Kenneth Eisen and Associates LTD v. Coxcom Incorporated

• Court: District Court, D. Arizona
• Decided: February 4, 2020
• Docket: 2:18-cv-02120
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Kenneth Eisen and Associates LTD, No. CV-18-02120-PHX-MTL

10 Petitioner, ORDER

11 v.

12 CoxCom LLC, et al.,

13 Defendant. 14 Pending before the Court is Plaintiff’s Motion for Partial Summary Judgment on its 15 Breach of Contract Claim - Liability - (Doc. 45), and Defendant’s Motion for Summary 16 Judgment on all claims (Doc. 47). The motions are fully briefed, and the Court heard oral 17 argument on January 29, 2020. As the Court indicated at oral argument, the Court denies 18 Plaintiff’s Motion for Partial Summary Judgment. The Court grants Defendant’s Motion 19 for Summary Judgment in part and denies it in part. 20 I. Background 21 The following facts are not disputed. On or about January 5, 2001, Plaintiff Kenneth 22 Eisen and Associates, Ltd. (“KEA”) entered into an Accounts Receivable Purchase 23 Agreement (the “Purchase Agreement”) with CoxCom, LLC (“Cox”). (Doc. 48 at 2, ¶ 1); 24 (Doc. 54 at 2, ¶ 1.) Pursuant to the Purchase Agreement, KEA purchased accounts 25 receivable (“the KEA accounts”) for a number1 of Cox’s cable, telephone and internet 26 customers who owed Cox money and/or the return of equipment, and whose services had 27 1 KEA claims that it purchased 8,889 accounts receivable pursuant to the Purchase 28 Agreement (Doc. 46 at 2, ¶ 2); Cox claims that there were only 7,162 (or 7,216) accounts subject to the Purchase Agreement (Doc. 54 at 2, ¶ 2); (Doc. 54-5 at 3, ¶ 8). 1 been disconnected or discontinued within the 30-day period immediately preceding the 2 effective date of the Purchase Agreement.2 (Doc. 1-1 at 6, ¶ 7); (Doc. 48 at 1, ¶ 1); (Doc. 3 54 at 2, ¶ 2.) Under the terms of the Purchase Agreement, Cox agreed to forward to KEA 4 all payments that Cox received from customers on the KEA Accounts after the closing date 5 of the agreement. (Doc. 46 at 2, ¶ 3); (Doc. 54 at 2, ¶ 3.) The Purchase Agreement also 6 required Cox to pay KEA $12.50 for each piece of equipment3 recovered by Cox from a 7 customer on a KEA account after the closing date of the Purchase Agreement, regardless 8 of whether the equipment was delivered directly to Cox by the customer or from KEA to 9 Cox. (Doc. 46 at 2, ¶¶ 5, 6); (Doc. 54 at 2 ¶¶ 5, 6); (Doc. 46-1 at 3.) 10 The Purchase Agreement also stated the following: 11 Returned Equipment: . . . [I]t is Cox’s policy not to permit any Customer to reconnect service so long as any Customer has an outstanding Account 12 balance or unreturned Equipment. Cox agrees to continue this policy with 13 respect to Accounts purchased by KEA and will refer such Customers to KEA for settlement of their Accounts before reconnecting services. Cox 14 agrees to maintain sufficient coding records of all Equipment so that Equipment returns are readily identifiable. 15 . . . 16 Information Support: Cox agrees that it will set up and maintain a computer 17 terminal at the premises of KEA which will permit KEA and Cox to share 18 information pertaining to the Accounts and Equipment and otherwise exchange information in order to keep accurate status of the balances of 19 Accounts and outstanding and returned Equipment. In addition, Cox will 20 promptly provide that Customer data requested by KEA which is customarily used for collection purposes by the collection industry, and does not violate 21 any customer privacy rights, to assist KEA in its collection efforts, including 22 without limitation, copies of signed Customer contracts.

23 2 As further consideration, the Purchase Agreement contained a “Future Account Placement” provision under which Cox agreed to place with KEA at least one-half of its 24 collection agency placements every year on a contingency basis, if KEA met certain performance standards. (Doc. 46-1 at 3.) KEA and Cox executed numerous subsequent 25 collection agreements whereby KEA performed collections services on a contingency basis for accounts that Cox owned. (Doc. 46-1 at 13); (Doc. 47 at 4.) The subsequent collection 26 agreements are not at issue in this action. (Doc. 46-1 at 13); (Doc. 47 at 4.) And the parties do not maintain that the subsequent collection agreements modified the Purchase 27 Agreement. 3 The Purchase Agreement defines “Equipment” as “[v]arious equipment consisting of 28 cable convertors and computer modems [that were] retained by Account Customers and not returned to Cox during the Account Period.” (Doc. 46-1 at 2.) 1 (Doc. 46-1 at 3); (Doc. 46 at 3, ¶ 11); (Doc. 54 at 3, ¶ 11.) 2 KEA engaged in collections efforts on the KEA accounts from 2001 until at least 3 2016.4 (Doc. 46 at 3, ¶ 13); (Doc. 54 at 3, ¶ 13.) During the entirety of Cox’s business 4 relationship with KEA, Cox sent KEA “daily journals” reflecting payments and equipment 5 returns made by customers to Cox on the KEA accounts. (Doc. 54 at 4, ¶ 16); (Doc. 46-1 6 at 37); (Doc. 46-1 at 58.) KEA then utilized the daily journals to input information into 7 KEA’s internal database, Debtmaster. (Doc. 48 at 6, ¶ 33); (Doc. 52 at 6, ¶ 33.) Based on 8 the transactions reflected in the daily journals, KEA would then create and send invoices 9 to Cox, seeking reimbursement for payments and equipment returns that were made to Cox 10 on the KEA accounts. (Doc. 48 at 7, ¶ 37); (Doc. 52 at 7, ¶ 37.) Cox paid all of KEA’s 11 invoices from 2001 to 2016. (Doc. 48 at 7, ¶ 38); (Doc. 52 at 7, ¶ 38.) 