The Solaria Corporation v. GCL System Integration Technology Co., Ltd.

Background

The Solaria Corporation sued GCL System Integration Technology Co., Ltd. for breach of contract based on alleged failures to make payments under a technology cross-license agreement and later payment agreements.

The agreement required three payments connected to GCL’s license to sell products containing Solaria’s intellectual property in the European Union: a $2,000,000 payment due upon execution, $1,500,000 in prepaid royalties due by January 1, 2020, and $1,000,000 in prepaid royalties due by January 1, 2021. Solaria’s original complaint was filed before the third payment became due.

Solaria later sought summary judgment concerning the unpaid remainder of the second payment and the third payment. On January 28, 2022, the court granted summary judgment that GCL owed the undisputed unpaid remainder of the second payment. The court also ruled that the issue concerning the third payment was not properly before it under the original complaint because that payment was not yet due when the complaint was filed.

Solaria then moved to supplement its complaint by adding one paragraph alleging that GCL breached the agreement by failing to make the third payment. GCL did not oppose the motion.

Legal standard

Because the deadline for amending pleadings in the scheduling order had passed, the court first applied Federal Rule of Civil Procedure 16(b). That rule required Solaria to show good cause, with the focus mainly on whether Solaria had acted diligently. The court then applied Rule 15(d), which allows a court to permit a supplemental pleading addressing an event that happened after the original pleading. The relevant considerations included undue prejudice, bad faith, futility, and undue delay.

Court’s reasoning

The court found good cause under Rule 16(b). Solaria had sought discovery about the third payment, raised the issue in its summary-judgment briefing, and moved to supplement within a month of the court’s indication that the issue was not covered by the existing complaint. The court therefore found that Solaria had acted diligently.

The court also found that the Rule 15(d) factors favored supplementation. It found no bad faith because Solaria had previously pursued discovery and made clear that it sought the third payment. It found little, if any, delay because discovery was complete, the issue had been fully briefed, and trial was not scheduled until September 25, 2023. It found no prejudice because GCL had long known that Solaria sought the payment, had conducted discovery, and had briefed its defenses. Finally, it found supplementation would not be futile because the court had previously indicated that Solaria needed to add allegations about the payment to seek recovery for it.

Order

Judge Beth Labson Freeman granted Solaria leave to supplement its initial complaint as proposed. The court ordered Solaria to file the supplemental complaint separately within seven days. It also ordered that, if Solaria filed another summary-judgment motion concerning the new allegations regarding the January 21, 2021 payment, the opening and responsive briefs would be limited to five pages each and the reply would be limited to three pages. The court vacated the scheduled May 26, 2022 hearing on the motion.