Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-00987/USCOURTS-cand-3_04-cv-00987-8/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

NAREN CHAGANTI,

 Plaintiff,

 v

I2 PHONE INTERNATIONAL, INC, et

al,

 Defendants.

 

No C 04-987 VRW

 ORDER

Naren Chaganti, an attorney representing himself, claims

that I2 Phone International, Inc (I2 Phone) and its president, Paul

Arena, unlawfully interfered with Chaganti’s attorney-client

relationship with Supercaller Community, Inc (Supercaller). 

Chaganti also alleges breach of contract against I2 Phone in its

capacity as Supercaller’s successor-in-interest. I2 Phone and

Arena move to dismiss for lack of subject matter jurisdiction or,

alternatively, for summary judgment. Doc #77. Chaganti also moves

for summary judgment. Doc #75. For reasons discussed below, the

court GRANTS I2 Phone and Arena’s motion to dismiss for lack of

subject matter jurisdiction and DENIES as MOOT the parties’ motions

for summary judgment. 

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I

Chaganti is a patent attorney with a background in

telecommunications, computer science and venture capital financing. 

Doc #75, (Chaganti decl) at ¶¶ 2, 9. Chaganti’s relationship with

Supercaller began in October 2001, when he met Teng Lew Lim, Chief

Executive Officer and principal shareholder of Supercaller, through

Darius Mostowfi, Supercaller’s Chief Technology Officer. Id at ¶¶

8, 12. At the time, Supercaller was in the business of creating

telecommunications products.

Lim asked Chaganti to assist Supercaller in marketing and

engineering and to identify venture capital contacts (“pre-patent

work”). Doc #75, Ex 21 (Mostowfi decl) at 2. After providing Lim

and Mostowfi several business leads, Chaganti requested payment. 

Id. Because Supercaller lacked funds, Lim offered 500,000 shares

of stock in Supercaller. Doc #75 (Chaganti decl) at ¶ 17. 

Chaganti approved this arrangement, albeit reluctantly, and sent an

email to Mostowfi requesting paperwork for the grant of shares and

further requesting that Supercaller’s corporate attorney assess the

reasonableness of the deal. Doc #75 (Chaganti decl) at ¶¶ 17, 18;

Id, Ex 21 (Mostowfi decl) at 2. Supercaller’s corporate counsel,

James Berg, found the grant of shares to be reasonable, which

Mostowfi relayed to Chaganti in an email. Chaganti did not,

however, receive a share certificate. Doc #75 (Chaganti decl) at ¶

18 

In May 2002, Supercaller entered into a licensing and

marketing agreement with I2 Phone, whereby I2 Phone acquired an

ownership interest in Supercaller. Doc #75, Ex 21 (Mostowfi decl)

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at 3. As a condition of this arrangement, I2 Phone’s president,

Paul Arena, became a member of Supercaller’s board of directors as

a designee of I2 Phone. Doc #85, Ex 1 at 2-3. 

In June 2002, Chaganti began prosecuting patents on

behalf of Supercaller. Doc #75, Ex 21 (Mostowfi decl) at 3. In

particular, Lim and Mostowfi directed Chaganti to file a

provisional patent application by July 4; in exchange, I2 Phone

would invest funds into Supercaller in order to compensate Chaganti

at his hourly rate. Id. Lim and Mostawfi also agreed to retain

Chaganti to prepare and file eight utility patent applications and

eventually hire him as in-house patent counsel. Id. 

Over the next several weeks, Chaganti prepared the

provisional patent application with the assistance of an associate. 

Doc #75, Ex 11 at 1-2, Ex 21 (Mostowfi decl) at 3. On June 26,

Chaganti participated in a conference call with Mostowfi, Lim,

various officers of I2 Phone and Virginia patent attorney Jon

Roberts, whom Arena wanted to be involved in the application

process. Doc #75 (Chaganti decl) at ¶¶ 25-26; Doc #75, Ex 1, 2. 

During this conference call, the parties discussed a private

placement memorandum (private offering of securities to limited

investors) disclosing the eight patent utility applications and

Chaganti and Roberts exchanged contact information. Doc #75 at 3;

Doc #75, Ex 1, 2. 

