Court Opinion

ID: 4236503
Source: CourtListenerOpinion
Date Created: 2018-01-12 21:00:28.393907+00
Date Added: 2024-06-11T14:43:15.513146
License: Public Domain

NOT FOR PUBLICATION                         FILED
                    UNITED STATES COURT OF APPEALS                        JAN 12 2018
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                             FOR THE NINTH CIRCUIT

HANI MAIM SAEED SHARAF,                         No.    16-55301

                Plaintiff-Appellant,            D.C. No.
                                                8:14-cv-00541-JVS-DFM
and

SALIM ELHALWANI,                                MEMORANDUM*

                Plaintiff,

 v.

STARBUZZ TOBACCO, INC., a California
Corporation,

                Defendant-Appellee.

                   Appeal from the United States District Court
                      for the Central District of California
                    James V. Selna, District Judge, Presiding

                     Argued and Submitted November 7, 2017
                              Pasadena, California

Before: BERZON and WATFORD, Circuit Judges, and PAYNE,** District Judge.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The Honorable Robert E. Payne, United States District Judge for the
Eastern District of Virginia, sitting by designation.
          Hani Sharaf appeals the district court’s grant of summary judgment in

 favor of Starbuzz Tobacco, Inc. (“Starbuzz”) on his breach of contract and fraud

 claims related to Starbuzz’s alleged failure to perform under a 2005 agreement

 (“the 2005 Agreement”). According to Sharaf, the 2005 Agreement required him1

 to set up an entire tobacco manufacturing process at a Starbuzz facility in the

 United States. In return, Sharaf was promised a substantial ownership interest.

 Sharaf argues that although he completed his obligations, Starbuzz did not

 provide the ownership interest,2 thereby committing the contractual breach at

 issue.

          It is difficult to discern the nature of Sharaf’s fraud claim. However,

 construed generously, it seems to be for fraud in the inducement to enter the 2005

 Agreement. No other fraud theory can be discerned.

          Because the District Court correctly held that both claims are barred by

 their respective statutes of limitations, we affirm.3

      1
        The 2005 Agreement called for both Hani Sharaf and his uncle, Bassam
Sharaf, to perform duties related to setting up a tobacco manufacturing plant and
process for Starbuzz in the United States. Bassam is not a party to this suit. For
simplicity, however, we refer simply to “Sharaf’s” duties under the Agreement.
      2
        The 2005 Agreement also called for Starbuzz to employ Sharaf, but that
aspect of the contract is not at issue.
      3
        As we affirm the grant of summary judgment, we do not consider the
damages issues raised by Starbuzz, which are implicated only if either of Sharaf’s
claims survives summary judgment.

                                             2                                      16-55301
      1.     Sharaf has not provided sufficient evidence to raise a triable issue of

fact as to whether his breach of contract claim accrued less than four years before

the date on which he filed suit, so as to satisfy the applicable statute of limitations.

See Cal. Civ. Proc. Code § 337(1). That claim arises from Starbuzz’s failure to

issue Sharaf his ownership interest after he completed his obligations under the

2005 Agreement. Thus, the relevant question is when Sharaf’s performance

triggered Starbuzz’s obligation to perform.

      The plain language of the 2005 Agreement at least required Sharaf to equip

Starbuzz’s U.S. factory with tobacco manufacturing equipment and set up the

production process there. See Cal. Civ. Code § 1638 (contract language governs

unless ambiguous). Although the full scope of Sharaf’s commitments under Article

Eight is not entirely clear, we may resolve that ambiguity based on the language of

the whole contract. See Lockwood v. Wolf Corp., 629 F.2d 603, 609-10 (9th Cir.

1980); see also Cal. Civ. Code § 1641 (“The whole of a contract is to be taken

together, so as to give effect to every part, . . . each clause helping to interpret the

other.”). Article Eight is a general provision indicating that Sharaf shall produce

tobacco, but Article Eleven describes his duties more narrowly, in terms of

equipping the factory and setting up the production process. Thus, Article Eight’s

broad statement is narrowed by the specific instructions of Article Eleven.

      The uncontroverted evidence shows that by early 2009, Sharaf had

                                            3                                     16-55301
sufficiently satisfied his obligations under Articles Eight and Eleven to put him on

inquiry notice of Starbuzz’s alleged breach at that time. See Jolly v. Eli Lilly &

Co., 44 Cal. 3d 1103, 1110–11 (1988). Sharaf himself stated that his efforts to set

up the equipment and produce tobacco at Starbuzz’s factory were successful then.4

He nonetheless maintains that he did not complete performance until early 2011,

when he finished setting up “processes related to product development, sales,

packaging, shipping, manufacturing staff training and supervision, and accounting

of production”—tasks that he contends are contemplated by Article Eleven. But

we need not credit interpretations to which the plain language of the contract is not

“reasonably susceptible.” Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Argonaut

