Zunum Aero Inc v. The Boeing Company et al

Filing 601

ORDER: The Court GRANTS Boeing's motion for summary judgment (Dkt. # 336 ) on Zunum's claim for declaratory judgment and Boeing's counterclaims for breach of contract. Zunum's claim for declaratory judgment is DISMISSED with prejudice. Signed by Judge James L. Robart. (SS)

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

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ZUNUM AERO, INC.,

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v.

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ORDER

Plaintiff,

THE BOEING COMPANY, et al.,
Defendants.

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I.

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CASE NO. C21-0896JLR

INTRODUCTION

On April 22, 2024, the court issued an order granting in part, denying in part, and

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reserving ruling in part on Defendants / Counterclaimants The Boeing Company and

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Boeing HorizonX Ventures, LLC’s (together, “Boeing”) motion for summary judgment.

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(4/22/24 Order (Dkt. # 560); see Mot. (Dkt. ## 336 (sealed), 357 (redacted)); Resp. (Dkt.

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## 480 (redacted), 481 (sealed)); Reply (Dkt. ## 484 (sealed), 485 (redacted)).) The

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court requested additional briefing on Plaintiff / Counter-Defendant Zunum Aero, Inc.’s

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(“Zunum”) declaratory judgment claim (4/17/24 Order (Dkt. # 552); see Def. Supp. Br.
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(Dkt. # 555); Pl. Supp. Br. (Dkt. # 556)), and therefore reserved ruling on Boeing’s

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motion for summary judgment as to that claim and Boeing’s counterclaims for breach of

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contract, which concern the same subject matter. (4/22/24 Order at 21, 26.) The court

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has considered the motion and related briefing, the parties’ supplemental briefs, the

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relevant portions of the record, and the governing law. Being fully advised, 1 the court

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GRANTS the remainder of Boeing’s motion for summary judgment.
II.

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BACKGROUND

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The claims at issue concern the relationship between two note purchase

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agreements (“NPAs”) and two investment rights letters (“IRLs”). On March 17, 2017,

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Boeing loaned Zunum $5,000,000 dollars (the “2017 NPA”). (2017 NPA (Dkt.

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## 463-14 (cover page), 465-13 (sealed)).) Boeing loaned Zunum an additional

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$4,000,000 on May 1, 2018 (the “2018 NPA”). (2018 NPA (Dkt. ## 463-16 (cover

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page), 465-15 (sealed))). Each NPA was executed alongside an investment rights letter

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(the “2017 IRL” and “2018 IRL”). 2 The 2017 IRL and 2018 IRL were executed on

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March 17, 2017 and May 1, 2018, respectively, and they required Boeing “to keep

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confidential and not disclose, divulge, or use for any purpose (other than to manage its

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investment in [Zunum] . . .) any confidential information obtained from [Zunum].” (2017

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IRL at 26; 2018 IRL at 31.)

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Both parties request oral argument. (Pl. Supp. Br. at 1; Def. Supp. Br. at 1.) The court
concludes, however, that oral argument would not be helpful to its disposition of the remainder
of Boeing’s motion. See Local Rules W.D. Wash. LCR 7(b)(4).
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The IRLs are accessible via the same docket numbers as their corresponding NPAs.
The court references the CM/ECF headers when citing these documents.
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Zunum’s failure to repay the loans is undisputed. (See Resp. at 55-56.) Zunum

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seeks a declaration that its obligations under the NPAs have been extinguished, however,

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due to Boeing’s material breach of the IRLs or, alternatively, “supervening impossibility

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or impracticability of performance, and frustration of purpose.” (See 2d Am. Compl.

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(Dkt. # 60) ¶ 468.) Boeing, for its part, brings counterclaims for breach of contract based

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on Zunum’s failure to repay the notes. (Answer (Dkt. # 129) ¶¶ 30-48.)
III.

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ANALYSIS

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Boeing moves for summary judgment in its favor on Zunum’s declaratory

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judgment claim and its own breach of contract counterclaims. (See generally Mot.) As

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the court previously noted, these claims are governed by Delaware law. (4/22/24 Order

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at 20 n.6.) The court addresses the parties’ arguments below.

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A.

