Opposition ObjectionsCal. Super. - 6th Dist.February 4, 2019MD 00 \J Ch Ln 4> DJ b) ha b) b) b9 b) b) b9 b) bJ b3 pd hi ha pd hi ha pd hi ha ha 00 \J Ch Lh 4> U0 b) Pd CD VD 00 \J Ch Ln 4§ DJ b) F‘ CD 1 QCV342439 Santa Clara - Civil TREVOR J. ZINK, ESQ. (218860) OMNI LAW GROUP, LLP 1940 Hamilton Avenue San Jose, CA 95 125 Telephone: (408) 879-8500 Facsimile: (408) 879-8501 Attorneys forNEW TECHNOLOGY SPECIALISTS, INC. Electronically Filed by Superior Court of CA, County of Santa Clara, on 4/1 0/2020 3:16 PM Reviewed By: L. Nguyen Case #1 9CV342439 Envelope: 4246179 SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE COUNTY OF SANTA CLARA DANIEL OSUNA and KRYSTAL SUMMERS, individually and dba OS DESIGN AND CONSULTING, Plaintiffs V. BRIAN BRAGER, an individual also known as Brian Timothy Brager, individually and doing business as NEW TECHNOLOGY SPECIALISTS, NEW TECHNOLOGY SPECIALISTS, INC., a California corporation, AMERICAN CONTRACTORS INDEMNITY COMPANY, a California corporation, and DOES 1-20, Defendants. Case No.2 19CV342439 MEMORANDUM OF POINTS AND AUTHORITIES OF NEW TECHNOLOGY SPECIALISTS, INC. IN OPPOSITION TO PLAINTIFF’S MOTION TO ENFORCE WRITTEN SETTLEMENT AGREEMENT MEMORANDUM OF POINTS AND AUTHORITIES OF NEW TECHNOLOGY SPECIALISTS, INC. IN OPPOSITION TO PLAINTIFF’S MOTION T0 ENFORCE WRITTEN SETTLEMENT AGREEMENT L. Nguyen OKOOONONUI-RUJNr-k NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t ooNONm-war-‘OKOOONQM-bwmr-K TABLE OF AUTHORITIES CASES Grand Prospect Partners, LP v. Ross Dress for Less, Inc. (2015) 232 Cal.App.4”‘ 1332 ................................................ 15 Magic Carpet Ride LLC v. Rugger Investment Group LLC (2019) 41 Cal.5th 357 ........................................................... 13 Ridg/ey v. Topa Thrift & Loan Assn. (1998) 17 Cal.4‘h 970 .......................................................................................... 15 STATUTES Civil Code § 1647 ......................................................................................................................................................... 11 Civil Code § 1636 ................................................................................................................................................... 11, 14 Civil Code § 1641 ......................................................................................................................................................... 14 Code of Civil Procedure § 664.6 .............................................................................................................................. 1, 16 MEMORANDUM OF POINTS AND AUTHORITIES OF NEW TECHNOLOGY SPECIALISTS, INC. IN OPPOSITION TO PLAINTIFF’S MOTION T0 ENFORCE WRITTEN SETTLEMENT AGREEMENT KOOONONUI-RWNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OONQUl-PUJNF-‘OKOOONQU‘I-PUJNF-‘O TABLE OF CONTENTS I. INTRODUCTION ................................................................................................................ 1 II. STATEMENT OF FACTS ................................................................................................... 3 A. The Dispute ......................................................................................................................... 3 B. The Settlement .................................................................................................................... 3 C. NTS Did Not Receive From InvenSense the Amount Set Forth in the Settlement Agreement ................................................................................................................................... 5 D. InvenSense’s Payment t0 NTS and NTS’s Payment to OSD ............................................. 7 E. The 1099 Issue .................................................................................................................... 9 F. The Non-Disparagement Issue ............................................................................................ 9 III. LEGAL ANALYSIS ............................................................................................................. 9 A. NTS Did Pay OSD 50% 0f the Net Profit Based 0n Payments it Received From InvenSense and Driftwood .......................................................................................................... 9 1. NTS’s Payments t0 Aegis and United Mechanical were Properly Deducted ............... 10 2. Regardless of Whether the Deductions for Aegis Fire and United Mechanical were Properly Deducted, OSD Still Received more than 50% of the Net Profit .......................... 12 B. Agreement is Unavailing OSD’S Assertion that It is Entitled t0 a 2% Late Fee 0n the Basis that NTS Failed t0 Comply with the Settlement Agreement .......................................... 13 C. OSD Cannot Collect a 2% Late Fee as it is an Impermissible Penalty ............................. 14 D. OSD’s Request No. 1, Relating t0 the 1099 is a Non-Issue ............................................. 15 E. OSD’s Request No. 6 is Unavailing ................................................................................. 16 F. There Has Been N0 Breach 0f the Nondisparagement Clause ......................................... 16 IV. CONCLUSION ................................................................................................................... 