Preview
1 CLEMENT S. ROBERTS (SBN 209203)
croberts@orrick.com
2 MICHAEL D. WEIL (SBN 209056)
mweil@orrick.com ELECTRONICALLY
3 ORRICK, HERRINGTON & SUTCLIFFE LLP
405 Howard Street F I L E D
Superior Court of California,
4 San Francisco, CA 94105-2669 County of San Francisco
Telephone: +1 415 773 5700
5 Facsimile: +1 415 773 5759 07/19/2019
Clerk of the Court
BY: RONNIE OTERO
6 DIANA RUTOWSKI (SBN 233878) Deputy Clerk
drutowski@orrick.com
7 ORRICK, HERRINGTON & SUTCLIFFE LLP
1000 Marsh Road
8 Menlo Park, CA 94025-1015
Telephone: +1 650 614 7400
9 Facsimile: +1 650 614 7401
10 ANDREW J. KIM (SBN 303081)
ajkim@orrick.com
11 ORRICK, HERRINGTON & SUTCLIFFE LLP
777 South Figueroa Street, Suite 3200
12 Los Angeles, CA 90017-5855
Telephone: +1 213 629 2020
13 Facsimile: +1 213 612 2499
14 Attorneys for Defendant
OpenTV, Inc.
15
SUPERIOR COURT OF THE STATE OF CALIFORNIA
16
CITY AND COUNTY OF SAN FRANCISCO
17
18
BROADBAND ITV, INC., a Delaware Case No.: CGC-17-561922
19 corporation,
OPENTV, INC.’S REPLY
20 Plaintiff, MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF ITS
21 vs. MOTION FOR SUMMARY
ADJUDICATION
22 OPENTV, INC., a Delaware corporation,
23 Defendant. Date: August 7, 2019
Time: 9:15 a.m.
24 Judge: Hon. A.C. Massullo
Dept.: 304
25
Action Filed: October 17, 2017
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OPENTV, INC.’S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR
SUMMARY ADJUDICATION
1 I. INTRODUCTION
2 California courts regularly enforce limitation of liability clauses, like Section 8 of the License
3 Agreement, that allocate risks differently than how the common law might treat parties to a contract.
4 Courts decline to apply these provisions to causes of action for breach of contract or breach of an
5 implied covenant only when the clauses are unconscionable or against public policy. BBiTV does
6 not even try to argue that Section 8 is unconscionable or against public policy; it is undisputed that
7 the clause is neither. Instead, BBiTV pins its opposition to (1) its argument that a plain reading of
8 Section 8 would make the License Agreement illusory, which is neither supported by the terms of
9 the License Agreement itself nor applicable law, and (2) the unexpressed subjective intent of the
10 parties, which is inadmissible. The Court must enforce Section 8 consistent with its plain terms and
11 grant summary adjudication.
12 First, BBiTV argues that enforcing the plain meaning of Section 8, which BBiTV agreed was
13 an “essential element” of the License Agreement, would render the agreement illusory. BBiTV’s
14 arguments misconstrue the agreement and are legally erroneous. The liability “Cap” in Section 8
15 does not make the License Agreement illusory because it is not an exculpatory clause i.e., it does not
16 relieve OpenTV of its obligations under the agreement. Rather, Section 8 simply caps liability for
17 either party to payments, if any, OpenTV actually made. Here, that amount happens to be zero,
18 limiting BBiTV’s recovery to that amount. But the enforceability of that provision is no different
19 than if it had specified $1, $100, or $10 million.
20 BBiTV also misstates and narrowly construes the consideration OpenTV provided. The
21 License Agreement does not guarantee any payments to BBiTV, as BBiTV suggests. To the
22 contrary, the License Agreement expressly contemplates that BBiTV might not receive any
23 payments from OpenTV. What BBiTV received, instead, is the right to receive payments based on a
24 condition precedent, namely, if OpenTV was successful in distributing the code or (in BBiTV’s
25 view) the intellectual property licensed to OpenTV under the agreement. Put differently, the fact
26 that BBiTV might not receive money under the agreement does not render the agreement illusory –
27 because what BBiTV received was not money, but the possibility that it might receive money. That
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OPENTV, INC.’S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR
SUMMARY ADJUDICATION
1 possibility had value to BBiTV in and of itself, even if it was never realized. Indeed, that is why
2 people pay money for lottery tickets and why they have value even if they don’t finish in the money.
3 More fundamentally, this isn’t a situation where applying Section 8 would prevent BBiTV
4 from recovering money under the License Agreement if OpenTV’s contract interpretation theory is
5 meritorious. Even if the Court enforces Section 8, BBiTV still has a right to seek forward looking
6 relief under the agreement, as demonstrated by the fact BBiTV has separate causes of action not
7 subject to this motion. That right to enforce through a declaratory judgment (Third Cause of Action)
8 and to seek an accounting (Fifth Cause of Action) has value. Stated different, if BBiTV is successful
9 in its claim for declaratory relief, it will have the right to pursue money – actual, real dollars – on a
10 going forward basis, even if this motion is granted. This fact refutes BBiTV’s meritless claim that
11 enforcing Section 8 would make the contract illusory. Yes, the provision reduces the amount that
12 BBiTV could recover, but (a) that is the point of a limitation of liability provision in the first place
13 and (b) where the provision doesn’t eliminate BBiTV’s ability to obtain money under the agreement,
14 it is irrefutable that the provision cannot – by definition – render consideration illusory.
15 Second, BBiTV’s opposition rests on the unexpressed subjective intent of the parties
16 regarding Section 8. It is hornbook law that such evidence is inadmssible. Nor can BBiTV create a
17 dispute of fact merely because the parties disagree on the interpretation of Section 8. BBiTV’s
18 arguments fail to appreciate that the parties expressly stated that Section 8 was an “essential element
19 of the bargain” without which there would be no agreement. The Court is not permitted to strike out,
20 rewrite or narrowly construe an essential term of the bargain merely because BBiTV complains in
21 hindsight that it will produce an unjust result. The Court should grant OpenTV’s motion.
22 II. ARGUMENT
23 A. BBiTV Ignores California Law that Upholds Limitation of Liability Provisions.
24 BBiTV’s opposition ignores well-developed California law that uniquely applies to limitation
25 of liability clauses and enforces them even when the result means a party, like OpenTV, can
26 exculpate itself from contract liability. See Food Safety Net Servs. v. Eco Safe Sys. USA, Inc., 209
27 Cal. App. 4th 1118, 1127 (2012) (granting summary judgment after enforcing limitation of liability
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OPENTV, INC.’S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR
SUMMARY ADJUDICATION
1 clause); Markborough Cal., Inc. v. Superior Court, 227 Cal. App. 3d 705, 714-715 (1991)
2 (describing common law). The fact that these clauses might create allegedly unfair results in
3 hindsight does not affect their enforceability. Id. Nor do these contracts become “unenforceable”
4 merely because one party is free from certain contract liability. Id. Rather, in the context of breach
5 of contract or implied covenant claims, they are deemed unenforceable only when they are (1)
6 against public policy or (2) unconscionable. Id.1
7 BBiTV devotes the majority of its brief to attempting to persuade this Court that Section 8, as
8 written, is unreasonable and ignores the pertinent questions of whether it is unconscionable or
9 against public policy. It remains undisputed that Section 8 is neither against public policy nor
10 unconscionable, as BBiTV does not seriously contest these points at all.2 Accordingly, the Court
11 must enforce the plain terms of Section 8 and grant summary adjudication.
