Low v. Omni Life Science Inc

IN THE UNTIED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF OKLAHOMA

WARREN G. LOW and )

THOMAS K. TKACH, )

)

Plaintiffs, )

)

v. ) Case No. CIV-18-305-SLP

)

OMNI LIFE SCIENCE, INC. and )

GEORGE CIPOLLETTI, )

)

Defendants. )

O R D E R

Before the Court is Defendants’ Motion for Summary Judgment [Doc. No. 93].

Plaintiffs have responded [Doc. No. 102], and Defendants have replied [Doc. No. 115].1

Accordingly, the matter is fully briefed and ready for determination.2

I. Introduction

Plaintiffs are medical doctors who entered into identical Product Development and

Clinical Surgical Consulting Services Agreements with Defendant OMNI Life Science,

Inc. Defendant George Cipolletti was OMNI’s Chief Technology Officer. Pursuant to

their agreements, Plaintiffs were to provide consulting services to Defendant OMNI related

to knee and hip reconstruction and replacement devices, in exchange for royalty payments

based on a percentage of net sales of the devices. Plaintiffs claim Defendants failed to

1 Citations to the record reference the Court’s ECF pagination.

2 Plaintiffs were granted leave to file a surreply to address specific evidence raised in Defendants’

Reply, but Plaintiffs’ Surreply was stricken for failure to comply with the Court’s Order. See [Doc.

No. 128].

timely pay them royalties owed pursuant to the agreements, and that they made improper

deductions in calculating royalties owed.3 Plaintiffs also assert that Defendants misled

them regarding these payments. After the Order on Defendants’ Motion to Dismiss [Doc.

No. 23], Plaintiffs’ remaining claims are for breach of contract, fraud, negligent

misrepresentation, and an accounting.4

Defendants have moved for summary judgment on Plaintiffs’ remaining claims. See

[Doc. No. 93] at 6-8. Defendants principally contend that Plaintiffs failed to perform their

part of the contract by providing the consulting services for which they seek compensation,

or that they failed to document any consulting services, despite a contractual obligation to

do so. Defendants alternatively contend that payments to Plaintiffs for consulting services

they failed to provide would exceed the fair market value of the services and therefore

violate 42 U.S.C. § 1320a-7b(b), the federal Anti-Kickback Statute. For similar reasons,

Defendants also seek dismissal of Plaintiffs’ claims for fraud, negligent misrepresentation,

and an accounting, in addition to the claims against Defendant George Cipolletti

individually.

3 The Court generally discusses Defendants together because Plaintiffs do not distinguish which

claims are asserted against which Defendants. See Am. Compl. [Doc. No. 9] at 6-20.

4 Defendants asserted counterclaims for breach of contract, declaratory judgment, and return of

overpayment/quasi-contract/unjust enrichment. See [Doc. No. 62]. Defendants assert that they

erroneously paid Plaintiffs for products that fell outside the scope of the Agreements, and that they

discovered Plaintiffs breached the Agreements by failing to provide the requisite consulting

services and failing to document those services as required. Defendants also seek a declaratory

judgment that the Agreements are terminated, and that they paid Plaintiffs in excess of what was

owed under the Agreements. Those claims are not presently at issue.

II. Governing Standard

A party is entitled to summary judgment if 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 only material if it “might affect the outcome of the suit under the governing

law.” Birch v. Polaris Indus., Inc., 812 F.3d 1238, 1251 (10th Cir. 2015) (quoting

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). The party seeking summary

judgment “shoulder[s] the initial burden of showing that there is an absence of evidence to

support the nonmoving party’s case.” GeoMetWatch Corp. v. Behunin, 38 F.4th 1183,

1200 (10th Cir. 2022) (cleaned up). If the movant meets this burden, the nonmovant must

then “identify specific facts that show the existence of a genuine issue of material fact.”

Id. (quoting Clinger v. New Mexico Highlands Univ., Bd. of Regents, 215 F.3d 1162, 1165

(10th Cir. 2000). The Court “view[s] the factual record and draw[s] any reasonable

inferences therefrom in the light most favorable to the nonmoving party.” Adams v. Am.

Guarantee & Liab. Ins. Co., 233 F.3d 1242, 1246 (10th Cir. 2000).

III. Undisputed Material Facts5

Plaintiffs, Drs. Low and Tkach, signed identical Product Development and

Clinical/Surgical Consulting Services Agreements with Defendant OMNI effective

January 1, 2006 and January 1, 2007, respectively (the “Agreements”). The initial

“recitals” of the Agreements stated that Plaintiffs sought to “perform certain Consulting

Services (defined below) and provide expertise, ideas, and know-how for the development

5 The Court includes facts that are material, supported by the summary judgment record, and not

genuinely disputed. See Fed. R. Civ. P. 56(c).

of new and/or improved medical devices and related instrumentation for [Defendant].”

