United States District Court, Northern District of California, San Jose Division
August 18, 1999
CENTIGRAM ARGENTINA., S.A., AN ARGENTINA CORPORATION, PLAINTIFF,
CENTIGRAM INCORPORATED, A CALIFORNIA CORPORATION, DEFENDANT. CENTIGRAM COMMUNICATIONS CORPORATION, A DELAWARE CORPORATION, COUNTERCLAIM PLAINTIFF, V. CENTIGRAM ARGENTINA, S.A., AN ARGENTINA CORPORATION, AND JUSTO MILAN, COUNTERCLAIM DEFENDANTS.
The opinion of the court was delivered by: Infante, United States Magistrate Judge.
ORDER DENYING IN PART AND GRANTING IN PART DEFENDANT'S MOTION FOR
Presently before the Court is Defendant Centigram
Communications Corporation's Motion for Summary Judgment, which
came on for hearing on August 2, 1999. The parties appeared
through their respective counsel of record. Having considered the
papers submitted by the parties and the arguments of counsel at
oral argument, and good cause appearing for the reasons set forth
below, the Court denies in part and grants in part Defendant's
Defendant Centigram Communications ("Centigram") is a
California corporation that provides voicemail equipment and
services. Plaintiff Centigram Argentina ("CASA") is an Argentina
corporation who was the exclusive distributor for Centigram's
voicemail equipment and services in portions of South America,
specifically Argentina, Paraguay and Uruguay. Plaintiff has sued
Defendant for breach of contract and for business torts
(intentional and negligent interference with existing and
prospective economic advantage, and breach of the implied
covenant of good faith and fair dealing). Defendant has now moved
for summary judgment on all claims.
On March 10, 1994, the parties entered into a two-page Letter
Agreement (Curet Declaration, Exh. A). No further formalized
distributor contract was executed by the parties. Four years
later, on April 14, 1998, Centigram gave notice to CASA of its
intent to terminate the agreement, effective 90 days later, on
July 15, 1998.
During the four-year relationship, several events occurred that
are relevant to the present dispute. First, one of Centigram's
existing customers was Movicom, an account that CASA began to
service. Movicom became dissatisfied with the Centigram voicemail
products because of technical difficulties that could not be
resolved to Movicom's satisfaction, and ceased purchasing
equipment or services from Centigram or CASA at least six months
before Centigram terminated the distributorship. Movicom and
CASA, however, were in discussions regarding a renewed service
agreement when Movicom was informed that Centigram had terminated
the distributorship agreement. No service agreement was
A second voicemail products and services customer in Argentina
is Miniphone. Miniphone refused to deal with CASA or Centigram
because CASA and Centigram provided equipment and services to
Miniphone's competitor, Movicom. Centigram, however, sold
PCM-manufactured equipment to Miniphone in Argentina through a
distribution company called BSA. CASA contends that Centigram's
sales through BSA to Miniphone violated the Letter Agreement
which provided CASA with territorial exclusivity to distribute
CASA contends that Centigram breached the Letter Agreement in
two ways: first, by terminating the agreement, and second, by the
sale of equipment to Miniphone through BSA. CASA also contends
that Centigram's act of terminating the agreement and sales
through BSA constituted intentional and negligent interference
with existing and prospective economic advantage and breaches of
the implied covenant of good faith and fair dealing.
Defendant now seeks summary judgment on all of Plaintiff's
claims. Specifically, Defendant seeks summary judgment:
1) that it did not breach the exclusivity provision
in the Letter Agreement by its sales of PCM
equipment through BSA, or alternatively, even if it
did, summary judgment is required because Plaintiff
suffered no damages;
2) that it did not breach the Letter Agreement by
giving notice of termination; and,
3) on each of Plaintiff's business tort claims, on
the ground that Plaintiff has not offered evidence
necessary to support each element of the claims,
III. LEGAL STANDARD
Summary judgment is proper "if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a
judgment as a matter of law." Rule 56(c), Fed.R.Civ.P. The moving
party bears the initial burden of demonstrating the absence of a
genuine issue of material fact. Celotex Corp. v. Catrett,
477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986).