16 MEMORANDUM OF POINTS AND AUTHORITIES OF NEW TECHNOLOGY SPECIALISTS, INC. IN OPPOSITION TO PLAINTIFF’S MOTION T0 ENFORCE WRITTEN SETTLEMENT AGREEMENT KOOONONUI-RWNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OONQUl-PUJNF-‘OKOOONQU‘I-PUJNF-‘O I. INTRODUCTION Plaintiffs DANIEL OSUNA and KRYSTAL SUMMERS (collectively “OSD”) and Defendants BRIAN BRAGER (Deceased) and NEW TECHNOLOGY SPECIALISTS, INC. (collectively “NTS”) entered into a settlement agreement 0n June 11, 2019, (EX. A1, the “Settlement Agreement”) with regards t0 a dispute and lawsuit filed by OSD, (EX. B, the “OSD Complaint”), over payments they were t0 receive pursuant t0 a joint venture related t0 certain construction proj ects. Each asserts that the other has not complied with the terms 0f the Settlement Agreement, and each has filed a motion seeking enforcement 0f its terms pursuant to California Code of Civil Procedure § 664.6.2 The motions are set t0 be heard simultaneously. OSD’s motion, opposed here, contains seven separate requests for relief which it asks the Court t0 “find” pursuant t0 the Settlement Agreement. These can be broken down into four categories: (1) That NTS issue an amended 2018 1099 tax form t0 OSD, (OSD Request N0. 1); (2) Relief related t0 payments made by NTS to OSD, (OSD Requests 2-5); (3) That n0 sum is owed t0 NTS related to the work 0f third party OSD Construction, Inc., (OSD Request 6); and (4) That NTS not disparage Mr. OSUNA, Ms. SUMMERS and their minor children, (OSD Request 7.) By far, the most contentious issues are those related t0 payments made by NTS to OSD. (OSD Requests 2-5.) In these Requests, OSD does not dispute that on August 13, 2019, NTS paid OSD $701,516.00; the total amount that NTS calculated was due OSD pursuant t0 the Settlement Agreement. OSD, however, contends that NTS owes it additional monies under the terms of the Settlement Agreement, based on: (1) that NTS’s calculation 0f the $701,516 was in error because it took an improper deduction, and (2) that NTS’s payments did not meet the 1 A11 references to Exhibits are to those attached t0 the Declaration of Trevor Zink, unless otherwise noted.) 2 Hereinafter, referred to as “Section 664.6.” MEMORANDUM OF POINTS AND AUTHORITIES OF NEW TECHNOLOGY SPECIALISTS, INC. IN 1 OPPOSITION TO PLAINTIFF’S MOTION T0 ENFORCE WRITTEN SETTLEMENT AGREEMENT KOOONONUI-RWNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OONQUl-PUJNF-‘OKOOONQU‘I-PUJNF-‘O procedural requirements set forth in the Settlement Agreement in that it did not make the payment within five days of receipt 0fpayment, thus entitling NTS to an additional 2% late fee, and did not provide proper documentation With the payment. These assertions have n0 merit. NTS complied with its payment obligations. The payment was not late. NTS provided a cashier’s check for $701,516.00 to OSD Within one day 0f receiving information from the parties’ jointly hired accountant, Which information was necessary for finalize its accounting. Furthermore, there were n0 improper deductions. Per the Settlement Agreement, OSD was entitled t0 half the net profit actually received from the construction contracts. OSD disputes a deduction taken by NTS based on payments that NTS made t0 prevent vendors from putting liens 0n the project. Such payments are a deduction from profits. Moreover, the $701,516.00 payment was actually $25,000 more than OSD should have received due t0 an inadvertent accounting error, meaning that even if OSD’S position regarding the lien payments is correct (it is not), OSD still received more than half 0f the net profit received by the joint venture. OSD’s claims t0 the contrary rest 0n its refusal t0 acknowledge the plain language 0f the Settlement Agreement, which provided that the amounts due were not certain and any final accounting true-up would be done by the jointly hired accountant, Michael Gurr. As set forth more fully below, NTS fully complied With the procedures of the Settlement Agreement. With regard to OSD’s other requests, the 1099 filing, (OSD Request 1), was prepared in June 2019 by NTS’s accountant and sent t0 Brian Brager, who is now deceased. NTS has been unable to determine if the corrected 1099 was filed, and is rectifying the issue to the extent necessary. As set forth in the Settlement Agreement, this issue has nothing t0 do with dismissing the action as dismissal is contingent solely on payment. The issue related t0 OSD Construction (OSD Request 6) is a non-issue by Which OSD seeks to prove too much. Finally, With regard t0 disparagement, there is none. OSD’s only evidence 0n the matter is pure hearsay. Indeed, Brian Brager’s Widow, Brandy Brager, desires that OSD’s principals cease from disparaging her and her family, but recognizes that her evidence is only hearsay. MEMORANDUM OF POINTS AND AUTHORITIES OF NEW TECHNOLOGY SPECIALISTS, INC. IN 2 OPPOSITION TO PLAINTIFF’S MOTION T0 ENFORCE WRITTEN SETTLEMENT AGREEMENT KOOONONUI-RWNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OONQUl-PUJNF-‘OKOOONQU‘I-PUJNF-‘O II. STATEMENT OF FACTS A. The Dispute NTS and OSD were 50/50 partners in a construction joint venture. OSD and NTS entered into agreements Where OSD essentially became the proj ect manager for certain commercial construction projects for which NTS was the licensed General Contractor. Per its agreement With NTS, OSD was t0 provide “Executive Project Service” on the proj ects. The bulk of the proj ects at issue herein were With two entities, Driftwood and InvenSense. OSD hasm had any direct agreement with Driftwood or InvenSense. The subj ect agreements were