[Doc. Nos. 93-1, 93-2] at 2.6

Section 2 of the Agreements provides—under “Duties and Responsibilities of

[Plaintiffs]”—that Plaintiffs “agree[] to provide to OMNI the services set forth in Exhibit

1 of this Agreement.” Id. at 3 (emphasis in original). Specific “Consulting Services”

enumerated in Exhibit 1 include: (1) evaluation of device designs, related instruments, and

surgical techniques; (2) participation in research for development of the devices; (3)

preparing materials to support the use of the devices, such as surgical models, guidelines,

and protocols; (4) preparing publications regarding the devices and publishing written

surgical techniques in peer-reviewed journals; (5) participation in meetings, seminars, and

symposia to promote the technology and related surgical techniques; (6) training surgeons

to use the technology.7 [Doc. No. 93-1] at 12-13; [Doc. No. 93-2] at 11-12.

6 The Agreements also stated that Plaintiffs “wish[] to assign to [Defendant] . . . any and all know-

how, patent rights, and copyrights relating to such new and/or improved medical devices[.]” Id.

The parties dispute whether Plaintiffs owned and therefore could have assigned intellectual

property rights for the devices, but that dispute is immaterial: Plaintiffs make no legal argument

whatsoever regarding intellectual property rights. See [Doc. No. 102] at 14-34. They do not

contend assignment of intellectual property rights constitutes their performance under the

Agreements or that it excuses nonperformance of “Consulting Services.” See id. At most,

Plaintiffs imply in their factual discussion that assignment of intellectual property rights was

consideration for “consulting fees and royalties,” but they fail to connect that to any issue raised

by Defendant or explain why it excuses nonperformance of consulting services. See id. at 6, 14-

34. Even if they had, unlike the multiple provisions regarding consulting services, the intellectual

property provision is not expressly connected to the payment provisions in Exhibit 2 of the

Agreements, discussed below.

7 Plaintiffs deny “that they were required to provide consulting services without qualification and

a request from OMNI to do so,” as some of the enumerated services required them to “make best

efforts” or provide services “reasonably required.” [Doc. No. 102] at 7. But other enumerated

services do not contain such qualifying language. See, e.g., [Doc. No. 93-2] at 11, ¶ 1.1

(“Consultant shall assist OMNI with the evaluation of new medical devices”); see also id. at ¶

1.1.1 (containing no such qualifying language).

Under “Compensation,” the Agreements provide, in pertinent part: “[i]n

consideration for any Consulting Services performed by [Plaintiffs] during the term of th[e]

Agreement[s] and any other obligations and performances under th[e] Agreement[s],

[Defendant] shall pay [Plaintiffs] pursuant to the terms set forth in ‘Exhibit 2’ to the

Agreements.” [Doc. Nos. 93-1, 93-2] at 3 (emphasis added). Within Exhibit 2 itself, the

Agreements again state: “in consideration for the Consulting Services performed by

[Plaintiffs], [Defendant] shall compensate [Plaintiffs] on an annual basis” as set forth

therein. [Doc. No. 93-1] at 14; [Doc. No. 93-2] at 13.

Exhibit 2 contains all the payment provisions. First, under “Annual Payment for

Consulting Services,” the Agreements state:

2.1 In consideration for [Plaintiffs’] Consulting Services (as set forth in

Exhibit 1), OMNI shall compensate [Plaintiffs] according to the schedule

below. Payments will be based on actual services performed and

documented in accordance with this agreement.

2.2 Compensation Schedule

$146,958 to be paid by March 31, 2007. In lieu of this payment, the first 2

calls on 293,916 OMNI convertible notes will be satisfied.

$58,783.00 to be paid by October 1, 2007. In lieu of this payment, the 3rd

call on 293,916 OMNI convertible notes will be satisfied.

$44,259 to be paid by January 1, 2008

$125,000 to be paid by January 1, 2009

[Doc. No. 93-1] at 14; [Doc. No. 93-2] at 13.8

8 The parties devote little attention to the “Compensation Schedule” in section 2.2, and there is no

dispute regarding the payment amounts set forth under that provision. As explained below, see

Section IV(A), infra, Plaintiffs contend the references to “OMNI convertible notes” which are not

otherwise defined or mentioned in the Agreements warrants consideration of extrinsic evidence,

but the payments owed under this provision are not actually at issue: Plaintiffs seek only royalties.

