Advanced Scientific Applications v. Cisco Systems
Filed 9/26/11 Advanced Scientific Applications v. Cisco Systems CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
| ADVANCED SCIENTIFIC APPLICATIONS, INC., Plaintiff, Cross-defendant and Appellant, v. CISCO SYSTEMS, INC., Defendant, Cross-complainant and Respondent. | G043125 (Super. Ct. No. 30-2008-00111935) O P I N I O N |
Appeal from a judgment of the Superior Court of Orange County, Derek W. Hunt, Judge. Motion to file late reply brief. Requests for judicial notice. Judgment affirmed. Motion granted. Requests granted.
Merritt L. McKeon for Plaintiff, Cross-defendant and Appellant.
Morgan, Lewis & Bockius, Thomas M. Peterson and Dennis J. Sinclitico, Jr., for Defendant, Cross-complainant and Respondent.
* * *
A jury returned verdicts in favor of defendant, cross-complainant and respondent Cisco Systems, Inc. (Cisco) for breach of contract and fraud against plaintiff, cross-defendant and appellant Advanced Scientific Applications, Inc. (ASA). After denying ASA’s motion for new trial, the superior court entered judgment for Cisco.
On appeal, ASA claims the trial court erroneously rejected a proposed jury instruction based on Civil Code section 1584 concerning acceptance of a contract through performance. ASA also contends the evidence fails to support a finding it agreed to the terms of Cisco’s standard Internet Commerce Agreement (ICA) through an online “‘click acceptance’” of the contract. Third, it argues prejudicial error occurred when Cisco’s counsel denied ASA’s attorney use of an overhead projector during closing argument. Finally, ASA urges Cisco’s ICA is unconscionable and should not be enforced.
ASA did not timely file its reply brief and seeks relief from its failure to do so. It also has filed two requests for judicial notice on the issue of unconscionability. We grant ASA’s requests but, for the reasons expressed below, affirm the judgment.
FACTS AND PROCEDURAL BACKGROUND
Cisco produces computer hardware equipment used for communication on the Internet. Steve Harmon, Cisco’s director of legal services, testified the bulk of the company’s equipment is sold through authorized resellers. To become an authorized reseller, a party must go to Cisco’s website, create an account, and agree to the terms of its Indirect Channel Partner Agreement. The latter step is accomplished by clicking on a button next to the statement “I agree to the terms and conditions” (italics omitted) of the contract. Cisco stores documentation of these contracts in several different databases.
Cisco also allows customers to purchase equipment for internal use by agreeing to the terms of a different contract entitled the ICA. Acceptance of the ICA is accomplished in the same manner as that of the Indirect Channel Partner Agreement. Under the ICA, a “[c]ustomer may not resell or distribute . . . [p]roducts . . . to end-users or other third parties”; equipment prices “shall be those specified in Cisco’s then-current applicable price list”; the agreement’s terms “may only be modified by a written document executed by the parties”; and, with certain exceptions, termination is permitted by “[e]ither party . . . at any time for breach of any part of this [a]greement or as authorized by law by providing at least ninety . . . days[’] prior notice to the other party.”
In addition, Cisco occasionally enters into non-standard contracts. Harmon testified this is accomplished through “the authorized reseller’s lawyer negotiat[ing] directly with a[] Cisco lawyer . . . and the resulting agreement . . . [is] stored in a completely separate system called our contract management system . . . .”
Shahram Manighalam created ASA in 1994 to develop scientific software and provide networking services. Manighalam testified that in late 2003 or early 2004
he became interested in acquiring Cisco equipment for resale to ASA’s customers. He claimed he spoke to some of Cisco’s employees by telephone and was told “resellers
and distributors received between 50 to 70 percent discount.” According to
Manighalam, personnel in Cisco’s Internet Commerce Department said that if ASA wanted to become a reseller and obtain equipment at “a discount we have to send in our own contract” because “the only template that [Cisco] ha[s] . . . online which is called [ICA] . . . does not allow for resale . . . .”
