dismissing a 5 fraudulent concealment claim as barred by the economic 6 loss rule where the allegedly fraudulent statements 7 related to defendant’s intent to make good on his 8 contractual promises
How later courts described this case
- dismissing a 5 fraudulent concealment claim as barred by the economic 6 loss rule where the allegedly fraudulent statements 7 related to defendant’s intent to make good on his 8 contractual promises
- finding 14 unconscionable injury where plaintiff changed its 15 position with another buyer in reliance on defendant’s 16 assurances and defendant rejected the goods after it was 17 too late for plaintiff to resell them
- holding that promissory estoppel was 22 inapplicable where defendant’s promises “were bargained 23 for and given in exchange for performance”
Written by the judges who cited it.
The opinion
Case 2:19-cv-10733-RSWL-JEM Document 260 Filed 03/04/22 Page 1 of 32 Page ID
#:15479
'O'
1
2
3
4
5
6
7
8 UNITED STATES DISTRICT COURT
9 CENTRAL DISTRICT OF CALIFORNIA
10
11
THE SANTA BARBARA CV 19-10733-RSWL-JEM x
12 SMOKEHOUSE, INC., a [ REDACTED]
13 California corporation; ORDER re: Defendants’
and DHBRANDS LIMITED, a Motion for Summary
14 Cyprus limited liability Judgment [129];
company, Defendants’ Objections and
15 Motion to Strike [165];
Plaintiffs, Defendants’ Motions in
16
Limine [196, 197, 198];
17 v. and Defendants’ Motion to
Exclude [206]
18 AQUACHILE, INC., a Florida
corporation; AGROSUPER
19 S.A., a Chile corporation;
and EMPRESAS AQUACHILE
20 S.A., a Chile corporation,
21 Defendants.
22
AQUACHILE, INC., a Florida
corporation,
23
Counter-Plaintiff,
24
v.
25
THE SANTA BARBARA
26
SMOKEHOUSE, INC., a
California corporation,
27
Counter-Defendant.
28
1
Case 2:19-cv-10733-RSWL-JEM Document 260 Filed 03/04/22 Page 2 of 32 Page ID
#:15480
1 Plaintiffs The Santa Barbara Smokehouse
2 (“Smokehouse”) and DHBrands Limited (“DHBrands”) bring
3 this Action, asserting the following claims for relief
4 against Defendants AquaChile, Inc. (“AquaChile”);
5 Agrosuper S.A. (“Agrosuper”); and Empresas AquaChile
6 S.A. (“Empresas”): (1) breach of contract; (2)
7 promissory estoppel; (3) fraudulent concealment; (4)
8 aiding and abetting fraudulent concealment; (5)
9 intentional interference with prospective economic
10 advantage; (6) negligent interference with prospective
11 economic advantage; (7) inducing breach of contract; (8)
12 intentional interference with contractual relations; (9)
13 intentional interference with prospective economic
14 advantage; and (10) negligent interference with
15 prospective economic advantage. AquaChile has asserted
16 counterclaims against Smokehouse for breach of contract
17 and promissory estoppel.
18 Currently before the Court are Defendants’ Motion
19 for Summary Judgment [129]; Motion to Strike [165];
20 Motions in Limine [196, 197, 198]; and Motion to Exclude
21 [206]. Defendants seek summary judgment on all of
22 Plaintiffs’ claims, as well as on AquaChile’s
23 counterclaims for breach of contract. Having reviewed
24 all papers submitted pertaining to this Motion, the
25 Court NOW FINDS AND RULES AS FOLLOWS: the Court GRANTS
26 Defendants’ Motion for Summary Judgment in its entirety.
27 The Court DENIES Defendants’ Motion to Strike and
28 OVERRULES Defendants’ objections. Given the Court’s
2
Case 2:19-cv-10733-RSWL-JEM Document 260 Filed 03/04/22 Page 3 of 32 Page ID
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1 ruling on the Motion for Summary Judgment, the Court
2 DENIES Defendants’ Motions in Limine and Motion to
3 Exclude as moot.
4 I. BACKGROUND
5 A. Factual Background
6 Smokehouse is a California corporation. Defs.’
7 Stmt. of Uncontroverted Facts (“Defs.’ SUF”) ¶ 1, ECF
8 No. 129-2.1 DHBrands owns the brands under which
9 Smokehouse sells its salmon products, and Smokehouse
10 pays DHBrands a percentage of Smokehouse’s revenues in
11 exchange for use of the brands. Id. ¶ 4. AquaChile is
12 a supplier of salmon fillets and is a wholly owned
13 subsidiary of Empresas. Id. ¶¶ 6, 8. Both AquaChile
14 and Empresas are owned by Agrosuper. Id. ¶ 7.
15 In 2015, Smokehouse and AquaChile entered into a
16 one-year supply agreement whereby AquaChile would supply
17 Smokehouse with various salmon fillets, and Smokehouse
18 would pay a price per pound that was negotiated monthly.
19 Id. ¶ 9. This agreement expired in April 2016, but
20 AquaChile continued to supply fillets to Smokehouse on a
21 per-order basis. Id. ¶ 10. When Smokehouse later
22 sought assurance that AquaChile would continue supplying
23
1 The Court relies on Defendants’ Statement of
24
Uncontroverted Facts [129-2] to the extent those facts are not
25 controverted by Plaintiffs’ Response [150-4]. See C.D. Cal. L.R.
56-3. A fact is considered controverted only where a “genuine”
26 factual dispute exists. See Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986). The Court relies on Plaintiffs’ Additional
27 Material Facts to supplement the factual record where
appropriate. Where any material facts are controverted, the
28
Court will indicate as much.
3
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1 it with salmon fillets at Smokehouse’s election,
2 AquaChile proposed a five-month supply agreement. Id.
3 ¶¶ 11, 12. Smokehouse CEO Tim Brown (“Brown”) rejected
4 this offer and instead proposed a two-year agreement.