12 Between 2001 and June 2016, in addition to sending daily journals, Cox granted 13 KEA read-only access to Cox’s system, ICOMS, where KEA could view Cox’s records 14 pertaining to customer payments and equipment returns on the KEA Accounts. (Doc. 48 at 5, ¶ 25); (Doc. 52 at 5, ¶ 25.) The parties agree that ICOMS contained accurate data 15 about customer payments and equipment returns, and that ICOMS contained records 16 regarding payments that Cox may have remitted to KEA on the KEA accounts.5 17 On May 26, 2016, Cox notified KEA in a letter that Cox was unilaterally terminating 18 its business relationship with KEA effective June 30, 2016. (Doc. 46-1 at 68); (Doc. 46 at 19 3, ¶ 14); (Doc. 54 at 3, ¶ 14.) After receiving this letter, KEA performed “spot checks” on 20 some of the KEA accounts by comparing ICOMS with Debtmaster. (Doc. 46-1 at 18); 21 (Doc. 46 at 4, ¶¶ 20, 21); (Doc. 54 at 5, ¶¶ 20, 21.) During the spot checks, KEA noted 22 that some KEA accounts reflected customer balances in ICOMS that were less than the 23 balances reflected in Debtmaster. (Doc. 46-1 at 18); (Doc. 46 at 4, ¶¶ 20, 21); (Doc. 54 at 24 5, ¶¶ 20, 21.) KEA did not perform any spot checks on the KEA accounts prior to its 25 receipt of the termination letter on May 26, 2016. (Doc. 48 at 5, ¶ 26); (Doc. 52 at 5, ¶ 26.) 26 27 4 KEA states that it is still engaging in collection efforts on the KEA accounts. (Doc. 46 at 28 3, ¶ 13.) 5 The parties conceded this at oral argument. 1 In June 2016, Cox terminated KEA’s access to ICOMS. (Doc. 46 at 3, 6, ¶¶ 15, 32); 2 (Doc. 54 at 3-4, ¶ 15.) KEA and Cox have identified multiple instances where Cox 3 accepted payments from customers on the KEA accounts, received equipment returns on 4 the KEA accounts, or issued credits on the KEA accounts. (Doc. 46 at 5, ¶ 25); (Doc. 54 5 at 6, ¶ 25.) The parties dispute whether Cox then transmitted proper payment to KEA for 6 those transactions. 7 KEA filed the Complaint in Maricopa County Superior Court on June 1, 2018, 8 raising claims for breach of contract (Count 1) and negligence (Count 2).6 (Doc. 1-1.) Cox 9 removed the action to this Court on July 5, 2018. (Doc. 1.) 10 KEA’s breach of contract (Count 1) and negligence (Count 2) claims allege that 11 Cox breached the Purchase Agreement and/or its duties by: terminating KEA’s access to 12 ICOMS data in June 2016; failing to share information that would enable KEA to keep 13 accurate status of the balances of KEA accounts and outstanding and returned equipment; 14 failing to reconcile amounts owed to KEA; failing to provide a proper accounting of KEA accounts to KEA; providing “amnesty credits” to customers on the KEA accounts; failing 15 to remit payment to KEA for payments made by customers to Cox; failing to remit payment 16 to KEA for returned equipment; and failing to remit payment to KEA for credits issued by 17 Cox to customers on the KEA accounts. (Doc. 1-1 at 10-13, ¶¶ 39-65.) KEA alleges in 18 the Complaint that Cox did not report payments or equipment returns on 20% of the KEA 19 accounts. (Doc. 48 at 9, ¶ 49); (Doc. 52 at 9, ¶ 49.) KEA estimates that Cox owes KEA 20 $100,000 for equipment returns (Doc. 48 at 9, ¶ 50), (Doc. 52 at 9, ¶ 50), and approximately 21 $301,482 for payments that Cox received from customers but did not forward to KEA. 22 (Doc. 48 at 8, ¶ 47); (Doc. 52 at 8, ¶ 47.) 23 Cox argues in its Motion for Summary Judgment (Doc. 47) that KEA’s damages are 24 too speculative to sustain a breach of contract or negligence claim, that KEA waived any 25 breaches under the Purchase Agreement by operating under the same conduct for 15 years 26 27 6 The Complaint additionally raised claims for unjust enrichment (Count 3) and conversion 28 (Count 4), which this Court previously dismissed. (Doc. 1-1 at 14-17, ¶¶ 67-97); (Doc. 37 at 7.) 1 without raising a concern, and that KEA’s claims are time-barred under the applicable 2 statute of limitations. (Doc. 47 at 2-3.) 3 II. Legal Standard 4 Summary judgment is appropriate if the evidence, viewed in the light most favorable 5 to the nonmoving party, demonstrates “that there is no genuine dispute as to any material 6 fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A 7 genuine issue exists if “the evidence is such that a reasonable jury could return a verdict 8 for the nonmoving party,” and material facts are those “that might affect the outcome of 9 the suit under the governing law . . . .” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 10 (1986). At the summary judgment stage, “[t]he evidence of the non-movant is to be 11 believed, and all justifiable inferences are to be drawn in his favor.” Id. at 255 (internal 12 citations omitted); see also Jesinger v. Nevada Fed. Credit Union, 24 F.3d 1127, 1131 (9th 13 Cir. 1994) (court determines whether there is a genuine issue for trial but does not weigh 14 the evidence or determine the truth of matters asserted). 