IceMOS Technology Corporation v. Omron Corporation

Opinion

1 WO 2 3 4 5

9 IceMOS Technology Corporation, No. CV-17-02575-PHX-JAT

10 Plaintiff/Counter-Defendant, ORDER

11 v.

12 Omron Corporation,

13 Defendant/Counter-Claimant. 14 15 Pending before the Court, among other things, are IceMOS Technology 16 Corporation’s (“Plaintiff”) Motion for Partial Summary Judgment (Doc. 153), Omron 17 Corporation’s (“Defendant”) Motion for Partial Summary Judgment (Doc. 229), and 18 Defendant’s Motion to Preclude Testimony of Plaintiff’s Business Valuation Expert Greg 19 Mischou (Doc. 296). This Order substantially addresses these motions and also rules on 20 other pending motions. 22 The Court has previously articulated the basic facts underlying this case: 23 Plaintiff offers super junction metal oxide semiconductor field-effect transistors (“MOSFETs”), microelectromechanical systems solutions, and 24 advanced engineering substrates to third parties. (Doc. 25 at 2). To produce 25 these products, Plaintiff needs fabrication services. (Id.). In 2007, Defendant purchased a fabrication facility and began fabricating “complementary 26 metal-oxide semiconductor” products. (Id.). Around this time, Defendant approached Plaintiff to suggest that Defendant and Plaintiff enter into 27 business together. (Id.). 28 1 Plaintiff and Defendant came to an agreement (“Supply Agreement”) on February 28, 2011 after negotiations. (See id.). Their agreement included, 2 inter alia, that Defendant would “perform the fabrication requested by 3 Plaintiff” and that Defendant would “fully resource the development of all generations of” Plaintiff’s super junction MOSFET (“SJ MOSFET”) for the 4 duration of the Supply Agreement. (Id.; see also Doc. 59 at 10; Doc. 60 at 5 15). Defendant asserts that Plaintiff represented that “[d]emand for Plaintiff’s Super Junction MOSFETs is estimated to reach a volume of up to three 6 thousand and five hundred (3,500) wafers per month by year 2014.” (See 7 Doc. 28 at 42 (alteration in original) (quoting Doc. 14-1 at 2)). Defendant also alleges that the parties forecasted, based on Plaintiff’s representations 8 regarding expected demand for its product, that “monthly demand would 9 reach 3,850 wafers per month by the fourth quarter of 2012.” (Id. (citing Doc. 14-1 at 14)). On March 6, 2018, the Supply Agreement terminated. (Doc. 60 10 at 37). 11 Plaintiff alleges breach of contract and fraud and seeks damages. (Doc. 59 at 33– 12 38). Plaintiff claims that Defendant breached several provisions of the Supply Agreement. 13 (Id. at 33–35). Plaintiff’s allegations include that Defendant improperly terminated the 14 Supply Agreement, which, according to Plaintiff, has resulted in lost profits, lost business 15 value, and lost development support costs. (Id.). 16 Defendant has counterclaimed and alleges breach of the implied covenant of good 17 faith and fair dealing, two counts of breach of contract, and fraud in the inducement 18 (relating to the alleged projections by Plaintiff) and also seeks damages. (Doc. 28 at 46– 19 50). 20 II. LEGAL STANDARD 21 A party is entitled to summary judgment when it “shows that there is no genuine 22 dispute as to any material fact and [it] is entitled to judgment as a matter of law.” Fed. R. 23 Civ. P. 56(a). As such, a court must grant summary judgment “against a party who fails to 24 make a showing sufficient to establish the existence of an element essential to that party’s 25 case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. 26 Catrett, 477 U.S. 317, 322 (1986). 27 The movant must establish the basis for summary judgment and the elements of the 28 claims upon which the nonmovant will be unable to show a genuine issue of material fact. 1 Id. at 323. Then, the burden shifts to the nonmovant to show the existence of any dispute 2 of material fact. Id. at 323–24. To meet this burden, the nonmovant must point to competent 3 evidence, meaning that the evidentiary content—but not necessarily its form—must be 4 admissible at trial. Fraser v. Goodale, 342 F.3d 1032, 1036 (9th Cir. 2003).1 This evidence 5 “must do more than simply show that there is some metaphysical doubt as to the material 6 facts,” it must show “that there is a genuine issue for trial.” Matsushita Elec. Indus. Co. v. 7 Zenith Radio Corp., 475 U.S. 574, 586–87 (1986) (quoting Fed. R. Civ. P. 56(e) (1963)). 8 A genuine issue of material fact exists if the disputed issue of fact “could reasonably be 9 resolved in favor of either party.” Ellison v. Robertson, 357 F.3d 1072, 1075 (9th Cir. 10 2004). A dispute is about a material fact when the dispute is about “facts that might affect 11 the outcome of the suit.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The 12 Court must “construe all facts in the light most favorable to the non-moving party.” Ellison, 13 357 F.3d at 1075–76 (citing Clicks Billiards, Inc. v. Sixshooters, Inc., 251 F.3d 1252, 1257 14 (9th Cir. 2001)). However, the nonmovant’s bare assertions, standing alone, are insufficient 15 to create a material issue of fact that would defeat the motion for summary judgment. 16 Anderson, 477 U.S. at 247–48. 17 18 19 20 1 Plaintiff objects to certain evidence that Defendant cites in its controverting statement of 21 facts (Doc. 193). (Doc. 223 at 8 n.1). In short, Plaintiff’s objections to leading, relevance, and improper legal conclusion are inappropriate for summary judgment because they are 22 either superfluous to the summary judgment standard or are objections relating to form rather than content. See Fraser, 342 F.3d at 1036; Dillon v. Cont’l Cas. Co., 278 F. Supp. 23 3d 1132, 1137 (N.D. Cal. 2017). Thus, these objections are overruled. Plaintiff also objects to Takahiro Hasegawa’s deposition, suggesting Hasegawa did not have personal 24 knowledge sufficient to testify on behalf of Defendant as a corporation. (Doc. 223 at 8 n.1). However, Plaintiff’s counsel specifically states during the deposition that Hasegawa was 25 testifying as Defendant’s “corporate representative,” and the transcript indicates that Hasegawa’s deposition was under Federal Rule of Civil Procedure 30(b)(6). (Doc. 190-7 26 at 1, 4–5). This fact belies Plaintiff’s objection. Moreover, it is not clear what specific testimony Plaintiff is objecting to. This objection is thus overruled. Plaintiff’s objection to 27 Docs. 190-9 to 109-11 and Doc. 190-13 are overruled because the Court did not consider these materials. Defendant’s objection to Doc. 190-14 as an unauthenticated document is 28 moot because the Court did not rely on this evidence in its analysis. 2 a. Plaintiff’s Motion for Partial Summary Judgment 3 Plaintiff seeks summary judgment on Defendant’s counterclaims for fraud and 4 breach of contract. (Doc. 153 at 7–21).2 5 1. Fraud Counterclaim 6 Plaintiff moves for summary judgment on Defendant’s fraud counterclaim. Plaintiff 7 argues that Defendant’s fraud counterclaim is barred by the statute of limitations. (Doc. 8 153 at 7–8). It also asserts that Defendant cannot prove certain elements of its fraud 9 counterclaim as a matter of law. (Id. at 9–13). 10 A. Statute of Limitations 11 First, Plaintiff contends that summary judgment must be entered on the fraud 12 counterclaim because it is barred by the statute of limitations under Arizona law. (Doc. 153 13 at 7–8). As the Court has noted, Arizona law applies to Defendant’s fraud counterclaim for 14 choice of law purposes. (See Doc. 152 at 9; see also Doc. 25 at 19–20 (stating Arizona law 15 applies to Plaintiff’s fraud claim)). As such, the Court must apply the Arizona statute of 16 17 2 Plaintiff argues that the Court must grant its Motion for Partial Summary Judgment 18 (Doc. 153) because it asserts Defendant did not comply with District of Arizona Local Rule of Civil Procedure 56.1. (Doc. 223 at 7–10). Specifically, Plaintiff contends that Defendant 19 “failed to controvert [Plaintiff]’s facts as required by LRCiv. 56.1(b),” and thus, the Court should deem Plaintiff’s entire statement of facts as admitted, or alternatively, disregard 20 additional explanation or argument. Plaintiff’s argument relies on Marceau v. International Brotherhood of Electrical Workers, 618 F. Supp. 2d 1127, 1141 (D. Ariz. 2009). (Doc. 153 21 at 9–10). There, the court stated “LRCiv 56.1 ‘does not permit explanation and argument supporting the party’s position to be included in the . . . statement of facts.’” Marceau, 618 22 F. Supp. 2d at 1141 (citation omitted). The Marceau court adopted that proposition from Pruett v. Arizona, 606 F. Supp. 2d 1065, 1075 (D. Ariz. 2009). See Marceau, 618 F. Supp. 23 2d at 1141 (quoting Pruett, 606 F. Supp. 2d at 1075). In Pruett, the defendant identified specific responses in the plaintiff’s controverting statement of facts that it asserted violated 24 Local Rule 56.1. 606 F. Supp. 2d at 1075. The Pruett court did not strike the entire controverting statement of facts but instead disregarded the additional explanation and 25 argument that the defendant specifically objected to. 606 F. Supp. 2d at 1075. In contrast, here, Plaintiff makes a vague challenge to the entirety of Defendant’s controverting 26 statement of facts, and the Court cannot identify any particular response within it that Plaintiff takes issue with as violative of Local Rule 56.1 or why Plaintiff specifically 27 objects to any of Defendant’s responses. The issue is further complicated by the fact that Plaintiff itself is guilty of the same briefing technique in its controverting statement of facts 28 to Defendant’s Motion for Partial Summary Judgment (Doc. 229). (See Doc. 308). Accordingly, the Court will take no action. 1 limitations for Defendant’s counterclaim. See Albano v. Shea Homes Ltd. P’ship, 634 F.3d 2 524, 528 (9th Cir. 2011). 3 Arizona law provides that the statute of limitations for a fraud claim is three years. 4 Ariz. Rev. Stat. Ann. § 12-543(3). However, the time for calculating the statute of 5 limitations does not begin to “accrue[] until the discovery by the aggrieved party of the 6 facts constituting the fraud or mistake.” Id. In other words, “[t]he statute of limitations 7 begins to run for [fraud claims] when the plaintiff knew or through reasonable diligence 8 could have learned of the fraud or the misrepresentation.” Cavan v. Maron, 182 F. Supp. 9 3d 954, 962 (D. Ariz. 2016) (citing Coronado Dev. Corp. v. Superior Court, 678 P.2d 535, 10 537 (Ariz. Ct. App. 1984)); see Gust, Rosenfeld & Henderson v. Prudential Ins. Co. of Am., 11 898 P.2d 964, 966 (Ariz. 1995). 