Britz Fertilizers, Inc. v. Bayer Corporation et al, No. 1:2006cv00287 - Document 182 (E.D. Cal. 2009)

Court Description: Memorandum Decision and Order Re: (1) Defendants Motion for Summary Judgment Or, in the Alternative, Summary Adjudication 106 ; and (2) Defendants Motion for Summary Adjudication 112 , signed by Judge Oliver W. Wanger on 10/16/09. (Coffman, Lisa)

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1 UNITED STATES DISTRICT COURT 2 EASTERN DISTRICT OF CALIFORNIA 3 4 BRITZ FERTILIZERS, INC., Plaintiff, 5 v. 6 7 1:06-CV-00287-OWW-DLB BAYER CORPORATION; BAYER CROPSCIENCE, LP; et al., 8 Defendants. MEMORANDUM DECISION AND ORDER RE: (1) DEFENDANTS MOTION FOR SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION (DOC. 106); AND (2) DEFENDANTS MOTION FOR SUMMARY ADJUDICATION (DOC. 112) 9 I. INTRODUCTION are two 10 11 Before the court Bayer motions and Corporation both Bayer jointly filed CropScience by 12 Defendants LP 13 (collectively, Bayer ). 14 summary judgment or, in the alternative, summary adjudication on 15 the seven claims asserted by Plaintiff Britz Fertilizers, Inc. 16 ( Britz ) in its Amended Complaint (Doc. 40), one of which is for 17 breach of a Contract to Indemnify. In a second, separate motion, 18 Bayer moves for summary adjudication on the issue of whether a 19 particular distribution agreement, i.e., the Aventis Distribution 20 Agreement, applies to Britz s claim for breach of a Contract to 21 Indemnify. 22 facts are taken from the parties submissions in connection with 23 the motions and other documents on file in this case.1 In the first motion, Bayer moves for Britz opposes both motions. The following background 24 25 26 27 28 1 A district court does not, of course, make findings of fact in ruling on a summary judgment motion. Findings of fact are made on the basis of evidentiary hearings and usually involve credibility determinations. Rand v. Rowland, 154 F.3d 952, 957 n.4 (9th Cir. 1998); see also Scott v. Harris, 550 U.S. 372, 378 (2007) ( As this case was decided on summary judgment, there have not yet 1 II. 1 2 A. BACKGROUND The Parties Britz is a distributor of agricultural chemical products. 3 4 (Doc. 38 at 7.)2 5 principal 6 Corporation is an Indiana Corporation with its principal place of 7 business in Pittsburgh, Pennsylvania. 8 LP is a Delaware limited partnership with its principal place of 9 business in North Carolina. place Britz is a California corporation with its of business in Fresno, California. Bayer Defendant Bayer CropScience The partners of Bayer CropScience LP 10 are entities which are citizens of Delaware, Indiana, and Germany, 11 and none of them are incorporated or have a principal place of 12 business in California. 13 diversity of citizenship. 14 B. 15 Jurisdiction is undisputably premised on 28 U.S.C. § 1332. Ahmad Skouti And The Chemical Ethrel In 2002, one of Britz s customers was Ahmad Skouti ( Skouti ), 16 a grape grower in Fresno and Madera County. 17 Skouti 18 addition to selling chemicals to Skouti, Britz, through its Pest 19 Control 20 provided recommendations to Skouti as to which chemicals to apply, 21 and offered advice as to how to apply those chemicals. 22 distributed a chemical to Skouti known as Ethrel, a growth 23 regulator that is supposed to hasten a grape s ripening process and one of its Advisor, full-service Buck Hedman, customers monitored Britz considered meaning Skouti s that, in vineyards, Britz 24 25 26 27 28 been factual findings by a judge or jury . . . . ); Cottrell v. Caldwell, 85 F.3d 1480, 1486 (11th Cir. 1996). 2 Document ( Doc ) 38 is the Scheduling Conference Order dated February 7, 2008. 2 1 increase its sugar content. 2 C. Ethrel And Britz s Distribution Agreements Initially, 3 known Britz as purchased Aventis with Ethrel whom from Britz the had a agricultural 4 company distribution 5 agreement. 6 into a distribution agreement effective January 1, 2000, through 7 October 31, 2000 ( Aventis Distribution Agreement ). 8 to the Aventis Distribution Agreement specifically includes the 9 distribution of ETHREL. Aventis (i.e., Aventis CropScience) and Britz entered twice Through written amendments, Britz and 10 Aventis 11 Agreement from November 1, 2000, to October 31, 2001, and then from 12 November 1, 2001, to October 31, 2002. 13 Exhibit 14 ETHREL. 15 the amendments to the Aventis Distribution Agreement, and that it 16 included the distribution of Ethrel. A extended Exhibit A which the term specifically of the Aventis Distribution Each amendment contained includes the distribution of Britz acknowledges that it executed the original of and 17 In addition to the Aventis Distribution Agreement, on or about 18 January 1, 2002, Britz entered into a distribution agreement with 19 Bayer Corporation for the period of January 1, 2002, through 20 December 31, 2002 ( Bayer Distribution Agreement ). 21 Distribution Agreement does not specifically mention Ethrel. 22 June 23 commenced and before it expired, Bayer acquired Aventis. 24 D. 25 2002, however, after the Bayer The Bayer Distribution In Agreement Bayer Acquires Aventis In June 2002, a division of Bayer acquired Aventis, which 26 resulted in the creation of Bayer CropScience. 27 dated June 3, 2002, announced Bayer s acquisition of Aventis and 28 the emergence of Bayer CropScience. 3 A press release, In part, the press release 1 states: 7 Leverkusen, June 3, 2002 -- The new Bayer CropScience subgroup, formed through the merger of Bayer s Crop Protection Business Group with Aventis CropScience SA, will begin operating on June 4, 2002. The industry s new number two company is thus being given the green light following a thorough examination by the antitrust authorities. The European Commission approved the acquisition in April and the United States Federal Trade Commission . . . gave the go-ahead on May 30. Closing of the EUR 7.25 billion deal on June 3, marks the biggest acquisition in Bayer s history.[3] 8 According to the President of Britz, David A. Britz, he saw this 9 press release on or about June 3, 2002. 2 3 4 5 6 10 E. Ethrel And Damage To Skouti s Vineyards 11 In or about July 2002, Britz sold some Ethrel to Skouti. 12 Along with other agricultural chemicals in a tank mix, Skouti 13 applied the Ethrel to certain vineyards he owned in Fresno and 14 Madera County, and to a vineyard he leased in Fresno County from 15 Walter Johnsen (collectively, the Vineyards ). 16 applied the Ethrel in the tank mix, the Vineyards sustained damage. 17 Britz claims that, as with nearly all of the Ethrel it 18 purchased in 2002, Britz purchased the Ethrel it sold to Skouti, 19 which Skouti then applied to the Vineyards, from Bayer and not 20 from Aventis.4 21 concede this point with the caveat that the billing statements [for 22 the Ethrel sold to Britz at this time] stated Bayer CropScience 23 and not Bayer Corporation. (Doc. 138 at 4.) After Skouti For argument purposes only, Bayer is willing to In other words, 24 25 3 26 4 27 28 Leverkusen is a city in Germany. Britz recognizes it purchased a small amount of Ethrel 35 gallons from Aventis in 2002 as reflected in an invoice dated April 25, 2002. According to Britz, however, no Ethrel from this purchase was sold to Skouti. 4 1 Bayer is conceding, for argument purposes, that Britz purchased the 2 Ethrel at issue from Bayer, but not that Ethrel was a product of 3 Bayer Corporation. 4 Bayer CropScience. 5 F. Bayer claims that Ethrel was a product of The September 10, 2002, Letter From Bayer To Britz 6 In response to an inquiry by Britz, Bayer Vice President and 7 Assistant General Counsel, William G. Ferguson, wrote David Britz 8 a letter dated September 10, 2002. In the letter, Ferguson advised 9 Britz that he was not aware of many details regarding a potential 10 claim by Skouti, but that Bayer would defend and indemnify for 11 losses caused by its products in a situation where the distributor 12 [Britz] acted as a purely pass through entity. 13 10, 2002, letter, which contains the subject line Ethrel Claim 14 (Grapes) - Mr. Ahmad Skouti, reads in pertinent part as follows: 15 I understand that you are concerned that the subject individual may file a lawsuit against Bayer CropScience and/or Britz Fertilizer with respect to the use of the (former Aventis) product Ethrel on grapes. 16 The September 17 18 Although I do not have many details on this claim, I understand that you request clarification of Bayer s position with respect to the defense of such a lawsuit. 19 27 In reply, I would refer to you to your current Distributor Agreement with Aventis CropScience, specifically to the section dealing with Indemnification. As you will note, it would be Bayer s position that it would defend and indemnify any claim related to its product in a situation where the distributor acted as a purely pass through entity. That is, where there were no claims and/or proof of independent negligence or acts on the part of the distributor, e.g., making recommendations off-label, improper storage, handling or transportation, etc. Were such independent acts alleged, the distributor would be expected to defend them, since those would be theories of liability independent of any actions of Bayer, and the distributor would be in the best position to know the facts involved. 28 With respect to being named in a lawsuit, of course, as 20 21 22 23 24 25 26 5 you may know given the current state of litigation in the United States, neither Bayer nor anyone else can control who might be named in a particular lawsuit, or which allegations might be made. This would be purely up to the plaintiff and his attorney, hopefully on some allegedly factual basis rather than a shot gun approach. 1 2 3 4 5 (Smith Decl. Ex. D.) 6 Vineyards in or about July 2002, and at the time of Ferguson s 7 September 10, 2002, letter, the Aventis Distribution Agreement had 8 not yet expired it was set to expire on October 31, 2002. 9 Indemnification provision in the Aventis Distribution Agreement in At the time Skouti applied the Ethrel to the 10 states, 11 indemnify, defend, and hold DISTRIBUTOR [Britz] harmless from any 12 third 13 reasonable attorneys fees, arising out of or resulting from Aventis 14 CropScience s negligence, breach of warranty or defective product. 15 (Schrimp Decl. Ex. C.) party relevant claims, part, losses, that Aventis damages and CropScience The expenses, shall including 16 The Bayer Distribution Agreement, which was in effect at the 17 time of Ferguson s September 10, 2002, letter, also contains an 18 Indemnity provision. 19 that Bayer Corp. will indemnify Distributor against all claims for 20 property damage or personal injury suffered by third persons caused 21 by goods supplied to Distributor hereunder whether arising in 22 warranty, negligence or otherwise, except to the extent the claims 23 are based on any one of the following: a) The negligence of 24 Distributor . . . . (Schrimp Decl. Ex. D) (emphasis added). 25 G. This provision states, in relevant part, Skouti s Action 26 On or about December 18, 2002, Skouti and lessor Johnsen filed 27 a lawsuit against Britz in the Fresno County Superior Court (Case 28 No. 02-CECG0450-MWS) to recover damages allegedly sustained to the 6 1 Vineyards as a result of applying the tank mix (the Skouti 2 action ). 3 the Skouti action and alleged the tank mix caused damage to the 4 Vineyards. 5 of action for breach of contract, negligence, products liability, 6 breach of the implied warranty of merchantability, breach of the 7 implied warranty of fitness and declaratory relief. 8 does not mention Ethrel. 9 In Skouti and Johnsen named Britz as the only defendant in The state-court complaint against Britz alleges causes January 2003, Britz s insurance The complaint carrier, Farmland 10 Insurance, retained Theodore W. (Tad) Hoppe of Fresno, California, 11 to represent Britz in the Skouti action. 12 on behalf of Britz, filed a cross-complaint against Bayer for 13 declaratory relief and indemnification. On March 7, 2003, Hoppe, 14 On May 14, 2003, James Moore, Esq., of the law firm of Baker 15 & Hostetler in Houston, Texas, outside counsel for Bayer, wrote to 16 Hoppe about defending and indemnifying Britz with respect to the 17 Skouti action. 18 19 20 21 22 23 24 25 26 27 28 Moore wrote: You have provided to Bayer CropScience ( Bayer ) a copy of a complaint that does not mention Bayer or any Bayer product. The complaint alleges, among other things, that Britz Fertilizers, Inc. ( Britz ) acted as a consultant for the plaintiff and performed negligently in this capacity. The information provided to Bayer indicates that Bayer has no duty to defend or indemnify Britz Fertilizers in this case. However, because of Bayer s relationship with Britz, Bayer agrees to defend Britz Fertilizers, Inc. at this time. Bayer will not pay past attorneys fees or costs in this case. Bayer will retain Jim Rushford of Rushford & Bonotto in Sacramento, to defend this matter with you. If there is any evidence in this case of negligence or fault on the part of Britz (whether credible or not), Bayer may at its option withdraw from the defense of this case. In the event that Bayer withdraws from the case, Britz agrees to waive any conflict and allow attorneys retained by Bayer in this matter to continue to represent Bayer if Bayer is included as a party. 7 1 2 Britz agrees that it will cooperate fully with Bayer in connection with the defense of this case. Both Bayer and Britz reserve the issue of indemnity until a later date. 3 4 (Schrimp Decl. Ex. II.) Hoppe, with the approval of Britz, sent 5 Moore a letter dated May 27, 2003, agreeing on behalf of Britz to 6 the terms proposed by Moore in his May 14, 2003, correspondence. 7 (Schrimp Decl. Ex. C of Ex. B.) 8 Mr. Rushford contact the undersigned [Hoppe] and we will associate 9 him in as counsel of record. (Id.) Hoppe also stated, please have On May 30, 2003, Rushford e- 10 mailed Hoppe and stated: Bayer has retained me to assist in the 11 defense of Britz in the above matter [Skouti v. Britz]. . . . I 12 would like to get together with you, in Fresno, at your earliest 13 convenience to discuss this case. 14 you [Hoppe] towards a favorable resolution of this matter. (Smith 15 Decl. Ex. L.) I look forward to working with 16 On June 3, 2006, Britz, through counsel, filed a request for 17 dismissal in the Skouti action in which Britz requested dismissal 18 of Britz s indemnity cross-complaint against Bayer. 19 court entered the dismissal on June 11, 2003. 