5 Id. ¶ 13. Vincent De La Cruz (“De La Cruz”), an
6 AquaChile representative, in turn rejected Smokehouse’s
7 offer, stating he would get fired for accepting a two-
8 year supply agreement on AquaChile’s behalf. Id. ¶ 14;
9 Decl. of Michael Weiss in Supp. of MSJ (“Weiss Decl.”)
10 Ex. 11, ECF No. 130-11.
11 The parties agree that from 2016 through September
12 2019, AquaChile continued to provide weekly sales to
13 Smokehouse. Id. ¶ 22. The parties also agree that
14 Smokehouse was free to purchase salmon from other
15 suppliers at any time. Id. ¶ 25. However, Plaintiffs
16 assert that AquaChile’s continued supply was pursuant to
17 a three-year supply agreement that the parties entered
18 into on July 20, 2017 (the “2017 Agreement”), which
19 obligated AquaChile to supply Smokehouse with salmon
20 fillets through July 2020.2 Id. Defendants dispute the
21 existence of this contract, asserting that AquaChile did
22
23 2 Plaintiffs assert the following facts as to the formation
of the 2017 Agreement: Representatives of Smokehouse and
24
AquaChile (including De La Cruz and Brown) met on July 20, 2017.
25 Id. ¶ 97. De La Cruz brought with him a three-year supply
agreement dated July 3, 2017, and he gave it to Brown to sign.
26 Id. ¶ 98. After Brown signed the agreement, De La Cruz elected
not to sign the agreement but “said he wanted to bring it back
27 with him for a double check.” Id. ¶ 100. Over the next month,
Brown followed up about obtaining a countersigned copy of the
28
agreement but did not receive one. Id. ¶ 102.
4
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1 not agree to supply Smokehouse with salmon fillets for
2 three years. Defs.’ SUF ¶ 20.
3 In early 2019, AquaChile started to reduce supply
4 of fillets to Smokehouse. Id. ¶ 28. Plaintiffs assert
5 that Smokehouse began experiencing poor customer service
6 from AquaChile, that AquaChile ignored several purchase
7 orders Smokehouse had placed, and that there were delays
8 in shipments. Id. ¶ 29. Plaintiffs believed that the
9 supply issues were due to Agrosuper’s recent acquisition
10 of Empresas because there had previously been a lawsuit
11 between Smokehouse and Agrosuper. Id. ¶ 27. On April
12 11, 2019, AquaChile’s sales director told Brown that
13 AquaChile was terminating its relationship with
14 Smokehouse at Agrosuper’s direction and would not
15 continue shipping any salmon to Smokehouse due to its
16 prior lawsuit with Agrosuper. Id. ¶ 30. However,
17 Plaintiffs assert that De La Cruz called Smokehouse
18 personnel the following morning explaining that there
19 had been a miscommunication and that AquaChile would, in
20 fact, continue to supply Smokehouse. Pls.’ Resp. to
21 Defs.’ SUF ¶¶ 142-43.
22 For the next two months, there was a significant
23 cutback in salmon offered by AquaChile to Smokehouse.
24 Defs.’ SUF ¶ 32. In response, Smokehouse informed
25 AquaChile that its insufficient supply was impacting
26 Smokehouse and that Smokehouse therefore refused to pay
27 invoices owed to AquaChile for fillets Smokehouse had
28 received from AquaChile. Id. ¶¶ 34, 35. To diffuse
5
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1 tensions between the two parties, Smokehouse and
2 AquaChile entered into an agreement on June 6, 2019 (the
3 “2019 Agreement”), whereby AquaChile agreed to deliver
4 six containers of fillets at a reduced price due to
5 shipping delays, and in exchange Smokehouse agreed to
6 pay three outstanding invoices totaling $404,078.23.
7 Id. ¶ 36. The 2019 Agreement also stated that
8 Smokehouse “incurred $150k damages for . . . delayed /
9 non-shipped containers as referenced in the agreement
10 dated July 3, 2017 [and] quality control issues as
11 discussed on June 30, 2019.” Pls.’ Resp. to Defs.’ SUF
12 ¶ 173; Decl. of David A. Thomas in Supp. of Opp’n to MSJ
13 (“Thomas Decl.”) Ex. 35, ECF No. 153-37.
14 Shortly thereafter, AquaChile stopped supplying
15 Smokehouse with frozen salmon fillets altogether, and on
16 July 30, 2019, Smokehouse personnel discussed the need
17 to place orders with other suppliers so there was not a
18 gap in supply. Defs.’ SUF ¶ 45. On August 5, 2019,
19 AquaChile further advised Smokehouse that it would not
20 be able to continue supplying Smokehouse with washed
21 salmon fillets.3 Defs.’ Suf ¶ 46. In September 2019,
22 AquaChile stopped accepting any new orders and
23 completely cut off its supply to Smokehouse. Id. ¶ 49.
24
25
26
27 3 “Washing” is a process designed to kill Lm, a dangerous
species of bacteria that is known to exist in salmon products.
28
See Pls.’ Resp. to Defs.’ SUF ¶¶ 87, 95.
6
Case 2:19-cv-10733-RSWL-JEM Document 260 Filed 03/04/22 Page 7 of 32 Page ID
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1 Id. ¶ 41.
2
3
4 Id. ¶¶ 42-43.
5
6
7
8
9 Id. ¶ 44. Smokehouse had a “record”
10 year in 2019,
11
12 Id. ¶ 50; Pls.’ Resp. to Defs.’ SUF ¶ 50.
13
14
15
16
17 Defs.’ SUF ¶ 52. At the same time that AquaChile began
18 decreasing its supply to Smokehouse, Plaintiffs began
19 the process of selling Smokehouse. Pls.’s Resp. to
20 Defs.’ SUF ¶ 156.
21
22
23
24 Id. ¶¶ 193, 197.
25
26
27
28 Id. ¶ 277; Decl. of Jeremy Roberts
7
Case 2:19-cv-10733-RSWL-JEM Document 260 Filed 03/04/22 Page 8 of 32 Page ID
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1 in Supp. of Pls.’ Opp’n to MSJ (“Roberts Decl.”) Ex. 15,
2 ECF No. 153-93.
3
4 Pls.’
5 Resp. to Defs.’ SUF ¶¶ 278-82; Roberts. Decl. Ex. 16,
6 ECF No. 150-22.
7 B. Procedural Background
8 Plaintiffs commenced this Action [1] December 19,
9 2019, alleging that AquaChile’s breach of the 2017
10 Agreement, along with Defendants’ other misconduct,
11 caused Plaintiffs’ deal with Labeyrie to fall through
12 and an ultimate loss in Smokehouse’s value. On July 7,
13 2020, this Court granted in part and denied in part [61]
14 Empresas and Agrosuper’s Motion to Dismiss and granted
15 [62] AquaChile’s Motion to Dismiss with leave to amend.