However, the moving party has no burden to negate or disprove
matters on which the non-moving party will have the burden of
proof at trial. The moving party need only point out to the court
that there is an absence of evidence to support the non-moving
party's case. Celotex, 477 U.S. at 325, 106 S.Ct. at 2554.
The burden then shifts to the non-moving party to "designate
`specific facts showing that there is a genuine issue for
trial.'" Id. 477 U.S. at 324, 106 S.Ct. at 2553 (quoting Rule
56(e)). To carry this burden, the non-moving party must "do more
than simply show that there is some metaphysical doubt as to the
material facts." Matsushita Electric Indus. Co., Ltd. v. Zenith
Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d
538 (1986). "The mere existence of a scintilla of evidence . . .
will be insufficient; there must be evidence on which the jury
could reasonably find for the [non-moving party]." Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 2512, 91
L.Ed.2d 202 (1986). Evidence that "is merely colorable, or is not
significantly probative," is not sufficient to avoid summary
judgment. Id. 477 U.S. at 249-50, 106 S.Ct. at 2511.
Summary judgment cannot be granted where a genuine dispute
exists as to any material fact. Rule 56(c), F.R.Civ.P. A
"material" fact is one which might affect the outcome of the case
under the applicable law. Anderson, 477 U.S. at 248, 106 S.Ct.
at 2510. A dispute about a material fact is genuine if a
reasonable jury could return a verdict for the non-moving party.
Id. In deciding a motion for summary judgment, the evidence is
viewed in the light most favorable to the non-moving party, and
all justifiable inferences are to be drawn in its favor. Id. at
477 U.S. at 255, 106 S.Ct. at 2513. Moreover, "[c]redibility
determinations, the weighing of the evidence, and the drawing of
legitimate inferences from the facts are jury functions, not
those of a judge [when] he is ruling on a motion for summary
The Letter Agreement provides that the agreement should be
governed and construed under the laws of the State of California,
which the parties do not dispute. Letter Agreement, ¶ C.
Under California law, "[t]he fundamental goal of contractual
interpretation is to give effect to the mutual intention of the
parties." Bank of the West v. Superior Court, 2 Cal.4th 1254,
1264, 10 Cal.Rptr.2d 538, 833 P.2d 545 (1992). "The mutual
intention to which the courts give effect is determined by
objective manifestations of the parties' intent, including the
words used in the agreement, as well as extrinsic evidence of
such objective matters as the surrounding circumstances under
which the parties negotiated or entered into the contract; the
object, nature and subject matter of the contract; and the
subsequent conduct of the parties." Morey v. Vannucci,
64 Cal.App.4th 904, 912, 75 Cal.Rptr.2d 573, 578-79 (1998).
The California Civil Code sets forth numerous guidelines under
which a contract must be interpreted. "A contract must be so
interpreted as to give effect to the
mutual intention of the parties as it existed at the time of
contracting, so far as the same is ascertainable and lawful."
Cal. Civ.Code § 1636. When interpreting a contract, California
courts begin their analysis with the language itself. "The
language of a contract is to govern its interpretation, if the
language is clear and explicit, and does not involve an
absurdity." Id. at § 1638. "[T]he intention of the parties is
to be ascertained from the writing alone, if possible. . . ."
Id. at § 1639. "The whole of a contract is to be taken
together, so as to give effect to every part, if reasonably
practicable, each clause helping to interpret the other." Id.
at § 1641. "The words of a contract are to be understood in their
ordinary and popular sense, rather than according to their strict
legal meaning; unless used by the parties in a technical sense,
or unless a special meaning is given to them by usage, in which
case the latter must be followed." Id. at 1644.
Where, as here, the meaning of the words in a contract is
disputed, "the trial court must provisionally receive any
proffered extrinsic evidence which is relevant to show whether
the contract is reasonably susceptible of a particular meaning."
