United States District Court, S.D. California
ORDER DENYING MOTION FOR PARTIAL SUMMARY
JEFFREY T. MILLER UNITED STATES DISTRICT JUDGE
LF Centennial Limited (“LFCL”) moves for partial
summary judgment on its claim for a contractual audit.
Defendant Z-Line Designs, Inc. (“Z-Line”)
partially opposes the motion. Pursuant to Local Rule
7.1(d)(1), the court finds the matters presented appropriate
for resolution without oral argument. For the reasons set
forth below, the court denies the motion for summary
April 18, 2016, LFCL, a British Virgin Islands corporation
with its principal place of business in Hong Kong, commenced
this action by alleging three claims for relief: (1) Breach
of Contract; (2) Breach of the Covenant of Good Faith and
Fair Dealing; and (3) Accounting. Defendant Z-Line, a Nevada
corporation with its principal place of business in San
Roman, California, answered the complaint on June 15, 2016,
and then filed an amended answer on July 6, 2016.
claims arise from a licensing and royalties contract dispute.
Whalen Furniture Manufacturing, Inc. (“WFM”) was
the original owner of two patents entitled “Television
Support and Mounting Kit, ” U.S. Patent Nos. 8, 079,
311 and 8, 191, 485. (Compl. ¶8, 9). In 2013, LFCL
acquired the assets of WFM, and WFM assigned the patents to
LFCL. (Compl. ¶10).
alleges that Z-Line violated the patents by making and
selling infringing television stands. On December 20, 2011,
WFM filed a patent infringement action in this judicial
district (11cv2958 H(DHB)) against Z-Line for infringement of
the ‘311 patent. On June 5, 2012, WFM commenced an
action against Z-Line for infringement of the ‘485
patent (12cv1341 H(DHB)). In July 2013, WFM, LFCL, and Z-Line
entered into a settlement and license agreement (the
“Agreement”), resolving all claims in both
infringement actions. As a result of the earlier assignment,
LFCL allegedly holds all rights granted to WFM in the
other things, the Agreement required Z-Line to pay a 5%
royalty on the licensed products sold in the United States.
(Compl. ¶19). The Agreement also provided for an annual
audit of the royalty payments by an agreed upon third party
accounting firm. (Compl. ¶22).
April 15, 2015, counsel for LFCL allegedly contacted Z-Line
and requested an audit for six quarters beginning July 26,
2013, and ending December 31, 2014. LFCL recommended Grant
Thornton LLP as the auditor and requested that Z-Line either
approve the auditor or propose a different auditor. (Compl.
¶27). On April 16, 2015, counsel for Z-Line responded
that the Agreement only called for annual audits and,
therefore, it would only provide information for the period
of July 26, 2013, to July 26, 2014. Z-Line also informed LFCL
that it would only provide the quantity of licensed products
sold, but not the dollar value of the products sold. (Compl.
now moves for partial summary judgment to obtain an audit
pursuant to the parties' contractual relationship. The
court notes that LFCL also moved for partial summary judgment
on Z-Line's novation affirmative defense. That issue is
now moot because, on May 24, 2017, Z-Line voluntarily
dismissed the novation affirmative defense.
motion for summary judgment shall be granted where
“there is no genuine issue as to any material fact and
. . . the moving party is entitled to judgment as a matter of
law.” Fed.R.Civ.P. 56(c); Prison Legal News v.
Lehman, 397 F.3d 692, 698 (9th Cir. 2005). The moving
party bears the initial burden of informing the court of the
basis for its motion and identifying those portions of the
file which it believes demonstrate the absence of a genuine
issue of material fact. Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986). There is “no express or
implied requirement in Rule 56 that the moving party support
its motion with affidavits or other similar materials
negating the opponent's claim.”
Id. (emphasis in original). The opposing party
cannot rest on the mere allegations or denials of a pleading,
but must “go beyond the pleadings and by [the
party's] own affidavits, or by the ‘depositions,
answers to interrogatories, and admissions on file'
designate ‘specific facts showing that there is a
genuine issue for trial.'” Id. at 324
(citation omitted). The opposing party also may not rely
solely on conclusory allegations unsupported by factual data.
Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989).
court must examine the evidence in the light most favorable
to the non-moving party. United States v. Diebold,
Inc., 369 U.S. 654, 655 (1962). Any doubt as to the
existence of any issue of material fact requires denial of
the motion. Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 255 (1986). On a motion for summary judgment, when
“‘the moving party bears the burden of
proof at trial, it must come forward with evidence which
would entitle it to a directed verdict if the evidence were
uncontroverted at trial.'” Houghton v.
South, 965 F.2d 1532, 1536 (9th Cir. 1992) (emphasis in
original) (quoting International Shortstop, Inc. v.
Rally's, Inc., 939 F.2d 1257, 1264-65 (5th Cir.
1991), cert. denied, 502 U.S. 1059 (1992)).