endeavor to save three minutes for rebuttal ok this california law contract case i think really divides into two parts which represent alternative grounds by which we asked the court to reverse the first is the district courts they can't run or perhaps if i could start so let me just clarify that the two sections so the first section is one point that's the one ok relies upon and that speaks about the terms of the contract and provides that it will renew unless there's three months notice of terminations given and that's what this record invoked the other clause is two point seven in the contract is divided into two parts and it and it has contemplate phases and this speaks to the development phase which was the first phase of the project and it says that during the development phase that only nav may terminate and if it does then it has to pay some of the development costs now in terms of what does the word development mean in one point within the word development it is simply a description it's not limited your honor to the development phase if you look at that term what it says is the term of nobody disputes the sophisticated nature of the business parties so the so you don't get to the contra proffer and from type of issue here but so i'd like to get back to judge grabarz question i think the court's concern which is why why can't these things be reconciled under california law you've got to take a look at the available extrinsic evidence in order to determine whether there is ambiguity in the contract and whether or not i supports an interpretation of the contract to which it is a reasonably construed you've got two different provisions that are arguably speaking to the subject of the ability to to terminate the agreement at different stages you've got a contract which is prepared in phases you have to put yourself in the position of the parties at the time they entered into the contract the contract contemplates that this development phase was supposed to be completed within ten months next so that would have been before you ever got to that possibility of terminating under section one point zero particularly because under this contract the way o p was going to make money was by producing these products so it would have had no incentive to terminate this  if it had developed a product successfully the next thing you have to look at is what was the object of the contract the district court here didn't appreciate the fact that the object of this contract was a commitment to actually develop these products if you look at section two point six of this agreement it says that the engineering prototypes quote will be delivered in section two point eight it says that these shell conform to the product specifications this wasn't just a what i'll call best efforts undertaking on the part of oki to see if it could be managed to accomplish something here as the district court mistakenly concluded this was a promise to deliver products and why is that relevant for purposes of the choice between one point zero excuse me and two point seven it's relevant because it doesn't make any sense to suggest that the the buyer who had a crew had a promise to do for delivery of these these prototypes would have agreed to a contract which allowed the seller to walk away without consequence now they can efficiently breach which is what this lawsuit is about that they should be held to their decision not to go forward because they efficiently breached having concluded they couldn't deliver those products but that doesn't allow them to walk away from the commitment with impunity when you sought to determine to terminate did their own lawyer on section one point no your honor they didn't and that brings us to the extrinsic evidence in the in this clearly contrary to california law if you look at page fifteen of whatever you are the district they simply said that they were terminating the agreement their notice letter in july of two thousand and eight simply says the green light is being terminated they do not invoke any part of the contract as the relevant basis for around to try to come up with something that we could use to put this machinery into operation and we acted within the statute where they were already doing that you just you didn't start scrambling around at the time but i'm a nice and you had some discreet project going on on the side what we did was we were faced with this with a situation where they delivered two prototypes to us at different times which didn't work there's no dispute about that and so what we started to do as any responsible contracting party would do is you started to look into how you were going to mitigate the damage you were going to suffer from the failure of performance and that's what we were doing and so then there is in two thousand and eight there's the breach of the agreement then it's about a year before we're managed to get the equipment up and running and then there's you know trying to assess what to do on a going forward basis and yes we waited a little time to file the lawsuit but within the relevant statute of limitations your honor so i don't think that's a factor that you know has any particular significance in this case and then let me just saw yes you're on our i'm sorry when you're finished with your answer i have another question effect if any shall we to give to the jury verdict form answer to question number three we have in which the jury found that you did not prove a contractual no question there was the written contract the one that they gave notice they were terminating which was the so called one nine hundred three chip contract there was a written amendment contract the number twenty five three tripp contract your point your honor judge gra what you're referring to was some discussions which never culminated in any amendment to the agreement with an idea