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NOT FOR PUBLICATION
`
`UNITED STATES COURT OF APPEALS
`
`FOR THE NINTH CIRCUIT
`
`
`FILED
`
`
`OCT 17 2023
`
`MOLLY C. DWYER, CLERK
`U.S. COURT OF APPEALS
`
`
`
`
`
`
`
` Plaintiff-Appellee,
`
`NETLIST INC., a Delaware corporation,
`
`
`
` v.
`
`
`SAMSUNG ELECTRONICS CO., LTD., a
`Korean corporation,
`
`
`
`
`
`
`
`
`
` Defendant-Appellant.
`
`
`
`
`
`
`
`
`
` Plaintiff-Appellant,
`
`NETLIST INC., a Delaware corporation,
`
`
`
` v.
`
`
`SAMSUNG ELECTRONICS CO., LTD., a
`Korean corporation,
`
`
`
`
`
`
`
`
`
` Defendant-Appellee.
`
`
`
`
`
`
`
`No. 22-55209
`
`
`D.C. No.
`8:20-cv-00993-MCS-ADS
`
`
`
`MEMORANDUM*
`
`No. 22-55247
`
`
`D.C. No.
`8:20-cv-00993-MCS-ADS
`
`
`
`
`
`
`Appeal from the United States District Court
`for the Central District of California
`Mark C. Scarsi, District Judge, Presiding
`
`Argued and Submitted June 8, 2023
`Pasadena, California
`
`
`
`*
` This disposition is not appropriate for publication and is not precedent
`
`
`except as provided by Ninth Circuit Rule 36-3.
`
`
`
`
`
`
`
`

`

`Before: M. SMITH and DESAI, Circuit Judges, and AMON,** District Judge.
`Partial Dissent by Judge DESAI.
`
`
`
`This appeal arises from a contract dispute between Samsung Electronics Co.,
`
`Ltd. and Netlist Inc. Samsung appeals the district court’s (1) grant of partial
`
`summary judgment in favor of Netlist on Netlist’s breach of contract claims, (2)
`
`award of nominal damages, (3) grant of a declaratory judgment that Netlist properly
`
`terminated the contract, and (4) preclusion of Samsung’s affirmative defenses at
`
`trial. Netlist cross appeals the district court’s preclusion of certain fees pursuant to
`
`the contract’s consequential-damages bar. We assume the parties’ familiarity with
`
`the briefing and record. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we
`
`affirm in part and reverse and remand in part.
`
`1.
`
`The district court erred in granting Netlist summary judgment on its
`
`claim that Samsung violated § 6.2 of the Joint Development and License Agreement
`
`(“JDLA”), because the provision is ambiguous as to whether Samsung’s supply
`
`obligation is limited to the now-failed joint development project (the “JDP”) or
`
`applies more broadly to the parties’ overall business relationship. See L.F. v. Lake
`
`Wash. Sch. Dist. #414, 947 F.3d 621, 625 (9th Cir. 2020) (grant of summary
`
`judgment reviewed de novo). Section 6.2 requires Samsung to “supply NAND and
`
`
`
`
`** The Honorable Carol Bagley Amon, United States District Judge for
`
`
`the Eastern District of New York, sitting by designation.
`
`
`
`2
`
`
`
`

`

`DRAM products to Netlist on Netlist’s request at a competitive price.” The
`
`substantive law of New York governs this dispute. To assess contract ambiguity,
`
`we consider “the intention of the parties . . . [as] gathered from the four corners of
`
`the instrument.” Beal Sav. Bank v. Sommer, 865 N.E.2d 1210, 1213 (N.Y. 2007).
`
`And in determining the parties’ intent as to a particular provision, New York courts
`
`read “the entirety of the agreement in the context of the parties’ relationship and
`
`circumstances,” rather than isolating distinct provisions of the agreement. In re
`
`Riconda, 688 N.E.2d 248, 252 (N.Y. 1997).
`
`Standing alone, the plain language of § 6.2 favors Netlist’s interpretation: that
`
`Samsung must fulfill all NAND and DRAM orders by Netlist for whatever purpose.
`
`See Vt. Teddy Bear Co. v. 538 Madison Realty Co., 807 N.E.2d 876, 879 (N.Y. 2004)
`
`(“[C]ourts should be extremely reluctant to interpret an agreement as impliedly
`
`stating something which the parties have neglected to specifically include.” (citation
`
`omitted)). Read as an integrated whole, however, the contract’s apparent purpose as
`
`derived from its title, structure, and related provisions make § 6.2 “reasonably
`
`susceptible of more than one interpretation.” See Chimart Assocs. v. Paul, 489
`
`N.E.2d 231, 233 (N.Y. 1986).
`
`First, the JDLA has two stated purposes: (1) developing a new NVDIMM-P
`
`product (i.e., the JDP), and (2) patent cross-licensing. The title and preamble of the
`
`agreement exclusively reference these two topics, and each substantive section
`
`
`
`3
`
`
`
`

