Reply Brief (Click here to view document) - E

1

2

3

4

WILLIAM H. CURTIS (State Bar No. 139920)

FRY’S ELECTRONICS, INC.

600 E. Brokaw Road

San Jose, California 95112

Telephone: (408) 487-4748

Facsimile: (408) 852-3316

Email: whc@i.frys.com

5

6

7

8

9

JAMES M. CHADWICK (State Bar No. 157114)

GREGORY P. BARBEE (State Bar No. 185156)

SHEPPARD, MULLIN, RICHTER & HAMPTON LLP

379 Lytton Avenue

Palo Alto, California 94301-1479

Telephone: (650) 815-2600

Facsimile: (650) 815-2601

Email: jchadwick@sheppardmullin.com gbarbee@sheppardmullin.com

10

Attorneys for FRY’S ELECTRONICS, INC.

11

E-FILED

Aug 9, 2013 4:49 PM

David H. Yamasaki

Chief Executive Officer/Clerk

Superior Court of CA, County of Santa Clara

Case #1-09-CV-143298 Filing #G-56193

By G. Duarte, Deputy

SUPERIOR COURT OF THE STATE OF CALIFORNIA

12 COUNTY OF SANTA CLARA

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

Coordination Proceedings Special Title

(Rule 3.550)

FRY’S ELECTRONICS PURCHASING CASES

Included Actions:

Fry’s Electronics Inc. v. Elitegroup Computer

Systems, Inc.

Superior Court of California

County of Santa Clara

Case No. 1-09-CV-143298

Lead Data International, Inc. v. Fry’s Electronics,

Inc.

Superior Court of California,


Case No. 1-09-CV-133292

Phoebe Micro Inc. v. Fry’s Electronics, Inc.



Case No. 1-09-CV-137828

Promedia Technologies, Inc. v. Fry’s Electronics,

Inc.


County of San Diego

Case No. 37-2009-00085407-CU-BC-CTL

Judicial Council Coordination Proceedings

Case No. 4589

JAMS Reference No. 1110013749

REPLY MEMORANDUM OF POINTS

AND AUTHORITIES IN SUPPORT OF

DEFENDANT AND CROSS-

COMPLAINANT FRY’S ELECTRONICS,

INC.’S MOTION FOR SUMMARY

JUDGMENT OR, IN THE

ALTERNATIVE, SUMMARY

ADJUDICATION OF PROMEDIA

TECHNOLOGIES, INC.’S THIRD

AMENDED COMPLAINT

Date: August 16, 2013

Time: 9:00 a.m.

Dept. 1 (Complex Civil Litigation)

Judge: Honorable James P. Kleinberg

Trial Date: February 24, 2014

AND RELATED CROSS-ACTIONS

28

SMRH:409846185.5

FRY’S ELECTRONIC PURCHASING CASES (JCCP 4589)

REPLY MEM. ISO FRY’S MTN FOR SUMMARY JUDGMENT/ADJUDICATION OF

PROMEDIA’S THIRD AMENDED COMPLAINT

S

E-FILED: Aug 9, 2013 4:49 PM, Superior Court of CA, County of Santa Clara, Case #1-09-CV-143298 Filing #G-56193

1

2

I.

INTRODUCTION

The gist of ProMedia’s opposition to Fry’s motion is that regardless of ProMedia’s collusion

3 with Siddiqui to defraud Fry’s, and regardless of Siddiqui’s gambling addiction that drove him to

4 defraud Fry’s, the scope of Siddiqui’s agency was so broad that Fry’s—the victim—can be held liable

5 to ProMedia. However, undisputed evidence that ProMedia colluded with Siddiqui in a scheme to

6 defraud Fry’s, and that Siddiqui was acting out of a “personal compulsion,” precludes holding Fry’s

7 responsible under the two principal theories of derivative liability ProMedia advocates—respondeat

8 superior and agency. As for ProMedia’s alter ego theory, Fry’s undisputed lack of ownership in

9

Siddiqui’s sham companies negates it. ProMedia does not effectively dispute this evidence, and

10 ignores its legal effect. ProMedia relies on the same evidence submitted in support of its motion for

