The Solaria Corporation v. GCL System Integration Technology Co., Ltd., No. 5:2020cv07778 - Document 64 (N.D. Cal. 2022)
Court Description: CORRECTED ORDER GRANTING IN PART AND DENYING IN PART WITHOUT PREJUDICE PLAINTIFF'S 44 MOTION FOR SUMMARY JUDGMENT. Signed by Judge Beth Labson Freeman on 1/28/2022. (blflc4, COURT STAFF) (Filed on 1/28/2022)
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1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 SAN JOSE DIVISION 6 7 THE SOLARIA CORPORATION, Plaintiff, 8 9 10 11 v. GCL SYSTEM INTEGRATION TECHNOLOGY CO., LTD., Defendant. United States District Court Northern District of California Case No. 20-cv-07778-BLF ORDER GRANTING IN PART AND DENYING IN PART WITHOUT PREJUDICE PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [Re: ECF No. 44] 12 13 This is an action for breach of contract between companies in the solar energy industry. 14 Plaintiff Solaria Corporation (“Solaria”) alleges that Defendant GCL System Integration 15 Technology Co., Ltd. (“GCL”) failed to make royalty payments pursuant to a non-exclusive license 16 agreement permitting GCL to sell products containing Solaria’s intellectual property in the 17 European Union, so Solaria seeks summary judgment of breach of contract and damages for the 18 missed payments plus interest and attorneys’ fees. Solaria seeks (1) $671,926.23 owed under a 19 September 4, 2020 agreement; (2) $92,909.91 in prejudgment interest; (3) $78,197.88 in attorneys’ 20 fees; and (4) $1,000,000 owed on or before January 1, 2021 under an April 23, 2019 agreement, for 21 a total of $1,843,034.02. GCL argues that it sold far less of Solaria’s intellectual property than either 22 of the parties expected it to when they entered the agreements, so it raises various contract defenses 23 to keep Solaria from enjoying what GCL argues would be a significant windfall under the 24 agreements. In addition to arguing that GCL’s defenses fail to raise an issue of material fact as to 25 its summary judgment motion, Solaria moves to strike GCL’s defenses because GCL failed to either 26 plead or disclose them during fact discovery. 27 Based on the below reasoning, the Court (1) DENIES Solaria’s Motion to Strike GCL’s 28 defenses under Rules 16 and 37; (2) GRANTS Solaria’s Motion for Summary Judgment as to GCL’s 1 breach of contract regarding the $671,926.23 payment; and (3) DENIES WITHOUT PREJUDICE 2 Solaria’s Motion for Summary Judgment as to GCL’s breach of contract regarding the January 1, 3 2021 $1,000,000 payment. Further, the Court DENIES WITHOUT PREJUDICE Solaria’s requests 4 for prejudgment interest and attorneys’ fees. United States District Court Northern District of California 5 I. BACKGROUND 6 Solaria is a Delaware solar technology company that designs, develops, and sells “high- 7 performance, high-efficiency photovoltaic (PV) solar modules and systems for residential and 8 commercial applications,” with its principal place of business in California. See Complaint, 9 ECF No. 1 ¶ 1. GCL is a Chinese corporation with its principal place of business in the People’s 10 Republic of China, which manufactures and sells solar modules throughout the world. See id. ¶ 2; 11 Declaration of Jordan Trent Jones (“Jones Decl.”), ECF No. 44-1, Ex. B. 12 On November 14, 2017, Solaria and GCL entered into a Technology Cross License 13 Agreement (“TCLA”) as part of the settlement of a trade secrets action in California Superior Court, 14 titled Solaria Corporation v. GCL Solar Energy, Inc., Case No. RG16830545. See Jones Decl., 15 ECF No. 44-1, Ex. A, Technology Cross License Agreement (“TCLA”); Opposition, ECF No. 47 16 at 1. The TCLA gave GCL a non-exclusive license to sell solar modules that incorporated Solaria’s 17 intellectual property (“Licensed Products”). See TCLA § 2.1. The license permitted GCL to sell 18 Licensed Products in any territory, excluding, for the first five years, the United States and the 19 European Union (“EU”). See id. §§ 1(l), 2.1.1. In exchange, Solaria agreed to pay royalties of 20 $0.003 for each watt of Licensed Products (“Wp”) GCL sold. See id. § 3.1. 21 On April 23, 2019, Solaria and GCL amended the TCLA. See Jones Decl., ECF No. 44-1, 22 Ex. C, Amendment to Technology Cross License Agreement (“A-TCLA”). Lifting the TCLA 23 restriction to sell Licensed Products in the EU, the A-TCLA licensed GCL to sell Licensed Products 24 in the EU for ten years. See A-TCLA §§ 1(c)–(f). Further, the A-TCLA required GCL to pay the 25 following royalties for products incorporating Solaria intellectual property sold in the EU: “(i) USD 26 $0.003/Wp; (ii) a non-refundable prepaid royalty fee of USD $2,000,000.00 upon execution of this 27 Amendment to be applied to royalty payments for the first 667 MWp; and (iii) additional non- 28 refundable prepaid royalties of US $1,500,000.00 due on or before January 1, 2020 and USD 2 United States District Court Northern District of California 1 $1,000,000.00 due on or before January 1, 2021.” See id. § 1(e). The A-TCLA also provided that 2 “[f]ailure to make any of the payments when due shall be grounds for termination of the license 3 grant provided herein.” See id. 4 GCL did not make the first $2,000,000 non-refundable prepaid royalty fee (“First A-TCLA 5 Payment”) to Solaria upon execution of the A-TCLA. See Jones Decl., ECF No. 44-1, Ex. D, June 6 12, 2019 Payment Agreement; Motion, ECF No. 44 at 2; Opposition, ECF No. 47 at 4. On June 12, 7 2019, Solaria and GCL executed a payment agreement extending the time for GCL to pay the first 8 $2,000,000 fee until July 1, 2019. See Jones Decl., ECF No. 44-1, Ex. D, June 12, 2019 Payment 9 Agreement. GCL paid the fee on or about June 26, 2019. See Jones Decl., ECF No. 44-1 ¶ 7. 10 The A-TCLA provided that a second payment—additional non-refundable prepaid royalties 11 of $1,500,000 (“Second A-TCLA Payment”)—was “due on or before January 1, 2020” to Solaria. 12 See A-TCLA § 1(e). GCL did not make the second payment by January 1, 2020. See Jones Decl., 13 ECF No. 44-1 ¶ 9. On March 16, 2020, Solaria and GCL executed a payment agreement that split 14 the second A-TCLA payment into two payments of $750,000 plus interest—one due on March 31, 15 2020 and the second due on June 30, 2020. See Jones Decl., ECF No. 44-1, Ex. F, March 16, 2020 16 Payment Agreement § 1.1. GCL made the first of the two $750,000 payments on or about March 31, 17 2020. See Jones Decl., ECF No. 44-1 ¶ 11. But GCL failed to make the second payment on June 18 30, 2020. See id. ¶ 12. And on July 29, 2020, GCL paid Solaria only an additional $100,000. See 19 id. 20 On September 4, 2020, Solaria and GCL executed a payment agreement for the remaining 21 balance due on the second installment of the March 16, 2020 Payment Agreement with interest, 22 requiring GCL to pay (1) $200,000 plus interest by September 30, 2020; (2) $200,000 plus interest 23 by October 31, 2020; and (3) $271,926.23 plus interest by November 30, 2020. See Jones Decl., 24 ECF No. 44-1, Ex. G, September 4, 2020 Amendment to Payment Agreement § 1.1; Jones Decl., 25 ECF No. 44-1 ¶ 13. GCL made none of these payments. See Jones Decl., ECF No. 44-1 ¶ 16. 26 The A-TCLA further provided that a third payment—additional non-refundable prepaid 27 royalties of $1,000,000 (“Third A-TCLA Payment”)—was “due on or before January 1, 2021” to 28 Solaria. See A-TCLA § 1(e). GCL did not make this payment by January 1, 2021. See Jones Decl., 3 United States District Court Northern District of California 1 ECF No. 44-1 ¶ 16. 2 During 2019 and 2020, GCL sold approximately 1.39 MWp of Licensed Products in the 3 European Union. See Declaration of Tony Tootell (“Tootell Decl.”), ECF No. 47-1, Ex. 16 at 5, 8; 4 Tootell Decl., ECF No. 47-1 ¶ 16. In total, GCL has paid Solaria approximately $2,871,923.23 so 5 far pursuant to the A-TCLA and the ensuing payment agreements. See Opposition, ECF No. 47 6 at 6. 7 Solaria filed suit on November 4, 2020. See Complaint, ECF No. 1. On April 23, 2021, 8 Solaria informed the Court that it would be filing an early summary judgment motion, and the parties 9 proposed an expedited schedule whereby fact discovery closed on September 10, 2021. See Joint 10 Case Management Statement, ECF No. 25. The Court scheduled a hearing on Solaria’s early 11 summary judgment motion for December 2, 2021. Fact discovery closed on September 10, 2021, 12 except for the parties’ Rule 30(b)(6) depositions, which were completed in October. 