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Oracle America, Inc v. Innovative Technology

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION


September 18, 2012

ORACLE AMERICA, INC., PLAINTIFF,
v.
INNOVATIVE TECHNOLOGY
DISTRIBUTORS LLC, DEFENDANT.

The opinion of the court was delivered by: Lucy H. Koh United States District Judge

ORDER GRANTING IN PART AND 13 DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

Before the Court is Defendant Oracle America, Inc.'s ("Oracle") Motion for Summary Judgment pursuant to Federal Rule of Civil Procedure 56 ("Motion"). ECF No. 155. This case 20 arises from Oracle's termination of an agreement between Plaintiff Innovative Technology 21

Distributors, LLC ("ITD") and Oracle's predecessor company, Sun Microsystems ("Sun"), relating 22 to the sale of Sun's products. Having considered the parties' submissions, the relevant case law, 23 and the parties' arguments at the August 23, 2012 hearing on this matter, the Court GRANTS IN 24 PART and DENIES IN PART the Motion.

I.FACTUAL BACKGROUND

A.Innovative Technology Distributors, LLC ITD is a "value added reseller[]" of technology products. Declaration of Robert S. Friedman in Support of Motion for Summary Judgment ("Friedman Decl."), Ex. 27. It was formed 5 in 2005 by Linda Spinella, Gloria Mellina, Karen Vogelzang, Rosemary Conway and "Ms. Batula" 6 ISD). Friedman Decl., Ex. 16 (L. Spinella Dep. Tr.) at 23:4-14, 24:21-25:15; Id., Ex. 27. ITD is a 8 woman-owned business and a diversity supplier. Friedman Decl., Ex. 16 (L. Spinella Dep. Tr.) at 9

While there is some dispute as to the reasons for ITD's formation (see Motion at 4; Opposition at 3), ITD appears to have been formed 12 a supplier of Sun products for Alcatel-Lucent ("ALU"), a prominent network equipment provider. 13

See Friedman Decl., Ex. 16 (L. Spinella Dep. Tr.) at 20:23-21:17, 24:8-12; Ex. 27. ALU needed a 14 supplier that was: (1) capable of providing certain enhanced supply chain management services 15 Spinella Dep. Tr.) at 20:23-21:17, 24:8-12. ITD met both requirements. 20 after ITD's formation, ITD entered into an agreement with Sun to become a Sun Partner ("Sun 21 Agreement consisted of two main documents: (1) the General Terms, and (2) the iForce Business 23

Terms Exhibit. Id. For the purposes of the instant motion, several provisions of these documents 24 are worth noting: 25

First, Section 9.1 of the General Terms provides that "[a]ll disputes will be governed by the 26 laws of California" and that "[c]hoice of law rules of any jurisdiction will not apply to any dispute 27 under the Agreement." Friedman Decl. Ex. 30, General Terms § 9.1. 28 (all of whom were the wives of executives and board members of another technology company, 7 24:8-9; Ex. 33 at ITDIST0176755. to take advantage of an opportunity to become ("dock-to-shop services"), and (2) a woman-owned enterprise. See Friedman Decl., Ex. 16 (L. 16 B.ITD's Relationship with Sun

1.The Sun Agreement

Consistent with its purpose of supplying ALU with Sun products, in June 2005, shortly Agreement"). See Declaration of Vincent James Spinella ("Spinella Decl."), Ex. B. The Sun Terms § 9.4. 4 5 any time upon ninety (90) days written notice." Spinella Decl., Ex. B., iForce Terms § 11.1(a). Trademark." Spinella Decl., Ex. B, iForce Terms § 12.1. Section 12.2 further states that ITD only 9 has "limited, non-exclusive. permission to use. Sun['s] logo. to refer or relate to Sun's 10 program for [ITD's] Partner Type." Id., § 12.2 (emphasis added). Additionally, while the agreement permits ITD to display Sun's logo "in pre-sale advertising and marketing materials," it is prohibited from displaying the logo on "product, packaging, documentation. or other materials 13 distributed with Products or the rendering of Services." Id., § 12.2(b). Moreover, any pre-sale 14 advertising and marketing materials displaying Sun's logo also had to "prominently display 15 Fifth, Section 4.2(e) of the iForce Terms stated that ITD could dispute an order within 15 17 days of receiving the invoice from Sun. Spinella Decl., Ex. B, iForce Terms, § 4.2(e). If a dispute 18 was raised within the specified time, ITD was not responsible for paying the outstanding invoice 19 until the dispute was resolved. Id.

America, Inc.'s Motion for Summary Judgment ("Wagner Decl."), Ex. D (Young Dep. Tr.) at 23 118:8-10 (stating that ITD was not an exclusive reseller of Sun products).

Second, the General Terms also provide that "[n]either the General Terms nor any Agreement is intended to create a. franchise. relationship," Spinella Decl., Ex. B., General 3 Third, the iForce Terms agreement provide that "[e]ither party may terminate this Exhibit at Fourth, the iForce agreement strictly limits ITD's use of Sun's trade names. Specifically, Section 12.1 provides that "[ITD] is granted no right, title or license to, or interest in, any Sun 8 [ITD's] own corporate name and logo.." Id. § 12.2(b).16 Significantly, the Sun Agreement did not require ITD to sell Sun's products exclusively.

See Spinella Decl., Ex. B; see also Declaration of Valerie Wagner in Opposition to Oracle 22 2.ITD's Business Model and Sale of Sun Products After the execution of the Sun Agreement, ITD began selling Sun's products. As a value 26 added reseller, ITD operated by pairing these products with its own "value added" products and 27 services. Wagner Decl., Ex. G at ORCL00649835-37. ITD's value added products and services included, inter alia, inventory and logistical support, customization of Sun's services and products, 2 and product and supply chain management. Id.; Spinella Decl., ¶ 2. 3

While there was no contractual requirement that ITD limit itself to the sale of Sun products, 4 it, nevertheless, sold Sun's products almost exclusively. For example, in 2005, 100% of ITD's 5 revenues were generated by its sale of Sun products. Spinella Decl. ¶ 6. Similarly, in 2006, 2007, 6 95.15%, and 96.09% of its total revenues, respectively. Spinella Decl. ¶ 6; Wagner Decl., Ex. D 8 Sun/Oracle products). 10 11 combination to potential customers. Dennis Young, a former Sun/Oracle executive, stated during 2008, 2010, and 2011, ITD's revenues from Sun products accounted for 99.86%, 61.83%, 77.22%, 7 (Young Dep. Tr.) at 118:11-14 (stating that the "vast majority" of products that ITD sold were 9 The pairing of ITD's services and Sun's products proved to be a particularly attractive his deposition that ITD's services were a "huge competitive differentiator for" Sun and helped 13 produce "[h]uge" increases in Sun's sales. Wagner Decl., Ex. D (Young Dep. Tr.) at 125:1-6, 14 "win new OEM design [projects] with Alcatel-Lucent and Motorola." Id. at 125:1-6.

consider selling Sun's competitor's products, specifically products manufactured by Hewlett 18

Packard ("HP"). See Friedman Decl., Ex. 42 (HP Business Plan dated February 2010). ITD 19 appears to have considered this option in response to requests by its two largest customers, ALU 20 and Motorola, that ITD supply HP's products in addition to Sun's. See Friedman Decl., Ex. 15 21

(Spinella Dep. Tr.) at 666:12-19. Notably, however, ITD did not actually begin selling HP 22 products until after the termination of the Sun Agreement. Friedman Decl., Ex. 13 (Spinella Dep. 23

Tr.) at 100:18-101:15 (stating that, prior to September 2011, ITD did not engage in any significant 24 sales of HP products). ITD's reluctance to sell HP products earlier appears to have been due, in 25 part, to its concerns about jeopardizing its relationship with Sun.See Wagner Decl., Ex B at 26 104:20-105:11; Friedman Decl., Ex. 28 (stating that, while ITD was exploring the possibility of 125:21-22. For example, Sun was able to "leverage" the additional services that ITD provided to 15 Despite enjoying a highly profitable relationship with Sun, ITD did, at certain times, joining HP's reseller program, ITD did not have a contract and still considered its relationship with 2

Sun to be its "highest. priority"). 3

4

5 relating to those products. Spinella Decl. ¶ 12. These activities included sending out targeted e-6 mails, as well as mailing brochures and other literature. Id. ITD also created promotional items, 7 including banners, t-shirts, and brochures. Many of these items featured Sun's name and logo; 8 however, pursuant to the Sun Agreement, Sun's logo was always accompanied by an equally 9 prominent ITD logo. See Spinella Decl., Ex. F; see also Id., Ex. B, iForce Terms § 12.2(b) (stating 10 that "pre-sale advertising and marketing materials" bearing Sun's logo must also "prominently

display [ITD's] own corporate name and logo").

In addition to distributing literature and creating promotional items, ITD constructed a "demonstration facility" for Sun's products at its Edison, New Jersey office. Spinella Decl. ¶ 24. 14

3.ITD's Marketing of Sun's Products and Use of Sun's Trade Name

In conjunction with its sale of Sun products, ITD engaged in certain marketing activities

The demonstration facility contained signs describing Sun's products and included special racks 15 that organized the cables connecting Sun's equipment so that customers could see how the cables 16 were laid out. Id. ¶ 25. Additionally, a Sun banner was displayed. Id. Over the course of Sun and 17

ITD has also presented evidence that it engaged in certain joint marketing efforts with Sun.

