Opinion
6:19-cv-01403-MK
05-05-2022
BLUE HERON FARM LLC, an Oregon limited liability company, Plaintiff, v. NORCAL NURSERY, INC., a California corporation, Defendant.
FINDINGS AND RECOMMENDATION
MUSTAFA T. KASUBHAI, UNITED STATES MAGISTRATE JUDGE
In this contract dispute, Plaintiff Blue Heron Farm LLC (“Plaintiff”) brings three claims under California state law against Defendant Norcal Nursery, Inc. (“Defendant”): (1) breach of contract; (2) breach of express warranty; and (3) negligence. Compl. 6-9, ECF No. 1. Defendant moves for partial summary judgment on Plaintiff's breach of express warranty claim, negligence claim, and damages. Def.'s Mot. Summ. J., 21-22, ECF No. 34. For the reasons that follow, Defendant's motion should be GRANTED in part and DENIED in part.
BACKGROUND
Plaintiff produces small fruits such as blueberries, blackberries, and strawberries. Affidavit of Peter B. Dinsdale ¶ 1, ECF No. 39-1 (“Dinsdale Aff.”). For the past twenty years, Plaintiff has grown and sold Tillamook variety strawberries. Deposition of Peter Dinsdale 44:5 13, ECF No. 36-1 (“Dinsdale Dep.”). The Tillamook variety is “well suited to the Willamette Valley climate and provides a high yield of excellent quality berries that secure a good market price.” Dinsdale Aff. ¶ 2, ECF No. 39-1.
For years, Plaintiff has purchased Tillamook variety strawberry plants from Defendant. See Dinsdale Dep. 59:3-6, ECF No. 36-1; see also Affidavit of Ronald Sakuma ¶ 4, ECF No. 35 (“Sakuma Aff.”). Each fall, Plaintiff calls Defendant to request a certain number of strawberry plants and Defendant typically sends Plaintiff sales confirmations and invoices. See Dinsdale Dep. 59:22-60:9, ECF No. 36-1; see also Sakuma Aff. ¶ 5, ECF No. 35.
On May 20, 2016, Plaintiff called Defendant to place an order for 400,000 Tillamook variety strawberry plants. Dinsdale Aff. ¶ 3, ECF No. 39-1. On October 5, 2016, Plaintiff called Defendant to increase its order size to 600,000 Tillamook variety strawberry plants. Id. On October 11, 2016, Defendant sent Plaintiff a sales confirmation (“2016 Sales Confirmation”) that contained the following language at the bottom of the document:
Contract will be binding upon signing of this document....No warranty either expressed or implied, is made as to description, variety, or productivity of any cuttings, runners, or plants. All items are sold “as is” and “with all faults”. All warranties, expressed and implied, including any implied warranty or merchantability, or fitness for a particular purpose, are hereby expressly disclaimed by the seller. Buyer acknowledges and accepts the entire risk as to quality and performance of cuttings,
runners, or plants. Buyer expressly agrees that any and all damages arising out of this contract shall be limited to the purchase price of the goods purchased. It is further agreed that in no event shall buyer's damages include any incidental or consequential damages.Sakuma Aff., Ex. 1, ECF No. 42-1. Plaintiff did not sign the document. See id. Plaintiff also denies ever receiving the 2016 Sales Confirmation. Dinsdale Aff. ¶ 3-4, ECF No. 39-1.
On April 10, 2017, Plaintiff spoke with Defendant to confirm the sales order for 600,000 Tillamook variety strawberry plants. Id. at ¶ 4. Defendant then emailed Plaintiff a sales confirmation (“2017 Sales Confirmation”) that contained the same language at the bottom of the document as the 2016 Sales Confirmation. Sakuma Aff. 4, Ex. 3 at 2, ECF No. 35-1. Plaintiff did not sign the 2017 Sales Confirmation. See id.
On April 28, 2017, Defendant delivered the strawberry plants to Plaintiff. Dinsdale Aff. ¶ 6, ECF No. 39-1. Upon delivery, Plaintiff planted the strawberry plants and had no reason to suspect that the plants were not Tillamook variety strawberry plants. Id. at ¶ 8. The strawberry plants do not produce fruit in the first year. Id.
