Court Opinion

ID: 1036358
Source: CourtListenerOpinion
Date Created: 2013-08-02 20:13:42.571876+00
Date Added: 2024-06-11T15:38:24.653430
License: Public Domain

FILED
                           NOT FOR PUBLICATION                             AUG 02 2013

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

VECTREN COMMUNICATIONS                           No. 11-15992
SERVICES, INC., an Indiana corporation,
                                                 D.C. No. 3:08-cv-03137-SI
              Plaintiff - Appellant,

  v.                                             MEMORANDUM*

CITY OF ALAMEDA, acting by and
through Alameda Power & Telecom,

              Defendant - Appellee.

VECTREN COMMUNICATIONS                           No. 11-16003
SERVICES, INC., an Indiana corporation,
                                                 D.C. No. 3:08-cv-03137-SI
              Plaintiff - Appellee,

  v.

CITY OF ALAMEDA, acting by and
through Alameda Power & Telecom,

              Defendant - Appellant.

                    Appeal from the United States District Court
                      for the Northern District of California

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
                       Susan Illston, District Judge, Presiding

                       Argued and Submitted January 18, 2013
                             San Francisco, California

Before: WALLACE, FARRIS, and BYBEE, Circuit Judges.

      Plaintiff Vectren Communications Services, Inc. (Vectren) appeals from a

judgment of the district court in favor of the City of Alameda (City) involving

contract claims governed by California law. We have jurisdiction pursuant to 28

U.S.C. § 1291, and we affirm in part, reverse in part, and remand.

      The jury found in favor of Vectren on its claims that the City had breached

the contract by failing to offer voice service (voice claim), by selling the

telecommunications system (sale claim), and by using improper accounting

methods (accounting claim). However, the jury further found that the sale claim

was barred by Vectren’s failure to comply with a statutory one-year notice

requirement, see Cal. Gov’t Code § 911.2(a), and that Vectren had waived the

claim. The jury also found that Vectren’s failure to comply with the one-year

notice requirement barred the voice claim.

      1. The district court’s application of the one-year notice requirement was

based on its holding that the California Government Claims Act (Act) applies to

Vectren’s claims against the City. We agree with the district court that the Act

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applies here. Under Arntz Builders v. City of Berkeley, where a contract sets out its

own procedure for notifying a city of claims against it, that process governs

exclusively unless the contract expressly “requires the presentation of a statutory

claim [under the Act] as well.” 82 Cal. Rptr. 3d 605, 617 (Ct. App. 2008). But the

alleged contractual claims procedure here is nothing like the detailed claims

procedure in Arntz, see id. at 607–08; in fact, it is not a claims procedure at all.

Rather, it is merely a 30-day cure period, triggered by written notice, built into one

prong of the definition of what constitutes an “Event of Default.” Under many of

the other prongs of the “Event of Default” definition, there is no notice requirement

or cure period at all. It is only once there is an Event of Default—which

sometimes requires notice and a cure period, and sometimes does not—that

Vectren has a claim. At that point, the contract defers to background law,

including the Act—providing that Vectren may “take whatever action at law or in

equity” is necessary to resolve the Event of the Default—rather than setting forth a

claims procedure. This reading of the contract is corroborated by the provision

stating that, in order to exercise a remedy under the contract, Vectren only needs to

give notice as required by the contract or by law.

      Arntz specifically rejected comparing the relative comprehensiveness of

claims procedures to determine whether the Act applies, but Arntz does not dictate

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that a contract that does not contain a claims procedure at all supplants the Act’s

default procedures.

       Given that the Act applies, and that Vectren’s counsel conceded at oral

argument that the jury’s finding that the voice claim was defeated by the notice

defense could only be overcome if we were to reverse the district court’s

determination that the Act’s default procedures were applicable, we affirm the

judgment against Vectren on the voice claim.

      2. With regard to the sale claim, the district court erred in denying Vectren’s

Rule 50(b) motion on the City’s waiver and notice defenses. Although the City

provided evidence that Vectren knew about the City’s desire to sell and provided

the City some assistance, those facts could not amount to clear and convincing

evidence that Vectren knowingly intended to waive its right to prohibit a sale, see

City of Ukiah v. Fones, 410 P.2d 369, 370-71 (Cal. 1966) (in bank), because it was

undisputed that Vectren repeatedly notified the City that a sale without Vectren’s

consent was unauthorized. Accordingly, the jury’s determination that Vectren

waived its rights on the sale claim was not supported by substantial evidence, and

the district court should have granted Vectren’s motion as to the waiver defense.

See Omega Envtl., Inc. v. Gilbarco, Inc., 127 F.3d 1157, 1161 (9th Cir. 1997).

