. at 413.7 Under California law, this assignment
was allowed to be made without Defendants’ consent under the consent to
assignment clause in the Agreement. See id. The Court is satisfied that Plaintiff is
the real party in interest with standing to bring its claims.8
D.

Summary judgment standard

A 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.” Fed. R. Civ. P. 56(a). Parties “asserting that a fact cannot be or is
7

Plaintiff claims:
After the Agreement was executed, [VCA PAL] management
realized that, for a Georgia customer, Cenvet should have been
the contracting party instead of PAL. Thus, the Agreement was
transferred from PAL to Cenvet. There is no formal agreement
memorializing this transfer because it is simply an intra-company
transfer between a parent and subsidiary, and both companies are
under the common ownership of VCA.

(Pl.’s Opp’n to Defs.’ Mot. for Summ. J. at 9; Everett Decl. ¶ 7).
8
The Court notes, however, that if Defendants discover evidence that is
inconsistent with the Court’s finding that the Agreement was assigned to VCA
Cenvet in the manner allowed by California law, Defendants should promptly
bring such evidence to the Court’s attention so that it may reconsider if it has
jurisdiction over the claims asserted in this matter.
17

genuinely disputed must support that assertion 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.” Fed. R. Civ. P. 56(c)(1).
The party seeking summary judgment bears the burden of demonstrating the
absence of a genuine dispute as to any material fact. Herzog v. Castle Rock
Entm’t, 193 F.3d 1241, 1246 (11th Cir. 1999). Once the moving party has met this
burden, the non-movant must demonstrate that summary judgment is inappropriate
by designating specific facts showing a genuine issue for trial. Graham v. State
Farm Mut. Ins. Co., 193 F.3d 1274, 1282 (11th Cir. 1999). Non-moving parties
“need not present evidence in a form necessary for admission at trial; however,
[they] may not merely rest on [their] pleadings.” Id.
The Court must view all evidence in the light most favorable to the party
opposing the motion and must draw all inferences in favor of the non-movant, but
only “to the extent supportable by the record.” Garczynski v. Bradshaw, 573 F.3d
1158, 1165 (11th Cir. 2009) (quoting Scott v. Harris, 550 U.S. 372, 381 n.8
(2007)). “[C]redibility determinations, the weighing of evidence, and the drawing
of inferences from the facts are the function of the jury . . . .” Graham, 193 F.3d at

18

1282. “If the record presents factual issues, the court must not decide them; it must
deny the motion and proceed to trial.” Herzog, 193 F.3d at 1246. But, “[w]here
the record taken as a whole could not lead a rational trier of fact to find for the
non-moving party,” summary judgment for the moving party is proper. Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
E.

Whether Defendants validly terminated the Agreement

The law of contract interpretation in California is well established:
‘Under statutory rules of contract interpretation, the mutual
intention of the parties at the time the contract is formed governs
interpretation. Such intent is to be inferred, if possible, solely
from the written provisions of the contract. The “clear and
explicit” meaning of these provisions, interpreted in their
“ordinary and popular sense,” . . . controls judicial interpretation.
. . . [L]anguage in a contract must be interpreted as a whole, and
in the circumstances of the case, and cannot be found to be
ambiguous in the abstract. Courts will not strain to create an
ambiguity where none exists. Interpretation of a contract “must
be fair and reasonable, not leading to absurd conclusions.”
ASP Properties Grp. v. Fard, Inc., 35 Cal. Rptr. 3d 343, 351 (Cal. Dist. Ct. App.
2005) (internal citation omitted); see also People ex rel. Lockyer v. R.J. Reynolds
Tobacco Co., 132 Cal. Rptr. 2d 151, 158-59 (Cal. Dist. Ct. App. 2003).
Defendants claim they validly terminated the Agreement under paragraph 5
when they gave notice on June 13, 2011, that VCA PAL’s services were
terminated and when, under a letter dated July 7, 2011, Defendants tendered a

