TM Technologies Incorporated v. Hand Technologies Incorporated

• Court: District Court, D. Arizona
• Decided: September 24, 2019
• Docket: 4:18-cv-00286
• Status: Unknown

Opinion

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

9 TM Technologies Incorporated, No. CV-18-00286-TUC-DCB

10 Plaintiff, ORDER

11 v.

12 Hand Technologies Incorporated, et al.,

13 Defendants. 14 15 The Court grants the Motion to Dismiss in part and denies it in part for the reasons 16 explained below. 17 I. Background 18 TM Technologies (the Company) is a tech company that began developing a type 19 of radio carrier signal to increase bandwidth over existing networks. (First Amended 20 Complaint (FAC) (Doc. 37) at ¶2.) This waveform technology is based on Transpositional 21 Modulation1 of a carrier signal that allows for a higher data transfer rate. Id. The Company 22 refers to the technology as “TM.” Id. 23 The Company advanced TM to the point where it worked in an analog format in 24 2013, but for modern uses TM would need to be viable in a digital format. Id. ¶64-65. In 25 order to further develop TM, the Company engaged with Alan Hand and his tech company, 26 Hand Technology, Inc. (Hand Tech), to develop TM in a digital format and engineer the 27 hardware that would be necessary to demonstrate TM IP2. Id. ¶64-66.

28 1 The physics on Transpositional Modulation has not been made public. 2 An IP Core is a reusable integrated circuit design that is intellectual property. 1 The agreement between the Company and Hand Tech was executed in stages and, 2 collectively, referred to as the Engineering Service Agreement (ESA). Id at ¶83, ¶96. In 3 the initial stage, Hand Tech agreed to determine whether TM could be converted to a 4 useable digital format. Id at ¶83. As part of this initial agreement (Phase One Contract), 5 Hand signed an Invention Assignment Agreement (IAA (Doc. 1-2, Ex. A) at 3-5, dated 6 6/17/2015), a Non-Disclosure Agreement (NDA (Doc. 1-2, Ex. B) at 7-9, dated 6/11/2015), 7 and the Engineering Service Agreement, (ESA (Doc. 1-2, Ex. C) at 11-20, dated 3/1/2016). 8 The ESA was signed March 1, 2016, memorializing the prior oral agreement by the 9 Company to pay, and its initial payment of, $625,000 for Phase One work, and setting out 10 the remainder of the Phase One work to be completed by March 24, 2016, with a Milestone 11 1, payment of $400,000. A month before the end of Phase One, Hand Tech had 12 communicated to the Company that TM could be translated into a digital format and the 13 effort should be made to develop TM for the market. (FAC (Doc. 37) at ¶87.) The ESA, 14 accordingly, included “Phase Two” contract provisions, which reflected Milestones 2-4 payments for a fixed price total of $2,000,000 to complete development of TM IP and four 15 radios (2 systems) capable of demonstrating TM IP to prospective customers. (ESA (Doc 16 1-2 Ex C) at 18-19). The four milestones set specific deliverables to be completed by a 17 certain date corresponding to payments to be made by the Company to Hand Tech. Id. 18 The contract also had a provision for changing to an hourly rate if it became more 19 equitable for the parties. Id. In order to migrate to an hourly rate, the contract called for 20 both parties to sign a written agreement with a not-to-exceed value. The billing rates that 21 were to be used if the contract migrated to an hourly rate were predetermined in the ESA 22 Contract. Id. at 20. 23 Milestones 1 and 2 required reporting on the simulation of TM and an IP module 24 plan for 1 and completed design and layout for the PC board for 2. Id. at 19. For Milestones 25 1 and 2, Hand Tech was to be paid $400,000 dollars each. Id. The Company made the 26 payments when they received invoices from Hand Tech indicating Milestones 1 and 2 had 27 been reached. The Company made the last of the two payments on May 12, 2016. At that 28 point, the Company had paid a total of $1,425,000 to Hand Tech leaving a balance of 1 $575,000 for the completion of the final two milestones per the Phase Two contract 2 provisions. 3 Shortly after Milestone 2 was attained, on May 31, 2016, Alan Hand told the 4 Company that he was able to add Amplitude Modulation to the Transpositional Modulation 5 to increase the number of bit/s/Hz3 the signal could carry from 12 bit/s/Hz to 16 bit/s/Hz. 6 (FAC (Doc. 37) at 14, ¶103.) In an email sent on May 31, 2016, from Hand to Dan Hodges 7 (CEO of TM Tech), Hand stated that Hand Tech is adding Amplitude Modulation to TM 8 (combined notation TM-A) in the simulations and the FPGA implementation, which 9 involved research and development outside the scope of the phase two contract. The 10 addition would cost between $250,000 to $300,000. Id. In a response email, the Company 11 agreed to pay an additional $250,000 because they were intending to add Amplitude 12 Modulation in a later phase, and because the “team greatly exceeded the allotted hours.” Id 13 at 24. It appears that the parties intended the emails to create a Contract Addendum (email 14 Contract Addendum). (Doc. 1-2, Ex. D) at 23-24, dated 5/31/2016). As part of the addition, Hodges noted, the Company still needed the programming 15 and data for Transpositional Modulation only. Id. It is from this point in time that the 16 disagreements between the parties ensued. The Plaintiff’s claim that Phase Two Milestones 17 3 and 4 were never met. (FAC (Doc. 37) at 16, ¶116-118. Hand Tech, despite repeated 18 assurances that they were almost complete, continued to delay the delivery of the radio 19 units past the contract’s timeline. Id. ¶119. The Company asserts that in November 2016, 20 another amendment was required to establish a new timeline for a list of items to be 21 completed, which included the Phase Two engineering of the 16 bit/s/Hz version of TM-A 22 and the additional payment of $250,000. Id. ¶¶ 19, 119 They also claim that what Hand 23 Tech delivered to the Company failed to meet the requirements specified in the Phase Two 24 contract; Specifically, they only delivered one of the four radio units called for, and the 25 unit was not up to specifications. Id. ¶125-26. The radio was only capable of 12 bit/s/Hz 26 and did not have enough ports to verify that it was functional. Id. 27

