[00:00:01] Speaker 01:
Good morning, Your Honors.

[00:00:02] Speaker 01:
Derek Winnisco for Appellant Sun Farms LLC and Mr. Mitch Domowski.

[00:00:07] Speaker 01:
We request the court to reverse the district court summary judgment order for the reason set forth in our brief.

[00:00:12] Speaker 01:
I will address two points in support of our position today.

[00:00:17] Speaker 01:
I would like to request three minutes for rebuttal.

[00:00:19] Speaker 05:
Yes, Counsel, please be reminded that the time shown on the clock is your total time remaining.

[00:00:24] Speaker 01:
Thank you, Your Honor.

[00:00:26] Speaker 01:
We believe the district court summary judgment order should be reversed for the following reasons.

[00:00:32] Speaker 01:
Sun Farms has never been provided a royalty agreement with the project company that was promised to it by EURAS in the Consultant Services Agreement.

[00:00:40] Speaker 01:
And second, the Palau Huawin project had been shortlisted for a power purchase agreement by the time EURAS terminated the Consultant Services Agreement in February 2017.

[00:00:50] Speaker 01:
The Consultant Services Agreement promised Sun Farms a royalty agreement

[00:00:56] Speaker 01:
on the at the end of a commercial operation date for a completed project with a project company not with yours and i quote the council go ahead well you've been receiving the royalties right

[00:01:11] Speaker 04:
So I'm just wondering what damages have you experienced, if any, by your substitution of itself into the agreement?

[00:01:21] Speaker 04:
And thank you, Judge Walton.

[00:01:22] Speaker 01:
The measure of damage here is the absence of an asset, the royalty agreement with the project company.

[00:01:28] Speaker 01:
That is the asset.

[00:01:29] Speaker 01:
What would the damages be for that?

[00:01:31] Speaker 01:
The damages are the present value of the royalty agreement.

[00:01:34] Speaker 01:
which was calculated at $2,070,000.

[00:01:36] Speaker 01:
And so that is a fairly easy present value calculation that was done by the experts to bring those profits, the maximum profits, forward to the present day.

[00:01:47] Speaker 05:
But that would assume that the agreement would last until the present day.

[00:01:51] Speaker 05:
And wasn't there a right to terminate the agreement?

[00:01:54] Speaker 01:
The amount in the agreement was for $2,070,000.

[00:01:57] Speaker 01:
And so Sunfarm's experts calculated the present value of that amount

[00:02:01] Speaker 01:
to the present day and calculated it to be approximately $920,000.

[00:02:04] Speaker 02:
But that's assuming you get the maximum royalties every year, right?

[00:02:10] Speaker 01:
The way that the contract was drafted, I believe it said that $2,070,000 was the minimum amount that could be calculated in the agreement.

[00:02:18] Speaker 01:
And it was to be paid for at least 20 or 25 years.

[00:02:22] Speaker 01:
And so that amount, I think, we believe is firm.

[00:02:24] Speaker 01:
And the experts and Sunfarm's experts believe that they could reasonably calculate those damages.

[00:02:29] Speaker 01:
And so the damages are the difference between the promised royalty agreement.

[00:02:33] Speaker 01:
Sun Farms does not have that royalty agreement.

[00:02:35] Speaker 01:
That agreement is an asset that was promised to Sun Farms, and it has never received that asset.

[00:02:42] Speaker 01:
And so any damages that have been paid in the past years by EURAS would just simply mitigate the damages that EURAS is going to be responsible to pay.

[00:02:51] Speaker 02:
And so from that... So just so I understand, the stream of payments is the $2 million figure.

[00:02:59] Speaker 02:
The present value of those $2 million to today's date is the $900,000 figure.

[00:03:05] Speaker 02:
Correct.

[00:03:07] Speaker 01:
And so the reason that the measure of damages is the value of the promised royalty agreement is because it is beyond dispute that a party cannot substitute itself for another party in an agreement.

[00:03:17] Speaker 01:
And that applies even for an LLC.

[00:03:19] Speaker 01:
An LLC is a separate and distinct legal entity.

[00:03:22] Speaker 05:
Counsel, your argument would have more force if you had not accepted the payments from EURAS.