Next, Section 2 of Exhibit 2 includes terms regarding royalty payments for the

“Apex Knee System and Apex Modular Knee System” (section 2.3); “Apex Modular Hip

System and Apex Modular K2 Hip System” (section 2.4); and the “Apex Interface Cup

System” (section 2.5). [Doc. No. 93-1] at 14-15; [Doc. No. 93-2] at 13-14. Those royalty

payment provisions provide for a two or three percent royalty from “Net Sales” of each

device. Id. Each provision states that “[r]oyalty payments will be paid within 60 days of

calendar’s year end analysis.”9 Id. These provisions further state that the “royalty will

continue during the life time of the product” and “[t]he royalty payment survives the

cancellation of this agreement.” Id.

Finally, at the bottom of Exhibit 2, and after the royalty provisions, section “3”

contains a documentation requirement:

For the protection of [Plaintiffs] and [Defendant] no payments will be made

until all appropriate documentation has been supplied by [Plaintiffs] to

[Defendant]. It is the responsibility of the department of Research and

Development for [Defendant] to provide direction on the type of

documentation necessary and to bring to the attention in advance of payment

schedule that there is a non-compliance issue with regard to the

documentation required.

[Doc. No. 93-1] at 15; [Doc. No. 93-2] at 14. As it pertains to documentation, the

Agreements also provide:

11.4 Consulting Fees and Expenses. In the event of the termination or

expiration of this Agreement, [Plaintiffs] shall, within thirty (30) days of the

termination date, provide [Defendant] with an invoice for any and all

Consulting Fees and expenses payable and due under this Agreement, but

9 The first provision, section 2.3, states that the “[r]oyalty payments will begin in year 2008 and

will be paid by 60 days of calendar’s year end analysis,” while the other provisions do not mention

payments beginning in 2008. See id. This does not make any material difference, but the Court

points this out to ensure the accuracy of the quoted provisions.

which have not been invoiced to or paid by [Defendant], which invoiced

Consulting Fees and expenses [Defendant] shall pay within thirty (30) days

after its receipt of such invoice. Any Consulting Fees and Expenses not so

invoiced shall be deemed to be irrevocably waived and forfeited by

Consultant.

[Doc. Nos. 93-1, 93-2] at 8.

The Agreements also contained a term provision, section 11.1, which provided that

they “commence[d] on the Effective Date and continue[d] for a period of three (3) years.”

[Doc. No. 93-1] at 8; [Doc. No. 93-2] at 7. There is no dispute Dr. Low’s Agreement

terminated on December 31, 2008, and Dr. Tkach’s Agreement terminated on December

31, 2009. See id.; see also [Doc. No. 102] at 8-9, 11, 19-20. Nevertheless, as explained

above, the royalty provisions in Exhibit 2 survived termination of the agreements.10

Although Plaintiffs argue they provided consulting services during the terms of the

Agreements, they do not actually point to any evidence showing they did. See Resp. [Doc.

No. 102] at 8-9, 11-14, 16-17. Plaintiffs provided an interrogatory response with fifty-nine

entries regarding consulting services they contend they performed, but the response does

not include any consulting services dated during the years the Agreements were in effect.

See [Doc. No. 93-5] at 10-12. Additionally, there are multiple “work activity reports” in

the record which list activities Plaintiffs performed, but all those documents involve actions

taken after termination Dr. Low’s Agreement on December 31, 2008 and after termination

of Dr. Tkach’s Agreement on December 31, 2009. See [Doc. No. 93-6] (listing services

by Dr. Low in August 2009); [Doc. No. 93-7] (listing services by Dr. Low in November

10 In the main body, the Agreements reiterate that the royalty provisions “survive any termination

or expiration of th[e] Agreement[s].” See [Doc. No. 93-1] at 9; [Doc. No. 93-2] at 8.

2009); [Doc. No. 93-8] (listing services by Dr. Tkach in 2011); [Doc. No. 93-9] (listing

services by Dr. Tkach in 2012); [Doc. No. 93-10] (listing services by Dr. Tkach in 2013);

[Doc. No. 93-11] (listing services by Dr. Tkach in 2016); [Doc. No. 93-12] (listing services

by Dr. Tkach in 2017); [Doc. No. 93-13] (listing services by Dr. Tkach in 2017).11

Plaintiffs testified that the only damages they are seeking are royalties they believe

should have been paid from 2014 to present. See [Doc. No. 93-3] at 23-24; [Doc. No. 93-

4] at 10.12 There is no dispute that Defendant paid Plaintiffs $858,479.00 each in royalties

from 2014 to 2018. See Mot. [Doc. No. 93] at 14; see also Resp. [Doc. No. 102] at 10.