`

`corresponds entirely to one of the two goals. In this context, it is reasonable to
`
`interpret § 6.2 as tethered to one of those projects rather than as a separate,
`
`freestanding obligation. See Hooper Assocs., Ltd. v. AGS Comps., Inc., 548 N.E.2d
`
`903, 905 (N.Y. 1989) (“Words in a contract are to be construed to achieve the
`
`apparent purpose of the parties.”).
`
`Second, the title and structure of § 6 support a finding of ambiguity. Section
`
`6, “Supply of Components,” requires both parties to supply certain products to the
`
`other upon request. Section 6.1 requires Netlist to “provide Samsung any
`
`NVDIMM-P controller,” while § 6.2 requires Samsung to “supply NAND and
`
`DRAM products.” Netlist’s view is that because § 6.1 explicitly links Netlist’s
`
`supply obligation to the JDP, while § 6.2 does not, that omission must be viewed as
`
`intentional. That is one plausible reading. It would also be reasonable to read §§ 6.1
`
`and 6.2 as complementary mirror provisions that describe the parties’ obligations to
`
`provide components of the NVDIMM-P product. See N.L.R.B. v. SW Gen., Inc., 137
`
`S. Ct. 929, 940 (2017) (“The expressio unius canon applies only when circumstances
`
`support a sensible inference that the term left out must have been meant to be
`
`excluded.” (internal quotation marks and alteration omitted)).
`
`Third, if Netlist’s interpretation of § 6.2 is correct, then the provision would
`
`be a significant outlier in the overall agreement. As noted, all other substantive
`
`provisions of the JDLA concern either the JDP or cross-licensing and describe the
`
`
`
`4
`
`
`
`

`

`parties’ rights and obligations related to those elements in detail. But if § 6.2 is
`
`properly understood as an unbounded supply obligation, it would represent a
`
`separate, third element of the JDLA. In addition, it would be unusual for this
`
`purportedly important, discrete obligation to be referenced only once in a single
`
`sentence in the entire agreement. Accordingly, we conclude that § 6.2 could
`
`reasonably be understood as restricted to the NVDIMM-P project.1 See Hooper, 548
`
`N.E.2d at 905 (“Although the words might seem to admit of a larger sense, yet they
`
`should be restrained to the particular occasion and to the particular object which the
`
`parties had in view.” (internal quotation marks and citation omitted)).
`
`Because we conclude that § 6.2 is ambiguous as a matter of law, we remand
`
`to the district court to consider in the first instance whether the extrinsic evidence
`
`“creates a genuine issue of material fact” as to the provision’s meaning. See
`
`MacIntyre v. Carroll Coll., 48 F.4th 950, 956 (9th Cir. 2022) (“[T]he remaining
`
`issues are not purely legal and require us to determine whether the evidence creates
`
`a genuine issue of material fact. The district court is thus better suited to consider
`
`these issues in the first instance.”).
`
`2.
`
`The district court erred in granting Netlist judgment on its claim that
`
`
`1 To the extent Samsung contends that the district court independently erred by
`awarding nominal damages following the jury’s finding that Netlist had not suffered
`actual damages from the breach of § 6.2, we disagree. See Kronos, Inc. v. AVX
`Corp., 612 N.E.2d 289, 292 (N.Y. 1993).
`
`
`
`5
`
`
`
`

