Opinion
2:22-cv-01447-CAS-JCx
08-29-2023
MOTIVO ENGINEERING, LLC v. BLACK GOLD FARMS
PRESENT: THE HONORABLE CHRISTINA A. SNYDER
CIVIL MINUTES - GENERAL
Proceedings: (IN CHAMBERS) - DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (Dkt. 78, filed on June 16, 2023)
I. INTRODUCTION
Presently before the Court is defendant's motion for summary judgment. The Court finds that defendant's motion is appropriate for decision without oral argument. See Fed.R.Civ.P. 78; CD. Cal. L.R. 7-15. Accordingly, the matter is hereby taken under submission.
On February 14, 2022, plaintiff Motivo Engineering, LLC filed suit in Los Angeles County Superior Court against defendant Black Gold Farms ("BFG") and Does 1-25 for (1) breach of contract; and (2) restitution/unjust enrichment. Dkt. 1-1 ("Compl."). Plaintiff is an end-to-end product design and engineering firm that builds robotic automation equipment in the agricultural industry. Id. ¶¶ 1, 2. Defendant is a North Dakota cooperative association whose farming operations date back to 1928. Dkt. 12 ¶ 6. The dispute in this case arises from the joint development of an automated sweet potato transplanter (the "Project") by plaintiff and defendant. Compl. ¶ 2. The transplanter is a smart robotic implement that can transplant sweet potatoes when pulled behind machinery. Id. Plaintiff alleges that during the phase of the Project that called for production of a prototype, costs climbed beyond the original scope of the contract due to design decisions that were approved by defendant. Id. ¶ 3. Plaintiff asserts that notwithstanding defendant's approval of certain design decisions, and even though plaintiff informed defendant in advance that the costs of the Project would exceed the total value of the scope of work, defendant has refused to pay plaintiff for the cost overruns. Id. ¶¶ 3, 10. Plaintiff claims that it is owed at least $1.3 million as a result of time and materials expended in order to get a prototype of the transplanter functioning in the field. Id. ¶ 15.
On March 4, 2022, defendant removed the case to this Court pursuant to the Court's diversity jurisdiction. Dkt. 1. On April 15, 2022, defendant answered the complaint and filed a counterclaim against plaintiff Dkt. 12.
Between September and November 2022, Motivo took the depositions of BGF's CEO and Chief Production Officer. Thereafter, Motivo filed a motion for leave to file an amended complaint seeking to add claims for fraud and misrepresentation, quantum meruit, and receipt of stolen property pursuant to Cal. Pen. Code § 496. Dkt. 44.
On January 30, 2023, the Court granted Motivo leave to amend its complaint. Dkt. 57. Motivo filed its first amended complaint the same day. Dkt. 58. However, the parties stipulated that Motivo be granted leave to file a second amended complaint after a docketing error occurred in relation to the first amended complaint. Motivo filed its second amended complaint on February 8, 2023. Dkt. 61 ("SAC").
On February 20, 2023, BGF filed a motion to dismiss Motivo's new claims for fraud and misrepresentation, quantum meruit, and receipt of stolen property pursuant to Cal. Pen. Code § 496. Dkt. 63.
On March 28, 2023, the Court granted in part and denied in part BGF's motion to dismiss Motivo's SAC. Dkt. 71. The Court denied BGF's motion as to Motivo's fraud and quantum meruit claims. The Court dismissed Motivo's receipt of stolen property claim with leave to amend.
The same day, on March 28, 2023, Motivo filed a third amended complaint, bringing claims for breach of contract, fraud/misrepresentation, quantum meruit, and receipt of stolen property pursuant to Cal. Pen. Code § 496. Dkt. 72 ("TAC"). On April 17, 2023, the parties submitted a joint stipulation to dismiss Motivo's receipt of stolen property claim, which the Court granted. Dkts. 75, 77.
On June 16, 2023, BGF filed a motion for summary judgment as to Motivo's remaining claims for breach of contract, fraud misrepresentation, and quantum meruit. Dkt. 78 ("Mot."). On July 14, 2023, Motivo filed an opposition. Dkt. 79 ("Opp."). On July 26, 2023, BGF filed a reply. Dkt. 80 ("Reply").
