MARY F. WALRATH, Bankruptcy Judge.
Before the Court is the Second Partial Motion to Dismiss the Amended Complaint, filed by Aspect Software, Inc. (the "Debtor"). The Debtor seeks to dismiss the claims for fraudulent inducement, negligent misrepresentation, and unjust enrichment with prejudice pursuant to Rules 12(b)(6) and 9(b) of the Federal Rules of Civil Procedure, incorporated by Rules 7012 and 7009 of the Federal Rules of Bankruptcy Procedure. For the reasons set forth below, the Second Partial Motion to Dismiss will be denied.
Bisk Education, Inc. ("Bisk") provides online interactive education services, including web-based certificate and degree programs for various universities. Bisk's web-based business requires a customer relations management ("CRM") system to manage its customer interactions and data. In 2014, Bisk sought to upgrade its CRM system from an on-premises platform to a cloud-based platform and considered various companies to provide this service.
The Debtor provides workforce optimization solutions, among other CRM services. Bisk contends that the Debtor actively marketed its services to Bisk in 2013 and began to market more aggressively in 2014 after learning of Bisk's intention to upgrade its CRM system. The Debtor claimed to be able to provide various cloud-based, hosted and hybrid CRM solutions to facilitate customer service in real time on multiple technology platforms.
Between July and December 2014, Bisk communicated regularly with the Debtor's marketing team to discuss Bisk's needs regarding the development and implementation of the CRM system. In September 2014, Bisk met with the Debtor's marketing team, which proposed to customize and implement a next-generation, cloud-based CRM system. The parties met again in October 2014 to discuss the Debtor's ability to integrate the necessary work optimization components with a CRM platform. Bisk subsequently agreed to hire the Debtor and on December 30, 2014, the parties executed a Product and Service Agreement (the "PSA") containing,
Bisk contends that, instead of providing a next-generation cloud-based CRM system, the Debtor caused unreasonable delay and failed to timely implement a functional CRM platform, which resulted in additional and unnecessary costs to Bisk. As a result, Bisk notified the Debtor that it was terminating the PSA on August 8, 2015. On September 23, 2015, the Debtor sent a letter to Bisk memorializing the parties' communications regarding the problems with the project and the Debtor's resulting termination.
On March 9, 2016, the Debtor filed a chapter 11 petition. (D.I. 1.) On May 24, 2016, Bisk filed a proof of claim based on fraud and breach of contract theories. On August 2, 2016, the Debtor moved for a more definite statement of the claims contained in Bisk's proof of claim. (D.I. 451.) On September 1, 2016, the Court denied the motion for a more definite statement, but entered an Order directing Bisk to file an adversary complaint to liquidate its proof of claim. (D.I. 502.)
On October 14, 2016, Bisk commenced the instant adversary proceeding, asserting claims for fraud in the inducement, negligent misrepresentation, breach of contract, breach of express warranties, and unjust enrichment. (Adv. D.I. 1.) Bisk seeks allowance of its proof of claim in an amount equal to its damages (to be determined by the Court), prejudgment interest, attorneys' fees and costs.
On November 23, 2016, the Debtor filed a Partial Motion to Dismiss, contending that the fraudulent inducement, negligent misrepresentation, and unjust enrichment claims failed to state a claim for relief pursuant to Rule 12(b)(6). (Adv. D.I. 5.) The Debtor argued that the tort claims were barred by the parties' contract as a matter of law and that equitable relief was not an appropriate remedy. The Debtor further contended that Bisk failed to plead its fraud claims with particularity as required by Rule 9(b). (
On January 6, 2017, Bisk filed a Motion for Leave to Amend the Complaint, which was granted. (Adv. D.I. 24.) The Amended Complaint was filed on March 24, 2017. (Adv. D.I. 33.)
On March 21, 2017, the Debtor filed a Second Partial Motion to Dismiss pursuant to Rules 12(b)(6) and 9(b), renewing the arguments from its prior motion to dismiss. (Adv. D.I. 31.) A notice of completion of briefing was filed on April 18, 2017, and the matter is now ripe for decision. (Adv. D.I. 44.)
The Court has jurisdiction over this adversary proceeding, which involves the allowance of Bisk's timely filed claim. 28 U.S.C. §§ 1334 & 157(b)(2)(B).
A Rule 12(b)(6) motion challenges the sufficiency of the factual allegations in a complaint.
To survive a motion to dismiss, a complaint must contain "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face."
Rule 9(b) imposes a heightened pleading standard for allegations of fraud and requires "sufficient particularity to place the defendant on notice of the precise misconduct for which it is charged."
The Court may base dismissal on either Rule 12(b)(6) or Rule 9(b).
Counts I and II of the Complaint assert claims for fraudulent inducement and negligent misrepresentation based on the Debtor's repeated misrepresentations of its extensive experience and expertise in the online education sector and its ability to implement a next-generation cloud-based CRM platform. Bisk contends that it never would have entered into the PSA but for such misrepresentations and that the Debtor knew, or should have known, that its representations of experience and expertise were false.
Under Florida law, a claim for fraudulent inducement (or fraudulent misrepresentation) must allege: (1) a false statement of material fact; (2) made with knowledge that the representation is false; (3) with intent to induce another to act on the representation; and (4) injury to the party relying on the representation.
The elements of a claim for negligent misrepresentation are almost identical, but differ in two major respects: the false statement of material fact may be made
The Debtor argues that the claims for fraudulent inducement and negligent misrepresentation fail to state a claim for relief under Florida law. FED. R. CIV. P. 12(b)(6); FED. R. BANKR. P. 7012. The Debtor contends that they are deficient because they are devoid of allegations that its representatives made false representations; that its representatives knew (or should have known) that the representations were false; and that Bisk relied on those representations.