12 Rather than focus on the relevant questions, BBiTV tries to take the Court down a rabbit hole
13 by describing a hypothetical situation where OpenTV willfully fails and refuses to pay BBiTV in
14 bad faith knowing that OpenTV owes BBiTV money. Opp. at 17-18. BBiTV then argues that
15 OpenTV’s interpretation of Section 8 – which would bar any liability under this circumstance –
16 causes the License Agreement to be illusory because OpenTV could unilaterally determine its own
17 liability by refusing to pay. This hypothetical, however, does not exist in reality and, more
18 importantly, BBiTV does not allege it. Nowhere in the complaint does BBiTV allege that OpenTV
19 engaged in fraud when it entered into the License Agreement or willfully refused to make payment
20 1
On page 17, 18 and footnote 19, BBiTV cites numerous cases applying Civil Code section 1668 to
21 limitation of liability clauses. All of those cases addressed claims for willful violations of statutes,
gross negligence or similar wrongful acts. None apply to claims for breach of contract. Rather,
22 when it comes to breach of contract or implied covenant claims, Food Safety, Markborough and
Lewis confirm that the only relevant inquiry is whether the clause violates public policy or is
23 unconscionable. See Food Safety, 209 Cal. App. 4th at 1126; Markborough, 227 Cal. App. 3d at
715; Lewis v. YouTube, LLC, 244 Cal. App. 4th 118, 125 (2015). Section 1668 is inapplicable.
24 2
BBiTV quibbles in its Separate Statement of Undisputed Facts that there was “little or no
25 negotiation” of the liability cap, itself. See Undisputed Fact No. 2. That is of no moment because
“an actual negotiation regarding every term has never been required for the formation of a contract.”
26 Marin Storage & Trucking, Inc. v. Benco Contracting & Eng'g, Inc., 89 Cal. App. 4th 1042, 1050
(2001). It remains undisputed, according to BBiTV’s complaint, that the parties engaged in
27 “extensive negotiations” regarding the terms of the License Agreement (see ¶59) and the parties
exchanged multiple drafts (see ¶¶55-65), thus, the License Agreement is not unconscionable. It also
28 remains undisputed that Section 8 does not violate any public policy.
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OPENTV, INC.’S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR
SUMMARY ADJUDICATION
1 in bad faith. Rather, as BBiTV admits, this lawsuit involves a good faith dispute “about the breadth
2 and scope of the Licensed Software.” Compl. ¶53.
3 At this juncture, the question is which party must bear the risk of late-filed claims, like the
4 ones here. Either the risk falls on the party who discovers its claim late (and cannot receive the
5 money it thinks it is owed because of the limitation of liability provision) or it falls of the other party
6 (who cannot rewind time and adjust its conduct to avoid liability had it known of the claim).
7 Commercial parties are (as a matter of law) free to allocate that risk as they see fit. In this case, the
8 parties allocated that risk when they executed the License Agreement containing Section 8 and
9 memorialized that it was an “essential element of the bargain.” Here, BBiTV must bear the risk
10 created by the fact that it allegedly “discovered” its claim a decade after the License Agreement was
11 signed.3 There is nothing unfair or unlawful about this. “It is axiomatic that absent a violation of
12 public policy, a statute, or a constitutional provision, the parties to a private agreement may allocate
13 risks in any manner they may choose.” Reserver Ins. Co. v. Pisciotta, 30 Cal. 3d 800, 814 (1982).
14 The Court should enforce the parties’ agreement and grant summary adjudication.
15 B. The Agreement Is Not Illusory.
16 BBiTV rests virtually every argument on its meritless claim that the liability cap in Section 8
17 renders the License Agreement illusory. BBiTV’s arguments misread the agreement and the law.
18 An agreement is illusory (a) “when one of the parties assumes no obligation” (Scottsdale Ins.
19 Co. v. Essex Ins. Co., 98 Cal. App. 4th 86, 95 (2002)), (b) “where one party provides no legal
20 consideration” (Harris v. TAP Worldwide, LLC, 248 Cal. App. 4th 373, 385 (2016)), or (c) “when
21 one of the parties has the unfettered or arbitrary right to modify or terminate the agreement.” Id.
22 Here, none of these conditions are present.
23 First, the relevant sentence in Section 8 is not an exculpatory clause whereby OpenTV
24 assumes “no liability” under the License Agreement and can simply refuse to pay BBiTV if OpenTV
25 receives revenue from customers, pursuant to Section 3.2. The License Agreement requires payment
26 upon the condition precedent; those provisions are clear. Instead, Section 8 contains a cap on
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Section 8 is not one-sided. Just like OpenTV, BBiTV’s liability for its breach of contract under the
28 License Agreement is also limited to the payments actually made by OpenTV.
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OPENTV, INC.’S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR
SUMMARY ADJUDICATION
1 liability, which limits either party’s liability for breach of contract to the amount of payments
2 actually made by OpenTV. In this case, that liability happens to be zero because OpenTV made no
3 payments and, therefore, there is no liability. But the mere existence of the cap does not, in of itself,
4 relieve OpenTV of its obligations under the License Agreement.
5 Second, BBiTV is wrong that OpenTV provided “no consideration” if the Court interprets
6 Section 8 as OpenTV urges. In fact, BBiTV incorrectly describes the consideration it received for
7 entering into the License Agreement as payment of money. Not so. BBiTV’s consideration was the
8 potential to receive money, but only if OpenTV was successful in selling products containing
9 BBiTV’s licensed code. This is something the parties expressly understood might not happen and
10 BBiTV might get nothing. See § 3.2. Thus, the contract is not illusory because BBiTV received the
11 potential for money; the condition precedent for receiving that money was OpenTV’s success in
12 selling its products. Id.; Civ. Code § 1605 (“Any benefit conferred, or agreed to be conferred . . . is a
13 good consideration for a promise.”); JMRConstruction Corp. v. Environmental Assessment &
14 Remediation Management, Inc., 243 Cal.App.4th 571, 59 (2015) (“Parties may expressly agree that a
15 right or duty is conditional upon the occurrence or nonoccurrence of an act or event”).