`

`Samsung breached § 3 of the JDLA by erroneously withholding $1.32 million of its
`
`$8 million payment to Netlist and paying that sum to the Korean tax authority.
`
`Section 3 requires Samsung to pay Netlist $8 million in non-recurring engineering
`
`fees, less any withholding taxes required by Korean law. The Korean tax authority
`
`ultimately concluded that the fees were not subject to withholding. The district court
`
`determined that “the reasonableness of Samsung’s position [on whether the taxes
`
`were properly withheld] is immaterial to whether it breached its obligation.” We
`
`disagree. Section 3.2 provides that if Samsung deducts withholding taxes, it must
`
`“reasonably cooperate with Netlist in any lawful efforts to claim a credit or refund
`
`or exemption with respect to any such withholding taxes.” Because § 3.2
`
`contemplates that Samsung may reasonably but erroneously withhold taxes, we do
`
`not interpret § 3.1 as providing for strict liability upon an erroneous withholding.
`
`See Beal Sav. Bank, 865 N.E.2d at 1213–14. A contrary holding that Samsung
`
`breached § 3 by reasonably misinterpreting Korean tax law would also produce
`
`absurd results and be inconsistent with the parties’ reasonable expectations. See
`
`Uribe v. Merchs. Bank of N.Y., 693 N.E.2d 740, 743 (N.Y. 1998) (construing
`
`contract in accordance with the “reasonable expectation and purpose of the ordinary
`
`businessperson” (alteration and citation omitted)). Accordingly, we reverse the
`
`district court’s entry of judgment in Netlist’s favor on the § 3 breach of contract
`
`
`
`6
`
`
`
`

`

`claim and remand with instructions to enter judgment for Samsung.2
`
`3.
`
`The district court erred in granting a declaratory judgment that Netlist
`
`properly terminated the JDLA because disputed fact issues precluded summary
`
`judgment on the materiality of Samsung’s alleged breach of § 6.2. “Under New York
`
`law, for a breach of a contract to be material, it must ‘go to the root of the agreement
`
`between the parties.’” Frank Felix Assocs., Ltd. v. Austin Drugs, Inc., 111 F.3d 284,
`
`289 (2d Cir. 1997) (citation omitted). New York courts consider several factors in
`
`assessing materiality, including, among others: the extent to which the injured party
`
`will be deprived of the benefit which he reasonably expected, the likelihood that the
`
`party failing to perform or to offer to perform will cure his failure, the quantitative
`
`character of the default, and the breaching party’s good faith or willfulness. See
`
`Hadden v. Consol. Edison Co. of N.Y., Inc., 312 N.E.2d 445, 449 (N.Y. 1974);
`
`Restatement (Second) of Contracts § 241 (Am. L. Inst. 1981). The record reflects
`
`that several of these factors hinge upon disputed facts. For example, the parties
`
`dispute whether—assuming that the district court correctly construed § 6.2—the
`
`exchange of Samsung’s mandatory supply obligation in return for Netlist’s patent
`
`
`2 On cross appeal, Netlist challenges the district court’s conclusion that the JDLA’s
`provision concerning consequential damages barred recovery of the fees Netlist paid
`to its tax consultant, PricewaterhouseCoopers, for assistance in obtaining a refund
`of the erroneously withheld taxes. Because we hold that Samsung did not breach
`§ 3 of the JDLA, and therefore that Netlist is not owed damages resulting from the
`purported breach, we need not address whether the district court properly barred
`recovery of the fees.
`
`
`
`7
`
`
`
`

`

`licenses was “the centerpiece” of the agreement.
`
`We reject Samsung’s contention that Netlist’s declaratory-judgment claim
`
`fails for the independent reason that Netlist waived its right to terminate the contract
`
`by delaying termination proceedings until 2020. The district court properly
`
`determined that given the JDLA’s no-waiver provision, Netlist’s failure to act upon
`
`notice of the breach does not constitute a clear manifestation of intent to waive its
`
`termination rights. See Gilbert Frank Corp. v. Fed. Ins. Co., 520 N.E.2d 512, 514
`
`(N.Y. 1988) (requiring “clear manifestation of intent by [one party] to relinquish
`
`[contractual] protection”). We reverse the district court’s entry of a declaratory
`
`judgment and remand for further proceedings.
`
`4.
`
`The district court correctly precluded Samsung from asserting at trial
`
`affirmative defenses of waiver, estoppel, and acquiescence. Samsung pleaded all
`
`three defenses in its answer, but did not raise them in response to Netlist’s motion for
`
`partial summary judgment or in its own motion for summary judgment. Samsung
`
`therefore abandoned the defenses. Where a movant puts liability at issue on summary
`
`judgment, a defendant opposing summary judgment may not decline to raise an
`
`affirmative defense that, if successful, would defeat the movant’s claim, and then
`
`seek to assert that defense at trial. See Fed. R. Civ. P. 56(a).3
`
`
`3 The district court also properly precluded Samsung from raising an election of
`remedies affirmative defense. Samsung failed to plead the defense in its answer, see
`In re Adbox, Inc., 488 F.3d 836, 841 (9th Cir. 2007); Fed. R. Civ. P. 8(c)(1), and the
`
`
`
`8
`
`
`
`