Morey, 75 Cal.Rptr.2d at 578. It is reversible error for a
trial court to refuse to consider such extrinsic evidence on the
basis of the trial court's own conclusion that the language of
the contract appears to be clear and unambiguous on its face.
Id.; Pacific Gas & Elec. Co. v. G.W. Thomas Drayage & Rigging,
Co., 69 Cal.2d 33, 40, n. 8, 69 Cal.Rptr. 561, 442 P.2d 641
(1968). "If in light of the extrinsic evidence the court decides
the language is reasonably susceptible to the interpretation
urged, the extrinsic evidence is then admitted to aid in the
second step — interpreting the contract." WYDA Assocs. v.
Merner, 42 Cal.App.4th 1702, 1710, 50 Cal.Rptr.2d 323 (1996).
The Court's determination of whether an ambiguity exists is a
question of law. Id.
Interpretation of the contract is an issue of law if a) the
contract is not ambiguous, or b) the contract is ambiguous but no
parol evidence is admitted or the parol evidence is not in
conflict. WYDA Assocs., 42 Cal.App.4th at 1710, 50 Cal.Rptr.2d 323;
Morey, 75 Cal.Rptr.2d at 579. "Furthermore, `[w]hen two
equally plausible interpretations of the language of a contract
may be made . . . parol evidence is admissible to aid in
interpreting the agreement, thereby presenting a question of fact
which precludes summary judgment if the evidence is
contradictory.'" WYDA Assocs., 42 Cal.App.4th at 1710,
50 Cal.Rptr.2d 323 (quoting Walter E. Heller Western, Inc. v. Tecrim
Corp., 196 Cal.App.3d 149, 158, 241 Cal.Rptr. 677 (1987)).
1. Breach of the Exclusivity Provision
Defendant seeks summary judgment on Plaintiff's claim that
Defendant breached the Letter Agreement by selling equipment in
Argentina, an area in which Plaintiff had been granted exclusive
distribution rights, through another distributor, BSA. The
exclusivity clause is contained in Paragraph A(2)(h) of the
Agreement, and provides that:
Centigram Communications Corporation will distribute
its products in Argentina, Paraguay and Uruguay
through CASA, excluding sales through OEM
relationships and third parties from outside the
The parties do not dispute that Centigram purchased equipment
from PCM, sold that equipment to BSA in Argentina for further
sale to Miniphone, all without the participation of CASA.
CASA contends that Centigram thereby breached the exclusivity
provision by offering to sell voice mail and related equipment in
Argentina to Miniphone through BSA, rather than through CASA.
Defendant contends that it did not breach the exclusivity
provision, offering three theories:
1) there was no contractual exclusivity conferred on
CASA because the parties never agreed to annual
which was a prerequisite to the grant of
2) the sales through BSA were expressly excluded from
the grant of territorial exclusivity, because such
sales were sales "through an OEM relationship," and
3) the sales did not violate the exclusivity clause
because they were not sales of Centigram's
equipment, but were instead, sales of PCM
Plaintiff disputes Defendant's characterization of the
transactions, as well as Defendant's interpretation of the
A. Defendant's Annual Sales Quotas Argument
Defendant's first argument is easily dismissed. Centigram
contends that the distribution agreement was not exclusive — that
the grant of exclusivity never attached — because the parties
never agreed on the annual sales quotas. In support, Defendant
cites to deposition testimony to the effect that witnesses do not
recall any discussions regarding annual sales quotas. See
Grindley Depo. 104:5-11; Millan Depo. 13:7-13; 16:11-17:7.
Plaintiff argues, however, that the contract itself evidences an
initial agreement on annual quotas, specifically $300,000 as set
forth in ¶ A(2)(b). Moreover, Plaintiff offers declaration
testimony to clarify the deposition testimony, to the effect that
the witnesses were testifying that there were no further sales
quota discussions other than those that occurred during the
contract negotiations. Millan Decl. ¶¶ 10-11; Grindley Decl. ¶
Construing the evidence most favorably towards Plaintiff, a
reasonable jury could find that the parties did at some point
reach an agreement as to the annual sales quota and that
therefore the distribution agreement became exclusive.
