N O T FO R PUB L ICAT IO N UNITED STATES C OUR T OF APPEALS FOR THE NINTH C IR C UIT
SIM ULADOS SOFTWARE, LTD.,

Pla i ntiff-Appe lle e , v. PHOTON INFOTEC H PR IVATE, LTD.,

De fe nda n t-Appe l la

nt. No. 17-17179

D.C . No. 5:12-c v-04382-EJD
M EM O R ANDUM *

Appe a l from

the Unite d

Stat e s Distric t C ourt for the Northe rn Distric t of C a lifornia Edwa rd J. Da vila , Distric t Judge , Pre s iding Argue d a nd Subm itte d April 18, 2019 San Fran c isc o , C a lifornia B e fore : FER

NANDEZ, B EA, a

nd N.R
. SM ITH, C irc uit Judge s. This c a se arise s from

a suit by Sim u la d os Softwa

re , Ltd. (Sim

u la dos) a ga inst Photon Infote c h Private , Ltd. (Photon) alle g ing fra ud a nd bre a c h of c ontra c t. A jury found Photon lia

ble on both c la im s . The distric t c ourt e nte re d judgm e n t, a fte r whic h Photon m a de m otions under Fe de ra l R ule s of C ivil Proc e dure 50(b) a nd 59 

# FIL ED
M AY07 2019 M OLLY C. DW Y ER, CLERK U

. S. CO URT O F APPEALS

* This disposition is not a ppropria te for public at ion a

nd is not pre c e de nt e xc e pt a s provide d

by Ninth C irc uit R

ule 36-3.for judgm e nt a s a m atte r of la

w (JM O L) and a

ne w tria l . In a supple m e nta l brie f, Sim ula dos c ha

nge d the orie s and “ e le c te d” to re sc ind the c ontra c t. The distric t
c ourt de nie d Photon’ s JM OL a n d ne w tria l m otions a

nd gra nte d re sc ission,
awarding $18,848 for the va lue of the c onside ration Sim ula dos pa id, plus $309,674 in “ c onse que ntia l” dam a g e s a nd $183,556.91 in a

ttorne y s’ fe e s. Photon now a

ppe a ls four issue s, whic h we a ddre s s he re . 1 1. Photon a

ppe a ls the de nia l of the R ule 50(b) m otions for judgme nt a s a
m atte r of la

w on: (A) thejury ’ s ve rdic t on fra u d ; a nd (B ) the jury ’ s ve rdic t on bre a c h of c ontra c t. On de novo re vie w, we ta ke the e vide nc e in the light m ost favora ble to the jury ’ s ve rdic t; we are powe rle ss to m ake any c re dibility de te rm i nations or we i gh the e vide nc e , a nd we m ust a ffirm unle ss the only
re a s ona ble c onc lusion is c ontra

ry to tha t of the jury
. E

state of Diaz v . C

ity of Anahe im , 840 F.3d 592, 604 (9th C ir. 2016). W e a ffirm

the distric t c ourt’ s de nia l of Photon’ s re ne we d m otion for judgm e nt a s a

m atte r of la

w on Sim ula dos’ s fra

ud c la im
. R e c o rd e vide nc e , ta ke n in the light m ost fa

vora ble to the jury ’ s ve rdic t, shows: (1) Photon m a de

1 W e have jurisdic tion unde r 28 U.S.C . § 1291. W e a p ply C a lifornia la

w to this dive rsity

a c tion be c a

use the pa rtie s c ontra c t

ua lly a gre e d to a

pply C a lifornia la w to dispute s a

rising from

the ir c ontra c t, a

nd a bse nt c irc um sta

nc e s not he re pre s e nt, we norm a lly

honor thepa

rtie s’ c ontra c tua l c h oic e of la w . 2re pre se ntations a bout thea ppropria te ne ss of the RE ALba sic pla tform for the proje c t a n d Photon’ s e xpe rtise in c re ating there que ste d produc t s; (2) the se
re pre se ntations we re fa lse ; (3) Photon m a de the s e re pre se ntat ions with knowle dge of the ir fa lsity

