AO2, LLC v. Respironics, Inc.

Decision Date04 May 2022
Docket NumberCASE NO. 8:20-cv-01921-JLS-DFM
Parties AO2, LLC v. RESPIRONICS, INC., et al.
CourtU.S. District Court — Central District of California

George Agustin Gonzalez, Martin J. Mullen, James S. Brasher, Rowe Mullen LLP, San Diego, CA, for AO2, LLC.

Michael W. Caspino, Forward Counsel LLP, Newport Beach, CA, for Respironics, Inc., Respironics Colorado, Inc., Philips Holding USA, Inc.

ORDER GRANTING DEFENDANTSMOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT

JOSEPHINE L. STATON, UNITED STATES DISTRICT JUDGE

Before the Court are Cross-Motions for Partial Summary Judgment filed by Defendants Philips Holding USA, Inc., Respironics Colorado, Inc., and Respironics, Inc. (collectively "Defendants") (Def's Mot., Doc. 39; Mem., 39-1) and Plaintiff AO2, LLC ("AO2") (Pl.’s Mot., Doc. 42; Mem., Doc. 43.) Both Parties have opposed and replied. (Pl.’s Opp., Doc. 60; Def's Opp., Doc. 54; Def's Reply, Doc. 61; Pl.’s Reply, Doc. 59.) The Court finds this matter appropriate for decision without oral argument. See Fed. R. Civ. P. 78(b) ; C.D. Cal. R. 7-15. Accordingly, the hearing set for May 6, 2022 at 10:30 a.m ., is VACATED. Having considered the pleadings, the parties’ briefs, and for the reasons stated below, the Court now GRANTS Defendants’ Motion and DENIES Plaintiff's Motion for the reasons stated below.

I. BACKGROUND

AO2 and Respironics, Inc. executed and entered into a valid and enforceable contract for the provision of goods, including SimplyGo and SimplyGo Mini oxygen concentrators on June 16, 2017 (the "Agreement"). (Pl.’s Response to Def's Statement of Uncontroverted Facts ("Pl.’s RSUF"), Doc. 56, ¶ 1; Agreement, Ex. 1 to Compl., Doc. 1-1, at ECF 6; see also Joint Stipulation, Doc. 48 (Ex. 1 to Complaint admissible).)

The Agreement included a limitation of liability clause that reads:

The total liability, if any, of Philips Respironics for all damages, and based on all claims, whether arising from breach of contract, breach of warranty, negligence, indemnity, strict liability or other tort, or otherwise, or arising from a product, license software and/or services is limited to the price paid hereunder for the particular Product(s) on which such claim is based. This limitation of liability shall not apply to third party claims for bodily injury or death caused by Philips Respironics’ negligence or proven product defect. This section will survive the termination of this Agreement.

(Pl.’s RSUF ¶ 3.) Section O of the Agreement also contained a choice of law provision that states that Pennsylvania law shall apply in any federal court lawsuit. (Id. ¶ 4.)

Pursuant to the Agreement, AO2 purchased and received SimplyGo and SimplyGo Mini oxygen concentrators sold by Respironics. (Id. ¶ 2.) The Parties dispute whether those products were defective; AO2 alleges that that the standard battery on every SimplyGo Mini oxygen concentrator

was defective and the batteries did not hold a charge and were rapidly depleted. (Id. ¶ 2; Kardish Decl., Doc. 57-1, ¶ 14.) AO2 cites a long history of back-and-forth exchanges with Respironics regarding the performance of the batteries commencing in April 2019. (See Pl.’s RSUF, Pl.’s Uncontroverted Facts ¶¶ 21-58.)

On October 1, 2020, AO2 filed the present action asserting claims for: (1) fraud; (2) breach of contract; (3) breach of the duty of good faith and fair dealing; (4) intentional interference with a contract; (5) violation of California Business & Professions Code § 17200 ; and (6) common law unfair competition. (See Compl., Doc. 1.)

Defendants and AO2 now have filed cross-motions for summary judgment seeking the Court's answer to, essentially, one question: does the limitation of liability clause in the contract limit AO2's recovery under the Complaint to the amount AO2 paid Defendants for the products purchased. (See Def's Mem. at 4 ("Respironics seeks an order holding that the limitation of liability for damages limits Plaintiff's recovery under the Complaint to the amount paid by Plaintiff to Defendant for the products at issue."); Pl.’s Mem. at 2 ("By this motion, AO2 seeks a partial summary judgment that the limitation of damages provision in the Agreement is unenforceable because that provision fails of its essential purpose.").)

