Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_04-cv-00147/USCOURTS-casd-3_04-cv-00147-1/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332 Diversity-Injunctive &amp; Declaratory Relief

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-1- 04cv147

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

GONZALES COMMUNICATIONS,

INC., a Kansas Corporation,

Plaintiff,

CASE NO. 04cv147 WQH (WMc)

ORDER

vs. (Doc. # 126)

TITAN WIRELESS, INC., a Delaware

Corporation, TITAN CORPORATION, a

Delaware Corporation, TITAN AFRICA,

INC., a Delaware Corporation,

GEOLUTION INTERNATIONAL, INC.,

a Delaware Corporation,

Defendants.

HAYES, Judge:

The matter before the Court is Defendants’ Motion for Voluntary Dismissal of

Counterclaims and Request for Entry of Judgment. (Doc. # 126.)

I. Background

This case arises from a failed telecommunications venture in the West African nation

of Guinea involving Plaintiff Gonzales Communications, Inc. (“GCI”) and Defendants Titan

Wireless, Inc. (“TWI”), Titan Corporation, Titan Africa, Inc. and Geolution International, Inc.

GCI filed this lawsuit on January 23, 2004, and filed an Amended Complaint on March 15,

2004 (Doc. # 4). On April 6, 2004, TWI filed five counterclaims. (Doc. # 5.) On July 11,

2005, the Court granted summary judgment in Defendants’ favor as to three of GCI’s claims.

(Doc. # 51.) On October 3, 2006, the Court granted summary judgment in Defendants’ favor

Case 3:04-cv-00147-WMC Document 132 Filed 04/18/07 Page 1 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-2- 04cv147

as to GCI’s remaining claims, denied summary judgment as to TWI’s counterclaims for breach

of contract and breach of the covenant of good faith and fair dealing, and granted summary

judgment in TWI’s favor as to TWI’s counterclaim for unjust enrichment. (Doc. # 119.) After

the Court’s October 3, 2006 Order, the issues remaining were the resolution of TWI’s

counterclaims for (1) breach of contract, (2) breach of the implied covenant of good faith and

fair dealing, (3) negligent misrepresentation and omission, and (4) setoff, as well as the

determination of the appropriate remedy for TWI’s unjust enrichment counterclaim.

On January 5, 2007, Defendants filed the Motion for Voluntary Dismissal of

Counterclaims and Request for Entry of Judgment (Doc. # 126), seeking an order dismissing

the four pending counterclaims without prejudice, pursuant to Federal Rule of Civil Procedure

41(a)(2), and entering judgment on the unjust enrichment counterclaim for the specific sum

of $1,162,959. Plaintiff opposes the Motion, arguing that any dismissal of the counterclaims

should be with prejudice, and that TWI is not entitled to an award of damages on their unjust

enrichment counterclaim without trial.

II. Discussion

A. Unjust Enrichment Counterclaim

In the Court’s October 3, 2006 Order, the Court found that the “Equipment Purchase

Agreement” between GCI and TWI was valid and enforceable (Oct. 3, 2006 Order Granting

in Part & Denying in Part Defs.’ Mot. Summ. J. (“Oct. 3, 2006 Order”) at 15), and that the

“Terms and Conditions of Offer/Sale” was “a binding part of the parties’ agreement” (Oct. 3,

2006 Order at 16). The Court further found that:

[A] genuine issue of material fact exists as to whether TWI performed, or was

excused from performing, its obligations under the contract, as required to

maintain its causes of action for breach of contract and breach of the implied

covenant of good faith and fair dealing. GCI’s promissory notes came due on

January 29, 2002. A genuine issue of material fact exists as to whether TWI

failed to provide equipment and services pursuant to the [Equipment Purchase

Agreement] both prior to and after that time. The evidence that TWI discharged

its technical staff while rushing to book equipment sales and voluntarily

increasing GCI’s credit limit–despite its knowledge that GCI had no funding in

place and lacked the technical capacity to get the equipment up and running–also

raises a genuine issue of material fact as to whether TWI fulfilled its contractual

obligations in good faith. Accordingly, the Court denies Defendants’ motion for

summary judgment on their counterclaims for breach of contract and breach of

the covenant of good faith and fair dealing.