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        As to the notice defense, “whether the breach is anticipatory or not, when

there are ongoing contractual obligations the plaintiff may elect to rely on the

contract despite a breach,” and a claim is not deemed to have accrued until “the

plaintiff has elected to treat the breach as terminating the contract.” Romano v.

Rockwell Int’l, Inc., 926 P.2d 1114, 1120 (Cal. 1996). Here, there were ongoing

contractual obligations, and the record does not support a conclusion that Vectren

treated the City’s sale without consent as a breach prior to August 29, 2006, the

date by which the jury had to find the claim had accrued in order for the notice

defense to be successful. Substantial evidence thus did not support the application

of the notice defense to defeat the sale claim, and the district court should have

granted Vectren’s motion as to that defense as well. See Omega, 127 F.3d at 1161.

Because the district court should have granted Vectren’s Rule 50(b) motion with

respect to both of the City’s defenses to the sale claim, we reverse the jury’s

verdict on the sale claim and remand that claim for further proceedings on damages

only.

        3. With regard to the City’s claim on cross-appeal that Vectren failed to

adequately present its accounting claim prior to litigation as required by the Act,

the district court erred in not deciding this claim as a matter of law in the City’s

favor because Vectren failed to adequately present the claim before litigation.

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Under the Act, a party may adequately present a claim before litigation either by

substantially complying with the requirements set out in section 910 of the Act,

Cal. Gov’t Code § 910, or by making a “claim as presented.” See City of Stockton

v. Super. Ct., 171 P.3d 20, 29–30 & n.11 (Cal. 2007); Alliance Fin. v. City & Cnty.

of S.F., 75 Cal. Rptr. 2d 341, 345–46 (Ct. App. 1998); see also Cal Gov’t Code §

945.4. Here, Vectren did not adequately present its accounting claim in either

manner. Though Vectren requested accounting figures and documents and raised

questions related to accounting prior to litigation, these requests were made in the

context of Vectren questioning the City’s operation of the telecommunications

system, not in the context of any discussion of the propriety of the accounting

methods used in calculating telecommunications system financial figures. These

requests did not “give[ ] adequate information” such that a “reasonable

investigation of [the] claim” would encompass the accounting claim raised by

Vectren during the litigation. Stockett v. Ass’n of Cal. Water Agencies Joint

Powers Ins. Auth., 99 P.3d 500, 505 (Cal. 2004). Because we hold that the

accounting claim was not adequately presented and should have been rejected as a

matter of law, we need not address the City’s argument regarding the applicability

of GAAP to “Net Series 2002A Revenues.”

                                          6
      In summary, we (1) affirm the judgment against Vectren on the voice claim;

(2) reverse the jury’s verdict against Vectren on the sale claim and remand that

claim for further proceedings on damages only; and (3) reverse the jury’s verdict

against the City on the accounting claim and remand that claim for entry of

judgment as a matter of law in the City’s favor.

      Each party shall bear its own costs on appeal.

      AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

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                                                                              FILED
Vectren Communications Service v. City of Alameda, 11-15992/11-16003AUG 02 2013

WALLACE, Senior Circuit Judge, concurring in part and dissenting inMOLLY C. DWYER, CLERK
                                                                    part:
                                                                     U.S. COURT OF APPEALS

      I concur with the majority’s holding that the district court erred in denying

Vectren’s Rule 50(b) motion on the City’s waiver and notice defenses to the sale

claim. However, I disagree that the Government Claims Act (Act) applies to

Vectren’s voice and accounting claims.

      The majority holds that because the claims process in Section 9 of the

contract between Vectren and the City is not as detailed or comprehensive as the

contractual process in Arntz, and because Section 9 contemplates that the notice

requirements imposed by “other law” apply to the parties, we should not hold that

the Act is supplanted by the contract. I disagree with both points.

      Arntz did not actually analyze whether the parties’ contract contained a

claims procedure—it simply proceeded as though that question was undisputed.

Thus, Arntz did not specify what the bare minimum requirements are for a

contractual claims process that would trigger that rule, nor did it state that the

contract at issue there was the standard by which to judge. While certainly a claims

process that was similar to Arntz would qualify, we cannot use that case to reject a

contractual process simply because it is dissimilar.

      While Arntz did not specify standards for a sufficient contractual claims

                                           1
procedure, it did make clear that it would not adopt a rule that required a

contractual claims process to be as comprehensive as the Act:

      As one treatise notes, public agencies are allowed to establish a
      different claims procedure by contract, and “[s]ometimes the
      provisions of a construction contract amount to a claims procedure
      that takes the place of the claims statute.” What the treatise does not
      explain is under what circumstances it does so. The statement seems
      to infer a test of “relative comprehensiveness” to determine whether
      any given contractual claims procedure is broad enough to supplant
      the statutory claims requirement. But such a test would be
      unworkable. What appears comprehensive to one party may seem
      only preliminary to the other. The parties to a public works contract,
      or any other public contract, should be able to determine from the
      contract what steps are required to complete a claims process prior to
      filing an action.