11 summary judgment, most of which either does not support what ProMedia says it does, or consists of

12 inadmissible hearsay, speculation, and a self-serving declaration from its principal that contradicts his

13 prior sworn deposition testimony. (Fry’s Evid. Objns. to ProMedia’s Separate Statement, filed

14 August 2, 2013; Fry’s Evid. Objns. to ProMedia OSS, filed herewith.) This requires the resolution of

15 the most significant issue to be adjudicated—whether Fry’s owes a duty to ProMedia for Siddiqui’s

16 conduct—in Fry’s favor. (Fry’s Notice of Motion, 1:8-15; Issue No. 1.) ProMedia fails to raise a

17 triable issue as to the remaining issues, either because it depends on the same flawed evidence, or for

18 other reasons explained below. Fry’s motion should be granted.

19 II.

PROMEDIA’S BURDEN IN OPPOSING SUMMARY JUDGMENT

20 Once a moving defendant has met its initial burden, the burden shifts to the plaintiff to show

21 that a triable issue of fact exists. (Code of Civil Procedure [“CCP”] §437c, subd. (p)(2).) “Claims and

22 theories not supported by admissible evidence do not raise a triable issue.” Rylaarsdam, et al., Cal.

23 Practice Guide: Civil Procedure Before Trial , ¶10:251 (The Rutter Group 2013) ¶10:253.1.)

24

Moreover, “substantial” responsive evidence is required to create a triable issue. (

Id.

) In addition,

25

“[d]eclarations and exhibits presented . . . in opposition to the motion may ‘cure’ evidentiary gaps in

26 the moving papers” and “[t]he court is entitled to consider ‘ all of the evidence set forth in the papers.’”

27 ( Civil Procedure Before Trial, supra , ¶10:251, citing Villa v. McFerren (1995) 35 Cal.App.4th 733,

28 749.) Here, ProMedia’s evidence bolsters the support for Fry’s motion for summary judgment.

SMRH:409846185.5

-1-





1 III.

UNDISPUTED EVIDENCE ESTABLISHES THAT FRY’S OWES NO DUTY TO

PROMEDIA FOR SIDDIQUI’S CONDUCT

2

Before addressing the key facts and the undisputed evidence supporting them, it is necessary to

3 point out that ProMedia’s version of the “facts” bears no resemblance to reality. ProMedia presents a

4 three-page “Factual Background” section (ProMedia Opp. Mem. Section II). ProMedia then reiterates

5 the argumentative version of the “facts” used in support of its motion for summary judgment.

6

(Compare ProMedia Opp. Mem. Section III.B with ProMedia Mem. Section III.C.) In both cases,

7

ProMedia overlays its unwarranted spin on the facts, does not cite evidence to support its hyperbolic

8 assertions, and relies on evidence that does not withstand scrutiny. For example, ProMedia falsely

9 asserts that Siddiqui pledged his interest in PC International, LLC (“PCI”) as collateral for Fry’s loans

10 to him, that Fry’s should have known about PCI, that Fry’s knowingly used casino “comps,” and that

11 Fry’s was aware of the extent of Siddiqui’s gambling. None of these assertions is supported by

12 ProMedia’s purported evidence. (Compare ProMedia Opp. Mem., 10:22-13:6, with Fry’s Evid. Objns

13 to ProMedia OSS [Objn Nos. 2, 3, 13, 14, 17-21, 27, 28, 36, 37, 43 & 48]; Fry’s OSS [Response to

14

ProMedia Undisputed Material Facts (“UMF”) Nos. 15, 18-21, 31-36 & 38], filed August 2, 2013.)

15 For purposes of resolving the issue of duty, the evidence can be distilled down to the following facts,

16 which are not meaningfully disputed by the admissible evidence ProMedia has submitted.

17

A.