On April 29, 2017, Defendant sent Plaintiff an invoice (“2017 Invoice”) for 600,000 Tillamook variety strawberry plants with final purchase price of $55,639.20 after a refund and discount. Sakuma Aff. 5, Ex. 4, ECF No. 35-1. At the bottom of the document, the 2017 Invoice contained identical language as the 2016 and 2017 Sales Confirmations. Id. Plaintiff did not sign the 2017 Invoice. See id.
On or around February 15, 2018, Defendant advised Plaintiff that Defendant had discovered the strawberry plants it delivered to Plaintiff in April 2017 were of the Pinnacle variety. Dinsdale Aff. ¶ 9, ECF No. 39-1. At that point, Plaintiff had already incurred “significant farming costs during the first year, including labor and spray[.]” Id. Instead of receiving the “more productive, sweeter Tillamook” variety strawberry plants, Dinsdale Dep. 138:24, ECF No. 43-3, Plaintiff received Pinnacle variety strawberry plants that resulted in a “poor yield of less desired fruit and additional farming costs” for Plaintiff, Dinsdale Aff. ¶ 10, ECF No. 39-1.
STANDARD OF REVIEW
Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, affidavits, and admissions on file, if any, show “that there is no genuine dispute as to any material fact and the [moving party] is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Substantive law on an issue determines the materiality of a fact. T.W. Elec. Servs.,Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987). Whether the evidence is such that a reasonable jury could return a verdict for the nonmoving party determines the authenticity of the dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
The moving party has the burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party shows the absence of a genuine issue of material fact, the nonmoving party must go beyond the pleadings and identify facts which show a genuine issue for trial. Id. at 324.
Special rules of construction apply when evaluating a summary judgment motion: (1) all reasonable doubts as to the existence of genuine issues of material fact should be resolved against the moving party; and (2) all inferences to be drawn from the underlying facts must be viewed in the light most favorable to the nonmoving party. T.W. Elec., 809 F.2d at 630.
DISCUSSION
Defendant argues that summary judgment is appropriate because: (1) Plaintiff's damages are capped by the limitation of damages clause in the Sales Confirmations and Invoice; (2) Plaintiff has provided no evidence to support its alleged damages; (3) Plaintiff's damages were caused by the fault of third parties; (4) Plaintiff's breach of warranty claim is barred by the warranty disclaimer in the Sales Confirmations and Invoice; and (5) Plaintiff's negligence claim is barred by the economic loss rule. Def.'s Mot. 9-22, ECF No. 34. The parties agree that California state law applies to their dispute. See id. at 9; see also Pl.'s Resp. 24, ECF No. 39. For the reasons below, Defendant's motion should be GRANTED in part and DENIED in part.
I. Damages
Defendant argues that summary judgment is appropriate as to Plaintiff's damages because: (1) Plaintiff's damages are capped by the limitation of damages clause in the Sales Confirmations and Invoice; (2) Plaintiff has provided no evidence to support its alleged damages; and (3) Plaintiff's damages were caused by the fault of third parties. Def.'s Mot. 9-21, ECF No. 34.
Under California law, “[a] contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.” Cal. Civ. Code § 1636. “The basic premise of contract law is to effectuate the expectations of the parties to the agreement, to give them the ‘benefit of the bargain' they struck when they entered into the agreement.” KGM Harvesting Co. v. Fresh Network, 36 Cal.App.4th 376, 382 (1995).
A. Limitation of Damages Clause
Defendant first argues that Plaintiff's damages are capped by the limitation of damages clause in the Sales Confirmations and Invoice. Def.'s Mot. 9, ECF No. 34. Plaintiff asserts its damages are neither diminished nor capped by the limitation of damages clause because: (1) Plaintiff never signed the Sales Confirmations or Invoice; (2) the limitation of damages clause is procedurally and substantively unconscionable; and (3) limiting Plaintiff's damages to the purchase price of the goods is a remedy that fails of its essential purpose. Pl.'s Resp. 10-11, ECF No. 39.