19

check in the amount of $211,770 pursuant to paragraph 3.3 of the Agreement. The
Court disagrees.
Defendants’ June 13, and July 7, 2011, letters are the writings by which
Defendants claim to have terminated the Agreement. In these letters, Defendants
advised VCA PAL that the Agreement was being terminated without reason. The
July 7, 2011, letter asserts that Defendants obligations under the Agreement are
satisfied by complying with the Loan default obligations set out in paragraph 3.3 of
the Agreement.
In their Motion for Partial Summary Judgment submitted to the Court,
Defendants now claim that the Agreement was terminated because of the
inadequate lab services performed for Defendants under the Agreement. (Aff. of
William R. Draper, Jr., DVM ¶ 10). In response, Plaintiff submits the declaration
of Richard Roskell, who states Defendants’ termination of the Agreement followed
remarks by Defendants’ president, Dr. William R. Draper, about his dissatisfaction
with services and with the negotiations over services to be provided for a new
location for Draper’s business in Atlanta. (Decl. of Richard Roskell ¶ 8). The
record evidence regarding the basis for Defendants’ termination of the Agreement
is disputed or at least uncertain. But even if the termination basis was Defendants’

20

dissatisfaction with the quality of the services rendered, Defendants did not comply
with the terms of the Agreement relating to termination.
The Court is required to determine the intention of the parties based on the
terms of the Agreement. See ASP Properties Grp., 35 Cal. Rptr. 3d at 351. The
intention of the parties is evident and unambiguous here. If Defendants believed
that the Laboratory Services provided to it pursuant to the Agreement were
substandard—as they now contend—the Agreement required Defendants to
“provide written notice . . . setting forth its concerns in reasonable detail” to allow
the provider of the services to “make any necessary changes with respect to its
provision of Laboratory Services.” (Agreement ¶ 1.2). If Defendants were
dissatisfied with the response, the parties agreed to arbitrate the dispute. (Id.). The
intent of the parties was first to try to resolve cooperatively and without litigation
any disputes about quality of laboratory services. Defendants failed in all respects
to comply with these obligations, and prerequisites, to claiming the right to
terminate the Agreement.
Defendants appear to claim that paragraph 5 of the Agreement allows them
to avoid compliance with paragraph 1.2 of the Agreement because paragraph 5
provides that:
In the event that [VCA PAL] (i) fails to deliver the Laboratory
Services in a reasonably prompt manner, (ii) [sic] the Laboratory
21

Services are rendered poorly or lack quality in [Defendants’]
reasonable judgment, or (iii) [VCA PAL] otherwise materially
breaches this Agreement, then the [Defendants] may, with thirty
(30) days’ advance written notice, terminate this Agreement.
(Id. ¶ 5). If Defendants terminated the Agreement, they were required to repay “all
outstanding (and prorated, as applicable) principal of the Loan and accumulated
interest.” (Id.). Defendants apparently contend that they may unilaterally
terminate the Agreement if “the Laboratory Services are rendered poorly or lack
quality in [their] reasonable judgment,” despite the process described in paragraph
1.2. (Id.).
The Court acknowledges the similar language in paragraphs 1.2 and 5.
Defendants’ reasoning that paragraph 5 gives to them the unilateral right to
terminate if “Laboratory Services are rendered poorly or lack quality” would
render meaningless paragraph 1.2’s notice and arbitration provision. (Id.). To
accept Defendants’ interpretation of the Agreement violates the principle of
contract interpretation that terms should be read to give meaning and effect to the
intent of the parties. See ASP Properties Grp., 35 Cal. Rptr. 3d at 351. The notice
and arbitration provision of paragraph 1.2 and termination provision of paragraph 5
are consistent and set out a process that gives effect to the parties’ intent.
Paragraph 1.2 obligates the parties to try to resolve any quality of services
disputes by offering VCA PAL the chance to remedy Defendants’ expressed
22

concerns about the quality of the Laboratory Services delivered. If VCA PAL does
not satisfactorily respond, Defendants are required to submit to arbitration the
claim that the services rendered were inferior. If the arbitrators find that the
Laboratory Services are substandard, then Defendants may terminate the
Agreement pursuant to paragraph 5.9
The Court thus finds that Defendants do not have a sufficient basis to
terminate the Agreement and for this reason Defendants’ request for summary
judgment that the Agreement was validly terminated is required to be denied.
F.

Whether the Agreement limits Defendants’ liability in the event of a
breach

Defendants next argue that even if they breached the Agreement, paragraphs
3.3 and 5 together provided a limitation of liability, and that Defendants have
tendered the damages required.
Unless unconscionable or otherwise contrary to public policy, “limitation of
liability provisions have long been recognized as valid in California.”
Markborough Cal., Inc. v. Superior Court, 277 Cal. Rptr. 919, 925 (Cal. Dist. Ct.