12 Plaintiff argues that it provided the forecasts that serve as the basis of Defendant’s 13 fraud counterclaim in September 2011, and thus, Defendant should have known that these 14 forecasts, assuming they were fraudulent representations, were inaccurate in September 15 2011, which started the clock on the statute of limitations. (Doc. 153 at 7–8). Plaintiff also 16 argues Defendant knew that Plaintiff was not meeting the projections at least as early as 17 March 6, 2015, which it contends was the latest date that the time on Defendant’s fraud 18 counterclaim could have begun accruing. (Id.). As such, Plaintiff argues that Defendant’s 19 fraud counterclaim was barred by the Arizona statute of limitations because Defendant did 20 not file the counterclaim until July 16, 2018. (Id.). Defendant responds that the time to file 21 its fraud counterclaim did not begin accruing until it could have discovered the fraud with 22 reasonable diligence, which is a question of fact that precludes summary judgment. (Doc. 23 189 at 9–11; see e.g., Doc. 191 at 3–53; Doc. 192 at 2–4; Doc. 193 at 27–28). 24 “[D]etermination of a claim’s accrual date usually is a question of fact . . . .” 25 Logerquist v. Danforth, 932 P.2d 281, 287 (Ariz. Ct. App. 1996) (citation omitted). “[T]he 26 inquiry center[s] on the plaintiff’s knowledge of the subject event and resultant injuries, 27 3 Plaintiff’s relevance objection to particular paragraphs within Takahiro Hasegawa’s 28 declaration (Doc. 191), (Doc. 223 at 11 n.7), is overruled because it is an inappropriate objection at the summary judgment stage. See Dillon, 278 F. Supp. 3d at 1137. 1 whom the plaintiff believed was responsible, and plaintiff’s diligence in pursuing the 2 claim.” Id. (citation omitted). Whether to apply the discovery rule generally “depends on 3 resolution of such factual issues,” and thus, a court cannot resolve these questions on 4 summary judgment. See id.; see also Gust, Rosenfeld & Henderson, 898 P.2d at 969 (“The 5 statute of limitations did not commence on [plaintiff]’s claim until [plaintiff] knew or in 6 the exercise of reasonable diligence should have known that it had been injured. The trial 7 court was correct to let the jury decide when that event occurred.”). 8 Defendant asserts there is a dispute of material fact as to when it discovered 9 Plaintiff’s alleged fraud. (Doc. 189 at 11). The Court agrees. Arizona law makes clear that 10 when a claim begins to accrue is a question of fact that generally cannot be determined on 11 summary judgment. But, Plaintiff argues that a party cannot “invoke[] the discovery rule 12 in the [r]esponse” to a motion for summary judgment. (Doc. 223 at 12 (quoting Breeser v. 13 Menta Grp., Inc., 934 F. Supp. 2d 1150, 1159 (D. Ariz. 2013))). Plaintiff cites Breeser, 934 14 F. Supp. 2d 1150, for this proposition. Breeser did not proclaim such an edict. Cf. Long v. 15 Ford Motor Co., No. CV07-2206-PHX-JAT, 2008 WL 2937751, at *8 (D. Ariz. July 23, 16 2008) (allowing plaintiff to raise discovery rule despite the fact that plaintiffs did not plead 17 factual allegations relevant to the discovery rule in its complaint). Rather, the issue in 18 Breeser was that both parties indicated that the date of accrual of the plaintiff’s claim was 19 beyond the limitations period. 934 F. Supp. 2d at 1158–60. Indeed, there, plaintiff’s “own 20 words” established the date of accrual. See id. Although plaintiff contradicted her earlier 21 statements regarding the date of accrual, the court invoked the doctrine of judicial estoppel 22 in determining that her later inconsistent statements did not create a genuine issue of 23 material fact as to the issue of accrual. See id. In contrast, here, it is disputed as to when 24 Defendant discovered Plaintiff’s alleged fraud, and thus, when the Defendant’s fraud 25 counterclaim began to accrue. Thus, Breeser is distinguishable because there was no 26 genuine dispute of fact there, id. at 1159–60, while there is one here. Because there is a 27 28 1 genuine dispute of material fact as to the fraud counterclaim’s date of accrual, the Court 2 cannot grant summary judgment.4 3 B. Merits of Fraud Counterclaim 4 Plaintiff also argues that summary judgment should be entered on the fraud 5 counterclaim because Defendant cannot establish all its elements. (Doc. 153 at 9–13). The 6 gist of Defendant’s fraud counterclaim is that Plaintiff fraudulently induced Defendant to 7 enter into the Supply Agreement with Plaintiff based on projections of monthly demand 8 that it knew it could never meet. (See Doc. 28 at 49–50; Doc. 152 at 3; Doc. 189 at 6–8). 9 Defendant asserts that, during the negotiations that ultimately culminated in the Supply 10 Agreement, Plaintiff fraudulently represented to Defendant that monthly demand for its SJ 11 MOSFETs would be at a forecasted volume of up to 3,500 wafers per month by 2014. (See 12 Doc. 189 at 6–8). Moreover, Defendant contends that it relied on these projections in 13 deciding to enter into the Supply Agreement with Plaintiff. (Doc. 189 at 6–8, 16). 14 A party must show the following elements to establish a fraud claim under Arizona 15 law: 16 (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker’s knowledge of the [representation’s] falsity or ignorance of its truth; (5) the 17 speaker’s intent that it be acted upon by the recipient in the manner 18 reasonably contemplated; (6) the hearer’s ignorance of its falsity; (7) the hearer’s reliance on its truth; (8) the right to rely on it; [and] (9) [the hearer’s] 19 consequent and proximate injury. 20 4 Should the jury find for Defendant on its fraud counterclaim and should it conclude that 21 the date of discovery was on July 15, 2015, or earlier, Plaintiff may raise the statute of limitations issue again. The Court notes that it has made no determination as to whether 22 the statute of limitations was tolled or suspended as a result of Plaintiff’s action being filed on August 2, 2017. Compare W.J. Kroeger Co. v. Travelers Indem. Co., 541 P.2d 385, 397 23 (Ariz. 1975) (in division) (“[I]f a claim would be barred originally by a statute of limitation, it is barred as a counterclaim even if it arises from the same transaction except as it falls 24 within the principles of recoupment.”), quoted in Unispec Dev. Corp. v. Harwood K. Smith & Partners, 124 F.R.D. 211, 214 (D. Ariz. 1988), and Occidental Chem. Co. v. Connor, 25 604 P.2d 605, 607 (Ariz. 1979) (“If one is not entitled to relief in a direct action, he is not entitled to assert a setoff or counterclaim.”), with Religious Tech. Ctr. v. Scott, 82 F.3d 423 26 (9th Cir. 1996) (table) (“[A] compulsory counterclaim relates back to the filing of the original complaint.”), and Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, 27 Federal Practice and Procedure § 1419, at 179 (3d ed. 2010) (“[T]he majority view appears to be that the institution of plaintiff’s suit tolls or suspends the running of the statute 28 of limitations governing a compulsory counterclaim.”). 1 Echols v. Beauty Built Homes, Inc., 647 P.2d 629, 631 (Ariz. 1982) (in division); see 2 Comerica Bank v. Mahmoodi, 229 P.3d 1031, 1033–34 ¶ 14 (Ariz. Ct. App. 2010). Plaintiff 3 contends that the undisputed facts prevent Defendant from establishing the first, second, 4 third, seventh, and eighth elements of its fraud counterclaim. (Doc. 153 at 9). Defendant 5 responds that Plaintiff has not shown that Defendant cannot prove each element of its fraud 6 counterclaim. (Doc. 189 at 13). 7 i. Representation 8 A projection can be a representation for purposes of establishing fraud. See Law v. 9 Sidney, 53 P.2d 64, 66 (Ariz. 1936). “[T]he promise to perform a future act” is actionable 10 when it “was made with a present intention on the part of the promisor that he would not 11 perform it.” Id.; see also Allstate Life Ins. v. Robert W. Baird & Co., 756 F. Supp. 2d 1113, 12 1165 (D. Ariz. 2010) (determining forward-looking statements made “with actual 13 knowledge that projections, promises, or expectations will not be met” are actionable 14 representations). Plaintiff argues that there is no dispute of material fact as to whether 15 Defendant can establish a representation because Defendant “has provided no evidence to 16 support any allegation that [Plaintiff] did not intend to perform its obligations under the 17 Supply Agreement.” (Doc. 153 at 12). Therefore, Defendant must show that it has evidence 18 to support that there is an actionable representation here. See Celotex Corp., 477 U.S. at 19 322–23. 20 Although Defendant did not specify in its Response that it has evidence that shows 21 Plaintiff never intended to perform,5 it does offer evidence that Plaintiff knew its 22 projections were false. (See Doc. 189 at 14–15; Doc. 193 at 22–24). For example, 23 Defendant offers evidence that Plaintiff only ordered approximately two percent of the 24 5 The Court notes that Defendant seems to rely on the Court’s holding on Plaintiff’s Motion 25 for Judgment on the Pleadings (Doc. 69). (See Doc. 189 at 13–14 (citing Doc. 152 at 11– 12)). At summary judgment, a party cannot rely on bare allegations alone, and thus, 26 Defendant cannot base its argument that summary judgment is not appropriate on the issue of representation simply because the Court has previously determined that, based on 27 Defendant’s allegations, it had stated a claim for fraud. Anderson, 477 U.S. at 247–48. It is axiomatic that allegations are not sufficient on summary judgment; instead, the 28 nonmovant must offer proof of its claims. See Butler v. San Diego Dist. Attorney’s Office, 370 F.3d 956, 963 (9th Cir. 2004). 1 forecasted volume. (Doc. 193 at 22 (citing Doc. 191 at 5); see also Doc. 241-1 at 8–9). A 2 reasonable fact-finder could find that such a disparity means that Plaintiff knew its 3 forecasts were false. Construing the evidence in the light most favorable to Defendant, 4 there is a dispute of material fact as to whether Plaintiff knew its projections were false, 5 and thus, whether it never intended to meet the projections of monthly demand.6 See 6 Orlando v. Carolina Cas. Ins., No. CIV F 07-0092AWISMS, 2007 WL 781598, at *8 (E.D. 7 Cal. Mar. 13, 2007). Thus, the Court cannot say Defendant will be unable to establish that 8 Plaintiff made an actionable representation.7 9 ii. Falsity of Representation 10 Plaintiff contends that Defendant cannot establish that the representation was false. 11 (See Doc. 153 at 9). In response, Defendant offers evidence that supports its claim that 12 Plaintiff knew its projections of monthly demand were false. (See Doc. 189 at 14–16; Doc. 13 193 at 22–24; see also Doc. 241-1 at 8–9). A projection or estimate typically cannot be 14 deemed a false representation. See Allstate Life Ins., 756 F. Supp. 2d at 1164–65; Sidney, 15 53 P.2d at 66. However, if one makes a projection or estimate “with actual knowledge that 16 projections, promises, or expectations will not be met,” there is a false representation. See 17 Allstate Life Ins., 756 F. Supp. 2d at 1164–65. Thus, for the same reason that the Court 18 found that Defendant has offered sufficient evidence to create a dispute of material fact on