Case 3:04-cv-00147-WMC Document 132 Filed 04/18/07 Page 2 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

 It is undisputed that California law applies to each of TWI’s counterclaims.

-3- 04cv147

(Oct. 3, 2006 Order at 18-19 (citations omitted)). Finally, the Court’s October 3, 2006 Order

stated:

The elements of an unjust enrichment claim are (1) receipt of a benefit, and (2)

unjust retention of the benefit at the expense of another. Lectrodryer v.

SeoulBank, 77 Cal. App. 4th 723, 726 (2000). In support of their counter-claim

for unjust enrichment, Defendants have established that they provided GCI with

equipment for which GCI failed to pay, and that GCI has retained that

equipment. GCI has set forth no evidence that would raise a genuine issue of

material fact as to either element of this counterclaim. Accordingly, the Court

grants summary judgment on Defendants’ counterclaim for unjust enrichment.

(Oct. 3, 2006 Order at 19.)

Under California law,1

 “[u]njust enrichment is not a cause of action . . . or even a

remedy, but rather a general principle, underlying various legal doctrines and remedies. It is

synonymous with restitution.” McBride v. Boughton, 123 Cal. App. 4th 379, 387 (Cal. Ct.

App. 2004) (citing Melchior v. New Line Prods., Inc., 106 Cal. App. 4th 779, 793 (Cal. Ct.

App. 2003)); see also McKell v. Wash. Mut ., Inc., 142 Cal. App. 4th 1457, 1490 (Cal Ct. App.

2006) (“There is no cause of action for unjust enrichment. Rather, unjust enrichment is a basis

for obtaining restitution based on quasi-contract or imposition of a constructive trust.”)

(citation omitted). “[R]estitution may be awarded where the defendant obtained a benefit from

the plaintiff by fraud, duress, conversion, or similar conduct. In such cases, the plaintiff may

choose not to sue in tort, but instead to seek restitution on a quasi-contract theory. . . .” Id. at

388 (citations omitted). “The quasi-contract, or contract ‘implied in law,’ is an obligation

created by the law without regard to the intention of the parties, and is designed to restore the

aggrieved party to his former position by return of the thing or its equivalent in money.” Id.

at 388 n.6 (citation omitted).

Moreover, “[u]nder . . . California . . . law, unjust enrichment is an action in

quasi-contract, which does not lie when an enforceable, binding agreement exists defining the

rights of the parties.” Paracor Fin., Inc. v. Gen. Elec. Capital Corp., 96 F.3d 1151, 1167 (9th

Cir. 1996) (emphasis added) (citing Wal-Noon Corp. v. Hill, 45 Cal. App. 3d 605, 613 (Cal.

Ct. App. 1975)). If the parties’ rights “are squarely set out in the [contract], their unjust

Case 3:04-cv-00147-WMC Document 132 Filed 04/18/07 Page 3 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-4- 04cv147

enrichment claim is precluded.” Id.; see also Hedging Concepts, Inc. v. First Alliance

Mortgage Co., 41 Cal. App. 4th 1410, 1419 (Cal. Ct. App. 1996) (“[T]here is no equitable

basis for an implied-in-law promise to pay reasonable value when the parties have an actual

agreement covering compensation.”) (citation omitted). For example, in Hedging Concepts,

the appellate court held that once the trial court found that a valid contingency-fee agreement

had been formed, plaintiff could not recover on a quantum meruit (or unjust enrichment)

theory. See Hedging Concepts, Inc., 41 Cal. App. 4th at 1422-23. Conversely, in Lectrodryer

(which is cited in the October 3, 2006 Order), the appellate court rejected an argument that the

plaintiff’s action for unjust enrichment was “an impermissible attempt to enforce indirectly”

a contract. Lectrodryer, 77 Cal. App. 4th at 726. The court stated that the jury’s finding of

unjust enrichment would stand because “[t]he focus of Lectrodryer’s case was on what

happened to the proceeds of the sale of the sieve dryer after the [contract] expired.” Id.

