Filed 6/23/15
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
EPIC COMMUNICATIONS, INC., et al., H037884
(Santa Clara County
Plaintiffs and Appellants, Super. Ct. No. 1-06-CV076689)
v.
RICHWAVE TECHNOLOGY, INC,. et
al.,
Defendants and Respondents.
In this case we are again called upon to determine whether a defendant is entitled
to the protection of a broad release clause contained in a settlement agreement to which
the defendant is a stranger. In Rodriguez v. Oto (2013) 212 Cal.App.4th 1020
(Rodriguez), we held that language unambiguously releasing “all persons” from liability
was on its face an objective manifestation of intent to extend the release to third parties,
and thus entitled a stranger to summary judgment in the absence of countervailing
evidence. While acknowledging that this result could present troubling questions of
policy, we found it dictated by basic principles of contract law. Critically, however, the
release in that case was unambiguous within its four corners, and no cogent reason was
presented to question its literal accuracy as an expression of the parties‟ intent. Here, in
contrast, several other provisions of the settlement agreement containing the release
clause are not easily reconciled its seemingly broad language. The subsequent conduct of
the contracting parties also appears inconsistent with an intent to extend the release to
unaffiliated third parties. We conclude that in view of these ambiguities, the trial court
erred by granting summary judgment in favor of strangers to the contract who raised the
release as a defense. Our reversal of the judgment on that ground renders moot a cross-
appeal by the defendants from the trial court‟s denial of their motion for attorney fees.
BACKGROUND
A. Initiation of Suit
This matter was previously before us in Epic Communications, Inc. v. Richwave
Technology (2009) 179 Cal.App.4th 314 (Epic I), review denied February 18, 2010,
where we described the background of the suit in some detail. To summarize, Epic
Communications Inc. (Epic) brought this action against ALi Corporation (ALi),
Richwave Technology, Inc. (Richwave), and Shyh-Chyi Wong, alleging that ALi had
transferred certain of Epic‟s intellectual property to Wong and Richwave in violation of
agreements between Epic‟s predecessor in interest, OEpic Inc. (OEpic), and ALi.
Specifically, Epic alleged that OEpic and ALi had agreed to cooperate in developing a
power amplifier for use in wireless networking devices. (Id. at p. 319.) In connection
with those efforts they entered into a nondisclosure agreement (NDA) in which they
undertook not to make any other use of the information they exchanged in connection
with their joint activities. Wong signed the agreement on ALi‟s behalf as the associate
vice-president of its “ „RF/Communications‟ ” unit. (Id. at p. 319.) In February 2003,
after negotiations largely conducted through Wong, ALi and OEpic entered into a design
services agreement (DSA) under which OEpic would design an amplifier for ALi‟s use.
This agreement too prohibited ALi from disclosing any confidential information it might
acquire from OEpic. (Id. at pp. 320-321.)
At the end of 2003, Wong formed Richwave, which she and others described as a
“spin-off” of the RF unit. (Id. at p. 321.) According to Epic, OEpic continued to transfer
intellectual property to Wong‟s team based upon assurances that ALi‟s rights and
2
obligations under the DSA had been or would be assumed by Richwave. However,
Richwave subsequently disclaimed any need for OEpic‟s services, and ALi disclaimed
any further obligation to OEpic on the ground that it had not used and would not use any
of the OEpic‟s intellectual property in its products. (Id. at pp. 321-323.) In November
2004, Epic was formed and became successor to all of OEpic‟s interest in the matter. (Id.
at p. 325.)
Epic brought this action in 2006 alleging that ALi had “breached both the
nondisclosure agreement and the design services agreement „by allowing Richwave to
access and use Epic‟s . . . confidential information,‟ as a result of which „Epic has
suffered economic loss . . . .‟ ”1 (Id. at p. 325.) Additional causes of action charged ALi,
Wong, and Richwave with fraud, misappropriation of trade secrets, civil conspiracy, and
unfair competition. (Id. at pp. 325-326.)
Wong and Richwave moved to quash service, asserting that they lacked sufficient
contacts with California to be subject to suit in its courts. (Id. at p. 326.) The trial court
granted the motion, and Epic appealed. (Ibid.)
B. Arbitration and Settlement
While Epic pursued its appeal from the order quashing service on Wong and
Richwave, its claims against ALi proceeded in the trial court. After the trial court
granted ALi‟s motion to compel arbitration, the claims were presented to a panel of
arbitrators, who ultimately issued an award against ALi and in favor of Epic for a
specified sum of money.2 The award concluded with the proviso, “Nothing in this
1
Epic was eventually joined as a co-plaintiff by EpicCom, Inc., which is
described in the complaint as “ „either a licensee or co-owner of Epic‟s intellectual
property rights at issue in this case.‟ ” (Id. at p. 325.) Its position appears
indistinguishable from Epic‟s for present purposes. We will refer to both entities
collectively as Epic.
2
Out of respect for the parties‟ express intention to keep their settlement
confidential, we describe the award as vaguely as circumstances permit.
3
Interim Award is intended to determine any issues or claims that may exist between Epic
and RichWave.”
In addition to damages, the award entitled Epic to recover interest, attorney fees,
and costs in amounts to be determined later. Rather than engage in further adversarial
proceedings to resolve those issues, ALi and Epic entered into a settlement agreement,
dated July 21, 2009, under which ALi would pay Epic a specified sum representing
damages and interest, plus an additional sum representing fees plus costs. The agreement
included a broad release clause, set forth in full below (see fn. 6). However it also
declared that it had a limited purpose, i.e., “to compromise and settle the Interim Award
without the need for further arbitration proceedings on the dispute of damage award
interest, attorneys‟ fees and costs.” In addition, it prohibited either party from disclosing
the terms of the agreement to any third party, and sharply restricted the rights of third
parties to “claim any right or benefit” under it. (See pt. I, post.)
C. Further Proceedings Against Wong and Richwave
About a month after Epic and ALi entered into the settlement agreement, this court
heard oral argument in Epic I. (California Courts, Appellate Courts Case Information