[00:03:29] Speaker 01:
I honestly we would disagree your honor because because again the focus here is not that isn't this is not a dispute over the payment stream this is dispute over a contract Sun farms filed a lawsuit immediately when it did not receive a contract a signed written executed contract with the project company

[00:03:50] Speaker 01:
which is a separate and distinct legal entity, EURAS cannot substitute itself for the project company here.

[00:03:56] Speaker 05:
But it did substitute itself.

[00:03:58] Speaker 05:
It made the royalty payments that your client was expecting from the other entity, and your client accepted those.

[00:04:06] Speaker 01:
I apologize, Your Honor, but that is disputed.

[00:04:08] Speaker 01:
Sun Farms has never accepted that two-page what we call a royalty IOU.

[00:04:11] Speaker 01:
No, accepted the payments, though.

[00:04:14] Speaker 01:
Right, Your Honor, but that's simply only to mitigate the damages.

[00:04:17] Speaker 01:
We have litigated this case for over six years on the fact that there has never been a royalty agreement, an asset, an asset that can be used and sold in the very highly liquid market for the resale of these royalty agreements.

[00:04:33] Speaker 01:
That asset is what Sun Farms is demanding.

[00:04:36] Speaker 01:
And the value of that asset was calculated to be the $920,000.

[00:04:40] Speaker 01:
And so what the district court did was basically amended the consulting services agreement and allowed yours to substitute itself

[00:04:47] Speaker 01:
for the project company.

[00:04:49] Speaker 01:
And that is not what the consulting services agreement promised.

[00:04:52] Speaker 01:
And so we are simply requesting the court to reverse the district court summary judgment order to hold EURAS accountable for the promises that it made in the consulting services agreement, the precise promises that was made.

[00:05:03] Speaker 01:
And that is a royalty agreement with the project company, not with EURAS.

[00:05:06] Speaker 01:
They are completely different assets.

[00:05:08] Speaker 01:
They are completely different contracts.

[00:05:10] Speaker 01:
And it was improper for EURAS to substitute itself for that.

[00:05:14] Speaker 02:
And did you make the argument about this being a saleable asset at the district court level?

[00:05:20] Speaker 01:
We do not believe that.

[00:05:22] Speaker 01:
That is, I think, our reasoning for why we are explaining this.

[00:05:27] Speaker 01:
But I don't think that changes.

[00:05:28] Speaker 01:
We did not raise that with the district court.

[00:05:30] Speaker 01:
That does not change the fact that what was precisely promised was an asset, a royalty agreement with the project company.

[00:05:36] Speaker 01:
And that is exactly what we requested.

[00:05:38] Speaker 01:
We filed a motion for summary judgment on three precise issues, one, that this was

[00:05:43] Speaker 01:
this contract was not precisely with the project company, it was with EURAS.

[00:05:49] Speaker 01:
And so we did not believe that it was necessary to provide an explanation for why.

[00:05:54] Speaker 01:
We were just simply requesting the royalty agreement to be provided with the precise party that was promised in the consultant services agreement.

[00:06:05] Speaker 01:
One other part with this is during the negotiations of the royalty agreement was

[00:06:13] Speaker 01:
Sun Farms received a draft royalty agreement, and in that, Eurus demanded Sun Farms to waive the implied covenant of good faith and fair dealing.

[00:06:21] Speaker 01:
And we believe that this, that act in and of itself establishes a breach of the implied covenant of good faith and fair dealing, a separate cause of action.

[00:06:29] Speaker 01:
That is an action that does not just simply mirror the cause of action for a breach of contract.

[00:06:33] Speaker 01:
The breach of contract damages here would be the $920,000 for the promised royalty agreement.

[00:06:40] Speaker 01:
But the alleged breaches of the implied covenant of good faith and fair dealing provide additional damages for lost profits for Palahua Wind and Solar that are not provided and are in addition to the damages provided for the breach of contract.

[00:06:57] Speaker 01:
Now, the second point that I'd like to raise today is the Palahua Wind project had been shortlisted

[00:07:02] Speaker 01:
for a power purchase agreement by the time the, by the time EUROS had terminated the consulting services agreement in February 2017.

[00:07:12] Speaker 01:
Or the consulting services.

[00:07:13] Speaker 05:
How are you defining shortlisted?

[00:07:14] Speaker 05:
What, what actions are you saying amounted to a short list?