BGF's motion is presently before the Court. Having carefully considered the parties' arguments and submissions, the Court finds and concludes as follows.
II. BACKGROUND
Unless otherwise noted, the Court references only facts that are uncontroverted.
A. The Parties Enter into a Master Services Agreement
On or around September 5, 2017, the parties entered into a Master Services Agreement (the "MSA") regarding the joint development of an automated sweet potato transplanter. Dkt. 80-1, ("Statement of Disputed Facts" or "SDF") ¶ 1. The parties adopted a phase approach for the project. Id. ¶ 2. Pursuant to the MSA, Motivo was required to submit Statements of Work ("SOW") to BGF for approval prior to starting work on each SOW phase. Dkt. 78-6, ("MSA"). Each SOW identified the scope and cost of any work to be performed in support of the Project, and Motivo was not to exceed the identified scope or cost without prior approval from BGF. Id.
In particular. Section 1 a of the MSA defined how the SOW phases would operate, and how the parties would bear the costs of the work associated with each SOW. Section 1 .a provided in relevant part:
Effort under any SOW will be billed as specified in the SOW as either a firm fixed price ([defined as] FFP) or time and materials ([defined as] T&M) contract based on the rates set forth in Appendix A or the current rates in effect as explicitly captured in the SOW. . . . [W]ithout express or implied authorization from [BGF], the aggregate amount billed or otherwise due from [BGF] to Motivo under any given SOW shall not exceed the total value shown on the SOW not to exceed ([defined as] NTE) or total value. Valid methods of authorization include, but are not limited to, payment of invoices in excess of the NTE, direction to Motivo to perform additional work after the NTE has been reached, or authorization to execute work outside of the scope of the SOW.Id.
Finally, pursuant to Section 9.j of the MSA, "[t]he terms and conditions in the SOW take priority if there is any conflict with the terms of this Agreement." Id.
B. The Parties Create a Statement of Work for Phase 3B/C
For Phases 0, 1,2, and 3A, Motivo provided work and was paid under each respective SOW. SDF ¶ 3. On July 23, 2019, the parties executed a SOW entitled "Sweet Potato Slip management Phase 3B/C" (the "Phase 3B/C SOW"). For the Phase 3B/C SOW, which is at the heart of this dispute, Motivo was to deliver a field-ready demonstrable prototype version of the Project.
The Phase 3B/C SOW contained a "Client Vision" section, which provided certain "design objectives" to be "utilized to guide the development of the system." The section stated, "[t]hese objectives are subject to change and expected to evolve over the course of the project, but are provided here as a baseline reference." One of the design objectives in this section was a "Target Prototype Multi-Row Transplanting Capabilities, at 12 inch in-row plant spacing. 42 inch row to row spacing (1.5X Current Capabilities)." with "3.47 acres planted/hour" and a "98% Transplanting Success Rate." Dkt. 78-9 at 3.
The SOW also included a "Deliverables Section." In relevant part, the section stated that Motivo's deliverables would include:
2 row production representative prototype transplanter with the following technical attributes:
a. Bulk input of slips at a rate to support multi-row transplanting
b. Automated Singulation of slips
c. Designed to a transplanting target rate of 3.47 planted acres per hourId. at 4.
The Phase 3B/C SOW provided for a firm fixed price of $ 1.2 million. Id. at 9. "If additional work beyond the scope outlined in this statement of work is required change orders may be issued." Specifically, within the "Assumptions" Section of the SOW, Section 13-"Budget and Schedule Assumptions"-provided that "[a]ny changes to the technical direction and assumptions may increase or decrease overall development cost. In the event a request for budget change is not approved by Black Gold Farms, Phase 3 development effort will cease and payment will be required only up to and including the development milestone being pursued at that time." Id. at 7.
C. Development of the Prototype and Field Demonstration
In the course of developing the Protype during Phase 3B/C, Motivo decided to change the technical approach to singulation, using a "vision system." SDF ¶ 6. The parties do not specify, but it appears that Motivo and BGF had been discussing the possibility of switching to using a vision system as early as October 2019. See id. ¶ 7.
On March 4, 2020, Motivo reached out to BGF about the possibility of a change order because "[s]ome of the architecture and design decisions we made are driving the material and later phase engineering costs higher than anticipated." Dkt. 79-16. It appears that Motivo and BGF executives spoke over the phone on March 12, 2020, but the parties do not indicate what the substance of that conversation was. See id.