As set forth in James Spinella's declaration, Sun and ITD made joint marketing presentations to a 20 number of customers including Nokia-Siemens, ALU, AT&T, and Huawei. Spinella Decl. ¶ 8, 10, 21

ITD, and Sun). The companies also jointly entertained certain customers, including taking them to 23 dinners, golf outings, and sporting events. Id. ¶ 11. 24

25

26 relating to its business with Sun. For example, as a Sun Partner, ITD was required to invest 27 resources to ensure that its staff was knowledgeable about presale, sale, and post-sale tasks, as well 28

ITD's relationship, numerous customers visited ITD's demonstration facility. Id. ¶ 26-27. 18

19

28; Id. ¶ 11 (describing account planning session with 30 to 40 representatives from Motorola, 22 4.ITD's Investments in Its Business with Sun

In addition to selling and marketing Sun's products, ITD made a number of investments as "sizing, configuring, integrating, and delivering services on Sun Products.." Spinella Decl., 2

Ex. D at ORCL00903417-21. ITD was also required to hire specialized staff, including a 3

"technical architect," who was responsible for designing, "deploy[ing,] and integrat[ing] Sun 4 products.." Id. at ORCL00903404; Spinella Decl., ¶ 21 (stating that ITD was required to employ 5 individuals with ISO and TSO certifications, individuals who were trained in product assembly, 6 and individuals trained to place orders on Sun configurations). As recognized by Mr. Young 7 during his deposition testimony, ITD's investments in acquiring the necessary knowledge, skills, 8 certifications, and human resources were "significant." Spinella Decl., Ex. D (Young Dep. Tr.) at 9 114:1-115:12; Spinella Decl., ¶ 21 (noting that ITD spent approximately $330,000 on Sun related 10 trainings and certifications). Moreover, the knowledge that ITD acquired was not useful with

respect to products manufactured by Sun's competitors. Id. (noting that ITD's knowledge of Sun products was not transferable to HP products). 13

14 million dollar integration deal.Spinella Decl. ¶ 16. Notably, after the termination of the Sun 15

Friedman Decl., Ex. 6 (Browne Dep. Tr.) at 65:24-66:9; Id., Ex. 37 (ITD 2011 Business Plan for 17

HP) (stating that ITD's "software development, hosting, integration and professional services. 18 could be readily transitioned to focus on HP and IBM."). 19

20 and a Sun/Oracle specific warehouse management platform. Spinella Decl. ¶ 14. ITD also 21 invested substantial sums in "loaner" equipment that was placed at customer's facilities to generate 22 more interest in Sun's products. Spinella Decl., ¶ 15 (stating ITD invested $615,000 in upgrading a 23

"frame" for Motorola to include Sun storage products and spent "thousands of dollars a year" 24 purchasing Sun equipment that was loaned to AT&T). 27 content delivery system ("CDS Agreement"), which was intended to function as an application 28

ITD also constructed an 18,000 square foot "integration facility" in anticipation of a $100

Agreement, ITD was able to repurpose this facility to use HP products at "no additional cost." 16

Additionally, ITD invested $1 million dollars in a Sun/Oracle specific inventory database

C.The CDS Agreement

In 2009, Sun entered into an agreement with Verizon to provide services relating to a store similar to Apple's App Store. Friedman Decl., Ex. 11 (Morrison Dep. Tr.) at 43:4-8. The 2 CDS Agreement required that Sun "engage the services of Certified MWDVBE Suppliers for an 3 amount equivalent [to] at least eighteen percent (18%) of the dollars spent under th[e] Agreement". 4

Friedman Decl. Ex. 17 at Ex. E; Opposition at 21. Verizon requested this provision in order to 5 ensure that it would be able to receive "diversity credits" in connection with the project. Friedman 6

Decl, Ex. 70 at 122:7-16. Verizon also believed that the use of a diversity supplier would enhance 7 its reputation with the federal government. Id. at 48:20-22. Prior to the contract's execution, Sun 8 and Verizon agreed that ITD would be the diversity supplier on the project. See Wagner Decl., Ex. 9

The CDS Agreement was terminated in February 2011. See Wagner Decl., Ex. L (Morrison Dep. Tr.) at 146:23-147:3. 12 from Sun for the purpose of reselling it to Motorola. Wagner Decl., Ex. E at ITDIST0002058;

ITD's risk" if ITD was unable to sell its Last Time Buy inventory to Motorola. Id.. Sun contests 17 this claim. Motion at 21. 18 planned, and ITD approached Sun for assistance. Wagner Decl., Ex. E at ITDIST0002058; 20

Executive, confirmed that, during a meeting between ITD and Sun regarding the Last Time Buy 22

Inventory, Sun agreed that it would modify its agreements with ITD to provide ITD with additional 23 discounts to be used "towards funding the [Last Time Buy] inventory that Motorola will not be 24 purchasing.." Wagner Decl., Ex. E at ITDIST0002058. Mr. Bunker further stated that it was 25

Sun's "intent[ion] to keep" the discounts in place "until the $6M USD of inventory [had] been 26 funded for ITD." Id. ITD contends these discounts were discontinued before Sun was able to 27 recoup its $6 million. Friedman Decl., Ex. 2 at No. 8. 28

L (Morrison Dep. Tr.) at 113:4-14. 10

D.The Last Time Buy Agreement

In mid-2008, ITD purchased certain soon-to-be discontinued ("Last Time Buy") inventory

Friedman Decl., Ex. 2 at No. 8. ITD contends that, at the time of purchase, Sun agreed to "mitigate 16

In any event, ITD was ultimately unable to sell all of the Last Time Buy inventory as

Friedman Decl., Ex. 2 at No. 8. In an August 2009 email, Donald Bunker, Sun's Senior Sales 21

E.Oracle Terminates ITD

In January 2010, Oracle acquired Sun. Wagner Decl., Ex. M (Althoff Dep. Tr.) 19:16-17.

Shortly after acquiring Sun, Oracle undertook a plan to shift Sun's sales to its top customers from 4 an indirect model, in which sales were made through resellers like ITD, to a direct model, in which 5 product was sold directly by Oracle. Id. at 19:13-23; see also Wagner Decl. Ex. T at 6

"100% direct sales" and to make "[i]ndirect sales *highly* non-standard"). The customers Oracle 8 intended to transition to the direct sales model included ITD's two biggest customers, ALU and 9

ORCL00252636-37 (stating that Oracle's goal was to transition Sun's top Global Accounts to a 7

Motorola. See Wagner Decl., Ex. M (Althoff Dep. Tr.) at 49:3-11; Friedman Decl., Ex. 55 (stating 10 that, in 2009, Alcatel-Lucent accounted for 90% of ITD's accounts receivable). 11

Notice"). This notice purported to terminate all agreements, including the Sun Agreement, 13 between Oracle/Sun and ITD effective October 15, 2010. Id. The notice did not set forth any 14 reasons for the termination. Id.

On July 1, 2010, Oracle sent a "Notice of Termina tion" to ITD. Spinella Decl., Ex. I ("July

On August 10, 2010, Oracle sent a follow-up letter retracting the July Notice. Spinella Decl., Ex. J. The retraction letter stated that the July Notice "was sent in error." Id. Oracle has 17 adduced evidence that when the July Notice was sent, Oracle was in the process of terminating its 18 agreements with "thousands" of Sun Partners and that ITD was added to the list due to an 19 "administrative error." See Friedman Decl., Ex. 10 (Lewis Dep. Tr.) at 91:6-92:6. Oracle contends 20 these distributors were being terminated in advance of being moved over to Oracle's Partner 21

(stating that ITD would "receive information about joining the Oracle Partner Network"). 23

24 notice of termination. Spinella Decl., Ex. K ("September Notice"). In this notice, Oracle stated 25 that the termination would be effective December 31, 2010. Id. Again, the notice did not provided 26 any reasons for the termination. Id. 27 28

Network program. See Friedman Decl., Ex. 1 at No. 1; see also Spinella Decl., Ex. I (July Notice) 22

On September 30, 2010, just two months after the July Notice, ITD received a second

2 was set to terminate, Oracle sent ITD an agreement that purported to amend the Sun Agreement. 3

Wagner Decl., Ex. AF at ORCL00268556. Under the amended agreement, ITD would be 4 restricted to selling to only three customers: Motorola, ALU, and HD Logix. Id. Furthermore, the 5 amended agreement would terminate after six months, on June 30, 2011. Id. Internal Oracle 6 documents suggest that the purpose of this agreement was to allow ITD to continue to act as a 7 distributor while Oracle completed its transition to direct sales. See Wagner Decl., Ex. AC at 8

On December 29, 2010, after the close of business, and two days before the Sun Agreement

ORCL00498780 (("CGBU's approach is to transition all NEP business from [a mix of direct and 9 indirect sales] . to 100% direct to NEP sales. [d]uring our transition, approval is needed for 10 eight partners [including ITD] to enable business continuity. through. [the] transition to a direct 11 sales model."). ITD signed the amended agreement on January 3, 2011. Wagner Decl., Ex.

AF at at ORCL00268558. 13

On April 15, 2011, approximately a month after this litigation began and 76 days before the Amendment to the Sun Agreement was scheduled to terminate, Oracle sent ITD a third notice of 15 termination. Friedman Decl., Ex. 57. In the letter, Oracle stated that it was terminating ITD 16 because of its failure to pay invoices totaling $19,105,396.11. Id. Notably, the alleged non-17 payment had begun in July 2010 (just after ITD received the July Notice). See Friedman Decl., Ex. 18

3. The April Notice provided ITD with 60 days to pay the invoices or the parties' agreement 19 would be terminated. Id. ITD failed to pay the invoices and the Sun Agreement was terminated.

complaint against Plaintiff Oracle America, Inc. ("Oracle") in the Superior Court of New Jersey. 23

Act ("NJFPA"); (2) breach of contract; (3) breach of the covenant of good faith and fair dealing; 25

(4) tortious interference with contract; (5) tortious interference with prospective economic 26 advantage; (6) promissory estoppel; (7) unjust enrichment; and (8) declaratory judgment. See 11-27

II.PROCEDURAL BACKGROUND

On March 2, 2011, Defendant Innovative Technology Distributors LLC ("ITD") filed a

ITD alleged eight causes of action including: (1) violation of the New Jersey Franchise Protection 24

2 its action, Oracle sought to recover the approximately $19.1 million in unpaid invoices. Id. Oracle 3 alleged causes of action for breach of contract, account stated, and goods sold and delivered. Id. 4

5

On March 7, 2011, Oracle filed suit in the Northern District of California. ECF No. 1. In

On March 10, 2012, Oracle removed ITD's New Jersey action to the United States District

Court for the District of New Jersey and then successfully moved to have the case transferred to the 6 instant Court. 11-CV-2135, ECF Nos. 1 and 12. After ITD's case was transferred, it was related to 7

On July 12, 2012, Oracle submitted its Motion for Summary Judgment. Oracle seeks

9 summary judgment as to ITD's: (1) first cause of action for a violation of the NJFPA; (2) second 10 cause of action for breach of contract; (3) third cause of action for breach of the covenant of good 11

Oracle's action. See 11-CV-1043, ECF No. 70. 8

faith and fair dealing; (4) fourth cause of action for intentional interference with contract; (5) fifth 12 cause of action for tortious interference with prospective economic advantage; and (6) sixth cause 13 of action for promissory estoppel. Oracle also seeks summary judgment on its affirmative claims 14 relating to the $19.1 million in outstanding invoices.