13 ECF No. 46. See 14 Solaria filed a Motion for Summary Judgment on October 28, 2021, arguing that the Court 15 should find as a matter of law that GCL owes it at least $1,843,034.02, including (1) $671,926.23 16 owed under the September 4, 2020 Payment Agreement; (2) $92,909.91 in interest as of October 17 27, 2021; (3) $78,197.88 in attorneys’ fees as of October 27, 2021; and (4) $1,000,000 owed under 18 the Third A-TCLA Payment as of January 1, 2021. See Motion, ECF No. 44 at 4–5. GCL opposed, 19 arguing that (1) it is ambiguous whether the A-TCLA required payment of the Second or Third 20 A-TCLA Payments if GCL did not sell the 667 MWp of Licensed Products covered by the First A- 21 TCLA Payment; (2) GCL’s performance under the A-TCLA should be excused under the frustration 22 of purpose doctrine or the A-TCLA should be reformed under the mutual mistake doctrine based on 23 GCL’s sale of only 1.39 MWp of Licensed Products in the EU during 2019 and 2020; (3) Solaria’s 24 Motion is premature under Rule 56(d); and (4) GCL does not owe the Third A-TCLA Payment, 25 attorneys’ fees, or prejudgment interest. See Opposition, ECF No. 47. On reply, Solaria argues, 26 inter alia, that GCL’s breach of contract defenses should be stricken or found to be waived, since 27 GCL did not plead those defenses or disclose them during fact discovery despite Solaria’s diligence 28 and multiple court orders. See Reply, ECF No. 52. 4 1 2 3 II. LEGAL STANDARD A. Motion for Summary Judgment “A party is entitled to summary judgment if the ‘movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.’” City of 4 Pomona v. SQM N. Am. Corp., 750 F.3d 1036, 1049 (9th Cir. 2014) (quoting Fed. R. Civ. P. 56(a)). 5 6 A fact is “material” if it “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is “genuine” if there 7 is sufficient evidence for a reasonable trier of fact to decide in favor of the nonmoving party. Id. 8 The party moving for summary judgment bears the initial burden of informing the Court of 9 the basis for the motion and identifying portions of the pleadings, depositions, answers to 10 interrogatories, admissions, or affidavits that demonstrate the absence of a triable issue of material United States District Court Northern District of California 11 fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). To meet its burden, “the moving party 12 must either produce evidence negating an essential element of the nonmoving party’s claim or 13 defense or show that the nonmoving party does not have enough evidence of an essential element 14 to carry its ultimate burden of persuasion at trial.” Nissan Fire & Marine Ins. Co. v. Fritz Cos., Inc., 15 210 F.3d 1099, 1102 (9th Cir. 2000). In judging evidence at the summary judgment stage, the Court 16 17 “does not assess credibility or weigh the evidence, but simply determines whether there is a genuine factual issue for trial.” House v. Bell, 547 U.S. 518, 559–60 (2006). Where the moving party will 18 have the burden of proof on an issue at trial, it must affirmatively demonstrate that no reasonable 19 trier of fact could find other than for the moving party. Celotex, 477 U.S. at 325; Soremekun v. 20 Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). 21 If the moving party meets its initial burden, the burden shifts to the nonmoving party to 22 produce evidence supporting its claims or defenses. Nissan Fire, 210 F.3d at 1103. If the 23 nonmoving party does not produce evidence to show a genuine issue of material fact, the moving 24 party is entitled to summary judgment. Celotex, 477 U.S. at 323. “The court must view the evidence 25 in the light most favorable to the nonmovant and draw all reasonable inferences in the nonmovant’s 26 27 favor.” City of Pomona, 750 F.3d at 1049. “[T]he ‘mere existence of a scintilla of evidence in support of the [nonmovant’s] position’” is insufficient to defeat a motion for summary judgment. 28 5 United States District Court Northern District of California 1 Id. (quoting Anderson, 477 U.S. at 252). “‘Where the record taken as a whole could not lead a 2 rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.’” 3 Id. at 1049–50 (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 4 (1986)). Motion to Strike – Rules 16 and 37 5 B. 6 Under Federal Rule of Civil Procedure 16(f), a court “may issue any just orders, including 7 those authorized by Rule 37(b)(2)(A)(ii)–(vii), if a party or its attorney . . . fails to obey a scheduling 8 or other pretrial order.” Fed. R. Civ. P. 16(f)(1)(C). Under Federal Rule of Civil Procedure 37, “[i]f 9 a party or a party’s officer, director, or managing agent . . . fails to obey an order to provide or permit 10 discovery, including an order under Rule 26(f), 35, or 37(a), the court . . . may . . . prohibit[] the 11 disobedient party from supporting or opposing designated claims or defenses, or from introducing 12 designated matters in evidence . . . [or] strik[e] pleadings in whole or in part[.]” 13 Fed. R. Civ. P. 37(b)(2)(A)(ii)–(iii). Rule 16 is “broadly remedial and its purpose is to encourage 14 forceful judicial management.” Sherman v. United States, 801 F.2d 1133, 1135 (9th Cir. 1986). 15 Courts order sanctions under Rule 16 for violation of an order where “[d]isregard of the order would 16 undermine the court’s ability to control its docket, disrupt the agreed-upon course of the litigation, 17 and reward the indolent and the cavalier.” 18 975 F.2d 604, 610 (9th Cir. 1992). 19 III. Johnson v. Mammoth Recreations, Inc., DISCUSSION Motion to Strike – Rules 16 and 37 20 A. 21 Solaria moves to strike the defenses of (1) ambiguity, (2) frustration of purpose, and 22 (3) mutual mistake GCL raises in its Opposition because GCL did not plead or disclose them during 23 discovery in violation of multiple Court orders. See Reply, ECF No. 52 at 3–5. Solaria argues that 24 GCL did not disclose any of the defenses it raises in its Opposition during discovery—not in its 25 Answer to the Complaint, in its interrogatory responses, or otherwise. See id. at 3. Solaria argues 26 that it would be prejudiced if GCL were allowed to proceed with its defenses in violation of multiple 27 court orders in an effort to defeat Solaria’s summary judgment motion, when it failed to disclose 28 these defenses during discovery despite Solaria’s active efforts to seek details of GCL’s defenses. 6 United States District Court Northern District of California 1 See id. at 5. In addition to seeking to strike GCL’s defenses, Solaria argues that GCL waived its 2 affirmative defenses by not pleading them in its Answer. See Reply, ECF No. 52 at 1–3. 3 Solaria argues that in waiting until its Opposition to disclose its defenses, GCL violated three 4 court orders. First, Solaria argues that GCL’s conduct violated the parties’ agreed schedule, which 5 set the close of fact discovery for September 10, 2021. See Reply, ECF No. 52 at 3; Joint Case 6 Management Statement, ECF No. 25; Order on the Parties’ Joint Stipulation Regarding Discovery, 7 ECF No. 46; Joint Stipulation Regarding Discovery, ECF No. 43. 8 Second, Solaria argues that GCL violated a discovery order of Magistrate Judge DeMarchi 9 directing GCL to provide responses to Solaria’s interrogatories. See Reply, ECF No. 52 at 3–4. In 10 a joint discovery letter brief, Solaria moved to compel GCL to respond to its first interrogatory, 11 which stated, “If GCL contends it does not owe Solaria any of the following payments, state all facts 12 and explain in detail why each payment is not owed and identify all documents related thereto,” 13 followed by a table of the payments provided by the A-TCLA and the payment agreements. See 14 Joint Discovery Letter Brief, ECF No. 28, Ex. 1, Plaintiff’s First Set of Interrogatories (Nos. 1-2) 15 at 2. Solaria argued in the letter brief that GCL failed to provide any response as to four payments 16 at issue in the present summary judgment motion: “(1) a $200,000.00 payment that was due 17 September 30, 2020; (2) a $200,000.00 payment that was due October 31, 2020; (3) a $271,926.23 18 payment that was due November 30, 2020; and (4) a $1,000,000.00 payment that was due January 19 1, 2021.” See Joint Discovery Letter Brief, ECF No. 28 at 1. In response, GCL argued that “[t]he 20 construction of Interrogatory No. 1 stated ‘[i]f GCL contends it does not owe Solaria any of the 21 following payments [then answer the following three questions]’—implicitly meaning that if the 22 conditional first question is answered in the