19 6 Plaintiff objects to a statement in Susumu Nukii’s declaration (Doc. 192) as being irrelevant, (Doc. 223 at 16 n.10), an inappropriate objection that the Court therefore 20 overrules. See Dillon, 278 F. Supp. 3d at 1137. Plaintiff objects to a statement in Takahiro Hasegawa’s declaration (Doc. 191) as being an inadmissible legal conclusion, (Doc. 223 21 at 17 n.11), another objection that is inappropriate at the summary judgment stage. See Dillon, 278 F. Supp. 3d at 1137. 22 7 Plaintiff also suggests that Defendant’s fraud counterclaim fails as a matter of law because 23 it cannot show the projections were a representation as Defendant “has admitted that the ‘Supply Agreement contains no representations, promises, or guarantees by [Plaintiff] as 24 to demand or minimum monthly purchases.’” (Doc. 153 at 9 (quoting Doc. 60 at 18)). Although that might be true, Defendant has made clear that its fraud counterclaim is based 25 on the projections of monthly demand Plaintiff made during negotiations prior to signing of the Supply Agreement. (Doc. 189 at 14). The Court even noted this fact when it denied 26 Plaintiff’s Motion for Judgment on the Pleadings (Doc. 69). (Doc. 152 at 11–12). If Defendant’s admission that the “Supply Agreement contains no representations, promises, 27 or guarantees by [Plaintiff] as to demand or minimum monthly purchases” did not entitle Plaintiff to judgment on the pleadings, it is unclear why Plaintiff believes it entitles it to 28 summary judgment now. 1 the issue of representation here, it has done the same on the issue of the falsity of such a 2 representation. 3 iii. Materiality of Representation 4 Plaintiff contends that Defendant cannot establish the materiality of its alleged 5 fraudulent representation because Defendant admitted in the pleadings that “[t]he material 6 terms of the Supply Agreement had already been negotiated before the forecasts in Exhibit 7 A were prepared.” (Doc. 153 at 10 (quoting Doc. 60 at 19)). However, Plaintiff leaves out 8 a key part of Defendant’s Answer; Defendant “denie[d] that Exhibit A to the Supply 9 Agreement contains the only forecasts that [Plaintiff] provided to [Defendant].” (Doc. 60 10 at 19; Doc. 193 at 3–4; see also Doc. 191-1 at 15 (draft agreement with projections)). 11 Additionally, as the Court noted above, Defendant’s fraud counterclaim relates to alleged 12 false representation that occurred during negotiations prior to signing of the Supply 13 Agreement; it is not necessarily based on the terms of the Supply Agreement alone. 14 At any rate, “[q]uestions about materiality . . . usually are for the jury.” See Lerner 15 v. DMB Realty, LLC, 322 P.3d 909, 914 ¶ 15 (Ariz. Ct. App. 2014). “A misrepresentation 16 is material if a reasonable person ‘would attach importance to its existence or nonexistence 17 in determining [his or her] choice of action in the transaction in question.’” Caruthers v. 18 Underhill, 287 P.3d 807, 815 ¶ 28 (Ariz. Ct. App. 2012) (quoting Restatement (Second) of 19 Torts § 538(2)(a) (1977)); see also M & I Bank, FSB v. Coughlin, No. CV 09-02282-PHX- 20 NVW, 2011 WL 5445416, at *4 (D. Ariz. Nov. 10, 2011). Defendant has offered sufficient 21 evidence to create a dispute of material fact as to whether the alleged false representation 22 mattered to it because it has evidence showing Plaintiff’s projections of monthly demand 23 were relevant to its decision to enter the Supply Agreement. (Doc. 189 at 16; Doc. 193 at 24 24); see M & I, FSB, 2011 WL 5445416, at *4 (holding alleged false representation was 25 material because plaintiff offered evidence that false representation was relevant to 26 plaintiff’s decision to agree to a loan); Lerner, 322 P.3d at 915 ¶ 19 (noting that materiality 27 depended on whether the “alleged misrepresentation was material to the transaction” 28 (emphasis added)). 1 For example, it is “simple business sense” that projections specifying monthly 2 demand would be material to Defendant’s decision to enter the Supply Agreement. See M 3 & I, FSB, 2011 WL 5445416, at *4; see Radware, Ltd. v. F5 Networks, Inc., 147 F. Supp. 4 3d 974, 1012 (N.D. Cal. 2015). The jury could reasonably infer that the projections 5 included in a prior draft agreement, (Doc. 191-1 at 15), would translate to future business 6 revenue for Defendant, and thus, would be material. Indeed, as Caruthers makes clear, 7 materiality is an objective standard, and thus, the jury must determine if a reasonable 8 person, under the circumstances, would attach importance to the projections of monthly 9 demand in deciding whether to enter the Supply Agreement. Additionally, Defendant offers 10 evidence that the projections were relevant to Defendant’s decision to enter the Supply 11 Agreement. (See Doc. 191 at 2–3).8 In sum, Defendant has offered sufficient evidence to 12 create a genuine dispute of material fact as to materiality. 13 iv. Reliance on Representation 14 Next, Plaintiff asserts Defendant cannot establish that Defendant relied on the 15 projections. (Doc. 153 at 10–11). Plaintiff raises three primary arguments: (1) the 16 projections “were not representations but rather just estimates of future events based on 17 factors beyond [Plaintiff’s] control,” (2) that Plaintiff’s ability to meet the forecasts 18 depended on Defendant, and (3) that Defendant signed the Supply Agreement because it 19 was “desperate for customers” and the projections were irrelevant to its decision to enter 20 21 22 23 8 Plaintiff objects to a statement regarding the materiality of the projections in Takahiro 24 Hasegawa’s declaration (Doc. 190), arguing that it is based on a lack of personal knowledge. (Doc. 223 at 17 n.12). However, Plaintiff’s Reply specifically asserts “the only 25 people [Defendant] identified as participating in the negotiation of the Supply Agreement were Yoshio Sekiguchi and Takahiro Hasegawa.” (Doc. 223 at 14 n.8; see also Doc. 204- 26 01 at 49 (“[Defendant] states that Yoshio Sekiguchi and Takahiro Hasegawa negotiated the Supply Agreement with [Plaintiff].”)). It is unclear how Hasegawa would lack personal 27 knowledge as to the materiality of the projections if he was part of the negotiations that led to the signing of the Supply Agreement. At any rate, although the Hasegawa declaration is 28 relevant as to this issue, the other evidence that the Court discussed that is relevant to this issue sufficiently creates a dispute of material fact. The objection is overruled. 1 the Supply Agreement. (Id.). Defendant responds that evidence supports a finding that 2 Defendant did rely on the projections. (Doc. 189 at 16–17; Doc. 193 at 5–6, 24). 3 A party relies on a misrepresentation when the party acts or refrains from acting 4 based on it. See Sw. Non-Profit Hous. Corp. v. Nowak, 322 P.3d 204, 212 ¶ 29 (Ariz. Ct. 5 App. 2014). Defendant asserts that it acted on the alleged misrepresentation because it 6 “spent a large amount of money out of pocket” that resulted in losses. (Doc. 189 at 17). 7 Defendant also points to the fact that it agreed to resource the development of the SJ 8 MOSFET and that it agreed to take on fifty percent of the cost of producing the “mask sets” 9 of the SJ MOSFETs. (Id. (citing Doc. 190-1 at 5–6 (§§ 4.0 and 4.2.1 of the Supply 10 Agreement))). In fact, at thirty thousand feet, Defendant’s claim is that it would not have 11 entered into the Supply Agreement with Plaintiff and sustained monetary losses but for the 12 alleged misrepresentations as to the projections of monthly demand. This fact alone creates 13 a dispute as to whether Defendant relied on the alleged misrepresentation. Cf. Int’l 14 Franchise Sols. LLC v. BizCard Xpress LLC, No. CV13-0086 PHX DGC, 2013 WL 15 2152549, at *3 (D. Ariz. May 16, 2013) (denying motion to dismiss on fraud claim where 16 the allegation was that party agreed to do business and lost money as a result of 17 misrepresentation). And, nothing indicates that Defendant did not believe the projections, 18 which would show it did not rely on the projections. See Sw. Non-Profit Hous. Corp., 322 19 P.3d at 212 ¶ 29; (cf. Doc. 191 at 2–5). Simply put, none of Plaintiff’s arguments overcome 20 the fact that Defendant has evidence that it did rely on the projections of monthly demand 21 when it decided to enter the Supply Agreement with Plaintiff. Thus, there is a dispute of 22 material fact on this issue as well. 23 v. Right to Rely on Representation 24 Finally, Plaintiff contends that Defendant cannot establish that Defendant had a 25 right to rely on Plaintiff’s alleged representation because it “cannot establish that such 26 forecasts are representations of fact to be relied upon.” (Doc. 153 at 9). Plaintiff notes that 27 Defendant “has admitted that the ‘Supply Agreement contains no representations, 28 promises, or guarantees by [Plaintiff] as to demand or minimum monthly purchases.’” (Id. 1 (quoting Doc. 60 at 18)). As the Court has noted, a promise of future performance is 2 generally not an actionable basis for fraud unless the party that made the promise had no 3 intent to perform. See supra Section III.a.1.B.i. 4 Here, Defendant has offered evidence to create a dispute of material fact as to 5 whether Plaintiff never intended to perform its promise. Therefore, the Court cannot say 6 that Defendant cannot establish its right to rely on Plaintiff’s alleged representation because 7 that question must be answered by the jury. Lerner, 322 P.3d at 914 ¶¶ 15–16; cf. Staheli 8 v. Kauffman, 595 P.2d 172, 175 (1979) (in division) (noting there is no right to rely on 9 promises, expressions of intent, or statements regarding future events “unless such were 10 made with the present intention not to perform”). 11 As indicated above, Defendant offers evidence that supports a reasonable inference 12 that Plaintiff knew it would never reach the monthly demand it was projecting and that 13 Plaintiff’s alleged representations of forecasted monthly demand were material to 14 Defendant’s decision to agree to the provisions of the Supply Agreement.9 “Reliance is 15 justifiable where the misrepresentation is material.” St. Joseph’s Hosp. & Med. Ctr. v. 16 Reserve Life Ins., 742 P.2d 808, 817 (Ariz. 1987) (holding that party reasonably relied on 17 misrepresentation because misrepresentation was material); see Maki v. N. Sky Partners II 18 LP, No. CV-15-02625-PHX-SRB, 2017 WL 10128386, at *6 (D. Ariz. Dec. 11, 2017) 19 (“Yet justifiability is effectively subsumed into the materiality inquiry.” (quoting Sitton v. 20 Deutsche Bank Nat’l Tr. Co., 311 P.3d 237, 243 ¶ 31 (Ariz. Ct. App. 2013))). Plaintiff has 21 22 23 9 Plaintiff objects to statements in Susumu Nukii’s declaration (Doc. 192) and Takahiro 24 Hasegawa’s declaration (Doc. 191) relating to whether Defendant took part in creating the forecasts that were incorporated into the Supply Agreement. (Doc. 223 at 13–14 n.8). 25 Plaintiff appears to argue that Nukii and Hasegawa lack personal knowledge on this subject. (Id.) But, Plaintiff indicates that Defendant identified Hasegawa as being a 26 participant in the negotiation of the Supply Agreement. (Id.). Because Plaintiff effectively acknowledges Hasegawa took part in the Supply Agreement negotiations, the objection to 27 Hasegawa’s statements is overruled, and thus, the objection to Nukii’s statements on this topic is rendered moot for purposes of deciding Plaintiff’s Motion for Partial Summary 28 Judgment (Doc. 153). 1 not shown, based on the undisputed material facts, that Defendant cannot establish at trial 2 that it had a right to rely on Plaintiff’s alleged representations.10 3 Accordingly, because there are genuine disputed issues of material fact on the 4 elements of Defendant’s fraud counterclaim, Plaintiff’s motion for summary judgment on 5 this counterclaim is denied.11 6 2. Breach of Contract Counterclaims 7 Plaintiff asserts it is entitled to summary judgment on Defendant’s breach of 8 contract counterclaims. (Doc. 153 at 13–21). Defendant alleges that Plaintiff breached the 9 Supply Agreement by failing to make timely payments (“Late Payment Counterclaim”). 10 (Doc. 28 at 47–48). Defendant also alleges Plaintiff breached the Supply Agreement by 11 failing to pay invoices (“No Payment Counterclaim”). (Id. at 48–49). 12 Preliminarily, the Supply Agreement provides that New York law governs the 13 Supply Agreement. (Doc. 59-1 at 9 (§ 9.2 of the Supply Agreement)). To prevail on a 14 breach of contract action under New York law, a plaintiff must show “the existence of a 15 contract, the plaintiff’s performance thereunder, the defendant’s breach thereof, and 16 resulting damages.” Harris v. Seward Park Hous. Corp., 913 N.Y.S.2d 161, 162 (App. 17 Div. 2010). 18 A. Late Payment Counterclaim 19 Plaintiff makes three general arguments in support of its claim that it is entitled to 20 summary judgment on the Late Payment Counterclaim. First, Plaintiff argues that