On or about March 18 or 19, 2020, Motivo discussed with BGF the possibility of a change order for the anticipated increased costs associated with changing to the vision system approach for the Prototype, Id., Motivo informed BGF that it expected expenses on the project to increase by approximately $400,000. See Dkt. 79-70. When Motivo reached the NTE limit for Phase 3B/C on or about March 23, 2020, it did specifically not inform BGF. SDF ¶ 8. There is no dispute by the parties that Motivo subsequently disclosed to BGF that it exceeded the NTE limit, but the parties dispute when Motivo first made the disclosure.
On or about March 24, 2020, Motivo presented BGF with a revised change order presentation and an option to proceed with development of a change order or increase to the Phase 3B/C budget. Id. ¶ 9.
On or about April 1, 2020, Motivo and BGF agreed to some cost control measures that reduced the physical deliverable to a single lane (instead of two) and removed some of the anticipated data collection functionality. Id. ¶ 10.
On or about April 13, 2020, Motivo and BGF representatives spoke over the phone. According to Motivo, BGF again directed Motivo to keep working on the Prototype. Id. ¶ 26.
At an unknown date on or around April 2020, Motivo requested that BGF pay 50% of the overage invoices in June 2020 after a successful demonstration of the Prototype, which could cover all of the material cost and part of the labor costs paid by Motivo. Motivo additionally requested that the remainder be paid in equal monthly payments. Id. ¶ 14.
On or about May 22, 2020, Motivo informed BGF that Motivo had incurred cost overruns in the amount of approximately $1 million. Id. ¶ 13. After learning of this overrun, BGF representatives told Motivo that BGF needed to see the Prototype working in the field Id. ¶ 14.
Motivo demonstrated the Prototype for BGF in June and July of 2020. Id. ¶ 17. The parties refer generally to conversations between Motivo and BGF executives during the field demonstrations, but they do not specify the content of those conversations.
After the field demonstrations, Motivo took the Prototype back to its offices in Los Angeles. Id. ¶ 20. After July 2020, BGF had multiple discussions with Motivo as to how the cost overrun, styled by the parties as the "overspend," might be covered. Id. ¶ 22. To date, BGF has paid Motivo only the firm fixed price outlined in the Phase 3B/C SOW. Id. ¶ 3.
III. LEGAL STANDARD
Summary judgment is appropriate where "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The moving party bears the initial burden of identifying relevant portions of the record that demonstrate the absence of a fact or facts necessary for one or more essential elements of each claim upon which the moving party seeks judgment. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
If the moving party meets its initial burden, the opposing party must then set out specific facts showing a genuine issue for trial in order to defeat the motion. Anderson v. Liberty Lobby. Inc.. 477 U.S. 242, 250 (1986); see Fed.R.Civ.P. 56(c), (e). The nonmoving party must not simply rely on the pleadings and must do more than make "conclusory allegations [in] an affidavit." Luian v. Natl Wildlife Fed'n. 497 U.S. 871, 888 (1990); see Celotex, 477 U.S. at 324. Summary judgment must be granted for the moving party if the nonmoving party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex. 477 U.S. at 322; see Abromson v. Am. Pac. Corp.. 114 F.3d 898, 902 (9th Cir. 1997).
In light of the evidence presented by the nonmoving party, along with any undisputed facts, the Court must decide whether the moving party is entitled to judgment as a matter of law. See T.W. Elec. Serv.. Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 631, 631 n.3 (9th Cir. 1987). When deciding a motion for summary judgment, "the inferences to be drawn from the underlying facts ... must be viewed in the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co. v. Zenith Radio Corp.. 475 U.S. 574, 587 (1986) (citation omitted); Valley Natl Bank of Ariz, v. A.E. Rouse & Co., 121 F.3d 1332, 1335 (9th Cir. 1997). Summary judgment for the moving party is proper when a rational trier of fact would not be able to find for the nonmoving party on the claims at issue. See Matsushita. 475 U.S. at 587.