Fry’s UMF Nos. 42-53, 60-61, 84-85 & 96: Siddiqui’s Statements in the Plea

Agreement/Plea Hearing Transcript and Corroborating Testimony

18

19

The Plea Agreement and the Plea Hearing Transcript are judicially noticeable. (Fry’s Request

20 for judicial notice. ([“RJN”], filed May 31, 2013, Ex. 1.) Moreover, properly certified copies of those

21 documents have been provided to this Court, and they can be admissible evidence even if not subject

22 to judicial notice. ( People v. Skiles (2011) 51 Cal.4th 1178, 1186.) The material facts that Siddiqui

23 attested “are true” therein are relevant and highly probative evidence of the Vendors’ (including

24

ProMedia’s) collusion with Siddiqui that should not and cannot be disregarded. For example: (1)

25

Siddiqui failed to disclose to Fry’s that he made secret deals with the Vendors for them to make

26 payments to PCI and IMR, that he awarded contracts to the Vendors who secretly agreed to pay funds

27 to PCI or IMR, and that those Vendors made payments to PCI or IMR pursuant to his scheme; (2) the

28

Vendors had secret agreements with Siddiqui to pay him kickbacks to do business with Fry’s; (3) the

SMRH:409846185.5

-2-





1

Vendors also made “loans” amounting to millions of dollars to Siddiqui through PCI and/or IMR; and

2 (4) the Vendors were aware that the kickback payments were fraudulently being paid to PCI or IMR.

3 Given the significance of this evidence, it is not surprising that ProMedia tries to challenge its

4 admissibility. (ProMedia OSS, 8:20-24:6; ProMedia Opp. Mem., 16:1-17:2.) Siddiqui’s statements,

5 however, are both highly probative, because they detail the scheme he engaged in with the Vendors’

6 complicity, and are admissible under at least two exceptions to the hearsay rule: (1) As declarations

7 against interest (Evid. Code §1230); and (2) as part of the basis for a felony conviction admissible

8 because they are “offered in a civil action to prove any fact essential to the judgment.” (Evid. Code

9 §1300). The evidence ProMedia offered to dispute UMF Nos. 42-53 is either inadmissible or does not

10 create a triable issue (Fry’s Evid. Objns to ProMedia OSS, Objn Nos. 8-30, 32 & 33), and there is

11 substantial corroborating testimony not subject to genuine dispute (Fry’s UMF Nos. 60-61, 84-85, 96).

12

13

1.

ProMedia’s Admissiblility Arguments Are Erroneous

ProMedia argues that Siddiqui’s statements cannot be used against it for purposes of collateral

14 estoppel and res judicata. (ProMedia Opp. Mem., 16:10-20, 23-27; ProMedia Evid. Objns [Nos. 25 &

15

26].) But Fry’s does not ask that Siddiqui’s statements be given “preclusive effect” or treated as

16

“conclusive proof;” Fry’s only asks that they be admitted and considered as evidence. ProMedia

17 incorrectly argues that felony convictions are admissible only to impeach credibility under Evidence Code

18 section 788, and then claims in a conclusory manner that “[c]onvictions may still be excluded” under

19

Evidence Code section 352 where “admission would be more prejudicial than probative.” (ProMedia

20 Opp. Mem., 16:3-9.) Section 352, however, is a trial objection that is inapplicable at the summary

21 judgment stage. (See People ex rel. City of Dana Point v. Holistic Health (2013) 213 Cal.App.4th 1016,

22 1029.) Even if section 352 applied, it is self-evident that the probative value of Siddiqui’s statements is

23 not

“substantially outweighed.” (Wegner, et al.,

Cal. Practice Guide: Civil Trials and Evidence ,

24

¶¶8:3205, 8:3206 (The Rutter Group 2013) [citing factors to be balanced].) Siddiqui’s statements are

25 central to the issues in this case, and given his refusal to testify are necessary evidence.

