Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_09-cv-00785/USCOURTS-casd-3_09-cv-00785-0/pdf.json

Nature of Suit Code: 442
Nature of Suit: Civil Rights Employment
Cause of Action: 28:1332 Diversity-Petition for Removal

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- 1 - 09cv785

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

DANIEL J. TAUTGES,

Plaintiff,

CASE NO. 09 CV 785 JLS (BGS)

ORDER: (1) GRANTING JOINT

MOTION TO DISMISS

DEFAMATION CAUSE OF

ACTION; (2) DENYING

DEFENDANTS’ MOTION FOR

SUMMARY JUDGMENT; (3)

GRANTING PARTIAL SUMMARY

JUDGMENT IN FAVOR OF

PLAINTIFF

(Doc. Nos. 31, 37.)

vs.

GLOBAL DATACENTER

MANAGEMENT, INC., et al.,

Defendant.

Presently before the Court is Defendant Global Datacenter Management, Inc.’s motion for

summary judgment of Plaintiff Daniel J. Tautge’s First Amended Complaint (“FAC”). Also before

the Court is a joint motion stipulating to the dismissal of Plaintiff’s third cause of action for

defamation. For the reasons below, the Court GRANTS the parties’ joint motion to dismiss the third

cause of action for defamation; DENIES Defendant’s motion for summary judgment of the first cause

of action for breach of contract and the second cause of action for breach of statutory duty; and sua

sponte GRANTS partial summary judgment in favor of Plaintiff. 

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Case 3:09-cv-00785-JLS-BGS Document 50 Filed 08/26/10 Page 1 of 10
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1

 The following facts are undisputed unless otherwise noted.

2

 “Defendant” as used throughout this Order is used generically and does specifically refer to

either company. When material, the Court will specify the companies. 

3

 As such, California law applies. 

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BACKGROUND

I. Factual Background1

This action arises out of the termination of Plaintiff Daniel Tautges’ employment by

Defendant Global Datacenter Management, Inc. (“Inc.”), the North American subsidiary of

Defendant Global Datacenter Management, Ltd. (“Ltd.”).2 Defendant employed Plaintiff as its

President for just over a year, commencing December 15, 2007 and terminating January 23, 2009. 

Pursuant to Plaintiff’s employment, Defendant executed an offer letter which both parties signed. 

(Tautges Decl. ISO MSJ, Ex. 1 (“Offer Letter”).) As to severance pay, the Offer Letter reads:

While we anticipate that our employment relationship will be long and mutually rewarding,

in the event that your employment at Global Datacenter Management is terminated by the

Company, the Company will make a severance payment based on your length of service on

the following terms:

1 – 12 months: No severance pay 

13 – 24 months: 3 months of your Base Salary

25 + months: 6 months of your Base Salary

* * *

In the event that the Company is acquired or undertakes an IPO the severance payment will

be 6 months of your Base Salary. 

(Offer Letter at 2.) Upon Plaintiff’s termination in January 2008, Defendant paid three months

severance pay consistent with his length of service. Plaintiff contends that he was entitled to 6

months severance pay given the purported acquisition of Defendant, discussed at length below. 

Plaintiff commenced this action in San Diego Superior Court on March 17, 2009. The

action was removed to federal court on April 16, 2009 on the basis of diversity jurisdiction.3

 (Doc.

No. 1.) The Complaint alleged five causes of action: (1) Wrongful termination in violation of

public policy; (2) Breach of Contract; (3) Breach of Statutory Duty; (4) Defamation; and (5) Alter

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Ego Liability. (Doc. No. 1.) On April 21, 2009, Defendant moved to dismiss the first, third and

fifth cause of action, which this Court granted on November 13, 2009. (Doc. Nos. 5 & 21.) 

Though the Court granted Plaintiff leave to amend these causes of action, he did not do so. 

Instead, on December 14, 2009, Plaintiff filed a First Amended Complaint (“FAC”) maintaining

only the causes of action for defamation, breach of contract, and breach of statutory duty insofar as

it relied on non-dismissed provisions. (Doc. No. 26.) 

