JOHN R. TUNHEIM, District Judge.
This case arises out of a software development and license agreement between Plaintiff Superior Edge, Inc. ("SEI") and Defendant Monsanto Company ("Monsanto"). Pursuant to the agreement, SEI was to develop software for Monsanto to assist in Monsanto's seed sales initiatives. Monsanto brings counterclaims for breach of contract, money had and received, fraudulent and negligent inducement, conversion, and professional negligence, based primarily on its allegation that SEI represented that it had the infrastructure and capacity to develop software satisfying Monsanto's objectives but failed to develop and deliver that promised software under the agreement. SEI moves to dismiss all but the breach of contract counterclaim alleged in Count I. Because the Court finds that Monsanto has stated plausible claims for relief with respect to its counterclaims for breach of contract, money had and received, fraudulent and negligent inducement, and conversion, the Court will deny SEI's motion as to those counterclaims. The Court will, however, grant SEI's motion as to the claim for professional negligence, because neither Minnesota nor Missouri courts recognize such a cause of action against computer professionals.
Monsanto is a global company that produces and sells commercial seeds and other agricultural products. (Answer to Am. Compl. & Countercls. ("Countercls."), ¶ 1 Jan. 10, 2014, Docket No. 108.)
In late 2008, Monsanto met the founder and chief executive officer of SEI who represented that SEI had the engineers and infrastructure to deliver complex, innovative technology, and had considerable experience in the agricultural industry. (Id. ¶ 13.) In a series of meetings that took place throughout 2009, SEI represented that it had the infrastructure and capability to develop software that would meet Monsanto's objectives. (Id. ¶¶ 15-18.) In particular, SEI represented that it had a software system for creating personalized sales proposals known as SalesEdge that could be adapted to fit Monsanto's needs. (Id. ¶ 15.)
On August 7, 2009, Monsanto and SEI executed a Software Development and License Agreement ("the Agreement") with an effective date of March 1, 2009. (Id. ¶ 19.) The Agreement required SEI to "tailor and/or customize SEI's SalesEdge... software, develop new capabilities, and provide services for the purpose of enhancing Monsanto's sales execution." (Compl., Ex. B at 11, Oct. 19, 2012, Docket No. 1.)
In the initial phases of the Agreement's implementation Monsanto and SEI met frequently to discuss the software development. (Countercls. ¶ 36.) In early 2010 Monsanto and SEI continued to discuss ideas for the production of customized sales proposals for customers in the field. (Id. ¶ 37.) Because SEI's software did not yet have this capability, SEI was manually producing the proposals. (Id. ¶ 38) Although this was not a commercially viable approach for Monsanto long-term, it used the manually produced proposals for a period of time during which SEI was to be developing the software that would allow their production to be automated. (Id.) In January 2011 Monsanto informed SEI that it would require software with specific features to be completed by May 2011 in order to ensure that automated production of the sales proposals could be demonstrated to Monsanto personnel at its June and July 2011 national sales meetings. (Id. ¶¶ 41-42.)
During early 2011 Monsanto became increasingly concerned with SEI's ability to timely deliver the promised software developments. (Id. ¶ 43.) SEI would not allow Monsanto to review its source code which "heightened" Monsanto's concerns about the status of the software. (Id. ¶ 45.) In light of these concerns, Monsanto implemented a backup plan and engaged Defendant Site-Specific Technology Development Group, Inc. ("SST") — another software development company with whom Monsanto had previously contracted — to also develop software with the desired functionality. (Id. ¶¶ 12, 46.) In the spring of 2011 Monsanto "repeatedly tested SEI's software application [and] encountered a host of different difficulties and error messages." (Id. ¶¶ 48-49.) In light of these issues, Monsanto could not present the software at its national sales meetings. (Id. ¶¶ 50-52.)
