Geraldine Mund, United States Bankruptcy Judge.
Defendants SunCal Management, LLC ("SCM") and Argent Management, Inc. ("Argent" and, with SCM, the "Defendants") brought a motion for summary judgment (dkt. 311; the "MSJ") on the first claim for relief (Breach of Contract) and the second claim for relief (Unjust
On August 2, 2017, the Court entered an order (dkt. 343; the "Order") and a memorandum of decision (dkt. 342; the "Memorandum of Decision" or "Memorandum"), which granted the MSJ on the first claim for relief (Breach of Contract) and continued the hearing on the MSJ to give the parties additional time to present evidence on an issue relevant to the second claim for relief (Unjust Enrichment/Restitution): whether SCM's damages arising from the Debtor/Trustee's breach of contract exceeded payments by the Debtor to SCM.
The Memorandum provided in relevant part:
Lewis Jorge Const. Mgmt., Inc. v. Pomona Unified Sch. Dist., 34 Cal.4th 960, 967-68, 22 Cal.Rptr.3d 340, 102 P.3d 257 (2004); see also Cal. Civ. Code § 3300. For SCM to be put in as good a position as performance, the Court expects that SCM would need to receive (i) its expected net profits under the DMA (the total expected Management Fees less remaining expected, non-reimbursable costs of performance) and (ii) all incurred, reimbursable costs. The Court would consider different measurements of SCM's damages that are supported by relevant fact and applicable law.
The Defendants filed a supplemental statement on this issue (dkt. 347; the "Supplemental Statement"), the Trustee filed a supplemental opposition (dkt. 348; the "Supplemental Opposition"), and the Defendants filed a reply to the Supplemental Opposition (dkt. 354; the "Supplemental Reply"). On November 14, 2017, the Court held a hearing on this issue.
In a motion for summary judgment, the defendant need not present any evidence on issues on which the plaintiff bears the burden of proof. The defendant may show the absence of a genuine issue of fact by pointing out the absence of evidence supporting the Plaintiff's claim.
The burden of proof is on the plaintiff to establish unjust enrichment and thus entitlement to restitution. Thus, it is a matter of black letter law that the defaulting party/plaintiff bears the burden of proving that the benefit conferred on the defendant exceeded the defendant's damages from the plaintiff's breach. If net enrichment of the defendant cannot be established, the plaintiff has not established unjust enrichment and is not entitled to
While the Debtor did pay $4 million in management fees and $3 million in expense reimbursements to SCM, there is no evidence that these amounts exceed SCM's costs and damages. To receive the $4 million in management fees, SCM had to perform its development management duties under the DMA; SCM has established that it performed an extraordinary amount of work developing the Project and incurred substantial (and non-reimbursed) costs. The Debtor has not shown that the $4 million in payments exceeded SCM's costs of performance. The $3 million in expense reimbursement was on account of $3 million in costs that SCM had incurred, thus there was no net benefit to SCM.
Under the DMA, SCM expected to be paid an additional $17 million if the Project were fully developed. As of May 2008, the agreed Project Budget reflected anticipated gross sales revenue of $522 million, with anticipated management fees (at 4% of gross sales) of $21 million. SCM has received only $4 million of this $21 million.
If the Debtor terminated the DMA, SCM was entitled to receive 90% of the management fee that would otherwise have been payable under the DMA. 90% of $21 million is $19 million. Again, the Debtor has received only $4 million of this $19, leaving $15 million of SCM's liquidated damages under the DMA unpaid.
It is impossible to establish exactly the cost to SCM to complete its performance under the DMA. However, the fee and cost reimbursement in the DMA were intended to comply with industry standards. The expectation was that the management fees would cover SCM's costs and provide a modest profit margin of 10-15%. It was also anticipated that the periodic payments to SCM would not cover all of the costs it had incurred; SCM would suffer a net loss under the DMA until the end of the Project when the lots were sold and SCM received the other half of its management fee.
SCM has also incurred legal expenses due to the Debtor's breach. The DMA provides for the recovery of such fees by the prevailing party in any litigation of the enforcement or interpretation of the DMA. DMA § 9.6. As this Court has adjudicated the Trustee's breach of contract claim in favor of SCM, SCM is entitled to reimbursement of attorney's fees.
