Sunfarms, LLC v. Eurus Energy America Corporation

• Court: Court of Appeals for the Ninth Circuit
• Decided: January 26, 2024
• Docket: 22-56049
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JAN 26 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

SUNFARMS, LLC, a Delaware Limited No. 22-56049 Liability Company; MITCH DMOHOWSKI, D.C. No. Plaintiffs-Appellants, 3:18-cv-00058-L-AGS

v. MEMORANDUM* EURUS ENERGY AMERICA CORPORATION, a Delaware Corporation; TOYOTA TSUSHO AMERICA, INC., AKA Toyota Tsusho America, a New York Corporation,

Defendants-Appellees,

and

EE WAIANAE SOLAR PROJECT, LLC; TOYOTA TSUSHO CORPORATION; ROBERT EISEN; SATOSHI TAKAHATA; EURUS ENERGY AMERICA, INC.

Defendants.

Appeal from the United States District Court for the Southern District of California M. James Lorenz, District Judge, Presiding

Argued and Submitted January 8, 2024 Pasadena, California

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Before: RAWLINSON, MELLOY, ** and H.A. THOMAS, Circuit Judges.

Appellant Mitch Dmohowski and his company, Sunfarms, LLC

(collectively, “Sunfarms”), appeal the district court’s grant of summary judgment

to Eurus Energy America Corporation (“Eurus”) and Toyota Tsusho America, Inc.

(“TTAI”) on claims arising from alleged breaches of a Consulting Services

Agreement (“CSA”). We have jurisdiction under 28 U.S.C. § 1291. We review the

district court’s grant of summary judgment de novo, S.R. Nehad v. Browder, 929

F.3d 1125, 1132 (9th Cir. 2019). We affirm.

1. Sunfarms claims that Eurus breached the royalty agreement in the CSA by

substituting itself in the place of the EE Waianae Solar Project, LLC Project

Company. To prevail on a breach of contract claim, an appellant must provide

“competent evidence of actual damages suffered, as opposed to speculative

damages.” Cal. Shoppers, Inc. v. Royal Globe Ins. Co., 175 Cal. App. 3d 1, 42

(1985). Sunfarms fails to provide evidence that it has or is likely to suffer actual

damages. Since 2018, Eurus has fully paid, and Sunfarms has accepted, all annual

royalty payments pursuant to the terms of the royalty agreement. And Eurus

** The Honorable Michael J. Melloy, United States Circuit Judge for the U.S. Court of Appeals for the Eighth Circuit, sitting by designation.

2 conceded at oral argument that a breach of contract action will lie against it if it

fails to make such payments.

2. Sunfarms argues that Eurus breached the implied covenant of good faith

and fair dealing during precontractual negotiations by requesting that Sunfarms

waive the implied covenant. But the implied covenant does not apply during non-

compulsory contract negotiations, Copeland v. Baskin Robbins U.S.A., 96 Cal.

App. 4th 1251, 1260 (2002). And the record does not indicate that negotiations

between Sunfarms and Eurus were compulsory. As such, the covenant of good

faith and fair dealing did not attach until the contract was formed, which was after

the request had been made. Id.

3. Sunfarms also argues that Eurus breached the CSA by refusing to provide

Sunfarms with a $500,000 termination payment because the Palehua Wind & Solar

Project was allegedly “shortlisted” for a Power Purchase Agreement with the

Hawaiian Electric Company (“HECO”) at the time the CSA was terminated. A

contract’s words are to be understood “in their ordinary and popular sense,” Cal.

Civ. Code § 1644, and “evidence of usage and custom may be introduced as an

instrument of interpretation,” Shenson v. Cnty. of Contra Costa, 89 Cal. App. 5th

1144, 1172 (2023). Here, the district court did not err in determining that Eurus

was not shortlisted.

3 4. Finally, Sunfarms argues that Eurus breached the implied covenant of

good faith and fair dealing by pursuing bilateral negotiations with HECO.

Sunfarms has waived this argument by failing to raise it in district court. Thus, we

decline to review it, People v. Lowery, 43 Cal. App. 5th 1046, 1054 (2020).

Because we hold that Eurus did not breach the CSA, TTAI cannot be held

vicariously liable for Eurus’s conduct.

AFFIRMED.