28 3 Bit/s/Hz is the measure of spectral efficiency. Higher Bit/s/Hz corresponds to faster data transfer across a given bandwidth. 1 Hand presents a different story. According to Hand, Hand Tech delivered on the 2 Phase Two contract, but the work required was beyond what was originally conceived of 3 under the contract and the Company turned down the higher bit version because of other 4 issues it created. The contract was for the construction of the technology TM had already 5 patented. (FAA (Doc. 47) at 20, ¶109-17); (Hodges Decl. (Doc. 1-2, Ex K) at 38). Once 6 Hand Tech began work, it discovered that one of the components (the “sepex” or 7 “Demodulator4”) did not function the way it was supposed to, and Hand Tech had to spend 8 significant time on research and development for reengineering. (Hodges Decl. (Doc. 1-2, 9 Ex K) at 38.) This R&D time is part of what they are billing for at an hourly rate because 10 it was not part of the original contract. Id. After several months of development, Hand Tech 11 produced a radio system for testing with a combined capacity of 12 bits/Hz, and all the 12 software and data was provided to the Company as specified. Id. At that point, Hand Tech 13 claims the Phase Two contract obligations were completed. 14 The email Contract Addendum, according to Hand, was only to test the possibility of increasing the capacity of TM by adding Amplitude Modulation to create TM-A. Id at 15 39. He specifically told the Company that it would be a hit or miss experiment, but initial 16 modeling was promising. Id., Exs. K at 39, D at 23. After Hand Tech built the TM-A 17 version, he notified the Company that it was functional, but it increased the signal-to-noise 18 ratio (SNR) significantly, which means in order to implement it a stronger and larger 19 antenna system would be required. (Hodges Decl. (Doc. 1-2), Ex. K at 39.) The Company 20 declined to pursue it further and the performance required by the email Contract Addendum 21 was completed. Id. 22 Finally, Hand Tech claims that after the Company denied the TM-A technology 23 with the high SNR, they changed the requirements. They told Hand Tech they needed a 16 24 bits/Hz version of TM-A without the SNR increase. Hand Tech successfully developed a 25 system capable of this, but according to Hand, the relationship was no longer governed by 26 the Phase Two Contract or the email Contract Addendum. Id. The system they developed 27

