Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_12-cv-04175/USCOURTS-cand-5_12-cv-04175-8/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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Case No.: 5:12-CV-04175-EJD 

ORDER GRANTING PLAINTIFFS’ MOTION FOR ORDER CLARIFYING ISSUES FOR 

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United States District Court 

For the Northern District of California 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN JOSE DIVISION 

NAVCOM TECHNOLOGY, INC. and DEERE 

& COMPANY, 

 Plaintiffs, 

 v. 

OKI ELECTRIC INDUSTRY CO., LTD. And 

DOES ONE THROUGH TEN, inclusive, 

 

 Defendants. 

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Case No.: 5:12-CV-04175-EJD

ORDER GRANTING PLAINTIFFS’ 

MOTION FOR ORDER CLARIFYING 

ISSUES FOR TRIAL 

[Re: Docket No. 228]

 

In response to the Order issued by the Court on March 11, 2014, Plaintiffs have requested 

that the Court provide clarification regarding issues to be tried. 

The Court reminds Plaintiffs that the Court’s finding that Defendant breached the 

Agreement by failing to provide timely notice pursuant to the terms of Section 1.0 was made only 

for the purposes of deciding the parties’ motions for summary judgment. The Court made this 

finding because Plaintiffs, through their motion papers, claimed that Defendant breached the 

Case 5:12-cv-04175-EJD Document 231 Filed 03/20/14 Page 1 of 5
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Case No.: 5:12-CV-04175-EJD 

ORDER GRANTING PLAINTIFFS’ MOTION FOR ORDER CLARIFYING ISSUES FOR 

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United States District Court 

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contract when Defendant provided notice of termination on July 8, 2008.1 The Court found that 

Defendant did have the right to terminate the Agreement but that Defendant did not appear to have 

terminated according to the Agreement’s terms. The Court previously found that Defendant may 

be liable for damages for its failure to provide timely notice of termination but is in no position to 

calculate what those damages might be. 

In its Order, the Court analyzed the issues with the understanding that Plaintiffs’ theory of 

breach was that Defendant breached when it terminated the Agreement. The Court’s Order does 

not preclude Plaintiffs from presenting alternate theories of breach. 

Plaintiffs’ alternate theories of breach (breaches of Sections 2.2, 2.6, and 2.8) were not 

discussed in Plaintiffs’ moving papers and Plaintiffs may still present these theories. However, 

Plaintiffs should be aware of certain issues that may arise should Plaintiffs attempt to bring these 

theories of breach. 

First, the Limitation of Liability Clause will continue to limit the damages Plaintiffs will be 

able to claim. For every item of damages Plaintiffs might claim, Plaintiffs will need to show that 

they are not precluded by the Limitation of Liability Clause. Second, Plaintiffs should be aware 

that issues regarding the statute of limitations may arise should they attempt to recover for any 

breaches that occurred more than four years prior to when the instant action commenced. Cal. Civ. 

Proc. Code § 337. In their moving papers, Plaintiffs had argued that their claim for breach of 

contract was outside the statute of limitations because Defendant breached when it provided notice 

of termination on July 8, 2008, and Plaintiffs had filed the instant action June 22, 2012. Plaintiffs 

may need to show why the statute of limitations does not apply to their alternate theories of breach. 

Finally, the Court remains uncomfortable with Plaintiffs’ third item of damages. 

Specifically, Plaintiffs contend that Defendant’s alleged breach (or breaches) of Sections 2.2, 2.6, 

and/or 2.8 proximately caused Plaintiffs’ third item of damages (the increased cost of using the 

 

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 Docket No. 114-4, Pl.’s Opp. to Def.’s Mot. for Sum. J. re Damages at 1 (“. . .Oki simply quit. It unilaterally 

terminated the Agreement. A clearer case of breach of contract there could not be.”); Docket No. 99-4, Pl.’s Memo 

ISO Mot. Partial Sum. J. at 9 (“Here, there is no evidence that Plaintiffs’ claim for breach of contract accrued prior to 

July 8, 2008, when Oki delivered its notice of termination to NavCom”). 

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Case No.: 5:12-CV-04175-EJD 

ORDER GRANTING PLAINTIFFS’ MOTION FOR ORDER CLARIFYING ISSUES FOR 

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United States District Court 

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replacement discrete solution). The Court disagrees and provides the following explanation to 

clarify its thinking regarding the third item of damages. 

Damages are awarded in an action for breach of contract to give the injured party the 

benefit of his bargain and insofar as possible to place him in the same position he would have been 

in had the promisor performed the contract. Coughlin v. Blair, 41 Cal. 2d 587, 602 (1953). 