Manighalam testified he “downloaded th[e ICA], . . . modified it,” and
on February 16, 2004, mailed the amended contract to Cisco’s Internet Commerce Department with a cover letter describing the amendments. The amendments
purportedly included authorization to “allow [ASA] to resell Cisco products” with
a “52 percent discount” and precluded Cisco from “terminat[ing] the contract without cause . . . .” Manighalam further claimed that, due to difficulties integrating ASA’s price list with Cisco’s ordering database, he re-sent the amended contract with another cover letter on February 26 requesting ASA’s account be corrected to allow it to order Cisco equipment with ASA’s reseller discount. He acknowledged ASA’s price list was never integrated with Cisco’s ordering procedure, but claimed Cisco employees told him discounts “would be applied at the invoicing time.”
Cisco presented evidence it entered into only a standard ICA with ASA through Manighalam’s click acceptance of that contract on February 24, 2004. Harmon testified he had reviewed Cisco’s contract management system records and did not find any documentation of a non-standard contract between Cisco and ASA. He also claimed Cisco did not have a division named the Internet Commerce Department. Two other Cisco employees corroborated Harmon’s testimony.
ASA purchased equipment from Cisco for its own use in March 2004. In 2006, ASA submitted its first order for Cisco equipment for resale after winning a federal government contract. ASA directed Cisco to send the equipment to it and, in turn, ASA delivered the equipment to the federal agency with which it had obtained the contract.
In 2007, ASA was awarded several federal government contracts requiring it to order Cisco’s equipment. Cisco filled the orders, sending the equipment directly to the federal agencies with which ASA had contracted. When Cisco requested payment of the past due amount on ASA’s account, ASA claimed it was entitled to a discount and made only a partial payment while continuing to submit new orders.
During this time Cisco learned ASA was reselling its equipment. William W. Friedman, an attorney for Cisco, testified he contacted ASA and asked Manighalam to provide a copy of the purported amended ICA. Manighalam never complied with this request. Since the federal government was one of Cisco’s largest customers and, given the importance of the equipment to the acquiring federal agencies, it delivered the previously ordered equipment. In early 2008, ASA won two additional federal government contracts and submitted orders for the equipment. Initially, Cisco accepted the orders but a few days later cancelled them. After Cisco terminated the contract, ASA failed to pay the remaining unpaid balance.
ASA sued Cisco, alleging it had breached the ICA as amended by Manighalam and committed trade libel by informing the federal government ASA was not an authorized reseller of its equipment. Cisco answered denying the complaint’s allegations and also filed a cross-complaint for breach of its ICA contract and fraud.
A jury trial was conducted in two phases. In the first phase, the jury returned a special verdict finding: (1) ASA failed to establish Cisco knew about the terms of the amended ICA; (2) Cisco proved ASA breached the terms of the standard ICA; and (3) ASA defrauded Cisco. In the second phase, the jury awarded Cisco $446,769.33 against ASA. The court denied ASA’s motion for new trial and entered judgment for Cisco that also included recovery of its costs and attorney fees.
DISCUSSION
1. The Instructional Error Claim
During the trial’s initial phase, one question presented to the jury was whether ASA proved “Cisco knew of and agreed to the terms of the ICA as changed by Mr. Manighalam.” The court instructed the jury ASA needed to prove “Cisco agreed to be bound by the terms of the offer,” and “Cisco communicated its agreement to ASA.” In addition, the court gave the following instruction: “ASA claims that Mr. Manighalam legitimately changed the ICA in February 2004. ASA must prove that the parties agreed to the changes. Cisco denies that the contract was changed. [¶] You must decide whether a reasonable person would conclude from the words and conduct of ASA and Cisco that the parties agreed to the changes in ASA’[s] version of the ICA. You cannot consider the parties’ hidden intentions.”
