Opinion
No. CIV 05-1519-PHX RCB.
March 23, 2006
ORDER
On October 12, 2005, Defendant Océ-Technologies B.V. ("Océ") filed a motion for summary judgment in this matter. Motion (doc. 19). Plaintiff PageMasters, Inc. ("PageMasters") entered their response to Océ's summary judgment motion on December 7, 2005. Resp. (doc. 27). In addition, PageMasters filed a cross-motion for summary judgment. Cross-Motion (doc. 27). These motions were fully briefed on February 7, 2006, and this Court, having reviewed the record in this case, now rules. P. Reply (doc. 31).
In its motion for summary judgement, Océ requested oral argument on this matter. Motion (doc. 19). Finding oral argument unnecessary, the Court shall deny this request.
On February 22, 2006, Océ filed a motion requesting leave to file a surreply in this matter. Mot. for Leave (doc. 32). Specifically, Océ asserts that a surreply is necessary, because, in its reply in support of its cross-motion for summary judgment, PageMasters "misstates certain facts and introduces a new argument for the first time[.]" Id. at 2. PageMasters opposes Océ's motion and asks the Court to deny Océ's request for leave to file a surreply. Resp. Surreply (doc. 33).
The Court sees no reason to extend briefing beyond that contemplated in the federal rules and local rules governing civil procedure. Any arguments initially raised in a reply shall not be considered. Thus, no further briefing is necessary or permitted and Océ's motion for leave to file a surreply shall be denied.
I. Undisputed Facts
On January 10, 1997, Océ and PageMasters entered into a Software OEM Distribution Agreement ("Distribution Agreement"). PSOF (doc. 26) at ¶ 1. This agreement granted Océ the exclusive right to reproduce, market and distribute the "Apprentice" software product. Id. at ¶¶ 2, 3. In return, Océ agreed to pay PageMasters royalties for each copy of "Apprentice" that it shipped and grant PageMasters the right to inspect and audit Océ's shipping records. Id. at ¶¶ 4, 5.
Three years after the Distribution Agreement, PageMasters entered into an Asset Purchase Agreement with Buzzsaw.com, Inc. ("Buzzsaw"). Id. at ¶ 9. In this agreement, PageMasters sold substantially all of its assets to Buzzsaw, including the Distribution Agreement. Id. at ¶¶ 9-11. Although Océ was not a party to the Asset Purchase Agreement, it did grant its consent to the assignment, as was required under the Distribution Agreement. Id. at ¶ 9.
The Court notes that since the closing of the Asset Purchase Agreement, Buzzsaw merged with Autodesk, Inc.
Sometime after the finalization of the Asset Purchase Agreement, PageMasters requested an audit of Océ's records believing that Océ owed them outstanding royalty payments. PSOF (doc. 26) at ¶ 26. PageMasters claimed that they discovered a discrepancy between the number of systems it supplied to Océ and the number of systems for which they received payment. Id. at ¶ 25. While Océ agreed to a limited audit by PageMasters, a dispute arose concerning the scope of the review. Id. at ¶ 30.
After extensive discussion between the parties concerning Océ's licensing records and PageMasters' rights to such information, PageMasters commenced an arbitration proceeding against Océ. Id. at ¶ 44. In response, Océ filed in this court a complaint and a motion for a preliminary injunction and stay of arbitration. Océ-Technologies B.V. v. PageMasters, Inc., No. CIV 04-0557 PHX RCB, Complt. Motion (docs. 1, 3). Thereafter, the parties entered into a stipulation proposing that the Court decide this matter on a motion for summary judgment. Océ-Technologies B.V. v. PageMasters, Inc., No. CIV 04-0557 PHX RCB, Order (doc. 18).
On October 25, 2004, the Court found in favor of Océ and granted its motion for summary judgment. Order, No. CIV 04-0557 PHX RCB (doc. 35). Specifically, the Court determined that, through the Asset Purchase Agreement, PageMasters assigned all of its rights under the Distribution Agreement, including its right to arbitration, to Buzzsaw. Id. However, the Court did not rule upon whether PageMasters retained the right to audit Océ, because "[t]he issue of PageMasters' right to audit [was] not currently before this Court." Id. at 5, n. 4.