21 10 Plaintiff also seems to argue that Defendant did not have a right to rely on the projections in deciding whether to enter the Supply Agreement because Defendant understood the 22 projections of monthly demand were not guarantees. (Doc. 153 at 9–10; Doc. 193 at 6–7). Plaintiff then cites a bevy of quotes from discovery that it suggests support this proposition. 23 (Doc. 153 at 9–10; Doc. 193 at 6–8). Though it may be understood that Plaintiff’s projections were not guarantees, this undisputed fact does not prevent Defendant from 24 establishing that Plaintiff’s projections were representations, and, if so, whether Defendant had a right to rely on them. See Anderson, 477 U.S. at 247–48; cf. Meinhold v. U.S. Dep’t 25 of Def., 34 F.3d 1469, 1475 n.4 (9th Cir. 1994) (concluding that a dispute of fact was not material when it was not dispositive to court’s legal analysis). 26 11 Plaintiff did not raise arguments as to whether Defendant can establish the fourth, fifth, 27 sixth, or ninth element of its fraud claim. As such, Plaintiff has failed to shift the burden to Defendant on these elements because Plaintiff, as the movant, must show that the 28 Defendant, as the nonmovant, will be unable to establish a genuine issue of material fact as to these elements. 1 Defendant committed material breaches of the Supply Agreement that excused Plaintiff 2 from further performance, including having to pay any invoice on time. (Doc. 153 at 13– 3 16). Second, Plaintiff contends that it did not breach the Supply Agreement as a matter of 4 law based on the undisputed facts. (Id. at 16–17). Third, Plaintiff claims Defendant waived 5 the right to timely payment. (Id. at 17–19). The Court evaluates each argument in turn. 6 i. Material Breach 7 If a party commits a material breach, the other party is excused from further 8 performance. See Hadden v. Consol. Edison Co. of N.Y., 312 N.E.2d 445, 449 (N.Y. 1974); 9 Markham Gardens L.P. v. 511 9th LLC, 954 N.Y.S.2d 811, 815 (Sup. Ct. 2012). But, when 10 a material breach occurs, the party must elect to either terminate the contract or to continue 11 under it. Awards.com, LLC v. Kinko’s, Inc., 834 N.Y.S.2d 147, 156 (App. Div. 2007). If it 12 chooses the latter, “it loses its right to terminate the contract because of the default.” Id. 13 A breach is material when it is “so substantial that it defeats the object of the parties 14 in making the contract.” In re Dissolution of Ongweoweh Corp., 14 N.Y.S.3d 212, 213 15 (App. Div. 2015); Residential Holdings III LLC v. Archstone-Smith Operating Tr., 920 16 N.Y.S.2d 349, 352 (App. Div. 2011) (stating that a breach is not material unless “the act 17 failed to be performed [goes] to the root of the contract or . . . render[s] the performance of 18 the rest of the contract a thing different in substance from that which was contracted for” 19 (alterations in original)). Whether a breach is material is generally a question of fact for the 20 jury that precludes summary judgment. See F. Garofalo Elec. Co. v. N.Y. Univ., 754 21 N.Y.S.2d 227, 230 (App. Div. 2002); see also Bear, Stearns Funding, Inc. v. Interface 22 Group-Nevada, Inc., 361 F. Supp. 2d 283, 295 (S.D.N.Y. 2005) (“[T]he question of 23 materiality of breach is a mixed question of fact and law—usually more of the former and 24 less of the latter—and thus is not properly disposed of by summary judgment.”). Therefore, 25 because Plaintiff suggests that Defendant’s breach of contract claim is barred due to 26 Defendant’s alleged material breaches of the Supply Agreement, which is a question of 27 fact that the Court cannot determine on summary judgment, this argument fails. 28 1 ii. No Breach 2 Plaintiff also contends that Defendant cannot show breach of the Supply Agreement. 3 There are thirty-three invoices that Defendant alleges Plaintiff did not pay on time that 4 serve as the basis of its breach of contract claim for late payments. 5 Plaintiff argues that one of the invoices that it did not pay on time “is not covered 6 by the Supply Agreement” because it “relates to cavity lid wafer process,” which is not an 7 SJ MOSFET product. (Doc. 153 at 16). Although Defendant agrees that this invoice relates 8 to cavity lid wafer process, (Doc. 193 at 11), Defendant asserts that this invoice is 9 nonetheless covered by the Supply Agreement but provides no evidence to support this 10 assertion. (Doc. 189 at 20). The Court finds that Defendant did not carry its burden in 11 rebutting Plaintiff’s argument that the Supply Agreement does not apply to this invoice 12 (No. MD140611OM150514). Defendant, as the nonmovant, “must do more than simply 13 show that there is some metaphysical doubt as to the material facts” by “com[ing] forward 14 with ‘specific facts showing that there is a genuine issue for trial.’” Matsushita Elec. Indus. 15 Co., 475 U.S. at 586–87 (quoting Fed. R. Civ. P. 56(e) (1963)). Accordingly, the Court 16 grants summary judgment on this issue in favor of Plaintiff. 17 Plaintiff also claims it did not breach the Supply Agreement by failing to pay Invoice 18 No. MD140401-2. (Doc. 153 at 16). Plaintiff specifically argues that this invoice relates to 19 development costs and that Defendant is required to pay all development costs under 20 § 4.2.1 of the Supply Agreement, which relieved Plaintiff of any duty to pay Invoice No. 21 MD140401-2 under the Supply Agreement. (Id.). However, it is unclear what “fully 22 resource the development of all generations of Super Junction MOSFETs” means under 23 § 4.2.1 of the Supply Agreement. (See Doc. 59-1 at 6). In other words, this provision is 24 ambiguous. Indeed, neither party even attempted to provide the Court with an argument as 25 to whether the provision applies to Invoice No. MD14040401-2 based on a reasonable 26 construction of § 4.2.1.12 Thus, there is a dispute of material fact as to whether Plaintiff

