Navcom Tech., Inc. v. OKI Elec. Indus. Co., Case No.: 5:12-CV-04175-EJD

• Decision Date: 11 March 2014
• Docket Number: Case No.: 5:12-CV-04175-EJD
• Court: U.S. District Court — Northern District of California
• Parties: NAVCOM TECHNOLOGY, INC. and DEERE & COMPANY, Plaintiffs, v. OKI ELECTRIC INDUSTRY CO., LTD. And DOES ONE THROUGH TEN, inclusive, Defendants.

NAVCOM TECHNOLOGY, INC. and DEERE & COMPANY, Plaintiffs, v. OKI ELECTRIC INDUSTRY CO., LTD. And DOES ONE THROUGH TEN, inclusive, Defendants.

Case No.: 5:12-CV-04175-EJD

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION

Dated: March 11, 2014

ORDER DENYING PLAINTIFFS'

MOTION FOR LEAVE TO AMEND;

GRANTING IN PART AND DENYING

IN PART THE MOTIONS FOR

SUMMARY JUDGMENT

[Re: Docket Nos. 97, 100, 102, 131]

Presently before the Court are four motions filed in the above-captioned case: a Motion for Leave to Amend filed by NavCom Technology, Inc. ("NavCom") and Deere & Company ("Deere") (collectively, "Plaintiffs"), a Motion for Summary Judgment filed by Plaintiffs, and two Motions for Summary Judgment filed by Oki Electric Industry Co., Ltd. ("Defendant"). The Court found these matters appropriate for decision without oral argument pursuant to Local Civil Rule 7-1(b), and previously vacated the corresponding hearing dates. Having fully reviewed the parties'briefings, the Court DENIES Plaintiffs' Motion for Leave to Amend. The three Motions for Summary Judgment, which seek to resolve a number of issues specific to this action, are GRANTED IN PART AND DENIED IN PART.

I. BACKGROUND

This action arises from the alleged breach of a contract between NavCom and Defendant ("the Agreement") under which Defendant was obligated to develop or design a radio frequency application-specific integrated circuit ("RF ASIC") to be included in NavCom's products. Defendant was to sell the RF ASIC to NavCom following the successful completion of the Development Phase described in the Agreement.

The Agreement was executed in December 2005. The parties worked together to complete a technical specification for the RF ASIC chips. During the design process, the specification underwent several revisions. In April 2007, Defendant delivered a number of prototypes which failed under testing. A second set of prototype chips was delivered in early 2008, but those chips failed as well.

NavCom became concerned that the project would not succeed and proceeded to develop an alternate solution described as the "discrete solution." By the summer of 2007, NavCom committed to developing the discrete solution parallel to the work with Defendant on the Agreement.

On July 8, 2008, Defendant gave written notice that it was terminating the Agreement. Plaintiffs went to market using the discrete solution in place of the RF ASICs Defendant was to provide under the Agreement, which resulted in higher costs to Plaintiffs. On June 22, 2012, Plaintiffs filed the instant action asserting a single claim for breach of contract.

II. LEGAL STANDARD

a. Motion for Leave to Amend

Federal Rule of Civil Procedure 16(b) provides that the district court must issue a scheduling order that limits the time to join other parties, amend the pleadings, complete discovery, and file motions. Fed. R. Civ. P. 16(b)(1)-(3). Once in place, "[a] schedule may be modified onlyfor good cause and with the judge's consent." Fed. R. Civ. P. 16(b)(4). The "good cause" requirement of Rule 16 primarily considers the diligence of the party seeking the amendment. Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992). "The district court may modify the pretrial schedule if it cannot reasonably be met despite the diligence of the party seeking the extension." Id (internal citation and quotation marks omitted).

Good cause may be found to exist where the moving party shows, for example, that it: (1) diligently assisted the court in recommending and creating a workable scheduling order, see In re San Juan Dupont Plaza Hotel Fire Litig., 111 F.3d 220, 228 (1st Cir. 1997), (2) is unable to comply with the deadlines contained in the scheduling order due to issues not reasonably foreseeable at the time of the scheduling order, see Johnson, 975 F.3d at 609, and (3) was diligent in seeking an amendment once the party reasonably knew that it could not comply with the scheduling order, see Eckert Cold Storage, Inc. v. Behl, 943 F. Supp. 1230, 1233 (E. D. Cal. 1996); see also Jackson v. Laureate, Inc., 186 F.R.D. 605, 608 (E. D. Cal. 1999). "If [the] party was not diligent, the inquiry should end." Johnson, 975 F.2d at 609. If the court finds that there is good cause to modify the schedule, the court then turns to Rule 15(a) to determine whether the amendment sought should be granted. Jackson, 186 F.R.D. at 607 ("As the Ninth Circuit explained in [Johnson], once the district court has filed a pretrial scheduling order pursuant to Rule 16 which establishes a timetable for amending pleadings, a motion seeking to amend pleadings is governed first by Rule 16(b), and only secondarily by Rule 15(a).")