The Trustee has presented no evidence that SCM (i) received a net benefit and (ii) is not being penalized and will not be left with a "net loss." From the Trustee's own deposition and responses to written discovery requests, it is clear that (i) the Trustee has no evidence that the benefit to SCM exceeds the injury to SCM caused by the Debtor's breach and (ii) the Trustee does not even know the scope of services provide by SCM, let alone the cost of such services.
In calculating SCM's damages from the Debtor's breach, SCM's prospective profits should not be reduced by fixed expenses that neither increased nor decreased as a result of nonperformance of the contract.
By arguing that the Court "inadvertently reserved the burden of proof" (in asking the Defendants to submit evidence that their damages from the Debtor's breach of contract exceeded the benefit conferred upon SCM by the Debtor), the Trustee is making a thinly disguised motion for reconsideration.
The Defendants have not presented any evidence of the amount of damages SCM allegedly incurred as a result of the Debtor's alleged breach of the DMA. In fact, they claim that it is impossible to establish what it would have cost SCM to perform the work required to complete the Project. If true, this means it would be impossible for SCM to establish its lost profits.
DMA § 6.2., which sets forth the termination fees that SCM would have been entitled to had the Debtor terminated SCM without cause, is inapplicable where the Debtor allegedly defaulted. Furthermore, this fee is contingent on SCM's performance of its obligations under § 6.4 of the DMA. The DMA's attorney's fees provision applies by its terms only to actions in contract and is inapplicable in an action in quasi-contract. Furthermore, the Defendants fail to (i) explain how the attorneys' fees were proximately caused by the Debtor's breach or (ii) set forth the amount of these attorneys' fees.
Bruce Elieff's testimony — based on a May 2008 budget — that SCM expected to be paid an additional $17 million in gross management fees and hoped to achieve a 10-15% profit margin is speculation. It is accordingly not admissible as expert opinion testimony under Federal Rule of Evidence 702 because it lacks a reliable basis. Furthermore, the parties have not identified experts, exchanged expert reports, or conducted expert discovery, so use of expert testimony is premature.
Elieff's opinion is not admissible as lay opinion testimony because he relied on specialized knowledge and industry standards rather than being "rationally based on the witness's perception." Fed. R. Evid. 701. While the Advisory Committee Note to the 2000 amendments to Rule 701 does state that "most courts have permitted the owner or officer of a business to testify as to the value or projected profits of the business without the necessity of qualifying the witness as an accountant, appraiser, or similar expert," this has been limited to where the owner had sufficient personal knowledge to so testify or the valuations were based on "straightforward, common sense calculations." James River Ins. Co. v. Rapid Funding, LLC, 648 F.3d 1134 (10th Cir. 2011). Elieff's opinion was based on the May 2008 budget, which was derived from a Lehman-approved cash flow that was based on a variety of factors, including "costs and scheduling," "the market and timing going to market," and "market reports." It "also included the anticipated gross and net revenue expected to be derived from placing the Project in a fully built-out condition based on the expenditures of all expenses in the cash flow." This is hardly the "straightforward, common sense" calculation contemplated
Danielle Harrison's conclusion — again based on the May 2008 budget — that SCM would be paid $21 million in management fees is also speculation. Furthermore, evidence of expected gross revenues alone provides no evidence of lost profits.
Both Elieff and Harrison's testimony are not admissible as lay testimony because they are based on inadmissible hearsay: the May 2008 budget. Furthermore, the Defendants' initial disclosures under Fed. R. Civ. P. 26 did not indicate that Elieff or Harrison would testify regarding SCM's alleged profits or damages. The Defendants are accordingly unable to use these witnesses to supply this information. Fed. R. Civ. P. 37(c).
The Defendants have met their burden of proof as movants both by presenting extensive evidence and showing the Trustee's lack of evidence on this issue. "Showing" the Trustee's lack of evidence does not require an evidentiary showing, but merely argument pointing out the Trustee's lack of evidence. Under Ninth Circuit law, either would be sufficient to shift the burden to the plaintiff Trustee.