20 2003, Rushford became co-counsel with Hoppe for Britz. Over a year 21 and four months later, Rushford withdrew as Britz s co-counsel from 22 the Skouti action. 23 24 The state On or about June 18, On October 25, 2004, Moore sent a letter to Hoppe which discussed, among other things, Rushford s withdrawal: 25 Bayer CropScience LP will agree to contribute $100,000 to a CCP § 998 offer to compromise of $500,000. 26 As we stated at the beginning of this suit, it is the view of Bayer CropScience that it has no duty to defend or indemnify Britz Fertilizers, Inc., in this case. Bayer CropScience LP has agreed to pay your fees up to 27 28 8 1 2 3 4 5 6 7 8 9 10 now as a goodwill gesture to Britz Fertilizers, Inc., because of the business relationship between Bayer and Britz. Bayer will continue to pay your fees and expenses provided you sign this letter affirming that Britz will not assert that Bayer is responsible for any liability of Britz in this case under a collateral estoppel doctrine or other doctrine or theory related to or based upon this gesture. Bayer does not want its goodwill gesture of paying for the defense to be held against it by Britz in this matter or a subsequent case. Also, Jim Rushford will withdraw from this case shortly. He has not been actively involved in defending this case, which has been defended by you. He may still attend some proceedings and will defend any Bayer witness who testifies at trial or in a deposition. Please sign this letter indicating the acceptance of Britz to the contents of the letter and return it to me as soon as possible. 11 (Schrimp Decl. Ex. EE.) 12 parties agree that Rushford announced his intention to withdraw as 13 counsel for Britz on October 25, 2004. 14 form was signed by Hoppe and Rushford, and filed on November 22, 15 2004. 16 Bayer paid Hoppe signed the letter. (Id.) Rushford s fees The The Withdrawal of Counsel through his withdrawal and 17 continued to pay Hoppe s attorney s fees and litigation costs 18 through the Skouti trial, which commenced on February 28, 2005. 19 After three weeks of the Skouti trial, Britz admitted liability for 20 its negligence and contested only the amount of damages. 21 Glassman, Britz s CFO who made the admission on the witness stand, 22 substituted in as a trial attorney for Britz in the Skouti action. 23 Glassman made the admission before the testimony of Britz s expert 24 witnesses. 25 26 27 28 Robert At the trial, on March 28, 2005, Glassman testified, on direct examination, as follows when being questioned by Hoppe: Q. You ve had a chance to listen to the evidence being presented; correct? 9 1 A. 2 Q. And based upon what you ve heard, you have revised your position on the denial of this claim. 3 A. Yes. 4 Q. And how have you revised it, sir? 5 8 A. The two issues of liability and damages, we agree that that tank mix had some impact and caused the damage and we ll take some liability on that. We don t know whether it was alone or with other things, but we ll accept that liability. . . . 9 Q. 6 7 Yes. How about damages, sir? 10 A. No we totally disagree with the damages and have for years. 11 12 Q. So you contest the amount of the damages that are being presented. 13 A. Yes, that s what our defense is about. 14 (Trial Transcript 6:6-17; 6:23-7:2.) After this admission, 15 opposing counsel, James B. Betts, cross-examined Glassman. 16 pertinent part, the cross-examination went as follows: 17 Q. Did you participate at Britz in the decision to admit liability in this case? 18 A. Yes. 19 Q. And you ve seen a lot of different photographs. I ll touch base on those in a minute. Let me just go through a couple of elements that I have in mind. 20 21 23 As part of your admission of liability, sir, are you agreeing that Britz Fertilizer had a duty of care, a duty to provide services within a reasonable standard of conduct to Ahmad Skouti and to Walter Johnsen? 24 A. Yes. 25 Q. And are you admitting that Britz Fertilizer in making the recommendations that were utilized in 2002 acted below the standard of care and breached its duty to plaintiffs? 22 26 27 28 A. I m saying that that is a plausible alternative, enough so that we should admit it. 10 In 1 Q. Are you admitting that Britz breached its duty to the plaintiffs in this case? 2 A. Yes, we made the sale. . . . 3 4 Q. Do you admit, sir, that the defendant s breach caused the plaintiffs damage? Whatever that damage may be. 5 A. Yes. 6 (Id. at 9:22-10:15; 10:24-26.) 7 awarded substantial damages to plaintiffs, totaling $7,596,247.00. 8 On or about April 14, 2005, the court entered judgment against 9 Britz for that amount plus costs. Britz appealed, but the judgment After the admission, the jury 10 was affirmed. 11 2007 WL 1954089 (Cal. Ct. App. July 6, 2007). 12 of its appeal rights and paid the judgment amount. See Skouti v. Britz Fertilizers, Inc., No. F048298, Britz exhausted all 13 At his later deposition, Glassman stated that his admission of 14 liability at the Skouti action was a method of damage control on 15 the damages, and he thought that [it] would help in that regard. 16 (Glassman Dep. 78:21-24.) 17 time he made the admission, he knew what the Britz defense 18 experts were going to say at the Skouti trial, but he did not 19 believe that they were going to be effective. (Glassman Dep. 20 81:18.) Glassman further stated that, at the 21 Britz has demanded that Bayer indemnify Britz for the judgment 22 rendered in the Skouti action, and for the post-judgment attorney s 23 fees and costs incurred by Britz. 24 that the admitted negligence of Britz in the Skouti action bars any 25 claim for indemnification. 26 G. 27 Bayer has refused and claims The Present Lawsuit On March 14, 2006, Britz filed a federal complaint against 28 11 1 Bayer (Case No. 1:06-cv-0287-OWW-SMS) for indemnity and declaratory 2 relief, and for damages for fraud, negligent misrepresentation and 3 false promise ( Britz I ). 4 federal complaint against Bayer for damages (Case No. 07-cv-0846- 5 OWW-SMS) asserting claims for negligence, gross negligence and 6 negligent supervision ( Britz II ). On June 11, 2007, Britz filed another 7 In Britz II, Britz filed a first amended complaint for damages 8 on June 18, 2007, alleging claims for negligence, gross negligence, 9 and breach of contract. On July 17, 2007, Bayer filed a Rule 10 12(b)(6) motion to dismiss the first amended complaint in Britz II, 11 attacking all claims and arguing that the action duplicated Britz 12 I. 13 negligence claims were dismissed, but the contract claim survived. 14 (See Britz II, Doc. 38.) 15 consolidated for all purposes including trial and Britz was given 16 time to file a consolidated complaint. Bayer s motion was granted in part: the negligence and gross In addition, Britz I and II were ordered 17 In its consolidated complaint, i.e., its Amended Complaint 18 (Doc. 40), Britz asserts seven claims: (1) breach of a Contract to 19 Defend ; (2) breach of the implied covenant of good faith and fair 20 dealing; (3) breach of a Contract to Indemnify ; (4) declaratory 21 relief; (5) fraud; (6) negligent misrepresentation; and (7) false 22 promise. 23 In its first claim for breach of a Contract to Defend, Britz 24 asserts that the May 14, 2003, letter from Moore constitutes an 25 enforceable contract between Britz and Bayer to defend Britz in the 26 Skouti action. 27 Britz s second claim for breach of the implied covenant of good 28 faith and fair dealing is also based on the May 14, 2003, letter. Britz asserts that Bayer breached this agreement. 12 1 Britz asserts that Bayer breached the covenant of good faith and 2 fail dealing implied in the Contract to Defend. 3 In its third claim for breach of a Contract to Indemnify, 4 Britz asserts that it is contractually entitled to indemnification 5 for 6 notwithstanding Britz s admission of liability for its own breach 7 of duty. 8 indemnification for the post-judgment interests, attorney s fees 9 and costs incurred by Britz post-verdict in the trial court and on 10 appeal in the Skouti action. Britz asserts that Bayer s failure to 11 indemnify 12 indemnification provision in the Bayer Distribution Agreement (not 13 the 14 deficient performance and failures of Rushford placed Britz in a 15 position where it proceeded to trial with an inadequate defense 16 and had little choice but to admit liability and contest damages. 17 In its fourth claim for declaratory relief, Britz seeks three 18 declarations: (1) that Bayer was obligated to furnish Britz with an 19 adequate defense in the Skouti action, not merely to pay the fees 20 of [Britz s] attorneys ; (2) that Bayer is obligated to indemnify 21 [Britz] for the judgment against [Britz] in the Skouti [a]ction, 22 and for post-judgment interest and costs ; and (3) that Bayer is 23 obligated to indemnify [Britz] for [Britz s] attorney fees and 24 costs post-verdict and on appeal in the Skouti [a]ction. the full amount of the judgment in the Skouti action, Britz also claims is it contractually entitled to for Aventis these matters Distribution constitutes Agreement). a Britz breach claims of that the the 25 Britz fifth claim for fraud asserts that Bayer made false 26 representations to Britz in Ferguson s September 10, 2002, letter. 27 Britz asserts that Bayer falsely represented in that letter that 28 it would defend and indemnify any claim related to its product in 13 1 a situation where the distributor acted as a purely pass through 2 entity. 3 through entity as that term is used in Ferguson s letter and yet 4 it was not indemnified. Britz asserts that, at all relevant times, it was a pass In its sixth claim for negligent misrepresentation, Britz 5 6 asserts that Ferguson, on behalf of Bayer, made a negligent 7 misrepresentation in his September 10, 2002, letter. Ferguson 8 allegedly had no reasonable ground for believing the statements 9 in the September 10, 2002, letter to be true. Britz s seventh claim for false promise is also based upon the 10 11 September 10, 2002, letter. Britz asserts that in Ferguson s 12 September 10, 2002, he promised Britz that Bayer would defend and 13 indemnify Britz in the Skouti action. 14 H. Bayer s Motions 15 In Bayer s first motion for summary judgment or, in the 16 alternative, summary adjudication, Bayer substantively attacks all 17 of Britz s claims. 18 assumes, arguendo, that the indemnity provision in the Bayer 19 Distribution Agreement controls, as Britz contends. For Britz s Contract to Indemnify claim, Bayer 20 If Britz s contractual indemnity claim survives Bayer s first 21 motion, Bayer advances a separate motion for summary adjudication 22 that the Aventis Distribution Agreement, along with its indemnity 23 provision, controls. 24 Bayer Distribution Agreement, fails as a matter of law. 25 III. If so, Britz s indemnity claim, based on the SUMMARY JUDGMENT/ADJUDICATION STANDARD 26 The standards and procedures for granting partial summary 27 judgment, also known as summary adjudication, are the same as those 28 for summary judgment. Mora v. Chem-Tronics, Inc., 16 F. Supp. 2d 14 1 1192, 1200 (S.D. Cal. 1998). 2 the pleadings, the discovery and disclosure materials on file, and 3 any affidavits show that there is no genuine issue as to any 4 material fact and that the movant is entitled to judgment as a 5 matter of law. Fed. R. Civ. P. 56(c). 6 the initial responsibility of informing the district court of the 7 basis 8 pleadings, depositions, answers to interrogatories, and admissions 9 on file, together with the affidavits, if any, which it believes 10 demonstrate the absence of a genuine issue of material fact. 11 Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal 12 quotation marks omitted). for its motion, and Summary judgment is appropriate when The movant always bears identifying those portions of the 13 Where the movant will have the burden of proof on an issue at 14 trial, it must affirmatively demonstrate that no reasonable trier 15 of fact could find other than for the moving party. Soremekun v. 16 Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). 17 respect to an issue as to which the non-moving party will have the 18 burden of proof, the movant can prevail merely by pointing out 19 that there is an absence of evidence to support the nonmoving 20 party's case. Id. at 984. With 21 When a motion for summary judgment is properly made and 22 supported, the non-movant cannot defeat the motion by resting upon 23 the 24 non-moving party must set forth, by affidavit or as otherwise 25 provided in Rule 56, specific facts showing that there is a 26 genuine issue for trial. Id. (quoting Anderson v. Liberty Lobby, 27 Inc., 477 U.S. 242, 250 (1986)). Conclusory, speculative testimony 28 in affidavits and moving papers is insufficient to raise genuine allegations or denials of 15 its own pleading, rather the 1 issues of fact and defeat summary judgment. Id. 2 non-movant s bald assertions or a mere scintilla of evidence in his 3 [or 4 judgment. FTC v. Stefanchik, 559 F.3d 924, 929 (9th Cir. 2009). her] favor are both insufficient to Likewise, [a] withstand summary 5 [S]ummary judgment will not lie if [a] dispute about a 6 material fact is genuine, that is, if the evidence is such that 7 a reasonable jury could return a verdict for the nonmoving party. 8 Anderson, 477 U.S. at 248. In ruling on a motion for summary 9 judgment, the district court does not make credibility 10 determinations; rather, the evidence of the non-movant is to be 11 believed, and all justifiable inferences are to be drawn in his 12 favor. Id. at 255. IV. 13 14 A. DISCUSSION AND ANALYSIS Bayer s First Motion 15 1. Breach Of A Contract To Indemnify 16 The alleged Contract to Indemnify is the indemnity provision 17 in the Bayer Distribution Agreement. 18 specifies: Bayer Corp. will indemnify Distributor [Britz] against 19 all claims for property damage or personal injury suffered by third 20 persons caused by goods supplied to Distributor hereunder whether 21 arising in warranty, negligence or otherwise, except to the extent 22 the claims are based on . . . [t]he negligence of Distributor. 23 (Schrimp Decl. Ex. D) (emphasis added.) 24 admitted negligence at the Skouti trial precludes Britz's claim for 25 indemnity. 26 Britz, through its officer and This indemnity provision Bayer argues that Britz's attorney, Mr. Glassman, 27 conceded Britz s negligence (breach of duty) in the Skouti action 28 and the jury returned a verdict against Britz. 16 Glassman admitted 1 liability believing it would help Britz s position on damages. 