toward trying to solve these inability to produce anything that work by way of a four chip contract and so all the jury decided is that that contract was was essentially never formed but it doesn't undermine the fact that the other contracts were exist in existence and while there were certain ovation abandonment waiver defenses the jury never reached those so you can't explain the verdict on that basis let me just come back and round out the extrinsic evidence with which if i may because judge hawkins you pointed to one of the two pieces of it which is the notice letter which did not invoke section one point zero the other is an e mail of two thousand and eight which was approximately a few months before the july cancellation notice and in it he advises in he's the liaison fellow he's the he's the man who's been dealing with now have come throughout this project and in it he tells o management quote the agreement has no option for oakey to cancel and it is unclear what kind of penalty fee there would be for dropping out of the project that's it e r seven fifty five so under california law you have to look at that e and you have to say to yourself does it support a reasonable interpretation of this agreement and if and if you then go back to these two provisions you look at the way the contract was structured you look at the fact it had a element period that was clearly contemplated to have been completed in ten months and all the circumstances that would suggest that a buyer would be the only one who could be allowed to step away from a contract which is guaranteeing it delivering its goods it's a reasonable interpretation of the contract and it leads to one of two consequences in terms of outcome out possible outcome number one is under california law if the extrinsic evidence is undisputed it becomes a question of law that this court could determine and direct the district court that the contract did not permit terminations alternative number two is if you think the evidence is capable of differing ways of looking at the agreement then under california law it clearly presents a jury question and the district court should not have should not have taken that question away and had huge consequences in this case because it changed the whole complection of it the complection of this case should have been about the daf comes efforts to find essentially replacement merchandise and the damages that flowed from that and the district court turned it into a case which was at best about whether there was any consequence to the failure to give the three month notice and the decision to immediate stop work and that that takes me to the second alternative basis for you to hold which is if you disagree with what i've urged to you with respect to the terminations it is that the jury had no basis on which to find that there was any that opi did not breach section one point zero of the agreement which required that it give notice and it continued to work it's clear that they would they save themselves one point four million dollars by doing that and that's the kind of a consequence which would be a harm that that that would be the basis for a cause of action in this case and so there's no dispute that they didn't perform the agreement up or rather given notice it's there's no dispute they stopped work in this just to generates into people's efforts to give other explanations for what the jury might have done principally on the basis that somehow there was no harm and again plainly we would have had a right to restitution of the money we paid that did us no good and also under california law we would have a right to nominal damages for the breach of the notice provision based upon in particular the suite case and i see that i've already eaten into some of my rebuttal time so i perhaps i better save the rest let me ask you one quick question and will detract from your little time under i'm looking at the contract under one point zero can you tell the court what the phrase prior to the expiration  current term what does that mean so the the contract had an initial term which would run intel as you see there earlier and one point zero until december thirty one two thousand and six and then it renews then it automatically renews so what the van kirk expiration of any then current term means i believe you can tell the end of that year in other words either two thousand and six which because they thought it would be developed i don't think that was realistically expected that would be the term but it would be the end of whatever that annual renewal would be your honor i think thank you all right two minutes on the clock when you come back and i appreciate that thank you point zero section one point zero the term the court has already hit on what we believe are the most salient aspects of this and that is the plain language as california law governs the plain language should be what's guiding the interpretation the term of this agreement for purposes of a sick and the parent that all development and purchase order placement on its face it expressly says that it covers development and the purchase order placement which is the second those are the two phases we're going to talk about so your position news that one point zero says well over contract continues until december thirty one zero six it renews each year with the in one of those renewal periods either the buyer or the seller could term need on three months notice and not only during any of the it could happen during the first period that there's nothing that limits it because it says during the any then current term it doesn't exclude the first term so with that caveat absolutely as long as there's three months notice that are given and expressively says that the buyer and or the seller terminates so we have both phases both parties and each term we believe that