negative, no response is required. . . . That is exactly 23 how GCL responded.” See id. at 3. In Judge DeMarchi’s order regarding the parties’ joint letter 24 brief, she stated that the Court “understands that GCL is not disputing it owes the four payments to 25 Solaria. . . . If the Court’s interpretation of GCL’s position is incorrect, GCL must supplement its 26 response to Interrogatory No. 1 to clarify its position. If it has not done so already, GCL must 27 identify all documents on which it relies in support of any contention that it does not owe a particular 28 payment.” See Order Re May 5, 2021 Discovery Dispute Letter, ECF No. 29 at 2–3. Solaria asserts 7 United States District Court Northern District of California 1 that GCL never supplemented its response to Interrogatory No. 1 following Judge DeMarchi’s 2 order. See Reply, ECF No. 52 at 4; Jones Decl., ECF No. 44-1, Ex. J, Defendant’s Second 3 Supplemental Response to Plaintiff’s First Set of Interrogatories (Nos. 1–2). Accordingly, Solaria 4 argues that in disputing that it owes the payments in its Opposition, GCL is in violation of Judge 5 DeMarchi’s order requiring it to supplement its response to Solaria’s Interrogatory No. 1 if it was 6 disputing that it owed any of the payments. See Reply, ECF No. 52 at 3–4. 7 Third, Solaria argues that in waiting until its Opposition to Solaria’s summary judgment 8 motion to disclose facts about its ambiguity, frustration of purpose, and mutual mistake defenses, 9 GCL violated the same discovery order from Judge DeMarchi regarding Solaria’s 10 Interrogatory No. 2. See Reply, ECF No. 52 at 4. Solaria’s Interrogatory No. 2 stated the following: 11 “State all facts in support of, and explain in detail all bases for, each of your defenses (both 12 affirmative and non-affirmative) to Solaria’s claim for breach of contract and identify by Bates 13 number all documents related thereto.” See Joint Discovery Letter Brief, Ex. 1, Plaintiff’s First Set 14 of Interrogatories (Nos. 1-2) at 3. After GCL responded by objecting to Solaria’s Interrogatory 15 No. 2 as cumulative of Solaria’s First Set of Requests for Production and referring Solaria to GCL’s 16 response to those Requests, Solaria moved to compel GCL to make an additional response. See 17 Joint Discovery Letter Brief, ECF No. 28. Judge DeMarchi granted Solaria’s request, stating that 18 “GCL must supplement its response to Interrogatory No. 2. Its answer must identify each defense 19 it asserts to Solaria’s breach of contract claim and for each such defense, it must describe the factual 20 bases for the defense and identify the documents that support the defense.” Order Re May 5, 2021 21 Discovery Dispute Letter, ECF No. 29 at 3–5. GCL subsequently supplemented its response to 22 Solaria’s Interrogatory No. 2, but only to state that it did not owe certain payments identified by 23 Solaria as part of its damages because it had made those payments to Solaria. See Jones Decl., 24 ECF No. 44-1, Ex. J, Defendant’s Second Supplemental Response to Plaintiff’s First Set of 25 Interrogatories (Nos. 1–2). 26 The Court agrees with Solaria. By waiting until its Opposition to Solaria’s Motion for 27 Summary Judgment to disclose its defenses to Solaria’s breach of contract claim, GCL violated this 28 Court’s scheduling order that was entered on the parties’ agreed discovery schedule, including 8 United States District Court Northern District of California 1 briefing dates for this early summary judgment motion, and Judge DeMarchi’s May 21, 2021 2 discovery order. GCL’s conduct is particularly egregious given that during fact discovery, GCL 3 affirmatively represented that it did not contest that it owed Solaria the remainder of the Second A- 4 TCLA Payment due under the September 4, 2020 Payment Agreement or the Third A-TCLA 5 Payment. See Joint Discovery Letter Brief, ECF No. 28 at 3. Now that discovery has closed, GCL 6 has changed course and contests that it owes those payments after all. See Opposition, ECF No. 47 7 at 10–16. Allowing GCL to proceed with this strategy would be “reward[ing] the indolent [or] the 8 cavalier.” Mammoth Recreations, 975 F.2d at 610. 9 GCL argues that it “supplemented its [interrogatory] responses with regard to its defenses.” 10 Opposition, ECF No. 47 at 6. To the contrary, it appears that even in the supplemental interrogatory 11 response GCL served following Judge DeMarchi’s discovery order regarding Solaria’s 12 Interrogatory Nos. 1 and 2, GCL did not disclose the defenses—ambiguity, frustration of purpose, 13 or mutual mistake—it seeks to rely on now. See Jones Decl., ECF No. 44-1, Ex. J, Defendant’s 14 Second Supplemental Response to Plaintiff’s First Set of Interrogatories (Nos. 1–2). GCL also 15 argues that it “stated that discovery was ongoing and reserved its right to supplement its response 16 as discovery was ongoing and trial was not set for over two years away.” Opposition, ECF No. 47 17 at 6. GCL is correct that when it served its supplemental interrogatory response following Judge 18 DeMarchi’s discovery order on June 4, 2021, discovery was ongoing until September 10, 2021 19 according to the parties’ agreed schedule. See Joint Case Management Statement, ECF No. 25; 20 Jones Decl., ECF No. 44-1, Ex. J, Defendant’s Second Supplemental Response to Plaintiff’s First 21 Set of Interrogatories (Nos. 1–2). But GCL has provided no evidence that it supplemented its 22 responses to Solaria’s Interrogatory Nos. 1 and 2 again after the June 4, 2021 response. See 23 Opposition, ECF No. 47 at 6; Reply, ECF No. 52 at 3–4. And now fact discovery has closed. See 24 Order on the Parties’ Joint Stipulation Regarding Discovery, ECF No. 46. 25 While the Court finds based on the evidence that it could strike GCL’s defenses under 26 Rules 16 and 37, the Court finds it appropriate to consider GCL’s arguments on the merits in order 27 to resolve these issues fairly to the parties. Accordingly, while the Court recognizes that GCL did 28 not plead or disclose its ambiguity, frustration of purpose, or mutual mistake defenses before the 9 United States District Court Northern District of California 1 close of fact discovery, and in fact GCL affirmatively represented that it was not challenging that it 2 owed payments under the A-TCLA and subsequent payment agreements that it now challenges 3 under these theories, the Court declines to strike GCL’s ambiguity, frustration of purpose, or mutual 4 mistake defenses or find that GCL waived any of these defenses. 5 B. 6 Solaria moves for summary judgment that GCL breached the A-TCLA and subsequent 7 payment agreements by (1) not paying Solaria the entirety of the Second A-TCLA Payment with 8 interest, which under the September 4, 2020 Payment Agreement was due as separate payments of 9 $200,000 on September 30, 2020, $200,000 on October 31, 2020, and $271,926.23 on November 10 30, 2020 and (2) not paying Solaria any of the Third A-TCLA Payment with interest, which under 11 the A-TCLA was due as of January 1, 2021.1 See Motion, ECF No. 44 at 4–6. Further, Solaria 12 moves for summary judgment that it is entitled to $78,197.88 in attorneys’ fees and $92,909.91 in 13 prejudgment interest. See id. GCL argues that (1) Solaria’s summary judgment motion is premature 14 under Rule 56(d), because Solaria has impeded discovery; (2) the A-TCLA is ambiguous as to 15 whether it required the payments GCL failed to pay; and (3) Solaria fails to establish breach as a 16 matter of law because (a) GCL’s performance was excused under the frustration of purpose doctrine, 17 and (b) the A-TCLA should be reformed under the mutual mistake doctrine; and (3) Solaria cannot 18 recover the Third A-TCLA Payment, attorneys’ fees, or prejudgment interest. See Opposition, ECF 19 No. 47 at 10–20. The Court considers each issue in turn. 20 Motion for Summary Judgment 1. Rule 56(d) 21 GCL argues that Solaria’s Motion for Summary Judgment should be denied as premature 22 under Rule 56(d). See Opposition, ECF No. 47 at 16–18. Rule 56(d) provides that “[i]f a nonmovant 23 shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify 24 its opposition, the court may: (1) defer considering the motion or deny it; (2) allow time to obtain 25 26 1 As outlined below, the Court finds that Solaria cannot seek the Third A-TCLA Payment under the 27 operative complaint. Accordingly, the Court does not address any disputes related to the Third 28 A-TCLA Payment in its analysis regarding Solaria’s summary judgment motion. 