On July 2, Roberts contacted Chaganti and asked to help

prosecute the utility patents that Chaganti would soon be filing. 

Doc #75 (Chaganti decl) at ¶ 29; Doc #75, Ex 21 (Mostowfi decl) at

3. Chaganti declined and informed Mostowfi and Lim of Roberts’

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offer. Doc #75 (Chaganti decl) at ¶¶ 29-30; Doc #75, Ex 21

(Mostowfi decl) at 3. Mostowfi and Lim concluded that Chaganti was

better suited for the job, despite Arena’s preference that Roberts

be involved. Doc #75, Ex 5, Ex 21 (Mostowfi decl) at 3. In an

email to Arena dated July 2, Lim wrote, “[w]e appreciate the offer

of [Roberts’] help but it looks like they are doing well for now.” 

Doc #75, Ex 5. Mostowfi and Lim also offered Chaganti a workspace

at Supercaller so they could interact with him on a day-to-day

basis. Doc #75, Ex 4, Ex 21 (Mostowfi decl) at 4.

On July 5, Chaganti filed the provisional patent

application and forwarded copies to Lim and Mostowfi; both noted

they were satisfied with Chaganti’s work and asked him to continue

drafting the utility applications. Doc #75, Ex 6, 7, 8, 21

(Mostowfi decl) at 4. On July 8, Roberts contacted Chaganti,

informing him that Arena wanted to know which of the utility

applications would be assigned to Roberts’ firm. Doc #75, Ex 9. 

Roberts again asked to divide up the work on July 11; Chaganti

responded by telling Roberts that he could handle the job himself

and that it was improper to make such a request without the

approval of Supercaller. Doc #75 (Chaganti decl) at ¶ 42; Doc #75,

Ex 9. 

Later that day, Arena contacted Lim and Mostowfi and

demanded the discharge of Chaganti and the assignment of the

utility applications to Roberts. Doc #75, Ex 21 (Mostowfi decl) at

4. Soon thereafter, Mostowfi called Chaganti and told him to cease

all work because Arena had threatened to withhold investment funds

if Supercaller continued to work with Chaganti. Doc #75 (Chaganti

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decl) at ¶¶ 43-44; Doc #75, Ex 21 (Mostowfi decl) at 4. Chaganti

complied with Mostowfi’s request and immediately sent an email to

Mostowfi confirming the request. Doc #75, Ex 10. On July 15,

Chaganti mailed Supercaller a bill for $46,744.50, encompassing

work for the provisional patent application and research and

preparation for the utility applications. Doc #75, Ex 11. In

response to Chaganti’s demand for payment, Mostowfi suggested in a

July 16 email that Chaganti would be paid eventually. Doc #75, Ex

12. On September 14, Dan Kern, an attorney for Supercaller and I2

Phone, offered $7,000 to Chaganti for services rendered and to

“[release] fully both Supercaller and I2 Phone International * * *

against any and all claims * * *.” Doc #75, Ex 14. Chaganti

rejected the offer. Doc #75 (Chaganti decl) at ¶ 54. 

On December 31, 2002, Supercaller and I2 Phone merged to

become I2 Telecom International, Inc (I2 Telecom). Doc #75, Ex 17

at 1. On February 21, 2003, Chaganti filed an action for tortious

interference with attorney-client relationship against I2 Phone and

Arena. Chaganti also alleged breach of contract against I2 Phone

in its capacity as Supercaller’s successor-in-interest. Doc #26. 

Although this action was originally before Judge Breyer, it was

found to be related to Mostowfi v I2 Telecom Int’l, Inc, C-03-5784

VRW, a case involving numerous business torts against a group of

defendants, including I2 Phone and Arena, in which Chaganti served

as plaintiffs’ counsel. Doc #3. 

On August 13, 2004, I2 Phone and Arena moved to dismiss,

which this court denied. Doc #28; Doc #35. In May 2007, I2 Phone

and Arena moved to dismiss for lack of subject matter jurisdiction

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or, alternatively, for summary judgment, Doc #77, and Chaganti

moved for summary judgment. Doc #75.