15 III. KEA’s Motion for Partial Summary Judgment 16 The parties disagree about the duration of Cox’s duties under the Purchase 17 Agreement to “set up and maintain a computer terminal at the premises of KEA” and “maintain sufficient coding records of all Equipment . . . .” See (Doc. 46-1 at 3.) The 18 parties also dispute whether the Purchase Agreement required Cox to report payments or 19 equipment returns to KEA, and whether the Purchase Agreement imposed an obligation 20 for Cox to refrain from reconnecting services for customers with outstanding balances on 21 the KEA accounts. The Court addresses each dispute in turn. 22 A. Principles of contract interpretation 23 KEA argues, and Cox does not dispute, that Arizona law governs the interpretation 24 of the purchase agreement. (Doc. 45 at 6); (Doc. 53 at 8 n.2.) The Court agrees. See 25 Restatement (Second) of Conflict of Laws § 188 (in the absence of an explicit choice of 26 law, the contractual rights and duties of the parties are determined by the local law of the 27 state that has the most significant relationship to the transaction. 28 Contract interpretation in Arizona is generally a matter of law, not a question of 1 fact. See Willamette Crushing Co. v. State ex rel. Dep’t of Transportation, 188 Ariz. 79, 2 81 (App. 1997); Scholten v. Blackhawk Partners, 184 Ariz. 326, 328 (App. 1995). 3 “Generally, and in Arizona, a court will attempt to enforce a contract according to the 4 parties’ intent.” State v. Mabery Ranch, Co., L.L.C., 216 Ariz. 233, 241, ¶ 28 (App. 2007) 5 (quoting Taylor v. State Farm Mut. Auto. Ins. Co., 175 Ariz. 148, 152 (1993)). In Arizona, 6 the plain language of the contract governs. Mass. Bonding & Ins. Co. v. Ariz. Concrete 7 Co., 47 Ariz. 420, 428 (1936). Courts also apply a “standard of reasonableness” to contract 8 language, so that the contract is construed “in its entirety and in such a way that every part 9 is given effect.” State ex rel. Goddard v. R.J. Reynolds Tobacco Co., 206 Ariz. 117, 120, ¶ 10 12 (App. 2003) (internal citations omitted). If the plain language of the contract is clear 11 and unambiguous, there is no need for interpretation. Grosvenor Holdings, L.C. v. 12 Figueroa, 218 P.3d 1045, 1050, ¶ 9 (App. 2009). 13 If the court finds that a contract is ambiguous, however, extrinsic evidence may be 14 resorted to for the purpose of ascertaining its real meaning. Associated Students of Univ. of Ariz. v. Ariz. Bd. of Regents, 120 Ariz. 100, 104 (App. 1978); Watson Const. Co. v. 15 Reppel Steel & Supply Co., Inc., 123 Ariz. 138, 142 (App. 1979) (“question of whether a 16 contract is ambiguous is initially a question of law for the court to decide”). If after 17 considering the extrinsic evidence, the Court determines that either party’s offered 18 interpretation is reasonable (i.e., if the extrinsic evidence establishes “controversy over 19 what occurred and what inferences to draw from the events”), the matter is properly 20 submitted to the jury. Taylor, 175 Ariz. at 158-59; Mabery Ranch, Co., L.L.C., 216 Ariz. 21 at 241, ¶ 28; see also Watson Const. Co., 123 Ariz. at 142 (entry of summary judgment 22 precluded if court determines that ambiguity exists and resolution of ambiguity involves a 23 material issue of fact). 24 Notably, a contract is not ambiguous just because the parties disagree about its 25 meaning. In re Estate of Lamparella, 210 Ariz. 246, 250, ¶ 21 (App. 2005) (internal 26 citations omitted). Language in a contract is only ambiguous when it can reasonably be 27 construed to have more than one meaning, and such construction cannot be determined 28 within the four corners of the instrument. Id.; Associated Students of Univ. of Ariz., 120 1 Ariz. at 104. Omissions in contracts do not necessarily cause ambiguity. See Smith v. Those 2 Certain Ins. Cos. Subscribing to Aircraft Hull Ins. Policy No. Reinco 57, 132 Ariz. 371, 3 373 (App. 1982) (failure to fill in the blank spaces did not create ambiguity, but instead 4 reflected an absence of any agreement). 5 B. Duration of Cox’s duties 6 Under the section titled “Information Support,” the Purchase Agreement states that 7 Cox “will set up and maintain a computer terminal at the premises of KEA which will 8 permit KEA and Cox to share information pertaining to the Accounts and Equipment and 9 otherwise exchange information in order to keep accurate status of the balances of 10 Accounts and outstanding and returned Equipment.” (Doc. 46-1 at 3.) Under the section 11 titled “Returned Equipment,” the Purchase Agreement states that “Cox agrees to maintain sufficient coding records of all Equipment so that Equipment returns are readily 12 identifiable.” (Id.) The parties agree that there is no expiration date to these duties 13 expressly enumerated within the four corners of the document. 14 KEA argues that, in order to avoid an interference with KEA’s ability to monitor its 15 purchased accounts, the “Information Support” provision requires Cox to grant KEA 16 access to ICOMS, and to update information about payments and equipment returns 17 received by Cox, in perpetuity. (Doc. 45 at 4, 7); (Doc. 46 at 4, ¶ 19.) Cox argues that 18 because the Purchase Agreement is silent as to its duration, the Court should deem the 19 contract to be effective “for a reasonable amount of time.” (Doc. 53 at 8) (quoting Roosevelt 20 Irrigation District v. United States, CV-15-00448-JJT, 2017 WL 4364108 at *6 (D. Ariz. 21 2017)). According to Cox, that “reasonable amount of time” ended when Cox terminated 22 the business relationship in June 2016. (Doc. 53 at 11-12); (Doc. 54 at 4-5, ¶ 19.) 