United States District Court, D. Arizona
A. TEILBORG, SENIOR UNITED STATES DISTRICT JUDGE
before the Court, among other things, are IceMOS Technology
Corporation's (“Plaintiff”) Motion for
Partial Summary Judgment (Doc. 153), Omron Corporation's
(“Defendant”) Motion for Partial Summary Judgment
(Doc. 229), and Defendant's Motion to Preclude Testimony
of Plaintiff's Business Valuation Expert Greg Mischou
(Doc. 296). This Order substantially addresses these motions
and also rules on other pending motions.
Court has previously articulated the basic facts underlying
Plaintiff offers super junction metal oxide semiconductor
field-effect transistors (“MOSFETs”),
microelectromechanical systems solutions, and advanced
engineering substrates to third parties. (Doc. 25 at 2). To
produce these products, Plaintiff needs fabrication services.
(Id.). In 2007, Defendant purchased a fabrication
facility and began fabricating “complementary
metal-oxide semiconductor” products. (Id.).
Around this time, Defendant approached Plaintiff to suggest
that Defendant and Plaintiff enter into business together.
Plaintiff and Defendant came to an agreement (“Supply
Agreement”) on February 28, 2011 after negotiations.
(See id.). Their agreement included, inter
alia, that Defendant would “perform the
fabrication requested by Plaintiff” and that Defendant
would “fully resource the development of all
generations of” Plaintiff's super junction MOSFET
(“SJ MOSFET”) for the duration of the Supply
Agreement. (Id.; see also Doc. 59 at 10;
Doc. 60 at 15). Defendant asserts that Plaintiff represented
that “[d]emand for Plaintiff's Super Junction
MOSFETs is estimated to reach a volume of up to three
thousand and five hundred (3, 500) wafers per month by year
2014.” (See Doc. 28 at 42 (alteration in
original) (quoting Doc. 14-1 at 2)). Defendant also alleges
that the parties forecasted, based on Plaintiff's
representations regarding expected demand for its product,
that “monthly demand would reach 3, 850 wafers per
month by the fourth quarter of 2012.” (Id.
(citing Doc. 14-1 at 14)). On March 6, 2018, the Supply
Agreement terminated. (Doc. 60 at 37).
alleges breach of contract and fraud and seeks damages. (Doc.
59 at 33- 38). Plaintiff claims that Defendant breached
several provisions of the Supply Agreement. (Id. at
33-35). Plaintiff's allegations include that Defendant
improperly terminated the Supply Agreement, which, according
to Plaintiff, has resulted in lost profits, lost business
value, and lost development support costs. (Id.).
has counterclaimed and alleges breach of the implied covenant
of good faith and fair dealing, two counts of breach of
contract, and fraud in the inducement (relating to the
alleged projections by Plaintiff) and also seeks damages.
(Doc. 28 at 46- 50).
is entitled to summary judgment when it “shows that
there is no genuine dispute as to any material fact and [it]
is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). As such, a court must grant summary
judgment “against a party who fails to make a showing
sufficient to establish the existence of an element essential
to that party's case, and on which that party will bear
the burden of proof at trial.” Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986).
movant must establish the basis for summary judgment and the
elements of the claims upon which the nonmovant will be
unable to show a genuine issue of material fact. Id.
at 323. Then, the burden shifts to the nonmovant to show the
existence of any dispute of material fact. Id. at
323-24. To meet this burden, the nonmovant must point to
competent evidence, meaning that the evidentiary content-but
not necessarily its form-must be admissible at trial.
Fraser v. Goodale, 342 F.3d 1032, 1036 (9th Cir.
2003). This evidence “must do more than
simply show that there is some metaphysical doubt as to the
material facts, ” it must show “that there is a
genuine issue for trial.” Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87
(1986) (quoting Fed.R.Civ.P. 56(e) (1963)). A genuine issue
of material fact exists if the disputed issue of fact
“could reasonably be resolved in favor of either
party.” Ellison v. Robertson, 357 F.3d 1072,
1075 (9th Cir. 2004). A dispute is about a material
fact when the dispute is about “facts that might affect
the outcome of the suit.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). The Court must
“construe all facts in the light most favorable to the
non-moving party.” Ellison, 357 F.3d at
1075-76 (citing Clicks Billiards, Inc. v. Sixshooters,
Inc., 251 F.3d 1252, 1257 (9th Cir. 2001)). However, the
nonmovant's bare assertions, standing alone, are
insufficient to create a material issue of fact that would
defeat the motion for summary judgment. Anderson,
477 U.S. at 247-48.
Plaintiff's Motion for Partial Summary Judgment
seeks summary judgment on Defendant's counterclaims for
fraud and breach of contract. (Doc. 153 at
moves for summary judgment on Defendant's fraud
counterclaim. Plaintiff argues that Defendant's fraud
counterclaim is barred by the statute of limitations. (Doc.