However, Defendant’s executives met in 2010 to review Plaintiffs’ Agreements, at which

time Defendants decided to reform the method of calculating Plaintiffs’ royalties by

deducting costs of goods sold and other expenses, which reduced royalty payments. See

[Doc. No. 102-9] at 9-10. After that, Defendant’s General Counsel sent Plaintiffs a letter

stating Defendant was paying them royalties based on “net sales.” See [Doc. No. 102-10].

As relevant to preliminary consideration of extrinsic evidence under California law

applicable to the breach of contract claim, see Section IV(A), infra, the Court notes that

Plaintiffs had prior consulting agreements with Defendant’s predecessor, Apex Surgical,

LLC related to the one or more of the medical devices that are the subject of the

Agreements at issue. See [Doc. No. 102] at 11. Pursuant to those prior agreements,

11 Defendant includes additional facts regarding Plaintiffs’ alleged inability to describe consulting

services performed from 2014-2018, [Doc. No. 93] at 10-14, but those facts are immaterial because

Plaintiffs’ obligations to provide consulting services ended when the Agreements expired.

12 Dr. Tkach testified he is seeking royalties from 2014-2018, [Doc. No. 93-4] at 10, but the Court

references the broader timeframe discussed in Dr. Low’s deposition.

Plaintiffs provided initial design and consultation services and assigned any intellectual

property rights they had in exchange for royalties based on net sales of the specified

products. Id. at 11-12. The 2003 agreements between the parties included a “compensation

schedule” with specified annual dollar amounts, in addition to a provision for royalties

based on net sales for the life of the products. See [Doc. No. 102-2] at 2, 6.13 The Court

further addresses these agreements as relevant to the legal issues below.

IV. Discussion

A. Breach of Contract

The parties agree California contract law applies to Plaintiffs’ breach of contract

claim. See Union Standard Ins. Co. v. Hobbs Rental Co., 566 F.3d 950, 952 (10th Cir.

2009) (when the parties agree what State’s laws apply, the Court may “proceed from the

same assumption”). Under California law, “the elements of a cause of action for breach of

contract are (1) the existence of the contract, (2) plaintiff’s performance or excuse for

nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.”

Oasis W. Realty, LLC v. Goldman, 250 P.3d 1115, 1121 (Cal. 2011) (citing Reichert v.

General Ins. Co., 442 P.2d 377 (Cal. 1968)). Defendants primarily contend Plaintiffs’

claim fails on the second element because they are unable to show that they performed

consulting services, and they failed to document any consulting services as required under

the Agreements. Id. at 7, 16-22.

13 Plaintiff only references an agreement entered into by Dr. Low, but Defendant does not contend

Dr. Tkach did not have the same agreement. See Reply [Doc. No. 115].

Plaintiffs do not directly address the language in the Agreements regarding payment

under Exhibit 2, including royalties, in consideration for “Consulting Services performed

during the term of th[e] Agreement[s].” See [Doc. No. 102] at 14-20. Instead, Plaintiffs

contend: (1) the Agreements are ambiguous, and there is a question of fact as to their

intended meaning; or (2) the agreements unambiguously provide that Defendant owes

royalty payments in perpetuity, and the royalty payment provisions are not dependent on

consulting services performed or documented. See id. at 15-20. In support of the latter,

Plaintiffs point out that the royalty payment provisions survived termination of the

Agreements, while the provisions regarding consulting services and documentation of

consulting services did not. Id.

The Court agrees with Defendants that the royalty payment provisions are expressly

and unambiguously tied to consulting services performed during the terms of the

Agreements, and Plaintiffs have failed to show they performed. There is no dispute that

Plaintiffs’ only “Duties and Responsibilities” specified in the Agreements were to provide

the listed “Consulting Services.” Most importantly, the “Annual Payment for Consulting

Services” under Exhibit 2—which includes all the royalty provisions—was “[i]n

consideration for any Consulting Services performed by [Plaintiffs] during the term of

th[e] Agreement[s]. . .” As noted above, Exhibit 2 reiterates that Defendant would

compensate Plaintiffs annually “in consideration for the Consulting Services performed[.]”

Finally, Exhibit 1, which defines “Consulting Services,” expressly states: “[d]uring the

term of this Agreement, it is understood that [Plaintiffs] shall provide the following

services. . . (emphasis added).” Accordingly, the Agreements make clear in multiple

provisions that all payment, including royalties, was in exchange for consulting services

performed during the terms of the Agreements.14

Accordingly, it is clear Plaintiffs’ obligations under the Agreements were to provide

and document consulting services during the terms of the Agreements, and the royalty

payments are expressly tied to such performance through multiple provisions. This is the

only reading of the Agreements that gives effect to all their provisions. See Colyear v.