26 ProMedia addresses the applicable hearsay exceptions only in passing, giving short shrift to

27 one of the exceptions (Evid. Code §1300) and completely ignoring the other (Evid. Code §1230):

28

“The felony conviction and former testimony hearsay exceptions are also inapplicable; Siddiqui was

SMRH:409846185.5

-3-





1 deposed and declined to affirm his plea for purposes of civil liability.” (ProMedia Opp. Mem., 16:20-

2 23.) As support, ProMedia cites People v. Lightsey (2012) 54 Cal.4th 668, for the proposition that

3

“unavailability [is] not established by privilege assertion.” First, Fry’s does not rely on Evidence Code

4 section 1292, the “former testimony” exception. Second, ProMedia’s “unavailability” argument

5 misses the point. Unlike the defendant in Lightsey , Siddiqui did not have a privilege to exercise, and

6 he was therefore held in contempt by this Court for improperly invoking the Fifth Amendment and

7 refusing to testify. (Dkt. 797, Order of Contempt.) This makes all the difference. Evidence Code

8 section 240 sets forth circumstances under which a declarant is “unavailable,” including being

9

“[p]ersistent in refusing to testify concerning the subject matter of the declarant’s statement despite

10 having been found in contempt for refusal to testify.” (Evid. Code §240, subd. (a)(6); see

Lee v.

11 McEwen (S.D. Cal. June 21, 2011) 2011 U.S. Dist. LEXIS 98853, at *6, 12 [upholding finding that

12 prisoner was unavailable when he refused to testify based on fear of retaliation]; People v. Lopez

13 (2013) 56 Cal.4th 1028, 1060 & fn. 13 [witness found unavailable where he was advised he had no

14 right not to testify and persisted in refusing to do so].) The Court ordered Siddiqui to testify, found

15 him in contempt when he refused to do so, and Siddiqui persisted in refusing to testify. (Order of

16 Contempt, 4:27-6:2.) ProMedia does not contest that Siddiqui’s statements otherwise satisfy Evidence

17 Code section 1230, i.e., as being against interest, nor that under section 1230 evidence can be admitted

18 against any party, not just against the declarant. ( People v. Greenberger (1997) 58 Cal.App.4th 298,

19

335, 337, 340 [recognizing admissibility of “a statement that incriminates the declarant and also

20 inculpates the nondeclarant”];

Civil Trials and Evidence , supra , ¶8:1279 [“declarations against interest

21 are admissible against any party to the litigation to the extent relevant to an issue in the case”].)

22 Finally, any felony judgment—whether after trial or based on a plea—may satisfy Evidence Code

23 section 1300 and be admitted in a civil case against the person convicted or anyone else. ( See Cal.

24 Law Revision Comm., comment 29B Pt. 4, West’s Ann. Evid. Code (1995 ed.) following §1300, pp.

25 396-97; Atlas Assurance Co., Ltd. v. McCombs Corporation (1983) 146 Cal.App.3d 135, 145 & fn. 5.)

26

Thus, Siddiqui’s statements are admissible. Although ProMedia purports to dispute Siddiqui’s

27 statements (ProMedia OSS, 8:20-24:6), the evidence on which it relies is either inadmissible or fails to

28 contradict them. (Fry’s Evid. Objns to ProMedia OSS, Objn Nos. 9-30, 32 & 33.)

SMRH:409846185.5

-4-





1

2

2.

Siddiqui’s Statements Preclude Any Duty to ProMedia By Fry’s

The facts Siddiqui affirmed in his Plea Agreement have specific legal significance. “An agent

3 can never have authority, either actual or ostensible, to do an act which is, and is known or suspected

4 by the person with whom he deals, to be a fraud upon the principal.” (Cal. Civ. Code §2306; accord

5 Meyer v. Glenmoor Homes, Inc. (1966) 246 Cal.App.2d 242, 264 ( Meyer ).) As explained in Saks v.

6 Charity Mission Baptist Church (2001) 90 Cal.App.4th 1116, 1139-40: “There is nothing fair or

7 equitable about permitting a third party to attribute a corporate employee’s acts to the corporation

8 where the third party is engaged in a conspiracy with the employee to use the corporation to obtain a

9 benefit for himself.” The general rule that an agent’s acts and knowledge are imputed to the principal

10 does not apply where “the agent and the third party act in collusion against the principal.” (

Sands v.