(emphasis in original). Finally, California law provides for an exception to the rule that if the

parties’ rights are squarely set out in the contract, their unjust enrichment claim is precluded:

“Restitution may be awarded in lieu of breach of contract damages when the parties had an

express contract, but it was procured by fraud or is unenforceable or ineffective for some

reason.” McBride, 123 Cal. App. 4th at 388.

In its summary judgment motion, TWI based its arguments supporting its motion for

summary judgment as to its unjust enrichment counterclaim on the existence of binding

agreements defining the rights of the parties. TWI argued:

It is undisputed that GCI received a benefit from TWI in that TWI provided the

equipment as required under the [Equipment Purchase Agreement] and the

multiple promissory notes. It is further undisputed that Plaintiff failed to make

any payments under the EPA, or any of the promissory notes. Finally, it is

undisputed that GCI failed to return any of the equipment back to Titan.

(Mem. Supp. Mot. Summ. J., Doc. # 85, at 23 (citations omitted).) In granting summary

judgment, this Court found that the agreements between to the parties were valid and

enforceable. (Oct. 3, 2006 Order at 15-16.) As discussed above, under California law, “unjust

enrichment . . . does not lie when an enforceable, binding agreement exists defining the rights

of the parties.” Paracor Fin., Inc. v. Gen. Elec. Capital Corp., 96 F.3d 1151, 1167 (9th Cir.

Case 3:04-cv-00147-WMC Document 132 Filed 04/18/07 Page 4 of 5
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

 The Court deems the unjust enrichment counterclaim to be pleaded in the alternative

to the breach of contract and breach of the implied covenant of good faith and fair dealing

counterclaims. See In re HP Inkjet Printer Litig., 2006 WL 563048, at *7 (N.D. Cal., Mar. 7,

2006) (“[A]lthough the terms of HP’s written warranty agreements may govern the relationship

between HP and Plaintiffs, Plaintiffs may plead an unjust enrichment claim in the

alternative.”).

-5- 04cv147

1996) (citation omitted). Moreover, TWI did not argue--nor did this Court find--that “the

parties had an express contract, but it was procured by fraud or is unenforceable or ineffective

for some reason.” McBride, 123 Cal. App. 4th at 388. Therefore, the Court was premature in

granting summary judgment in favor of TWI on its unjust enrichment counterclaim. This

ruling is hereby vacated. The following counterclaims are now pending: (1) breach of contract,

(2) breach of the implied covenant of good faith and fair dealing, (3) negligent

misrepresentation and omission, (4) setoff, and (5) unjust enrichment.2

Because of the Court’s decision to vacate the grant of summary judgment as to the

unjust enrichment counterclaim, TWI may choose to proceed to trial on one or more of its four

other counterclaims. Therefore, the Motion for Voluntary Dismissal of Counterclaims and

Request for Entry of Judgment is DENIED without prejudice to renew the motion.

III. Conclusion

The Court’s grant of summary judgment in favor of TWI on its unjust enrichment

counterclaim (Doc. # 119) is VACATED. TWI’s motion for summary judgment as to its

unjust enrichment counterclaim (Doc. # 84) is DENIED.

The Motion for Voluntary Dismissal of Counterclaims and Request for Entry of

Judgment (Doc. # 126) is DENIED without prejudice to renew the motion.

On May 11, 2007 at 11:00 a.m., the Court will conduct a telephonic status conference

to set the trial date.

DATED: April 18, 2007

WILLIAM Q. HAYES

United States District Judge

Case 3:04-cv-00147-WMC Document 132 Filed 04/18/07 Page 5 of 5