# Den-Mat Holdings, LLC v. CAO Group, Inc.

> District Court, C.D. California · August 19, 2019

URL: https://www.frixlaw.com/law-library/cases/9978604

## Case

- **Court:** District Court, C.D. California
- **Decided:** August 19, 2019
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9978604

## How later opinions describe it (automated extraction)

- finding that in case of purported retraction of repudiation, “[q]uestions of justifiable reliance constitute questions of fact which cannot be resolved when the facts are disputed.”

## Opinion text

CIVIL MINUTES – GENERAL ‘O’
Case No.  2:18-cv-06358-CAS(JEMx) Date  August 19, 2019
Title  DEN-MAT HOLDINGS, LLC v. CAO GROUP, INC.

Present: The Honorable  CHRISTINA A. SNYDER
Catherine Jeang    Laura Elias    N/A
Deputy Clerk    Court Reporter / Recorder    Tape No.
Attorneys Present for Plaintiffs:    Attorneys Present for Defendants:
Todd Tiberi   J. Christopher Jaczko
Nona Yegazarian Craig Hoggan
Ethan Brown  Nathan Kopp
Proceedings:   PLAINTIFF’S MOTION FOR PARTIAL SUMMARY
JUDGMENT (Dkt. [ 34 ], filed June 20, 2019)
DEFENDANT’S MOTION FOR PARTIAL SUMMARY
JUDGMENT (Dkt. [ 41 ], filed June 24, 2019)
I. INTRODUCTION
On July 23, 2018, plaintiff Den-Mat Holdings, LLC (“DenMat”) filed this action
for breach of contract against defendant CAO Group, Inc. (“CAO Group”). Dkt. 1
(“Compl.”). DenMat asserts two claims for relief: (1) breach of contract; and (2) unjust
enrichment. Id.
CAO Group filed its operative amended answer on August 28, 2018, asserting
seven counterclaims pursuant to California law: (1) Breach of the License Agreement; (2)
Breach of Implied Covenant of Good Faith and Fair Dealing – License Agreement; (3)
Breach of the Manufacturing Agreement; (4) Breach of Implied Covenant of Good Faith
and Fair Dealing – Manufacturing Agreement; (5) Rescission of the Manufacturing
Agreement; (6) Unjust Enrichment; and (7) Permanent Injunction. Dkt. 14
(“Countercl.”).
On June 20, 2019, DenMat filed a motion for partial summary judgment as to its
first claim for relief and as to each of CAO Group’s counterclaims, dkt. 34 (“D. Mot.”),
and a statement of undisputed material facts and conclusions of law, dkt. 36 (“DSUF”).
CAO Group filed an opposition on July 8, 2019, dkt. 55 (“C. Opp.”), and a statement of
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Title  DEN-MAT HOLDINGS, LLC v. CAO GROUP, INC.

genuine disputed facts, dkt. 55-1 (“CGDF”). DenMat filed a reply on July 15, 2019.
Dkt. 62 (“D. Reply”).
On June 24, 2019, CAO Group filed a motion for partial summary judgment as to
both of DenMat’s claims for relief, dkt. 41 (“C. Mot.”), and a statement of undisputed
material facts and conclusions of law, dkt. 42 (“CSUF”). DenMat filed an opposition on
July 8, 2019, dkt. 46 (“D. Opp.”), and a statement of genuine disputed facts, dkt. 46-1
(“DGDF”). CAO Group filed a reply on July 15, 2019, dkt. 61 (“C. Reply”), and a reply
statement to DenMat’s statement of genuine disputed facts (“CRSDF”), dkt. 61-3.
The Court held a hearing on the parties’ cross motions for summary judgment on
August 19, 2019. Having carefully considered the parties’ arguments, the Court
concludes as follows.
II. BACKGROUND
This case arises out of a dispute between DenMat and CAO Group regarding
licensing and manufacturing contracts related to soft-tissue diode lasers used by dentists
and other dental professionals. Unless otherwise noted, the Court references only facts
that are uncontroverted and as to which evidentiary objections have been overruled.
A. The Parties
DenMat is a limited liability company with its principal place of business in
California. DSUF No. 8. It manufactures and sells dental equipment, including oral
hygiene products, oral cancer screening devices, and dental lasers, to dentists and
hygienists located in the United States, the European Union, and elsewhere. Id. Nos. 9–
10. David Casper (“Casper”) serves as the company’s Chief Executive Officer. Dkt. 37,
Declaration of David Casper (“Casper Decl. I.”) ¶ 1.
CAO Group is a Utah corporation that has manufactured and sold products,
including dental lasers, for more than 15 years. DSUF No. 1; Dkt 41-3 at 2. It has
manufactured lasers for other large dental companies and produces 3,000 lasers per year.
DSUF Nos. 1–2. Densen Cao, Ph.D. (“Dr. Cao”) serves as CAO Group’s President. Id.
No. 4. This case arises out of previous litigation in which CAO Group alleged that
DenMat’s products infringe several of CAO Group’s patents.
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Title  DEN-MAT HOLDINGS, LLC v. CAO GROUP, INC.

B. CAO Group’s Previous Patent Infringement Suit Against DenMat
In 2015, CAO Group brought suit against DenMat alleging that DenMat’s SOL®
and NV®Pro3 dental lasers and laser tips infringed several of CAO Group’s patents.
CAO Group v. Den-Mat Holdings, 2:15-cv-07731-SJO-FFM (C.D. Cal.) (“the patent
infringement action”), Dkt. 2. The United States District Court for the District of Utah
transferred the case to the Central District of California on September 29, 2015. Id., Dkt.
35. The case was thereafter stayed for two years pending the United States Patent and
Trademark Office’s (“USPTO”) reexamination of one of the patents at issue. CSUF No.
1. After the USPTO completed its reexamination and verified CAO Group’s patent, the
district court lifted its stay in July 2017. DSUF No. 16.
C. The Parties Resolve the Infringement Suit and Execute Two
Agreements
CAO Group and DenMat thereafter began discussions to resolve the patent
infringement action. DSUF No. 17. On November 2, 2017, the parties agreed to dismiss
the patent infringement action, and the Court dismissed that action on November 3, 2017.
Patent Infringement Action, Dkt. 105, 106. In settlement of the patent infringement
action, the parties executed two agreements: (1) the Nonexclusive Patent License
(“License Agreement”); and (2) the Manufacturing and Services Agreement
(“Manufacturing Agreement”). DSUF No. 25.
The License Agreement and the Manufacturing Agreement give rise to the dispute
in this case. DenMat alleges that CAO Group breached the Manufacturing Agreement
by: (1) failing to fulfill DenMat’s initial purchase order; (2) failing to supply two or more
purchase orders; (3) refusing to manufacture products that comport with DenMat’s design
specifications; and (4) representing to DenMat that it had the right, ability, and intent to
perform. Dkt 38-10 at 12. DenMat further contends that CAO Group anticipatorily
repudiated the Manufacturing Agreement. Id. at 9.
CAO Group, in turn, asserts that DenMat breached both the License and
Manufacturing Agreements. See Countercl. ¶¶ 40, 63, 65. It alleges that DenMat
breached the License Agreement by failing to make required royalty payments and
provide quarterly reports. Id. ¶ 74. CAO Group further alleges that DenMat breached the
Manufacturing Agreement by: (1) refusing to allow it to purchase components from
DenMat or other vendors at the components’ fair market value; (2) failing to timely
provide it with DenMat’s manufacturing specifications; (3) declining to pay for tooling;
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Title  DEN-MAT HOLDINGS, LLC v. CAO GROUP, INC.