b. Motion for Summary Judgment

A motion for summary judgment should be granted if "there is no genuine dispute as to any material fact and the movant is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(a); Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th Cir. 2000). The moving party bears the initial burden of informing the court of the basis for the motion and identifying the portions of the pleadings, depositions, answers to interrogatories, admissions, or affidavits that demonstrate the absence of a triable issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

If the moving party meets this initial burden, the burden then shifts to the non-moving party to go beyond the pleadings and designate specific materials in the record to show that there is a genuinely disputed fact. Fed. R. Civ. P. 56(c); Celotex, 477 U.S. at 324. The court must regard as true the opposing party's evidence, if supported by affidavits or other evidentiary material. Celotex, 477 U.S. at 324. However, the mere suggestion that facts are in controversy, as well as conclusory or speculative testimony in affidavits and moving papers, is not sufficient to defeat summary judgment. See Thornhill Publ'g Co. v. GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979). Instead, the non-moving party must come forward with admissible evidence to satisfy the burden. Fed. R. Civ. P. 56(c); see also Hal Roach Studios, Inc. v. Feiner & Co., Inc., 896 F.2d 1542, 1550 (9th Cir. 1990).

A genuine issue for trial exists if the non-moving party presents evidence from which a reasonable jury, viewing the evidence in the light most favorable to that party, could resolve the material issue in his or her favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986); Barlow v. Ground, 943 F.2d 1132, 1134-36 (9th Cir. 1991). Conversely, summary judgment must be granted where a party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322.

III.DISCUSSION

In this Order, the Court will first address Plaintiffs' Motion for Leave to Amend. It will then turn to the three Motions for Summary Judgment.

a. Plaintiffs' Motion for Leave to Amend

i. Rule 16(b)

Since such an observation is critical to framing this analysis, the Court notes at the outset that a scheduling order setting a deadline for amendments to the pleadings was issued in November, 2012. Accordingly, the Court's initial task is to determine whether Plaintiffs have shown good cause under Rule 16(b). Plaintiffs contend that they have shown good cause because their claim for fraud depends on facts they "could not have known until after the deadline foramendments to the pleadings established in the Court's scheduling order." However, there are facts in the record that suggest that Plaintiffs knew at least some of the facts they are now using to support their fraud claim as early as 2006. Because Plaintiffs base their good cause argument on facts they allege they could not have known prior to 2013, and because an inability to comply with the scheduling order can support a finding of good cause, the Court finds it appropriate to compare the facts discovered in 2013 with the facts Plaintiffs possessed prior to 2013.

Plaintiffs make the following allegations to support their claim for fraud:

1) When Plaintiffs selected Defendant for the Agreement, Plaintiffs were given the impression that a design firm named Peregrine would take a substantial role in the project.

2) Defendant repeatedly told Plaintiffs that Peregrine would be doing the design work if Defendant were awarded the contract, and Defendant understood that Plaintiffs were relying on Defendant's representations regarding Peregrine's involvement in the project. Defendant made the representations regarding Peregrine intentionally to induce Plaintiffs into selecting Defendant for the contract.

3) Plaintiffs would not have selected Defendant for the project if Peregrine had not been doing the design work.

4) Defendant actually knew that Peregrine would take only a minor role in the project and that another firm named ACCO would be doing the design work. Peregrine's role would be limited to oversight. Defendant did not disclose these details to Plaintiffs.

There is evidence in the record suggesting that Plaintiffs had many of these facts in their possession earlier than 2013. In the declaration of Jacob Makhinson, who was employed by Plaintiff NavCom as a Senior RF Engineer between 2005 and 2008, Makhinson testifies that he attended a design review meeting in France with ACCO, Peregrine, and Oki in July 2006. Docket No. 116 ¶ 7. At the meeting, Makhinson learned "that ACCO was doing all of the circuit-design work that we had been told that Peregrine would be doing prior to the execution of the Agreement.It quickly became clear that Peregrine knew very little about the circuit design for the project, and that Peregrine's role was limited to overseeing the project." Id.

In 2013, NavCom, through discovery, obtained an email between Oki employees dated August 10, 2005 which contained the following statement: "I heard that we are using a French RF design team, along with...