11 Eagle Oil & Refining Co. (1948) 83 Cal.App.2d 312, 319; Mott v. Nardo (1946) 73 Cal.App.2d 159,

12

165 [“[k]nowledge of the acts of an agent which are in his own interest or in the interest of others and

13 adverse to those of his principal will not be imputed to the principal because of the mere existence of

14 the agency”].) Fry’s prominently cited this authority in its opening memorandum (12:6-27), but

15

ProMedia ignores it. Thus, the legal significance of Siddiqui’s statements is not disputed either.

16

17

B.

Fry’s UMF No. 58: ProMedia Never Informed Anyone About The Scheme

ProMedia purports to dispute this fact by asserting that “[t]here was no kickback scheme; only

18 an innocent vendor paying marketing commissions to a company reasonably believed to be an

19 authorized Fry’s affiliate.” (ProMedia OSS, 25:16-27:17.) Its assertion is belied by the attestation of

20

ProMedia’s principal that Siddiqui’s conduct was far beyond the bounds of normal business practices,

21 with Siddiqui acting in a “highly coercive manner,” “threaten[ing] ProMedia,” and engaging in an

22

“extortionate scheme.” (Declaration of Nai-Chung Tsai (“Tsai Dec.”), ¶¶13 [4:7-8], 14 [4:17-18], 15

23 [5:1].) ProMedia cannot have it both ways—on the one hand accusing Siddiqui of extortion, while on

24 the other claiming that he was acting as a normal business partner.

25

Moreover, it is undisputed that Fry’s included an express provision against kickbacks or

26 commissions to any Fry’s employee in its Vendor Agreement with ProMedia. (Fry’s UMF No. 37;

27 ProMedia OSS, 8:4-12.) By doing so, Fry’s gave ProMedia effective notice that any effort by Siddiqui

28 to obtain such payments was outside the scope of his agency or employment:

SMRH:409846185.5

-5-





1

2

[B]y stipulating in the contract that the agent has no such authority, the principal has done all that is reasonably possible to give notice thereof to the third party.

Under such circumstances the innocent principal may justly be relieved of liability for the agent’s wrong.

3

4

( Harnischfeger Sales Corp. v. Coats (1935) 4 Cal.2d 319, 320-21.) ProMedia knew that Siddiqui

5 did not have authority to demand or receive kickbacks or commissions. Had ProMedia simply

6 done what it was contractually obligated to do, Siddiqui’s kickback scheme could not have been

7 perpetrated. Thus, Fry’s is not and cannot be found subject to liability for Siddiqui’s conduct.

8

ProMedia asserts that it can subject Fry’s to liability on the basis of statements by Siddiqui regarding the nature of his authority and the relationship between himself, his shell companies, and

9

Fry’s. (ProMedia Opp. Mem., 1:5-12, 7:22-8:4; ProMedia OSS, 9:6-10, 9:21-10:3.) However, it is

10 well-settled that

“[a] corporation is not chargeable with the knowledge of an officer who

11 collaborates with an outsider to defraud it.

”

( Meyer, supra , 246, Cal.App.2d at p. 264 [emphasis

12 added].) Moreover, it is similarly well-settled that even

“[o]stensible authority must be established

13 through the acts or declarations of the principal and not the acts or declarations of the agent.”

14

( Preis v. American Indemnity Co.

(1990) 220 Cal.App.3d 752, 761 [emphasis added]; see also

15

Lindsay-Field v. Friendly (1995) 36 Cal.App.4th 1728, 1734 [“there must be evidence of conduct by

16 the principal which causes a third party reasonably to believe the agent has authority”].) Simply

17 promoting an employee to an executive position and granting him the commensurate responsibility to

18 transact business does not equate to conduct by a principal that could cause anyone to reasonably

19 believe that the employee has the authority to engage in a kickback scheme, especially when, as here,

20 the principal expressly and contractually provides that no employee has such authority. Under the

21 circumstances, ProMedia’s assertion that it was entitled to rely solely on Siddiqui’s representations and

22 essentially do whatever he demanded because it purportedly “had no means by which to independently

23 investigate” (ProMedia Opp. Mem., 7:22-8:4) is insupportable as a matter of law.