On August 16, 2011 Monsanto met with SEI to discuss "its disappointment with the numerous development and milestone failures." (Id. ¶ 56.) At the meeting, SEI was still unable to present or deliver the
Based on these allegations, Monsanto brings counterclaims against SEI for breach of the Agreement, money had and received, fraudulent and negligent inducement, conversion, and professional negligence.
In reviewing a motion to dismiss brought under Rule 12(b)(6), the Court considers all facts alleged in the complaint as true to determine if the complaint states "`a claim to relief that is plausible on its face.'" See Magee v. Trs. of Hamline Univ., Minn., 747 F.3d 532, 535 (8th Cir.2014) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. "Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility" and therefore must be dismissed. Id. (internal quotation marks omitted). Although the Court accepts the complaint's factual allegations as true, it is "`not bound to accept as true a legal conclusion couched as a factual allegation.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986)). Therefore, to survive a motion to dismiss, a complaint must provide more than "`labels and conclusions' or `a formulaic recitation of the elements of a cause of action.'" Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955).
SEI first argues that Counts II through VII of Monsanto's counterclaims should be dismissed without prejudice for failure to comply with Federal Rule of Civil Procedure 10, which requires parties to state claims or defenses "in numbered paragraphs, each limited as far as practicable to a single set of circumstances" and state "each claim founded on a separate transaction or occurrence ... in a separate count" where "doing so would promote clarity." Fed.R.Civ.P. 10. SEI argues that Monsanto has violated this rule by unnecessarily incorporating in succeeding counts, the allegations of all prior counts. For example, Count VI alleges a claim for conversion, but incorporates by reference all previous paragraphs in the counterclaims — including the background facts, two claims for breach of contract, a claim for money had and received, a claim for fraudulent inducement, and one for negligent inducement. (Countercls. ¶ 153 ("Monsanto repeats, adopts and incorporates herein by reference the allegations made in paragraphs 1 through 152 of these Counterclaims.").) SEI contends that although "it is possible, with sufficient effort, to sort out which is which, that burden should not
In resolving Monsanto's arguments based on Rule 10(b), the Court begins with the Federal Rules' pleading standards, which provide that a claim for relief need include only "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a). The purpose of the pleading requirements is simply to "give the [counterclaim] defendant fair notice of what the [counterclaim] plaintiff's claim is and the grounds upon which it rests." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002) (internal quotation marks omitted). "No technical form" is required for pleadings, and the Court construes pleadings "so as to do justice." Fed. R.Civ.P. 8(d)(1), (e). The Federal Rules also explicitly allow a party to incorporate earlier allegations in a pleading by reference. See Fed.R.Civ.P. 10(c) ("A statement in a pleading may be adopted by reference elsewhere in the same pleading or in any other pleading or motion."). Rule 10(c) "was adopted to encourage pleadings that are short and free of unneeded repetition," Kramer & Frank, P.C. v. Wibbenmeyer, Civ. No. 05-2395, 2006 WL 3079097, at *2 (E.D.Mo. Oct. 27, 2006) (internal quotation marks omitted); see also Wright & Miller, 5A Federal Practice & Procedure § 1326 (3d ed.), and courts frequently allow parties to satisfy pleading requirements "by incorporating by reference other paragraphs within the same complaint or counterclaim" Empire Today, LLC v. Nat'l Floors Direct, Inc., 788 F.Supp.2d 7, 22 (D.Mass.2011). The ultimate question regarding the sufficiency of pleadings under Rules 8 and 10 is "whether the theory and basis of the various counts are easily distinguishable." Iowa Health Sys. v. Trinity Health Corp., 177 F.Supp.2d 897, 906 (N.D.Iowa 2001) (internal quotation marks omitted).