153 at 7-8). It also asserts that Defendant cannot prove
certain elements of its fraud counterclaim as a matter of
law. (Id. at 9-13).
Statute of Limitations
Plaintiff contends that summary judgment must be entered on
the fraud counterclaim because it is barred by the statute of
limitations under Arizona law. (Doc. 153 at 7-8). As the
Court has noted, Arizona law applies to Defendant's fraud
counterclaim for choice of law purposes. (See Doc.
152 at 9; see also Doc. 25 at 19-20 (stating Arizona
law applies to Plaintiff's fraud claim)). As such, the
Court must apply the Arizona statute of limitations for
Defendant's counterclaim. See Albano v. Shea Homes
Ltd. P'ship, 634 F.3d 524, 528 (9th Cir. 2011).
law provides that the statute of limitations for a fraud
claim is three years. Ariz. Rev. Stat. Ann. § 12-543(3).
However, the time for calculating the statute of limitations
does not begin to “accrue until the discovery by the
aggrieved party of the facts constituting the fraud or
mistake.” Id. In other words, “[t]he
statute of limitations begins to run for [fraud claims] when
the plaintiff knew or through reasonable diligence could have
learned of the fraud or the misrepresentation.”
Cavan v. Maron, 182 F.Supp.3d 954, 962 (D. Ariz.
2016) (citing Coronado Dev. Corp. v. Superior Court,
678 P.2d 535, 537 (Ariz.Ct.App. 1984)); see Gust,
Rosenfeld & Henderson v. Prudential Ins. Co. of Am.,
898 P.2d 964, 966 (Ariz. 1995).
argues that it provided the forecasts that serve as the basis
of Defendant's fraud counterclaim in September 2011, and
thus, Defendant should have known that these forecasts,
assuming they were fraudulent representations, were
inaccurate in September 2011, which started the clock on the
statute of limitations. (Doc. 153 at 7-8). Plaintiff also
argues Defendant knew that Plaintiff was not meeting the
projections at least as early as March 6, 2015, which it
contends was the latest date that the time on Defendant's
fraud counterclaim could have begun accruing. (Id.).
As such, Plaintiff argues that Defendant's fraud
counterclaim was barred by the Arizona statute of limitations
because Defendant did not file the counterclaim until July
16, 2018. (Id.). Defendant responds that the time to
file its fraud counterclaim did not begin accruing until it
could have discovered the fraud with reasonable diligence,
which is a question of fact that precludes summary judgment.
(Doc. 189 at 9-11; see e.g., Doc. 191 at
Doc. 192 at 2-4; Doc. 193 at 27-28).
of a claim's accrual date usually is a question of fact .
. . .” Logerquist v. Danforth, 932 P.2d 281,
287 (Ariz.Ct.App. 1996) (citation omitted). “[T]he
inquiry center[s] on the plaintiff's knowledge of the
subject event and resultant injuries, whom the plaintiff
believed was responsible, and plaintiff's diligence in
pursuing the claim.” Id. (citation omitted).
Whether to apply the discovery rule generally “depends
on resolution of such factual issues, ” and thus, a
court cannot resolve these questions on summary judgment.
See id.; see also Gust, Rosenfeld &
Henderson, 898 P.2d at 969 (“The statute of
limitations did not commence on [plaintiff]'s claim until
[plaintiff] knew or in the exercise of reasonable diligence
should have known that it had been injured. The trial court
was correct to let the jury decide when that event
asserts there is a dispute of material fact as to when it
discovered Plaintiff's alleged fraud. (Doc. 189 at 11).
