Case Name: Seagate Technology, LLC, et al. v. Goel, et al.
Case No.: 18CV328929

Plaintiffs/cross-defendants Seagate Technology LLC, Seagate Technology, Seagate Technology International and Seagate Singapore International Headquarters Pte. Ltd. (collectively, “Plaintiffs”) move for judgment on the pleadings in their favor and against defendant/cross-complainant eSys Information Technologies Pvt. Ltd. (“eSys India”) as to eSys India’s cross-complaint (“Cross-Complaint”).

I. Factual and Procedural Background

The instant actions arise out of a purported failure to pay money owed pursuant to a settlement agreement. According to the allegations of the underlying complaint (“Complaint”), in or around June and July 2009, Plaintiffs and defendants Vikas Goel (“Goel”), eSys Technology Pte. Ltd. (“eSys Singapore”), eSys Distribution, Inc., eSys Technologies FZE, eSys Distribution FZE, eSys Distribution (Private) LTD., eSys Pakistan (Pvt.) Ltd, eSys India, eSys Global Holdings Limited and Rainforest Trading (“Rainforest”) (collectively, “Defendants”) entered into a written agreement entitled “Final Settlement Agreement and Mutual Release” (the “Settlement Agreement”) pursuant to which Defendants were required to make payments to Plaintiffs. (Complaint, ¶ 18, Exhibit A.)

On June 11, 2014, Plaintiffs demanded defendant eSys Singapore make its payments to Seagate Technology International pursuant to the Settlement Agreement. (Complaint, ¶ 19.) eSys Singapore failed to do so and, as a result, failed to perform its obligations under the contract. (Id.) On June 23 and July 14, 2014, Plaintiffs sent Certificates of Debt to Rainforest, the guarantor of the debt pursuant to the Settlement Agreement and the two corresponding Deeds of Guarantee. (Id., ¶ 20.) Plaintiffs then sent several demand letters to Rainforest for it to satisfy eSys Singapore’s debt, as well as to Goel to satisfy eSys Singapore and Rainforest’s debts as required by the Settlement Agreement and the five corresponding Deeds of Guarantees. (Id., ¶¶ 21-24.) These letters failed to compel Defendants to pay the sums owed. (Id.)

Consequently, Plaintiffs filed their Complaint on May 31, 2018, which asserted a single claim for breach of contract. Approximately three months later, on August 20, 2018, eSys India filed a cross-complaint (“Cross-Complaint”) against Plaintiffs for (1) breach of contract and (2) declaratory judgment. In the Cross-Complaint, eSys India pleads that the purpose of the Settlement Agreement was to settle and resolve all claims that the parties had made or could make against one another and, pursuant to the Settlement Agreement, Plaintiffs released eSys India from any and all claims, known or unknown, related to or arising out of the subject matter of the Settlement Agreement (the so-called “Seagate-eSys Cases”). (Cross-Complaint, ¶ 10.) Plaintiffs agreed that they would not institute any action of any kind against eSys India, including any claims “within the scope of, arises out of, or regarding the Released Claims.” (Id., ¶ 11.)

According to eSys India, before the execution of the Settlement Agreement, Plaintiffs breached their distribution agreements with eSys India by, among other things, failing to fulfill warranty obligations and terminating those agreements. (Cross-Complaint, ¶ 12.) This resulted in the destruction of eSys India. (Id., ¶ 13.) As part of the Settlement Agreement, eSys India released Plaintiffs from its rightful claim to the damages they caused, and did so in reliance on Plaintiff’s commitment to abide by the terms of the Settlement Agreement, including the covenant not to sue eSys India. (Id., ¶ 15.)

eSys India maintains that under the Settlement Agreement, it had no obligation to pay Plaintiffs any sum of money, and alleges that by bringing the underlying action seeking money damages, Plaintiffs have materially breached and repudiated the Settlement Agreement. (Cross-Complaint, ¶ 19.)

On January 29, 2019, Plaintiffs filed the instant motion for judgment on the pleadings as to the Cross-Complaint in its entirety and both of the causes of action asserted therein. eSys India opposes the motion.