28 4 A demodulator is the hardware, or software in a “software defined radio,” that separates the data from the carrier wave. 1 is what Hand Tech refers to as the “Unbalanced Side Lobe Modulation,” and the Company 2 has made no additional payments for the development of this technology. Id. Hand Tech is 3 now withholding this version and threatening to sell it, if the Company refuses to pay for 4 the additional work. (Hodges Decl. (Doc. 1-2), Ex. L at 47.) 5 The Company filed suit against Hand Tech alleging fraud, breach of contract for 6 both the Phase Two ESA Contract and the email Contract Addendum, misappropriation of 7 trade secrets, misappropriation of confidential information, replevin, conversion, and 8 requests for preliminary and permanent injunctive relief. (FAC (Doc. 37) at 23-31, ¶¶178- 9 230.) The Company also attempts to pierce the corporate vail by naming Alan Hand and 10 his wife in the lawsuit, with the allegation that Alan Hand used the Company payments to 11 purchase a boat. 12 In their First Amended Answer (FAA), Defendants Alan Hand and Hand Tech 13 (Hand Tech) have denied all allegations, asserted 20 affirmative defenses, and 125 counter- 14 claims against the Company including: breach of contract (Counts I and XII); unjust enrichment (Counts II and VII), promissory estoppel (Count III); negligent 15 misrepresentation (Counts IV and VIII); intentional misrepresentation (Counts V and IX), 16 interference with prospective advantage (Count VI); breach of escrow duties (Counts X 17 and XI), and specific performance (Count XII). 18 Defendants TerraNova Capital Partners and TerraNova Capital Equities, Inc 19 (TerraNova) have not been served. TerraNova is named in Counts III through XI. Hand 20 Tech alleges that the Company acted through its investment banker, TerraNova, an entity 21 responsible for raising investment capital for the Company, and through John Steinmetz, 22 Chairman and President of TerraNova and a member of the Company’s board of directors. 23 Hand Tech has not served TerraNova and did not name Steinmetz as a Defendant. 24 25 26 27 5 The FAA includes two Count XIIs for both the breach of contract claim related to the 28 alleged optional equipment sale/purchase and the specific performance claim for the alleged optional equipment purchase agreement. 1 II. Motion to Dismiss Counter-Claims 2 In response to the counter claims, the Company filed a Motion to Dismiss under 3 Rule 12(b)(6). 4 To survive a motion to dismiss, the party must plead facts with sufficient 5 particularity so that its claim to relief is more than just conjecture. Ashcroft v. Iqbal, 556 6 U.S. 662, 677-78 (2009). “All allegations of material fact in the complaint are taken as true 7 and construed in the light most favorable to the nonmoving party.” Shannon v. Verizon 8 Wireless, LLC., WL 7755354 (D. Ariz. 2015). The allegations “may not simply recite the 9 elements of a cause of action but must contain sufficient allegations of underlying facts to 10 give fair notice and to enable the opposing party to defend itself.” Id. Dismissal is 11 warranted where the complaint fails to allege enough facts to state a plausible claim for 12 relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). 13 1) Breach of Contract Counter-Claims 14 Hand Tech’s breach of contract claim (Count I) alleges that the Company breached 15 the Phase Two contract provisions in the ESA because Hand Tech adequately performed its contractual obligations and the Company failed to compensate them accordingly. (FAA 16 (Doc. 47) ¶¶65-67.) Hand Tech claims it delivered a demonstration set of radios capable 17 of 12 Bit/s/Hz and all the accompanying software and data. Id. ¶30. The Company decided 18 after the fact that 12 Bit/s/Hz was not satisfactory and demanded 16 Bit/s/Hz. Id. ¶¶51-52. 19 Hand Tech also claims that the Company received 2 radios but disassembled one in an 20 attempt to reverse engineer it and are now claiming they only got one. Id. ¶ 121-125. 21 The Company’s Motion to Dismiss the counter claims argues that Hand Tech did 22 not allege sufficient facts for the claim to survive. They point to a lack of evidence of a 23 contract modification authorizing hourly rates. That is not, however, the central assertion 24 of the Hand Tech breach of contract claim. Hand Tech is claiming that it delivered what 25 was required under the ESA and the Company failed to pay. Enough facts are alleged for 26 this claim to survive the motion to dismiss. 