II

The court must first address the motion to dismiss for

lack of subject matter jurisdiction. See Ruhrgas Ag v Marathon Oil

Co, 526 US 574, 578 (1999) (“Customarily, a federal court first

resolves doubt about its jurisdiction over the subject matter * *

*.”). Federal courts have limited subject matter jurisdiction and,

unless jurisdiction is authorized by the Constitution or a statute,

a federal court is presumed to lack jurisdiction. Kokkonen v

Guardian Ins Co of America, 511 US 375, 377 (1994); National

Treasury Employees Union v Fed Labor Relation Authority, 112 F3d

402, 404 (9th Cir 1997). The burden of establishing otherwise

rests on the party asserting jurisdiction. Kokkonen, 511 US at

377; Tosco Corp v Communities for a Better Environment, 236 F3d

495, 499 (9th Cir 2001); St Clair v City of Chico, 880 F3d 199, 201

(9th Cir 1989) (finding that it is “necessary for the party

opposing the motion to present affidavits or any other evidence

necessary to satisfy its burden of establishing that the court, in

fact, possesses subject matter jurisdiction”). 

 Unlike other defenses that may be raised pursuant to

motions under Rule 12(b), defects in subject matter jurisdiction

cannot be waived by the parties and may be raised at any time

during the proceedings or even sua sponte by the court. Fox v

Board of Trustees of the State University of New York, 42 F3d 135,

140 (2d Cir 1994); Prescott v United States, 973 F2d 696, 701 (9th

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Cir 1992). Rule 12(h)(3) allows the court to dismiss a case

“[w]henever it appears by suggestion of the parties or otherwise

that the court lacks jurisdiction of the subject matter.”

 In determining whether a challenge to subject matter

jurisdiction is warranted under FRCP 12(b)(1), the court need not

accept the factual allegations in the complaint as true. Thornhill

Publishing Co v General Telephone & Electronics Co, 594 F2d 730,

733 (9th Cir 1979); see also Thigpen v United States, 800 F2d 393

396 (4th Cir 1986). If the jurisdictional issue is separable from

the merits of the case, the court may consider the evidence

presented with respect to the jurisdictional issue and resolve

factual disputes where necessary to the determination of

jurisdiction. AAMC, 217 F3d at 778; Augustine v United States, 704

F2d 1074, 1077 (9th Cir 1983). If the jurisdictional issue

involves factual issues going to the merits of the underlying

claim, the court should employ the standard applicable to a motion

for summary judgment. Augustine, 704 F2d at 1077; Thornhill, 594

F2d at 733-35. That is, the evidence presented by the nonmoving

party “is to be believed, and all justifiable inferences are to be

drawn in his favor.” Anderson, 477 US at 255. 

III

A

I2 Phone, as Supercaller’s successor-in-interest, first

argues that no enforceable contract formed between Chaganti and

Supercaller because the alleged agreement violates California

Business & Professions Code § 6148(a), which regulates attorneyCase 3:04-cv-00987-VRW Document 100 Filed 07/23/07 Page 7 of 19
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client relationships, and the terms of payment are indefinite. 

With respect to the grant of Supercaller shares, I2 Phone contends

the agreement lacks consideration and constitutes a contingency fee

arrangement in violation of California Business & Professions Code

§ 6147. Doc #77 at 6-12. Chaganti contends that an implied-infact contract existed between the parties and, in the alternative,

seeks summary judgment for compensation under quantum meruit. Doc

#75 at 5, 7. 

Because this action was brought under diversity

jurisdiction, California contract law governs this case. St Paul

Fire and Marine Ins Co v Weiner, 606 F2d 864, 867 (9th Cir 1979). 

The elements of a cause of action for breach of contract are: (1) a

contract; (2) plaintiff’s performance; (3) defendant’s breach and

(4) damage to plaintiff therefrom. McDonald v John P Scripps

Newspaper, 210 Cal App 3d 100, 104 (1989). 