`

`AFFIRMED IN PART AND REVERSED AND REMANDED IN PART.
`
`The parties shall bear their own costs.
`
`
`court did not abuse its discretion in finding that Samsung had not shown “good
`cause” to amend its answer at the close of discovery, see Johnson v. Mammoth
`Recreations, Inc., 975 F.2d 604, 607–08 (9th Cir. 1992).
`
`
`
`9
`
`
`
`

`

`Netlist Inc. v. Samsung Electronics Co., Ltd., No. 22-55209
`
`DESAI, Circuit Judge, dissenting in part:
`
`FILED
`
`
`OCT 17 2023
`
`MOLLY C. DWYER, CLERK
`U.S. COURT OF APPEALS
`
`
`
`I respectfully dissent from Section 1 of the memorandum disposition. The
`
`majority’s means-to-an-end analysis of § 6.2 is a departure from longstanding rules
`
`of contract interpretation, particularly when interpreting a contract negotiated at an
`
`arm’s length between two sophisticated parties. Worse, my colleagues’ perfunctory
`
`conclusion that § 6.2 is ambiguous makes doing business harder. It forces contracting
`
`parties to anticipate and expressly disclaim every conceivable limiting construction
`
`to avoid an alleged ambiguity. I would not impose that burden.
`
`
`
`Section 6.2 is clear and unambiguous: Samsung agreed to “supply NAND and
`
`DRAM products to Netlist on Netlist’s request at a competitive price.” That
`
`provision means what it says. The majority concedes, as it must, that “the plain
`
`language of § 6.2 favors Netlist’s interpretation.” Mem. Disp. at 3. Yet my colleagues
`
`bend over backwards to invent an ambiguity based on the agreement’s “apparent
`
`purpose as derived from its title, structure, and related provisions.” Mem. Disp. at
`
`3.1 Their arguments are unpersuasive.
`
`
`1
`The majority’s decision relies on Samsung’s made-for-litigation theory that §
`6.2 is ambiguous. But Samsung never even argued the agreement was ambiguous
`until after it decided to stop fulfilling its supply obligations. In fact, Samsung raised
`its ambiguity argument for the first time only after the district court denied its motion
`for judgment on the pleadings.
`
`1
`
`

`

`For starters, my colleagues overreach by concluding without any basis that §
`
`6.2 is “a significant outlier in the overall agreement.” Mem. Disp. at 4. The
`
`majority’s own notions about the fairness of Samsung’s supply obligation go far
`
`beyond interpreting the “four corners of the contract,” Ellington v. EMI Music, Inc.,
`
`21 N.E.3d 1000, 1003 (N.Y. 2014), and instead infer, “under the guise of judicial
`
`construction, . . . additional requirements to relieve a party from asserted
`
`disadvantage flowing from the terms actually used.” Collard v. Inc. Vill. of Flower
`
`Hill, 421 N.E.2d 818, 823 (N.Y. 1981). Those inferences violate New York’s
`
`“established contract law, which focuses on the parties’ chosen language, by
`
`injecting considerations untethered to the words that the parties included in their
`
`agreement.” Donohue v. Cuomo, 184 N.E.3d 860, 870 (N.Y. 2022). When “a contract
`
`‘was negotiated between sophisticated, counseled business people negotiating at
`
`arm’s length,’ courts should be especially ‘reluctant to interpret an agreement as
`
`impliedly stating something which the parties have neglected to specifically
`
`include.’” 2138747 Ontario, Inc. v. Samsung C & T Corp., 103 N.E.3d 774, 780
`
`(N.Y. 2018) (quoting Vt. Teddy Bear Co. v. 538 Madison Realty Co., 807 N.E.2d
`
`876, 879 (N.Y. 2004)). Yet that is what the majority did here.
`
`Although the majority’s decision purports to rely on the plain text of § 6.2, it
`
`goes further than the plain text; it takes a simple clause—“Samsung will supply
`
`NAND and DRAM products to Netlist”—and inserts the words “in connection with
`
`2
`
`