“Contract damages are generally limited to those within the contemplation of the parties when the contract was entered into or at least reasonably foreseeable by them at that time; consequential damages beyond the expectations of the parties are not recoverable.” AppliedEquip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503, 515 (1994). However, under California law, “parties may agree by their contract to the limitation of their liability in the event of a breach.” National Rural Telecomms. Coop. v. DIRECTV, Inc., 319 F.Supp.2d 1040, 1048 (C.D. Cal. 2003) (citations omitted); see also, e.g., Cal. Com. Code § 2719(3) (“Consequential damages may be limited or excluded unless limitation or exclusion is unconscionable.”). “The prevailing rule is that an invoice, standing alone, is not a contract, and a buyer is ordinarily not bound by statements thereon which are not a part of the original agreement.” Hebberd-KulowEnters., Inc. v. Kelomar, Inc., 218 Cal.App.4th 272, 279 (2013) (internal quotations, bracketing, and citation omitted).
1. Signature
As a preliminary matter, the Court notes that Defendant's limitation of damages clause was contained within a paragraph beginning with the following language: “Contract will be binding upon signing of this document.” Sakuma Aff., Ex. 1, ECF No. 42-1 (2016 Sales Confirmation); Sakuma Aff. 4, Ex. 3 at 2, ECF No. 35-1 (2017 Sales Confirmation); Sakuma Aff. 5, Ex. 4, ECF No. 35-1 (2017 Invoice). Defendant seeks to enforce a limitation of damages clause that is conditional on Plaintiff's signing of the documents. Plaintiff did not sign the 2016 Sales Confirmation, 2017 Sales Confirmation, or 2017 Invoice. See id. For this reason alone, Defendant's motion should be denied as to Plaintiff's damages.
2. Section 2207
Defendant argues that, despite being unsigned, the limitation of damages clause is enforceable based on the commercial history between the parties. Def.'s Mot. 10, ECF No. 34. Plaintiff asserts that a genuine issue of material fact exists as to the parties' understanding and treatment of sales confirmations and invoices throughout their commercial history. Pl.'s Resp. 13, ECF No. 39.
The question here is whether the limitation of damages clause included in Defendant's forms became a term of the parties' contract. The parties reached an oral agreement for the sale of Tillamook variety strawberry plants. See Dinsdale Aff ¶ 2-4, ECF No. 39-1. Defendant later sent Plaintiff at least one sales confirmation and an invoice relating to their oral agreement. Sakuma Aff. 4, Ex. 3 at 2, ECF No. 35-1 (2017 Sales Confirmation); Sakuma Aff. 5, Ex. 4, ECF No. 35-1 (2017 Invoice). Because the parties' contract was formed by their conduct and “the writings of the parties [did] not otherwise establish a contract,” § 2207(3) applies. Cal. Com. Code § 2207(3). “One of the principles underlying section 2-207 is neutrality. If possible, the section should be interpreted so as to give neither party to a contract an advantage simply because it happened to send the first or in some cases the last form.” Diamond Fruit Growers,Inc. v. Krack Corp., 794 F.2d 1440, 1444 (9th Cir. 1986) (citation omitted).
In its Reply, Defendant cites to subsection (2) of § 2207 in support of its argument. However, subsection (2) does not apply when “[c]onduct by both parties . . . recognizes the existence of a contract” but “the writings of the parties do not otherwise establish a contract.” Cal. Com. Code § 2207(3). In such cases, subsection (3) of § 2207 applies. See Diamond Fruit Growers, Inc. v. Krack Corp., 794 F.2d 1440, 1445 (9th Cir. 1986) (“If the offeror does not give specific and unequivocal assent but the parties act as if they have a contract, the provisions of section 2-207(3) apply to fill in the terms of the contract.”). The California Court of Appeal has noted that “payment on an invoice in accordance with an existing oral contract does not in itself establish assent to the addition of terms to the contract. For a party's performance to establish assent to a modification or addition of terms, the performance must be related to the proposed modification or addition and differ from the performance already required of the party by the existing contract.” C9 Ventures v. SVC-W., L.P., 202 Cal.App.4th 1483, 1502 (2012).