In its current motion for summary judgement, Océ focuses much of its argument around language the Court used in its prior order regarding PageMasters' asserted right to audit. Motion (doc. 19) at 6. However, as stated in that same order, the Court did not consider the issue of PageMasters' right to audit and expressly noted that the scope of the dispute at that time was limited to the question of PageMasters' right to arbitration. Océ-Technologies B.V. v. PageMasters, Inc., No. CIV 04-0557 PHX RCB, Order (doc. 35) at 5, n. 4.
Thus, on November 1, 2004, PageMasters filed the present action in the Superior Court of Arizona, seeking a declaratory judgment holding that PageMasters is entitled to audit Océ's books and records, and that Océ is required to cooperate with the audit. Resp. Cross-Motion (doc. 27) at 2. PageMasters also requests a judgment for the amount of accounts receivable due and owed by Océ to PageMasters, any accrued interest on such amount, and its attorneys' fees and costs. Id. On May 23, 2005, Océ removed the action to the United States District Court in the District of Arizona. Notice (doc. 1). This action is based on the same contracts that were at issue in the prior case that was before this court. Motion (doc. 19) at 1.
II. Summary Judgment Standard
To grant summary judgment, the Court must determine that the record before it contains "no genuine issue as to any material fact" and, thus, "that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In determining whether to grant summary judgment, the Court will view the facts and inferences from these facts in the light most favorable to the nonmoving party. See Matsushita Elec. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be nogenuine issue of material fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). A material fact is any factual dispute that might affect the outcome of the case under the governing substantive law. Id. at 248. A factual dispute is genuine if the evidence is such that a reasonable jury could resolve the dispute in favor of the nonmoving party. Id.
A party opposing a motion for summary judgment cannot rest upon mere allegations or denials in the pleadings or papers, but instead must set forth specific facts demonstrating a genuine issue for trial. See Id. at 250. Finally, if the nonmoving party's evidence is merely colorable or is not significantly probative, a court may grant summary judgment. See, e.g., California Architectural Build. Prods., Inc. v. Franciscan Ceramics, 818 F.2d 1466, 1468 (9th Cir. 1987).
III. Analysis
In determining whether summary judgment is appropriate in this case, the main issue that must be analyzed is whether there exists a contractual agreement between Océ and PageMasters that grants PageMasters the right to audit and collect royalties from Océ. The parties do not dispute the fact that they entered into the Distribution Agreement according to the previously described terms. In addition, the parties both concede that PageMasters entered into the Asset Purchase Agreement that assigned essentially all of PageMasters' assets, including the Distribution Agreement, to Buzzsaw. The issue the parties dispute is whether PageMasters, in the Asset Purchase Agreement, reserved a right to audit Océ or assigned such a right away to Buzzsaw. Océ asserts that summary judgment should be granted in its favor because, under the Asset Purchase Agreement, PageMasters lacks standing to bring its claims and, in any event, its claims are time barred. Motion (doc. 19) at 4-11.
a. Contract Language of the Asset Purchase Agreement
Océ asserts that summary judgment should be granted in its favor, because PageMasters lacks standing to pursue this action. Motion (doc. 19) at 4. Noting this Court's orders from the prior case and the contract language included in the Asset Purchase Agreement, Océ argues that "PageMasters transferred all of its rights under the Distribution Agreement to Buzzsaw, . . . [and, thus,] lacks standing to proceed with an action against Océ under the Distribution Agreement to conduct an audit and to recover damages[.]" Id. at 5.
In the case at bar, the Asset Purchase Agreement is governed by California law. Exbt. 2 (doc. 20) at § 8.16. Consequently, it must be analyzed under California law to determine how PageMasters' transfer of the Distribution Agreement affected their right to audit or collect royalties from Océ.
Under California law, a court must use the language of a contract to govern its interpretation as long as the language is "clear and explicit." CAL. CIV. CODE, § 1638 (2006). When interpreting the meaning of contract language, a court must enforce "the outward expression of the agreement, rather than a party's unexpressed intention[.]" Winet v. Price, 6 Cal.Rptr.2d 554, 558 (4th Dist. 1992).