II. LEGAL STANDARD

In deciding a motion for summary judgment, the Court must view the evidence in the light most favorable to the non-moving party and draw all justifiable inferences in that party's favor. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Summary judgment is proper "if the [moving party] shows that there is no genuine dispute as to any material fact and the [moving party] is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A factual dispute is "genuine" when there is sufficient evidence such that a reasonable trier of fact could resolve the issue in the non-moving party's favor, and a fact is "material" when it might affect the outcome of the suit under the governing law. Anderson , 477 U.S. at 248, 106 S.Ct. 2505. But "credibility determinations, the weighing of evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge." Acosta v. City of Costa Mesa , 718 F.3d 800, 828 (9th Cir. 2013) (quoting Reeves v. Sanderson Plumbing Prods., Inc. , 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) (internal quotation marks omitted)).

The role of the Court is not to resolve disputes of fact but to assess whether there are any factual disputes to be tried. The moving party bears the initial burden of demonstrating the absence of a genuine dispute of fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "Once the moving party carries its initial burden, the adverse party ‘may not rest upon the mere allegations or denials of the adverse party's pleading,’ but must provide affidavits or other sources of evidence that ‘set forth specific facts showing that there is a genuine issue for trial.’ " Devereaux v. Abbey , 263 F.3d 1070, 1076 (9th Cir. 2001) (quoting Fed. R. Civ. P. 56(e) ).

III. DISCUSSION

The first, and most important, matter for the Court to decide is whether the liability limitation clause of the Agreement is enforceable and limits AO2's ability to recover on its Complaint to the amount it paid for the goods under the contract. The Court holds that it is and it does.

Pennsylvania law does not disfavor limitation of liability provisions in a contract, and absent unconscionability, such provisions are binding on parties that fashioned the terms of their agreement. John B. Conomos, Inc. v. Sun Co., Inc. (R&M) , 831 A.2d 696, 704 (Pa. Super. 2003).1 Section 2719 of the Pennsylvania Commercial Code provides that an agreement "may limit or alter the measure of damages recoverable under this division, as by limiting the remedies of the buyer to return of the goods and repayment of the price or to repair and replacement of nonconforming goods." 13 Pa. C.S.A. § 2719(a)(1). It also provides for an exception: "[w]here circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this title." Id. § 2719(b). The comment to Section 2719(b) also explains that "where an apparently fair and reasonable clause because of circumstances fails in its purpose or operates to deprive either party of the substantial value of its bargain, it must give way to the general remedy provisions of this Article." 13 Pa. C.S.A. § 2719(b), cmt. 1. "[S]ituations where an exclusive remedy will fail of its essential purpose are rare[.]" New York State Elec. & Gas Corp. v. Westinghouse Elec. Corp. , 387 Pa. Super. 537, 557, 564 A.2d 919 (1989). This section "has been called into action most often in cases ... when the exclusive remedy involves replacement or repair of defective parts, and the seller because of his negligence in repair or because the goods are beyond repair, is unable to put the goods in warranted condition." ( Id. (quoting White, J.J. & Summers, R.S., Uniform Commercial Code , at 469 (2d ed. 1980)).

AO2's primary contention is that the limitation of damages provision is unenforceable because this provision falls within the "fails of its essential purpose" exception under Section 2719 of Pennsylvania's Commercial Code. (See Pl.’s Mem. at 12.) AO2 has not disputed that the language of the provision is clear; instead, it contends that the "limitation of damages provision fails of its essential purpose because Respironics unquestionably failed to provide AO2 with the contracted for repair or replacement or refund remedy." (Id. at 15.) AO2 cites a long history of notifying Respironics of the battery defects in its products and Respironics's failure to repair those defects as proof that Respironics "completely failed to fulfill its contracted for obligation to repair or replace or refund regarding the undisputed defective units it delivered to AO2." (Id. at 17.)

Alternatively, in its Opposition to Defendants’ Motion, AO2 argues that the limitation of damages provision is unconscionable and therefore unenforceable due to Respironics’ knowledge of the defect. (Pl.’s Opp. at 11-14.)

Here, the language of the Agreement clearly limits the liability for damages to the price paid for the products. The language explicitly states that: "The total liability ... for all damages, and based on all claims ... is limited to the price paid hereunder for the particular Product(s) on which such claim is based." (Pl.’s RSUF ¶ 3.) Moreover, that Respironics failed to repair or replace the allegedly defective goods or refund the cost of purchase does not demonstrate that the limitation of liability provision in the Agreement failed of its essential purchase. It may mean that Respironics failed to live up to the terms of the Agreement; this in turn may permit AO2 to seek remedies available at law pursuant to this action. The limitation on those...

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