DenMat and CAO Group each seek partial summary judgment. See D. Mot. at 1;
C. Mot. at 2. DenMat seeks partial summary judgment on its own claim that CAO Group
anticipatorily repudiated the Manufacturing Agreement and summary judgment on each
of CAO Group’s counterclaims. D. Mot. at 1. CAO Group seeks summary judgment on
each of DenMat’s claims. C. Mot. at 12.
i. The License Agreement
The License Agreement provides DenMat “a nonexclusive, license . . . to import,
export, make, manufacture, have made, make for others, use, offer for sale, sell, or
otherwise distribute” products covered by CAO Group’s patents. Dkt. 41-3, License
Agreement (“L. Agmt.”) § (2.1). In return for DenMat’s payment of a “License Issue
Fee” and ongoing royalty fees, CAO Group agreed to release its patent infringement
claims against DenMat. Id. § (3.1).
Specific provisions of the License Agreement which form the bases for the parties’
respective claims and contentions are set forth more fully below.
a. Sections 4.1, 4.2, and 4.3 Require DenMat to Pay a “License
Issue Fee” and Make Royalty Payments
Section 4.1 requires DenMat to pay CAO Group a License Issue Fee totaling
$800,000.00, with an initial $200,000.00 payment due “[w]ithin five (5) business days
after the Effective Date of this Agreement[.]” L. Agmt. § (4.1). DenMat must make a
second installment payment of $120,000.00 following its “acceptance of the first delivery
of the Initial Purchase Order under the [Manufacturing] Agreement[,]” and thereafter
make subsequent $120,000.00 payments every 30 days. Id.
Section 4.2 of the License Agreement provides that DenMat must also pay to CAO
Group a 10% royalty payment for products “used, sold, or otherwise disposed of pursuant
to the license granted[.]” Id. § (4.2). The royalty obligations began on January 1, 2018,
and were set to continue until CAO Group’s patents expired. Id. Any individual royalty
amounts paid pursuant to the License Agreement “shall be deemed earned when paid and
shall be completely non-refundable.”1 Id.

1 Another provision titled “Payments Non-Refundable,” Section 5.5, reiterates that
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Title  DEN-MAT HOLDINGS, LLC v. CAO GROUP, INC.

Section 4.3 of the License Agreement exempts certain products from its royalty
provisions. Id. § (4.3). These include products that DenMat purchases from CAO Group
that DenMat later resells; products that DenMat sells before it receives its first delivery
from CAO Group under the Manufacturing Agreement; products that DenMat makes for
itself or obtains from a third party due to CAO Group’s uncured material breach of the
Manufacturing Agreement; and all products that DenMat sells after achieving “the
Purchase Threshold” defined in the Manufacturing Agreement. L. Agmt. § (4.3).
b. Sections 5.2, 5.3, and 5.4 Require Quarterly Royalty
Payments, Written Reports, and Interest on Late Payments
The License Agreement also requires DenMat to make its royalty payments on a
quarterly basis, within thirty days of the end of each calendar quarter. L. Agmt. § (5.2).
At CAO Group’s request, DenMat must provide a written statement of all royalty
amounts due, including the number of units of each model sold, net sales prices for each
product sold, and the royalty fee payable. Id. § (5.3). Late payments are subject to ten
percent interest until the amount is paid in full. Id. § (5.4).
ii. The Manufacturing Agreement
The parties also entered into a Manufacturing Agreement providing that CAO
Group would manufacture, and DenMat would purchase, products that DenMat had
previously sold under the SOL® and NV®Pro3 trade names. Dkt. 41-4 at 2,
Manufacturing Agreement (“M. Agmt.”) § (1.1). DenMat would then market and resell
these finished products. Id.
Specific provisions of the Manufacturing Agreement which form the bases for the
parties’ respective claims and contentions are set forth more fully below.
a. Section 3.1 Requires DenMat to Provide Design Files to
CAO Group and Pay for Necessary Tooling
To manufacture the dental lasers and laser tips that DenMat itself previously
produced under the SOL® and NV®Pro3 trade names, CAO Group required access to
DenMat’s design files. Accordingly, Section 3.1 of the Manufacturing Agreement
requires DenMat to provide to CAO Group “the molds for injection molded housing
components, dimensioned engineering drawings, electronic design files, software
programs, and any other design files required for manufacturing[.]” M. Agmt. § (3.1).
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Title  DEN-MAT HOLDINGS, LLC v. CAO GROUP, INC.