IV. DISCUSSION
A. Breach of Contract
A breach of contract claim requires four elements: "(1) the existence of the contract, (2) plaintiffs performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff." Oasis W. Realty. LLC v. Goldman. 51 Cal.4th 811, 821 (2011). "Contract formation requires mutual consent, which cannot exist unless the parties 'agree upon the same thing in the same sense.'" Bustarnante v. Intuit. Inc., 141 Cal.App.4th 199, 208 (2006) (citing Cal. Civ. Code §§ 1580, 1550, 1565). "If there is no evidence establishing a manifestation of assent to the 'same thing' by both parties, then there is no mutual consent to contract and no contract formation." United States v. Glob. Metals Corp.. No. CV 13-09208 MMM (JEMx), 2015 WL 12661913, at *6 (CD. Cal. Jan. 12, 2015) (quoting Weddington Productions. Inc. v. Flick, 60 Cal.App.4th 793, 811 (1998)).
Under California law, "[t]he interpretation of a contract involves a two-step process." F.B.T. Prods.. LLC v. Aftermath Records. 621 F.3d 958, 963 (9th Cir. 2010) (quoting Winet v. Price. 4 Cal.App.4th 1159, 1165 (1992))
First the court provisionally receives (without actually admitting) all credible evidence concerning the parties' intentions to determine ambiguity, i.e., whether the language is reasonably susceptible to the interpretation urged by a party. If in light of the extrinsic evidence the court decides the language is reasonably susceptible to the interpretation urged, the extrinsic
evidence is then admitted to aid in the second step-interpreting the contract.Id. (quotation marks omitted). "Even if a contract appears unambiguous on its face, a latent ambiguity may be exposed by extrinsic evidence which reveals more than one possible meaning to which the language of the contract is yet reasonably susceptible." Pore v. Arnold Worldwide. Inc.. 139 P.3d 56, 60 (Cal. 2006) (quotation marks omitted); see also First Nat. Mortg. Co. v. Fed. Realty Inv. Tr.. 631 F.3d 1058, 1067 (9th Cir. 2011) (same).
Additionally, a" 'course of dealing' is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct." Cal. Com. Code § 1303(b). A genuine dispute surrounding the parties' course of dealing or performance may therefore preclude summary judgment. See United States v. Sacramento Mun. Util. Dist., 652 F.2d 1341, 1344 (9th Cir. 1981) ("differing views of the intent of parties [may] raise genuine issues of material fact").
"Course of dealing" consists of the parties' relations prior to forming the contract at issue, whereas "course of performance" consists of the parties' actions in carrying out the contract at issue. Nanakuh Paving & Rock Co. v. Shell Oil Co., 664 F.2d 772, 794 (9th Cir. 1981).
Finally, even once it is established that a party breached a contract, the "question of whether a breach is material depends upon the setting and is typically a question of fact." Farina Focaccia & Cucina Italians LLC v. 700 Valencia St., LLC, 15-cv-02286-JCS, 2016 WL 5672961, at *46-47 (N.D. Cal. Oct. 2, 2016); see also Superior Motels, Inc. v. Rinn Motor Hotels, Inc., 195 Cal.App.3d 1032, 1051 (Ct. App. 1987) (materiality of a breach "is ordinarily a question for the trier of fact").
1. Motivo's Performance Under the Contract
BGF argues that Motivo cannot prove its performance of its obligations under the Phase 3B/C because: (1) Motivo did not produce a Prototype that satisfies the performance criteria set forth in the Phase 3B/C SOW; (2) Motivo did not produce a Prototype that possesses "all system, subsystems, and functionality of the intended production unit without any consideration to form, detailed manufacturing drawings, or parts/operations manuals" pursuant to the "Assumptions" Section of the SOW; and (3) Motivo has not delivered all of the Phase 3B/C SOW "Deliverables" identified in the Phase 3B/C SOW. Mot. at 10-12.