16 Plaintiffs filed a First Amended Complaint [66] on
17 August 20, 2020. Defendants answered [73] on September
18 23, 2020, asserting their own counterclaims against
19 Plaintiffs for breach of contract and promissory
20 estoppel.
21 Defendants filed the instant Motion [129] on
22 January 18, 2022. Plaintiffs filed their Opposition
23 [153] on February 1, 2022, and Defendants replied [163]
24 on February 8, 2022. On February 11, 2022, this Court
25 granted [175] Plaintiffs’ Ex Parte Application to file a
26 sur-reply to address arguments raised in Defendants’
27 Reply regarding the economic loss doctrine. Plaintiffs
28 filed their Sur-Reply [189] on February 18, 2022.
8
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1 II. DISCUSSION
2 A. Legal Standard
3 Summary judgment is appropriate when the moving
4 party “shows that there is no genuine dispute as to any
5 material fact and the movant is entitled to judgment as
6 a matter of law.” Fed. R. Civ. P. 56(a). A fact is
7 “material” if it might affect the outcome of the suit,
8 and the dispute is “genuine” if the evidence is such
9 that a reasonable factfinder could return a verdict for
10 the nonmoving party. Anderson v. Liberty Lobby, 477 U.S
11 242, 248 (1986).
12 The moving party bears the initial burden of
13 proving the absence of a genuine dispute of material
14 fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323
15 (1986). Where the nonmoving party bears the burden of
16 proof at trial, the moving party need only show “an
17 absence of evidence to support the nonmoving party’s
18 case.” Id. at 325. If the moving party meets its
19 burden, the burden then shifts to the nonmoving party to
20 present “specific facts showing that there is a genuine
21 issue for trial.” Anderson, 477 U.S at 250. The
22 nonmoving party “must show more than the mere existence
23 of a scintilla of evidence . . . or some ‘metaphysical
24 doubt’ as to the material facts at issue.” In re Oracle
25 Corp. Sec. Litig., 627 F.3d 376, 387 (9th Cir. 2010).
26 The evidence, and all reasonable inferences based
27 on underlying facts, must be construed in the light most
28 favorable to the nonmoving party. Scott v. Harris, 550
9
Case 2:19-cv-10733-RSWL-JEM Document 260 Filed 03/04/22 Page 10 of 32 Page ID
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1 U.S. 372, 378 (2007). In reviewing the record, the
2 court’s function is not to weigh the evidence but only
3 to determine if a genuine issue of material fact exists.
4 Anderson, 477 U.S. at 255. “A district court’s ruling
5 on a motion for summary judgment may only be based on
6 admissible evidence.” In re Oracle Corp. Sec. Litig.,
7 627 F.3d at 385. “While the evidence presented at the
8 summary judgment stage does not yet need to be in a form
9 that would be admissible at trial, the proponent must
10 set out facts that it will be able to prove through
11 admissible evidence.” Norse v. City of Santa Cruz, 629
12 F.3d 966, 973 (9th Cir. 2010).
13 B. Analysis
14 1. Evidentiary Objections
15 Defendants lodged a total of twenty-four objections
16 to various evidence submitted in support of Plaintiffs’
17 Opposition to Defendants’ Motion for Summary Judgment.
18 See generally Defs.’ Objs. & Mot. to Strike Evid. in
19 Opp’n to Defs.’ MSJ, ECF No. 162-2. The majority of
20 these objections refer to evidence the Court does not
21 rely upon in considering Defendants’ Motion for Summary
22 Judgment. Accordingly, any objections pertaining to
23 evidence upon which the Court does not rely are
24 OVERRULED. See Carillo v. Schneider Logistics Trans-
25 Loading & Distrib., Inc., No. 2:11–cv–8557–CAS(DTBx),
26 2014 WL 172516, at *3 (C.D. Cal. Jan. 14, 2014). To the
27 extent the Court relies on any objected-to evidence, the
28 Court has considered the admissibility of the evidence
10
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1 and has not relied on any facts that are irrelevant or
2 that could not be produced in an admissible form at
3 trial. Objections to any evidence the Court has relied
4 upon are therefore OVERRULED.
5 2. The Motion
6 i. Breach of Contract
7 Defendants argue that Smokehouse’s breach of
8 contract claim fails as a matter of law because the
9 unsigned 2017 Agreement does not satisfy the statute of
10 frauds. Mot. 14:1-3. The Court agrees.
11 Under California’s statute of frauds, a contract
12 that by its terms is not to be performed within a year
13 of its making is invalid unless there is a written
14 record or memorandum acknowledging the agreement that is
15 signed by the party to be charged. Cal. Civ. Code. §
16 1624(a)(1). “A memorandum satisfies the statute of
17 frauds if it identifies the subject of the parties’
18 agreement, shows that they made a contract, and states
19 the essential terms with reasonable certainty.”
20 Sterling v. Taylor, 152 P.3d 420, 425 (Cal. 2007).
21 “What is essential depends on the agreement and its
22 context and also on the subsequent conduct of the
23 parties.” Id. (citing Restatement (Second) of Contracts
24 § 131 (Am. L. Inst. 1981)). Because the memorandum
25 serves an evidentiary purpose, the memorandum itself
26 must contain those essential terms; extrinsic evidence
27 cannot be used to supply required terms that are missing
28 from the memorandum. Id. at 425-26. It is a question
11
Case 2:19-cv-10733-RSWL-JEM Document 260 Filed 03/04/22 Page 12 of 32 Page ID
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1 of law whether a memorandum complies with the statute of
2 frauds, so “the issue is generally amenable to
3 resolution by summary judgment.” Id. at 429.
4 Here, Plaintiffs’ breach of contract claim rests on
5 the enforceability of the 2017 Agreement, which they
6 assert was a three-year supply agreement that obligated
7 AquaChile to supply Smokehouse with salmon fillets
8 through July 2020. See FAC ¶¶ 90-95, ECF No. 66. It is
9 undisputed that the 2017 Agreement was never signed by
10 any AquaChile representative. See Pls.’ Resp. to Defs.’
