WonderWorks PTE. v. Hewlett-Packard CA1/3

Filed 12/16/22 WonderWorks PTE. v. Hewlett-Packard CA1/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or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
FIRST APPELLATE DISTRICT
DIVISION THREE
WONDERWORKS PTE. LTD.,
Plaintiff and Appellant,
A165810
v.
HEWLETT-PACKARD COMPANY (Santa Clara County
et al., Super. Ct. No. 114-CV-273632)
Defendants and Respondents.
This appeal pertains to a dispute arising out of a failed project to
develop a computer system for Bank Negara Malaysia, the central bank of
Malaysia. Hewlett-Packard (M) Sdn. Bhd. (HP Malaysia) was the prime
contractor for the project, and WonderWorks Pte. Ltd. (WonderWorks) was a
subcontractor.1 After Bank Negara and HP Malaysia agreed to terminate the
project, WonderWorks filed this action alleging it was not compensated for its
services and software, and that it lost millions of dollars due to tortious
“Pte. Ltd.” stands for private limited company, and Sendirian Berhad
1
(Sdn. Bhd.) refers to a private limited company in Malaysia (M).
The California Supreme Court transferred this matter from the Court
of Appeal for the Sixth Appellate District to the First Appellate District on
August 9, 2022.
1
conduct by HP Malaysia and two of its affiliates, the Hewlett-Packard
Company (HP Co.) and HP Enterprise Services, LLC (HP Enterprise).
Following a jury trial, judgment was entered against HP Malaysia but
in favor of HP Co. and HP Enterprise. The judgment requires HP Malaysia
to pay WonderWorks approximately $1.75 million for its unpaid work on the
project.
On appeal, WonderWorks contends that its judgment against HP
Malaysia is insufficient and must be reversed due to the erroneous exclusion
of evidence and an improper jury instruction. It contends further that the
judgment in favor of HP Co. must be reversed due to an erroneous summary
adjudication order rejecting WonderWorks’ theory that HP Malaysia was HP
Co.’s agent. We reject these contentions and affirm the judgment.
BACKGROUND
I. The Complaint
WonderWorks filed this action in 2014. The 2018 second amended
complaint (complaint) is the operative pleading with respect to issues raised
on appeal. According to the complaint, WonderWorks is a small start-up
software company, wholly owned by Sri Rajan. The complaint refers to the
defendants collectively as HP and contains allegations that HP Malaysia and
HP Enterprise are agents or alter-egos of HP Co., and that defendants
conspired or aided and abetted each other. WonderWorks’ claims are divided
into fourteen causes of action based on theories of breach of contract, fraud,
negligence, business interference, and quantum meruit. Every cause of
action incorporates by reference a lengthy background section. To frame the
issues on appeal, we summarize key events alleged by WonderWorks.
In April 2011, HP Malaysia and Bank Negara entered into a contract
(the Prime Contract), pursuant to which HP Malaysia agreed to build and
2
maintain a computerized financial reporting system for Bank Negara (the
project).
In July 2011, WonderWorks entered into a contract with HP to “provide
certain software components and services” for the project (the Subcontract).
This “single” “integrated” contract consisted of three types of form documents:
a “Statement of Work”; a “Global Supply Chain” document containing
standard terms and conditions; and purchase orders.
After WonderWorks began work on the project, HP began taking
unlawful actions against WonderWorks, the complaint alleged. For example,
they avoided paying WonderWorks “millions of dollars [in] license fees” by
understating the number of “central processing units and cores” on which
they installed WonderWorks software. They also failed to pay “millions of
dollars” on invoices for work WonderWorks performed pursuant to purchase
orders. Then they induced WonderWorks to keep working on the project by
promising to pay or otherwise resolve the outstanding invoices and license
fees.
Both before and after WonderWorks agreed to join the project, HP
made false representations and concealed material facts as part of a scheme
to acquire WonderWorks’ software and services without having to pay for
them, the complaint continued. For example, they promised to partner with
WonderWorks on a “lucrative Cloud System that would be replicated
worldwide,” never intending to follow through. They also concealed a plan to
build an alternative computer system without WonderWorks. And during
construction of the computer system for Bank Negara, they concealed
information about the number of times they installed WonderWorks’ software
in order to avoid incurring license fees.
3
The defendants were unable to fulfill their obligations under the Prime
Contract due to their own failings, plaintiff alleged. So, defendants
negotiated an “exit agreement” with Bank Negara and abandoned the project.
Their failure to build the promised computer system “eliminat[ed] the utility
and benefit of WonderWorks software” not just for Bank Negara but for
“Reporting Entities,” i.e., other financial institutions that would have used
the computer system had the Prime Contract been completed.
II. Summary Judgment/Adjudication
In May 2018, the trial court decided two motions for summary
judgment or summary adjudication: a joint motion filed by HP Co. and HP
Enterprise, referred to by the court as the “American Entities”; and a
separate motion filed by HP Malaysia. In its 48-page order, the court granted
the American Entities summary adjudication of many claims, granted HP
Malaysia summary adjudication of substantially fewer claims, and made
several findings that limited the scope of WonderWorks’ case.
A. Contract-Based Causes of Action
1. Breach of the Subcontract
In its eighth and ninth causes of action, WonderWorks alleged that the
defendants committed two distinct breaches of the Subcontract by: failing to
pay for all the work that WonderWorks performed on the project; and
installing WonderWorks’ software on additional central processing units
(CPUs) without paying for additional licenses to do so. The court granted the
American Entities summary adjudication of these causes of action, but denied
it to HP Malaysia. In reaching these rulings, the court made several findings
pertinent to this appeal.
4
a. The Contract
The court found that the Subcontract was a single integrated
agreement between WonderWorks and HP Malaysia, comprised of a
Statement of Work, the Global Supply Chain Standard Terms and
Conditions, and purchase orders. The American Entities were not parties to
the Subcontract.
The court based these findings on paragraph 25 of the complaint, which
set forth material factual allegations regarding the existence of a contract,
and on the summary judgment evidence produced by the American Entities,
which showed that they were not parties to the three form documents that
comprised the Subcontract. WonderWorks did not produce responsive
evidence to raise a triable issue as to these facts.
In reaching these conclusions, the court observed that some
terminology in the complaint obfuscates WonderWorks’ factual allegations
and legal theories, “perhaps intentionally.” For example, plaintiff’s use of the
word “HP” to refer to all three defendants was “neither appropriate nor
helpful.” Moreover, in paragraphs expressly alleging a breach of the
Subcontract, WonderWorks used the plural word “contracts.” The court
construed this term as a reference to the three form documents comprising
the Subcontract, i.e., the Statement of Work, Global Supply Chain Standard
Terms and Conditions, and purchase orders.
The complaint paragraphs alleging breach of contract (as distinguished
from the background section) also refer to other documents, not previously
mentioned in paragraph 25, which the court disregarded as “surplusage.”
The additional documents were “Change Requests, EULAs, and oral and
email agreements.” The court also observed that a EULA, which stands for
End User License Agreement, “binds the end user or consumer of software; it
5
does not ordinarily bind a collaborating software developer.” (Citing SoftMan
Products Co., LLC v. Adobe Systems, Inc. (N.D.Cal. 2001) 171 F.Supp.2d
1075, 1087.)
Although WonderWorks opposed summary adjudication of these claims,
it appeared to concede that the American Entities were not parties to the
Subcontract. Instead, it argued these defendants could be liable for breach of
contract as alter egos of HP Malaysia. The court rejected this argument
based on the defense evidence, which showed that “HP Malaysia operated as
a separate and independent entity from the American Entities such that it
was not a mere shell or conduit for their affairs and vice versa.”
WonderWorks failed to respond with evidence that would create a triable
issue as to a unity of interests that would destroy corporate separateness.
(See Zoran Corp. v. Chen (2010) 185 Cal.App.4th 799, 811 [discussing unity of
interest requirement for proving alter ego liability].)