16 Third, that’s not all BBiTV received. BBiTV also received the right to conduct audits – paid
17 for by OpenTV if they revealed underpayment of more than 10% (Section 3.4) – and to seek
18 declaratory judgment regarding the definition of Licensed Software, just as it has done in this lawsuit
19 and will continue to do even if the Court grants this motion. Indeed, if a court rules in BBiTV’s
20 favor in this case, OpenTV will have to begin to make payments. It might not be as much as BBiTV
21 might want (to be sure) but the fact that there would be payments is incompatible with the notion that
22 BBiTV received no consideration under the License Agreement. The contract is also clear that
23 BBiTV received indemnification rights: OpenTV agreed to indemnify BBiTV for certain claims
24 made by third parties. See § 8. That too, is consideration. Indeed, the entire insurance industry
25 would fail if an insurance company’s agreement to indemnify had no value.
26 Finally, OpenTV does not have the unfettered right to modify or terminate the License
27 Agreement. Rather, OpenTV can only terminate if it contends BBiTV is in breach of the agreement
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OPENTV, INC.’S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR
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1 (see §9.2) and can only modify the agreement if BBiTV agrees (see §10.7). Thus, there is no
2 contractual provision that allows OpenTV to unilaterally decide to end any forward looking
3 obligations imposed by the Court as a result of BBiTV’s claim for declaratory relief.
4 The idea that the License Agreement is somehow illusory fails to properly construe the
5 agreement or consider the multitude of obligations OpenTV owes and the benefits BBiTV received,
6 which are not stripped away by Section 8. Section 8 simply limits OpenTV’s liability for past acts,
7 to the amount that already has been paid – and which happens to be zero here. While BBiTV may
8 be dissatisfied with this result, it does not make the License Agreement illusory. San Diego City
9 Firefighters, Local 145 v. Bd. of Admin. of San Diego City Emples. Ret. Sys., 206 Cal. App. 4th 594,
10 619 (2012) (“All the law requires for sufficient consideration is the proverbial ‘peppercorn’”).
11 C. The Parties’ Subjective Intent Is Irrelevant; The Plain Language Must Control.
12 BBiTV’s opposition repeatedly references inadmissible evidence of the parties’ subjective
13 intent when entering into the License Agreement. There is, however, no evidence in the record
14 suggesting the parties ever disclosed to one another their subjective intent regarding the liability cap
15 in Section 8 at the time of contracting. Because a “parties’ undisclosed intent or understanding is
16 irrelevant to contract interpretation” (Founding Members of the Newport Beach Country Club v.
17 Newport Beach Country Club, Inc., 109 Cal. App. 4th 944, 956 (2003)), the Court cannot consider
18 this evidence in divining the meaning of the contract. Alex Robertson Co. v. Imperial Cas. & Indem.
19 Co., 8 Cal. App. 4th 338, 346 (1992) (“Parol evidence of the subjective, uncommunicated intent of
20 one of the parties is not admissible to contradict the express terms of an agreement.”). Indeed, “a
21 party’s subjective intent cannot be used to create an ambiguity or a material factual issue.” Havstad
22 v. Fid. Nat'l Title Ins. Co., 58 Cal. App. 4th 654, 661 (1997) (affirming summary judgment and
23 rejecting evidence of subjective intent of unambiguous contract).
24 Likewise, the parties’ dispute about the meaning of Section 8 does not render the License
25 Agreement ambiguous. “Neither disagreement concerning the meaning of a phrase nor the fact that
26 a word or phrase isolated from its context is susceptible of more than one meaning makes that word
27 or phrase ambiguous.” CDM Inv'rs v. Travelers Cas. & Sur. Co., 139 Cal. App. 4th 1251, 1256
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1 (2006) (internal quotations omitted). “Courts will not adopt a strained or absurd interpretation in
2 order to create an ambiguity where none exists.” Baldwin v. AAA N. California, Nevada & Utah Ins.
3 Exch., 1 Cal. App. 5th 545, 553 (2016). The question of ambiguity is a matter of law and does not,
4 on its own, create a triable issue. Schmidt v. Macco Const. Co., 119 Cal. App. 2d 717, 730 (1953).
5 In fact, BBiTV reaffirmed in its Opposition that it contends the License Agreement is
6 unambiguous.4 Opp. at 10. Accordingly, the Court must analyze the parties’ intentions “as
7 disclosed by the language of the contract.” Food Safety, 209 Cal. App. 4th at 1128 (interpreting
8 limitation of liability clause from language used); Lewis, 244 Cal. App. 4th at 125 (sustaining
9 demurrer and interpreting limitation of liability clause based on the plain meaning of the words
10 used). Like the clause in Food Safety, Section 8 broadly states that “in no event” will the total
11 liability of either party “hereunder” exceed the revenue share payments, “if any, made by OpenTV
12 under this agreement.” In view of this broad “in no event” language, the Court must regard the
13 clause as limiting OpenTV’s liability for any claim under the License Agreement to the payments
14 actually made. See Food Safety, 209 Cal. App. 4th at 1128 (broadly applying similar language).
15 BBiTV references numerous provisions relating to the revenue share payments (see Opp. pp.
16 5-7) and argues that OpenTV’s interpretation of Section 8 – whereby OpenTV’s liability here would
17 be zero – is inconsistent with those provisions. BBiTV then pleads the Court to engage in contract
18 interpretation calisthenics by either ignoring, rewriting, narrowly construing or anything else
19 humanly possible to save BBiTV from the deal it made. This, the Court cannot do. Walnut Creek
20 Pipe Distributors, Inc. v. Gates Rubber Co. Sales Div., 228 Cal.App.2d 810, 815 (1964) (“The courts
21 cannot make better agreements for parties than they themselves have been satisfied to enter into or
22 rewrite contracts because they operate harshly or inequitably.”).
23 Indeed, Section 8 is not a “garden variety” clause nor is it a “subordinate” provision, as
24 BBiTV argues. BBiTV’s request that the Court modify, reform, or narrowly construe Section 8
25 4
BBiTV’s argument that the contract language is unambiguous as long at the Court rules in its favor
26 is unsupported. That’s like arguing “heads I win, tails you lose.” Nor does Kavruck v. Blue Cross of
California 108 Cal. App. 4th 773, 782 (2003) support that argument. That case merely holds that a
27 party conceding a contract is unambiguous does not waive that party’s right to submit parol
evidence. Id. It certainly does not support BBiTV’s inconsistent argument that the agreement is
28 only ambiguous if the Court adopts OpenTV’s interpretation.
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OPENTV, INC.’S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR
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1 ignores the weight both parties placed on that provision when they agreed that “the limitations of
2 liability in this Section 8 . . . and the allocation of risk herein are an essential element of the bargain
3 between the parties, without which either party would not have entered into this Agreement.”
4 (emphasis added). None of the other provisions BBiTV cites receive the same emphasis in the
5 contract. In fact, BBiTV cites no authority supporting the proposition that the Court should treat as
6 subordinate a contract provision that the parties expressly agreed was essential to the contract.