10 United States District Court Northern District of California 1 affidavits or declarations or to take discovery; or (3) issue any other appropriate order.” Fed. R. 2 Civ. P. 56(d). To prevail on a Rule 56(d) request, the party seeking relief must show that “(1) it has 3 set forth in affidavit form the specific facts it hopes to elicit from further discovery; (2) the facts 4 sought exist; and (3) the sought-after facts are essential to oppose summary judgment.” Family 5 Home & Fin. Ctr., Inc. v. Fed. Home Loan Mortg. Corp., 525 F.3d 822, 827 (9th Cir. 2008). The 6 party must also show that he or she has pursued discovery diligently in the past and that additional 7 discovery would prevent summary judgment. 8 18–cv–00561–BLF, 2020 WL 1531349, at *6 (N.D. Cal. Mar. 31, 2020) (citing Chance v. Pac-Tel 9 Teletrac Inc., 242 F.3d 1151, 1161 n.6 (9th Cir. 2001)). Iglesia Ni Cristo v. Cayabyab, Case No. 10 GCL’s complaint that this Motion is premature flies in the face of its stipulation to schedule 11 an early summary judgment motion. In March 2021, Solaria raised the issue of filing an early 12 motion for summary judgment at the initial case management conference. On April 23, 2021, the 13 parties submitted a stipulated briefing schedule. See ECF No. 25. The Court accommodated the 14 request and set the hearing on the preferred date identified by the parties. There was no surprise to 15 GCL here. However, the Court will consider GCL’s current grievance about the early summary 16 judgment under Rule 56(d). 17 GCL argues that Solaria’s Motion for Summary Judgment is premature for two reasons. 18 First, GCL argues that after GCL proposed Rule 30(b)(6) witnesses residing in China and Japan, 19 which would have required delays to set up a deposition, Solaria insisted GCL produce a Rule 20 30(b)(6) witness that could be immediately deposed. See Opposition, ECF No. 47 at 7–8, 16–17. 21 This required GCL to designate Hu Huiming, an independent contractor for GCL’s Canadian entity 22 who was unaware of many relevant facts. See id. GCL also argues that Solaria took a “rushed and 23 incomplete deposition” of Mr. Huiming. See id. at 17. Second, GCL argues that Solaria hindered 24 its ability to conduct a productive Rule 30(b)(6) deposition of Solaria by objecting to GCL’s 25 deposition topics and failing to designate a knowledgeable Rule 30(b)(6) representative. See 26 Opposition, ECF No. 47 at 8–9, 17–18. GCL argues that instead of designating a Rule 30(b)(6) 27 representative knowledgeable of the negotiation and execution of the agreements at issue in this 28 case like Suvi Sharma or Tony Alvarez, who have worked at Solaria since 2017, Solaria designated 11 United States District Court Northern District of California 1 its ill-prepared chief counsel Jordan Trent Jones. See id. at 17–18. GCL argues did not know 2 anything regarding the negotiation and execution of the parties’ agreements or Solaria’s expectation 3 of GCL’s sales of the Licensed Products and did not speak to those knowledgeable at Solaria. See 4 Opposition, ECF No. 47 at 17–18. GCL points to excerpts from his deposition transcript where he 5 stated, inter alia, that he did not know details of how the agreements were drafted or negotiated, 6 that he had not reviewed documents outside of the agreements in preparation for his deposition, and 7 that he had not spoken to anyone other than counsel. See Opposition, ECF No. 47 at 8–9, 17–18. 8 In response to GCL’s arguments about its own Rule 30(b)(6) deposition, Solaria argues that 9 (1) Solaria was not required to depose any GCL witness before moving for summary judgment and 10 (2) if GCL wanted to use the testimony of other witnesses in opposing Solaria’s summary judgment 11 motion, it could have attached declarations from such witnesses to its opposition—which it failed 12 to do. See Reply, ECF No. 52 at 12. In response to GCL’s arguments about Solaria’s Rule 30(b)(6) 13 deposition, Solaria points out that (1) to the extent GCL thought that other Solaria employees were 14 more knowledgeable, it could have deposed them during fact discovery, but it chose not to, and 15 (2) GCL never met and conferred with Solaria about the preparedness of Mr. Jones or moved for a 16 further deposition. See id. at 12–13. 17 GCL’s arguments regarding its Rule 30(b)(6) witness are unavailing. Solaria is correct that 18 it was not required to depose any GCL witness before moving for summary judgment. See Reply, 19 ECF No. 52 at 12. If GCL had witnesses that could testify to facts essential to opposing Solaria’s 20 summary judgment motion, it could have attached declarations from those witnesses to its 21 opposition. But GCL did not take this approach, and it fails to identify any specific facts that these 22 witnesses could have testified to. Moreover, GCL’s argument regarding Solaria’s “insist[ence]” 23 that it provide a Rule 30(b)(6) witness outside of China hides the impact of GCL’s own unreasonable 24 discovery conduct. In her September 21, 2021 discovery order regarding the parties’ dispute over 25 GCL’s Rule 30(b)(6) deposition, Judge DeMarchi stated the following: 26 27 28 [T]he record reflects that GCL has not cooperated in the conduct of discovery and that its conduct has prejudiced Solaria’s ability to obtain discovery. In particular, GCL unreasonably delayed seven weeks before identifying a corporate designee, and by the time GCL 12 advised Solaria that it designated Ms. Jing, an employee who resides in China, Solaria had no meaningful opportunity to seek permission to take Ms. Jing’s deposition pursuant to the Hague Evidence Convention before the agreed deadline for completion of fact discovery. 1 2 United States District Court Northern District of California 3 4 Interim Order Re September 15, 2021 Discovery Dispute Re Rule 30(b)(6) Deposition of GCL, 5 ECF No. 37 at 2–3. Accordingly, the Court does not find it appropriate to fault Solaria for its 6 “insist[ence]” that GCL produce a corporate witness located outside of China. See Chance, 242 7 F.3d at 1161 n.6. 8 GCL’s arguments regarding Solaria’s Rule 30(b)(6) deposition fare no better. First, GCL 9 cannot point to any efforts it made to remedy the alleged insufficiency of the Rule 30(b)(6) 10 deposition of Mr. Jones for GCL’s discovery of relevant facts. Solaria points out that GCL did not 11 seek relief earlier—instead, choosing to raise issues with Solaria’s Rule 30(b)(6) deposition in its 12 Opposition to Solaria’s summary judgment motion. See Reply, ECF No. 52 at 12–13. The Court 13 finds Solaria’s argument persuasive, since it suggests that GCL did not pursue discovery diligently 14 in the past, which is a prerequisite for seeking relief under Rule 56(d). See Chance, 242 F.3d at 1161 15 n.6. 16 Second, GCL argues that Mr. Jones was unprepared for the deposition because he “did not 17 know anything related to the negotiation and execution of the parties’ agreements or Solaria’s 18 expectation of GCL’s usage of its IP.” See Opposition, ECF No. 47 at 9. But GCL failed to plead 19 or disclose during fact discovery any of the defenses it raises now or any indication that it considered 20 the A-TCLA ambiguous. In fact, GCL affirmatively represented during discovery that it did not 21 dispute that it owed Solaria various payments under the A-TCLA and subsequent payment 22 agreements. See Joint Discovery Letter Brief, ECF No. 28 at 3. Accordingly, it is not clear to the 23 Court how facts regarding the “negotiation and execution of the parties’ agreements or Solaria’s 24 expectation of GCL’s usage of its IP” were relevant subject matters for which Solaria was under a 25 duty to prepare its Rule 30(b)(6) witness based on GCL’s representations. Further, GCL has made 26 no attempt to show that facts related to negotiation and execution of the parties’ agreements were 27 “essential to oppose summary judgment.” Family Home, 525 F.3d at 827. 28 Based on the above reasoning, the Court declines to deny Solaria’s summary judgment 13 1 United States District Court Northern District of California 2 motion based on Rule 56(d). 