Because the American Entities were not parties to the Subcontract or
alter egos of HP Malaysia, the trial court granted them summary
adjudication of all contract claims relating to the Subcontract.
b. Choice of Law
Before deciding HP Malaysia’s motion for summary adjudication, the
court found that a Malaysian choice of law provision in the Subcontract was
enforceable. Moreover, Malaysian law applied to both contract and tort
claims alleged against HP Malaysia because they all arose out of the
subcontract relationship.2
2 “Determination of the law . . . of a foreign nation . . . is a question of
law.” (Evid. Code, § 310, subd. (b).) It is to be determined by the court
pursuant to rules of evidence governing judicial notice. (Ibid.) If “the court
resorts to the advice of persons learned in the subject matter,” such advice
may be received in open court or in writing. (Evid. Code, § 455, subd (b).)
6
HP Malaysia was denied summary adjudication of the two causes of
action alleging breach of the Subcontract because it failed to carry its initial
burden as the moving party of establishing the absence of a triable issue of
fact under Malaysian law.
2. Quantum Meruit
In its fourteenth cause of action, Wonderworks alleged that between
March 2011 and October 2012, defendants “demanded” that WonderWorks
perform services for the benefit of defendants, WonderWorks performed the
requested services “under coercion,” and defendants did not pay for those
services. WonderWorks sought compensation for “the fair and reasonable
value” of services rendered.
The American Entities were granted summary adjudication based on
evidence demonstrating that WonderWorks performed work at the request of
and for the benefit of HP Malaysia, and that the American Entities are not
alter egos of HP Malaysia. WonderWorks failed to raise a triable issue as to
either fact. However, HP Malaysia was denied summary adjudication
because it did not carry its initial burden of demonstrating that
WonderWorks could not establish an essential element of its quantum meruit
claim.
3. Other Contract-Based Causes of Action
All defendants were granted summary adjudication of a cause of action
alleging breach of the implied covenant of good faith and fair dealing
allegedly arising out of the Subcontract. The court also dismissed a cause of
action alleging breach of unspecified third-party contracts, which was
The appellate record contains two declarations from defendants’ Malaysian
law expert that were submitted in support of the summary adjudication
motions.
7
premised on allegations that HP Malaysia executed contracts with financial
institutions that would have used Bank Negara’s reporting system if it had
been completed, and that WonderWorks was the intended beneficiary of those
contracts. These rulings are not challenged on appeal.
B. Tort Causes of Action
Applying Malaysian law to decide HP Malaysia’s motion and California
law to decide the American Entities’ motion, the court denied summary
adjudication as to all tort causes of action, save one.3 Again, we highlight
rulings relevant to the present appeal.
1. Fraud
The complaint’s first four causes of action alleged fraud based on
theories of intentional misrepresentation, fraudulent inducement, negligent
misrepresentation, and fraudulent concealment. These theories were pleaded
in the most general terms, and the court observed that it was difficult to
determine whether factual allegations supported them because the
complaint’s long convoluted background section was incorporated wholesale
into each cause of action. Ultimately, the court rejected a defense argument
that fraud had not been pled with sufficient specificity and denied summary
adjudication, as it was able to locate specific paragraphs in the complaint
that alleged misrepresentations and concealed facts. However, the court also
made a record of the fact that WonderWorks had previously been granted
leave to amend in order to clarify its pleaded theories so as to avoid confusion
3 The American Entities were granted summary adjudication of a
cause of action alleging that they interfered with HP Malaysia’s ability to
perform contracts with reporting entities because WonderWorks alleged no
facts to show it was a third-party beneficiary of purported contracts with
reporting entities.
8
at summary judgment and trial, and that “inexplicably” WonderWorks’
amended complaint did not clarify its fraud theories.
2. Negligence
In its twelfth cause of action, WonderWorks alleged the defendants
were negligent because they failed to exercise reasonable care when
performing obligations under the Prime Contract, and the breach of this duty
caused WonderWorks to suffer damages. Although all defendants were
denied summary adjudication of this cause of action, the court’s findings
further limited WonderWorks’ case against the American Entities.
a. Direct Liability Findings
The American Entities had no duty of care arising from the Prime
Contract, the court found, because they were not parties to the agreement
between HP Malaysia and Bank Negara. Therefore, the American Entities
could not be directly liable for negligence under the theory alleged. However,
HP Malaysia was a contracting party, and it did not carry its initial burden of
demonstrating that WonderWorks’ theory of negligence was untenable under
Malaysian law.
b. Vicarious Liability Findings
Because WonderWorks alleged that HP Malaysia and HP Enterprise
were HP Co.’s agents, the court considered whether the American Entities
could be liable for HP Malaysia’s alleged negligence pursuant to an agency
theory.
The court found that control is the key characteristic of an agency
relationship and that a corporate parent’s general executive control over a
subsidiary is insufficient. (Citing Sonora Diamond Corp. v. Superior Court
(2000) 83 Cal.App.4th 523, 542 (Sonora Diamond).) Instead, “ ‘the parent
must be shown to have moved beyond the establishment of general policy and
9
direction for the subsidiary and in effect taken over performance of the
subsidiary’s day-to-day operations in carrying out that policy.’ ” (Quoting
Sonora Diamond, at p. 542, italics omitted.)
Applying these principles, the court found that WonderWorks’ agency
theory of liability was unmeritorious. The summary judgment evidence
showed HP Malaysia was not controlled by the other defendants “to such a
degree that it was merely their agent.” WonderWorks failed to raise a triable
issue as to this fact. Instead, it relied on evidence that the American Entities
provided assistance in connection with the project when it appeared the
project was in jeopardy, which did not “qualif[y] as usurpation of control over
HP Malaysia’s day-to-day operations as an entity.”
However, there was a triable issue as to WonderWorks’ aider and
abettor theory of liability. Aider and abettor liability may be imposed on a
defendant “ ‘who knows that another’s conduct constitutes a breach of duty
and substantially assists or encourages the breach.’ ” (American Master
Lease LLC, v. Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451, 1476.) The
American Entities produced evidence that they did not knowingly agree to
engage in any tortious activity. But WonderWorks raised a triable issue as to
the American Entities’ knowledge by proffering evidence that these
defendants were involved in material decisions impacting the trajectory of
the project. On this basis, the American Entities were denied summary
adjudication of the negligence cause of action.4
4 The court found no triable issue as to WonderWorks’ conspiracy
allegations against the American Entities because a conspiracy can only be
formed by parties who are already under a duty to the plaintiff. (Citing
Chavers v. Gatke Corp. (2003) 107 Cal.App.4th 606, 614.)
10
3. Other Tort Causes of Action
In its fifth cause of action, WonderWorks alleged that the American
Entity defendants intentionally interfered with the Subcontract by taking
“control” of the contractual relationship between WonderWorks and HP
Malaysia, and preventing WonderWorks from realizing profits under the
Subcontract. The American Entities were denied summary adjudication of
this claim because they failed to carry their initial burden of demonstrating
that it lacked merit.
Finally, we note that WonderWorks also alleged causes of action for
interference with economic advantage and commercial disparagement.
Although summary adjudication of these claims was denied, WonderWorks
abandoned them at trial, so they are not at issue on appeal.
III. Jury Trial
Trial was held in September and October 2018. According to its trial
brief, WonderWorks intended to pursue all claims for which summary
adjudication had not been granted. In early October, the trial court granted
WonderWorks’ motion for leave to amend the quantum meruit claim alleged
in the complaint, which sought compensation for unpaid services but not for
unpaid goods. Over defendants’ objection the court granted WonderWorks
“leave to amend . . . to state a claim based on both the services and goods it
provided for which it did not receive compensation.”
By the close of evidence, WonderWorks’ case was pared down to three
claims against HP Malaysia and a single claim against the other defendants.
On October 19, 2018, the jury returned special verdicts as to these claims.