11 SUF ¶ 19. However, Plaintiffs argue that the memorandum
12 exception to the statute of frauds applies because the
13 2019 Agreement references the existence of the 2017
14 Agreement. See Pls.’ Opp’n to Defs.’ MSJ (“Opp’n”)
15 14:1-11, ECF No. 150-3.
16 The 2019 Agreement is insufficient to satisfy the
17 memorandum exception to statute of frauds as a matter of
18 law. The duration of AquaChile’s supply obligation is
19 an essential term of the purported 2017 Agreement. The
20 parties had formerly disagreed over duration, and the
21 very purpose of the purported 2017 Agreement was to give
22 Smokehouse assurance that AquaChile would continue
23 supplying it for a certain period of time. The 2019
24 Agreement, however, makes no reference whatsoever to any
25 duration term governing the 2017 Agreement. See Thomas
26 Decl. Ex. 35. Even if the Court were to consider
27 extrinsic evidence of a three-year term, nothing in the
28 record supports the existence of such a term. To the
12
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1 J contrary, the record shows that De La Cruz had refused a
2 | two-year supply agreement less than a month before the
3 | parties purportedly entered into the 2017 Agreement.
4 | See Defs.’ SUF 14-17.4
By Plaintiffs additionally argue that “AquaChile is
6 | estopped to assert the statute of frauds due to its
7 | partial performance, [Smokehouse’s] reliance thereon,
8 | and the unconscionability of finding it unenforceable.”
9] Opp’n 14:12-14. The Court disagrees.
10 “[W]here assertion of the statute of frauds would
11] cause unconscionable injury, part performance allows
12 | specific enforcement of a contract that lacks the
13 | requisite writing.” In re Marriage of Benson, 116 P.3d
14 1152, 1159 (Cal. 2005). However, “to constitute part
15 | performance, the relevant acts must either
16 □□
4 Plaintiffs also argue that representatives of each
17 | Defendant admitted during depositions that the 2019 Agreement
referenced the 2017 Agreement. Opp’n 14:9-ll. These oral
18 | statements do not amount to judicial admissions that AquaChile
agreed to be bound by a supply agreement for three years. Fora
19 judicial admission to overcome the statute of frauds, the
20 admission of the contract’s existence must be “unqualified or
unconditional.” Am. Induction Techs., Inc. v. KBK, Inc., No. SA
a4 CV11-00350 JAK (RNBx), 2012 WL 12888105, at *6 (C.D. Cal. April
208 AMA) 2
ae
24
25
26
□□
aT atements are equivocal at best
and cannot be considered judicial admissions of a three-year
28 supply agreement.
13
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1 ‘unequivocally refer’ to the contract or ‘clearly
2 relate’ to its terms.” Id. at 1160 (citations omitted).
3 “Unconscionable injury results from denying enforcement
4 of a contract after one party is induced by another
5 party to seriously change position relying upon the oral
6 agreement” or where there is unjust enrichment. Allied
7 Grape Growers v. Bronco Wine Co., 249 Cal. Rptr. 872,
8 878 (Cal. Ct. App. 1988).
9 Here, AquaChile’s conduct in supplying Smokehouse
10 with salmon fillets through September 2019 does not
11 unequivocally refer or relate to the purported three-
12 year term of the 2017 Agreement. This evidence shows
13 nothing more than that Smokehouse had been placing
14 orders with AquaChile and AquaChile had been filling
15 them; Plaintiffs point to no performance by Defendants
16 indicating that they were required to do so for a three-
17 year term. Similarly, that the 2019 Agreement required
18 AquaChile to pay Smokehouse $150,000 for delays
19 “referenced” in the 2017 Agreement does not clearly
20 relate to a three-year term. In short, AquaChile’s
21 conduct in supplying salmon fillets to Smokehouse and
22 paying for delays does not create a genuine issue of
23 fact as to whether AquaChile was under an obligation to
24 supply for a term of three years. AquaChile’s conduct
25 therefore fails to affirm the purported terms of the
26 2017 Agreement. See Sutton v. Warner, 15 Cal. Rptr. 2d
27 632, 637 (Cal. Ct. App. 1993) (stating that a primary
28 consideration in applying the part performance exception
14
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1 is “the extent to which the evidentiary function of the
2 statutory formalities of the statute of frauds is
3 fulfilled by the conduct of the parties”).
4 The part performance exception is also inapplicable
5 because Smokehouse would not suffer an unconscionable
6 injury if the 2017 Agreement were not enforced. It is
7 undisputed that Plaintiffs did not suffer any material
8 loss in earnings due to AquaChile’s supply stoppage.
9 See Pls.’ Resp. to Defs.’ SUF ¶¶ 50-51. And even if
10 AquaChile’s supply stoppage prevented Smokehouse from
11 closing the deal with Labeyrie,
12
13
14 See Roberts Decl. Ex. 15. Because
15 AquaChile’s supply stoppage did not cause Smokehouse any
16 loss in earnings and did not prevent Plaintiffs from
17 pursuing the sale of Smokehouse to other buyers
18 , Smokehouse would not suffer an
19 unconscionable injury if the contract were deemed
20 unenforceable. Further, AquaChile would not be unjustly
21 enriched if the 2017 Agreement were not enforced because
22 AquaChile held up its end of each bargain by supplying
23 Smokehouse with salmon fillets to fill the orders that
24 Smokehouse had paid for. See Pls.’ Resp. to Defs.’ SUF
25 ¶¶ 79-82.
26 The evidence also reveals that Smokehouse did not
27 seriously change its position in reliance upon
28 AquaChile’s purported representations that it would
15
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1 continue to supply Smokehouse with salmon for three
2 years. See Allied Grape, 249 Cal. Rptr. at 878.
3
4
5
6 Pls.’ Resp. to Defs.’ SUF ¶¶ 42-43.
7
8
9 Id. ¶ 44. This
10 transition shows that Smokehouse was not fully dependent
11 on AquaChile to supply it with fillets, and the impact
12 of the supply stoppage on Smokehouse was minimal. Cf.
13 Allied Grape, 249 Cal. Rptr. at 879 (finding
14 unconscionable injury where plaintiff changed its
15 position with another buyer in reliance on defendant’s
16 assurances and defendant rejected the goods after it was
17 too late for plaintiff to resell them).
