Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_16-cv-05326/USCOURTS-cand-4_16-cv-05326-17/pdf.json

Parties Involved:
Stephen Bradway
Plaintiff
Super Lucky Casino, Inc.
Defendant
Nicholas Talarico
Defendant
Bret Terrill
Defendant
Dan Vigdor
Plaintiff

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

DAN VIGDOR, et al.,

Plaintiffs,

v.

SUPER LUCKY CASINO, INC., et al.,

Defendants.

Case No. 16-cv-05326-HSG 

ORDER GRANTING DEFENDANTS’ 

MOTION FOR SUMMARY 

JUDGMENT, DENYING PLAINTIFFS’ 

MOTION FOR PARTIAL SUMMARY 

JUDGMENT, AND DENYING 

PLAINTIFFS’ MOTIONS FOR 

JUDICIAL NOTICE

REDACTED VERSION 

Re: Dkt. Nos. 114, 116, 124, 135

Pending before the Court is a motion for summary judgment filed by Defendants Super 

Lucky Casino, Inc. (“Super Lucky” or “SLC”), Nicholas Talarico, and Bret Terrill, Dkt. No. 114, 

and a motion for partial summary judgment filed by Plaintiffs Dan Vigdor and Stephen Bradway, 

Dkt. No. 116. For the following reasons, the Court GRANTS Defendants’ motion, and DENIES

Plaintiffs’ motion.

1

I. FACTUAL BACKGROUND2

Plaintiffs were early investors in Defendants’ start-up company who decided to invest after 

connecting with Defendant Talarico. See Dkt. No. 115-6, Ex. 4 at 33:3–24, 185:10–24; Ex. 44; 

Ex. 28. On January 25, 2012, Plaintiffs each invested $100,000 in the company and in exchange 

received a Convertible Promissory Note (“CPN”), with a principal amount of $100,000 and a 6% 

 

1 Plaintiffs additionally move for the Court to take judicial notice of the Certificate of Amendment 

of Articles of Incorporation of 12 Gigs, Incorporated, Dkt. No. 135, and the Certificate of 

Amendment of Articles of Incorporation of 12 Gigs, Dkt. No. 124. At the summary judgment 

stage, the Court may consider the documents as evidence without taking judicial notice. See, e.g.,

Ballen v. City of Redmond, 466 F.3d 736, 745 (9th Cir. 2006). Further, the Court does not rely on 

either document in reaching its conclusions. Therefore, the Court DENIES Plaintiffs’ motions for 

judicial notice.

2 All facts listed in this section are undisputed unless otherwise noted.

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interest rate. Dkt. No. 114-2, Exs. 3 and 4 (“CPNs”). Each CPN could be converted into equity 

shares in the company under certain limited circumstances. See CPNs. The conversion process 

for each CPN was governed by a Note Purchase Agreement. Dkt. No. 114-2, Exs. 6 and 7 

(“NPAs”). Under the NPAs, two circumstances could lead to conversion: conversion would 

occur automatically if the company sold equity shares that grossed at least $750,000, and 

conversion could occur at Plaintiffs’ option in the event of a corporate transaction, such as a 

merger or sale of assets. See NPAs at §§ 1(e), (i), 2.2(a)–(b).

On July 29, 2016, Defendants attempted to repay Plaintiffs the CPN principal and accrued 

interest. Dkt. No. 115-6 at Vigdor Decl. ¶ 21; Ex. 39; Bradway Decl. ¶ 10; Ex. 49. Plaintiffs filed 

this action in response, claiming Defendants improperly attempted to eliminate their conversion 

rights. See Dkt. No 95 (“FAC”). 3

II. SUMMARY JUDGMENT STANDARD

Summary judgment is proper when a “movant shows that there is no genuine dispute as to 

any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). 

