The opinion
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8 UNITED STATES DISTRICT COURT
9 EASTERN DISTRICT OF CALIFORNIA
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12 R & M INNOVATIONS LLC, No. 2:24-cv-0060 WBS AC
13 Plaintiff and
Counterdefendant,
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v. MEMORANDUM AND ORDER RE:
15 THE PARTIES’ MOTIONS FOR
ALLIANCE SALES & MARKETING MW, PARTIAL SUMMARY JUDGMENT
16 INC., and DOES 1 TO 20,
17 Defendant and
Counterclaimant.
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BRIGHT PEOPLE FOODS, INC., DBA No. 2:24-cv-0058 WBS AC
20 DR. MCDOUGALL’S RIGHT FOODS,
21 Plaintiff and
Counterdefendant,
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v.
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ALLIANCE SALES & MARKETING MW,
24 INC., and DOES 1 TO 20,
25 Defendant and
Counterclaimant.
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1 ----oo0oo----
2 These now-related actions concern commercial disputes
3 between plaintiffs and counter-defendants Bright People Foods,
4 Inc. (“BPF”), R & M Innovations LLC (“R&M”), and defendants and
5 counterclaimants Alliance Sales and Marketing (“Alliance”). BPF
6 and R&M originally filed claims for breach of contract seeking
7 declaratory relief in state court in connection with Alliance’s
8 alleged failure to perform its contractual obligations. (Docket
9 No. 1.) After removing to this court, Alliance filed
10 counterclaims against plaintiffs for breach of contract and
11 violations of the Wholesale Sales Representative Act. (Docket
12 No. 22.) All parties move for partial summary judgment and to
13 exclude expert testimony. (Docket Nos. 54, 57, 62.)1
14 I. Motions to Exclude Expert Testimony
15 Both plaintiffs and Alliance have moved to exclude
16 testimony of their competing expert witnesses at trial. (Docket
17 Nos. 59, 63.) As explained to counsel at oral argument, the
18 motions to exclude expert testimony will be denied without
19 prejudice, with the parties instructed to renew their motions in
20 accordance with the procedure which will be set forth in the
21 Pretrial Order if they so wish.
22 II. The Motions for Partial Summary Judgment
23 Alliance moves for summary judgment on its claims that
24 (1) BPF and R&M materially breached the agreements, (2) those
25 material breaches excused Alliance’s performance, and (3) the
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1 Plaintiffs BPF and R&M filed duplicate motions for
27 summary judgment containing identical arguments. (See generally
Docket Nos. 54, 57.) For purposes of this order, the court will
28 analyze the motions together.
1 actions of BPF and R&M constitute violations of the Wholesale
2 Sales Representatives Act, California Civil Code Section 1738.10,
3 et seq. (Docket No. 62 at 6.) Plaintiffs make two threshold
4 arguments: (1) Alliance’s claims pre-dating August 2023 are
5 barred because of limitations in Section 19 of the agreement; and
6 (2) Alliance cannot bring claims under the Wholesale Sales
7 Representatives Act because it does not qualify as a “wholesale
8 sales representative.” (Docket No. 64.)
9 A. The Term “Dispute” in Section 19’s First Clause
10 Plaintiffs’ first argument concerns the first clause of
11 Section 19 of the agreements, which reads: “any disputes over
12 brokerage commissions due must be initiated within 60 days of
13 brokerage payment for that month.” (Docket No. 54-3 at 3.)
14 Plaintiffs argue that the term “dispute” denotes legal action and
15 required Alliance to bring such “an action within 60 days of [a]
16 payment or waive its right” to do so. (Docket No. 57 at 7.)
17 Alliance argues that plaintiffs’ interpretation improperly limits
18 the meaning of “dispute” to lawsuits. (Docket No. 70 at 12.)