Some courts have found violations of Rule 10(b), and required repleading of claims,
The remedy of repleader based on violation of Rules 8 and 10 has generally been reserved for egregious cases where "a defendant does not know the basic facts that constitute the claim for relief against it." Terrell v. DIRECTV, LLC, Civ. No. 12-81244, 2013 WL 451914, at *2 (S.D.Fla. Feb. 6, 2013) (requiring amendment of a complaint where, among other deficiencies, the paragraphs were not numbered consecutively, several complaints had been merged into one, the complaint was repetitive and rambling, "[s]everal counts appear[ed] to be cut-off mid-count," and unnecessary statutes and regulations were attached as exhibits); Allen v. Cypress Village, Ltd., Civ. No. 10-994, 2011 WL 1667055, at *2 (M.D.Ala. May 3, 2011) (finding a complaint violated Rule 10(b) by incorporating every antecedent allegation by reference into each subsequent claim for relief where "[t]here are no counts, only a `Prayer for Relief.' In that Prayer for Relief, Plaintiff's claims are crammed into a 300-word single sentence, connected by a plethora of commas. Reading between the commas, there appear to be no less than twenty-four claims. But deciphering what all of those claims are, which facts are meant to support which claim, and how each Defendant is liable is an insurmountable task...."); In re Banks, Bankr.No. 04-38360, 2008 WL 3979288, at *5 (Bankr.E.D.Va. Aug. 22, 2008) (dismissing with leave to amend for failure to comply with Rules 8(a) and 10(b) where "[p]aragraph 88 asserts causes of action under multiple code sections requesting judgment against `appropriate defendants... under any theory of recovery ....'" because the pleading created confusion among multiple defendants by not specifying "which defendants are to be held liable for which code sections").
Here, the Court concludes that Monsanto's counterclaims meet the standards of Rules 8 and 10. The counterclaims contain 105 clearly numbered paragraphs of factual allegations. These allegations are followed by seven separate counts that, although they incorporate by reference the prior paragraphs in the counterclaims, explicitly state the basis for relief under each legal theory. These allegations are more than sufficient to put SEI on notice of the conduct for which Monsanto seeks to hold it liable, and therefore is not the type of pleading that violates Rules 8 and 10. See Matheson Tri-Gas, Inc. v. Sheehan, Civ. No. 11-401, 2011 WL 1832708, at *2 (M.D.Fla. May 13, 2011) (finding that "although each count incorporates by reference each factual allegation and each allegation of every preceding count, the complaint falls exceedingly short of a `shotgun' pleading" because it "alleges discrete claims in separate counts and distinguishes among the three defendants" (internal quotation marks omitted)); Chin v. DaimlerChrysler Corp., Civ. No. 95-5569, 2005 WL 5121812, at *2 (D.N.J. Dec. 5, 2005) (explaining that "broad incorporation by reference" of all
In Count III, Monsanto brings a claim for money had and received alleging that "[t]hroughout the course of the parties' relationship, Monsanto paid to SEI approximately $6.7 million relating to the software development work that SEI was allegedly performing" and that "SEI's acceptance and retention of the $6.7 million was unjust as SEI never provided to Monsanto a fully functional and scalable software product." (Countercls. ¶¶ 119, 121.) SEI moves to dismiss this claim on the basis that money had and received is an equitable quasi-contract claim and provides relief only where no express contract governs the relationship of the parties. SEI argues that because the "claim is based on nothing more than the existence of the written contract between the parties, the obligation to perform under the contract, and monies paid pursuant to the contract" it does not adequately plead alternative relief to Monsanto's breach of contract claims, and must therefore be dismissed. (Reply at 4, Dec. 19, 2013, Docket No. 103.)
To state a claim for money had and received, a plaintiff must allege that "(1) the defendant received or obtained possession of the plaintiff's money; (2) the defendant thereby appreciated a benefit; and (3) the defendant's acceptance and retention of the money was unjust." Pitman v. City of Columbia, 309 S.W.3d 395, 402 (Mo.Ct.App.2010). Claims for money had and received are founded upon equitable principles whereby the law implies a contract to prevent unjust enrichment. Karpierz v. Easley, 68 S.W.3d 565, 570 (Mo.Ct.App.2002). Under Missouri law, a party may not recover on such an implied, or quasi-contract theory when a valid, express contract governs the subject matter of the parties' dispute. See Al-Khaldiya Elecs. & Elec. Equip. Co. v. Boeing Co., 571 F.3d 754, 759 (8th Cir.2009); Howard v. Turnbull, 316 S.W.3d 431, 436 (Mo.Ct. App.2010).