Specifically pertaining to assignments, California law holds that an assignor "may not maintain an action upon a claim after making an absolute assignment of it to another." McCown v. Spencer, 8 Cal.App.3d 216, 225 (2nd Dist. 1970). What constitutes an "absolute assignment" was further defined inBotsford v. Haskins Sells, 146 Cal.Rptr. 752 (1st Dist. 1978). In Botsford, the court reviewed an agreement where a trustor assigned "all of its right, title and interest" in certain assets to a trustee. Id. at 783. The court held that such contractual language, without a listed remainder or reservation, indicates an absolute assignment. Id. Therefore, all of the assignor's rights and interests, including causes of actions and rights to sue, were relinquished to the assignee.Id. at 783-84.
Here, the text of the Asset Purchase Agreement states at least three times that PageMasters intended to assign "all" agreements, rights and obligations created under the Distribution Agreement to Buzzsaw. Exbt. 2 (doc. 20) at §§ 1.1 and 5.16. PageMasters argues that despite their use of such all-inclusive language, they retained their right to audit and collect royalties from Océ. After a thorough reading of the contract language, this Court does not agree that PageMasters reserved such rights in the Asset Purchase Agreement.
As stated in the Court's October 25, 2004 Order in the prior related case, the language of the Asset Purchase Agreement "clearly and unequivocally assign[ed] to Buzzsaw all rights and responsibilities created by the Distribution Agreement." Océ-Technologies B.V. v. PageMasters, Inc., No. CIV 04-0557 PHX RCB, Order (doc. 35) at 7. The parties do not dispute that this included Section 5.6 of the Distribution Agreement, which originally granted PageMasters the right to inspect and audit Océ's records. See Exbt. 1 (doc. 20) at 6. However, PageMasters asserts that the critical language relating to its reserved ability to audit Océ and collect royalties due to it prior to the "Closing" is contained within Section 5.16 of the Asset Purchase Agreement. Exbt. 2 (doc. 20) at § 5.16.
The "Closing" is defined in the agreement as "no later than 10:00am Pacific Standard Time on March 31, 2000 . . . or date as may be agreed upon by the parties." Exbt. 2 (doc. 20) at § 6.1.
Buyer [Buzzsaw] will provide reasonable assistance to [PageMasters] to assist [PageMasters] in conducting a single audit of Océ's financial records (as permitted under the [Distribution] Agreement) to verify amounts due and paid by Océ to [PageMasters] prior to the Closing, and will pay [PageMasters] the Net Revenues actually recovered pursuant to such audit.Id. As the Court found in its prior order,
. . . the Asset Purchase Agreement bestows upon Buzzsaw "all right, title, and interest" and "all responsibilities" pertaining to the Distribution Agreement. Such all-inclusive language, without any indication to the contrary, would logically include the arbitration rights established in the Distribution Agreement's arbitration clause.
Océ-Technologies B.V. v. PageMasters, Inc., No. CIV 04-0557 PHX RCB, Order (doc. 35) at 7-8. The same analysis applies here in relation to PageMasters' alleged right to audit and collect royalties from Océ.
Section 5.16 of the Asset Purchase Agreement bestows upon Buzzsaw "all responsibilities" pertaining to the Distribution Agreement. Although Section 5.16 allows for a "single" audit of Océ's financial records to verify amounts due and paid by Océ to PageMasters prior to the Closing, the contract does not state that PageMasters retained the right to independently pursue such an audit. Instead, the contract language specifically declares that Buzzsaw will provide reasonable assistance to PageMasters to assist PageMasters in conducting the audit, and that Buzzsaw will pay PageMasters the "Net Revenues" actually recovered pursuant to the audit. Thus, the plain language of the contract indicates that the parties intended to transfer to Buzzsaw all rights and responsibilities pertaining to the Distribution Agreement, including the right to conduct the "single" audit to collect any remaining royalty payments due to PageMasters. The "single" audit clause contained within Section 5.16 is merely an agreement between PageMasters and Buzzsaw that requires Buzzsaw to allow and assist such an audit, and deliver to PageMasters any royalties it discovers through such an audit. Even PageMasters admits that "[t]hese same obligations were reinforced in Schedule G to the Asset Purchase Agreement, and required Buzzsaw to bill and collect said accounts receivable from Océ and remit payment to PageMasters." Resp. Cross-Motion (doc. 27) at 18. The fact that the contractual definition of "Net Revenues" allows Buzzsaw to deliver to PageMasters the gross amounts actually received from the audit, minus the costs incurred from conducting the audits, further indicates that the parties contemplated that only Buzzsaw would have the right to conduct the audit of Océ. An independent right to audit Océ was not expressly retained for PageMasters within the contract.