18 In sum, there is simply no written memorandum or
19 conduct by the parties that overcomes the statute of
20 frauds defense here. “The writing requirement is
21 intended to permit the enforcement of agreements
22 actually reached, but ‘to prevent enforcement through
23 fraud or perjury of contracts never in fact made.’”
24 Sterling, 152 P.3d at 431 (quoting Restatement (Second)
25 of Contracts § 131 (Am. L. Inst. 1981)). The evidence
26 here fails as a matter of law to establish with
27 reasonable certainty that the parties entered into a
28 supply agreement with a three-year term.
16
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1 Accordingly, the Court concludes that the 2017
2 Agreement is unenforceable under the statute of frauds
3 because it is not signed by any representative of
4 Defendants and no exception to the statute of frauds
5 applies. Because Plaintiffs’ first claim is for breach
6 of this unenforceable agreement, the Court GRANTS
7 Defendants’ Motion as to Plaintiffs’ first claim for
8 relief.
9 Plaintiffs’ seventh claim, for inducing breach of
10 contract, and eighth claim, for intentional interference
11 with contractual relations, also depend on the
12 enforceability of the 2017 Agreement. See FAC ¶¶ 124-
13 137; see Sebastian Int’l, Inc. v. Russolillo, 162 F.
14 Supp. 2d 1198, 1203 (C.D. Cal. 2001). Because the
15 Agreement is unenforceable under the statute of frauds,
16 these claims must also fail as a matter of law.
17 Accordingly, the Court GRANTS Defendant’s Motion as to
18 Plaintiffs’ seventh and eighth claims for relief.
19 ii. Promissory Estoppel
20 Plaintiffs alternatively seek recovery under a
21 promissory estoppel theory. See FAC ¶ 97. Plaintiffs
22 assert that AquaChile promised to supply Smokehouse with
23 salmon fillets “in accordance with the terms of the
24 [2017 Agreement] and the parties’ prior dealings.” Id.
25 ¶ 98.
26 Promissory estoppel is intended to “make a promise
27 binding, under certain circumstances, without
28 consideration in the usual sense of something bargained
17
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1 for and given in exchange.” Youngman v. Nev. Irrigation
2 Dist., 449 P.2d 462, 468 (Cal. 1969). If, however,
3 there was a bargained-for exchange such that a promise
4 is supported by consideration, the doctrine of
5 promissory estoppel is inapplicable. Id.; Walker v. KFC
6 Corp., 728 F.2d 1215, 1220 (9th Cir. 1984) (quotation
7 marks and citations omitted) (“[T]he promissory estoppel
8 doctrine is limited to cases where no benefit flows to
9 the promisor.”).
10 Here, Smokehouse alleges that it detrimentally
11 relied on AquaChile’s promises that it would continue to
12 supply Smokehouse with salmon fillets through July 2020.
13 FAC ¶ 98. However, it is undisputed that Smokehouse
14 agreed to pay AquaChile for each order of fillets that
15 AquaChile supplied. Pls.’ Resp. to Defs.’ SUF ¶ 22.
16 AquaChile’s purported promise was therefore part of a
17 bargained-for exchange that was supported by
18 consideration. Accordingly, promissory estoppel is
19 inapplicable here. See Boon Rawd Trading Int’l Co. v.
20 Paleewong Trading Co., 688 F. Supp. 2d 940, 953-54 (N.D.
21 Cal. 2010) (holding that promissory estoppel was
22 inapplicable where defendant’s promises “were bargained
23 for and given in exchange for performance”); Patriot
24 Scientific Corp. v. Korodi, 504 F. Supp. 2d 952, 969
25 (S.D. Cal. 2007) (same). In other words, Plaintiffs may
26 not use the doctrine of promissory estoppel to
27 circumvent the statute of frauds and recover under an
28 unenforceable contract. “Promissory estoppel is not a
18
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1 doctrine designed to give a party to a negotiated
2 commercial bargain a second bite at the apple in the
3 event it fails to prove a breach of contract.” Walker,
4 728 F.2d at 1220. Accordingly, the Court GRANTS
5 Defendants’ Motion as to Plaintiffs’ second claim for
6 relief.
7 iii. Fraudulent Concealment
8 A. Smokehouse’s Claim
9 1. Economic Loss Doctrine
10 “The economic loss rule requires a purchaser to
11 recover in contract for purely economic loss due to
12 disappointed expectations, unless he can demonstrate
13 harm above and beyond a broken contractual promise.”
14 Robinson Helicopter Co., v. Dana Corp., 102 P.3d 268,
15 272 (Cal. 2004) (citation omitted). Thus, in an effort
16 to “prevent the law of contract and the law of tort from
17 dissolving one into the other,” the economic loss rule
18 bars tort claims that seek recovery for purely economic
19 loss that is indistinguishable from the loss caused by
20 breach itself. Id. at 273 (quoting Rich Prods. Corp. v.
21 Kemutec, Inc., 66 F. Supp. 2d 937, 969 (E.D. Wis. 1999).
22 Despite this rule, courts have allowed recovery for
23 a “tortious breach of contract” where the breach is
24 accompanied by fraudulent conduct that is separate from
25 the breach itself and causes damage to the plaintiff
26 beyond that contemplated by the contract. Id. at 273,
27 276. Where the fraud is rooted solely in
28 misrepresentations as to the defendant’s performance
19
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1 under the terms of the contract, however, courts have
2 held that the economic loss rule bars the tort claim.
3 See UMG Recordings, Inc. v. Global Eagle Ent., Inc., 117
4 F. Supp. 3d 1092, 1104-05 (C.D. Cal. 2015) (dismissing a
5 fraudulent concealment claim as barred by the economic
6 loss rule where the allegedly fraudulent statements
7 related to defendant’s intent to make good on his
8 contractual promises).
9 Here, Plaintiffs assert that Defendants are liable
10 in fraud because they failed to disclose to Smokehouse
11 that they “had decided to terminate the [2017 Agreement]
12 and cut off all supply . . . well before the earliest
13 end of the three-year term in the agreement.” See FAC ¶
14 76(a); see also Opp’n 22:23-26 (“Defendants are liable
15 to Plaintiffs because they made a past decision . . . to
16 cut off all supply to [Smokehouse] in the near future
17 despite the [2017 Agreement] and then misled Plaintiffs
18 into believing supply would continue.”). This claim
19 seeks recovery of solely economic loss and is not
20 independent from the purported contract between
21 Smokehouse and AquaChile. Plaintiff’s fraudulent
22 concealment claim is therefore barred by the economic
23 loss doctrine.
