Alcatel-Lucent United States, Inc. v. Juniper Networks, Inc.

• Decision Date: 08 November 2017
• Docket Number: H040819,H041259
• Parties: ALCATEL-LUCENT USA, INC., Plaintiff and Appellant, v. JUNIPER NETWORKS, INC., Defendant and Respondent. ALCATEL-LUCENT USA, INC., Plaintiff and Appellant, v. JUNIPER NETWORKS, INC., Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

ALCATEL-LUCENT USA, INC., Plaintiff and Appellant, v. JUNIPER NETWORKS, INC., Defendant and Respondent.

ALCATEL-LUCENT USA, INC., Plaintiff and Appellant, v. JUNIPER NETWORKS, INC., Defendant and Appellant.

H040819

H041259

COURT OF APPEAL OF THE STATE OF CALIFORNIA SIXTH APPELLATE DISTRICT

November 8, 2017

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Santa Clara County Super. Ct. No. 1-11-CV206910)

Plaintiff Alcatel-Lucent USA, Inc. (Alcatel-USA) brought this action alleging that defendant Juniper Networks, Inc. (Juniper) had tortiously interfered with an agreement entitling plaintiff to purchase products and support from Brilliant Telecommunications, Inc. (Brilliant). The alleged interference consisted of defendant's purchase of Brilliant's assets with the knowledge that this would deprive Brilliant of the means to perform its undertakings to plaintiff. At the time of the purchase Brilliant was in serious financial distress, and likely could not have continued to perform the agreement on its own. But Brilliant was attempting to sell its business to another entity, Symmetricom, Inc. (Symmetricom), which intended—had that transaction gone through—to assume Brilliant's obligations to plaintiff. Five of plaintiff's six causes of action were disposed of by the court, but the sixth—interference with contract—was tried to a jury, which returned a verdict for plaintiff. The court then granted motions for new trial and judgment notwithstanding the verdict (judgment NOV) on the ground that the evidence was insufficient to establish that Juniper actionably interfered with the contract, or that Juniper's conduct was a legal cause of harm to plaintiff. On appeal plaintiff challenges these rulings, while Juniper contends that plaintiff is not the real party in interest because it is seeking to prosecute claims properly belonging to its corporate parent or affiliates. We hold that the court did not err in finding plaintiff to be the real party in interest, because the assignments of other entities' claims to plaintiff were effective to vest it with standing to prosecute these claims even though the assignments were not perfected until after this action was filed. Nor did the court err in finding the evidence insufficient to sustain the jury's finding that Juniper's conduct was the legal cause of harm to plaintiff. The only way plaintiff could have continued to enjoy the fruits of its contract with Brilliant was for Symmetricom to assume Brilliant's obligations under that contract; and on the present record, any inference that this would in fact have occurred is necessarily speculative. All the record shows is that if Juniper had not appeared, the Symmetricom buyout might have succeeded; the record lacks evidence sufficient to permit a reasoned inference that it probably would have succeeded. Accordingly, we will affirm the judgment. We will also affirm the trial court's order taxing certain costs claimed by Juniper.

BACKGROUND

A. Reseller Agreement

The agreement underlying this action was signed in November 2008, by Charles Barry, as President and CEO of Brilliant, and Paul-Dauphin Thierry, as "VP Product Sourcing" of Compagnie Financière Alcatel-Lucent (Compagnie), an international telecommunications concern headquartered in France and operating globally through various regional subsidiaries.¹ The contract, entitled "Global Reseller Agreement" (reseller agreement) obligated Brilliant to sell to Compagnie's subsidiaries, for resale to "End User Customers," "certain products including hardware, firmware, operating software and/or applications software, and . . . services related thereto." This action is chiefly concerned with Brilliant's Z1000 "Zurich" network time protocol server. This was a device sold to cellular telephone providers to provide timing functions for products known as femtocells. A femtocell is a device on an end user's premises which transmits and receives cellular telephone signals over a relatively small area while providing a link to the cellular network via a broadband internet connection. Its purpose is to provide cellular coverage within an area such as a home or office that has a broadband connection but lacks an adequate cellular signal. The Zurich, or a network timing server like it, was a critical component. If the server should fail, one witness testified, the link between connected femtocells and the cellular network would "slowly go[] out of synchronization,and then all of a sudden you can't make calls any longer." According to another witness, up to 60,000 femtocells could connect to a single Zurich server.