such tooling fee.” Id. Tooling refers to the “construction of separate components and
machines needed to make the lasers,” such as molds for plastic housings, fixtures,
gauges, and dies. Dkt. 41-1 at 5.
b. Sections 4.1, 4.2, and 4.3 Establish Development and
Manufacturing Obligations
Section 4.1 of the Manufacturing Agreement requires CAO Group to “use
commercially reasonable efforts to create a timeline for setting up the manufacture and
delivery” of dental lasers and laser tips to DenMat. M. Agmt. § (4.1). CAO Group must
use “commercially reasonably efforts . . . to develop and deliver” the products within
three months of executing the Agreement. Id. Manufacturing and delivery “may take
more or less time depending on many factors.” Id.
Section 4.2 grants DenMat an option to require CAO Group to purchase DenMat’s
existing component inventory. Id. § (4.2). Should DenMat exercise this option, CAO
Group must pay DenMat the lesser of: (1) DenMat’s material cost, plus four percent; or
(2) the then-current fair market price of equivalent component inventory. Id. DenMat’s
exercise of the option would bar CAO Group from purchasing any “substantially
equivalent” components until DenMat’s existing component inventory is depleted. Id.
Section 4.3 requires CAO Group to “use best efforts to maintain the necessary
manufacturing capability to fill orders for Products received from” DenMat. Id. § (4.3).
CAO Group’s failure to “timely supply all or substantially all” of two or more purchase
orders, and its inability to cure such failure within ten business days, constitutes a
“material breach” of the Manufacturing Agreement, unless that failure is attributable to
DenMat. Id.
c. Section 5.2 Specifies Particular Purchase Prices and
Quantities
The Manufacturing Agreement specifies the prices at which CAO Group is
required to sell finished dental laser and laser tips to DenMat, as well as the minimum
number of units DenMat must purchase annually. DenMat must purchase a minimum of:
two hundred and forty SOL laser kits per year, at a price of $1,199.00 per unit; two
hundred and forty NV laser kits per year, at a price of $1,1029.00 per unit; and one
hundred and twenty-five thousand laser tips per year, at a price of $1.95 per unit. M.
Agmt. § (5.2). This provision requires DenMat to pay CAO Group the same prices for
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ultimately uses to manufacture these products. DSUF No. 102. DenMat’s purchase of
$4.5 million in products from CAO Group triggers an eight percent decrease in the prices
that DenMat pays to CAO Group for SOL laser kits, NV laser kits, and laser tips. M.
Agmt. §§ (5.2, 7.3).
d. Sections 7.1, 7.2, and 7.3 Require DenMat to Issue an Initial
Purchase Order and Make Subsequent Regular Purchases
Towards a “Paid-Up and Royalty-Free” License
Following the parties’ completion of “manufacturing logistics,” Section 7.1 of the
Manufacturing Agreement requires DenMat to issue an “Initial Purchase Order”
consisting of one hundred and fifty NV laser kits, one hundred and fifty SOL laser kits,
and two hundred thousand laser tips. M. Agmt. § (7.1). DenMat retains authority to
determine the “delivery schedule and quantities of each type of laser tip” prior to issuing
the Initial Purchase Order. Id. Section 7.1 requires CAO Group to provide the Initial
Purchase Order “at no cost” to DenMat. Id.
Section 7.2 establishes minimum purchase quantities that DenMat must purchase
each month after delivery of the Initial Purchase Order. Id. § (7.2). These monthly
minimums commence thirty days after delivery of the Initial Purchase Order and require
DenMat to purchase, at minimum, twenty SOL laser kits and twenty NV laser kits each
calendar month. Id.
Section 7.3 grants DenMat a “fully paid-up and royalty-free license” to CAO
Group’s patent rights pursuant to thirteen of CAO Group’s patents. M. Agmt. § (7.3).
To earn this license, DenMat must purchase $4.5 million worth of product from CAO
Group. Id.
e. Section 9.5 Requires CAO Group to Adhere to DenMat’s
Specifications and Obtain Written Approval for Any
Changes
Section 9.5 requires CAO Group to manufacture dental lasers and laser tips “in
accordance with [DenMat]’s specifications, drawings, and technical requirements, using
approved vendors and components[.]” M. Agmt. § (9.5). Accordingly, CAO Group
“shall not change any bills of materials, vendors, or work instructions without
[DenMat’s] prior written approval[.]” Id.; CSUF No. 12.
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f. Sections 11.2 and 11.3 Require Specific Representations
In executing the Manufacturing Agreement, DenMat represents that: “(a) it has the
right, ability and intention to enter into this Agreement and perform its obligations
hereunder; and (b) it has entered into no other agreement in conflict with this
Agreement.” M. Agmt. § (11.2). The Agreement contains another provision requiring
that CAO Group represent the same. Id. § (11.3).
g. Sections 12.1 and 12.2 Govern the Agreement’s
Termination
Section 12 specifies the Manufacturing Agreement’s effective duration, and it
provides several means by which either party may terminate the Agreement. M. Agmt.
§§ (12.1, 12.2). By default, the Licensing Agreement remains in effect until DenMat
purchases more than $4.5 million in product from CAO Group, at which time DenMat
may terminate the Manufacturing Agreement in its sole discretion. Id. § (12.1). Should
DenMat choose not to terminate the Manufacturing Agreement, the Manufacturing
Agreement may be renewable for additional three-year periods subject to both parties’
good faith agreement. Id.
The Manufacturing Agreement may be terminated: by the parties’ mutual written
consent; at DenMat’s option following written notice to CAO Group after DenMat
exceeds $4.5 million in purchases; or at either party’s option, following written notice,
should the other commit a material breach and fail to cure the breach within thirty days of
receiving written notice. Id. § (12.1(a)(b)(c)(d)).
The means used to terminate the Manufacturing Agreement dictate the continuing
duties and obligations of the respective parties. CAO Group is excused from selling
products to DenMat if the Manufacturing Agreement is terminated by the parties’ mutual
written consent, at DenMat’s option following more than $4.5 million in product sales, or
at CAO Group’s option following DenMat’s uncured material breach. Id. § (12.2(a)). If
DenMat terminates the Manufacturing Agreement because of CAO Group’s uncured
material breach, then CAO Group may continue to provide products to DenMat at
DenMat’s discretion, and DenMat shall continue to enjoy a patent license. Id. §
(12.2(b)).
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Title  DEN-MAT HOLDINGS, LLC v. CAO GROUP, INC.

D. The Parties’ Performance Under the Agreements
i. DenMat Makes an Initial $200,000 Payment Under the Licensing
Agreement, and the Parties Initially Cooperate to Transition
Manufacturing Responsibility to CAO Group
Within five days of executing the License Agreement on November 2, 2017,
DenMat made the required initial $200,000.00 payment to CAO Group. DSUF No. 25.
The parties thereafter commenced preparations so that CAO Group could begin
manufacturing the dental lasers and laser tips specified by the Manufacturing Agreement.
Id. No. 41.
DenMat began transferring the instructions to make its dental lasers and laser tips
to CAO Group in November 2017. DSUF No. 38. To do so, it created a File Transfer
Protocol site through which CAO Group would have direct access to DenMat’s
engineering drawings, component specifications, work instructions, vendor lists, and
other information. Id. No. 40. On November 9, 2017, DenMat indicated to CAO Group,
in writing, that it could source laser components from alternative vendors so long as it
“validated” the alternative vendors and received DenMat’s approval. Id. No. 149.
ii. DenMat Provides Information Regarding Its Components’ Costs
to CAO Group
In February 2018, DenMat provided CAO Group with the pricing it paid for its
laser components.2 DSUF No. 49. CAO Group notified DenMat that, from its own
vendors, CAO Group could obtain lower pricing on these components, though the
difference in “the total dollar amount is not huge.” Id. No. 51. DenMat never exercised
its option to require CAO Group to purchase its component inventory, and it never
expressed to CAO Group whether it intended to do so.3 CSUF Nos. 36–37. CAO Group

2 CAO Group disputes this fact to the extent that it represents DenMat sent CAO
Group this information at CAO Group’s request. CGDF No. 49. DenMat also asserts
that “the parties were in constant contact regading [sic] DenMat’s inventory, which CAO
could have purchased at any time.” DGDF No. 34.

