AIG Specialty Ins. Co. v. Pegatron Corp.

AIG SPECIALTY INSURANCE COMPANY, as assignee and subrogee, Plaintiff, v. PEGATRON CORPORATION, Defendant.

Civil Action No. 1:18-cv-03701-SDG

United States District Court, N.D. Georgia, Atlanta Division

September 17, 2021

OPINION AND ORDER

Steven D. Grimberg United States District Court Judge

This matter is before the Court on cross-motions for summary judgment [ECF 144 and 149] and on Defendant Pegatron Corporation's motion to exclude the declaration of James T. Geier [ECF 173]. After careful consideration of the parties' briefing, the Court DENIES Pegatron's motion to exclude; GRANTS IN PART AND DENIES IN PART Plaintiff AIG Specialty Insurance Company's motion for summary judgment; and GRANTS IN PART AND DENIES IN PART Pegatron's motion for summary judgment.

I. BACKGROUND

Unless otherwise noted, the following facts are undisputed or are supported by undisputed evidence in the record.^[1] In April 2004 Scientific-Atlanta, Inc. entered into a Blanket Purchase Agreement (BPA) with ASUSTek Computer, Inc., under which ASUSTek would manufacture wireless products for Scientific-Atlanta.^[2] By 2013, through a series of assignments Cisco Systems, Inc. (the Insured) acquired Scientific-Atlanta's rights and Pegatron acquired ASUSTek's rights under the BPA.^[3]

In 2013, Pegatron began designing and manufacturing two wireless products, comprised of the same component parts, for Insured. One product was intended for residential use and one for commercial use (collectively, the Products).^[4] Pursuant to a Master Supply Agreement (MSA), and a later Product Addendum, Insured sold the Products to a customer (Customer).^[5] Separate Product Addendums were agreed to for each product Insured sold to Customer under the MSA. In November 2015, Insured sold its connected business device unit to another entity (Successor), which took over Insured's obligations to Customer under the MSA related to the Products.^[6]

According to their specifications, the Products were required to operate within two frequency spectrums, 2.4 GHz and 5 GHz.^[7] However, in December 2015, Customer received complaints that the Products were operating in and interfering with the 2.5 GHz frequency spectrum.^[8] Though the parties dispute the cause and extent of this interference, they agree that the Products did oscillate into the 2.5 GHz frequency spectrum and that a component part manufactured by a third-party, Skyworks Solutions, Inc., contributed to the interference.^[9]

Under the MSA, Insured warranted and represented to Customer that any product supplied pursuant to a Product Addendum would “conform to the applicable Specifications.”^[10] Insured also represented and warranted that its performance would “comply in all material respects with all Applicable Law.”^[11]Customer contended that Insured breached these warranties because the Products operated outside of the 2.4 GHz and 5 GHz spectrums, which violated the specifications and, as alleged by Customer, violated federal communications regulations.^[12] On July 21, 2016, Customer sent a formal demand to Insured and requested replacement Products and reimbursement of costs.^[13] Customer and Insured entered into a settlement on October 19, 2016, in which Insured agreed to repair or replace defective Products and reimburse Customer for the costs of remediation.^[14] Pegatron declined to contribute to the settlement.^[15]

Following the settlement, Insured sought indemnification from Successor.^[16]Successor rejected the Insured's claim, and in fact sought indemnification from the Insured based on alleged breaches of warranties.^[17] Successor and Insured entered into a settlement agreement on September 30, 2016.^[18]

Insured submitted its claims related to the settlements with Customer and with Successor to its primary insurer, AIG, and its excess insurers.^[19] AIG paid Insured the full policy amount of approximately $15 million.^[20] On August 2, 2018, Insured and AIG entered into an assignment agreement through which Insured granted AIG the right to pursue any and all claims against Pegatron.^[21] Insured and AIG amended the assignment agreement on January 22, 2020.^[22]

AIG, as assignee and subrogee of Insured's claims, filed this action against Pegatron to recover the remediation and reimbursement costs Insured paid to Customer.^[23] AIG asserts breach of contract and breach of warranty claims under the BPA, ^[24] a negligent misrepresentation claim, ^[25] and a breach of contract claim related to the terms and conditions of the purchase order.^[26] Both AIG and Pegatron have filed summary judgment motions.^[27]

