UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA
June 2, 2008
VANCE HILDERMAN, AN INDIVIDUAL; HIGHRELY INC., A DELAWARE CORPORATION, PLAINTIFFS,
ENEA TEKSCI, INC., DBA ENEA EMBEDDED TECHNOLOGY, DEFENDANTS.
The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge
ORDER DENYING ENEA'S MOTION FOR SUMMARY JUDGMENT ON HILDERMAN'S BREACH OF CONTRACT CLAIM
AND RELATED COUNTERCLAIMS
Defendant Enea TekSci, Inc. ("Enea") has filed a motion for summary judgment on Vance Hilderman's second claim for breach of contract. For the reasons discussed below, Enea's motion is DENIED.
The factual background of this case was set forth in the Court's order filed on March 12, 2008, and need not be repeated here. In that order, the Court denied without prejudice Enea's motion for summary judgment on Hilderman's breach of contract claim. The Court explained that although Hilderman contended that he personally suffered damages from the alleged breach of the Severance Agreement, Hilderman had not detailed exactly what damages he was claiming. The Court gave Enea leave to file a new motion for summary judgment limited to the issue of Hilderman's contract damages and cautioned Hilderman to specify each and every element of his claimed damages.
Pointing to Hilderman's Responses to Enea's First Set of Interrogatories, dated December 5, 2005, Enea argues that Hilderman was not personally damaged by the alleged breach of contract. Responding to interrogatories regarding the amount of damages Hilderman is claiming against Enea and how such damages were calculated, Hilderman stated: "Vance Hilderman's claims are identical to, based upon, and incorporate the business damages accruing to HighRely, and Hilderman incorporates HighRely's answers to this interrogatory." (Enea's Ex. 2.)
Based on Hilderman's interrogatory responses, Hilderman seeks to recover damages suffered by HighRely and did not personally suffer any damages. However, in his opposition to Enea's motion, Hilderman declares that he has suffered damages separate and apart from HighRely. Specifically, Hilderman claims the following damages: (1) lost profits he would have drawn under his profit-sharing agreement with HighRely (according to Hilderman, the loss of the Hospira contract resulted in HighRely losing $1,000,000 in profit); (2) a loan in the amount of $70,000 to HighRely which remains unpaid because HighRely does not have the financial assets to repay the loan; (3) an annual salary of $95,000 for his services to HighRely from 2005 to 2007 (Hilderman states he was budgeted to receive a $95,000 annual salary for his services as President of HighRely but was never paid for the time he served as President and was forced to step down as President in late 2005 as a result of "Ms. Walker's disparagement of my reputation with HighRely and the avionics certification industry."); (4) $79,333.00 in unpaid rent (HighRely is a tenant in an office building which is owned by MHB Properties; Hilderman owns one-third of MHB Properties); (5) attorney's fees that are recoverable under the terms of the Severance Agreement.
Enea contends that Hilderman should be bound to his interrogatory responses. Under the "sham affidavit" rule, a party cannot create a triable issue of fact by introducing a sham affidavit that contradicts his prior deposition testimony or interrogatory responses. School District No. 1J, Multnomah County, Oregon v. ACandS, Inc., 5 F.3d 1255, 1264 (9th Cir. 1993). However, this rule should be applied with caution. Kennedy v. Allied Mutual Ins. Co., 952 F.2d 262, 266-67 (9th Cir. 1991). This rule applies to "'sham' testimony that flatly contradicts earlier testimony in an attempt to 'create' an issue of fact and avoid summary judgment." Id. at 267. "Therefore, before applying [the rule], the district court must make a factual determination that the contradiction was actually a 'sham.'" Id.
Although Hilderman's declaration contradicts his earlier interrogatory responses, the Court does not find that the declaration is a "sham affidavit." Hilderman's contention that he has personal financial interests in relation to HighRely is not new. During his deposition on May 15, 2007, Hilderman insisted that he had a financial interest in HighRely and had been personally damaged by Enea's actions. (Hilderman Dep. (Ex. C to Lucio Decl.), 31:11-15, 18-19.) Hilderman explained that he was a lender to HighRely and was still owed money on the loans. (Hilderman Dep., 32:25-33:1.) He also explained that HighRely was a tenant on property that he co-owned. (Hilderman Dep., 33:4.) When asked whether he had any other financial interests in HighRely, Hilderman said, "No." (Hilderman Dep., 33:21-22.) Hilderman did not discuss a profit-sharing agreement. However, he may have believed that he had covered the profit-sharing agreement by generally referring to his financial interest in HighRely. He also did not mention that he was to receive a salary for serving as President of HighRely. However, he did state that he served as President of HighRely. (Hilderman Dep. 32:17-18.) Although Enea's counsel asked Hilderman if he was paid as an employee, Enea's counsel never asked if the office of President was salaried. (Hilderman Dep., 32:21-22.)
Because the Court does not find that Hilderman's declaration is a "sham affidavit," the Court turns to the question of whether Hilderman has raised a triable issue regarding the existence of breach of contract damages. Generally, the measure of damages for breach of contract is "the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom." Civ. Code § 3300. The test for causation is whether the breach was a substantial factor in causing the damages. U.S. Ecology, Inc. v. State, 129 Cal. App. 4th 887, 909 (2005). "The term 'substantial factor' has no precise definition, but 'it seems to be something which is more than a slight, trivial, negligible, or theoretical factor in producing a particular result.'" Id. (quoting Espinosa v. Little Co. of Mary Hospital, 31 Cal. App. 4th 1304, 1314 (1995). In addition, "[c]ontract damages are generally limited to those within contemplation of the parties when the contract was entered into or at least reasonably foreseeable by them at that time; consequential damages beyond the expectation of the parties are not recoverable." Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 515 (1994).
The Court finds that there is a triable issue as to whether Hilderman may recover damages as a result of Enea's alleged breach of the Severance Agreement. According to Hilderman's evidence, Enea's interference with the Hospira contract resulted in a huge financial loss to HighRely. HighRely was unable to earn any profits and did not have the funds to repay the loan from Hilderman, pay rent, or pay Hilderman's salary. In addition, Hilderman was deprived of payments under the profit-sharing agreement. Because the Hospira contract was a major contract and was projected to bring in over $1,000,000 in profit (Hilderman Decl. ¶ 12), the loss of this contract arguably was a substantial factor in HighRely's financial condition and inability to make payments to Hilderman. Furthermore, it was arguably foreseeable that Hilderman would have made financial outlays for the benefit of HighRely and would suffer financial loss if HighRely was prevented from soliciting customers of Enea after the initial six-month period.*fn1
Therefore, the Court denies Enea's motion for summary judgment on Hilderman's breach of contract claim. However, the Court cautions Hilderman that he is under a continuing duty to supplement his discovery responses. Fed. R. Civ. P. 26(e)(1). To the extent Hilderman has failed to supplement his discovery responses regarding his breach of contract damages, Hilderman must do so within 20 days of the entry of this order. If Hilderman fails to do so, he will be barred from presenting this evidence at trial.
For the reasons discussed above, Enea's motion for summary judgment on Hilderman's second claim for breach of contract is DENIED.
IT IS SO ORDERED.