24 Alexsam Inc. v. Green Dot Corp., No. 2:15–cv–05742–
25 CAS (PLAx), 2017 WL 2468769 (C.D. Cal. June 5, 2017), is
26 instructive. There, plaintiff sued defendant for breach
27 of contract and intentional misrepresentation, among
28 other things. Id. at *1. Plaintiff alleged that
20
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1 defendant breached the parties’ licensing agreement by
2 failing to pay plaintiff royalties. Id. at *2.
3 Plaintiff further alleged that when it sent a letter to
4 defendant asking whether defendant owed royalties to
5 plaintiff for its sale of certain products, defendant
6 intentionally misrepresented that no royalties were owed
7 in order to avoid paying them. Id. at *3. The court
8 determined that the intentional misrepresentation claim
9 was barred by the economic loss doctrine because
10 defendants “alleged fraud is directly related to its
11 alleged breach” of the licensing agreement and the
12 parties’ dispute was “fundamentally contractual in
13 nature.” Id. at *6. Further, the court reasoned that
14 plaintiff did not allege damages resulting from the
15 fraud “aside from economic losses resulting from breach”
16 of the licensing agreement. Id.
17 Smokehouse’s fraud claim here fails for similar
18 reasons. Plaintiffs seek to hold Defendants liable for
19 their repeated affirmations that they would continue to
20 supply Smokehouse with salmon fillets pursuant to the
21 2017 Agreement. Plaintiffs pinpoint Defendants’
22 fraudulent conduct as their failure to disclose their
23 intention to breach that agreement early.5 See Opp’n
24
5 In their sur-reply, Plaintiffs attempt to recharacterize
25 their fraud claim as one of fraudulent inducement by asserting
that the fraud claim is based on “Defendants’ fraudulent
26
inducement of Plaintiffs to enter into two sets of contracts”:
27 (1) the 2019 Agreement; and (2) subsequent purchases of salmon
from AquaChile until the supply cutoff. See Pls.’ Sur-Reply in
28 Opp’n to Defs.’ MSJ (“Sur-Reply”) 1:5-9, ECF No. 189. This fraud
theory is not only inconsistent with Plaintiffs’ prior papers but
21
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1 22:23-27. Because the specified misrepresentations are
2 tied directly to Defendants’ performance under the 2017
3 Agreement, the dispute is fundamentally contractual in
4 nature. Plaintiffs are barred from transforming that
5 contractual dispute into a tort claim because any losses
6 Plaintiffs suffered from Defendants’ misrepresentations
7 should have been anticipated by Plaintiffs and accounted
8 for when the parties purportedly negotiated the 2017
9 Agreement.6 See Chaffey Joint Union High School Dist.
10 V. FieldTurf USA, Inc., No. EDCV 16-204-JGB-DTBx, 2016
11 WL 11499348, at *4 (C.D. Cal. April 28, 2016)
12
is also unpersuasive. The representations that Plaintiffs
13
identify as fraudulent relate to Defendants’ continued supply of
14 salmon through July 2020. See Sur-Reply 1:19-21. Neither the
2019 Agreement nor the subsequent purchases Plaintiffs refer to
15 relate in any way to Defendants’ purported obligation to continue
supply. To the extent Plaintiffs argue that they relied on
16 Defendants’ statements about continued supply in entering these
agreements, that reliance is therefore unreasonable as a matter
17
of law. Moreover, Plaintiffs have failed to create a triable
18 issue of fact as to any loss they suffered by entering into
either the 2019 Agreement or the subsequent purchases, as they do
19 not dispute that Defendants held up their end of the bargain in
each instance.
20
6 The Court’s conclusion that the 2017 Agreement is
21 unenforceable does not change the application of the economic
loss rule. See Soil Retention Prods., Inc. v. Brentwood Indus.,
22 Inc., 521 F. Supp. 3d 929 (S.D. Cal. 2021) (dismissing breach of
contract claim for failure to sufficiently allege the existence
23 of a contract, and then dismissing fraud claims related to that
alleged contract as barred by the economic loss rule). Applying
24
the rule here serves its policy of preventing “the law of
25 contract and the law of tort from dissolving one into the other.”
Robinson Helicopter, 102 P.2d at 273 (citations omitted).
26 Smokehouse seeks to recover for the same economic losses here as
it does in its breach of contract claim, and it cannot circumvent
27 the flaws of that claim by recasting it as fraud without also
showing some “clear . . . deviation from socially useful business
28
practices” in support. Id. at 275 (citations omitted).
22
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1 (dismissing misrepresentation claim because the
2 “representations [fell] squarely within the warranties
3 of the contracts”). Indeed, as in Alexsam, Plaintiffs
4 seek identical recovery for both the breach of contract
5 and the fraud claims. Because the economic loss rule
6 bars Plaintiffs’ fraudulent concealment claims, the
7 Court GRANTS Defendants’ Motion as to Smokehouse’s third
8 claim for relief.
9 2. Duty to Disclose
10 To the extent Smokehouse is alleging that
11 Defendants are liable for fraud based on their
12 misrepresentations that supply would continue
13 independent of the contract, the Court finds that this
14 claim must fail because Defendants did not have a duty
15 to disclose their supply cutoff to Smokehouse.
16 “The elements of fraudulent concealment are: (1)
17 the defendant concealed or suppressed a material fact;
18 (2) the defendant was under a duty to disclose the fact
19 to the plaintiff; (3) the defendant intentionally
20 concealed or suppressed the fact with the intent to
21 defraud the plaintiff; (4) the plaintiff was unaware of
22 the fact and would not have acted as he did if he had
23 known of the concealed or suppressed fact; and (5) as a
24 result of the concealment or suppression of the fact,
25 the plaintiff sustained damage.” Immobiliare, LLC v.
