Digital Ally, Inc. v. Z³ Technology, LLC (864 F. Supp. 2d 1050, 2012)

United States District Court for the District of Kansas 2012-03-29

Citations

Full opinion text

MEMORANDUM AND ORDER

K. GARY SEBELIUS, United States Magistrate Judge.

This matter comes before the Court upon Plaintiffs Second Motion for Partial Summary Judgment (ECF No. 160) and Defendant Z3 Technology, LLC’s Motion for Summary Judgment (ECF No. 152).

This case involves two contracts for the design and manufacture of hardware modules using Texas Instrument computer chips. On November 1, 2008, Plaintiff Digital Ally, Inc. (“Digital”) and Z3 Technology, LLC (“Z3”) entered into a contract entitled Production License Agreement PLA-2008.10.31 (“PLA-2008”). PLA-2008 called for Z3 to design a DM355 module for use in Digital’s products and then manufacture and deliver to Digital 1,000 units along with the necessary software. On January 2, 2009, Digital and Z3 purportedly entered into a contract entitled Software/Hardware Design and Production License Agreement (“PLA-2009”). Under PLA-2009, Z3 agreed to design, manufacture, and deliver to Digital DM365 hardware modules and related software components. PLA-2009 purportedly required Digital to pay $300,000 in fees to Z3 and to order at least 39,050 modules.

In Count I of its Complaint, Digital alleges that Z3 breached PLA-2008 by delivering nonconforming modules. In Counts II and III, Digital seeks a declaration that PLA-2009 was rescinded and/or is void because the officer who signed PLA-2009 on behalf of Digital lacked authority to do so. Z3 denies Digital’s allegations and, in a counterclaim, asserts that Digital breached PLA-2009 (Count I) and PLA-2008 (Count II).

Digital has filed a motion for summary judgment on Counts II and III of its Complaint, seeking a determination that PLA-2009 is null and void for lack of authority. Alternatively, if the Court determines that PLA-2009 is an enforceable contract, Digital seeks a ruling that Z3 is not entitled to recover any lost profits purportedly caused by Digital’s failure to order at least 39,050 DM365 modules.

Z3 requests that the Court enter summary judgment on Count I of its counterclaim and find that PLA-2009 is a valid and enforceable agreement that was breached by Digital. Z3 asks the Court to enter judgment against Digital for $4,046,810.50 in damages, which includes lost profits from Digital’s failure to order at least 39,050 DM365 modules. Z3 also requests that the Court grant summary judgment against Digital on Count II of Z 3’s counterclaim in the amount of $15,000.

For the reasons explained below, the Court grants in part and denies in part both motions.

I. Legal Standard Governing Summary Judgment Motions

Summary judgment is appropriate only if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” The substantive law defines which facts are material. “Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” A fact is “material” if, under the applicable substantive law, it is “essential to the proper disposition of the claim.” A “genuine” issue of fact exists where “there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way.” In considering a motion for summary judgment, a court must “examine the factual record and reasonable inferences therefrom in the light most favorable to the party opposing summary judgment.”

The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact and entitlement to judgment as a matter of law. In attempting to meet that standard, a movant that does not bear the ultimate burden of persuasion at trial need not negate the other party’s claim; rather, the movant need simply point out to the court a lack of evidence for the other party on an essential element of that party’s claim.

Once the movant has met this initial burden, a party opposing a properly supported motion for summary judgment may not rest upon the allegations or denials in its pleadings. Rather, the burden shifts to the non-moving party to “set forth specific facts that would be admissible in evidence in the event of trial from which a rational trier of fact could find for the nonmovant.” To accomplish this, the facts must be supported by affidavits, deposition transcripts, or specific exhibits incorporated therein. The court’s function at this juncture is not to weigh the evidence, but merely to determine whether there is sufficient evidence favoring the non-moving party for a finder of fact to return a verdict in that party’s favor.

II. Whether Z3 Properly Controverted the Facts Relied Upon by Digital in its Second Motion for Partial Summary Judgment

Digital contends Z3 improperly responded to approximately forty-eight (48) paragraphs contained in Plaintiffs Statement of Uncontroverted Facts in Support of Plaintiffs Second Motion for Partial Summary Judgment (“SOF”), ECF No. 161. Digital argues that the Court must deem these facts admitted under this District’s local rules.

D. Kan. R. 56.1 governs motions for summary judgment in this District. It provides, in relevant part, that the facts relied upon by a movant “must be numbered and must refer with particularity to those portions of the record upon which movant relies.” Further, “[a]ll material facts set forth in the statement of the movant will be deemed admitted for the purpose of summary judgment unless specifically controverted by the statement of the opposing party.”

Any “memorandum in opposition to a motion for summary judgment must begin with a section containing a concise statement of material facts as to which” the non-moving party “contends a genuine issue exists.” Each fact in dispute must refer with particularity to those portions of the record upon which the opposing party relies.

If the responding party cannot truthfully admit or deny a fact, the response must specifically describe the reasons why. All responses must fairly meet the substance of the matter asserted.

Z3 “dispute[s]” approximately twenty-eight paragraphs of Digital’s SOF by indicating that the material cited by Digital does not support the statements contained in those paragraphs. Digital argues that Z3 failed to comply with this District’s local rules because it did not attempt to admit any portion of these paragraphs that are supported by admissible evidence. In many instances, it appears that Digital cites to incorrect deposition pages or exhibits to support these facts. For example, in paragraph 5, Digital states that Derek Douglas, Digital’s Comptroller, was in charge of “getting the document in final form.” But the cited pages in support of this purported fact do not contain the quoted language. And Digital makes numerous errors when citing to the deposition transcript of Stephen Phillips, Digital’s Director of Engineering (SOF ¶¶ 26-42).

As the moving party, Digital is required to support its factual assertions by citing to particular parts of materials in the record. The Court will deem these paragraphs admitted only to the extent that the material cited by Digital actually supports the asserted facts or the Court otherwise finds support for the facts in the record. The facts that the Court finds to be uncontroverted will appear in Section III below.

Digital also argues that Z3 improperly disputes paragraphs 11 through 15. These purported facts all relate to and/or allegedly cite language from Digital’s Signature Authorities Policy. Digital cites to Exhibit 16 in support of these facts. But Exhibit 16 is not Digital’s Signature Authorities Policy. Exhibit 16 is a e-mail between Digital executives commenting on the proposed policy. Although Digital concedes it failed to attach a copy of its Signature Authorities Policy as Exhibit 16, it argues that Z3 should have admitted or denied paragraphs 11 through 15 because Z3 had a copy of the Signature Authorities Policy. The Court does not believe Z3 is obligated to correct Digital’s mistake and look for evidence that supports Digital’s “facts.” The Court will not deem these paragraphs as uncontroverted based solely upon Z 3’s failure to review its copy of Digital’s Signature Authorities Policy.