2 Britz does not suggest that Glassman testified untruthfully when 3 he, while on the witness stand and being questioned by plaintiffs 4 counsel, admitted Britz s duty to the plaintiffs, Britz s breach of 5 that duty, and that the breach caused the damages sustained to the 6 Vineyards. 7 The Skouti action was based on Britz s negligence within the 8 meaning of the Contract to Indemnify and no reasonable trier of 9 fact could The jury fixed the amount at over $7 million dollars. conclude otherwise. Britz has not attempted to 10 apportion fault, nor has the product been characterized as itself, 11 inherently defective.5 12 the Skouti action bars the Contract to Indemnify claim. Britz s admission of its own negligence in 13 To avoid the negligence language of the indemnity agreement, 14 in response to Bayer's separate statement of undisputed material 15 facts, 16 negligence. This one-sentence contention (not repeated in Britz's 17 opposition brief) is specious. 18 alleged against Britz in the Skouti complaint. In addition, on the 19 witness stand, Glassman specifically admitted, in response to 20 focused questions, the elements of negligence 21 causation, resulting in damage. 22 of damages. 23 alleged a negligence cause of action against Britz and Glassman's 24 explicit testimony admitting each element of negligence, Britz 25 cannot seriously contend that Glassman did not admit negligence or 26 that his testimony does not establish Britz's negligence for 27 28 Britz claims that Glassman admitted liability, not Negligence was specifically duty, breach, and Glassman only disputed the amount Given that the state-court complaint specifically 5 Britz does not assert any claim for equitable indemnity or contribution against Bayer. 17 1 purposes of the indemnity provision. 2 unqualified, he referred to Britz only, not Bayer, or the product. 3 Britz argues that Bayer cannot rely on Britz's admission of 4 liability as excusing compliance with the indemnity provision 5 because Britz relied to its detriment on Bayer's promise that it 6 would defend Britz in the Skouti action. 6 7 (Second) of Contracts § 90(1), and citing Division of Labor Law 8 Enforcement v. Transpacific Transportation Co., 69 Cal. App. 3d 9 268, 275-76 (1977), Britz argues Glassman s testimony was that Quoting the Restatement promissory estoppel 10 precludes Bayer from relying on the negligence provision in the 11 indemnity agreement. 12 Contracts § 90(1): A promise which the promisor should reasonably 13 expect to induce action on the part of the promisee or a third 14 person and which does induce such action or forbearance is binding 15 if injustice can be avoided only by enforcement of the promise. 16 Promissory According to the Restatement (Second) of estoppel . . . is based upon the equitable 17 doctrine that a promisor is bound when he should reasonably expect 18 a substantial change of position (act or forbearance) in reliance 19 on his promise if injustice can be avoided only by the enforcement 20 of the promise. Transpacific Transp., 69 Cal. App. 3d at 275. 21 Promissory 22 principles to satisfy the requirement that consideration must be 23 given in exchange for the promise sought to be enforced. US 24 Ecology, Inc. v. California, 129 Cal. App. 4th 887, 901-02 (2005). 25 [P]romissory estoppel is estoppel a is doctrine an which equitable employs doctrine equitable to allow 26 27 6 This argument is premised on the unstated assertion that Glassman s admission of liability was an admission of negligence. 28 18 1 enforcement of a promise that would otherwise be unenforceable. 2 Id. 3 Because the doctrine of promissory estoppel is a consideration 4 substitute, it is wholly inapplicable here. 5 defend Britz in the Skouti action is not otherwise unenforceable 6 absent the application of promissory estoppel the parties do not 7 dispute 8 contract.7 9 Bayer from invoking and relying on the express negligence language 10 in the indemnity provision, to which Britz agreed in writing. 11 There is no argument or evidence that Bayer promised not to invoke 12 or rely upon the negligence language in the indemnity provision, 13 let alone that Britz relied upon such a promise to its detriment. 14 Nor is there any argument or evidence that Bayer promised Britz 15 that if Britz admitted liability in the Skouti action, that this 16 strategic choice would help reduce Britz's damages or otherwise 17 work to Britz's advantage. 18 that Bayer's agreement to defend Bayer's promise to is an enforceable Britz cannot invoke promissory estoppel to prevent Bayer did not recommend this strategy to Britz. Rather, this 19 was an independent choice by Britz. Britz did not notify or seek 20 Bayer s consent to Britz s trial strategy. 21 estoppel, which is unavailing, Britz has advanced no other legal 22 theory under which Bayer s promise to defend precludes Bayer s 23 reliance on and enforcement of the express negligence language in Aside from promissory 24 25 7 26 27 28 To the extent Britz argues that Bayer also promised to provide an "adequate" defense in the Skouti action, and, because of this promise, Bayer is estopped from relying on the negligence language in the indemnity agreement, this argument fails because Bayer made no such promise of adequacy. 19 1 the indemnity agreement.8 2 In its effort to avoid summary judgment, Britz also focuses on 3 Ferguson's September 10, 2002, letter that states it would be 4 Bayer's position that it would defend and indemnify any claim 5 related to its product in a situation where the distributor acted 6 as a purely pass through entity. 7 a triable issue as to what constitutes a pass through entity and 8 whether it qualified as a pass through entity in the Skouti 9 action. 10 theory. According to Britz, there is There are several problems with Britz's new indemnity 11 First, Britz never pleaded any indemnity claim based on 12 Ferguson's September 10, 2002, letter. Britz's claim for breach of 13 a 14 Distribution Agreement. 15 premised on the September 10, 2002, letter, Britz cannot advance 16 this claim for the first time on summary judgment. 17 Pier 1 Imps. (U.S.), Inc., 457 F.3d 963, 968-69 (9th Cir. 2006) 18 (refusing to allow the plaintiff to advance new theories presented 19 for the first time in [the plaintiff's] opposition to summary 20 judgment ); Wasco Prods., Inc. v. Southwall Techs., Inc., 435 F.3d 21 989, 992 (9th Cir. 2006) ( Simply put, summary judgment is not a 22 procedural second chance to flesh out inadequate pleadings. ) 23 (internal quotation marks omitted); see also Gonzalez v. City of Contract to Indemnify is explicitly premised on the Bayer Having failed to plead an indemnity claim See Pickern v. 24 25 8 26 27 28 While Britz has not advanced any theory which precludes Bayer s reliance on the express negligence language in the indemnity agreement or that prevents Glassman s admission from barring the contractual indemnity claim, this does not mean that Britz s admission categorically precludes other contractual claims Britz asserts. 20 1 Federal Way, 299 F. App'x 708, 710 (9th Cir. 2008) (affirming the 2 district court's refusal to consider a claim not in the complaint 3 and raised for the first time on summary judgment ). 4 failure to allege this theory of indemnity liability and its effort 5 to raise this theory for the first time at summary judgment is 6 fatal. 7 Britz's Second, Ferguson's letter specifically defines what he meant 8 by pass through entity. 9 that it would defend and indemnify any claim related to its product 10 in a situation where the distributor acted as a purely pass 11 through entity. 12 of independent negligence or acts on the part of the distributor, 13 e.g., making recommendations off-label, improper storage, handling 14 or transportation, etc. 15 distributor would be expected to defend them, since those would be 16 theories of liability independent of any actions of Bayer, and the 17 distributor would be in the best position to know the facts 18 involved. 19 Bayer meant by pass through entity, there is no dispute by 20 contrary 21 through entity as defined in the letter. 22 identified by Britz that would qualify it as a pass through 23 entity. 24 That is, where there were no claims and/or proof Were such independent acts alleged, the Based on Ferguson's detailed explanation as to what evidence Britz He stated it would be Bayer's position was from more Britz than a as pass to what through constitutes a pass No evidence has been distributor in the 25 distribution chain. It was an agricultural chemical service 26 consultant and dealer to Skouti. 27 through Glassman, admitted its own breach of its own duty that it 28 owed to the plaintiffs, contesting only the amount of damages. 21 On the witness stand, Britz, 1 Glassman did so strategically, based on his interpretation, it 2 would improve Britz s position on reducing damages. 3 claimed that Glassman testified untruthfully when he admitted duty, 4 breach, and causation resulting in Skouti s damage. 5 action, Britz was not merely a pass through entity as defined by 6 Ferguson's letter. 7 otherwise from the undisputed facts and admission of Britz. 8 all these reasons, Britz's reliance on the September 10, 2002, 9 letter is misplaced. Britz has not In the Skouti No reasonable trier of fact could conclude For 10 Britz's admission of its liability for negligence, duty, 11 breach, and causation resulting in damage, in the Skouti action 12 bars its claim for indemnity. Summary judgment is GRANTED in favor 13 of Bayer on Britz's claim for breach of a Contract to Indemnify. 14 2. Breach Of A Contract To Defend 15 The alleged Contract To Defend is the May 14, 2003, letter 16 from Moore to Hoppe. 17 letter constitutes an enforceable agreement to defend Britz in the 18 Skouti action. 19 actually agreed upon by the parties. 20 the express substantive terms of the agreement: 21 22 23 24 25 26 27 28 No party disputes that the May 14, 2003, Bayer argues that it performed all the terms Both Bayer and Britz set out 1) Bayer agrees to defend Britz Fertilizers, Inc. at this time; 2) Bayer will not pay past attorney's fees or costs in this case; 3) Bayer will retain Jim Rushford of Rushford & Bonotto in Sacramento, to defend this matter with you; 4) If there is any evidence in this case of negligence or fault on the part of Britz (whether credible or not), Bayer may at its option withdraw from the defense of this case; 5) In the event that Bayer withdraws from the case, Britz agrees to waive any conflict and allow attorneys retained by Bayer in this manner to continue to represent Bayer if Bayer is included as a party; 6) Britz agrees that it will cooperate fully with Bayer in connection with the defense of this case; and, 7) Both Bayer and Britz reserve the issue of indemnity until a later date. 22 1 In making the argument that it performed the express terms of the 2 Contract to Defend, Bayer quotes the following passage from the 3 Memorandum Decision on Bayer s Rule 12(b)(6) motion, which dealt, 4 in part, with the Contract to Defend: 5 6 7 8 9 Contract terms one and three, above, simply require Defendants to defend Britz at this time and to provide Rushford to do so. Defendants are sellers of agricultural products. Defendants could only provide a defense to Britz by providing and paying counsel. The payment of Hoppe s fees (term two) and providing Rushford to assist with Britz s defense (term three) explained how Defendants would defend Britz. 10 (See Britz II, Doc. 38 at 29.) Bayer contends that it complied 11 with the Contract to Defend because it supplied Rushford, paid for 12 his attorney s fees through his consensual withdrawal, and paid 13 Hoppe s attorney s fees and litigation costs through trial. 14 addition, at the Skouti trial, Britz admitted its liability which, 15 according to Bayer, constitutes any evidence . . . of negligence 16 or fault . . . credible or not and thus justified Bayer s non- 17 payment of any attorney s fees or costs on appeal. 18 Bayer contends it complied with all the express terms of the 19 Contract to Defend. In Accordingly, 20 In opposition, Britz does not dispute that Bayer did all of 21 these things, i.e., that Bayer supplied Rushford, and that Bayer 22 paid Rushford s and Hoppe s attorneys fees and the litigation 23 costs through the Skouti trial. 24 admitted liability in the Skouti action. 25 that Bayer did not fulfill all of its obligations under the 26 Contract to Defend. 27 Nor does Britz dispute that it Instead, Britz argues As far as can be discerned, according to Britz, Bayer breached 28 23 1 the express terms of the agreement in two respects: (1) Bayer did 2 not honor its agreement to defend Britz in the Skouti case; and 3 (2) 4 replacement counsel upon Rushford s withdrawal. 5 the latter theory, according to Britz, Rushford s withdrawal was 6 not premised on evidence of Britz s negligence or fault, and based 7 on the timing of Rushford s withdrawal, the express terms of the 8 Contract 9 replacement Bayer was to required and failed Defend obligated counsel. This Bayer to furnish to obligation, Britz with a With respect to provide Britz according to with Britz, 10 continued up until the point that Bayer withdrew completely, which 11 was not until after the jury verdict. 12 In addition to these alleged breaches of express terms, Britz 13 contends that the Contract to Defend contains an implied term to 14 adequately defend Britz in the Skouti action. 15 that given California case law on implied terms, and California 16 Civil Code §§ 1655 and 1656 governing implied terms, an obligation 17 to adequately defend Britz in the Skouti action is properly read 18 into the agreement.9 Britz s argues 19 Bayer rejoins that it satisfied its obligation to defend 20 Britz, that Britz had no right to replacement counsel, and even if 21 it did, Britz waived this contractual right. 22 that no implied term to adequately defend Britz can be read into 23 the agreement. 24 Bayer further argues The contract theories raise several issues: (1) did Bayer 25 26 27 9 Britz also argues the implied covenant of good faith and fair dealing gave rise to an implied obligation to adequately defend Britz in the Skouti action. 28 24 1 breach its obligation to defend Britz; (2) did Britz have a 2 contractual right to replacement counsel and, if so, did it waive 3 this right; and (3) can an implied term to adequately defend 4 Britz be read into the agreement. 