24 C.

Fry’s UMF No. 82: Siddiqui Had a Compulsive Gambling Habit

25 ProMedia does not dispute this fact, but expressly admits it. (ProMedia’s Third Amended

26 Complaint. ¶100; ProMedia’s UMF No. 17.) The legal significance of this fact is dispositive:

27

28

[V]icarious liability is deemed inappropriate where the misconduct does not arise from the conduct of the employer’s enterprise but instead arises out of a personal

SMRH:409846185.5

-6-





1

2 dispute, or is the result of a personal compulsion . In such cases, the risks are engendered by events unrelated to the employment, so the mere fact that an employee has an opportunity to abuse facilities or authority necessary to the performance of his or her duties does not render the employer vicariously liable.

3

4

( Farmers Ins. Group v. County of Santa Clara (1995) 11 Cal.4th 992, 1006 [citations omitted;

5 emphasis added].)

Siddiqui’s gambling addiction is the paradigm of a “personal compulsion” that

6 makes his conduct “inappropriate” for vicarious liability. Again, Fry’s prominently cited this

7 authority in its opening memorandum (8:7-21), and ProMedia ignores it.

8

Furthermore, “[r]espondeat superior liability should apply only to the types of injuries that ‘as

9 a practical matter are sure to occur in the conduct of the employer's enterprise’

” and “ must be such

10 as predictably to create the risk employees will commit intentional torts of the type for which liability

11 is sought

.” (

Lisa M.

v. Henry Mayo Newhall Memorial Hosp.

(1995) 12 Cal.4th 291, 299 [emphasis

12 added].) There is no evidence that the very nature of Siddiqui’s job responsibilities was such that they

13 predictably created the risk that he would conspire with ProMedia to submit fraudulent invoices to

14

Fry’s, much less that he would (allegedly) force ProMedia to advance payments or loans in

15 anticipation of being repaid from the proceeds of such fraudulent invoices. Unlike a delivery van

16 driver involved in a fender bender on his route or a bank teller who skims a depositor’s account to

17 supplement his income, orchestrating a multi-party kickback scheme “to fund a massive gambling

18 addiction” is not conduct “sure to occur in the conduct of the employer’s enterprise.”

19 D.

Fry’s UMF Nos. 83 & 84: Fry’s Did Not Have An Ownership Interest in

Siddiqui’s Sham Companies Nor Vice Versa

20

21

There is no shareholder or ownership relationship between PCI and IMR on the one hand, and

22

Fry’s on the other. (Fry’s UMF Nos. 83 & 84.) Because this negates alter ego liability, ProMedia tries

23 to cloud the issue, asserting Fry’s “held an equitable ownership interest in PCI after Siddiqui pledged

24 his interest as collateral” for loans. (ProMedia OSS, 33:25-34:19.) This statement is not true and no

25 evidence supports it. (Fry’s Evid. Objns to ProMedia OSS, Objn No. 43.) Nevertheless, ProMedia

26 persists in distorting the alter ego doctrine by conflating it with agency principles and arguing that

27

“Siddiqui/PCI may effectively be deemed Fry’s alter ego” based on Fry’s purportedly “accepting

28 benefits” and “recei[ving] an interest in PCI as loan collateral.” (ProMedia Opp. Mem., 17:3-19.) The

SMRH:409846185.5

-7-





1 law is precisely the opposite: the alter ego is held responsible for the debts of the entity in which it is a

2 shareholder or member, and not the other way around. ( Internet Direct Response, Inc. v. Buckley

3 (C.D. Cal., Mar. 7, 2011) 2011 U.S. Dist LEXIS 28344, at **7-10 [applying California law].) In any

4 event, there is no evidence of any the factors required for a finding of alter ego,—factors which this

5 Court recognized in ruling on a demurrer in this case. (Fry’s RJN, Ex. 7.)

6 E.

ProMedia’s Authority Does Not Establish Any Duty on the Part of Fry’s

7 ProMedia seeks to analogize this case to situations with which it has nothing in common, e.g.,

8 an employee using his position to overcharge innocent customers on a beverage delivery route or to

9 steer elderly widows into unwise investments. (ProMedia Opp. Mem., 13:7-14:20, citing Grigsby v.