9

Admittedly, the Agreement is not carefully drafted. For example, paragraph 1.2
provides: “Any issues shall be submitted the issue for binding arbitration.”
(Agreement ¶ 1.2). It appears “the issue” is conclusorily redundant. Paragraph 5
provides: “In the event that [VCA PAL] . . . (ii) the Laboratory Services are
rendered poorly or lack quality.” (Id. ¶ 5). It appears that paragraph 5 intends to
mean “(ii) renders Laboratory Services that are of poor quality or lack quality.”
23

App. 1991). “[N]o public policy opposes private, voluntary transactions in which
one party, for a consideration, agrees to shoulder a risk which the law would
otherwise have placed upon the other party.” Tunkl v. Regents of Univ. of Cal.,
383 P.2d 441, 446 (Cal. 1963).
Parties may contract to limit damages in the event of certain occurrences.
See Farnham v. Superior Court (Sequoia Holdings, Inc.), 70 Cal. Rptr. 2d 85, 90
(Cal. Dist. Ct. App. 1997); Morris v. Chevrolet Motor Div. of Gen. Motors Corp.,
114 Cal. Rptr. 747, 752 (Cal. Dist. Ct. 1974) (unpublished). Where an agreement
provides for a limitation of damages upon termination or a default on a loan, a
claim by the non-defaulting or non-terminating party for lost profits or
consequential damages is not per se barred by the agreement. See Whittlestone,
Inc. v. Handi-Craft Co., 618 F.3d 970, 975 n.2 (9th Cir. 2010).
Paragraph 3.3 of the Agreement addresses circumstances where Defendants
are deemed to be in default on the Loan. It does not apply to an alleged breach as
claimed here by Plaintiff.
Paragraph 5 addresses circumstances where either party may terminate the
Agreement and provides:
. . . In the event that [VCA PAL] (i) fails to deliver the
Laboratory Services in a reasonably prompt manner, (ii) the
Laboratory Services are rendered poorly or lack quality in
[Defendants’] reasonable judgment, or (iii) [VCA PAL]
24

otherwise materially breaches this Agreement, then the
[Defendants] may, with thirty (30) days’ advance written notice,
terminate this Agreement; provided, however, that the
[Defendants] shall in any case pay [VCA PAL] all outstanding
(and prorated, as applicable) principal of the Loan and
accumulated interest thereon within sixty (60) days of such
written notice (not including previously forgiven or discharged
principal and interest).
(Agreement ¶ 5).
Interpreting the Agreement as a whole in the circumstances of this case,
there is no language or provision that limits the liability of the parties in the event
of a material breach or failure to perform. Paragraphs 3.3 and 5 are not, by their
clear and explicit terms, blanket limitations of liability that apply to any breach of
the Agreement, but only apply to Defendants’ default with respect to the Loan and
valid termination, respectively.10,11
10

The Court also notes that in the event VCA PAL elects to terminate the
Agreement pursuant to paragraph 5, there are no terms or provisions that calculate
or limit its possible recovery for Defendants’ “material breach of the terms and
provisions” of the Agreement. This is further support for concluding that the
Agreement only limited liability in the event Defendants defaulted on the Loan or
validly terminated the Agreement.
11
The Agreement further requires that Defendants satisfy the Minimum Average
Annual Fee of $114,000 per year during the seven-year Term of the Agreement, or
that the total amount of fees paid to VCA PAL during the Term be no less than
$798,000. While the Agreement defines the remedies available to VCA PAL the
event of default on the Loan by Defendants as “intended to compensate [VCA
PAL] for the Loan and concessions provided” by the Agreement and defines
Defendants obligations in the event they validly terminate, there is no provision in
the Agreement that limits VCA PAL’s recovery for lost profits and damages
25

The Court finds that there is no limitation of liability or liquidated damages
provision in the Agreement that applies to material breaches by either party and
Defendants’ liability to Plaintiff for any breach of the Agreement is a question of
fact to be determined at trial.
III.

CONCLUSION
For the foregoing reasons,
IT IS HEREBY ORDERED that Defendants’ Motion for Partial Summary

Judgment [15] is DENIED.

SO ORDERED this 31st day of August, 2012.

_________________________________________

WILLIAM S. DUFFEY, JR.
UNITED STATES DISTRICT JUDGE

should Defendants breach the Agreement’s terms, to include the requirement to
pay the Minimum Average Annual Fee. The Court finds this is further indication
that the parties intended that the remedies provided in paragraphs 3.3 and 5 were,
by their clear and explicit terms, to be limited to circumstances where Defendants
defaulted on the Loan or validly terminated the Agreement—and not, as
Defendants suggest, for any and all breaches of the Agreement.
26