ASA unsuccessfully requested an instruction based on Civil Code section 1584, which declares “[p]erformance of the conditions of a proposal, or the acceptance of the consideration offered with a proposal, is an acceptance of the proposal.” On appeal, ASA claims the court erred by refusing the proposed instruction since, although it “was able to show Cisco actually performed . . . the terms of its ‘amended’ ICA,” the “the [j]ury was never given . . . instruction that such performance equaled acceptance of [the] amended ICA.” We disagree.
Under Code of Civil Procedure section 608, “[i]n charging the jury the [c]ourt may state to them all matters of law which it thinks necessary for their information in giving their verdict . . . .” On appeal, an “appellate court must read the charge as a whole and give the instructions a reasonable construction from the standpoint of their probable effect upon the jury. [Citations.]” (Wells v. Lloyd (1942) 21 Cal.2d 452, 458.) The parties can submit special instructions, but the court has discretion to refuse to give them. (Code Civ. Proc., § 609.) Furthermore, “[a] party is not entitled to have the jury instructed in any particular language so long as the instructions given correctly state the law,” and “[w]hen an instruction requested by an appellant is not materially different from those given, it is not error to refuse those proposed by the appellant. [Citations.]” (Hom v. Clark (1963) 221 Cal.App.2d 622, 643.)
The court instructed the jury it was ASA’s burden to show Cisco had agreed to the terms of the amended ICA Manighalam claimed he sent to its Internet Commerce Department. The jury was told it could find for ASA on this issue if, “from the words and conduct of” the parties, a reasonable person could conclude Cisco had accepted ASA’s changes to the standard ICA contract. “Jurors are presumed to be persons of common intelligence and capable of comprehending the ordinary use of language as applied to the particular proposition under consideration and in reference to which it is employed. We will not assume that they may not have understood the charge as we understand it.” (Douglas v. Southern Pacific Co. (1928) 203 Cal. 390, 396.)
The instructions given adequately informed the jury about the concept of accepting a contract by performance. ASA fails to show the court erred by refusing its proposed instruction.
2. Sufficiency of the Evidence
In a half-page, two-paragraph argument, ASA makes the conclusory assertion “[t]he evidence did not support the [jury’s] finding that there had been acceptance of Cisco’s ICA.” (Some capitalization omitted.) Cisco claims ASA has waived this argument because its “brief does not fully and accurately describe the evidence at trial in the light most favorable to the jury’s verdict.” In addition, Cisco contends the evidence does support the judgment.
Cisco’s analysis of this issue has merit. California Rules of Court, rule 8.204(a)(2)(C) declares “[a]n appellant’s opening brief must” “[p]rovide a summary of the significant facts limited to matters in the record.” “Where the appellant challenges the sufficiency of the evidence, the reviewing court starts with the presumption that the record contains evidence sufficient to support the judgment; it is the appellant’s affirmative burden to demonstrate otherwise. [Citations.] The appellant’s brief must set forth all of the material evidence bearing on the issue, not merely the evidence favorable to the appellant, and must show how the evidence does not sustain the challenged finding. [Citations.] If the appellant fails to set forth all of the material evidence, its claim of insufficiency of the evidence is forfeited. [Citations.]” (Garlock Sealing Technologies, LLC v. NAK Sealing Technologies Corp. (2007) 148 Cal.App.4th 937, 951; see also Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881.)
ASA’s opening brief summarizes the procedural history of this action, but fails to detail the evidence presented at trial. Other than referring to the arguments supporting its unsuccessful motions for nonsuit and new trial, ASA does not explain why the evidence fails to support the jury’s finding that it accepted Cisco’s ICA contract without Manighalam’s purported changes. Thus, we conclude the issue has been waived.
In any event, the record supports the jury’s finding. “‘[I]n reviewing the sufficiency of the evidence, we must consider all of the evidence in the light most favorable to the prevailing party, accept as true all the evidence and reasonable inferences therefrom that tend to establish the correctness of the trial court’s findings and decision, and resolve every conflict in favor of the judgment. [Citation.] “It is not our task to weigh conflicts and disputes in the evidence; that is the province of the trier of fact. Our authority begins and ends with a determination as to whether, on the entire record, there is any substantial evidence, contradicted or uncontradicted, in support of the judgment.” [Citation.]’ [Citation.]” (Garlock Sealing Technologies, LLC v. NAK Sealing Technologies Corp., supra, 148 Cal.App.4th at p. 951.) Cisco introduced testimony and documentary evidence reflecting Manighalam click-accepted its standard ICA without any changes on February 24, 2004. Merely because Manighalam denied doing so and testified to a contrary scenario does not render the jury’s finding unsupported.