`

`the JDP.” But if the parties meant to limit Samsung’s supply obligation to NAND
`
`and DRAM used only in connection with the JDP, they would have said so. See
`
`Ellington, 21 N.E.3d at 1004 (“If the parties intended to bind future affiliates they
`
`would have included language expressing that intent.”); Riverside S. Plan. Corp. v.
`
`CRP/Extell Riverside, L.P., 920 N.E.2d 359, 365 (N.Y. 2009) (holding that the plain
`
`language of a contract’s sunset clause applied to the entire agreement when “the
`
`parties could have drafted an agreement that restricted the scope of the sunset clause”
`
`but declined to do so). Indeed, the majority acknowledges that the parties did exactly
`
`that in Netlist’s supply obligation in § 6.1. Other parts of the agreement similarly
`
`include limiting language where the parties saw fit to include it. See, e.g., § 4.1
`
`(discussing ownership of inventions “arising out of the JDP”); § 1 (defining a term
`
`used in the agreement to describe technology created “in the course and within the
`
`scope of the JDP”). We must give meaning to the omission of similar language in §
`
`6.2. E.g., Quadrant Structured Prods. Co. v. Vertin, 16 N.E.3d 1165, 1172 (N.Y.
`
`2014) (explaining that the expressio unius maxim precludes courts from reading
`
`language into a contract provision that a “sophisticated drafter” omitted).
`
`Respectfully, my colleagues overstep by rewriting § 6.2 to add language Samsung
`
`failed to include.
`
`The majority’s analysis next turns to the title and structure of § 6 to justify its
`
`conclusion that § 6.2 is ambiguous. But the title and structure confirm just the
`
`3
`
`

`

`opposite. Section 6’s title (“Supply of Components”) is general, and both Samsung
`
`and Netlist develop and manufacture components generally, not just for the JDP. All
`
`but one of the provisions in § 6 discuss the parties’ rights and obligations related to
`
`the supply of components generally. Section 6.3 preserves both parties’ rights to
`
`make “semiconductor components” and sell them to third parties. Section 6.4
`
`provides that neither party must buy “any products” from the other. And Section 6.2
`
`requires Samsung to supply “NAND and DRAM products” to Netlist at competitive
`
`prices. In the only provision tied to a JDP-specific product (§ 6.1), the parties
`
`expressly said so. It runs afoul of basic principles of contract interpretation to imply
`
`a similar limitation into any other provision in § 6.
`
`Finding no support in the terms of the agreement, the majority’s decision
`
`settles on the recitals as the basis for its finding that § 6.2 is ambiguous. Mem. Disp.
`
`at 3. But nothing in the recitals makes § 6.2 ambiguous. The recitals state that two
`
`main goals of the agreement were developing a new NVDIMM-P product through
`
`the JDP and cross-licensing patents. In their quest to find an ambiguity where none
`
`exists, my colleagues again read too much into the plain text. Parties often have
`
`many reasons for executing contracts, and they need not list every form of
`
`consideration in the recitals. In any event, the supply obligation as written in § 6.2
`
`furthers these goals or, at a minimum, there is nothing inconsistent about the
`
`agreement’s general purposes and the clear supply obligation in § 6.2. Nor can the
`
`4
`
`

`

`recitals alter the plain language of a substantive term. See Jones Apparel Grp., Inc.
`
`v. Polo Ralph Lauren Corp., 791 N.Y.S.2d 409, 410 (App. Div. 2005) (“Since the
`
`contract is unambiguous on its face, there is no need to refer to its recitals, which are
`
`not part of the operative agreement.”).
`
`In short, every purportedly “reasonable” justification the majority’s decision
`
`constructs to conclude that § 6.2 is ambiguous requires inserting words in § 6.2,
`
`implying policy considerations, and looking beyond the four corners of the
`
`agreement. That is not this court’s role. A contract “that is complete, clear and
`
`unambiguous on its face must be enforced according to the plain meaning of its
`
`terms.” Greenfield v. Philles Recs., Inc., 780 N.E.2d 166, 170 (N.Y. 2002).
`
`I respectfully dissent from the portion of the majority’s decision holding that
`
`§ 6.2 is ambiguous. I would affirm the district court’s summary judgment on Netlist’s
`
`breach of contract claim over § 6.2.
`
`5
`
`

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