or with re c kle s s disre ga

rd of the ir truth; (4) Photon inte nde d to induc e re lia

nc e (i.e
. , to induc e Sim

ula dos to sign the

c o ntra c t); (5) Sim

ula dos’ s
re lia nc e on Photon wa s justifia ble ; and (6) Photon suffe re d re sulting da m a ge . Se e Allianc e Mortg. C

o. v . Rothw e ll , 900 P.2d 601, 608 (C a l. 1995) (listing e le m e nts for fraud). The sta

nda rd of re vie w pre c lude s us from c onside ring e v ide nc e in the
re c o rd favora

ble to Photon tha

t the jury wa s not re q

uire d to be lie ve . W

allac e v . C ity of San Die

go , 479 F.3d 616, 624 (9th C i r. 2007). 2. W e a ffirm

the distric t c ourt’ s de nia l of Photon’ s re ne we d m otion for judgm e nt a s a

m atte r of la

w on Sim ula dos’ s bre a c h of c ontra c t c la im
. R e c ord
e vide nc e , ta

ke n in thelight m ost fa

vora ble to the jury ’ s ve rdic t, re ve a ls tha t Sim ula dos still had

not re c e ive d the prom ise d we b a pplic ation m onths a fte r the
c om ple t ion da t e . Expe rt te stim ony

a lso indic ate d

the softwa

re provide d re pe ate dly
c ra s he d. 2

2 The jury wa s not re quire d to be lie ve Photon’ s a rgum e n t re ga

rding the c re d ibility

of Sim ula dos’ s e xpe rt. 33. At the tim e the distric t c ourt a m e nde d the judgm e nt, Photon ha d file d its JM OL a

nd ne w tria l m otions re ga rding: (1) whe the r Sim

ula d os c ould re c ove r dam a ge s for fra

ud (i.e ., whe the r the fra

ud c la im wa s suffic ie ntly

inde pe nde nt of the
c ontra c t to a l l ow re c ove ry unde r C a lifornia

la w); a nd (2) whe the r a

provision in the
c ontra c t lim iting da

m a g e s a p plie d to Sim

ula dos’ s fra

ud c la im . R athe r tha

n de c ide the s e issue s, the distric t c ourt gra nte d Sim ula dos’ s re q

ue st to re sc ind the c ontra c t. W e re ve rse an d va c at e the orde r granting re sc i ssion. To make re sc ission of the c ontra c t e ffe c t ive , C a lifornia la w re quire d

Sim ula dos to provetwo e le m e nts: (1) the c ontra c t wa s obta ine d through fra u d; a nd (2) Sim

ula dos ga ve Photon notic e that it wa s re sc i nding thec ontra c t “prom p t ly upon disc ove ring thefa c ts” unde rly ing Photon’ s a lle ge d fra ud. Se e C a l. C iv. C ode §§ 1689(b)(1), 1691. Sim ula dos fa ile d to m e e t

the notic e re quire m e n t, be c a use it ne ve r ple a de d or othe rwise pursue d re sc ission until a post-ve rdic t, c ourt-orde re d supple m e nta l brie f. Se e C itic o rp Re al Estate