26 Westcor Land Title Ins. Co., 424 F. Supp. 3d 882, 888
27 (E.D. Cal. 2019) (quoting Burch v. CertainTeed Corp.,
28 246 Cal. Rptr. 3d 99, 106 (Cal. Ct. App. 2019)). A duty
23
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1 to disclose arises: “(1) when the defendant is in a
2 fiduciary relationship with the plaintiff; (2) when the
3 defendant had exclusive knowledge of material facts not
4 known to the plaintiff; (3) when the defendant actively
5 conceals a material fact from the plaintiff; and (4)
6 when the defendant makes partial representations but
7 also suppresses some material facts.” Id. In the
8 latter three circumstances, some sort of transactional
9 relationship between the parties is also required that
10 would give rise to the need for full disclosure of facts
11 material to that agreement. Id. at 889.
12 Here, Defendants were not under a duty to disclose
13 AquaChile’s decision to stop supplying Smokehouse
14 because there was not a sufficient transactional
15 relationship between the parties. Given that the 2017
16 Agreement is unenforceable, all that existed between
17 AquaChile and Smokehouse was an informal supply
18 arrangement that both parties were free to terminate at
19 any time. While each order placed by Smokehouse and
20 fulfilled by AquaChile constituted a transactional
21 relationship, those distinct transactions did not
22 include a promise that any new transactions would take
23 place. Because there was no existing agreement between
24 the parties that obligated Defendants to notify
25 Smokehouse that it would no longer accept orders from
26 them, Defendants cannot be liable in fraud for failing
27 to disclose that fact to Smokehouse.
28 Plaintiffs argue that Defendants had a duty to
24
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1 disclose their June 2019 decision to stop supplying
2 Smokehouse because they made “misleading statements” and
3 “half-truths designed to conceal the cutoff decision”
4 and because they actively concealed the cutoff decision
5 from Plaintiffs. Opp’n 21:21-27. Plaintiffs point to
6 two emails sent from De La Cruz to Brown where AquaChile
7 purportedly made material misrepresentations. Id. The
8 first responded to Smokehouse’s concern in not receiving
9 an offer to purchase more fillets for the week, which
10 stated: “I will call them to make sure they offer you
11 volumes every week.” See Thomas Decl. Ex. 27, ECF No.
12 153-29. The second responded to Smokehouse’s inquiry
13 about a shipment from Defendants that was short on
14 expected quantity, which stated: “We [w]ill make it [up]
15 in the next ones, or through fresh [fillets] if needed.”
16 See Decl. of Timothy Brown in Supp. of Opp’n (“Brown
17 Decl.”) Ex 1, ECF No. 153-77.
18 These statements, read in the light most favorable
19 to Plaintiffs, are not likely to mislead a reasonable
20 person into believing that AquaChile would continue
21 supplying Smokehouse for any certain period of time.
22 While De La Cruz promised to offer Smokehouse volumes of
23 salmon “every week,” no reasonable businessperson would
24 read that statement so literally as to require a
25 qualification that the supply would not continue
26 forever. Similarly, De La Cruz’s promise to make up for
27 a short supply in subsequent orders is not a promise to
28 supply orders indefinitely. In the absence of an
25
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1 enforceable agreement to continue supply, these two
2 statements are not likely to mislead a reasonable
3 purchaser into believing that the supplier is obligating
4 itself to continue the supply for a certain period of
5 time. To find that such statements either bind
6 AquaChile to continue supply indefinitely or make
7 AquaChile liable for fraud would discourage healthy
8 communication between businesses and would create
9 needless litigation any time an informal supply
10 arrangement fell through. Because the Court finds the
11 2017 Agreement to be unenforceable for the reasons
12 stated above, the Court declines to hold that Defendants
13 were under a duty to disclose their intent to stop
14 supplying Smokehouse in the near future.
15 Plaintiffs alternatively argue that Defendants were
16 under a duty to disclose their intent to cut off supply
17 because they “prevented Plaintiffs from discovering the
18 cutoff decision by reassuring [Smokehouse] about
19 supply.” Opp’n 21:27-28. The record, however,
20 indicates otherwise. When Defendants had to cut back
21 their supply by no longer providing fresh salmon to
22 Smokehouse, De La Cruz clearly communicated as much.
23 See Thomas Decl. Ex. 22, ECF No. 153-24. And Plaintiffs
24 themselves acknowledge that from June through September
25 2019, “the amount of salmon AquaChile was offering
26 remained on the lower side.” See Pls.’ Resp. to Defs.’
27 SUF ¶ 235. While Defendants may not have told
28 Plaintiffs about their supply cutoff decision as soon as
26
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1 they formed their intent to cut off supply, Defendants
2 were under no duty to do so. Defendants’ failure to
3 inform Plaintiffs of this decision from June until
4 September 2019 therefore cannot amount to fraud.
5 Accordingly, the Court GRANTS Defendants’ Motion as to
6 Smokehouse’s claim for fraudulent concealment.
7 B. DHBrands’ Claim
8 Because DHBrands’ fraudulent concealment claim is
9 based on the same purported misrepresentations as those
10 underpinning Smokehouse’s claim, the economic loss rule
11 should apply equally to bar DHBrands’ claim. While
12 DHBrands itself was not in privity of contract with
13 AquaChile, the misrepresentations presented are
14 nonetheless rooted in AquaChile’s promises to perform
15 duties under the purported contract. The policies
16 behind the economic loss doctrine therefore apply with
17 equal force to DHBrands’ claim as to Smokehouse’s claim.
18 See Agricola Cuyuma SA v. Corona Seeds, Inc., No. CV 17-
19 8220-DMG (SKx), 2021 WL 3930054 (C.D. Cal. June 25,
20 2021) (applying the economic loss rule in the absence of
21 contractual privity because it furthered the policy goal
22 of requiring an agreement to sue under to recover for
23 purely economic loss).
24 DHBrands’ claim similarly fails because Defendants
25 did not owe DHBrands a duty to disclose their intent to
26 cut off their supply to Smokehouse. DHBrands’ claim
27 relies on the same statements and arguments as
28 Smokehouse’s claim, and the arguments related to duty
27
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1 therefore fail for the reasons stated above.