On March 18, 2010, Defendant filed the present motion for summary judgment of all three

causes of action. (Doc. No. 31.) On June 17, 2010, both parties filed a joint motion to dismiss the

cause of action for defamation. (Doc. No. 37.) As such, Plaintiff’s opposition to the motion for

summary judgment, which was filed on June 18, 2010, addresses only the breach of contract and

breach of statutory duty causes of action. (Doc. No. 40.) Defendant filed its reply on July 8,

2010. (Doc. No. 45.) The motion was heard before this Court on August 5, 2010 and thereafter

taken under submission.

LEGAL STANDARD

Federal Rule of Civil Procedure 56 permits a court to grant summary judgment where (1)

the moving party demonstrates the absence of a genuine issue of material fact and (2) entitlement

to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). “Material,”

for purposes of Rule 56, means that the fact, under governing substantive law, could affect the

outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Freeman v.

Arpaio, 125 F.3d 732, 735 (9th Cir. 1997). For a dispute to be “genuine,” a reasonable jury must

be able to return a verdict for the nonmoving party. Anderson, 477 U.S. at 248.

The initial burden of establishing the absence of a genuine issue of material fact falls on the

moving party. Celotex, 477 U.S. at 323. The movant can carry his burden in two ways: (1) by

presenting evidence that negates an essential element of the nonmoving party’s case; or (2) by

demonstrating that the nonmoving party “failed to make a sufficient showing on an essential

element of her case with respect to which she has the burden of proof.” Id. at 322–23. “Disputes

over irrelevant or unnecessary facts will not preclude a grant of summary judgment.” T.W. Elec.

Serv., Inc. v. Pacific Elec. Contractors Ass’n, 809 F.2d 626, 630 (9th Cir. 1987).

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Once the moving party establishes the absence of genuine issues of material fact, the

burden shifts to the nonmoving party to set forth facts showing that a genuine issue of disputed

fact remains. Celotex, 477 U.S. at 324. The nonmoving party cannot oppose a properly supported

summary judgment motion by “rest[ing] on mere allegations or denials of his pleadings.” 

Anderson, 477 U.S. at 256. When ruling on a summary judgment motion, the court must view all

inferences drawn from the underlying facts in the light most favorable to the nonmoving party. 

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

DISCUSSION

I. Breach of Contract

Plaintiff contends that Defendant breached its contract by failing to pay 6 months of

severance pay pursuant to the Offer Letter. Specifically, Plaintiff asserts that Defendant was

acquired and, as such, the provision providing for 6 months severance pay applies. Defendant,

however, argues that this provision applies only if the termination was a result of the acquisition

and that, in any event, Defendant was not acquired. As such, the Court must interpret the Offer

Letter as it pertains to these two issues. 

Under California law, contract interpretation is a question of law. SDR Capital Mgmt., Inc.

v. Am. Int’l Specialty Ins. Co., 320 F. Supp. 2d 1043, 1046 (S.D. Cal. 2004); see also Parsons v.

Bristol Develop. Co., 62 Cal. 2d 861 (1965). “The fundamental goal of contractual interpretation

is to give effect to the mutual intention of the parties.” Byrne v. Laura, 52 Cal. App. 4th 1054,

1066 (1997). “When a contract is reduced to writing, the parties’ intention is determined from the

writing alone, if possible.” Founding Members of the Newport Beach Country Club v. Newport

Beach Country Club, Inc., 109 Cal. App. 4th 944, 955 (1992). 

In interpreting the contract, a court must first determine whether the contract is ambiguous. 

See Han v. Mobil Oil Corp., 73 F.3d 872, 877 (9th Cir. 1995). “A contract provision is considered

ambiguous when the provision is susceptible to more than one reasonable interpretation.” SDR

Capital Mgmt., 320 F. Supp. 2d at 1046 (citing MacKinnon v. Truck Ins. Exchange, 31 Cal. 4th

635, 648 (2003)). However, the “mere fact that a word or phrase in a policy may have multiple

meanings does not create an ambiguity.” Palmer v. Truck Ins. Exchange, 21 Cal. 4th 1109, 1118