3. Cisco’s Refusal to Permit Use of its Overhead Projector
ASA asserted in its new trial motion that, although during trial both parties had the use of an overhead projector provided by Cisco, “just before [its trial counsel] was to present his closing argument, Cisco refused to let him use [the] . . . projector.” The court held ASA’s claim did not constitute a basis for relief, stating it was “unaware of any jurisprudential authority that would compel” it to grant a new trial on this basis. ASA repeats its claim on appeal, arguing denial of access to the projector was prejudicial because it “was unable to show the evidence in support of [its] case[] in the ‘high-tech’ way shown by Cisco.” (Some capitalization omitted.) Cisco contends ASA waived this argument by failing to timely assert it and, in any event, it lacks merit.
Again, we agree with Cisco’s response to ASA’s argument. Code of Civil Procedure section 657, subdivision 1 authorizes a court to grant a new trial for an “[i]rregularity in the proceedings of the court, jury or adverse party . . . by which either party was prevented from having a fair trial.” But ASA did not object at trial to Cisco’s refusal to permit use of the projector during closing argument. It waited until filing the new trial motion to assert this claim. “[A] party may not remain quiet, taking his chances upon a favorable verdict, and, after a verdict against him, raise a point of which he knew and could have raised during the progress of the trial. [Citation.]” (Gray v. Robinson (1939) 33 Cal.App.2d 177, 183.) Since ASA failed to timely object to Cisco’s purported refusal to use the projector, it waived the claim. (Finch v. Brenda Raceway Corp. (1994) 22 Cal.App.4th 547, 556.)
Furthermore, ASA does not explain how lack of access to projector during closing argument prevented it from having a fair trial. Courts have recognized “[n]o accurate classification of such irregularities can be made,” other than it must involve “an overt act of the trial court, jury, or adverse party, violative of the right to a fair and impartial trial, amounting to misconduct . . . .” (Gray v. Robinson, supra, 33 Cal.App.2d at p. 182.) “[W]hether, under all the circumstances, an irregularity has materially affected substantial rights and prevented a fair trial is addressed to the discretion of the trial court which, having heard and seen the witness[es] and having knowledge of circumstances which may not be produced in the record, is in better position than the appellate court to determine the effect.” (Ibid.) ASA’s counsel was allowed to cite to the evidence and argue how it supported his client’s case. There is no claim either counsel or the jury lacked access to physical copies of the documentary evidence. Thus, we reject ASA’s assertion misconduct occurred requiring a new trial.
4. ASA’s Unconscionable Contract Claim
On appeal, ASA contends, for the first time, Cisco’s ICA is unconscionable. We again conclude Cisco is correct in arguing ASA is barred from making this claim.
Courts have recognized that, since “[a] determination of unconscionability requires the development of a factual record to inform such analysis” (Olinick v. BMG Entertainment (2006) 138 Cal.App.4th 1286, 1293, fn. 7), “whether attempted to be used affirmatively or defensively, the issue of unconscionability must be put before the trial court or it will be waived” (Koehl v. Verio, Inc. (2006) 142 Cal.App.4th 1313, 1339). Contrary to the opening brief and counsel’s assertion at oral argument, ASA did not raise unconscionability of the ICA at any time in the trial court. The sole record citation supporting ASA’s timeliness claim is a reference to an affirmative defense in ASA’s answer to the cross-complaint that alleged “the damages [Cisco] is seeking are unreasonable, unconscionable, grossly oppressive and/or contrary to substantial justice in violation of California Civil Code section 3359.” ASA has not challenged the damage award in this appeal.