Under § 2207(3), “the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this code.” Cal. Com. Code. § 2207(3). Any “disputed additional terms on which the parties do not agree simply ‘drop out' and are trimmed from the contract.” Textile Unlimited, Inc. v. A..BMH and Co., Inc., 240 F.3d 781, 788 (9th Cir. 2001) (citation omitted). The Ninth Circuit explained the reasoning underlying this rule:
Application of section 2-207(3) is appropriate in that situation because by going ahead with the transaction without resolving their dispute, both parties are responsible for introducing ambiguity into the contract. Further, in a case such as this one, requiring the seller to assume more liability than it intends is not altogether inappropriate. The seller is most responsible for the ambiguity because it inserts a term in its form that requires assent to additional terms and then does not enforce that requirement. If the seller truely does not want to be bound unless the buyer assents to its terms, it can protect itself by not shipping until it obtains that assent.Diamond Fruit, 794 F.2d at 1445.
When considering what constitutes a “supplementary term” under § 2207(3), a court may examine both the Code's “gap-filler” provisions as well as other provisions in the Code. See, e.g., Textile Unlimited, 240 F.3d at 788 (“The terms of an agreement formed pursuant to § 2207(3) are those terms upon which the parties expressly agreed, coupled with the standard ‘gapfiller' provisions of Article Two.”); Transwestern Pipeline Co. v. Monsanto Co., 46 Cal.App.4th 502, 516 (1996) (“[T]he ‘supplementary terms' referred in section 2207, subdivision (3) may include terms incorporated as a result of the parties' course of dealing.”). The Code does not contain a “gap-filler” provision for a disputed limitation of damages clause. See Cal. Com. Code § 2301 et seq.
However, the parties' course of dealing can constitute a “supplementary term” under § 2207(3). Transwestern, 46 Cal.App.4th at 516; see also Cal. Com. Code § 1303(d). A “course of dealing” is “a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.” Cal. Com. Code § 1303(b) (emphasis added). “An inference of the parties' common knowledge or understanding that is based upon a prior course of dealing is a question of fact.” In re CFLC, Inc., 166 F.3d 1012, 1017 (9th Cir. 1999). “The mere exchange of forms containing inconsistent terms, for however long a period, cannot establish a common understanding between the parties[.]” Transwestern, 46 Cal.App.4th at 505.
The parties do not dispute that after agreeing to sell Plaintiff the plants, Defendant sent Plaintiff the 2017 Sales Confirmation and 2017 Invoice containing the following language:
Buyer expressly agrees that any and all damages arising out of this contract shall be limited to the purchase price of the goods purchased. It is further agreed that in no event shall buyer's damages include any incidental or consequential damages.Sakuma Aff. 4-5, Ex. 3-4, ECF No. 35-1. However, the parties do dispute their understanding of the limitation of damages clause based on their commercial history. Defendant offers several documents containing the same limitation of damages clause, including an unsigned invoice dated June 2014, a signed sales contract dated February 2015, and an unsigned invoice dated April 2015. Id., Ex. 5 at 1-3, ECF No. 39-1. Plaintiff points out that “some [of those documents] indicated that the contract was binding upon signature and some did not.” Pl.'s Resp. 13, ECF No. 39 (citing Dinsdale Aff. 8-9, ECF No. 39-1). The signed sales contract dated February 2015 contained the following language: “Contract will be binding upon signing of this invoice.” Sakuma Aff. 7, Ex. 5 at 2, ECF No. 35-1. The unsigned invoice dated June 2014 and the unsigned invoice dated April 2015 did not contain such “binding upon signing” language. See Id. at 6, 8, Ex. 5 at 1, 3, ECF No. 35-1. Plaintiff also did not sign the 2016 Sales Confirmation, 2017 Sales Confirmation, or 2017 Invoice. See, e.g., Sakuma Aff. 5, Ex. 4, ECF No. 35-1.
The Court concludes that Plaintiff has raised a genuine issue of material fact as to the parties' common understanding based on their course of dealing. See In re CFLC, 166 F.3d at 1017 (“An inference of the parties' common knowledge or understanding that is based upon a prior course of dealing is a question of fact.”). Viewing the facts in the light most favorable to Plaintiff and drawing all reasonable inferences in its favor, a reasonable jury could conclude that the parties did not have a common understanding based upon their prior course of dealing. As such, Defendant's motion should be denied as Plaintiff's damages.