27 12 Section 4.2.1 of the Supply Agreement is also at issue in Defendant’s Motion for Partial Summary Judgment (Doc. 229). The parties do offer conflicting interpretations of the 28 provision within that discussion, as will be discussed. Infra Section III.b.1.C. 1 breached the Supply Agreement by not paying Invoice No. MD140401-2. See Five Corners 2 Car Wash, Inc. v. Minrod Realty Corp., 20 N.Y.S.3d 578, 579 (App. Div. 2015). 3 Finally, Plaintiff contends it was not required to pay for any late paid invoices where 4 the invoice is for a lot that Plaintiff asserts it was not required to pay for under the Supply 5 Agreement. (Doc. 153 at 16–17). Specifically, Plaintiff argues that the Supply Agreement 6 required that Defendant meet a target yield13 of eighty percent for each lot and that certain 7 lots did not meet this alleged requirement. (Id.). Thus, Plaintiff claims it does not need to 8 pay invoices relating to the lots that did not meet the target yield requirement. (See id.). 9 Defendant responds that there was no agreement that it needed to meet an eighty-percent 10 target yield, and even if there was, such a requirement would not relieve Plaintiff of its 11 duty to pay. (Doc. 189 at 20–21; Doc. 191 at 1–2 (“There was never any agreement reached 12 on the meaning of ‘Target Yield[]’ . . . .”)). 13 The parties therefore dispute whether there was an agreement on target yield, 14 (Doc. 193 at 16–17), which precludes the Court from granting summary judgment. And, 15 even if Plaintiff is correct that there was an agreement as to target yield, as noted above, a 16 party is only relieved from performance of a contractual provision if the other party 17 commits a material breach. See supra Section III.a.2.A.i. Under New York law, Plaintiff is 18 not relieved from timely payment of invoices unless Defendant’s failure to produce lots 19 with a target yield of eighty percent—assuming that this requirement exists under the 20 Supply Agreement—constituted a material breach, which creates another dispute of 21 material fact that the Court cannot answer on summary judgment. See supra Section 22 III.a.2.A.i. In short, Plaintiff, as the movant, has not carried its burden of establishing that 23 there are no disputes of material fact relating to whether Defendant has failed to establish 24 breach of the Supply Agreement for invoices that relate to SJ MOSFET lots that Plaintiff 25 claims were below eighty-percent target yield. 26 27 13 The Supply Agreement defines “Target Yield” as “an average number of good Products 28 resulting from production wafers which shall be agreed between [Plaintiff] and [Defendant].” (Docket 59-1 at 4 (§ 1.0 of the Supply Agreement)). 1 iii. Waiver 2 The Court also rejects Plaintiff’s argument that Defendant waived the requirement 3 for timely payment “by repeatedly and knowingly accepting late payments from [Plaintiff] 4 over an extended period of time.” (Doc. 153 at 17–18). The Supply Agreement specifies, 5 “No term or condition of this A[greement] shall be deemed waived unless such a waiver is 6 in a writing executed by the Party against whom the waiver is sought to be enforced.” (Doc. 7 59-1 at 9 (§ 9.1 of the Supply Agreement)). Non-waiver clauses are “uniformly enforced” 8 under New York law. Awards.com, LLC, 834 N.Y.S.2d at 155–56 (holding that contractual 9 provision specifying there was no waiver of a provision of the contract unless the provision 10 was waived in writing meant that acceptance of late payments did not effectuate a waiver 11 of the requirement for timely payments). Plaintiff has offered no evidence that Defendant 12 waived timely payment in writing. Moreover, whether a party waived a contractual 13 provision is a question of fact for the jury because the party asserting waiver must show 14 that there was an intent to waive. See Fundamental Portfolio Advisors, Inc. v. Tocqueville 15 Asset Mgmt., L.P., 850 N.E.2d 653, 658 (N.Y. 2006). Thus, Plaintiff has not shown it is 16 entitled to summary judgment on the Late Payment Counterclaim as a result of waiver. 17 B. No Payment Counterclaim 18 Plaintiff also contends that it is entitled to summary judgment on the No Payment 19 Counterclaim for invoices Defendant alleges Plaintiff did not pay. (Doc. 153 at 19–21). 20 First, the Court again denies summary judgment to Plaintiff on its argument that it was not 21 required to pay these invoices because the lots were below the eighty-percent target yield 22 it claims Defendant was required to meet or because Defendant did not timely produce the 23 lots. Supra Section III.a.2.A.ii; (see Doc. 153 at 19–20). Second, Plaintiff’s argument that 24 it is entitled to summary judgment because Defendant said Plaintiff did not have to pay 25 these invoices fails as well. (Doc. 153 at 19–21). Plaintiff states that Defendant agreed that 26 Plaintiff would not have to pay for these two invoices if Plaintiff destroyed the lots. (Id. at 27 20). No proof has been offered that Plaintiff destroyed the lots. (See id. at 19–21; Doc. 153- 28 1 21 at 8–11; Doc. 189 at 22; Doc. 193 at 19). Thus, there are disputed issues of material fact 2 that preclude summary judgment on the No Payment Counterclaim. 3 3. Conclusion 4 Accordingly, the Court grants summary judgment in Plaintiff’s favor on 5 Defendant’s breach of contract counterclaim for Invoice No. MD140611OM150514 for 6 the reason specified above. The Court denies summary judgment as to the rest of 7 Defendant’s counterclaims. 8 b. Defendant’s Motion for Partial Summary Judgment 9 Defendant seeks summary judgment on Plaintiff’s claims for lost profits damages, 10 lost business value damages, and lost development support cost damages which Plaintiff 11 asserts arise from its breach of contract claim. (Doc. 229 at 9–22). Defendant also asserts 12 summary judgment must be entered on Plaintiff’s fraud claim. (Id. at 22). 13 1. Breach of Contract Claim 14 Defendant only asserts that certain types of damages Plaintiff seeks for its breach of 15 contract claim are unavailable, not that summary judgment is appropriate on Plaintiff’s 16 breach of contract claim in toto. The Court will evaluate each type of damages Defendant 17 asserts is unavailable here in turn. 18 As the Court has noted, New York law governs the Supply Agreement. See supra 19 Section III.a.2. There are two overarching classifications of damages that can arise from a 20 breach of contract under New York law. First, “the nonbreaching party may recover general 21 damages which are the natural and probable consequence of the breach.” Yenrab, Inc. v. 22 794 Linden Realty, LLC, 892 N.Y.S.2d 105, 110 (App. Div. 2009). Second, a party may 23 recover “‘special’ or extraordinary damages that do not flow directly from the breach.” Id. 24 A party seeking special damages must “plead that the damages were foreseeable and within 25 ‘the contemplation of the parties at the time the contract was made.’” Id. (quoting Am. List 26 Corp. v. U.S. News & World Report, 549 N.E.2d 1161, 1164 (N.Y. 1989)). 27 28 1 A. Lost Profits Damages Claim 2 “A claim for lost profits is generally a claim for special or extraordinary damages.” 3 Yenrab, Inc., 892 N.Y.S.2d at 110. Therefore, lost profits must be foreseeable, and the party 4 must show that lost profits were in “the contemplation of the parties at the time the contract 5 was made.” Id. Moreover, the party must establish lost profits with reasonable certainty. 6 Ashland Mgmt. Inc. v. Janien, 624 N.E.2d 1007, 1011 (N.Y. 1993); Kenford Co. v. Erie 7 County, 493 N.E.2d 234, 235 (N.Y. 1986) (per curiam). Therefore, the Court must evaluate 8 whether Plaintiff’s lost profits damages claim is capable of proof with reasonable certainty 9 and that lost profits were foreseeable from breach and that they were within the 10 contemplation of the parties when the Supply Agreement was made. Kenford Co., 493 11 N.E.2d at 235; see also Alaska Rent-A-Car, Inc. v. Avis Budget Grp., Inc., 738 F.3d 960, 12 970 (9th Cir. 2013) (“Under New York law, in order to recover lost profits [the plaintiff] 13 must prove that ‘(1) the damages were caused by the breach; (2) the alleged loss must be 14 capable of proof with reasonable certainty, and (3) the particular damages were within the 15 contemplation of the parties to the contract at the time it was made.’”). 16 A party must show lost profit damages are “reasonably certain and directly traceable 17 to the breach, not remote or the result of other intervening causes.” Kenford Co., 493 18 N.E.2d at 235. Lost profit damages cannot be “merely speculative, possible or imaginary.” 19 Id. Generally, because a new business does not have “a reasonable basis of experience,” a 20 new business seeking lost profits must establish them under “a stricter standard.” See id.; 21 Blinds to Go (U.S.), Inc. v. Times Plaza Dev., L.P., 931 N.Y.S.2d 105, 108 (App. Div. 22 2011); see also Trademark Research Corp. v. Maxwell Online, Inc., 995 F.2d 326, 332 (2d 23 Cir. 1993) (articulating same standard). This stricter standard requires a new business to 24 “meet a higher evidentiary burden” than an established business. Kidder, Peabody & Co. 25 v. IAG Int’l Acceptance Grp. N.V., 28 F. Supp. 2d 126, 131 (S.D.N.Y. 1998). In other 26 words, “[w]hether a business is a ‘new venture’ or an ongoing operation of course will 27 affect the quantity and quality of evidence relied upon by a plaintiff to prove lost future 28 profits with ‘reasonable certainty’” Washington v. Kellwood Co., No. 05CV10034 MHD, 1 2015 WL 6437456, at *24 (S.D.N.Y. Oct. 14, 2015) (quoting Coastal Aviation, Inc. v. 2 Commander Aircraft Co., 937 F. Supp. 1051, 1066 (S.D.N.Y. 1996)). 3 As such, the first question is whether Plaintiff’s sale of SJ MOSFETs constituted a 4 new business or venture. Plaintiff argues because it had been in business for years at the 5 time of Defendant’s alleged breach, it does not constitute a new business. (See Doc. 306 at 6 9–10). Defendant responds that “New York law requires a track record of profits” in the 7 relevant market to support lost profits or the party is a new business. (Doc. 327 at 7–8). 8 An established business that attempts to enter into a new or different market is a 9 new business. See Blinds to Go (U.S.), Inc., 931 N.Y.S.2d at 108. For example, in Blinds 10 to Go (U.S.), Inc. v. Times Plaza Development, the plaintiff operated a chain of stores. Id. 11 at 107–08. A lease dispute arose between plaintiff and defendant, and plaintiff was left 12 without space to sell its product in a new location that it had not sold in previously. Id. at 13 107. Plaintiff sought lost profit damages it asserted arose from that dispute. See id. The 14 court found that the plaintiff’s assertion that it was attempting “to break into a new market” 15 illustrated it was a new business. See id. at 108; see also Ho Myung Moolsan, Co. v. 16 Manitou Mineral Water, Inc., No. 07 CIV.07483 RJH, 2010 WL 4892646, at *7 n.3 17 (S.D.N.Y. Dec. 2, 2010) (“The critical newness is not of the business itself or of the 18 logistical foundations for sales, but for the attempt to sell a new product.” (citing Aviation 19 Inc., 937 F. Supp. at 1068)). 20 Because Plaintiff was also breaking into a new market, it must be considered a new 21 business. It is undisputed that Plaintiff never sold its SJ MOSFET until July 2011 and that 22 Plaintiff was attempting to enter the Chinese SJ MOSFET market. (Doc. 308 at 33, 36). 23 And importantly, Plaintiff has not offered any proof of a history of profit in the SJ 24 MOSFET market. (Id. at 47). Plaintiff even notes in its Response to the Motion that it “was 25 a new entrant to the SJ MOSFET market.” (Doc. 306 at 14). Thus, just as in Blinds to Go 26 (U.S.), Inc., here, Plaintiff is a new business under New York law because it is breaking 27 into a new market, and the Court must apply the stricter evidentiary standard. 28 1 When a business is new, projections of future profit typically will not be enough to 2 establish reasonable certainty. Kenford Co., 493 N.E.2d at 236. Indeed, in Kenford Co. v. 3 Erie County, the New York Court of Appeals concluded, “despite [a] massive quantity of 4 expert proof” that it found was reliable, the experts’ projections of future profit were not 5 sufficient to establish reasonable certainty as to lost profit damages. Id. The experts based 6 their projections of profits on the following hypothetical scenario: “that the facility was 7 completed, available for use and successfully operated by [the plaintiff] for 20 years, 8 providing professional sporting events and other forms of entertainment, as well as hosting 9 meetings, conventions and related commercial gatherings.” Id. The court held that this type 10 of speculation requiring a “multitude of assumptions” did not establish “proof with 11 reasonable certainty” of lost profits. Id. 12 To establish reasonable certainty, a new business must generally support its lost 13 profits damages claim with evidence of a history of profit or comparison of the new 14 business with other comparable and profitable businesses. See, e.g., Schonfeld v. Hilliard, 15 218 F.3d 164, 173–75 (2d Cir. 2000); Blinds to Go (U.S.), Inc., 931 N.Y.S.2d at 108–09; 16 Vasquez v. Gesher Realty Corp., 985 N.Y.S.2d 819, 821 (App. Term. 2014) (per curiam). 17 Moreover, a new business must account for “general market risks” that might negatively 18 affect its future profits, such as: “(1) the entry of competitors; (2) technological 19 developments; (3) regulatory changes; or (4) general market movements.” Schonfeld, 218 20 F.3d at 174–75; see also Trademark Research Corp., 995 F.2d at 333 (“On this record, the 21 future of the CD-ROM market is subject to too many uncertain variables to project lost 22 profits with the requisite certainty.”). 23 Plaintiff has offered insufficient proof to show lost profit damages with reasonable 24 certainty. Plaintiff’s principal support for lost profits is the projections of its president, Sam 25 Anderson (“Anderson”), and its experts Walter Bratic (“Bratic”) and Uzi Sasson 26 (“Sasson”).14 (Doc. 306 at 12–14). But, for a new business, like Plaintiff, projections are 27 14 Plaintiff also apparently offers the fact that its business valuation expert, Greg Mischou, 28 “so believed in [Plaintiff] and its products that he spent years working to help the company raise capital with no guarantee of any compensation unless he was successful” to show 1 generally not sufficient under New York law to establish lost profits with reasonable 2 certainty. At bottom, if the “massive quantity of expert proof” behind the projections in 3 Kenford Co. was not enough for the New York Court of Appeals to find reasonable 4 certainty of lost profits there, then the opinion of Anderson and the expert testimony that 5 relied upon it certainly cannot establish lost profits with reasonable certainty here. 6 Indeed, Plaintiff has failed to show a history of lost profits or any comparison with 7 the profitability of other like ventures or businesses. It is undisputed that Plaintiff’s lost 8 profits experts failed to make comparisons between IceMOS and its competitors. Sasson 9 failed to compare IceMOS to its competitors or Plaintiff’s product to any of its competitors’ 10 products. (Doc. 308 at 35–36). Similarly, Bratic did not compare the efficacy of Plaintiff’s 11 product to competitors’ products, its sale resources to competitors, any of its competitor’s 12 entry to the MOSFET marketplace, or how Plaintiff would have competed with its 13 competitors. (Id. at 44). Without a history of profit or evidence showing the profitability of 14 other like-businesses, Plaintiff cannot establish lost profit damages with the reasonable 15 certainty New York law requires for new businesses. 16 It is also unclear if Plaintiff accounted for various factors that could affect its ability 17 to make profit. Plaintiff stated, “a semiconductor-industry sales forecast . . . depends upon 18 actions of third parties beyond the control of the forecaster.” (Doc. 232-22 at 3). Plaintiff 19 went on to say that these third parties include the buyers of the product, competitors who 20 could introduce new products, and new market entrants that could cause Plaintiff to reduce 21 the price for its product. (Id.) Plaintiff also suggested it may be required “to take other 22 actions to preserve customer relationships,” another scenario that could affects its ability 23 to meet its projections. (Id.). Plaintiff noted that economic recession, supply disruptions, 24 and “a myriad of other natural and man-made events” could affect its ability to make a 25 profit on its product as well. (See id. at 4). A party’s failure to account for “general market 26 risks,” such as “(1) the entry of competitors; (2) technological developments; 27 (3) regulatory changes; or (4) general market movements,” precludes a finding of