27 The second breach of contract claim (Count XII) refers to an alleged contract for 28 the optional purchase of specialized equipment loaned to Hand Tech for the project. (FAA 1 (Doc. 47) ¶¶ 60, 117.) The alleged agreement flies in the face of bailment agreements, 2 relied on by the Company to support its claims for replevin and conversion, which do not 3 include an option to purchase. See (FAC (Doc. 37) ¶¶ 158, 162, 163, 166, 169 231, 233, 4 239, 241); (Reply in Support of Motion for Preliminary Injunction, (Doc. 50-1, Exs. P, Q) 5 Bailment Agreements 10/12/2015 and 2/2/2016 at 6-10) Hand Tech argues that the 6 Company has not filed a motion for summary judgment and when a contract is ambiguous, 7 “‘the parties may offer evidence to help interpret it, in which case construction is a question 8 for the jury.’” (Response (Doc. 65) at 9-10.) Hand Tech, however, fails to allege even one 9 single fact to support its assertion that the “contract is ambiguous.” It fails to even direct 10 the allegation of ambiguity at the bailment agreements; it ignores the existence of the 11 bailment agreements. 12 The Company, and likewise the Court, may consider materials incorporated into the 13 complaint, even if not attached as an exhibit, on a motion to dismiss. (Motion to Dismiss 14 (Doc. 62) at 13 n. 4 (citing Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 2010)). The bailment contracts state, as follows: 15 Nothing in this Agreement shall constitute an offer by Bailor to sell or by 16 Bailee to buy said Bailed Property, or give rise to any obligation to pay any charge or rental whatsoever of the Bailed Property in its possession. Bailee 17 is not responsible for reasonable wear and tear to the Bailed Property. 18 Id. (quoting Bailment Agreements ¶ 5 (Doc. 50-1, Exs. P-Q).) 19 In the face of the alleged Bailment Agreements, Hand Tech alleges no facts to 20 support its breach of contract claim because it alleges no facts to support its claim that an 21 agreement existed between the parties for Hand Tech to purchase the specialized 22 equipment loaned to Hand Tech by the Company for the project. Count XII fails. 23 Defendant’s counter-claim for specific performance of this alleged agreement, also 24 numbered (Count XII), likewise fails. 25 2) Unjust Enrichment Claims 26 To make a claim for unjust enrichment, the pleading party must show that he 27 conferred some benefit onto the defendant, and it would be unfair for the defendant to retain 28 that benefit without paying for it. Bloomgarden v. Coyer, 479 F.2d 201, 211 (D.C. Cir. 1 1973). Unjust enrichment is applicable where there is no contract, express or implied. Id. 2 “Where there is a specific contract which governs the relationship of the parties, the 3 doctrine of unjust enrichment has no application.” Brooks v. Valley Nat. Bank, 548 P.2d 4 1166, 1171 (Ariz. 1976). 5 Hand Tech asserts two unjust enrichment claims, one regarding the failure of 6 payment under the original ESA and the other for the development of Unbalanced Side 7 Lobe Modulation. The Company’s Motion to Dismiss argues that the express, written 8 Phase Two ESA provisions preclude a claim of unjust enrichment regarding the 9 development of any technology related to the TM project. 10 Hand Tech’s first unjust enrichment claim (Count II) is based on the Company’s 11 failure to pay after the delivery of Milestones 3 and 4 of the ESA Contract. Because this 12 relationship is governed by an express contract, an unjust enrichment claim is not proper 13 and should be dismissed. The Company’s claim itself alleges Hand Tech failed to perform 14 under the original ESA. If the Company’s claim fails, Hand Tech may recover under the 15 contract for the Company’s failure to pay. 16 The second unjust enrichment claim (Count VII) is for the development of 17 Unbalanced Side Lobe Technology. Hand Tech repeatedly alleges it “created this design 18 to double the output (from 8 to 16bits/Hz of data), with the knowledge of TM, a project 19 beyond the scope of and outside of the original ESA and the $250,000 agreement [the email 20 Contract Addendum]. (Doc. 1-2, Ex. D) at 23-24, dated 5/31/2016); (FAA (Doc. 55) ¶¶ 34, 21 144, 147, 148, 150, 151, 156.) Arguably, the development of Unbalanced Side Lobe 22 Technology is outside the original contract. Id.¶¶ 62-146. If true, the ESA contract would 23 not govern, and if there is no implied contract, unjust enrichment may be the proper claim. 