II. Plaintiffs’ Request for Judicial Notice

In support of their motion for judgment on the pleadings, Plaintiffs request that the Court take judicial notice of the following items: (1) three documents filed in Seagate Technology v. eSys Distribution, Inc., et al., Santa Cruz County Superior Court Case No. CV 160181 (Exhibits A, B and C); and (2) judgment dated January 29, 2016 in Seagate Technology International v. Vikas Giel, Suit No, 1041 of 2014, High Court of the Republic of Singapore (Exhibit D).

The Court certainly can take judicial notice of the existence of these items (assuming, for the sake of argument, that they are relevant to the disposition of Plaintiffs’ motion) as court records or facts and propositions that are not reasonably subject to dispute and capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy. But it cannot take judicial notice of the truth of their contents, which is what Plaintiffs appear to be seeking based on the way these materials are discussed in their motion. (See Day v. Sharp (1975) 50 Cal.App.3d 904, 914; see also Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1568 [stating that while court can take judicial notice that a particular factual finding was made, it cannot take judicial notice of that fact as true].) It is otherwise not clear to the Court how taking judicial notice merely of the existence of these materials is relevant to the disposition of Plaintiffs’ motion for judgment on the pleadings. Therefore, Plaintiffs’ request is DENIED.

In addition to their request for judicial notice, Plaintiffs also submit the declaration of their counsel, Elizabeth Pipkin (“Pipkin Decl.”), which includes testimony pertaining to the history of the dispute between the parties and authenticates the items contained in Plaintiffs’ request for judicial notice. eSys India objects to the entirety of the Pipkin Decl., with the exception of her authentication of the exhibits attached thereto. This objection is SUSTAINED, as a motion for judgment on the pleadings tests only the sufficiency of the pleading itself and cannot be turned into an evidentiary motion via the attempted submission of extrinsic materials. (Bach v. McNelis (1989) 207 Cal.App.3d 852, 864.) There is simply no basis for the Court to consider the contents of the Pipkin Decl. and thus it will not do so.

III. Plaintiffs’ Motion for Judgment on the Pleadings

With the instant motion, Plaintiffs maintain that eSys India fails to state claims for breach of contract and declaratory relief because finding otherwise would require the court to adopt an “unjust and irrational interpretation of the Settlement Agreement from the outset.” (Plaintiffs’ Memo. at 5:19-20.)

A. Breach of Contract (First Cause of Action)

In the first cause of action, eSys India alleges that Plaintiffs materially breached the Settlement Agreement by filing the instant Complaint accusing it of breaching the agreement itself. Under California law, in order to state a claim for breach of contract, a party must plead the following elements: (1) the existence of a contract between the parties; (2) the plaintiff’s performance or excuse for nonperformance; (3) the defendant’s breach; and (4) damages to the plaintiff as a result of the breach. (CDF Firefighters v. Maldonado (2008) 158 Cal.App.4th 1226, 1239.) Here, Plaintiffs contend that eSys India cannot establish that they breached the Settlement Agreement by filing the Complaint because the Settlement Agreement expressly permits them to do so.

eSys India’s breach of contract claim is specifically predicated on Paragraphs 15, 16, 17 and 18 of the Settlement Agreement, which contain the “Mutual Release,” “Release of Unknown Claims,” “Release of Warranty Claims” and “Covenant Not to Sue,” respectively. According to the Cross-Complaint, under the first three of these four paragraphs, Plaintiffs released eSys India from any and all claims, known or unknown, “including but not limited to any and all claims arising out of, relating to or in any way connected with the Seagate-eSys Cases, whether absolute or contingent, direct or indirect, known or unknown,” through the effective date of the Settlement Agreement. (Cross-Complaint, ¶ 10.) Pursuant to Paragraph 18, eSys India explains, Plaintiffs agreed that they would not institute any action of any kind against it, including but not limited to any claim that “is within the scope of, arises out of, or regarding the Released Claims.” (Id., ¶ 11.)