A fact is “material” if it “might affect the outcome of the suit under the governing law.” Anderson 

v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is “genuine” if there is evidence in the 

record sufficient for a reasonable trier of fact to decide in favor of the nonmoving party. Id. The 

Court views the inferences reasonably drawn from the materials in the record in the light most 

favorable to the nonmoving party, Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 

574, 587–88 (1986), and “may not weigh the evidence or make credibility determinations,” 

Freeman v. Arpaio, 125 F.3d 732, 735 (9th Cir. 1997), overruled on other grounds by Shakur v. 

Schriro, 514 F.3d 878, 884–85 (9th Cir. 2008). 

The moving party bears both the ultimate burden of persuasion and the initial burden of 

producing those portions of the pleadings, discovery, and affidavits that show the absence of a 

genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Where the 

moving party will not bear the burden of proof on an issue at trial, it “must either produce 

 

3 A redacted version of the Fourth Amended Complaint can be found at Dkt. No. 146-2. A sealed, 

unredacted version can be found at Dkt. No. 92-5.

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evidence negating an essential element of the nonmoving party’s claim or defense or show that the 

nonmoving party does not have enough evidence of an essential element to carry its ultimate 

burden of persuasion at trial.” Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 

(9th Cir. 2000). Where the moving party will bear the burden of proof on an issue at trial, it must 

also show that no reasonable trier of fact could not find in its favor. Celotex Corp., 477 U.S. at 

325. In either case, the movant “may not require the nonmoving party to produce evidence 

supporting its claim or defense simply by saying that the nonmoving party has no such evidence.” 

Nissan Fire & Marine Ins. Co., 210 F.3d at 1105. “If a moving party fails to carry its initial 

burden of production, the nonmoving party has no obligation to produce anything, even if the 

nonmoving party would have the ultimate burden of persuasion at trial.” Id. at 1102–03. 

“If, however, a moving party carries its burden of production, the nonmoving party must 

produce evidence to support its claim or defense.” Id. at 1103. In doing so, the nonmoving party 

“must do more than simply show that there is some metaphysical doubt as to the material facts.” 

Matsushita Elec. Indus. Co., 475 U.S. at 586. A nonmoving party must also “identify with 

reasonable particularity the evidence that precludes summary judgment.” Keenan v. Allan, 91 

F.3d 1275, 1279 (9th Cir. 1996). If a nonmoving party fails to produce evidence that supports its 

claim or defense, courts enter summary judgment in favor of the movant. Celotex Corp., 477 U.S. 

at 323.

III. DISCUSSION

A. CPN and NPA Terms

The parties agree that the relevant contracts are the Convertible Promissory Notes and 

Note Purchase Agreements. See Dkt. No. 146-5 at 4; Dkt. No. 127 at 6. Neither party contends 

that adjudication of the breach of contract claims in the first and second causes of action requires 

resolution of any disputed issue of material fact. See Dkt. No. 133-4 at 1; Dkt. No. 114 at 9–14. 

The terms of Plaintiffs’ respective CPNs and NPAs are identical. CPNs; NPAs.

The CPNs state that:

Unless earlier converted into Conversion Shares pursuant to Section 

2.2 of that certain Note Purchase Agreement . . . the principal and 

accrued interest shall be due and payable by the Company on demand 

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by the Majority Note Holders at any time after the Maturity Date.

CPNs at 1. 

The CPNs additionally state that “[p]repayment of principal, together with accrued interest, 

may not be made without the written consent of the Majority Note Holders.” Id. § 1. The 

Maturity Date is defined in the NPAs as “the date that is thirty-six (36) months following the date 

of issuance” of each NPA. NPAs § 1(h). The Maturity Date for Plaintiffs’ notes was January 25, 

2015. Id.; CPNs at 1.

The NPAs also state that the “principal and unpaid accrued interest of each Note will be 

automatically converted into Conversion Shares upon the closing of the Next Equity Financing.” 