A. HP Malaysia
Breach of the Subcontract: The jury found that WonderWorks
performed its contractual obligations, HP Malaysia did not perform its
11
contractual obligations, and there was no defense for HP Malaysia’s breach.
The “amount of reasonably certain damages that WonderWorks suffered as a
direct result of HP Malaysia’s breach of the contract” was $474,861.00.
Quantum Meruit: The jury found that HP Malaysia demanded
services and/or goods from WonderWorks that WonderWorks was not
contractually obligated to provide, and that WonderWorks provided those
services and/or goods with the intention that it would be compensated. The
jury also found that HP Malaysia did not pay WonderWorks the fair and
reasonable value for services and goods provided, entitling WonderWorks to
damages in the amount of $1,277,901.00. And, the jury found, WonderWorks
was entitled to prejudgment interest on these damages in the amount of
seven percent, compounded annually starting on August 27, 2012.
Fraud: The jury found that a false statement of fact had not been
made by anyone with authority to act on behalf of HP Malaysia. Someone
with such authority did conceal a material fact from WonderWorks, but
WonderWorks did not “suffer a financial loss as a result of its reliance on the
nonexistence of the fact concealed.” Therefore, HP Malaysia was not liable
for fraud.
B. The American Entities
Intentional Interference with the Subcontract: The jury found
that HP Co.’s conduct prevented WonderWorks’ performance of the
Subcontract or made performance of the contract more expensive or difficult.
Further, HP Co. intended to disrupt performance of the Subcontract or knew
that disruption was substantially certain to occur. However, HP Co. had “a
legitimate financial interest in the contractual relationship between
WonderWorks and HP Malaysia,” and it acted “only to protect its own
financial interest.” Further, HP Co. used “appropriate means” to protect its
12
own financial interest. Therefore, HP Co. was not liable for intentional
interference with the Subcontract.
HP Enterprise was also found not liable for intentional interference
with the Subcontract, but because WonderWorks raises no issues on appeal
relevant to HP Enterprise, we will mention this entity no further.
IV. The Judgment
On April 29, 2019, the trial court entered a judgment, which
incorporated the special verdict of the jury. HP Co. was granted judgment
against WonderWorks, and WonderWorks was granted judgment against HP
Malaysia in the total amount of $2,549,993. This award included seven
percent compound interest on the quantum meruit award, and three percent
interest on contract damages.
In May 2019, HP Malaysia moved for judgment notwithstanding the
verdict with respect to the quantum meruit claim, arguing (1) the verdict was
not supported by substantial evidence, and (2) WonderWorks was not entitled
to compound interest. Only partially granting the motion, the court rejected
HP Malaysia’s sufficiency of the evidence challenge but reduced the judgment
to award three percent simple interest on the quantum meruit claim.
DISCUSSION
I. The End User Licensing Agreement
A. Issues Presented
WonderWorks’ primary claim of error is that the trial court excluded
“all evidence” of the End User Licensing Agreement (EULA) that
WonderWorks uses to protect its intellectual property rights. WonderWorks
argues this evidence was admissible to prove that HP Malaysia agreed to pay
a license fee each time WonderWorks’ software was installed on a “core”
device during construction of the information system for the project.
13
We review the trial court’s evidentiary rulings for abuse of discretion.
(See Christ v. Schwartz (2016) 2 Cal.App.5th 440, 446–447.) Before turning
to rulings regarding the EULA, we correct two factual misconceptions that
permeate WonderWorks’ appellate arguments.
First, “all evidence” of the EULA was not excluded at trial. Solely by
way of example, we note that WonderWorks’ owner, Sri Rajan, testified about
the function and content of his company’s EULA. During that testimony, a
EULA that had been signed by a reporting entity of Bank Negara was
admitted into evidence.
Second, the trial court made more than one ruling regarding the
admissibility of EULA evidence, and WonderWorks obfuscates our review
when it ignores that a series of evidentiary rulings were made at specific
times during the trial court proceedings. WonderWorks confuses matters
further by placing heavy reliance on a 388-page “offer of proof” that it filed
mid-way through trial. On appeal, WonderWorks treats information
contained in that document as if it were part of the trial evidence, when it
was not.
An October 1, 2018 order, filed sua sponte by the trial court,
acknowledges receipt of plaintiff’s offer of proof and explains why the court
took no action in response to it. This order memorializes facts that inform
our review of WonderWorks’ claim that EULA evidence was erroneously
excluded from the trial evidence. The order recounts that WonderWorks had
the opportunity to file an offer of proof before the court ruled on every motion
relating the EULA, but it consistently failed to do so. Instead, it asked to file
an offer of proof after objecting to an in limine ruling, and then waited until
after the court made many subsequent rulings before filing. As the trial
court found, such a “belated presentation” is inconsistent with the function
14
and purpose of an offer of proof for purposes of appellate review, which is to
evaluate a specific ruling based on evidence that was before the court when
the ruling was made. (Nienhouse v. Superior Court (1996) 42 Cal.App.4th 83,
93–94; People v. Foss (2007) 155 Cal.App.4th 113, 126–127.)
Moreover, WonderWorks’ offer of proof is based on “legal and logical
fallacies,” the trial judge found. WonderWorks included new information in
its filing that had not been presented when the motions were considered,
depriving the defendants of an opportunity to respond. The court also found
that the offer misconstrues the court’s rulings, and fails to “accurately
recount the evidence [WonderWorks had] purportedly been prohibited from
introducing.” Indeed, concerns about possible erosion of “the judicial
process,” prompted the trial court to make a record of the fact that it had
already “admonished counsel for WonderWorks about their professional and
ethical duties,” and that it “implore[d] them to be accurate historians for the
sake of this trial and the integrity of the judicial system.”
Like the trial court, we will guard against any effort to manufacture an
overarching error by misconstruing evidentiary rulings relating to the EULA.
We limit our discussion to arguments that we can trace to a specific
evidentiary ruling, with the caveat that we have no obligation to search the
record.5 As we explain, WonderWorks fails to show error with respect to any
specific ruling regarding the admissibility of EULA evidence.
5 The “ ‘judgment or order of a lower court is presumed to be correct on
appeal, and all intendments and presumptions are indulged in favor of its
correctness.’ Plaintiff has the ‘burden of overcoming this presumption by
showing error on an adequate record.’ ” (Brown v. Boren (1999) 74
Cal.App.4th 1303, 1320–1321.)
15
B. The In Limine Order
On September 6, 2018, the trial court granted a pretrial motion by the
defense to exclude evidence of alleged contracts precluded by the summary
judgment ruling. Several of WonderWorks’ appellate arguments implicate
this order.
1. Background
Prior to trial, defendants moved for an order precluding WonderWorks
from presenting evidence of alleged “side contracts and agreements.”
Defendants argued this side-contract evidence was irrelevant in light of the
summary adjudication finding that the integrated Subcontract between
WonderWorks and HP Malaysia is comprised of the three form documents
alleged in the complaint.
Moreover, defendants argued that an integration clause in the
Subcontract was enforceable under Malaysian law. (Citing Master Strike
Sdn. Bhd. v. Sterling Heights Sdn. Bhd. (Malay. 2005) 3 MLJ 585.)6 That
clause contains a provision requiring any modification or amendment to the
Subcontract to be in a writing stating that it is an amendment to the
Subcontract, signed by each party. WonderWorks had no evidence of a
binding amendment or modification to the Subcontract, defendants argued.
In their motion, defendants used the EULA as a “prejudicial example”
of WonderWorks’ intention to “insert unenforceable agreements into this
litigation.” The Subcontract obligated WonderWorks to provide “multiple
licenses of three software programs, at a total price of $220,000.” And yet,
WonderWorks intended to argue to the jury that HP Malaysia was bound by
the EULA and therefore owed $133 million in additional license and
maintenance fees. Defendants argued that HP Malaysia, who was not an end
6 References to the MLJ are to the Malayan Law Journal.
16
user of the software, was not a party to the EULA, and that the Subcontract
precluded WonderWorks from imposing its EULA on HP Malaysia.