2 Accordingly, the Court GRANTS Defendants’ Motion as to
3 DHBrands’ claim for fraudulent concealment.
4 C. Aiding and Abetting
5 Plaintiffs assert a claim for aiding and abetting
6 fraudulent concealment against Agrosuper, arguing that
7 Agrosuper aided the fraudulent conduct of AquaChile and
8 Empresas in concealing the supply cutoff decision. See
9 FAC ¶¶ 110-112. “[L]iability under an aiding and
10 abetting theory ‘is dependent upon the commission of an
11 underlying tort.’” Harrison v. Downey Savings & Loan
12 Ass’n, F.A., No. 09–CV–1391 H(BLM), 2009 WL 2524526, at
13 *6 (S.D. Cal. Aug. 14, 2009) (quoting Richard B. LeVine,
14 Inc. v. Higashi, 32 Cal. Rptr. 3d 244, 249 (Cal. Ct.
15 App. 2005)). Because Plaintiffs’ underlying fraudulent
16 concealment claims fail, their claim for aiding and
17 abetting fraudulent concealment also fails. The Court
18 therefore GRANTS Defendants’ Motion as to Plaintiffs’
19 fourth claim for relief.
20 iv. Intentional and Negligent Interference with
21 Prospective Economic Advantage
22 Interference with prospective economic advantage
23 requires, among other things, “intentional [or
24 negligent] acts on the part of the defendant designed to
25 disrupt the relationship.” Korea Supply Co. v. Lockheed
26 Martin Corp., 63 P.3d 937, 950 (Cal. 2003) (citation
27 omitted). As part of this element, a plaintiff must
28 also prove that the defendant’s acts were wrongful apart
28
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1 from the interference itself. Id.
2 Plaintiffs argue that Defendants interfered with
3 the prospective economic advantage Plaintiffs were to
4 receive from their deal with Labeyrie by cutting off the
5 supply of salmon to Smokehouse. See FAC ¶¶ 113-123,
6 138-147. To establish that Defendants’ interfering
7 actions were wrongful, Plaintiffs rely on Defendants’
8 “ongoing pattern” of fraudulently concealing their
9 decision to cut off supply in violation of the 2017
10 Agreement. See Opp’n 18:11-17. As explained above,
11 however, there was nothing fraudulent about Defendants’
12 failure to inform Plaintiffs of their decision to cut
13 off supply before September 2019. Because Plaintiffs
14 offer no alternative basis for finding that Defendants’
15 conduct was wrongful, Plaintiffs fail to establish the
16 third element of their interference claims. The Court
17 therefore GRANTS Defendants’ Motion as to Plaintiffs’
18 fifth, sixth, ninth, and tenth claims for relief.
19 v. Defendants’ Counterclaims
20 AquaChile seeks summary judgment against Smokehouse
21 in the amount of $556,519.32 for orders that AquaChile
22 filled but for which Smokehouse refuses to pay. See
23 Mot. 25:14-19. Smokehouse does not dispute that it
24 received these orders, nor that it was able to earn a
25 profit of over $100,000 from reselling these fillets to
26 its customers. See Pls.’ Resp. to Defs.’ SUF ¶¶ 79-82.
27 Rather, Smokehouse argues that AquaChile fraudulently
28 altered its “washing” process without informing
29
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1 Smokehouse, which is a complete defense to AquaChile’s
2 claim. See Opp’n 25:10-22.
3 Fraud is a well-established defense to a breach of
4 contract claim that may serve as a complete bar to the
5 claimant’s recovery. TSI USA LLC v. Uber Techs., Inc.,
6 No. 17-cv-03536-HSG, 2020 WL 5257873, at *8 (N.D. Cal.
7 Sept. 3, 2020). “In California, the elements of fraud
8 are: (1) misrepresentation; (2) knowledge of falsity;
9 (3) intent to defraud or to induce reliance (4)
10 justifiable reliance; and (5) resulting damage.” Id.
11 (citing Odorizzi v. Bloomfield Sch. Dist., 246 Cal. App.
12 2d 123, 129 (Cal. Ct. App. 1966).
13 Several issues thwart Smokehouse’s affirmative
14 defense. First, Smokehouse has failed to provide
15 evidence of an affirmative representation made by
16 AquaChile that the fillets included in the relevant
17 purchase order were washed. To the contrary, Smokehouse
18 admits that AquaChile communicated its inability to
19 continue supplying washed fillets on April 26, 2019, and
20 again on August 5, 2019. See Pls.’ Resp. to Defs.’ SUF
21 ¶¶ 145, 229. Because all of the invoices for the orders
22 at issue are dated after these communications, any
23 reliance on a statement to the contrary was unreasonable
24 as a matter of law. See Weiss Decl. Ex. 55, ECF No.
25 130-55. Finally, even if such a misrepresentation
26 existed, Smokehouse has failed to raise a triable issue
27 of fact as to damage resulting from the fraud.
28 Plaintiff does not dispute that it was able to sell the
30
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1 relevant fillets at a profit and does not otherwise
2 assert any losses occurred as a result of AquaChile’s
3 purported misrepresentation. See Pls.’ Resp. to Defs.’
4 SUF ¶ 82.
5 In sum, it is undisputed that Smokehouse received
6 $556,519.32 worth of salmon and has refused to pay
7 AquaChile despite the existence of valid agreements.
8 See Weiss Decl. Ex. 55, ECF No. 130-55. Smokehouse has
9 failed to raise a triable issue of fact as to its
10 affirmative defense for fraud. The Court therefore
11 GRANTS Defendants’ Motion as to AquaChile’s first and
12 second counterclaims for breach of contract and award
13 AquaChile $556,519.32 on its breach of contract claim.
14 Because AquaChile pleaded its third counterclaim for
15 promissory estoppel as an alternative to its second
16 claim for relief, AquaChile’s third counterclaim is
17 therefore moot.
18 III. CONCLUSION
19 Based on the foregoing, the Court GRANTS
20 Defendants’ Motion for Summary Judgment. The Court
21 enters judgment in favor of Defendants and against
22 Plaintiffs on all ten of Plaintiffs’ claims for relief.
23 The Court also rules in favor of AquaChile on its first
24 and second counterclaims for breach of contract and
25 enters judgment against Smokehouse in the amount of
26 $556,519.32. The Court dismisses AquaChile’s third
27 counterclaim for promissory estoppel as moot.
28 Given the Court’s ruling on the Motion for Summary
31
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1 Judgment, the Court DENIES Defendants’ Motions in Limine
2 and its Motion to Exclude as moot.
3 IT IS SO ORDERED.
4
5 DATED: March 4, 2022 ____/_s_/ _R_o_n_a_l_d_ S_._W__. _L_e_w______
HONORABLE RONALD S.W. LEW
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Senior U.S. District Judge
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