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Crestwood Capital Corp. v. Andes Industries, Inc.

United States District Court, D. Arizona

September 14, 2017

Crestwood Capital Corporation, Plaintiff,
v.
Andes Industries, Inc., Defendant. Devon Investment Inc., Plaintiff,
v.
Andes Industries, Inc., Defendant. Preston Collection Inc., Plaintiff,
v.
Steven Youtsey, Defendant. Andes Industries, Inc.; and PCT International, Inc., Plaintiffs,
v.
EZconn Corporation; and eGtran Corporation, Defendants. Andes Industries, Inc.; and PCT International, Inc., Plaintiffs,
v.
Cheng-Sun Lan; Kun-Te Yang; Chi-Jen Dennis) Lan; Polar Star Management Ltd., Defendants.

          ORDER [RE: NO. CV-15-01810-PHX-NVW]

          Neil V. Wake Senior United States District Judge

         Before the Court is EZconn Corporation's Motion for Summary Judgment (Doc. 197 (redacted), Doc. 205 (sealed)). EZconn seeks summary judgment in its favor on PCT's two remaining claims against EZconn, i.e., breach of contract (Count IV) and breach of the implied duty of good faith and fair dealing (Count IX).

         I. LEGAL STANDARD

         Summary judgment is proper if the evidence shows there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving party must produce evidence and show there is no genuine issue of material fact. Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1102 (9th Cir. 2000). If the burden of persuasion at trial would be on the nonmoving party, the party moving for summary judgment may carry its initial burden of production under Rule 56(c) by producing “evidence negating an essential element of the nonmoving party's case, ” or by showing, after suitable discovery, that the “nonmoving party does not have enough evidence of an essential element of its claim or defense to carry its ultimate burden of persuasion at trial.” Id. at 1106.

         The party seeking summary judgment bears the initial burden of identifying the basis for its motion and those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which demonstrate the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). When the moving party has carried its burden, the nonmoving party must produce evidence to support its claim or defense by more than simply showing “there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). To defeat a motion for summary judgment, the nonmoving party must show that there are genuine issues of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). A material fact is one that might affect the outcome of the suit under the governing law. Id. at 248. A factual issue is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id.

         On summary judgment, the nonmoving party's evidence is presumed true, and all inferences from the evidence are drawn in the light most favorable to the nonmoving party. Eisenberg v. Ins. Co. of North America, 815 F.2d 1285, 1289 (9th Cir. 1987); Baldwin v. Trailer Inns, Inc., 266 F.3d 1104, 1117 (9th Cir. 2001). But it is not the Court's task “to scour the record in search of a genuine issue of triable fact.” Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir. 1996). The evidence presented by the parties must be admissible. LRCiv 56.1(a), (b); see Fed. R. Civ. P. 56(e). Conclusory and speculative testimony in affidavits and moving papers is insufficient to raise genuine issues of fact and to defeat summary judgment. Thornhill Publ'g Co., Inc. v. GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979). “If a party fails to properly support an assertion of fact or fails to properly address another party's assertion of fact as required by Rule 56(c), the court may . . . consider the fact undisputed for purposes of the motion.” Fed. R. Civ. 56(e)(2).

         II. UNDISPUTED MATERIAL FACTS

         PCT International, Inc., is a closely held Nevada corporation with its principal place of business in Mesa, Arizona. It develops, manufactures, and sells products for broadband telecommunication networks. EZconn Corporation is a Taiwanese corporation.

         PCT had a relationship with Cheng-Sun Lan, who was a principal in EZconn. This relationship did not involve a formal written agreement, but included Lan investing in PCT, Lan's nominees becoming shareholders of PCT's parent company, and PCT sharing confidential trade secret and financial information with Lan and EZconn. PCT and EZconn routinely marked documents “confidential.” PCT invested significant time, energy, and resources in helping EZconn develop the capacity to manufacture for PCT the broadband telecommunications products PCT sold to distributors and customers worldwide. EZconn filed patent applications at PCT's direction and on PCT's behalf in the United States, China, and Taiwan.

         In addition, EZconn had a sales relationship with PCT whereby EZconn manufactured and supplied broadband communications components to PCT. When a PCT customer submitted a purchase order to PCT or when PCT needed to place its product in inventory in response to a customer's forecasted need, PCT ordered its own products from EZconn. PCT would initiate orders of specific quantities of specific goods to be manufactured by sending a purchase order to EZconn. Upon receipt of PCT's purchase order, EZconn's regular business practice was to respond by providing a pro forma invoice to PCT by email, attaching a copy of PCT's purchase order. EZconn would then fulfill the order, either from goods in inventory (if available) or by manufacturing necessary quantities. After shipping the goods, EZconn would provide PCT a final invoice by email.

         After May 19, 2009, PCT began printing “Purchase Order Terms and Conditions” on the back side of purchase orders sent to its vendors. On October 21, 2009, PCT emailed to EZconn a purchase order that included a more detailed version of “Purchase Order Terms and Conditions” as the second page of a PDF document, and EZconn returned to PCT a pro forma invoice that attached the purchase order with the revised “Purchase Order Terms and Conditions.” Although EZconn attached the purchase order with the “Purchase Order Terms and Conditions, ” there is no indication that EZconn accepted the “Purchase Order Terms and Conditions.” PCT admits that it does not know whether EZconn ever said anything to PCT that indicated EZconn's acceptance of the “Purchase Order Terms and Conditions” as part of the parties' contract.

         PCT posted the revised “Purchase Order Terms and Conditions”[1] on its website on April 29, 2010 (in Chinese) and May 5, 2010 (in English). Shortly thereafter, PCT revised its purchase order to include an electronic link to the “Purchase Order Terms and Conditions.” PCT never mentioned the link when it sent purchase orders to EZconn.

         The revised “Purchase Order Terms and Conditions” states, “All data, documents, materials, and other information supplied by Buyer, including drawings, specifications, financial, marketing and customer data and other business information, and all proprietary rights embodied therein are exclusively reserved by Buyer and the same shall not be used, disclosed or reproduced for any purpose except the performance of work under this order.” It further states, “Seller is hereby notified that this order is proprietary information of Buyer. Unless specifically authorized in writing by Buyer, Seller shall not discuss this order with third parties to the order. These third parties include without limitation Buyer's customers, Buyer's other vendors, Seller's other customers, Seller's vendors, the general public, or the media.” PCT does not know whether PCT and EZconn ever had any communications about the “Purchase Order Terms and Conditions.” PCT does not know whether EZconn said anything to PCT that indicated EZconn's acceptance of the “Purchase Order Terms and Conditions” in any of its versions.

         In its First Amended Complaint, PCT alleged that PCT engaged EZconn as its contract manufacturer and, pursuant to this contractual agreement, PCT provided EZconn with detailed confidential technical information regarding its proprietary product designs, including PCT's amplifiers and patented coaxial cable connectors. PCT further alleged that Lan and others at EZconn assured PCT that they “would take steps” to properly protect PCT's confidential proprietary information, including product designs, related technical information, and pricing information.

         Count IV (Breach of Contract) of the First Amended Complaint alleges, in part:

111. PCT and EZconn are parties to contracts by which EZconn manufactured various products for PCT pursuant to PCT's specifications. Each such contract incorporated detailed Terms and Conditions, including those terms set forth above.
112. PCT performed all of its material obligations owed under these contracts.
113. EZconn breached its obligations under these contracts by, inter alia:
a. Wrongfully using PCT “items . . . materials, data, technical information, [] intellectual property, ” and other ...

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