166 Cal. App. 4th at 291-92 (citation omitted) (emphasis added). Clearly then,

Arntz’s focus was not so much on the breadth and depth of a contractual claims

process as it was on whether the non-government party could understand its

obligations based on the contract’s plain language. It follows that a contract that

instructs that party to provide notice to the government prior to filing an action,

whether the contractual provisions doing so are “standard” or otherwise, must

clarify that the Act also applies.

      The contract between Vectren and the City informed Vectren what steps

were necessary prior to filing an action, including a period of notice but did not

state that the Act applied. To apply the Act would therefore be contrary to Arntz.

                                           2
       Subsection 9.1(b) of the contract states that the City’s failure to perform any

part of the contract is a default if it continues for thirty days after the City receives

written notice of the failure. If an event of default occurs, Section 9.2 gives

Vectren the right “at its option and without further demand or notice” to “take

whatever action at law or in equity may appear necessary . . . or enforce

performance and observance of any obligation, agreement or covenant.” In sum,

Vectren must present its claim to the City and the City has 30 days to cure. If the

City does not cure, Vectren has the right to sue without giving further notice.

       It is true that the contract lists several other events of default in Section 9.1

and does not impose a notice requirement on Vectren for those events. However,

again, the test for whether the Act applies is not whether a contractual claims

procedure is comprehensive, but whether, where a contract contains any claims

process, the government party has made clear that the Act still applies. The fact

that the contractual claims process here applied only to failure by the city “to

observe and perform any covenant, condition or agreement” under the contract,

and not to other more specific events of default (i.e. if the City files a bankruptcy

petition) does not therefore have any bearing on whether the Act applies. In fact, it

is in precisely this kind of situation that the Arntz rule should apply. The contract

makes clear that the parties intended to have a notice requirement for some

                                            3
breaches and not for others—it does not make clear that the Act also applies.

      Nor does the fact that the contract is structured so that an “event of default”

only occurs once a breach has gone uncured for thirty days mean that there is no

“claim,” and therefore no claims process, until that occurs. The Act helps

municipalities become aware of potential suits and gives them time to resolve

disputes by other means. In the same way, the contract here requires that the City

receive notice of breaches and affords a period of time in which to correct them. If

no correction is forthcoming, Vectren is permitted to sue without further notice. To

say that this process is not a “claims procedure” merely because the notice and

response period is styled as a necessary prerequisite to an event of default, rather

than something that kicks in after a “claim” appears, is both unduly narrow and

contrary to the parties’ clear intent. Why would the contract give Vectren the right

to sue without further notice if, in reality, Vectren was required to give a second

notice and wait longer before suing?

      The majority’s answer is that three words in Section 9.3 can be read to allow

application of the Act, with all of its additional notice requirements, to apply.

Section 9.3 of the contract states: “In order to entitle [Vectren] to exercise any

remedy reserved to it in this Article IX it shall not be necessary to give any notice,

other than such notice as may be required in this Article IX or by law.” The

                                           4
majority reasons that Act notice is “required by law,” and thus the City must not

have meant to waive Act notice. But reading “or by law” this way would require

additional notice any time the City triggered Section 9.1(b) by breaching “any

covenant, condition or agreement” under the contract. This would, in turn, render

entirely superfluous the language of 9.2 allowing Vectren to sue without any other

“demand or notice,” a result we must avoid. Carson v. Mercury Ins. Co., 210 Cal.

App. 4th 409, 420 (Cal. Ct. App. 2012) (“‘An interpretation which gives effect to

all provisions of the contract is preferred to one which renders part of the writing

superfluous, useless or inexplicable,’” quoting 11 Williston on Contracts (4th

ed.2012) § 32:5). The more sensible reading is that the “or by law” language does

not include the Act because the Act is only a requirement by law where there is not

a contractual claims procedure.

      Furthermore, Arntz specifically precludes holding that the “notice required . .

. by law” language incorporates the Act.

      It is no great burden for public entities to include, in any contract that
      contains a contractual claims procedure, a single sentence stating
      clearly that a statutory claim must also be presented prior to the filing
      of an action.

166 Cal. App. 4h at 292. The “or by law” language, which could just as easily be

read to mean general service of process as notice under the Act, is certainly not a

                                           5
clear statement that all of the Act claims process applies. To allow application of

the Act based on such ambiguous language would be to do exactly what Arntz

forbids.

      I therefore respectfully dissent.

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