3 DenMat does not dispute that it never exercised its option but asserts that “CAO
did not ask DenMat whether it intended to exercise the option in Section 4.2 of the
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contends that “DenMat’s refusal to provide this basic information effectively prevented
CAO from arranging to purchase components from other sources and otherwise plan its
manufacturing process.” C. Mot. at 12–13. That is because, according to CAO Group, it
“was never able to determine which, and how many, components CAO would be required
to purchase from DenMat’s existing inventory and which components CAO would be
permitted to purchase from other sources.” Id. at 13.
iii. CAO Delivers Several Products to DenMat, and DenMat
Subsequently Provides Its Manufacturing Specifications
In February 2018, CAO Group manufactured and delivered several products to
DenMat for testing during the pilot builds and validation process. CSUF No. 39; DSUF
No. 154; see also Dkt. 41-18, Deposition of Nicholas Gonzales (“Gonzales Depo.”) at
74:2–16. DenMat provided the components for these lasers to CAO Group “free of
charge.” DSUF No. 155. This batch of products did not pass validation testing,4 id. No.
44, and products that fail validation testing cannot be sold to customers, CSUF No. 22;
DSUF No. 47. As a result, DenMat disassembled these validation batches, using them
for parts or scrapping them. DSUF No. 48.
iv. DenMat’s February 27, 2018 Purchase of Dental Lasers and Laser
Tips
The Manufacturing Agreement requires DenMat to purchase from CAO Group, as
part of an Initial Purchase Order, a total of one hundred and fifty NV laser kits, one
hundred SOL laser kits, and two hundred thousand laser tips. M. Agmt. § (7.1). The
Agreement mandates that DenMat issue this Initial Purchase Order “after completion of
manufacturing logistics[.]” Id.
On February 27, 2018, DenMat submitted paperwork to purchase the requisite total
quantities of product set forth as part of the Initial Purchase Order requirements in the
Manufacturing Agreement. DSUF No. 153. CAO Group contends that the paperwork
DenMat submitted consists of “six purchase orders,” CSUF No. 17, while DenMat asserts

4 The parties dispute whether CAO Group delivered any dental lasers or laser tips to
DenMat that passed validation testing. See CGDF Nos. 44, 138. DenMat asserts that
“CAO was unable to pass validation testing for either SOL or NVPro3 (and did not
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it submitted one purchase order “comprised of different quantities over multiple delivery
dates, which is common in a manufacturing and supply agreement[.]” DGDF No. 17.
The parties dispute whether the Initial Purchase Order was fulfilled. CGDF No.
159. DenMat asserts that CAO Group “never delivered a single sellable laser to
DenMat.” DSUF No. 138. CAO Group insists that DenMat did not provide the product
specifications that CAO Group needed to begin manufacturing product until March or
April of 2018, CSUF No. 32, and that “[t]his failure by DenMat . . . prevented CAO from
building and delivering products in response to any purchase orders,” C. Mot. at 13. In
any event, CAO Group maintains that it “delivered multiple finished lasers to DenMat
between February 2018 and April 2018.” CGDF No. 138.
v. DenMat Declines to Reimburse CAO Group for Tooling
On May 22, 2018, CAO Group invoiced DenMat for tooling it represented was
necessary to manufacture the laser tips. CSUF No. 66. DenMat declined to pay for this
tooling, id., and as a result, CAO Group did not order or pay for this tooling, dkt. 46-1,
DenMat’s Statement of Additional Uncontroverted Facts (“DAUF”) No. 68. CAO Group
contends that DenMat’s decision not to pay for tooling constitutes a breach of the
Manufacturing Agreement. C. Mot. at 5–6.
vi. CAO Group’s May 16, 2018 Proposal and Dr. Cao’s Subsequent
“D.O.A.” Statement
CAO Group made a formal proposal to DenMat on May 16, 2018, to transition
away from the vendors and components that DenMat had been using. CSUF No. 47.
The proposal indicated that, given the sales prices the Manufacturing Agreement
specified, “the act of assuming manufacturing is simply not economically viable under
the terms of continued purchase of parts and materials exactly as DenMat is doing now.”
Dkt. 41-8 at 3. Therefore, [f]or this activity to be profitable, CAO must make some
adjustments to the sourcing of components for these products.” Id. The proposal
acknowledged that substitutions would require DenMat’s approval. CSUF No. 50.
DenMat subsequently declined CAO Group’s proposal. Dkt. 38-12 at 7. Dr. Cao,
CAO Group’s president, subsequently contacted David Casper, DenMat’s CEO, to
determine why. CSUF No. 52. Casper represents that during this conversation, Dr. Cao
stated that the Manufacturing Agreement was “D.O.A.” Dkt. 38-12 at 7. The parties
dispute the significance of this statement.
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CAO Group represents that “if DenMat had not intended to approve vendors and
components other than those DenMat had been using,” then it would not have entered the
Manufacturing Agreement because manufacturing products using DenMat’s existing
vendors and components would cause CAO Group to suffer a loss on each laser. CGDF
No. 166. Therefore, CAO Group maintains that in making the “D.O.A.” statement, Dr.
Cao “meant that the contract would have been a losing venture from CAO from the
beginning, because DenMat’s known cost to make each laser using its existing vendors
and components was higher than the final sale price that CAO was permitted to charge
DenMat per laser[.]” CSUF No. 56. In contrast, DenMat asserts the statement reflects a
“refus[al] to perform in accordance with [the Manufacturing Agreement’s] terms . . . to
make more money out of the deal[.]” DGDF No. 56.
vii. The Parties Exchange Correspondence Regarding Anticipatory
Repudiation of the Manufacturing Agreement
On May 29, 2018, DenMat’s counsel sent a letter to CAO Group alleging that it
had repudiated the Manufacturing Agreement. CSUF No. 61. The letter specifically
references CAO Group’s May 16, 2018 proposal, including the statement that “the act of
assuming manufacturing is simply not economically viable,” as well as Dr. Cao’s
“D.O.A.” statement on May 24, 2018. Dkt. 41-10 at 2. It requests that “CAO
immediately revoke[] its repudiation and agree[] to honor the terms of the Agreement[.]”
Id. at 3.
CAO Group responded to DenMat’s May 29, 2018 letter in its own letter dated
June 1, 2018. CSUF No. 62. In it, counsel for CAO Group indicated that “CAO ha[d]
not repudiated the Manufacturing Agreement and d[id] not wish to do so.” Dkt. 41-11 at
2. CAO Group reiterated that, “[f]or the sake of absolute clarity, CAO hereby revokes
any statements of repudiation that may have been made on its behalf, even though it is
not aware of any such statements.”5 Id.
viii. DenMat’s June 4, 2018 “Written Notice of Breach of Contract”
and June 26, 2018 “Notice of Termination” Letters
On June 4, 2018, counsel for DenMat sent CAO Group a letter entitled “Written
Notice of Breach of Contract.” DSUF No. 167. In it, DenMat asserted that CAO Group