The Court agrees. Arizona law makes clear that when a claim
begins to accrue is a question of fact that generally cannot
be determined on summary judgment. But, Plaintiff argues that
a party cannot “invoke the discovery rule in the
[r]esponse” to a motion for summary judgment. (Doc. 223
at 12 (quoting Breeser v. Menta Grp., Inc., 934
F.Supp.2d 1150, 1159 (D. Ariz. 2013))). Plaintiff cites
Breeser, 934 F.Supp.2d 1150, for this proposition.
Breeser did not proclaim such an edict. Cf. Long
v. Ford Motor Co., No. CV07-2206-PHX-JAT, 2008 WL
2937751, at *8 (D. Ariz. July 23, 2008) (allowing plaintiff
to raise discovery rule despite the fact that plaintiffs did
not plead factual allegations relevant to the discovery rule
in its complaint). Rather, the issue in Breeser was
that both parties indicated that the date of accrual of the
plaintiff's claim was beyond the limitations period. 934
F.Supp.2d at 1158-60. Indeed, there, plaintiff's
“own words” established the date of accrual.
See Id. Although plaintiff contradicted her earlier
statements regarding the date of accrual, the court invoked
the doctrine of judicial estoppel in determining that her
later inconsistent statements did not create a genuine issue
of material fact as to the issue of accrual. See Id.
In contrast, here, it is disputed as to when Defendant
discovered Plaintiff's alleged fraud, and thus, when the
Defendant's fraud counterclaim began to accrue. Thus,
Breeser is distinguishable because there was no
genuine dispute of fact there, id. at
1159-60, while there is one here. Because there is a genuine
dispute of material fact as to the fraud counterclaim's
date of accrual, the Court cannot grant summary
Merits of Fraud Counterclaim
also argues that summary judgment should be entered on the
fraud counterclaim because Defendant cannot establish all its
elements. (Doc. 153 at 9-13). The gist of Defendant's
fraud counterclaim is that Plaintiff fraudulently induced
Defendant to enter into the Supply Agreement with Plaintiff
based on projections of monthly demand that it knew it could
never meet. (See Doc. 28 at 49-50; Doc. 152 at 3;
Doc. 189 at 6-8). Defendant asserts that, during the
negotiations that ultimately culminated in the Supply
Agreement, Plaintiff fraudulently represented to Defendant
that monthly demand for its SJ MOSFETs would be at a
forecasted volume of up to 3, 500 wafers per month by 2014.
(See Doc. 189 at 6-8). Moreover, Defendant contends
that it relied on these projections in deciding to enter into
the Supply Agreement with Plaintiff. (Doc. 189 at 6-8, 16).
must show the following elements to establish a fraud claim
under Arizona law:
(1) a representation; (2) its falsity; (3) its materiality;
(4) the speaker's knowledge of the [representation's]
falsity or ignorance of its truth; (5) the speaker's
intent that it be acted upon by the recipient in the manner
reasonably contemplated; (6) the hearer's ignorance of
its falsity; (7) the hearer's reliance on its truth; (8)
the right to rely on it; [and] (9) [the hearer's]
consequent and proximate injury.
Echols v. Beauty Built Homes, Inc., 647 P.2d 629,
631 (Ariz. 1982) (in division); see Comerica Bank v.
Mahmoodi, 229 P.3d 1031, 1033-34 ¶ 14 (Ariz.Ct.App.
2010). Plaintiff contends that the undisputed facts prevent
Defendant from establishing the first, second, third,
seventh, and eighth elements of its fraud counterclaim. (Doc.
153 at 9). Defendant responds that Plaintiff has not shown
that Defendant cannot prove each element of its fraud
counterclaim. (Doc. 189 at 13).
projection can be a representation for purposes of
establishing fraud. See Law v. Sidney, 53 P.2d 64,
66 (Ariz. 1936). “[T]he promise to perform a future
act” is actionable when it “was made with a
present intention on the part of the promisor that he would
not perform it.” Id.; see also Allstate
Life Ins. v. Robert W. Baird & Co., 756 F.Supp.2d
1113, 1165 (D. Ariz. 2010) (determining forward-looking
statements made “with actual knowledge that
projections, promises, or expectations will not be met”
are actionable representations). Plaintiff argues that there
is no dispute of material fact as to whether Defendant can
establish a representation because Defendant “has
provided no evidence to support any allegation that
[Plaintiff] did not intend to perform its obligations under
the Supply Agreement.” (Doc. 153 at 12). Therefore,
Defendant must show that it has evidence to support that
there is an actionable representation here. See Celotex
Corp., 477 U.S. at 322-23.