NPAs § 2.2(a); CPNs § 3 (stating that the notes “shall be convertible into Conversion Shares in 

accordance with the terms of Section 2.2.” of the NPAs). “Next Equity Financing” is defined as:

The next sale (or series of related sales) by the Company of its Equity 

Securities from which the Company receives gross proceeds of not 

less than $750,000 (excluding the aggregate amount of debt securities 

converted into Equity Securities upon conversion of the Notes 

pursuant to Section 2.2 below).

NPAs § 1(i).

“Equity Securities” is further defined as:

The Company’s Common Stock or Preferred Stock or any securities 

conferring the right to purchase the Company’s Common Stock or 

Preferred Stock or securities convertible into, or exchangeable for 

(with or without additional consideration), the Company’s Common 

Stock or Preferred Stock, except any security granted, issued and/or 

sold by the Company to any director, officer, employee or consultant 

of the Company in such capacity for the primary purpose of soliciting 

or retaining their services.

Id. § 1(f).

Conversion pursuant to Section 2.2 of the NPAs results in a price per share based on either 

(1) “the price paid per share for Equity Securities by the investors in the Next Equity Financing,” 

or (2) a price determined by dividing the “Valuation Cap” by “the number of shares of outstanding 

common stock of the Company immediately prior to the closing of the Next Equity Financing.” 

CPNs § 3.1. Plaintiffs’ notes list a “Valuation Cap” of $6,000,000, which would lower to 

$4,000,000 if both of the following were to occur:

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(a) The Company does not raise an aggregate of at least 

$1,000,000.00 principal amount of convertible promissory notes 

pursuant to the Purchase Agreement by March 30, 2012 

(including this Note and previously issued Notes), and

(b) The Company does not record gross revenue of $21,000.00 or 

more during any seven (7) consecutive day period prior to March 

15, 2012. 

Id. § 3.3. 

Plaintiffs’ notes were issued on January 25, 2012. CPNs at 1. Prior to the issuance of their 

notes, Plaintiffs and Plaintiffs’ attorney corresponded by email with Defendant Talarico regarding 

the terms governing conversion. The following is a summary of their email exchanges:

• On January 17, counsel for SLC emailed Plaintiffs several clarifications, including: 

“Prepayment of the notes - please note that Section 1 of the Notes says the 

Company cannot prepay the Note without the consent of the holders of a majority 

of the notes (measured by the total principal outstanding, aggregated together). 

This gives investors more protection than the typical clause which says the 

Company can prepay at any time.” Dkt. No. 144-2, Ex. 1. 

• On January 19, 2012, Plaintiffs’ attorney emailed Plaintiffs with an attachment of a 

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draft version of the Note with the highlighted text stating that “[p]repayment of 

principal, together with accrued interest, may not be made without the written 

consent of the Majority Note Holders.” Dkt. No. 144-4, Ex. E at PLTFS000112–

13.

B. Prepayment (First and Sixth Causes of Action)

Plaintiffs contend that the clause in the CPNs stating that “[p]repayment of principal, 

together with accrued interest, may not be made without the written consent of the Majority Note 

Holders” applies only to a repayment made prior to the Maturity Date. Dkt. No. 116 at 10–11. 

Plaintiffs contend that, because prepayment with written consent of the Majority Note Holders can 

only occur before the Maturity Date, repayment may not occur after the Maturity Date under the 

same procedure, and Defendants’ attempt to repay Plaintiffs therefore constituted breach of the 

CPNs. Id. Plaintiffs rely on a Black’s Law Dictionary definition of the term “prepayment” as 

“[p]ayment of debt obligation or expense before it is due.” Dkt. No. 134 at 7 (emphasis in original 

quotation). Plaintiffs then contend that the CPNs are “due” on the Maturity Date. Id. Plaintiffs 

do not, however, contend that CPNs must be paid on the Maturity Date simply because they are 

“due.” Rather, Plaintiffs contend that “[a]ll the Maturity Date does is set forth the time frame (i.e., 

temporal limitation) that SLC can prepay Plaintiffs back within the Lockup Period.” Id. at 8

(emphasis in original). 