7 Further, BBiTV’s argument that Section 8 is inconsistent with other payment terms ignores
8 the last sentence in Section 3.2. As noted, that provision contemplates that OpenTV might make no
9 payments to BBiTV under the License Agreement. There is thus nothing inconsistent about
10 enforcing Section 8 as written. BBiTV’s argument also disregards the rights and remedies available
11 under the License Agreement that permit BBiTV to enforce by conducting audits and seeking
12 declaratory judgments. For example, OpenTV’s payment obligations, as described in Section 3.2,
13 would be meaningless if the Court enforced Section 8 as written. However, Section 8 does not affect
14 these rights because BBiTV retains the right to audit OpenTV and obtain a declaratory judgment
15 delineating its rights going forward, as explained above. OpenTV’s interpretation of Section 8 is
16 consistent with both the clear terms of Section 8 and the remaining terms of the contract.
17 D. The Implied Covenant Does Not Save BBiTV’s Claims.
18 BBiTV next argues that the License Agreement is enforceable, yet the Court should impose
19 an alternative construction on Section 8 pursuant to the implied covenant of good faith and fair
20 dealing in order to avoid what it considers an unfair result. BBiTV’s argument is flawed.
21 A court may not insert implied covenants into a contract unless all of the following
22 conditions are met: “(1) the implication must arise from the language used or it must be
23 indispensable to effectuate the intention of the parties; (2) it must appear from the language used that
24 it was so clearly within the contemplation of the parties that they deemed it unnecessary to express
25 it; (3) implied covenants can only be justified on grounds of legal necessity; (4) a promise can be
26 implied only where it may be rightfully assumed that it would have been made if attention had been
27 called to it; and (5) there can be no implied covenant where the subject is completely covered by the
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1 contract.” Walnut Creek Pipe, 228 Cal. App. 2d at 815–16. BBiTV fails to demonstrate or discuss
2 any of these conditions because it cannot. As noted, it was not the express intention of the parties
3 for OpenTV to pay BBiTV. Rather, the parties expressly contemplated that OpenTV might not pay
4 BBiTV anything. The parties also expressly provided that Section 8 was an “essential element” of
5 the bargain -- it would be improper for the Court to rewrite an expressly material term of the deal.
6 Moreover, “where the contract is unambiguous, the express language is to govern, and [n]o
7 obligation can be implied ... which would result in the obliteration of a right expressly given under a
8 written contract.” Third Story Music, Inc. v. Waits, 41 Cal. App. 4th 798, 808 (1995). As discussed,
9 the License Agreement is not ambiguous. Thus, there is no basis to imply any terms.
10 Likewise, the Court cannot use the implied covenant to insert terms even if the Court
11 believes that certain promises were illusory because BBiTV received other consideration detailed
12 above. See Third Story Music, Inc., 41 Cal. App. 4th at 808 (a contract relieving a party from
13 performing part of the deal was not illusory because the other party received other consideration).
14 Thus, the implied covenant cannot be used to alter the plain meaning of the parties’ agreement.
15 E. Section 8 Is Not Severable.
16 BBiTV’s last argument urges this Court to sever the liability cap in Section 8. However,
17 courts may only sever provisions that are “unlawful.” Civ. Code § 1599. BBiTV has not, nor can it,
18 show that Section 8 is unlawful. If the provision is not unlawful, it cannot be severed. Id.
19 Moreover, severance is only appropriate “when the transaction is of such a nature that the
20 good part of the consideration can be separated from that which is bad . . . If the court is unable to
21 distinguish between the lawful and unlawful parts of the agreement, ‘the illegality taints the entire
22 contract, and the entire transaction is illegal and unenforceable.” Shopoff & Cavallo LLP v. Hyon,
23 167 Cal. App. 4th 1489, 1524 (2008). Here, the parties agreed that Section 8 was an “essential
24 element of the bargain between the parties, without which either party would not have entered into
25 this Agreement.” The Court should not sever a term that is expressly integral to the contract.
26 BBiTV also urges the Court to sever the words “made by OpenTV” from Section 8, but
27 courts are not permitted to rewrite contracts under severability rules, Civil Code section 1652 (cited
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1 by BBiTV) or otherwise. See, e.g., Ajamian v. CantorCO2e, L.P., 203 Cal. App. 4th 771, 803
2 (2012) (“courts cannot cure contracts by reformation or augmentation.”).5
3 F. The Court Should Deny BBiTV’s Request For A Continuance.
4 BBiTV also requests a continuance, but only if the Court intends to grant OpenTV’s motion.
5 To continue the hearing, BBiTV must submit a declaration that provides “(1) the facts to be obtained
6 are essential to opposing the motion; (2) there is reason to believe such facts may exist; and (3) the
7 reasons why additional time is needed to obtain these facts.” Cooksey v. Alexakis, 123 Cal. App. 4th
8 246, 254 (2004) (emphasis added). BBiTV fails to satisfy these requirements.
9 BBiTV contends that it needs deposition testimony on “whether, when it entered into the
10 Agreement, OpenTV intended to have no legal liability to pay BBiTV any Revenue Share payments
11 otherwise called for by the language of the Agreement.” Nassiri Decl., ¶ 8. As noted, OpenTV’s
12 subjective intent is irrelevant. Also, BBiTV has not even noticed or requested any deposition on this
13 subject. BBiTV also claims that it is still awaiting production of other agreements OpenTV executed
14 with other parties that contained a limitation of liability clause. The purpose of those documents,
15 supposedly, is “so that BBiTV could take discovery on how OpenTV interpreted those limitation of
16 liability clauses.” Id. The terms of OpenTV’s agreements with other parties, however, is irrelevant
17 to the interpretation of this agreement. None of the discovery BBiTV seeks is essential to this
18 motion and, accordingly, the Court should deny BBiTV’s request.
19 III. CONCLUSION
20 The Court should grant OpenTV’s motion for summary adjudication.6
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22 5
Even if the Court severed the words “made by OpenTV,” as BBiTV requests, the meaning of the
23 provision remains the same. “IN NO EVENT WILL THE TOTAL LIABILITY OF EITHER
PARTY HEREUNDER TO THE OTHER PARTY EXCEED, EITHER INDIVIDUALLY OR IN
24 THE AGGREGATE, THE AGGREGATE REVENUE SHARE PAYMENTS, IF ANY, MADE BY
OPENTV UNDER THIS AGREEMENT (THE “CAP”) . . .” The dictionary definition of the term
25 “payments” means “an amount paid.” See https://www.dictionary.com/browse/payment. Thus,
Section 8 would still cap liability for both parties at the amount of payments made.
26 6
BBiTV’s opposition fails to save its implied covenant and unjust enrichment causes of action. As
27 set for in Food Safety, Section 8’s limitation of liability bars both contract and implied covenant
claims. 209 Cal. App. 4th at 1127. Moreover, BBiTV failed to rebut OpenTV’s argument that
28 unjust enrichment is not a cognizable cause of action in California.