2. Breach of Contract 3 Solaria moves for summary judgment that GCL breached the A-TCLA and subsequent 4 payment agreements by not making certain payments to Solaria and that it is entitled to the 5 remainder of the Second A-TCLA Payment, the entirety of the Third A-TCLA Payment, 6 prejudgment interest, and attorneys’ fees. See Motion, ECF No. 44 at 4–6. Under California law, 7 which governs the TCLA and ensuing agreements, to be entitled to damages for breach of contract, 8 a plaintiff must prove (1) a contract, (2) plaintiff’s performance or excuse for nonperformance, (3) 9 defendant’s breach, and (4) damage to plaintiff.” Walsh v. W. Valley Mission Cmty. Coll. Dist., 66 10 Cal. App. 4th 1532, 1545 (1998); see TCLA, ECF No. 44-2 § 8.4(c) (“The laws of the State of 11 California shall apply, exclusive of choice of law principles.”); Opposition, ECF No. 47 at 11; 12 Reply, ECF No. 52 at 9. 13 The only disputes between the parties pertain to the third and fourth elements of breach of 14 contract—GCL’s breach and Solaria’s damages. GCL does not dispute that the TCLA, the 15 A-TCLA, or any of the subsequent payment agreements are valid contracts or that Solaria performed 16 under the contracts. Rather, GCL argues that there are material disputes of fact as to whether it 17 breached the contracts because of the ambiguity of the A-TCLA and GCL’s affirmative defenses of 18 frustration of purpose and mutual mistake. See Opposition, ECF No. 47 at 10–16. Further, GCL 19 argues that Solaria cannot seek damages for the Third A-TCLA Payment under the operative 20 complaint, which was filed before that payment came due on January 1, 2021, and it cannot seek 21 attorneys’ fees or prejudgment interest at this stage. See Opposition, ECF No. 47 at 16–20. The 22 Court considers each of these disputes in turn. 23 24 25 a. Ambiguity The parties disagree about the interpretation of the payment provisions in the A-TCLA. The A-TCLA provides the following: 26 27 28 The royalty fees for the GCL SI Products sold in the EU as provided above shall be as follows: (i) USD $0.003/Wp; (ii) a non-refundable prepaid royalty fee of USD $2,000,000.00 upon execution of this Amendment to be applied to royalty payments for the first 667 MWp; 14 1 2 3 United States District Court Northern District of California 4 and (iii) additional non-refundable prepaid royalties of USD $1,500,000.00 due on or before January 1, 2020 and USD $1,000,000.00 due on or before January 1, 2021. Failure to make any of the payments when due shall be grounds for termination of the license grant provided herein. Except as expressly provided herein, all other royalty rates provided in the TCLA shall remain in full force and effect. 5 A-TCLA § 1(e). GCL argues that it was only required to make the Second A-TCLA Payment once 6 it had sold enough Licensed Products to cover the 667 MWP it had already prepaid for under the 7 First A-TCLA Payment. See Opposition, ECF No. 47 at 10–13. Solaria argues that GCL was 8 required to pay the Second Payment regardless of how many Licensed Products it sold. See Motion, 9 ECF No. 44 at 7–8; Reply, ECF No. 52 at 6–10. 10 In its effort to defeat Solaria’s summary judgment motion, GCL argues that the language of 11 the A-TCLA is ambiguous as to which party’s interpretation applies. See Opposition, ECF No. 47 12 at 10–13. Under California law, a contract must be interpreted to give effect to the mutual intention 13 of the parties at the time the contract was formed. See Cal. Civ. Code § 1636. The parties’ intent is 14 determined from the language of the contract, “if the language is clear and explicit, and does not 15 involve an absurdity.” Cal. Civ. Code § 1638. However, “[t]he proper interpretation of a contract 16 is disputable if the contract is susceptible of more than one reasonable interpretation, that is, if the 17 contract is ambiguous.” Fremont Indem. Co. v. Fremont Gen. Corp., 148 Cal.App.4th 97, 114 18 (2007). “Extrinsic evidence may be admitted if it serves to prove a meaning to which the contract 19 is reasonably susceptible.” Shum v. Intel Corp., No. C–02–03262–DLJ, 2008 WL 4414722, at *6 20 (N.D. Cal. Sept. 26, 2008) (citing Powers v. Dickson, Carlson & Campillo, 54 Cal.App.4th 1102, 21 1111 (1997)). Moreover, extrinsic evidence may be offered “to resolve an ambiguity,” even when 22 the contract is an integrated agreement. See Lennar Mare Island LLC v. Steadfast Ins. Co., 23 176 F.Supp.3d 949, 963 (E.D. Cal. 2016) (citing California law). “[E]ven if a contract appears 24 unambiguous on its face, a latent ambiguity may be exposed by extrinsic evidence which reveals 25 more than one possible meaning to which the language of the contract is yet reasonably susceptible.” 26 First Nat’l Mortgage Co. v. Federal Realty Inv. Trust, 631 F.3d 1058, 1067 (9th Cir. 2011) (quoting 27 Morey v. Vannucci, 64 Cal.App.4th 904, 912, (1998)). 28 GCL argues that based on the plain language and the extrinsic evidence, the payment 15 United States District Court Northern District of California 1 provision of the A-TCLA is ambiguous as to whether (1) it required GCL to make the Second 2 A-TCLA Payment regardless of how many Licensed Products it sold or (2) it required GCL to make 3 the Second A-TCLA Payment only once it had sold the 667 MWp of Licensed Products covered by 4 the First A-TCLA Payment. See Opposition, ECF No. 47 at 10–13. GCL argues that the language 5 of the A-TCLA providing that the initial $2,000,000 payment is “to be applied to royalty payments 6 for the first 667 MWp” supports that GCL would only have to pay the Second A-TCLA Payment 7 once it had sold 667 MWp of Licensed Products. See id. at 12. GCL further points to deposition 8 testimony from its Rule 30(b)(6) witness indicating that the value GCL derived from the A-TCLA 9 does not “match up” with the amount GCL was required to pay under the agreement. See id. (citing 10 Tootell Decl., ECF No. 47-1, Ex. 9, Huiming Depo. Tr., 58:7–23). Further, GCL points to 11 deposition testimony from Solaria’s Rule 30(b)(6) witness indicating that the “most reasonable 12 interpretation” of the A-TCLA is that each prepaid royalty payment covered an amount of MWp 13 determined by the rate of $0.003/Wp, and if GCL were to exceed those amounts, then the $0.003/Wp 14 royalty rate would apply to the excess. See id. (citing Tootell Decl., ECF No. 47-1, Ex. 15, Jones 15 Depo., Jones Depo. Tr., 86:4–87:6; 87:15–87:22; 90:20–91:1). 16 interpretation of the A-TCLA is supported by the fact that Solaria would enjoy a “significantly unfair 17 windfall” if the contract were interpreted otherwise. See id. at 12–13. GCL further argues that its 18 In response, Solaria argues that the plain language and the extrinsic evidence do not support 19 GCL’s proffered interpretation or the ambiguity of the A-TCLA. See Reply, ECF No. 52 at 6–10. 20 Solaria argues that the A-TCLA would not have provided dates for when GCL must pay the non- 21 refundable prepaid royalty fee payments if the fees were only to become due once GCL had used 22 the 667 Wp of Licensed Products it had previously paid for. See id. at 6. Moreover, Solaria argues 23 that the “prepaid” and “nonrefundable” language in the A-TCLA further undermines GCL’s 24 interpretation, because this “necessarily means that payments must be made regardless of the 25 amount and timing” of GCL’s sales of Licensed Products. See id. at 6–7. Further, Solaria argues 26 that the express terms of the March 16, 2020 and September 4, 2020 Payment Agreements extending 27 GCL’s deadline to make the Second A-TCLA Payment demonstrates there was no ambiguity that 28 GCL owed this amount regardless of how many Licensed Products it had sold. See id. at 7. And 16 United States District Court Northern District of California 1 Solaria argues that GCL’s course of conduct—paying more than half of the Second A-TLCA 2 Payment—shows that GCL believed it owed this payment. See id. at 7–8. 3 The Court agrees with Solaria. The Court finds that GCL does not raise a disputed issue of 4 material fact as to whether the language of the A-TCLA’s payment provision was “reasonably 5 susceptible” to GCL’s proffered interpretation. See First Nat’l Mortgage, 631 F.3d at 1067. The 6 payment deadline provided by the A-TCLA for the Second A-TCLA Payment would be extraneous 7 if GCL only had to make this payment once it had sold the 667 MWp of Licensed Products it had 8 prepaid for under the First A-TCLA Payment. California law disfavors an interpretation of a 9 contract that yields surplus language, and GCL has provided no explanation for how the payment 10 deadlines in the A-TCLA are consistent with its interpretation of the contract. See, e.g., Cal. Civ. 11 Code § 1641 (“The whole of a contract is to be taken together, so as to give effect to every part, if 12 reasonably practicable, each clause helping to interpret the other.”); Carson v. Mercury Ins. Co., 13 210 Cal.App.4th 409, 420 (2012) (“An interpretation which gives effect to all provisions of the 14 contract is preferred to one which renders part of the writing superfluous, useless or inexplicable.”) 