Defendant Innovative Technology Distributors LLC filed its Opposition on July 26, 2012

("Opposition). Plaintiff filed its Reply on August 2, 2012 ("Reply"). 17

the movant shows that there is no genuine dispute as to any material fact and the movant is entitled 20 to judgment as a matter of law." Fed. R. Civ. P. 56(a). Material facts are those that may affect the 21 outcome of the case. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as 22 to a material fact is "genuine" if the evidence is such that "a reasonable jury could return a verdict 23 for the nonmoving party." See id. "[I]n ruling on a motion for summary judgment, the judge must 24 view the evidence presented through the prism of the substantive evidentiary burden." Id. at 254. 25

The question is "whether a jury could reasonably find either that the [moving party] proved his 26 case by the quality and quantity of evidence required by the governing law or that he did not." Id. 27

III.LEGAL STANDARD

Under Federal Rule of Civil Procedure 56(a), "the court shall grant summary judgment if

"[A]ll justifiable inferences must be drawn in [the non-movant's] favor." See United Steelworkers 28

of Am. v. Phelps Dodge Corp., 865 F.2d 1539, 1542 (9th Cir. 1989) (en banc) (citing Anderson, 2

477 U.S. at 255). 3

4 for its motion and identifying those portions of the pleadings, depositions, interrogatory answers, 5 admissions and affidavits, if any, that it contends demonstrate the absence of a genuine issue of 6 material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A party opposing a properly 7 supported motion for summary judgment "may not rest upon the mere allegations or denials of 8

The moving party bears the initial responsibility for informing the district court of the basis

[that] party's pleading, but . . . must set forth specific facts showing that there is a genuine issue for 9 trial." See Fed. R. Civ. P. 56(e); see also Anderson, 477 U.S. at 250. The opposing party need not 10 show the issue will be resolved conclusively in its favor. See

that is necessary is submission of sufficient evidence to create a material factual dispute, thereby requiring a jury or judge to resolve the parties' differing versions at trial. See id. 13

14 discovery, and affidavits that demonstrate the absence of a genuine issue of material fact. Celotex 15

Corp., 477 U.S. at 323. Where the moving party will have the burden of proof on an issue at trial, 16 it must affirmatively demonstrate that no reasonable trier of fact could find other than for the 17 moving party, but on an issue for which the opposing party will have the burden of proof at trial, 18 the party moving for summary judgment need only point out "that there is an absence of evidence 19 to support the nonmoving party's case." Id. at 325; accord Soremekun v. Thrifty Payless, Inc., 509 20 F.3d 978, 984 (9th Cir. 2007). Once the moving party meets its initial burden, the nonmoving 21 party must set forth, by affidavit or as otherwise provided in Rule 56, "specific facts showing that 22 there is a genuine issue for trial." Anderson, 477 U.S. at 250. 23

The moving party bears the initial burden of identifying those portions of the pleadings,

IV. DISCUSSION

A.Choice of Law

As an initial matter, the Sun Agreement includes a choice of law provision. Specifically,

Section 9.1 states that "[a]ll disputes will be governed by the laws of California" and that "[c]hoice 27 of law rules of any jurisdiction will not apply to any dispute under the Agreement." Friedman 28 Decl. Ex. 30, General Terms § 9.1. Thus, prior to considering the parties' claims, the Court must 2 determine whether this provision should apply. 3

4 courts sitting in diversity are generally bound by the choice of law provisions of the state in which 5 they reside. See Hoffman v. Citibank (S.D.), N.A., 546 F.3d 1078, 1082 (9th Cir. 2008) (applying 6

In determining whether to respect a contractual choice of law provision, federal district

California's choice of law rule despite choice of law provision in contract). However, when a case 7 is transferred pursuant to 28 U.S.C. § 1404, as this case was, "the transferee district court [is]. 8 obligated to apply the state law that would have been applied if there had been no change of 9 venue." Van Dusen v. Barrack, 376 U.S. 612, 639 (1964), superseded by statute on other grounds.

New Jersey choice-of-law rules in determining whether the parties' selection of California law 14 should be honored. See Ferens v. John Deere Co., 494 U.S. 516, 524-25 (1990) (holding that, 15 pursuant to Van Dusen, Mississippi choice of law rules applied following the transfer of the case to 16

"courts will uphold the contractual choice [of law] if it does not violate New Jersey's public 18 policy." Instruction Sys., Inc. v. Computer Curriculum Corp. ("ISI"), 614 A.2d 124, 133 (N.J. 19

ITD's first cause of action alleges a violation of the New Jersey Franchise Protection Act

("NJFPA"). Applying New Jersey's choice-of-law rules, courts have found that contractual 22 choice-of-law agreements that prevent application of the NJFPA by selecting the substantive law 23 from another state are contrary to New Jersey public policy. See, ISI, 614 A.2d at 133-35 (holding 24 that New Jersey law applied to plaintiff's NJFPA claim despite the presence of a choice-of-law 25 provision selecting California law in the contract). Accordingly, the Court will apply New Jersey 26 law for the purposes of resolving this claim. Id. With respect to ITD's other claims, courts 27 applying New Jersey's choice-of-law rules have concluded that the parties' choice of law should be 28

Because the instant case is actually a consolidation of two related cases, which were filed in

different states, the law governing each party's affirmative claims may differ.

United States District Court

For the Northern District of California

ITD originally brought its claims in the District of New Jersey. Thus, this Court must apply Pennsylvania under Section 1404). Broadly speaking, New Jersey choice-of-law rules provide that 17 1992) (citation omitted).

respected with regards to common law claims. See Goldwell of N.J., Inc.v. KPSS, Inc., 622 F. 2

Supp. 2d 168, 193 (D.N.J. 2009) (holding that, where the contract included a choice of law 3 provision selecting Maryland law, New Jersey law was applicable to the NJFPA claim but 4

Maryland law was applicable to the non-NJFPA claims). Accordingly, ITD's remaining causes of 5 action will be decided under California law. 6

Oracle's claims were originally brought in this district. See Compl.,EFC No. 1. Thus,

7 even in the absence of the parties' choice of law provision, Oracle's claims would be governed by 8

California law. Accordingly, the Court need not determine whether California choice-of-law rules 9 would uphold the parties' choice of California law.

"teriminat[ing], cancel[ing,] or fail[ing] to renew a franchise without good cause." N.J. Stat. Ann. 14

[1] a person grants to another person a license to use a trade name, trade mark, service mark, or 16 related characteristics, and [2] in which there is a community of interest in the marketing of goods 17 or services.." Id. §56:10-3 (West). The NJFPA additionally requires that the franchise "establish 18 or maintain a place of business within the State of New Jersey." Id. §56:10-4. Accordingly, in 19 order to qualify as a franchise under the NJFPA, ITD must show that: (1) the franchisor granted the 20 franchisee a "license"; (2) there is a "community of interest" between the franchisor and 21 franchisee; and (3) the parties contemplated that the franchisee would maintain a "place of 22 business" in New Jersey. Cooper Distrib. Co. v. Amana Refrigeration, Inc., 63 F.3d 262, 268-69 23

Oracle contends that summary judgment is appropriate as to ITD's NJFPA claim for several

25 reasons. First, Oracle argues that ITD is not a franchise because it did not have a license. Motion 26 at 11-13. Second, Oracle argues that there was no community of interests between Sun/Oracle and 27

B.ITD's New Jersey Franchise Practices Act Claim

Oracle moves for summary judgment on ITD's first cause of action for a violation of the New Jersey Franchise Practices Act ("NJFPA"). The NJFPA prohibits a franchisor from 13

§56:10-5 (West). Under the statute, a "franchise" is defined as "a written arrangement . . . in which 15

(3d Cir. 1995) (citing N.J. Stat. Ann. §§ 56:10-3a, -4). 24

ITD. Id. at 13-17.Third, Oracle argues that ITD did not maintain a place of business as required 28

by the statute. Id. at 17-18. Finally, Oracle argues that, regardless of whether ITD is a franchise, 2

Oracle did not violate the NJFPA because it did not terminate ITD without good cause. Id. at 18-3

19. The Court considers each of these issues in turn. 4

7 does not have a "license" to use Oracle's trade name and is therefore not a "franchise" within the 8 meaning of the statute. Motion at 10-11. Oracle contends that ITD cannot have been granted a 9 license because the contract between the parties explicitly disclaims the existence of a license.

12 only "limited, non-exclusive" use of Sun's logo, and when using the logo, ITD was required to 13 comply with strict guidelines. Motion at 6 (citingFriedman Decl. Ex. 30, iForce Terms § 12.2) 14

[ITD's] Partner Type.." Id. Additionally, when using the logo in "advertising and marketing 16 materials," ITD also had to "prominently display [its] own corporate name and logo.." Id. 17

§ 12.2(b). Oracle contends these textual provisions show that no license was conferred in this 18 case.*fn1 19

20 determining whether a license exists, New Jersey courts look beyond the parties' written 21 agreement. See Opposition at 14 (citing Lithuanian Commerce Corp., Ltd. v. Sara Lee Hosiery, 22

1.License in Oracle's Trademark

a)The Parties' Contentions Regarding the Licensing Issue

Oracle argues that ITD's claims under the NJFPA must fail as a matter of law because ITD

Motion at 11; Friedman Decl. Ex. 30, iForce Terms § 12.1 ("[ITD] is granted no right, title or license to, or interest in, any Sun Trademark.").

