Owlink Technology, Inc. v. Cypress Technology Co., Ltd.

• Court: Court of Appeals for the Ninth Circuit
• Decided: February 28, 2025
• Docket: 23-4314
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS FEB 28 2025 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

OWLINK TECHNOLOGY, INC., a No. 23-4314 California corporation, D.C. No. 8:21-cv-00717-SPG-KES Plaintiff - Appellee,

v. MEMORANDUM*

CYPRESS TECHNOLOGY CO., LTD., a foreign corporation,

Defendant - Appellant.

Appeal from the United States District Court for the Central District of California Sherilyn Peace Garnett, District Judge, Presiding

Argued and Submitted February 13, 2025 Honolulu, Hawaii

Before: S.R. THOMAS, BRESS, and DE ALBA, Circuit Judges. Dissent by Judge DE ALBA

Cypress Technology Co., Ltd. (“Cypress”) appeals the district court’s denial

of Cypress’s motions for renewed judgment as a matter of law and for a new trial

or remittitur after a jury verdict in favor of OWLink Technology, Inc. (“OWLink”)

in a breach of contract suit. Cypress argues that the Exclusive Business

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Management Agreement (“EBMA”) it executed with OWLink was validly

terminated as a matter of law. Cypress contends that the district court erred by

submitting the termination issue to the jury and the error warrants a new trial on

both liability and damages.

“A jury’s verdict must be upheld if it is supported by substantial evidence,

which is evidence adequate to support the jury’s conclusion, even if it is also

possible to draw a contrary conclusion.” Harper v. City of Los Angeles, 533 F.3d

1010, 1021 (9th Cir. 2008) (quoting Pavao v. Pagay, 307 F.3d 915, 918 (9th Cir.

2002)). However, whether an ambiguity exists in a contract is a question of law

that we review independently on appeal. See F.B.T. Prods., LLC v. Aftermath

Records, 621 F.3d 958, 962–63 (9th Cir. 2010). We have jurisdiction pursuant to

28 U.S.C. § 1291. We reverse the ruling of the district court, vacate the judgment

against Cypress, and remand this matter to the district court for a new trial. The

district court shall determine the scope of that new trial.1

Under California law, “[a] contract must be so interpreted as to give effect to

the mutual intention of the parties as it existed at the time of contracting, so far as

the same is ascertainable and lawful.” Cal. Civ. Code § 1636. “If a contract is

reduced to writing, ‘the intention of the parties is to be ascertained from the writing

1 Given our holding, we do not address Cypress’s other claims, including as to the jury instruction on incorporation by reference.

2 23-4314 alone . . . .’” Block v. eBay, Inc., 747 F.3d 1135, 1138 (9th Cir. 2014) (quoting

Cal. Civ. Code § 1639); see also Cal. Civ. Code § 1638 (“The language of a

contract is to govern its interpretation, if the language is clear and explicit, and

does not involve an absurdity”). “[T]he ultimate inquiry is what was the parties’

‘objective intent, as evidenced by the words of the contract.’” DiCarlo v.

MoneyLion, Inc., 988 F.3d 1148, 1157 (9th Cir. 2021) (quoting Reilly v. Inquest

Tech., Inc., 160 Cal. Rptr. 3d 236, 249 (Ct. App. 2013)). “The Agreement must be

read as a whole, ‘so as to give effect to every part.’” Id. (quoting Cal. Civ. Code §

1641).

“It is not the parties’ subjective intent that matters, but rather their objective

intent, as evidenced by the words of the contract.” Block, 747 F.3d at 1138

(quoting Reilly, 160 Cal. Rptr. 3d at 249). Extrinsic evidence may be introduced

“to construe a contract only when its language is ambiguous,” and a trial court’s

“determination of whether an ambiguity exists remains ‘a question of law, subject

to independent review on appeal.’” F.B.T. Prods., LLC, 621 F.3d at 963 (quoting

Wolf v. Superior Court, 8 Cal. Rptr. 3d 649, 656 (Ct. App. 2004)).

The EBMA featured several termination provisions. Pursuant to section 7.1

of the agreement, the EMBA would terminate upon termination of another

contract, known as the “ODM Contract.” The EBMA defined the “ODM

Contract” as “the Crestron Standard Terms and Conditions for Purpose of Products

3 23-4314 and Services between Crestron and Cypress.” “Crestron” refers to Crestron

Electronics, Inc., a third party. In 2014, OWLink and Cypress signed the EBMA.

Cypress and Crestron signed an agreement entitled Crestron Modified Terms and

Conditions for Purchase of Products and Services (“2014 agreement”) a few days

later. Though titled slightly differently, the three companies for the next few years

treated the 2014 agreement as the “ODM Contract” referred to in the EBMA.

Then, in 2020, Crestron terminated the 2014 agreement and entered into a new

agreement (“2020 agreement”) with Cypress 60 seconds later.

The EBMA was clear that a termination of the “ODM Contract” would

terminate the EBMA, and here the “ODM Contract” was terminated. While there

are other provisions in the EBMA that prohibited Cypress from “negotiating a new

direct pricing structure with Crestron,” the issue here is not the fact of these

prohibitions but the remedy for breaching them. Setting aside any claimed breach

of the duty of good faith and fair dealing, which is not before us, through section

7.5 of the EBMA, the parties effectively agreed to cap contractual damages to two

years’ worth of the value of the EBMA to OWLink, following termination of the

“ODM Contract.” OWLink is thus not “defenseless” to Cypress and Crestron

cutting it out of the relationship, because under section 7.5, OWLink can recover

two years’ worth of damages in this circumstance. And whether the relationship

between Cypress and Crestron stopped for a minute or a year, the fact remains that

4 23-4314 the termination of the “ODM Contract” was enough to terminate the EBMA. The

EBMA did not impose any conditions on such a termination.