Notably, eSys India does not discuss Paragraph 20 of the Settlement Agreement. This Paragraph provides as follows:

NO RELEASE FOR THIS FINAL SETTLEMENT AGREEMENT. The Parties specifically acknowledge that execution of this Final Settlement Agreement shall have the legal effect of forever surrendering, waiving and withdrawing any request or claim they have made, may have made, or could make in the Seagate-eSys Cases. However, nothing in the preceding paragraphs should be construed as a right of release of the Parties’ rights under the Settlement Documents and the Parties agree to cooperate in order to effectuate the terms of the Settlement Documents and enforce payment of the settlement amount.

(emphasis added.)

The above language shows that there is no release relative to claims to enforce the Settlement Agreement. This interpretation is further buttressed by other portions of the Settlement Agreement, including Paragraph 30, which identifies the specific courts which may “properly and nonexclusively serve as the venue for any dispute arising as to the enforcement of the Settlement Documents,” and Paragraph 36, which provides, in pertinent part, that “the prevailing party in any action to enforce the Final Settlement Documents … will be entitled to recover its attorneys’ [sic] and costs.” These provisions would be rendered meaningless if the Court were to accept as accurate eSys India’s position that the covenant not to sue includes any action to enforce the terms of the Settlement Agreement. If no such action could be brought, there would be no need to agree on a venue for it. Critically, “an interpretation [of a contract] which gives a reasonable, lawful, and effective meaning to all the terms is preferred to an interpretation which leaves a part unreasonable, unlawful or of no effect.” (1 Witkin, Summary of Cal. Law (11th ed. 2018) Contracts, § 773 [emphasis added]; see Civ. Code, § 1641 [stating that “[t]he whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other”].)

Moreover, a court may properly interpret a contract and sustain a motion which attacks the sufficiency of claims predicated on that agreement if the agreement is not obviously susceptible of more than one reasonable interpretation, i.e., is not ambiguous, and the plaintiff does not plead parol evidence allegations which support another interpretation to which the contract is reasonably susceptible. (See George v. Automobile Club of Southern California (2011) 201 Cal.App.4th 1112, 1127-1128.) Here, the portions of the Settlement Agreement that relate to whether or not Plaintiffs can properly bring an action against the other signatories to the agreement for breach are not ambiguous, and there are otherwise no parol evidence allegations by eSys India in the Cross-Complaint which support its interpretation of the agreement.

In sum, because Plaintiffs have a right to sue to enforce the Settlement Agreement, their act of doing so in filing the Complaint cannot serve as a breach of that agreement. Thus, eSys India has not, and cannot, plead a claim for breach of contract by Plaintiffs on this basis and its claim fails.

B. Declaratory Judgment (Second Cause of Action)

In the second cause of action, eSys India alleges that an actual controversy exists between it and Plaintiffs concerning their respective obligations under the Settlement Agreement, and requests a declaration from the Court that: (1) it has no payment obligations under the Settlement Agreement; (2) Plaintiffs materially breached the Settlement Agreement by suing eSys India for money damages; (3) the Settlement Agreement is terminated as to eSys India, and eSys India therefore has no obligation to adhere to any obligations thereunder, including but not limited to its obligations under Paragraphs 22 through 25 (which relate to the confidentiality of the Settlement Agreement); and (4) the eSys India may reconstitute the “Independent Fact Finding Committee” (“IFFC”) and distribute any and all previously prepared IFFC Reports to whomever it chooses. (Cross-Complaint, ¶ 35.)

In order to state a claim for declaratory relief, a plaintiff must plead the existence of “an actual, present controversy ….” (City of Cotati v. Cashman (2002) 29 Cal.4th 69. 79.) Importantly, “[d]eclaratory relief operates prospectively to declare future rights, rather than to redress past wrongs.” (Canova v. Trustees of Imperial Irrigation District Employee Pension Plan (2007) 10 Cal.App.4th 1487, 1497 [internal citation omitted, emphasis added].)

Plaintiffs maintain that this claim is deficient because it is wholly derivative of the first cause of action for breach of contract, resting solely on the premise that Plaintiffs have breached the Settlement Agreement by filing suit against eSys India. Where a claim for declaratory relief is wholly derivative of other non-viable causes of action, Plaintiffs explain, a demurrer (or motion for judgment on the pleadings) is properly sustained as to that claim. (See Ochs v. PacifiCare of California (2004) 115 Cal.App.4th 782, 794.)

