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IceMOS Technology Corp. v. Omron Corp.

United States District Court, D. Arizona

November 13, 2019

IceMOS Technology Corporation, Plaintiff/Counter-Defendant,
v.
Omron Corporation, Defendant/Counter-Claimant.

          ORDER

          JAMES A. TEILBORG, SENIOR UNITED STATES DISTRICT JUDGE

         Pending 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.

         I. BACKGROUND

         The Court has previously articulated the basic facts underlying this case:

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. (Id.).
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).

         Plaintiff 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.).

         Defendant 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).

         II. LEGAL STANDARD

         A party 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).

         The 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).[1] 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.

         III. ANALYSIS

         a. Plaintiff's Motion for Partial Summary Judgment

         Plaintiff seeks summary judgment on Defendant's counterclaims for fraud and breach of contract. (Doc. 153 at 7-21).[2]

         1. Fraud Counterclaim

         Plaintiff 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).

         A. Statute of Limitations

         First, 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).

         Arizona 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).

         Plaintiff 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 3-5[3]; Doc. 192 at 2-4; Doc. 193 at 27-28).

         “[D]etermination 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 occurred.”).

         Defendant 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 judgment.[4]

         B. Merits of Fraud Counterclaim

         Plaintiff 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).

         A party 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).

         i. Representation

         A 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.

         Although Defendant did not specify in its Response that it has evidence that shows Plaintiff never intended to perform, [5] it 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.[6] 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 actionable representation.[7]

         ii. Falsity of Representation

         Plaintiff 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.

         iii. Materiality of Representation

         Plaintiff 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 alone.

         At any 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)).

         For 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).[8] In sum, Defendant has offered sufficient evidence to create a genuine dispute of material fact as to materiality.

         iv. Reliance on Representation

         Next, 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).

         A party 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.

         v. Right to Rely on Representation

         Finally, 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 III.a.1.B.i.

         Here, 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, ...


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