Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-00642/USCOURTS-caed-2_05-cv-00642-4/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: Civil Miscellaneous Case

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

PACIFIC MDF PRODUCTS, INC.,

NO. CIV. S-05-642 LKK/JFM

Plaintiff,

v. O R D E R

BIO-MASS ENERGY CONCEPTS, LLC;

ADVANCED RECYCLING EQUIPMENT,

INC.; and DONALD KUNKEL,

Defendants.

 /

AND RELATED COUNTER-CLAIMS.

 /

This case involves a contract dispute over the purchase of

equipment and equipment packages used to convert sawdust into

various forms of energy. Pending before the court is defendant

Donald Kunkel’s motion for summary judgment and, in the

alternative, motion for partial summary adjudication. Kunkel

argues that he cannot be held liable in his individual capacity.

For the reasons set forth below, defendant’s motion for summary

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 All facts are undisputed unless otherwise noted. 1

 Plaintiff disputes that the meeting occurred on this date, 2

but the precise date of the meeting is immaterial for the purposes

of the motion pending before the court.

2

judgment is denied, and the motion for partial summary adjudication

is granted in part and denied in part.

I. Facts1

Plaintiff Pacific MDF Products, Inc. (“Pacific MDF”)

manufactures a variety of products, including bases, casings, and

crown moldings, out of medium density fiberboard (“MDF”). The

process of manufacturing these products consumes a large amount of

electricity and also produces a significant amount of MDF sawdust,

which plaintiff is required by law to capture and dispose of at

significant cost. Defendants Bio-Mass Energy Concepts (“BEC”) and

Advanced Recycling Equipment, Inc. (“ARE”) approached plaintiff

with a proposal for a system that would convert the sawdust into

multiple forms of energy. Specifically, they proposed a

“cogeneration” system that would burn sawdust to produce steam,

which would in turn produce electricity to run Pacific MDF’s plant.

On April 15, 2003, plaintiff entered into a contract with ARE and

BEC to purchase equipment and equipment packages for the

cogeneration system.

Defendant Donald Kunkel (“defendant”), ARE’s majority owner,

first met with Pacific MDF representatives on April 2, 2001.2

Def.’s Statement of Undisputed Fact (“SUF”) ¶ 11. These

representatives included Douglas Hanzlick, the president of Pacific

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MDF, and William Gregory, the vice president of Pacific MDF, as

well as several key Pacific MDF staff who would be involved in the

cogeneration project. The meeting initially took place in the main

conference room at Pacific MDF’s facility. Pl.’s Additional

Statement of Undisputed Fact (“ASUF”) ¶ 1. When Hanzlick asked

defendant if he would provide the financial statements of ARE/BEC

and a performance bond, defendant declined to answer and said that

the conversation should take place between the owners of the

companies.

Following the meeting in the conference room, defendant,

Hanzlick, and Gregory adjourned to a meeting in Hanzlick’s private

office. When Hanzlick renewed his request for the financial

statements of ARE/BEC and a performance bond, defendant responded:

“Doug, I know that you are a wealthy man, but so am I. I just sold

my company for $50,000,000. We are a private company. We don’t

give out financial sheets. We don’t have any debt. So you don’t

need a financial statement.” SUF ¶ 15. No efforts were made to

investigate this claim. Gregory, who attended the meeting to

ensure that Pacific MDF was doing business with a reputable

company, did not request any proof of the alleged sale, nor did he

undertake any independent verification of the sale. Similarly,

even though Hanzlick was “a wealthy man with various consultants

and resources at his disposal to investigate that information,” he

also did not investigate defendant’s statement. SUF ¶ 22.

When questioned at the meeting about which entity would have

ultimate responsibility for the entire system, defendant stated,

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“That is the beauty of BEC in that we put this all together. And

if you have any problem, there is only one person to look [to], and

that is me.” SUF ¶ 12. At this point, defendant took his finger,

made a big circle, and pointed it back at himself to emphasize the

point that he would be the only person responsible for the system.