[00:07:21] Speaker 01:
As, as, as using the, it's a CSA, it's a, it's a phrase, has been shortlisted.

[00:07:26] Speaker 01:
And we are defining that to mean considered, final, selected for final consideration.

[00:07:33] Speaker 01:
And that is an undershortlisted- But the district court did not define it that way, correct?

[00:07:38] Speaker 01:
No, the district court actually did.

[00:07:39] Speaker 01:
The district court applied, I think, two ordinary and common definitions.

[00:07:45] Speaker 01:
And that is what the district court held.

[00:07:46] Speaker 01:
That was one of the many definitions that it applies.

[00:07:50] Speaker 05:
Selection for final- The shortlisted a term of art in the industry?

[00:07:55] Speaker 01:
It is, but that term was left undefined by Eurus, the drafter of this contract.

[00:08:00] Speaker 01:
Eurus had every right and opportunity to add, to limit, has been shortlisted in this contract to use the formal term of art, which applied only to competitive bidding.

[00:08:14] Speaker 01:
Eurus drafted this contract and it did not define that term.

[00:08:17] Speaker 01:
And so this term has been shortlisted for a power purchase agreement we believe requires a broad definition to be applied

[00:08:25] Speaker 01:
to that.

[00:08:26] Speaker 01:
And here it would apply to simply selection for final consideration for a power purchase agreement.

[00:08:35] Speaker 04:
Just by its own definition, imply a list of candidates and not just one.

[00:08:39] Speaker 04:
I just I don't suppose I don't really understand the definition of shortlist that you're asking us to.

[00:08:44] Speaker 01:
Yeah.

[00:08:45] Speaker 01:
And so that that has been a dispute.

[00:08:47] Speaker 01:
And so it is our it is our position that there can be a shortlist of one.

[00:08:51] Speaker 01:
There can even be a shortlist of zero.

[00:08:53] Speaker 01:
And I think that is, you know, it does not have to be a tangible shortlist.

[00:08:57] Speaker 01:
either.

[00:08:58] Speaker 01:
Someone can have an idea of a short list of items on there or candidates.

[00:09:03] Speaker 01:
What is our standard of review on this issue?

[00:09:06] Speaker 01:
For this, it should be de novo, Your Honor.

[00:09:09] Speaker 01:
And so the first step in contract determination is it is a question of law unless there is conflicting extrinsic evidence or if the court considers extrinsic evidence.

[00:09:22] Speaker 01:
And I believe here

[00:09:24] Speaker 01:
The extrinsic evidence before the district court, that the district court did not consider, and the dispositive extrinsic evidence here was that Hawaiian Electric was the determinative agency for the issue of shortlisting.

[00:09:38] Speaker 01:
That is because both of these projects in the consulting services agreement were developed to be, the power was going to be sold to Hawaiian Electric.

[00:09:47] Speaker 01:
And so the conclusion, if a project had been shortlisted, was

[00:09:52] Speaker 01:
in effect up to Hawaiian Electric.

[00:09:55] Speaker 02:
At what point do you think it was shortlisted?

[00:09:58] Speaker 02:
Was it when they entered into the bilateral negotiations or was it after the request for expression of interest?

[00:10:05] Speaker 01:
Working backwards we are saying that no later than January 31st when it was a formal response that was submitted to the expression of interest and then on February 5th the Hawaiian Electric basically communicated to

[00:10:21] Speaker 01:
Sun to euros and Sun farms that it has selected the project but on January 31st when this was the one and only response to the expression of interest and it met all of the qualifications and it could be accepted at no later date than January 31st But on the earlier date is we are we're saying we are applying a broad definition for shortlist and that would include bilateral just simply bilateral negotiations when a project is being selected for final consideration and so that would include a

[00:10:50] Speaker 01:
at the very earliest, the September 22nd meeting between Hawaiian Electric and URIS, where they discussed the most important part of a power purchase agreement, price, and then URIS requested HECO to

[00:11:03] Speaker 01:
consider the project for a power purchase agreement.

[00:11:06] Speaker 01:
And then in the following four months, negotiations between Hawaiian Electric and EURAS happened.

[00:11:12] Speaker 01:
These were final negotiations.

[00:11:14] Speaker 01:
There was a formal manifestation of intent to begin negotiations for this.

[00:11:21] Speaker 01:
The expression of interest was a formal approval process of that.