Defendant's motion on this ground is therefore denied.
B. Defendant's OEM Relationship Argument
Defendant's second argument in seeking summary judgment is that
its sale of PCM-manufactured equipment through to Miniphone
through BSA was exempted from the exclusivity clause because
those sales constituted sales "through an OEM relationship" and
are thus expressly excepted from the grant of exclusivity.
Plaintiff contends that the parties only sought to exclude sales
by third party OEMs, rather than sales by Centigram as an OEM.
Resolution of this question involves a matter of contract
interpretation, specifically, that portion of Paragraph A(2)(h)
which carves out an exception from the exclusivity for "sales
through OEM relationships and third parties from outside the
territory." The Court finds that the clause is ambiguous, and the
phrase "through OEM relationships" is reasonably susceptible to
either party's proffered interpretation. Thus, parol evidence
should be considered to determine the true agreement of the
parties. That evidence, however, appears to be in conflict.
Defendant offers two definitions of "OEM" from reference
sources and argues that Centigram's sales as an OEM fall within
the clause "sales through an OEM relationship." Curret Decl.
Exhs. N and O. Plaintiff, by contrast, offers evidence of CASA's
understanding of the phrase as illustrated by the parties'
subsequent course of conduct, as evidenced by the Motorola
transaction and CASA's contemporaneous response to it. Millan
Decl. ¶ 12 and Exh. 7. CASA's evidence suggests that CASA
understood the clause only to address a situation where Centigram
sold products to another manufacturer, who embedded the Centigram
products into other telecommunications products and which were
subsequently sold, by the third party OEM, within the territory.
A reasonable jury could agree with Plaintiff's interpretation.
Thus, there is a
genuine issue of material fact regarding the meaning of the
"sales through OEM relationships" clause and accordingly, there
is a genuine issue of material fact regarding whether Centigram's
sales to BSA violated the exclusivity provision. Summary judgment
must therefore be denied. WYDA Assocs., 42 Cal.App.4th at 1710,
50 Cal.Rptr.2d 323.
C. Defendant's Sales of non-Centigram Products Argument
Defendant's third argument in seeking summary judgment on
Plaintiffs claim for breach of the exclusivity clause is that the
sales through BSA were sales of PCM-manufactured products, not
sales of "Centigram's products," and therefore the sales were
outside the scope of the distributorship agreement under which
Centigram agreed to sell "its products" through CASA. Reply Brief
at 8; Agreement ¶ A(2)(h).
Plaintiff again disagrees, and offers evidence in the form of
declaration testimony that in the course of their four-year
relationship, CASA had acted as a distribution arm for Centigram
of products manufactured by others, but which were sold by
Centigram. CASA argues that these PCM-manufactured products and
other third-party-manufactured products were all offered through
Centigram's catalogue and were therefore a part of Centigram's
product line that CASA was to distribute in Argentina, Paraguay
and Uruguay. Grindley Decl. ¶ 16 (Centigram's product line
included products not of Centigram's own manufacture, but were to
be sold by CASA because they related to the principal product,
voice mail equipment); Millan Decl. ¶ 16 (Millan personally made
presentations, bids and quotations to potential customers that
included items manufactured by other manufacturers, including
PCM; no one from Centigram at the time suggested that such
products would fall within the OEM relationship exclusion);
Marroquin Depo. 89:7-90:9 (PCM products were in Centigram
brochures and were promoted in the name of Centigram). Moreover,
Centigram put its own part numbers and trademark, "Mobile
Manager," on the products. Bridges Depo. 108:24-109:24.
CASA also offers additional evidence, specifically the
Declaration of Justo Millan that
It was not until documents were produced by CCC
[Centigram] in this litigation that I learned that
CCC had sold the products that were bought by and
installed in Miniphone. I also learned then that they
were products that were CCC products, based upon
products that they had acquired from PCM, with CCC
names, product numbers and with CCC product
literature. In fact they were the same products that
I had initially presented to Miniphone with Ms.