24 Id. ¶¶ 147-156/) In the event, the Company prevails in forcing Hand Tech to turn over the 25 technology conferring a benefit on the Company, Hand Tech has a reasonable expectation 26 of get paid for their efforts, and it would be unjust for the Company to take the technology, 27 worth millions of dollars, without compensating Hand Tech for the development work it 28 did on the Unbalanced Side Lobe Technology. 1 3) Promissory Estoppel 2 Hand Tech asserts a counter claim for promissory estoppel (Count III). According 3 Hand Tech, it communicated to the Company that a flaw existed in their patents. The 4 Company agreed Hand Tech needed to find a solution and also agreed that this work was 5 outside the scope of the original contract. Hand Tech then proceeded to reengineer the 6 faulty component with the understanding that the Company would be paying for the 7 additional work. 8 For Hand Tech to succeed on a claim for promissory estoppel, it must show that the 9 Company made a promise knowing that Hand Tech would reasonably rely on that promise, 10 and that Hand Tech did in fact rely on the promise to its detriment. Higginbottom v. State, 11 51 P.3d 972, 977 (Ariz. Ct. App. 2002). However, “A claim for promissory estoppel cannot 12 exist as a matter of law when the subject matter is governed by contract.” Nelson v. Frank, 13 2018 WL 6435766 at *3 (D. Ariz. Dec. 7, 2018). The Court cannot dismiss this counter 14 claim based solely on the existence of the ESA because its “primary effort” was to develop 15 and test an IP module that “implements the TM waveform. The TM IP Module will 16 implement TM Modulation [and] TM demodulation . . ..” (ESA Appendix. B. (Doc. 1-2) 17 at 18). The use of the word implement implies that the contract only contemplated use of 18 the demodulator, not the complete development of a TM demodulator. The allegations that 19 Hand Tech completed work on a separate project, outside the scope of the ESA and email 20 Contract Addendum, support the promissory estoppel counter claim. 21 4) Negligent Misrepresentation 22 Hand Tech makes two allegations in his counter claims for negligent 23 misrepresentation (Counts IV and VIII). In Count IV, Hand Tech’s first allegation is that 24 the Company negligently misrepresented that it would pay for the additional service of 25 reengineering the demodulator. Second, Hand Tech claims that the Company, through 26 TerraNova promised to hold $500,000 of the Company’s funds in escrow for the benefit of 27 Hand Tech as payment toward the outstanding amounts owed under the ESA, thereby 28 1 inducing Hand Tech to work without pay on developing the Unbalanced Side Lobe 2 Modulation Technology. 3 The elements of negligent misrepresentation in Arizona are: 1) the defendant 4 provided false information in a business transaction; 2) the defendant intended for the 5 plaintiff to rely on the incorrect information or knew that it reasonably would rely; 3) the 6 defendant failed to exercise reasonable care in obtaining or communicating the 7 information; 4) the plaintiff justifiably relied on the incorrect information, and 5) resulting 8 damage. KB Home Tucson, Inc. v. Charter Oak Fire Ins. Co., 340 P.3d 405, 412 (Ariz. Ct. 9 App. 2014). The misrepresentation must be of a material fact, and not a promise of future 10 performance that is then unfulfilled. Ahmed v. Collins, 530 P.2d 900, 902-03 (Ariz. Ct. 11 App. 1975). 12 In Count IV, Hand Tech claims that the Company falsely stated that they would 13 compensate Hand Tech beyond the $2,000,000 owed under the Phase Two Contract for 14 reengineering the demodulator, the Unbalanced Side Lobe Modulation Technology. This 15 is nothing more than a claim based on a future promise to pay and not a representation of 16 material fact. This claim is not cognizable under Count IV because the Defendant does not 17 point to any misrepresentation of material fact other than the promise of future performance 18 to base the claim on. 19 The second claim in Count IV survives the Motion to Dismiss. Hand Tech alleges 20 that the Company misrepresented that $500,000 was being held by TerraNova for payment 21 for work done under the ESA and this promise induced Hand Tech to begin work outside 22 of the scope of the ESA payment provisions to develop the Unbalanced Side Lobe 23 Modulation Technology. Hand Tech alleges it reasonably relied on the misrepresentation 24 that payment for work performed under the ESA and email Contract Addendum was 25 assured. This reliance resulted in damages when the Company refused to pay for Hand 26 Tech’s development of the Unbalanced Side Lobe Modulation Technology; Hand Tech 27 also suffered damages when it lost opportunities to do business with other companies 28 because it was working for the Company. 