5 DenMat disputes whether, as a matter of law or fact, CAO Group’s June 1, 2018
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had breached “one or more material terms” of the Manufacturing Agreement including
Sections 4.3, 7.1, 9.5, and 11.3. Dkt. 38-10 at 16. DenMat urged that these purported
breaches “trigger the termination provisions in § 12.2(b) of the Agreement.” Id. It
demanded return of the $200,000.00 initial payment it made to CAO Group under the
License Agreement and written acknowledgment that the Manufacturing Agreement had
been terminated. Id. at 17. DenMat reiterated these demands in a “Notice of
Termination” letter dated June 26, 2018. Dkt 38-10 at 12.
III. LEGAL STANDARDS
Summary judgment is appropriate where “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). The moving party bears the initial burden of identifying relevant portions of the
record that demonstrate the absence of a fact or facts necessary for one or more essential
elements of each claim upon which the moving party seeks judgment. See Celotex Corp.
v. Catrett, 477 U.S. 317, 323 (1986).
If the moving party meets its initial burden, the opposing party must then set out
“specific facts showing a genuine issue for trial” in order to defeat the motion. Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986); see also Fed. R. Civ. P. 56(c), (e). The
nonmoving party must not simply rely on the pleadings and must do more than make
“conclusory allegations [in] an affidavit.” Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871,
888 (1990); see also Celotex, 477 U.S. at 324. Summary judgment must be granted for
the moving party if the nonmoving party “fails to make a showing sufficient to establish
the existence of an element essential to that party’s case, and on which that party will
bear the burden of proof at trial.” Id. at 322; see also Abromson v. Am. Pac. Corp., 114
F.3d 898, 902 (9th Cir. 1997).
In light of the facts presented by the nonmoving party, along with any undisputed
facts, the Court must decide whether the moving party is entitled to judgment as a matter
of law. See T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n, 809 F.2d 626, 631 &
n.3 (9th Cir. 1987). When deciding a motion for summary judgment, “the inferences to
be drawn from the underlying facts . . . must be viewed in the light most favorable to the
party opposing the motion.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 587 (1986) (citation omitted); Valley Nat’l Bank of Ariz. v. A.E. Rouse & Co., 121
F.3d 1332, 1335 (9th Cir. 1997). Summary judgment for the moving party is proper
when a rational trier of fact would not be able to find for the nonmoving party on the
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IV. DISCUSSION
CAO Group moves for summary judgment on both of DenMat’s claims for relief.
C. Mot. at 2. DenMat moves for partial summary judgment as to its first claim on the
issue of anticipatory repudiation, as well as for summary judgment on CAO Group’s
counterclaims. D. Mot. at 1.
A. The Parties’ Breach of Contract Claims
The parties assert breach of contract claims against each other. DenMat’s first
claim alleges that CAO Group repudiated and materially breached the Manufacturing
Agreement by failing to timely supply multiple purchaser orders, including the Initial
Purchase Order, refusing to manufacture products using DenMat’s approved vendors and
components, and misrepresenting its intent to perform its contractual duties. Compl. ¶
41. CAO Group’s first and third claims allege that DenMat breached the License and
Manufacturing Agreements by failing to make required royalty payments and reports,
submitting an invalid initial purchase order, refusing to pay for tooling, and providing
manufacturing specifications on an untimely basis. Countercl. ¶¶ 74, 84. To prevail on a
claim for breach of contract, a party must show “(1) the existence of the contract6, (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, 51 Cal. 4th 811,
821 (2011) (internal citation omitted).
i. Whether Triable Issues Exist Regarding DenMat’s Performance
Under the Manufacturing and License Agreements
The materiality of an obligation or a breach of that obligation “is generally a
question of fact.” Urica, Inc. v. Pharmaplast S.A.E., No. CV1102476MMMRZX, 2013
WL 12123230, at *7 (citing Associated Lathing etc. Co. v. Louis C. Dunn, Inc., 135
Cal.App.2d 40, 49 (1955)). Whether triable issues exist regarding DenMat’s
performance under the Manufacturing and License Agreements bears on the Court’s
determination of both parties’ motions.

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a. DenMat’s Performance Under the Manufacturing
Agreement
CAO Group seeks summary judgment on DenMat’s breach of contract claim on
the grounds that DenMat itself “has failed to perform its duties under the Manufacturing
Agreement, without any valid legal excuse.” C. Mot. at 4. CAO Group alleges that
DenMat breached Section 7.1, by failing to submit a valid Initial Purchase Order, as well
as Section 3.1, by refusing to pay for necessary tooling. Id. at 4–6. Triable questions of
fact exist that preclude the Court from granting summary judgment to CAO Group.
For example, there is disputed evidence regarding the purchase order paperwork
that DenMat submitted to CAO Group on February 27, 2018, and whether CAO Group
obtained manufacturing specifications sufficient to fulfill these orders. Each page of
what DenMat claims to be its single Initial Purchase Order contains a “Purchase Order
No.” field, and each of the six pages contains a different number in this field. Dkt. Nos.
38-9 at 33–36, 38-10 at 1–3. Moreover, DenMat’s Chief Executive Officer, David
Casper testified that “the initial purchase order is to be issued after the manufactured
initial logistics were completed, . . .and we had not gotten there yet.” Dkt. 41-16,
Deposition of David Casper (“Casper Depo.”) at 153:24–154:3. On the other hand, the
parties do not dispute that the quantities of products described over the six separate pages
that DenMat submitted on February 27, 2018, together add up to the total amounts
required by Section 7.1. DSUF No. 153. DenMat offers deposition testimony that the
parties treated the February 27, 2018 purchases “as one” and that “as of February 27th,
CAO Group clearly felt they had what they needed to build both lasers,” since DenMat
later delivered lasers for validation testing. Casper Depo. at 161:16–20, 169:4–6. At this
juncture, the Court cannot determine whether DenMat complied with Section 7.1’s Initial
Purchase Order requirements or whether any failure to do so was material.
Nor can the Court determine, at this time, whether DenMat’s May 22, 2018 refusal
to pay CAO Group for tooling constitutes a material breach of the Manufacturing
Agreement. CAO Group offers, as support, a series of emails wherein CAO Group
submitted an invoice for $42,300 in tooling on May 22, 2018, and CAO Group declined
this request in writing on June 6, 2018. Dkt. No. 41-12 at 2. In response, DenMat offers
the undisputed fact that CAO Group never ordered or paid for this tooling.7 CRSDF No.

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68. The Court observes that CAO Group’s request for payment for tooling came on May
22, 2018, nearly three months after DenMat submitted purchase orders for lasers and
laser tips on February 27, 2018. Accordingly, genuine disputes of fact preclude the Court
from determining, at this time, that any failure by DenMat to pay CAO Group for tooling
in May 2018 excused any failure by CAO Group to fulfill a purchase order submitted
some three months earlier. See Urica, 2013 WL 12123230, at *6 (“a material breach of
contract excuses further performance by the injured party and entitles that party to
terminate the contract.”) (emphasis added).
Questions of fact exist regarding DenMat’s performance under the Manufacturing
Agreement. The disputed record therefore precludes the Court from granting summary
judgment to CAO Group on the grounds that DenMat’s lack of performance excused
CAO Group’s own further performance under the Manufacturing Agreement.
b. DenMat’s Performance Under the License Agreement
DenMat moves for summary judgment on CAO Group’s claim that DenMat
breached the License Agreement, contending that subsequent license payments never
became due because the condition precedent, delivery under the Initial Purchase Order,
never occurred. D. Mot. at 23. DenMat asserts that “CAO [Group] never delivered a
single sellable laser to DenMat[.]”8 Id. CAO Group in turn urges that the second and
subsequent $120,000 License Issue Fee payments became due because “DenMat
accepted multiple laser deliveries from CAO [Group].” C. Opp. at 21.
The Court has already found that triable issues exist regarding whether DenMat’s
February 27, 2018 purchases complied with the Manufacturing Agreement. Genuine
disputes also exist regarding CAO Group’s fulfillment of those purchases. For example,
former CAO Group employee Nathan Hult testified that “while I was there, we never did
deliver the first . . . lasers[.]” Dkt. 38-1, Deposition of Nathan Hult (“Hult Depo.”) at
79:25–80:3. Casper likewise asserts that “DenMat never received a delivery from CAO
[Group] of a single sellable SOL, NVPro3, laser tip or any other product that DenMat
could sell or did sell to its customers,” Casper Decl. I. ¶ 15. Conversely, DenMat