SEI has cited no authority to the contrary. SEI relies upon a number of cases for the proposition that breach of contract and quasi-contract claims cannot coexist, but these cases do not deal with alternative claims presented at the motion to dismiss stage, but rather deal with situations where a party obtained double recovery under these alternative theories. See A & L Underground, Inc. v. Leigh Constr., Inc., 162 S.W.3d 509, 510-11 (Mo. Ct.App.2005) (reversing judgment on money had and received claim after a bench trial because the parties "had an express contract"); KC Excavating & Grading, Inc. v. Crane Constr. Co., 141 S.W.3d 401, 408 (Mo.Ct.App.2004) (reversing judgment on quantum meruit claim entered after a bench trial because the trial court had also "found for KC Excavating on its breach of contract claim").
Monsanto brings separate counterclaims for fraudulent and negligent inducement.
(Countercls. ¶¶ 125, 140.) For example, Monsanto alleges that prior to entering into the Agreement SEI misrepresented that it had "ample and capable software engineers and an infrastructure that allowed SEI to create innovative and complex solutions," "considerable experience in the agricultural industry," "the capability and necessary infrastructure to develop software that would allow Monsanto sales representatives to pitch Monsanto products to farmers `at their kitchen tables' through the use of electronic devices like iPads and laptops," "an advanced method
SEI first argues that Missouri law does not treat claims for fraudulent and negligent inducement differently, and therefore Monsanto's claims "should be merged into one count" which "warrants dismissal" of the claims without prejudice. (Pl.'s Mem. in Supp. of Mot. to Dismiss at 7.) Specifically, SEI argues that the claims are duplicative because they both rely on the same universe of allegedly misrepresentative statements and omissions. (Reply at 5-6 (comparing Countcls. ¶¶ 126-131 with ¶¶ 141-146).)
Inducement claims are a subset of misrepresentation claims. See Docmagic, Inc. v. Mortg. P'ship of Am., LLC, Civ. No. 09-1779, 2010 WL 2326047, at *3 (E.D.Mo. June 8, 2010) (citing Bracht v. Grushewsky, 448 F.Supp.2d 1103, 1110 (E.D.Mo.2006); Hess v. Chase Manhattan Bank, USA, N.A., 220 S.W.3d 758, 763 (Mo.2007) (en banc)). Under Missouri law
CADCO, Inc. v. Fleetwood Enters., Inc., 220 S.W.3d 426, 436 (Mo.Ct.App.2007). The elements of negligent misrepresentation are:
Harris v. Smith, 250 S.W.3d 804, 808 (Mo. Ct.App.2008) (internal quotation marks omitted). Although these two claims are similar, Missouri courts have noted that there are two primary "differences between a cause of action for fraud and negligent misrepresentation; namely fraud `requires that the person knowingly or recklessly supply false information and negligent misrepresentation requires that the information be supplied in the course of the defendant's business.'" Leonard v. BASF Corp., Civ. No. 06-33, 2006 WL 3702700, at *6 (E.D.Mo. Dec. 13, 2006) (alterations omitted) (quoting Kesselring v.
In light of the authority from Missouri courts, it is clear that Missouri recognizes distinct causes of action for fraudulent and negligent misrepresentations and Monsanto is therefore permitted to allege both claims. Additionally, as explained above, the Federal Rules allow Monsanto to plead in the alternative, and therefore dismissal is not warranted even though Monsanto's claims for fraudulent and negligent inducement are based on the same universe of statements and omissions. See Williams v. Fin. Plaza, Inc., 78 S.W.3d 175, 186 (Mo.Ct.App.2002) (noting that negligent misrepresentation can be pled as an "alternative theory" to a fraudulent misrepresentation claim). Here, it is possible that discovery will reveal that SEI knowingly supplied false information and Monsanto will prevail on its fraudulent inducement theory. It is alternatively possible that discovery will show that SEI did not knowingly supply false information, but instead supplied information without exercising reasonable care with respect to the information's falsity and therefore may be liable for negligent inducement. At this motion to dismiss stage, the Court must accept the facts in Monsanto's alternative claims as true, and will deny SEI's motion to dismiss to the extent it contends that dismissal is warranted because Monsanto's fraudulent and negligent inducement claims must be merged.