Opposing this motion, WonderWorks argued that it was entitled to
prove that the Subcontract was not its only contract with HP Malaysia,
offering three reasons: (1) the complaint alleges the “existence” of other
agreements; (2) the summary judgment finding that the Subcontract is the
only agreement between WonderWorks and HP Malaysia was dicta; and (3)
the Subcontract’s integration clause does not apply to agreements outside the
scope of the contract. Alternatively, WonderWorks argued that, even if the
Subcontract was its only contract with HP Malaysia, evidence of other
agreements was admissible to (1) interpret ambiguous terms in the
Subcontract pertaining the scope of WonderWorks’ work, and (2) prove the
quantum meruit claim.
The trial court granted the motion to exclude evidence of alleged side
agreements offered to prove the breach of contract claims. The court
reasoned that WonderWorks was bound by its pleading, which alleged that
WonderWorks and HP Malaysia entered into a single contract with respect to
the project (i.e. the Subcontract), and that this integrated agreement was
comprised of the Statement of Work, the Global Supply Chain Standard
Terms and Conditions, and the purchase orders. WonderWorks could not
offer evidence of other alleged agreements to prove a breach of the
Subcontract, the court found.
The court rejected WonderWorks’ argument that its breach of contract
claims embraced agreements other than the tripartite Subcontract. As a
preliminary matter, the court found that “Summary Judgment cannot be
reversed by a trial judge in limine.” But even without the summary
judgment rulings, the court stated it would have found that “non-original
17
contract evidence” (including the EULA) was inadmissible to prove the
contract causes of action, explaining that it based its ruling on its own
understanding of the law, the fairest construction of the pleading, and the
need to avoid jury confusion.
The court also rejected WonderWorks’ alternative contention that the
EULA was admissible as parol evidence to resolve a perceived ambiguity in
the Subcontract. Allowing in the EULA as evidence of the parties’ agreement
would contradict the clause in the Subcontract stating it was an integrated
agreement, the court concluded. The court also opined that WonderWorks
was mischaracterizing the EULA as parol evidence so that it could later use
EULA licensing terms to prove the damages element of its breach of contract
claims.
However, the court gave credence to plaintiff’s theory that EULA
evidence could be admissible for some other reason. Specifically, it observed
that, because “the quantum meruit claim will proceed to trial, . . . the EULA
agreement and [related evidence] may be relevant to that cause of action.”
2. Analysis
WonderWorks contends first that the in limine order is based on a
misapplication of the parol evidence rule. We reject this argument, which
misconstrues the trial court’s ruling. The court found that WonderWorks
could not use purported side agreements to prove its breach of contract
claims because it was bound by its pleading and the summary judgment
order, both of which establish that the Subcontract is a single integrated
contract comprised of documents specifically delineated in the complaint.
WonderWorks, not the court, proposed characterizing the EULA as
parol evidence. It made a cursory argument that provisions in the
Subcontract “about how HP was to pay for WonderWorks’ software” were
18
ambiguous, and that the EULA resolved those alleged ambiguities. As noted,
the court rejected this argument because relying on the EULA’s licensing
terms to construe the Subcontract contradicts the express terms of the
Subcontract. On appeal, WonderWorks makes the irrelevant argument that
the parol evidence rule would not have precluded using the EULA to show
that the parties modified the Subcontract at a later date. That distinct issue
was not raised in WonderWorks’ opposition to the in limine motion, nor
addressed in the pretrial order.
Taking a different tack, WonderWorks argues the EULA was
admissible as substantive proof of an enforceable contract between
WonderWorks and HP Malaysia. This argument appears to rest on three
contentions: (1) the complaint states a claim against HP Malaysia for breach
of the EULA; (2) the summary judgment court did not preclude
WonderWorks from arguing that HP Malaysia agreed to the EULA; and (3)
the in limine order depends on an erroneous interpretation of the summary
adjudication order. Each prong of this argument is flawed.
First, factual allegations establishing the existence of a contract are
found in paragraph 25 of the complaint, which describes the Subcontract that
gave rise to this litigation and establishes that the EULA was not part of the
Subcontract. The EULA is discussed in paragraph 30, which enumerates the
allegations relating to WonderWorks’ fraudulent misrepresentation theories.
WonderWorks alleged that a representative of the defendants promised that
the EULA would be incorporated into the Subcontract and that this
representation was false because the EULA was not incorporated into the
Subcontract, and indeed, “HP never had any intention of” amending the
Subcontract to incorporate the EULA. More generally, “HP never had any
intention of resolving the commercial disputes with WonderWorks . . . in
19
compliance with WonderWorks’ EULA.” These fraud allegations do not state
a cause of action for breach of contract, and are squarely inconsistent with
WonderWorks’ contention on appeal that HP Malaysia agreed to
WonderWorks’ EULA.
Second, the summary adjudication order contains a finding that the
only contract supporting the breach of contract causes of action is the
Subcontract between WonderWorks and HP Malaysia. That finding was not
dicta; it was based on pleaded facts, the summary judgment evidence, and
the failure of WonderWorks to raise a triable issue of fact. While the
summary adjudication order did not expressly preclude WonderWorks from
arguing that HP Malaysia agreed to the EULA, it did establish definitively
that the EULA was neither part of the Subcontract nor an independently
enforceable contract between the parties to this lawsuit.
Third, the in limine order was not premised on an erroneous
understanding of the summary adjudication order because the trial court
stated it would have made the same order regardless of the summary
adjudication order. Both the judge who decided the summary judgment
motion and the trial judge reached the same conclusion: the complaint states
a cause of action for breach of the Subcontract and the EULA was not part of
that contract. Because the EULA was not part of the Subcontract,
WonderWorks was precluded from offering evidence of that purported side
agreement for the purpose of proving a breach of the Subcontract.
WonderWorks fails to demonstrate this ruling was error.
WonderWorks also fails to acknowledge that the in limine order
expressly contemplated that evidence about the EULA could be admissible
for other purposes, such as to prove the quantum meruit claim. This aspect
20
of the ruling reinforces our conclusion that the court did not abuse its
discretion in granting the defendants’ in limine motion.
C. The Course of Conduct Motion
On September 14, 2018, WonderWorks called Sri Rajan as its first
witness. Rajan, who testified over the course of many days, completed
testimony in plaintiff’s case-in-chief on October 1. On September 20, the trial
court denied WonderWorks’ motion for permission to elicit testimony from
Rajan regarding the parties’ course of conduct as evidence of the meaning of
the Subcontract. On appeal, WonderWorks contends that the court’s denial
of this motion was based on a misapplication of the law of estoppel.
1. Background
On September 18, Rajan testified about WonderWorks’ EULA. He
described it as a warranty-type agreement with customers who purchase
WonderWorks software. He testified further that, under the EULA, a
software license applies to a “CPU” system, but limits installation of the
software to two “cores” within the system. While answering questions about
a EULA signed by a reporting entity of Bank Negara that was admitted into
evidence, Rajan lamented that other reporting entities did not have the
opportunity to license his software because the project was shut down.
On September 18, Rajan also discussed some of the problems between
WonderWorks and HP Malaysia that arose before the project was terminated.
For example, the Subcontract required WonderWorks to provide six licenses
of its “Composer” software for installation on the computer system that was
to be constructed for Bank Negara. Rajan testified that HP Malaysia
installed more than double that number of copies and never paid
WonderWorks for additional licenses.
21
On September 19, WonderWorks filed a “Bench Brief Regarding
Evidence of the Parties’ Course of Dealing.” (Block capitalization omitted.)