Defendants agree that “prepayment” with the written consent of the Majority Note Holders 

may occur at any time before the notes are due, but contend that the notes are “due” whenever the 

Majority Note Holders demand the notes to be “due and payable,” as described in the CPNs. Dkt. 

No. 127 at 16 (citing CPNs at 1). 

In its June 23, 2017 Order, the Court did not dismiss Plaintiffs’ breach of contract claims 

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based on Plaintiffs’ reading of “prepay,” and noted that “making all inferences in Plaintiff’s favor 

as required at this stage, Plaintiffs’ interpretation is as plausible as Defendants’ competing 

interpretation that ‘prepayment’ refers to payment before conversion.” Dkt. No. 55 at 5. Plaintiffs 

have since offered no evidence that directly supports their proposed definition. Plaintiffs’ 

interpretation requires the Court to infer that: (1) CPNs are “due” at the Maturity Date, despite no 

requirement that they be paid at that time, and (2) CPNs are not “due” when demanded by the 

Majority Note Holders, despite the express language of the CPNs stating that the notes are “due 

and payable” at that time. Neither inference is supported by the plain language of the CPNs or by 

any of the extrinsic evidence presented. 

The Court finds that the language of the CPNs is unambiguous with respect to prepayment 

with the written consent of the Majority Note Holders. Prepayment may occur at any time before 

a note is due. The CPNs state that the notes are “due and payable” when demanded by the 

Majority Note Holders. CPNs at 1. Therefore, the prepayment procedure described in Section 1 

of the CPNs applies at any time prior to such a demand. Because it is undisputed that no demand 

of the Majority Note Holders was made prior to July 29, 2016, when Defendants attempted to 

repay Plaintiffs, the Court GRANTS Defendants’ motion for summary judgment as to Plaintiffs’ 

first cause of action for breach of contract and Plaintiffs’ sixth cause of action for tortious 

interference.

4

C. Next Equity Financing (Second, Third, and Fourth Causes of Action)

The NPAs define “Next Equity Financing” as the sale of at least $750,000 in “Equity 

Securities,” excluding the amount of converted “debt securities.” NPAs § 1(i). Plaintiffs contend 

that a Next Equity Financing occurred when SLC sold in CPNs in 2012. Dkt. No. 

116 at 10. Defendants contend that CPNs are “debt securities,” and therefore excluded from Next 

Equity Financing Calculations. Dkt. No. 127 at 11–12. 

Plaintiffs contend that, because the NPAs define “Equity Securities” as including “any 

 

4 Plaintiffs’ sixth claim for tortious interference alleges that “Talarico and Terrill decided to 

improperly twist the language of Section 1 of the CPN to give them a way to pay back Plaintiffs’ 

investment,” and relies on the same reading of Section 1 of the CPN addressed above. FAC ¶ 134.

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securities . . . convertible into, or exchangeable for (with or without additional consideration), the 

Company’s Common Stock or Preferred Stock,” NPAs § 1(f), and CPNs were intended to 

eventually convert into equity securities, see NPAs at 1 (“WHEREAS, the parties intend for the 

Company to issue in return for the Consideration one or more Notes convertible into shares of the 

Company’s Equity Securities”), all CPNs sold in 2012 were Equity Securities whose sales count 

toward the $750,000 Next Equity Financing threshold. 

Plaintiffs’ argument is not persuasive. The NPAs specifically exclude “the aggregate 

amount of debt securities converted into Equity Securities upon conversion of the Notes” in 

defining when the $750,000 threshold of sales of “Equity Securities” has been met so as to 

constitute a “Next Equity Financing.” NPAs § 1(i). This provision can only logically be read to 

make clear that sales of Notes (i.e. “debt securities”) are irrelevant to whether a Next Equity 