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Dated: July 19, 2019 ORRICK, HERRINGTON & SUTCLIFFE LLP
2
3 BY:
4 DIANA M. RUTOWSKI
ATTORNEYS FOR DEFENDANT
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1 CLEMENT S. ROBERTS (SBN 209203) croberts@orrick.com 2 MICHAEL D. WEIL (SBN 209056) mweil@orrick.com ELECTRONICALLY 3 ORRICK, HERRINGTON & SUTCLIFFE LLP 405 Howard Street F I L E D Superior Court of California, 4 San Francisco, CA 94105-2669 County of San Francisco Telephone: +1 415 773 5700 5 Facsimile: +1 415 773 5759 07/19/2019 Clerk of the Court BY: RONNIE OTERO 6 DIANA RUTOWSKI (SBN 233878) Deputy Clerk drutowski@orrick.com 7 ORRICK, HERRINGTON & SUTCLIFFE LLP 1000 Marsh Road 8 Menlo Park, CA 94025-1015 Telephone: +1 650 614 7400 9 Facsimile: +1 650 614 7401 10 ANDREW J. KIM (SBN 303081) ajkim@orrick.com 11 ORRICK, HERRINGTON & SUTCLIFFE LLP 777 South Figueroa Street, Suite 3200 12 Los Angeles, CA 90017-5855 Telephone: +1 213 629 2020 13 Facsimile: +1 213 612 2499 14 Attorneys for Defendant OpenTV, Inc. 15 SUPERIOR COURT OF THE STATE OF CALIFORNIA 16 CITY AND COUNTY OF SAN FRANCISCO 17 18 BROADBAND ITV, INC., a Delaware Case No.: CGC-17-561922 19 corporation, OPENTV, INC.’S REPLY 20 Plaintiff, MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS 21 vs. MOTION FOR SUMMARY ADJUDICATION 22 OPENTV, INC., a Delaware corporation, 23 Defendant. Date: August 7, 2019 Time: 9:15 a.m. 24 Judge: Hon. A.C. Massullo Dept.: 304 25 Action Filed: October 17, 2017 26 27 28 OPENTV, INC.’S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR SUMMARY ADJUDICATION 1 I. INTRODUCTION 2 California courts regularly enforce limitation of liability clauses, like Section 8 of the License 3 Agreement, that allocate risks differently than how the common law might treat parties to a contract. 4 Courts decline to apply these provisions to causes of action for breach of contract or breach of an 5 implied covenant only when the clauses are unconscionable or against public policy. BBiTV does 6 not even try to argue that Section 8 is unconscionable or against public policy; it is undisputed that 7 the clause is neither. Instead, BBiTV pins its opposition to (1) its argument that a plain reading of 8 Section 8 would make the License Agreement illusory, which is neither supported by the terms of 9 the License Agreement itself nor applicable law, and (2) the unexpressed subjective intent of the 10 parties, which is inadmissible. The Court must enforce Section 8 consistent with its plain terms and 11 grant summary adjudication. 12 First, BBiTV argues that enforcing the plain meaning of Section 8, which BBiTV agreed was 13 an “essential element” of the License Agreement, would render the agreement illusory. BBiTV’s 14 arguments misconstrue the agreement and are legally erroneous. The liability “Cap” in Section 8 15 does not make the License Agreement illusory because it is not an exculpatory clause i.e., it does not 16 relieve OpenTV of its obligations under the agreement. Rather, Section 8 simply caps liability for 17 either party to payments, if any, OpenTV actually made. Here, that amount happens to be zero, 18 limiting BBiTV’s recovery to that amount. But the enforceability of that provision is no different 19 than if it had specified $1, $100, or $10 million. 20 BBiTV also misstates and narrowly construes the consideration OpenTV provided. The 21 License Agreement does not guarantee any payments to BBiTV, as BBiTV suggests. To the 22 contrary, the License Agreement expressly contemplates that BBiTV might not receive any 23 payments from OpenTV. What BBiTV received, instead, is the right to receive payments based on a 24 condition precedent, namely, if OpenTV was successful in distributing the code or (in BBiTV’s 25 view) the intellectual property licensed to OpenTV under the agreement. Put differently, the fact 26 that BBiTV might not receive money under the agreement does not render the agreement illusory – 27 because what BBiTV received was not money, but the possibility that it might receive money. That 28 1 OPENTV, INC.’S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR SUMMARY ADJUDICATION 1 possibility had value to BBiTV in and of itself, even if it was never realized. Indeed, that is why 2 people pay money for lottery tickets and why they have value even if they don’t finish in the money. 3 More fundamentally, this isn’t a situation where applying Section 8 would prevent BBiTV 4 from recovering money under the License Agreement if OpenTV’s contract interpretation theory is 5 meritorious. Even if the Court enforces Section 8, BBiTV still has a right to seek forward looking 6 relief under the agreement, as demonstrated by the fact BBiTV has separate causes of action not 7 subject to this motion. That right to enforce through a declaratory judgment (Third Cause of Action) 8 and to seek an accounting (Fifth Cause of Action) has value. Stated different, if BBiTV is successful 9 in its claim for declaratory relief, it will have the right to pursue money – actual, real dollars – on a 10 going forward basis, even if this motion is granted. This fact refutes BBiTV’s meritless claim that 11 enforcing Section 8 would make the contract illusory. Yes, the provision reduces the amount that 12 BBiTV could recover, but (a) that is the point of a limitation of liability provision in the first place 13 and (b) where the provision doesn’t eliminate BBiTV’s ability to obtain money under the agreement, 14 it is irrefutable that the provision cannot – by definition – render consideration illusory. 15 Second, BBiTV’s opposition rests on the unexpressed subjective intent of the parties 16 regarding Section 8. It is hornbook law that such evidence is inadmssible. Nor can BBiTV create a 17 dispute of fact merely because the parties disagree on the interpretation of Section 8. BBiTV’s 18 arguments fail to appreciate that the parties expressly stated that Section 8 was an “essential element 19 of the bargain” without which there would be no agreement. The Court is not permitted to strike out, 20 rewrite or narrowly construe an essential term of the bargain merely because BBiTV complains in 21 hindsight that it will produce an unjust result. The Court should grant OpenTV’s motion. 22 II. ARGUMENT 23 A. BBiTV Ignores California Law that Upholds Limitation of Liability Provisions. 24 BBiTV’s opposition ignores well-developed California law that uniquely applies to limitation 25 of liability clauses and enforces them even when the result means a party, like OpenTV, can 26 exculpate itself from contract liability. See Food Safety Net Servs. v. Eco Safe Sys. USA, Inc., 209 27 Cal. App. 4th 1118, 1127 (2012) (granting summary judgment after enforcing limitation of liability 28 2 OPENTV, INC.’S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR SUMMARY ADJUDICATION 1 clause); Markborough Cal., Inc. v. Superior Court, 227 Cal. App. 3d 705, 714-715 (1991) 2 (describing common law). The fact that these clauses might create allegedly unfair results in 3 hindsight does not affect their enforceability. Id. Nor do these contracts become “unenforceable” 4 merely because one party is free from certain contract liability. Id. Rather, in the context of breach 5 of contract or implied covenant claims, they are deemed unenforceable only when they are (1) 6 against public policy or (2) unconscionable. Id.1 7 BBiTV devotes the majority of its brief to attempting to persuade this Court that Section 8, as 8 written, is unreasonable and ignores the pertinent questions of whether it is unconscionable or 9 against public policy. It remains undisputed that Section 8 is neither against public policy nor 10 unconscionable, as BBiTV does not seriously contest these points at all.2 Accordingly, the Court 11 must enforce the plain terms of Section 8 and grant summary adjudication. 