Ins. Co., 701 F.2d 95, 96-97 (9th Cir. 1983). Nothing in Article Eleven or the rest

of the 2005 Agreement supports Sharaf’s reading, and his broad construction of

the phrase “whatever else is required in the production process” to include matters

not directly involving production is inconsistent with the narrow meaning of the

enumerated items immediately preceding that phrase in Article Eleven. See Yates

      4
        We note that even if Article Eleven does not narrow Article Eight, we
would still affirm summary judgment for Starbuzz on an alternative ground. There
is no record evidence that Sharaf ever produced commercial tobacco in the United
States. Although Sharaf states in his declaration that his “efforts to . . . produce
Mu’assal tobacco” in the United States were successful, that statement does not
contradict Starbuzz’s and Bassam Sharaf’s assertions that Mu’assal tobacco was
produced, but that it was unfit for use and unsalable. As Sharaf cannot show full
performance if Article Eight is read in isolation, he never became entitled under
the Agreement to an ownership interest on that reading.

                                          4                                    16-55301
v. United States, 135 S. Ct. 1074, 1086 (2015). Sharaf’s explanation of Article

Eleven’s scope is thus unreasonable. His other arguments about the effect of

Articles Twelve and Thirteen are equally unavailing, and in any event, are

inconsistent with the delegation of certain responsibilities to Starbuzz alone in

Article Nine.

      For these reasons, we affirm the district court’s grant of summary judgment

in Starbuzz’s favor on Sharaf’s breach of contract claim because the claim accrued

in or around early 2009 and Sharaf did not file suit until April 8, 2014.

      2.     Having affirmed the district court’s grant of summary judgment on

the breach of contract claim on statute of limitations grounds, we do not address

whether the district court erred in concluding that the 2005 Agreement was

impliedly rescinded by the parties’ subsequent conduct. See Hardie v. Nat’l

Collegiate Athletic Ass’n, 876 F.3d 312, 318 (9th Cir. 2017) (“We . . . may affirm

on any basis supported by the record.”) (internal quotations omitted).

      3.     Sharaf has similarly failed to show a genuine dispute of fact about

whether he discovered Starbuzz’s fraud less than three years before April 8, 2014.

See Cal. Civ. Proc. Code § 338(d). Under California law, a fraud claim does not

accrue until the plaintiff’s discovery of facts constituting the fraud. In this context,

“discover” can mean either actual discovery, or instead when there was “reason to

discover” the fraud—that is, when Sharaf “‘ha[d] reason at least to suspect a

                                           5                                     16-55301
factual basis for [the] elements’” of the claim. Fox v. Ethicon Endo-Surgery, Inc.,

35 Cal. 4th 797, 807 (2005) (quoting Norgart v. Upjohn Co., 21 Cal. 4th 383, 398

(1999)).

      The district court’s finding that Sharaf had reason to discover the fraud

when Starbuzz, in or around early 2009, failed to perform as promised in the 2005

Agreement was not clear error. Erlin v. United States, 364 F.3d 1127, 1130 (9th

Cir. 2004). Sharaf’s argument to the contrary rests entirely on his assertion that he

did not complete performance under the 2005 Agreement until early 2011. But, for

the reasons discussed above, that contention fails.

      The record further supports the district court’s conclusion that Sharaf was on

inquiry notice of Starbuzz’s alleged fraud in or around early 2009. At that time,

Starbuzz failed to provide Sharaf with his ownership interest after he completed

performance under the 2005 Agreement. Sharaf was thus “aware of facts which

would make a reasonably prudent person suspicious” that Starbuzz’s

representations that it would perform under the 2005 Agreement5 were fraudulent.

Lee v. Escrow Consultants, Inc., 210 Cal. App. 3d 915, 921 (Cal. Ct. App. 1989).

The only evidence that could create a dispute on this point is Sharaf’s subjective

contention that he was not suspicious of Starbuzz’s fraudulent representations

      5
        Sharaf’s fraud claim is based solely on Starbuzz’s statements to this effect
in October 2005, when the 2005 Agreement was executed. He does not argue that
Starbuzz made additional misrepresentations between 2009 and 2011 that might
have affected the statute of limitations.

                                          6                                    16-55301
before 2011, which is misplaced in this objective analysis. Moreover, there is no

evidence that Sharaf could not have discovered Starbuzz’s fraud in or around early

2009 by conducting a reasonable investigation, such as by asking Starbuzz about

the ownership interest or by making a written demand. See Fox, 35 Cal. 4th at 808

(“[A] plaintiff whose . . . claim would be barred without the benefit of the

discovery rule must specifically plead facts to show . . . the inability to have made

earlier discovery despite reasonable diligence.”) (internal quotations omitted).

      Based on these undisputed facts, Sharaf was on inquiry notice of Starbuzz’s

fraud in or around early 2009. Accordingly, we affirm the district court’s grant of

summary judgment in Starbuzz’s favor on Sharaf’s fraud claim, because Sharaf

did not bring that claim until April 8, 2014.

      AFFIRMED.

                                          7                                    16-55301