Defendant did not specify in its Response that it has
evidence that shows Plaintiff never intended to perform,
does offer evidence that Plaintiff knew its projections were
false. (See Doc. 189 at 14-15; Doc. 193 at 22-24).
For example, Defendant offers evidence that Plaintiff only
ordered approximately two percent of the forecasted volume.
(Doc. 193 at 22 (citing Doc. 191 at 5); see also
Doc. 241-1 at 8-9). A reasonable fact-finder could find that
such a disparity means that Plaintiff knew its forecasts were
false. Construing the evidence in the light most favorable to
Defendant, there is a dispute of material fact as to whether
Plaintiff knew its projections were false, and thus, whether
it never intended to meet the projections of monthly
demand. See Orlando v. Carolina Cas.
Ins., No. CIV F 07-0092AWISMS, 2007 WL 781598, at *8
(E.D. Cal. Mar. 13, 2007). Thus, the Court cannot say
Defendant will be unable to establish that Plaintiff made an
Falsity of Representation
contends that Defendant cannot establish that the
representation was false. (See Doc. 153 at 9). In
response, Defendant offers evidence that supports its claim
that Plaintiff knew its projections of monthly demand were
false. (See Doc. 189 at 14-16; Doc. 193 at 22-24;
see also Doc. 241-1 at 8-9). A projection or
estimate typically cannot be deemed a false representation.
See Allstate Life Ins., 756 F.Supp.2d at 1164-65;
Sidney, 53 P.2d at 66. However, if one makes a
projection or estimate “with actual knowledge that
projections, promises, or expectations will not be met,
” there is a false representation. See Allstate
Life Ins., 756 F.Supp.2d at 1164-65. Thus, for the same
reason that the Court found that Defendant has offered
sufficient evidence to create a dispute of material fact on
the issue of representation here, it has done the same on the
issue of the falsity of such a representation.
Materiality of Representation
contends that Defendant cannot establish the materiality of
its alleged fraudulent representation because Defendant
admitted in the pleadings that “[t]he material terms of
the Supply Agreement had already been negotiated before the
forecasts in Exhibit A were prepared.” (Doc. 153 at 10
(quoting Doc. 60 at 19)). However, Plaintiff leaves out a key
part of Defendant's Answer; Defendant “denie[d]
that Exhibit A to the Supply Agreement contains the only
forecasts that [Plaintiff] provided to [Defendant].”
(Doc. 60 at 19; Doc. 193 at 3-4; see also Doc. 191-1
at 15 (draft agreement with projections)). Additionally, as
the Court noted above, Defendant's fraud counterclaim
relates to alleged false representation that occurred during
negotiations prior to signing of the Supply Agreement; it is
not necessarily based on the terms of the Supply Agreement
rate, “[q]uestions about materiality . . . usually are
for the jury.” See Lerner v. DMB Realty, LLC,
322 P.3d 909, 914 ¶ 15 (Ariz.Ct.App. 2014). “A
misrepresentation is material if a reasonable person
‘would attach importance to its existence or
nonexistence in determining [his or her] choice of action in
the transaction in question.'” Caruthers v.
Underhill, 287 P.3d 807, 815 ¶ 28 (Ariz.Ct.App.
2012) (quoting Restatement (Second) of Torts § 538(2)(a)
(1977)); see also M & I Bank, FSB v. Coughlin,
No. CV 09-02282-PHX-NVW, 2011 WL 5445416, at *4 (D. Ariz.
Nov. 10, 2011). Defendant has offered sufficient evidence to
create a dispute of material fact as to whether the alleged
false representation mattered to it because it has evidence
showing Plaintiff's projections of monthly demand were
relevant to its decision to enter the Supply Agreement. (Doc.
189 at 16; Doc. 193 at 24); see M & I, FSB, 2011
WL 5445416, at *4 (holding alleged false representation was
material because plaintiff offered evidence that false
representation was relevant to plaintiff's decision to
agree to a loan); Lerner, 322 P.3d at 915 ¶ 19
(noting that materiality depended on whether the
“alleged misrepresentation was material to the
transaction” (emphasis added)).
example, it is “simple business sense” that
projections specifying monthly demand would be material to
Defendant's decision to enter the Supply Agreement.