Preliminary negotiations or an agreement for future

negotiations do not amount to an enforceable agreement. Kruse v

Bank of America, 202 Cal App 3d 38 (1988). In order for a contract

to form, there must be a meeting of the minds with an intent to be

bound by a legally enforceable agreement. Weddington Productions,

Inc v Flick, 60 Cal App 4th 793, 811 (1998). The parties must

mutually assent to a sufficiently definite offer so that upon

acceptance, the parties’ obligations are reasonably certain. See

id. An offer must clearly articulate the terms of the agreement

and the acceptance must be absolute, unqualified and a mirror image

of the offer. See Panagotacos v Bank of America, 60 Cal App 4th

851, 855 (1998). “The existence of mutual assent is determined by

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objective rather than subjective criteria, the test being what the

outward manifestations of consent would lead a reasonable person to

believe.” Meyer v Banko, 55 Cal App 3d 937, 942-43 (1976).

The court first addresses the claim for breach of

contract with respect to the fees for Chaganti’s work on the

provisional and utility patent applications. In relying on

California Business and Professions Code § 6148, I2 Phone

refashions an argument this court already rejected. Section 6148

provides in part:

(a) In any case * * * in which it is reasonably

foreseeable that total expense to a client,

including attorney fees, will exceed one

thousand dollars * * * the contract for

services in the case shall be in writing.

* * *

(c) Failure to comply with any provision of this

section renders the agreement voidable at the

option of the client, and the attorney shall,

upon the agreement being voided, be entitled

to collect a reasonable fee. 

Doc #29 at 5.

The court draws I2 Phone’s attention to sub-section (d),

which provides in part: 

This section shall not apply to any of the

following:

* * *

(4) If the client is a corporation.

(emphasis added). Because Supercaller was a California

corporation, the court (once again) rejects I2 Phone’s reliance on

section 6148.

Next, I2 Phone asserts that the terms of any agreement it

had with Chaganti are indefinite, arguing that negotiations

regarding compensation never resulted in specific payment terms.

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Doc #77 at 9-11. In support, I2 Phone cites Chaganti’s deposition

testimony:

Q: Did you have a discussion with anyone at

[Supercaller] either in that first initial meeting

or thereafter as to how you would be compensated?

A: Yes.

Q: And please describe for me what was said in that

portion of the conversation.

A: * * * If I were to do a substantial amount of

work up front and I was not going to get paid in

cash, then equity would be substantially more. On

the other hand, if I were to be paid a lower hourly

rate, then I offered to give them – take a smaller

equity * * *. One, I wasn’t really clear as to

their financial situation in the sense that how

much money they had in the bank. They never told

me. So I gave a panoply of options saying on the

one hand I could come in house and become a general

counsel for the company. They could pay me hourly

fee and then put me on the equity thing, and also

possibly on the board of directors. And the other

extreme is purely pay me by the hour at the going

rate.

Q: When you started doing the patent application

for Supercaller * * * you weren’t sure if it was

going to be a flat-fee matter or an hourly matter

because the agreement had been written but not

signed?

A: Let me put it this way. My mental state was,

this is an hourly thing at the time I started, but

if they came back sometime during that period or

soon thereafter saying, whoops, we made a mistake,

we got our funding, here is your 40 grand, take

this money, I probably would have – in order to

maintain an ongoing relationship with these guys,

probably would have done that and canceled the * *

* hourly thing, and written off any excess hours *

* *. 

Doc #77, Ex 1 at 26:12-25, 27:1-11, 62:19-25, 63:1-11. 

Chaganti counters with a declaration from Mostowfi, which

lends support to the contention that Chaganti was to be compensated

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for the provisional patent application and the subsequent utility

patents. 

Before [Chaganti] started representation of

Supercaller as a lawyer in June 2002, Lew Lim and I

agreed on behalf of Supercaller that we would pay

[Chaganti] his hourly fees and expenses for the

preparation and filing. Lew Lim and I also agreed

that [Chaganti] would prepare and file 8-9 utility

applications based on the disclosure in the

provisional application.

Doc #75, Ex 21 (Mostowfi decl) at 3. Further support is found in

Mostowfi’s July 16 email, which suggested that Chaganti’s invoice

would be paid eventually. Doc #75, Ex 13. 

In view of the conflicting evidence, and drawing all

justifiable inferences in favor of Chaganti, the court cannot

conclude as a matter of law that no contract formed for work on the

provisional and utility patent applications.