SEI next argues that Monsanto's claims for fraudulent and negligent inducement are barred by the economic loss rule because the claims are identical to Monsanto's claims based on breach of the Agreement. "The economic loss doctrine prohibits a party `from seeking to recover in tort for economic losses that are contractual in nature.'" Graham Constr. Servs., Inc. v. Hammer & Steel Inc., 755 F.3d 611, 616 (8th Cir.2014) (quoting Autry Morlan Chevrolet Cadillac, Inc. v. RJF Agencies, Inc., 332 S.W.3d 184, 192 (Mo. Ct.App.2010)). The economic loss doctrine seeks to preserve a distinction between contract law and tort law and recognizes that contract law "is better suited for dealing with purely economic loss in the commercial arena than tort law, because it permits the parties to specify the terms of their bargain and to thereby protect themselves from commercial risk." Dannix Painting, LLC v. Sherwin-Williams Co., 732 F.3d 902, 906 (8th Cir.2013) (internal quotation marks omitted).
But the economic loss doctrine does not "categorically" bar fraud and misrepresentation claims that arise in cases involving contractual relationships. AKA Distrib. Co. v. Whirlpool Corp., 137 F.3d 1083, 1086 (8th Cir.1998) cited with approval in Compass Bank v. Eager Rd. Assocs., LLC, 922 F.Supp.2d 818, 827 (E.D.Mo.2013); Self v. Equilon Enters., LLC, Civ. No. 00-1903, 2005 WL 3763533, at *11 (E.D.Mo. Mar. 30, 2005). Instead, most courts have allowed tort claims to go forward where they are "based upon a misrepresentation that was outside of or collateral to the contract, such as many claims of fraudulent inducement." Id.; see also Bridgestone/Firestone, Inc. v. Recovery Credit Servs., Inc., 98 F.3d 13, 20 (2d Cir.1996) (explaining that a plaintiff may maintain a claim of fraud by "demonstrat[ing] a fraudulent misrepresentation collateral or extraneous to the contract"). Although the Missouri Supreme Court has not addressed the operation of the economic loss doctrine in the context of a claim for fraudulent or negligent inducement,
Relying on Compass Bank, SEI argues that because the alleged misrepresentations that form the basis of Monsanto's inducement claims relate to the subject matter of the Agreement — in that they both largely pertain to the nature of software that SEI agreed to develop for Monsanto — the inducement claims are barred by the economic loss doctrine. But it is not enough to warrant dismissal on the basis of the economic loss doctrine for the subject matter of the misrepresentation to merely be referenced in the parties' contract. To the extent Compass Bank can be interpreted as holding that, it reflects an overly narrow view of misrepresentations that are outside of or collateral to a contract. Indeed, such an interpretation would unduly restrict the types of fraudulent inducement claims that could be brought, as many fraudulent inducement claims will be based upon misrepresentations that are in some way referenced in the subject matter of the contract, as, in order to present a fraudulent inducement claim at all, the misrepresentations must be material to the contract. See Scott Salvage Yard, LLC v. Gifford, 382 S.W.3d 134, 138 (Mo.Ct.App.2012) (noting that plaintiff stated a claim for fraudulent inducement to enter a contract regarding payment for crushing of cars where he alleged that defendant "intentionally misrepresented the number of cars he had available for crushing and that such fact was material to the contract"); Evergreen Nat'l Corp. v. Carr, 129 S.W.3d 492, 496 (Mo.Ct.App.2004) (noting that an essential element of fraudulent inducement is the "materiality" of the statement, and describing a claim or fraudulent inducement where plaintiff alleged he was induced to buy certain lots "because of fraudulent misrepresentations regarding the lots").