28 reasonable certainty of lost profits. (Doc. 306 at 14). As the case law above indicates, this fact cannot be proof of Plaintiff’s lost profits claim. 1 reasonable certainty. Schonfeld, 218 F.3d at 174–75. Indeed, in Trademark Research Co., 2 the court concluded the uncertainty in the market and the plaintiff’s failure to account for 3 this uncertainty rendered lost profits damages too uncertain. Similarly here, Plaintiff cannot 4 show the requisite certainty necessary to establish lost profit damages given the uncertainty 5 that the above factors could foster that even Plaintiff recognizes are “beyond [its] control.” 6 (Doc. 232-22 at 3–4). 7 In sum, the Court concludes Plaintiff did not establish lost profit damages with 8 reasonable certainty. As a new business, Plaintiff may not rely solely on projections but 9 instead must offer proof of profitability to establish lost profits with reasonable certainty. 10 Thus, Plaintiff’s lost profit damages claim is simply too speculative to survive Defendant’s 11 summary judgment motion. 12 Nonetheless, Plaintiff argues that it could rely on its projections to establish lost 13 profits damages with reasonable certainty because it has been an established business. 14 (Doc. 306 at 14). Plaintiff contends that Kenford Co. and its progeny turned on the fact 15 that, in those cases, evidence of lost profit “was based on products that never existed or 16 businesses that never operated,” and therefore, Plaintiff should not be classified as a new 17 business. (Id.). Not so. As noted above, when an established company enters into a new 18 market, it must show lost profits under the heightened evidentiary burden that New York 19 law applies to new businesses. See, e.g., Blinds to Go (U.S.), Inc., 931 N.Y.S.2d at 108. 20 But, even if the Court assumes Plaintiff is correct, Plaintiff still must prove lost 21 profit damages with reasonable certainty. Ashland Mgmt. Inc., 624 N.E.2d at 1011 22 (“Whether the claim involves an established business or a new business, however, the test 23 remains the same, i.e., whether future profits can be calculated with reasonable certainty.”). 24 While a party can approximate lost profits damages, the approximation must be “based 25 upon known reliable factors without undue speculation.” Id. at 1010–11 (citations omitted); 26 cf. Uncas Int’l LLC v. Crimzon Rose, Inc., No. 16 CIV. 9610 (JSR), 2017 WL 2839668, at 27 *7 (S.D.N.Y. June 26, 2017) (noting a court can dismiss a claim for lost profit damages 28 where it “would require an unreasonable level of speculation”). “[P]rojections of future 1 profits” based upon assumptions that require “speculation and conjecture” do not establish 2 reasonable certainty of lost profit damages. Louis Hornick & Co. v. Darbyco, Inc., No. 3 12CV5892 (VSB) (DCF), 2015 WL 13745787, at *7–8 (S.D.N.Y. Aug. 19, 2015) (citation 4 omitted) (concluding that plaintiff’s claim for lost profits was not reasonably certain 5 because plaintiff failed to provide any data behind its projections of profit despite plaintiff 6 having “a successful and established product line”), adopted, No. 12-CV-5892 (VSB), 7 2015 WL 9478239 (S.D.N.Y. Dec. 29, 2015). 8 Thus, Plaintiff has failed to establish lost profits with reasonable certainty even if 9 the Court assumes it was not a new business for the same reasons the Court articulated 10 above. Plaintiff has not cited to any reliable evidence in support of its lost profits damages. 11 Its experts’ opinions are laden with assumptions, and Plaintiff has failed to connect any 12 quantifiable data to its projections of lost profits, just like the plaintiff in Louis Hornick & 13 Co., rendering its lost profit damages claim not reasonably certain. As noted above, the 14 principal support for Plaintiff’s lost profits damages is projections, and Plaintiff itself 15 recognizes the numerous factors that are beyond its control that could affect the accuracy 16 of these projections, rendering the projections too speculative to support lost profit 17 damages with reasonable certainty. 18 Plaintiff highlighted Ashland Management at oral argument; however, Ashland 19 Management provides Plaintiff no refuge from the speculativeness of its lost profits claim. 20 Indeed, Ashland Management illustrates exactly why Plaintiff cannot establish its lost 21 profits claim with reasonable certainty. In Ashland Management, the court determined that 22 the projection of future profits there was not only based on the “parties’ carefully studied 23 professional judgments” but also that the company had a “substantial presence” in the 24 market for “several years” and the venture was part of a strategy that had a strong track 25 record, among other things. 624 N.E.2d at 1012. Thus, the projections in Ashland 26 Management were unlike the speculative nature of the projections in Kenford Co., which 27 were marred by “speculative assumptions and few known factors.” Id. (citing Kenford Co., 28 493 N.E.2d at 236). The court made clear that reasonable certainty requires that “damages 1 be capable of measurement based upon known reliable factors without undue speculation.” 2 Id. at 1010. At bottom, the key takeaway from Ashland Management is that a lost profits 3 claim cannot be based on projections of profit that are built on assumptions and speculation. 4 See id. 5 Accordingly, Plaintiff’s claim for lost profits fails under Ashland Management. 6 Plaintiff’s projections of future profit include far too many speculative assumptions and 7 few, if any, known factors to establish its claim with reasonable certainty. Plaintiff has not 8 had a “substantial presence” in the Chinese SJ MOSFET market for years; rather, Plaintiff 9 referred to itself as “a new entrant to the SJ MOSFET market.” (Doc. 306 at 14); see 10 Ashland Mgmt., 624 N.E.2d at 1012. Nor are Plaintiff’s projections based on the reliable 11 track record that helped establish reasonable certainty in Ashland Management. As noted, 12 Plaintiff has failed to show that its SJ MOSFET had a history of profit and Plaintiff 13 recognized the numerous factors beyond its control that could affect its ability to make 14 profit on its product. Thus, Ashland Management shows why Plaintiff’s lost profit claim 15 fails. 16 The newness of the business only affects the quantity and quality of the evidence 17 Plaintiff must offer to establish its lost profits claim. Because Plaintiff has not cited 18 sufficient reliable evidence on which to base its lost profits damages claim, its claim is not 19 based on the reasonable certainty that New York law demands, and summary judgment 20 will be granted in favor of Defendant on this claim. Given this conclusion, the Court need 21 not determine whether these damages were foreseeable or within the contemplation of the 22 parties when the Supply Agreement was formed. 23 B. Lost Business Value Damages Claim 24 Defendant argues that lost business value damages are unavailable because IceMOS 25 was not destroyed, Plaintiff cannot prove lost valuation with reasonable certainty, and that 26 lost business value damages were not within the contemplation of the parties or foreseeable 27 from breach. (Doc. 229 at 18–20). Because the Court concludes that Plaintiff has failed to 28 establish business value damages with reasonable certainty, it need not address whether 1 these damages were within the contemplation of the parties or whether these damages were 2 foreseeable from breach. 3 “[T]he ‘most accurate and immediate measure of damages’” of a new business can 4 be its “market value . . . at the time of breach.” Washington v. Kellwood Co., 714 F. App’x 5 35, 41 (2d Cir. 2017) (ellipsis in original) (citation omitted). Fair market value is usually 6 determined by calculating “capitalization of expected future profits.” 24/7 Records, Inc. v. 7 Sony Music Entm’t, Inc., 566 F. Supp. 2d 305, 317 (S.D.N.Y. 2008); see also Matter of 8 Seagroatt Floral Co., Inc., 583 N.E.2d 287, 290 (N.Y. 1991). Calculating lost business 9 value based on its market value at the time of breach is “inherently less speculative” than 10 measuring damages through lost profits because it is “measured by proof of ‘what a buyer 11 is willing to pay for the chance’ that the business will produce substantial income.” 12 Washington, 714 F. App’x at 41 (quoting Schonfeld, 218 F.3d at 177). However, a party 13 must still show lost business value damages with reasonable certainty because lost business 14 value damages are special damages. Id.; Bi-Economy Mkt., Inc. v. Harleysville Ins. Co. of 15 N.Y., 886 N.E.2d 127, 129–30 (N.Y. 2008). To do so a party must typically offer a history 16 of profit. See 24/7 Records, Inc., 566 F. Supp. 2d at 316–17 (rejecting that past revenue 17 was sufficient to establish lost business value damages with reasonable certainty given that 18 business was unprofitable for a year-and-a-half); S.A.B. Enters., Inc. v. Village of Athens, 19 564 N.Y.S.2d 817, 822 (App. Div. 1991) (rejecting plaintiff’s lost business value damages 20 calculation because it was not based on proof of profit); cf. In re Ford, 312 N.Y.S.2d 966, 21 973 (App. Div. 1970) (noting, in litigation involving valuation of businesses that had been 22 condemned by the government, that basing business valuation on “hypothetical future 23 profits” is too speculative to establish lost business value). 24 /// 25 /// 26 /// 27 /// 28 /// 1 It is undisputed that Plaintiff’s lost business value damages expert, Greg Mischou 2 (“Mischou”),15 based his business valuation on revenue projections for 2017 and 2018 that 3 he made in 2014. (Doc. 308 at 50–52). Mischou’s expert report reads: 4 In summary, in 2014, based on Comparable M&A Transactions analysis, I determined that a conservative financial valuation base for IceMOS in a 5 M&A transaction would be 1.9 to 4.1 times revenue, resulting in a value 6 range based on [Plaintiff]’s financial forecast of [redacted] for 2017 and extending this analysis to [Plaintiff’s] 2018 projected revenues results in a 7 transaction valuation range of [redacted] for 2018. Likewise, based on 8 Comparable Public Company Valuation analysis, a conservative financial valuation base for IceMOS in a company sale would be [redacted] times 9 revenue, resulting in a value range of [redacted] for 2017 and [redacted] for 10 2018. 11 (Doc. 296-4 at 16). Consequently, Plaintiff’s lost business value damages claim is 12 speculative because it is based on hypothetical future revenue without any proof of profit. 13 As discussed supra Section III.b.1.A., it is undisputed that Plaintiff had no history of profit 14 at the time of the alleged breach. (Doc. 308 at 33, 36). Plaintiff points to no other relevant 15 evidence in support of its lost business value damages that overcomes this fact. Thus, 16 because Plaintiff’s lost business value claim is based only on projections and because 17 Plaintiff has failed to establish a history of profit, Plaintiff has not established lost business 18 value damages with reasonable certainty. Accordingly, the Court grants the motion for 19 summary judgment as to Plaintiff’s lost business value damages claim.16 20 21