SCM has presented evidence that $21 million in management fees were expected to be paid to SCM upon completion of the DMA and that SCM anticipated a 10-15% profit margin on these fees. It also presented evidence that the interim payments to SCM under the DMA did not provide SCM with a net benefit, as SCM did not expect the DMA to be profitable until the Project was completed and sold. At the time the parties stopped performing, SCM was suffering a net loss under the DMA.
The Trustee has presented no affirmative evidence that SCM has received an unjust enrichment from the Debtor under the DMA.
Thus, the burden is now on the Trustee to establish this element of his unjust enrichment claim. The Trustee should bear the risk of all difficulties of proof. Presenting no evidence, the Trustee has failed to create a genuine issue of material fact that SCM received a net enrichment under the DMA.
California law allows a breaching party — under a theory of unjust enrichment — to recover benefits conferred on the non-breaching party minus damages to the non-breaching party. However, the innocent party (SCM) is entitled to no less than the contract price and the breaching party should recover no more than the contract price. Here, if money is returned to the Trustee, the Debtor will have paid less than it is contractually obligated to pay and would be unjustly enriched.
Mr. Elieff's testimony is factual — rather than expert — in nature: identifying product costs and partial payments received. Numerous courts have recognized a business owner's ability to testify about his business's costs and profit margins. His testimony is also plainly supported by an adequate foundation: he was owner and manager of SCM and had personal knowledge of SCM's business operations and profits and costs.
SCM's additional damages in lost profits can be measured by the termination provision in the DMA, which gave SCM 90% of the management fees that would have been payable if SCM had not been terminated. The Debtor's breach is effectively a
The Trustee's evidentiary objections to the Project Budget are inapplicable to this analysis, because the Project Budgets were part of the parties' contract and are used to establish the parties' agreement as to the damages that SCM was entitled to. Authenticated contracts are admissible as evidence. The historical projection of sales revenues was used to calculate the agreed upon monthly payment of management fees to SCM. Thus, the May 2008 Budget and the DMA taken together are an admission by the Debtor of SCM's damages.
Mr. Elieff and Ms. Harrison's testimony are admissible under Fed. R. Evid. 701. Numerous courts have recognized a business owner's ability to testify about his businesses costs and profit margins. The same holds true for employees, such as Ms. Harrison. Lost profits in particular can be testified to by lay witnesses. Their testimony is supported by an adequate foundation showing their personal knowledge.
Both Elieff and Harrison — and their potential testimony — were properly disclosed to the Trustee.
The Trustee is seeking the restitution of approximately $4 million in management fees and $3 million in expense reimbursement paid by the Debtor to SCM. As discussed in the Memorandum quoted above, under California law the Trustee is entitled to restitution only to the extent that this $7 million exceeds SCM's damages arising from the Debtor's breach of the DMA.
There is no question that the Trustee would have the burden of proof on this issue at trial.
Bird v. Kenworthy, 43 Cal.2d 656, 659, 277 P.2d 1 (1954); see also, e.g., Harriman v. Tetik, 56 Cal.2d 805, 811, 17 Cal.Rptr. 134, 366 P.2d 486 (1961) (a willfully defaulting party may recover consideration paid to the extent he could show it exceeded damages to other party); Grill v. Hunt, 6 Cal.App.4th 73, 78-79, 7 Cal.Rptr.2d 768 (Cal. Ct. App. 1992)("The rule in California seems clear that following rescission of a contract, the burden of proving entitlement to restitution or offset is on the defaulting party.")
However, the Defendants carry an initial burden of production in their MSJ, as the Ninth Circuit has explained:
Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102-03 (9th Cir. 2000).
Thus, to be granted summary judgment on this unjust enrichment claim, the Defendants must first meet their burden of production by either (i) producing evidence that the payments to SCM did not exceed SCM's damages arising from the Debtor's breach of contract or (ii) showing that the Trustee does not have enough evidence on this issue to carry the Trustee's ultimate burden of persuasion.
It is black letter law that damages for breach of contract are measured as expectation: what is required to put the non-breaching party in the same place as performance of the contract would have.