"`Net Revenues' shall mean gross amounts actually received, less commissions, trade discounts, costs of goods sold . . . services provided, taxes, and costs of conducting audits." Exbt. 2 (doc. 20) at § 5.16.
Moreover, as the Court noted in the prior related action, additional language in the Asset Purchase Agreement indicates that PageMasters and Buzzsaw actively excluded certain assets from their agreement. However, the parties failed to explicitly reserve a right for PageMasters to audit or collect royalties under the Distribution Agreement. Schedule 1.2 of the Asset Purchase Agreement lists assets the parties intended to exclude from the contract, but makes no mention of a right to audit or collect royalties under the Distribution Agreement. Exbt. 2 (doc. 20). The face of the contract indicates that the parties contemplated limitations to their agreement and chose not to designate a retention of PageMasters' audit rights. Accordingly, this Court finds that under the language of the Asset Purchase Agreement, PageMasters did not retain a right to independently audit or collect royalties from Océ. Having reached such a conclusion, a further analysis of whether PageMasters' claims are time barred is unnecessary.
b. PageMasters as a Third-Party Beneficiary to the Distribution Agreement
Just as it did in the prior related action, PageMasters encourages the Court to consider it a third-party beneficiary to the Distribution Agreement held between Buzzsaw and Océ. However, the Court, in its prior order, already determined that PageMasters is not an intended third-party beneficiary to the Distribution Agreement. See Océ-Technologies B.V. v. PageMasters, Inc., No. CIV 04-0557 PHX RCB, Order (doc. 35) at 10-12. In the instant case, the facts and analysis of this argument have not changed. Thus, the Court shall repeat its prior conclusion that PageMasters is not an intended third-party beneficiary to the Distribution Agreement and receives no rights accorded under such a designation.
c. PageMasters Request to Join Buzzsaw to the Arbitration
In its Response and Cross-Motion, PageMasters states that if the Court finds that the provisions of the Asset Purchase Agreement required Buzzsaw to affirmatively pursue PageMasters' claims, it requests leave of the Court to join Buzzsaw, now Autodesk, as an indispensable party. Resp. Cross-motion (doc. 27) at 20. Standing, however, is a constitutional requirement that is to be assessed under the facts existing when the complaint is filed. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 569 n. 4 (1992). Rule 19 of the Federal Rules of Civil Procedure is intended to protect the interests of absent parties. See Carroll v. Nakatani, 342 F.3d 934, 945 (9th Cir. 2003). "If an action is no longer pendent due to plaintiff's deficient standing, the absent party's interest is not at stake."Id. Accordingly, the Court shall deny PageMasters' request for leave to join Buzzsaw in this action in order to cure PageMasters' lack of standing.
"A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in the person's absence complete relief cannot be accorded among those already parties, or (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may (i) as a practical matter impair or impede the person's ability to protect that interest or (ii) leave any of the persons already parties subject to substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of the claimed interest." Fed.R.Civ.P. 19.
Therefore,
IT IS ORDERED that Océ's motion for leave to file a surreply (doc. 32) is DENIED.
IT IS FURTHER ORDERED that PageMasters' motion for summary judgment (doc. 27) is DENIED.
IT IS FINALLY ORDERED that Océ's motion for summary judgment (doc. 19) is GRANTED. The court clerk is directed to enter JUDGMENT for Defendant and terminate this case.