between InvenSense and NTS, as well as Driftwood and NTS. OSD was entitled t0 payments for its work through its agreement with NTS. After a falling out between the principals 0fOSD and NTS, 0n February 11, 2019, OSD filed a lawsuit claiming it was owed money 0n the Driftwood and InvenSense proj ects, and additionally claiming that it was an employee 0fNTS. (EX. B, the OSD Complaint.) The lawsuit was filed prior t0 NTS receiving more than $1,500,000 owed t0 it on the two projects. Since the joint venture gave OSD 50% 0f the net profit actually received, and NTS had paid OSD more than 50% 0f the then-received net profit, NTS did not owe OSD any money at that time. B. The Settlement The parties resolved the matter at mediation, entering into the Settlement Agreement on June 11, 2019. Per the Settlement Agreement, OSD would receive its 50% share 0f the net profits from the Driftwood and InvenSense proj ects once the customers paid NTS, and in exchange OSD would dismiss its lawsuit against NTS With prejudice. (EX. A, Settlement Agreement, para.’s 1, 2, 18.) The Settlement Agreement spelled out the then-known financial numbers related t0 the InvenSense and Driftwood proj ects. The balances agreed as due to Plaintiff were based 0n the net profits, though the parties understood that the numbers could change. As related to Driftwood, the amounts set forth in the agreement were: Net Profit: $ 1 ,539,577 50% Share [0f profits]: $769,788.57 MEMORANDUM 0F POINTS AND AUTHORITIES 0F NEW TECHNOLOGY SPECIALISTS, INC. IN 3 OPPOSITION TO PLAINTIFF’S MOTION TO ENFORCE WRITTEN SETTLEMENT AGREEMENT KOOONONUI-RWNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OONQUl-PUJNF-‘OKOOONQU‘I-PUJNF-‘O Paid t0 OSD t0 Date: $500,000 Balance Owed to OSD $269,788.57 (EX. A, Settlement Agreement, para. 1.) As related t0 InvenSense, the amounts were: Net Profit: $ 1 ,3 1 8,572 50% Share [ofprofits]: $659,286 Paid t0 OSD t0 Date: $160,000 Balance Owed to OSD: $499,286 (EX. A, Settlement Agreement, para. 2.) Importantly, the numbers were not set in stone. Rather, paragraphs 1 and 2 each contained the qualifier that the amounts owed were “subject t0 NTS ’s receipt ofpaymem‘ ” from Driftwood and InvenSense. (See, EX. A, Settlement Agreement, para.’s 1-2. Emphasis added.) In the Settlement Agreement, OSD and NTS specifically acknowledged that the InvenSense proj ect was being audited, and that Brian Brager ofNTS represented that there were two items for Which InvenSense was seeking recoupment, and that the items totaled approximately $1 10,000. (EX. A, Settlement Agreement, para. 6.) Consistent with such, the Settlement Agreement conceded that the full payment set forth in the Settlement Agreement might not be received from Driftwood and InvenSense, and in such a case: “In the event that full payment is not received from [Driftwood/InvenSense], each party shall receive its allocable share to true up its 50% share 0f the profits.” (EX. A, Settlement Agreement, para.’s 1, 2, respectively.) The Settlement Agreement provided that with regard to Driftwood, “Within 5-days 0f receipt of full payment from Driftwood, NTS shall promptly pay to OSD the full amount owed to OSD 0f $269,788.57. In the event that full payment is not received from Driftwood, each party shall receive its allocable share t0 true up its 50% share of profits.” (EX. A, Settlement Agreement, para. 1.) Similarly, With regard t0 InvenSense, the agreement provided that, “In the event that full payment is not received from InvenSense, each party shall receive its allocable share t0 true up MEMORANDUM OF POINTS AND AUTHORITIES OF NEW TECHNOLOGY SPECIALISTS, INC. IN 4 OPPOSITION TO PLAINTIFF’S MOTION T0 ENFORCE WRITTEN SETTLEMENT AGREEMENT KOOONONUI-RWNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OONQUl-PUJNF-‘OKOOONQU‘I-PUJNF-‘O its 50% share of profits.” (EX. A, Settlement Agreement, para. 2.) The Settlement Agreement further provides that NTS would provide t0 OSD a detailed summary of payments made by Driftwood and/or InvenSense; that all payments would be “evenly split between the parties until such time as OSD is paid in full[;]” that “NTS shall pay t0 OSD 50% 0f all payments received by NTS within five (5) days 0f receipt by NTS[;]” and that NTS shall pay a 2% late payment penalty 0n each payment that is not timely paid.” (EX. A, Settlement Agreement, para. 4.) The Settlement Agreement does n_0t contain a “Time is 0f the Essence” clause, nor does it provide linkage or relationship of the 2% penalty t0 any actual damage incurred by OSD if the payment is not paid Within five days. (See, EX. A, Settlement Agreement.) To facilitate matters, NTS and OSD jointly hired CPA Michael Gurr as the joint accountant 0n the matter in the dispute. He prepared a full accounting Which was ultimately used by the parties in reaching the resolution set out in the Settlement Agreement. It was also agreed that if there were any discrepancies, Mr. Gurr would determine the “true up.” Mr. Gurr was paid by both NTS and OSD. (EX. A, Settlement Agreement, at para.’s 1,2.) C. NTS DidM Receive From InvenSense the Amount Set Forth in the Settlement Agreement NTS received payment from InvenSense 0n August 5, 2019. It did not, however, receive the full amount set forth in paragraph 2 0f the Settlement Agreement, for three reasons. First, InvenSense discovered that there had been a double-counting in the amount of $100,992 related t0 anticipated change orders. The original contract price had