A plaintiff’s lawyers must think through all possible actions and results before selecting a course of action in commercial contract litigation.

In Paramount Petroleum Corporation v. Superior Court (2014) 227 Cal.App.4^th 226, the Court considered the issue of whether summary adjudication may be granted in a breach of contract action on liability only, leaving damages to be determined later at trial.  This case involved a breach of contract action by a roofing shingle manufacturer (GAF Materials Corp.) against an asphalt supplier (Paramount Petroleum) due to a drop in the price of oil used as a benchmark for other types of oil supplied for shingle manufacturing.

• GAF filed a motion for summary judgment/adjudication in which GAF provided that it was not seeking summary judgment in the amount of damages through the motion, and that if the motion was granted, then barring settlement, the amount of damages would be established at trial.
• Paramount opposed on the basis that summary adjudication could not be sought on a portion of a cause of action.

The trial court granted summary adjudication as to breach of contract and did not address Paramount’s procedural argument that summary adjudication could not be granted on issues of liability alone, without a calculation of damages.

The Court of Appeal reversed this ruling on the grounds that there is no statutory basis for a determination of liability only under the summary judgment statute, Code of Civil Procedure §437c.  The Court referred to the language of Section 437c, subdivision (f), which provides that “… A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages or an issue of duty.”

The Court concluded that as damages are an element of a breach of contract cause of action, a plaintiff cannot obtain judgment on this cause of action in an amount of damages to be determined later.  The Court referred to legislative history in emphasizing that a 1990 amendment (proposed by the California Judges Association) which limited summary adjudication motions was enacted because the Court’s attempt to resolve issues which will not result in adjudication of a cause of action or defense is a “waste” of the Court’s time – since the cause of action must still be tried, much of the same evidence will be considered by the Court at the time of trial.

The Court stated that alternative procedures could have been:

• To file a motion to bifurcate the issue of liability, which the parties could have tried upon the undisputed facts. 
• To move for summary adjudication on the issue of duty—specifically, that Paramount owed GAF a duty under the contract. 

Under Section 437c(f), “a plaintiff may move for summary adjudication as to … or one or more issues of duty, if that plaintiff contends … that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs.”   Thus, a plaintiff may seek summary adjudication on the existence or nonexistence of a contractual duty (see Linden Partners v. Wilshire Linden Assoc. (1998) 62 Cal.App.4th 508) when the plaintiff clearly seeks this relief in its Notice and Motion, however there is no statutory basis for an order summarily adjudicating that a party breached a duty.

Accordingly, under Paramount, summary adjudication may not be granted on the issue of liability only, with damages to be determined later.  This case is significant because it highlights the necessity for litigation counsel to perform a preliminary review of the strategies which may be utilized in preparing a motion for summary judgment and/or adjudication, and ensuring the necessary showing is made to satisfy the requirements under the Code. 

At PLP, we are experienced commercial loan and lending attorneys with the practical legal skills and knowledge to assert our clients’ interests or defend them in breach of contract actions, and have the expertise to navigate this complex area of business litigation.

Commercial Contract Attorney Oakland & San Francisco, Bay Area. Call Us: (510) 881-8700