B. Evidence of Damages
Defendant argues that Plaintiff has not provided any evidence to support its alleged damages. Def.'s Mot. 18, ECF No. 34. With its response, Plaintiff offers an affidavit detailing its alleged damages. See Dinsdale Aff., ECF No. 39-1. Defendant asks the Court to disregard the affidavit because: (1) it contradicts Dinsdale's sworn testimony, Def.'s Reply 4, ECF No. 41, and (2) Plaintiff failed to provide a computation of damages under Fed.R.Civ.P. 26, id. at 16 n.8.
1. Inconsistency with Prior Testimony
“The general rule in the Ninth Circuit is that a party cannot create an issue of fact by an affidavit contradicting his prior deposition testimony.” Yeager v. Bowlin, 693 F.3d 1076, 1080 (9th Cir. 2012) (citation omitted). This “sham affidavit rule” prevents “a party who has been examined at length on deposition” from “rais[ing] an issue of fact simply by submitting an affidavit contradicting his own prior testimony.” Kennedy v. Allied Mut. Ins. Co., 952 F.2d 262, 266 (9th Cir. 1991). Allowing a party to do so “would greatly diminish the utility of summary judgment as a procedure for screening out sham issues of fact.” Id. However, the rule “should be applied with caution because it is in tension with the principle that the court is not to make credibility determinations when granting or denying summary judgment.” Yeager, 693 F.3d at 1080 (internal quotations and citation omitted). Accordingly, “the district court must make a factual determination that the contradiction is a sham, and the ‘inconsistency between a party's deposition testimony and subsequent affidavit must be clear and unambiguous to justify striking the affidavit.'” Id. (citing Van Ansdale v. International Game Tech., 577 F.3d 989, 998-99 (9th Cir. 2009)).
Here, the Court has reviewed both Dinsdale's affidavit and Dinsdale's deposition testimony and concludes that Dinsdale's affidavit is not a “sham.” While Dinsdale's deposition testimony is at times vague on the issue of damages, it does not contradict Dinsdale's affidavit. As such, Defendant's motion should be denied as to Plaintiff's affidavit.
2. Computation of Damages
Under Rule 26, a party must, without awaiting a discovery request, provide the other party “a computation of each category of damages claimed by the disclosing party-who must also make available for inspection and copying . . . the documents or other evidentiary material, unless privileged or protected from disclosure, on which each computation is based, including materials bearing on the nature and extent of injuries suffered[.]” Fed.R.Civ.P. 26(a)(1)(A)(iii).
Citing Rule 26, Defendant argues that “Plaintiff's last attempt to create damages should be disregarded” and “Plaintiff should not be allowed to now testify via an affidavit to these perceived damages.” Def.'s Reply 16 n.8, ECF No. 41. First, in Plaintiff's response to Defendant's first set of interrogatories, Plaintiff included tables of its strawberry sales from 2015 through 2018. See Corsale Decl. 6-7, ECF No. 43-1. In those tables, Plaintiff identified the customer, strawberry type, amount of strawberries sold, and profit. Id. Second, when asked about Plaintiff's damages during his deposition, Dinsdale pointed Defendant to the documents that Plaintiff previously submitted to Defendant. See Dinsdale Dep. 141:19-143:13, ECF No. 36-3. Defendant's argument that Plaintiff has failed to provide a computation of damages is unavailing. As such, Defendants' motion should be denied as to Plaintiff's damages.
C. Third Parties
Defendant asserts that Plaintiff's damages were caused by the fault of third parties that were not under Defendant's control. Def.'s Mot. 16, ECF No. 34. Plaintiff argues that Defendant did not merely “pass down a defective product” but rather “propagated, grew, and harvested the plants for five years, during which time it was able to inspect and test the plant material.” Pl.'s Resp. 24, ECF No. 39. Plaintiff further argues that the extent to which the third parties' conduct affects Defendant's liability is a genuine issue of material fact. Id.
The Court concludes that Plaintiff has raised a genuine issue of material fact as to the extent of Defendant's liability for Plaintiff's damages. As such, Defendant's motion should be denied as to Plaintiff's damages.