In that brief, WonderWorks disclosed its intention to elicit testimony from
Rajan to explain that when the parties used the term “ ‘per CPU’ ” while
discussing pricing of software licenses, they meant “ ‘per core,’ ” as evidenced
by the fact that they agreed to adopt the EULA. WonderWorks characterized
this proposed testimony as “course of conduct” evidence, admissible to resolve
an ambiguity in the Subcontract’s Statement of Work as to what the parties
meant when they agreed that software licenses would be priced on a “ ‘per
CPU’ ” basis. As authority, WonderWorks relied on a Malaysian case
applying the principle that when “ ‘parties to a contract, by their course of
dealing, put a particular interpretation on the terms of it . . . they are bound
by that interpretation just as if they had written it down as being a variation
of the contract.’ ” (Quoting Summer Harvest Sdn. Bhd. V. Michael Chang Tze
Chon (Malay. 2017) 5 MLJ 77, 88–89 (Summer Harvest).)
On September 20, the court held a hearing and issued a written order
denying this motion. It found that testimony WonderWorks sought to elicit
from Rajan was not course of conduct evidence; plaintiff did not offer to show
how the parties actually used or installed software during the course of their
contractual relationship. Instead, the proposed testimony would show only
that Rajan thought, guessed or hoped HP Malaysia would adopt Rajan’s view
that the “ ‘per-CPU’ ” licensing term in the Statement of Work was defined in
the EULA. WonderWorks could not use this theory to attempt (once again) to
incorporate the “independent EULA” into the integrated Subcontract.
The court also found that WonderWorks had misapplied Malaysian
law. The court reasoned that the general rule is that “ ‘an agreement may
not be interpreted by reference to the subsequent conduct of the parties
22
thereto.’ ” (Quoting Sejati Educ. Sdn. Bhd. v. S3M Dev. Sabah Sdn. Bhd.
(Malay. 2015) 2 MLJ 98, 101.) WonderWorks relied on Summer Harvest,
supra, 5 MLJ 77, which discusses an exception to this general rule referred to
as estoppel by convention. The court further found, to invoke the exception,
WonderWorks would have to show (1) the parties’ course of dealing put a
particular interpretation on the terms of their contract; (2) WonderWorks
placed its “ ‘faith’ ” on this interpretation and HP Malaysia knew this fact;
and (3) it would be “ ‘altogether unjust’ ” to allow HP Malaysia to adopt a
construction of the parties’ contract that is contrary to the parties’ prior
course of dealings.” (Quoting Summer Harvest, at pp. 88–89.)
Applying this authority, the court found that the exception
WonderWorks asked the court to apply is “limited to situations in which the
parties’ undisputed conduct establishes ‘a particular interpretation on the
terms of the contract’ such that a party may be estopped from subsequently
taking a position contrary to that course of dealing.” Wonderworks had not
established any of the requirements for applying estoppel by convention to its
EULA, the court found. Rather, the only undisputed fact before the court was
that there was no enforceable agreement binding HP Malaysia to the EULA.
Thus, the EULA was not admissible to vary the terms of the Subcontract
under a “course of dealing argument.”
2. Analysis
WonderWorks contends that the trial court “applied the wrong
standard” in denying WonderWorks’ estoppel motion. We disagree. Because
WonderWorks based its course of conduct motion on the estoppel theory
applied in the Summer Harvest case, the trial court explained why estoppel
by convention did not apply. On appeal, WonderWorks does not discuss
Summer Harvest at all. Indeed, although it requests judicial notice of
23
multiple other Malaysian court decisions, WonderWorks does not seek
judicial notice of the Summer Harvest case.7
On appeal, WonderWorks attempts to invoke a different estoppel
theory. It argues that a party who makes an oral agreement to modify a
written contract is estopped from enforcing a term in the contract that
requires all contract modifications to be in writing. WonderWorks bases this
theory on Ng Sau Foong v. Rhombus Food & Lifestyle Sdn. Bhd. & Anor
(Malay. 2020) 8 MLJ 155, a case that was decided after entry of judgment in
the present case. WonderWorks argues that Ng Sau Foong should be applied
on appeal because it was simply a clarification of existing law.
Because a determination of foreign law is a question of law, Ng Sau
Foong could be subject to permissive judicial notice. (Evid. Code, § 452,
subd. (f).) However, WonderWorks fails to articulate a valid theory of
relevancy, which is a “precondition to the taking of judicial notice in either its
mandatory or permissive form.” (Shamrock Foods, supra, 24 Cal.4th at
p. 422, fn. 2.) WonderWorks did not rely on the estoppel theory allegedly
discussed in Ng Sau Foong as a basis for its course of conduct motion. Nor
did the trial court deny the motion on the ground that an alleged agreement
to follow the EULA was not in writing.
7 WonderWorks has filed two requests for judicial notice, which we
grant in part and deny in part. We take judicial notice of Malaysian cases
and legal authority that were relied on by the parties in the trial court.
Requests for judicial notice of cases that were not presented to the trial court
are denied because they are not supported by a showing of relevance. (See
People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2
(Shamrock Foods).) Nor do we have, as to these cases, substantive “advice of
persons learned in the subject matter.” (Evid. Code, § 454, subd. (a)(1); see
Mireskandari v. Gallagher (2020) 59 Cal.App.5th 346, 359.)
24
In its reply brief, WonderWorks amends its argument to be that Ng
Sau Foong decided a new point of law by holding that parties can orally vary
the terms of a contract that requires modifications to be in writing. For this
reason, WonderWorks contends it may rely on Ng Sau Foong pursuant to an
exception to the rule that a court will not consider a new contention on appeal
that applies to a newly decided issue of law. (Citing In re Marriage of
Moschetta (1994) 25 Cal.App.4th 1218, 1227.) This theory about the
significance of Ng Sau Foong is not properly raised for the first time in a
reply brief. (See e.g. Owens v. City of Oakland Housing, Residential Rent &
Relocation Bd. (2020) 49 Cal.App.5th 739, 746 (Owens).) Regardless, this
new legal theory is irrelevant as it has nothing to do with the challenged
order excluding course of conduct evidence. WonderWorks’ motion was
denied because Rajan’s proposed testimony was not course of conduct
evidence and, even if it could be so construed, WonderWorks failed to satisfy
the elements of estoppel by convention. The court did not base its ruling on
the Subcontract’s requirement that contract modifications had to be in
writing.
Finally, WonderWorks contends that the trial court erred by basing its
order on the allegedly undisputed fact that the EULA was not a binding
agreement with HP Malaysia even though WonderWorks disputed that very
fact. Although WonderWorks repeatedly argued that the EULA should be
binding on HP Malaysia, the summary adjudication order established that it
was not a binding contract, thus we see no error in the trial court’s
statement. In any event, this assertion was not material to the September 20
order, which denied the course of conduct motion because the proffered
testimony was not course of conduct evidence, and WonderWorks failed to
establish an estoppel by convention.
25
D. Motion to Admit Quantum Meruit Evidence
On September 24, 2018, the trial court denied WonderWorks’ motion to
elicit testimony about the EULA to prove its quantum meruit claim.
WonderWorks disputes this ruling.
1. Additional Background
On the morning of September 24, WonderWorks filed a motion to admit
evidence of the EULA for a “limited purpose.” As its direct examination of
Rajan drew near, WonderWorks sought to elicit testimony regarding the
EULA and discussions the parties had about it, including a discussion in
which HP Malaysia allegedly agreed to the terms of the EULA.
WonderWorks argued this evidence was relevant to its quantum meruit claim
as proof of “the reasonable value of WonderWorks’ software that was
provided to HP Malaysia but not paid for.”
Opposing the motion, defendants argued that the EULA was not
relevant to the quantum meruit claim because that document does not
contain any pricing terms and, even if it says something about reasonable
value, it pertains to a product, whereas the plaintiff sought quantum meruit
relief for unpaid services. Defendants also argued that many terms in the
EULA conflict with terms of the Subcontract; alleged discussions about the
EULA had nothing to do with licensing terms; and HP Malaysia never agreed
to be bound by the EULA.
