Simulados Software, Ltd. v. Photon Infotech Private, Ltd.

          ORDER ADDRESSING POST-APPEAL MATTERS RE: DKT. NOS. 207, 212

          EDWARD J. DAVILA, UNITED STATES DISTRICT JUDGE.

         On May 7, 2019, the Ninth Circuit affirmed in part, reversed in part, vacated, and remanded this Court's September 2017 Order Denying Defendant's Motion for Judgment as a Matter of Law.^[1] The Parties construe the Ninth Circuit's Memorandum differently, which the Court resolves below. The Court finds this motion suitable for consideration without oral argument. See N.D. Cal. Civ. L.R. 7-1(b). Having considered the Parties' papers, the Court holds that pursuant to the bar on double recovery, Plaintiff may not recover contract and tort damages. However, under the economic loss rule, Plaintiff may recover tort damages instead of contract damages. The Court also holds that the contractual cap on liability is not applicable to such damages. Accordingly, Plaintiff is entitled to $309, 674 in fraud damages.

         I. BACKGROUND

         A. Factual Background

         On May 11, 2012, Plaintiff Simulados Software, Ltd. filed a Complaint against Defendant Photon Infotech Private, Ltd. alleging that Defendant breached the Parties' contract and intentionally misrepresented its ability to complete the contract. See generally Dkt. 1; see also Short Statement of Case, Dkt. 135. The jury found for Plaintiff on both claims and awarded Plaintiff $309, 674 for each claim. See Judgment, Dkt. 167; see also Verdict Forms, Dkt. 165.

         Defendant renewed its motion for judgment as a matter of law. Dkt. 178. Despite the jury award of contractual damages, the parties had a negotiated provision that limited the amount of contractual damages to the amount of money actually received by the breaching party. Plaintiff paid Defendant $18, 848 for Defendant's services, and so Defendant's liability on the breach of contract claim was capped at $18, 848. See Supplemental Brief Regarding Plaintiff Simulados Software Ltd.'s “Election of Remedy” at 5, Dkt. 193 (“[B]oth parties agree that the consideration paid by [Plaintiff] was $18, 848.”).

         Ultimately, the Court denied Defendant's motion for judgment as a matter of law. The Court determined that sufficient evidence, viewed in the light most favorable to the non-moving party, supported the jury's findings of breach of contract and fraud. Order Denying Defendant's Motion for Judgment as a Matter of Law (“JMOL Order”), Dkt. 197. Defendant questioned whether: (1) the fraud claim was sufficiently independent of the contract to allow recovery under California law for both fraud and breach of contract; and (2) the contractual provision limiting damages applied to Plaintiff's fraud claim. This Court determined it did not need to address those issues because it granted Plaintiff's request to rescind the contract and awarded Plaintiff $18, 848 in consideration damages and $309, 674 in consequential damages. Id. at 6.

         On appeal, the Ninth Circuit affirmed this Court's holdings that sufficient evidence supported the jury's fraud and breach of contract findings. Simulados Software, Ltd. v. Photon Infotech Private, Ltd., 771 Fed.Appx. 732, 734 (9th Cir. 2019). The Ninth Circuit reversed and vacated this Court's order granting rescission because Plaintiff “failed to meet the notice requirement” required to rescind a contract. Id. Defendant argued that the panel should reduce the jury's award pursuant to the contractual limitation on damages. Id. at 735. The Ninth Circuit agreed “that there is an $18, 848 cap on [Plaintiff's] recovery for breach of contract.” Id. “It is undisputed that [Plaintiff] paid [Defendant] $18, 848, and the contractual provision limits damages to the amount that [Plaintiff] paid on the contract.” Id. The Ninth Circuit, however, did not address whether this provision applied to the fraud damages or if Plaintiff could recover damages for both the fraud and contract claim.

         Judge Bea concurred in the Memorandum Disposition but wrote separately to note that he would include an instruction that on remand, the district court should consider whether its award of $309, 674 to Plaintiff based on the jury's fraud verdict is duplicative of its separate award of $18, 848. Id. The Parties' briefing focuses on this question-may Plaintiff receive damages for both the fraud and contract claims without violating the rule against duplicative recovery? And, if yes, what effect does the contractual provision limiting damages have on Plaintiff's fraud claim?

         B. Procedural History

         On August 9, 2019, Defendant filed a brief addressing the effect of the Ninth Circuit's decision. Defendant Photon Post-Appeal Opening Brief (“D Brief”), Dkt. 212. Plaintiff filed its response brief on August 23, 2019. Plaintiff Simulados Response to Defendant's Post-Appeal Opening Brief (“P Brief”), Dkt. 214. On August 30, 2019, Defendant filed its reply brief. Defendant Photon's Post-Appeal Reply Brief (“D Reply”), Dkt. 215.

         II. DISCUSSION

         A. Duplicative Recovery

         There is no dispute between the Parties that Plaintiff's damages for the contractual claim is $18, 848. The Parties dispute whether the Court may award Plaintiff $309, 674 in fraud damages in addition to the $18, 848 in contract damages or if such an award constitutes double recovery. D Brief at 7; P Brief at 6-7. Defendant argues that because Plaintiff suffered only one loss, past economic damages, Plaintiff may only recover one form of damages, i.e., either contract or fraud damages. Plaintiff ...