19 Contract interpretation is a question of law, unless
20 “ascertaining the intent of the parties at the time the contract
21 was executed depends on the credibility of extrinsic evidence,”
22 in which case the interpretive question is resolved by the
23 factfinder. City of Hope National Medical Center v. Genentech,
24 Inc., 43 Cal. 4th 375, 395 (2008). Words of a contract are to be
25 understood “in their ordinary and popular sense . . . unless used
26 by the parties in a technical sense[.]” Cal. Civ. Code § 1644.
27 Nowhere in the agreements is the term “dispute” defined
28 in any technical sense. (See Docket 54-3 at 3-5.) Plaintiffs’
1 argument that the term requires legal action is thus unsupported
2 by the agreement, which contains no references to filing a
3 complaint or instituting an action. The Ninth Circuit has also
4 understood “dispute” to “mean[] [a] conflict or controversy, esp.
5 one that has given rise to a particular lawsuit . . . [and this]
6 definition is not limited to court proceedings.” Nomadix, Inc.
7 v. Guest-Tek Interactive Ent. Ltd., No. 20-55439, 2021 WL
8 4027807, at *2 (9th Cir. 2021).
9 In light of the above, the court agrees with Alliance
10 and interprets “dispute” within the meaning of Section 19 to
11 encompass a “conflict or controversy” over commission payments,
12 including written communications asserting that the other party
13 is in breach of its obligations. Nomadix, Inc., 2021 WL 4027807,
14 at *2. The record here contains more than a dozen instances of
15 such communications, wherein Alliance informed BPF and R&M of
16 late payments and missing documentation, at times using urgent
17 language suggesting that the commercial relationship was in
18 jeopardy. (See generally Declaration of Erik C. Olson (“Olson
19 Decl.”) (Docket No. 62-2.) These communications fall within the
20 meaning of the term “dispute” as used in Section 19, which
21 defeats plaintiffs’ argument at summary judgment that Alliance’s
22 claims are barred by this provision. Accordingly, the court will
23 not grant summary judgment in plaintiffs’ favor on this basis.
24 B. Section 19’s Second Clause
25 Plaintiffs also argue that the second clause of Section
26 19 -- providing that “both parties agree ongoing that there are
27 no disputes over brokerages for any sales 60 days prior to last
28 month for which brokerage check was cashed” -- operates as an
1 independent waiver of Alliance’s right to bring its claims.
2 (Docket No. 73 at 16-17.) Counsel for Alliance emphasized at
3 oral argument that “there are no disputes” should be read as a
4 prospective phrase that does not apply to disputes raised prior
5 to the cashing of checks.
6 California courts disfavor interpretations that produce
7 commercially unreasonable results or that defeat the parties’
8 reasonable expectations. See MacKinnon v. Truck Insurance
9 Exchange, 31 Cal. 4th 635, 648 (2003). The courts also favor
10 interpretations consistent with the parties’ course of
11 performance. See Employers Reinsurance Co. v. Superior Ct., 161
12 Cal. App. 4th 906, 920-21 (2008).
13 Plaintiffs’ reading raises both concerns. For one, it
14 forces Alliance into the impractical choice between accepting
15 payment on a contested commission and preserving its objections.
16 Section 19 read this way operates as a forfeiture clause, which
17 California courts “have rather consistently held [are] not
18 favored in contract law and . . . should be explicitly and
19 clearly stated.” In re Crown Corp., 679 F.2d 774, 776-77 (9th
20 Cir. 1982); see also Cal. Civ. Code § 1442 (“A condition
21 involving a forfeiture must be strictly interpreted against the
22 party for whose benefit it is created.”). Plaintiffs’ reading is
23 also difficult to reconcile with the parties’ performance, under
24 which plaintiffs continually engaged with Alliance’s commission
25 concerns rather than treating those concerns as extinguished by
26 payment.
27 Moreover, the phrase “there are no disputes” does not
28 by its terms apply to disputes initiated before checks are
1 cashed. Cf. Morse v. ServiceMaster Global Holdings, Inc., No.
