The Solaria Corp. v. GCL Sys. Integration Tech. Co.

• Decision Date: 28 January 2022
• Docket Number: 20-cv-07778-BLF
• Parties: THE SOLARIA CORPORATION, Plaintiff, v. GCL SYSTEM INTEGRATION TECHNOLOGY CO., LTD., Defendant.
• Court: U.S. District Court — Northern District of California

THE SOLARIA CORPORATION, Plaintiff,
v.
GCL SYSTEM INTEGRATION TECHNOLOGY CO., LTD., Defendant.

No. 20-cv-07778-BLF

United States District Court, N.D. California, San Jose Division

January 28, 2022

ORDER GRANTING IN PART AND DENYING IN PART WITHOUT PREJUDICE PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT [RE: ECF NO. 44]

BETH LABSON FREEMAN, United States District Judge.

This is an action for breach of contract between companies in the solar energy industry. Plaintiff Solaria Corporation (“Solaria”) alleges that Defendant GCL System Integration Technology Co., Ltd. (“GCL”) failed to make royalty payments pursuant to a non-exclusive license agreement permitting GCL to sell products containing Solaria's intellectual property in the European Union, so Solaria seeks summary judgment of breach of contract and damages for the missed payments plus interest and attorneys' fees. Solaria seeks (1) $671, 926.23 owed under a September 4, 2020 agreement; (2) $92, 909.91 in prejudgment interest; (3) $78, 197.88 in attorneys' fees; and (4) $1, 000, 000 owed on or before January 1, 2021 under an April 23, 2019 agreement, for a total of $1, 843, 034.02. GCL argues that it sold far less of Solaria's intellectual property than either of the parties expected it to when they entered the agreements, so it raises various contract defenses to keep Solaria from enjoying what GCL argues would be a significant windfall under the agreements. In addition to arguing that GCL's defenses fail to raise an issue of material fact as to its summary judgment motion, Solaria moves to strike GCL's defenses because GCL failed to either plead or disclose them during fact discovery.

Based on the below reasoning, the Court (1) DENIES Solaria's Motion to Strike GCL's defenses under Rules 16 and 37; (2) GRANTS Solaria's Motion for Summary Judgment as to GCL's

1

breach of contract regarding the $671, 926.23 payment; and (3) DENIES WITHOUT PREJUDICE Solaria's Motion for Summary Judgment as to GCL's breach of contract regarding the January 1, 2021 $1, 000, 000 payment. Further, the Court DENIES WITHOUT PREJUDICE Solaria's requests for prejudgment interest and attorneys' fees.

I. BACKGROUND

Solaria is a Delaware solar technology company that designs, develops, and sells “high-performance, high-efficiency photovoltaic (PV) solar modules and systems for residential and commercial applications, ” with its principal place of business in California. See Complaint, ECF No. 1 ¶ 1. GCL is a Chinese corporation with its principal place of business in the People's Republic of China, which manufactures and sells solar modules throughout the world. See Id. ¶ 2; Declaration of Jordan Trent Jones (“Jones Decl.”), ECF No. 44-1, Ex. B.

On November 14, 2017, Solaria and GCL entered into a Technology Cross License Agreement (“TCLA”) as part of the settlement of a trade secrets action in California Superior Court, titled Solaria Corporation v. GCL Solar Energy, Inc., No. RG16830545. See Jones Decl., ECF No. 44-1, Ex. A, Technology Cross License Agreement (“TCLA”); Opposition, ECF No. 47 at 1. The TCLA gave GCL a non-exclusive license to sell solar modules that incorporated Solaria's intellectual property (“Licensed Products”). See TCLA § 2.1. The license permitted GCL to sell Licensed Products in any territory, excluding, for the first five years, the United States and the European Union (“EU”). See Id. §§ 1(1), 2.1.1. In exchange, Solaria agreed to pay royalties of $0.003 for each watt of Licensed Products (“Wp”) GCL sold. See Id. § 3.1.

On April 23, 2019, Solaria and GCL amended the TCLA. See Jones Decl., ECF No. 44-1, Ex. C, Amendment to Technology Cross License Agreement (“A-TCLA”). Lifting the TCLA restriction to sell Licensed Products in the EU, the A-TCLA licensed GCL to sell Licensed Products in the EU for ten years. See A-TCLA §§ 1(c)-(f). Further, the A-TCLA required GCL to pay the following royalties for products incorporating Solaria intellectual property sold in the EU: “(i) USD $0.003/Wp; (ii) a non-refundable prepaid royalty fee of USD $2, 000, 000.00 upon execution of this Amendment to be applied to royalty payments for the first 667 MWp; and (iii) additional non-refundable prepaid royalties of U.S. $1, 500, 000.00 due on or before January 1, 2020 and USD

2

$1, 000, 000.00 due on or before January 1, 2021.” See Id. § 1(e). The A-TCLA also provided that “[f]ailure to make any of the payments when due shall be grounds for termination of the license grant provided herein.” See id.

