VECTREN COMMUNICATIONS SERVICES, INC., an Indiana corporation v. City of Alameda, acting by and through Alameda Power & Telecom

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
VECTREN COMMUNICATIONS
SERVICES, INC., an Indiana corporation,
Plaintiff - Appellant,
v.
CITY OF ALAMEDA, acting by and
through Alameda Power & Telecom,
Defendant - Appellee.
No. 11-15992
D.C. No. 3:08-cv-03137-SI
MEMORANDUM*
VECTREN COMMUNICATIONS
SERVICES, INC., an Indiana corporation,
Plaintiff - Appellee,
v.
CITY OF ALAMEDA, acting by and
through Alameda Power & Telecom,
Defendant - Appellant.
No. 11-16003
D.C. No. 3:08-cv-03137-SI
Appeal from the United States District Court
for the Northern District of California
FILED
AUG 02 2013
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.

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Susan Illston, District Judge, Presiding
Argued and Submitted January 18, 2013
San Francisco, California
Before: WALLACE, FARRIS, and BYBEE, Circuit Judges.
Plaintiff Vectren Communications Services, Inc. (Vectren) appeals from a
judgment of the district court in favor of the City of Alameda (City) involving
contract claims governed by California law. We have jurisdiction pursuant to 28
U.S.C. § 1291, and we affirm in part, reverse in part, and remand.
The jury found in favor of Vectren on its claims that the City had breached
the contract by failing to offer voice service (voice claim), by selling the
telecommunications system (sale claim), and by using improper accounting
methods (accounting claim). However, the jury further found that the sale claim
was barred by Vectren’s failure to comply with a statutory one-year notice
requirement, see Cal. Gov’t Code § 911.2(a), and that Vectren had waived the
claim. The jury also found that Vectren’s failure to comply with the one-year
notice requirement barred the voice claim.
1. The district court’s application of the one-year notice requirement was
based on its holding that the California Government Claims Act (Act) applies to
Vectren’s claims against the City. We agree with the district court that the Act
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applies here. Under Arntz Builders v. City of Berkeley, where a contract sets out its
own procedure for notifying a city of claims against it, that process governs
exclusively unless the contract expressly “requires the presentation of a statutory
claim [under the Act] as well.” 82 Cal. Rptr. 3d 605, 617 (Ct. App. 2008). But the
alleged contractual claims procedure here is nothing like the detailed claims
procedure in Arntz, see id. at 607–08; in fact, it is not a claims procedure at all.
Rather, it is merely a 30-day cure period, triggered by written notice, built into one
prong of the definition of what constitutes an “Event of Default.” Under many of
the other prongs of the “Event of Default” definition, there is no notice requirement
or cure period at all. It is only once there is an Event of Default—which
sometimes requires notice and a cure period, and sometimes does not—that
Vectren has a claim. At that point, the contract defers to background law,
including the Act—providing that Vectren may “take whatever action at law or in
equity” is necessary to resolve the Event of the Default—rather than setting forth a
claims procedure. This reading of the contract is corroborated by the provision
stating that, in order to exercise a remedy under the contract, Vectren only needs to
give notice as required by the contract or by law.
Arntz specifically rejected comparing the relative comprehensiveness of
claims procedures to determine whether the Act applies, but Arntz does not dictate
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that a contract that does not contain a claims procedure at all supplants the Act’s
default procedures.
Given that the Act applies, and that Vectren’s counsel conceded at oral
argument that the jury’s finding that the voice claim was defeated by the notice
defense could only be overcome if we were to reverse the district court’s
determination that the Act’s default procedures were applicable, we affirm the
judgment against Vectren on the voice claim.
2. With regard to the sale claim, the district court erred in denying Vectren’s
Rule 50(b) motion on the City’s waiver and notice defenses. Although the City
provided evidence that Vectren knew about the City’s desire to sell and provided
the City some assistance, those facts could not amount to clear and convincing
evidence that Vectren knowingly intended to waive its right to prohibit a sale, see
City of Ukiah v. Fones, 410 P.2d 369, 370-71 (Cal. 1966) (in bank), because it was
undisputed that Vectren repeatedly notified the City that a sale without Vectren’s
consent was unauthorized. Accordingly, the jury’s determination that Vectren
waived its rights on the sale claim was not supported by substantial evidence, and
the district court should have granted Vectren’s motion as to the waiver defense.
See Omega Envtl., Inc. v. Gilbarco, Inc., 127 F.3d 1157, 1161 (9th Cir. 1997).