Rolling Hills Cmty. Assn. of Rancho Palos Verdes, 318 Cal. Rptr. 3d 805, 816–17 (Cal. Ct.

App. 2024) (“The whole of the contract is to be taken together, so as to give effect to every

part, if reasonably practicable, and to avoid a construction that would render other

provisions surplusage.” (cleaned up, citations omitted)); Carson v. Mercury Ins. Co., 210

Cal. App.4th 409, 420, 148 Cal. Rptr.3d 518 (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.’”).

This is true despite Plaintiffs’ argument that the consulting services obligation ended

when the agreements terminated, while the royalty provisions survived termination. These

terms are entirely consistent with (and indeed dependent on) one another: Plaintiffs agreed

to perform consulting services while the Agreements were in effect, and Defendant agreed

14 Additionally, the obligation to document consulting services is found twice in Exhibit 2, and it

is clear that no payments would be made unless Plaintiffs documented their services. Plaintiffs

contend the first documentation requirement—i.e., “[p]ayments will be based on actual services

performed and documented in accordance with this agreement” in Exhibit 2, section 2.1—is

specific to the “Compensation Schedule” immediately below. [Doc. No. 102] at 8. But they do

not dispute that section 3 of Exhibit 2 further provides that “no payments will be made until all

appropriate documentation has been supplied by [Plaintiffs] to [OMNI].” [Doc. No. 93-1] at 15;

[Doc. No. 93-2] at 14. That latter provision does not specifically reference (and does not otherwise

appear specific to) the compensation schedule.

to pay them royalties for the life of the products in exchange for those consulting services.

Plaintiffs have not explained why these provisions cannot be read in harmony, or why the

parties’ obligations have to conclude at the same time. See Resp. [Doc. No. 102] at 15-20.

The relevant question, then, is whether Plaintiffs performed consulting services

during the terms of the Agreements.15 As explained above, Plaintiffs offer no evidence

that they did: although there are numerous exhibits regarding consulting services

performed in the years after termination of the Agreements, Plaintiffs offer no evidence

showing they performed consulting services while their Agreements were in effect. See

section III, supra.16

Accordingly, Plaintiffs have not shown they performed under the Agreements,

which is fatal to their breach of contract claim. See Goldman, 250 P.3d at 1121; Salami v.

Los Robles Reg’l Med. Ctr., 324 Cal. Rptr. 3d 45, 49 (Cal. Ct. App. 2024) (dismissal of a

breach of contract claim was appropriate where the plaintiff failed to allege he performed

under the contract or was excused from doing so); see also eOnline Glob., Inc. v. Google

LLC, 387 F. Supp. 3d 980, 988 (N.D. Cal. 2019) (granting summary judgment because the

15 Plaintiffs misconstrue Defendants’ argument, asserting: “Defendants do not assert Plaintiffs

failed to provide services between 2006 and 2009—the actual term of the Agreement.” [Doc. No.

102] at 19. They are wrong: although they make alternative arguments, Defendants repeatedly

quote—and emphasize—the language in the Agreements requiring consulting services “during the

term of th[e] Agreement[s]” and argue “[t]here is no genuine dispute that Plaintiffs did not provide

the requisite Consulting Services during the term of the Agreement.” [Doc. No. 93] at 17-22.

16 Plaintiffs’ interrogatory response does not list any services dated during the terms of the

Agreements and therefore does not create a fact dispute as to whether they performed. See [Doc.

No. 93-5] at 10-12; see also Anderson, 477 U.S. at 249 (The Court may grant summary judgment

if the nonmovant comes forward with evidence that “is merely colorable . . . or is not significantly

probative.”).

plaintiff filed to show it performed under the contract); Adler v. Wal-Mart Stores, Inc., 144

F.3d 664, 670-71 (10th Cir. 1998) (If the movant carries their initial burden, “the burden

shifts to the nonmovant to go beyond the pleadings and ‘set forth specific facts’ that would

be admissible in evidence in the event of trial from which a rational trier of fact could find

for the nonmovant.” (citations omitted)).17

Plaintiffs’ arguments are unpersuasive and undeveloped.18 First, they fail to explain

with any detail how the Agreements are ambiguous, nor have they shown extrinsic

evidence may be properly considered in the context of this case. Plaintiffs do not point to

any word or phrase that is ambiguous and that extrinsic evidence would help define. See

Appling v. State Farm Mut. Auto. Ins. Co., 340 F.3d 769, 777-78 (9th Cir. 2003) (explaining

California law permits consideration of extrinsic evidence “only to define the terms in the

contract” and declining to consider such evidence because the plaintiffs “have not

introduced any extrinsic evidence that interprets specific words” in the provision at issue);

17 Plaintiffs do not contend their non-performance was immaterial and have therefore forfeited any

argument on that issue. In any event, there is no question as to the materiality of Plaintiffs’ failure

to perform consulting services because that was their only duty under the Agreements.

