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Chinese Hospital Association v. Jacobs Engineering Group, Inc.

United States District Court, N.D. California

September 3, 2019

CHINESE HOSPITAL ASSOCIATION, Plaintiff,
v.
JACOBS ENGINEERING GROUP, INC., Defendant.

          ORDER RE: DEFENDANT'S MOTION FOR SUMMARY JUDGMENT Dkt. No. 29

          Jacqueline Scott Corley United States Magistrate Judge.

         Chinese Hospital Association alleges that Jacobs Engineering Group, Inc. breached its written agreement with Chinese Hospital for architectural services. Jacobs' motion for summary judgment is now pending before the Court.[1] (Dkt. No. 29.[2]) Having considered the parties' briefs and having had the benefit of oral argument on August 22, 2019, the Court DENIES Jacobs' motion for summary judgment. While it is undisputed that Chinese Hospital terminated the Design Contract “for convenience, ” Jacobs has not met its burden of proving as a matter of law its affirmative defense that Chinese Hospital thereby waived its right to recover damages from Jacobs.

         DISCUSSION

         Jacobs insists that it is entitled to summary judgment because Chinese Hospital terminated the parties' Design Contract for convenience and not for cause. In particular, it argues that the language of the Design Contract and case law from other states compel this Court to conclude that Chinese Hospital waived its right to seek damages and no reasonable jury could find otherwise. Jacobs has not met its summary judgment burden.

         1. The Design Contract Language

         The Design Contract language does not unambiguously provide that a termination for convenience waives Chinese Hospital's rights to seek damages.

         The “for cause” provision states:

If Architect fails or neglects to comply with this Agreement, Owner may give written notice that the Owner intends to terminate this Agreement. If Architect fails to correct such defaults, failure or neglect within seven days after being given such notice, Owner may without prejudice to any other remedy terminate the employment of Architect.

(Dkt. No. 1-3 at ECF 19, Sec. 1.3.8.2 (emphasis added.) The “convenience and without cause” provision states:

This Agreement may be terminated by the Owner upon not less than seven days' written notice to the Architect for the Owner's convenience and without cause.

(Id. at Sec. 1.3.8.5.) Unlike the for cause provision, the convenience termination provision is silent as to the effect such termination has on the availability of remedies. Jacobs argues that this silence means that a “convenience and without cause” termination negates Chinese Hospital's ability to pursue “any other remedy, ” otherwise the “without prejudice” part of the with cause termination provision would be meaningless. In other words, because the Design Contract for cause termination provision has explicit language regarding reservation of remedies, the absence of such language from the convenience and without cause termination clause means that there is no remedy available following a convenience termination.

         Jacobs has not persuasively explained why the “without prejudice to any other remedy” language itself means that termination pursuant to the for convenience provision means that such a termination waives any remedy given that there is nothing in the for convenience provision or otherwise in the Design Contract that provides for a waiver. Assuming, without deciding, that the Design Contract's termination for cause provision is expressly providing a remedy by stating that termination pursuant to that provision is without prejudice to any other remedy, California law commands that “[w]here a contract expressly provides a remedy for a breach thereof, the language used in the contract must clearly indicate an intent to make the remedy exclusive.” Nelson v. Spence, 182 Cal.App. 2d 493, 497 (1960). Jacobs has not identified anything in the Design Contract that clearly indicates an intent to make the for cause termination provision the exclusive method of termination for obtaining a remedy.

         Further, it has not been established that the for cause termination provision even contains a remedy. Stating that the termination is without prejudice to a remedy is not the same as providing a remedy, let alone an exclusive one. See Shelter Products, Inc. v. Steelwood Const., Inc., 257 Or.App. 382, 399, 307 P.3d 449 (2013) (holding that a contract termination provision that states that it is “without prejudice to any other right or remedy” “does not itself confer any right or remedy”). Under these circumstances, the Court cannot hold as a matter of law that the absence of language preserving a remedy under the convenience termination provision means Chinese Hospital waived its right to seek a remedy.

         Jacobs' reliance on the Design Contract fails for a second reason: its argument ignores the evidence that supports a reasonable inference that the parties negotiated a termination of the Design Contract different from the options set forth in the Design Contract. The letter in which Chinese Hospital initially terminated the Contract recites that “[t]here have been detailed discussions regarding the requirements of this transition, ” and then goes on to provide a list of things that Jacobs must provide to Chinese Hospital, items not required by the Design Contract. (Dkt. No. 29, Ex. 1 at ECF 27.) Then, a little over a month ...


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