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As to the notice defense, “whether the breach is anticipatory or not, when
there are ongoing contractual obligations the plaintiff may elect to rely on the
contract despite a breach,” and a claim is not deemed to have accrued until “the
plaintiff has elected to treat the breach as terminating the contract.” Romano v.
Rockwell Int’l, Inc., 926 P.2d 1114, 1120 (Cal. 1996). Here, there were ongoing
contractual obligations, and the record does not support a conclusion that Vectren
treated the City’s sale without consent as a breach prior to August 29, 2006, the
date by which the jury had to find the claim had accrued in order for the notice
defense to be successful. Substantial evidence thus did not support the application
of the notice defense to defeat the sale claim, and the district court should have
granted Vectren’s motion as to that defense as well. See Omega, 127 F.3d at 1161.
Because the district court should have granted Vectren’s Rule 50(b) motion with
respect to both of the City’s defenses to the sale claim, we reverse the jury’s
verdict on the sale claim and remand that claim for further proceedings on damages
only.
3. With regard to the City’s claim on cross-appeal that Vectren failed to
adequately present its accounting claim prior to litigation as required by the Act,
the district court erred in not deciding this claim as a matter of law in the City’s
favor because Vectren failed to adequately present the claim before litigation.
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Under the Act, a party may adequately present a claim before litigation either by
substantially complying with the requirements set out in section 910 of the Act,
Cal. Gov’t Code § 910, or by making a “claim as presented.” See City of Stockton
v. Super. Ct., 171 P.3d 20, 29–30 & n.11 (Cal. 2007); Alliance Fin. v. City & Cnty.
of S.F., 75 Cal. Rptr. 2d 341, 345–46 (Ct. App. 1998); see also Cal Gov’t Code §
945.4. Here, Vectren did not adequately present its accounting claim in either
manner. Though Vectren requested accounting figures and documents and raised
questions related to accounting prior to litigation, these requests were made in the
context of Vectren questioning the City’s operation of the telecommunications
system, not in the context of any discussion of the propriety of the accounting
methods used in calculating telecommunications system financial figures. These
requests did not “give[ ] adequate information” such that a “reasonable
investigation of [the] claim” would encompass the accounting claim raised by
Vectren during the litigation. Stockett v. Ass’n of Cal. Water Agencies Joint
Powers Ins. Auth., 99 P.3d 500, 505 (Cal. 2004). Because we hold that the
accounting claim was not adequately presented and should have been rejected as a
matter of law, we need not address the City’s argument regarding the applicability
of GAAP to “Net Series 2002A Revenues.”
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In summary, we (1) affirm the judgment against Vectren on the voice claim;
(2) reverse the jury’s verdict against Vectren on the sale claim and remand that
claim for further proceedings on damages only; and (3) reverse the jury’s verdict
against the City on the accounting claim and remand that claim for entry of
judgment as a matter of law in the City’s favor.
Each party shall bear its own costs on appeal.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
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Vectren Communications Service v. City of Alameda, 11-15992/11-16003
WALLACE, Senior Circuit Judge, concurring in part and dissenting in part:
I concur with the majority’s holding that the district court erred in denying
Vectren’s Rule 50(b) motion on the City’s waiver and notice defenses to the sale
claim. However, I disagree that the Government Claims Act (Act) applies to
Vectren’s voice and accounting claims.
The majority holds that because the claims process in Section 9 of the
contract between Vectren and the City is not as detailed or comprehensive as the
contractual process in Arntz, and because Section 9 contemplates that the notice
requirements imposed by “other law” apply to the parties, we should not hold that
the Act is supplanted by the contract. I disagree with both points.
Arntz did not actually analyze whether the parties’ contract contained a
claims procedure—it simply proceeded as though that question was undisputed.
Thus, Arntz did not specify what the bare minimum requirements are for a
contractual claims process that would trigger that rule, nor did it state that the
contract at issue there was the standard by which to judge. While certainly a claims
process that was similar to Arntz would qualify, we cannot use that case to reject a
contractual process simply because it is dissimilar.
While Arntz did not specify standards for a sufficient contractual claims
FILED
AUG 02 2013
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
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procedure, it did make clear that it would not adopt a rule that required a
contractual claims process to be as comprehensive as the Act:
As one treatise notes, public agencies are allowed to establish a
different claims procedure by contract, and “[s]ometimes the
provisions of a construction contract amount to a claims procedure
that takes the place of the claims statute.” What the treatise does not
explain is under what circumstances it does so. The statement seems
to infer a test of “relative comprehensiveness” to determine whether
any given contractual claims procedure is broad enough to supplant
the statutory claims requirement. But such a test would be
unworkable. What appears comprehensive to one party may seem
only preliminary to the other. The parties to a public works contract,
or any other public contract, should be able to determine from the
contract what steps are required to complete a claims process prior to
filing an action.