10 Hagler (1938) 25 Cal.App.2d 714; Blackburn v. Witter (1962) 201 Cal.App.2d 518.) ProMedia fails

11 to acknowledge—but also fails to dispute—that this is a case in which an employee acted out of an

12 undisputed personal compulsion to defraud his employer in collusion with a vendor.

13 ProMedia also unduly relies on the fact that Siddiqui dealt directly with the Vendors in this

14 action and made business decisions relating to them (Fry’s UMF No. 62), characterizing this as

15 reflecting a “lack of supervision” that “constitutes actionable negligence.” (ProMedia Opp. Mem.,

16 14:23-26.) In reality, an executive of Siddiqui’s level is not the kind of employee that has been found

17 to require close supervision. Rather than establishing Fry’s negligence, this fact shows that Siddiqui

18 and the Vendors opportunistically capitalized on Fry’s trust to engage in the kickback scheme for years

19 without being caught. ProMedia mischaracterizes Hartong v. Partake, Inc. (1968) 266 Cal.App.2d

20 942, which it also extensively cited in support of its motion for summary judgment. (ProMedia Opp.

21 Mem., 14:27-15:21; Fry’s Memorandum in Opposition to ProMedia Motion for Summary Judgment,

22 15:14-16:16, detailing ProMedia’s mischaracterization.) Finally, ProMedia’s belittling of the

23 significance of the anti-kickback and reporting requirement in the Vendor Agreement is misguided.

24

As previously noted, ProMedia’s principal attested that Siddiqui was acting in a “highly coercive

25 manner,” “threaten[ing],” and engaging in an “extortionate scheme.” (Tsai Decl., ¶¶13 [4:7-8], 14

26 [4:17-18], 15 [5:1].) If ProMedia were truly an innocent party, then it would have availed itself of the

27 contractual safeguard. ProMedia failed to do that. Thus, ProMedia’s own evidence further supports

28 the inference that ProMedia colluded in the kickback scheme.

SMRH:409846185.5

-8-





1 In sum, ProMedia would have this Court draw the unreasonable and unsupported inferences

2 that it was an innocent third party, and that nothing Siddiqui did was out of the ordinary or triggered

3

ProMedia’s reporting requirement under its Vendor Agreement. To defeat summary judgment,

4 however, inferences must be reasonable. ( Civil Procedure Before Trial, supra , ¶10:260 , citing

5 McGrory v. Applied Signal Technology, Inc.

(2013) 212 Cal.App.4th 1510, 1530 [“a material triable

6 controversy is not established unless the inference is reasonable”].) Fry’s met its burden by showing

7 that it has a complete defense on the issue of duty to ProMedia for Siddiqui’s conduct. (CCP §437c,

8 subds. (f)(1) and (p)(2).) The burden shifted to ProMedia, and ProMedia has failed to carry it.

9

10

IV.

SUMMARY JUDGMENT IS PROPER AS TO THE CAUSES OF ACTION BASED

ON PAYMENT OF “COMMISSIONS”

11

ProMedia mischaracterizes Fry’s argument regarding ProMedia’s negligence cause of action

12

(Issue No. 11). Fry’s does not argue that “liability can only attach for negligent hiring.” (ProMedia

13 Opp. Mem., 20:3-15.) Fry’s expressly states that ProMedia’s allegations reflect “essentially a

14 negligent hiring and retention claim.” (Fry’s Mem., 18:2-7.) Fry’s cited negligent hiring cases for the

15 proposition that an employer must know or have reason to believe that an “employee poses a particular

16 hazard.” (Fry’s Mem., 18:8-19.) This requirement also applies to claims based on negligent

17 supervision. ( Doe v. Capital Cities (1996) 50 Cal.App.4th 1038, 1054.) Even after Siddiqui was

18 hired, neither the Fry’s Founders nor Fry’s employees were aware of his gambling addiction.

19 (ProMedia OSS, 3:17-5:5 [Fry’s UMF Nos. 7 & 8]; Fry’s Evid. Objns to ProMedia OSS [Objn Nos. 2

20

& 3].) ProMedia’s contract causes of action based on “commission advances” (breach of oral

21 contract/open book account, Issue Nos. 8(a) & (c), 9(a) & (c)) fail because Fry’s was not a party to and

22 not aware of the oral contract or account, and did not receive any of the money paid. (Fry’s UMF Nos.

