Simulados Software, Ltd. v. Photon Infotech Private, Ltd.
5:12-cv-04382
N.D. Cal.Jan 9, 2020Background
- Simulados sued Photon for breach of contract and intentional misrepresentation; a jury awarded $309,674 on each claim.
- The parties’ contract contained a damages cap for breach equal to the amount Simulados actually paid: $18,848.
- The district court initially rescinded the contract and awarded both contract and consequential damages; Photon appealed.
- The Ninth Circuit affirmed the liability findings, vacated rescission for insufficient notice, and held the contract cap limits breach-of-contract recovery to $18,848, but did not resolve whether the cap applied to fraud damages or whether both awards would duplicate recovery.
- On remand the district court concluded California law bars duplicative recovery (one recovery per distinct loss), that the economic-loss rule allows tort recovery for fraudulent inducement, and that liability caps in contract do not bar fraud damages.
- The court therefore awarded Simulados $309,674 in fraud damages and disallowed the separate $18,848 contract recovery as duplicative.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Simulados may recover both contract and fraud damages (duplicative recovery) | Simulados: harms are distinct so both awards are appropriate | Photon: there was a single economic loss; awarding both would duplicate recovery | Court: barred — only one recovery per distinct loss; here same evidence shows one loss, so cannot recover both |
| Whether the economic-loss rule requires recovery in contract rather than tort | Simulados: fraud claim is independent (intentional misrepresentation), so tort damages permitted | Photon: economic-loss rule forces contract remedy (thus capped) | Court: economic-loss rule does not bar fraud damages for intentional misrepresentation; tort recovery allowed here |
| Whether the contractual liability cap ($18,848) limits fraud damages | Simulados: cap applies only to contract remedies, not to fraud damages | Photon: cap should limit total recovery including fraud award | Court: contractual cap does not apply to fraud damages (Robinson Helicopter rationale) |
| What monetary relief is proper on remand | Simulados: full fraud award ($309,674) plus contract award | Photon: at most $18,848 (contract cap) | Court: award $309,674 in fraud damages; do not award the separate $18,848 contract amount (would be duplicative) |
Key Cases Cited
- Tavaglione v. Billings, 847 P.2d 574 (Cal. 1993) (prevents duplicative recovery—one recovery per distinct item of damage)
- Shell v. Schmidt, 126 Cal. App. 2d 279 (Cal. Ct. App. 1954) (same facts supporting tort and contract recovery do not permit double recovery)
- DuBarry Int’l, Inc. v. Southwest Forest Indus., Inc., 231 Cal. App. 3d 552 (Cal. Ct. App. 1991) (duplicative jury awards reversed where only one item of damages was proved)
- Ambassador Hotel Co. v. Wei-Chuan Inv., 189 F.3d 1017 (9th Cir. 1999) (no double recovery where two theories sought compensation for the same economic loss)
- Robinson Helicopter Co. v. Dana Corp., 102 P.3d 268 (Cal. 2004) (economic-loss rule preserves distinction between contract and tort; intentional fraud can give rise to tort damages)
- Erlich v. Menezes, 981 P.2d 978 (Cal. 1999) (tort recovery permitted where duty independent of the contract exists or tortious conduct is intentional)
- Simulados Software, Ltd. v. Photon Infotech Private, Ltd., [citation="771 F. App'x 732"] (9th Cir. 2019) (affirmed liability findings, held contract cap limits breach recovery to amount paid, vacated rescission)