23 Here, the Court finds that the Purchase Agreement is silent regarding the duration 24 of Cox’s duties. But this silence does not render the Purchase Agreement ambiguous. The 25 Court also does not agree that Cox’s duties under the Purchase Agreement last in 26 perpetuity. Because the Purchase Agreement does not specify an expiration date of Cox’s 27 obligations, the Court must determine “what is reasonable under the circumstances.” See 28 Bowen v. Watz, 5 Ariz.App. 519, 523 (App. 1967) (“Since the agreement did not specify 1 any particular time for the accomplishment of its purposes, it must be interpreted as lasting 2 for a time reasonable under the circumstances, or until the arrangement becomes 3 impossible or too costly.”); see also M & G Polymers USA, LLC v. Tackett, 135 S. Ct. 926, 4 936 (2015) (quoting 3 A. Corbin, Corbin on Contracts § 553, at 216) (1960) (“[C]ontracts 5 that are silent as to their duration will ordinarily be treated not as ‘operative in perpetuity’ 6 but as ‘operative for a reasonable time.’”). The Court finds that “what is reasonable under 7 the circumstances” in this case depends on whether it was possible and probable for KEA 8 to still collect monies or equipment on the KEA accounts at the time of the alleged breach. 9 Because the parties dispute whether KEA could still collect, or was still collecting on the 10 15-year-old KEA accounts in June 2016, (Doc. 46 at 3, ¶ 13); (Doc. 54 at 3, ¶ 13); (Doc. 11 54-5 at 7, ¶ 30), there remain significant disputes as to material facts. The duration of 12 Cox’s duties under the Purchase Agreement must be determined by the trier of fact. The 13 Court therefore denies KEA’s Motion for Summary Judgment. 14 C. Amnesty credits The Purchase Agreement states that “it is Cox’s policy not to permit any Customer 15 to reconnect service so long as any Customer has an outstanding Account balance or 16 unreturned Equipment. Cox agrees to continue this policy with respect to the Accounts 17 purchased by KEA and will refer such Customers to KEA for settlement of their Accounts 18 before reconnecting services.” (Doc. 46-1 at 3) (emphasis added). 19 KEA argues that these provisions required Cox to refrain from canceling 20 outstanding balances and equipment owed on the KEA Accounts in exchange for 21 reconnecting services with Cox (“amnesty credits”), unless Cox first referred the customer 22 to KEA for settlement of the account. (Doc. 45 at 13-14.) Cox responds that the Purchase 23 Agreement did not prohibit Cox from forgiving customer balances or from reconnecting 24 services after forgiving a balance. (Doc. 53 at 13.) According to Cox, the Purchase 25 Agreement merely restated Cox’s general policy without imposing a contractual obligation 26 to follow it. (Id.) 27 The Court finds that the plain language of the Purchase Agreement unambiguously 28 required Cox to refrain from reconnecting services for customers with outstanding balances 1 or unreturned equipment unless Cox first referred the customers to KEA for settlement of 2 their accounts. (Doc. 46-1 at 3) (“Cox agrees to continue this policy with respect to the 3 Accounts purchased by KEA.”) Because the parties dispute whether the zero balances in 4 ICOMS mean that Cox provided amnesty credits on the KEA Accounts, (Doc. 54 at 5, 5 ¶¶ 22-23); (Doc. 46 at 4-5, ¶¶ 22-23); (Doc. 52-6 at 13), there are material, disputed facts. 6 Whether Cox provided amnesty credits in violation of the Purchase Agreement must be 7 determined by the trier of fact. The Court therefore denies KEA’s Motion for Summary 8 Judgment. 9 D. Cox’s duty to report 10 KEA argues that it is undisputed Cox failed to notify KEA of payments and 11 equipment returns made to Cox by delinquent customers on the KEA accounts. (Doc. 45 at 10-12.) Cox responds (Doc. 53 at 9, 15) that the Purchase Agreement imposes no general 12 obligation to notify or report payments or equipment returns to KEA, but that in any event, 13 Cox accurately reported the data through ICOMS, to which KEA had access for 15 years. 14 The Court finds that the Purchase Agreement unambiguously imposes a duty on 15 Cox to accurately report to KEA the payments and equipment returns that Cox received on 16 the KEA accounts. That the words “notify” or “report” are not in the Purchase Agreement 17 is immaterial. Cox’s duty to report is inherent in its obligations to “share information 18 pertaining to the Accounts and Equipment,” (Doc. 46-1 at 3); to “forward all payments it 19 receives on Accounts from and after the Closing Date to KEA,” (Doc. 46-1 at 2); and to 20 “pay to KEA the sum of $12.50 for each piece of Equipment . . . regardless if such 21 Equipment is delivered directly to Cox . . . .” (Doc. 46-1 at 3). 22 Because the parties agree that when KEA had access to ICOMS it contained 23 accurate data about customer payments and equipment returns, the Court grants summary 24 judgment in favor of Cox on the portions of Count 1 and 2 that relate to the reporting of 25 payments and equipment returns prior to the termination of KEA’s access to ICOMS.7 If 26 27 7 Because the parties have had notice and a reasonable time to respond, the court grants 28 summary judgment for Cox as the nonmovant on these issues, pursuant to Fed. R. Civ. P. 56(f)(1). 1 the trier of fact determines that Cox’s duties to report extend beyond the date on which Cox 2 terminated KEA’s access to ICOMS, then the trier of fact may also determine whether Cox 3 breached its duty to report between June 2016 and the present. 