See M & I, FSB, 2011 WL 5445416, at *4; see
Radware, Ltd. v. F5 Networks, Inc., 147 F.Supp.3d 974,
1012 (N.D. Cal. 2015). The jury could reasonably infer that
the projections included in a prior draft agreement, (Doc.
191-1 at 15), would translate to future business revenue for
Defendant, and thus, would be material. Indeed, as
Caruthers makes clear, materiality is an objective
standard, and thus, the jury must determine if a reasonable
person, under the circumstances, would attach importance to
the projections of monthly demand in deciding whether to
enter the Supply Agreement. Additionally, Defendant offers
evidence that the projections were relevant to
Defendant's decision to enter the Supply Agreement.
(See Doc. 191 at 2-3). In sum, Defendant has offered
sufficient evidence to create a genuine dispute of material
fact as to materiality.
Reliance on Representation
Plaintiff asserts Defendant cannot establish that Defendant
relied on the projections. (Doc. 153 at 10-11). Plaintiff
raises three primary arguments: (1) the projections
“were not representations but rather just estimates of
future events based on factors beyond [Plaintiff's]
control, ” (2) that Plaintiff's ability to meet the
forecasts depended on Defendant, and (3) that Defendant
signed the Supply Agreement because it was “desperate
for customers” and the projections were irrelevant to
its decision to enter the Supply Agreement. (Id.).
Defendant responds that evidence supports a finding that
Defendant did rely on the projections. (Doc. 189 at 16-17;
Doc. 193 at 5-6, 24).
relies on a misrepresentation when the party acts or refrains
from acting based on it. See Sw. Non-Profit Hous. Corp.
v. Nowak, 322 P.3d 204, 212 ¶ 29 (Ariz.Ct.App.
2014). Defendant asserts that it acted on the alleged
misrepresentation because it “spent a large amount of
money out of pocket” that resulted in losses. (Doc. 189
at 17). Defendant also points to the fact that it agreed to
resource the development of the SJ MOSFET and that it agreed
to take on fifty percent of the cost of producing the
“mask sets” of the SJ MOSFETs. (Id.
(citing Doc. 190-1 at 5-6 (§§ 4.0 and 4.2.1 of the
Supply Agreement))). In fact, at thirty thousand feet,
Defendant's claim is that it would not have entered into
the Supply Agreement with Plaintiff and sustained monetary
losses but for the alleged misrepresentations as to the
projections of monthly demand. This fact alone creates a
dispute as to whether Defendant relied on the alleged
misrepresentation. Cf. Int'l Franchise Sols. LLC v.
BizCard Xpress LLC, No. CV13-0086 PHX DGC, 2013 WL
2152549, at *3 (D. Ariz. May 16, 2013) (denying motion to
dismiss on fraud claim where the allegation was that party
agreed to do business and lost money as a result of
misrepresentation). And, nothing indicates that Defendant did
not believe the projections, which would show it did not rely
on the projections. See Sw. Non-Profit Hous. Corp.,
322 P.3d at 212 ¶ 29; (cf. Doc. 191 at 2-5).
Simply put, none of Plaintiff's arguments overcome the
fact that Defendant has evidence that it did rely on the
projections of monthly demand when it decided to enter the
Supply Agreement with Plaintiff. Thus, there is a dispute of
material fact on this issue as well.
Right to Rely on Representation
Plaintiff contends that Defendant cannot establish that
Defendant had a right to rely on Plaintiff's alleged
representation because it “cannot establish that such
forecasts are representations of fact to be relied
upon.” (Doc. 153 at 9). Plaintiff notes that Defendant
“has admitted that the ‘Supply Agreement contains
no representations, promises, or guarantees by [Plaintiff] as
to demand or minimum monthly purchases.'”
(Id. (quoting Doc. 60 at 18)). As the Court has
noted, a promise of future performance is generally not an
actionable basis for fraud unless the party that made the
promise had no intent to perform. See supra Section
Defendant has offered evidence to create a dispute of
material fact as to whether Plaintiff never intended to
perform its promise. Therefore, the Court cannot say that
Defendant cannot establish its right to rely on
Plaintiff's alleged representation because that question
must be answered by the jury. Lerner, 322 P.3d at
914 ¶¶ 15-16; cf. Staheli v. Kauffman, 595
P.2d 172, 175 (1979) (in division) (noting there is no right
to rely on promises, ...