5 When Glassman admitted liability on the stand in the Skouti 6 action, this constituted any evidence . . . of negligence or fault 7 . . . credible or not on the part of Britz. 8 could conclude otherwise. To the extent Britz s Contract to Defend 9 claim is based on Bayer s alleged non-payment of any attorney's 10 fees or costs on appeal, or any alleged failure to supply counsel 11 on appeal, summary adjudication is GRANTED on this claim in favor 12 of Bayer. This does not end the inquiry. a. 13 Alleged Breaches Of Express Terms i. 14 15 No No reasonable jury party The Agreement To Defend disputes that Bayer agreed to defend Britz. 16 Rather, the parties dispute whether Bayer performed its obligation 17 to defend. 18 which Bayer vigorously disputes, that paying Hoppe s fees and 19 retaining Rushford did not completely satisfy Bayer s obligation to 20 defend Britz under the Contract to Defend. 21 something more was required. As stated by Britz in its opposition: 22 24 The fact that a contract to defend exists between the parties is not in dispute, but the meaning of the contract is. Britz contends that to defend means what it says. To defend is all-inclusive term whatever may be necessary for that purpose. 25 At the heart of Britz s contract claim is the notion Bayer did not 26 do enough to defend it in the Skouti action. 23 27 Implicit in Britz s breach theory is the premise, According to Britz, The threshold question raised by the parties briefing is 28 25 1 whether Bayer s express promise to defend can be interpreted, as 2 Britz suggests, to impose some continuing defense obligation on 3 Bayer over and above its obligation to pay Hoppe s fees and to 4 retain Rushford for Britz pretrial? 5 what is the nature and extent of the defense obligation? Third, 6 does a material dispute exist as to its breach? 7 first question is yes, the answer to the second question is found 8 in the plain language of the agreement, and the answer to the third 9 question is yes. If so, the second question is The answer to the 10 Both parties apply California law to the interpretation of the 11 agreement. Under California law, the interpretation of a written 12 contract is a matter of law for the court even though questions of 13 fact are involved. Southland Corp. v. Emerald Oil Co., 789 F.2d 14 1441, 1443 (9th Cir. 1986). 15 interpret a written contract unless the interpretation turns upon 16 the 17 inferences may be drawn from uncontroverted evidence. Hess v. Ford 18 Motor Co., 27 Cal. 4th 516, 527 (2002) (internal quotation marks 19 omitted). credibility of It is solely a judicial function to extrinsic evidence, even when conflicting 20 The basic goal of contract interpretation is to give effect 21 to the parties mutual intent at the time of contracting. Founding 22 Members of the Newport Beach Country Club v. Newport Beach Country 23 Club, Inc., 109 Cal. App. 4th 944, 955 (2003). 24 reduced to writing, the parties' intention is determined from the 25 writing alone, if possible. Id. 26 are used in a technical manner or are defined in the contract, 27 Superior Dispatch, Inc., v. Ins. Corp. of N.Y., 176 Cal. App. 4th 28 26 When a contract is Unless the words in a contract 1 12, 30 (2009), [t]he words of a contract are to be understood in 2 their ordinary and popular sense, Newport Beach Country Club, 3 Inc., 109 Cal. App. 4th at 955. 4 [t]he whole of a contract is to be taken together with each 5 clause helping to interpret the other. Cal. Civ. Code § 1641. 6 addition, a court may not read the contract in a manner that leads 7 to an absurd result. Kassbaum v. Steppenwold Prods., Inc., 236 8 F.3d 487, 491 (9th Cir. 2000) (applying California law). 9 If a contract is capable When interpreting a contract, of two different In reasonable 10 interpretations, the contract is ambiguous. Oceanside 84, Ltd. v. 11 Fidelity Fed. Bank, 56 Cal. App. 4th 1441, 1448 (1997). 12 however, will not strain to create an ambiguity. Kashmiri v. 13 Regents of the Univ. of Cal., 156 Cal. App. 4th 809, 842 (2007) 14 (internal quotation marks omitted). 15 defined in the [contract] does not make it ambiguous. Nor does 16 [d]isagreement concerning the meaning of a phrase, or the fact that 17 a word or phrase isolated from its context is susceptible of more 18 than one meaning. Muzzi v. Bel Air Mart, 171 Cal. App. 4th 456, 19 462-63 (2009) (alterations in original) (internal quotation marks 20 omitted). 21 context of that instrument as a whole, and in the circumstances of 22 that case, and cannot be found to be ambiguous in the abstract. 23 Powerline Oil Co., Inc. v. Superior Court, 37 Cal. 4th 377, 391 24 (2005) (internal quotation marks omitted). A court, The fact that a term is not [L]anguage in a contract must be construed in the 25 Extrinsic evidence is admissible to interpret the instrument, 26 but not to give it a meaning to which it is not reasonably 27 susceptible. Parsons v. Bristol Dev. Co., 62 Cal. 2d 861, 865 28 27 1 (1965). If the trial court decides, after receiving the extrinsic 2 evidence, the language of the contract is reasonably susceptible to 3 the interpretation urged, the evidence is admitted to aid in 4 interpreting the contract. Newport Beach Country Club, Inc., 109 5 Cal. App. 4th at 955. 6 or when the competent extrinsic evidence is not in conflict, the . 7 . . court independently construes the contract. Id. 8 offered extrinsic evidence to explain what the parties meant when 9 they agreed that Bayer would defend Britz, beyond its plain 10 When no extrinsic evidence is introduced, No party has meaning. 11 Under California contract principles, Bayer s agreement to 12 defend must be interpreted in the context of the instrument as a 13 whole and cannot be interpreted in the abstract. 14 defend Britz and then explained two means by which it would do so 15 by paying Hoppe's fees10 and by retaining Rushford to defend the 16 Skouti action with Britz. In other words, as part of its agreement 17 to defend Britz, Bayer agreed that it would pay Britz s attorney, 18 Hoppe s fees, and would supply another attorney, Rushford, who 19 would defend the Skouti matter with you (Britz). 20 Bayer could defend the Skouti action is by providing legal 21 representation for the defendant. Bayer agreed to The only way 22 As to what defend means, to determine the common meaning of 23 a word a court typically looks to dictionaries. Lockyer v. R.J. 24 25 26 27 10 Although the second contract term is phrased in the negative Bayer will not pay past attorney's fees or costs in this case no party disputes the natural implication arising from this language, i.e., that Bayer agreed to pay Hoppe s future attorney s fees and costs. 28 28 1 Reynolds Tobacco Co., 116 Cal. App. 4th 1253, 1263 (2004). The 2 dictionary definition of the word defend includes to act as 3 attorney for and to deny or oppose the right of a plaintiff in 4 regard to (a suit or a wrong charged). See Merriam-Webster's 5 Online Dictionary, http://www.merriam-webster.com (last visited 6 Oct. 14, 2009). 7 word defend as to deny, contest, or oppose (an allegation or 8 claim) and [t]o represent (someone) as an attorney. Black s Law 9 Dictionary 450 (8th ed. 2004). Similarly, the Black s Law Dictionary defines the 10 Applying the common meaning of the word defend to the 11 agreement, Bayer agreed that it would oppose the Skouti action. As 12 part of that agreement, Bayer promised that it would supply an 13 attorney, Rushford, who would oppose the Skouti action with Britz s 14 attorney. 15 the Skouti action claims or failed to perform as an attorney for 16 Britz to deny, contest or oppose the Skouti litigation, a material 17 issue of fact exists whether Bayer performed or breached its 18 promise to defend the Skouti action by providing Britz with an 19 attorney who would assist in defending. 20 expressly delineate the nature or extent of defense work to be 21 provided, nor the role of the assigned defense lawyer, i.e., lead, 22 second chair, or monitoring counsel. 23 to which party is in control of the defense or who makes final 24 decisions on matters of defense. This lack of specificity does not 25 preclude a reasonable trier of fact from determining whether 26 Rushford and Bayer failed to defend the Skouti action with Britz 27 under the common meaning of the word defend. If Rushford failed to perform legal services to oppose 28 29 The agreement does not No authority is provided as 1 Generally, whether a party has performed as required by a 2 contract, or breached it, is a question of fact. See Stonebrae, 3 L.P. v. Toll Bros, Inc., No. C08-0221 EMC, 2009 WL 1082067, at *5 4 (N.D. 5 performed as required under a contract is a question of fact for a 6 jury, not a judge, to decide. ); 23 Richard A. Lord, Williston on 7 Contracts § 63:15 (4th ed. updated May 2009) ( [G]enerally whether 8 there was a breach of the terms of a contract is a question of 9 fact. ) (footnote omitted). Cal. Apr. 22, 2009) ( Ordinarily, whether a party has Here, there is a genuine issue as to 10 whether Bayer breached its promise that an attorney, Rushford, 11 would defend the Skouti action with Britz. 12 Despite Bayer s promise that it would defend Britz in the 13 Skouti action and that Rushford would defend the Skouti matter with 14 Britz, Plaintiffs evidence suggests that Rushford did not take an 15 active role in defending the Skouti action. 16 correspondence states Rushford: has not been actively involved in 17 defending this case. 18 defense, there is evidence that Rushford was serving another 19 principal he was monitoring the case for Bayer. Moore s October 2004 Instead of actively participating in the 20 Britz points out, and Bayer does not dispute, that at the time 21 Bayer agreed to defend Britz in the Skouti litigation and supply 22 Rushford, Bayer had a pre-existing attorney-client relationship 23 with Rushford, which neither Bayer nor Rushford disclosed to Britz. 24 During the Skouti litigation, according to Rushford, he understood 25 he was reporting to Bayer: 26 27 Q. Was it your understanding that you were supposed to be monitoring the Skouti versus Britz case and reporting for Bayer and reporting to Bayer? 28 30 1 A. Yes. 2 (Rushford Dep. 147:11-15.) Bayer's outside counsel, Moore, also 3 acknowledged that "[t]he reason he [Rushford] was hired was because 4 at the time if our thinking was that if Ethrel got involved in 5 the case it appeared at the time of the complaint Ethrel was not 6 mentioned, but if that changed and Ethrel became involved, 7 Rushford's role was going to be to defend the product of Ethrel." 8 (Moore Dep. 46:1-6.) During the Skouti litigation, Rushford sent 9 e-mails to Moore (only) updating him on the progress of the case, 10 which included some discussion of the Ethrel product and Ethrel s 11 potential responsibility for the alleged Vineyard damage. (See 12 Schrimp Dep. Exs. KK, LL, NN.)11 Bayer concedes that "Rushford was 13 monitoring the litigation in case Bayer was named, which at that 14 point he would be able to defend Bayer." (Doc. 143-1 at 21.) 15 Viewing the evidence in a light most favorable to Britz, 16 Rushford's undisclosed prior relationship with Bayer, his 17 "monitoring" of the Skouti litigation for Bayer, coupled with his 18 19 11 20 21 22 23 24 25 26 27 Bayer objects to Exhibit KK of Schrimp's declaration, which is one e-mail from Rushford to Moore. Britz argues that it lacks authentication. Schrimp declares, under penalty of perjury, that Exhibit KK of his declaration is a "true and correct copy of an undated e-mail from James Rushford to James Moore." In Rushford's deposition, when asked questions by Schrimp about this e-mail, Rushford discussed this e-mail as if he wrote it, and, when questioned about a particular sentence in the e-mail, Rushford specifically admitted he "wrote" that sentence. This is sufficient to authenticate Exhibit KK. Even if the e-mail lacked authentication, other e-mails between Rushford and Moore, Exhibits LL and NN, to which Bayer does not object, illustrate the same point for which Exhibit KK is cited. Bayer's objection to Exhibit KK is overruled. 28 31 1 undisclosed communications to Bayer, and his potential role as 2 counsel for Bayer if Bayer was brought into the litigation, raise 3 a question whether Rushford was defending the Skouti litigation for 4 or 5 interests. 6 defend the case, must be decided by the jury. 7 with Britz or whether he was solely defending Bayer s Whether Bayer used Rushford only as a monitor, not to In addition, Britz raises several arguments about Rushford 8 conduct in the Skouti litigation.12 9 prior experience in agricultural chemical cases, and who was aware 10 of the use of field trials in such cases, did not recommend that 11 Britz conduct field trials of the tank mix at issue in the Skouti 12 litigation. 13 time, it had at its disposal scientific expertise and resources, 14 including research facilities and scientific staff qualified and 15 capable to conduct field trials of its products. 16 dispute that it then had the capability to conduct, and in the past 17 has conducted, field trials in which it attempted to replicate a For example, Rushford, who had Bayer does not dispute that from 2002 to the present Nor does Bayer 18 19 20 21 22 23 24 25 26 27 12 Bayer s argument that it cannot be held accountable for any of Rushford s actions or omissions in the Skouti litigation is unpersuasive. This is not (or no longer is) a negligence case where Britz is trying to pin tort liability on Bayer for the acts of Rushford based on vicarious liability. Compare Merrit v. Reserve Ins. Co., 34 Cal. App. 4th 858, 880-81 (1973). This is a breach of contract case, and, in Bayer s contract, Bayer promised that it would defend the Skouti action and it would supply an attorney, Rushford, who would defend the Skouti action with Britz. If Rushford did not defend the Skouti action with Britz before negligence was admitted, a jury could find that Bayer failed to perform its promise that Rushford would do so. If Rushford did not defend, neither did Bayer. The language of the letter agreement makes Bayer directly accountable for Rushford s purported failure to defend, not the application of vicarious liability principles. 28 32 1 problem with one of its products, as reported by the grower. 2 Rushford did not invoke Bayer s resources and recommend field 3 trials. 4 expert, conducted a field trial with the tank mix, and found that 5 it did not cause crop damage. After the Skouti litigation, Britz retained its own 6 There is also evidence that Rushford had concerns about the 7 adequacy of Hoppe s representation, yet Rushford did not report 8 those concerns to Britz (only to Bayer). 