4 E. Cox’s duty to reimburse KEA for payments and equipment returns 5 KEA argues that it is undisputed Cox failed to reimburse KEA for all the payments 6 and equipment returns Cox received from customers on the KEA accounts. (Doc. 45 at 7 12.) Cox responds that KEA has failed to identify the specific KEA accounts for which 8 Cox allegedly failed to reimburse KEA. (Doc. 53 at 17.) Cox has no records currently in 9 its possession, custody or control that identify payments or reimbursements that Cox made 10 to KEA on the KEA accounts. (Doc. 54-5 at 10-11, ¶¶ 4-8.) 11 The Court finds this is a material, disputed fact that must be resolved by the trier of 12 fact. Accordingly, it is ordered denying KEA’s Motion for Partial Summary Judgment. 13 F. Reporting bankruptcies KEA argues that it is entitled to partial summary judgment because Cox materially 14 breached the purchase agreement by failing to notify KEA of customers’ bankruptcies after 15 the closing date of the Purchase Agreement. (Doc. 45 at 14.) While the Court could find 16 no allegation in the Complaint to that effect, the Purchase Agreement only required Cox to 17 report and credit the purchase price for bankruptcy filings made prior to assignment of the 18 accounts to KEA. (See Doc. 46-1 at 2.) Accordingly, the Court grants summary judgment 19 for Cox on any claim that Cox failed to report customer bankruptcies after the closing date 20 of the Purchase Agreement.8 21 G. Purging customer account records 22 Finally, KEA argues that it is entitled to partial summary judgment on its claim that 23 Cox breached the Purchase Agreement by purging customer account records. (Doc. 45 at 24 14.) Cox admits that it does not have any payment records prior to July 2005 in its 25 possession, custody or control, due to a change in its accounting system. (Doc. 54-4 at 3, 26 27 8 Because the parties have had notice and a reasonable time to respond, the court grants 28 summary judgment for Cox as the nonmovant on this issue, pursuant to Fed. R. Civ. P. 56(f)(1). 1 ¶ 3.) The Court finds that Cox’s duty to preserve records on the KEA accounts is 2 coextensive with Cox’s obligations to “set up and maintain a computer terminal” and 3 “maintain sufficient coding records” so that the parties could keep accurate status of the 4 balances. For the reasons stated above, the duration of Cox’s duties under the Purchase 5 Agreement to maintain customer account records must be determined by the trier of fact, 6 considering what is reasonable under the circumstances. Therefore, the Court denies 7 KEA’s Motion for Partial Summary Judgment. 8 IV. Cox’s Motion for Summary Judgment 9 A. Lay testimony 10 Cox moves for summary judgment on KEA’s breach of contract and negligence 11 claims, asserting that KEA improperly relies solely on lay testimony to support its claims for damages. (Doc. 47 at 11-12.) KEA responds that its damages claims are not based on 12 any scientific, technical or other specialized knowledge, such that expert testimony would 13 be required. (Doc. 51 at 10-11.) 14 Federal Rule of Evidence 701 provides that “[i]f a witness is not testifying as an 15 expert, testimony in the form of an opinion is limited to one that is: . . . not based on 16 scientific, technical, or other specialized knowledge within the scope of Rule 702.” Fed. 17 R. Evid. 701(c). Here, KEA’s damages calculation is based on a comparison of the 18 numbers in spreadsheets produced by Cox with the spreadsheets produced by KEA. This 19 comparison was made by Bill Eisen, the President and Owner of KEA (Doc. 46-1 at 60, 20 ¶ 2) and KEA’s Rule 30(b)(6) deponent. (Doc. 52 at 16, ¶¶ 42, 43.) The Court agrees with 21 KEA that KEA’s damage claims are not based on any “scientific, technical, or other 22 specialized knowledge” such that the evidence must be introduced through a qualified 23 expert witness under Federal Rule of Evidence 702. Cox has not shown why the damage 24 calculations proffered by KEA through Mr. Eisen involve anything more than “simple 25 math” and the ability to “read and compare spreadsheets.” (Doc. 51 at 11); see Ryan 26 Development Co., L.C. v. Indiana Lumbermens Mut. Ins. Co., 711 F.3d 1165, 1170 (10th 27 Cir. 2013) (noting that the advisory committee’s notes to Rule 701 explain that “most 28 courts have permitted the owner or officer of a business to testify to the value or projected 1 profits of the business, without the necessity of qualifying the witness as an accountant, 2 appraiser, or similar expert.”); United States v. Lindsey, 680 F. App’x 563, 566 (9th Cir. 3 2017) (“The district court did not abuse its discretion in permitting lenders’ employees to 4 testify as lay witnesses rather than as expert witnesses . . . [defendant] has offered no 5 explanation for why the witnesses’ testimony, which was based on their personal 6 observations while working for the lenders—rather than on scientific, technical, or 7 specialized knowledge—did not qualify as lay testimony.”). Accordingly, Cox’s Motion 8 for Summary Judgment on these grounds is denied. 9 B. KEA’s damages 10 Cox additionally moves for summary judgment on KEA’s breach of contract and 11 negligence claims, asserting that KEA’s damages are too speculative. (Doc. 47 at 8-11.) Cox states that is has produced a complete record of all available ICOMS transactions for 12 the 8,896 account numbers that Plaintiff identified as the KEA accounts, (Doc. 55 at 5), 13 and that summary judgment is appropriate because KEA failed to calculate damages by 14 conducting an account-by-account analysis of every KEA account. (Doc. 55 at 2.) 