, Inc

. v . Smith , 155 F.3d 1097, 1103–04 (9th C i r. 1998); Doc tor v . Lak

e ridge C onstr. C o ., 60 C a l. R

ptr. 824, 828 (C t. App. 1967). 4. Photon a

rgue s tha t, e ve n if it we re not e ntitle d to judgme n t a s a m atte r of la w on the c ontra c t c la im , the pa ne l should re d

uc e the jury ’ s a

ward pursua

nt to the c ontra c tua l lim i tation on da m a ge s. W e a g re e tha

t the re is a

n $18,848 c a

p on Sim ula dos’ s re c ove ry

for bre a c h of c ontra c t. It is undispute d tha t Sim ula dos pa id
4Photon $18,848, a nd the c ontra c tua l provision lim its da m a ge s to theam ount tha

t Sim ula dos pa id on thec ontra c t. This c o n tra c tua l lim ita tion is e n forc e a

ble with
re spe c t to Sim

ula d os’ s bre a c h of c ontra c t c la im , be c a u se it wa s ba

rga ine d-for by pa rtie s of e qua l ba

rga ining powe r. S

e e Food Safe ty N

e t Se rv s. v . Ec o Safe

Sy s. USA, Inc ., 147 C a l. R

ptr. 3d 634, 642 (C t. App. 2012) (“W ith re spe c t to c la i m s for bre a c h of c ontra c t, limi tation of lia bility c la u se s a re e nforc e a

ble unle ss the y

are
unc onsc i ona

b le , tha t is, theim

prope r re sult of une qua l ba rga ining powe r or
c ontra ry to publicpolic y .” ). At ora l a rgum e nt, Sim

ula dos’ s c ounse l c onc e de d tha t the e vide n c e shows tha

t at le a st som e of the sa

m ple produc ts we re de live re d, so Haw aiian Te le

phone C o. v . Mic roform Data Sy

ste ms, Inc

. , is ina

pplic a ble . 829 F.2d 919, 925 (9th C ir. 1987) (“ In our c a se , no produc t wa s de live re d.” ). Ea c h pa rty will be ar its own c o sts on a ppe a l. AFFIRM E D in par t , RE V E RSE D in par t , VA CAT E D, a nd RE M A NDE D for furthe r proc e e dings c onsiste nt with this de c ision.

5Simulados Software, Ltd. v. Photon Infotech , No. 17

- 17179 BEA , Circuit Judge, concurring: I concur in the memorandum disposition , but I write separately to emphasize two points. First, as to the rescission issue, I would reverse the district court’s grant of rescission to Simulados based on California Civil Code § 1693, in addition to §§ 1689(b), 1691. Under California Civil Code § 1691, a party seeking rescission must, “promptly upon discovering the facts which entitle him to rescind,” give notice to the other party and return everything of value that he has received from the other party under the contract . But § 1691 is “[s]ubject to Section 1693,” which states that where “reli ef based upon rescission is claimed in an action or proceeding,” as it was here (though in a supplemental brief on a post

- trial motion) , “such relief shall not be denied because of delay in giving notice of rescission unless such delay has been substantial ly prejudicial to the other party.” Id. § 1693. Simulados sought to rescind its contract with Photon in a post

- trial supplemental brief , after choosing to affirm the contract from its filing of the complaint, throughout discovery and trial
. That decis ion was “substantially prejudicial” to Photon because Simulados changed its tune after causing Photon to defend Simulados’s breach of contract claim through trial, which spanned more than three years of litigation. S ee Citicorp Real Estate, Inc. v. Smith , 155 F.3d 1097, 1104 

# FILED

MAY 7 2019 MOLLY C. DWYER, CLER K

U.S. COURT OF APPEAL S2 (9th Cir. 1998) (“As a result of Defendants’ delay in giving notice of an intent to rescind, Citicorp suffered substantial prejudice

— by weathering several months of arbitration and nearly two years of litigation.”). Second, I would include an instruction to the district court on remand that it ought to consider whether its award for $309,674 to Simulados based on the jury’s fraud verdict comprising “lost profits” and “out

- of

- pocket expenses” overlaps with its separate award of $18,84 8 to Simulados for the value of the consideration it paid on the contract. If so, this constitutes impermissible double recovery. See Tavaglione v. Billings , 847 P.2d 574, 580 (Cal. 1993) (in bank) (“Double or duplicative recovery for the same items of d amage amounts to overcompensation and is therefore prohibited.”).