built in that amount t0 pay for anticipated change orders, but as the proj ect went 0n, InvenSense was billed for all 0f the change orders Without regard t0 the built-in contingency, resulting in InvenSense being billed an extra $100,992. For clarity on this issue, the initial contract price had a change order contingency in the amount 0f $100,992, and the first $100,992 of change orders was t0 be billed against this Without adding t0 the contract price. However, all 0f the change orders 0n the proj ect were billed without any offset t0 the contingency amount. When InvenSense discovered the circumstance, it properly reduced its payment by the $100,992.00. (Declaration ofHooman MEMORANDUM OF POINTS AND AUTHORITIES OF NEW TECHNOLOGY SPECIALISTS, INC. IN 5 OPPOSITION TO PLAINTIFF’S MOTION T0 ENFORCE WRITTEN SETTLEMENT AGREEMENT KOOONONUI-RWNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OONQUl-PUJNF-‘OKOOONQU‘I-PUJNF-‘O Bambad, hereinafter “Bambad Decl.”, para. 4; Zink Decl., para. 11.) Secondly, the amount set forth in the Settlement Agreement was further changed since NTS was required t0 pay certain other vendors a few days after the mediation. As Aegis Fire was owed $1,348 and United Mechanical was owed $23,992, InvenSense asked NTS t0 take care 0f these obligations to prevent liens from being placed 0n the project, a requirement 0fNTS’s contract with InvenSense. (Bambad Decl., para. 4; Zink Decl., para. 11.). NTS paid these amounts totaling $25,340 immediately so as to prevent liens from being placed against the proj ect, and thereby putting NTS in breach of its contract with InvenSense. Thirdly, the InvenSense audit reduced the profits by $50,000. This amount was agreed to between NTS and InvenSense, and OSD approved this amount as well. This reduction was listed as Change Order 25 to the contract. This was confirmed in an email from Krystal Summers of OSD. (Zink Decl., para. 12; EX. F, Summers Email.) Thus, t0 simplify, the $100,992 reduction for the double accounting, plus the additional $25,340 payments t0 Aegis Fire and United Mechanical, plus the $50,000 audit credit reduced the amount owed by InvenSense t0 NTS and OSD by $176,332. As a result, the profit split by NTS and OSD from the InvenSense project should have been reduced by $88,166 for each 0f them. NTS’s final accounting for the $701,516 payment inadvertently omitted the $50,000 audit credit. Therefore, instead of reducing the amount owed on the InvenSense project by $88,166 as t0 OSD, it only reduced the amount by $63,166 (the Driftwood amounts did not change), resulting in an overpayment of $25,000 to OSD. (Bambad Decl., para. 7; Zink Decl., para. 12.) That the numbers in the Settlement Agreement might vary was contemplated by the Settlement Agreement, which states, “The Parties acknowledge that the InvenSense proj ect is currently being audited by InvenSense[,]” (EX. A, Settlement Agreement, para. 6), and “[t]he Parties acknowledge that the above amount [referring to the $499,286 balance due, and its calculation which includes 50% share 0f the profit, to OSD from the InvenSense project] is subject t0 NTS’s receipt of payment from InvenSense.” (EX. A, Settlement Agreement, para. 2.). Simply put, NTS is not obligated t0 pay amounts not received from InvenSense, and NTS, in fact, paid more than the net profit owed When its accounting did not include the $50,000 audit MEMORANDUM OF POINTS AND AUTHORITIES OF NEW TECHNOLOGY SPECIALISTS, INC. IN 6 OPPOSITION TO PLAINTIFF’S MOTION T0 ENFORCE WRITTEN SETTLEMENT AGREEMENT KOOONONUI-RWNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OONQUl-PUJNF-‘OKOOONQU‘I-PUJNF-‘O credit reduction. D. InvenSense’s Payment t0 NTS and NTS’s Payment to OSD InvenSense paid NTS 0n August 5, 2019, adjusting the amount for the reductions discussed immediately above. (Bambad Decl., para. 5; Zink Decl., para. 9.) Upon receipt, Mr. Brager ofNTS then immediately sent Mr. Gurr, the jointly hired CPA, emails 0n August 7 and August 8, asking for confirmation as t0 Whether certain items were included in his summary of total costs from the InvenSense and the Driftwood proj ects. Specifically, Mr. Brager sent Mr. Gurr the following email on August 7, 2019: Hi Michael, Ireceived payment from InvenSense this week, and need t0 pay OSD/Daniel Within next few days, but before I do, I need to have confirmation if any of the items listed below were included in your summary 0f total costs for the InvenSense proj ect. The “items” listed related t0 InvenSense were nine cost items, totaling $44,190. Mr. Brager sent a similar email t0 Mr. Gurr relating t0 Driftwood for two items with a total cost 0f $18,414. (Zink Dec1., para. 9; Bambad Decl., para. 6. Brager/Gurr Email String, 8/7/19-8/12/19, hereinafter “Brager/Gurr Email String.” EX. A t0 Bambad Decl., and Zink Decl., EX. C.) Mr. Brager’s purpose in seeking confirmation from the amounts indicated in his August 7 and 8 emails, was t0 ascertain whether the amounts listed therein were included in Mr. Gurr’s accounting, so as t0 ensure that OSD was receiving the proper allocation of the funds. (Zink Decl., para. 9; Bambad Decl., para. 6.) Mr. Gurr did not respond to NTS until August 12. (EX. C, Brager/Gurr Email String.) On August 12, the very same day of Mr. Gurr’s response, NTS’s counsel (Trevor Zink) advised OSD that a cashier’s check in the amount of $701,516 would be available for OSD to pick up in his office 0n August 13, 2019 (the next day). Also, 0n August 12, 