Two years later, on April 15, 2003, plaintiff and ARE/BEC

entered into a contract in which plaintiff purchased equipment and

equipment packages for the cogeneration system. The contract

consisted of two parts, a proposal and purchase agreement. The

proposal was signed by Hanzlick and Dave Gamble, the president of

BEC. The purchase agreement was signed by Hanzlick and defendant,

as the authorized signatory of ARE. The final contract contained

a refund and removal clause which provided plaintiff with a full

refund and removal of the equipment at ARE/BEC’s cost if the system

did not work as promised. This clause was not present in the first

revision of the contract in October 2002, but was inserted at a

later date upon the suggestion of Gregory.

On March 31, 2005, plaintiff filed its complaint against ARE,

BEC, and defendant Kunkel. The complaint alleges, inter alia,

breach of express warranty, breach of implied warranties, fraud,

negligent misrepresentation, and violation of section 17200 of the

California Business and Profession Code. Pending before the court

is defendant Kunkel’s motion for summary judgment and, in the

alternative, motion for partial summary adjudication. 

II. Standard

SUMMARY JUDGMENT STANDARDS UNDER FED. R. CIV. P. 56

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Summary judgment is appropriate when it is demonstrated

that there exists no genuine issue as to any material fact, and

that the moving party is entitled to judgment as a matter of

law. Fed. R. Civ. P. 56(c); See also Adickes v. S.H. Kress &

Co., 398 U.S. 144, 157 (1970); Secor Ltd. v. Cetus Corp., 51

F.3d 848, 853 (9th Cir. 1995).

Under summary judgment practice, the moving party

[A]lways bears the initial responsibility of

informing the district court of the basis

for its motion, and identifying those

portions of "the pleadings, depositions,

answers to interrogatories, and admissions

on file, together with the affidavits, if

any," which it believes demonstrate the

absence of a genuine issue of material fact.

Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). "[W]here

the nonmoving party will bear the burden of proof at trial on a

dispositive issue, a summary judgment motion may properly be

made in reliance solely on the 'pleadings, depositions, answers

to interrogatories, and admissions on file.'" Id. Indeed,

summary judgment should be entered, after adequate time for

discovery and upon motion, against a party who fails to make a

showing sufficient to establish the existence of an element

essential to that party's case, and on which that party will

bear the burden of proof at trial. See id. at 322. "[A]

complete failure of proof concerning an essential element of the

nonmoving party's case necessarily renders all other facts

immaterial." Id. In such a circumstance, summary judgment

should be granted, "so long as whatever is before the district

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court demonstrates that the standard for entry of summary

judgment, as set forth in Rule 56(c), is satisfied." Id. at

323.

If the moving party meets its initial responsibility, the

burden then shifts to the opposing party to establish that a

genuine issue as to any material fact actually does exist. 

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,

586 (1986); see also First Nat'l Bank of Ariz. v. Cities Serv.

Co., 391 U.S. 253, 288-89 (1968); Secor Ltd., 51 F.3d at 853. 

In attempting to establish the existence of this factual

dispute, the opposing party may not rely upon the denials of its

pleadings, but is required to tender evidence of specific facts

in the form of affidavits, and/or admissible discovery material,

in support of its contention that the dispute exists. Fed. R.

Civ. P. 56(e); Matsushita, 475 U.S. at 586 n.11; see also First

Nat'l Bank, 391 U.S. at 289; Rand v. Rowland, 154 F.3d 952, 954

(9th Cir. 1998). The opposing party must demonstrate that the

fact in contention is material, i.e., a fact that might affect

the outcome of the suit under the governing law, Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Owens v. Local

No. 169, Ass’n of Western Pulp and Paper Workers, 971 F.2d 347,

355 (9th Cir. 1992) (quoting T.W. Elec. Serv., Inc. v. Pacific

Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987)), and

that the dispute is genuine, i.e., the evidence is such that a

reasonable jury could return a verdict for the nonmoving party,

Anderson, 477 U.S. 248-49; see also Cline v. Indus. Maint. Eng’g

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& Contracting Co., 200 F.3d 1223, 1228 (9th Cir. 1999).