Financing has occurred: only once there is a sale of $750,000 of Equity Securities excluding the 

value of such debt securities has there been a Next Equity Financing. Plaintiffs’ argument that this 

provision “simply means that Notes converted prior to Plaintiffs’ or sold prior to Plaintiffs’ 

investments do not count toward the $750,000,” Dkt. No. 123 at 14, finds no support in the record, 

and does not make sense. Nothing in § 1(i) says, or even suggests, that the relevant dividing line 

is when these particular Plaintiffs (or any others) happened to invest. Instead, the point is that 

even converted Notes do not count toward the $750,000 threshold. And because even converted 

Notes do not count, Plaintiffs’ claim that sold, but unconverted, Notes do count must be rejected 

as irreconcilable with the plain language of the contract. 5 

Further, Plaintiffs’ proffered interpretation of Next Equity Financing would render several 

other clauses of the NPAs incomprehensible. For example, Section 2.2(a) of the NPAs states that 

the “principal and unpaid accrued interest of each Note will be automatically converted into 

Conversion Shares upon the closing of the Next Equity Financing.” NPAs § 2.2(a). The term 

 

5 Plaintiffs’ contention that the excluded debt securities are only those which have already been 

converted via a Next Equity Financing would nullify the provision excluding debt securities from 

the calculation. See Dkt. No. 134 at 11 n.4. No debt securities could possibly have been 

converted at the time they are sold under the terms of the NPAs, as any CPNs sold could only be 

converted pursuant to a subsequent Next Equity Financing or Corporate Transaction under Section 

2.2 of the NPAs. NPAs § 2.2. 

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“Conversion Shares” is defined in Section 1(c)(i) “with respect to a conversion pursuant to Section 

2.2(a),” to mean “the Equity Securities issued in the Next Equity Financing.” Id. § 1(c)(i). 

Plaintiffs’ interpretation, under which a Next Equity Financing caused by the sale of more than

$750,000 of CPNs would automatically convert Plaintiffs’ CPNs into different CPNs (the “Equity 

Securities issued in the Next Equity Financing”), is nonsensical. Because the NPAs do not 

provide any guidance to calculate the value of the resulting CPNs, Plaintiffs’ interpretation would 

turn a logical contract term into a superfluous provision that would be impossible to apply.

6

 

Governing principles of contract interpretation require the Court to reject Plaintiffs’ reading in 

favor of a reading that renders the contract capable of execution. See Edwards v. Arthur Andersen 

LLP, 44 Cal. 4th 937, 953–54 (2008) (“If a contract is capable of two constructions courts are 

bound to give such an interpretation as will make it lawful, operative, definite, reasonable and 

capable of being carried into effect.”). 

Because the NPAs unambiguously exclude CPNs from the Next Equity Financing 

calculation, there is no genuine factual dispute as to whether a Next Equity Financing occurred 

before SLC attempted to repay Plaintiffs’ respective CPNs. It did not. The Court therefore 

GRANTS Defendants’ motion for summary judgment as to Plaintiffs’ second cause of action for 

breach of contract, Plaintiffs’ third cause of action for fraudulent concealment, and Plaintiffs’ 

fourth cause of action for conversion.

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D. Amendment or Waiver

Plaintiffs further contend that, when Defendants obtained the vote of the Majority Note 

Holders to repay Plaintiffs’ principal and interest, that vote constituted an amendment in violation 

 

6 Defendants contend that CPNs resulting from such a conversion would be less valuable than the 

original CPNs because each of the CPNs sold after Plaintiffs’ had a higher valuation cap. Dkt. 

No. 127 at 12–13 (citing Dkt. No. 115-6, Ex. 9). Plaintiffs contend that if “Plaintiffs’ valuation 

cap changed . . . their $100,000 notes would have been adjusted upward . . . to keep the ‘new’

notes equivalent.” Dkt. No. 134 at 13. The parties’ divergent interpretations highlight the absence 

of any contract language addressing the valuation cap or other adjustment for notes converted in 

this manner. That the CPNs and NPAs do not contemplate the value of CPNs converted into 

different CPNs is further evidence that sale of CPNs was not meant to trigger a Next Equity 

Financing.