With respect to Chaganti’s pre-patent work and the

alleged offer of 500,000 shares to Chaganti, I2 Phone contends the

agreement lacks consideration, relying on Passanti v McWilliam, 53

Cal App 4th 1240 (1997). Doc #77 at 11-12. In Passanti, a

corporate attorney secured financing for a company and later sued

after the company reneged on its promise to grant corporate stock

to the attorney. The promise lacked consideration, the court

found, because the stock was not bargained for in exchange for

securing financing; the attorney secured the financing before the

stock reward was ever mentioned. Because “past consideration is no

consideration,” the promise was unenforceable. Passanti, 53 Cal

App 4th at 1247-48. 

As in Passanti, 53 Cal App 4th at 1247-78, Chaganti

completed the relevant services before securing the promise for

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Supercaller shares. Lim and Mostowfi, acting on behalf of

Supercaller, may have agreed in March 2002 to grant 500,000 shares

of Supercaller to Chaganti, but they did so after Chaganti

performed the pre-patent work. Doc #75, Ex 21 (Mostowfi decl) at

2. Chaganti conceded as much in his deposition:

Q: Did you come to a conclusion as to how you would

get paid for what you characterized as the in-house

counsel services? Was that what the 500,000 shares

of stock was for? 

A: 500,000 shares was – yeah, that is the type of

services that – they made me some trademark

searches, for example. Didn’t pay me. * * * [T]hey

said, “We are tight on cash, so we want to give you

this thing.” I said, “Okay, for these type of

service * * * [I] have already done, I’ll take

these shares * * *.”

Doc #77, Ex 1 at 39:8-23 (emphasis added). Because past

consideration cannot be bargained for, the court concludes that any

agreement granting 500,000 shares to Chaganti is not enforceable.

Alternatively, Chaganti claims that even if no

enforceable contract formed, he may obtain recovery for his prepatent work under quantum meruit. Doc #75 at 8. Quantum meruit,

“is an equitable remedy implied by the law under which a plaintiff

who has rendered services benefitting the defendant may recover the

reasonable value of those services when necessary to prevent unjust

enrichment of the defendant.” In re De Laurentiis Entertainment

Group, Inc, 963 F2d 1269, 1272 (9th Cir 1992) (applying California

law). “Quantum meruit is based not on the intention of the

parties, but rather on the provision and receipt of benefits and

the injustice that would result to the party providing those

benefits absent compensation.” Id. To succeed on such a theory,

Chaganti must establish that he rendered services to Supercaller’s

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benefit such that Supercaller would be unjustly enriched if

Chaganti were not compensated. Id. Under California law, Chaganti

and Supercaller need not be in contractual privity with each other;

nor is it necessary that Supercaller expected to pay Chaganti. 

Rather, Chaganti must establish that the services he performed were

not intended to be gratuitous. See id.

 Although the promise for shares lacks consideration,

Chaganti may still have a claim that his pre-patent services

benefitted Supercaller and that Supercaller would be unjustly

enriched if Chaganti is not compensated. Chaganti’s deposition

testimony concerning these pre-patent services is as follows:

Q: At the point in time where you had the meeting

at the Polaris Avenue address with Mr Lim and Mr

Mostowfi in March or April of 2002, how many hours

had you spent working on tasks for

Limcom/Supercaller?

A: By that time?

Q: Yes.

A: Maybe 20. Maybe it’s more than 20 actually. 

Maybe close to 40, 50 hours.

Q: Had you ever asked them to pay you?

A: I have repeatedly asked them to pay * * *

Doc #77, Ex 1 at 34:1-8, 38:19-20. 

I2 Phone fails on the present record to rebut Chaganti’s

claim that his services were not intended to be gratuitous. 

B

Chaganti also alleges that I2 Phone and Arena wrongfully

induced Supercaller to breach its contractual obligation concerning

the provisional patent applications and interfered with Chaganti’s

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prospective business relations with Supercaller. Doc #26 at 4-5. 

Under California tort law, general principles regarding tortious

interference claims are applicable in the attorney-client context. 

