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Zykronix Inc. v. Conexant Systems, Inc.

United States District Court, D. Colorado

November 22, 2017

ZYKRONIX, INC., a Colorado corporation, Plaintiff,
CONEXANT SYSTEMS, INC., a Delaware corporation, Defendant.


          Kristen L. Mix United States Magistrate Judge

         This matter is before the Court on Defendant's Motion for Summary Judgment or, In the Alternative, Partial Summary Judgment [#78][1] (the “Motion”). Defendant filed a Response [#93] in opposition to the Motion [#78], and Plaintiff filed a Reply [#97]. The Court has reviewed the Motion, Response, Reply, the entire case file, and the applicable law, and is sufficiently advised in the premises. For the reasons set forth below, the Motion [#78] is GRANTED in part and DENIED in part.

         I. Summary of the Case[2]

         Plaintiff Zykronix, Inc. (“Plaintiff”) is a Colorado corporation doing business in Colorado and Taiwan. Joint Amendment to Section 4 of the Scheduling Order [#46]. Defendant Conexant Systems, Inc. (“Defendant”) is a Delaware corporation doing business in California whose registered agent is in Colorado. Id. Defendant was authorized to do business in Colorado until June 30, 2015. Id. In early 2012, Plaintiff entered into an agreement with a third-party named Home Automation, Inc. (“HAI”), pursuant to which Plaintiff agreed to design and manufacture for HAI a home automation product later called the OmniTouch 7. Motion [#78] ¶ 1. HAI was later acquired by Leviton Manufacturing, Co. Ltd. (“Leviton”). Id. ¶ 3. Plaintiff met with Defendant in March 2012 because it needed an audio chip for the OmniTouch 7, and the parties executed a Non-Disclosure Agreement. Id. ¶ 2. On March 26, 2013, Plaintiff sent Defendant a Purchase Order (the “Purchase Order”) via email for 10, 400 chips, after which Defendant delivered the chips to Plaintiff. Id. Plaintiff thereafter installed the chips in 10, 000 OmniTouch 7 devices and delivered them to Leviton for sale on the retail market. Id. ¶ 6. Eventually, a “loud buzzing noise” was discovered in some of the devices.[3] Id. ¶ 9; Response [#93] at 10. Plaintiff alleges that Leviton began returning devices that emitted the noise in approximately January 2015, and that the noise was determined to originate from the chips.[4] Response [#93] at 5-6.

         Plaintiff is seeking damages from Defendant for alleged past and future costs incurred due to the allegedly defective chips. Compl. [#2] at 3. Plaintiff asserts two claims against Defendant: Claim One is for breach of contract, and Claim Two is for breach of warranty. Id. at 3-4. Defendant moves for entry of summary judgment on the breach of contract claim because it contends that there is no enforceable “contract” between the parties. Motion [#78] at 10-12. Defendant moves for entry of summary judgment on the breach of warranty claim on the grounds that a warranty of fitness for a particular purpose does not apply because the chips were purchased for their ordinary purpose. Id. at 12-13. Defendant further argues that Plaintiff cannot establish that its damages were caused by Defendant, and that Plaintiff has been released from its obligations to provide repairs to its product via a settlement agreement in a separate matter. Id. at 13-19.

         II. Defendant's Objections to Evidence

         Defendant asks the Court to disregard all of the 26 exhibits attached by Plaintiff to its Response [#93]. Defendant first argues that the Affidavit of David Ghaemi [#93-1] (the “Ghaemi Affidavit”) submitted by Plaintiff should be stricken because it contains unsupported conclusions, hearsay, statements not founded on personal knowledge, and self-serving assertions that are not corroborated by evidence. Reply [#97] at 1-2. Defendant further argues that Exhibits 2 through 26 “have not been authenticated, they lack foundation, and they are hearsay.” Id. at 2.

         With respect to the Ghaemi Affidavit [#93-1], Fed.R.Civ.P. 56(c)(4) requires that an affidavit be made on personal knowledge, show that the affiant is competent, and include facts that would be admissible at trial. Defendant does not provide any explanation of why it believes that the Affidavit, which was provided by Plaintiff's Chief Executive Officer (“CEO”), does not comply with these requirements. On the Court's review of the Affidavit, it is apparent that Mr. Ghaemi is competent to testify to the facts, the facts appear to be admissible, and it is plausible that Mr. Ghaemi has personal knowledge of the facts stated, given that he is Plaintiff's CEO. See Ghaemi Affid. [#93-1]. Accordingly, the Court overrules Defendant's objections to the Affidavit.