12 Rather than focus on the relevant questions, BBiTV tries to take the Court down a rabbit hole 13 by describing a hypothetical situation where OpenTV willfully fails and refuses to pay BBiTV in 14 bad faith knowing that OpenTV owes BBiTV money. Opp. at 17-18. BBiTV then argues that 15 OpenTV’s interpretation of Section 8 – which would bar any liability under this circumstance – 16 causes the License Agreement to be illusory because OpenTV could unilaterally determine its own 17 liability by refusing to pay. This hypothetical, however, does not exist in reality and, more 18 importantly, BBiTV does not allege it. Nowhere in the complaint does BBiTV allege that OpenTV 19 engaged in fraud when it entered into the License Agreement or willfully refused to make payment 20 1 On page 17, 18 and footnote 19, BBiTV cites numerous cases applying Civil Code section 1668 to 21 limitation of liability clauses. All of those cases addressed claims for willful violations of statutes, gross negligence or similar wrongful acts. None apply to claims for breach of contract. Rather, 22 when it comes to breach of contract or implied covenant claims, Food Safety, Markborough and Lewis confirm that the only relevant inquiry is whether the clause violates public policy or is 23 unconscionable. See Food Safety, 209 Cal. App. 4th at 1126; Markborough, 227 Cal. App. 3d at 715; Lewis v. YouTube, LLC, 244 Cal. App. 4th 118, 125 (2015). Section 1668 is inapplicable. 24 2 BBiTV quibbles in its Separate Statement of Undisputed Facts that there was “little or no 25 negotiation” of the liability cap, itself. See Undisputed Fact No. 2. That is of no moment because “an actual negotiation regarding every term has never been required for the formation of a contract.” 26 Marin Storage & Trucking, Inc. v. Benco Contracting & Eng'g, Inc., 89 Cal. App. 4th 1042, 1050 (2001). It remains undisputed, according to BBiTV’s complaint, that the parties engaged in 27 “extensive negotiations” regarding the terms of the License Agreement (see ¶59) and the parties exchanged multiple drafts (see ¶¶55-65), thus, the License Agreement is not unconscionable. It also 28 remains undisputed that Section 8 does not violate any public policy. 3 OPENTV, INC.’S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR SUMMARY ADJUDICATION 1 in bad faith. Rather, as BBiTV admits, this lawsuit involves a good faith dispute “about the breadth 2 and scope of the Licensed Software.” Compl. ¶53. 3 At this juncture, the question is which party must bear the risk of late-filed claims, like the 4 ones here. Either the risk falls on the party who discovers its claim late (and cannot receive the 5 money it thinks it is owed because of the limitation of liability provision) or it falls of the other party 6 (who cannot rewind time and adjust its conduct to avoid liability had it known of the claim). 7 Commercial parties are (as a matter of law) free to allocate that risk as they see fit. In this case, the 8 parties allocated that risk when they executed the License Agreement containing Section 8 and 9 memorialized that it was an “essential element of the bargain.” Here, BBiTV must bear the risk 10 created by the fact that it allegedly “discovered” its claim a decade after the License Agreement was 11 signed.3 There is nothing unfair or unlawful about this. “It is axiomatic that absent a violation of 12 public policy, a statute, or a constitutional provision, the parties to a private agreement may allocate 13 risks in any manner they may choose.” Reserver Ins. Co. v. Pisciotta, 30 Cal. 3d 800, 814 (1982). 14 The Court should enforce the parties’ agreement and grant summary adjudication. 15 B. The Agreement Is Not Illusory. 16 BBiTV rests virtually every argument on its meritless claim that the liability cap in Section 8 17 renders the License Agreement illusory. BBiTV’s arguments misread the agreement and the law. 18 An agreement is illusory (a) “when one of the parties assumes no obligation” (Scottsdale Ins. 19 Co. v. Essex Ins. Co., 98 Cal. App. 4th 86, 95 (2002)), (b) “where one party provides no legal 20 consideration” (Harris v. TAP Worldwide, LLC, 248 Cal. App. 4th 373, 385 (2016)), or (c) “when 21 one of the parties has the unfettered or arbitrary right to modify or terminate the agreement.” Id. 22 Here, none of these conditions are present. 23 First, the relevant sentence in Section 8 is not an exculpatory clause whereby OpenTV 24 assumes “no liability” under the License Agreement and can simply refuse to pay BBiTV if OpenTV 25 receives revenue from customers, pursuant to Section 3.2. The License Agreement requires payment 26 upon the condition precedent; those provisions are clear. Instead, Section 8 contains a cap on 27 3 Section 8 is not one-sided. Just like OpenTV, BBiTV’s liability for its breach of contract under the 28 License Agreement is also limited to the payments actually made by OpenTV. 4 OPENTV, INC.’S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR SUMMARY ADJUDICATION 1 liability, which limits either party’s liability for breach of contract to the amount of payments 2 actually made by OpenTV. In this case, that liability happens to be zero because OpenTV made no 3 payments and, therefore, there is no liability. But the mere existence of the cap does not, in of itself, 4 relieve OpenTV of its obligations under the License Agreement. 5 Second, BBiTV is wrong that OpenTV provided “no consideration” if the Court interprets 6 Section 8 as OpenTV urges. In fact, BBiTV incorrectly describes the consideration it received for 7 entering into the License Agreement as payment of money. Not so. BBiTV’s consideration was the 8 potential to receive money, but only if OpenTV was successful in selling products containing 9 BBiTV’s licensed code. This is something the parties expressly understood might not happen and 10 BBiTV might get nothing. See § 3.2. Thus, the contract is not illusory because BBiTV received the 11 potential for money; the condition precedent for receiving that money was OpenTV’s success in 12 selling its products. Id.; Civ. Code § 1605 (“Any benefit conferred, or agreed to be conferred . . . is a 13 good consideration for a promise.”); JMRConstruction Corp. v. Environmental Assessment & 14 Remediation Management, Inc., 243 Cal.App.4th 571, 59 (2015) (“Parties may expressly agree that a 15 right or duty is conditional upon the occurrence or nonoccurrence of an act or event”). 16 Third, that’s not all BBiTV received. BBiTV also received the right to conduct audits – paid 17 for by OpenTV if they revealed underpayment of more than 10% (Section 3.4) – and to seek 18 declaratory judgment regarding the definition of Licensed Software, just as it has done in this lawsuit 19 and will continue to do even if the Court grants this motion. Indeed, if a court rules in BBiTV’s 20 favor in this case, OpenTV will have to begin to make payments. It might not be as much as BBiTV 21 might want (to be sure) but the fact that there would be payments is incompatible with the notion that 22 BBiTV received no consideration under the License Agreement. The contract is also clear that 23 BBiTV received indemnification rights: OpenTV agreed to indemnify BBiTV for certain claims 24 made by third parties. See § 8. That too, is consideration. Indeed, the entire insurance industry 25 would fail if an insurance company’s agreement to indemnify had no value. 