166 Cal. App. 4th at 291-92 (citation omitted) (emphasis added). Clearly then,
Arntz’s focus was not so much on the breadth and depth of a contractual claims
process as it was on whether the non-government party could understand its
obligations based on the contract’s plain language. It follows that a contract that
instructs that party to provide notice to the government prior to filing an action,
whether the contractual provisions doing so are “standard” or otherwise, must
clarify that the Act also applies.
The contract between Vectren and the City informed Vectren what steps
were necessary prior to filing an action, including a period of notice but did not
state that the Act applied. To apply the Act would therefore be contrary to Arntz.
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Subsection 9.1(b) of the contract states that the City’s failure to perform any
part of the contract is a default if it continues for thirty days after the City receives
written notice of the failure. If an event of default occurs, Section 9.2 gives
Vectren the right “at its option and without further demand or notice” to “take
whatever action at law or in equity may appear necessary . . . or enforce
performance and observance of any obligation, agreement or covenant.” In sum,
Vectren must present its claim to the City and the City has 30 days to cure. If the
City does not cure, Vectren has the right to sue without giving further notice.
It is true that the contract lists several other events of default in Section 9.1
and does not impose a notice requirement on Vectren for those events. However,
again, the test for whether the Act applies is not whether a contractual claims
procedure is comprehensive, but whether, where a contract contains any claims
process, the government party has made clear that the Act still applies. The fact
that the contractual claims process here applied only to failure by the city “to
observe and perform any covenant, condition or agreement” under the contract,
and not to other more specific events of default (i.e. if the City files a bankruptcy
petition) does not therefore have any bearing on whether the Act applies. In fact, it
is in precisely this kind of situation that the Arntz rule should apply. The contract
makes clear that the parties intended to have a notice requirement for some
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breaches and not for others—it does not make clear that the Act also applies.
Nor does the fact that the contract is structured so that an “event of default”
only occurs once a breach has gone uncured for thirty days mean that there is no
“claim,” and therefore no claims process, until that occurs. The Act helps
municipalities become aware of potential suits and gives them time to resolve
disputes by other means. In the same way, the contract here requires that the City
receive notice of breaches and affords a period of time in which to correct them. If
no correction is forthcoming, Vectren is permitted to sue without further notice. To
say that this process is not a “claims procedure” merely because the notice and
response period is styled as a necessary prerequisite to an event of default, rather
than something that kicks in after a “claim” appears, is both unduly narrow and
contrary to the parties’ clear intent. Why would the contract give Vectren the right
to sue without further notice if, in reality, Vectren was required to give a second
notice and wait longer before suing?
The majority’s answer is that three words in Section 9.3 can be read to allow
application of the Act, with all of its additional notice requirements, to apply.
Section 9.3 of the contract states: “In order to entitle [Vectren] to exercise any
remedy reserved to it in this Article IX it shall not be necessary to give any notice,
other than such notice as may be required in this Article IX or by law.” The
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majority reasons that Act notice is “required by law,” and thus the City must not
have meant to waive Act notice. But reading “or by law” this way would require
additional notice any time the City triggered Section 9.1(b) by breaching “any
covenant, condition or agreement” under the contract. This would, in turn, render
entirely superfluous the language of 9.2 allowing Vectren to sue without any other
“demand or notice,” a result we must avoid. Carson v. Mercury Ins. Co., 210 Cal.
App. 4th 409, 420 (Cal. Ct. App. 2012) (“‘An interpretation which gives effect to
all provisions of the contract is preferred to one which renders part of the writing
superfluous, useless or inexplicable,’” quoting 11 Williston on Contracts (4th
ed.2012) § 32:5). The more sensible reading is that the “or by law” language does
not include the Act because the Act is only a requirement by law where there is not
a contractual claims procedure.
Furthermore, Arntz specifically precludes holding that the “notice required . .
. by law” language incorporates the Act.
It is no great burden for public entities to include, in any contract that
contains a contractual claims procedure, a single sentence stating
clearly that a statutory claim must also be presented prior to the filing
of an action.
166 Cal. App. 4h at 292. The “or by law” language, which could just as easily be
read to mean general service of process as notice under the Act, is certainly not a
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clear statement that all of the Act claims process applies. To allow application of
the Act based on such ambiguous language would be to do exactly what Arntz
forbids.
I therefore respectfully dissent.
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