Z3 admits paragraph 26 of Digital’s SOF in which Digital states that it attached as Exhibit 15 a true and correct copy of its Amended and Restated Bylaws as of September 1, 2005. In paragraphs 27 and 28, Digital quotes various provisions from its bylaws but fails to specifically cite to Exhibit 15. Z3 disputes these paragraphs because Digital cites to no evidence supporting the statements. It is clear that Digital intended to cite to Exhibit 15. Except for a minor typographical error, the language quoted in paragraphs 27 and 28 of Digital’s SOF accurately quotes Digital’s bylaws. In the Court’s statement of uncontroverted facts, the Court has corrected the typographical error.

Paragraphs II — 6 through 18 of Digital’s SOF facts set forth various provisions of PLA-2009. In its opposition, “Z3 denies that the statements] accurately characterize[] the text of the contract.” For similar reasons, Z3 disputes paragraphs 51 and 52, which refer to statements made in Z3’s counterclaim. Z3 directs the Court to its counterclaim for the true and correct language used. The Court agrees that Z3 should have described how any of the cited language is inaccurate. As discussed above, the Court will deem these paragraphs admitted only to the extent the cited material actually supports Digital’s asserted facts.

Digital also argues that Z3 improperly disputes paragraphs 11-60, 62, 63, and 64. These paragraphs contain excerpts from the deposition of Bruno Marchevsky wherein Mr. Marchevsky testifies about his understanding of PLA-2009. In its opposition, Z3 disputes these facts and denies that the statements accurately characterize the text of the contract but does not further elaborate how. The Court has compared paragraphs 11-60, 62, 63, and 64 to Mr. Marchevsky’s deposition transcript. Paragraph 11-60 states, “Marchevsky admits that all of the ‘licensed materials’ as that term is used in the preamble to Contract PLA-2009 are the materials listed in Exhibit 1 to the contract.” This accurately reflects Mr. Marchevsky’s testimony. Accordingly, the Court deems this statement to be uncontroverted.

But Digital mischaracterizes Marchevsky’s testimony in paragraphs 62, 63 and 64. For example, in paragraph 62, Digital states that Marchevsky “admits that there were conditions to the ‘requirement’ in Contract PLA-2009 that Digital purchased ’12,000’ DM365 modules from Z3 ‘per year for three years.’ ” Although Marchevsky testified that there were conditions in PLA-2009, he never specifically testified that there were conditions to the requirement that Digital purchase 12,000 DM365 modules. Digital also mischaracterizes Marchevsky’s testimony in paragraphs 63 and 64. Accordingly, the Court will not deem paragraphs 62, 63 and 64 as uncontroverted.

Z3 contends it lacks sufficient information to admit or deny paragraph 11-41 but does not describe the reasons why as required by D. Kan. R. 56.1(e). Paragraph 11-41 states, “Digital has not used any of Z 3’s designs for the DM365 in any fashion.” Digital cites the deposition of Stephen Phillips at Exhibit 9, 117:25-118:2 to support this fact. The cited portion of Mr. Phillips’ deposition states:

25. product?

1. Mr. Wilson, object to the form of the

2. question.

Because Digital’s cited evidence does not support the assertion made in paragraph 11-41, the Court will not deem this fact to be uncontroverted based solely upon Z 3’s failure to comply with D. Kan. R. 56.1(e).

III. Uncontroverted Facts

The following facts are uncontroverted:

Digital designs, manufactures, and distributes digital video systems for law enforcement agencies. For example, some of its existing or planned products have included an audio-visual recording system that an officer would wear on his person and digital video recorders for police cars. The functionality of some of Digital’s existing or planned products requires digital media technology, such as the Texas Instruments (“TI”) DM355 and DM365 silicon chips.

Z 3’s principal business is to design and manufacture, to customer specifications, hardware modules for use in videographic products. Robert Haler was Digital’s Executive Vice-President for Engineering and Production. In 2008, Haler telephoned Aaron Caldwell, President of Z3, to discuss possible business dealings between Digital and Z3. Haler approached Caldwell about Z3 designing and manufacturing modules for Digital using the TI DM355 silicon chip, followed by the anticipated DM365 chip.

The first modules would contain the TI DM355 chip, while the next set of modules would contain TI’s next generation chip, the DM365, which was made available to Z3 in December 2008. Digital planned to use the DM355 module for the first production run of Digital’s FirstVu camera. It was Haler’s plan to then transition into the more versatile DM365 module.

On November 1, 2008, Haler, on behalf of Digital, and Caldwell, on behalf of Z3, signed a contract entitled Production License Agreement PLA-2008.10.31 (“PLA-2008”) providing generally for the design of 1,000 DM355 modules and the licensing of the design and modules to Digital. Haler had authority to execute PLA-2008 on behalf of Digital. Digital’s President and Chief Executive Officer, Stan Ross, understood that Haler was going to be signing a contract with Z3 for the DM355 work, learned that Haler had signed the contract shortly after it was signed, and totally trusted Haler.

PLA-2008 required Digital, as the “Licensee,” to pay Z3, as the “Licensor,” $155,000 in fees and per-unit prices for 1,000 DM355 modules. Pursuant to these terms, Digital paid Z3 $140,000 of the $155,000 fee. Z3 delivered the DM355 software on December 24, 2008 Z3 delivered the DM355 modules in two lots, 200 units on January 14, 2009 and 800 units on March 10, 2009.

Paragraph 3 of PLA-2008 is entitled “Warranties and Limitations.”

As to software and hardware design, Paragraph 3.A. states in relevant part:

A. WARRANTY FOR SOFTWARE PRODUCTS AND HARDWARE DESIGN:

LICENSOR WARRANTS FOR THIRTY (30) DAYS AFTER PURCHASE THAT THE MEDIA (IF THE SOFTWARE IS PROVIDED ON MEDIA) WILL BE FREE FROM DEFECTS AND THAT THE SOFTWARE PROGRAMS WILL SUBSTANTIALLY CONFORM TO THE PRODUCT REQUIREMENTS SET FORTH IN THE ATTACHED LICENSE EXHIBIT 1. THE LICENSED MATERIALS ARE OTHERWISE PROVIDED “AS IS”. LICENSOR MAKES NO WARRANTIES OR REPRESENTATIONS, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, ACCURACY OR COMPLETENESS.

