CTC Global Corp. v. Huang
CTC Global Corp. v. Huang
2019 WL 4565180 (C.D. Cal. 2019)
August 7, 2019
Guilford, Andrew J., United States District Judge
Summary
The Court denied the Defendants' motion for partial summary judgment due to their failure to preserve documents and meet their discovery obligations. CTC had shown that there were several categories of documents that were likely in Defendants' possession that had not been produced, and that Defendants had recently discovered certain responsive documents. The Court noted that their production was not expected to be complete until after the hearing on the motion.
Additional Decisions
CTC GLOBAL CORPORATION
v.
JASON HUANG ET AL.
v.
JASON HUANG ET AL.
Case No. SACV 17-02202 AG (KESx)
United States District Court, C.D. California
Filed August 07, 2019
Counsel
Melissa Kunig, Deputy Clerk, Attorneys Present for Plaintiffs:Not Present, Court Reporter / Recorder, Tape No., Attorneys Present for Defendants:
Guilford, Andrew J., United States District Judge
Proceedings: [IN CHAMBERS] ORDER REGARDING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT (DKT. 228)
*1 Defendants Jason Huang (“Huang”) and Rulong Chen move for partial summary judgment regarding Plaintiff CTC Global Corporation's claims for breach of contract. See Motion for Summary Judgment (“Mot.”), Dkt. 228.
The Court DENIES Defendants' Motion.
1. RELEVANT BACKGROUND
The Court has recited the facts of this case in several recent orders, including two summary judgment orders and one on a motion for default judgment and sanctions. The Court refers to those orders for further background. See Dkt. Nos. 227, 269, 272.
CTC manufactures an Aluminum Conductor Composite Core (“ACCC”) made up of carbon fibers, glass fibers, and resin for use in traditional utilities grids. (First Amended Complaint (“FAC”), Dkt. 161-3 ¶¶ 19-20.) Huang began work with CTC as Vice President of Research and Development in May 2010 and entered a confidential information and invention assignment agreement with CTC's predecessor company. (FAC ¶¶ 25, 26.) He later served as Chief Executive Officer and Chief Technology Officer. (Id. ¶ 28.) Defendant Rulong Chen is Huang's wife, who worked as a CTC consultant beginning in November 2012. (Id. ¶ 27.)
CTC alleges that its joint venture partner (the “JV”) alerted them that Huang was engaged in conduct competitive with the JV. (FAC ¶ 72.) CTC started an investigation into Huang's activities and suspended him with pay in December 2016. (Id. ¶¶ 73, 74.) The company simultaneously cancelled Chen's consulting agreement. CTC requested that Huang return his company laptop and iPad for inspection but found that the returned devices had been wiped of data. (Id. ¶ 75; see also July 3, 2019 Order Granting In Part Motion for Default Judgment and Sanctions (Dkt. 227).) Huang's employment was terminated in January 2017.
CTC brought a breach of contract claim against Huang alleging that he violated his confidentiality and invention assignment agreement (“Invention Agreement.”) (FAC ¶¶ 20-21, 108-115.) Specifically, CTC alleges Huang disclosed confidential information to his brother (Jason Huang), used the information in business dealings with third parties (including Xinbo and Xinbo Cable), and profited from the information by creating competitor companies. (Id. ¶ 112.) There is some dispute about whether the Invention Agreement was signed, but the merits of CTC's claim are not at issue in the present motion. CTC also amended its complaint to assert a breach of contract claim against Chen, alleging that Chen violated the confidentiality obligations in her Consultant Agreement with CTC. (Id. at ¶ 128.)
2. LEGAL STANDARD
Summary judgment is appropriate where the record, read in the light most favorable to the non-moving party, shows that “there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). Material facts are those necessary to the proof or defense of a claim, as determined by reference to substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A factual issue is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party,” based on the issue. See id. In deciding a motion for summary judgment, “[t]he evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.” Id. at 255. But if the evidence of the nonmoving party “is merely colorable, or is not significantly probative, summary judgment may be granted.” Id. at 249–50.
*2 The burden is first on the moving party to show an absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. The moving party satisfies this burden either by showing an absence of evidence to support the nonmoving party's case when the nonmoving party bears the burden of proof at trial, or by introducing enough evidence to entitle the moving party to a directed verdict when the moving party bears the burden of proof at trial. See Celotex, 477 U.S. at 325; C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000). If the moving party satisfies this initial requirement, the burden then shifts to the nonmoving party to designate specific facts, supported by evidence, showing that there is a genuine issue for trial. Celotex, 477 U.S. at 324.
3. TIMING ISSUE
On April 15, 2019, the Court gave CTC leave to amend its complaint as to its breach of contract claim and deemed the First Amended Complaint operative. (Dkt. 210.) Defendants filed an Answer about a week later. (Dkt. 211.) Defendants filed this motion for summary judgment on July 8, 2019. It's true that Defendants' motion is late under the Court's Scheduling Order. (Dkt. 39.) But the Court amended that order based on CTC's request in April 2019 without specifically revisiting Defendants' deadline to file a motion regarding CTC's amended claims. In the interests of justice, the Court thus decides the current motion on the merits and considers it timely filed.