26 Finally, OpenTV does not have the unfettered right to modify or terminate the License 27 Agreement. Rather, OpenTV can only terminate if it contends BBiTV is in breach of the agreement 28 5 OPENTV, INC.’S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR SUMMARY ADJUDICATION 1 (see §9.2) and can only modify the agreement if BBiTV agrees (see §10.7). Thus, there is no 2 contractual provision that allows OpenTV to unilaterally decide to end any forward looking 3 obligations imposed by the Court as a result of BBiTV’s claim for declaratory relief. 4 The idea that the License Agreement is somehow illusory fails to properly construe the 5 agreement or consider the multitude of obligations OpenTV owes and the benefits BBiTV received, 6 which are not stripped away by Section 8. Section 8 simply limits OpenTV’s liability for past acts, 7 to the amount that already has been paid – and which happens to be zero here. While BBiTV may 8 be dissatisfied with this result, it does not make the License Agreement illusory. San Diego City 9 Firefighters, Local 145 v. Bd. of Admin. of San Diego City Emples. Ret. Sys., 206 Cal. App. 4th 594, 10 619 (2012) (“All the law requires for sufficient consideration is the proverbial ‘peppercorn’”). 11 C. The Parties’ Subjective Intent Is Irrelevant; The Plain Language Must Control. 12 BBiTV’s opposition repeatedly references inadmissible evidence of the parties’ subjective 13 intent when entering into the License Agreement. There is, however, no evidence in the record 14 suggesting the parties ever disclosed to one another their subjective intent regarding the liability cap 15 in Section 8 at the time of contracting. Because a “parties’ undisclosed intent or understanding is 16 irrelevant to contract interpretation” (Founding Members of the Newport Beach Country Club v. 17 Newport Beach Country Club, Inc., 109 Cal. App. 4th 944, 956 (2003)), the Court cannot consider 18 this evidence in divining the meaning of the contract. Alex Robertson Co. v. Imperial Cas. & Indem. 19 Co., 8 Cal. App. 4th 338, 346 (1992) (“Parol evidence of the subjective, uncommunicated intent of 20 one of the parties is not admissible to contradict the express terms of an agreement.”). Indeed, “a 21 party’s subjective intent cannot be used to create an ambiguity or a material factual issue.” Havstad 22 v. Fid. Nat'l Title Ins. Co., 58 Cal. App. 4th 654, 661 (1997) (affirming summary judgment and 23 rejecting evidence of subjective intent of unambiguous contract). 24 Likewise, the parties’ dispute about the meaning of Section 8 does not render the License 25 Agreement ambiguous. “Neither disagreement concerning the meaning of a phrase nor the fact that 26 a word or phrase isolated from its context is susceptible of more than one meaning makes that word 27 or phrase ambiguous.” CDM Inv'rs v. Travelers Cas. & Sur. Co., 139 Cal. App. 4th 1251, 1256 28 6 OPENTV, INC.’S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR SUMMARY ADJUDICATION 1 (2006) (internal quotations omitted). “Courts will not adopt a strained or absurd interpretation in 2 order to create an ambiguity where none exists.” Baldwin v. AAA N. California, Nevada & Utah Ins. 3 Exch., 1 Cal. App. 5th 545, 553 (2016). The question of ambiguity is a matter of law and does not, 4 on its own, create a triable issue. Schmidt v. Macco Const. Co., 119 Cal. App. 2d 717, 730 (1953). 5 In fact, BBiTV reaffirmed in its Opposition that it contends the License Agreement is 6 unambiguous.4 Opp. at 10. Accordingly, the Court must analyze the parties’ intentions “as 7 disclosed by the language of the contract.” Food Safety, 209 Cal. App. 4th at 1128 (interpreting 8 limitation of liability clause from language used); Lewis, 244 Cal. App. 4th at 125 (sustaining 9 demurrer and interpreting limitation of liability clause based on the plain meaning of the words 10 used). Like the clause in Food Safety, Section 8 broadly states that “in no event” will the total 11 liability of either party “hereunder” exceed the revenue share payments, “if any, made by OpenTV 12 under this agreement.” In view of this broad “in no event” language, the Court must regard the 13 clause as limiting OpenTV’s liability for any claim under the License Agreement to the payments 14 actually made. See Food Safety, 209 Cal. App. 4th at 1128 (broadly applying similar language). 15 BBiTV references numerous provisions relating to the revenue share payments (see Opp. pp. 16 5-7) and argues that OpenTV’s interpretation of Section 8 – whereby OpenTV’s liability here would 17 be zero – is inconsistent with those provisions. BBiTV then pleads the Court to engage in contract 18 interpretation calisthenics by either ignoring, rewriting, narrowly construing or anything else 19 humanly possible to save BBiTV from the deal it made. This, the Court cannot do. Walnut Creek 20 Pipe Distributors, Inc. v. Gates Rubber Co. Sales Div., 228 Cal.App.2d 810, 815 (1964) (“The courts 21 cannot make better agreements for parties than they themselves have been satisfied to enter into or 22 rewrite contracts because they operate harshly or inequitably.”). 23 Indeed, Section 8 is not a “garden variety” clause nor is it a “subordinate” provision, as 24 BBiTV argues. BBiTV’s request that the Court modify, reform, or narrowly construe Section 8 25 4 BBiTV’s argument that the contract language is unambiguous as long at the Court rules in its favor 26 is unsupported. That’s like arguing “heads I win, tails you lose.” Nor does Kavruck v. Blue Cross of California 108 Cal. App. 4th 773, 782 (2003) support that argument. That case merely holds that a 27 party conceding a contract is unambiguous does not waive that party’s right to submit parol evidence. Id. It certainly does not support BBiTV’s inconsistent argument that the agreement is 28 only ambiguous if the Court adopts OpenTV’s interpretation. 7 OPENTV, INC.’S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR SUMMARY ADJUDICATION 1 ignores the weight both parties placed on that provision when they agreed that “the limitations of 2 liability in this Section 8 . . . and the allocation of risk herein are an essential element of the bargain 3 between the parties, without which either party would not have entered into this Agreement.” 4 (emphasis added). None of the other provisions BBiTV cites receive the same emphasis in the 5 contract. In fact, BBiTV cites no authority supporting the proposition that the Court should treat as 6 subordinate a contract provision that the parties expressly agreed was essential to the contract. 