In opposition, Motivo argues that BGF has failed to provide any evidence that Motivo did not perform its contractual obligations. Specifically, Motivo notes that BGF offers no evidence that the Prototype failed to feature the "bulk input slips at a rate to support multi-row transplanting" and the "automated singulation of slips" required by the Deliverables Section of the SOW. Opp. at 7. Instead, Motivo cites to comments made by BGF executives who considered the Prototype as tested in the 2020 field demonstration to have been "complete" and "working." Id. at 7-8. Additionally, Motivo notes that the other Deliverables requirements, such as a Phase 3B/C review presentation and a Phase 4 proposal presentation, were given by Motivo to BGF. Id. at 10. Finally, Motivo argues post-testing documentation relating to contemplated redesigns and repairs of the Prototype are not a concession that the Deliverable requirements were not met, because the Phase 3B/C SOW explicitly contemplated the possibility of the need for physical modifications of the Prototype in subsequent phases: "physical modifications to the first production prototype build are not included in Phase 3 and if needed, may require additional budget and schedule." Id. at 9-10 (citation omitted).
In reply, BGF argues that Motivo's cited statements by BGF executives are "irrelevant as to whether the Prototype satisfied the applicable performance criteria," because "[qualitative opinions about the Prototype's performance do not meet [the] quantitative measure" set forth in the SOW. Reply at 3-4. Instead, BGF argues that Motivo's Phase 4 proposal indicating a need for functional redesigns "amounts to a concession that the Prototype did not satisfy the targets to which the parties agreed." Id. at 2-3.
The Court concludes that BGF is not entitled to summary judgment on this issue. First, it appears to be undisputed that Motivo properly delivered a Phase 3B/C review presentation and a Phase 4 proposal presentation, as required by the SOW Deliverables Section. As to the applicable performance criteria of the Prototype, the parties clearly raise a triable fact issue. Notably, neither party have proffered specific evidence that the Prototype did or did not satisfy the requirements of the Deliverables Section. Instead, the only available circumstantial evidence appears to be the positive perceptions and reactions expressed by BGF executives after the Phase 3 field demonstration, and the redesign and improvements to the Prototype outlined by Motivo for Phase 4 development. In light of this record, (1) whether the Protype outright met the Phase 3B/C specifications, (2) whether it did not but Motivo nonetheless substantially complied with the SOW; or (3) whether BGF excused any nonperformance, are all properly questions of fact. See, e.g., 8 Corbin on Contracts § 36.11 (2023).
BGF also argues that other metrics were not satisfied by Motivo. Mot. at 10-12. However, these metrics, as Motivo notes, are listed in the "Client Vision" Section of the SOW and not the Deliverables Section. As described above, the Client Vision Section explained that the "design objectives" outlined in this section "are subject to change and expected to evolve over the course of the project, but are provided here as a baseline reference." This Client Vision Section clearly uses aspirational language, in contrast to the mandatory language of the Deliverables Section. Moreover, for the reasons discussed above, the Court concludes that there are triable fact issues as to whether Motivo satisfied the Deliverables requirements.
2. BGF's Performance Under the Contract
BGF argues that Motivo cannot prove that BGF breached the parties' contract. BGF argues that (1) BGF did not accept a modification to the Phase 3B/C budget pursuant to Section 13 of the SOW; (2) BGF's promise to discuss the overspends in the future is uncertain and unenforceable; and (3) BGF explicitly declined to make an immediate commitment to Motivo. Mot. at 12. First, BGF argues that the more specific provision of the SOW's Section 13 supersedes the more general provision in the MSA as to whether BGF approved the overrun costs. Id. at 13-14. Because Motivo did not request a budget change pursuant to Section 13, and BGF did not approve one, BGF did not breach the contract by declining to pay the overrun costs. BGF argues that instead of expressly approving a request for a budget change, the facts in the record only show that BGF agreed to discuss the overrun costs. Id. at 14 ("Whether those discussions involved BGF paying for some of the overspend, or whether they involved securing an investor or commercialization partner to cover the overspend, or whether they involved something else, was entirely undecided and never the subject of any commitment by BGF.").