22 Am. Jur. 2d Damages § 53. The DMA called for SCM to receive Management Fees equaling 4% of the gross sales revenues of the Project and reimbursement for all reimbursable expenses. DMA § 5.1, § 5.3. On the other hand, to fully perform the DMA, SCM would have incurred expenses, both reimbursable and not-reimbursable. DMA § 5.2, § 5.3.
The reimbursable expenses incurred by SCM and the expense reimbursements payable by the Debtor to SCM exactly offset one other. The expense reimbursement payments were made to SCM on account of expenses SCM paid in developing the Project. See Exhibit 33 to Supplemental Declaration of Tom Rollins filed in
Accordingly, after the DMA had been fully performed, SCM would have been expected to receive — on a net basis — its management fees (4% of gross sales revenues) less its non-reimbursable costs of performance, i.e., its profits from the DMA. To get SCM to this place from where SCM stands today, SCM's contractual damages would need to include both expected profits and unreimbursed expenses already incurred (both non-reimbursable expenses and reimbursable expenses that had not yet been reimbursed) by SCM in performing the DMA. It should also be noted that either expected net profits or unreimbursed costs in excess of $4 million would be sufficient to deny SCM's claim for unjust enrichment.
SCM has submitted evidence that it performed massive amounts of work developing the Project between 2006 and 2008. Bruce Elieff — SCM's owner and Manager — has testified that the unreimbursed costs and expenses associated with providing project management services on the Project exceeded the $4 million payments of Management Fees, such that SCM suffered a "net loss" on the Project.
The Trustee argues that SCM's "net loss" on the DMA is unsupported by admissible evidence: Mr. Elieff lacks personal knowledge of SCM's net profits (or losses) under the DMA, his testimony relies on hearsay, and he cannot offer admissible expert testimony or lay testimony. For this last point, the Trustee argues that Mr. Elieff was not qualified as an expert witness, he was not included in expert witness disclosure, and his reliance on specialized knowledge and industry standards precludes his giving lay opinion testimony. The Trustee also argues that the Defendants did not disclose — as required by Fed. R. Civ. P. 26 — that Mr. Elieff would be testifying regarding lost profits or damages.
The Trustee's arguments are not well taken.
Mr. Elieff's declaration does lay a proper foundation demonstrating Mr. Elieff's personal knowledge about SCM's revenues and profitability. He states that he "personally monitored, participated in and oversaw others who also participated in each facet of SCM's business and the day-to-day activities performed by SCM as development
His testimony is lay opinion testimony admissible under Fed. R. Evid. 701. While the Trustee argues that Mr. Elieff's testimony is based on "scientific, technical, or other specialized knowledge within the scope of Rule 702 [governing expert witness testimony] and thus is barred by the express language of Rule 701, the comments to Rule 701 state:
Comments to 2000 Amendments to Fed. R. Evid. 701.
In this case, the DMA's profitability for SCM is the type of "particularized knowledge that the witness [Mr. Elieff] has by virtue of his ... position in the business [SCM's owner and Manager]." See Securitron Magnalock Corp. v. Schnabolk, 65 F.3d 256, 265 (2d Cir. 1995)("a president of a company, such as Cook, has "personal knowledge of his business ... sufficient to make ... [him] eligible under Rule 701 to testify as to how lost profits could be calculated"), cert. denied., 516 U.S. 1114, 116 S.Ct. 916, 133 L.Ed.2d 846 (1996); State Office Sys. v. Olivetti Corp., 762 F.2d 843, 846 (10th Cir. 1985)("given Mr. Springer's position as president and treasurer of the company, his lengthy experience in marketing and selling Olivetti computers in Kansas, and his personal knowledge of SOS operations, sales, and profits, he qualified as a witness able to render an opinion concerning SOS's lost future profits"); Farina v. Compuware Corp., 256 F.Supp.2d 1033, 1045 (D. Ariz. 2003)("Plaintiff's analysis is admissible as the opinion testimony of a lay witness under Fed. R. Evid. 701; she has a unique familiarity with the record-keeping and business operations of Defendant and had personal knowledge of the documents upon which she relies for her calculations.") Bona Fide Conglomerate, Inc. v.