D. Acceptance of Non-Conforming Goods
In its Reply, Defendant argues for the first time that Plaintiff's acceptance of nonconforming plants limits Plaintiff's damages to the purchase price. Def.'s Mot. 14-15, ECF No. 41. The Court declines to address the argument because Defendant waived the argument by not raising it in Defendant's initial motion. See In re Rains, 428 F.3d 893, 902 (9th Cir. 2005).
II. Breach of Express Warranty
Defendant argues that Plaintiff's breach of express warranty claim is barred by the warranty disclaimer in the Sales Confirmations and Invoice. Def.'s Mot. 14, ECF No. 34. Plaintiff argues that the warranty disclaimer is unenforceable because it is inconspicuous, unsigned, provides no warranty as to “variety,” and violates public policy. Pl.'s Mot. 17-20, ECF No. 39.
A seller can create an express warranty in the following ways: “(a) [a]ny affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise[;]” and “(b) [a]ny description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.” Cal. Com. Code § 2313(1)(a)-(b). “It is not necessary to the creation of an express warranty that the seller use formal words such as ‘warrant' or ‘guarantee' or that [the seller] have a specific intention to make a warranty[.]” Id. § 2313(2).
In 2017, Defendant sent Plaintiff a sales confirmation and invoice containing the following language:
No warranty, either expressed or implied, is made as to description, variety, or productivity of any cuttings, runners, or plants. All items are sold “as is” and “with all faults”. All warranties, expressed and implied, including any implied warranty or merchantability, or fitness for a particular purpose, are hereby expressly disclaimed by the seller.Sakuma Aff. 5, Ex. 4, ECF No. 35-1. The same documents contained a description of the goods as “Tillamook Strawberry.” Id.; see also Cal. Com. Code § 2313(1)(b) (“Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.”).
1. Signature
As a preliminary matter, Defendant's warranty disclaimer was contained within a paragraph beginning with the following language: “Contract will be binding upon signing of this document.” Sakuma Aff., Ex. 1, ECF No. 42-1 (2016 Sales Confirmation); Sakuma Aff. 4, Ex. 3 at 2, ECF No. 35-1 (2017 Sales Confirmation); Sakuma Aff. 5, Ex. 4, ECF No. 35-1 (2017 Invoice). Defendant seeks to enforce a warranty disclaimer that is conditional on Plaintiff's signing of the documents. Plaintiff did not sign the 2016 Sales Confirmation, 2017 Sales Confirmation, or 2017 Invoice. See id. For this reason alone, Defendant's motion should be denied as to Plaintiff's breach of express warranty claim.
2. Warranty Disclaimer
Under California law, “[w]ords or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other” but any “negation or limitation is inoperative to the extent that such construction is unreasonable.” Cal. Com. Code § 2316(1). “Because a disclaimer or modification is inconsistent with an express warranty, words of disclaimer or modification give way to words of warranty unless some clear agreement between the parties dictates the contrary relationship.” Hauter v. Zogarts, 14 Cal.3d 104, 119 (1975) (citations omitted). Any disclaimer or modification must be strictly construed against the seller. Id. (citation omitted); see also Fundin v. Chicago Pneumatic Tool Co., 152 Cal.App.3d 951, 958 (1984) (“Strict construction against the person who has both warranted a particular fact to be true and then attempted to disclaim the warranty is especially appropriate in light of the fact that [a] disclaimer of an express warranty is essentially contradictory.”) (internal quotations and citation omitted). The construction of a warranty disclaimer is a question of law. See, e.g., Hauter, 14 Cal.3d at 120.
“This section is designed principally to deal with those frequent clauses in sales contracts which seek to exclude ‘all warranties, express or implied.' It seeks to protect a buyer from unexpected and unbargained language of disclaimer by denying effect to such language when inconsistent with language of express warranty and permitting the exclusion of implied warranties only by conspicuous language or other circumstances which protect the buyer from surprise.” Cal. Com. Code § 2316, Comment 1.
