Opinion
No. 5:04-cv-3270 RS.
November 5, 2004
ORDER DENYING FORTINET'S MOTION FOR SUMMARY JUDGMENT
I. INTRODUCTION
Plaintiff Fortinet, Incorporated ("Fortinet") filed a motion seeking summary judgment on its complaint for breach of contract, as well as common counts, against Defendant OFC Capital ("OFC"). The motion was fully briefed and heard by the Court on November 3, 2004. Based on all papers filed to date, as well as on the oral argument of counsel, the Court denies the motion for summary judgment for the reasons set forth below.
II. BACKGROUND
Fortinet, a privately held company headquartered in Sunnyvale, California, specializes in the development and sale of computer network security products. OFC, a division of ALFA Financial Corporation, provides lease financing for the purchase of computer equipment. Fortinet contends that it sold computer network security products to OFC which OFC intended to lease to a third party, NorVergence, Inc. ("NorVergence"). Fortinet alleges that the products were delivered to NorVergence, based on OFC's instructions, but that OFC has failed to pay for the products as promised. As a result, Fortinet filed this action seeking to collect the sum of $222,951.04, which it contends represents the total value of the products delivered to NorVergence.
OFC responds that it never agreed to purchase equipment from Fortinet. Instead, OFC states that it entered into a Master Lease Agreement with NorVergence whereby NorVergence agreed to select equipment and arrange for its delivery directly from the vendor. OFC contends that the terms of the Master Lease require that, prior to the authorization of financing, it receive: (1) an executed schedule of the equipment; (2) confirmation of the delivery of the equipment; (3) a completed invoice for the equipment; (4) an executed delivery and acceptance form; and, (5) a report from an independent investigator confirming installation of the equipment. OFC argues that Fortinet was advised that no financing would be forthcoming unless and until these conditions were met.
OFC notes that, although it prepared a schedule for the Fortinet equipment, NorVergence never executed either the schedule or the delivery and acceptance receipt, as required by the Master Lease. Instead, OFC alleges that NorVergence advised it that certain items of equipment were missing and/or not installed properly. Although such messages were allegedly conveyed to Fortinet, OFC contends that the proper equipment was never installed and, therefore, no finance agreement was ever consummated between OFC and NorVergence. As a result, OFC asserts that it is not liable to Fortinet for the payment of any equipment which may have been delivered to NorVergence. Moreover, it notes that NorVergence filed for bankruptcy in June of 2004.
Fortinet replies that it entered into a purchase contract with OFC on March 15, 2004, the terms of which it alleges are adequately set forth in email correspondence between the parties. Fortinet contends that it was never informed of either the existence or terms of the Master Lease Agreement between OFC and NorVergence until the filing of this action. Fortinet maintains that the agreement between OFC and NorVergence notwithstanding, OFC promised to pay Fortinet for certain network security products and instructed Fortinet to deliver various products to NorVergence but to bill OFC for such products. Fortinet alleges that it complied with all terms and conditions of its agreement with OFC but that, despite full performance by Fortinet, OFC refuses to pay for the products delivered to NorVergence. Accordingly, Fortinet filed this action for breach of contract against OFC and now seeks entry of summary judgment in its favor on its complaint.
The complaint also pleads claims for promissory estoppel, goods sold and delivered, account stated, open book account, reasonable value of goods, and conversion.
III. STANDARDS
Summary judgment is proper "if the pleadings and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The purpose of summary judgment "is to isolate and dispose of factually unsupported claims or defenses." Celotex v. Catrett, 477 U.S. 317, 323-324 (1986).The moving party "always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of `the pleadings and admissions on file, together with the affidavits, if any' which it believes demonstrate the absence of a genuine issue of material fact."Id. at 323. If it meets this burden, the moving party is then entitled to judgment as a matter of law when the non-moving party fails to make a sufficient showing on an essential element of his case with respect to which he bears the burden of proof at trial.Id. at 322-23.
The non-moving party "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). The non-moving party cannot defeat the moving party's properly supported motion for summary judgment simply by alleging some factual dispute between the parties. To preclude the entry of summary judgment, the non-moving party must bring forth material facts, i.e., "facts that might affect the outcome of the suit under the governing law. . . . Factual disputes that are irrelevant or unnecessary will not be counted." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). The opposing party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 588 (1986).