For the Northern District of California

Moreover, under the contract, ITD was permitted

United States District Court

(emphasis added). For example, ITD could only use the logo "to refer. to Sun's program for 15

ITD responds that Oracle's reliance on the contract is misplaced. ITD contends that, in 179 F.R.D. 450, 471 n.9 (D.N.J. 1998)). Citing ISI and Cooper, ITD argues that, in determining 2 whether a license exists, the court should focus on whether there was a "perception among 3 customers" that the parties were "integrally related." Opposition at 13 (citing ISI, 614 A.2d 124; 4

13-14. Accordingly, ITD argues that there is evidence sufficient to create a dispute of material 6 facts as to whether it had a license for the purposes of the NJFPA. Id. 7

8 sufficient evidence of a license to survive summary judgment. 9

Cooper, 63 F.3d 262). ITD contends that there was such a perception among its customers. Id. at 5

Having reviewed the parties' submissions, the Court concludes that ITD has presented

b)The Law Governing the Licensing Issue

The "hallmark" of a franchise license is that the franchisor gives its "imprimatur" (its

approval) "to [the franchisee's] business enterprise in respect to the [franchisor's] product" and that

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For the Northern District of California

its trade name induces "the consuming public to expect from [the franchisee] a uniformly 13 acceptable and quality controlled service endorsed by" the franchisor. Neptune T.V. & Appliance 14

Serv., Inc. v. Litton Sys., Inc. ("Neptune"), 462 A.2d 595, 599 (App. Div. 1983). The mere right to 15 use a franchisor's name or mark in marketing the franchisor's products is not sufficient to confer a 16 license. ISI, 614 A.2d at 138. Rather, the franchisee "must use the name of the franchisor 'in such 17 a manner as to create a reasonable belief on the part of the consuming public that there is a 18 connection between the... licensor and licensee by which the licensor vouches, as it were, for the 19 activity of the licensee.'" Id. at 139 (quoting Neptune, 462 A.2d at 599). In determining whether a 20 license is present, the Court must consider not only the parties' written agreement, but also their 21

"relationship." ISI, 614 A.2d at 139; see also Cooper, 63 F.3d at 272 (holding that a reasonable 22 jury could have "inferred the existence of a 'license' based on various aspects of the lengthy 23

Two cases, ISI and Cooper, are instructive with respect to the factors that are relevant in

25 determining whether a license has been granted. In ISI, the plaintiff, Instructional Systems Inc. 26

("ISI") was the exclusive distributor of defendant Computer Curriculum Corporation's ("CCC") 27 computerized educational-learning systems for the northeast. ISI, 614 A.2d at 126. ISI alleged that

it was a franchise under the NJFPA, and that it had been improperly terminated by CCC. Id. at 2

127. In addressing the licensing issue, the Court noted that ISI had "always operated under its own 3 trade name, and. [did] not use CCC's name on its stationery, business cards, or on any business 4 signs"; however the Court held that the "relationship" between the parties indicated the presence of 5 a license. Id. at 139. The factors the Court considered in reaching this conclusion included, among 6 other things, that: (1) ISI was "required. to 'use its best efforts to maintain and promote CCC's 7 name, trademark and logo on the Products," id. (emphasis in original); (2) ISI was prohibited from 8 selling any of CCC's competitor's products, id.; (3) CCC's product was "not an 'off-the -shelf' 9 product. [but instead] it [was] a unique combination of hardware and software whose identity 10

11

12

[was] integrally related with that of ISI," id.; and (4) ISI was CCC's exclusive distributor and

"CCC explicitly promoted ISI" as such. Id. at 140. The Court held that these factors were enough

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to "induce[] the consuming public to expect from ISI a uniformly acceptable and quality controlled 13 service endorsed by CCC itself." Id. (internal punctuation omitted).

Similarly, in Cooper, the Court held that plaintiff Cooper Distributing Co., Inc., a

15 distributor of and authorized service provider for defendant Amana Refrigeration, Inc.'s home 16 appliances, had a license in Amana's trade name for the purposes of the NJFPA. Id., 63 F.3d at 17

273. In reaching this conclusion, the Court noted that: (1) Cooper was "the exclusive Amana 18 distributor and servicer of Amana products"; (2) Cooper's showroom displayed the Amana sign; 19

(3) Cooper's servicemen wore Amana uniforms; (4) Cooper's servicemen were "integrally related" 20 to the proper function of Amana products because the agreement between the parties "required 21

Cooper to give 'warranty' service" on Amana's products; and (5) "Cooper's customer service was 22 important so that customers would distinguish Amana from other manufacturers.." Id. at 272-73. 23

The Court also emphasized the fact that Cooper's dealers had testified that they "regarded Amana 24 and Cooper as being 'one and the same.'" Id. at 273. 25

26

27 was not Sun's exclusive distributor for any region or market. See ISI, 614 A.2d at 139; Cooper, 63 28

c)Application to the Instant Case

To be sure, this case is different than ISI and Cooper in several respects. For example, ITD

F.3d at 273 (finding it "noteworthy that Cooper was the exclusive Amana distributor to local 2 dealers in Cooper's four-state territory"). ITD was also not prohibited from selling Sun's 3 competitor's products, nor was it "required. to. promote[Sun's] name.." ISI, 614 A.2d at 4

Moreover, it is arguable whether ITD's use of Sun's logo at marketing events and on

6 promotional items, including "banners, t-shirts, and brochures," shows that ITD was a franchise 7 licensee. Opposition at 14. Consistent with the terms of the Sun Agreement, each of the 8 promotional items bearing Sun's logo also bore an equally prominent ITD logo. See Spinella 9

139. Furthermore, ITD's sales staff did not wear Sun uniforms. Cooper, 63 F.3d at 272. 5

Decl., Ex. F. Some courts have held that such use of a franchisor's logo is indicative of a franchise 10 license. See Lithuanian Commerce Corp., 179 F.R.D. at 471 (holding that LCC's use of

"numerous promotional devices" including, inter alia, "a van prominently displaying the LCC

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For the Northern District of California

name alongside a L'egg's [the franchisor's product] poster" was sufficient to enable a reasonable 13 jury to find that there was a license). Others have suggested that it is not. See Liberty Sales 14

Assocs., Inc. v. Dow Corning Corp., 816 F. Supp. 1004, 1010 (1993) (holding that Dow's 15 authorizing "Liberty to provide. promotional gifts" with "both Dow and Liberty's names printed 16 on them" did not turn Liberty into a licensee for the purposes of the NJFPA). This Court need not 17 reach this issue. 18

This Court concludes that ITD has presented sufficient evidence to create a material factual

19 dispute as to whether ITD had a franchise license. Significantly, ITD has presented evidence that 20 at least one of its two primary customers, Alcatel-Lucent,*fn2 "believed that Sun vouched for the 21 activities of ITD." Wagner Decl., Ex. D., (Young Dep. Tr.) at 122:18-22. According to August 22

Manz, ALU's former Global Supplier Relationship Manager, he considered ITD to be "essentially 23 an extension of Sun." Declaration of August F. Manz, Jr. ("Manz Decl."), ECF No. 161, ¶ 4. 24

(stating that "resellers were an extension of Sun as a company[,] of their products[,] and their 26

Indeed, Sun appears to have shared this view. Wagner Decl., Ex. D (Young Dep. Tr.) at 120:18-20 25 services"). As recognized in Cooper, the perception among customers that the franchisor and 2 franchisee share a "special relationship" or that they are "one and the same" is a critical factor in 3 determining the existence of a franchise license. See Cooper, 63 F.3d at 273. In this case, there 4 were several factors that may have contributed to the perception that Sun vouched for ITD. 5

6

First, ITD has presented evidence suggesting that its marketing services were "integral[]" to

Sun's marketing scheme. Cooper, 63 F.3d at 272. In order to reduce its own overhead, Sun relied 7 heavily on resellers like ITD to market its products. See Wagner Decl., Ex. D. (Young Dep. Tr.) at 8

119:10-17. Indeed, approximately 50 to 60 percent of Sun's sales were accomplished through 9 resellers like ITD. See also id. at 120:20-24. Thus, resellers like ITD were Sun's representatives 10 in the market. This could have led ITD's customers, particularly ALU and Motorola, to perceive

13 functioning of [Sun's] products." Cooper, 63 F.3d at 272 (holding Cooper's repair services were 14 integrally related to the functioning of Amana's products). For example, ITD provided services 15 including, inter alia, customization of Sun's products, integration services, and facilitation of 16 infrastructure deployments. Spinella Decl., ¶ 2. These services facilitated the deployment of Sun's 17 products and ensured that Sun's products met customer needs. Indeed, as in Cooper, ITD's 18 services appear to have been "a huge competitive differentiator" for Sun. Wagner Decl., Ex. D 19

(Young Dep. Tr.) at 125:1-6, 21-22; Cooper, 63 F.3d at 273 (noting the fact that Cooper's services 20 were "important so that customers would distinguish [Sun] from other manufacturers."). Thus, the 21 role ITD's value added services played in ensuring the proper functioning of Sun's products may 22 have also fostered the perception that Sun vouched for ITD's work. Cooper, 63 F.3d at 272. 23

24

"that [Sun] vouched for [ITD's] use of [Sun's] name." Cooper, 63 F.3d at 272.