15 KEA responds that Cox’s improper termination of KEA’s access to ICOMS and 16 subsequent refusal to reconcile the KEA accounts has unfairly prevented KEA from 17 calculating the full extent of its damages. (Doc. 51 at 6.) In any event, KEA states that, 18 through the spot check it conducted prior to losing ICOMS access—and by reviewing the 19 “combined research summary spreadsheet” produced by Cox in discovery—it has 20 identified no less than $90,000 in damages. (Doc. 51 at 8, 11); (Doc. 52-7 at 5, ¶ 15.) KEA 21 affirms that this $90,000 figure is based on an account-by-account comparison of Cox’s 22 records with KEA’s records. (Id.) For the remaining amount of stated damages, KEA 23 confirmed at oral argument that its damages calculation is based on the application of a 24 percentage, which KEA derived from its analysis of accounts that are subject to the 25 collections services agreements. KEA additionally maintains that there are still 1700 KEA 26 accounts for which Cox failed to produce transaction records during discovery. (Doc. 51 27 at 15.) Accordingly, in its Response to Cox’s Motion for Summary Judgment, KEA asked 28 the Court to reopen discovery pursuant Rule 56(d) and either order Cox to provide the 1700 1 purportedly missing transaction records or require that Cox grant KEA access to ICOMS. 2 (Doc. 51 at 15.) 3 Preliminarily, the Court notes that discovery closed in this case on May 31, 2019. 4 (Doc. 28 at 2.) At no point prior to the close of discovery did KEA raise a discovery dispute 5 with the Court, addressing the 1700 accounts for which KEA claims it is missing 6 transaction histories from Cox. Nor did KEA ask the Court, prior to the close of discovery, 7 to order that Cox grant KEA access to ICOMS. Because KEA moves the Court to allow 8 additional discovery into information it knew it did not possess prior to the close of 9 discovery, KEA’s request for additional discovery pursuant to Rule 56(d) (Doc. 51 at 15) 10 is denied. See Qualls By & Through Qualls v. Blue Cross of Calif., Inc., 22 F.3d 839, 844 11 (9th Cir. 1994) (in ruling on a motion to reopen discovery, the Court considers whether the 12 movant diligently pursued its previous discovery opportunities); see also Pfingston v. 13 Ronan Eng’g Co., 284 F.3d 999, 1005 (9th Cir. 2002) (failure to conduct discovery 14 diligently is grounds for the denial of a Rule 56(d) motion). Turning to Cox’s argument about speculative damages, under Arizona law, a breach 15 of contract claim requires a plaintiff to demonstrate: (1) the existence of a contract; (2) the 16 breach of the contract; and (3) resulting damages. Chartone, Inc. v. Bernini, 207 Ariz. 162, 17 170, ¶ 30 (App. 2004). To establish a claim for negligence under Arizona law, a plaintiff 18 must prove four elements: (1) a duty requiring the defendant to conform to such standard 19 of care; (2) a breach by the defendant of that standard; (3) a causal connection between the 20 defendant’s conduct and the resulting injury; and (4) actual damages. Quiroz v. ALCOA 21 Inc., 243 Ariz. 560, 563-64, ¶ 7 (2018). Where a plaintiff has not set forth facts that 22 demonstrate to reasonable certainty that it would be entitled to damages, a breach of 23 contract or negligence claim fails as a matter of law. Coury Bros. Ranches Inc. v. Ellsworth, 24 103 Ariz. 515, 521 (Ariz. 1968) (“Damages that are speculative, remote or uncertain may 25 not form the basis of a judgment.”). Summary judgment is not appropriate, however, where 26 the plaintiff has demonstrated with reasonable certainty that he would be entitled to 27 damages and has devised some reasonable method of computing his net loss. See Holliday 28 Fenoglio Fowler, L.P. v. L’Auberge Newco, LLC, No. CV-15-01180-PHX-SPL, 2017 WL 1 5569875, at *3 (D. Ariz. 2017); Gilmore v. Cohen, 95 Ariz. 34, 36 (1963) (plaintiff’s 2 evidence must provide some basis for estimating his loss); Suroweic v. Capital Title 3 Agency, Inc., 790 F.Supp.2d 997, 1001 (D. Ariz. 2011) (quoting Gilmore v. Cohen, 95 4 Ariz. 34 (1963) (“‘[C]ertainty in amount’ of damages is not essential to recovery when the 5 fact of damage is proven.”) (emphasis altered from original)). 6 The instant case differs from those cited by Cox where the record was either 7 completely devoid of evidence regarding damages, Red Equip. Pte Ltd. v. BSE Tech, LLC, 8 CV-13-1003-HRH, 2016 WL 1158738 at *5 (D. Ariz. Mar. 24, 2016) (court granted 9 summary judgment after excluding an exhibit containing plaintiff’s damages computation 10 and no other evidence of damages was provided), or where the alleged damages were based 11 purely on testimony without the submission of existing records that would have “added 12 weight to plaintiffs’ claim.” Gilmore, 95 Ariz. at 36. But the Court still cannot excuse 13 KEA’s failure to conduct an account-by-account comparison of its records in Debtmaster 14 with the records produced by Cox. Construing the inferences from the facts in KEA’s favor, the Court finds that KEA 15 has reasonably demonstrated that it would be entitled to damages, and that its computation 16 of damages through an account-by-account comparison is a reasonable method, but solely 17 with