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Integration of IRLs and NPAs
Zunum argues that the IRLs and NPAs are “integrated,” meaning Boeing’s

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material breach of the IRLs would extinguish Zunum’s obligations to repay under the

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NPAs. (Pl. Supp. Br. at 2-3.) Zunum argues that each pair of agreements constitutes

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“one contract” because they were “signed on the same day by the same parties, with the

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former appended to the latter.” (Id. at 4.) Boeing asserts that Zunum “mistakes an

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‘interpretive tool’ for a wholesale combining of separate contracts,” which requires an

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“explicit manifestation of intent” that is absent from the NPAs and IRLs. (Def. Supp. Br.

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at 5 (first quoting Tulare Golf Course, LLC v. Vantage Tag, Inc., No.

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1:21-cv-00505-JLR-SKO, 2023 WL 2587994, at *6 (E.D. Cal. Mar. 21, 2023); and then

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quoting McDonald’s Corp. v. Easterbrook, No. 2020-0658-JRS, 2021 WL 351967, at *4

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(Del. Ch. Feb. 2, 2021)).) The court agrees with Boeing.

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Integration presents a question of contract construction, which “is a matter of law

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for the Court.” See Segovia v. Equities First Holdings, LLC, No. 06C-09-149-JRS, 2008

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WL 2251218, at *8 (Del. Ch. May 30, 2008); see also Huyler’s v. Ritz-Carlton Rest. &

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Hotel Co. of Atl. City, 1 F.2d 491, 492 (D. Del. 1924) (describing integration as “a rule of

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construction”). Although “several instruments relating to the same subject and executed

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at the same time should be construed together in order to ascertain the intention of the

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parties, it does not necessarily follow that those instruments constitute one contract or

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that one contract was accordingly merged in or unified with another so that every

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provision in one becomes a part of every other.” RWI Acquisition LLC v. Todd, No.

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6902-VCP, 2012 WL 1955279, at *8 n.51 (Del. Ch. May 30, 2012) (quoting 11 Williston

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on Contracts § 30:26 (4th ed. 2011)). Indeed, “considering several instruments as one is

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not the natural construction, and is resorted to only to effectuate the intention” of the

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parties. Huyler’s, 1 F.2d at 492; see also Thomas v. Del Biaggio, 527 B.R. 33, 42 (N.D.

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Cal. 2014) (interpreting Delaware law) (“[T]he intention of the parties determines

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whether two agreements will be construed as one integrated agreement.”).

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Under Delaware law, two agreements are considered separate instruments absent

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“an explicit manifestation of intent” to the contrary. Town of Cheswold v. Cent. Del. Bus.

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Park, 188 A.3d 810, 819 (Del. 2018) (quoting Wolfson v. Supermarkets Gen. Holdings

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JCorp., No. Civ.A. 17047, 2001 WL 85679, at *5 (Del. Ch. Jan. 23, 2001)). A “mere

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reference in one agreement to another agreement, without more, does not incorporate the
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latter agreement into the former by reference.” Id. (quoting Wolfson, 2001 WL 85679, at

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*5). More specifically, the “conditions” of one instrument do not become “part of”

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another “except to the extent that the same is specifically set forth or identified by

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reference.” State ex rel. Hirst v. Black, 83 A.2d 678, 681 (Del. Super. Ct. 1951) (citation

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omitted).

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Here, Boeing is correct that Zunum has not identified any express language clearly

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incorporating the confidentiality provisions of the IRLs into the NPAs. (See Def. Supp.

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Br. at 5. See generally Pl. Supp. Br.; Resp.; 2017 NPA; 2017 IRL; 2018 NPA; 2018

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IRL.) Indeed, Zunum does not identify any language in the NPAs referencing the IRLs.

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(See generally Pl. Supp. Br. See Resp. at 55-56.) The NPAs do not condition repayment

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upon Boeing’s compliance with the IRLs. (See generally 2017 NPA; 2017 IRL; 2018

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NPA; 2018 IRL.) Accord CBS Inc. v. McCrory, No. 86 C 4919, 1987 WL 17136, at *4

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(N.D. Ill. Sept. 15, 1987) (finding “no genuine issues of material fact” where a

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promissory note “contain[ed] only an unconditional promise to pay”). Instead, they

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provide that Zunum shall pay Boeing back the principal sum of each loan plus interest,

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period. (See 2017 NPA at 22; 2018 NPA at 24.)