[00:11:26] Speaker 01:
And so no later than January 31st was this project shortlisted.

[00:11:30] Speaker 01:
And that is what the extrinsic evidence here that the district court did not consider establishes.

[00:11:35] Speaker 01:
In California, there's a liberal parole evidence rule.

[00:11:38] Speaker 01:
And so even if the terms of a contract are facially unambiguous, if extrinsic evidence creates the possibility of an ambiguity, the district court may not rely on the text alone.

[00:11:48] Speaker 01:
But that is what the district court did here.

[00:11:50] Speaker 01:
And so the extrinsic evidence was that in the 30 v 6 deposition testimony of Hawaiian electric, Mr. Rodney Chong testified.

[00:11:58] Speaker 01:
that this project had been essentially shortlisted?

[00:12:00] Speaker 01:
Essentially.

[00:12:01] Speaker 05:
That's the problem.

[00:12:03] Speaker 05:
Essentially shortlisted and shortlisted are two different things.

[00:12:09] Speaker 05:
So he's equating what happened with being shortlisted, but he's not saying that the company was actually shortlisted.

[00:12:16] Speaker 05:
He said essentially shortlisted.

[00:12:18] Speaker 05:
And that's not the same.

[00:12:20] Speaker 01:
Your Honor, I would respectfully disagree.

[00:12:22] Speaker 01:
It is our position that to be essentially shortlisted is to be shortlisted.

[00:12:26] Speaker 04:
But if you looked at his whole statement, he says, if not for the way we typically formally use the term, then yes, it was essentially shortlisted.

[00:12:34] Speaker 04:
So I mean, it seems that even he himself is saying, this is not shortlisting.

[00:12:40] Speaker 01:
He would simply just be agreeing that the narrow definition of this, the formal, the technical definition of shortlist was not being applied.

[00:12:48] Speaker 01:
Eurus had every opportunity to apply the technical, the formal definition to this.

[00:12:53] Speaker 01:
It did not.

[00:12:54] Speaker 01:
When they entered into this consultant services agreement in June 2012, it was the mutual intent of the parties for this termination provision to provide protection against- But if a term is defined in the industry,

[00:13:10] Speaker 05:
and that term is used.

[00:13:12] Speaker 05:
How is that ambiguous?

[00:13:15] Speaker 01:
Because it's still the technical terms are not, technical meanings are not used unless it's specifically defined in the contract.

[00:13:22] Speaker 05:
What case says that?

[00:13:23] Speaker 05:
That technical terms cannot be used unless they're expected?

[00:13:26] Speaker 01:
I believe that's the California Civil Code, Your Honor.

[00:13:31] Speaker 01:
So in this case, the ordinary meaning should be applied first over the formal meaning, and that is what Mr. Rodney Chong

[00:13:37] Speaker 01:
was saying when he said that.

[00:13:39] Speaker 05:
The district court said that the ordinary meaning of shortlist includes a list.

[00:13:48] Speaker 01:
Yes, and he limited that to a tangible list, and we disagree and request the court to reverse that.

[00:13:55] Speaker 01:
And I'd like to reserve my time for a while.

[00:13:57] Speaker 05:
Thank you.

[00:14:18] Speaker 03:
Good morning, Your Honors.

[00:14:20] Speaker 03:
Jennifer Meeker on behalf of Appellee Uris Energy America Corporation.

[00:14:25] Speaker 03:
I want to thank you for your time today and for your careful consideration of this matter.

[00:14:31] Speaker 03:
I think your questions are showing that you have studied the briefs and study the record quite well, and I don't want to.

[00:14:45] Speaker 03:
You know belabor any certain points.

[00:14:48] Speaker 02:
I think our briefs lay things out quite well Let me get let me get to what I considered Major an issue for me is Why should yours get to decide?

[00:15:03] Speaker 02:
Who the of a gore is on the royalty agreement?

[00:15:06] Speaker 02:
There is a written contract white white Why shouldn't Sun Farms have the benefit of what's explicitly provided for in the contract?

[00:15:13] Speaker 03:
And that's a good question, Your Honor, and thank you.

[00:15:16] Speaker 03:
I think a couple of things are important that are borne out by the record here, and it has to do with the negotiations about the royalty agreement.