22 15 Although the Court grants Defendant’s motion to exclude Mischou’s expert testimony (Doc. 296) due to the Court’s conclusion that lost business value damages are unavailable 23 as discussed below, infra Section IV, the Court assumes, for purposes of analyzing whether lost business value damages are available, that Mischou’s expert testimony is reliable. 24 16 Given this conclusion, the Court will not address Defendant’s claim that lost business 25 value damages are only available under New York law where a business is destroyed. (Doc. 229 at 18–19). But see Stanacard, LLC v. Rubard LLC, No. 12 CIV. 5176 (CM), 26 2016 WL 6820741, at *4 (S.D.N.Y. Nov. 10, 2016) (indicating lost business value damages would be available where business was “almost completely destroyed”); Kenneth M. 27 Kolaski & Mark Kuga, Measuring Commercial Damages via Lost Profits or Loss of Business Value: Are these Measures Redundant or Distinguishable?, 18 J.L. & Comm. 1, 28 5 n.8 (1998) (noting business value damages may be available where business was “permanently damaged”). 1 C. Lost Development Support Damages Claim 2 Defendant asserts that Plaintiff’s claim for lost development support damages are 3 unavailable because: (1) Plaintiff has failed to show any damage, (2) lost development 4 support damages were not foreseeable, and (3) Plaintiff has not offered proof that shows 5 lost development support damages with reasonable certainty. (Doc. 229 at 20). Plaintiff 6 responds that there is a genuine issue of material fact as to whether Defendant “was 7 contractually obligated to provide developmental support for various generations of the SJ 8 MOSFET.” (Doc. 306 at 21). Plaintiff’s claim for lost development support damages is 9 grounded in a provision in the Supply Agreement that provides, “[Defendant] agrees to 10 fully resource the development of all generations of Super Junction MOSFETs as indicated 11 in Exhibit B2, through the duration of this A[greement].” (Doc. 59-1 at 6 (§ 4.2.1 of the 12 Supply Agreement)). 13 If a contract’s language is ambiguous, there is a material dispute of fact that the 14 court cannot resolve on a motion for summary judgment. Five Corners Car Wash, Inc., 20 15 N.Y.S.3d at 579. Whether a contract’s language is ambiguous must be determined by the 16 court. See Amusement Bus. Underwriters, a Div. of Bingham & Bingham, Inc. v. Am. Int’l 17 Grp., Inc., 489 N.E.2d 729, 732 (N.Y. 1985). A contract is ambiguous “when specific 18 language is ‘susceptible of two reasonable interpretations.’” Ellington v. EMI Music, Inc., 19 21 N.E.3d 1000, 1003 (N.Y. 2014) (citation omitted). 20 Defendant asserts that the phrase “fully resource” merely refers to Defendant’s 21 obligations as a foundry, not that Defendant must pay for development support costs. 22 (Doc. 327 at 18). Plaintiff responds that “fully resource” could include development 23 support costs. (Doc. 306 at 19). Thus, Plaintiff claims there is a genuine issue of material 24 fact that precludes summary judgment. (Id.). Plaintiff also contends that whether these 25 development support costs are general or special damages is a question of fact that is not 26 properly before the Court on a motion for summary judgment. (Id. at 19–20). 27 “Resource” means “[t]o provide or supply with resources.” Resource, Oxford 28 English Dictionary (3d ed. 2010). “Resources” are “[s]tocks or reserves of money, 1 materials, people, or some other asset, which can be drawn on when necessary.” Resources, 2 Oxford English Dictionary, supra. Given these definitions, Plaintiff’s interpretation, based 3 on the text of § 4.2.1 of the Supply Agreement, is not foreclosed as a matter of law because 4 “to resource” includes providing monetary support when necessary. As such, there is a 5 genuine issue of material fact because the term “fully resource” is ambiguous. 6 Additionally, just as Plaintiff suggests, this genuine issue of material fact precludes 7 the Court from deciding whether Plaintiff’s claimed development support damages are 8 general or special. If Plaintiff’s interpretation of the provision prevails, then it may be that 9 lost development costs are the natural and probable consequence of breach of the Supply 10 Agreement. Yenrab, Inc., 892 N.Y.S.2d at 110. Defendant’s criticism that Plaintiff has not 11 offered sufficient evidentiary support for the specific amount of damages Plaintiff claims 12 as its lost development support costs cannot be resolved on a motion for summary 13 judgment. See Anderson, 477 U.S. at 248 (stating “[a]ny proof or evidentiary requirements 14 imposed by the substantive law are not germane” to the materiality analysis). 15 In short, because there is a genuine issue of material fact as to what Defendant’s 16 obligations under the Supply Agreement were as to development support costs, the Court 17 cannot grant summary judgment on Plaintiff’s claim for these damages. 18 2. Fraud Claim 19 Defendant also moves for summary judgment on Plaintiff’s fraud claim. (Doc. 229 20 at 22). Defendant argues that the fraud claim is barred by the economic loss doctrine 21 because the subject matter of Plaintiff’s fraud claim relates only to issues regarding the 22 Supply Agreement. (Id.). Plaintiff responds that the economic loss doctrine does not apply 23 here because it asserts the doctrine is generally inapplicable to fraud claims and because it 24 claims its “damages directly relate to losses caused by fraudulent conduct that is unrelated 25 to [Defendant]’s performance of the Supply Agreement.” (Doc. 306 at 21–23).17