Furthermore, we note ASA’s unconscionability claim is contrary to its trial theory. “‘The rule is well settled that the theory upon which a case is tried must be adhered to on appeal. A party is not permitted to change his position and adopt a new and different theory on appeal. To permit him to do so would not only be unfair to the trial court, but manifestly unjust to the opposing litigant.’ [Citations.] And this rule ‘is to be stringently applied when the new theory depends on controverted factual questions whose relevance thereto was not made to appear at trial.’ [Citation.]” (Koehl v. Verio, Inc., supra, 142 Cal.App.4th at p. 1339.) At trial, ASA argued that it, in fact, did negotiate the terms of the parties’ contract. Manighalam testified he discussed the terms of a proposed contract with Cisco’s employees, downloaded a copy of the standard ICA, modified and signed it on ASA’s behalf, then mailed the amended ICA to Cisco, which purportedly accepted it by performance. Simply because the jury rejected this testimony does not mean ASA can now change course and argue the contract between it and Cisco was unenforceable due to the lack of an ability to negotiate different terms.
5. The Requests for Judicial Notice
To bolster its unconscionability claim, ASA has filed two judicial notice requests. The focus of the first one is a trial transcript from an unrelated lawsuit where the trial judge ruled a Cisco-drafted contract was unconscionable. ASA argues this ruling supports a collateral estoppel defense to the enforceability of Cisco’s ICA. The second request seeks judicial notice of Civil Code section 1670.5 and the recent decision in Chin v. Advanced Fresh Concepts Franchise Corp. (2011) 194 Cal.App.4th 704. While we grant both requests, nothing in either of them alters our foregoing conclusion.
As for the collateral estoppel argument, the doctrine of res judicata “has two aspects. It applies to both a previously litigated cause of action, referred to as claim preclusion, and to an issue necessarily decided in a prior action, referred to as issue preclusion. [Citations.] The prerequisite elements for applying the doctrine to either an entire cause of action or one or more issues are the same: (1) A claim or issue raised in the present action is identical to a claim or issue litigated in a prior proceeding; (2) the prior proceeding resulted in a final judgment on the merits; and (3) the party against whom the doctrine is being asserted was a party or in privity with a party to the prior proceeding. [Citations.]” (Brinton v. Bankers Pension Services, Inc. (1999) 76 Cal.App.4th 550, 556.) Here, two of these elements are absent. The contract at issue in the other lawsuit was Cisco’s Indirect Channel Partner Agreement, not the ICA litigated in this action. Furthermore, ASA acknowledges the parties to the prior case ultimately settled their lawsuit and thus a final judgment was never entered.
As for ASA’s second judicial notice request, public statutes and published case law constitute proper subjects for judicial notice on appeal. (Evid. Code, §§ 451, subd. (a), 459, subd, (a).) But neither the statute nor the opinion support ASA’s case. Civil Code section 1670.5, subdivision (a) merely specifies the remedies available where a court finds a “contract or any clause of the contract to have been unconscionable at the time it was made,” while subdivision (b) declares “[w]hen it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose, and effect to aid the court in making the determination.” As noted above, ASA failed to timely assert its unconscionability claim and thus waived the issue. (Koehl v. Verio, Inc., supra, 142 Cal.App.4th at p. 1339.) In Chin, the trial court concluded portions of the arbitration clause in the parties’ contract were unconscionable and denied the defendant’s motion to compel arbitration. The Court of Appeal reversed, in part holding “the trial court erred in finding . . . terms of the arbitration provision unconscionable . . . .” (Chin v. Advanced Fresh Concepts Franchise Corp., supra, 194 Cal.App.4th at p. 707.)
DISPOSITION
Appellant’s motion to file a late reply brief is granted. Appellant’s requests for judicial notice are granted. The judgment is affirmed. Respondent shall recover its costs and attorney fees on appeal.
RYLAARSDAM, ACTING P. J.
WE CONCUR:
BEDSWORTH, J.
FYBEL, J.
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