Second, ITD's value added services appear to have been designed "to [promote] the proper

Third, Sun directly warrantied all products purchased through ITD. Wagner Decl., Ex. D.,

(Young Dep. Tr.) at 120:25-121:3. Indeed, the presence of a "direct[]" warranty from Sun was a 25 critical factor in many customer's decisions to purchase Sun's products from ITD. Id. at 121:19--26

25. As recognized by Mr. Young, one of Sun's former executives, this warranty "further cause[d] 27 customers to believe that ITD was an extension of Sun." Id. at 121:13-18. 28

Fourth, Sun, rather than ITD, negotiated the pricing for sales of Sun's products. Manz

Decl., ¶ 5. Sun's role in negotiating pricing could lead a reasonable consumer to conclude that, 3 when it purchased product from ITD, Sun was vouching for that product. 4

5

Fifth, ITD displayed Sun's banner and logo in its corporate offices. See Spinella Decl., ¶

25. This factor was found to be indicative of a license in Cooper. See id., 63 F.3d at 272 (inferring 6 the existence of a license in part because "Cooper's showroom displayed the Amana sign"). 7

8 have a franchise license for the purposes of the NJFPA. 9

10 proposition that no license exists in the present case is misplaced. Id., No. C-94-7001, CCH Bus.

Franch. Guide, ¶ 10,407 (Mar. 3, 1994). In Pride, the Court concluded that Pride, a New Jersey

corporation in the business of selling computers, software, and computer consulting services, was 13 not a Sun franchise under the NJFPA. Id. at 3-4. While Pride did involve a nearly identical 14 contract provision governing Pride's use of Sun's trade name, it is distinguishable in at least two 15 material respects. Id. at 2. First, the Pride Court emphasized that Pride sold "different types of 16 computers manufactured. by various companies." Id. at 1, 3. As will be discussed infra in 17

Decl. ¶ 6. Second, Pride was decided on a motion for preliminary injunction and, unlike the 19 present case, there was no factual record indicating that "consumers felt that the franchise and 20 franchisor were. one and the same.." Pride at 3; see also Manz Decl., ¶ 4. 21

22

In light of these facts, the Court is unable to conclude, as a matter of law, that ITD did not

Oracle's reliance on Pride Tech. Inc. v. Sun Microsystems Computer Corp. for the Section III(B)(2) almost all ITD's revenues came from its sale of Sun's products. See Spinella 18

The remaining cases cited by Oracle are similarly inapposite. Motion at 11 (citing Colt

Indus. Inc., v. Fidelco Pump & Compressor Corp., 844 F.2d 117, 119 (3rd Cir. 1988); Southern 23

2008); Liberty Sales Associates, Inc., 816 F. Supp. at 1010-11. Significantly, in these cases, there 25 was no deposition testimony, customer affidavits, or other evidence showing that consumers 26 believed the franchisor vouched for the franchisee (see Wagner Decl., Ex. D (Young Dep. Tr.) at 27

States Co-op., Inc. v. Global AG Associates, Inc., No. 06-1494, 2008 WL 834389, *7 (E.D. Penn. 24

122:18-22), or that the franchisee was an extension of the franchisor. See Manz Decl., ¶ 4.

2 respect to the licensing issue. The Court notes, however, that in reaching this conclusion, it does 3 not express a view on the relative merits of the parties' positions. 4

5

6 of interest" between ITD and Oracle. Motion at 13. As set forth in ISI, a community of interest 7 exists "when the terms of the agreement between the parties or the nature of the franchise business 8 requires the licensee, in the interest of the licensed business's success, to make a substantial 9 investment in goods or skill that will be of minimal utility outside the franchise." Id. at 142 10

e distributor's investments must have been 'substantially

12 franchise-specific', and (2) the distributor must have been required to make these investments by 13 the parties' agreement or the nature of the business." Cooper, 63 F.3d at 269. 14

15 and ITD because ITD cannot show it made any significant franchise-specific investments. Motion 16 at 15. Oracle's argument fails. ITD has adduced sufficient evidence of substantial franchise 17 specific investments. 18

For example, ITD has adduced evidence showing that it was contractually obligated to

19 make substantial investments in developing Sun-specific knowledge and skills, including "[s]erver 20 training, software training, partner training, [and] services training.." Wagner Decl., Ex. D 21

(Young Dep. Tr.) at 114:15-18; Spinella Decl., Ex. D at ORCL00903417 ("Partners must be 22 knowledgeable in sizing, configuring, integrating, and delivering services on Sun Products.."); Id. 23 at ORCL00903417-21 (discussing training courses and accreditation process). ITD was also 24 required to hire specialized staff, including a "technical architect" with responsibility for designing, 25

Spinella Decl., ¶ 21 (stating that ITD was required to employ individuals with ISO and TSO 27 28

For the reasons stated above, the Court denies Oracle's motion for summary judgment with

2.Community of Interest

Oracle also contends that summary judgment is appropriate because there is no "community

(quoting Cassidy, 944 F.2d at 1143). "Thus, in order to find a 'community of interests,' two 11 requirements must be met: (1) th Oracle contends that ITD cannot establish there was a community of interest between Sun

"deploy[ing,] and integrat[ing] Sun Products.." Spinella Decl., Ex. D at ORCL00903404; 26

certifications, individuals who were trained in product assembly, and individuals trained to place 2 orders on Sun configurations). 3

As recognized by Mr. Young, a former Sun/Oracle executive, ITD's investments in

4 acquiring Sun specific knowledge were "significant." Wagner Decl., Ex. D (Young Dep. Tr.) at 5

114:1-4; Spinella Decl., ¶ 21 (noting that ITD spent approximately $330,000 on Sun related 6 trainings and certifications). Moreover, the knowledge ITD acquired was not transferable to Sun's 7 competitor's products. Wagner Decl., Ex. D (Young Dep. Tr.) at 114:1-19-115:12. ITD's 8 investment in acquiring knowledge about Sun's products, therefore, constitutes substantial 9 franchise-specific investments. See Cooper, 63 F.3d at 270 (holding that Cooper's significant 10 investments in "the acquisition of knowledge about Amana products" supported the conclusion that

13 investments in order to facilitate its business with Sun. For example, ITD invested $1 million in a 14

Sun/Oracle specific inventory database and a Sun/Oracle specific warehouse management 15 platform. Spinella Decl. ¶ 14.*fn3 ITD also invested significant sums in "loaner" equipment as a 16 means of generating interest in Sun's products. Spinella Decl., ¶ 15 (stating ITD invested 17

"thousands of dollars a year" purchasing Sun equipment that was loaned to AT&T). These 19 investments further support the conclusion that ITD made substantial franchise-specific 20 investments. 21

22 received the vast majority of its sale of Sun products. See Cooper, 63 F.3d at 272 (stating there was a community of interest between Cooper and Amana)

ITD has also adduced evidence that it was required to make other non-transferable

$615,000 in upgrading a "frame" for Motorola to include Sun storage products and spent 18

The existence of a community of interest is also supported by the fact that ITD that economic dependence is "the 'most important' factor in determining whether a 2 community of interest exists"). For example in 2005, ITD received 100% of its revenue 3 from its sale of Sun products. Similarly, in 2006, 2007, 2008, 2009, and 2010, ITD's 4 revenues from its sale of Sun products accounted for 99.86%, 61.83%, 77.22%, 95.15%, 5 and 96.09% of total revenues, respectively. See Spinella Decl. ¶ 6. The high percentage of 6

ITD's revenues attributable to the sale of Sun products further supports the conclusion that 7 there was a community of interest between ITD and Oracle. See Cooper, 63 F.3d at 272 8

85% of plaintiff's revenues were derived from defendant's products).*fn4

In light of ITD's evidence of substantial franchise-specific investments, the Court

cannot conclude, as a matter of law, that there was no community of interest between ITD

and Oracle. Accordingly, Oracle's motion for summary judgment on this ground is denied.

(concluding that there was a community of interests between plaintiff and defendant where 9

15 business in New Jersey. Motion at 19. Oracle argues that ITD's Edison, New Jersey facility does 16 not constitute a "place of business" under the aforementioned statute because "the vast majority of 17

This argument fails. 19

20 franchisee displays for sale and sells the franchisor's goods or offers for sale and sells the 21 franchisor's services." N.J. Stat. Ann. § 56:10-3 (West). Ordinarily, the place of business 22 requirement demands something more than "an office [or] a warehouse." Id. However, courts 23

ITD's dependence on Sun's products for its revenues, the Court concludes that there is sufficient evidence of a community of interests. Accordingly, the Court need not consider the additional two 28 factors raised by Oracle.

Case No.: 5:11-CV-01043-LHK

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

3.Place of Business in New Jersey

Oracle also contends that ITD was not a franchise because it did not maintain a place of

ITD's products are sold remotely . . . and delivered at the customers' facilities." Motion at 17. 18

Under the NJFPA, " 'Place of business' means a fixed geographical location at which the

24

Cassidy as factors that are relevant in determining whether there was a community of interests. Id., 944 F.2d at 1140. In light of the evidence of ITD's substantial franchise specific investments and 27

have recognized that, under certain circumstances, a commercial office may qualify as a place of 2 business under the Act. 3

4

For example, in ISI, the Court held that the place of business requirement was satisfied by

ISI's Hackensack, New Jersey office, which was located on the sixth floor of a commercial office 5 building. ISI, 614 A.2d at 138. In reaching this conclusion, the Court relied upon the fact that the 6 office featured a mock laboratory where customers were permitted to test CCC's products. Id. The 7

Court also noted that ISI hosted numerous demonstrations at this laboratory every year. Id. The 8 office was therefore "more than a mere sales office or warehouse." Id. It was a "marketing 9 facility. where [ISI's] customers. [could] receive. [a] sales demonstration of the operation of 10

[CCC's] complex [computer] product." Id.