23

85 & 88.) ProMedia submits no evidence to the contrary. ProMedia’s unclean hands is also a bar to

24 relief. ([Fry’s Mem., 15:13-18].) ProMedia has failed to address the fact that negligence is not a basis

25 for an unfair business practices claim, and that it cannot show the requisite economic injury because

26 the money it paid Siddiqui actually came from Fry’s payment of inflated invoices. (Compare Fry’s

27 Mem., 19:1-20:12 with ProMedia Opp. Mem., 20:16-22; Issue No. 10(a), (b) & (d).) ProMedia

28 ignores the legal significance of the largely undisputed evidence of the Vendors’ interlocking

SMRH:409846185.5

-9-





1 relationships, substantial backing, and similar practices, i.e., ignoring contractual obligation to report

2 kickbacks, that facilitated the kickback scheme. (ProMedia OSS, 5:7-7:25 [Fry’s UMF Nos. 9, 12, 14-

3

24, 59]; Fry’s Evid. Objns to ProMedia OSS [Objn Nos. 4-6, 35.) ProMedia also does not dispute that

4 it had customers other than Fry’s, and ended up with Fry’s as its sole source of business because its

5 prices were not competitive. (Fry’s Mem., 17:21-24; ProMedia’s OSS, 36:23-28 [Fry’s UMF No. 97];

6

Fry’s Evid. Objns to ProMedia OSS [Objn No. 49].) The evidence does not show that ProMedia was a

7 small, isolated and vulnerable start-up, which is what ProMedia claimed in order to get its economic

8 duress/extortion cause of action past the pleading stage. (Fry’s Mem., 17:11-21; Issue No. 12.)

9

10

V.

SUMMARY JUDGMENT IS PROPER AS TO THE CAUSES OF ACTION BASED

ON NON-PAYMENT FOR GOODS

11 Despite considerable obfuscation, ProMedia does not dispute its failure to fulfill its contractual

12 obligation to report Siddiqui’s conduct. (ProMedia OSS, 25:16-27:17 [Fry’s UMF No. 58]; Fry’s

13

Evid. Objns to ProMedia’s OSS [Objn No. 31].) Further, ProMedia does not dispute that “the amount

14 owed by Fry’s on unpaid invoices is less than the aggregate amount of commissions paid by ProMedia

15 to PCI.” (ProMedia OSS, 35:14-27 [Fry’s UMF No. 92]; Fry’s Evid. Objns to ProMedia OSS [Objn

16

No. 46].) Given these facts, there is no triable issue with respect to ProMedia’s breach of contract

17 cause of action—it is undisputed that ProMedia failed to perform. (Fry’s Mem., 14:14-15:3; Issue No.

18

2.) ProMedia’s non-performance bars its claim. (Fry’s Mem., 14:15-21.) Essentially the same facts

19 eliminate any triable issue with respect to ProMedia’s common counts and unjust enrichment causes of

20 action based on non-payment for goods. (Fry’s Mem., 15:4-16:13; Issue Nos. 3-6.) ProMedia has

21 presented no evidence to raise a triable issue with respect to Fry’s statutory defenses to its enforcement

22 of negotiable instruments cause of action. (Fry’s Mem., 16:14-17:2.; Issue No. 7.)

23 VI.

CONCLUSION

24

For all the foregoing reasons, Fry’s requests that its motion be granted in its entirety.

25

26

Dated: August 9, 2013

27

28

SMRH:409846185.5

SHEPPARD, MULLIN, RICHTER & HAMPTON

LLP

By

JAMES M. CHADWICK

Attorneys for FRY’S ELECTRONICS, INC.

-10-




Reply Brief (Click here to view document) - E

E-FILED

Related documents

Products

Support

Reply Brief (Click here to view document) - E

E-FILED

Related documents

Add this document to collection(s)

Add this document to saved

Suggest us how to improve StudyLib