The trial court denied the motion to admit EULA evidence for purpose
of establishing quantum meruit damages, giving three reasons. First,
evidence that the parties had discussions about the EULA was not relevant
to prove that extra-contractual services were provided, and it appeared to the
court that WonderWorks was using this theory as an opportunity to argue
that HP Malaysia agreed to the EULA. Second the EULA did not contain
26
relevant information about the value of any product that WonderWorks
provided, although the court was open to considering how the terms could be
useful for making such a calculation. Third, because the EULA pertains to a
software product, it was not relevant to show the reasonable value of services
that WonderWorks sought to recover pursuant to its quantum meruit claim.
2. Analysis
WonderWorks argues the September 24 order was error because the
EULA evidence was relevant to two elements of its quantum meruit claim:
(1) to establish that WonderWorks did not intend to provide its software
gratuitously, i.e., for free; and (2) to establish the fair value of the software.
These arguments assume erroneously that the quantum meruit claim sought
compensation for products supplied by WonderWorks.
When the court denied this motion on September 24, the quantum
meruit claim alleged in the complaint was limited to a request for
compensation for services, and did not encompass goods. The value of a
WonderWorks product was not relevant to the quantum meruit claim as it
was pleaded at the time this motion was denied, but the court stated
expressly that it was open to considering plaintiff’s theory as to how the
terms of the EULA would be useful in calculating the value of its software.
On appeal, WonderWorks fails to show any abuse of discretion in this ruling.
On October 3, after the quantum meruit motion had been denied, the
trial court granted WonderWorks leave to amend its quantum meruit cause
of action to seek compensation for unpaid goods in addition to unpaid
services. As best we can determine, WonderWorks did not file a subsequent
motion to admit EULA evidence to prove the amended quantum meruit
claim.
27
II. The Fraudulent Inducement Claim
WonderWorks contends that the trial court committed reversible error
midway through trial by excluding “wholesale” WonderWorks’ claim that HP
Malaysia fraudulently induced WonderWorks to provide goods and services
that it was not contractually required to supply. In considering this claim of
error, we also consider the largely duplicative argument that the court erred
by excluding EULA evidence as proof of fraudulent inducement.
A. Background
On September 17, 2018, the trial court denied defendants’ motion for
non-suit of the fraud causes of action. But it also refused to grant
WonderWorks permission to present “state of mind” evidence to prove one of
its fraud theories–that WonderWorks was fraudulently induced to continue
working on the project despite the fact that it was not being paid.
WonderWorks had acknowledged during a hearing on the matter that its
specific theory was premised on proving a contract breach entitling it to walk
away from the Subcontract. Therefore, the court ruled that WonderWorks
could not present evidence to show that Rajan relied on allegedly fraudulent
inducements and representations (such as an alleged agreement to the terms
of the EULA) until it provided evidence establishing that the Subcontract
was actually breached.
On September 18, the court heard further argument regarding this
fraudulent inducement theory. WonderWorks argued that testimony elicited
from Rajan earlier that day proved that HP Malaysia materially breached the
Subcontract and opened the door to evidence of fraudulent inducement.
Specifically, Rajan testified that, by March 7, 2012, the number of
installations of WonderWorks software exceeded the number of licenses
provided to Bank Negara under the Subcontract. During argument before
28
the court, the defendants argued that even if HP Malaysia had a contractual
obligation to pay for additional licenses, that obligation was conditioned on
issuance of invoices pursuant to the terms of the Subcontract. Defendants
also argued that WonderWorks could not have walked away from the project
even if a payment was overdue because WonderWorks did not invoke section
9.2 of the Subcontract, which set forth an agreed procedure for terminating
the contract. Discussion about the parties’ competing theories was
protracted, and the court did not rule until the following day.
On September 19, the court made a finding that, as of that date,
WonderWorks had not proved a breach of the Subcontract sufficient to open
the door to its fraudulent inducement theory. Rajan’s testimony about the
additional software installations was insufficient because even if HP
Malaysia had a contractual obligation to pay for additional installations,
WonderWorks had agreed to a “grievance” procedure by executing the
Subcontract, and that provision (section 9.2) was enforceable under
Malaysian law. Since WonderWorks did not follow the grievance procedure,
it was not free to walk away from the project on the ground that additional
software installations occurred, the court found. The court stated that its
ruling was without prejudice, since additional information or relevant
evidence could be forthcoming.
On September 24, WonderWorks filed another motion to elicit
testimony about allegedly fraudulent statements by HP Malaysia that
induced WonderWorks to continue work on the project despite not being paid.
Seeking reconsideration of the September 19 order, WonderWorks argued it
was not required to follow the termination/grievance procedure in the
Subcontract before it could walk away from the project. According to this
29
theory, WonderWorks’ failure to comply with section 9.2 was “irrelevant”
because it had been fraudulently induced not to invoke section 9.2.
The trial court denied WonderWorks’ motion for reconsideration. The
court found that section 9.2. specifies how to remedy an alleged breach of
contract “before anybody has a right to walk away from the contract.” Both
parties agreed to this provision and plaintiff’s theory that the clause simply
evaporated once a breach occurred defied logic. The court also affirmed its
prior ruling that section 9.2. was enforceable under Malaysian law.
On September 24, the court also addressed a “second part” to
WonderWorks’ fraudulent inducement argument. That morning,
WonderWorks had filed a document titled “Fraudulent Inducement,” which
presented a new theory. (Block capitalization omitted.) WonderWorks
sought permission to admit EULA evidence to prove that it was fraudulently
induced to do “other work” on the project that was outside the scope of the
Subcontract. The court agreed that WonderWorks had the right to present
evidence of fraud, whether or not there was a breach of the Subcontract. But
if found that this new theory was flawed because plaintiff wanted to “use
[the] EULA” as “their operative agreement” in order to prove fraud as to this
other work. In other words, this theory rested on an assumption that HP
Malaysia agreed to the EULA, which was not consistent with the evidence.
Moreover, WonderWorks had failed to specify what fraudulent statements it
was seeking to introduce under this new theory. Thus, the court found that
WonderWorks had not met its “burden” under this new theory, but did not
make a formal ruling on this request because it was not timely filed, and
defendants had no opportunity to respond to it.
On September 27, the court heard further argument on the motions to
introduce fraudulent inducement evidence. During the exchange, the court
30
affirmed its prior rulings. It also clarified for the record that it had never
ruled that other agreements, such as the EULA, were inadmissible, but only
that plaintiff must first “prove[] that Mr. Rajan was able to walk away from
the contract.” So far, the court found, WonderWorks had failed to produce
that proof.
B. Analysis
Preliminarily, we reject WonderWorks’ contention that the trial court
made a “wholesale” ruling excluding evidence of allegedly fraudulent
inducements. As discussed, the court made a series of rulings, and
WonderWorks pursued at least two distinct theories: (1) that WonderWorks
was induced to continue performing under the Subcontract; and (2) that
WonderWorks was induced to do work outside the scope of the contract. On
appeal, WonderWorks fails to present a cogent argument challenging a
specific ruling as to either theory.
Initially, WonderWorks focuses on its theory that it was fraudulently
induced to do work outside the scope of the contract. It argues that the trial
court erred by using section 9.2’s termination provision to preclude
WonderWorks from offering EULA evidence to prove this theory. It reasons
that products and services not covered by the Subcontract were not subject to
section 9.2. We reject this argument because WonderWorks misconstrues the
record and the trial court’s ruling. The request to admit EULA evidence to
prove fraudulent inducement to do work outside the contract was denied
because this theory was based on the erroneous premise that the EULA was
a binding agreement with HP Malaysia, and because WonderWorks had not
disclosed in its untimely “Fraudulent Inducement” document what evidence
it sought to introduce. We do not find a copy of this document in the
Appellant’s Appendix or any basis in the appellate briefs for questioning the
31
trial court ruling. (See WFG National Title Ins. Co v. Wells Fargo Bank, N.A.