regard to the $90,210.40 it has purportedly identified through an account-by-account 18 analysis. (Doc. 51 at 4.) The Court finds that any computation of damages based on the 19 application of a percentage too speculative. For damages over $90,210.40, the Court 20 grants summary judgment in favor of Cox. 21 C. Waiver 22 Cox argues that it is entitled to summary judgment on Counts 1 and 2 because KEA 23 waived its right to allege breach of the Purchase Agreement by waiting more than 15 years 24 to dispute how the parties operated under the agreement. (Doc. 47 at 14-16.) Cox asserts 25 that KEA was on actual notice that its daily journals were not always accurate because 26 there were instances where customers reported to KEA that they had made payments or 27 equipment returns to Cox that were not reflected on the daily journals. (Doc. 47 at 14.) 28 According to Cox, because it was KEA’s course of conduct to then verify the equipment 1 return or payment in ICOMS and invoice Cox for those amounts, KEA waived its right to 2 challenge the accuracy of Cox’s reporting.9 (Id.) 3 KEA responds that it could not have clearly, decisively, and unequivocally waived 4 its rights to allege a violation of the Purchase Agreement because it had no reason to believe 5 its rights were being infringed until June 2016. (Doc. 51 at 13.) KEA further argues that 6 Cox effectively concealed its failure to report customer payments and equipment returns, 7 obstructing KEA’s ability discover the harm. (Id.) 8 The law is clear in Arizona—a “waiver is an intentional relinquishment of a known 9 right.” N. Ariz. Gas Service, Inc. v. Petrolane Transp., Inc., 145 Ariz. 467, 476 (App. 10 1984). “It may be express or inferred from conduct.” Id. (internal citations omitted). But 11 intent to waive the breach is required. See City of Tucson v. Koerber, 82 Ariz. 347, 356 12 (1957). A party’s failure to attempt to enforce its rights regarding a breach of which it was 13 unaware cannot be interpreted as a waiver. N. Ariz. Gas Service, Inc., 145 Ariz. at 477; 14 see also Owen v. Mecham, 9 Ariz.App. 529, 531-32 (App. 1969). Waiver is a question of fact for the court to decide. N. Ariz. Gas Service, Inc., 145 Ariz. at 476. 15 Because KEA alleges that Cox breached the Purchase Agreement in numerous 16 ways, (Doc. 1-1 at 11-13, ¶¶ 46-62), the Court addresses waiver of each allegation 17 separately. First, the Court cannot say as a matter of law that KEA knew, prior to 2016, 18 that Cox breached its duty to accurately report and provide a proper accounting of the KEA 19 accounts to KEA. (Doc. 1-1 at 11, ¶ 46); (Doc. 1-1 at 12, ¶ 54.) The Court therefore denies 20 summary judgment to Cox regarding waiver, and grants summary judgment in favor of 21 KEA regarding waiver of those portions of Count 1 and 2.10, 11 22

23 9 Cox also argued at oral argument that KEA waived its right to allege breach because KEA did not comply with its duties under the Purchase Agreement to “double check” Cox’s 24 calculations and notify Cox of any discrepancies. But whether KEA breached that purported duty is a separate question from whether KEA knew that Cox was inaccurately 25 reporting transactions to KEA. 10 As stated above, because KEA had access to ICOMS for over 15 years, and because the 26 parties agree that ICOMS contained accurate data on the KEA accounts, summary judgment is granted for Cox on KEA’s claims that Cox failed to accurately report 27 information on the KEA accounts prior June 2016. See supra at 9-10. 11 Because the parties have had notice and a reasonable time to respond, the court grants 28 summary judgment for KEA as the nonmovant on the issue of waiver, pursuant to Fed. R. Civ. P. 56(f)(1). 1 Second, whether KEA waived its right to claim that Cox breached the Purchase 2 Agreement by failing to remit proper payment to KEA (Doc. 1-1 at 9, ¶ 28); (Doc. 1-1 at 3 13, ¶ 60)—and whether KEA waived its right to demand reconciliation of the missing 4 amounts (Doc. 1-1 at 9, ¶ 24); (Doc. 1-1 at 11, ¶ 46)—turns on whether KEA knew that 5 Cox had purportedly breached the contract by failing to pay KEA for equipment returns or 6 customer payments on the KEA accounts. N. Ariz. Gas Service, Inc., 145 Ariz. 477; Owen, 7 9 Ariz.App. at 531-32 (requiring knowing acquiescence in the other party’s conduct in 8 order to find waiver). Cox does not set forth facts from which the Court could conclude 9 that KEA was purportedly made aware, prior to 2016, of Cox’s alleged failure to remit 10 proper payment to KEA. Simply stating that KEA “never once complained of any issue 11 under the Agreement” does not establish that KEA knew Cox was withholding payments 12 owed to KEA and that KEA acquiesced in such conduct. (See Doc. 47 at 16.) The Court 13 therefore denies summary judgment to Cox, and grants summary judgment in favor of 14 KEA regarding waiver of those portions of Counts 1 and 2. Third, the Court similarly denies summary judgment to Cox on KEA’s claims that 15 Cox impermissibly offered amnesty credits to customers on the KEA accounts without 16 reimbursing or notifying KEA (Doc. 1-1 at 11, ¶ 46); (Doc. 1-1 at 13, ¶ 62). Nowhere does 17 Cox set forth facts from which the Court can conclude that KEA purportedly knew about 18 the amnesty credits prior to 2016. That KEA never complained of any issues under the 19 Agreement, prior to 2016, does not establish that KEA was aware of, and acquiesced in, 20 Cox’s alleged offering of amnesty credits in violation of the Purchase Agreement. 