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(1999). “Ambiguity cannot be based on a strained instead of reasonable interpretation” of the

contract’s terms. McKee v. State Farm Fire & Cas. Co., 145 Cal. App. 3d 772, 776 (1983). The

contract must be interpreted as a whole. MacKinnon, 31 Cal. 4th at 648. Further, the Court can

determine whether the contract is ambiguous on its face or by using extrinsic evidence of the

parties’ intent. Oceanside 84, Ltd. v. Fidelity Fed. Bank, 56 Cal. App. 4th 1441, 1448 (1997); see

also Founding Members, 109 Cal. App. 4th at 955. If no parol evidence is introduced to interpret

the contract, or if the evidence is not contradictory, the trial court’s resolution of the ambiguity is a

question of law. See Winet v. Price, 4 Cal. App. 4th 1159, 1166 (1992). However, “when two

equally plausible interpretations of the language of a contract may be made . . . parol evidence is

admissible to aid in interpreting the agreement, thereby presenting a question of fact which

precludes summary judgment if the evidence is contradictory.” WYDA Assoc. v. Merner, 42 Cal.

App. 4th 1702, 1710 (1996) (quoting Walter E. Heller Western Inc. v. Tecrim Corp., 196 Cal.

App. 3d 149, 158 (1987)). 

The key severance provision at issue in this case states: “In the event that the Company is

acquired or undertakes an IPO the severance payment will be 6 months of your Base Salary.” 

(Offer Letter at 2.) The provision does not explicitly require the termination to be a result of or

because of the acquisition or IPO, as Defendant contends. Instead, the plain language of the

provision merely refers to the “event” of an acquisition or IPO, with no time period and no causal

connection to the severance payment. Moreover, a review of the contract as a whole further

supports this interpretation. Prior to this provision, the contract sets forth the severance payment

depending on Plaintiff’s length of service, ranging from no severance pay to 6 months severance

pay. This paragraph is followed by a separate paragraph indicating that any modification to these

terms must be in writing and that, if Plaintiff is to voluntarily terminate his employment,

Defendant asks for 30 days notice prior to his departure. (Id.) Thereafter, separate from the

“length of service” severance provision, the acquisition/IPO severance provision is stated. Again,

there is no indication in this statement regarding any length of service requirement or impact or

that the termination must be a result of an acquisition or IPO, just that if there is (“in the event”) an

acquisition or IPO, any severance payment is 6 months of Plaintiff’s Base Salary. 

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4

 For these same reasons, the Court rejects Defendant’s contention that Plaintiff’s declaration

plainly contradicts his deposition testimony so as to render the declaration an inadmissible “sham

affidavit.” (Reply at 4-6.) 

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As such, the Court finds the contract unambiguous based on its plain language alone and

that it is not “reasonably susceptible” to the interpretation proffered by Defendant, as that would

inexplicably and improperly insert words and causal requirements that are not there and which are

not otherwise implied by the contract as a whole. See Winet v. Price, 4 Cal. App. 4th 1159, 1165

(1992); see also Pacific Gas & Elec. Co. v. G.W. Thomas Drayage & Rigging Co., 69 Cal. 2d 33,

39 (1968) (“[E]xtrinsic evidence is not admissible to add to, detract from, or vary the terms of a

written contract . . .”). 

Further, the Court, after provisionally receiving all extrinsic evidence, determines that the

language is still not “reasonably susceptible” to the interpretation urged and therefore does not

admit the extrinsic evidence. See Winet, 4 Cal. App. 4th at 1165 (“The test of whether parol

evidence is admissible to construe an ambiguity is not whether the language appears to the court to

be unambiguous, but whether the evidence presented is relevant to prove a meaning to which the

language is ‘reasonably susceptible.’”). Here, the evidence offered by Defendant does not

sufficiently support than an insertion of a causal requirement is a reasonable interpretation of the

language at issue. Defendant offers testimony by Plaintiff that he clearly understood the contract

and that he believe he would receive 6 months severance payment if he was terminated because of

an acquisition or IPO. (Tautges Depo. at 134:25-135:22; 139:13-18.) This evidence, however,

only establishes that Plaintiff understood the contract language to unambiguously mean what he

believed it meant and that one instance in which he believed he would be entitled to 6 months

payment under that severance provision would be if the termination was a result of said acquisition

or IPO,4

 not that the Offer Letter’s language or the parties’ intent was to require the termination and

resulting severance to be a result of the acquisition or IPO. As such, the Court does not admit the

extrinsic evidence submitted in order to interpret the clearly unambiguous language in the Offer

Letter. See Winet v. Price, 4 Cal. App. 4th at 1165; see also Blumenfeld v. R.H. Macy & Co., 92

Cal. App. 3d 832, 840 (1989). 