In the endeavor to establish the existence of a factual

dispute, the opposing party need not establish a material issue

of fact conclusively in its favor. It is sufficient that "the

claimed factual dispute be shown to require a jury or judge to

resolve the parties' differing versions of the truth at trial." 

First Nat'l Bank, 391 U.S. at 290; see also T.W. Elec. Serv.,

809 F.2d at 631. Thus, the "purpose of summary judgment is to

'pierce the pleadings and to assess the proof in order to see

whether there is a genuine need for trial.'" Matsushita, 475

U.S. at 587 (quoting Fed. R. Civ. P. 56(e) advisory committee's

note on 1963 amendments); see also Int’l Union of Bricklayers &

Allied Craftsman Local Union No. 20 v. Martin Jaska, Inc., 752

F.2d 1401, 1405 (9th Cir. 1985).

In resolving the summary judgment motion, the court

examines the pleadings, depositions, answers to interrogatories,

and admissions on file, together with the affidavits, if any. 

Rule 56(c); see also In re Citric Acid Litigation, 191 F.3d

1090, 1093 (9th Cir. 1999). The evidence of the opposing party

is to be believed, see Anderson, 477 U.S. at 255, and all

reasonable inferences that may be drawn from the facts placed

before the court must be drawn in favor of the opposing party,

see Matsushita, 475 U.S. at 587 (citing United States v.

Diebold, Inc., 369 U.S. 654, 655 (1962) (per curiam)); see also

Headwaters Forest Def. v. County of Humboldt, 211 F.3d 1121,

1132 (9th Cir. 2000). Nevertheless, inferences are not drawn

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out of the air, and it is the opposing party's obligation to

produce a factual predicate from which the inference may be

drawn. See Richards v. Nielsen Freight Lines, 602 F. Supp.

1224, 1244-45 (E.D. Cal. 1985), aff'd, 810 F.2d 898, 902 (9th

Cir. 1987).

Finally, to demonstrate a genuine issue, the opposing party

"must do more than simply show that there is some metaphysical

doubt as to the material facts. . . . Where the record taken as

a whole could not lead a rational trier of fact to find for the

nonmoving party, there is no 'genuine issue for trial.'"

Matsushita, 475 U.S. at 587 (citation omitted).

III. Analysis

Defendant moves for summary judgment on the grounds that he

entered into the contract with Pacific MDF as an agent of ARE,

rather than in his individual capacity. Accordingly, he

maintains that any liability arising out of the contract flows

only to ARE and that summary judgment should be granted as to

all claims. In the alternative, defendant seeks partial summary

adjudication as to each claim. Specifically, he argues that the

fraud and negligent misrepresentation claims fail because

plaintiff has not proven the element of reasonable reliance, and

that damages are not available under section 17200 of the

California Business and Profession Code. For the reasons set

forth below, defendant’s motion for summary judgment is denied,

and the motion in the alternative for partial summary

adjudication is granted in part and denied in part.

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A. Defendant Kunkel’s Individual Liability

The crux of defendant’s motion for summary judgment is that

he cannot be held liable in his individual capacity because he

was acting as a representative of ARE in executing the contract. 

Plaintiff responds that its claims against defendant do not

arise out of the written contract but, rather, arise out of

defendant’s conduct prior to execution of the contract. As

explained below, the court finds that there is a genuine dispute

as to whether defendant was acting in his individual or

representative capacity before the contract was signed. 

Accordingly, summary judgment must be denied.