21 Accordingly, the Court denies summary judgment to Cox, and grants summary judgment 22 in favor of KEA regarding waiver of those portions of Count 1 and 2. 23 Finally, regarding KEA’s claim that Cox breached the terms of the Purchase 24 Agreement by terminating KEA’s access to ICOMS in June 2106, (Doc. 1-1 at 11, ¶ 46); 25 (Doc. 1-1 at 13, ¶ 56), the parties’ course of conduct during the 15 years prior is irrelevant. 26 Therefore, while Cox did not expressly argue that KEA waived its right to allege that Cox 27 breached the agreement by terminating KEA’s access to ICOMS, the Court nonetheless 28 finds that summary judgment is not appropriate on those portions of Count 1 or 2. (Doc. 1- 1 1 at 11, ¶ 46); (Doc. 1-1 at 13, ¶ 56.) The Court therefore denies summary judgment to 2 Cox, and grants summary judgment in favor of KEA regarding waiver of those portions 3 of Count 1 and 2. 4 D. Statute of limitations 5 Cox also moves for summary judgment on Count 1 and Count 2, stating that KEA’s 6 claims are barred by the applicable statutes of limitations. (Doc. 47 at 16-18.) Cox argues 7 that KEA had access to ICOMS for 15 years, and that therefore KEA could have easily 8 investigated any alleged discrepancies between Debtmaster and ICOMS during that time. 9 (Doc. 47 at 17.) KEA responds that it would have not had standing to sue until 2016, and 10 that in any event, no reasonable diligence could have led KEA to discover facts underlying 11 the cause of action because KEA had no reason to suspect “foul play” until Cox terminated KEA’s access to ICOMS. (Doc. 51 at 14.) KEA further argues that Cox “concealed its 12 actions from KEA’s review and investigation.” (Id.) 13 The statute of limitations for a breach of contract claim in Arizona is 6 years after 14 the cause of action accrues. A.R.S. § 12-548. The statute of limitations for a negligence 15 claim in Arizona is 2 years after the cause of action accrues. A.R.S. § 12-542. Arizona 16 recognizes the discovery rule, meaning that “a plaintiff’s cause of action does not accrue 17 until the plaintiff knows or, in the exercise of reasonable diligence, should know the facts 18 underlying the cause.” Gust, Rosenfeld & Henderson v. Prudential Ins. Co. of Am., 182 19 Ariz. 586, 588 (1995). The discovery rule applies to breach of contract claims and 20 negligence claims. Id. at 591; Acton v. Morrison, 62 Ariz. 139, 144 (1945). If a defendant 21 fraudulently conceals facts that would give rise to a cause of action, the statute of 22 limitations is tolled “until such concealment is discovered, or reasonably should have been 23 discovered.” Walk v. Ring, 202 Ariz. 310, 319 ¶ 35 (2002). When discovery occurs and a 24 cause of action accrues are questions of fact for the jury unless there is no genuine issue of 25 material fact as to whether the plaintiff possessed the minimum requisite knowledge. Walk, 26 202 Ariz. at 316, ¶ 23; Doe v. Roe, 191 Ariz. 313, 323 ¶ 32 (1998). 27 Here, the Court disagrees with Cox that the relevant inquiry is whether KEA had 28 the opportunity to discover the alleged breach by searching ICOMS and comparing ICOMS 1 with Debtmaster. The question is whether a reasonable business in KEA’s position would 2 have been put on notice to investigate. See Walk, 202 Ariz. at 316, ¶ 23. It is undisputed 3 that during the parties’ 15-year relationship, Cox knew that KEA was using the daily 4 journals (and not ICOMS) to generate invoices and reconcile its accounts. (Doc. 48 at 7, 5 ¶ 37); (Doc. 52 at 7, ¶ 37.) While it is also undisputed that a number of customers reported 6 to KEA that they had made payments or equipment returns to Cox that were not reflected 7 on the daily journals, the Court cannot say as a matter of law that a reasonable business in 8 KEA’s position would have been on notice to commence investigating whether negligence 9 or breach was involved. Whether KEA was sufficiently put on notice to investigate is a 10 factual determination that must be resolved at trial. Accordingly, it is ordered denying 11 summary judgment to Cox. 12 V. Conclusion. 13 IT IS ORDERED denying Plaintiff’s Motion for Partial Summary Judgment – 14 Liability (Doc. 45). IT IS FURTHER ORDERED granting summary judgment to Defendant on 15 Plaintiff’s claim (part of Count 1 and part of Count 2) that, prior to June 2016, Defendant 16 failed to accurately report information on the KEA accounts. 17 IT IS FURTHER ORDERED granting summary judgment in favor of Plaintiff 18 on the issue of waiver (part of Doc. 47). 19 IT IS FURTHER ORDERED granting in part Defendant’s Motion for Summary 20 Judgment (part of Doc. 47). Summary judgment is granted in favor of Defendant for all 21 damages beyond $90,210.40. 22 IT IS FURTHER ORDERED denying Plaintiff’s request (part of Doc. 51) to 23 reopen discovery pursuant to Rule 56(d). 24 IT IS FURTHER ORDERED granting summary judgment in favor of Defendant 25 on Plaintiff’s claim that Defendant breached the Purchase Agreement by failing to notify 26 Plaintiff about delinquent customers’ bankruptcies. 27 /// 28 /// 1 Dated this 4th day of February, 2020. 2

4 Michael T, Liburdi United States District Judge 5 6 7 8 9 10 1] 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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