As to hardware production, Paragraph 3.B. of PLA-2008 provides in relevant part:

B. WARRANTY FOR PRODUCTION HARDWARE MODULES

LICENSOR WARRANTS FOR ONE HUNDRED EIGHTY (180) DAYS AFTER RECEIPT BY LICENSEE OF THE LICENSED MATERIALS HARDWARE THAT THE LICENSED MATERIALS HARDWARE SHALL BE FREE FROM DEFECTS IN MATERIAL AND WORKMANSHIP, AND WILL PERFORM SUBSTANTIALLY IN ACCORDANCE WITH THE SPECIFICATIONS AND RELATED DOCUMENTATION PROVIDED TO LICENSEE.

THE LICENSOR WILL PROVIDE LICENSEE UP TO 3% REPLACEMENT FOR PRODUCT RETURNED DURING WARRANTY DUE TO HARDWARE DEFECT IN LICENSED MATERIALS OR DUE TO MANUFACTURING PROCESS PROVIDED BY LICENSOR. LICENSOR WILL HAVE THE RIGHT TO REQUEST RETURNED WARRANTY PRODUCT FOR INSPECTION. LI-CENSOR WILL BE RESPONSIBLE FOR SHIPPING COSTS ASSOCIATED WITH RETURNS.

IN THE ADVENT OF CATASTROPHIC FAILURE, DEFINED AS A FAILURE RATE OF GREATER THAN 10% DUE TO HARDWARE DEFECT(S) IN LICENSED MATERIALS OR DUE TO LICENSOR’S MANUFACTURING PROCESS, LI-CENSOR SHALL ASSIST IN DETERMINATION OF THE ROOT CAUSE OF THE FAILURE AND SHALL REPAIR OR REPLACE THE DEFECTIVE MATERIALS AT LI-CENSOR’ S OPTION AND EXPENSE. ANY SUCH REPAIR OR REPLACEMENT SHALL BE COMPLETED IN A TIMELY FASHION AS IS PRACTICAL ... LICENSOR WILL HAVE THE RIGHT TO REQUEST RETURNED WARRANTY PRODUCT FOR INSPECTION. LI-CENSOR WILL BE RESPONSIBLE FOR SHIPPING COSTS ASSOCIATED WITH RETURNS.

THE LICENSED MATERIALS ARE OTHERWISE PROVIDED “AS IS”. LICENSOR MAKES NO WARRANTIES OR REPRESENTATIONS, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, ACCURACY OR COMPLETENESS.

Paragraph 3 of PLA-2008 also states in relevant part:

IN NO EVENT SHALL LICENSOR, OR ANY APPLICABLE LICENSOR, BE LIABLE FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES, HOWEVER CAUSED, ON ANY THEORY OF LIABILITY AND WHETHER OR NOT LICENSOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ARISING IN ANY WAY OUT OF THIS AGREEMENT, THE LICENSED MATERIALS OR LICENSEE’S USE OF THOSE MATERIALS. EXCLUDED DAMAGES INCLUDE, BUT ARE NOT LIMITED TO, COST OF REMOVAL OR REINSTALLATION, COMPUTER TIME, LABOR COSTS, LOSS OF GOODWILL, LOSS OF PROFITS, LOSS OF SAVINGS, OR LOSS OF USE OR INTERRUPTION OF BUSINESS.

IN NO EVENT WILL LICENSOR’S AGGREGATE LIABILITY UNDER THIS AGREEMENT OR ARISING OUT OF LICENSEE’S USE OF THE LICENSED MATERIALS EXCEED THE FEES PAID TO LICENSOR BY LICENSEE FOR THE LICENSED MATERIALS OR FIVE HUNDRED DOLLARS (U.S.$500), WHICHEVER IS GREATER.

Doug Fletcher at Digital spoke with Z3 ’s President Aaron Caldwell about issues with “pink noise” in the DM355 module probably in the April 2009 time frame, but was not sure when. Until Digital filed and served its Complaint upon Z3, Digital never informed Z3 that Digital believed the “pink noise” constituted grounds for repairing or replacing the modules. Digital never asked Z3 to repair or replace the modules with regard to the pink noise issue or any other alleged issues that Digital raises in this lawsuit

Digital’s bylaws in effect at least from October 1, 2008 through April 30, 2009 contained the following provisions:

ARTICLE IV OFFICERS

9. Vice President.

Each vice president shall have such powers and perform such duties as the Chairman of the Board, the Chief Executive Officer, the President or the Board of Directors may from time to time prescribe and shall perform such other duties as may be prescribed in these Bylaws....

ARTICLE VI MISCELLANEOUS

1. Execution of Contracts.

Except as otherwise required by law or by these Bylaws, any contract or other instrument may be executed and delivered in the name of the Corporation and on its behalf by the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the Treasurer, the President, or any Vice President. In addition, the Board of Directors may authorize any other officer [or] officers or agent or agents to execute and deliver any contract or other instrument in the name of the Corporation and on its behalf, and such authority may be general or confined to specific instances as the Board of Directors may by resolution determine.

In the summer of 2008, Digital and its Sarbanes-Oxley compliance auditors began developing a two signature policy. Jaime Kilcoyne, Digital’s Sarbanex-Oxley “expert” had suggested to Thomas Heckman (Digital’s Chief Financial Officer) and/or Derek Douglas that ■ Digital needed “to consider and adopt something of that sort because ... it would be a weakness if’ Digital did not have a two signature policy in the “[Sarbanes-Oxley] reporting.”

At an October 2008 meeting, Heckman told the Board of Directors that “we were implementing a two signature policy.” Digital’s Board of Directors was “fully in favor of it.”

The Signature Authorities Policy was still being drafted in early December 2008. Digital’s Signature Authorities Policy was to become “effective immediately once all of the officers have signed and dated [a December 10, 2008] memo.” Stan Ross admits that his signature appears on the transmittal memorandum. Ross recognizes Robert Haler’s signature and has identified it as one of the signatures that appears on the transmittal memorandum. Haler’s signature is dated December 22, 2008.

On January 9, 2009, Aaron Caldwell on behalf of Z3 and Robert Haler signed Software/Hardware Design and Production License Agreement PLA-2009.01.02 (“PLA-2009”). At the time Haler executed PLA-2009, he was Digital’s Executive Vice President for Engineering and Production. No other officer from Digital signed PLA-2009.

Thomas Heckman talked to Robert Haler about PLA-2009 before Haler signed the contract. Stan Ross knew before Haler signed PLA-2009 that Haler was going to engage Z3 regarding DM365 technology. Ross never told Haler not to engage Z3 and never told Haler not to sign a contract with Z3.

The objective of PLA-2009 was for Z3 to design a custom version of the DM365 module and the software that would go into all or many Digital products.

The preamble to PLA-2009 states, in part, “By installing, copying or otherwise using the Licensed Materials, LICENSEE agrees to abide by the following provisions.” Marchevsky testified that all of the licensed materials as that term is used in the preamble to PLA-2009 are the materials listed in Exhibit 1 to the contract. Marchevsky admits that the “licensed materials” to which the preamble to PLA-2009 refers consist of hardware in the form of the DM365 modules to be constructed by Z3 and software consisting of the computer programs designed to make that hardware perform whatever functions it was supposed to perform.

