Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_14-cv-03562/USCOURTS-cand-5_14-cv-03562-5/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition For Removal--Other Contract

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

JOHN D. SHILLING,

Plaintiff,

v.

POLYONE CORPORATION,

Defendant.

Case No. 14-cv-03562-BLF 

ORDER DENYING MOTION FOR 

LEAVE TO FILE MOTION FOR 

RECONSIDERATION

[Re: ECF 112]

Before the Court is Defendant Cross-Claimant PolyOne Corporation (“PolyOne”)’s motion 

for leave to file a motion for reconsideration of this Court’s order granting in part and denying in 

part PolyOne’s motion for partial summary judgment (the “Order”). ECF 108, 112. PolyOne’s 

motion for partial summary judgment sought a determination (1) that the “Cap” in section 9.4(b) 

of the Share Purchase Agreement (“SPA”) does not limit the Majority Shareholder’s obligations in 

regard to the indemnity claims asserted by PolyOne, and (2) that Shilling is obligated to defend 

and indemnify PolyOne against the pending lawsuit against Glasforms and PolyOne, entitled Total 

Rod Concepts, Inc. v. Glasforms, Inc. et al., Case No. 14-05-05365, in the District Court of 

Montgomery County Texas (the “TRC lawsuit”). ECF 93. In the Order, the Court granted 

summary judgment to PolyOne on the first issue relating to the “Cap” in section 9.4(b) of the SPA, 

but denied summary judgment on the second issue, that the costs and damages associated with the 

TRC lawsuit resulted from the breach of representations and warranties under sections 5.14(a) and 

(b) of the SPA. Now PolyOne seeks leave to file a motion for reconsideration on the denial of 

summary judgment in relation to indemnification of the TRC lawsuit. PolyOne argues that the 

basis for leave is “[a] manifest failure by the Court to consider material facts or dispositive legal 

arguments which were presented to the Court before such interlocutory order.” Civ. L.R. 7-

Case 5:14-cv-03562-BLF Document 113 Filed 01/05/17 Page 1 of 3
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United States District Court

Northern District of California

9(b)(3). Because PolyOne has not demonstrated this basis for reconsideration of that ruling, its

motion for leave to file a motion for reconsideration is DENIED. 

In this District, a party must seek leave of court before filing a motion for reconsideration 

of an interlocutory order. Civ. L.R. 7-9(a). The party seeking leave must show reasonable 

diligence and one of three conditions. Civ. L.R. 7-9(b). The condition on which PolyOne bases 

its motion is “[a] manifest failure by the Court to consider material facts or dispositive legal 

arguments which were presented to the Court before the interlocutory order.” Civ. L.R. 7-9(b)(3). 

The moving party may not reargue any written or oral argument previously asserted to the Court

in connection with the interlocutory order. Civ. L.R. 7–9(c).

PolyOne asserts that reconsideration is warranted “because the Court did not consider 

important facts regarding the contract terms at issue, and dispositive legal arguments regarding 

causation.” Mot. 2, ECF 112. PolyOne first argues that the Court did not address the effect of 

Section 9.4(d) of the SPA, which states:

For purposes of determining the failure of any representations or 

warranties to be true and correct, and calculating Losses hereunder, 

any materiality or Material Adverse Effect qualifications in the 

representations and warranties shall be disregarded.

However, this section does not change the Court’s determination on whether the costs and 

damages associated with the TRC lawsuit resulted from the breach of representations and 

warranties under sections 5.14(a) and (b) of the SPA. Although any failure of representations or 

warranties would supposedly be deemed a breach regardless of the materiality of the failure, this 

section does not state that the element of “causation” or that the required proof that “damages 

flowed from the breach” in a breach of contract claim shall be deemed admitted. Further, no 

authority supports PolyOne’s argument that this section of the SPA circumvents the requirement

to prove this element of a breach of contract claim. PolyOne’s citation to Hudson’s Bay Co. 

Luxembourg, S.A.R.L. v. JZ LLC is unpersuasive. No. 10-12107, 2013 WL 1457019, at *11 (Del. 

Super. Ct. Mar. 11, 2013). The court there first determined that “in determining whether a breach 

has occurred,” the “Materiality Scrape” applies to certain claims regardless of whether the breach 

was “material” or “immaterial.” Id. It then proceeded to evaluate whether these “errors” or 

Case 5:14-cv-03562-BLF Document 113 Filed 01/05/17 Page 2 of 3
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United States District Court

Northern District of California

“breach” caused the plaintiff to suffer the alleged “Covered Losses.” Id. at *13. Accordingly, 

having a “Materiality Scrape” provision does not discharge a plaintiff’s obligation to prove by a 

preponderance of evidence that the “damages flowed from the breach.” Nor would PolyOne’s 

argument make sense if a plaintiff could assert any damage that is not caused by the breach.

PolyOne next argues that the Court failed to consider the “implications that flow from 

acceptance of Shilling’s argument regarding causation – that the representations and warranties of 

the seller become meaningless.” However, PolyOne merely reiterates arguments made in its 

motion for partial summary judgment, which the Court had already considered. In Cobalt 

Operating, LLC v. James Crystal Enterprises, LLC, the indemnification provision there is not the 

same as sections 5.14(a) and (b) of the SPA and the court there also noted that “[t]he 

indemnification provision . . . was broadly drafted, and covers all costs and expenses related to 

Crystal’s breaches of contract ‘whether suit is instituted [against Cobalt] or not.’” No. 714, 2007 

WL 2142926, at *30-32 (Del. Ch. July 20, 2007). Requiring causation also does not render “the 

representations and warranties of the seller [] meaningless” because as long as PolyOne can 

demonstrate by a preponderance of evidence at trial that the damages flowed from the breach, it 

can still prevail.

The Court notes that its denial of PolyOne’s motion for partial summary judgment on the 

indemnification of the TRC lawsuit does not preclude PolyOne from proving at trial the alleged 

damages flowed from the breach of sections 5.14(a) and (b) of the SPA or its entitlement to 

indemnification based on another section of the SPA, section 9.2(a)(v). Because PolyOne has 

failed to demonstrate a manifest failure by this Court in the Order, its motion for leave to file a 

motion for reconsideration is DENIED.

Dated: January 5, 2017

 ______________________________________

BETH LABSON FREEMAN

United States District Judge

Case 5:14-cv-03562-BLF Document 113 Filed 01/05/17 Page 3 of 3