9 and only Moore, Rushford stated: 10 11 12 13 In an e-mail to Moore, We are supposed to have expert depos next week but, scheduling has not been reliable. I do not think this case is being worked up well for the defense. I don t think our farming expert has done the work we suggested and for some reason, Hoppe did not list the Farm Advisor Leavette as an expert. I also think Hoppe is intimidated by Skouti s counsel. 14 (Schrimp Dec. Ex. LL.) Bayer concedes that it did not share 15 Rushford s concerns with Britz. (Doc. 143-2 at 25.) 16 share these concerns with Britz, and take an active role in the 17 Skouti litigation, Rushford withdrew from the Skouti litigation 18 before the trial began. Rather than 19 This circumstantial evidence all bears on the existence of a 20 triable issue of fact as to whether Bayer breached its commitment 21 to defend. Bayer s motion for summary adjudication on the ground 22 that it did not breach any express term of the Contract to Defend 23 is DENIED. 24 ii. The Alleged Agreement To Provide Replacement Counsel 25 Britz argues that a material dispute of fact exists as to 26 whether Bayer was obligated under the express terms of the Contract 27 28 33 1 to Defend to furnish replacement counsel upon Rushford s withdrawal 2 and whether Bayer breached that obligation. 3 position, Britz quotes a passage from the Memorandum Decision on 4 Bayer s 5 Contract to Defend: 6 7 8 9 10 11 12 13 14 Rule 12(b)(6) motion which dealt, In support of its in part, with the The agreement specifically states Bayer will defend Britz at this time and will retain Rushford to do so in the Skouti Lawsuit. The parties do not dispute that Defendants paid Hoppe s fees and that Rushford represented Britz for approximately seventeen months and then withdrew from representation several months before the Skouti Lawsuit went to trial. The record does not show why Rushford withdrew from [his] representation of Britz. Term four, above, expressly reserves the right to withdraw from the defense of this case in the event of any negligence by Britz. There is no provision that Bayer was further obligated to provide a defense or counsel to Britz. Defendants failure to provide replacement counsel for Britz after Rushford withdrew may or may not have breached terms number one and three in view of the temporal limitation at this time, which introduces material ambiguity into the extent and length of the defense commitment. 15 (Britz II, Doc. 38 at 28-29) (emphasis added). Quoting this 16 passage, Britz argues that the court has already recognized that 17 the Contract To Defend can be interpreted, as Britz reads it, to 18 impose an obligation on Bayer to provide replacement counsel. 19 Bayer rejoins that no express term of the Contract to Defend 20 obligated Bayer to provide replacement counsel upon Rushford s 21 withdrawal. Bayer further notes that the agreement to provide 22 Rushford is a personal services contract which cannot be 23 specifically enforced. In addition, Bayer suggests that the term 24 at this time does not create ambiguity. According to Bayer, at 25 this time means that Bayer could stop paying attorney fees and 26 costs when there is any evidence in this case [the Skouti action] 27 28 34 1 of negligence or fault on the part of Britz (whether credible or 2 not). 3 obligation, as Britz contends, to provide replacement counsel for 4 Rushford, Britz waived this right. 5 In the alternative, Bayer argues that even if it had an The Contract to Defend is susceptible of the interpretation 6 that Bayer agreed to defend Britz at this time. 7 wholly ambiguous as it leaves open the duration of the promise to 8 defend Britz. 9 to defend not just pay attorney fees and costs until "there is 10 any evidence in this case [the Skouti action] of negligence or 11 fault on the part of Britz (whether credible or not)." 12 the obligation to defend is an obligation to pay for or to 13 furnish an attorney to defend. 14 Britz 15 ambiguity, whether Bayer was obligated to provide replacement 16 counsel upon Rushford s withdrawal cannot be resolved on summary 17 judgment. 18 4th 129, 147 (2002) ( [T]he phrase appears ambiguous on the record 19 before us and, as such, presents a question to be resolved by the 20 trier of fact. ). 21 ambiguity. 22 v. Lee, 14 Cal. App. 4th 1533, 1541 (1993) (recognizing that the 23 usual 24 drafter ). except rule That term is When does the time and defense end? Bayer promised by providing Implicit in Bayer could not otherwise defend legal representation. Given the See Alexander v. Codemasters Group Ltd., 104 Cal. App. Bayer drafted the agreement and created the The ambiguity is construed against Bayer. [is] that ambiguities are construed Cathay Bank against the 25 Bayer did not tell Britz it would no longer defend Britz, it 26 only attained Britz s consent to Rushford s withdrawal. Bayer s 27 argument that a personal services contract cannot be specifically 28 35 1 enforced is misplaced. The issue is whether the Contract to Defend 2 obligated Bayer to provide replacement counsel for Rushford or 3 arrange for a defense, not whether Britz could have specifically 4 enforced the defense agreement for Rushford personally. 5 Whether Britz waiver its claimed right to replacement counsel 6 creates a triable issue of fact. 7 relinquishment of a known right after knowledge of the facts." 8 Waller v. Truck Ins. Exch., Inc., 9 "[W]aiver may be either express, based on the words of the waiving or implied, party, 11 relinquish the right." Id. Britz did not expressly waive its right 12 to replacement counsel. 13 withdrawal, but Britz did not expressly agree that Bayer owed no 14 further obligation to provide replacement counsel for Rushford. 15 Whether Britz impliedly waived its right to replacement counsel is 16 ordinarily a question of fact. Oakland Raiders v. Oakland-Alameda 17 County 18 Implied waiver may be determined as a matter of law where the 19 underlying facts are undisputed, or the evidence is susceptible of 20 only one reasonable conclusion. Oakland Raiders, 144 Cal. App. 4th 21 at 1191 (internal citations omitted). 22 here. Inc., on 11 Cal. 4th 1, 31 (1995). 10 Coliseum, based "Waiver is the intentional conduct indicating an intent to At most, Britz agreed to Rushford s 144 Cal. App. 4th 1175, 1191 (2006). That standard is not met 23 To the extent Bayer moves for summary judgment as to Britz s 24 claim that Bayer was obligated but failed to provide replacement 25 counsel for Rushford, Bayer s motion is DENIED. b. 26 27 Britz Alleged Breach Of An Implied Term of Adequate Defense argues, and Bayer disputes, 28 36 that implied in the 1 Contract to Defend is a term that Bayer would provide an adequate 2 defense. According to Britz, Bayer breached this implied term. 3 Britz cites case law, including Ben-Zvi v. Edmar Co., 40 Cal. App. 4 4th 468, 473 (1995), and California Civil Code §§ 1655-56, to 5 support its implied term argument. Neither source, however, 6 justifies reading an implied obligation to provide an adequate 7 defense into the Contract to Defend. 8 In Ben-Zvi the court explained when implied terms may be read 9 into a contract: 13 Under limited circumstances, the court may find that a contract includes an implied term or covenant. To effectuate the intent of the parties, implied covenants will be found if after examining the contract as a whole it is so obvious that the parties had no reason to state the covenant, the implication arises from the language of the agreement, and there is a legal necessity. 14 . . . 15 A term can only be implied . . . upon grounds of obvious necessity. 10 11 12 16 40 Cal. App. 4th at 473 (internal citation and quotation marks 17 omitted) (emphasis added). Contrary to Britz s argument, an implied 18 term that Bayer would provide an adequate defense in the Skouti 19 action is not so obvious that the parties had no reason to state 20 the covenant. 21 There is no language in the agreement remotely related to the 22 nature or quality of the performance to be provided by counsel that 23 Bayer furnished. Bayer is a business entity that sells agricultural 24 products, it is not a legal services provider. Bayer is not in a 25 position to readily assess the quality or sufficiency of Rushford s 26 defense (or Hoppe s defense) to ensure that it is adequate. 27 28 37 It 1 is not obvious that Bayer would guarantee the adequacy of a service 2 it is not in the business of providing and not in a position to 3 assess. In addition, the term adequate is inherently imprecise 4 and does not provide a discrete benchmark of performance. A 5 recognized standard could have been defined by the applicable 6 standard of care for trial attorneys in agricultural chemical 7 (products liability) and agricultural chemical service provider 8 cases. It is not obvious that the parties would agree to such a 9 vague performance standard as adequate. Finally, Rushford, as an 10 attorney, already owed a duty, under the professional standard of 11 care, to provide reasonably competent representation to Britz. See 12 Janik v. Rudy, Exelrod & Zieff, LLP, 119 Cal. App. 4th 930, 937 13 (2005); Ventura County Humane Soc y v. Holloway, 40 Cal. App. 3d 14 897, 902 (1974). 15 Britz s reliance on the California Civil Code fares no better. 16 California Civil Code § 1655 states that [s]tipulations which are 17 necessary to make a contract reasonable, or conformable to usage, 18 are implied, in respect to matters concerning which the contract 19 manifests no contrary intention. California Civil Code § 1656 20 states that [a]ll things that in law or usage are considered as 21 incidental to a contract, or as necessary to carry it into effect, 22 are implied therefrom, unless some of them are expressly mentioned 23 therein, when all other things of the same class are deemed to be 24 excluded. 25 A stipulation that Bayer would supply an adequate defense is 26 not necessary to make the contract reasonable. On the contrary, 27 given that Bayer is not in the law business, is not in a position 28 38 1 to readily assess the adequacy of the Skouti defense, and the 2 indeterminate scope of the word adequate which has no clear, 3 unambiguous, or regularly accepted meaning, it is not reasonable to 4 read such a term into the agreement. Reading an adequate defense 5 term into the agreement is not necessary to make it reasonable. Nor 6 is an adequate defense term necessary to carry it into effect. 7 The common meaning of the word defend, coupled with the implied 8 covenant of good faith and fair dealing, is all that is needed to 9 carry the agreement to defend into effect. No additional 10 contractual requirement of adequate representation is necessary. 11 Neither Civil Code § 1655 or 1656 mandates that an implied 12 obligation to provide an adequate defense be read into the 13 Contract to Defend. 14 To the extent Bayer moves for summary judgment on Britz s claim 15 for breach of an alleged obligation to provide an adequate defense 16 in the Skouti action, Bayer s motion is GRANTED. 17 3. Breach Of The Implied Covenant Of Good Faith And Fair Dealing 18 Bayer moves for summary judgment on the implied covenant claim 19 arguing that it performed all the express terms of the Contract to 20 Defend, and, accordingly, could not have violated the implied 21 covenant of good faith and fair dealing. This argument lacks merit 22 as stated above, there is a triable issue at to whether Bayer 23 honored its express contractual duty to defend. 24 Bayer also argues that summary judgment is appropriate on this 25 claim because Britz is improperly attempting to use the implied 26 covenant of good faith and fair dealing to augment the agreement by 27 28 39 1 adding an adequate defense term that was not bargained for by the 2 parties. In its briefing, Britz does use the implied covenant of 3 good faith and fair dealing as support for its position that Bayer 4 was obligated to provide an adequate defense, and contends that 5 Bayer breached the implied covenant in this regard. 6 The implied covenant of good faith and fair dealing exists in 7 every contract. The implied covenant is aimed at making effective 8 the agreement's promises. Kransco v. Am. Empire Surplus Lines Ins. 9 Co., 23 Cal. 4th 390, 400 (2000). Broadly stated, that covenant 10 requires that neither party do anything which will deprive the other 11 of the benefits of the agreement. Freeman v. Mills, & Inc. v. 12 Belcher Oil Co., 11 Cal. 4th 85, 91 (1995). The implied covenant 13 prevent[s] a contracting party from engaging in conduct which 14 (while not 15 frustrates technically the other transgressing party's rights the to express the covenants) benefits of the 16 contract, Racine & Laramie, Ltd. v. Dept. of Parks & Recreation, 17 11 Cal. App. 4th 1026, 1031-32 (1992). The implied covenant also 18 imposes a duty on each contracting party to do everything that the 19 contract presupposes that he will do to accomplish its purpose. 20 L.A. Mem l Coliseum Comm n v. Nat l Football League, 791 F.2d 1356, 21 1361 (9th Cir. 1986); see also McClain v. Octagon Plaza, LLC, 159 22 Cal. App. 4th 784, 806-07 (2008). 23 The implied covenant, however, does not extend beyond the 24 terms of the contract at issue. Poway Royal Mobilehome Owners 25 Ass n v. City of Poway, 149 Cal. App. 4th 1460, 1477 (2007). 26 Instead, the covenant of good faith and fair dealing is limited to 27 assuring compliance with the express 28 40 terms of the contract. 1 Pasadena Live, LLC v. City of Pasadena, 114 Cal. App. 4th 1089, 1094 2 (2004). 3 4 5 6 7 As the California Supreme Court has recognized: The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party's right to receive the benefits of the agreement actually made. The covenant thus cannot be endowed with an existence independent of its contractual underpinnings. It cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement. 8 Guz v. Bechtel Nat l, Inc., 24 Cal. 4th 317, 349-50 (2000) (internal 9 citations and quotation marks omitted). 10 Contrary to what Britz suggests, the implied covenant of good 11 faith and fair dealing 12 adequate defense. did not require Bayer to provide an Such a requirement imposes a substantive duty 13 on Bayer that extends beyond the express terms of the contract. The 14 implied covenant of good faith and fair dealing cannot be used to 15 so augment the agreement. The express terms of the agreement 16 required Bayer to defend the Skouti action and supply Rushford to 17 defend the Skouti action with Britz. 