2 10cv-0628 SI, 2012 WL 4755035, at *4 (N.D. Cal. Oct. 4, 2012)
3 (declining to apply agreement provision retroactively because
4 “the clause refers to the material scope of the agreement, not
5 temporal scope” (emphasis in original)). Read prospectively, the
6 second clause bars the initiation of new disputes about old
7 commissions once payment has been completed and the limitations
8 window has closed, while leaving timely raised disputes intact.
9 Because Alliance’s reading better accords with the
10 commercially reasonable expectations of the parties, their
11 performance, and the agreement’s text, the court interprets the
12 second clause of Section 19 to bar the initiation of new disputes
13 about commissions after a check is cashed, but not to extinguish
14 prior disputes that were timely raised. Accordingly, plaintiffs
15 are not entitled to summary judgment on the grounds that
16 Alliance’s claims are barred by this provision, and their motion
17 will not be granted on that basis either.
18 C. Whether Alliance is a “Wholesale Sales Representative”
19 Section 1738.12 of the Wholesale Sales Representative
20 Act defines a “wholesale sales representative” as “any person who
21 contracts with a manufacturer, jobber, or distributor for the
22 purpose of soliciting wholesale orders, is compensated, in whole
23 or part, by commission[.]” Cal. Civ. Code § 1738.12(e).
24 “Wholesale” generally means sales of a larger “quantity usually
25 for resale (as by a retail merchant),” and is understood to be
26 the opposite of “retail,” which is the sale of smaller quantities
27 directly to consumers. Reilly v. Inquest Tech., Inc., 218 Cal.
28 App. 4th 536, 160 Cal. Rptr. 3d 236 (2013). It is undisputed
1 that all relevant orders here were wholesale orders.
2 Plaintiffs argue that Alliance does not qualify as a
3 wholesale sales representative because Alliance’s contractual
4 duties are tangential to direct order-taking and fall outside the
5 Act’s scope. (Docket No. 83 at 13-14.) Alliance argues that the
6 phrase “for the purpose of soliciting wholesale orders” reaches
7 commercial services more broadly and encompasses Alliance’s
8 obligations per the agreements. (Docket No. 70 at 14-21.)
9 Nowhere in the agreements is the phrase “soliciting
10 wholesale orders” used. (Docket No. 73 at 28.) The agreements
11 provide that Alliance “will represent [BPF’s] product line to
12 distributors and retailers,” and ties Alliance’s compensation to
13 a 3% commission, which suggests Alliance’s role was a sales
14 representative facilitating transactions. (Docket No. 54-3 at
15 3.) At the same time, the agreement routes all sales orders
16 directly to plaintiffs “via EDI [electronic data interchange],
17 email, or fax,” with plaintiffs exclusively handling order
18 approval, revisions, shipment availability, and delivery
19 appointments. (Id. at 4.) This provision removes Alliance from
20 the order-placement and fulfillment processes and thus supports
21 plaintiffs’ characterization of Alliance as a promotional and
22 administrative services provider with no operative role in the
23 order process. Taken together, these provisions create a tension
24 within the contract as to Alliance’s role.
25 The agreements are therefore ambiguous as to whether
26 Alliance was contracted “for the purpose of soliciting wholesale
27 orders,” and where contractual language is ambiguous and the
28 parties have offered extrinsic evidence bearing on its meaning,
1 the court considers that evidence to ascertain intent. See
2 Thomson, 150 F.4th at 1103; Cal. Com. Code § 1303(a). If
3 interpretation depends on the credibility of the conflicting
4 evidence, then the interpretative question cannot be resolved as
5 a matter of law at summary judgment. City of Hope, 43 Cal. 4th
6 at 395.