[00:15:27] Speaker 02:
We all agree, don't we, that negotiations do not result in an agreement.

[00:15:31] Speaker 02:
You can't pick and choose and say, well, we liked this part of the negotiation, but we didn't like that part of the negotiation.

[00:15:37] Speaker 02:
So we're going to implement what we like, and we're going to disregard what we don't like.

[00:15:41] Speaker 03:
You can't do that.

[00:15:41] Speaker 03:
Absolutely.

[00:15:42] Speaker 03:
I understand, Your Honor.

[00:15:43] Speaker 03:
In this case, I think what ended up happening was Yeris was kind of caught between a rock and a hard place, so to speak.

[00:15:48] Speaker 03:
And part of that had to do with the fact that during the negotiations, the Council for Appellant had requested that URIS be added to the royalty agreement.

[00:15:59] Speaker 03:
And I think that notwithstanding the fact that they didn't say, hey, substitute URIS instead of the project agreement, we want both of them instead.

[00:16:09] Speaker 03:
But ultimately, what I think URIS was coming to the conclusion on was this wasn't going to lead to an agreement

[00:16:16] Speaker 03:
they needed to have a definitive agreement so that they could substantially comply with their requirements for a royalty agreement under the CSA.

[00:16:24] Speaker 03:
And ultimately, you know, given discussions between counsel, it seemed that there was a desire that it would be advantageous to appellant to have Eurus as the obligor rather than the one asset entity of the project company.

[00:16:40] Speaker 05:
But that was never agreed to.

[00:16:42] Speaker 03:
That's correct.

[00:16:44] Speaker 03:
We will admit it's a technical violation of the agreement.

[00:16:48] Speaker 02:
Technical violation still is a violation.

[00:16:51] Speaker 03:
That's correct.

[00:16:51] Speaker 03:
And under California law, to have a compensable breach of contract, a cause of action for a breach of contract, and to prove that cause of action, you need to have not only a breach, but you also have an independent showing of damages.

[00:17:05] Speaker 02:
Well, let me ask you this.

[00:17:06] Speaker 02:
This is kind of what bothered me.

[00:17:08] Speaker 02:
What happens if a year from now, yours decides to sell the asset?

[00:17:13] Speaker 02:
Who becomes the obligor of the... Because you're supposed to pay the royalties out of, what's the term, free cash or distributable cash.

[00:17:25] Speaker 02:
So what if there's no distributable cash?

[00:17:27] Speaker 02:
You've sold it.

[00:17:28] Speaker 03:
So under these circumstances, and based on the testimony that came out during discovery, Nick Henriksen, who's the person most knowledgeable and the corporate representative of EURAS, testified that even in the indication where the YNI project is sold, that EURAS is still obligated to pay these royalty

[00:17:50] Speaker 03:
to pay these royalty payments.

[00:17:52] Speaker 03:
And that's undisputed.

[00:17:55] Speaker 05:
But what if the heurist doesn't have the distributable cash to pay the royalties at that point?

[00:18:00] Speaker 03:
Yeah, and you know, Your Honor, I think ultimately that if there was, and this wasn't in the record at all and under any circumstance, it wasn't part of discovery.

[00:18:11] Speaker 03:
And so I might be speculating a little bit here and I apologize for that, but I think that to the, if in the unlikely event that URIS decides to sell its interest in the project company or the project itself, which there's no indication that that's gonna happen.

[00:18:28] Speaker 03:
But if that happens, there's going to have to be a structuring where these royalty payments are still going to be made by URIS.

[00:18:37] Speaker 05:
Because it's a- Well how can that be if URIS isn't even,

[00:18:41] Speaker 05:
I mean, there is no agreement, actually, between EURAS and Sunfarm, so how can that be?

[00:18:46] Speaker 05:
How can you structure a payment arrangement between parties who don't even have an agreement?

[00:18:52] Speaker 03:
Well, we disagree that there's no agreement here.

[00:18:55] Speaker 03:
We believe that the— You think there's an agreement between EURAS and Sunfarm?

[00:18:59] Speaker 03:
Absolutely.

[00:18:59] Speaker 03:
The royalty agreement that EURAS executed

[00:19:02] Speaker 03:
and sent to Sun Farms and has been acting in accordance with ever since.