Rather than looking generally to whether the subject matter of the alleged misrepresentations and the at-issue contract are the same, most courts have focused more precisely on whether a contract term conflicts with or contains the alleged misrepresentation, in which case the inducement claim is barred. Where a contract term contains or conflicts with an alleged misrepresentation, the contract term controls, and there is no fraudulent misrepresentation claim. See AKA Distrib. Co., 137 F.3d at 1087 (finding that a fraud claim could not be based on defendant's representation that plaintiff would be its distributor "for a long time" when "duration was a term of the contract"). Similarly, courts have found that misrepresentations as to a party's intention to perform its obligations under a contract are not actionable under an inducement theory, as the terms of a party's performance are contained in the contract and misrepresentations
Although courts have almost uniformly found claims based on misrepresentations about a party's
With respect to the types of misrepresentations alleged here — about SEI's capabilities, personnel, infrastructure, and experience in the field — which go to a party's
Id.
With these principles in mind, the Court concludes that a Missouri court would allow Monsanto's fraudulent and negligent inducement claims to go forward based on at least some of the misrepresentations alleged in Monsanto's counterclaims, and will therefore deny SEI's motion to dismiss. Certainly some of the misrepresentations alleged by Monsanto were incorporated in the Agreement, and therefore cannot form the basis of a fraudulent inducement claim. For example, Monsanto alleges that SEI represented that it had a Sales Edge product which "included software, date and Intellectual Property that was delivered over the internet." (Countcls. ¶¶ 128, 143.) But the Agreement explicitly incorporates this alleged misrepresentation, stating "SEI has an existing sales enhancement product, SalesEdge Accelerator comprised of software, data and Intellectual property which is delivered over the internet." (Compl., Ex. B at 11.) To the extent that SEI did not have such a product or it was not comprised of those elements, Monsanto has a breach of contract, not a fraud claim.
Monsanto's counterclaim for conversion arises out of its allegation that pursuant to the Agreement "Monsanto is the owner of any Intellectual Property associated with the Monsanto Premium Products that is developed under the Agreement, including but not limited to, software source code." (Countercls. ¶ 155.) Monsanto further alleges that "SEI has possession of the Intellectual Property, including but not limited to, the software source code, and has deprived Monsanto of its right to the Intellectual Property." (Id. ¶ 156.) Finally, Monsanto alleges that it made "[a] demand for the Intellectual Property, including but not limited to, the software source code... on a number of different occasions throughout 2011, but SEI has refused to relinquish the Intellectual Property." (Id. ¶ 157.)
"Conversion is the unauthorized assumption of the right of ownership over the personal property of another to the exclusion of the owner's rights." Emerick v. Mut. Benefit Life Ins. Co., 756 S.W.2d 513, 523 (Mo.1988). To state a claim for conversion, a plaintiff must allege that "(1) plaintiff was the owner of the property or entitled to its possession; (2) defendant took possession of the property with the intent to exercise some control over it; and (3) defendant thereby deprived plaintiff of the right to possession." JEP Enters., Inc. v. Wehrenberg, Inc., 42 S.W.3d 773, 776 (Mo.Ct.App.2001). Where a party's possession of property is initially lawful, wrongful refusal to return the property to its owner can also be actionable under a theory of conversion. See Green Valley Seed, Inc. v. Plenge, 72 S.W.3d 601, 603 (Mo.Ct.App.2002); see also Emerick, 756 S.W.2d at 525. To succeed on a conversion claim based on wrongful refusal to return, the claimant must allege as an element of the claim that a demand for return of the property was made. Green Valley Seed, 72 S.W.3d at 603.