Bisk responds that the Amended Complaint does in fact satisfy notice pleading requirements because it alleges that the Debtor knew, or should have known, that its representatives made false statements of material fact because the Debtor's method of performing the contract was different from what was promised. Bisk contends that the Debtor understood the distinction between designing a next-generation unified CRM system (as promised to Bisk) and implementing a contact center platform intended to create a CRM system (as the Debtor actually provided to Bisk). In addition, Bisk contends that the Amended Complaint sufficiently alleges that Bisk relied on the misrepresentations because it alleges that it would not have selected the Debtor to perform such a crucial project but for its purported expertise.
The Court agrees with Bisk and concludes that, accepting the factual allegations as true, Bisk has adequately pled claims for fraudulent inducement and negligent misrepresentation. The Amended Complaint alleges that the Debtor deliberately misrepresented its experience, expertise, and core competencies with cloud-based CRM systems in order to win the Bisk contract. (Adv. D.I. 33, ¶ 37.) It further alleges that Bisk relied on those misrepresentations in awarding the contract to the Debtor. (
The Debtor additionally argues that even if the Amended Complaint does allege reliance on the Debtor's misrepresentations of expertise, Bisk cannot prove such reliance as a matter of Florida law because the PSA contains a Merger Clause and an express, bargained-for Expertise Clause.
Bisk responds that its claims are viable because an integration clause does not bar claims for fraudulent inducement or negligent misrepresentation as a matter of Florida law.
The Court agrees with Bisk that the Merger Clause in the PSA does not bar its fraudulent inducement or negligent misrepresentation claims. As the Court noted in
126 F. Supp. at 1363 (citations omitted).
The Court concludes that the misrepresentations Bisk alleges are not being offered to contradict the terms of the PSA, but rather to demonstrate that the contract was procured by fraud or misrepresentation of material fact. Therefore, the Merger Clause in the PSA does not preclude those claims.
The Debtor argues, however, that the Expertise Clause in the PSA does deal with the subject matter of the alleged misrepresentations and, therefore, the claims based on those misrepresentations are precluded.
The Expertise Clause in the PSA states that Bisk engaged the Debtor to "provide expert advice and recommendations, and to ensure that plans, ideas, designs, implementation and other suggestions relating to the Services or Deliverables and proposed by Customer are appropriate, consistent with industry best practices and standards, and are in the best interest of the Customer." (Adv. D.I. 32, ¶ 21.)
The Court notes that the Expertise Clause in the PSA does not expressly state that the Debtor is an expert in cloud-based CRM technology. Nor is that Clause the type of "clear, unambiguous, and specific" contractual term that the Florida courts have held precludes a fraudulent inducement claim.
Therefore, the Court concludes that neither the Merger Clause nor the Expertise Clause preclude Bisk's claims for fraudulent inducement and negligent misrepresentation.
The Debtor additionally contends that the claims for fraudulent inducement and negligent misrepresentation should be dismissed pursuant to Rule 12(b)(6) as a result of Florida's economic loss doctrine, which precludes a claim based on tort which is identical to a claim for breach of contract. The Debtor argues that Bisk does not and cannot allege any tort separate and independent of the breach of contract claim.
The Florida Supreme Court explained the basis for the economic loss rule thus:
Bisk responds that it is not seeking damages under the contract. Rather, the Amended Complaint alleges a separate cause of action for fraud based on the Debtor's repeated misrepresentation of its ability to meet Bisk's needs in order to win the Bisk contract, even though the Debtor never actually intended to provide a cloud-based CRM system because it lacked the experience to do so. Bisk alleges that it relied on the Debtor's representations of experience in selecting its offer over others.
The Court finds that Bisk's fraud claims (Counts I and II) are not barred by the economic loss doctrine for several reasons. First, the Florida Supreme Court has acknowledged that a claim for fraudulent inducement is not barred by that doctrine.
Second, the Florida Supreme Court has expressly restricted the economic loss doctrine to products liability cases.
Therefore, the Court concludes that the fraudulent inducement and negligent misrepresentation claims in Counts I and II are not barred by the economic loss rule.
Even if (as the concurring opinion in
Bisk's fraud claims are premised on the Debtor's misrepresentation of its ability to provide a cloud-based CRM system, they are not based on breach of the contract. Bisk's contention is not that the Debtor breached the contract but that Bisk would never have entered into the contract if it had known that the Debtor did not have an expertise in cloud-based CRM systems.
Accepting the facts alleged by Bisk as true, these misrepresentations are "torts independent of the contractual breach. . . . requir[ing] proof of facts separate and distinct from the breach of contract."
Count V of the Complaint asserts a claim for unjust enrichment for the Debtor's acceptance and retention of the $3 million advance payment made pursuant to the PSA while it conferred no value or benefit on Bisk in return.
The Debtor seeks to dismiss Count V pursuant to Rule 12(b)(6), contending that Bisk cannot attach an equitable claim (Count V) to a breach of contract claim (Count III) for which an adequate legal remedy is available.
Bisk responds that dismissal of the unjust enrichment claim is premature until the existence of an express breach of contract claim is established.
Under Florida law, a plaintiff generally cannot pursue an unjust enrichment claim if there is an express contract concerning the subject matter.
In this case, Bisk contends that the PSA was invalid because it was fraudulently induced to enter into that agreement by the actions of the Debtor. Accordingly, the Court concludes that Bisk may plead unjust enrichment in the alternative.
For the reasons set forth above, the Second Partial Motion to Dismiss will be denied.
An appropriate Order follows.