Paragraph 1 of Exhibit 1 to PLA-2009 entitled “Deliverable Items” states:

1) Deliverable items:

a) Includes the following licensed hardware:

Product Number_Description_

Z3-DM365-MOD-OX-SP2 DM365 special hardware module _board_

Z3-DM365-APP-OX-SP2 DM365 special hardware application _board_

b) Includes the following licensed software for Texas Instruments DM365:

Product Number_Description_

Z3-DM365-MOD-SW-2.6.22 2.6.22 Linux Software for DM365 including drivers and features _below_

Z3-DM365-MOD-SW-COD AN Encoder/ Decoder Software application for _DM365 _

Paragraph 2 of Exhibit 1 to PLA-2009 states, in part, that a “Special version of Z3-DM365-MOD will be designed and manufactured,” and that “Licensee will have final approval of design.”

Paragraph 13 of Exhibit 1 to PLA-2009 requires Digital to pay Z3 $300,000 in fees. In accordance with the terms of PLA-2009, Digital made two. payments on PLA-2009: one in the amount of $75,000 on January 2, 2009 and one in the amount of $50,000 on February 6, 2009.

Paragraph 14 of Exhibit 1 to PLA-2009 is entitled “Guaranteed Minimum Purchase Quantity or Minimum Royalty.” Paragraph 14(a) of Exhibit 1 to PLA-2009 called for Digital to order 50 pre-production sample units at $200 per unit. Paragraph 14(b) of Exhibit 1 to PLA-2009 called for Digital to order 3,000 units during the first fiscal year of the contract at $100 per unit.

Paragraph 14(b)(iii)(l) of Exhibit 1 to PLA-2009 has a conditional minimum order term of 12,000 units per year for a three year period; it states:

(iii) Minimum 12,000 units or equivalent Royalty PER YEAR for 3 years.

(1) LICENSEE will provide LI-CENSOR 1st opportunity to manufacture modules given LICENSOR’S per module pricing, quality, and delivery are competitive with alternative manufacturers, including consideration of royalty cost for non- Z3 manufactured modules.

Paragraph 14(b)(iv) of Exhibit 1 to PLA-2009 states, in part:

If LICENSOR cannot provide on-time delivery, a price and quality acceptable to LICENSEE, or is not willing to produce Z3-DM365-MOD-OX-SP2, then LICENSEE has the right to use alternative manufacturing. LICENSEE is liable for royalty of $7.50 per unit on modules actually sold by LICENSEE on all modules not manufactured by Z3. If LICENEE [sic] does not order 36,000 units at 12,000 units per year, LICENSEE is [to] pay a minimum royalty to LICENSOR equivalent to 12,000*7.500 = $90,000 royalty per calendar year or the pro-rated balance if at least some units have been purchased within the fiscal year in question....

PLA-2009 contemplates a design period, including interim payments to Z3, followed by a manufacturing and delivery period when Z3 would deliver modules and software after receiving orders from Digital. Paragraph 12 to Exhibit 1 of PLA-2009 sets forth a design schedule, commencing in “Week 0” when Digital was to provide “all necessary design details” to Z3, and ending once Digital received and tested sample units. Under the contract, this design period would take 28 weeks. The design schedule does not require Z3 to deliver an initial sample until “Week 10” of the contract.

During the “design period,” Digital was obligated to pay $300,000 in fees according to the schedule set forth in paragraph 13 to Exhibit 1 to PLA-2009, with the last payment being made in Week 28, when pre-production samples were available.

From January through early April 2009, engineers from Digital worked extensively with Z3 engineers, by e-mail and phone, on the DM365 module. Digital was still providing design details to Z3 in March 2009. Z3 completed the design work on the DM365 module sometime in March 2009. On March 23, 2009, Z3 provided the design schematics to Digital.

Aaron Caldwell believed that Robert Haler had authority to enter into PLA-2009 on behalf of Digital based upon Haler’s position as an Executive Vice-President and because Haler had executed PLA-2008 on Digital’s behalf. The form and structure of PLA-2008 and PLA-2009 are similar.

Between December 2008 and January 2009, Digital kept its Signature Authorities Policy on its “intranet.” Z3 was not aware that Digital had an “intranet” and no one from Z3 accessed Digital’s “intranet.” Neither Haler nor anyone else at Digital ever informed Z3 of Digital’s Signature Authorities Policy. Neither Caldwell nor anyone else at Z3 knew about Digital’s purported Signature Authorities Policy or any other policy related to Haler’s authority to enter into contracts on behalf of Digital.

On March 31, 2009, Digital relieved Robert Haler of certain duties as Executive Vice-President of Engineering and Production and hired Stephen Phillips to replace him. Haler officially resigned from Digital on April 23, 2009. Shortly thereafter, Phillips gave a presentation to the Board of Directors describing the Engineering Department as being in “chaos.”

Paragraph 3 of PLA-2009 states:

Termination — This license is effective until terminated. Without prejudice to any other rights, either party may terminate the other party’s rights or obligations under this Agreement at any time with 30 days written notice ... if the party receiving notice has breached a material term of this Agreement and fails to cure such breach within 30 days after receipt of written notice.

On April 10, 2009, Digital, by its Chief Financial Officer, Thomas Heckman, sent a letter to Z3 purporting to terminate PLA-2009 under Paragraph 3, effectively immediately. The letter stated:

In accordance with Paragraph 3 of the Software/Hardware Design and Production License Agreement PLA-2009.01.02 (the “Agreement”) dated January 2, 2009 we are hereby notifying you that we are exercising our right to terminate the Agreement effective immediately. Therefore please cease all activity with respect to this activity.

After receiving the April 10 letter, Aaron Caldwell met with, had phone conversations with and exchanged e-mails with Stan Ross, Thomas Heckman, and Steve Phillips. Digital reaffirmed that it was standing by its termination letter and its direction that Z3 cease work on PLA-2009. If Z3 had done any further work on PLA-2009, it was Digital’s and Heck-man’s intent not to pay Z3 for that work. Digital’s April 10, 2009 letter caused Z3 to stop working on the DM365 module.

Digital did not give 30 days’ written notice of the termination. Digital never notified Z3 of any purported breach by Z3 of PLA-2009 in Digital’s April 10th letter or otherwise. Digital did not give Z3 thirty days to cure any purported breach of PLA-2009. Digital never paid Z3 $175,000 of the $300,000 identified in Paragraph 13 of Exhibit 1 to PLA-2009.