2019, after receiving the confirming information, Mr. Zink emailed a spreadsheet t0 OSD detailing exactly how NTS arrived at the amount due ($701,516), and providing OSD with a detailed summary 0fpayments received from Driftwood and InvenSense, as was also required by the Settlement Agreement. (Zink Decl., para.’s 10, 11; EX. D, Zink email t0 OSD, dated August 12, 2019.) MEMORANDUM OF POINTS AND AUTHORITIES OF NEW TECHNOLOGY SPECIALISTS, INC. IN 7 OPPOSITION TO PLAINTIFF’S MOTION T0 ENFORCE WRITTEN SETTLEMENT AGREEMENT KOOONONUI-RWNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OONQUl-PUJNF-‘OKOOONQU‘I-PUJNF-‘O The $701,516 payment resolved all amounts due, and, in fact, overpaid OSD by $25,000 as it did not account for the audit credit. While, the payment is less than the amounts anticipated in the Settlement Agreement, it is the appropriate number after the $100,992 reduction discovered by InvenSense for the double counting, and the reduction for the $25,340 paid t0 Aegis Fire and United Mechanical. (Zink Decl., para. 12; EX. F; Bambad Dec1., para. 7.) Importantly, per the Settlement Agreement, the $701,5 1 6 paid t0 OSD 0n August 13, 2019 was n0 less than 50% 0f the net profit from the two proj ects, as was required by the Settlement Agreement. The worksheet provided 0n August 13 reflected that the $701,516 was the full amount owed t0 OSD, and how the number was arrived at, though, as noted, it was $25,000 more than it should have been. Thus, even, assuming for purposes of argument, if the Aegis and United Mechanical payments were removed from the calculation, (though, as detailed in III.A. 1 ., below, they should not be), OSD still received n0 less than 50% 0f the net profits. (Zink Decl., para. 12; Bambad Decl., para. 7.) The following details a side-by-side comparison 0fWhat OSD is owed in the scenario where NTS pays Aegis Fire and United Mechanical (left) and Where it doesn’t (right). Driftwood Aegis/UM Paid AegiS/UM Not Paid Final Contract amount 5,234,794 5,234,794 Materials Cost (3,537,913) (3,537,913) Labor Cost (157,304) (157,304) Michael Gurr (8,785) (8,785) NET Profit 1,530,792 1,530,792 50% 765,396 765,396 Paid to OSD to Date (500,000! (500,000! Balance owed to OSD 265,396 265,396 InvenSense Final Contract amount 2,920,657.00 2,920,657.00 Materials Cost (1,500,117.00) (1,500,117.00) Labor Cost (101,968.00) (101,968.00) Customer adjust of total (100,992.00) (100,992.00) Audit Credit (50,000) (50,000) Aegis Fire Sprinklers (1,348.10) O UMI (23,992.00) 0 NET Profit 1,142,239.90 1,167,580.00 MEMORANDUM 0F POINTS AND AUTHORITIES 0F NEW TECHNOLOGY SPECIALISTS, INC. IN 8 OPPOSITION TO PLAINTIFF’S MOTION TO ENFORCE WRITTEN SETTLEMENT AGREEMENT KOOONONUI-RWNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OONQUl-PUJNF-‘OKOOONQU‘I-PUJNF-‘O 50% 571,119.95 583,790.00 Paid to OSD to Date (160,000.00) (160,000.00) Balance owed to OSD 411,119.95 423,790.00 Total Due OSD $676,515.95 $689,186.00 Regardless of whether one factors in the NTS payments t0 Aegis Fire and United Mechanical, OSD has been overpaid. NTS invites OSD t0 identify Which line items above, if any, are inaccurate. Though several requests for this information have been made, t0 date, n0 such explanation has been provided. E. The 1099 Issue NTS’s accountant prepared the appropriate corrected 1099 in June 2019, (Acct. Decl., para. 2). Due to an oversight, the 1099 was apparently not filed. Brian Brager died in October 2019, and this loose end was apparently left undone. NTS is making sure that the matter will be completed prior t0 the hearing. The Settlement Agreement places n0 time constraint on when this must be done. This issue in n0 way affects the necessity ofOSD dismissing the matter With prejudice and OSD has not asserted that it has suffered any damages as a result 0f this. F. The Non-Disparagement Issue The Settlement Agreement does contain a non-disparagement provision. (EX. A, para. 10.) No disparagement has taken place; the evidence offered by OSD is double hearsay. It is a false claim. In fact, it is reported that it is actually the Brager children who have been the subject 0f disparagement at school. III. LEGAL ANALYSIS A. NTS Did Pav OSD 50% 0f the Net Profit Based 0n Payments it Received From InvenSense and Driftwood OSD incorrectly asserts that it was not paid 50% 0f the net profits due under the Settlement Agreement, notably $12,670 allegedly due for the InvenSense project. (See, OSD MPA, Request 5,3 pp. 4: 1 1-12; 5: 14.) The evidence establishes that there was n0 shortfall; that 3 OSD’s MPA has two Request No. 5’s, the first related to InvenSense, the second t0 Driftwood.) MEMORANDUM OF POINTS AND AUTHORITIES OF NEW TECHNOLOGY SPECIALISTS, INC. IN 9 OPPOSITION TO PLAINTIFF’S MOTION T0 ENFORCE WRITTEN SETTLEMENT AGREEMENT KOOONONUI-RWNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OONQUl-PUJNF-‘OKOOONQU‘I-PUJNF-‘O OSD was paid at least 50% 0f the net profits. OSD does not contend that it is owed a balance 0n principal from Driftwood. 