In opposition, Motivo argues that there are triable issues of fact as to whether BGF agreed to pay the overrun costs. Contrary to BGF's assertions, Motivo argues that nothing in Section 13 of the SOW prohibited BGF from approving the overrun costs in a manner consistent with Section l.a of the MSA. Opp. at 15. Instead, Motivo argues that BGF did precisely that: BGF agreed to design changes of the Prototype, Motivo informed BGF of the expected and incurred overrun, and BGF repeatedly directed Motivo to continue working on the Prototype. In support of this contention, Motivo cites to BGF's own RFA responses in which BGF admitted that it was informed in March of 2020 that the project was expected to cost $400,000 above the NTE, and that on April 1, 2020, BGF instructed Motivo to continue working on the project. Id. at 13. Additionally, Motivo cites to comments made by BGF executives directing Motivo to continue working, including BGF Chief Production Officer Kerwm Bradley's comment to "get [the Prototype] in the field, and then we'll talk about those amounts" around the same time he learned that the cost overrun exceeded $1 million. Id. at 13-14. Motivo additionally cites to deposition testimony by its executive Praveen Penmetsa, who had a phone call with BGF executive Gregg Halverson around April 3, 2020, in which Penmetsa stressed the costs Motivo was incurring and asked if BGF was committed to the project. Id. at 16. According to Motivo, the fact that BGF knew about the anticipated and incurred overrun and affirmatively instructed BGF to continue working past the NTE constituted an implied authorization in light of the MSA's provision stating that "direction to Motivo to perform additional work after the NTE has been reached" constitutes a "valid method[] of authorization."
In reply, BGF argues that Motivo mischaracterizes BGF's RFA responses and misinterprets BGF employee' communications to Motivo during 2020. Reply at 7. According to BGF, none of its employees' comments about being "committed" to the project or to "talk about the amounts" incurred by Motivo in excess of the NTE can be properly attributed as an express commitment to pay an unspecified overrun amount. Instead, BGF contends that "[a]sking Motivo to perform its side of a contract to completion is perfectly consistent with the FFP term of the Phase 3B/C SOW." Li at 8.
The Court finds that there are numerous triable fact issues as to whether BGF authorized and agreed to pay the overrun costs. First, as to the relevant contractual provisions, the Court concludes that properly construed, the provisions permit to implicitly authorize Motivo to incur costs above the NTE limit. As described above, Section l.a of the MSA describes "valid methods" of "express or implied authorization," which "include, but are not limited to, payment of invoices in excess of the NTE, direction to Motivo to perform additional work after the NTE has been reached, or authorization to execute work outside of the scope of the SOW." Section of the Phase 3B/C SOW, Section 13-"Budget and Schedule Assumptions"-provided that "[a]ny changes to the technical direction and assumptions may increase or decrease overall development cost," and "[i]n the event a request for budget change is not approved by Black Gold Farms, Phase 3 development effort will cease and payment will be required only up to and including the development milestone being pursued at that time." Dkt. 78-9 at 7. BGF emphasizes that these provisions are contradictory and that only Section 13 is applicable. However, nothing in Section 13 of the SOW prescribes the manner in which BGF may "approve[]" a request for budget change. In the absence of a specific contradiction, the MSA's terms apply generally to all project phases. Therefore, rather than being contradictory, the listed examples of express or implied authorization in MSA Section l.a illustrate how BGF could have "approved" the request for budget change. Furthermore, as described above, a parties' course of dealing and performance, as well as customs and practices within an industry, are questions of fact. In light of these two contractual provisions, the parties' course of dealing and performance, along with industry custom and practice, are material issues bearing on whether or not the Motivo and BGF's communications constituted a budget request that BGF approved.
More importantly, there are triable issues of fact as to what the parties' employees specifically represented to each other during their communications. For instance, the parties' briefing and the evidence proffered in the form of PowerPoint slides and emails refer to several telephone and m-person conversations by Motivo and BGF employees throughout Phase 3B/C. However, the parties do not specify the precise content of those conversations, which will need to be provided in the form of witness testimony and subject to typical factfinder evaluations such as credibility. Many of these conversations relate to when BGF learned about projected (and subsequently, incurred) cost overruns, as well as what BGF told Motivo in response to these costs, see, e.g., Dkt. 79-16; Dkt. 80-9.
As indicated above, the parties' dispute the significance of BGF's RFA responses. BGF admitted in its RFA response that in "March 2020, Steve Babin presented Kerwin Bradley and Kevin Bloom with a SLIDE DECK which showed MOTIVO expected expenses on the PROJECT to increase by $405,100." Dkt. 79-70. BGF also admitted that "on April 1, 2020, Kerwin Bradley had a phone call with Steve Babin where BGF asked MOTIVO to continue working on the PROJECT to show machine functionality." Id. According to BGF, these responses do not prove that it promised to pay for any overspend. For the reasons discussed above, these RFA responses relate to the triable issue of fact as to whether BGF's knowledge of the expected overrun and its direction to Motivo to continue working tends to establish that BGF implicitly authorized Motivo to exceed the NTE limit in light of the relevant contractual provisions and the parties' course of performance.