         Defendant also raises specific objections to the March 26, 2013 Purchase Order [#73-7]. First, Defendant argues in the Reply that the Purchase Order should not be considered by the Court because it has not been properly authenticated. Reply [#97] at 2, 5. To the extent that Defendant argues that the Purchase Order must have been authenticated by affidavit, there is no such absolute requirement. See Law Co., Inc. v. Mohawk Const. & Supply Co., 577 F.3d 1164, 1171 (10th Cir. 2009) (stating that “no authenticating affidavit is required” and explaining that “exhibits might be sufficiently authenticated taking into consideration the ‘[a]ppearance, contents, substance, internal patterns, or other distinctive characteristics, taken in conjunction with circumstances'”). Additionally, Defendant does not argue that the Purchase Order is anything other than what Plaintiff asserts it is.[5] Moreover, Defendant in fact submits a copy of the Purchase Order with the Motion, see [#79-17], and cites to it in the Undisputed Facts section of the Motion in support of the following facts: “. . . on approximately March 26, 2013, [Plaintiff] issued a purchase order for the purchase of 10, 400 of [Defendant's] CX-20709-21Z audio CODEC chips . . . for the price of $2.89 per Chip.” Motion [#78] at 3. Furthermore, Defendant provides part of the transcript from the deposition of Mr. Streicher, who testified that he was the preparer of a March 26, 2013 Purchase Order and that the document “is a Revision 3, as you can see on page 2, and is not the original purchase order which was sent to [Defendant] in March of 2013.” Streicher Depo. [#79-16] at 4. Although relevant parts of the deposition testimony are cut short, the Purchase Order matches Mr. Streicher's description of the document that he was examining. Thus, it appears that the Purchase Order was properly authenticated, and it is likely that the exhibit is admissible at trial. See Alfonso v. SSC Pueblo Belmont Operating Co., LLC, No. 11-cv-01186-PAB-KLM, 2012 WL 2863128, at *1-2 (D. Colo. July 11, 2012) (explaining the changes caused to Rule 56 by amendments in 2010, and rejecting a party's authentication argument where a sufficient method had been proposed by which an exhibit might be admitted at trial); see also Shipman v. Carrasco, No. 15-CV-167-BRB-KBM, 2016 WL 10100732, at *2 (D.N.M. July 19, 2016) (“Significantly, the objection contemplated by [the 2010 amendment to rule 56(c)(2)] is not that the material ‘has not' been submitted in admissible form, but that it ‘cannot' be.”). For these reasons, the Court overrules Defendant's evidentiary objections to the Purchase Order and will consider it in connection with this Motion [#78].[6]

         With respect to the other 24 exhibits, Defendant essentially makes a blanket statement that they have not been properly authenticated, lack foundation, and are hearsay. Reply [#97] at 2. Defendant provides no further explanation of what specific objections apply to each exhibit, which consist of varied documents including: the agreement between Plaintiff & HAI, Plaintiff's Warranty and Repair Program Standard Terms and Conditions, emails, internet printouts, deposition excerpts, reports on Defendant's letterhead, interrogatory responses, and more. See Reply [#97] at 2. As discussed above, with respect to authentication, “[t]here is no requirement that the evidence be actually admitted or authenticated for the Court to consider it on a motion for summary judgment, as long as it would be admissible if duly authenticated.” Digital Advert. Displays, Inc. v. Newforth Partners, LLC, No. 12-CV-00682-WJM-MEH, 2014 WL 1292931, at *3 (D. Colo. Mar. 31, 2014). Similarly, with respect to Defendant's foundation and hearsay objections, Fed.R.Civ.P. 56(c)(2) provides that parties may object that cited material “cannot be presented in a form that would be admissible in evidence.” Defendant has not objected that the material cannot be presented in an admissible form, and the Court sees no reason why the documents would not be admissible at trial.[7] Thus, Defendant's vague objections to Plaintiff's Exhibits 2-6 and 8-26 are overruled.

         III. Motion for Summary Judgment

         A. Legal Standard

         The purpose of a motion for summary judgment pursuant to Fed.R.Civ.P. 56 is to assess whether trial is necessary. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Pursuant to Fed.R.Civ.P. 56(a), summary judgment should enter if the pleadings, the discovery and disclosure materials on file, and any affidavits show “that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” An issue is genuine if the evidence is such that a reasonable jury could resolve the issue in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is material if it might affect the outcome of the case under the governing substantive law. Id.