18 meaning of the word defend is the The common and ordinary specified performance 19 obligation. 20 Even though the implied covenant of good faith and fair dealing 21 did not require Bayer to provide an adequate defense, there 22 remains a triable issue as to whether Bayer breached the covenant 23 of good faith and fair dealing. Viewing the evidence in a light 24 most favorable to Britz, Bayer supplied an attorney, Rushford, who 25 had a prior attorney-client relationship with Bayer, undisclosed by 26 Rushford or Bayer. Rushford also reported to Bayer during the 27 Skouti litigation, including on the Ethrel product, not to Britz. 28 41 1 Rushford also disclosed to Bayer concerns he had with the adequacy 2 of the Skouti defense, but neither Rushford nor Bayer disclosed this 3 fact to Britz. Viewing the evidence in a light most favorable to Britz, while 4 5 Bayer promised that it would defend the Skouti action and provide 6 Rushford to Britz, whether Bayer made Rushford fully available to 7 defend or whether Bayer denied Britz the benefits of its bargain, 8 i.e., Rushford s actual assistance in defending the Skouti action 9 with Britz, is a disputed issue of material fact. To the extent Bayer moves for summary judgment on the ground 10 11 that the implied covenant cannot be used to impose a duty on Bayer 12 to provide an adequate defense, Bayer s motion is GRANTED. 13 Bayer s motion for summary judgment on the ground that it did not 14 breach the implied covenant in any way is DENIED. 15 4. Causation As To The Contract To Defend And The Implied Covenant Claims 16 Because there is a triable issue as to whether Bayer breached 17 the Contract to Defend and the implied covenant of good faith an 18 fair dealing in that contract, it is necessary to consider Bayer s 19 motion for summary judgment on the causation aspect of these claims. 20 Quoting Ventura, 40 Cal. App. 3d at 907, Bayer argues that it 21 is black-letter law that damages may not be based upon sheer 22 speculation or surmise, and the mere possibility or even probability 23 that damage will result from wrongful conduct does not render it 24 actionable. Bayer argues that the entire notion that its alleged 25 breaches were the cause of an unfavorable judgment at the Skouti 26 trial is so speculative that Britz cannot recover damages. 27 28 42 Bayer 1 cites two cases, Vu v. California Commerce Club, Inc., 58 Cal. App. 2 4th 229 (1997), and Sidney Marshak v. Emma H. Ballesteros, 72 Cal. 3 App. 4th 1514 (1999), in support of its argument. Bayer s arguments 4 are not without force. 5 Causation resulting in damage is an essential element of a 6 claim for breach of contract as well as a claim for breach of the 7 implied covenant of good faith and fair dealing. Thompson Pacific 8 Construction, Inc. v. City of Sunnyvale, 155 Cal. App. 4th 525, 541 9 (2007); Vu, 58 Cal. App. 4th at 234. A fundamental rule of law is 10 that whether the action be in tort or contract compensatory damages 11 cannot be recovered unless there is a causal connection between the 12 act or omission complained of and the injury sustained. McDonald 13 v. John P. Scripps Newspaper, 210 Cal. App. 3d 100, 104 (1989) 14 (internal quotation marks omitted). 15 The requisite causation, or causal connection, between breach 16 and damage is established when the plaintiff demonstrates that the 17 defendant's breach was a substantial factor in causing the damage. 18 Haley v. Casa Del Rey Homeowners Ass'n, 153 Cal. App. 4th 863, 871 19 (2007); US Ecology, 129 Cal. App. 4th at 909; Linden Partners v. 20 Wilshire Linden Assocs., 62 Cal. App. 4th 508, 530 (1998); Bruckman 21 v. Parliament Escrow Corp., 190 Cal. App. 3d 1051, 1063 (1987). 22 explained in US Ecology: 23 24 25 26 The test for causation in a breach of contract (or [implied covenant]) action is whether the breach was a substantial factor in causing the damages. . . . The term substantial factor has no precise definition, but it seems to be something which is more than a slight, trivial, negligible, or theoretical factor in producing a particular result. 27 28 43 As 1 129 Cal. App. 4th at 909 (internal citations and quotation marks 2 omitted). For a breach to be a substantial factor in causing the 3 damages, it need not be the sole or exclusive cause of the 4 damages. Bruckman, 190 Cal. App. 3d at 1063; see also Banville v. 5 Schmidt, 37 Cal. App. 3d 92, 107 (1974) ( It is an established 6 principle that proximate cause, to be actionable, need not be the 7 sole factor contributing to the damages sustained, but need only be 8 A proximate cause of injury. . . . Nothing occurs in a vacuum, and 9 the event without multiple causes is inconceivable. ) (internal 10 quotation marks omitted). 11 That Glassman admitted liability believing it would be 12 strategically helpful on the issue of damages, does not preclude 13 Britz from establishing causation between Bayer s breach and the 14 alleged damages. If Britz can demonstrate, i.e., create a triable 15 issue, that Bayer's breach of the Contract to Defend and/or breach 16 of the implied covenant of good faith and fair dealing was a 17 substantial factor in causing the damages that accrued, the 18 necessary causal connection exists. If a reasonable jury would have 19 found Britz liable for the same damages had Bayer not breached, the 20 breach cannot be considered a substantial factor in causing the 21 damages. See Mills v. U.S. Bank, 166 Cal. App. 4th 871, 899 (2008) 22 ( Except in situations involving concurrent independent causes, 23 which no one contends is the case here, the actor's [wrongful] 24 conduct is not a substantial factor in bringing about harm to 25 another if the harm would have been sustained even if the actor had 26 not [acted wrongfully]. ) (quoting Viner v. Sweet, 30 Cal. 4th 27 1232, 1240 (2003) (footnote omitted)). 28 44 1 Even where a breach is a substantial factor in bringing about 2 damage, other legal principles may operate to preclude recovery. 3 See Sentry Ins. A Mutual Co. v. U.S. Reports, Inc., 322 F. App x 4 574 (9th Cir. 2009) (recognizing that a breach may be a substantial 5 factor in bringing about damage but another rule of law may relieve 6 the defendant of liability). For example, if a breach was a 7 substantial factor in causing the plaintiff s damages, but the 8 damages were of a type not reasonably foreseeable at the time of 9 contracting nor within the contemplation of the parties at that 10 time, the damages are not recoverable. See Equip. Corp. v. Litton 11 Saudi Arabia Ltd., 7 Cal. 4th 503, 515 (1994) ( Contract damages are 12 generally limited to those within the contemplation of the parties 13 when the contract was entered into or at least reasonably 14 foreseeable by them at that time; consequential damages beyond the 15 expectations of the parties are not recoverable. ); see also Gibson 16 v. Office of Attorney Gen., State of Cal., 561 F.3d 920, 929 (9th 17 Cir. 2009) (applying California law and stating Plaintiffs 18 contractual claims must fail because Plaintiffs have failed to 19 allege any foreseeable contract damages ); Lewis Jorge Constr. 20 Mgmt., Inc. v. Pomona Unified Sch. Dist., 34 Cal. 4th 960, 969 (Cal. 21 2004) ( Contract damages, unlike damages in tort, do not permit 22 recovery for unanticipated injury. ) (internal citation omitted); 23 Coughlin v. Blair, 41 Cal. 2d 587, 603 (1953) ( Damages must be 24 reasonable, however, and the promisor is not required to compensate 25 the injured party for injuries that he had no reason to foresee as 26 the probable result of his breach when he made the contract. ); 27 Martin v. U-Haul Co. of Fresno, 204 Cal. App. 3d 396, 409 (1988) 28 45 1 ( [C]ontract damages are limited to those foreseeable by the parties 2 at the time of contracting. ). One situation in which this may 3 occur is when an independent event intervenes in the chain of 4 causation, producing harm of a kind and degree so far beyond the 5 risk the [defendant] should have foreseen that the law deems it 6 unfair to hold him responsible. Soule v. Gen. Motors Corp., 8 Cal. 7 4th 548, 573 n.9 (1994); see also Lugtu v. Cal. Highway Patrol, 26 8 Cal. 4th 703, 725 (2001). In Vu, Mansour Matloubi and Tom Vu, brought an action against 9 10 a gambling establishment, the California Commerce Club, Inc. 11 ( Club ), after they lost a substantial amount of money in two card 12 games Asian stud poker and Pan-Nine. 58 Cal. App. 4th at 231. The 13 plaintiffs asserted various contract claims including breach of an 14 implied contract, and breach of the implied covenant of good faith 15 and fair dealing, premised on the theory that an implied contract 16 existed between them and the Club whereby the Club impliedly agreed 17 to provide adequate security, including the investigation of 18 cheating, to insure that games were honestly played. Id. at 232. 19 The Club allegedly breached this duty, and this caused the 20 plaintiffs to lose their hands to cheating players. Id. 21 On appeal, the court concluded that the causal connection 22 between the alleged breach (the Club s failure to provide adequate 23 security) and the damages (the plaintiffs gambling losses) was 24 based on speculation that the games would have turned out more 25 favorable than they did without the alleged cheating. Id. at 235. 26 The causal connection between breach and damages was simply too 27 speculative to support a viable claim: 28 46 1 2 3 4 5 6 7 8 9 Causation of damages in contract cases, as in tort cases, requires that the damages be proximately caused by the defendant's breach, and that their causal occurrence be at least reasonably certain. (Civ. Code, §§ 3300, 3301.) No such certainty or probability appertains with respect to plaintiffs' gambling losses, assertedly the result of cheating. Assuming arguendo that an adequate causal connection could be established between the club's alleged breach of security obligations and the cheating that plaintiffs allegedly encountered, no such relationship appears between the cheating and plaintiffs' losses. That is because winning or losing at card games is inherently the product of other factors, namely individual skill and fortune or luck. It simply cannot be said with reasonable certainty that the intervention of cheating such as here alleged was the cause of a losing hand, and certainly not of two weeks' or two years' net losses (as alleged by Matloubi and Vu respectively). 10 Id. at 233. Here, Bayer attempts to analogize the Skouti litigation 11 to the card games in Vu, arguing that the outcome in the Skouti 12 action was inherently the product of other factors including the 13 actions of the attorneys for each party, the court, the witnesses, 14 and ultimately the most unpredictable variable, the jury. Bayer s 15 attempted analogy between the card games in Vu and civil litigation 16 is unpersuasive. 17 Although every trial has some element of risk and 18 unpredictability, a card game of chance and a civil lawsuit are too 19 dissimilar to support application of Vu s reasoning. In a card 20 game, the players do not get to see the cards of all their 21 opponents. In a civil lawsuit, however, broad discovery permits the 22 parties to put all their cards on the table before trial. Second, 23 in many card games, the skill a player possesses for example, 24 being able to read other players, predict the cards held by others, 25 or calculate the odds of winning is not known to or possessed by 26 other players. In a lawsuit, motion practice, depositions, written 27 28 47 1 discovery, and dispositive motions, provide attorneys and parties 2 a means to observe the technical, forensic, and adversary skills of 3 their opponent and to evaluate the likelihood of success on the 4 merits. In a game of chance, a player has no control over the 5 limited cards dealt to him or her, injecting an element of fortune 6 or luck into the game. A litigant has the power to gather as many 7 facts as exist in the discovery process and to test their legal 8 merit in dispositive motions and in limine motions before trial. 9 Winning or losing a civil lawsuit, like the Skouti action, does 10 not hinge on unobservable skill, chance, and unpredictability that 11 is inherent in gambling. 12 In a lawsuit, the performance of an attorney can be objectively 13 evaluated in light of prevailing standards of care to determine 14 whether breaches of the duty of competence caused the loss of a 15 case. California courts have long recognized and applied the trial 16 within a trial analysis to establish causation between an 17 attorney s wrongful act or omission and the damage the client 18 suffered. Mattco Forge, Inc. v. Arthur Young & Co, 52 Cal. App. 4th 19 820, 840 (1997); Viner, 30 Cal. 4th at 1240 n.4, 1241, 1244; Blanks 20 v. Shaw, 171 Cal. App. 4th 336, 357 (2009). In trial within a 21 trial cases, to prevail, the plaintiff must demonstrate that absent 22 or but for the claimed malpractice, it is more likely than not that 23 the plaintiff would have obtained a more favorable result. Viner, 24 30 Cal. 4th at 1244 (emphasis removed). Such a showing satisfies 25 the of substantial factor requirement causation, as the 26 substantial factor test subsumes the but for test. Id. at 1239. 27 As explained in Mattco Forge: 28 48 1 2 3 4 5 The trial-within-a-trial method does not recreate what a particular judge or fact finder would have done. Rather, the jury's task is to determine what a reasonable judge or fact finder would have done. . . . Even though should and would are used interchangeably by the courts, the standard remains an objective one. The trier of facts determines what should have been, not what the result would have been, or could have been, or might have been, had the matter been before a particular judge or jury. 6 52 Cal. App. 4th at 840 (citation and internal quotation marks 7 omitted). The trial within a trial method may be complicated, 8 but it avoids speculative and conjectural claims, Blanks, 171 Cal. 9 App. 4th at 357, which is the concern at the heart of Bayer s 10 causation argument. Applying that framework here, to survive 11 summary judgment on the issue of causation, Britz must create a 12 triable issue that, absent Bayer s alleged breach of the Contract 13 to Defend and/or the implied covenant of good faith and fair 14 dealing, it is more likely than not that Britz would have obtained 15 a more favorable result in the Skouti action.13 This is normally a 16 question of fact for the jury. See Kurinij v. Hanna & Morton, 55 17 Cal. App. 4th 853, 864 (1997). 