1 Hand Tech does not need to reallege the negligent misrepresentation claim 2 (Counts VIII) to seek damages for lost business opportunities related to loss of work from 3 other business endeavors that were not undertaken because Hand Tech was working to 4 develop the Unbalanced Side Lobe Modulation technology. Likewise, Hand Tech may 5 seek damages for lost opportunity to sell the Unbalanced Side Lobe Modulation 6 technology. Count VIII fails to state a claim of misrepresentation related to the allegation 7 that the Company misrepresented it owns the Unbalanced Side Lobe Modulation 8 technology. While this is an alleged misrepresentation, there is no allegation that it 9 induced Hand Tech to act. 10 5) Intentional Misrepresentation Claims 11 The allegations in the counter claims for intentional misrepresentation (Counts V 12 and IX6) mirror the claims for negligent misrepresentations, except it is alleged the 13 misrepresentations were made “intentionally” instead of negligently. (FAA (Doc. 55) ¶ 14 127.) 15 As it could not allege negligent misrepresentation, Hand Tech cannot allege 16 intentional misrepresentation based on the allegation that the Company falsely stated that 17 it would compensate Hand Tech beyond the $2,000,000 owed under the Phase Two 18 Contract for reengineering the demodulator. 19 A claim for fraud requires proof of nine elements by clear and convincing evidence: 20 (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its 21 22 6 Count IX realleges the intentional misrepresentation claim alleged in Count 23 V and similarly fails to state a claim of misrepresentation related to the allegation that the 24 Company misrepresented it owns the Unbalanced Side Lobe Modulation technology. 25 While this is an alleged misrepresentation, there is no allegation that it induced Hand 26 Tech to act. Additionally, Hand Tech was fully aware of the contractual arrangements it 27 had with the Company. A requirement for fraud is that the hearer be ignorant of the 28 statement’s falsity. The Court dismisses Counts IX. 1 falsity or ignorance of its truth; (5) the speaker's intent that it be acted upon by the recipient 2 in the manner reasonably contemplated; (6) the hearer's ignorance of its falsity; (7) the 3 hearer's reliance on its truth; (8) the hearer's right to rely on it, and (9) the hearer's 4 consequent and proximate injury. Comerica Bank v. Mahmoodi, 229 P.3d 1031, 1033–34 5 (Ct. App. 2010). 6 When pleading a fraud claim, the party must state with particularity the 7 circumstances constituting the fraud. Fed. R. Civ. P. 9(b). To satisfy the particularity 8 requirement, “who, what, where, and how” must be identified, as well as “what is false or 9 misleading about the statement.” United States ex rel. Anita Silingo v. WellPoint, Inc., 10 904 F.3d 667, 677 (9th Cir. 2018). 11 Here, Hand Tech alleges an “intentional” misrepresentation that $500,000 would 12 be set aside in escrow sufficient to pay for the work performed under the contracts 13 induced Hand Tech to undertake work outside the scope of the contacts, meaning the 14 alleged set aside induced Hand Tech to work outside the scope of the ESA. Hand Tech 15 alleges Steinmetz, on behalf of the Company and Terra Nova said that the $500,000 in 16 funds were held “until ‘TM [the Company] had to have the money.’” (FAA (Doc. 55) 17 ¶131.) These two allegations do not support a claim that the speaker, Steinmetz, 18 knowingly made a misrepresentation when he said TerraNova would set aside $500,000 19 for Hand Tech. These allegations are insufficient to convert a negligent misrepresentation 20 to a fraudulent claim under the heightened requirement of Rule 9(b). Counts V and IX, 21 including punitive damage claims, are dismissed. 22 6) Interference with Perspective Business Advantage Claim 23 While poorly plead,7 the essence of Count VI is the allegation that the Company, 24 without justification, claims it owns the Unbalanced Side Lobe Technology that Hand Tech 25 developed outside the scope of the agreements between the Company and Hand Tech. As 26 a result of the Company’s misrepresentation, Hand Tech has been and continues to be 27 unable to market and sell the Unbalanced Side Lobe Technology. This counter claim