SEI argues that Monsanto's claim must be dismissed for two reasons. First, SEI argues that Monsanto is not the owner of the intellectual property at issue because "[t]here is no language within the body of the Agreement or any other agreement that conveys such ownership," and instead the Agreement only provides Monsanto with a right to use and access the intellectual property. (Mem. in Supp. of Mot. to Dismiss at 10.) Second, SEI argues that Monsanto's conversion claim fails because it fails to allege the "loss of possession of physical, tangible property," and instead alleges conversion of "an idea." (Id. at 12.)
With respect to SEI's first argument, the Court concludes that there is sufficient language in the Agreement to render Monsanto's claim of ownership to the intellectual property plausible at this
(Compl., Ex. B at 25.) Disputes about the import of this provision, its potential ambiguity, scope, and interaction with other provisions in the Agreement are not questions to be resolved on a motion to dismiss. Accepting Monsanto's factual allegations in its counterclaims as true, in conjunction with the provision of the Agreement assigning to Monsanto ownership rights in all intellectual property developed under the Agreement, the Court concludes that Monsanto has adequately alleged an ownership interest in the allegedly converted property.
SEI's second argument also misses the mark. SEI essentially contends that Monsanto's conversion claim must be dismissed because the Court previously dismissed SEI's conversion claim based on the theory that conversion of an idea is not actionable. SEI brought a conversion claim against Monsanto based on, among others, the allegation that Monsanto had unlawfully retained copies of SEI's software. Superior Edge, Inc., 964 F.Supp.2d at 1038. The Court dismissed SEI's claim to the extent it was based upon "Monsanto's retention of SEI's intellectual property... because `conversion does not lie for the appropriation of an idea.'" Id. at 1039 (quoting Schaefer v. Spence, 813 S.W.2d 92, 96 (Mo.Ct.App.1991)). The Court explained that "[c]onversion of intangible property cannot occur where the plaintiff still has the information that the defendant allegedly appropriated." Id. (citing Monsanto Co. v. Hill, Civ. No. 03-181, 2004 WL 4996339, at *4-5 (E.D.Mo. May 21 2004)). Therefore, the Court concluded that "[h]ere, SEI does not dispute that it retains the software it created during the course of the Agreement. Monsanto's retention of any intellectual property did not, therefore, deprive SEI of possession and cannot be the basis of a conversion claim." Id.
Monsanto's conversion claim is essentially the opposite of SEI's claim. Here, unlike with SEI's claim, Monsanto does not claim that it still has the information that SEI allegedly appropriated. Also unlike SEI, Monsanto does not allege that it retains the software that SEI created during the course of the Agreement. Instead, Monsanto's claim is based upon loss of possession of the intellectual property and source code to which the Agreement granted it an ownership interest; not loss of a copy or loss of exclusivity, but loss of the actual software and source code itself. This is sufficient to state a claim for conversion. See Mayo Clinic v. Elkin, Civ. No. 09-322, 2010 WL 760728, at *5 n. 12 (D.Minn. Mar. 4, 2010) (explaining that a conversion claim survived summary judgment based on a dispute over the ownership of software and source code); Abundance Partners LP v. Quamtel, Inc., 840 F.Supp.2d 758, 772 (S.D.N.Y.2012) (denying a motion to dismiss a conversion claim based on conversion of source code).
In support of its counterclaim for professional negligence, Monsanto alleges that "SEI is held to a standard of care as a member of a learned and skilled profession and had a duty to exercise the ordinary and reasonable technical skill that is usually exercised by those in the software development field." (Countercls. ¶ 161.) Monsanto further alleges that "[b]y failing to timely deliver a fully functional and scalable software product in a timely manner, SEI deviated from the standard of care and that deviation was the proximate cause of Monsanto's damages." (Id. ¶ 162.)