7 Further, BBiTV’s argument that Section 8 is inconsistent with other payment terms ignores 8 the last sentence in Section 3.2. As noted, that provision contemplates that OpenTV might make no 9 payments to BBiTV under the License Agreement. There is thus nothing inconsistent about 10 enforcing Section 8 as written. BBiTV’s argument also disregards the rights and remedies available 11 under the License Agreement that permit BBiTV to enforce by conducting audits and seeking 12 declaratory judgments. For example, OpenTV’s payment obligations, as described in Section 3.2, 13 would be meaningless if the Court enforced Section 8 as written. However, Section 8 does not affect 14 these rights because BBiTV retains the right to audit OpenTV and obtain a declaratory judgment 15 delineating its rights going forward, as explained above. OpenTV’s interpretation of Section 8 is 16 consistent with both the clear terms of Section 8 and the remaining terms of the contract. 17 D. The Implied Covenant Does Not Save BBiTV’s Claims. 18 BBiTV next argues that the License Agreement is enforceable, yet the Court should impose 19 an alternative construction on Section 8 pursuant to the implied covenant of good faith and fair 20 dealing in order to avoid what it considers an unfair result. BBiTV’s argument is flawed. 21 A court may not insert implied covenants into a contract unless all of the following 22 conditions are met: “(1) the implication must arise from the language used or it must be 23 indispensable to effectuate the intention of the parties; (2) it must appear from the language used that 24 it was so clearly within the contemplation of the parties that they deemed it unnecessary to express 25 it; (3) implied covenants can only be justified on grounds of legal necessity; (4) a promise can be 26 implied only where it may be rightfully assumed that it would have been made if attention had been 27 called to it; and (5) there can be no implied covenant where the subject is completely covered by the 28 8 OPENTV, INC.’S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR SUMMARY ADJUDICATION 1 contract.” Walnut Creek Pipe, 228 Cal. App. 2d at 815–16. BBiTV fails to demonstrate or discuss 2 any of these conditions because it cannot. As noted, it was not the express intention of the parties 3 for OpenTV to pay BBiTV. Rather, the parties expressly contemplated that OpenTV might not pay 4 BBiTV anything. The parties also expressly provided that Section 8 was an “essential element” of 5 the bargain -- it would be improper for the Court to rewrite an expressly material term of the deal. 6 Moreover, “where the contract is unambiguous, the express language is to govern, and [n]o 7 obligation can be implied ... which would result in the obliteration of a right expressly given under a 8 written contract.” Third Story Music, Inc. v. Waits, 41 Cal. App. 4th 798, 808 (1995). As discussed, 9 the License Agreement is not ambiguous. Thus, there is no basis to imply any terms. 10 Likewise, the Court cannot use the implied covenant to insert terms even if the Court 11 believes that certain promises were illusory because BBiTV received other consideration detailed 12 above. See Third Story Music, Inc., 41 Cal. App. 4th at 808 (a contract relieving a party from 13 performing part of the deal was not illusory because the other party received other consideration). 14 Thus, the implied covenant cannot be used to alter the plain meaning of the parties’ agreement. 15 E. Section 8 Is Not Severable. 16 BBiTV’s last argument urges this Court to sever the liability cap in Section 8. However, 17 courts may only sever provisions that are “unlawful.” Civ. Code § 1599. BBiTV has not, nor can it, 18 show that Section 8 is unlawful. If the provision is not unlawful, it cannot be severed. Id. 19 Moreover, severance is only appropriate “when the transaction is of such a nature that the 20 good part of the consideration can be separated from that which is bad . . . If the court is unable to 21 distinguish between the lawful and unlawful parts of the agreement, ‘the illegality taints the entire 22 contract, and the entire transaction is illegal and unenforceable.” Shopoff & Cavallo LLP v. Hyon, 23 167 Cal. App. 4th 1489, 1524 (2008). Here, the parties agreed that Section 8 was an “essential 24 element of the bargain between the parties, without which either party would not have entered into 25 this Agreement.” The Court should not sever a term that is expressly integral to the contract. 26 BBiTV also urges the Court to sever the words “made by OpenTV” from Section 8, but 27 courts are not permitted to rewrite contracts under severability rules, Civil Code section 1652 (cited 28 9 OPENTV, INC.’S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR SUMMARY ADJUDICATION 1 by BBiTV) or otherwise. See, e.g., Ajamian v. CantorCO2e, L.P., 203 Cal. App. 4th 771, 803 2 (2012) (“courts cannot cure contracts by reformation or augmentation.”).5 3 F. The Court Should Deny BBiTV’s Request For A Continuance. 4 BBiTV also requests a continuance, but only if the Court intends to grant OpenTV’s motion. 5 To continue the hearing, BBiTV must submit a declaration that provides “(1) the facts to be obtained 6 are essential to opposing the motion; (2) there is reason to believe such facts may exist; and (3) the 7 reasons why additional time is needed to obtain these facts.” Cooksey v. Alexakis, 123 Cal. App. 4th 8 246, 254 (2004) (emphasis added). BBiTV fails to satisfy these requirements. 9 BBiTV contends that it needs deposition testimony on “whether, when it entered into the 10 Agreement, OpenTV intended to have no legal liability to pay BBiTV any Revenue Share payments 11 otherwise called for by the language of the Agreement.” Nassiri Decl., ¶ 8. As noted, OpenTV’s 12 subjective intent is irrelevant. Also, BBiTV has not even noticed or requested any deposition on this 13 subject. BBiTV also claims that it is still awaiting production of other agreements OpenTV executed 14 with other parties that contained a limitation of liability clause. The purpose of those documents, 15 supposedly, is “so that BBiTV could take discovery on how OpenTV interpreted those limitation of 16 liability clauses.” Id. The terms of OpenTV’s agreements with other parties, however, is irrelevant 17 to the interpretation of this agreement. None of the discovery BBiTV seeks is essential to this 18 motion and, accordingly, the Court should deny BBiTV’s request. 19 III. CONCLUSION 20 The Court should grant OpenTV’s motion for summary adjudication.6 21 22 5 Even if the Court severed the words “made by OpenTV,” as BBiTV requests, the meaning of the 23 provision remains the same. “IN NO EVENT WILL THE TOTAL LIABILITY OF EITHER PARTY HEREUNDER TO THE OTHER PARTY EXCEED, EITHER INDIVIDUALLY OR IN 24 THE AGGREGATE, THE AGGREGATE REVENUE SHARE PAYMENTS, IF ANY, MADE BY OPENTV UNDER THIS AGREEMENT (THE “CAP”) . . .” The dictionary definition of the term 25 “payments” means “an amount paid.” See https://www.dictionary.com/browse/payment. Thus, Section 8 would still cap liability for both parties at the amount of payments made. 26 6 BBiTV’s opposition fails to save its implied covenant and unjust enrichment causes of action. As 27 set for in Food Safety, Section 8’s limitation of liability bars both contract and implied covenant claims. 209 Cal. App. 4th at 1127. Moreover, BBiTV failed to rebut OpenTV’s argument that 28 unjust enrichment is not a cognizable cause of action in California. 10 OPENTV, INC.’S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR SUMMARY ADJUDICATION 1 Dated: July 19, 2019 ORRICK, HERRINGTON & SUTCLIFFE LLP 2 3 BY: 4 DIANA M. RUTOWSKI ATTORNEYS FOR DEFENDANT 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11 OPENTV, INC.’S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR SUMMARY ADJUDICATION