1. NTS’s Payments t0 Aegis and United Mechanical were Properly Deducted The disputed amount stems from payments made by NTS to vendors Aegis Fire and United Mechanical after the parties entered into the Settlement Agreement. Aegis Fire and United Mechanical were subcontractors/suppliers Who were collectively owed $25,340. InvenSense required that NTS make payments t0 these subcontractors t0 prevent liens from being placed on the proj ect. If a lien was placed on the property, this would constitute a material breach ofNTS’s agreement With InvenSense. The payments are reflected in NTS’S final accounting t0 OSD, and deducted from the profit figure. Per the Settlement Agreement, OSD was entitled to receive 50% of the Net Profit from the InvenSense and Driftwood projects, respectively. (EX. A, Settlement Agreement, para.’s 1, 2.) But the Settlement Agreement also states that “[i]n the event full payment is not received” each party “shall receive its allocable share to true up its 50% share 0f the profits.” (EX. A, Settlement Agreement, para.’s 1,2). OSD’s reliance on paragraph 8 0f the Settlement Agreement is unavailing. The purpose 0f Paragraph 8 0f the Settlement Agreement was t0 assure that OSD had the right t0 seek payment from InvenSense for certain work that OSD claims it did apart from the joint venture. The fact that NTS paid certain subcontractors Who were going t0 lien the InvenSense project is in no way a Violation 0f that section of the Settlement Agreement. NTS has never attempted to “invoice and seek payment from InvenSense for said work,” as the Settlement Agreement states OSD has had the right t0 do that, and NTS fails to see how payment to these subcontractors in any way violated the Settlement Agreement and/or harmed OSD. It is ironic the position that OSD is taking because NTS’s actions actuallym OSD. NTS was Willing to pay these subcontractors, such that NTS and OSD would each be liable for half 0f the expense, While allowing OSD t0 collect 100% 0f the amount InvenSense was to pay for the work. NTS is not seeking to receive any payment from InvenSense for this work and has repeatedly informed OSD that that is the case. OSD failed t0 even attempt to pay these invoices until after it received MEMORANDUM OF POINTS AND AUTHORITIES OF NEW TECHNOLOGY SPECIALISTS, INC. IN 10 OPPOSITION TO PLAINTIFF’S MOTION T0 ENFORCE WRITTEN SETTLEMENT AGREEMENT KOOONONUI-RWNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OONQUl-PUJNF-‘OKOOONQU‘I-PUJNF-‘O payment from NTS, and it was immediately informed by United Mechanical that the invoice had already been paid by NTS in June 2019. Zink Decl., 11 15 and EX. G. It is elementary that payments made by a general contractor t0 a subcontractor are costs, and not part 0f the profits received from a job. A contract, as the Settlement Agreement is, must be interpreted so as to give effect t0 the mutual intentions of the parties at the time 0f its making, and it may be explained by reference t0 the circumstances under Which it was made, and the matter to which it relates. (Civil Code §§ 1636, 1647.) The intention 0f the parties, as reflected in the Settlement Agreement, was to provide a mechanism s0 that each received 50% 0f the net profits. OSD’s contention that it should not have its share 0f the net profits reduced by such an obvious cost as monies paid t0 a subcontractor is an absurdity. To further evidence the absurdity 0f OSD’s position, OSD actually demanded that NTS seek reimbursement from Aegis Fire and United Mechanical so that OSD could then pay these subcontractors the exact same amount 0f money. Why? This makes no sense. However, it became clear t0 NTS that the sole reason for this was t0 attempt to create a breach 0f the Settlement Agreement, so OSD could continue to harass NTS. OSD’s theory appears t0 be that if the Aegis Fire and United Mechanical expenses are removed from the accounting, then OSD is owed an additional $12,670 (i.e., $25,340 paid to the subcontractors, divided by 2). IfOSD is owed this extra $12,670, then NTS is in breach 0f the Settlement Agreement, and OSD can sue and claim attorney’s fees. What OSD misses, which NTS has repeatedly pointed out to OSD over the past several months, is that even ifwe accept this absurd approach, OSD has been overpaid. See the accountings in II.D., above. The bottom line on this issue is that NTS is happy t0 remove the Aegis Fire and United Mechanical amounts from the accounting. This results in NTS receiving more money (i.e., NTS gets back its $25,340 paid t0 the subcontractors and adds only $12,760 t0 the amount owed t0 OSD). In fact, NTS already received a reimbursement from United Mechanical in the amount of $23,992 and immediately issued a payment to OSD for $1 1,996 after OSD repeatedly refused to agree t0 let NTS pay Aegis Fire and United Mechanical. Bambad Decl., 1] 8. Why OSD is pushing so hard for this is beyond NTS’s comprehension. Additionally, there is simply n0 harm MEMORANDUM OF POINTS AND AUTHORITIES OF NEW TECHNOLOGY SPECIALISTS, INC. IN 1 1 OPPOSITION TO PLAINTIFF’S MOTION T0 ENFORCE WRITTEN SETTLEMENT AGREEMENT KOOONONUI-RWNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OONQUl-PUJNF-‘OKOOONQU‘I-PUJNF-‘O that occurred to anyone as a result 0fNTS paying Aegis Fire and United Mechanical, which payments were made at InvenSense’s request for the purpose of keeping the project lien-free, as required by NTS’s contract With InvenSense. 