The Court therefore DENIES Defendant’s motion for summary judgment insofar as it

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5

 In his moving papers, Defendant makes much of the fact that there is no time limit on the

severance provision at issue, arguing that it defies logic for the Court to find that Plaintiff would be

entitled to 6 months severance payment even though the purported acquisition or IPO took place, for

example, 10 years prior to Plaintiff’s termination. This is a moot point. After Plaintiff worked for 25

months or longer, he would be entitled to 6 months of his base salary as severance regardless of which

provision he invoked to receive that 6 month payment. Thus, the acquisition/IPO provision serves to

protect Plaintiff only within the first 2 years of Plaintiff’s employment when he would otherwise be

entited to no severance payment or only 3 months of his base salary. Accordingly, in viewing the

contract as a whole, the lack of time limitation within the acquisition/IPO provision does not make

this severance provision more or less reasonably susceptible to including a causal requirement.

6

 A court may sua sponte grant summary judgment to the non-moving party. Cool Fuel, Inc.

v. Connett, 685 F.2d 309, 311 (9th Cir. 1982); Hood River County v. U.S. Dept. of Labor, 532 F.2d

1236 (9th Cir. 1976). Thus, because the Court finds no ambiguity in favor of Plaintiff’s interpretation,

it grants partial summary judgment accordingly. 

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asserts that the Offer Letter unambiguously states that the severance must be a result or caused by

the acquisition or IPO.5

 Instead, the Court sua sponte GRANTS summary judgment in favor of

Plaintiff, finding that the contract language unambiguously does not insert a causal requirement and

instead entitles Plaintiff to 6 months severance pay at any time after such an acquisition or IPO

occurs.6

The Court further finds it unambiguous under the plain terms of the agreement that the

Company which must be acquired or partake in an IPO sufficient to trigger this severance provision

is Global Datacenter Management, Inc., the subsidiary. The Offer Letter clearly defines “the

Company” as Global Datacenter Management, Inc. (Offer Letter at 1.) In his declaration, Plaintiff

asserts that all parties to the agreement and in negotiations understood “the Company” was in

reference to both “Inc.” and “Ltd.” and that only “Ltd.” would be involved in an IPO, sale, or

further investment. (See Tautges Decl. at ¶¶ 2-3.) Not only does the Court finds that the express

language of the contract is not “reasonably susceptible” to this interpretation given the clear

language in the contract, but parol evidence is not admissible if it “flatly contradict[s] the express

terms of the agreement.” See Winet, 4 Cal. App. 4th at 1167 (citing Stevenson v. Oceanic Bank,

223 Cal. App. 3d 306, 317-18 (1990)). Plaintiff’s declaration that the parties intended “the

Company” which must be acquired to mean both “Inc.” and/or “Ltd.” directly contradicts the

language of the contract and its definition of “the Company.” Therefore, the Court finds this

extrinsic evidence inadmissible for this purpose. See id. 

The inquiry, however, does not end there. The Court finds a genuine issue of material fact

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7

 Plaintiff does not contend that the severance provision at issue was triggered because the

Company undertook an IPO, so the only issue is the acquisition prong of the provision. (See Tautges

Depo. at 136:10-12.)

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to be determined at trial as to whether “Inc.” was “acquired” sufficient to trigger this severance

provision.7

 “Acquired” is not defined in the contract. The plain and common meaning of the term

“acquired” is a change of ownership or control in the company which was acquired. See, e.g.,

Muething v. Franchise Tax Bd., 52 Cal. App. 4th 275, 282 (1997) (“[I]n common parlance, one

acquires property when one obtains ownership, possession, or control over it.”) However, the

extent of said change of control or ownership is not easily determined by common meaning of the

term and the Offer Letter itself lends no clarification. Plaintiff contends that the approximately $16

to $20 million investment made by Balderton’s Capital in exchange for 28.5% of the outstanding

shares and the resulting change in board members meets the definition of “acquired” as used in the

contract. (See Tautges Depo. at 136-138; see also Tautges Decl. ¶ 7; Edelson Decl., Ex. 3 (Nisbett