15 (quoting 11 Williston on Contracts (4th ed.2012) § 32:5, p. 704); In re Tobacco Cases I, 16 186 Cal.App.4th 42, 49 (2010) (“We must give significance to every word of a contract, when 17 possible, and to avoid interpretation that renders a word surplusage.”). Further, the “prepaid” and 18 “nonrefundable” language in the A-TCLA is not reasonably susceptible to GCL’s proposed 19 interpretation. See A-TCLA § 1(e). This language indicates that the agreement required GCL to 20 make the payments to Solaria on the dates provided for in the contract regardless of circumstances 21 like prior usage. 22 GCL primarily points to intrinsic and extrinsic evidence that the A-TCLA payments were 23 supposed to apply to a particular amount of MWp of Licensed Product sales. GCL points to the 24 language in the A-TCLA indicating that the First A-TCLA Payment is “to be applied to royalty 25 payments for the first 667 MWp[.]” See Opposition, ECF No. 47 at 12; A-TCLA § 1(e). Further, 26 GCL points to deposition testimony from Solaria’s Rule 30(b)(6) witness confirming the same 27 understanding for each of the A-TCLA payments—they each were to be applied to a particular 28 amount of MWp of Licensed Product sales at a rate of $0.003 per Wp. See id. (citing Tootell Decl., 17 United States District Court Northern District of California 1 ECF No. 47-1, Ex. 15, Jones Depo. Tr., 86:4–87:6; 87:15–87:22; 90:20–91:1). GCL’s evidence 2 fails to support its interpretation of the A-TCLA because that evidence is entirely consistent with 3 Solaria’s interpretation of the contract. Even if each A-TCLA payment covered a particular amount 4 of MWp of Licensed Product sales, those payments would still be due before GCL had used up the 5 amount of MWp it had previously paid for. As Solaria’s Rule 30(b)(6) witness outlined in his 6 deposition testimony, the fact that each A-TCLA payment applied to a particular amount of MWp 7 of Licensed Product sales only meant that if GCL sold more than that amount of Licensed Products, 8 then it would owe Solaria additional royalties at the $0.003 per MWp rate. See Tootell Decl., ECF 9 No. 47-1, Ex. 15, Jones Depo. Tr., 90:20–91:1 (“Solaria contemplated that it would get paid these 10 nonrefundable prepaid royalties, and that if GCL exceeded the amounts that would be covered by 11 the nonrefundable prepaid royalties, then a royalty rate of $0.003 per watt would then . . . be paid[.]”) 12 Solaria’s Rule 30(b)(6) witness did not make any statements about what happened if GCL sold less 13 than the amount of Licensed Products covered by a particular A-TCLA payment. Accordingly, 14 GCL’s intrinsic and extrinsic evidence provides no support for GCL’s interpretation of the A-TCLA 15 or the existence of an ambiguity in the contract. GCL’s evidence is consistent with Solaria’s 16 interpretation of the A-TCLA and the “clear and explicit” meaning of the A-TCLA’s language— 17 each A-TCLA payment was due on the date provided for in the A-TCLA, regardless of how many 18 Licensed Products GCL had sold previously. Cal. Civ. Code § 1638. If GCL sold amounts in excess 19 of the amounts it had prepaid for, then it would have to pay Solaria additional royalties—but GCL 20 has not presented any evidence that its payment obligations changed if it sold less than the amounts 21 it had prepaid for. 22 Otherwise, GCL can only raise evidence and arguments regarding the unfairness of the 23 A-TCLA. GCL points to testimony from its Rule 30(b)(6) witness indicating that there was a 24 “mismatch” between the A-TCLA’s value for GCL and the amount GCL was required to pay under 25 the contract. See Opposition, ECF No. 47 at 12 (citing Tootell Decl., ECF No. 47-1, Ex. 9, Huiming 26 Depo. Tr., 58:7–23). Further, GCL points to the fact that under Solaria’s interpretation of the 27 A-TCLA, the contract represents a “significantly unfair windfall” for Solaria, because GCL has paid 28 to sell the Licensed Products at a rate of nearly 700 times that contemplated by the TCLA. See id. 18 United States District Court Northern District of California 1 at 13. The Court does not find that GCL’s arguments related to the fairness of the contract raise an 2 issue of material fact as to its ambiguity, especially in light of the Court’s conclusion that all of the 3 intrinsic and extrinsic evidence supports Solaria’s interpretation. GCL can point to no caselaw 4 where a court has found that the apparent unfairness of a contract is sufficient to raise an issue of 5 material fact as to its interpretation or ambiguity, particularly when no intrinsic or extrinsic evidence 6 supports that ambiguity. Bad deals are struck every day, and contract law does not rescue the party 7 on the short end of the stick. 8 Additionally, the extrinsic evidence Solaria points to—the parties’ course of dealing 9 following the execution of the A-TCLA—indicates that there was no ambiguity in how the parties 10 understood the contract at the time they entered into it. The March 16, 2020 and September 4, 2020 11 Payment Agreements both provide the following: 12 13 14 Whereas, pursuant to Section 1(e)(iii) of the Amendment, GCL SI and Corner Star were obligated to pay a non-refundable prepaid royalty fee of USD $1,500,000.00 to Solaria on or before January 1, 2020[.] 15 See Jones Decl., ECF No. 44-1, Ex. F, March 16, 2020 Payment Agreement; id., Ex. G, September 16 4, 2020 Payment Agreement. GCL therefore repeatedly agreed that it owed Solaria the Second 17 A-TCLA Payment regardless of how many Licensed Products it had sold. Further, GCL agreed that 18 it was under this obligation well into 2020, when GCL’s evidence indicates that it had only sold a 19 fraction of the 667 MWp covered by the first A-TCLA payment. See Tootell Decl., ECF No. 47-1, 20 Ex. 16. Additionally, GCL paid Solaria $750,000 of the Second A-TCLA Payment on March 31, 21 2020, and an additional $100,000 on July 29, 2020. See Jones Decl., ECF No. 44-1 ¶¶ 11–12. These 22 payments directly undermine GCL’s argument that the extrinsic evidence supports that “GCL 23 understood that it would owe additional royalties of $1.5 million and $1 million on January 1, 2020 24 and January 1, 2021, respectively, if and only after it had used the first 667 MWp of Solaria’s IP 25 used for its products sold in the EU.” Opposition, ECF No. 47 at 12; Simi Mgmt. Corp. v. Bank of 26 Am., N.A., 930 F.Supp.2d 1082, 1098 (N.D. Cal. 2013). 27 GCL further argues that if it was required to make the Second A-TCLA Payment on 28 January 1, 2020, then Solaria had grounds to terminate the A-TCLA when GCL failed to make that 19 1 payment. See Opposition, ECF No. 47 at 13. GCL’s argument appears to be that Solaria’s 2 understanding of the A-TCLA cannot be correct, because if it were, then Solaria would have 3 terminated the contract under the provision stating that “[f]ailure to make any of the payments when 4 due shall be grounds for termination of the license grant provided herein.” See A-TCLA § 1(e). But 5 having grounds for terminating a contract is not the same as an obligation to terminate a contract. 6 Even if GCL’s failure to make payments under the A-TCLA gave Solaria the ability to terminate 7 the contract, Solaria still had the right to decline to terminate the contract, as it chose to do. 8 Accordingly, GCL’s argument about Solaria’s right to terminate the contract is unavailing. 9 Based on the above reasoning, the Court finds that GCL has not raised an issue of material 10 fact that the A-TCLA is ambiguous as to whether GCL owes Solaria the Second A-TCLA Payment. United States District Court Northern District of California 11 b. Affirmative Defenses 12 GCL also raises two affirmative defenses in opposing Solaria’s summary judgment 13 motion—frustration of purpose and mutual mistake. See Opposition, ECF No. 47 at 13–16. Solaria 14 argues that GCL waived these affirmative defenses by not raising them in its answer, to Solaria’s 15 prejudice. See Reply, ECF No. 52 at 1–3. Further, Solaria argues that GCL’s defenses fail as a 16 matter of law. See id. at 10–12. 17 1. Frustration of Purpose 18 GCL argues that it is excused from performance by the frustration of purpose doctrine. 