18 The evidence, when viewed in a light most favorable to Britz 19 and drawing all inferences in its favor, is sufficient to create a 20 triable issue on causation. Despite Glassman s potentially 21 supervening admission to breach the chain of causation, there is 22 evidence that Rushford did not take an active role in defending the 23 Skouti litigation and Britz points to specific examples. Among 24 others, Rushford did not disclose the concerns he had regarding the 25 26 27 13 As Bayer puts it, Britz must prove that, absent Bayer s alleged breach, Britz would have obtained a more favorable verdict. 28 49 1 defense, naturally preventing Britz from correcting the perceived 2 deficiencies. He failed to recommend a test trial of the tank mix 3 in the Skouti litigation. Britz has subsequently conducted a test 4 trial of the tank mix at issue the Skouti litigation and allegedly 5 found that the tank mix did not cause crop damage. It is unclear 6 as to the extent Rushford interacted with Hoppe, evaluated Hoppe, 7 or made suggestions how Hoppe s performance before trial could be 8 improved. This presents a triable issue as to whether Rushford s 9 failure to be more actively involved in defense of the Skouti 10 litigation, including his failure to recommend test trials, breached 11 Bayer s promise that Rushford would defend the Skouti litigation and 12 absent this breach, Britz would have more successfully defended the 13 Skouti litigation. Because a reasonable jury could attribute 14 Rushford s failures to Bayer s use of Rushford as a monitor, not a 15 litigator, the implied covenant of good faith and fair dealing claim 16 also survives a causation challenge on summary judgment. 17 The other case Bayer cites, Marshak, 72 Cal. App. 4th 1514, 18 does not alter this analysis. Marshak is an example of a trial 19 within a trial case that did not survive summary judgment on the 20 issue of causation. There, the plaintiff, Sidney Marshak, hired 21 defendant Emma Ballesteros, an attorney, to represent the plaintiff 22 in a dissolution action. Id. at 1516. During the case, the parties 23 attended a mandatory settlement conference at which the plaintiff 24 and his ex-wife stipulated to a settlement in open court. Id. The 25 settlement terms covered attorney fees, restraining orders, and 26 distribution of property. Id. The settlement also relieved the 27 plaintiff of any continuing support obligation. Id. 28 50 Three days 1 after entry of the stipulated settlement, the plaintiff, in pro per, 2 filed a motion to set aside the judgment. Id. The trial court 3 denied the motion, the plaintiff appealed, and the appellate court 4 affirmed. Id. The plaintiff then sued his attorney claiming that 5 she negligently failed to object to the overvaluation of plaintiff s 6 accounts receivable from his medical practice, which was charged to 7 him, and to the undervaluation of the marital residence, which was 8 awarded to plaintiff s ex-wife, which together resulted in a claimed 9 loss to the plaintiff of over three hundred thousand dollars. Id. 10 Thus, the gravamen of plaintiff s complaint is that defendant 11 advised him to settle the marital dissolution action for less than 12 the case was worth. Id. 13 Consistent with Viner s standard, Marshak noted that for the 14 plaintiff to prevail in his malpractice action, he must prove that 15 the dissolution action would have resulted in a better outcome 16 absent the claimed negligence. Id. at 1518. After noting that the 17 breach of a duty causing only speculative harm is insufficient to 18 support a viable claim, the court concluded that the plaintiff 19 lacked evidence demonstrating that, absent the negligence, he would 20 have obtained a better outcome: 21 22 23 24 25 26 27 Here, plaintiff simply alleges that the case was worth more than he settled it for. He proffered no evidence to establish the value of his case, other than his own declaration that the family residence was worth more, and the accounts receivable were worth less, than they were valued at for the purposes of settlement. Even if he were able to prove this, however, he would not prevail. For he must also prove that his ex-wife would have settled for less than she did, or that, following trial, a judge would have entered judgment more favorable than that to which he stipulated. Plaintiff has not even intimated how he would establish one or the other of these results with the certainty required to permit an 28 51 1 award of damages. 2 Id. at 1519. 3 This case is distinguishable from Marshak. The plaintiff in Marshak proffered no evidence to support the 4 trial within a trial analysis. Britz has evidence to create a 5 triable issue on causation, i.e., whether, absent Bayer s breach of 6 the Contract to Defend and/or the implied covenant of good faith and 7 fair dealing, Britz would have obtained a better outcome in the 8 Skouti action. [T]he plaintiff need not prove causation with 9 absolute certainty. Viner, 30 Cal. 4th at 1243. 10 Even if Bayer s breach was a substantial factor in causing 11 Britz damage, Britz must establish that the claimed damage, the 12 adverse judgment, was a type of damage reasonably foreseeable or 13 within the contemplation of the parties at the time of contracting. 14 Viewing the evidence in a light most favorable to Britz, one 15 reasonably foreseeable consequence of Bayer s failure to honor its 16 Contract to Defend Britz and/or its breach of the covenant of good 17 faith and fair dealing implied in that contract, was that an adverse 18 judgment would be rendered against Britz for the damage to Skouti s 19 Vineyards. An adverse judgment in the lawsuit to be defended is the 20 type of harm that a contracting party in Bayer s position would 21 reasonably expect to flow from failing to defend Britz as promised 22 and/or denying Britz the benefits of promised defense. 23 Nor can it be concluded as a matter of law that Glassman s 24 admission of liability produced harm of a kind and degree so far 25 beyond the risk that Bayer should have foreseen that the law deems 26 it unfair to hold [Bayer] responsible. Soule, 8 Cal. 4th at 573 27 n.9. This is question of fact. The adverse judgment against Britz 28 52 1 in the Skouti litigation is the type of harm that Bayer should have 2 foreseen as a likely consequence of its failure to honor its 3 Contract to Defend and/or its breach of the covenant of good faith 4 and fair dealing implied in the Contract to Defend. 5 Bayer s argument regarding the speculative nature of the 6 damages is cogent but unpersuasive. That damages are hard to 7 measure does not make them unrecoverable. Bayer s motion for 8 summary judgment on the causation and damages issues is DENIED. 9 10 5. Declaratory Relief Britz s declaratory relief claim requests a declaration that: 11 (1) Bayer was obligated to furnish Britz with an adequate defense 12 in the Skouti action, not merely to pay the fees of Plaintiff's 13 attorneys (2) Bayer is obligated to indemnify [Britz] for the 14 judgment against [Britz] in the Skouti [a]ction, and for 15 post-judgment interest and costs ; and (3) that Bayer is obligated 16 to indemnify [Britz] for [Britz's] attorney fees and costs 17 post-verdict and on appeal in the Skouti [a]ction. 18 Summary judgment is warranted on Britz s declaratory relief 19 claim for at least two reasons. First, Britz s declaratory relief 20 claim fails on the merits with respect to each subject. Bayer was 21 not obligated, whether by virtue of an implied term or the implied 22 covenant of good faith and fair dealing, to supply an adequate 23 defense. Nor is Bayer obligated to indemnify Britz for the judgment 24 in the Skouti action, for the post-judgment interest and costs, for 25 Britz s attorney s fees and costs post-verdict or on appeal in the 26 Skouti action. Britz s admission of its own negligence establishes 27 that the Skouti action was based on . . . [t]he negligence of 28 53 1 [the] Distributor" within the meaning of the indemnity agreement. 2 Because Britz s underlying claim for indemnity is barred, its 3 associated claim for a declaration regarding its alleged 4 indemnification entitlements is equally barred. Britz has not sued 5 Bayer for equitable indemnity or contribution. Britz is not 6 entitled to the declaratory relief it seeks. 7 Second, the declaratory relief Britz requests is inappropriate. 8 A declaratory relief claim operates prospectively, and not merely 9 for the redress of past wrongs. Babb v. Superior Court, 3 Cal. 3d 10 841, 848 (1971) (internal quotation marks omitted). The purpose of 11 declaratory relief is to enable the parties to shape their conduct 12 so as to avoid a breach. Id. Here, however, Britz seeks 13 declaratory relief only to address past wrongs in connection with 14 the Skouti litigation, which is concluded and final. 15 declarations all deal 16 occurred in the past. with purported breaches by The requested Bayer which Britz s declaratory relief is thus not 17 prospective, would not enable the parties to shape their conduct so 18 as to avoid a breach, and is not appropriate. 19 In a similar vein, courts have recognized where a party has 20 a fully matured cause of action for money, the party must seek the 21 remedy of damages, and not pursue a declaratory relief claim. 22 Canova v. Trs. of Imperial Irrigation Dist. Employee Pension Plan, 23 150 Cal. App. 4th 1487, 1497 (2007); see also Gafcon, Inc. v. Ponsor 24 & Assocs., 98 Cal. App. 4th 1388, 1404 (2002). Here, Britz has 25 fully matured causes of action that seek monetary relief for Bayer s 26 alleged breaches. An associated declaratory relief claim on these 27 fully matured causes of action is inappropriate. 28 54 Courts have also 1 recognized that a where a plaintiff has alleged a substantive cause 2 of action, a declaratory relief claim should not be used as a 3 superfluous second cause of action for the determination of 4 identical issues subsumed within the first. Hood v. Superior Court, 5 33 Cal. App. 4th 319, 324 (1995) (internal quotation marks omitted). 6 The requested declarations address issues subsumed within Britz s 7 causes of action for breach of the Contract to Defend, breach of the 8 implied covenant of good faith and fair dealing, and breach of the 9 Contract to Indemnify. Accordingly, a separate declaratory relief 10 claim is superfluous and inappropriate. Britz s declaratory relief claim fails. 11 Summary judgment is 12 GRANTED in favor of Bayer on Britz s claim for declaratory relief. Fraud14 13 6. 14 In California, [t]he elements of fraud, which give[] rise to 15 the tort action for deceit, are (a) misrepresentation (false 16 representation, concealment, or nondisclosure); (b) knowledge of 17 falsity (or scienter ); (c) intent to defraud, i.e., to induce 18 reliance; (d) justifiable reliance; and (e) resulting damage. Small 19 v. Fritz Companies, Inc., 30 Cal. 4th 167, 173 (2003); see also 20 Conroy v. Regents of the Univ. of Cal., 45 Cal. 4th 1244, 1255 21 (2009); City Solutions, Inc. v. Clear Channel Commc n, 365 F.3d 835, 22 840 (9th Cir. 2004). 23 A fraud claim requires actual reliance on the 24 25 14 26 27 In its opposition brief, Britz lumps all of its fraud theories together under one heading without addressing the naunces of each fraud claim fraud, negligent misrepresentation, and false promise it has alleged. 28 55 1 misrepresentation. Actual reliance is a component of justifiable 2 reliance. Buckland v. Threshold Enters., Ltd., 155 Cal. App. 4th 3 798, 807 (2007). Actual reliance occurs when a misrepresentation 4 is an immediate cause of [a plaintiff's] conduct, which alters his 5 legal relations, and when, absent such representation, he would not, 6 in all reasonable probability, have entered into the contract or 7 other transaction. Conroy, 54 Cal. 4th at 1257 (internal quotation 8 marks omitted) (alteration in original). 9 The claim for fraud in Britz s Amended Complaint is based on 10 the September 10, 2002, letter from Bayer (Ferguson) to Britz. As 11 alleged in the Amended Complaint: 12 13 14 81. On or about September 10, 2002, Ferguson, on behalf of Bayer, represented to Plaintiff that: it would be Bayer's position that it would defend and indemnify any claim related to its product in a situation where the distributor acted as a purely 'pass through' entity . 15 Ferguson s letter continues: That is, where there were no claims 16 and/or proof of independent negligence or acts on the part of the 17 distributor, e.g., making recommendations 18 storage, handling or transportation, etc. off-label, improper Were such independent 19 acts alleged, the distributor would be expected to defend them . . 20 . 21 According to Britz, as a distributor for Bayer, it was a 22 purely pass through entity and yet Bayer failed to indemnify 23 Britz for the liability incurred in the Skouti action. Accordingly, 24 Britz maintains that Bayer made a misrepresentation. In its motion 25 for summary judgment, Bayer argues, among other things, that the 26 September 10, 2002, letter did not contain a misrepresentation. 27 There is no triable issue whether Britz qualified as a pass 28 56 1 through entity as stated in the letter. On the witness stand, 2 Britz, through Glassman, admitted Britz breached its own duty owed 3 to the Skouti plaintiffs, contesting only the amount of damages. 4 Glassman s judicial admission 5 negligence was not qualified. 6 Britz s position on damages. accepting responsibility for It was strategically made to enhance Britz has not said that Glassman 7 testified untruthfully nor was there any reservation that Britz was 8 only a pass through dealer. Rather, Britz recommended the tank mix 9 and Skouti applied it, without direction from Bayer. No jury could 10 find that Britz was only a pass through entity in the Skouti 11 litigation. Britz never claimed to be a pass through entity and 12 cannot now change the testimony of its CFO which is binding. There 13 is no basis for a fraud claim on the theory that Bayer made a 14 misrepresentation when it stated it would defend and indemnify Britz 15 in a situation where Britz acted as a purely pass through entity 16 as Britz was not and never made that claim in the Skouti litigation. 