2. Regardless of Whether the Deductions for Aegis Fire and United Mechanical were Properly Deducted, OSD Still Received more than 50% 0f the Net Profit OSD’s position is that NTS’s deduction for the monies it paid t0 Aegis Fire and United Mechanical was improper, and that it should have received an additional $12,760 related to the InvenSense proj ect. But, as set forth above, the $701,516 payment was based on 50% of the net profits from the InvenSense and Driftwood projects. InvenSense’s final payment t0 NTS deducted $50,000 for the audit credit, and, as such, that reduced the total profits by $50,000, meaning that both OSD’s and NTS’s final distribution should have been reduced by $25,000. OSD’s Krystal Summers confirms this. (Zink Dec1., EX. F.) This $50,000 deduction, however, was inadvertently left out 0fNTS’S accounting from Which its $701,516 payment t0 OSD was calculated. As a result, that $701,516 payment OSD received was $25,000 more than it should have been. Thus, even ifOSD is correct that the Aegis Fire and United Mechanical payments were improper, (and NTS does not believe they were for reasons stated elsewhere) - the $25,000 overpayment 0n the amount as a Whole offsets the $12,760 increase that would occur with the removal 0f the Aegis Fire and United Mechanical payments. N0 money is, 0r was, owed, nor would there be a late payment owed due to a shortfall. In sum, OSD is owed n0 additional principal balance. In accord with the Settlement Agreement, it has been paid more than 50% 0f the net profits. Counsel for NTS, Trevor Zink, attempted 0n multiple occasions t0 explain the accounting in painstaking detail t0 OSD’s counsel, but OSD has continued t0 disagree with the accounting and is needlessly pursuing this motion, costing NTS an extensive amount in otherwise unnecessary attorney’s fees. Zink Decl., 1] 16 and EX. H. MEMORANDUM OF POINTS AND AUTHORITIES OF NEW TECHNOLOGY SPECIALISTS, INC. IN 12 OPPOSITION TO PLAINTIFF’S MOTION T0 ENFORCE WRITTEN SETTLEMENT AGREEMENT KOOONONUI-RWNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OONQUl-PUJNF-‘OKOOONQU‘I-PUJNF-‘O B. Agreement is Unavailing OSD’s Assertion that It is Entitled t0 a 2% Late Fee on the Basis that NTS Failed to Comply with the Settlement Agreement OSD asserts that the August 13 payment was late, and that OSD is, therefore, owed an additional 2% late fee pursuant t0 paragraph 4 of the Settlement Agreement. The argument fails because 0f the doctrine 0f substantial performance and general equity principles. NTS’s payment 0f the amounts due under the Settlement Agreement constituted substantial performance. “‘What constitutes substantial performance is a question 0f fact, but it is essential that there be no willful departure from the terms of the contract, and that the defects be such as may be easily remedied 0r compensated, so that the promise may get practically What the contract calls for.’ [Citation] The doctrine 0f substantial performance also applies When a party performs but misses a deadline. ‘Where time is not 0f the essence of a contract, payment made Within a reasonable time after the due date stated in the contract constitutes compliance therewith.’ [Citation] ‘ . . .a substantial compliance meets the requirements 0f any obligation.” Magic Carpet Ride LLC V. Rugger Investment Group LLC (2019) 41 Ca1.5th 357, 364. While NTS is of the position that there was complete performance, NTS at a minimum substantially performed by making the payment Within eight (8) days 0f receipt 0f the funds from InvenSense, delayed only due t0 its waiting for confirmation 0f certain accounting items from Michael Gurr, the jointly hired CPA. The Settlement Agreement states plainly: “In the event that full payment is not received from InvenSense, each party shall receive its allocable share to true up its 50% share 0f profits.” (EX. A, Settlement Agreement, para. 2.) NTS did not receive “full payment” of the amounts set forth in the Settlement Agreement because (1) InvenSense discovered that it had been double- charged for the change orders in an amount 0f $100,992, (2) the accounting performed by Mr. Gurr prior to mediation and by the parties at the mediation did not include the $25,340 in payments to Aegis Fire and United Mechanical, and (3) the accounting performed by Mr. Gurr prior to mediation and by the parties at the mediation did not include the $50,000 credit on the InvenSense proj ect as a result 0f the audit. In order t0 true-up the allocation 0fpayments, NTS asked Mr. Gurr t0 check the calculations, per the agreement. Upon receipt of confirmation from MEMORANDUM OF POINTS AND AUTHORITIES OF NEW TECHNOLOGY SPECIALISTS, INC. IN 13 OPPOSITION TO PLAINTIFF’S MOTION T0 ENFORCE WRITTEN SETTLEMENT AGREEMENT KOOONONUI-RWNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OONQUl-PUJNF-‘OKOOONQU‘I-PUJNF-‘O Mr. Gurr, NTS notified OSD that it could pick up a cashier’s check the next day; all of this took place within eight days from NTS’s receipt 0f the funds. OSD cannot use the process agreed upon by the contract - the use 0f Mr. Gurr t0 determine final amounts - as a basis for claiming that NTS breached its obligations under the Settlement Agreement. That is not a fair reading of the contract under ordinary rules 0f interpretation. First, “A contract must be so interpreted as t0 give effect to the mutual intention of the parties as it existed at the time 0f contracting, so far as the same is ascertainable and lawful.” Civil Code § 1636. Second, “The whole of a contract is t0 be taken together, so as t0 give effect to every part, if reasonably practicable, each clause helping t0 interpret the other.” Civil Code § 1641. T0 make the five-day payment requirement preeminent would be t0 ignore the role the parties assigned t0 Mr. Gurr in the Settlement Agreement, making the contract potentially unenforceable subj ect t0 the time constraints of Mr. Gurr. This simply cannot be a fair or appropriate reading 0f the contract. Further, under