7 The record of Alliance’s actual performance presents
8 competing evidence. Alliance has produced evidence demonstrating
9 occasional visits and pitches to buyers. (Docket No. 70 at 3-4,
10 19-21.) However, that Alliance may have incidentally performed
11 activities resembling order solicitation does not necessarily
12 qualify them as a wholesale sales representative as a matter of
13 law. The Act’s usage of “the purpose” as opposed to “a purpose”
14 suggests the statute was intended to protect sales
15 representatives whose principal or primary purpose was direct
16 order solicitation. Cf. Madain v. BMW of N. Am., LLC, No. 20-cv-
17 0038 JAK, 2020 WL 13250489, at *5 (C.D. Cal. Dec. 23, 2020) (“The
18 use of the term ‘a’ instead of ‘the’ supports the view that the
19 entry and terms of a contract can be motivated by more than one
20 purpose.”)
21 Plaintiffs, in contrast, have produced evidence
22 emphasizing the promotional aspects of Alliance’s role: they
23 point to deposition testimony establishing that Alliance was
24 responsible for analyzing promotional spending and for submitting
25 promotions that plaintiffs had created. (Nguyen Decl., Ex. 4, at
26 88-93; SUF ¶ 16.) Under plaintiffs’ account, Alliance’s function
27 was to evaluate and transmit promotional decisions rather than to
28 solicit purchasing commitments. Additional evidence from
1 Alliance’s own representatives is consistent with that account:
2 when asked to describe its performance, Alliance described
3 coordinating meetings between plaintiffs and retailers or
4 promotional activity rather than explicit sales or order
5 solicitation. (Docket No. 54-2 Ex. 6.)
6 Because the agreements are ambiguous as to Alliance’s
7 purpose and the extrinsic evidence of Alliance’s performance is
8 in conflict, the court cannot determine as a matter of law that
9 Alliance qualifies as a wholesale sales representative under the
10 Act. City of Hope, 43 Cal. 4th at 395. Accordingly, the court
11 will not grant summary judgment in favor of plaintiffs, or in
12 favor of Alliance, on the issue of whether Alliance was a
13 wholesale sales representative.
14 D. Willfulness Under the Act
15 Alliance also asks the court to find that plaintiffs
16 willfully failed to pay commissions and provide documentation in
17 violation of the Act. Section 1738.15 of the Act states that
18 “[a] manufacturer, jobber, or distributor who . . . willfully
19 fails to pay commissions as provided in the written contract
20 shall be liable to the sales representative in a civil action for
21 treble the damages proved at trial.” Cal. Civ. Code. § 1738.15.
22 The existence of a good-faith and reasonable belief
23 that the facts imposing the Act’s obligations were not present
24 may defeat willfulness. Elia v. Roberts, No. 1:16-cv-0557 AWI
25 EPG, 2018 WL 4849653, at *4 (E.D. Cal. Oct. 4, 2018). “For
26 example, a failure to comply would not be willful if the
27 manufacturer reasonably and in good faith believed that a person
28 did not qualify as a ‘wholesale sales representative’ within the
1 meaning of the Act.” Id. at *4. Willfulness has been deemed a
2 “factual determination[] that must be made by a jury rather than
3 the court.” Id. at *5.
4 Plaintiffs argue that a finding of willfulness is
5 negated by two good faith beliefs: that Alliance was not a
6 wholesale sales representative, and that plaintiffs were not
7 required to make the final payments because of Alliance’s prior
8 material breach. (Docket No. 73 at 25-26.)
9 The court has already concluded that the question of
10 Alliance’s qualification as a wholesale sales representative is
11 uncertain at this juncture, which bolsters plaintiffs’ assertion
12 that they reasonably believed the Act may not apply. And as
13 explained below, the basis of plaintiffs’ second belief -- that
14 the August through October 2023 commissions were not owed because
15 of Alliance’s prior material breach -- remains an open question.
16 The court cannot therefore conclude as a matter of law that
17 plaintiffs willfully violated the Act, and Alliance’s request for
18 summary adjudication on this issue must fail.