A warranty disclaimer on an unsigned sales confirmation and an unsigned, post-delivery invoice does not show a clear agreement between the parties regarding the warranty disclaimer. See id. at 119. In addition, Defendant's disclaimer directly contradicts Defendant's description in the same documents that the strawberry plants it delivered to Plaintiff were of the Tillamook variety. See Klein v. Asgrow Seed Co., 246 Cal.App. 2d 87, 97 (1966) (“A unilateral nonwarranty cannot be tacked onto a contract containing a warranty.”). Because no reasonable construction of Defendant's express warranty disclaimer can resolve this inconsistency, Defendant's express warranty disclaimer is inoperative. See Cal. Com. Code § 2316(1). As such, Defendant's motion should be denied as to Plaintiff's breach of express warranty claim.
III. Negligence
Defendant argues that Plaintiff's negligence claim is barred by the economic loss rule. Def.'s Mot. 15, ECF No. 34.
“In general, there is no recovery in tort for negligently inflicted ‘purely economic losses,' meaning financial harm unaccompanied by physical or property damage.” Sheen v. Wells FargoBank, N.A., 12 Cal. 5th 905, 922 (2022) (citation omitted); see also Robinson Helicopter Co. v.Dana Corp., 34 Cal.4th 979, 988 (2004) (“Economic loss consists of damages for inadequate value, costs of repair, and replacement of the defective product or consequent loss of profits- without any claim of personal injury or damages to other property.”) (internal quotations and citation omitted). The economic loss rule “functions to bar claims in negligence for pure economic losses in deference to a contract between litigating parties.” Sheen, 12 Cal. 5th at 922 (citations omitted); see also Robinson, 34 Cal.4th at 988 (“Quite simply, the economic loss rule ‘prevent[s] the law of contract and the law of tort from dissolving one into the other.'”) (citation omitted, bracketing in original).
However, a plaintiff can recover in tort after a contract breach in three situations: (1) when a “product or defect causes damage to ‘other property,' that is, property other than the product itself[,]” Jimenez v. Superior Court, 29 Cal.4th 473, 483 (2002); (2) when a defendant breaches a legal duty independent of the contract, irrespective of whether damages are economic, Robinson, 34 Cal.4th at 989-90; and (3) if a “special relationship existed between the parties, a party can still recover when the economic loss rule would otherwise apply[,]” J'Aire Corp. v.Gregory, 24 Cal.3d 799, 804 (1979). “Not all tort claims for monetary losses between contractual parties are barred by the economic loss rule. But such claims are barred when they arise from-or are not independent of-the parties' underlying contracts.” Sheen, 12 Cal. 5th at 923.
Here, the economic loss rule bars Plaintiff's negligence claim. Plaintiff seeks actual damages in the amount of $509,212 in addition to the loss of value, reputation, and future business in an amount to be proven at trial. Compl. 9, ECF No. 1. These damages fall squarely within “damages for inadequate value, costs of repair, and replacement of the defective product or consequent loss of profits-without any claim of personal injury or damages to other property.” Robinson, 34 Cal.4th at 988. Plaintiff does not argue that it sustained damage to other property, that Defendant breached a legal duty independent of the contract, or that a special relationship existed between the parties such that an exception to the economic loss rule should apply. Plaintiff argues only that Defendant committed tortious conduct when it had the plant material for five years and knew, or should have known, that the plants were not Tillamook variety strawberry plants. Pl.'s Resp. 22-23, ECF No. 39. Plaintiff's claim arises from, and is completely dependent upon, the underlying contract. Sheen, 12 Cal. 5th at 923. As such, Defendant's motion should be granted as to Plaintiff's negligence claim.
RECOMMENDATION
The Court recommends that Defendant's partial motion for summary judgment (ECF No. 34) be GRANTED as to Plaintiff's negligence claim and DENIED as to Plaintiff's breach of warranty claim and damages.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Federal Rule of Appellate Procedure 4(a)(1) should not be filed until entry of the district court's judgment or appealable order.
The Findings and Recommendation will be referred to a district judge. Objections to this Findings and Recommendation, if any, are due fourteen (14) days from today's date. See Fed.R.Civ.P. 72. Failure to file objections within the specified time may waive the right to appeal the District Court's order. Martinez v. Ylst, 951 F.2d 1153, 1157 (9th Cir. 1991).