19 Frustration of purpose may be established “[w]here, at the time a contract is made, a party’s principal 20 purpose is substantially frustrated without his fault by a fact of which he has no reason to know and 21 the non-existence of which is a basic assumption on which the contract is made[.]” FPI Dev., Inc. 22 v. Nakashima, 231 Cal.App.3d 367, 398 (1991) (quoting Rest.2d Contracts, § 266(2)). Courts 23 require that “the risk of the frustrating event was not reasonably foreseeable and that the value of 24 counterperformance is totally or nearly totally destroyed.” Waegemann v. Montgomery Ward & 25 Co., Inc., 713 F.2d 452, 454 (1983) (quoting Lloyd v. Murphy, 25 Cal.2d 48, 54 (1944)). Application 26 of the doctrine “has been limited to cases of extreme hardship so that businessmen, who must make 27 their arrangements in advance, can rely with certainty on their contracts.” Id. (quoting Lloyd, 25 28 Cal.2d at 54). The frustration must be “so severe that it is not fairly to be regarded within the risks 20 1 2 GCL argues that the parties agreed on a prepaid fee of $2 million because they anticipated 3 that GCL would use upwards of 667 MWp of Licensed Products, but an “unexpected” and 4 “unforeseen” decrease in market demand for Solaria’s intellectual property substantially destroyed 5 the value of the contract. See Opposition, ECF No. 47 at 13–14. In response, Solaria argues that 6 (1) it performed under the A-TCLA by lifting the ban on GCL’s sales of Licensed Products in the 7 EU, and this purpose was not frustrated by the decrease in market demand; (2) virtually no contract 8 would be enforceable if a party could be excused from performance by falling on hard luck; and (3) 9 there was no requirement in the contract that GCL sell any Licensed Products at all. Reply, ECF 10 United States District Court Northern District of California . . . assumed under the contract.” FPI, 231 Cal.App.3d at 399. No. 52 at 10–11. 11 The Court agrees with Solaria. Solaria performed under the A-TCLA by lifting the ban on 12 GCL’s sales of Licensed Products in the EU. See A-TCLA § 1(c); TCLA § 1(l); Opposition, ECF 13 No. 47 at 1 (“[The A-TCLA] modified the royalty fee terms of the TCLA to allow GCL to use 14 Solaria’s IP in its solar modules sold in the European Union.”). This purpose could not have been 15 frustrated by the lack of GCL’s actual sales in the EU. Even if the purpose of the contract were 16 somehow linked to the amount of GCL’s sales of Licensed Products in the EU, GCL has failed to 17 provide any evidence that the decrease in market demand was not reasonably foreseeable. 18 Waegemann, 713 F.2d at 454. The Court considers a decrease in market demand for a product to 19 be squarely within the bounds of reasonable risks for a party paying prepaid royalties to sell that 20 product—certainly a risk that is “fairly to be regarded within the risks . . . assumed under the 21 contract.” FPI, 231 Cal.App.3d at 399. GCL points to no evidence to the contrary. GCL can only 22 point to evidence of the mismatch between the amount it paid under the A-TCLA and the ultimate 23 value the contract had to GCL. See Opposition, ECF No. 47 at 14. This has no bearing on whether 24 its purported expectations were reasonable, or whether it was reasonably foreseeable that a market 25 downturn could take place. 26 Accordingly, the Court finds that GCL has failed to show that the frustration of purpose 27 doctrine raises an issue of material fact as to whether GCL owes Solaria the Second A-TCLA 28 Payment. 21 2. Mutual Mistake 1 GCL argues that it is excused from performance under the A-TCLA based on the doctrine 2 of mutual mistake. Under California law, “[w]hen, through fraud or a mutual mistake of the parties, 3 . . . a written contract does not truly express the intention of the parties, it may be revised on the 4 application of a party aggrieved, so as to express that intention, so far as it can be done without 5 6 prejudice to rights acquired by third persons, in good faith and for value.” Cal. Civ. Code § 3399. Where the failure of a written contract to express the intention of the parties is due to both parties’ 7 inadvertence, the mistake is mutual and the contract may be revised on the application of the party 8 aggrieved. See Lemoge Elec. v. San Mateo Cty., 46 Cal.2d 659, 640–41 (1956). In determining 9 whether a mutual mistake has occurred, a court may consider extrinsic evidence. See Hess v. Ford 10 Motor Co., 27 Cal.4th 516, 525 (2002). 11 United States District Court Northern District of California GCL argues that the parties agreed to the payment structure of the A-TCLA because they 12 both believed that GCL would sell upwards of 667 MWP of Licensed Products in the EU. See 13 Opposition, ECF No. 47 at 14–16. Since GCL has sold far fewer Licensed Products in the EU than 14 expected, GCL argues that the Court should reform the A-TCLA to relieve GCL from paying the 15 outstanding balance alleged by Solaria, since it would constitute a “significant windfall” for Solaria. 16 See id. In response, Solaria argues that (1) GCL has pointed to what the parties thought might 17 happen during performance of the contract, rather than an identifiable mistake in the contract and 18 (2) the September 4, 2020 Payment Agreement, which provided a payment schedule for payments 19 due under the A-TCLA for 2020, negates the possibility of any “mutual mistake.” See Reply, ECF 20 No. 52 at 11–12. 21 The Court agrees with Solaria. GCL has not pointed to a mutual mistake that could excuse 22 23 its performance under the A-TCLA. GCL argues that the parties’ “mutual expectation . . . grossly overestimated” the number of Licensed Products GCL would sell in the EU. Opposition, ECF 24 No. 47 at 15. For purposes of the mutual mistake doctrine, courts require the mistake to be about 25 an “objective, existing fact,” rather than an erroneous prediction or future expectation. See Hedging 26 Concepts, Inc. v. First Alliance Mortgage Co., 41 Cal.App.4th 1410, 1421 (1996); Mosher v. 27 Mayacamas Corp., 215 Cal.App.3d 1, 4 (1989) (finding trial court properly granted summary 28 22 United States District Court Northern District of California 1 judgment that plaintiff was entitled to full performance of contract where alleged mutual mistake 2 about future expectations was an “‘error in judgment’ rather than a mistake of fact or a failure of 3 consideration”) (quoting M.F. Kemper Const. Co. v. City of Los Angeles, 37 Cal.2d 696, 703 4 (1951)); CRV Imperial-Worthington, LP v. Gemini Ins. Co., 770 F.Supp.2d 1074, 1078 (S.D. Cal. 5 2010) (collecting cases); see also BHD v. Dow Chemical Co., No. CV 05–8881 SGL, 6 2009 WL 3633871, at *22 (C.D. Cal. 2009); Consol’d Rail Corp. v. Portlight, Inc., 188 F.3d 93, 97 7 (3d Cir. 1999) (referencing the “general principle of mutual mistake doctrine that erroneous 8 predictions of future events do not qualify as a mistake”) (citing Restatement (Second) Contracts, 9 § 151 cmt. A (1979)) (other citations omitted). Since GCL has only pointed to a “mutual 10 expectation” and “overestimate[]” of GCL’s future sales of Licensed Products, GCL has failed to 11 point to a mutual mistake sufficient to excuse its performance under the contract. See Opposition, 12 ECF No. 47 at 15. 13 Even if GCL had pointed to a mutual mistake sufficient to excuse its performance under the 14 A-TCLA, the A-TCLA is not the only contract at issue here—Solaria is also asserting that GCL had 15 payment obligations under the September 4, 2020 Payment Agreement, which was executed over a 16 year after the A-TCLA. By September 2020, it was clear based on GCL’s sales data that it was not 17 on track to meet the parties’ alleged mutual expectation of Licensed Product sales in the EU. See 18 Tootell Decl., ECF No. 47-1, Ex. 16. And yet GCL still executed the September 4, 2020 Payment 19 Agreement, which provided a schedule for payment of the Second A-TCLA Payment. See Jones 20 Decl., ECF No. 44-1, Ex. G, September 4, 2020 Payment Agreement. GCL does not even attempt 21 to argue that the September 4, 2020 Payment Agreement should be reformed under the mutual 22 mistake doctrine, focusing only on the A-TCLA, which was executed at a time—April 2019—when 23 the parties had less of an indication as to how many Licensed Products GCL would sell in the EU. 24 25 26 Accordingly, the Court finds that GCL’s mutual mistake defense does not raise an issue of material fact as to whether it owes Solaria the Second A-TCLA Payment. 