BJB ELECTRIC LP v. BRIDGELUX, INC.

Background

BJB Electric LP and Bridgelux, Inc. submitted supplemental briefing about the admissibility of “parol evidence,” meaning evidence outside the written contract that may help explain or supplement its terms. The dispute concerned the Letter Agreement and, in particular, the meaning of “obtain orders” in Article 2 during the Cost Sharing Period.

The parties agreed that course of dealing, usage of trade, course of performance, and evidence concerning the circumstances in which the agreement was made or to which it relates could be admitted to explain or supplement the Letter Agreement. They disagreed about whether particular evidence contradicted the contract or improperly showed a party’s subjective, undisclosed intent.

Court’s Analysis

The court explained that California Commercial Code § 2202(a) appears to supply the relevant parol-evidence rule for a contract for the sale of goods. It also recognized that California Civil Procedure Code § 1856(g) permits evidence about the circumstances surrounding an agreement to explain an ambiguity or otherwise interpret the agreement. The court stated that a contract is ambiguous when its language can reasonably support two different interpretations, and that outside evidence is admissible when the contract is reasonably susceptible to the meaning the evidence supports.

The court had previously found the phrase “obtain orders” ambiguous. BJB Electric sought to introduce Exhibit 17, which contained purchase orders Bridgelux submitted during the first three and a half years of the Cost Sharing Period. The court concluded that Exhibit 17 could support an argument about how the parties understood the ordering and delivery process without necessarily interpreting the Letter Agreement to require delivery of 15 million holders within the Cost Sharing Period. Evidence concerning the parties’ earlier agreements on delivery schedules therefore did not contradict the contract and was admissible.

BJB Electric also sought to introduce evidence about trade usage of “order” and “blanket purchase order.” The court held that trade-usage evidence could be admitted to explain or supplement “obtain orders,” because that term was ambiguous. But BJB Electric had to identify specific evidence in the record establishing that the evidence qualified as trade usage. The court rejected Bridgelux’s argument that it lacked adequate notice of the issue.

The court also held that evidence about the parties’ shared understanding of what it meant for BJB Electric to obtain orders during the Cost Sharing Period was admissible. That evidence supported an interpretation that the period was the general time in which BJB Electric would recover its initial investment in tooling and machinery by obtaining 15 million orders or receiving compensation for a shortfall. Bridgelux’s evidence about what the parties understood regarding delivery lead time was likewise admissible as context. Whether the parties actually shared the asserted understanding, and how much weight to give the evidence, remained open questions.

As to California Civil Procedure Code § 1861, the court said evidence concerning a term’s “peculiar signification” was potentially admissible if it showed that the term was used and understood in a local or otherwise unusual way. BJB Electric had not identified specific trial testimony or explained how that statute would admit evidence not already admissible on another basis.

Finally, the court found it unclear how Bridgelux’s subjective intent in submitting Purchase Order 0801-01 related to the meaning of the Letter Agreement. The court noted that undisclosed communications and understandings could not be used to determine mutual intent. Still, the evidence was outside the scope of deciding which parol-evidence rules governed, and its possible relevance to the parties’ shared understanding meant Bridgelux’s request to exclude it as irrelevant was unpersuasive.

Ruling and Schedule

Judge Richard Seeborg ruled that parol evidence was admissible to the extent it constituted course-of-performance evidence, including Exhibit 17, or usage-of-trade evidence. He also ruled that the parties’ evidence about the meaning of “obtain orders” in the context of the Cost Sharing Period was admissible, subject to the requirements described in the order, including identifying specific evidence where required.

The order set October 30, 2023, as the deadline for revised proposed findings of fact and conclusions of law. It scheduled closing arguments for November 3, 2023, at 10:00 a.m., in person, with 30 minutes permitted per side. The opinion did not resolve the underlying contract dispute.