19 E. The Breach Claims
20 i. Which Party Materially Breached First
21 “Under California law, a claim for breach of contract
22 includes four elements: that a contract exists between the
23 parties, that the plaintiff performed his contractual duties or
24 was excused from nonperformance, that the defendant breached
25 those contractual duties, and that plaintiff’s damages were a
26 result of the breach.” Boland, Inc. v. Rolf C. Hagen (USA)
27 Corp., 685 F. Supp. 2d 1094, 1101 (E.D. Cal. 2010) (Karlton, J.).
28 “When a party’s failure to perform a contractual
1 obligation constitutes a material breach . . . the other party
2 may be discharged from its duty to perform[.]” Brown v. Grimes,
3 192 Cal. App. 4th 265, 277, (4th Dist. 2011). Whether a breach
4 is material depends on “the importance or seriousness thereof and
5 the probability of the injured party getting substantial
6 performance.” Id. at 278. Materiality of breach may only be
7 resolved as a matter of law “if reasonable minds cannot differ on
8 the issue[.]” Brown, 192 Cal. App. 4th at 277-78.
9 Alliance argues that plaintiffs’ failures to timely
10 make payments and provide backup documentation throughout the
11 parties’ commercial relationship constituted material breaches,
12 which excused Alliance’s subsequent performance. (See Docket No.
13 62 at 23-24.) Alliance then argues that plaintiffs’ failure to
14 pay their final three commissions constituted a second material
15 breach. (Id. at 20.) Plaintiffs argue that their first
16 purported material breaches were immaterial or, alternatively,
17 waived by Alliance’s continued performance; their second material
18 breach, plaintiffs argue, was excused by Alliance’s material
19 breaches. (Docket No. 73 at 11.)
20 The evidence does not support a finding that
21 plaintiffs’ failure to make timely payments constituted a
22 material breach that excused Alliance’s subsequent performance.
23 If a contract does not contain a “time is of the essence” clause,
24 “the number and amount of late payments does not, by itself,
25 decide the issue of materiality.” Urica, Inc. v. Pharmaplast
26 S.A.E., No. 11-cv-02476 MMM RZX, 2013 WL 12123230, at *7 (C.D.
27 Cal. May 6, 2013); see also, McLellan v. Fitbit, Inc., No. 3:16-
28 cv-00036-JD, 2018 WL 3549042, at *5 (N.D. Cal. July 24, 2018)
1 (“Aside from a special circumstance where the contract specifies
2 that time is of the essence, a short delay in performance
3 typically does not result in a material breach excusing the other
4 side from its obligations.”).
5 But even assuming plaintiffs’ late payments were
6 material, Alliance waived its right to treat them as such through
7 its continued performance. “Waiver is the intentional
8 relinquishment of a known right after knowledge of the facts,”
9 and “may be either express . . . or implied, based on conduct
10 indicating an intent to relinquish the right.” Waller v. Truck
11 Insurance Exchange, Inc., 11 Cal.4th 1, 31 (1995). “Accepting a
12 late or insufficient payment is an affirmation of the contract,
13 and the right to rescind the contract for material breach may be
14 waived by this conduct.” World Mix Ent., Ltd. v. Bone Thugs
15 Harmony, Inc., No. 07-cv-02159 DDP, 2009 WL 10671949, at *4 (C.D.
16 Cal. Mar. 3, 2009).
17 It is undisputed that the agreements at issue do not
18 contain a “time is of the essence” clause. It is also undisputed
19 that Alliance eventually received and accepted all requested
20 payments and backup documentation, continued doing business with
21 plaintiffs for years despite what Alliance now claims were
22 material breaches, and signed an identical contract with R&M five
23 years into the BPF relationship. Based on these undisputed
24 facts, Alliance is not entitled to treat plaintiffs’ late
25 payments as material breaches that excused Alliance’s subsequent
26 performance. See Urica, Inc. v. Pharmaplast S.A.E., No. 11-cv-
27 02476 MMM, 2013 WL 12123230, at *8 (C.D. Cal. May 6, 2013)
28 (“Given the absence of [a ‘time is of the essence’] provision . .