3. Third A-TCLA Payment 27 The parties dispute whether Solaria can seek the Third A-TCLA Payment under the operative 28 Complaint, which was filed before that payment came due. Solaria argues that GCL owes the Third 23 1 A-TCLA Payment. See Motion, ECF No. 44 at 5–6; A-TCLA § 1(e). Solaria asserts that Section 2 1.3 of the September 4, 2020 Payment Agreement provides that if GCL failed to make any payments 3 under the agreement, then all payments would become immediately due and payable, including 4 those provided for in the A-TCLA. See Motion, ECF No. 44 at 3. In response, GCL argues that by 5 filing the present action on November 4, 2020 before the January 1, 2021 payment was due, Solaria 6 terminated the parties’ obligations under the TCLA and any subsequent agreements, including the 7 A-TCLA. See Opposition, ECF No. 47 at 19. GCL further argues that Solaria has not satisfied its 8 burden of showing that the payment became due because of an anticipatory breach. See id. On 9 reply, Solaria argues that even if it filed the present action before the Third A-TCLA Payment United States District Court Northern District of California 10 became due, GCL still owes Solaria that payment. See Reply, ECF No. 52 at 13–14. 11 As the Court outlined at the December 2, 2021 hearing, the Court finds that the $1 million 12 third payment under the A-TCLA did not become due until after the operative complaint was filed, 13 so the Court cannot consider the third payment to be at issue in Plaintiff’s Motion.2 See Complaint, 14 ECF No. 1. Solaria’s argument that the September 4, 2020 Payment Agreement accelerated the 15 Third A-TCLA Payment is unavailing. Section 1.3 of the 9/20 Agreement only provides that “[i]f 16 [GCL] or its subsidiary fails to make any one of the payments specified above, all the remaining 17 amounts set forth in Section 1.1. above shall become accelerated and shall immediately become due 18 and payable in full[.]” See Jones Decl., ECF No. 44-1, Ex. G, September 4, 2020 Payment 19 Agreement § 1.3. Section 1.1 of the September 4, 2020 Payment Agreement does not list the Third 20 A-TCLA Payment. See id. § 1.1. Therefore, Solaria has not demonstrated how the third A-TCLA 21 22 2 On December 2, 2021, the Court directed the parties to file (1) a stipulation agreeing to submit the 23 issue of whether GCL owes the Third A-TCLA Payment under the existing briefing, (2) a stipulation 24 for Solaria to file an amended complaint including a claim for the Third A-TCLA Payment, or (3) a 25 joint status report indicating the parties’ failure to agree to either (1) or (2). See ECF No. 55. On 26 December 16, 2021, the parties filed a status report indicating that they had failed to agree to either 27 of the stipulations. See ECF No. 60. Accordingly, the Court ordered that Plaintiff’s Motion was 28 submitted under the current pleading. See ECF No. 61. 24 1 payment became due prior to the filing of the operative complaint. 2 Accordingly, the Court finds that the issue of whether GCL owes the $1 million third 3 payment under the A-TCLA is not before it under the present Motion and the operative complaint. 4 4. Relief 5 The parties have two disputes regarding the relief Solaria seeks. Solaria seeks summary 6 judgment that it is entitled to (1) attorneys’ fees; and (2) prejudgment interest. See Motion, ECF 7 No. 44 at 4–6. GCL argues that Solaria’s requests for attorneys’ fees and prejudgment interest are 8 premature. See Opposition, ECF No. 47 at 19–20. a. Attorneys’ Fees United States District Court Northern District of California 9 10 In the Complaint, Solaria alleges that it is entitled to attorneys’ fees and costs under the 11 TCLA and its amendments. See Complaint, ECF No. 1 ¶¶ 18–19. In its Motion, Solaria argues that 12 it is entitled to $78,197.88 in attorneys’ fees and costs if it prevails on its breach of contract claim. 13 See Motion, ECF No. 44 at 4. In response, GCL argues that Solaria’s request for attorneys’ fees is 14 premature, since under Federal Rule of Civil Procedure 54(d), such a request must be made by 15 motion 16 Fed. R. Civ. P. 54(d)(1)–(2)). On reply, Solaria argues that nothing in Federal Rule of Civil 17 Procedure 54(d) says that a motion for fees and costs must come after judgment, and it has properly 18 made a request for fees and costs by motion. See Reply, ECF No. 52 at 14. after entry of judgment. See Opposition, ECF No. 47 at 19 (citing 19 The Court agrees with GCL. Solaria’s motion for attorneys’ fees and costs is premature. 20 See Mull v. Motion Picture Ind. Health Plan, 937 F.Supp.2d 1161, 1181 (C.D. Cal. Dec. 20, 2012) 21 (“[I]t is premature to consider the appropriate form of relief until and unless the plaintiffs win a 22 judgment on one of their substantive claims.”); Hulihan v. Reg. Transp. Comm’n of So. Nevada, No. 23 2:09-cv-01096-ECR-RJJ, 2012 WL 2060955, at *2 (D. Nev. June 7, 2012) (“[T]his Court denied 24 without prejudice Defendants’ Motion for Attorney’s Fees and Costs as premature because there 25 has yet to be an entry of final judgment[.]”). While the TCLA provides that “[t]he prevailing party, 26 as determined by the Court, shall be entitled to reasonable attorneys’ fees and costs,” the Court has 27 not entered judgment or declared Solaria to be the prevailing party. TCLA § 8.4(c); see Jones Decl., 28 ECF No. 44-1 ¶ 18. In the event that Solaria does not amend the Complaint, it may ask the Court 25 1 to find it to be the prevailing party and issue final judgment. 2 Accordingly, the Court DENIES Plaintiff’s Motion regarding its entitlement to attorneys’ 3 fees and costs WITHOUT PREJUDICE to seeking attorneys’ fees by motion following the Court’s 4 entry of final judgment under Federal Rule of Civil Procedure 54(d). United States District Court Northern District of California 5 b. Prejudgment Interest 6 In the Complaint, Solaria alleges that it is entitled to prejudgment interest. See Complaint, 7 ECF No. 1 at 3. In its Motion, Solaria seeks prejudgment interest of $92,909.91, which is the amount 8 of interest allegedly owed from July 1, 2020 to October 27, 2021—the date the motion was filed— 9 based on the terms of the September 4, 2020 Payment Agreement. See Motion, ECF No. 44 at 4 10 (citing Jones Decl., ECF No. 44-1, Ex. G, September 4, 2020 Payment Agreement § 1.1). In 11 response, GCL argues that (1) Solaria is not entitled to prejudgment interest as a matter of law 12 because of genuine issues of triable fact as to whether GCL owes Solaria the $671,926.23 payment 13 and (2) Solaria’s request for prejudgment interest is premature because such a request must be made 14 by motion after a party prevails in a case. See Opposition, ECF No. 47 at 18–19. On reply, Solaria 15 argues that there is nothing that requires a separate motion for prejudgment interest after summary 16 judgment is granted. See Reply, ECF No. 52 at 14–15. The Court agrees with GCL. Solaria’s request for prejudgment interest at this stage is 17 Accordingly, the Court DENIES WITHOUT PREJUDICE Solaria’s motion for 18 premature. 19 prejudgment interest. *** 20 21 Based on the above reasoning, the Court finds that Solaria’s requests for attorneys’ fees and 22 prejudgment interest are premature before judgment is granted. The Court notes that Solaria has 23 filed a motion for leave to amend the Complaint, and the Court anticipates expedited briefing on 24 summary judgment if the amended complaint is approved. See ECF No. 62. 25 /// 26 /// 27 /// 28 /// 26 1 IV. ORDER For the foregoing reasons, IT IS HEREBY ORDERED that: 2 1. Solaria’s request to strike GCL’s arguments and evidence in support of its ambiguity, 3 frustration of purpose, and mutual mistake arguments under Rules 16(f) and 4 37(b)(2)(A)(ii) is DENIED; 5 2. Solaria’s motion for summary judgment as to GCL’s breach of contract for failing to 6 pay Solaria $671,926.23 under the A-TCLA and September 4, 2020 Payment 7 Agreement is GRANTED; 8 3. Solaria’s motion for summary judgment as to GCL’s breach of contract for failing to 9 pay Solaria $1,000,000 under the A-TCLA by January 1, 2021 is DENIED 10 WITHOUT PREJUDICE; United States District Court Northern District of California 11 4. Solaria’s request for attorneys’ fees is DENIED WITHOUT PREJUDICE; and 5. Solaria’s request for prejudgment interest is DENIED WITHOUT PREJUDICE. 12 13 14 Dated: January 28, 2022 15 16 17 ______________________________________ BETH LABSON FREEMAN United States District Judge 18 19 20 21 22 23 24 25 26 27 28 27
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