As an initial matter, SEI argues that Minnesota rather than Missouri law should govern the professional negligence counterclaim. Because the Court concludes that the claim is subject to dismissal under either state's law, it need not determine whether the choice of law clause in the Agreement is broad enough to encompass claims for professional negligence. "An action for professional negligence exists where, in the context of the contractual relationship, the professional negligently discharges the duties arising from that relationship." Rosemann v. Sigillito, 956 F.Supp.2d 1082, 1109 (E.D.Mo. 2013). With respect to the duty of care in professional negligence claims "`[o]ne who undertakes to render professional services is under a duty ... to exercise such care, skill, and diligence as men in that profession ordinarily exercise under like circumstances.'" Pond Hollow Homeowners Ass'n v. The Ryland Grp., Inc., 779 N.W.2d 920 (Minn.Ct.App.2010) (alterations in original) (quoting City of Eveleth v. Ruble, 302 Minn. 249, 225 N.W.2d 521, 524 (1974)); see also Murphy v. A.A. Mathews, a Div. of CRS Grp. Eng'rs Inc., 841 S.W.2d 671, 674 (Mo.1992) (en banc).
Minnesota and Missouri courts have recognized claims for professional negligence against professionals such as attorneys, architects, accountants, and engineers. See, e.g., Minn.Stat. § 544.42, subd. 1(1); Witzman v. Lehrman, Lehrman & Flom, 601 N.W.2d 179, 184 (Minn.1999) (accountants); Pond Hollow Homeowners Ass'n, 779 N.W.2d at 923 (engineer); Children's Wish Found. Int'l, Inc. v. Mayer Hoffman McCann, PC., 331 S.W.3d 648, 649 (Mo. 2011) (accountants); Blackstock v. Kohn, 994 S.W.2d 947, 950 (Mo.1999) (attorneys) Brennan v. St. Louis Zoological Park, 882 S.W.2d 271, 273 (Mo.Ct.App.1994) (architect). Courts have occasionally suggested that the scope of professional negligence claims might include other similar professionals, such as roofing companies, see Trident Grp., LLC v. Miss. Valley Roofing, Inc., 279 S.W.3d 192, 197 (Mo.Ct.App. 2009), or real estate appraisers, Dueker v. Gill, 175 S.W.3d 662, 669 & n. 6 (Mo.Ct. App.2005) (noting in the context of a negligent misrepresentation claim that "there is some general authority that commercial real estate appraisers may be held liable for negligent misrepresentation" (internal quotation marks omitted)).
Neither the Minnesota nor Missouri Supreme Court has ever recognized a cause of action for professional negligence against providers of computer-related services
In deciding that computer professionals are not subject to professional negligence claims, courts to consider the question have often relied upon the reasoning of Raymond T. Nimmer in his treatise The Law of Computer Technology, who explains:
Ferris & Salter, P.C., 889 F.Supp.2d at 1152 (quoting Raymond T. Nimmer, The Law of Computer Tech. § 9.30 (4th ed.2012)). Additionally, courts have rejected the argument that computer professionals should be subject to professional negligence claims on the basis that they
Hosp. Computer Sys., Inc. v. Staten Island Hosp., 788 F.Supp. 1351, 1361 (D.N.J. 1992).
Here, Monsanto has provided no reason why the Missouri Supreme Court would deviate from the reasoning of these cases. For example, Monsanto has not pointed to any Missouri law which expansively defines a professional negligence action as including any profession that involves complicated or skilled work. Additionally, Monsanto has not identified any Missouri statute or regulation requiring computer professionals to obtain licenses or complete continuing education, which might thereby suggest that Missouri courts would treat computer professionals like attorneys, architects, or accountants. Nor has Monsanto presented any argument that computer professionals are subject to self-regulation in Missouri. Instead, Monsanto argues only that "[b]ased on the facts presented in this case, Monsanto believes that the Missouri Supreme Court would permit a claim for professional negligence against SEI." (Monsanto's Mem. in Opp'n to Mot. to Dismiss at 17 n. 5, Nov. 25, 2013, Docket No. 96.)
Based on the foregoing, and all the files, records, and proceedings herein,
1. The motion is
2. The motion is