The parties do not dispute the central facts in this case: that the Products, manufactured by Pegatron and sold to Customer by Insured, were required to operate in the 2.4 GHz and 5 GHz spectrums and that the Products operated outside of these spectrums. Pegatron's liability depends on whether the BPA covers AIG's claims, whether AIG can establish the essential elements of negligent misrepresentation, and whether AIG is entitled to indemnity. In its summary judgment motion, AIG also seeks damages for claims belonging to Successor and for Insured's settlement with a non-party customer, Shaw Cablesystems PGP (Shaw), involving similar products. The parties have fully briefed the motions, which are ripe for consideration.^[28]

II. LEGAL STANDARD

Summary judgment is appropriate when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A fact is “material” only if it can affect the outcome of the lawsuit under the governing legal principles. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A factual dispute is “genuine . . . if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id.

A party seeking summary judgment has the burden of informing the district court of the basis for its motion and identifying those portions of the record that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If a movant meets its burden, the party opposing summary judgment must present evidence showing either (1) a genuine issue of material fact or (2) that the movant is not entitled to judgment as a matter of law. Id. at 324.

In determining whether a genuine issue of material fact exists, the evidence is viewed in the light most favorable to the party opposing summary judgment, “and all justifiable inferences are to be drawn” in favor of that party. Anderson, 477 U.S. at 255; see also Herzog v. Castle Rock Entm't, 193 F.3d 1241, 1246 (11th Cir. 1999). “Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, ” and cannot be made by the Court in evaluating summary judgment. Anderson, 477 U.S. at 255. See also Graham v. State Farm Mut. Ins. Co., 193 F.3d 1274, 1282 (11th Cir. 1999). Summary judgment for the moving party is proper “[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

The parties agree that Georgia law applies to AIG's claims.^[29] When, as here, this Court exercises jurisdiction based on diversity of citizenship, it applies Georgia law. U.S. Fid. & Guar. Co. v. Liberty Surplus Ins. Corp., 550 F.3d 1031, 1033 (11th Cir. 2008). Further, the BPA provides that it is governed by Georgia law.^[30]

III. ANALYSIS

A. AIG's Claims Unrelated to Customer

The Court first must determine what claims AIG is entitled to pursue. The parties do not dispute that AIG and Insured entered into a valid assignment agreement, through which AIG can pursue Insured's claims arising out of its sales of the Products to Customer.^[31] In addition to these claims, however, AIG seeks damages on the claims Successor has against Pegatron and for claims arising out of products sold to Shaw.^[32]

i. Successor's Claims

Pegatron argues that AIG lacks assignment rights to assert Successor's claims. Without a valid assignment, AIG lacks authority, as a factual matter, to pursue Successor's claims, and also lacks standing to pursue these claims on behalf of Successor.

AIG responds, first, that Pegatron waived this standing argument as to Successor's claims because it did not plead standing as an affirmative defense.^[33]Standing, however, implicates the Court's subject matter jurisdiction and cannot be waived. See Stalley ex rel. U.S. v. Orlando Reg'l Healthcare Sys., Inc., 524 F.3d 1229, 1232 (11th Cir. 2008) (“Because standing is jurisdictional, a dismissal for lack of standing has the same effect as a dismissal for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1).”) (quoting Cone Corp. v. Fla. Dep't of Transp., 921 F.2d 1190, 1203 n.42 (11th Cir. 1991)). Even if this defense were subject to waiver, Pegatron never had the ability to plead standing as an affirmative defense because AIG's Complaint did not contain a single allegation suggesting that AIG was asserting Successor's claims.^[34]

The Court agrees with Pegatron that AIG lacks assignment rights with regard to Successor's claims. “An assignment is an absolute, unconditional, and completed transfer of all right, title, and interest in the property that is the subject of the assignment with the concomitant total relinquishment of any control over the property.” Phillips v. Selecto Sci., 308 Ga.App. 412, 413 (2011) (cleaned up) (quoting Allianz Life Ins. Co. of N Am. v. Riedl, 264 Ga. 395, 397 (1994)). An assignment of a right to sue must be in writing. Wirth v. Cach, LLC, 300 Ga.App. 488, 489 (2009). “Any language, however informal, will be sufficient to constitute a legal...