Depo) at 27:17-29:20, 31:18-32:2; 41:21-25.) Further, Plaintiff asserts that this change of control

and ownership of “Ltd.” resulted in an acquisition of “Inc.” because “Ltd.” is the parent company

of the wholly-owned subsidiary “Inc.” (See Tautges Depo. 137:13-25; 137:17-21.) Finally,

Plaintiff’s declaration supports the reasonable interpretation that the purported acquisition or

undertaking of an IPO by “Ltd.” would include an acquisition or IPO of “Inc.” considering only the

parent company in this case would reasonably be acquired or undertake an IPO. (Tautges Decl. ¶

4.) Moreover, there is some evidence that the board of “Inc.” changed, as well. (See Tautges Decl.

¶ 7; see also Nisbett Depo. at 40:15-41:20.) As such, Plaintiff interprets “acquired” as used in the

Offer Letter to generally mean “if the company raised money so that it led to changes in

governance and top management.” (Tautges Decl. ¶ 4.) 

Defendant, however, argues that the conpany was not “acquired” because the largest

shareholder both prior to and after Balderton’s investment, South Pacific Holdings, remained the

same. (Nisbett Depo. at 32:10-33:13). The percentage of shares owner by South Pacific Holdings,

however, did increase. (Id.) Further, Defendant argues that an acquisition did not occur because 

the Chairman of the board of directors, Mr. John Moreton, remained the same after Balderton’s

investment. (Id. 28:21-29:6). Plaintiff, however, asserts that Bernard Liautaud became the

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Chairman and that other board members changed, and the total number of board member was

reduced, as well. (Tautges Depo. at 137:6-12; Tautges Decl. ¶ 7; see also Nisbett Depo. at 40:15-

41:20.) 

Having considered this extrinsic evidence on a provisional basis, the Court finds the

contract provision and the meaning of “acquired” reasonably susceptible to both Defendant and

Plaintiff’s interpretation and thus admits the extrinsic evidence cited above. Accordingly, the Court

finds the meaning of the term “acquired” as used within the Offer Letter ambiguous. The evidence

submitted, however, does not aid the Court in interpreting the ambiguity in favor of either

interpretation. Instead, the Court finds that the extrinsic evidence is contradictory as to whether

Inc. was acquired under the terms of the Offer Letter so as to invoke this severance provision at

issue. See WYDA Assocs. v. Merner, 42 Cal. App. 4th at 1710 (“When two equally plausible

interpretations of the language of a contract may be made . . . parol evidence is admissible to aid in

interpreting the agreement, thereby presenting a question of fact which precludes summary

judgment if the evidence is contradictory.” (quoting Walter E. Heller Western, Inc., 196 Cal. App.

3d at 158); see also Byrne, 52 Cal. App. 4th at 1066 (“These conflicting interpretations and any

others supported by reasonable inferences from the evidence must be resolved by a trier of fact . . .

[and therefore] summary adjudication is an inapporpriate means of resolving the ambiguity.”

(citations omitted)). Thus, the Court DENIES Defendant’s motion for summary judgment of the

cause of action for breach of contract. 

II. Breach of Statutory Duty

Plaintiff’s second cause of action is for breach of statutory duty; specifically, California

Labor Code §§ 200(a), 201, and 203 by “failing to pay [him] six months of severance as required

by his employment contract.” (FAC ¶ 10.) As such, because the Court denies Defendants’ motion

for summary of the cause of action for breach of contract, the Court DENIES Defendant’s motion

for summary judgment of the cause of action for breach of statutory duty. 

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CONCLUSION

For those reasons, the Court GRANTS the parties joint motion to dismiss the defamation

cause of action; DENIES Defendant’s motion for summary judgment; and GRANTS partial

summary judgment in favor of Plaintiff as to the issue of causation in the acquisition/IPO severance

provision as discussed above. 

DATED: August 26, 2010

Honorable Janis L. Sammartino

United States District Judge

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