[00:19:08] Speaker 03:
It's our position that that is a binding agreement and it's the evidence in the case and the uncontroverted testimony in the case is that, from EURAS, is that that is a binding obligation, contractual obligation on EURAS.

[00:19:22] Speaker 05:
Well, but the negotiations for that agreement were not successful.

[00:19:25] Speaker 05:
some of the terms that yours wanted, some farms would not agree to.

[00:19:30] Speaker 05:
So how can that be a binding agreement if there were still terms that were not agreed upon?

[00:19:36] Speaker 03:
We don't believe that there weren't terms that weren't agreed upon.

[00:19:39] Speaker 03:
What we believe is that the royalty, the consulting services agreement

[00:19:44] Speaker 03:
had a requirement of, sorry, just check the time, it had a requirement for the specific terms that would be required in an ultimate royalty agreement.

[00:19:58] Speaker 03:
And those have, there's five very specific terms, and this is set forth in section two of the consulting agreement, and that includes 75% gross revenue of the project company from power sales,

[00:20:09] Speaker 03:
that it's paid annually in arrears with 30 days after the end of each calendar year.

[00:20:15] Speaker 03:
It's from distributable casts.

[00:20:17] Speaker 03:
And that there's a term, which is a maximum of a ceiling of $2,070,000 or the 20th anniversary or in another circumstance, the 25th anniversary of the COD date.

[00:20:29] Speaker 03:
And so our position is that the consulting agreement actually laid out the required terms for the royalty agreement.

[00:20:37] Speaker 03:
And the royalty agreement that was executed by Eurus and sent to Sun Farms, and that has been performed ever since, contains verbatim those.

[00:20:47] Speaker 05:
Sun Farms never signed it.

[00:20:48] Speaker 03:
They never signed it, but they certainly have accepted it by taking five, six payments.

[00:20:53] Speaker 05:
Sun Farms said they didn't accept it because

[00:20:56] Speaker 05:
Uris wanted them to waive certain rights that they had, and they weren't willing to waive those rights.

[00:21:03] Speaker 03:
And I absolutely understand that allegation.

[00:21:06] Speaker 03:
And in the beginning of the negotiations, Uris did ask for Sunfarms to waive a concept of fiduciary duty or implied covenant.

[00:21:16] Speaker 03:
in the royalty agreement, which that term during negotiations was later withdrawn and was never part of the ultimate agreement.

[00:21:24] Speaker 03:
And that has been also completely misconstrued.

[00:21:29] Speaker 03:
The reason that that was included was that Eurus was concerned that appellant would ultimately come and sue them saying, well, you didn't maximize power cells.

[00:21:39] Speaker 03:
You didn't do more to sell more.

[00:21:41] Speaker 03:
And so therefore, you've breached the agreement.

[00:21:43] Speaker 03:
And so they were trying to protect themselves from having to operate Waianae for the benefit of the Hawaiian community, really instead for the benefit of the pellet.

[00:21:54] Speaker 03:
So, but ultimately that term was in fact removed from the agreement and was never part of the final royalty agreement that has been, that was sent by URIS and has been performed ever since.

[00:22:09] Speaker 02:
Go ahead.

[00:22:09] Speaker 02:
Well, I'm going back to the royalty agreement.

[00:22:12] Speaker 02:
First of all, it's distributable cash.

[00:22:14] Speaker 02:
So if you sell it, you won't have distributable cash.

[00:22:17] Speaker 02:
And secondly, it's based upon gross revenue of the company.

[00:22:21] Speaker 02:
And if you sell the company, how we even know what the gross revenue is?

[00:22:25] Speaker 02:
So how will you compute the royalty if you don't own the company?

[00:22:30] Speaker 03:
And I understand that question.

[00:22:31] Speaker 03:
And again, that wasn't a part of the district court proceedings.

[00:22:35] Speaker 02:
So all you're saying is there's got to be a new agreement negotiated?

[00:22:38] Speaker 02:
And what happens if they don't agree to it?

[00:22:39] Speaker 03:
I don't think that it needs to be a new agreement.

[00:22:41] Speaker 03:
I think what ends up happening is between the buyer and the seller, the seller being URIS, if there was in the hypothetical speculative situation where this entity is sold or the project is sold, I think what would end up happening is that URIS having this binding

[00:22:57] Speaker 03:
royalty agreement where they owe Sun farms and they don't contest that they owe Sun farms these royalties from distributable cash paid in arrears on a yearly basis that there is going to have to be some kind of either carve out or reporting between the buyer and Eurus so that the amount of that distributable cash is still going to then be reported to Eurus such that they can and

[00:23:21] Speaker 03:
to make these royalty of payments.