It is well-settled law that an agent is not responsible for

liability stemming from a contract entered into on behalf of a

principal. Restatement of Agency 2d, § 328 (“An agent, by

making a contract only on behalf of a competent disclosed or

partially disclosed principal whom he has power to bind, does

not thereby become liable for its non-performance.”). Here,

there is no dispute that when defendant entered into an

agreement with plaintiff, he did so only as an authorized agent

of ARE. Accordingly, while there was privity of contract

between plaintiff and ARE, there was no such privity between

plaintiff and defendant.

Plaintiff maintains, however, that defendant’s liability

stems not from his conduct in executing the contract but from

the representations that he made prior to executing the

contract. Some of these representations -- specifically, those

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made during the meeting on April 2, 2001 -- clearly create a

genuine dispute about whether defendant was acting within his

representative capacity. However, the other representations --

those related to defendant’s ability to perform -- present a

closer issue. The court addresses each category of these

representations in turn.

1. Representations Made During the April 2, 2001 Meeting

First, plaintiff has identified several representations

made by defendant on April 2, 2001 that could reasonably be

construed as statements made within his individual capacity. 

For example, at the meeting, when plaintiff asked defendant who

would have ultimate responsibility for the entire system,

defendant responded: “That is the beauty of BEC in that we put

this all together. And if you have any problem, there is only

one person to look [to], and that is me.” SUF ¶ 12. Indeed, at

that same meeting, defendant made a big circle with his finger

and pointed it back at himself to emphasize that he bore

ultimate responsibility for the entire system.

Furthermore, in response to requests by Hanzlick, president

of Pacific MDF, for a performance bond and/or financial

statements from ARE/BEC, defendant declined. This request was

made at the main conference room at Pacific MDF’s offices, in

the presence of several Pacific MDF staff. Plaintiff responded

that this was a conversation that should take place between the

owners of the companies. Following this meeting, defendant and

Hanzlick adjourned to a private office, where defendant declined

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to provide a performance bond or financial statements. Instead,

he offered the following assurance: “Doug, I know you are a

wealthy man, but so am I. I just sold my company for

$50,000,000. We are a private company. We don’t give out

financial sheets. We don’t have any debt. So you don’t need a

financial statement.” SUF ¶ 15.

There is clearly a genuine dispute as to whether defendant

was acting in his representative capacity when making these

statements. Indeed, the persuasive force of defendant’s

statements relies upon the fact that he was making a personal

guarantee, rather than a representative guarantee; otherwise, a

performance bond and the financial statements would have still

been needed to assuage plaintiff’s concerns. 

2. All Other Representations

It is a closer issue whether the other representations

identified by plaintiff could reasonably be construed as

statements made in defendant’s individual capacity. These

representations mostly pertain to defendant’s ability to perform

(the “performance-related representations”). Compl. ¶ 35. For

instance, it is undisputed for purposes of this motion that

defendant lied when he represented that ARE/BEC had the

experience to provide a turnkey co-generation facility, that the

entire system would be automated, and the equipment used in the

facility would be new. 

Defendant characterizes the performance-related

representations as ones made in his representative capacity. 

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 The evidence consists of defendant’s response to an 3

interrogatory. Bodzin Decl., Ex. E, 8:11-9:16. The response

merely recites the alleged misrepresentations but does not disclose

any facts that would assist in the determination of whether they

were made in defendant’s individual or representative capacity.

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Admittedly, these representations are unlike those containing

self-evident personal guarantees, for instance, or those made

under circumstances suggesting that defendant was stepping

outside his role as a representative of ARE (e.g., private

office meetings). Nevertheless, the evidence that defendant

cites in support of its contention that the representations were

made in a representative capacity is simply silent as to that

issue. 

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Accordingly, defendant has failed to tender sufficient

evidence to establish the absence of a genuine dispute on the

issue. Moreover, the general presumption is that no agency

exists, and that each person is acting for himself or herself. 