any reading 0f the agreement, the payment within eight days 0f receipt by NTS was substantial performance under the precepts 0f Magic Carpet Ride. The Court is invited t0 note that the Settlement Agreement does not contain a “Time is 0f the Essence” clause. Thus, in order for there t0 be a material breach, there would have to be some extraordinary facts as to the necessity of the payment in the five days. There are none and the Settlement Agreement does not identify any such conditions 0r circumstances. C. OSD Cannot Collect a 2% Late Fee as it is an Impermissible Penalty While NTS believes that there was full compliance given that the delay was the consequence 0f a procedure that the parties wrote into the Settlement Agreement, (i.e., Mr. Gurr’s “true-up” procedure), there is an additional question as t0 whether OSD is even entitled to the 2% payment. It is not. Per the California Supreme Court, unless the 2% late fee has a reasonable relationship t0 the damages which could be expected t0 flow from the delay in payment, it is an invalid penalty: A liquidated damages clause Will generally be considered unreasonable, and hence, unenforceable under section 1671(b) if it bears n0 reasonable relationship t0 the range 0f actual damages that the parties could have anticipated would flow from a breach. MEMORANDUM OF POINTS AND AUTHORITIES OF NEW TECHNOLOGY SPECIALISTS, INC. IN 14 OPPOSITION TO PLAINTIFF’S MOTION T0 ENFORCE WRITTEN SETTLEMENT AGREEMENT KOOONONUI-RWNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OONQUl-PUJNF-‘OKOOONQU‘I-PUJNF-‘O The amount set as liquidated damages “must represent the result 0f a reasonable endeavor by the parties t0 estimate a fair average compensation for any loss that may be sustained.” [Citation] In the absence 0f such relationship, a contractual clause purporting t0 predetermine damages “must be construed as a penalty.” [Citation] Ridglev V. Topa Thrift & Loan Assn. (1998) 17 Ca1.4th 970, 977. Importantly, here, neither the Settlement Agreement nor OSD’s moving papers show any reasonable relationship of the 2% late fee t0 any damages that OSD sustained, if any there be, as a consequence 0f a late payment 0f three days. “The general rule for Whether a contractual condition is an unenforceable penalty requires the comparison of (1) the value 0f the money 0r the property forfeited or transferred t0 the party protected by the condition t0 (2) the range 0f harm 0r damages anticipated t0 be caused that party by failure 0f the condition. Iftheforfeiture 0r transfer bears n0 reasonable relationship t0 the range Ofanticipated harm, the condition will be deemed an unenforceable penalty.” Grand Prospect Partners, LP V. Ross Dress for Less, Inc. (2015) 232 Cal.App.4th 1332, 1358 (emphasis added). The draconian nature 0f the penalty is seen in OSD’s request for relief. With regard to InvenSense, it claims an underpayment 0f $12,760, and seeks t0 layer an additional $8,976 t0 that because 0f its assertion that NTS paid three days late. Its request for late fees related t0 Driftwood is even more ludicrous; it concedes that it was paid the entire amount, but seeks an additional $5,307 for its claim that NTS’S payment was three days late. OSD’s moving papers make no attempt t0 establish that it sustained any damages as a consequence 0f receiving payment on August 13 rather than August 10; for good reason, it did not sustain any. The lack of any proportionality or reasonable relationship 0f the late fee to damages sustained by OSD makes the provision invalid as an unenforceable penalty.4 D. OSD’s Request N0. 1, Relating t0 the 1099 is a Non-Issue NTS prepared the corrected 1099 in June 2019. The failure to file has been rectified. (Bambad Decl., 11 9.) 4 Such invalidity, however, does not affect the validity 0r enforceability 0f the remainder 0f the Settlement Agreement. (EX. A, Settlement Agreement, para. 23.) MEMORANDUM OF POINTS AND AUTHORITIES OF NEW TECHNOLOGY SPECIALISTS, INC. IN 15 OPPOSITION TO PLAINTIFF’S MOTION T0 ENFORCE WRITTEN SETTLEMENT AGREEMENT KOOONONUI-RWNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OONQUl-PUJNF-‘OKOOONQU‘I-PUJNF-‘O E. OSD’s Request N0. 6 is Unavailing This argument relates t0 the payments made to Aegis Fire and United Mechanical, and, as explained above, the deductions were not improper, and even if they were, it does not change the fact that NTS’s payment to OSD of $701,516 0n August 13 provided it with more than 50% 0f the profits from the InvenSense and Driftwood projects, thus satisfying the Settlement Agreement. F. There Has Been N0 Breach of the Nondisparagement Clause While OSD’s MPA asserts that there has been a breach 0f the nondisparagement clause, it offers no competent evidence to support such claims. The only proof is a statement in paragraph 14 0f the Declaration 0f Krystal Summers that “Plaintiffs have received reports from the school and others in our community 0f disparaging remarks made by. . .the Bragers, to our private school community.” This is pure hearsay, double hearsay, in fact. IV. CONCLUSION For the above-cited reasons, NTS respectfully request that the Court deny OSD’s Motion t0 Enforce the Settlement Agreement pursuant t0 Code of Civil Procedure § 664.6. Dated: April 10, 2020 OMNI LAW GROUP, LLP By'W' TREVOR J. ZINK, ESQ. Attorneys for NTS, Inc. MEMORANDUM OF POINTS AND AUTHORITIES OF NEW TECHNOLOGY SPECIALISTS, INC. IN 16 OPPOSITION TO PLAINTIFF’S MOTION T0 ENFORCE WRITTEN SETTLEMENT AGREEMENT