Brilliant also licensed some proprietary software to Alcatel for incorporation into Alcatel's own femtocell product. Brilliant earned a small royalty fee for each unit sold containing this software.

The reseller agreement recited that it was executed by Compagnie "on behalf of its Subsidiaries." It largely consisted of undertakings by Brilliant in favor of the subsidiaries. It required Brilliant to honor purchase orders from the various Alcatel entities and to provide support, as specified in considerable detail, for the products sold. It included numerous provisions seeking to guard Alcatel entities against an interruption of Brilliant's business.

B. Brilliant's Unsuccessful Attempts to Secure Financing

As of the end of 2009, Brilliant's balance sheet showed liabilities of $9,670,000 over assets of $3,623,000. Early in 2010 it solicited a new round of financing from various sources, including Alcatel and Juniper. Other than as described immediately below, none of the potential investors expressed interest.

C. Attempted Sale to Symmetricom

In the latter half of 2010, as hope for additional financing dimmed, Brilliant board members—led by Jonathan Ladd, then CEO—began seeking a purchaser for the company. In late 2010 or early 2011, two companies expressed interest. One was Symmetricom, a competing maker of network timing devices. The other was CXR Larus (CXR), a reseller of network-related products, including the Zurich. According to Brilliant president Barry, nothing came of CXR's inquiry because "[i]t wasn't a traditional offer for purchase," but "more of a partnership to share revenue." Symmetricom, however, put in an initial bid of $5.8 million to buy the company. Brilliant's board decided to "move into due diligence on that offer."

On January 24, 2011, Barry e-mailed Alcatel manager Yannick Dupuch advising him of a pending "transaction" involving an as-yet unnamed party and stating, "The other party to the transaction is very interested and enthusiastic to continue our relationship going forward post the transaction." He also advised Dupuch that Alcatel's formal consent to the transaction would be required. Three days later he advised Dupuch that the buyer also wanted Alcatel's written confirmation that Brilliant owned certain intellectual property rights in some code it had written for Alcatel.² Although Dupuch said in an e-mail that he would supply the latter on February 1, no such document was ever provided. Similarly, while Alcatel management indicated that written consent to the transaction would be forthcoming, it had not been provided when subsequent events rendered the matter moot.

By the end of January, the buyout process had progressed to a point where Barry expected the transaction to be consummated. However, on February 1 Alcatel informed Brilliant that it would not use Brilliant's code in the next version (version 2) of Alcatel's femtocell; this meant that Brilliant—and Symmetricom as prospective assignee—would receive no license fee on those products. Symmetricom thereafter lowered its offer from $5.8 to $2.5 million. The parties eventually arrived at a price of $3.5 million with the possibility of an additional "earn-out" of $2.3 million if certain conditions were met. The primary condition was that Alcatel agree within six months of closing to incorporate a new Brilliant design into its version 3 femtocell at a price yielding least $1.25 million in forecasted royalties over three years. Barry testified that when he asked Symmetricom's James Armstrong about allocating the necessary resources to achieve this objective,Armstrong refused, saying, "It's not in our interest for you to achieve this earn-out."³ Barry considered it impossible to satisfy the earn-out condition under such circumstances.

Nonetheless, the Symmetricom buyout proposal was reduced to a written agreement on February 13, 2011, and the agreement was publicly announced.⁴ The text of the agreement called for a purchase price of $3.5 million, of which (1) $2,970,750 was to be "paid in cash at the Closing in accordance with the payment instructions of Seller" as set forth in an attached schedule, and (2) $524,250 was to be placed in escrow "to be released in accordance with the terms of the Escrow Agreement," a copy of which does not appear in the record.⁵ The attached payment instructions called for direct payment of some $644,000 to specified Brilliant creditors, including $180,371.60 to Victron, the main contract manufacturer of the Zurich server. After deducting an escrow fee and adding $16,000 attributed to "the Transition Period," a total of $2,345,079.82 would be paid by Symmetricom to Brilliant. Of this sum, however, Brilliant was to dispense $584,579.74 to an unnamed "Payroll Agent," presumably to defray unpaid wage obligations. Brilliant would retain the $16,000 "Transition Period" fee to pay for "rent,utilities and data communications costs" for a period up to 30 days while Symmetricom was allowed access to Brilliant's "facilities and tangible assets." Brilliant would transfer the entire remaining balance ($1,...