Philadelphia Workforce Dev. Corp. v. KRA Corp., 156 F.Supp.3d 616, 634 (E.D. Pa. 2016), aff'd, 673 Fed.Appx. 183 (3d Cir. 2016).
James River Ins. Co. v. Rapid Funding, LLC, 658 F.3d 1207, 1214 (10th Cir. 2011), which the trustee relies upon, is distinguishable. The Tenth Circuit ruled that a valuation of a building was based on "technical or specialized knowledge," because it required a complicated depreciation calculation (involving the interaction between depreciation and damages) and relied on both the owner's professional experience in real estate and a technical report by an outside expert. Furthermore, landowner testimony about land value is generally considered to be expert testimony.
In fact, Mr. Elieff's knowledge that SCM was in a net loss position on the DMA is the type of "straightforward, common sense calculation[s]" that James River cited as admissible under Rule 701: a simple calculation of net profits — revenues (management fees) received less expenses incurred. James River, 658 F.3d at 1216. If this calculation were too complicated for business owners to testify about, no business owner could testify as to the profitability of a business.
Alternatively, SCM's profitability (or lack thereof) is admissible as a matter of fact: the historical results of SCM's business operations on the Project. See United States v. Kayne, 90 F.3d 7, 12 (1st Cir. 1996)("purchasers from RCGA were permitted to testify about the price they realized on resale of the coins. . . . This testimony was not opinion testimony at all, but a simple recitation of an observed phenomenon: the price paid for the coins."), cert. denied, 519 U.S. 1055, 117 S.Ct. 681, 136 L.Ed.2d 607 (1997); Pena v. Ludwig, 766 S.W.2d 298, 304 (Tex. App. 1989)("Ludwig testified from actual, personal knowledge about Haircrafters' financial condition as well as Lone Star's six-month profit, which she used as the beginning point for calculating Haircrafters' probable loss. This was not opinion testimony on her part, but testimony based upon first-hand knowledge of their business records.")
Furthermore, Mr. Elieff's testimony is not based on hearsay, but his personal knowledge of SCM's net loss on the DMA.
Bona Fide Conglomerate, 2017 WL 3149578, at *10.
Finally, while the Defendants' Rule 26 disclosure of what discoverable information Mr. Elieff might have [quoted on p. 10 of the Opposition] did not specifically mention net profits or losses under the DMA, it did mention topics that would include such results from operations: the "functioning of [SCM]," "the payment of management fees and development fees and expenses to [SCM]," and "the development of the Project." Furthermore, it cannot be a surprise to the Trustee that the owner and Manager of SCM would have knowledge of the results of SCM's operations. Thus, to the extent that this disclosure did not specifically include the profit/loss resulting from SCM's performance under the DMA, such omission is harmless and does not warrant sanctions. Fed. R. Civ. P. 37(c).
Accordingly, Mr. Elieff's testimony that SCM's already incurred costs of performance under the DMA exceeded the monies SCM had received from the Debtor is admissible. This alone is sufficient to find that SCM's damages from breach exceed the payments it received, without even including SCM's expected profits in the calculation of damages.
The Defendants argue — based on testimony by Mr. Elieff and Danielle Harrison (an employee of SCM) and the May 2008 Project Budget — that gross sales revenue for the Project was expected to be over $522 million, resulting in almost $21 million in management fees to SCM. The Defendants also rely on testimony from Mr. Elieff stating that SCM hoped to achieve a profit margin of 10-15% on this $21 million. Applying the 10-15% profit margin to the $522 million gross sales revenue figure, the Defendants argue that SCM expected to receive $2.1 — $3.15 million in net profits if the DMA had been fully performed.
The expected management fees of $21 million are based on the gross sales revenue figure of $522 million from the May 2008 Project Budget. Exhibit 23 to Declaration of Danielle Harrison submitted in support of the MSJ ("Harrison Dec."). The May 2008 Project Budget has been authenticated — by Ms. Harrison (who was personally involved in the development of project budgets) — as reflecting an agreement among the parties as to the anticipated revenue and expenses numbers that they would use in managing the Project, which was regularly updated by SCM and Lehman. See Harrison Dec. ¶ 9 ¶ 13, ¶ 26, ¶ 27. It is not hearsay under Fed. R. Evid. 803(6))("business records"). Mr. Elieff has testified in support of this gross sale figure as the "parties good faith estimate." Supp. Elieff Dec. ¶ 18.