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The “only Delaware case on point” Zunum cites (Pl. Supp. Br. at 6), Walgreen,

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Co. v. Theranos, Inc., No. 16-1040-RGA-MPT, 2017 WL 3189006 (D. Del. July 27,

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2017), does not warrant a different outcome. The question in that case was whether the

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plaintiff had standing to seek repayment of a promissory note that was purchased by its

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wholly-owned subsidiary, and the court concluded that it did because the “certificate

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evidencing the right to purchase the note . . . explicitly refer[red] to Paragraph 21 of”
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another agreement, which “allow[ed the plaintiff] to exercise its right to purchase the

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note.” 2017 WL 31896006, at *7. Zunum has not identified any portion of the NPAs

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referencing the IRLs, let alone their confidentiality provisions. (See generally Pl. Supp.

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Br.; Resp.) Moreover, it is not enough that the IRLs generally reference the NPAs. (See

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2017 IRL at 25; 2018 IRL at 30); see also Wolfson, 2001 WL 85679, at *5. The

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Delaware Supreme Court has made it clear that more is required. See Town of Cheswold,

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188 A.3d at 819.

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B.

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Impossibility, Impracticability, and Frustration
Zunum argues that, even if the IRLs and NPAs are not integrated, its obligations

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under the NPAs have been “extinguished by impossibility, impracticability, and/or

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frustration.” (Pl. Supp. Br. at 7.) Zunum cites no case law in support of this argument in

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either its response to Boeing’s motion for summary judgment or its supplemental brief.

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(See Resp. at 56. See generally Pl. Supp. Br.) Boeing argues that “[i]mpossibility

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originating in financial incapacity is no excuse.” (Reply at 21 (quoting Martin v. Star

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Pub. Co., 126 A.2d 238, 243 (Del. 1956)).) The court agrees with Boeing.

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“Under Delaware law, an impracticability/impossibility defense requires the

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showing of ‘(1) the occurrence of an event, the nonoccurrence of which was a basic

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assumption of the contract; (2) the continued performance is not commercially

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practicable; and (3) the party claiming impracticability did not expressly or impliedly

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agree to performance in spite of impracticability that would otherwise justify

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nonperformance.’” Bobcat N. Am., LLC v. Inland Waste Holdings, LLC, No.

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N17C-06-170 PRW CCLD, 2019 WL 1877400, at *9 (Del. Super. Ct. Apr. 26, 2019)
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(quoting Chase Manhattan Bank v. Iridium Afr. Corp., 474 F. Supp. 2d 613, 620 (D. Del.

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2007)). The defense does not apply if the supervening events were “reasonably

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foreseeable, and could and should have been anticipated by the parties and provision

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made therefor within the four corners of the agreement.’” Id. (quoting Williams Nat. Gas

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Co. v. Amoco Prod. Co., No. 11040, 1991 WL 58387, at *13 (Del. Ch. Apr. 16, 1991)).

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Boeing is correct that Zunum, as a pre-revenue start-up company, obviously risked

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defaulting on its obligations under the NPAs. (Mot. at 43.) Zunum argues that Boeing

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wrongly “assumes the cause of Zunum’s inability to pay was the vicissitudes of the free

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market, rather than Boeing’s own conduct” (Resp. at 56), but Zunum fails to direct the

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court toward any cases in which the defense has been applied under those circumstances

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(see generally Resp.; Pl. Supp. Br.). Moreover, aside from mentioning Boeing’s general

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“conduct,” Zunum does not identify a specific event, the nonoccurrence of which was a

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basic assumption of the NPAs (see Resp. at 56), meaning it has failed to raise a genuine

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dispute with respect to the first element of the defense. See Bobcat, 2019 WL 1877400,

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at *9. The court “will not make arguments for” a party. See SEC v. Schooler, 905 F.3d

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1107, 1115 (9th Cir. 2018). Zunum’s defense therefore fails as a matter of law.

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IV.

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CONCLUSION

For the foregoing reasons, the court GRANTS Boeing’s motion for summary

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judgment (Dkt. # 336) on Zunum’s claim for declaratory judgment and Boeing’s

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counterclaims for breach of contract. Zunum’s claim for declaratory judgment is

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DISMISSED with prejudice.

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Dated this 9th day of May, 2024.

A

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JAMES L. ROBART
United States District Judge

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