See Inglewood Teachers Ass’n v. Public Employment Relations Bd.,

227 Cal. App. 3d 767, 780 (2d Dist. 1991) (“The law indulges in

no presumption that an agency exists but instead presumes that a

person is acting for himself and not as agent for another.”)

(internal quotation marks omitted).

The question of agency is, typically, one for the jury to

resolve. See L. Byron Culver & Assocs. v. Jauodi Industrial &

Trading Corp., 1 Cal. App. 4th 300, 305 (4th Dist. 1991) (“The

existence of an agency is a factual question within the province

of the trier of fact.”); Pistone v. Superior Court, 228 Cal.

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 This includes the first cause of action for breach of 4

express warranty arising out of the written contract. As discussed

above, this claim is not viable against Kunkel, who was acting in

his representative capacity in signing the contract. However,

plaintiff has not abandoned its second express warranty claim,

which addresses liability for representations made outside the

contract. Plaintiff has also abandoned its third cause of action

for breach of implied warranty arising out of the written contract.

13

App. 3d 672, 679 (1st Dist. 1991) (“The existence or absence of

agency ordinarily poses a question of fact. Unless the evidence

permits only one inference, the question is one for the trier of

fact.”).

 In order to prevail on summary judgment as to the entirety

of the case, defendant must prove that he was acting in his

representative capacity at all relevant times. He has not met

this burden here, at least with respect to the aforementioned

representations. Accordingly, the court denies defendant’s

motion for summary judgment.

B. Liability for Each Claim

Having addressed defendant’s liability as a general matter,

the court turns to defendant’s motion for partial summary

adjudication as to each claim. These claims include (1) breach

of express warranty, (2) fraud, (3) negligent misrepresentation,

and (4) violation of section 17200 of the California Business

and Profession Code. Plaintiff has abandoned two other claims

with respect to defendant.4

1. Breach of Express Warranty

First, defendant moves for partial summary adjudication as

to the breach of express warranty claim. An express warranty

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Defendant also argues in his reply brief that even if he was 5

acting in his individual capacity, no express warranty could be

created in the absence of a contract between him, in his individual

capacity, and plaintiff. If this argument was set forth in

defendant’s moving papers, it was not sufficiently clear to afford

plaintiff a fair opportunity to respond, and, in any event, is

unsupported by case law indicating that privity of contract is

required for express warranty claims. The only cases cited by

defendant in his moving papers with regard to this issue either

discuss the general circumstances giving rise to an express

warranty or recite basic principles of agency.

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includes “[a]ny affirmation of fact or promise made by the

seller to the buyer which relates to the goods and becomes part

of the basis of the bargain.” Cal. Commercial Code § 2313. 

Again, the thrust of defendant’s argument is that any

representations giving rise to an express warranty were made in

a representative capacity. As discussed above, however, this is

the subject of a genuine dispute and is typically a question for

the jury. Accordingly, defendant’s motion for partial summary

adjudication as to the express warranty claim is denied.5

2. Fraud

Defendant next moves for partial summary adjudication as to

the fraud claim. He maintains that plaintiff did not rely on

his representations and that even if it did, this reliance was

unreasonable. For the reasons set forth below, defendant’s

motion is granted in part and denied in part.

In California, a cause of action for intentional

misrepresentation or fraud requires that the plaintiff prove the

following: (1) a misrepresentation (false representation,

concealment, or nondisclosure), (2) knowledge of falsity, (3)

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intent to deceive or induce reliance, (4) justifiable reliance,

and (5) resulting damage. Lazar v. Superior Court, 12 Cal. 4th

631, 638 (1996); Engalla v. Permanente Medical Group, Inc., 15

Cal. 4th 951, 974 (1997); Glenn K. Jackson Inc. v. Roe, 273 F.3d

1192, 1201 (9th Cir. 2001). The absence of any element bars

recovery. Okun v. Morton, 203 Cal. App. 3d 805, 828 (2d Dist.