Plaintiff’s third item of damages essentially seeks to place Plaintiffs in the position they 

would have occupied if Defendant had never exercised its termination right and assumes that 1) 

Defendant had been able to successfully create a prototype based on the specifications that both 

parties had a role in developing, which further assumes that it was actually possible to produce a 

working prototype based on the specifications provided, 2) Plaintiffs had ordered as much product 

as they felt they needed over the period of X years (as described in the sealed Expert Report), 3) 

Defendant actually accepted each one of those orders2, 4) and this continued for the period of X 

years. Given that contract damages attempt to place the promisee in the same position had the 

promisor performed, this would be the maximum, or very close to the maximum, amount that 

Plaintiffs could reasonably claim as a measure of contract damages that are not the consequential, 

special, exemplary, etc. damages excluded by the Limitation of Liability clause. 

Allowing Plaintiffs to recover this item of damages would render the termination right 

meaningless. It would mean that Defendant would have negotiated for a right to terminate the 

contract, exercised that right to terminate the contract (albeit without adhering to its notice 

requirements), yet still remain liable for the full extent of the benefit Plaintiffs would have received 

had the contract been performed indefinitely, successfully, and with no concern to whether 

Defendant would actually have filled every one of Plaintiffs’ orders (as described in the Expert 

Report, eventually the cheaper ASICs would have been the same cost as the discrete solution, at 

which point Plaintiffs’ would have received the full benefit of the contract with Defendant vs. 

going with the discrete solution). 

 

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 Agreement, Section 3.1 (“Seller may commence production of the units upon completion of the Development Phase 

and upon receipt of acceptable purchase orders,” compared with “Buyer agrees to enter purchase orders against this 

Agreement during the term of the Agreement to achieve the annual commitment quantities set forth in Schedule D”) 

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Case No.: 5:12-CV-04175-EJD 

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The Court does not read the Agreement as providing a promise by Defendant that 

Defendant would certainly succeed in developing the prototype and provide the exact quantities 

Plaintiffs would want to buy every year. Instead, the Court reads the Agreement as providing for a 

number of smaller promises, for example: Defendant’s promise that it would use best efforts to 

meet the development schedule; Defendant’s promise that it would warrant the prototypes; 

Defendant’s promise that once Plaintiffs started placing orders, each order would be free of 

defects; Defendant’s promise that, if it accepted an order from Plaintiffs, Defendant would ship the 

goods in the amount requested; Defendant’s promise that if it terminated the agreement it would 

give 3 months’ notice prior to the end of a term. Plaintiffs allege that Defendant breached in a 

number of ways (e.g., providing prototypes that violated the warranty). Since the contract never 

reached the stage where Plaintiffs were placing orders, Defendant’s obligation to deliver the orders 

never triggered because the condition precedent to Defendant’s obligation never occurred 

(Plaintiffs never placed the orders). 

In other words, the Court reads the Agreement as providing that Defendant would become 

obligated to deliver each shipment only after certain conditions precedent were met (that the 

prototype was accepted by Plaintiffs, that Plaintiffs placed an order according to Agreement terms, 

that Defendant accepted order according to contract terms). Once the conditions precedent were 

met, Defendant would become liable for failure to deliver the particular shipment ordered by 

Plaintiffs. Because the conditions precedent to Defendant’s obligation to deliver each shipment 

never occurred, Defendant was never obligated to deliver each shipment. It would violate the 

proximate cause requirement to award Plaintiffs for breaches of promises to provide X years worth 

of shipments when the actual breach is a failure to provide timely notice of termination or a failure 

to deliver a prototype that adheres to the warranty. 

Furthermore, the above discussion assumes that Plaintiffs’ third item of damages is not 

expressly precluded by the Limitation of Liability Clause. The Court had declined to rule on this 

issue because, although the Court found the parties’ submissions on this topic helpful, the Court 

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Case No.: 5:12-CV-04175-EJD 

ORDER GRANTING PLAINTIFFS’ MOTION FOR ORDER CLARIFYING ISSUES FOR 

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did not reach this issue after identifying the more fundamental problem with awarding Plaintiffs 

these damages as discussed above. 

Finally, with respect to the third-party beneficiary issue, the Court earlier declined to rule 

on the issue and both parties may still contest it.

IT IS SO ORDERED 

Dated: March 20, 2014 

 _________________________________ 

 EDWARD J. DAVILA 

 United States District Judge 

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