7 Plaintiffs’ third and fourth causes of action for fraudulent concealment and conversion, 

respectively, are based entirely on the same Next Equity Financing theory. 

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of Section 7.8 of the NPAs, which reads in relevant part: 

[A]ny term of this Agreement or the Notes may be amended and the 

observance of any term of this Agreement or the Notes may be waived 

(either generally or in a particular instance and either retroactively or 

prospectively), with the written consent of the Company and the 

Majority Note Holders; provided, however, that any such amendment, 

waiver or consent that materially and adversely treats one or more 

Lenders in a manner that is disproportionate to such treatment of all 

other Lenders . . . such amendment or waiver shall also require the 

written consent of the Lenders disproportionately treated.

NPAs § 7.8 (emphasis in original).

8

The agreement signed by the Majority Note Holders reads, in part: 

 Dkt. No. 115-6, Ex. 15 at SLC00002195. Plaintiffs contend that the 

agreement constituted an amendment that materially and adversely treated Plaintiffs Bradway and 

Vigdor disproportionately without their written consent. Dkt. No. 122-6 at 14–15.

Because Defendants had the right to repay Plaintiffs with the consent of a majority of 

noteholders, see Section IV(B) supra, the only portion of the Majority Note Holders’ signed 

agreement that even arguably could be claimed to be an amendment to the NPAs is the ability for 

Defendants to repay Plaintiffs’ notes “in part.” But Plaintiffs present no evidence, and do not even 

claim, that Defendants ever attempted to exercise or enforce this alleged amendment. Therefore,

even if the Court considers this late-raised theory, it finds based on the undisputed facts that the 

agreement signed by the Majority Note Holders at Defendants’ request did not constitute a breach 

of the NPAs.

E. Libel (Fifth Cause of Action)

Plaintiffs assert that Defendant Talarico made the following defamatory statements to 

investors:

 

8 The Court notes that Plaintiffs raise this theory of liability for the first time in their summary 

judgment briefing. See generally FAC; Dkt. Nos. 130-5, 130-6. 

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See FAC ¶¶ 122–123.

Plaintiffs contend that the last three statements are either provably false or imply false 

facts. Dkt. No. 122-6 at 24–25. Plaintiffs contend that each of the statements indicates or implies

that Plaintiffs breached the terms of the CPNs and/or NPAs. Id. Plaintiffs contend that the 

statements are provably false based on Talarico’s testimony that: 

 Id.; Dkt. No. 122-4, Ex. 2 at 248:4–13, 273:17–274:2, 

290:11–13. The Court finds that none of the statements are provably false, and none imply 

provably false facts. 

“The dispositive question for the court is whether a reasonable fact finder could conclude 

that the published statements imply a provably false factual assertion. The answer to that question 

is determined by applying the ‘totality of circumstances’ test—a review of the meaning of the 

language in context and its susceptibility to being proved true or false.” Moyer v. Amador Valley 

J. Union High Sch. Dist., 225 Cal. App. 3d 720, 724–25 (Ct. App. 1990). “The issue whether a 

communication was a statement of fact or opinion is a question of law to be decided by the court. 

In making the distinction, the courts have regarded as opinion any broad, unfocused and 

wholly subjective comment.” Copp v. Paxton, 45 Cal. App. 4th 829, 837 (1996) (internal 

quotation marks and citations omitted).

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 None of the allegedly defamatory statements is an actionable statement of fact. When 

viewed in the context of Plaintiffs’ negotiations with Defendants, each statement represents a 

nonactionable assertion of opinion 

. None of these statements became provably false 

based on anything in Talarico’s later testimony. Further, the identified statement about what to do 

if is not provably false because it 

was made within an exchange about a hypothetical scenario, and was not an assertion of fact. Dkt. 

No. 122-4 Ex. 14

 (emphasis added). The Court therefore GRANTS summary judgment for Defendants 

with respect to Plaintiff’s libel cause of action.