Similarly, ITD has adduced evidence that, rather than being just a sales office or

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For the Northern District of California

warehouse, its Edison, New Jersey office is a marketing facility. ITD held "hundreds of on-site 13 sales meetings" at its office. Id. ¶ 26; Friedman Decl., Ex. 33 at ITDIST0176756 (stating that the 14

Edison New Jersey office includes "warehouse, integration center[, and]. sales"). Moreover, 15 similar to ISI's office, ITD's office included a demonstration facility for Sun's products. Id. ¶ 25. 16

This facility included server racks that were organized so customers could "see how the cables 17 were laid-out," as well as "signs describing the Sun/Oracle machines.." Id. ITD and Sun hosted 18 a number of events in which customers toured its facility. Id. ¶26-28; see also id. ¶ 26 (stating that 19

ITD and Sun met with Verizon representatives at ITD's offices numerous times and that these 20 representatives toured the demonstration facility). In light of these facts, the Court concludes that 21

ITD has adduced sufficient evidence that its office qualifies as a place of business under the Act. 22

As ITD points out in its Opposition, its office also qualifies as a place of business under the

24 recently added exception for businesses that do not make the "majority of [their] sales directly to 25 consumers." N.J. Stat. Ann. § 56:10-3. This exception was added in 2010. Id. Under this 26 exception, notwithstanding the fact that the franchisee does not "display[]. [or] sell[] the 27 franchisor's goods" from its office, its office may still qualify as a place of business if: (1) it is the 28 place where the franchisee's "personnel. call upon customers," or (2) the franchisee's "goods are 2 delivered to customers" from the location. Id. 3

The threshold issue that must be addressed in determining whether ITD qualifies under this

4 exception is whether ITD makes the "majority of [its] sales directly to consumers." N.J. Stat. Ann. 5

§ 56:10-3. Notably, the statute does not define the term "consumer," and the Court is unaware of 6 any prior precedent construing the term. Black's Law Dictionary defines consumer as: "[a] person 7 who buys goods or services for personal, family or household use, with no intention for resale." 8

Here, ITD sells primarily to Network Equipment Providers ("NEPs"), as opposed to "end-

10 user[s]." Friedman Supp. Decl., Ex. 72 (Spinella Dep. Tr.) at 33:3. Unlike end-users, NEPs do not

Black's Law Dictionary (9th ed. 2009). 9

buy equipment for "their own internal consumption," but rather so that they can package it with

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For the Northern District of California

their own products and resell the goods to end-users. Id. at 31:15-22. In light of the fact that NEPs 13 are not purchasing product primarily for their personal use, they are not consumers. Accordingly, 14

ITD does not make the majority of its sales to consumers. ITD is therefore eligible for the 15 exception if either of the two other requirements are met (i.e. the location is the place where the 16 franchisee's employees call upon customers or goods are delivered from the location). 17

18 his declaration, Mr. Spinella states that ITD's Edison office is the place where its sales people 19

"call[] upon customers," and this office is the location "where Sun/Oracle goods were stored and 20 delivered to customers." Spinella, Decl., ¶ 29. Accordingly, the Court concludes ITD's office 21 qualifies as a place of business under the exception. 22

23

ITD has adduced evidence showing it meets the other requirements for the exception. In

Oracle's reliance on Liberty Sales Associates and Fischer Thompson Beverages, Inc. v.

Energy Brands Inc., CIV.A.07-4585 (SRC), 2007 WL 3349746 (D.N.J. Nov. 9, 2007), in support 24 of its contention that ITD's facility does not qualify as a place of business is misplaced. In Liberty, 25 the Court held that plaintiff company's president's home did not qualify as a place of business 26 under the statute because it "was used primarily as an office for telephone sales calls, paper work 27 and an occasional meeting or demonstration, and as a short-term warehouse." Similarly, in 28

Fischer, the Court held that plaintiff's 40,000 square-foot facility did not qualify as a place of 2 business because there was no evidence that "any substantial sales, product promotion or related 3 interaction with purchasers" took place there. Fischer, 2007 WL 3349746, at *3. Here, ITD has 4 adduced evidence that its Edison office was the hub for substantive sales and marketing activity 5 including numerous customer demonstrations and meetings. Moreover, both these cases were 6 decided before the statute was amended in 2010 to include an exception to the office and 7 warehouse prohibition. Accordingly, Liberty and Fischer are inapposite. 8

9 the issue of whether ITD maintains a place of business in New Jersey as required by the NJFPA. 10

Oracle next argues that even if the NJFPA applies to the Sun Agreement, ITD's claims fail

because Oracle had good cause to terminate the agreement. Motion at 18. 13

14 fail to renew a franchise without good cause." N.J. Stat. Ann. § 56:10-5 (West). For the purposes 15 of the statute, "good cause" is limited to situations where a franchisee has failed to "substantially 16 comply" with the parties' agreement. Id. " '[S]ubstantial compliance' is simply the absence of 17

'material breach' of contract." Goldwell, 622 F. Supp. 2d at 188. A franchisor seeking to 18 terminate a franchise relationship must give "written notice setting forth all the reasons for such 19 termination. at least 60 days in advance of such termination." N.J. Stat. Ann. § 56:10-5 (West). 20

As recognized in Goldwell, a franchisor violates the Act when it sends, without good cause, a letter 21 providing "unequivocal notice" of its intent not to renew the parties' agreement. See Id., 622 F. 22

Supp. 2d at 189-93 (holding that "an unequivocal notice of intent not to renew is no difference 23 from the actual failure to renew that is bound to follow" and denying summary judgment because 24 there was a material issue of fact as to whether defendant had good cause to terminate the franchise 25 agreement when it sent its notice of intent not to renew). 26

27 the purposes of the Act. Motion at 18-19 (citing Friedman Decl., Ex. 57). Oracle contends that it 28

For these reasons, the Court denies Oracle's motion for summary judgment with respect to

4.Good Cause for Termination

11 12

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For the Northern District of California

The NJFPA states: "It shall be a violation of this act for a franchisor to terminate, cancel or

Here, Oracle contends that its April 15, 2010 letter constituted its notice of termination for

did not violate the Act by sending this letter because ITD's failure to pay approximately $19.1 2 million in unpaid invoices gave it good cause to terminate the parties' agreement. Motion at 18. 3

Moreover, Oracle argues that, consistent with the statutory requirements, the letter identified the 4 basis for Oracle's decision to terminate ITD and provided ITD sixty days to cure its breach. Id. at 5

Oracle's description of the sequence of events leading to its termination of ITD is

7 somewhat incomplete. As ITD points out in the Opposition, prior to sending the April Notice, 8

18-19. Accordingly, Oracle contends that it did not violate the Act when it terminated ITD. 6

Oracle sent two other letters to ITD, on July 1, 2010, and September 30, 2010, respectively, 9 purporting to terminate the Sun Agreement. Spinella Decl., Ex. I; Ex. K. Notably, neither letter 10 provided any grounds for termination. Moreover, the evidence suggests that, when these letters

were sent, Oracle was in the process of terminating all its resellers in an effort to move to a direct

sales model. See Wagner Decl., Ex. M (Althoff Dep. Tr.) at 19:13-23 (discussing Oracle's plan to 13 transition to a direct sales model); Ex. T at ORCL00252636-37 (stating that Oracle intended to 14 transition to a "100% direct sales" model for Global Accounts and to make "[i]ndirect sales 15

September were based on good cause. Accordingly, to the extent these letters constitute 17

"unequivocal" notices of Oracle's intent to terminate the Sun Agreement, Oracle violated the Act 18 by sending them. Goldwell, 622 F. Supp. 2d at 190. 19

*highly* non-standard"). Thus, making it doubtful that Oracle's termination letters in July and 16

Oracle argues that neither letter constituted a true notice of termination under the Act.

Reply at 11. Oracle argues that the July letter was not a notice of termination because it was 21 retracted shortly after it was sent. Reply at 11; see also Friedman Decl., Ex. 10 (Lewis Dep. Tr.) at 22

Agreement was not actually terminated on December 31, 2010 (the termination date set forth in the 24 letter) but was rather amended and renewed. Reply at 11; Wagner Decl., Ex. AF at 25

While the July letter was rescinded, if ITD was aware of Oracle's plan to terminate its

27 channel partners and sell directly, the letter may have provided ITD with unequivocal notice of 28

91:6-92:6. Oracle argues that the September letter was not a notice of termination because the Sun 23

what was on the horizon, notwithstanding the letter's retraction. See Wagner Decl., Ex. M at 2

19:13-23 (stating that Oracle's plan to take Sun's customers direct was "communicated publicly to 3 the market"). Similarly, the Court cannot conclude that the September letter was not a notice of 4 termination. The January 2011 amendment that Sun argues superseded the September letter only 5 extended the agreement for another six months and limited ITD to three customers. Wagner Decl., 6

Ex. AF at ORCL00268556. Indeed, Oracle's internal documents suggest that the amendment was 7 only intended to allow ITD to sell Sun products temporarily while Oracle completed its transition 8 to direct sales. Wagner Decl., Ex. AC at ORCL00498780 (recommending that ITD be permitted to 9 continue selling to ALU and Motorola "[d]uring [Oracle's] transition" to 100% direct sales). 10

11 12

13 gave notice of its intent to terminate the Sun Agreement, and (2) whether Oracle had good cause to 14 terminate the agreement when notice was given. Thus, the Court cannot conclude, as a matter of 15 law, that Oracle did not violate the NJFPA when it terminated ITD. 16

17

Accordingly, the Court cannot conclude as a matter of law that the July or September letters did not terminate the Sun Agreement.