1988).

A. Actual Reliance

First, defendant argues that plaintiff did not actually

rely on his representations that he would personally guarantee

performance of the contract. Actual reliance exists where the

misrepresentation was an immediate cause of the plaintiff’s

conduct and where, but for the misrepresentation, the plaintiff

would not have entered into the contract “in all reasonable

probability.” Alliance Mortgage Co. v. Rothwell, 10 Cal. 4th

1226, 1239 (1995). The misrepresentation need not be the only

cause of plaintiff’s damages but must have been a “substantial

factor” that induced the plaintiff to act. Wennerholm v.

Stanford Univ. Sch. of Medicine, 20 Cal. 2d 713, 717 (1942); see

also Engalla, 15 Cal. 4th at 977 (holding that the

misrepresentation need not be “the sole or even the predominant

or decisive factor”). 

Here, defendant points out that the final contract

contained a clause providing for a full refund if the system did

not work as promised and a removal of the equipment at ARE/BEC’s

expense (the “refund clause”). Moreover, it is undisputed that

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 In its opposition, plaintiff states that, when requesting 6

financial statements and a performance bond, “Mr. Hanzlick already

had in hand a draft of the contract and found the warranty

provisions in the draft to be insufficient.” Pl.’s Opp’n at 12.

To the extent that the “warranty provisions” refer to the refund

clause, there is no support for this statement in the record.

Indeed, plaintiff conceded that the refund clause was not in

existence as of October 2002. Pl.’s Response to SUF ¶ 25.

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the refund clause did not exist at the time of the April 2001

meeting, when defendant made the allegedly fraudulent

representations, but was inserted at some point after October

2002. In other words, defendant’s position is that plaintiff 6

entered into the contract on the basis of the later-inserted

refund clause -- not on the basis of defendant’s

representations.

Even taking the refund clause into account, there is still

a genuine dispute as to whether defendant’s misrepresentations

constituted a “substantial factor” in plaintiff’s decision to

enter into the contract, and whether “in all reasonable

probability” it would not have done so without those

misrepresentations. There is a distinction, for instance,

between a refund clause and a performance bond, in that

plaintiff would have greater certainty of actually recovering

its losses with the latter. Accordingly, plaintiff might have

abandoned its request for the bond in light of both the refund

clause and defendant’s personal guarantee. This is the type of

dispute over which reasonable minds could disagree, rendering

summary adjudication inappropriate. 

B. Justifiable Reliance

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 Second, defendant argues that plaintiff’s reliance was not

justifiable or reasonable. In assessing the reasonableness of a

plaintiff’s reliance, the court must consider the plaintiff’s

level of knowledge, education, and experience. Guido v.

Koopman, 1 Cal. App. 4th 837, 843 (1st Dist. 1991) (holding that

a licensed attorney’s reliance on the advice of an equestrian

instructor regarding the validity of a release of liability was

not reasonable). Justifiable reliance is usually a question of

fact but becomes a question of law when reasonable minds could

come to only one conclusion based on the facts. Id. at 843.

Here, defendant maintains that it was unreasonable for

plaintiff to take at face value defendant’s representations,

including the statement that he just sold a company for $50

million, without undertaking any due diligence to determine

whether the sale took place, or to even find out the name of the

company. Furthermore, it is undisputed that Hanzlick is “a

wealthy man with various consultants and resources at his

disposal.” SUF ¶ 22. In addition, Gregory, who was also

present at the April 2001 meeting, is a licensed attorney but

did not advise Hanzlick to investigate defendant’s statements.