[00:23:23] Speaker 03:
But there is no indication anywhere in the record that Eurus is going to be one day unwilling, unable to make these payments.

[00:23:33] Speaker 03:
And frankly, Your Honor, with the well-settled rules of waiver in the Ninth Circuit, this shouldn't be at issue in this case because this wasn't raised in the district court case.

[00:23:49] Speaker 03:
which causes a lot of problems.

[00:23:52] Speaker 03:
And the district court, Judge Lorenz, at the end of his order, pointed out that this has been a moving target with new theories and new facts and new everything from day one.

[00:24:03] Speaker 03:
And at some point, Judge Lorenz wasn't going to allow it to continue on.

[00:24:09] Speaker 03:
And the evidence and the case law in front of Judge Lorenz indicated that summary judgment was in favor of your as was appropriate.

[00:24:18] Speaker 03:
because there are no facts and under California law the fact of damage needs to be

[00:24:25] Speaker 03:
certain to a degree, it can't be speculative.

[00:24:28] Speaker 03:
And there are no evidence in this case that would indicate that EURAS is someday going to either sell this property, is going to somehow structure things away, is going to somehow do anything that would cause them to not pay these royalties.

[00:24:44] Speaker 04:
And in fact, the- How do you respond to Sunfarm's argument that there is a market now

[00:24:50] Speaker 04:
for this royalty agreement, but only if the agreement is with the project company and not with EURAS and that that's like an existing damage.

[00:24:58] Speaker 03:
There is no evidence of that whatsoever, Your Honor.

[00:25:01] Speaker 03:
The mention of a sale of this royalty agreement was not mentioned at all during discovery or during summary judgment briefing in this case.

[00:25:10] Speaker 03:
This is a new argument that was invented on appeal.

[00:25:13] Speaker 05:
So counsel, if the unthinkable happens and EURAS does sell,

[00:25:19] Speaker 05:
does sell the asset, then would Sun Farms have a new cause of action against URIS?

[00:25:26] Speaker 03:
I think that if they didn't pay, if something caused it where they didn't make their royalty payment, which is due at the end of January, then as Judge Laurent said, they have a cause of action for breach of the royalty agreement against URIS.

[00:25:41] Speaker 03:
There is a remedy there if that happens.

[00:25:43] Speaker 05:
Well, URIS could actually say there is no agreement because it hasn't been signed.

[00:25:49] Speaker 03:
I I think that would be hard in light of the arguments the briefing the public record the penalty under perjury Statements that says that yours is bound.

[00:25:59] Speaker 03:
I think that would be a very I mean I Understand I see that my time is out.

[00:26:08] Speaker 03:
I didn't reach the Palahua argument I don't know if you guys have questions.

[00:26:12] Speaker 03:
Otherwise, I am gonna respect the time limit.

[00:26:14] Speaker 05:
Thank you Thank you

[00:26:28] Speaker 00:
Good morning, Your Honors.

[00:26:29] Speaker 00:
Michael Simms for Appellee Toyota Tsucho America.

[00:26:33] Speaker 00:
I only have three minutes, so we'll get right to it.

[00:26:35] Speaker 00:
In short, my client should have never been sued, should not have been in this case.

[00:26:41] Speaker 00:
Judge Lorenz disposed of the claims against my client in a single footnote.

[00:26:46] Speaker 00:
As succinct as it was, it was also indisputably correct.

[00:26:51] Speaker 00:
There was not a single piece of evidence in the case that showed my client

[00:26:58] Speaker 00:
or had any involvement in the contract at issue here.

[00:27:03] Speaker 00:
And as Judge Lorenz pointed out, control is required under any theory of derivative liability that plaintiffs assert here, whether that's alter ego,

[00:27:19] Speaker 00:
A to Z principles, or even the new unpled theory of this joint enterprise theory that we address in our brief.

[00:27:30] Speaker 00:
So this is a rare case where there really is just not a single fact.

[00:27:33] Speaker 00:
We moved for summary judgment.