United States District Court

For the Northern District of California

As set forth above, there are disputed issues of material fact concerning: (1) when Oracle

In light of the Court's conclusions that there are disputed issues of material fact concerning:

(1) whether ITD had a franchise license in Sun's trade name; (2) whether ITD and Sun shared a 18 community of interests; (3) whether ITD maintained a place of business (as that term is defined in 19 the NJFPA) in New Jersey; and (4) whether Oracle violated the NJFPA when it terminated ITD, 20

Oracle's motion for summary judgment is denied as to ITD's NJFPA claim. 21

22

23 contract. Motion at 19-21. ITD's second cause of action alleges that: (1) Oracle breached various 24 agreements with ITD, and (2) breached an agreement with Verizon relating to the Content Delivery 25

System project ("CDS Project"). ECF No. 1-1, ¶ 150-51. ITD contends that it has standing to raise 26 the CDS claim because it was a third-party beneficiary to the agreement. Id., ¶ 151. The Court 27 addresses ITD's third party beneficiary claim first. 28

A.ITD's Breach of Contract Claims

Oracle also seeks summary judgment on ITD's second cause of action for breach of 2 contract between Sun and Verizon ("CDS Agreement") requiring Sun to "engage the services of 3

Certified [Minority-Owned, Women-Owned, or Disabled Veteran-Owned Business Enterprise 4

("MWDVBE")] Suppliers for an amount equivalent [to] at least eighteen percent (18%) of the 5 dollars spent under th[e] Agreement". Friedman Decl. Ex. 17 at Ex. E; Opposition at 21. ITD 6 contends that Sun and Verizon always contemplated that ITD would be the diversity supplier and 7 that, accordingly, ITD suffered damage when Sun breached the CDS Agreement. Opposition at 21. 8

9 expressly for [his] benefit.." In order to pursue a claim under Section 1559, the third party must 10

1. ITD's Third Party Claim

ITD's third-party beneficiary claim relating to the CDS project is based on language in the

California Civil Code Section 1559 permits a third party to enforce "[a] contract, made

have been an intended, as opposed to an incidental, beneficiary of the contract. Hammes Co. 11

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For the Northern District of California

Healthcare, LLC v. Tri-City Healthcare Dist., 801 F. Supp. 2d 1023, 1032 (S.D. Cal. 2011). A 12 third party is an intended beneficiary if "the terms of the contract necessarily require the promisor 13 to confer a benefit on [the] third person." Id. It is not necessary that "[the] person. be named or 14 identified individually.." Id. It is enough that the third person be "a member of a class of 15 persons for whose benefit it was made." Id. In determining intent of the parties, the Court may 16 look beyond the written agreement and consider "the circumstances under which it was entered." 17

Id. While, intent is ordinarily "a question of fact. where the issue can be answered by 18 interpreting the contract as a whole and doing so in light of the uncontradicted evidence of the 19 circumstances and negotiations of the parties in making the contract, the issue becomes one of law" 20 and may be resolved on summary judgment. Id. 21

22 was selected as the diversity supplier before the CDS Agreement was executed (see e.g. Wagner 23

Decl., Ex. L (Morrison Dep. Tr.) at 112:4-5), the evidence shows that the parties did not include 24 the diversity supplier provision for the purpose of benefitting ITD or any other diversity supplier. 25

Rather, this provision was included because it would be "advantageous" to Verizon. Friedman 26

Decl. Ex. 11 (Morrison Dep. Tr.) at 95:6-7; see also Wagner Decl., Ex. L (Morrison Dep. Tr.) at 27

ITD's claim fails because ITD was not an intended beneficiary. While it is true that ITD

135:17-19 (stating that the diverse supplier provision was a Verizon requirement). Specifically, by requiring Sun to use a diversity supplier, Verizon would become eligible for "diversity credits" and 2 enhance its standing with the federal government. Friedman Decl., Ex. 70 at 122:7-16, 48:20-22. 3

4

ITD's reliance on Spinks v. Equity Residential Briarwood Apartments, 171 Cal. App. 4th

1004, 1022 (2009), is misplaced. Opposition at 23. In Spinks, defendant landlord sought summary 5 judgment against plaintiff on her breach of contract claim, which was based on a lease agreement 6 the landlord had executed with plaintiff's employer. Id., 171 Cal. App. 4th at 1018. Defendant 7 argued that plaintiff could not pursue her claim because she was neither a party to the lease, nor a 8 third-party beneficiary. Id. The Court disagreed, holding that there was a triable issue of material 9 fact as to whether plaintiff was an intended third party beneficiary. Id. at 1030. In reaching this 10 conclusion, the Court relied upon the fact that the "core purpose" of the agreement was to provide 11 plaintiff the "benefit of occupancy."

13 benefit Verizon by making it eligible to receive diversity credits, and not to benefit the diversity 14 supplier selected to perform the work. Any benefit to ITD was, therefore, incidental. Accordingly, 15 the Court concludes that ITD was not an intended beneficiary. 16

ITD's third party breach of contract claim. 18

20 the CDS Agreement, ITD's second cause of action alleges a number of breaches of the Sun 21

(1) an agreement to provide ITD with "integration" work worth approximately $60 to $80 million 23 per year, and (2) an agreement to repurchase or otherwise compensate ITD for "Last Time Buy" 24 inventory ITD purchased for resale to Motorola. Id., ¶¶ 115-129, 150. 25

26

Oracle over $19 million for outstanding invoices." Motion at 21. The Court agrees with respect to 28

Id. at 1027.

United States District Court

For the Northern District of California

Here, in contrast to Spinks, the core purpose of the diversity supplier provision was to

For the reasons set forth above, the Court grants Oracle's motion for summary judgment on

17

2.ITD's Remaining Breach of Contract Claims

In addition to alleging a third party beneficiary claim based on Oracle's purported breach of

Agreement by Sun/Oracle. Compl., ECF No. 1-1, ¶ 150. ITD also alleges that Oracle breached: 22

Oracle contends that ITD's breach of contract claims based on its agreements with

Sun/Oracle must fail because ITD materially breached the Sun Agreement by "fail[ing] to pay 27

ITD's claims based on the Sun Agreement. However, the Court disagrees with respect to ITD's 2 claims based on the integration and Last Time Buy agreements. 3

It is axiomatic that a plaintiff who has himself materially breached or failed to perform a

4 contract may not pursue a breach of contract action against the other party to the agreement. See 5

Brown v. Dillard's, Inc., 430 F.3d 1004, 1006 (9th Cir. 2005) (holding plaintiff could not compel 6 defendant "to honor an arbitration agreement of which it is itself in material breach"); Id. at 1010 7

("A bedrock principle of California contract law is that "[h]e who seeks to enforce a contract must 8 show that he has complied with the conditions and agreements of the contract on his part to be 9 performed."); Transcription Commc'ns Corp. v. John Muir Health, No. C 08-4418 TEH, 2009 WL 10

11

666943, at *5 (N.D. Cal. Mar. 13, 2009) ("The elements of a breach of contract suit in California

For the Northern District of California

[include].. plaintiff's performance or excuse for nonperformance.."). 12

13 dollars in product which it purchased under the parties' agreement. ITD is, therefore, in material 14 breach of the Sun Agreement. Accordingly, ITD cannot pursue a breach of contract claim against 15

ITD argues that, notwithstanding its breach of the Sun Agreement, it should still be

17 permitted to bring breach of contract claims based on this agreement because its claims are based, 18 in part, on conduct that predates the payment issues. The only example ITD gives of such conduct 19 is Oracle's alleged failure to "quote and process orders for ITD within a commercially reasonable 20 amount of time," and ITD does not identify any evidence showing this conduct occurred. See 21

Opposition at 24 (quoting Complaint, ECF No. 1-1, ¶ 150). Moreover, ITD fails to cite a single 22 case for the proposition that a plaintiff who has failed to perform its portion of a contract may 23 nevertheless pursue a breach of contract claim based on breaches by the defendant that predate 24 plaintiff's own nonperformance. Accordingly, this argument fails. For these reasons, ITD's 25 breach of contract claim fails to the extent it is based on Oracle's breach of the Sun Agreement. 26

In contrast, ITD's integration agreement and Last Time Buy inventory claims are not based

27 on the Sun Agreement. Oracle has offered no legal authority for the proposition that ITD's breach 28

United States District Court

In its Opposition, ITD does not contest the fact that it failed to pay Oracle for millions of Oracle based on the Sun Agreement. See Brown, 430 F.3d at 1006. 16

of the Sun Agreement precludes ITD from bringing breach of contract claims based on the Last 2

Time Buy and integration agreements, which the Court understands were distinct from the Sun 3

Agreement. Accordingly, the Court cannot conclude ITD's claims based on the integration 4 agreement and the Last Time Buy agreement fail as a matter of law. 5

6

Oracle offers an additional basis for granting summary judgment with respect to the Last

Time Buy claim. Specifically, Oracle contends that this claim should be dismissed because ITD 7 failed to adduce any evidence of an agreement.*fn5 Motion at 21. As set forth in the Complaint, ITD 8 alleges there was an "oral agreement" between the parties that ITD would purchase certain soon-to-9 be-discontinued ("Last Time Buy") inventory for resale to Motorola and that Sun would repurchase 10 this inventory if Motorola failed to purchase it. See Opposition at 24; Compl., ECF No. 1-1, ¶¶

11

$6 million of this Last Time Buy inventory, Sun promised that it would provide ITD a greater 13 discount on future purchases to help ITD recoup its losses. See Opposition at 24; Compl., ECF No. 14

The Court agrees that ITD has failed to adduce sufficient evidence of an agreement to

16 repurchase the Last Time Buy inventory. See Friedman Decl., Ex. 9 (Huber Dep. Tr.) at 162:21-24 17

Buy inventory if Motorola did not buy it). However, ITD has presented sufficient evidence of a 19 promise by Oracle to help ITD recoup its losses from the $6 million in inventory ITD was unable 20 to sell to Motorola. Specifically, in an August 2009 email from Donald Bunker of Sun to Jim 21

Spinella of ITD, Mr. Bunker states that Sun agreed to provide ITD with additional discounts to be 22 used "towards funding the [Last Time Buy] inventory that Motorola will not be purchasing.." 23

Wagner Decl., Ex. E at ITDIST0002058. Mr. Bunker further states that these discounts would 24 continue "until the $6M USD of inventory [has] been funded for ITD." Id. at ITDIST0002058. 25

For the Northern District of California

115-23, 150. ITD additionally alleges that, after Sun failed to repurchase from ITD approximately 12

United States District Court

1-1, ¶¶ 115-23, 150. Oracle contends that these agreements are fictitious. Motion at 21. 15

(stating that he was not aware of any contractual commitment by Sun to repurchase the Last Time 18

Accordingly, the Court is unable to conclude as a matter of law that there was no agreement with 2 respect to the Last Time Buy inventory. 3

4 to ITD's breach of contract claims based on the Sun Agreement and denies Oracle's motion for 5 summary judgment as to ITD's claims based on the integration agreement and Last Time Buy 6 inventory agreement.