26 17 Plaintiff’s Response violated District of Arizona Local Rule of Civil Procedure 7.2(e)(1), which provides that a response may only be seventeen pages. Plaintiff’s brief is eighteen 27 pages. Although Defendant argues that the Court should strike the entirety of Plaintiff’s argument on why the economic loss doctrine does not apply here, (Doc. 327 at 19–20), the 28 Court has wide discretion on whether to sanction a party for violation of Local Rule 7.2(e). See Christian v. Mattel, Inc., 286 F.3d 1118, 1129 (9th Cir. 2002). The Court finds no 1 As the Court previously noted, Arizona law applies to Plaintiff’s fraud claim. (See 2 Doc. 25 at 19–20). Under Arizona law, the economic loss doctrine precludes common law 3 tort actions that seek “pecuniary damage[s] not arising from injury to the plaintiff’s person 4 or from physical harm to property.” Sullivan v. Pulte Home Corp., 306 P.3d 1, 3 ¶ 8 (Ariz. 5 2013) (alteration in original) (citation omitted). Thus, a contracting party is limited to 6 contractual remedies for the recovery of purely economic loss that is not accompanied by 7 physical injury to persons or other property. Flagstaff Affordable Hous. Ltd. P’ship v. 8 Design All., Inc., 223 P.3d 664, 667 ¶ 12 (Ariz. 2010). “Economic loss” is “pecuniary or 9 commercial damage, including any decreased value or repair costs for a product or property 10 that is itself the subject of a contract between the plaintiff and defendant, and consequential 11 damages such as lost profits.” Id. ¶ 11. 12 The rationale behind the economic loss doctrine is that contract law better protects 13 a party’s expectations while tort law is designed to protect the safety of persons and 14 property. See Gilbert Unified Sch. Dist. No. 41 v. CrossPointe, LLC, No. CV 11-00510- 15 PHX-NVW, 2012 WL 1564660, at *4–5 (D. Ariz. May 2, 2012) (citing Flagstaff 16 Affordable Hous. Ltd. P’ship, 223 P.3d at 667 ¶¶ 11–12). To determine whether the 17 economic loss doctrine applies, the court must analyze “whether the facts preponderate in 18 favor of the application of tort law or commercial law exclusively or a combination of the 19 two.” Salt River Project Agric. Improvement & Power Dist. v. Westinghouse Elec. Corp., 20 694 P.2d 198, 210 (Ariz. 1984). When the allegations underlying a tort claim “are 21 inseparable from the essence of the contractual agreement,” the court should apply contract 22 law rather than tort law because the facts preponderate in favor of applying contract law. 23 CIT Fin. LLC v. Treon, Aguirre, Newman & Norris PA, No. CV-14-00800-PHX-JAT, 2016 24 WL 6610604, at *5 (D. Ariz. Nov. 9, 2016) (holding plaintiff’s claim was barred by 25 economic loss doctrine because the alleged misrepresentations at the foundation of the 26 27 sanction is warranted though the Court warns Plaintiff that future rule violations may result 28 in sanctions. See Kimoto v. McDonald’s Corp., No. CV063032PSGFMOX, 2007 WL 9711198, at *2 n.1 (C.D. Cal. July 5, 2007). 1 plaintiff’s tort claim were “inseparable from the essence of the contractual agreement”); 2 Gilbert Unified Sch. Dist. No. 41, 2012 WL 1564660, at *4–6 (same). 3 Preliminarily, Plaintiff appears to contend that fraud claims are exempt from the 4 economic loss doctrine. (See Doc. 306 at 21–22 (“[T]he ELR should not apply simply 5 because, as a matter of necessity, damages incurred for fraud ‘will relate to the subject of 6 the parties’ contract.’” (quoting Jes Solar Co. v. Matinee Energy, Inc., No. CV 12-626 7 TUC DCB, 2015 WL 10943562, at *5 (D. Ariz. Nov. 2, 2015)))). But, the cases Plaintiff 8 cites do not stand for the proposition that a fraud claim is never barred by the economic 9 loss doctrine. For example, in Jes Solar Co. v. Matinee Energy, Inc., the plaintiffs 10 specifically alleged that the defendants there “never intended to perform on the contracts.” 11 2015 WL 10943562, at *5. Therefore, the Jes Solar Co. court found that the facts there 12 preponderated in favor of applying tort law because the plaintiffs would not have expected 13 the defendants to have no intention of performing the contracts. See id. No such claim is 14 presented here. Arizona law does not otherwise provide for a fraud exception to the 15 economic loss doctrine. See, e.g., CIT Fin. LLC, 2016 WL 6610604, at *5 (concluding 16 fraud claim was barred by economic loss doctrine). 17 The economic loss doctrine bars Plaintiff’s fraud claim here because the essence of 18 Plaintiff’s breach of contract claim and fraud claim are the same. In short, each of 19 Plaintiff’s allegations relating to Defendant’s alleged fraudulent misrepresentations 20 concern issues regarding Defendant’s performance of various provisions of the Supply 21 Agreement. (Doc. 59 at 35–38). As such, like CIT Finance LLC, Plaintiff’s fraud claim is 22 inseparable from its breach of contract claim, and thus, the facts preponderate in favor of 23 applying contract law. Moreover, the policy considerations underlying the economic loss 24 doctrine identified above also weigh in favor of applying the doctrine here. Both Plaintiff 25 and Defendant are sophisticated parties that had equal bargaining power, and thus, each 26 party could negotiate and bargain to order their contractual relationship and allocate the 27 risks of breach according to their preferences. See Gilbert Unified Sch. Dist. No. 41, 2012 28 WL 1564660, at *4–5. As a result, there are contractual remedies available to Plaintiff 1 should Plaintiff show Defendant did not perform its end of the bargained-for Supply 2 Agreement. The fact that Plaintiff seeks punitive damages does not affect this analysis. See 3 CIT Fin., 2016 WL 6610604, at *5–6. Consequently, the facts here preponderate in favor 4 of applying contract law; thus, Plaintiff’s fraud claim is barred by the economic loss 5 doctrine. 6 3. Conclusion 7 Accordingly, the Court grants Defendant’s Motion for Partial Summary Judgment 8 (Doc. 229) as to Plaintiff’s lost profits claim, lost business value claim, and its fraud claim 9 (and thus its prayer for punitive damages as well (Doc. 59 at 38)). The Court denies the 10 Motion as to Plaintiff’s development support costs claim. The Court clarifies that this Order 11 does not address any claim for general damages arising from Plaintiff’s breach of contract 12 claim. 14 As noted above, also pending before the Court is Defendant’s Motion to Preclude 15 Testimony of Plaintiff’s Expert Greg Mischou (Doc. 296). 16 A party seeking to offer an expert opinion must show that the opinion satisfies the 17 requirements set forth by Federal Rule of Evidence 702 (“Rule 702”). Rule 702 requires 18 that the court “ensure that any and all scientific testimony or evidence admitted is not only 19 relevant, but reliable.” See Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589 (1993). 20 To be relevant, an expert’s testimony must fit the case. See id. at 591. 21 Mischou’s expert testimony regarding Plaintiff’s lost business value damages is 22 now irrelevant in light of the Court’s decision that these damages are unavailable. See supra 23 Section III.b.1.B. Plaintiff does not identify any other relevant issue Mischou’s expert 24 testimony will be offered for. (Doc. 324 at 18–20 (stating that Mischou was “retained 25 merely” to opine on lost business value damages)). Nor is it apparent, based on Mischou’s 26 expert report, that his testimony could be offered for any other relevant issue. (See Doc. 27 296-4 at 4 (Mischou’s report) (noting that Mischou was “asked to consider and provide 28 [his] opinions regarding the potential value [Plaintiff] would have been able to obtain from 1 a merger and acquisition or company sale” absent alleged breaches of the Supply 2 Agreement)). As such, Defendant’s motion to exclude Mischou as an expert is granted 3 because his expert testimony is irrelevant, and thus, not fit for this case.18 5 Plaintiff and Defendant have filed various motions to seal in connection with the 6 partial summary judgment motions (Docs. 153; 229) and Defendant’s motion to exclude 7 Mischou from offering expert testimony (Doc. 296). (See Docs. 194; 228; 304; 309; 321; 8 323; 345; 346). Because review of the unredacted materials was unnecessary to the Court’s 9 resolution of these motions, the requests to file unredacted versions of these materials into 10 the record are denied as unnecessary. See Maui Elec. Co. v. Chromalloy Gas Turbine, LLC, 11 No. CIV. 12-00486 SOM, 2015 WL 1442961, at *16–17 (D. Haw. Mar. 27, 2015). All 12 documents filed lodged under seal will thus remain lodged under seal. 13 VI. CONCLUSION19 14 Based on the foregoing, 15 IT IS ORDERED that Plaintiff’s Motion for Partial Summary Judgment (Doc. 153) 16 is GRANTED IN PART and DENIED IN PART. The Motion is GRANTED as to 17 Defendant’s breach of contract counterclaim for payment of Invoice No. 18 MD140611OM150514. The Motion is DENIED as to Defendant’s fraud counterclaim, the 19 Defendant’s Late Payment Counterclaim relating to the thirty-two other invoices (i.e., each 20 invoice other than Invoice No. MD140611OM150514), and Defendant’s No Payment 21 Counterclaim. 22 18 Although the Court had previously indicated that granting Defendant’s Motion for Partial 23 Summary Judgment on the issue of lost profits damages could be a ground to exclude the expert testimony of Bratic and Sasson, (Doc. 343 at 1 n.1), the parties’ briefing on 24 Defendant’s motions to exclude Bratic and Sasson did not discuss the other issues that Bratic and Sasson have opined on. (See Doc. 293 (motion to exclude Bratic); Doc. 299 25 (motion to exclude Sasson)). Upon further review of Bratic’s expert report (Doc. 293-1) and Sasson’s expert report (Doc. 299-1), the Court finds that the expert testimony of Bratic 26 and Sasson may be relevant despite the unavailability of lost profit damages. Accordingly, the Court will rule on Defendant’s motions to exclude Bratic and Sasson in a separate order 27 to follow.

28 19 To be clear, any claim that is not subject to the parties’ motions for partial summary judgment may proceed to trial. 1 IT IS FURTHER ORDERED that Defendant’s Motion for Partial Summary 2|| Judgment (Doc. 229) is GRANTED IN PART and DENIED IN PART. The Motion is || GRANTED as to Plaintiff's lost profits claim, lost business value claim, and fraud claim. The Motion is DENIED as to Plaintiff's lost development support costs claim. 5 IT IS FURTHER ORDERED that Defendant’s Motion to Preclude Testimony of 6|| Plaintiff's Business Valuation Expert Greg Mischou (Doc. 296) is GRANTED as his expert testimony is irrelevant. 8 IT IS FURTHER ORDERED that the following motions to seal (Docs. 194; 228; 9}| 304; 309; 321; 323; 345; 346) are DENIED for the reason indicated above. The Clerk of 10 || Court shall not unseal the related documents and shall instead leave Docs. 195; 230; 298; 11 || 305; 307; 310; 325; 329; 336 lodged under seal. 12 Dated this 13th day of November, 2019. 13 14 a 3 15 16 _ James A. Teil Org Senior United States District Judge 17 18 19 20 21 22 23 24 25 26 27 28

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