Ultimately, Motivo and BGF have two interpretations of the events. According to BGF, Motivo "grossly mismanaged the project" and simply seeks to "foist the costs of that mismanagement onto BGF" by pretending that its choice to work beyond the NTE limit during Phase 3B/C was reasonable. Reply at 13. According to Motivo. BGF repeatedly instructed Motivo to continue working after learning about the projected overrun in order to take advantage of Motivo, which would have had no contractual obligation to continue working on the project if BGF had outright refused to pay for the additional work. Opp. at 13-14.
Because a reasonable jury could find that BGF authorized the overrun, it is not entitled to summary judgment.
B. Fraud
"To state a cause of action for fraud, a plaintiff must allege '(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or "scienter"); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.'" Neilson v. Union Bank of California, N.A.. 290 F.Supp.2d 1101, 1140-41 (CD. Cal. 2003) (citing Engalla v. Permanente Medical Group. Inc., 15 Cal.4th 951, 9740997)); see Stretch Lab Franchise, LLC v. Stretch Lab, LLC, No. CV 18-7816-GW(SSX), 2019 WL 2279388, at *1 (CD. Cal. Mar. 4, 2019) (same elements for fraudulent inducement).
BGF argues that Motivo cannot establish the requirement elements for its fraud claim. Specifically, BGF argues that it cannot do so because: "(i) Motivo cannot prove the existence of any 'misrepresentation of fact' by BGF because BGF's promise to discuss the cost overspend in the future was not a promise to pay the full overspend; (ii) Motivo did not rely on BGF's promise because Motivo incurred almost the entire overspend before BGF made its promise of future discussions; (iii) Motivo's alleged reliance on BGF's promise of future discussions was not justified; and (iv) Motivo cannot tie its purported damages to anything BGF did because BGF complied with its promise to discuss the cost overspend after the field demonstration of the Prototype." Mot. at 16.
In opposition, Motivo argues that there are factual disputes as to all elements of its fraud claim. Similar to the arguments made with respect to the breach of contract claim. Motivo argues a reasonable jury could conclude that BGF made a false promise to pay the overrun costs during its communications with Motivo in Phase 3B/C. Opp. at 18. Additionally, Motivo argues that even if BGF only promised to "discuss" the costs, because BGF never had the intention of paying beyond the fixed price of the Phase 3B/C SOW, that promise was made in bad faith and false at the time it was made. Id. at 18-19. Finally- Motivo argues that it reasonably relied on BGF's instruction to keep working, particularly in light of the MSA's provision that "direction to Motivo to perform additional work after the NTE has been reached" constituted a "valid method" for BGF to authorize and approve cost overruns. Id. at 19-20.
In reply, BGF emphasizes that "the only promise[] BGF made was to discuss the issue of the cost overspend after Motivo produced a working Prototype" and that a "promise to discuss the overspend is not a promise to pay Motivo's entire overspend." Reply at 8 (emphasis in original). BGF argues that the "disconnect between and among what BGF actually promised, the harm that Motivo is claiming and the reasonableness of Motivo's reliance, are why Motivo's promissory fraud claim lacks merit." Id
Because the Court concludes above that there are triable issues of fact as to whether BGF made statements authorizing Motivo to incur overrun costs, these fact issues similarly preclude summary judgment on plaintiffs fraud claim. Indeed, "[f]raud claims normally are so larded with fact issues (including issues as to intent) that summary judgment is seldom possible." Garter-Bare Co. v. Munsingwear. Inc.. 650 F.2d 975, 981 (9th Cir. 1980); see Alliance Mortgage. 10 Cal.4th at 1239 ("Except in the rare case where the undisputed facts leave no room for a reasonable difference of opinion, the question of whether a plaintiffs reliance is reasonable is a question of fact.").