18 As noted, Plaintiffs’ argument fails to address the operative language discussed above. Instead,

Plaintiffs zero in on other provisions of the Agreements without developing legal arguments as to

why those provisions render the contract ambiguous or how they are otherwise material to the

issues in this case. Plaintiffs include unanswered questions and conclusory assertions that invite

the Court to develop their arguments for them, which it may not do. See State v. U.S. Env’t Prot.

Agency, 989 F.3d 874, 885 (10th Cir. 2021) (“[C]ourts do not sit as self-directed boards of legal

inquiry and research.” (quoting Nat’l Aeronautics & Space Admin. v. Nelson, 562 U.S. 134, 147

n. 10 (2011))); C.P.C. v. Boulder Valley Sch. Dist. Re-2, No. 122CV00564RMRSBP, 2023 WL

8831330, at *3 (D. Colo. Dec. 21, 2023) (“The Court is not obligated to perform legal research on

behalf of [a party] . . . nor will the Court make arguments for [a party] that he himself has not

raised.”); Lovato v. Mahler, No. 121CV01986RMRMDB, 2023 WL 2613821, at *3 (D. Colo. Mar.

23, 2023) (“The Court will not make arguments for the parties, nor should the parties expect that

the Court will consider arguments that the parties could have made but did not.”).

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

37 (1968) (the question is “whether the offered evidence is relevant to prove a meaning to

which the language of the instrument is reasonably susceptible” because “[w]ords . . . do

not have absolute and constant referents.”); Brawthen v. H & R Block, Inc., 104 Cal. Rptr.

486, 490 (Cal. Ct. App. 1972) (The rule from Pacific Gas. & Elec. Co. “does no more than

allow extrinsic evidence of the parties’ understanding and intended meaning of the words

used in their written agreement.”); Vaughn v. Duran, No. 1:17-CV-00966-NODJ-HBK,

2023 WL 9111162, at *2 (E.D. Cal. Dec. 15, 2023) (“extrinsic evidence and other rules of

construction may be used to interpret the words chosen, but not to add, subtract, or vary

the words used in the written agreement.”). As explained in Bionghi v. Metro. Water Dist.

of So. California:

This is not a case where, for example, a party contended that the words “30

days” were reasonably susceptible of meaning either “30 business days” or

“30 calendar days,” or that, in the examples given in Pacific Gas & Electric,

the term “United Kingdom” in a motion picture distribution contract included

Ireland, or that the word “ton” in a lease meant a long ton or 2,240 pounds

and not the statutory ton of 2,000 pounds.

83 Cal. Rptr. 2d 388, 393 (Cal. App. 1999). Instead, Plaintiffs ask the Court to: (1) ignore

the provisions that state payment is in exchange for consulting services performed “during

the term[s]” of the Agreements; and (2) find the royalty payment provisions were for other

consideration not set forth in the Agreements. This is impermissible under California law.

See Pacific Gas & E. Co., 442 P.2d at 645 (“extrinsic evidence is not admissible to add to,

detract from, or vary the terms of a written contract.”); see also Vaughn, 2023 WL

9111162, at *2.19

Even if considered preliminarily, none of the extrinsic evidence Plaintiffs discuss

renders the Agreements reasonably susceptible to any other meaning. See AMTAX

Holdings 279, LLC v. Montalvo Assocs., LLC, No. 22-55688, 2024 WL 2749163, at *3

(9th Cir. May 29, 2024) (Courts applying California contract law must preliminarily

“consider extrinsic evidence regarding a contract’s meaning (without admitting it) and

determine whether the contract’s language would be ‘reasonably susceptible’ to the reading

in support of which the extrinsic evidence is proffered.”). The only extrinsic evidence

Plaintiffs reference in their legal argument is a letter from Mr. Cipolletti around the time

the Agreements were signed reflecting his understanding that the royalty provisions were

for the “life of the product[s]” and would remain in force even if the contract was not

renewed. See Resp. [Doc. No. 102] at 19; [Doc. No. 19-4]. Mr. Cipolletti further offered

to “add a specific exclusion of royalties from the termination clause.” Id. Setting aside the

fact that Plaintiffs do not identify any contract language this letter renders ambiguous, the

plain language of the Agreements is entirely consistent with Mr. Cipolletti’s understanding

that the royalty provisions survived termination of the Agreements. Nothing in his letter