The court finds that it was unreasonable as a matter of law

for Hanzlick, and therefore plaintiff, to rely on the April 2,

2001 representations. Hanzlick’s reliance must be judged, not

by the standard of a reasonable person, but by the standard of a

reasonable CEO or company president. Viewed from this

perspective, his reliance on defendant’s April 2, 2001

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 Arguably, plaintiff’s reliance on the $50 million statement 7

might have been reasonable to the extent that it indicated

defendant’s willingness to personally guarantee the system, even

if it was unreasonable to the extent it indicated defendant’s

financial ability to personally guarantee the system. However, it

would still be unreasonable for plaintiff to rely on a personal

guarantee that it should have known defendant could not in fact

deliver. 

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representations without any conducting any due diligence was

unreasonable. See Grumman Allied Industries, Inc. v. Rohr

Industries, Inc., 748 F.2d 729, 737 (2d Cir. 1984) (“Where

sophisticated businessmen engaged in major transactions enjoy

access to critical information but fail to take advantage of

that access, [] courts are particularly disinclined to entertain

claims of justifiable reliance.”); In re AHT Corp., 292 B.R.

734, 743 (S.D.N.Y. 2003) (finding that the failure of a

sophisticated business enterprise to inquire into CEO’s

statements regarding business deal was unreasonable as a matter

of law). Indeed, it could be argued that the more plaintiff

relied on defendant’s representations, the more unreasonable it

was for plaintiff not to undertake any type of due diligence.7

The court notes that its ruling with respect to the April

2, 2001 representations does not extend to the other,

performance-related representations. See Compl. ¶ 35. Contrary

to the representations regarding defendant’s financial status,

which could be easily verified, these other representations

(i.e., the claim that new equipment would be used) would be more

difficult to investigate. At least in part, this is because

many of the performance-related representations reflected

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defendant’s future intentions. Moreover, defendant has only

demonstrated that reliance with respect to the April 2, 2001

representations would be unreasonable; it has not briefed the

issue of reliance with respect to the performance-related

representations.

Accordingly, the court grants the motion for partial

summary adjudication with respect to the April 2, 2001

representations and denies the motion with respect to the

performance-related representations.

3. Negligent Misrepresentation

Defendant also moves for partial summary adjudication as to

the negligent misrepresentation claim. The elements of a cause

of action for negligent misrepresentation are similar to those

for fraud, except that plaintiff need not prove the element of

scienter. Gagne v. Bertran, 43 Cal. 2d 481, 487-88 (1954). 

Like fraud, a claim of negligent misrepresentation requires

proof of justifiable reliance. For the reasons discussed above,

plaintiff’s reliance on the April 2, 2001 misrepresentations was

unreasonable. Accordingly, the court grants the motion for

partial summary adjudication with respect to the April 2, 2001

representations and denies the motion with respect to the

performance-related representations.

4. California Business and Profession Code § 17200

Defendant last moves for summary adjudication with respect

to the issue of damages under the Unfair Competition Law

(“UCL”). Cal. Bus. Prof. Code § 17200. It is well-settled that

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non-restitutionary damages are not permitted under the UCL. See

Korea Supply Co v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1149

(2003). In the prayer for relief, plaintiff seeks “compensatory

and consequential damages,” Compl. 12:3-6, which defendant

construes as seeking more than restitution. However, the

section of the complaint setting forth the relevant cause of

action makes clear that plaintiff seeks only restitution. 

Accordingly, the court grants the motion to the extent there is

any ambiguity that plaintiff seeks more than restitution.

IV. Conclusion

Accordingly, the court orders as follows:

1. Defendant’s motion for summary judgment is DENIED.

2. Defendant’s motion for partial summary adjudication

with respect to the breach of express warranty claim

is DENIED.

3. Defendant’s motion for partial summary adjudication

with respect to the fraud claim is GRANTED in part and

DENIED in part.

4. Defendant’s motion for partial summary adjudication

with respect to the negligent misrepresentation claim

is GRANTED in part and DENIED in part.

5. Defendant’s motion for partial summary adjudication

with respect to the issue of damages under section

17200 of the California Business and Profession Code

is GRANTED.

////

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IT IS SO ORDERED.

DATED: November 17, 2006.

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