Digital never ordered 50 pre-production samples of the DM365 module at $200 per unit as called for in Paragraph 14(a) of Exhibit 1 to PLA-2009. Digital never ordered 3,000 production units of the DM365 module at $100 per unit in the first fiscal year as called for in Paragraph 14(b)(ii) of Exhibit 1 to PLA-2009.

Digital never ordered 12,000 additional production units of the DM365 module per year for three years at the target price of $100 per unit or pay an equivalent royalty of $270,000.

Z3 never produced any DM365 hardware and no DM365 hardware was ever given to Digital. Z3 never provided a DM365 module to Digital, never provided a DM365 special hardware application board to Digital, never provided 2.6.22 Linux software for DM365, including drivers and features, to Digital, and never provided a A/V encoder/decoder software application for DM365 to Digital.

Z 3’s Marchevsky admits that he has no proof that Digital is buying DM365 modules, constructed according to Z3’s designs, from someone other than Z3 or that Digital has purchased any modules having the same function as the Z3-designed DM365 module from someone other than Z3 or that Digital has purchased any DM365 boards of identical design or similar design from someone other than Z3 or that Digital has purchased any boards or modules having the same configuration or function as the Z 3-designed DM365 module from anyone other than Z3.

IV. Analysis

A. PLA-2009 is a Valid Contract Between Digital and Z3

Digital contends that Robert Haler’s signature did not bind Digital on PLA-2009 because Haler exceeded his authority under Digital’s Signature Authorities Policy. The Signature Authorities Policy allegedly required that PLA-2009 also be signed by Stan Ross, Digital’s President and Chief Executive Officer. Because Ross did not also sign PLA-2009, Digital contends PLA-2009 is not a valid contract between it and Z3. Digital seeks summary judgment in its favor that Haler did not have authority to bind Digital on PLA-2009. Digital also argues that Z3 cannot prove Haler had apparent authority or that Digital ratified PLA-2009.

Z3 contends that (1) Haler had actual authority to sign PLA-2009 under Digital’s bylaws, regardless of Digital’s purported Signature Authorities Policy; (2) Haler had apparent authority to sign PLA-2009 on behalf of Digital; (3) Digital ratified PLA-2009 by paying money and working on the contract for more than three months after Haler signed it; and (4) the Signature Authorities Policy on its face does not apply to production license agreements. Z3 moves for summary judgment in its favor on each of the above arguments.

1. There is a dispute of fact whether Digital’s Board of Directors adopted the Signature Authorities Policy.

The parties dispute whether Haler had actual authority to execute PLA-2009 on behalf of Digital. As presented by the parties, the issue turns on whether Digital’s Signature Authorities Policy was adopted by Digital’s Board of Directors (the “Board”) or by the independent acts of Digital’s officers. For the reasons stated below, the Court concludes there are disputed issues of fact that prevent the Court from granting summary judgment for either party on this issue.

Because Digital is incorporated under the laws of Nevada, the Court will analyze the authority and duties of Digital’s officers under Nevada law. Under Nevada law, “[a]ll officers ... have such powers and duties as may be prescribed by the bylaws or determined by the board of directors....” In other words, an officer of a private corporation has only the authority delegated to him by the bylaws and/or the board of directors.

Article IV, paragraph 9 of Digital’s bylaws in effect at all times relevant states, “Except as otherwise required by law or by these Bylaws, any contract or other instrument may be executed and delivered in the name of the Corporation and on its behalf by ... any Vice President.” When he executed PLA-2009, Haler was Digital’s Executive Vice President of Engineering and Production and an officer of Digital. As a result, Z3 argues that Haler had actual authority under Digital’s bylaws to execute PLA-2009.

Digital asserts that its Board adopted a Signature Authorities Policy that limited the authority previously given under its bylaws to officers to execute contracts. This policy allegedly required that all contracts, including PLA-2009, be executed by two officers. Digital argues it is not bound under PLA-2009 because Haler did not have authority to execute PLA-2009 on his own.

In support of its position, Digital cites to the deposition testimony of Thomas Heck-man, Digital’s Chief Financial Officer. Mr. Heckman testified that Digital’s Sarbanes-Oxley “compliance auditors” suggested to him or Derek Douglas, Digital’s comptroller, that Digital consider and adopt a two signature policy. Mr. Heck-man stated that he talked to Digital’s Board about the policy at an October 2008 meeting, and that the Board was “fully in favor of it.” In its Reply, Digital asserts a “supplemental” declaration from Heckman in which he states that Digital’s Board “approved the adoption” of the two signature policy at the October 2008 meeting.

Z3 does not challenge that Digital’s Board could restrict the authority of an officer to enter into contracts. Rather, Z3 contends that the Signature Authorities Policy was created and adopted by Digital’s officers, not its Board. Z3 points out that Digital cites to no Board resolutions, no Board meeting minutes reflecting a vote, or any other documentation from the Board showing it formally adopted the policy. This belies the notion that Digital’s Board took formal action with regard to the Signature Authorities Policy. And a December 10, 2008 memorandum states, “This policy will be effective immediately once all of the officers have signed and dated this memo.” Z3 also points out that the Board of Directors could not have approved and adopted the actual Signature Authorities Policy at issue because it was still being drafted in early December 2008 — after the October 2008 board meeting.

For purposes of Digital’s motion, the Court finds that Z3 has presented sufficient evidence to create a dispute of fact whether Digital’s Board adopted the Signature Authorities Policy. Similarly, in analyzing Z’s motion for summary judgment on this issue, the Court finds Digital has presented sufficient evidence to create a dispute of fact whether Digital’s Board adopted the Signature Authorities Policy. As result, the Court denies the parties’ respective motions for summary judgment on this issue. But this does not end the Court’s analysis regarding the validity of the contract.

2. Haler had apparent authority to execute PLA-2009 on behalf of Digital.

Both parties move for summary judgment on whether Haler had apparent authority to execute PLA-2009 on behalf of Digital. The parties analyze the issue of apparent authority under Nevada law. Because there is nothing before the Court suggesting that there is a conflict between Nevada and Nebraska law on this issue, the Court will apply Nevada law as the parties have done.

Under Nevada law, “[a]pparent authority is ‘that authority which a principal holds his agent out as possessing or permits him to exercise or to represent himself as possessing, under such circumstances as to estop the principal from denying its existence.’ ” Once the principal cloaks the agent with the apparent authority to act, the principal is estopped from later denying the actions of the agent. Apparent authority is an application of the doctrine of equitable estoppel, of which reasonable reliance is a necessary element. The “party who claims reliance must not have closed his eyes to warnings or inconsistent circumstances.”

It is indispensable to keep in mind here that, as against the principal, there can be reliance only upon what the principal himself has said or done, or at least said or done through some other and authorized agent. The acts of the agent in question can not be relied upon as alone enough to support an estoppel. If his acts are relied upon there must also be evidence of the principal’s knowledge and acquiescence in them.