Marroquin. Prior to this litigation my understanding
was that these sales that Ms. Marroquin had made had
been made directly to Miniphone by PCM, whom Ms.
Marroquin, I believe, also represented.
Millan Decl. ¶ 18.
There appears to be no dispute by the parties that Centigram is
not the manufacturer of the PCM equipment which it sold to
Miniphone through BSA. That does not end the inquiry, however,
for the question remains whether the PCM products ultimately sold
by Centigram to Miniphone constituted "Centigram's products"
under the parties' Letter Agreement such that those sales through
BSA violated the exclusivity clause, Reading all of these facts
in a light most favorable to the non-moving party, a jury could
reasonably conclude that those sales violated the exclusivity
clause, and accordingly, summary judgment must be denied.
2. Contract Damages Are Shown
As an alternative, Defendant seeks summary judgment on CASA's
claim for breach of the exclusivity clause on the ground that
Plaintiff has not suffered any damages. Defendant points to
evidence that establishes that Miniphone declined to do business
with CASA or Centigram because
those parties serviced Miniphone's competitor, Movicom. Thus,
Centigram argues that even if its sales of PCM products through
BSA to Miniphone are considered a breach of the exclusivity
clause, there is no damage to CASA because CASA could not have
made the sale to Miniphone anyway.
In opposition, Plaintiff argues that there is a genuine issue
of material fact as to whether it could have made the sales to
Miniphone. CASA does not deny that Miniphone refused to do
business with it, but contends that since BSA is now serving both
Miniphone and Movicom, with a "Chinese Wall" erected between the
engineers and service people on the two accounts to prevent
disclosure of confidential information, CASA could have done so
just as easily, if given the opportunity. Specifically, Mr.
If I had been told that CCC was going to go ahead and
try to sell the PCM-manufactured equipment to
Miniphone under its own name but needed to find a
different local service provider, my shareholders and
I could easily have set up a different company,
without the CCC name. An, using a different engineer,
we could have serviced the account with no
commingling of information between him and the
engineer who serviced the Movicom account, thus
assuaging Miniphone's concerns. I was not given that
opportunity. In fact, I did not know that CCC was
directly involved in the sale of voice mail equipment
to Miniphone through a different distributor, BSA, in
a territory, Argentina, that was supposed to be
exclusively ours under our contract with CCC.
Millan Decl. ¶ 20.
CASA further contends that under its commission structure, it
would have earned $1,950,000 on the sales that were made through
BSA. Grindley Decl. ¶ 32.
Defendant objects to the evidence offered by CASA on the ground
that it constitutes speculation on hypothetical facts regarding
what CASA and Miniphone might have done or could have done.
Conclusory speculative testimony is insufficient to raise a
genuine issue of material fact and defeat summary judgment.
Columbia Pictures Indus., Inc. v. Professional Real Estate
Investors, Inc., 944 F.2d 1525, 1529 (9th Cir. 1991) (rejecting
speculative affidavit not based on personal knowledge), aff'd
508 U.S. 49, 113 S.Ct. 1920, 123 L.Ed.2d 611 (1993); Independent
Cellular Tel. v. Daniels & Assocs., 863 F. Supp. 1109, 1114
Plaintiff's evidentiary showing, however, is sufficient to
defeat summary judgment. First and foremost, the Court must
construe the evidence most favorably towards Plaintiff. So
construed, the evidence suggests that there is a business
practice in Argentina, where Miniphone is located, under which
competitors such as Miniphone and Movicom both contract for
equipment and services from the same distributor, provided that
certain precautions are taken to safeguard the competitors'
confidential business information. Plaintiff should not be
deprived of the opportunity to present to a jury its evidence
that it could have stood in the shoes of BSA, and made the same
sales of Centigram's PCM equipment to Miniphone, notwithstanding
contemporaneously servicing Movicom. Furthermore, Plaintiff has
offered sufficient evidence that it has suffered damages as a
result of Centigram's sales through BSA, specifically, the amount
of sales and service BSA provided to Miniphone. Accordingly,
Defendant's motion on this ground is denied.