C. Economic Loss Rule
"Under the economic loss rule, [a] person may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations." Expedited Packages. LLC v. Beavex Inc.. No. 15-cv-00721-MMM-AGRx, 2015 WL 13357436, at *2 (CD. Cal. Sept. 10, 2015) (internal quotation marks and citation omitted). "[C]ourts will generally enforce the breach of a contractual promise through contract law, except when the actions that constitute the breach violate a social policy that merits the imposition of tort remedies," such as the tortious breach of a contract. Erlich v. Menzes. 21 Cal. 4th 543, 552 (1999) (internal quotation marks and citation omitted). Fhe California Supreme Court has enumerated several exceptions to the economic loss rule permitting a plaintiff to bring a tort claim, the relevant exceptions here being "where the contract was fraudulent induced," as well as a defendant's "affirmative misrepresentations on which a plaintiff relies and which expose a plaintiff to liability for personal damages independent of the plaintiffs economic loss." Robinson Helicopter Co. v. Dana Corp., 34 Cal.4th 979, 989-990, 993 (2004).
Having argued in its prior motion to dismiss that the economic loss rule bars plaintiffs fraud claim, BGF now contends that the "time for decision is ripe." Mot. at 20. BGF reiterates the points made in its motion to dismiss, specifically that there is no applicable exception to the economic loss rule here, because Motivo's entire theory of its case is premised on BGF being bound by the existing contract terms. Id. Additionally, BGF argues that "all of Motivo's damages for the purported fraud overlap entirely with Motivo's purported contractual damages," which is likewise barred by the economic loss rule. 143120-21.
In opposition, Motivo similarly reiterates its same arguments that its fraud claim should not be dismissed at this phase. In particular, Motivo emphasizes that if BGF's alleged promises do not implicate appropriate contractual interpretations of the MSA and SOW, then the promissory fraud claim would not implicate the economic loss rule in the first place. Opp. at 20-21 (citing Singelyn v. PNC Bank Nat'l Ass'n, No. EDCV 22-02026-CJC (SPx), 2023 U.S. Dist. LEXIS 97674, at *8-9 (CD. Cal. June 1, 2023)).
Previously, this Court concluded in its March 28, 2023 Order that "it is premature to adjudicate" the economic loss rule, and that the economic loss rule along with plaintiffs fraud claim generally might be "better evaluated with the benefit of a complete factual record." See Dkt. 71. Because the Court finds that there are still many factual disputes at this juncture, the Court similarly concludes that the economic loss rule may be better decided on a Rule 50 motion following trial when the Court has heard all of the evidence. See, e.g.. Icon Desert Logistics v. City of Blythe Police Dep't. No. 520CV02225CASJCX, 2022 WL 1155359, at *9 (CD. Cal. Apr. 18, 2022), reconsideration denied 2022 WL 3013059 (CD. Cal. May 4, 2022).
D. Quantum Meruit Claim
Similar to its recent motion to dismiss, BGF argues that Motivo's quantum meruit claim must be dismissed because the parties have a valid and enforceable agreement and Motivo cannot recover for unjust enrichment on this basis. Mot. at 21-22. In opposition, Motivo argues that alternative pleading of contract and quantum meruit claims has been allowed in federal court even in the context of summary judgment. Opp. at 24.
In light of the questions of fact relating to the breach of contract claim discussed above, the Court agrees with plaintiff that it is entitled to plead its quantum meruit claim in the alternative. See Weinstein v. Katapult Grp., Inc., No. 21-cv-05175-PJH, 2022 U.S. Dist. LEXIS 8076, at *11 (N.D. Cal. Jan. 14, 2022) (concluding that a party may allege breach of contract and quantum meruit claims in the alternative because "parties are plainly permitted to plead in the alternative" pursuant to Federal Rule of Civil Procedure 8(d)(2)); NextWave Marine Sys. v. M/V Nelida, 488 F.Supp.3d 1004, 1015 (D. Or. 2020) ("alternative pleading is not only unremarkable but also plainly contemplated by the law. Summary judgment on Plaintiffs claims in quantum meruit is denied.").
Accordingly, the Court denies BGF's motion for summary judgment as to Motivo's quantum meruit claim.
V. CONCLUSION
In accordance with the foregoing, the Court DENIES defendant's motion for summary judgment without prejudice to defendant bringing a subsequent Rule 50 motion for judgment as a matter of law.
IT IS SO ORDERED.