17 Britz s pass through argument, and its fraud claim, also fail 18 for another reason. Ferguson's letter explained the scope of 19 Bayer's perceived contractual obligation by stating it would be 20 Bayer's position that it would defend and indemnify any claim 21 related to its product in a situation where the distributor acted 22 as a purely pass through entity. That is, where there were no 23 claims and/or proof of independent negligence or acts on the part 24 of the distributor, e.g., making recommendations off-label, improper 25 storage, handling or transportation, etc. Were such independent 26 acts alleged, the distributor would be expected to defend them . . 27 . (Emphasis added.) There was a claim of independently negligent 28 57 1 conduct on Britz's part. There are no facts to support a fraud 2 claim on the theory that Bayer made a misrepresentation in the 3 September 10, 2002, letter, when it represented it would defend and 4 indemnify Britz in a situation when it acted as a purely pass 5 through entity. Britz was a consultant and specialist agricultural 6 chemical dealer, and did more than simply sell the product. 7 Britz raises a new theory of fraud not alleged in its Amended 8 Complaint. Britz argues that while Bayer promised to defend Britz, 9 Bayer did not retain Rushford to defend the Skouti action, but to 10 protect its own interests. Bayer allegedly concealed this 11 purported fact from Britz. Having failed to plead such a fraudulent 12 concealment claim, Britz cannot advance such a fraud claim for the 13 first time at summary judgment. See Pickern, 457 F.3d at 968-69; 14 Wasco Prods., Inc., 435 F.3d at 992; see also Gonzalez v. City of 15 Federal Way, 299 F. App'x at 710. Moreover, Britz does not explain 16 how Bayer s non-disclosure (as opposed to Rushford s failure to 17 defend) caused Britz to suffer damages. In any event, having failed 18 to allege this fraud theory, Britz cannot assert it for the first 19 time on summary judgment. 20 Summary judgment on Britz s intentional fraud claim is GRANTED 21 in favor of Bayer. 22 7. Negligent Misrepresentation Claim 23 The tort of negligent misrepresentation is a species of the 24 tort of deceit. Conroy, 45 Cal. 4th at 1255. Unlike fraud, 25 however, a negligent misrepresentation claim does not require 26 scienter or intent to defraud. Small, 30 Cal. 4th at 173. 27 still, however, requires a misrepresentation. 28 58 A It negligent 1 misrepresentation claim encompasses [t]he assertion, as a fact, of 2 that which is not true, by one who has no reasonable ground for 3 believing it to be true, and [t]he positive assertion, in a manner 4 not warranted by the information of the person making it, of that 5 which is not true, though he believes it to be true. Small, 30 Cal. 6 4th at 174. Justifiable and actual reliance on the negligent 7 misrepresentation, and resulting damage, are also required. 8 Alliance Mortgage Co. v. Rothwell, 10 Cal. 4th 1226, 1239 n.4 9 (1995); Conroy, 45 Cal. 4th at 1256. 10 Britz s negligent misrepresentation claim is also premised on 11 the September 10, 2002, letter.15 For the same reasons discussed 12 above, Britz s negligent misrepresentation claim cannot survive 13 summary judgment. Contrary to Britz s arguments, there is no 14 triable issue as to whether Britz qualified as a purely pass 15 through entity in the Skouti action as stated in the letter it 16 did not and no reasonable jury could conclude otherwise. Because 17 there is no triable issue as to whether Britz qualified as a pass 18 through entity, there is no basis for a negligent misrepresentation 19 claim on the theory that Bayer made a negligent misrepresentation 20 when it stated it would defend and indemnify Britz in a situation 21 where it acted as a purely pass through entity. 22 Summary judgment is GRANTED on Britz s negligent 23 24 25 26 27 15 In its briefing, Britz argues that there are genuine issues of material fact as to whether at the time he wrote his September 10, 2002, letter, Ferguson intentionally or negligently misrepresented to Britz that it would be Bayer s position that it would defend and indemnify Britz in connection with the Skouti claim. (Doc. 130 at 40) (emphasis added.) 28 59 1 misrepresentation claim. 2 8. False Promise Claim 3 Promissory fraud is a subspecies of the action for fraud and 4 deceit. A promise to do something necessarily implies the intention 5 to perform; hence, where a promise is made without such intention, 6 there is an implied misrepresentation of fact that may be actionable 7 fraud. Lazar v. Superior Court, 12 Cal. 4th 631, 638 (1996). To 8 maintain an action for deceit based on a false promise, one must 9 specifically allege and prove, among other things, that the promisor 10 did not intend to perform at the time he or she made the promise and 11 that it was intended to deceive or induce the promisee to do or not 12 do a particular thing [i.e., to induce reliance]. Bldg. Permit 13 Consultants, Inc. v. Mazur, 122 Cal. App. 4th 1400, 1414 (2004). 14 Justifiable and actual reliance on the false promise, and resulting 15 damage, are also required. Dore v. Arnold Worldwide, Inc., 39 Cal. 16 4th 384, 393 (2006); Lazar, 12 Cal. 4th at 638-39; Mazur, 122 Cal. 17 App. 4th at 1415. 18 Britz s claim for false promise is also based on the September 19 10, 2002, letter. In the letter, Bayer promised that it would 20 defend and indemnify any claim related to its product in situation 21 where the distributor acted as a purely pass through entity. For 22 the same reasons discussed above, Britz's promissory fraud claim 23 cannot survive summary judgment. Contrary to Britz's arguments, 24 there is no triable issue as to whether Britz qualified as a purely 25 pass through entity in the Skouti action as stated in the letter. 26 Britz was not and no reasonable jury could conclude otherwise. 27 Because there is no triable issue as to whether Britz qualified as 28 60 1 a pass through entity, there is no basis for a promissory fraud 2 claim on the theory that Bayer made a false promise when it stated 3 it would defend and indemnify Britz in a situation where it acted 4 as a purely pass through entity and yet failed to do so, when 5 Britz admitted it was negligent as to the Skouti plaintiffs and 6 could not be a pass through entity as a matter of law. 7 B. Bayer s Second Motion 8 In Bayer s second motion, Bayer argues that, for purposes of 9 Britz s Contract to Indemnify claim, the Aventis Distribution 10 Agreement is 11 Distribution the applicable Agreement as agreement, claimed by and not Britz. the Because Bayer summary 12 judgment is warranted on Britz s claim for breach of the indemnity 13 provision in the Bayer Distribution Agreement, it need not be 14 determined whether the Aventis Distribution Agreement, which 15 specifically mentions Ethrel, applies. Accordingly, Bayer s second 16 motion for summary adjudication is DENIED as moot. 17 C. Ancillary Matters 18 1. 19 In connection with Bayer s motions, both parties have filed Judicial Notice 20 requests for judicial notice. A court make take judicial notice of 21 a fact that is not subject to reasonable dispute in that it is 22 either (1) generally known within the territorial jurisdiction of 23 the trial court or (2) capable of accurate and ready determination 24 by resort 25 questioned. to sources whose accuracy Fed. R. Evid. 201(b). cannot reasonably be Under Federal Rule of Evidence 26 201, a court may take judicial notice of matters of public record. 27 Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001) 28 61 1 (internal quotation marks omitted). 2 With respect to its first motion for summary judgment or, in 3 the alternative, summary adjudication, Bayer requests judicial 4 notice of various exhibits to the declaration of T. Mark Smith, 5 which are all litigation-related documents. Bayer requests judicial 6 notice of Exhibit P, a previous opposition brief in this action, 7 Exhibit FF, an earlier declaration in this action by Glassman, 8 Exhibit GG, an earlier declaration by Hoppe, Exhibit B, the Skouti 9 complaint, Exhibit U, a filed withdrawal of counsel form in the 10 Skouti action, Exhibit O, an association of counsel form in the 11 Skouti action, Exhibit V, a trial transcript from the Skouti action, 12 Exhibit Z, the judgment in the Skouti action, Exhibit AA, the 13 opinion by the California Court of Appeals in the Skouti action, and 14 Exhibit CC, an acknowledgment of satisfaction of judgment filed in 15 the Skouti action. These are all public records some were already 16 on the docket in this action and others are part of the state-court 17 Skouti litigation. Because they are public records, judicial notice 18 of these documents can be taken. However, to the extent that the 19 contents of the documents are disputed, existence of the documents 20 is noted. Lee, 250 F.3d at 689-90. This request for judicial notice 21 is GRANTED. 22 In connection with its opposition to Bayer s first motion, 23 Britz requests judicial notice of three documents attached to the 24 declaration of Roger M. Schrimp: (1) Britz s Amended Complaint in 25 this action; (2) the previously-issued Memorandum Decision on 26 Bayer s Rule 12(b)(6) motion to dismiss; and (3) a previous order 27 of Magistrate Judge Beck in this action. 28 62 These documents are 1 matters of public record and judicial notice of them can be taken 2 subject to the non binding effect of disputed matters in the 3 documents. 4 This request for judicial notice is GRANTED. In connection with Bayer s reply to the first motion, Bayer 5 requests judicial notice of Exhibit A to another declaration of T. 6 Mark Smith. Exhibit A is the cross-complaint Britz filed against 7 Bayer CropScience in the Skouti action. As a matter of public 8 record, judicial notice of this document can be taken, disputed 9 contents are not deemed established. This request for judicial 10 notice is GRANTED. 11 As to the second motion for summary adjudication, Bayer 12 requests judicial notice of Exhibits M and N attached to a different 13 declaration of T. Mark Smith. This request for judicial notice 14 appears to duplicate another Bayer request for judicial notice. 15 Exhibits M and N are documents already included in Bayer s first 16 motion for judicial notice (they just have different lettered tabs 17 in this request). This latter request for judicial notice is 18 DENIED. 19 As to its opposition to Bayer s second motion, Britz requests 20 judicial notice of its Amended Complaint in this action. This 21 separate request for judicial notice duplicates Britz s other 22 request for judicial notice already GRANTED. 23 2. Evidentiary Objections 24 In connection with Bayer s motion for summary judgment or, in 25 the alternative, summary adjudication, Bayer has filed written 26 objections to certain items of evidence. (Doc. 140.) Bayer has 27 objected to certain paragraphs of, and parts of an exhibit attached 28 63 1 to, the declaration of Dale Dorfmeier. Bayer has also objected to 2 certain exhibits attached to the declaration of Roger Schrimp. The 3 objection to Exhibit KK to Schrimp s declaration is overruled. With 4 respect to the remainder of the objections, in ruling on Bayer s 5 motion, no reliance was placed on inadmissible evidence properly 6 objected to by Bayer. Bayer s remaining evidentiary objections are 7 DENIED as moot. V. 8 CONCLUSION 9 For the reasons stated: 10 1. Summary judgment is GRANTED in favor of Bayer on Britz's 11 claim for breach of the express Contract to Indemnify. 12 2. Summary judgment is GRANTED in part in favor of Bayer and 13 DENIED in part on Britz's claim for breach of a Contract to Defend. a. 14 To the extent Bayer moves for summary judgment on the 15 ground that it did not breach the Contract to Defend, and that 16 damages are speculative, Bayer's motion is DENIED. b. 17 To the extent Bayer moves for summary judgment as to 18 Britz's claim that Bayer was obligated but failed to provide 19 replacement counsel for Rushford, Bayer's motion is DENIED. c. 20 To the extent Bayer moves for summary judgment on 21 Britz's claim for breach of an alleged obligation to provide an 22 "adequate" defense in the Skouti action, Bayer's motion is GRANTED. d. 23 To the extent Bayer moves for summary judgment on 24 Britz's claim for breach of an alleged obligation to pay attorney's 25 fees and costs on appeal in the Skouti action, Bayer's motion is 26 GRANTED. 27 3. Summary judgment is GRANTED in part in favor of Bayer and 28 64 1 DENIED in part on Britz's claim for breach of the implied covenant 2 of good faith and fair dealing. a. 3 To the extent Bayer moves for summary judgment on the 4 ground that it did not breach the covenant of good faith and fair 5 dealing implied in the Contract to Defend, and that damages are 6 speculative, Bayer's motion is DENIED. b. 7 To the extent Bayer moves for summary judgment on the 8 ground that the implied covenant did not obligate Bayer to provide 9 an "adequate" defense in the Skouti action, Bayer's motion is 10 GRANTED. 11 4. Summary judgment is GRANTED in favor of Bayer on Britz's 12 declaratory relief claim. 13 5. Summary judgment is GRANTED in favor of Bayer on Britz's 14 intentional fraud claim. 15 6. Summary judgment is GRANTED in favor of Bayer on Britz's 16 negligent misrepresentation claim. 17 7. Summary judgment is GRANTED in favor of Bayer on Britz's 18 false promise claim. 19 8. The requests for judicial notice in connection with 20 Bayer's first motion for summary judgment or, in the alternative, 21 summary adjudication, are GRANTED. The requests for judicial notice 22 in connection with Bayer's second motion for summary adjudication 23 are duplicative and DENIED. 24 9. Bayer's written evidentiary objections are DENIED without 25 prejudice 26 Bayer shall submit a form of order consistent with, and within 27 five (5) days following electronic service of, this Memorandum 28 65 1 Decision. 2 Consistent with Rule 56(d)(1), all parties shall have five (5) 3 days following electronic service of this decision to file a list 4 of material facts which each party believes are not genuinely at 5 issue for purposes of trial. 6 these lists shall not If separately filed by the parties, exceed five pages. STo the extent 7 practicable, the parties should meet and confer to determine whether 8 and to what extent any material facts are agreed upon for purposes 9 of trial. Agreed upon facts should be listed in a joint filing. 10 Any such joint filing has no page limitation. 11 12 SO ORDERED Dated: October 16, 2009 13 /s/ Oliver W. Wanger Oliver W. Wanger United States District Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 66

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