Frazier v Boccardo, 70 Cal App 3d 331, 338 (1977). “The fact that

the relationship between an attorney and client is ‘at-will’ does

not prevent an inducement to terminate the contractual relationship

from being actionable, irrespective of whether the agreement was

written or oral.” Pacific Gas & Electric Co v Bear Stearns & Co,

50 Cal 3d 1118, 1127 (1990).

I2 Phone and Arena first assert they cannot be held

liable for tortious interference because they were not third

parties to the contract between Chaganti and Supercaller, as Arena

was a board member of Supercaller and I2 Phone held an economic

interest in Supercaller. Doc #77 at 13-15; Doc #75, Ex 21

(Mostowfi decl) at 2; Doc #85, Ex A at 2-3.

 A long-recognized principle in actions for tortious

interference with a contract or economic relationship is that a

claim will not lie against a party to the contract or relationship. 

Woods v Fox Broadcasting Sub, Inc, 129 Cal App 4th 344, 350-51

(2005). If the defendant is a party to the contract or

relationship, “* * * the grievance of the plaintiff is, in essence,

breach of contract.” Dryden v Tri-Valley Growers, 65 Cal App 3d

990, 999 (1977); see Kasparian v County of Los Angeles, 38 Cal App

4th 242, 262 (1995). Absent a privilege or justification, however,

contract or prospective economic advantage interference claims may

lie against owners, officers, shareholders and directors of an

entity whose contract or economic relationship is the subject of

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the litigation. Woods, 129 Cal App 4th at 356. Hence, the law

regards Arena and I2 Phone as third parties with respect to

Chaganti’s alleged contract with Supercaller and they may be

subject to claims for tortious interference.

Next, Arena and I2 Phone assert that even if their

conduct induced a breach of the alleged agreement between Chaganti

and Supercaller, they were privileged to act in such manner. Doc

#77 at 13-14. “The determination * * * whether the privilege

applies in a particular instance requires a two step analysis. The

first step is to determine if the relationship between the parties

involves the type of interests that the privilege is designed to

protect. The second step is to determine whether, in light of the

nature and importance of the above relationship, the advisor’s

intent in inducing the breach was proper. Los Angeles Airways, Inc

v Davis, 687 F2d 321, 325 (9th Cir 1992) (applying California law). 

 An owner, shareholder, officer or manager of an entity

enjoys a qualified privilege to induce an otherwise tortious breach

of contract if he reasonably believes the contract to be harmful to

the entity’s best interests. Wanland v Los Gatos Lodge, Inc, 230

Cal App 3d 1507, 1522 (1991). Although the extent to which motive

or state of mind goes into determining whether the inducement was

done with the proper intent is “somewhat muddled in California

law,” Aalgaard v Merchants Nat Bank, Inc, 224 Cal App 3d 674, 684

(1990), the Ninth Circuit in Los Angeles Airways, Inc, 687 F2d at

328, concluded that an officer, agent, manager or shareholder may

claim the privilege “as long as he was motivated, at least in part,

by a desire to benefit the company.” See id (emphasis added). 

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Resolving ambiguity in favor of a defendant, the Ninth Circuit

reasoned, is necessary for the managers privilege to serve its

purpose of “fostering uninhibited advice.” Los Angeles Airways,

Inc, 687 F2d at 328.

Applying these principles, Arena, on behalf of I2 Phone,

need not have been acting solely in Supercaller’s interest; all

that is required is evidence that Supercaller’s interest was one of

the factors motivating his actions that led to the disruption of

Chaganti’s relationship with Supercaller. See id; see also

Wanland, 230 Cal App 3d at 1522. Arena provides ample evidence to

satisfy this standard. Arena declares that I2 Phone’s attorney Jon

Roberts advised him that Chaganti was failing to prepare the patent

applications competently and timely, thereby jeopardizing

Supercaller’s intellectual property. Doc #85, Ex A at 2. Id. 

Arena claims that “he suggested, and the board of directors voted

as a whole, to terminate [Chaganti’s] services because of

dissatisfaction with [Chaganti’s] provisional patent.” Id. 