The court must draw all reasonable inferences in favor of the non-moving party, including questions of credibility and of the weight to be accorded particular evidence. Masson v. New Yorker Magazine, Inc., 111 S.Ct. 2419, 2434-35 (1991) (citing Anderson, 477 U.S. at 255); Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 588 (1986); T.W. Elec. Service v. Pacific Elec. Contractors, 809 F.2d 626, 630 (9th Cir. 1987). It is the court's responsibility "to determine whether the `specific facts' set forth by the nonmoving party, coupled with undisputed background or contextual facts, are such that a rational or reasonable jury might return a verdict in its favor based on that evidence." T.W. Elec. Service, 809 F.2d at 631. "[S]ummary judgment will not lie if the dispute about a material fact is `genuine,' that is if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248. However, "[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no `genuine issue for trial.'" Matsushita, 475 U.S. at 587.
IV. DISCUSSION
Fortinet correctly notes that, in order for the Court to enter summary judgment in its favor on its claim for breach of contract, it must establish: (1) the existence of an agreement between the parties; (2) performance by the moving party; (3) breach of such agreement by the nonmoving party; and, (4) damage caused by such breach. McDonald v. John P. Scripps Newspaper, 210 Cal.App.3d 100, 104 (1989). In this instance, Fortinet contends that the undisputed evidence establishes that on or before March 15, 2004, Fortinet and OFC entered into a contract whereby Fortinet agreed to provide certain goods to NorVergence in exchange for payment of such goods by OFC. To support this contention, Fortinet cites to the Declaration of Radha Raj at ¶ 2. Mr. Raj states in his declaration that Fortinet and OFC entered into an oral contract for the purchase of products which were to be delivered to NorVergence. However, Fortinet offers no documentary or additional evidence, other than Mr. Raj's conclusion and an exchange of emails discussed below, to substantiate the claim that a contract was ultimately finalized.
In contrast, OFC states that it never made any promise to Fortinet to purchase any products. See Declaration of Brian Brophy at ¶ 16, Exhs., A, B, D, I, J, K. Moreover, it notes that any such oral agreement would be invalid under the statute of frauds set out in California Commercial Code § 2201(1). That code section requires that any contract for the sale of goods exceeding $500 or more must be evidenced in writing and signed by the party against whom enforcement is sought. In response, Fortinet contends that the "writing" necessary to fulfill the requirement of the statute of frauds is satisfied by email correspondence between Fortinet and OFC exchanged on March 22, and 29, 2004. See Brophy Declaration at ¶¶ 4, 5, Exhs. A, B. Those communications, from Brian Brophy, a New Business Development Manager for OFC, to Steve Vogel, a Territory Manager for Fortinet, and Radha Raj, the Finance Manager, Credit and Collections and Order Management, for Fortinet, outline the invoice procedures "required to expedite the processing of your invoice to effect the prompt delivery of the equipment." Id. at Exh. A, p. 2.
A review of the electronic correspondence relied upon by Fortinet fails to establish as a matter of law, however, the existence of a contract between Fortinet and OFC on March 15, 2004. Rather, the correspondence simply describes several steps which Fortinet must take "to effect the prompt delivery of the equipment." Although the correspondence states that OFC is serving "as the leasing agent for Norvergence," it does not refer to any agreement or promise on the part of OFC to pay for the equipment. Id. at Exhs. A, B. While an argument may be made that the Court could infer such intent simply from the fact that OFC is instructing Fortinet regarding its invoice requirements to trigger payment for goods delivered to NorVergence, OFC points to additional correspondence which specifically states that funding for the equipment will not occur until various steps have been completed, such as installation of the equipment, execution by NorVergence of the delivery and acceptance form, and a site inspection. See Raj Decl., Exh. D. Although Fortinet contends that such terms were added after the formation of the parties' contract on March 15, 2004, it provides no evidence as to the terms and conditions agreed to by the parties on that date. In fact, the emails relied upon by Fortinet to support its contention that a contract was formed on March 15, 2004, post-date such time period and make no reference to any contract or agreement as of that date. See Brody Decl., Exhs. A, B. Accordingly, the Court on summary judgment cannot infer from the facts presented that the parties had reached a fully formed contract.
Fortinet's alternative argument, that it is entitled to summary judgment based on the doctrine of promissory estoppel, similarly fails. The elements necessary to establish promissory estoppel are: (1) a promise clear and unambiguous in its terms; (2) reasonable and foreseeable reliance; (3) by the party to whom the promise is made; and, (4) injury based upon such reliance.Thomson v. International Alliance of Theatrical State Employees Moving Picture Machine Operators, 232 Cal.App.2d 446, 454 (1965). However, based on the foregoing, Fortinet has failed to submit uncontroverted evidence of a "clear and unambiguous" promise between it and OFC regarding the terms and conditions for the purchase of equipment on behalf of NorVergence. At most, Fortinet has established that OFC may have agreed to pay for equipment delivered to NorVergence provided that certain terms were completed. Accordingly, Fortinet's motion for summary judgment must be denied.
V. CONCLUSION
For the reasons stated, the Court denies Fortinet's motion for summary judgment.