         The burden is on the movant to show the absence of a genuine issue of material fact. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670-71 (10th Cir. 1998) (citing Celotex, 477 U.S. at 323). When the movant does not bear the ultimate burden of persuasion at trial, the “movant may make its prima facie demonstration [of the absence of a genuine issue of material fact] simply by pointing out to the [C]ourt a lack of evidence for the nonmovant on an essential element of the nonmovant's claim.” Id. at 671. If the movant carries the initial burden of making a prima facie showing of a lack of evidence, the burden shifts to the nonmovant to put forth sufficient evidence for each essential element of his claim such that a reasonable jury could find in his favor. See Anderson, 477 U.S. at 248; Simms v. Okla. ex rel. Dep't of Mental Health & Substance Abuse Servs., 165 F.3d 1321, 1326 (10th Cir. 1999). The nonmovant must go beyond the allegations and denials of his pleadings and provide admissible evidence, which the Court views in the light most favorable to him. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970); Panis v. Mission Hills Bank, N.A., 60 F.3d 1486, 1490 (10th Cir. 1995) (citing Celotex, 477 U.S. at 324). Conclusory statements based merely on conjecture, speculation, or subjective belief are not competent summary judgment evidence. Bones v. Honeywell Int'l, Inc., 366 F.3d 869, 875 (10th Cir. 2004). The nonmoving party's evidence must be more than “mere reargument of [his] case or a denial of an opponent's allegation” or it will be disregarded. See 10B Charles Alan Wright, et al., Federal Practice and Procedure § 2738 at 356 (3d ed. 1998).

         B. Choice of Law

         The Court has diversity jurisdiction in this matter pursuant to 28 U.S.C. § 1332. See Notice of Removal [#1]; Compl. [#2]; Scheduling Order [#41] at 2. Based on the parties' briefing, [8] they appear to agree that Colorado law controls this diversity action. Therefore, the Court applies Colorado substantive law. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941) (applying choice of law rules of the forum state in diversity case); TMJ Implants, Inc. v. Aetna, Inc., 498 F.3d 1175, 1180-81 (10th Cir. 2007) (“The parties agree that the applicable substantive law is that of Colorado . . . . We therefore assume that this case is governed by Colorado substantive law.”).

         C. Analysis

         1. Breach of Contract

         To recover on a breach of contract claim, a party must prove (1) the existence of a contract, (2) that the party performed its duties under the contract, (3) that the other party failed to perform its contractual obligations, and (4) damages resulting from the breach. W. Distrib. Co. v. Diodosio, 841 P.2d 1053, 1058 (Colo. 1992). Here, Defendant argues that summary judgment should enter in its favor because Plaintiff has not sufficiently shown the existence of a contract on which a claim for breach of contract could be based. Motion [#78] at 10-12. Plaintiff argues that the March 26, 2013 Purchase Order for the chips constituted an offer, and that the shipment of the chips constituted an acceptance. Response [#93] at 13-14.

         The Colorado Uniform Commercial Code (Colo. Rev. Stat. § 4-2-206(1)(b)) provides:

An order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods, but such a shipment of nonconforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.

         Defendant argues that this statute should be entirely disregarded because the Central District of California ruled that “the parties have exchanged conflicting forms, ” and that therefore Section 2207 of the California Commercial Code applies. Reply [#97] at 5. However, the California court made that ruling on considering whether the parties had agreed to an arbitration clause, which is not relevant to the issue currently before this Court. See C.D. Cal. Order [#93-22] at 4-6. Furthermore, Section 2207 of the California Commercial Code is clearly not relevant here, as that section pertains solely to the issue of whether additional terms included in the acceptance of a contract are controlling. Lastly, as determined above, the Court applies Colorado substantive law in this lawsuit. Thus, the Court finds that Colo. Rev. Stat. § 4-2-206 applies here, and that there is a genuine issue of material fact regarding whether the Purchase Order and Defendant's subsequent shipment of the goods respectively constitute the requisite offer and acceptance to constitute formation of a contract. See Colo. Rev. Stat. § 4-2-206; see also LiquidMagnetix Corp. v. Therma-Stor LLC, No. 13-cv-3151-WJM-KMT, 2014 WL 1389984, at *2 (D. Colo. April 9, 2014) (finding a contract where purchase orders constituted offers and shipment of the goods constituted acceptance). To the extent that Defendant argues that Revision 3 of the Purchase Order does not represent the terms ...

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