F. Breach of the Implied Covenant of Faith and Fair Dealing (Eighth Cause of 

Action)

Under California law, “[e]very contract imposes on each party a duty of good faith and fair 

dealing in each performance and in its enforcement.” Carson v. Mercury Ins. Co., 210 Cal. App. 

4th 409, 429 (Cal. Ct. App. 2012) (internal quotation marks omitted). The covenant exists to 

ensure that “each party [does] not [] do anything which will deprive the other parties thereto of the

benefits of the contract.” Harm v. Frasher, 181 Cal. App. 2d 405, 417 (Cal. Ct. App. 1960). A 

party cannot interfere with the performance of the contract and it must do “everything that the 

contract presupposes that he will do to accomplish its purpose.” Id. 

The implied covenant does not alter a party’s existing rights or duties under a contract. See 

Guz v. Bechtel Nat. Inc., 24 Cal. 4th 317, 327, 349–52 (Cal. 2000) (“[W]hile the implied covenant 

requires mutual fairness in applying a contract’s actual terms, it cannot substantively alter those 

terms.”). Nor may Plaintiffs use the implied covenant to merely duplicate a breach of contract 

claim. Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal. App. 3d 1371, 1401 (Cal. Ct. App. 

1990), as modified on denial of reh’g (Oct. 31, 2001) (“[A]s [the plaintiffs] have alleged nothing 

more than a duplicative claim for contract damages, the trial court was correct in sustaining a 

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United States District Court

Northern District of California

demurrer to this count without leave to amend.”); California Shoppers, Inc. v. Royal Globe Ins. 

Co., 175 Cal. App. 3d 1, 54 (Cal. Ct. App. 1985) (“[B]reach of the implied covenant of good faith 

and fair dealing involves something beyond breach of the contractual duty itself.”). Rather, the 

implied covenant supplements “the express contractual covenants, to prevent a contracting party 

from engaging in conduct which (while not technically transgressing the express covenants) 

frustrates the other party’s rights to the benefits of the contract.” Avidity Partners, LLC v. State, 

221 Cal. App. 4th 1180, 1204 (Cal. Ct. App. 2013) (internal quotation marks omitted).

Plaintiffs’ claim that SLC “violated the spirit of the contracts with Plaintiffs” by failing to 

convert Plaintiffs’ CPNs into shares. FAC ¶ 156. As the Court found in its previous Order 

dismissing Plaintiffs’ earlier-pled claim for breach of the Implied Covenant of Faith and Fair 

Dealing, Plaintiffs’ claim relies on the same acts—and seeks the same damages—as their claim for 

breach of contract. The Court therefore GRANTS Defendants’ motion for summary judgment as 

to Plaintiffs’ eighth cause of action for breach of the implied covenant of faith and fair dealing.9

IV. CONCLUSION

For the foregoing reasons, the Court GRANTS Defendants’ motion for summary judgment

as to all claims and DENIES Plaintiffs’ motion for partial summary judgment. The clerk shall 

vacate all further proceedings, enter judgment in favor of Defendants, and close the file.

IT IS SO ORDERED.

Dated: 

______________________________________

HAYWOOD S. GILLIAM, JR.

United States District Judge

 

9 Plaintiffs separately filed objections to evidence submitted in Defendants’ motion for summary 

judgment and opposition to Plaintiffs’ motion for summary judgment. Dkt. Nos. 125, 136. The 

Court DENIES those objections for failing to comply with Local Rule 7-3. L.R. 7-3(a) & 1-3. 

Plaintiffs additionally object to certain testimony of Brett Terrill presented in Defendants’ reply 

brief, contending that the testimony is irrelevant and speculative. Dkt. No. 141. The Court 

considers the testimony relevant to Mr. Terrill’s opinion regarding Plaintiffs, and DENIES 

Plaintiffs’ objection.

11/20/2018

Case 4:16-cv-05326-HSG Document 173 Filed 11/20/18 Page 13 of 13