[00:27:34] Speaker 00:
We pointed out that TAI has different offices, directors, employees, bank accounts, the nearest.

[00:27:44] Speaker 00:
So there was undisputed evidence that TAI

[00:27:48] Speaker 00:
did not control yours, and conversely, but equally important, no evidence offered by plaintiffs that my client controlled yours so as to be liable on any basis of derivative liability.

[00:28:06] Speaker 00:
There was just one point that I wanted to address in plaintiff's reply brief where they attach a screenshot, which stores the record.

[00:28:15] Speaker 00:
This is new.

[00:28:16] Speaker 00:
They took a screenshot from the internet and claimed that TAI and yours share offices based on the screenshot.

[00:28:23] Speaker 00:
If you actually go on the internet, it shows two dots.

[00:28:26] Speaker 00:
Urus location, the other dot says, I'm sorry, one dot says Toyota Susho location, the other dot says affiliate location, that is Urus.

[00:28:36] Speaker 00:
There's no secret that the companies are affiliates.

[00:28:39] Speaker 00:
And if you simply Google the two companies, their San Diego addresses, a simple Google search reveals that they have different addresses in San Diego.

[00:28:48] Speaker 00:
So it's remarkable that, frankly, they would make such an assertion.

[00:28:52] Speaker 00:
But that's been par for the course here.

[00:28:55] Speaker 00:
We addressed some of the other mischaracterizations and distortions of the record in our brief.

[00:29:00] Speaker 00:
So with that, if the panel has any question or doubt whatsoever that Judge Lorenz's decision with respect to TAI was correct, I can address those now, of course.

[00:29:14] Speaker 05:
Thank you, counsel.

[00:29:14] Speaker 05:
It appears not.

[00:29:16] Speaker 00:
Thank you.

[00:29:17] Speaker 05:
Rebuttal.

[00:29:24] Speaker 05:
Council, could you briefly address the derivative liability issue?

[00:29:30] Speaker 01:
Yes.

[00:29:30] Speaker 01:
And we say that there is sufficient evidence to survive summary judgment.

[00:29:35] Speaker 01:
The burden has shifted to us, and we have provided sufficient evidence for both enterprise liability, agency liability, and partnership liability.

[00:29:44] Speaker 01:
I mean, you can look on Toyota's website today, and it still says partnership with EURAS.

[00:29:49] Speaker 01:
I mean, it advertised itself as a partner with EURAS.

[00:29:53] Speaker 01:
And we believe that there were sufficient allegations for joint enterprise.

[00:29:56] Speaker 05:
And the issue of- Well, allegations aren't enough.

[00:29:58] Speaker 05:
There has to be, for summary judgment, there has to be some evidence.

[00:30:01] Speaker 01:
Sorry.

[00:30:01] Speaker 01:
Yes, Your Honor.

[00:30:02] Speaker 01:
There were the declarations.

[00:30:03] Speaker 01:
And so there were directions.

[00:30:05] Speaker 01:
There were directions from Toyota to Sun Farms in order to arrange these high-level meetings to pursue the development of these two projects.

[00:30:12] Speaker 01:
And so we believe there is sufficient evidence to establish control.

[00:30:15] Speaker 01:
And then just quickly, Your Honor, we would like to say just, you know, the district court's ruling, if not, this is page 40 of our brief,

[00:30:22] Speaker 01:
The district court's ruling, if not reversed, would force a non-breaching party to acquiesce to a new agreement and to continue business relationship with an unscrupulous corporation for an additional 20 years.

[00:30:31] Speaker 01:
That is what we're asking for.

[00:30:33] Speaker 01:
We're asking for simply nothing more than what the contract promised us.

[00:30:36] Speaker 01:
We do not want a contract with EURAS.

[00:30:38] Speaker 01:
We do not want a 20-year relationship continued with EURAS here.

[00:30:41] Speaker 01:
We would request the court to reverse the district court's order, denying some form of summary judgment, and then reverse the district court's order, granting EURAS and summary and Toyota summary judgment.

[00:30:52] Speaker 05:
Thank you, counsel.

[00:30:53] Speaker 05:
Thank you.

[00:30:54] Speaker 05:
Thank you to both counsel for your helpful arguments in this challenging case.

[00:30:58] Speaker 05:
The case just argued is submitted for decision by the court.