3. Breach by Terminating the Letter Agreement
Defendant Centigram also seeks summary judgment on CASA's
breach of contract claim, to the extent the claim is based on a
theory that Centigram breached the agreement by terminating it.
Centigram contends that the Letter Agreement is silent as to its
duration, and accordingly, under California law, the contract is
terminable at the will of either party, on reasonable notice.
See Cal. Comm.Code
§ 2309(2); see also, Varni Bros. Corp. v. Wine World, Inc.,
35 Cal.App.4th 880, 890, 41 Cal.Rptr.2d 740 (1995) (where there is
no agreement that the distributorship agreement would last for an
indefinite period, the contract was terminable at will after a
reasonable time and upon reasonable notice); Consolidated
Theatres, Inc. v. Theatrical Stage Employees Union, 69 Cal.2d 713,
727-28, 73 Cal.Rptr. 213, 447 P.2d 325 (1968). Plaintiff, by
contrast, contends that the agreement was intended to last until
terminated, and the only grounds for termination are set forth in
Paragraph K, permitting termination should the parties ever fail
to agree upon annual quotas. Defendant, in turn, disagrees,
arguing that Paragraph K is clear and unambiguous on its face,
providing only for the termination of the exclusivity of the
contract, and does not address the termination of the agreement
Thus, it is necessary for the Court to consider the Letter
Agreement, under the principals of contract interpretation set
forth above, to determine 1) whether Paragraph K is susceptible
to the meaning advocated by Plaintiff, and 2) if not, whether the
agreement is silent regarding its duration.
Paragraph K, in full, provides that:
Exclusivity in the territory is subject to
termination within sixty (60) days of notification in
writing by either party if agreements [sic] is not
reached on the annual sales quota.
The language of Paragraph K — "exclusivity in the territory is
subject to termination" — taken alone, appears clear and
unambiguous. It relates only to a termination of the exclusivity
granted under the contract, should the parties fail to reach
agreement on annual sales quotas. Provisions in a contract,
however, are not to be considered in a vacuum, but instead the
entirety of the contract must be interpreted together.
Cal.Civ.Code § 1641 ("The whole of a contract is to be taken
together, so as to give effect to every part, if reasonably
practicable, each clause helping to interpret the other.").
In construing Paragraph K in light of the entire agreement, a
jury could reasonably find that terminating exclusivity meant
terminating the entire agreement. The contract provides that "the
parties intend to cooperatively offer VoiceMail and related
equipment in Argentina, Paraguay and Uruguay." ¶ A. The parties
agree to "form CASA in good faith both legally and promptly to
offer such services. . . ." ¶ A(1). The parties contemplate that
developing a "mutually agreed upon business plan" including
efforts to include "the mutually agreed upon exploration of the
market for VoiceMail." ¶ A(2). Among other things, CASA
specifically agreed to develop a one-year business plan "based
upon discreet calibrations of revenues from specific customer
types," agreed to an annual equipment sales quota of $300,000,
subject to annual modification on mutually agreed terms, agreed
to develop a competitive survey of the territory and to identify
product requirements and specifications required in the three
countries in the territory. ¶ A(1)(a)-(d). The parties agreed to
"use the best reasonable efforts to cooperatively exploit the
markets for VoiceMail services in Argentina, Paraguay and
Uruguay." ¶ B. The parties also agreed that "Centigram
Communications Corporation will distribute its product in
Argentina, Paraguay and Uruguay through CASA, excluding sales
through OEM relationships and third parties from outside the
territory." ¶ A(2)(h). Finally, the contract provides that
"Exclusivity in the territory is subject to termination within
sixty (60) days of notification in writing by either party if
agreements (sic) is not reached on the annual sales quota." ¶ K.