19 Plaintiffs blankly contend section 11.4 “renders the Agreements ambiguous,” but they wholly

fail to explain why, and they immediately pivot to an argument that the provisions are

unambiguous. See [Doc. No. 102] at 16-18. Section 11.4 provides for payment of “Consulting

Fees and expenses” for amounts invoiced within thirty days of termination of the Agreements. See

id. The Court is unable to discern what Plaintiffs mean in stating Section 11.4 renders the

Agreements ambiguous, and it cannot speculate or make that argument for them. At most, this

appears to relate to the documentation issue, see id., but Plaintiffs do not explain why this means

they were not required to perform consulting services during the terms of the Agreements.

states, for example, that the royalties are in exchange for anything other than consulting

services performed during the terms of the Agreements. See id. As such, this evidence

does not actually help define or otherwise understand the language of the Agreements, nor

does it suggest the terms of the Agreements are susceptible to another meaning.

Plaintiffs’ discussion of prior agreements, [Doc. No. 102] at 11-13, is similarly

undeveloped and does not advance their contract claim. Although included among their

additional material facts, Plaintiffs make no legal argument regarding these prior

agreements, and they have therefore failed to explain how those facts are material to any

aspect of their breach of contract claim. See Resp. [Doc. No. 102] at 11-20.20 Even if they

had, the Agreements at issue expressly state that they superseded all prior agreements,

communications, or representations, therefore the terms of the prior agreements are of no

effect. [Doc. No. 93-1] at 11; [Doc. No. 93-2] at 10; see also Cal. Civ. Code § 1625 (“The

execution of a contract in writing . . . supersedes all the negotiations or stipulations

concerning its matter which preceded or accompanied the execution of the instrument.”);

Grey v. Am. Mgmt. Servs., 139 Cal. Rptr. 3d 210, 213 (Cal. Ct. App. 2012) (holding the

contract superseded a previous agreement where it stated that it is the “entire agreement”

and “supersedes all prior understandings”).

20 Moreover, as Defendant points out, Plaintiffs solely referenced and attached the Agreements to

their Amended Complaint, [Doc. Nos. 9, 9-1], and they are not permitted to assert new a claim for

breach of contract based on those prior agreements in response to a summary judgment motion.

See Navajo Nation Hum. Rts. Comm’n v. San Juan Cnty., 281 F. Supp. 3d 1136, 1149 (D. Utah

2017) (“[T]he liberal pleading standard for civil complaints under Federal Rule of Civil Procedure

8(a) . . . does not afford plaintiffs with an opportunity to raise new claims at the summary judgment

stage.” (quoting Gilmour v. Gates, McDonald & Co., 382 F.3d 1312, 1314 (11th Cir. 2004) (per

curiam))).

To the extent Plaintiffs offer those prior agreements as extrinsic evidence, they

identify no term they contend is ambiguous for which the prior agreements would provide

guidance. See generally Resp. [Doc. No. 102]. Plaintiffs assert the royalty provisions in

the Agreements were based on royalties already earned pursuant to those prior agreements,

id. at 12, but they identify no term or phrase in the Agreements themselves that actually

says so.21 Moreover, this proposed understanding cannot be squared with the multiple

provisions in the Agreements establishing the payment is in exchange for consulting

services performed during the term of the Agreements, which Plaintiffs have no

explanation for. See Brawthen, 104 Cal. Rptr. at 490 (explaining Pacific Gas. & Elec. Co.

permits consideration of parol evidence to help understand “[w]ords used in the[] written

agreement,” but that rule “is unconcerned with extrinsic collateral agreements.”); see also

Pacific Gas & E. Co., 442 P.2d at 645 (“extrinsic evidence is not admissible to add to,

detract from, or vary the terms of a written contract.”).22

Plaintiffs have not shown consideration of extrinsic evidence is proper in the first

place. Even if it were, however, the evidence they discuss does not render the Agreements

susceptible to another meaning, and it would require the Court to ignore or strike through

the language that provides payment, including royalties, was in exchange for consulting

21 Plaintiffs make no argument regarding course of dealing or course of performance.

22 Even if considered, Plaintiffs do not offer any evidence showing what they actually did to earn

royalties even under the prior agreements: they just state as a legal conclusion that they did. See

Resp. [Doc. No. 102] at 12-13. At most, the prior agreements explain the basis for the specific

amounts included in the “Compensation Schedule” in section 2.2 of Exhibit 2, see [Doc. No. 102]

at 17, but that explanation is immaterial because Plaintiffs do not seek payment pursuant to the

Compensation Schedule.

services performed during the terms of the Agreements. The Agreements unambiguously

required Plaintiffs to perform consulting services while they were in effect, and Plaintiffs

have not shown that they performed as required.