GCL did not make the first $2, 000, 000 non-refundable prepaid royalty fee (“First A-TCLA Payment”) to Solaria upon execution of the A-TCLA. See Jones Decl., ECF No. 44-1, Ex. D, June 12, 2019 Payment Agreement; Motion, ECF No. 44 at 2; Opposition, ECF No. 47 at 4. On June 12, 2019, Solaria and GCL executed a payment agreement extending the time for GCL to pay the first $2, 000, 000 fee until July 1, 2019. See Jones Decl., ECF No. 44-1, Ex. D, June 12, 2019 Payment Agreement. GCL paid the fee on or about June 26, 2019. See Jones Decl., ECF No. 44-1 ¶ 7.

The A-TCLA provided that a second payment-additional non-refundable prepaid royalties of $1, 500, 000 (“Second A-TCLA Payment”)-was “due on or before January 1, 2020” to Solaria. See A-TCLA § 1(e). GCL did not make the second payment by January 1, 2020. See Jones Decl., ECF No. 44-1 ¶ 9. On March 16, 2020, Solaria and GCL executed a payment agreement that split the second A-TCLA payment into two payments of $750, 000 plus interest-one due on March 31, 2020 and the second due on June 30, 2020. See Jones Decl., ECF No. 44-1, Ex. F, March 16, 2020 Payment Agreement § 1.1. GCL made the first of the two $750, 000 payments on or about March 31, 2020. See Jones Decl., ECF No. 44-1 ¶ 11. But GCL failed to make the second payment on June 30, 2020. See Id. ¶ 12. And on July 29, 2020, GCL paid Solaria only an additional $100, 000. See id.

On September 4, 2020, Solaria and GCL executed a payment agreement for the remaining balance due on the second installment of the March 16, 2020 Payment Agreement with interest, requiring GCL to pay (1) $200, 000 plus interest by September 30, 2020; (2) $200, 000 plus interest by October 31, 2020; and (3) $271, 926.23 plus interest by November 30, 2020. See Jones Decl., ECF No. 44-1, Ex. G, September 4, 2020 Amendment to Payment Agreement § 1.1; Jones Decl., ECF No. 44-1 ¶ 13. GCL made none of these payments. See Jones Decl., ECF No. 44-1 ¶ 16.

The A-TCLA further provided that a third payment-additional non-refundable prepaid royalties of $1, 000, 000 (“Third A-TCLA Payment”)-was “due on or before January 1, 2021” to Solaria. See A-TCLA § 1(e). GCL did not make this payment by January 1, 2021. See Jones Decl.,

3

ECF No. 44-1 ¶ 16.

During 2019 and 2020, GCL sold approximately 1.39 MWp of Licensed Products in the European Union. See Declaration of Tony Tootell (“Tootell Decl.”), ECF No. 47-1, Ex. 16 at 5, 8; Tootell Decl., ECF No. 47-1 ¶ 16. In total, GCL has paid Solaria approximately $2, 871, 923.23 so far pursuant to the A-TCLA and the ensuing payment agreements. See Opposition, ECF No. 47 at 6.

Solaria filed suit on November 4, 2020. See Complaint, ECF No. 1. On April 23, 2021, Solaria informed the Court that it would be filing an early summary judgment motion, and the parties proposed an expedited schedule whereby fact discovery closed on September 10, 2021. See Joint Case Management Statement, ECF No. 25. The Court scheduled a hearing on Solaria's early summary judgment motion for December 2, 2021. Fact discovery closed on September 10, 2021, except for the parties' Rule 30(b)(6) depositions, which were completed in October. See ECF No. 46.

Solaria filed a Motion for Summary Judgment on October 28, 2021, arguing that the Court should find as a matter of law that GCL owes it at least $1, 843, 034.02, including (1) $671, 926.23 owed under the September 4, 2020 Payment Agreement; (2) $92, 909.91 in interest as of October 27, 2021; (3) $78, 197.88 in attorneys' fees as of October 27, 2021; and (4) $1, 000, 000 owed under the Third A-TCLA Payment as of January 1, 2021. See Motion, ECF No. 44 at 4-5. GCL opposed, arguing that (1) it is ambiguous whether the A-TCLA required payment of the Second or Third A-TCLA Payments if GCL did not sell the 667 MWp of Licensed Products covered by the First A-TCLA Payment; (2) GCL's performance under the A-TCLA should be excused under the frustration of purpose doctrine or the A-TCLA should be reformed under the mutual mistake doctrine based on GCL's sale of only 1.39 MWp of Licensed Products in the EU during 2019 and 2020; (3) Solaria's Motion is premature under Rule 56(d); and (4) GCL does not owe the Third A-TCLA Payment, attorneys' fees, or prejudgment interest. See Opposition, ECF No. 47. On reply, Solaria argues, inter alia, that GCL's breach of contract defenses should be stricken or found to be waived, since GCL did not plead those defenses or disclose them during fact discovery despite Solaria's diligence and multiple court orders. See Reply, ECF No. 52.

4

II. LEGAL STANDARD

A. Motion for Summary Judgment

“A party is entitled to summary judgment if the ‘movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.'” City of Pomona v. SQM N. Am. Corp., 750 F.3d 1036, 1049 (9th Cir. 2014) (quoting Fed.R.Civ.P. 56(a)). A fact is “material” if it “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is “genuine” if there is sufficient evidence for a reasonable trier of fact to decide in favor of the nonmoving party. Id.

The party moving for summary judgment bears the initial burden of informing the Court of the basis for the motion and identifying portions of the pleadings, depositions, answers to interrogatories, admissions, or affidavits that...