The Trustee argues that the testimony of Bruce Elieff and Danielle Harrison regarding this gross sales revenues figure is not admissible as expert testimony or lay testimony. However, Mr. Elieff and Ms. Harrison are not relying on hearsay when they cite the May 2008 Project Budget; they are authenticating that document.
The Trustee also objects to Mr. Elieff and Ms. Harrison's testimony as lacking personal knowledge. But, as discussed in detail in 1. above, Mr. Elieff's declaration does lay a proper foundation for his personal knowledge of SCM's operations generally. He has also testified to his personal involvement in creating project budgets. Supp. Elieff Dec. ¶ 16. Ms. Harrison provides a strong foundation for her testimony, as well. She testifies in detail about her personal involvement in the business plan and budgeting process for the Project. Harrison Dec. ¶1-¶ 4, ¶ 5, ¶ 7.
The Trustee argues that Mr. Elieff and Ms. Harrison's testimony was not adequately disclosed under Rule 26. However, the Defendants' disclosure on Mr. Elieff specifically mentions budgets. Disclosure on Ms. Harrison is more limited, but the Trustee cannot be surprised that an SCM employee with "asset management responsibility" [a description of Ms. Harrison in the disclosure] would testify as to the budgeting process.
Finally, the Trustee argues that the $522 in gross sales revenue is based on the May 2008 Budget, but that budget overstates anticipated gross sales revenue because several months later the great recession sharply reduced the value of California real estate. While the May 2008 Budget may not reflect the effects of the 2008 recession, it appears to be the most recent budget and good faith estimation of expected gross sales revenue from the Project. The Trustee, as the successor to the breaching party, cannot insist that SCM provide perfect proof of its expectancy damages, which are by their very nature hypothetical. As one California Court put it: "any difficulty in proof should not inure to the benefit of the party responsible for the failure of the contract." Grill v. Hunt, 6 Cal.App.4th at 79, 7 Cal.Rptr.2d 768.
Restatement (Third) of Restitution and Unjust Enrichment § 36 (2011)(comment c).
The Trustee makes the same evidentiary and procedural objections to Mr. Elieff's testimony of a 10-15% anticipated profit margin, but this testimony is admissible under the federal rules. As discussed in detail in 1. above, (i) Mr. Elieff's declaration does lay a proper foundation for his personal knowledge of SCM's historic profitability, on which this estimate is based, (ii) he is exactly the type of business owner/manager that the comments to 2000 Amendments to Fed. R. Evid. 701 and the case law have allowed to give lay opinion testimony on profitability, and (iii) Rule 26 disclosure on Mr. Elieff was sufficient to put the Trustee on notice that Mr. Elieff — as owner and Manager — had knowledge of SCM's profit margins.
Taking the $522 million of gross sales revenue from the May 2008 Project Budget, the 4% Management Fee provision from the DMA, and SCM's 10-15% expected profit margin from Mr. Elieff's testimony, the Defendants have provided admissible evidence of $2-$3 million of lost profit damages. These lost profits do not exceed
The Defendants also point to § 6.2 of the DMA, which provides that if the Debtor terminates the DMA without cause, SCM is entitled to receive a termination fee of 90% of the management fee that would have been payable to SCM (less any management fees already paid). Under this provision, the Defendants' argue that SCM would be entitled to 90% of $21 million anticipated management fees ($18.9 million) less the $4 million already received for damages of $14.9 million. The Trustee argues that § 6.2 is not applicable because the Debtor breached the contract, which is different from terminating without cause.