1 . [and] the fact that [defendant] consistently accepted late
2 payments . . . the court cannot [determine materiality] as a
3 matter of law.”). Alliance was therefore not excused from its
4 contractual obligations.
5 None of the parties have moved for summary judgment on
6 the issue of whether Alliance materially breached the contract.
7 In response to plaintiffs’ allegations of Alliance’s breaches
8 (Docket No. 73 at 24-27), Alliance states only that the breaches
9 “occurred when Plaintiffs were first in breach” for their late
10 payments, thus excusing Alliance’s performance. (Docket No. 84
11 at 12.) The court has now rejected that premise. Beyond it,
12 Alliance offers nothing to negate the breaches plaintiffs allege,
13 stating only that it “strongly disputes” that they occurred.
14 (Docket No. 84 at 12.) Alliance accordingly is not entitled to
15 summary judgment on plaintiffs’ breach claim or its counterclaim.
16 ii. Causation
17 Alliance alternatively argues that plaintiffs cannot
18 establish that any purported breach by Alliance caused their
19 losses. (Docket No. 62 at 29.) Causation of contract damages is
20 assessed using the substantial factor standard, which requires
21 “something that is more than a slight, trivial, negligible, or
22 theoretical factor in producing a particular result.” Haley v.
23 Casa Del Rey Homeowners Assn., 153 Cal. App. 4th 863, 871-72
24 (2007). Substantial-factor causation may exist even where other
25 concurrent factors contribute to the loss and is “ordinarily a
26 question of fact.” See Jenni Rivera Enterprises, LLC v. Latin
27 World Entertainment Holdings, Inc., 36 Cal. App. 5th 766, 792
28 (2019).
1 Alliance argues that plaintiffs’ purported losses are
2 tied to the purchasing decisions of third-party grocers and
3 distributors and identifies a series of independent factors it
4 contends drove plaintiffs’ decline in sales. (Docket No. 62 at
5 29-32.) In response, plaintiffs offer evidence that Alliance
6 failed to provide in-depth business review and category
7 preparation services in advance of a major grocer’s annual
8 category review and failed to inform plaintiffs of
9 contemporaneous developments with that grocer’s distribution
10 partner that bore directly on plaintiffs’ submission. (Nguyen
11 Decl., Ex. 4.) Alliance also failed entirely, on several
12 occasions, to submit promotions that plaintiffs had prepared,
13 despite Alliance’s CEO conceding at deposition that promotions
14 ordinarily produce measurable increases in sales volume. (Nguyen
15 Decl., Exs. 4, 20, 21.)
16 Plaintiffs have presented sufficient evidence that
17 Alliance’s alleged failures were substantial factors in causing
18 their losses, even accepting Alliance’s evidence of concurrent
19 contributing causes. The categories of nonperformance plaintiffs
20 identify track Alliance’s contractual duties, and they correspond
21 to commercial outcomes within the period plaintiffs have placed
22 at issue. Whether those failures rose to the level of
23 substantial factors, given the concurrent causes Alliance
24 identifies, requires weighing the relative contribution of each
25 cause; that weighing is for the trier of fact. See Anderson v.
26 Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) (“Credibility
27 determinations, the weighing of the evidence, and the drawing of
28 legitimate inferences from the facts are jury functions, not
EI IERIE RS IE OD
1 those of a judge.”).
2 Because the court cannot conclude as a matter of law
3 that Alliance’s alleged failures were not substantial factors in
4 | plaintiffs’ losses, Alliance is not entitled to summary judgment
5 | on the issue of causation.
6 IT IS THEREFORE ORDERED that the parties’ motions for
7 partial summary judgment (Docket Nos. 54, 57, 62) be, and the
8 same hereby are, DENIED.
9 IT IS FURTHER ORDERED that the parties’ motions to
10 exclude (Docket Nos. 59, 63) be, and the same hereby are, DENIED
11 without prejudice.
12 Dated: May 29, 2026
13 hth A, (lh. be □
WILLIAM B. SHUBB
14 UNITED STATES DISTRICT JUDGE
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