618 F.3d 970 (9th Cir. 2010), 09-16353, Whittlestone, Inc. v. Handi-Craft Co.

Docket Nº:09-16353.
Citation:618 F.3d 970
Opinion Judge:N.R. SMITH, Circuit Judge:
Party Name:WHITTLESTONE, INC., a California corporation, Plaintiff-Appellant, v. HANDI-CRAFT COMPANY, a Missouri corporation, Defendant-Appellee.
Attorney:Russell J. Hanlon (argued), San Jose, CA, for plaintiff-appellant Whittlestone, Inc. Peter W. Herzog (argued) & Michael A. Vitale of Herzog Crebs, LLP, St. Louis, MO; Dean Pollack & Rohit A. Sabnis of Burnham Brown, PLC, Oakland, CA, for defendant-appellee Handi-Craft Company.
Judge Panel:Before STEPHEN REINHARDT, WILLIAM A. FLETCHER and N. RANDY SMITH, Circuit Judges.
Case Date:August 17, 2010
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 970

618 F.3d 970 (9th Cir. 2010)

WHITTLESTONE, INC., a California corporation, Plaintiff-Appellant,

v.

HANDI-CRAFT COMPANY, a Missouri corporation, Defendant-Appellee.

No. 09-16353.

United States Court of Appeals, Ninth Circuit.

August 17, 2010

Argued and Submitted May 13, 2010.

Page 971

Russell J. Hanlon (argued), San Jose, CA, for plaintiff-appellant Whittlestone, Inc.

Peter W. Herzog (argued) & Michael A. Vitale of Herzog Crebs, LLP, St. Louis, MO; Dean Pollack & Rohit A. Sabnis of Burnham Brown, PLC, Oakland, CA, for defendant-appellee Handi-Craft Company.

Appeal from the United States District Court for the Northern District of California, Saundra B. Armstrong, District Judge, Presiding. D.C. No. 4:08-cv-04193-SBA.

Before STEPHEN REINHARDT, WILLIAM A. FLETCHER and N. RANDY SMITH, Circuit Judges.

OPINION

N.R. SMITH, Circuit Judge:

In this case of first impression, we hold that Rule 12(f) of the Federal Rules of Civil Procedure does not authorize a district court to strike a claim for damages on the ground that such damages are precluded as a matter of law. We reverse and remand.

I. Background

In March 2006, Whittlestone (a California corporation with its principal place of business in California) and Handi-Craft (a Missouri corporation with its principal place of business in Missouri) entered into a written, twenty-year contract. In the contract, Handi-Craft was obligated to make minimum annual unit or dollar amount purchases of Whittlestone products for resale to third parties.

Relevant paragraphs of the contract stated:

5. Term. The " Term" of this Agreement shall begin on the date of this Agreement and end after the initial term described below, unless sooner terminated pursuant to the Agreement.

....

Page 972

20. Termination.

a. This Agreement may be terminated as to any or all of the Whittlestone Products at any time by the mutual written consent of both parties.

b. This Agreement may be terminated as to any or all of the Whittlestone Products by Handi-Craft upon at least forty-five (45) days prior written notice to Whittlestone in the event of the occurrence of any of the following events and Whittlestone's failure to cure said default within said time:

1. The insolvency of Whittlestone; ....

2. If Whittlestone shall at any time commit a breach of its obligations or fails or omits to perform any of its material obligations contained herein.

c. This Agreement may be terminated as to any or all of the Whittlestone Products by Whittlestone upon at least forty-five (45) days prior written notice to Handi-Craft in the event of the occurrence of any of the following events and Handi-Craft's failure to cure said default within said time:

1. The insolvency of Handi-Craft; ....

2. If Handi-Craft shall at any time commit a breach of its obligations or fails or omits to perform any of its material obligations contained herein.

d. Neither party, by reason of the termination or nonrenewal of this Agreement for any or all of the Whittlestone Products, shall be liable to the other for compensation, reimbursement or damages because of the loss of anticipated sales or prospective profits or because of expenditures, investments, leases, property improvements or other matters related to the business or good will of either party.

....

f. Upon termination of this Agreement as to any or all of the Whittlestone Products as a result of a material breach by Whittlestone, Handi-Craft, at its option, shall be relieved from any obligation to distribute any further shipment of any Whittlestone Products and may cancel all of its unshipped orders for such Whittlestone Products.... Upon termination of this Agreement as to any or all of the Whittlestone Products as a result of a material breach by Handi-Craft, Whittlestone at its option, shall be relieved from any obligation to ship any further shipment of any Whittlestone Products, and Handi-Craft must accept delivery of any remaining shipped or unshipped orders for such Whittlestone Products and Handi-Craft will be held liable for any and all such orders.

....

i. This Agreement may be terminated by Whittlestone, at any time after the date that is eighteen (18) months following a Change in Control in the ownership of Handi-Craft upon ten (10) days prior written notice to Handi-Craft.

j. This Agreement may be terminated by HandiCraft, at any time after the date that is eighteen (18) months following a Change in...

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