invoice without CAO [Group] first providing the specifications for the proposed tooling.”
Dkt. No. 46-2, Declaration of David Casper (“Casper Decl. II”) ¶ 5.
8 DenMat’s motion does not address CAO Group’s claims that DenMat also
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acknowledges that it received units that passed validation, and that units which pass
validation “could then be put into finished goods in an unquarantined fashion and sold.”
Casper Depo. at 198:22–25; Gonzales Depo. at 187:11–13.
Conflicting evidence in record prevents the Court from determining, at this time,
whether subsequent payments under the License Agreement became due or whether
DenMat materially breached the License Agreement by failing to make them. Summary
judgment for DenMat on this ground is therefore improper.
ii. Whether Triable Issues Exist Regarding CAO Group’s
Performance Under the Manufacturing Agreement
a. DenMat’s Actual Breach Claims
DenMat alleges that CAO Group breached Sections 4.3, 7.1, 9.5, and 11.3 of the
Manufacturing Agreement by failing to timely supply multiple purchase orders, including
the Initial Purchase Order, refusing to manufacture products using DenMat’s approved
vendors and components, and misrepresenting its intent to perform its contractual duties.
Dkt. 38-10 at 16. DenMat seeks summary judgment on CAO Group’s breach of contract
claim, contending that CAO Group cannot maintain a claim for breach in light of its own
material breaches. D. Mot. at 11. CAO Group in turn moves for summary judgment on
DenMat’s claim that CAO Group breached these provisions of the Manufacturing
Agreement.9 D. Mot. at 3.
Numerous genuine issues of fact preclude the Court from granting summary
judgment to either party regarding CAO Group’s performance under the Manufacturing
Agreement. For example, DenMat alleges that CAO Group breached Section 9.5 of the
Manufacturing Agreement by failing to “manufacture the Products in accordance with
DenMat’s specifications . . . using approved vendors and components[.]” Compl. ¶ 35.
In response, CAO Group contends that any failure to manufacture products in accord
with DenMat’s requirements was because “DenMat did not timely provide CAO with the
specifications and information that CAO needed to make the products[.]” C. Mot. at 14.

9 DenMat’s June 4, 2018 letter to CAO Group alleges that CAO Group breached Sections
4.3, 7.1, 9.5, and 11.3 of the Manufacturing Agreement, while its operative complaint
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The record contains conflicting evidence on this point. For example, DenMat
employees testified that DenMat did not provide CAO Group all the materials that CAO
Group needed for manufacturing until March or April of 2018, that CAO Group
continued to request information from DenMat through May 24, 2018, and that “certain
errors caused by Den-Mat may have led to delays.” Gonzales Depo. at 208:17–21;
Casper Depo. at 170:1–171:6. CAO Group’s delivery of validation lasers to DenMat
during this time, however, could allow a finder of fact to determine that “as of February
27th, CAO Group clearly felt they had what they needed to build both lasers[.]” Casper
Depo. at 169:4–6.
The parties also dispute whether CAO Group’s desire for additional profits caused
these delays. DenMat contends that in a June 22, 2018 conversation between Dr. Cao
and David Casper, Dr. Cao stated that although CAO Group “would earn a profit if it
performed under the Manufacturing Agreement using DenMat’s components and vendors
(12% profit margin on SOL and 5% profit margin on NVPRO3) . . . this was not as much
profit as CAO wanted to make.”10 Casper Decl. II ¶ 11. A finder of fact could
reasonably conclude that CAO Group’s failure to provide dental lasers and laser tips to
DenMat, using DenMat’s approved vendors and components, was the result of either
DenMat’s own delays or CAO Group’s desire for additional profits.
For these reasons, the Court cannot determine, at this stage of the litigation,
whether CAO Group materially breached various provisions of the Manufacturing
Agreement or was excused in doing so. Genuine disputes of fact therefore preclude the
Court from granting summary judgment to either party.
b. DenMat’s Anticipatory Repudiation Claims
DenMat seeks partial summary judgment as to its own breach of contract claim,
contending that CAO Group made a series of statements that constitute express

10 CAO Group disputes DenMat’s characterization of this conversation as “Mr.
Casper’s interpretation of something Dr. Cao allegedly said[.]” CRSDF No. 53. CAO
Group also disputes that it could turn any profit using DenMat’s approved components
and vendors and that “DenMat knew at the time the parties entered the Manufacturing
Agreement that the only way CAO could make money . . . was to pay lower costs by
using alternative vendors and components, rather than using DenMat’s existing vendors
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anticipatory repudiation. D. Mot. at 11. CAO Group seeks summary judgment as to
DenMat’s claim, contending that, as matters of law, these various statements are
insufficiently “clear, positive, [and] unequivocal” to constitute repudiations. C. Mot. at
17.
Anticipatory repudiation occurs where a party “positively repudiates the contract
by acts or statements indicating that it will not or cannot substantially perform essential
terms thereof.” Mission Beverage Co. v. Pabst Brewing Co., LLC, 15 Cal. App. 5th 686,
702 (2017) (citing Guerrieri v. Severini, 51 Cal. 2d 12, 18 (1958)) (internal punctuation
omitted). “In each case, it is a question of fact as to whether or not a party has committed
an anticipatory breach by repudiating the contract.” Pac. Coast Eng’g Co. v. Merritt-
Chapman & Scott Corp., 411 F.2d 889, 894 (9th Cir. 1969); accord Purdum v. Wolfe,
No. C-13-04816 DMR, 2014 WL 171546, at *5 (N.D. Cal. Jan. 15, 2014). “[R]epudiation
is ordinarily a question of fact and intent, and [it] must be determined by the facts in the
particular case.” Gold Mining & Water Co. v. Swinerton, 23 Cal. 2d 19, 28 (1943).
The parties’ contentions regarding Dr. Cao’s May 24, 2018, “D.O.A.” statement
provide but one example of the factual disputes that exist regarding the circumstances
and intentions underlying CAO Group’s various alleged repudiating statements.11 DGDF
No. 56. Moreover, CAO Group also argues that its June 1, 2018 letter “revoke[d] any
statements of repudiation that may have been made on its behalf[.]” Dkt. 41-11 at 2; C.
Mot. at 22. But whether that revocation was effective turns on whether “the injured party
disregards the repudiation and treats the contract as still in force[.]” Mammoth Lakes
Land Acquisition, LLC v. Town of Mammoth Lakes, 191 Cal. App. 4th 435, 463 (2010).
That too raises additional disputes, including whether DenMat detrimentally relied on
CAO Group’s alleged repudiating statements before CAO Group may have retracted
them. See Ferguson v. City of Cathedral City, 197 Cal. App. 4th 1161, 1170 (2011)
(finding that in case of purported retraction of repudiation, “[q]uestions of justifiable
reliance constitute questions of fact which cannot be resolved when the facts are
disputed.”).