For all these reasons, Defendants are entitled to summary judgment on Plaintiffs’

breach of contract claim.23

B. Remaining Claims: Accounting, Fraud, and Negligent Misrepresentation

Plaintiffs’ remaining claims are for an accounting, fraud, and negligent

misrepresentation. As to the latter two claims, Plaintiffs argue Defendants decided to alter

the method of calculating royalties they had been paying Plaintiffs by deducting certain

costs and expenses from the calculation of “Net Sales” under the Agreements. Resp. [Doc.

No. 102] at 33. Plaintiffs contend Defendant’s general counsel, Elizabeth Cipolletti,

misrepresented to Plaintiffs that Defendant was calculating “Net Sales” consistent with the

Agreements, and that they relied on those representations to their detriment. Id. at 33-34.24

Throughout this action, the parties have maintained Plaintiffs’ fraud claim is

governed by Oklahoma law, and that their negligent misrepresentation claim is governed

by California law. See [Doc. Nos. 14, 19, 23]. Under Oklahoma law, a fraud claim requires

Plaintiffs to show: (1) a false material misrepresentation; (2) made as a positive assertion

which is either known to be false or is made recklessly without knowledge of the truth; (3)

23 Because the Court finds in favor of Defendants on the grounds set forth above, it need not

address their alternative argument regarding the federal Anti-Kickback Statute.

24 Plaintiffs’ only legal argument regarding these claims is a reference to a California case

regarding the discovery rule for tolling the statute of limitations of a misrepresentation claim, see

id. at 34, which has no relevance to the issues here. Plaintiffs include no argument whatsoever

regarding their accounting claim. See id.

with the intention that it be acted upon; and (4) which is relied on by the other party to his

or her own detriment. Bowman v. Presley, 212 P.3d 1210, 1218 (Okla. 2009). Under

California law, the elements of negligent misrepresentation are: “(1) representation as to a

material fact, (2) representation is untrue, (3) regardless of actual belief, the defendant

made the representation without a reasonable ground for believing it true, (4) intent to

induce reliance, (5) justifiable reliance by plaintiff who does not know the representation

is false, and (6) damage.” Guzman v. Nationstar Mortg. LLC, No. 18cv2531-WQH-RBB,

2019 WL 2436456, at *12 (S.D. Cal. June 11, 2019) (quotation marks and citation omitted).

Plaintiffs’ remaining claims fail as a matter of law because they are all

fundamentally based on the difference between the amount of royalties Defendant paid and

the royalty amounts Plaintiffs contend they were owed under the Agreement. As explained

above, however, Plaintiffs have not shown they were entitled to any royalties in the first

place. Necessarily, then, Plaintiffs are unable to show: (1) the alleged misrepresentations

by Ms. Cipolletti were material (because those representations solely relate to a difference

in the amount of royalties they were not owed anyway); (2) that they detrimentally relied

on representations by Ms. Cipolletti (because they have not shown that they performed and

thereby triggered any duty by Defendant to pay royalties); or (3) that they suffered any

actual damages, because the only actual damages they claim are the difference between

royalties based on “Net Sales” and what they contend Defendants were paying them due

to their deductions.

Accordingly, Plaintiffs’ claims for an accounting, fraud, and negligent

misrepresentation fail as a matter of law. See Simonsen v. McClinton Energy Grp., LLC,

No. 13-CV-635-JED-FHM, 2014 WL 5795494, at *7 (N.D. Okla. Nov. 6, 2014) (“[E]ven

assuming it were proper to maintain a fraud claim based upon allegations of breach of

contract, the plaintiff has not presented evidence that would establish the existence of any

genuine issue of material fact as to required elements of a fraud claim’).

V. Conclusion

IT IS THEREFORE ORDERED that Defendants’ Motion for Summary Judgment

[Doc. No. 93] is GRANTED. Plaintiffs’ claims for breach of contract, fraud, and negligent

misrepresentation against Defendants OMNI and Mr. Cipolletti are DISMISSED.

Defendants’ counterclaims remain pending.

IT IS SO ORDERED this 11" day of March, 2025.

SCOTT L. PALK

UNITED STATES DISTRICT JUDGE

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