(2020) 51 Cal.App.5th 881, 894 (WFG National) [“to demonstrate error, an
appellant must supply the reviewing court with some cogent argument
supported by legal analysis and citation to the record”].)
Changing targets, WonderWorks next argues that the court erred by
using section 9.2 to preclude proof that WonderWorks was fraudulently
induced to continue working under the Subcontract, reasoning that the fact
that WonderWorks did not invoke section 9.2 is itself evidence that
WonderWorks was fraudulently induced. The trial court explained that
section 9.2 was enforceable under Malaysian law and rejected the idea that
WonderWorks could make this provision “evaporate” by incorporating it into
its fraud theory. The court clarified expressly that evidence of side
agreements (i.e., the EULA) could be offered to prove this theory once
plaintiff substantiated its own premise that when allegedly fraudulent
inducements were made WonderWorks was free to walk away from the
project due to a contract breach. On appeal, WonderWorks fails to
demonstrate any error in the court’s ruling.
Finally, WonderWorks contends its motion to admit evidence of
fraudulent inducements should have been granted because HP Malaysia was
estopped from invoking section 9.2. WonderWorks bases this cursory
argument on Malaysia’s equitable doctrine of promissory estoppel. According
to a declaration by plaintiff’s Malaysian law expert that was filed in the trial
court, under this doctrine, “a party to a contract can be estopped from
insisting on his strict legal rights under the terms of the contract if the said
party had made representation of facts, whether fraudulently or otherwise,
which were intended to induce the other party to alter his position such that
it would be unjust or unfair to permit him to insist on the performance of the
32
original terms of the contract.” (Citing, e.g., Sim Siok Eng v. Government of
Malaysia (Malay. 1978) 1 MLJ 15.)
This estoppel theory might be relevant if HP Malaysia was attempting
to pursue its rights under the Subcontract. But WonderWorks turns the
doctrine on its head by taking the view that HP Malaysia was estopped from
insisting that WonderWorks prove its own theory that it had a contractual
right that it did not invoke due to the alleged fraud of the defendants. Trial
court rulings that involved section 9.2 were all concerned specifically with
WonderWorks’ trial theory that it was fraudulently induced to stay on the
project, continuing to provide services and software after it had no
contractual obligation to do so. WonderWorks fails to demonstrate error in
the court’s decision to hold WonderWorks to its burden of proving a breach
that entitled it to walk away before admitting Rajan’s testimony about
allegedly fraudulent inducements to stay.
III. The Jury Instruction
WonderWorks contends the trial court erred when instructing the jury
regarding the breach of contract claims alleged against HP Malaysia because
it gave the following instruction relating to conditions precedent to
performance of contractual obligations:
“A condition is an event, the happening of which creates an obligation
on the part of the promisor to perform. HP Malaysia and WonderWorks
agreed in their contract that HP Malaysia would not have to pay
WonderWorks unless WonderWorks submitted invoices in accordance with
the payment schedule and financial terms.[8] HP Malaysia asserts the
8 The instruction that was read to the jury prior to deliberations
inadvertently identified HP Malaysia rather than WonderWorks as the
contracting party that was required to submit invoices. The error was
discovered and corrected while the jury was deliberating.
33
conditions for payment did not occur and that it did not have to pay
WonderWorks. To overcome this assertion, WonderWorks must prove that
the conditions for payment occurred. . . . If WonderWorks does not prove the
conditions occurred for payment, then HP Malaysia was not required to pay
it.”
WonderWorks argues that a conditions precedent instruction should
not have been given in this case because any condition requiring
WonderWorks to submit invoices was excused by HP Malaysia’s allegedly
fraudulent conduct (i.e., concealing allegedly unauthorized software
installations and requesting services without formal documentation). This
argument, untethered to legal authority, does not constitute a cognizable
claim of error.
Parties are “entitled upon request to correct, nonargumentative
instructions on every theory of the case” that they advance “which is
supported by substantial evidence.” (Soule v. General Motors Corp. (1994)
8 Cal.4th 548, 572 (Soule).) On appeal, WonderWorks does not dispute that
failure to satisfy a condition precedent was a theory advanced by HP
Malaysia, or show that this theory was unsupported by the evidence.
Instead, WonderWorks argues it was excused from complying with invoice
conditions set forth in the Subcontract.
Assuming the trial evidence supports this theory, it was incumbent on
WonderWorks to request an excuse instruction. (See e.g., Bisno v. Douglas
Emmett Realty Fund 1988 (2009) 174 Cal.App.4th 1534, 1555–1556 & fn. 14.)
WonderWorks having failed to do so, any error in not giving an excuse
instruction is forfeited. When the trial court “ ‘ “gives an instruction correct
in law, but the party complains that it is too general, lacks clarity, or is
incomplete, he must request the additional or qualifying instruction in order
34
to have the error reviewed.” ’ ” (Metcalf v. County of San Joaquin (2008) 42
Cal.4th 1121, 1131, italics omitted.)
WonderWorks insists that it preserved its right to appellate review by
objecting to this instruction in the trial court. This contention is misleading
and ultimately incorrect, as demonstrated by the procedural history of this
case that we have gleaned from the record with no assistance from
WonderWorks.
On August 31, 2018, the parties filed proposed jury instructions.
WonderWorks’ breach of contract instructions included a modified version of
CACI No. 303, which delineates the essential factual elements of a breach of
contract under California law. Wonderworks’ version of the instruction
omitted— without explanation— elements from the model instruction
involving conditions precedent. These elements would have clarified that
performance of a condition precedent can be excused. (See 1 CACI No. 303.)
By contrast, HP Malaysia submitted proposed Malaysian law jury
instructions, which listed compliance with conditions precedent as an
element of each of WonderWorks’ breach of contract claims. HP Malaysia
also proposed a special conditions-precedent instruction regarding its theory
that it was not required to pay invoices for software and services unless
“corresponding payment milestones in the contract were satisfied.”
On October 1, the parties filed trial briefs regarding proposed jury
instructions. WonderWorks did not dispute HP Malaysia’s contention that
compliance with conditions precedent is a requirement under Malaysian law.
However, it objected to the “phrasing of the conditions-precedent element” in
HP Malaysia’s instructions. It also objected to the proposed special
instruction regarding the condition for payment of invoices, arguing that it
35
was based on an improper construction of the Subcontract and was not a
“neutral” statement of the law.
On the morning of October 10, the trial court shared a proposed final
version of the instructions with the parties, which included the version of the
conditions precedent instruction that was ultimately delivered to the jury.
The court crafted the instructions by utilizing the parties’ proposed
instructions and its own research into Malaysian law. On the evening of
October 10, the parties submitted “joint jury instructions,” which included
“the final instructions written by the Court.”
On the morning of October 11, at a hearing to address jury instruction
and verdict form issues, the court made a record of its “understanding” that
“the parties have adopted the Court’s rulings on the Malaysian law, and they
have stipulated to all of the instructions as they now stand,” with one
exception. The exception was an objection by the plaintiff to using the phrase
“ ‘one integrated contract’ ” in the instructions, which the court overruled.
Before the court turned to another matter, plaintiff’s counsel stated that
WonderWorks maintained its prior briefing objections as to whether the
instructions were an “appropriate statement of Malaysian law.” Later that
day, the court instructed the jury.
On the afternoon of Friday, October 12, the jury began deliberating. At
the end of the day, it delivered a note indicating that the conditions precedent
instruction may have contained a scrivener’s error, in that HP Malaysia’s
name appeared where WonderWorks’ name should have appeared. (See fn. 7,
ante.) The parties were advised of the note and agreed that the “ ‘pseudo
typographical error’ should be corrected.” WonderWorks also raised a new
objection to the instruction and sought a substantive change.