is the guiding princip with regard to section one point zero in the district court had no problems understanding that with regard to the two point seven we agree with the comments that were the questions that came about in our position as with the district court says is that they're not inconsistent that the buyer has been given an extra benefit during that period they can terminate without notice and that's not inconsistent it just further gives them the additional benefit but what it doesn't say is what the appellant the plaintiffs in this case wanted to say is that it somehow excludes any terminations by the seller in this case not the three months were given with regard to that specific point briefly the way it's described in the briefing is that okey then immediately threw up its hands did nothing further and refused to do any more work but if you look at the actual language of the agreement as amended and would like to discuss the terms for such germination with you at your earliest convenience so this was not a situation where they said we quit we're done we're out of here now it's not surprising that nab and dear did not have anything to talk about small it's bricks that with the willingness to negotiate absolutely and it's clearly more than three months before the end of the then current term but we have a situation where there can be no question the jury found with regard to the try to negotiate now there was nothing honestly as with the record shows there was nothing to negotiate the parties had been discussing this for chip option there was no agreement reached on the four chip auction undisputed that was undisputed that it would require an amendment of the agreement to cover the four chip option so with regard to question three of the verdict form i don't think there can be a dispute substantial evidence supports that when you come back to question two is whether now they also argue that you your client got a lot of money for not performing under the contract you never did delivered your client never delivered a prototype that actually worked let you respond so that our response is as if you take a look at first schedule b schedule b plays in very important in this is on page one of seven of th e record the first thing on the buyer's responsibilities they're required to deliver the specifications so if we don't have a specification to make that's not a problem of my my client that's something that they have to fulfill with regard to the last three steps in there it says one is delivery of engineering prototypes that's my client's responsibility delivery their responsibilities then to evaluate the prototype and provide written approval in such a written approval is forthcoming now we look at schedule c this is the payments the payment on the first payment is the upfront payment non refundable three hundred thousand dollars it doesn't say what that for it says it's not refundable under any terms i'll come back to that one moment the second payment specifically says what has to be accomplished the hundred twenty thousand dollars due and payable upon delivery of block specifications pin assignment and simulation results in conformance with and it proceeds that is a pure milestone payment that payment was due that was made when they received delivery of those those those results in some cases data in some cases with regard to the first payment are they say that that's not a payment for cause but the all the work it this isn't one of those cases where they received three hundred thousand dollars and said we're sorry we're not going to do anything it's not refundable they were clearly working because they met the second milestone so there isn't there a third payment the third payment is for and that's where we get to relating back to what i was saying one hundred  fifty due and payable upon the livery of engineering prototypes that's why i called attention to schedule b because this lets us know what the delivery is it comes before the two steps that have to be performed by the statement of work for the buyer evaluation and written approval and if you look at two point four of the agreement we have engineering prototypes shall be deemed acceptable if at the time of delivery so we have delivery after inspection and testing they conform with the products that's vacation that clearly sets forth again the three delineations delivery and schedule c says that payment is due on delivery they want this to say that we had agreed that oki had agreed to deliver a working prototype but not only did the liver that i agree to deliver that absolutely it was supposed to be within ten months this ten month argument is a very dangerous ground which appellate counsel has stepped into more so in the reply brief because if that breach was a breach the failure to deliver comply with the ten month requirement then that breach occurred back in two thousand and six and this entire case would have been barred under the statute of limitations the district court warned about that when it said in the granting of the summary judgment you can raise your other grounds under two point two two point four two point six two point eight but be very careful you don't run a pal of the statute of limitations if they want to have the position that it was absolutely due and payable it was due and deliverable in a working prototype back in two thousand and six then that's perfectly fine because then they've exhausted their statute of limitations by a long shot that's not the position that was before the court the part that the position before the court was there was no breach until it occurred in two thousand and eight july eighth two thousand and eight now they're also can be no dispute as to what happened before that we have a situation where the jury h heard the evidence and we have a situation of mr galley and dr galleon is the