4. ANALYSIS
To prove breach of contract, a plaintiff must show (1) the existence of a contract, (2) performance or excuse for nonperformance by the plaintiff, (3) breach, and (4) damages. Silicon Image, Inc. v. Analogix Semiconductor, 642 F. Supp. 2d 957, 964 (2008). Defendants' motion seeks partial summary judgment on the issue of damages, seeking only to limit their liability if CTC prevails on its contract claims against Huang and Chen.
Defendants' position is that CTC is unable to prove it has incurred any damages from the alleged breaches. They cite CTC's designated damages witness, who testified that CTC hadn't lost any business from Defendants' disclosure of confidential information. (Defendants' Statement of Uncontroverted Facts (“SUF”), Dkt. 228-3 at No. 2.) Defendants also interpret CTC's damages expert report as stating that CTC's only calculable damages are Huang's reimbursement expenses and the cost of investigating Defendants' conduct. (SUF No. 7.)
Defendants' failure to preserve documents and otherwise meet their discovery obligations in this case precludes summary judgment in favor of Defendants. Where “facts are unavailable to the nonmovant,” Rule 56(d) gives courts discretion to defer ruling on summary judgment, deny summary judgment, or “issue any other appropriate order.” Fed. R. Civ. P. 56(d). See also Beauty 21 Cosmetics, Inc. v. Glam Doll, Inc., No. EDCV140882JGBDTBX, 2014 WL 11858166, at *2 (C.D. Cal. Dec. 30, 2014) (“[S]ummary judgment is disfavored where relevant evidence remains to be discovered.”). There are several categories of documents that CTC has shown likely were (or are) in Defendants' possession, that haven't been produced in this case, and that would be relevant to a computation of damages. For example, Defendants haven't produced any communications they had with CTC's competitor Xinbo – no messages, no emails, and no proofs of payment. (SGD No. 11.) This, despite the fact that Huang testified he was in recruiting discussions with Xinbo in October 2014 and received $20,000 from the company. (Id. No. 9.) Defendants also haven't produced any sales or income documents regarding Jason and James Huang's competing company TS Conductors, which CTC alleges was founded using CTC's resources. (Id. No. 11.) Meanwhile, a third party production and Defendants' own public statements about their sales of TS conductor products suggest such documents likely exist. (Id. Nos. 18, 19.) Defendants' recent discovery of certain responsive documents – for example, on the eve of the May 2019 evidentiary hearing on spoliation – further supports the Court's finding that responsive documents regarding damages have been systematically underproduced in this case.
*3 After finding Defendants had destroyed certain data in anticipation of litigation, the Court ordered them to conduct additional searches. As the trial date approaches, that search is still ongoing, and Defendants' production is not expected to be complete until after the hearing on this motion. See Status Report, Dkt. 275. It would be unjust at this stage to reward Defendants' tardy and incomplete production with a motion for summary judgment in their favor.
Even putting aside the spoliation and other document production issues – which are sufficient basis for denying summary judgment here – there are factual disputes regarding damages that would prevent summary judgment. As the Court stated in a prior summary judgment order, the cost of CTC's investigation into Defendants' conduct is more akin to business expenses than attorney's fees and is thus recoverable as damages in this case. See July 29, 2019 Order, Dkt. 272 at 13 (“Here, CTC was internally investigating its own employee's conduct and the potential need for preventative and remedial business measures, so the investigation is best characterized as a business expense.”) These business expenses must, of course, be immediately disclosed to Defendants to the extent CTC claims they are damages and not litigation expenses.
Also, even considering the document production issues here, CTC has shown a genuine dispute of fact exists regarding unjust enrichment, including by producing evidence of a payment by Xinbo to Defendants. (SGD No. 9.) The measure of damages for breach of contract in California “is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom.” Cal. Civ. Code § 3300. These damages include not only actual losses, but also unjust enrichment. See Brandon & Tibbs v. George Kevorkian Accountancy Corp., 226 Cal. App. 3d 442, 456 (1990). CTC's expert George Miller estimated that Defendants derived unjust gains from using CTC's confidential information in violation of their employment and consulting agreements. (Miller Report (Dkt. 175-7, Ex. 42 at 7.) The Court has already found that CTC showed a genuine dispute of fact regarding Defendants' misuse of certain alleged trade secrets. See Order, Dkt. 272. Though the estimate in Miller's report must be reduced to account for summary adjudication of specific trade secrets allegations – to the extent those allegations are also the basis of CTC's breach of contract claims – CTC has shown a genuine dispute of fact regarding unjust enrichment from breach of contractual obligations. See, e.g., Miller Report at 5 (describing gain to Defendants from business dealings with competitors). The Court DENIES Defendants' motion for partial summary judgment.
5. DISPOSITION
Defendants' motion for partial summary judgment is DENIED. (Dkt. 228.)
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