“Apparent authority, including a third-party’s reasonable reliance on such authority is a question of fact.”

In its motion, Digital argues there is no evidence that Digital or one of its authorized agents “said” or “did” anything to suggest that Haler had authority to enter into PLA-2009 on behalf of Digital. But Z3 does not rely upon statements or acts by Haler in executing PLA-2009 as the basis for its apparent authority argument. Rather, Z3 argues that Digital’s conduct surrounding the execution of PLA-2008 establishes that Haler had apparent authority to execute PLA-2009.

On November 1, 2008, Robert Haler, on behalf of Digital, and Aaron Caldwell, President of Z3, signed PLA-2008, which provided generally for the design of 1,000 DM355 modules and the licensing of the design and modules to Digital. The bylaws at least in effect from October 1, 2008 through April 30, 2009 stated that “[e]xcept as otherwise required by law or by these Bylaws, any contract or other instrument may be executed and delivered in the name of the Corporation and on its behalf by ... any Vice President.” When he executed PLA-2008, Haler was Digital’s Executive Vice President for Engineering and Production and an officer of Digital. It is undisputed that Haler had actual authority to execute PLA-2008 on behalf of Digital. Digital’s President and Chief Executive Officer, Stan Ross, understood that Haler was going to be signing a contract with Z3 for the DM355 work and learned about the contract shortly after it was signed.

Approximately two months after he executed PLA-2008, Haler signed PLA-2009. At the time he executed PLA-2009, Haler was still Digital’s Executive Vice President for Engineering and Production. The form and structure of PLA-2008 is similar to the form and structure of PLA-2009. For example, both contracts covered the design and production of modules containing Texas Instrument chips, which were to used in Digital’s FirstVu camera. Digital planned to use the DM355 module for the first production run of Digital’s FirstVu camera and then transition into the more versatile Z3 DM365 module.

Aaron Caldwell, Z 3’s President, believed Haler had authority on behalf of Digital to enter into PLA-2009 based upon Haler’s position as an Executive Vice-President and because Haler executed PLA-2008 on Digital’s behalf.

The above facts establish Haler’s apparent authority to enter into PLA-2009 on behalf of Digital. First, “where a person is clothed with a title such as vice-president or secretary of a corporation he has apparent authority as the agent of the corporation to act.” As discussed above, Haler was Digital’s Executive Vice President for Engineering and Production. Although not conclusive of the issue of apparent authority, the Court believes that this strongly suggests Haler had authority to enter into contacts such as PLA-2009, which called for the production of modules to be utilized in Digital’s products.

Second, and more significantly, Haler had authority under Digital’s bylaws, as adopted by its Board, to enter into contracts at least through December 22, 2008. Pursuant to that authority, Haler caused Digital to enter into a valid contract (PLA-2008) with Z3 on November 1, 2008. Courts in various jurisdictions, including Nevada, have recognized that parties’ prior dealings with each other can form the basis of apparent authority.

Moreover, termination of actual authority does not, by itself, terminate the apparent authority held by an agent. Apparent authority ends when it is no longer reasonable for the third party with whom an agent deals to believe that the agent continues to act with actual authority. Often termed “lingering authority,” the Restatement (Third) of Agency recognizes that “it is reasonable for third parties to assume that an agent’s actual authority is a continuing or ongoing condition, unless and until a third party has notice of circumstances that make it unreasonable so to assume.” The Restatement (Third) of Agency provides the following illustration:

P Corporation, in the recycling business, retains A as a purchasing agent to buy recyclable material on its behalf. A is authorized by P Corporation to buy on terms that commit P Corporation to pay for the material when it arrives at P Corporation’s recycling facility. A has purchased recyclables many times from T, who is in the business of building demolition. P Corporation terminates A’s actual authority. T has no notice of the termination. As to T, A continues for a reasonable period of time to possess apparent authority to purchase from T on terms comparable to those on which A has made prior purchases on P Corporation’s behalf.

Despite knowing that Robert Haler had entered into PLA-2008 with Z3 and that Haler was planning an engagement with Z3 for DM365 modules, Digital provides no proof that it expressly notified Z3 of Digital’s “Signature Authorities Policy.” On the contrary, neither Robert Haler nor anyone else at Digital ever informed Z3 of any Signature Authorities. Neither Aaron Caldwell nor anyone else at Z3 knew about Digital’s purported Signature Authorities Policy or any other policy related to Haler’s authority to enter into contracts on behalf of Digital.

At least until the Signature Authorities Policy was purportedly enacted, Digital’s bylaws authorized any Vice President to execute a contract on Digital’s behalf. Digital held out Haler as having authority to execute PLA-2008 as its Executive Vice President for Engineering and Production, and Haler had such authority to cause Digital to enter into PLA-2008 with Z3. Two months later, Haler executed PLA-2009, a contract similar in form and structure to PLA-2008. At the time he executed PLA-2009, Haler was still Digital’s Executive Vice President for Engineering and Production. There are ho circumstances suggesting Z3 should question Haler’s authority. Based upon the above facts, it was reasonable for Z3 to believe Haler had authority to enter into PLA-2009.

In its opposition, Digital does not directly address. Z 3’s argument regarding lingering authority or otherwise suggest it is an improper theory to establish apparent authority. Rather, Digital attempts to create a question of fact regarding Z3’s awareness of the Signature Authorities Policy by asserting that “this and other Digital policies were available for viewing on Digital’s ‘intranet’ and any person who had access to such ‘intranet’ could have read, reviewed and in the process become fully aware of Digital’s ‘Signature Authorities Policy.’ ”

The evidence that Digital cites for this proposition is the testimony of Heckman, who confirmed that the Signature Authorities Policy was kept on the company’s intranet. But Digital provides no evidence that Z3 had access to Digital’s intranet or this policy. Indeed, Z3 was not aware that Digital had an intranet and no one from Z3 accessed Digital’s intranet. Digital provides no proof that it expressly notified Z3 of Digital’s “Signature Authorities Policy” or provide any other evidence suggesting Z3 should have questioned Haler’s authority to execute PLA-2009 on behalf of Digital.

The Court concludes Z3 subjectively believed that Haler had authority to execute PLA-2009 on behalf of Digital and that this belief was objectively reasonable. As a result, Z3 has established as a matter of law that Haler had apparent authority to execute PLA-2009 on behalf of Digital.

Because the Court concludes Haler had apparent authority to enter into PLA-2009 on behalf of Digital, the Court finds it unnecessary to address whether the Signature Authorities Policy applied to PLA-2009 or whether Digital ratified PLA-2009.

