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Oracle America, Inc v. Innovative Technology

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 ...


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