Construing the contract as a whole, it is clear that
"exclusivity" — being the exclusive distribution means for sales
of Centigram voicemail products and services — was the very
essence of the contract, the primary consideration for which CASA
bargained. An agreement to work cooperatively to develop and
exploit a market for Centigram's products and services, absent
territorial exclusivity, would appear to be
absurd. Thus, a provision terminating "exclusivity" could be
understood to be a provision governing termination of the
contract itself. Thus, the contract is not silent on the grounds
Defendant relies on several cases to assert that the law may
imply into a contract a right of either party to terminate the
agreement at will, upon reasonable notice, and after the
agreement has been in place for a reasonable time. Varni Bros.,
35 Cal.App.4th 880, 41 Cal.Rptr.2d 740; Consolidated Theatres,
69 Cal.2d 713, 73 Cal.Rptr. 213, 447 P.2d 325. Defendant's
authorities, however, are distinguishable, because in each of
those cases, the agreement at issue was wholly silent on
termination. Specifically, Varni involved a contract that was
implied in fact by the parties actions, one which was entirely
silent of express provisions, either written or oral. Similarly,
although Consolidated Theatres involved a written contract, its
duration and termination were left unstated. Under such
circumstances, the law will imply into the agreement, a right to
terminate at will, on reasonable notice, after a reasonable time,
as described above. In the present situation, by contrast, the
contract is not silent on termination — the parties negotiated an
express clause addressing termination, albeit in the form of
addressing "termination of exclusivity." Since the parties have
expressly addressed and negotiated "termination," the Court will
not imply other grounds for terminating the entire agreement.
Defendant also cites cases for the proposition that "a contract
will not be construed to call for perpetual performance unless
the language of the contract unequivocally compels such
construction." Zimco Restaurants, Inc. v. Bartenders & Culinary
Workers Union, 165 Cal.App.2d 235, 238, 331 P.2d 789 (1958);
Nissen v. Stovall-Wilcoxson Co., 120 Cal.App.2d 316, 319,
261 P.2d 10 (1953). Once again, Defendant's authorities, while
supporting the proposition for which they are asserted, are not
on point. The Letter Agreement between Centigram and CASA does
not require perpetual performance: either party may cause the
agreement to terminate by not agreeing to the annual sales
The Court finds that there is a genuine issue of material fact
regarding whether Centigram had the right to terminate the
agreement at will, absent a disagreement on the annual sales
quotas. The evidence is in conflict, and reading the evidence
most favorably towards CASA, a reasonable jury could conclude
that the parties intended that the only grounds for terminating
the parties' contract was if the parties ever failed to reach
agreement on the annual sales quota. Under that reading,
Centigram's termination in April of 1998 would constitute a
breach of the Letter Agreement.
4. Summary Judgment on The Business Tort Claims
Plaintiff has asserted three business tort claims: intentional
interference with existing and prospective economic advantage,
negligent interference with existing and prospective economic
advantage, and breach of the implied covenant of good faith and
fair dealing. Defendant seeks summary judgment on each claim.
a. Intentional and Negligent Interference Claims
CASA claim's that Centigram intentionally interfered with
CASA's existing and prospective business advantage by falsely
telling Movicom that as of April 14, 1998 [the date Centigram
gave notice of termination], BSA was Centigram's only distributor
in Argentina, when the termination was not to be effective until
July. CASA also contends that the same false statement was made
to other commercial enterprises
with which CASA had developed advantageous economic
For Plaintiff to prevail on its claim of intentional
interference with existing and prospective economic advantage,
CASA must prove: 1) an economic relationship existed between CASA
and some third party, with the probability of future economic
benefit to CASA, 2) Centigram's knowledge of that relationship
between CASA and the third party; 3) intentional acts by
Centigram designed to disrupt that relationship, 4) actual
disruption of the relationship, and 5) damages to CASA
proximately caused by Centigram's acts. Silicon Knights, Inc. v.