B. Z 3 is Entitled to Summary Judgment on Counts II and III of Digital’s Complaint

The only remaining claims in Counts II and III of Digital’s Complaint are for rescission of PLA-2009 because Haler lacked authority and for a declaratory judgment that PLA-2009 is void because Haler lacked authority. As indicated above, PLA-2009 is binding on Digital and is not void. Further, because Haler had authority to bind Digital, Digital cannot maintain a claim for rescission based upon Haler’s alleged lack of authority. Accordingly, the Court grants summary judgment to Z3 on Counts II and III of Digital’s Complaint.

C. Digital Breached PLA-2009.

Z3 moves for summary judgment on its claim that Digital breached PLA-2009. Z3 contends that Digital breached PLA-2009 by attempting to terminate the contract without giving Z3 thirty-days written notice and a thirty-day period to cure any material breach. Z3 also argues that Digital’s conduct amounted to an anticipatory breach of contract. In its opposition, Digital contends that Z3 cannot recover for breach of contract because Z3 did not substantially perform its own obligations under PLA-2009.

A federal court sitting in diversity applies “the choice of law principles of the state in which it sits.” Kansas case law recognizes the principle of freedom to contract and, under most circumstances, permits parties to choose the law applicable to their contract. Accordingly, where the parties to a contract have entered into an agreement that incorporates a choice of law provision, Kansas courts generally effectuate the law chosen by the parties to control the agreement unless doing so would be contrary to Kansas public policy.

PLA-2009 states: “This Agreement will be governed by and interpreted in accordance with the laws of the State of Nebraska, without reference to conflict of laws principles.” Both parties appear to agree that Nebraska law applies. Neither party has argued there are public policy concerns that dictate a different result. The Court will apply Nebraska law.

Under Nebraska law, to recover for breach of contract, Z3 must plead and prove the existence of a promise, its breach, damage, and compliance with any conditions precedent that activate Digital’s duty. A “breach” is the non-performance of a duty.

Further, “[t]o successfully bring an action on a contract, a plaintiff must first establish that the plaintiff substantially performed the plaintiffs obligations under the contract.” In other words, “a party who has failed or refused to perform the terms and conditions imposed upon him by a contract, or has not been ready, willing, and able to perform the same, cannot recover for a breach thereof by the other party.”

“To establish substantial performance under a contract, any deviations from the contract must be relatively minor and unimportant.” Substantial performance is shown when the following circumstances are established by the evidence: (1) the party made an honest endeavor in good faith to perform its part of the contract, (2) the results of the endeav- or are beneficial to the other party, and (8) such benefits are retained by the other party. The following instruction has also been approved by the Nebraska Supreme Court:

If you find from the evidence that the plaintiff has substantially performed its contract in this regard, you should find for the plaintiff on this issue. And in passing upon this issue you are instructed that, if you believe the plaintiff in good faith substantially performed the terms of its contract, but that there are some slight omissions, or defects which are not so essential as to defeat the object of the parties, but could be readily remedied, then the plaintiff can recover the contract price less the damages occasioned by the omission or defect. Such damages are what it would have cost the defendant to remove the defect or omission, and thus give to the defendant what his contract called for.

Digital contends that its obligations under PLA-2009 were triggered only when it received the licensed materials. Digital bases its argument on the preamble to PLA-2009, which states: “By installing, copying or otherwise using the Licensed Materials, LICENSEE agrees to abide by the following provisions.” Because Z3 never provided any DM365 modules to Digital, Digital argues Z3 did not substantially perform under PLA-2009.

In relying on the text of the preamble, Digital ignores the performance terms of the contract. In its Order denying Digital’s first motion for partial summary judgment, the Court summarized Z 3’s initial performance obligations under PLA-2009 as follows:

A substantial portion of Z 3’s work under the contract was to design DM365 modules pursuant to design details provided by Digital. Until Digital “provide[d] all necessary design details, Z3 could not design, manufacture and deliver the modules. PLA-2009 sets forth a design schedule, commencing in “Week 0” when Digital was to provide “all necessary design details” to Z3, and ending once Digital ordered, received, and tested sample units. Under the contract, this design period would take 28 weeks. The design schedule did not require Z3 to deliver an initial sample until ‘Week 10” of the contract, which could not have occurred until mid-March at the earliest.

Digital also had certain obligations during this “design” period. For example, Paragraph 13 of Exhibit 1 to PLA-2009 required Digital to pay Z3 $300,000 in fees according to the schedule set forth therein. Digital was required to pay $75,000 upon execution of the license agreement on January 2, 2009 and $50,000 in February 2009. In essence, PLA-2009 contemplates a design period, including interim payments to Z3, followed by a manufacturing and delivery period when Z3 would deliver modules and software after receiving orders from Digital.

In accordance with the terms of PLA-2009, Digital made two payments on PLA-2009: one in the amount of $75,000 on January 2, 2009 and one in the amount of $50,000 on February 6, 2009. Thus, Digital was obligated to perform — and did perform — under PLA-2009 even though no modules or software had yet been delivered or were required to be delivered. Accordingly, the Court rejects Digital’s argument that it was not obligated under the contract until it received the licensed materials from Z3.

Digital’s argument also does not address Z 3’s claim that Z3 was excused from delivering any DM365 modules or software because Digital repudiated PLA-2009 before any modules and software were required to be delivered. Under Nebraska law, where a promisor bound under an executory contract repudiates his obligation before the time for performance, the promisee has the option to treat the contract as ended so far as further performance is concerned and to maintain an action at once for damages. “Where performances are to be exchanged under an exchange of promises, one party’s repudiation of a duty to render performance discharges the other party’s remaining duties to render performance.” And where a party’s repudiation contributes materially to the nonoccurrence of a condition of one of his or her duties, the non-occurrence is excused. Whether Z3 substantially performed under PLA-2009 should be determined by the obligations that were due at the time Digital purportedly breached the contract — April 10, 2009.

As discussed above, PLA-2009 sets forth a design schedule, commencing in “Week 0” when Digital was to provide “all necessary design details” to Z3. The design schedule does not require Z3 to deliver an initial sample until Week 10” of the contract. Z3 argues that Week..0” of PLA-2009 commenced on March 21, 2009 when it received all of the design details from Digital. Using March 21, 2009 as “Week 0,” Z3 would not have been obligated to provide Digital with any DM365 sample modules until May 30, 2009 — well after Digital’s purported breach.

From January through early April 2009, engineers from Digital worked extensively with Z3 engineers, by e-mail and phone, on the DM365 module. Z3 attaches a series of e-mails between it and Digital reflecting these communications. The emails demonstrate that Digital was still providing design details to Z3 in March 2009. Caldwell confirms that Z3 was still receiving design details from Digital through March 21, 2009. Thus, Z3 was not obligated to provide any DM365 modules at the time of Digital’s breach because ‘Week 10” could not have occurred by April 10, 2009.