At this point, it is not clear to the Court whether § 6.2 would apply to the Debtor's breach of the DMA. Many decisions have held that breach and repudiation do not terminate the contract, but merely provide grounds for termination by the non-breaching party. See, e.g., Taylor v. Johnston, 15 Cal.3d 130, 137, 123 Cal.Rptr. 641, 539 P.2d 425 (Cal. 1975); Whitney Inv. Co. v. Westview Dev. Co., 273 Cal.App.2d 594, 602, 78 Cal.Rptr. 302 (Cal. Ct. App. 1969) ("A breach does not terminate a contract as a matter of course but is a ground for termination at the option of the injured party."); Larson v. Warner Bros. Entm't Inc., 2013 WL 1164434, at *3 (C.D. Cal. Mar. 20, 2013), judg. entered, 2013 WL 4101539 (C.D. Cal. June 18, 2013), and aff'd, 640 Fed.Appx. 630 (9th Cir. 2016). On the other hand, at least one court has equated repudiation of a contract — expressly refusing to perform — with "termination" in a liquidated damages clause. See Jiu Zhou Grp. (HK) Holding Ltd. v. M. Bros., 2017 WL 2829532, at *13 (Cal. Ct. App. June 30, 2017)("We conclude that the term "unilateral terminat[ion]," as found in the liquidated damages provision, is intended to refer to a repudiation of the contract.")
The Court need not decide whether § 6.2 is applicable, because — as described above — the Defendants have met their burden of production on the issue of whether the SCM's damages exceed the Debtor's payments to SCM.
The DMA provided that:
DMA § 9.6. The Defendants have been granted summary judgment on the Trustee's first claim for breach of the DMA, which certainly falls with the category of enforcement of the DMA. This second claim for restitution/unjust enrichment requires calculation of SCM's damages arising from the Debtor's breach of the DMA, which requires interpretation of the DMA (as is evident from this ruling). Thus, under DMA § 9.6, SCM is entitled to its costs, expenses, and attorneys' fees for its litigation of the first claim and — if granted summary judgment on the second claim — for its litigation of the second claim. Such fees should be included in SCM's damages arising from the Debtor's breach. Fortunately, the amount of such damages need
The Ninth Circuit has explained that "showing" a lack of evidence may be done simply by argument:
Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001). This conclusion is based on the language of the Celotex decision:
Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
The Defendants have repeatedly pointed out that the Trustee has failed to put forth any evidence that the Debtor's payments to SCM exceed SCM's damages. The Memorandum put this issue squarely before the parties, asking them to "provide evidence of the amount of SCM's damages." As the Defendants point out, the Trustee's Supplemental Opposition lacks any such evidence and is based primarily on evidentiary objections to the Defendants' evidence. Thus, the Defendants have also met their burden of production by pointing out the Trustee's lack evidence.
(On the other hand, the Defendants have not presented evidence showing that the Trustee lacks evidence to carry his burden of proof at trial. The interrogatory responses cited by the Defendants do not state that the Trustee lacks knowledge: they simply object to the interrogatory. Declaration of Mark Gustafson submitted in support of the Defendants' Supplemental Statement ¶ 2. The Trustee's deposition testimony does indicate that the Trustee lacks personal knowledge relevant to these issues, but that does not mean that the Trustee and his attorneys do not have other evidence on this point. Declaration of Aalok Sharma submitted in support of the Defendants' Supplemental Statement ¶ 2.)
As the Defendants have met their burden of production, the Trustee must produce enough evidence to create a genuine issue of material fact. Otherwise, the Defendants should be granted summary judgment. See Celotex, 477 U.S. at 322, 106 S.Ct. 2548; Nissan Fire & Marine, 210 F.3d at 1102-03.
As noted above, the Trustee has failed to produce any evidence that the Debtor's payments to SCM exceeded SCM's expected damages from the Debtor's breach of the DMA — despite the fact that the Court had continued this MSJ for the express purpose of allowing the parties to present
This legal conclusion is buttressed by common sense. Discovery has been completed. The Trustee has the burden of proof on this issue. If the Trustee has no evidence that the amounts paid to SCM by the Debtor exceed SCM's contractual damages, taking this claim to trial would only result in wasted time and expense.
Judgment is granted to the Defendants on the second claim for restitution and/or unjust enrichment.
The Trustee has interposed numerous objections to the testimony offered by the Defendants. The Court will only rule on objections to the testimony used by the Court in this ruling.