9 covenant of good faith and fair dealing on the grounds that ITD materially breached its agreement 10 with Sun by failing to pay millions of dollars in outstanding invoices.

The implied covenant of good faith and fair dealing prohibits "one contracting party from

unfairly frustrating the other party's right to receive the benefits of the agreement actually made." 13

Transcription Commc'ns Corp., 2009 WL 666943, at *7 (emphasis omitted). Like a breach of 14 contract claim, a claim for a breach of the implied covenant of good faith and fair dealing is barred 15 where the plaintiff has failed to perform under the contract and does not have an excuse for such 16 failure. Durrell v. Sharp Healthcare, 183 Cal. App. 4th 1350, 1369 (2010). 17

Here, ITD's breach of the covenant of good faith and fair dealing claim is based entirely on

18 the Sun Agreement. Compl., ECF No. 1-1, ¶¶ 154-57. As set forth supra in Section III(C)(2), ITD 19 breached this agreement by failing to pay millions of dollars in outstanding invoices. Accordingly, 20

ITD's breach of the covenant of good faith and fair dealing claim fails as a matter of law. See 21

Durrell, 183 Cal. App. 4th at 1369 (dismissing good faith and fair dealing claim because plaintiff 22 failed to "adequately plead[] an excuse for his nonperformance"). 23

24 third cause of action for breach of the covenant of good faith and fair dealing. 25

26

27 estoppel. ITD's promissory estoppel claim alleges that Oracle broke promises that it would: (1) 28

For the reasons set forth above, the Court grants Oracle's motion for summary judgment as

B.ITD's Breach of the Covenant of Good Faith and Fair Dealing Claim

Oracle also seeks summary judgment on ITD's third cause of action for breach of the For the reasons set forth above, the Court grants motion for summary judgment as to ITD's

C.ITD's Promissory Estoppel Claim

Oracle also moves for summary judgment on ITD's sixth cause of action for promissory

"send ITD integration work upon [ITD's] completion of an integration facility"; (2) "renew the Sun 2

Agreement or enter into a new contract containing similar business terms"; and (3) "reimburse ITD 3 for its purchase of the Motorola 'Last Time Buy' inventory." Compl., ECF No. 1-1, ¶ 171. 4

"Promissory estoppel applies whenever a promise which the promissor should reasonably

5 expect to induce action or forbearance on the part of the promisee or a third person and which does 6 induce such action or forbearance would result in an injustice if the promise were not enforced." 7

Lange v. TIG Ins. Co., 68 Cal. App. 4th 1179, 1185, 81 Cal. Rptr. 2d 39 (1998) (internal quotation 8 marks and citations omitted). "To be binding, the promise must be clear and unambiguous." Id. 9

10 breach of the covenant of good faith and fair dealing claims, is barred because ITD materially

breached the Sun Agreement by failing to pay Oracle millions of dollars in outstanding invoices.

Motion at 21. Moreover, with respect to the Last Time Buy inventory, Oracle contends that Sun 13 never promised to reimburse ITD for the "Last Time Buy" inventory. Id. 14

15 authority for the proposition that a promissory estoppel claim is barred by a plaintiff's material 16 breach of a related contract. Second, with respect to the Last Time Buy inventory, as set forth 17 supra in Section III(C)(2), there is evidence of the existence of an agreement concerning this 18 inventory. Accordingly, the Court denies Oracle's motion for summary judgment as to ITD's 19 promissory estoppel claim.*fn6

22 and fifth cause of action for tortious interference with a prospective economic advantage fail 23 because ITD's own actions caused its relationships with its customers to deteriorate. See Motion at 24

22. Oracle also notes that "ITD has failed to pursue discovery from any of the prospective 25 customers with whom ITD alleges it had a reasonable expectation of a future economic benefit." 26

Oracle contends that ITD's promissory estoppel claim, like its breach of contract and Oracle's arguments fail. First, Oracle fails to cite, and the Court is unaware of, any

D.Tortious Interference Claims

Oracle argues that ITD's fourth cause of action for intentional interference with contract

Id. In its Opposition, ITD addresses these claims only in passing. Opposition at 23-24 (stating that 2

ITD's tortious interference claim "is predicated on Oracle's termination of ITD and taking direct 3 the customers that ITD supplied"). 4

5 between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's 6 intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual 7 breach or disruption of the contractual relationship; and (5) resulting damage." Bauer v. 8

The elements of an intentional interference with contract claim are: "(1) a valid contract

Interpublic Group of Companies, Inc., 255 F. Supp. 2d 1086, at 1094 (N.D. Cal. 2003). Here, ITD 9 does not identify the contracts or customers with which Oracle interfered, nor does ITD point to 10 specific evidence in the record showing actual breach or disruption of that contract or identify ITD's damages. Accordingly, ITD's claim fails.

ITD's claim for intentional interference with a prospective economic advantage similarly

13 fails. To state a claim for intentional interference with prospective economic advantage, a plaintiff 14 must prove: (1) the reasonable probability of a business opportunity, (2) the intentional interference 15 by defendant with that opportunity, (3) proximate causation, and (4) damages. Navellier v. Sletten, 16

262 F.3d 923, 939 (9th Cir. 2001) (internal quotations omitted). Here, ITD does not identify the 17 specific business opportunities it lost, nor does it direct the Court to any of the evidence supporting 18 this claim. ITD has, therefore, failed to show the existence of a genuine issue of material fact with 19 respect to this claim. See id. (upholding the district court's grant of summary judgment in favor of 20 defendant on tortious interference claim where plaintiff "failed to present evidence demonstrating 21 that [it] had a reasonable expectation of continuing as the Fund's investment adviser"). 22

ITD's fourth cause of action for intentional interference with contract and fifth cause of action for 24 tortious interference with a prospective economic advantage. 25

For the reasons set forth above, Oracle's motion for summary judgment is granted as to

E.Oracle's Affirmative Claims

Oracle also seeks summary judgment on its affirmative claims for: (1) breach of contract,

(2) account stated, and (3) goods sold and delivered. Oracle contends that summary judgment is 28 appropriate with respect to these claims because ITD does not (and cannot) dispute that it owes 2

$19.1 million to Oracle for products that Oracle delivered. Motion at 22. 3

4

53:21-24; Ex. 13 at 222:8-223:6. With respect to the $982,481 difference, ITD argues in its

6

Opposition that ITD was entitled to discounts totaling $982,481. Opposition at 25. ITD also 7 argues that Oracle should not be granted summary judgment on the $18,121,140 because ITD has a 8 setoff defense based on any judgment in its favor on its affirmative claims. Id. at 24. 9

10 indicated that it was likely to rule in Oracle's favor with respect to the $18,121,140 and ITD

acknowledged that ITD owed this amount. With respect to the remaining $982,481, the Court

ordered the parties to meet and confer to see if a resolution could be reached regarding the disputed 13 amount. As to ITD's setoff argument, the Court indicated that it was likely to rule that the 14 possibility of a setoff defense does not preclude the Court from granting summary judgment. See 15

Electroglas, Inc. v. Dynatex Corp., 473 F. Supp. 1167, 1171 (N.D. Cal. 1979) ("An offset may 16 ultimately diminish, but does not defeat, Regan's recovery and hence does not preclude resolution 17 of the contract claim at this stage of the litigation."). 18

In ITD's interrogatory responses, ITD admitted that it owes Oracle $18,121,140 of the

$19,103,621 million at issue. Opposition at 24; see also Friedman Decl., Ex. 2 at No. 10; Ex. 5 at 5

At the August 23, 2012 hearing on Oracle's motion for summary judgment, the Court

Following the August 23 hearing, the parties met and conferred regarding the disputed

$982,481. ECF No. 182. Subsequently, on September 4, 2012, the parties filed a stipulation in 20 which the parties agreed that judgment should be entered in favor of Oracle on each of Oracle's 21 affirmative claims, in the amount of $19,103,621. Id. at 1. The parties also agreed that "[t]he 22

The Court entered an order adopting the parties' stipulation on September 17, 2012. ECF No. 201. 24

25

Court shall stay execution of the judgment until after the conclusion of the trial" in this matter. Id. 23

In light of this Court's September 17 order adopting the parties' stipulation concerning the

$19,103,621, Oracle's motion for summary judgment is denied as moot with respect to Oracle's 26 affirmative claims. 27 28

V.CONCLUSION

For the reasons discussed above, the Court GRANTS Oracle's motion for summary

3 judgment as to: (1) ITD's second cause of action for breach of contract to the extent it is based on 4

Oracle's breach of the CDS Agreement; (2) ITD's second cause of action to the extent it is based 5 on Oracle's breach of the Sun Agreement; (3) ITD's third cause of action for breach of the 6 covenant of good faith and fair dealing; (4) ITD's fourth cause of action for intentional interference 7 with contract; and (5) ITD's fifth cause of action for tortious interference with prospective 8 economic advantage. 9

The Court DENIES Oracle's motion for summary judgment as to: (1) ITD's first cause of

10 action for a violation of the NJFPA, (2) ITD's second cause of action to the extent this claim is

based on breaches of the integration agreement and Last Time Buy agreement, and (3) ITD's sixth

United States District Court

For the Northern District of California

cause of action for promissory estoppel. 13

The Court DENIES AS MOOT Oracle's motion for summary judgment on Oracle's: (1)

14 first cause of action for breach of contract; (2) second cause of action for account stated; and (3) 15 third cause of action for goods sold and delivered. 16 17

IT IS SO ORDERED. 18


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