There is also undisputed evidence that Z3 was working on completing its obligations under PLA-2009 at the time of Digital’s purported breach. Caldwell testified that Z3 completed the design work on the DM365 module sometime in March 2009. On March 23, 2009, Z3 provided the design schematics to Digital.

During his deposition, Thomas Heckman claimed that Z3 did not have the capability to produce the DM365 modules, but Digital provides no actual evidence supporting this statement. Stan Ross stated during his deposition that Z3 was “unable to deliver what they were supposed to when they were supposed to ...” But Ross appears to have been speaking about his opinion of Z 3’s performance under the earlier PLA-2008. For example, Ross refers to the pink noise issue, which was related to the DM355 module. Ross does not point to any particular missed deliverable under PLA-2009 or offer any specifics of how Z3 failed to perform under PLA-2009. The testimony of Heckman and Ross is insufficient to create a dispute of fact whether Z3 substantially performed its obligations under PLA-2009. In short, Digital provides no contrary evidence that Z3 failed to perform its obligations under PLA-2009 at the time of Digital’s purported breach.

The Court concludes Z3 made an honest endeavor in good faith to perform its part of the contract, the results of the endeavor were beneficial to Digital, and Digital retained such benefits. Z3 was excused from providing any DM365 modules to Digital because, as will be discussed below, Digital breached the agreement in April 2009 — before any DM365 modules were required to be delivered. Accordingly, Z3 substantially performed its obligations under PLA-2009 at the time of Digital’s breach.

Z3 argues Digital breached the termination clause of PLA-2009 and/or anticipatorily repudiated PLA-2009. Nebraska courts have found that termination clauses, including unilateral termination clauses, are valid and enforceable. The termination clause in PLA-2009 states:

Termination — This license is effective until terminated. Without prejudice to any other rights, either party may terminate the other party’s rights or obligations under this Agreement at any time with 30 days written notice ... if the party receiving notice has breached a material term of this Agreement and fails to cure such breach within 30 days after receipt of written notice.

On April 10, 2009, Digital, by its Chief Financial Officer, Thomas Heckman, sent a letter to Z3 purporting to terminate PLA-2009 under this clause, effectively immediately. The letter stated:

In accordance with Paragraph 3 of the Software/Hardware Design and Production License Agreement PLA-2009.01.02 (the “Agreement”) dated January 2, 2009 we are hereby notifying you that we are exercising our right to terminate the Agreement effective immediately. Therefore please cease all activity with respect to this activity.

It is undisputed that Digital did not give 30 days’ written notice of the termination, that Digital never notified Z3 of any purported breach by Z3 of PLA-2009 in Digital’s April 10th letter or otherwise, and that Digital did not give Z3 thirty days to cure any purported breach of PLA-2009. The Court concludes that Digital breached PLA-2009 when it attempted to terminate the contract in its April 10, 2009 letter without notifying Z3 of any alleged breach and/or providing Z3 with the opportunity to cure any alleged breach.

Z3 also argues that Digital’s April 10, 2009 letter constitutes an anticipatory repudiation. “The anticipatory breach of a contract is one committed before the time has come when there is a present duty of performance and is the outcome of words or acts evidencing an intention to refuse performance in the future.” Anticipatory breach requires an unequivocal repudiation of the contract.

“In order to constitute a repudiation, a party’s language must be sufficiently positive to be reasonably interpreted to mean that the party will not or cannot perform. Mere expression of doubt as to his willingness or ability to perform is not enough to constitute a repudiation .... However, language that under a fair reading ‘amounts to a statement of intention not to perform except on conditions which go beyond the contract’ constitutes a repudiation.”

Although the question of whether there has been a repudiation is normally a question of fact, it may be appropriate for courts to resolve the issue on summary judgment if the facts are uncontroverted and the moving party is entitled to judgment as a matter of law.

In Anderson Excavating & Wrecking Co. v. Sanitary Improvement District No. 177, Anderson sent a letter stating that it was facing additional expenses to complete the contract. The letter then stated Anderson would perform if a change order was entered to provide for additional payment of $27,000. The letter also stated that if a change order could not be made, the two remaining options were to rebid the contract or have the dispute settled through legal action. The Nebraska Supreme Court concluded that a reasonable reading of the letter showed that Anderson would not perform the contract as originally agreed, and thus, it was not error for the district court to find the letter was a repudiation of the contract.

The facts of this case present an even clearer case of repudiation than Anderson. Digital’s April 10, 2009 letter was unequivocal — Digital was attempting to terminate the contract and directed Z3 to cease working on PLA-2009. After receiving Digital’s April 10, 2009 letter, Caldwell met with, had phone conversations with, and exchanged e-mails with Stan Ross, Thomas Heckman, and Steve Phillips. During these conversations, Digital reaffirmed that it was standing by its termination letter and its direction to Z3 to cease work on PLA-2009. If Z3 had done any further work on PLA-2009, it was Digital’s intent not to pay Z3 for that work. Based upon the above undisputed facts, the Court.concludes Digital anticipatorily repudiated PLA-2009 through its April 10, 2009 letter.

D. Z 3’s Alleged Damages

Z3 alleges it incurred multiple categories of damages as a result of Digital’s breach of PLA-2009 and asks the Court to enter judgment against Digital for $4,046,810.50. Z3 alleges it is entitled to (1) lost profits from Digital’s failure to place a conditional minimum order of 12,-000 units per year for a three year period; (2) lost profits from Digital’s failure to place an unconditional minimum order of 3,050 units; and (3) $175,000 in unpaid fees.

1. Lost Profits on Conditional Minimum Order Term

PLA-2009 has a conditional minimum order term of 12,000 units per year for a three year period. Both parties move for summary judgment on whether Z3 is entitled to lost profits from Digital’s failure to order 36,000 modules. In its motion, Z3 argues it has proven its lost profits as a matter of law. In Digital’s motion for summary judgment, Digital argues that Z3 is not entitled to its lost profits because (1) there were unfilled conditions precedent to Digital’s obligation to order the 36,000 units; and (2) Digital could discharge its obligation to order the 36,000 units by paying an equivalent royalty,

a. The condition precedent to the purchase of 12,000 units per year for a three year period was excused by Digital’s anticipatory repudiation.

As mentioned above, PLA-2009 has a conditional minimum order term of 12,000 units per year for a three year period. Section 14(b)(iii)(l) further explains this conditional order term:

(iii) Minimum 12,000 units or equivalent Royalty PER YEAR for 3 years.

(1) LICENSEE will provide LI-CENSOR 1st opportunity to manufacture modules given LICENSOR’ S per module pricing, quality, and delivery are competitive with alternative manufacturers, including considerat