Chaganti’s response misses the mark. It matters not that

Mostowfi and Lim were satisfied with Chaganti’s patent work, see

Doc #75, Ex 8. Under the managers privilege, what matters is

Arena’s intent, for the underlying issue is whether Arena was

motivated, at least in part, by a desire to benefit Supercaller. 

See id. Arena’s good faith concern about Chaganti’s performance

merits protection under the managers privilege.

//

//

//

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C

Having assessed Chaganti’s claims, the court must

determine whether the amount of fees sought in this action meets

the jurisdictional amount in controversy requirement. Doc #77 at

16. District courts have jurisdiction in diversity cases so long

as the amount in controversy exceeds $75,000, exclusive of interest

and costs. See 28 USC § 1332(a); Crum v Circus Circus Enterprises,

231 F3d 1129, 1131 (9th Cir 2000). Generally, the amount in

controversy is determined from the face of the pleadings. See

Pahinger v MGM Grand Hotel-Las Vegas, Inc, 802 F2d 362, 363 (9th

Cir 1986), and the sum claimed by the plaintiff controls so long as

the claim is made in good faith. Paul Mercury Indem Co v Red Cab

Co, 303 US 283, 288 (1938). To justify dismissal, “it must appear

to a legal certainty that the claim is really for less than the

jurisdictional amount.” Id at 289. 

A more exacting standard, however, is imposed when the

amount of controversy is challenged by a motion for summary

judgment. See William W Schwarzer, et al, Federal Civil Procedure

Before Trial 9:90-91 (Rutter Group Practice Guide 2001). 

Were this a threshold motion to dismiss the

complaint for want of subject matter jurisdiction,

[plaintiff] would be entitled to the speculative

benefit of any facts he might conceivably prove in

support of his well-pleaded allegations. On a

motion for summary judgment, though, he is not

entitled to hold back his heavier fire for the

ultimate trial -- for it may never come. 

Accordingly [plaintiff] may properly be accorded

the benefit of favorable inferences only from

established facts and from his own asserted facts

(accepted as true for these purposes) -- no more.

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Farmilant v Singapore Airlines, Ltd, 561 F Supp 1148, 1151 (ND Ill

1983) (Shadur, J), citing Walker v Hoffman, 583 F2d 1073, 1075 (9th

Cir 1978).

As Chaganti claims $46,445.25 for the value of the patent

prosecution services rendered to Supercaller, Doc #26, this court’s

subject matter jurisdiction turns on whether Chaganti could recover

the remaining $28,554.75 under quantum meruit for his pre-patent

services. In deposition, Chaganti testified that before working on

the patents, he billed between twenty to fifty hours rendering an

array of services to Supercaller, including engineering issues,

trademark research and helping Supercaller find “distribution

channels” and investors. Doc #77, Ex 1 24:8-20, 34:1-15, 37:15-17,

39:12-15, 69:4-13. Chaganti’s bill for services — attached to Doc

#77 (Diemer decl), Ex B — lists his hourly rate at $275. See also

Doc #77, Ex A at 27 (Chaganti depo) (testifying that the quoted

rate was $275-300/hr). 

Even if the court draws all justifiable inferences in

Chaganti’s favor and credits him for 50 hours of pre-patent 

services, his quantum meruit claim would amount to $13,750 — not

enough to put Chaganti over the $75,000 jurisdictional minimum. In

order for Chaganti to reach that amount, his hourly rate would have

to be over twice what he quoted Supercaller and charged in the July

15, 2002, invoice. While some lawyers now charge hourly rates at

and above that level ($571/hour), it is a legal certainty that

Chaganti did not in his billing charge less than what he regarded

as the value of his services. Chaganti has thus failed to meet the

jurisdictional threshold required under 28 USC § 1332.

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IV

In sum, the court GRANTS I2 Phone and Arena’s motion to

dismiss for lack of subject matter jurisdiction and DENIES as MOOT. 

the parties’ cross-motions for summary judgment. The clerk is

directed to close the file and terminate all motions.

IT IS SO ORDERED.

 

VAUGHN R WALKER

United States District Chief Judge

Case 3:04-cv-00987-VRW Document 100 Filed 07/23/07 Page 19 of 19