But the Court disagrees with Plaintiff’s description of the declaratory relief claim as being “wholly derivative” of the preceding breach of contract claim. The Court agrees that the second through fourth items of the declaration sought by eSys India are predicated solely on eSys India’s incorrect contention that Plaintiffs’ underlying Complaint, by its mere filing, is a breach of the Settlement Agreement, and thus cannot support a claim for declaratory relief. The first item, however, is not similarly dependent, as it is completely separate from the issue of the propriety of Plaintiffs’ lawsuit.

That does not save the claim, however. The first item relates to whether eSys India has payment obligations under the Settlement Agreement. This allegation is about a past wrong—a breach that has already taken place—rather than a present, ongoing controversy. Said breach is the subject of Plaintiffs’ underlying lawsuit but cannot serve as the basis for a valid declaratory relief claim. Consequently, eSys India’s second cause of action for declaratory relief also fails.

For these reasons, Plaintiffs’ motion for judgment on the pleadings is GRANTED. While unlikely, it is possible that eSys India can validly plead claims in accordance with this Order. Therefore, the Court give eSys India 10 days to file an amended cross-complaint, if it wishes to do so.

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18CV328929
SEAGATE TECHNOLOGY LLC et al vs VIKAS GOEL et al

The Court provides its tentative thoughts below:

1. The only issue before the Court is the sufficiency of Rainforest’s interrogatory responses. (Goel is no longer part of this motion to compel.)

2. The Court finds the meet and confer process sufficient—perhaps not as extensive as possible, but sufficient.

3. The Court agrees that Rainforest has not generally appeared. It has been very careful not to do so, and the Court does not interpret any of its actions in this litigation as constituting a general appearance.

4. Seagate’s discovery on Rainforest focuses on jurisdictional issues. (To the extent certain interrogatories do not, the Court would not require Rainforest to answer them, since a specially appearing defendant need only answer jurisdictional discovery while a writ is pending concerning a failed motion to dismiss/quash.) The Court is happy to hear from the parties as to which, if any, interrogatories fall in the “non-jurisdiction” category.

5. But how is this jurisdictional discovery relevant to the issues at hand? After all, Rainforest’s primary arguments in its original motion to dismiss were: a) the forum selection clauses of the Rainforest Guarantees trump Paragraph 30 of the Settlement Agreement; and b) service was improper because it occurred on Rainforest itself, as opposed to an individual agent. The Court ruled against these arguments on legal, not factual, grounds. The Court doesn’t see the relevance of the propounded discovery on those questions.

The Court thinks that Seagate’s cited cases (see p. 9 of its Opening Brief) are distinguishable because they focus on situations where minimum contacts purportedly establish jurisdiction. By contrast, the Court has already found personal jurisdiction exists over Rainforest based on a “consent through contract” theory. None of the discovery in question relates to that issue, the Court thinks.

6. It is true, however, that Rainforest made an argument in its motion to dismiss that finding personal jurisdiction in Santa Clara County would be factually unreasonable. If Rainforest is going to maintain that argument—even though it wasn’t brought up in its writ petition—then the Court can see the relevance of the jurisdictional discovery.

For instance, let’s assume the appellate court finds against Rainforest on the main argument it presented in its writ petition, namely argument a) in point 5 above. At that point, under this Court’s order, there would be personal jurisdiction over Rainforest. The case then proceeds to trial, with Rainforest losing. Rainforest then appeals, asserting, among other things, that asserting personal jurisdiction over Rainforest was unreasonable as a factual matter.

In order to forestall that argument, it may be that Seagate needs to take jurisdictional discovery to show reasonableness, as a backup argument to the Court’s consent-based jurisdictional finding.

7. But if Rainforest is willing to agree (through stipulation or otherwise) that it will not argue to an appellate court that personal jurisdiction, based on minimum contacts, is factually unreasonable, then the relevance of the jurisdictional discovery falls dramatically. At that point, it is not at all plain whether such discovery would be needed.