11 DenMat asserts that Dr. Cao’s statement meant that as of May 24, 2018, “CAO
[Group] would not honor the Manufacturing Agreement.” D. Opp. at 11. CAO Group
contends that Dr. Cao meant that CAO Group would not have entered the Manufacturing
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iii. Whether Triable Issues Exist Regarding DenMat’s Damages
CAO Group asserts that, even if triable issues of fact remain regarding the first
three elements of DenMat’s breach of contract claim, it is entitled to summary judgment
because “[t]here is no evidence that DenMat has incurred any damages at all, let alone
any as a result of breaches by CAO.” C. Mot. at 15. DenMat contends that it has
adduced sufficient evidence to raise a triable issue to the damages it suffered as a result of
CAO Group’s purported breaches. D. Opp. at 15.
“Under California law, a breach of contract claim requires a showing of
appreciable and actual damage.” Aguilera v. Pirelli Armstrong Tire Corp., 223 F.3d
1010, 1015 (9th Cir. 2000). To withstand a motion for summary judgment, DenMat
“must provide evidence such that the jury is not left to ‘speculation or guesswork’ in
determining the amount of damages to award.” Dolphin Tours, Inc. v. Pacifico Creative
Serv., Inc., 773 F.2d 1506, 1509–10 (9th Cir. 1985) (internal citation omitted). But
“[w]here the fact of damages is certain . . . the amount of damages need not be calculated
with absolute certainty. The law requires only that some reasonable basis of computation
be used, and the result reached can be a reasonable approximation.” JMR Constr. Corp.
v. Envtl. Assessment & Remediation Mgmt., Inc., 243 Cal. App. 4th 571, 585 (2015)
(ellipsis and emphasis in original) (internal citation omitted).
The disputed evidence before the Court prevents the Court from determining, at
this stage, that DenMat cannot recover damages. For example, DenMat’s CEO, David
Casper, testified: that DenMat “had sent a $200,000 check” to CAO Group12; that
DenMat “had sent tens of thousands of dollars of components to” CAO Group; and that
DenMat “had sent a team of people on multiple occasions to Utah[.]” Casper Depo. at
238:23–239:4. It supplants this testimony with Casper’s declaration reiterating the nature