OWLink attempts to circumvent the plain language of the EBMA by arguing

that the “ODM Contract” instead “referred to whatever version of the [terms and

conditions] governed Cypress and Creston’s ongoing business dealings at any

given time.” By this logic, the phrase “ODM Contract” encompasses the 2020

agreement between Cypress and Crestron, which, if true, would mean that there

was never a termination under section 7.1 of the EBMA, because the relationship

between Cypress and Crestron continued.

However, the terms of the EBMA referred to a single agreement, and the

only extant agreement at the time of the execution of the EBMA was the 2014

agreement between Cypress and Crestron. The phrase “ODM Contract” may

include amendments to the 2014 agreement but, at the very least, what “ODM

Contract” does not refer to is any agreement between Cypress and Creston that is

made after a termination. A “termination” necessarily ends whatever agreement is

contemplated by the reference to “ODM Contract.” “Termination” places the

parties in a post-termination world, with post-termination remedies. The 2020

agreement does not mean the EBMA carries on as usual, as OWLink contends,

because termination of the 2014 agreement is a formal event that carries formal

consequences under the EBMA. To the extent OWLink’s president, Paul Tzeng,

5 23-4314 had a different subjective understanding, that is irrelevant. The parties treating the

amendments to the 2014 agreement as part of the “ODM Contract” referred to in

the EBMA is likewise irrelevant because these amendments were, by definition,

not a termination of the 2014 agreement. Therefore, the extrinsic evidence

OWLink presented did not create an ambiguity in the EBMA.

Though we vacate the judgment against Cypress, we leave it to the district

court to determine the scope of the new trial in the first instance. See Gasoline

Products Co. v. Champlin Refining Co., 283 U.S. 494, 500 (1931).

REVERSED, VACATED, AND REMANDED.

6 23-4314 FILED FEB 28 2025 OWLink Tech., Inc. v. Cypress Tech. Co., LTD., No. 23-4314 MOLLY C. DWYER, CLERK DE ALBA, Circuit Judge, dissenting: U.S. COURT OF APPEALS

I agree that my colleagues’ interpretation of the Exclusive Business

Management Agreement (“EBMA”) is the most natural construction of its terms. I

do not believe that their interpretation is the only one to which the language of the

EBMA is “reasonably susceptible.” Wolf v. Superior Court, 8 Cal. Rptr. 3d 649,

655–56 (Ct. App. 2004). Therefore, I respectfully dissent.

In California, “[w]hen a contract is reduced to writing, the intention of the

parties is to be ascertained from the writing alone . . . subject . . . to the other

provisions of [the California Code of Civil Procedure].” Cal. Civ. Code § 1639.

However, “[courts] are permitted to consider extrinsic evidence when interpreting

[a contract] as a matter of law if the language of the provisions is reasonably

susceptible to the interpretation of the party proffering the evidence.” Cachil Dehe

Band of Wintun Indians of Colusa Indian Community v. California, 618 F.3d 1066,

1075 (9th Cir. 2010); see also Cal. Civ. Code § 1647 (“A contract may be

explained by reference to the circumstances under which it was made, and the

matter to which it relates”). The goal is not to determine the objective meaning of

the terms of the contract but to determine the “actual intent” of the contracting

parties. See Hess v. Ford Motor Co., 41 P.3d 46, 54 (Cal. 2002) (“The goal of

contract law is to ascertain the parties’ actual intent at the time they made the

1 23-4314 contract. This intent is necessarily subjective.” (citation omitted)). “[S]ubjective

opinions about” the meaning of the terms of a contract are unreliable, but

“objective facts surrounding the negotiations” of those terms are valid things to

consider when interpreting a contract. Id. Here, OWLink’s case largely rises and

falls with the credibility of its president, Paul Tzeng (“Tzeng”).

Tzeng testified that he insisted that the parties include section 2.4 to ensure

that Cypress would not eliminate that OWLink’s participation in the agreement, an

understanding he says that Cypress shared. He did not state that section 7.5

functioned as a cap on damages. Moreover, Tzeng testified that Cypress agreed

with his view that the EBMA would terminate when Crestron actually ceased

purchasing products from Cypress. None of these statements are undisclosed

intentions or subjective understandings of the contract; rather, Tzeng testified to

the parties’ shared understanding of the contract, of which he had firsthand

knowledge.

Undoubtedly, Tzeng’s testimony may be characterized as self-serving.

However, Cypress had an opportunity to question Tzeng about the veracity of his

statements, challenge the basis of his knowledge, and present evidence that

countered his narrative. The jurors were in the best position to judge Tzeng’s

credibility. They had the best vantage point to determine if Tzeng was an honest

entrepreneur who had been betrayed by a company that did not live up to its word,

2 23-4314 a snake oil salesman attempting to get far more than what he bargained for, or

something in between. Based on the verdict, it appears that the jury agreed with

Tzeng’s interpretation of the EBMA, and I fear my colleagues’ view that the jury’s

interpretation was unreasonable too “lightly cast[s] aside the solemnity of the

jury’s verdict.” Harper v. City of Los Angeles, 533 F.3d 1010, 1015 (9th Cir.

2008). I respectfully dissent.

3 23-4314