Stellar Labs, Inc. v. FL3XX GmbH

Background

Stellar Labs, Inc. sued FL3XX GmbH based on two agreements: a Master Strategic Alliance Agreement (MSAA) and a Reciprocal Reseller Agreement (RRA). Stellar asserted claims for breach of the RRA and MSAA, breach of the implied promise of good faith and fair dealing, intentional interference with contractual relations, negligent interference with prospective economic relations, trade libel, and defamation. FL3XX also filed counterclaims.

FL3XX moved for partial summary judgment concerning Stellar’s claimed damages. It argued that all of Stellar’s claims were subject to contractual damages limits, that the RRA’s $100,000 limit controlled over the MSAA’s $1 million limit, that the MSAA’s exclusion of consequential and related damages applied to contract and tort claims, and that Stellar could not recover attorney’s fees under the agreements.

Relationship Between the Agreements

The MSAA allows the parties to enter ancillary agreements and provides that the MSAA controls if an ancillary agreement conflicts with it, unless the ancillary agreement expressly says otherwise. The RRA identifies itself as an ancillary agreement to the MSAA and states that its terms control in a conflict with the MSAA.

The court therefore held that the MSAA applies to matters covered by the RRA unless the agreements conflict. When they conflict, the particular RRA term controls. Conduct outside the RRA’s scope is governed only by the MSAA.

MSAA Dollar Cap

The MSAA states that neither party’s aggregate liability “under this agreement” may exceed $1 million. The court interpreted “under this agreement” as covering liability for breach of the agreements, including breach of the implied covenant of good faith and fair dealing, but not Stellar’s tort claims. The court rejected FL3XX’s argument that the dollar cap applies to every claim in the complaint.

MSAA Damages Exclusion

The MSAA separately excludes consequential, indirect, special, incidental, and punitive damages “arising out of or related to” the agreement. The court concluded that this language is broader than the dollar-cap provision. It applies to contract claims and to tort claims that arise out of or are related to the agreements.

The court rejected Stellar’s argument that California Civil Code § 1668 prevents the exclusion from applying to its negligence claim. The court stated that the negligence claim was based on common law rather than a negligent violation of a statute, and the record did not show that the public interest was involved.

The court did not resolve whether § 1668 prevents the damages limits from applying to Stellar’s intentional-tort claims. It explained that the record was not sufficiently developed regarding the alleged misconduct, the alleged injury, and the parties. Thus, that issue could not be decided at this stage.

RRA Limitations

For the same reasons as under the MSAA, the court held that the RRA’s dollar cap applies only to contract-based claims. The court could not determine whether the MSAA or RRA dollar cap applies to the particular claims because that depends on the nature of FL3XX’s alleged misconduct and whether there is liability under the RRA.

Although the RRA does not itself contain a damages exclusion, the court held that the MSAA’s exclusion applies to the RRA because the RRA is subject to the MSAA and there is no conflict between the two provisions.

Attorney’s Fees

The court did not prejudge whether Stellar could recover attorney’s fees. It noted that neither the MSAA nor the RRA contains a provision shifting attorney’s fees between the parties. The court also stated that the MSAA’s indemnification provision did not apply to this case.

Disposition

Judge Edward M. Chen granted in part and denied in part FL3XX’s motion for partial summary judgment. The motion was granted to the extent the court’s rulings aligned with FL3XX’s arguments and was otherwise denied without prejudice. The order disposed of Docket No. 54.