28 7 The defendants agree that the counter claim for interference with perspective business advantage does not contain enough detail. They request leave to amend. 1 || remains to be resolved on summary judgment or at trial. 2 7) Breach of Escrow Claims 3 The Court dismisses the breach of escrow claims (Counts X and XI) because Hand 4|| Tech fails to allege the existence of any escrow account or other fact to support an assertion of a breach of escrow duties. 6 II. Conclusion 7 For the reasons explained above, the Court grants the Motion to Dismiss in part, as || follows: Counts II, V, and VIII through XII, including the claim for specific 9|| performance. Counter claimant Hand Tech has leave to file a Second Amended Answer, 10 || to reflect the rulings contained in this Order regarding the counter claims, including 11 || amendment of Count IV and to state Count VI in greater detail. 12 Accordingly, 13 IT IS ORDERED that the Motion to Dismiss (Doc. 62) is GRANTED IN PART AND DENIED IN PART. 15 IT IS FURTHER ORDERED that Counts II, V, and VI through XII are dismissed. 17 IT IS FURTHER ORDERED that Counter claimant Hand Tech may file a 18 || Second Amended Answer, reflecting the rulings of this Court regarding dismissal of 19 || claims and the amendment of the claims alleged in the FAA, Counts IV and VI 20 IT IS FURTHER ORDERED that the Second Amended Answer shall be filed within 14 days of the filing date of this Order. 22 3 Dated this 24th day of September, 2019. 24 SS YY a7 Honorable David C. But 28 United StatesPrstrict Judge

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