Crystal Dynamics, Inc., 983 F. Supp. 1303, 1311 (N.D.Cal. 1997);
Westside Ctr. Assocs. v. Safeway Stores 23, Inc.,
42 Cal.App.4th 507, 521-22, 49 Cal.Rptr.2d 793, 803 (1996). CASA
must also prove not only that Centigram knowingly interfered with
CASA's expectancy, but also that Centigram engaged in conduct
that was wrongful by some legal measure other than the fact of
the interference itself. Silicon Knights, 983 F. Supp. at 1311,
citing Della Penna v. Toyota Motor Sales, U.S.A., Inc.,
11 Cal.4th 376, 392-93, 45 Cal.Rptr.2d 436, 447, 902 P.2d 740
Defendant contends that CASA cannot produce any evidence to
support the elements of its cause of action. Having considered
the evidence submitted by the parties, however, the Court
disagrees. Read most favorably to the Plaintiff, there is
evidence sufficient to defeat summary judgment. First, there is
evidence of an economic relationship existed between CASA and
Movicom, and the possibility of an economic relationship with
Miniphone, both with the probability of future economic benefit
to CASA. Second, there is evidence to suggest that Centigram knew
of CASA's relationship with Movicom, and that Centigram knew of
the opportunity at Miniphone. Third, there is evidence that
Centigram acted intentionally to terminate the agreement, thereby
disrupting the potential stream of service agreement revenue, and
also acted intentionally to take advantage of the Miniphone
business without including CASA. Fourth, there is evidence that
the service agreement negotiations with Movicom terminated, and
also that Miniphone accepted the business from BSA and not CASA.
Finally, there is evidence that CASA suffered damages proximately
caused by Centigram's acts. Accordingly, summary judgment must be
b. Breach of Covenant of Good Faith and Fair Dealing
Finally, Defendant seeks summary judgment on Plaintiff's claim
for breach of the covenant of good faith and fair dealing on two
grounds: 1) that such claim requires an underlying breach of the
Agreement which is absent here; and 2) CASA cannot recover tort
damages under this claim, and since it has failed to establish
any recoverable contract damages, Defendant is entitled to
As to the first ground, establishing that there has been a
breach of contract is a prerequisite to obtaining recovery under
the theory of breach of the implied covenant of good faith and
fair dealing. Bionghi v. Metropolitan Water Dist. of Southern
Cal., 70 Cal.App.4th 1358, 1370, 83 Cal.Rptr.2d 388
(1999) (affirming summary judgment on claim for breach of the
implied covenant arising out of the termination of a contract
when there was no breach of the contract by the termination).
Centigram's primary argument fails, however, because as discussed
above, there are genuine issues of material fact in dispute
regarding whether Centigram breached the Letter Agreement.
Defendant's second ground for seeking summary judgment on the
breach of the implied covenant, however, stands on stronger
grounds. Specifically, Defendant argues that CASA cannot recover
tort damages under the claim for breach of the implied covenant
of good faith and fair dealing, because "tort recovery for breach
of the covenant is available only in limited
circumstances, generally involving a special relationship between
the contracting parties, such as between an insured and its
insurer." Id. A supplier-distributor relationship is not a
"special relationship" that could give rise to tort recovery.
Premier Wine & Spirits of S.D. v. E. & J. Gallo Winery,
644 F. Supp. 1431, 1436-37 (E.D.Cal. 1986), aff'd 846 F.2d 537 (9th
Cir. 1988). Plaintiff has not established that the Centigram-CASA
relationship was a "special relationship" such that tort damages
may be recovered and thus has failed to carry its burden in
opposing Defendant's motion. Accordingly, Defendant is entitled
to preclude tort damages on Plaintiff's claim for breach of the
implied covenant of good faith and fair dealing, and its motion,
to this degree, is granted.
For the foregoing reasons, and GOOD CAUSE APPEARING, IT IS
HEREBY ORDERED that Defendant's Motion for Summary Judgment is
DENIED in part and GRANTED in part.
IT IS SO ORDERED.