12 CAO Group asserts that DenMat cannot recover this $200,00 payment as damages
for CAO Group’s purported breach of the Manufacturing Agreement because the
payment obligation arose under the separate License Agreement. C. Mot. at 15. Dr.
Cao’s declaration, however, raises an inference that the parties executed the two
agreements together to resolve previous patent infringement litigation. Cao Decl. II ¶¶
85–89. Dr. Cao asserts that “[i]n exchange for agreeing to accept [license] installment
apyments from DenMat over time rather than the full $800,000 up front, CAO [Group]
proposed a supplemental arrangement, where CAO [Group] would take over DenMat’s
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of these losses, in addition to “lost gains in profits expected from the transfer of its laser
manufacturing to CAO[.]” Casper Decl. I ¶ 4. That is sufficient to raise a question of fact
regarding damages. See Morgan Creek Prods., Inc. v. Capital Cities/ABC, Inc., No. CV-
89-5463-RSWL(JRX), 1991 WL 352619, at *16–17 (C.D. Cal. Oct. 28, 1991) (finding
that deposition testimony that allegedly infringing television show caused film sequel to
suffer lost gains in box office profits expected between original film and sequel precluded
summary judgment on issue of damages).
B. CAO Group’s Implied Covenant of Good Faith and Fair Dealing
Claims
CAO Group asserts counterclaims against DenMat for violating the implied
covenant of good faith and fair dealing. Countercl. ¶¶ 79, 89. CAO Group alleges that
DenMat acted in bad faith by refusing to make the second and subsequent License Issue
Fee payments despite having accepted multiple laser deliveries from CAO Group. C.
Opp. at 21. CAO Group also contends that DenMat acted in bad faith by refusing to
allow it to use alternative vendors and components, knowingly causing CAO Group to
manufacture products at a loss. C. Opp. at 19. DenMat moves for summary judgment as
to these claims, contending that it acted in accord with its express contractual rights, and
its conduct therefore “cannot be a breach [of the implied covenant], as a matter of law.”
D. Mot. at 21.
“Every contract imposes upon each party a duty of good faith and fair dealing in its
performance and its enforcement.” Carma Developers (Cal.), Inc. v. Marathon Dev.
California, Inc., 2 Cal. 4th 342, 371 (1992). The covenant of good faith and fair dealing
may not, however, “prohibit a party from doing that which is expressly permitted by an
agreement.” Id. at 374. But “where a contract confers on one party a discretionary
power affecting the rights of the other, a duty is imposed to exercise that discretion in
good faith and in accordance with fair dealing.” Perdue v. Crocker Nat’l Bank, 38 Cal.
3d 913, 923 (1985) (citing Cal. Lettuce Growers v. Union Sugar Co., 45 Cal. 2d 474, 487
(1955)).
The Court has already determined that numberous triable issues of fact exist. For
example, a finder of fact must determine whether CAO Group complied with its initial
purchase order requirements under the Manufacturing Agreement, sufficient to trigger
DenMat’s subsequent payment obligations under the License Agreement. Similarly, a
finder of fact must also decide whether CAO Group could have profitably manufactured
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cannot decide, based on the disputed record, whether DenMat’s purported failure to
comply with provisions of these agreements was motivated by bad faith. See Las Vegas
Land & Dev. Co., Inc. v. Bank of Am., N.A., No. CV152273FMOMANX, 2018 WL
6991161, at *6 (C.D. Cal. Oct. 15, 2018) (denying summary judgment and noting that
“[t]he issue of whether the implied covenant of good faith and fair dealing has been
breached is ordinarily a question of fact[.]”) (citing Hicks v. E.T. Legg & Associates., 89
Cal.App.4th 496, 509 (2001)).
C. CAO Group’s Rescission Claim
CAO Group seeks rescission of the Manufacturing Agreement based on its
mistaken beliefs regarding its ability to source using alternative vendors and components,
as well as regarding the bases for the sales prices for dental lasers and laser tips specified
in the Agreement. Countercl. ¶¶ 93–97. DenMat moves for summary judgment on CAO
Group’s claim, contending that, as a matter of law, CAO Group cannot demonstrate the
unconscionability required to warrant rescission. D. Mot. at 23–24.
A party to a contract may rescind the contract where “the consent of the party
rescinding . . . was given by mistake[.]” Cal. Civ. Code § 1689(b)(1). “Rescission for
unilateral mistake is permissible under California law only ‘where the other party knows
of the mistake or caused the mistake’ or ‘where the effect of the mistake is such that
enforcement of the contract would be unconscionable.’” Hamilton v. Marx, No.
LACV1007278JAKCWX, 2012 WL 12882368, at *11 (C.D. Cal. July 24, 2012) (citing
Donovan v. RRL Corp., 26 Cal. 4th 261, 281 (2001)).
The parties dispute whether DenMat knew that CAO Group was using its own
internal costs to benchmark the sales prices fixed in the Manufacturing Agreement. CAO
Group provides evidence that when the parties negotiated these prices ($1,199 per SOL
laser kit, $1,029 per NV laser kit, and $1.95 per laser tip), M. Agmt. § (5.2), CAO Group
used its own cost estimates to determine these prices, understanding that, over time, it
would be able to use its own vendors and components to manufacture products for
DenMat. Dkt. 55-23, Declaration of Densen Cao (“Cao Decl. II”) at ¶¶ 63–67. CAO
Group offers evidence that it submitted its own “calculated pricing information to
DenMat, which was based on CAO’s estimation of its costs to make the products[.]” Id.
¶ 64. DenMat disputes that it was aware of CAO Group’s estimated costs or that CAO
Group considered these costs in negotiating the sales prices specified in the
Manufacturing Agreement. Casper Decl. I. at ¶ 10. This dispute regarding whether
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pricing term alone precludes summary judgment as to CAO Group’s rescission claim.
Neoris de Mexico, S.A. De C.V. v. Ariba Inc., No. C 02-01670 JSW, 2005 WL 947032,
at *3 (N.D. Cal. Apr. 25, 2005) (noting that element of rescission claim requires that
“other party knew of or caused the mistake,” and finding that “existence of genuine
issues of material fact . . . precludes summary judgment”).
The parties also dispute whether it would be unconscionable for CAO Group to
manufacture products for DenMat using only DenMat’s approved vendors and
components. D. Mot. at 24; C. Opp. at 25. Dr. Cao maintains that CAO Group could not
profitably manufacture products using only DenMat’s approved vendors and components,
and it would not have entered the Manufacturing Agreement had it known DenMat would
not allow it to use alternative vendors and components. Cao Decl. II ¶¶ 90–93; D. Opp.
at 25. David Casper, DenMat’s CEO, disputes that CAO Group could not have profitably
manufactured products using DenMat’s approved components and vendors. Casper Decl.
II ¶ 11. Because the Court cannot resolve whether CAO Group could have profitably
manufactured products using only DenMat’s approved vendors and components, the
Court cannot determine whether enforcing CAO Group’s purported unilateral mistake
would be sufficiently “overly harsh or one-sided” to justify rescission. Donovan, 26 Cal.
4th at 291.
D. The Parties’ Unjust Enrichment Claims
DenMat and CAO Group each assert claims for unjust enrichment. See Compl. ¶
47; Countercl. ¶ 104. The parties elsewhere contend that California courts do not
recognize unjust enrichment as a cause of action. D. Mot. at 24 n.7; C. Mot. at 24. The
Court agrees with the parties’ contentions that unjust enrichment is not, itself, a
cognizable claim under California law.
Unjust enrichment is not a claim for relief but instead a “general principle
underlying various legal doctrines and remedies” that “is synonymous with restitution.”
Rosal v. First Fed. Bank of California, 671 F. Supp. 2d 1111, 1133 (N.D. Cal. 2009)
(collecting cases). A court may award restitution under an unjust enrichment theory in
two scenarios: (1) the parties’ express contract was procured by fraud or is otherwise
unenforceable; or (2) the defendant extracted a benefit from plaintiff by fraud, duress,
conversion, or similar conduct. McBride v. Boughton, 123 Cal. App. 4th 379, 388
(2004). In these cases, courts imply a “quasi-contract” to avoid one party’s unjust
enrichment. Id.
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DenMat and CAO Group agree that the License and Manufacturing Agreements
were valid and enforceable at the time the parties executed them. DSUF No. 87; C. Mot.
at 24; D. Mot. at 24. Under California law, no unjust enrichment claim lies “when an
enforceable, binding agreement exists defining the rights of the parties.” Paracor Fin.,
Inc. v. Gen. Elec. Capital Corp., 96 F.3d 1151, 1167 (9th Cir. 1996); accord Exp.-Imp.
Bank of the U.S. v. United Cal. Disc. Corp., 738 F. Supp. 2d 1047, 1060 (C.D. Cal. 2010)
(granting summary judgment on unjust enrichment claims asserted under California law
where binding and enforceable agreements between the parties exist). Therefore, the
parties’ claims for unjust enrichment fail as a matter of law.13
E. CAO Group’s Permanent Injunction Claim
CAO Group asserts a claim for “Permanent Injunction,” seeking an order
“enjoining DenMat from manufacturing, selling, distributing or otherwise
commercializing the Products.” Countercl. ¶ 112. Though not specifically addressed by
the parties, the Court notes that “an injunction is a remedy, not a cause of action.”
Roberts v. Los Angeles Cty. Bar Assn., 105 Cal. App. 4th 604, 618 (2003). A permanent
injunction is “a determination on the merits that a plaintiff has prevailed on a cause of
action for tort or other wrongful act against a defendant and that equitable relief is
appropriate.” Benasra v. Mitchell Silberberg & Knupp, 96 Cal. App. 4th 96, 110 (2002).
Because triable issues regarding CAO Group’s claims for relief remain, the Court
declines to adjudicate CAO Group’s request at this time.14

13 During oral argument, counsel for DenMat asserted that, although styled as a claim
for unjust enrichment, DenMat seeks relief pursuant to the California common law
doctrine of “money had, money received.” The Court reserves judgment as to whether
it would be unduly prejudicial to CAO Group for DenMat to assert this theory.
Accordingly, the grant of summary judgment as to the claim for unjust enrichment is
without prejudice to DenMat seeking leave to add a claim based on money had and
received or a similar continuous count.

14 See Tater-Alexander v. Amerjan, No. 1:08-CV-00372 OWW, 2011 WL 319012, at
*12 (E.D. Cal. Jan. 28, 2011) (finding that where other causes of action raise triable
CIVIL MINUTES – GENERAL ‘O’
Case No.  2:18-cv-06358-CAS(JEMx) Date  August 19, 2019
Title  DEN-MAT HOLDINGS, LLC v. CAO GROUP, INC.

V. CONCLUSION
For the foregoing reasons, the Court GRANTS, in part, and DENIES, in part,
DenMat’s motion for partial summary judgment. Specifically, the Court GRANTS
DenMat’s motion with respect to CAO Group’s sixth claim for unjust enrichment. The
Court otherwise DENIES the motion.
The Court GRANTS, in part, and DENIES, in part, CAO Group’s motion for
partial summary judgment. Specifically, the Court GRANTS CAO Group’s motion with
respect to DenMat’s second claim for unjust enrichment. The Court otherwise DENIES
the motion.
IT IS SO ORDERED.
00  :  15
Initials of Preparer                           CMJ

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9978604. Public record. Not legal advice.