36
The following Monday, October 15, the court held a hearing on
WonderWorks’ request to change the already delivered jury instructions. The
court framed the issue as follows: the conditions precedent instruction “was
one that was stipulated to by the parties and was sent in to the jurors”; a
question from the jury about the wording on one line of the instruction led
plaintiff’s counsel to have a “new thought” that perhaps the instruction was
wrong.
Plaintiff’s counsel then argued for the first time that, although a
conditions precedent instruction may be reasonable as to the breach of
contract claim for unpaid invoices, it did not apply to the claim for unpaid
license fees. Counsel reasoned that the instruction essentially directed a
verdict for the defense as to unpaid licenses because those licenses were
procured without purchase orders, and WonderWorks could not have invoiced
the installations without purchase orders. Counsel requested that the court
“tailor something different for the unpaid license fees” and revise the special
verdict form to reflect that there were no conditions precedent to the
contractual obligation to pay for excess licenses.
Defendants opposed these requests, arguing the instruction was
substantively correct and plaintiff had agreed to it. Defense counsel also
pointed out that the court had permitted plaintiff to amend the quantum
meruit claim to seek payment for unpaid license fees, on the theory that
those products were not provided pursuant to the Subcontract.
After further argument, the court ruled as follows: “[T]he parties
submitted instructions. This section that is being complained of now was not
redlined by Plaintiffs. They accepted it. It went to the jurors. Everybody
argued their case based upon this. The instruction as it reads presently
37
states the law correctly, and I am going to just change the word ‘Hewlett-
Packard’ to ‘WonderWorks,’ which is a typographical error.”
These procedural facts reinforce our conclusion that WonderWorks has
failed to demonstrate error relating to the conditions precedent instruction.
WonderWorks stipulated to the instruction that was delivered to the jury.
After the jury began deliberations, WonderWorks requested a substantive
change to the instruction and verdict forms based on its new theory that the
Subcontract’s invoice condition should not apply to excessive licenses. Now,
on appeal, WonderWorks makes yet another argument—that compliance
with this condition was excused, at least with respect to the excessive
licenses. Since WonderWorks never requested an instruction regarding its
excuse theory, the court did not err by failing to give one. (Martinez v. Rite
Aid Corp. (2021) 63 Cal.App.5th 958, 972, fn. 4 [appellant “cannot claim error
in the failure to give a jury instruction it did not request”].)
In its reply brief, WonderWorks switches targets again by arguing that
it was “not legally correct” for the trial court to give the conditions precedent
instruction in connection with WonderWorks’ other breach of contract claim,
the cause of action for unpaid software and services. WonderWorks reasons
that its eighth cause of action “was specifically for ‘Unpaid Invoices,’ ” and,
therefore the “invoicing condition precedent was not at issue” as to that
claim.
First, WonderWorks may not raise this new issue it its reply brief.
(Owens, supra, 49 Cal.App.5th at p. 746.) Second, this argument was not
raised below. Indeed, during the hearing that was held after deliberations
began, WonderWorks expressly acknowledged that the conditions-precedent
instruction was relevant to its eighth cause of action. Finally, in its reply
brief, WonderWorks once again mischaracterizes the record. The eighth
38
cause of action alleged that WonderWorks had complied with all “conditions”
of the Subcontract, and HP Malaysia had breached “by failing and refusing to
pay Plaintiff for products and services delivered to and accepted by HP,
despite repeated requests by Plaintiff for HP to make such payments.” This
claim sought payment for all unpaid products and services for which payment
had been requested, not just those that had been invoiced.
IV. WonderWorks’ Agency Theory
Finally, WonderWorks contends the court that granted summary
adjudication erred by finding that WonderWorks’ agency theory was without
merit. That finding was based on evidence before the court when the
summary adjudication motions were decided, that the American Entities did
not control HP Malaysia “to such a degree that it was merely their agent.”
On appeal, WonderWorks fails to discuss this evidence or explain how it was
insufficient to support the court’s ruling. Instead, WonderWorks makes three
flawed arguments.
First, WonderWorks contends that it produced evidence in opposition to
the summary adjudication motion which showed that HP Co. took over
performance of HP Malaysia’s “ ‘day-to-day operations’ ” on the project.
(Quoting Sonora Diamond Corp., supra, 83 Cal.App.4th at p. 542, italics in
original omitted.) We are not persuaded by this conclusory argument, which
is not supported sufficiently by citations to evidence that WonderWorks relied
on below. (WFG National, supra, 51 Cal.App.5th at p. 894 [appellate court
may disregard conclusory arguments not supported by pertinent authority
and is not required to “scour the record unguided” by accurate citations].)
For example, WonderWorks contends that HP Co. controlled HP
Malaysia during negotiations that resulted in the Prime Contract, citing a
declaration by Stephen Illingworth. Illingworth is a former employee of
39
Hewlett-Packard Singapore, who worked in the “HP Software” division from
2007 until December 2010. Illingworth stated that he was “very closely
involved with” the Bank Negara project, and that high level executives from
many Hewlett-Packard related entities were also involved. He also stated
that when HP Malaysia was bidding for the Prime Contract, it had to secure
approvals from other Hewlett-Packard entities. But Illingworth resigned
from his employment four months before the Prime Contract was executed in
April 2011, and his declaration contains no concrete information about HP
Malaysia’s substantive work on the project.
Similarly, WonderWorks contends that by early 2012, HP Co. took over
“ ‘ultimate decision making authority’ ” for the project, referring us to the
declaration of Andrew Norton, a former contractor of another HP Co.
subsidiary. Between October 2011 and October 2012, Norton worked on the
project in various “support” roles, and he observed that, as problems
mounted, employees of several subsidiaries became involved in the project.
Norton specifically recalled the name Kathy Garcia, but was unsure of
Garcia’s actual employer. Norton shared his “understanding” that Garcia
had “ultimate decision-making authority” for the project, since, for example,
she approved “project-related travel expenses.” Norton’s declaration does not
support WonderWorks’ assertion that HP Co. “took over” the project from HP
Malaysia.
WonderWorks’ second argument on appeal is that the summary
adjudication court committed an error of law because it applied “general”
agency principles to conclude that WonderWorks failed to raise a triable issue
of fact as to its theory that HP Co. usurped control of HP Malaysia.
According to this argument, all WonderWorks had to show was that HP
Malaysia was a “special agent” by establishing that HP Co. usurped control of
40
this “one transaction.” It did not have to show a total usurpation of control of
HP Malaysia “ ‘as an entity.’ ”
The complaint alleged HP Malaysia was an alter ego and/or agent of
HP Co., without alleging that HP Malaysia was a “special agent” or that
there was an agency relationship specific to this transaction. More
importantly, WonderWorks opposed summary adjudication on the ground
that HP Malaysia was a general agent of its corporate parent, relying on
Sonora Diamond Corp., supra, 83 Cal.App.4th at page 541, a case it now
mischaracterizes as inapposite. The summary judgment court did not
commit a legal error by failing to address a principle that was not raised in
the pleadings or the summary adjudication motions. Further, even if this
new theory could be raised now, WonderWorks fails to substantiate its claim
that it produced evidence which showed that HP Co. took over performance of
HP Malaysia’s day-to-day operations on the project.
Finally, WonderWorks contends that summary adjudication of the
agency issue is “especially problematic” because it permits HP Co. to
“escape[] liability” despite the jury’s special verdict regarding the intentional
interference claim, which establishes that HP Co. controlled HP Malaysia
and engaged in wrongdoing. Again WonderWorks misstates the record. The
jury did not find that HP Co. controlled HP Malaysia nor that HP Co.
engaged in wrongdoing. Moreover, the special verdicts have no bearing on
our review of the summary adjudication ruling.
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to
respondents.
41
TUCHER, P.J.
WE CONCUR:
FUJISAKI, J.
RODRÍGUEZ, J.
WonderWorks Pte. Ltd. v. Hewlett-Packard Company et al. (A165810)
42