senior researcher on the other side the engineer he's the person who's opposite this mr bell boy now who we talked about he's the primary contact for the case and he testified in cross examination well at least in the question well at least as of that time it's agreed that version twenty five design will not be made correct answer yeah the version twenty five spec has three chips and there are pin outs in it if we're proceeding to a four chip solution the specification has to change but the key point is and there's a repeated recitation where we show there was agreement starting a descent february twenty first two thousand and eight and through the spring version twenty five has gone that this edition has been made to go with the four chip design the four chip design is not version twenty five version twenty five is the one that they decided not to make so if we assume for one moment the record is what the record is and there's nothing to dispute that when it comes around to july eighth two thousand and eight when we have a situation where the four chip design we haven't been provided with the specification that would be required under schedule b to be delivered by the buyer it's going to cost a lot more money and at this point they've paid four hundred seventy thousand dollars the first two payments and for twenty thousand my client they admit freely and the record has invested well over one point six million dollars and if we're going to go forward with this new risky design it's going to take more money no agreement is reached so that leaves us with what exactly was my client supposed to do during those three months even if they didn't respond to the request to discuss the terms of terminations were they really supposed to get in the lab and continue to make version twenty five which they express lee said it's not what they want they're not going to buy it it's not what they need and everybody agrees it's not going to do what anybody wants that's the situation we're left with and so when it comes around for with the jury sits there and has a substantial basis to find that there's no breach absolutely what exactly were they supposed to do during those three months and the jury could conclude that and that's before we get to the issues of harm the statute in california dealt the law california has four elements there has to be standard elements of contract and there has to be that you have you have to have a formation they asserting party has to  we don't now they don't get to those issues but also we get to the point is what could be the harm because the fourth element of the jury instruction which the plaintiffs provided based on the model jury instruction based on the  says there has to be a harm to find a breach of contract and in that regard it's clear there was no harm and this isn't the usual case where we could hypothetically say well maybe there was a harm but we can't really calculate it because it kind of speculative or well we're not sure what the harm is but they clearly showed that there was something that they didn't get and they were expecting something like that to the contrary we have record citations where the c e o did saying things like there is a benefit for us and we have executive saying this is great news and we have another executive saying this is going to be perfectly fine because we've already developed the plant the parallel path we've never had to scramble they've never had to replace anything they followed a parallel path because it was so risky so they continued doing exactly what they had been doing for all the time before that and as a trial four years after that they were still doing exactly the same thing even though they'd already achieved another a sick from it that the company you don't have to use all your time there's no further questions i don't see any thank you very much of this time two minutes on the clock honor the harm in this case was that dear had to spend twelve to thirteen million dollars that he didn't expect it would have to spend in order to make something that would work the promise in the contract you can't get away from the fact that the contract contains a promise that these good will be produced two point two six two point two eight this is not a will use our best efforts this oki sold this on the basis they could do this so for that reason you have to look at section one and section two point seven in the light of why would a contract allow someone who was promised to deliver goods to walk away in the middle having having received payments without delivering on the promise that's why if you have to look at it in the light of the extrinsic evidence and admissions that they had no ability to walk away from the agreement to judge great question they did terminate the agreement but they take but they didn't give the required notice now my my friend points to some language about how we'd be happy to talk to you about it the you don't terminate and then say we'll talk to you about it what you're supposed to do is say we're going to end this agreement at the end of the current term that's all it was said that you were you all conceded in  that i think page thirty two that the notice was compliant but not compliant with section one point zero your honor what we said was it effectively terminated the agreement and constituted to breach the ten month period the relevance of that in this case i helps you understand what was contemplated at the time the contract was signed that is that the development phase was going to be over before we ever got to the point of there being any issue about  renewal or non renewal with respect to section one point zero with respect to the four chip solution to jury decided that there was no agreement on a four chip solution there was never an amended agreement which you would have had to implement it so the other