ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR JUDGMENT AS A MATTER OF LAW
Re: ECF No. 76
LAUREL BEELER, Magistrate Judge.
INTRODUCTION
This case is a commercial contract dispute.1 Plaintiff Grouse River Outfitters, Ltd. is an outdoor-equipment retailer; defendant NetSuite, Inc. provides commercial software systems that integrate various aspects of retailers' businesses. The parties entered a series of written agreements under which NetSuite would install the software system.2 Grouse River alleges that NetSuite breached its contractual commitments and also misrepresented the capabilities of its software, its experience in installing such a system, and ultimately its ability to provide a system that could work as promised.3
NetSuite moves for judgment on the pleadings to strike certain allegations in the complaint on the ground that they are not actionable fraud.4 The court grants the motion in part.
STATEMENT
The court assumes familiarity with its prior orders, which recount Grouse River's claims that the integrated software system it purchased from NetSuite was installed late and never worked as promised.5 The basic allegations are as follows. In 2012, Grouse River began searching for an "integrated software system" that would help its retail operations grow.6 Grouse River read (and later relied upon) false statements made in NetSuite's advertising material about its capabilities to implement software solutions.7 Grouse River later relied on express statements that NetSuite made that it could deliver a software system that would have the capability to meet Grouse River's requirements.8 The parties entered into a pair of written contracts in March 2014.9 The NetSuite system was not installed and operational by its original deadline of September 12, 2014.10 The system never met its promised capabilities.11
Grouse River eventually filed this lawsuit. NetSuite moved to dismiss the fraud claims, and the court dismissed them with leave to amend.12 The court found — among other things — that Grouse River had adequately pleaded justifiable reliance but had not pleaded fraud with sufficient particularity.13 Grouse River filed a second amended complaint with five claims: (1) fraudulent misrepresentation; (2) negligent misrepresentation; (3) fraud in the inducement; (4) violation of California's Unfair Competition Law (Cal. Bus. & Profs. Code § 17200); and (5) breach of contract.14 NetSuite moved again to dismiss the fraud claims for failing to plead fraud sufficiently under Rule 9(b).15 The court denied the motion, primarily because the statements were at least identified particularly.16 Reading Rule 9(b)'s pleading requirement in harmony with Rule 8(a)'s requirement of a "short and plain" statement of the facts, the court's view was that the lawsuit survived the pleadings stage.17
NetSuite now moves to strike some of the allegations.18 The court held a hearing on December 14, 2017.19
GOVERNING LAW
"After the pleadings are closed—but early enough not to delay trial—a party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c). "[T]he same standard of review applicable to a Rule 12(b) motion applies to its Rule 12(c) analog," because the motions are "functionally identical." Dworkin v. Hustler Magazine, Inc., 867 F.2d 1188, 1192 (9th Cir. 1989). A Rule 12(c) motion may thus be predicated on either (1) the lack of a cognizable legal theory or (2) insufficient facts to support a cognizable legal claim. See Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). When considering a motion to dismiss under Rule 12(c), the court "must accept all factual allegations in the complaint as true and construe them in the light most favorable to the non-moving party." Fleming v. Pickard, 581 F.3d 922, 925 (9th Cir. 2009). "A judgment on the pleadings is proper if, taking all of [plaintiff]'s allegations in its pleadings as true, [defendant] is entitled to judgment as a matter of law." Compton Unified Sch. Dist. v. Addison, 598 F.3d 1181, 1185 (9th Cir. 2010).
ANALYSIS
The motion is procedurally appropriate and valid at least in part. A chart with the court's conclusions about each challenged statement is set forth at the end of the order.
1. The Rule 12(c) Motion Is Procedurally Appropriate
Grouse River argues that the court should deny NetSuite's motion for judgment on the pleadings because "it is nothing more than a disguised motion to have the Court rehear NetSuite's prior Rule 12(b)(6) motion the Court carefully considered, and carefully denied. . ."20 The precise argument — whether the statements in the complaint are not fraud because they are mere puffery — was not raised in the earlier motions or addressed in the court's two prior orders.
As the court said at the hearing, its prior order denying the motion to dismiss was aimed at moving the case forward through discovery. Moreover, there are so many allegations that might or might not — depending on context — sound in fraud that the court essentially kicked the fraud can down the road. The court anticipated that the defense was better raised later21 and (perhaps naively) thought that the parties might resolve their contract dispute with some discovery.
In any event, it was not the court's intent to foreclose the issue. It is procedurally appropriate. Fed. R. Civ. P. 12(h)(2); In re Apple iPhone Antitrust Litig., 846 F.3d 314, 320 (9th Cir.) cert. docketed, 2017 WL 3393652 (Aug. 8, 2017).
2. Statements That Are Actionable Fraud
Under California law, the elements of fraud and deceit are: (1) misrepresentation; (2) knowledge of falsity; (3) intent to defraud; (4) justifiable reliance; and (5) resulting damages. Lazar v. Superior Court, 12 Cal.4th 631, 638 (1996). "The same elements comprise a cause of action for negligent misrepresentation, except there is no requirement of intent to induce reliance." Cadlo v. Owens-Illinois, Inc., 125 Cal.App.4th 513, 519 (2004). "In both causes of action, the plaintiff must plead that he or she actually relied on the misrepresentation." Id.
NetSuite argues that certain allegations in the Second Amended Complaint ("SAC") are not fraud because they are either (1) "mere puffery," (2) statements about future events; or (3) not alleged to be false.
2.1 Statements That Are "Mere Puffery"
NetSuite argues that the advertisements and communications described in the second amended complaint are "mere puffery."22 Some are "mere puffery," but others are actionable because they refer to specific aspects of NetSuite's product and services.
Statements constituting mere "puffery" cannot support liability under a claim for fraud or negligent misrepresentation. Glen Holly Entm't, Inc. v. Tektronix, Inc., 100 F.Supp.2d 1086, 1093 (C.D. Cal. 1999). "Puffery" has been described "as making generalized or exaggerated statements such that a reasonable consumer would not interpret the statement as a factual claim upon which he or she could rely." In re All Terrain Vehicle Litig., 771 F.Supp. 1057, 1061 (C.D. Cal. 1991) (citing Cook, Perkiss & Liehe, Inc. v. Nor. Cal. Collection Serv., 911 F.2d 242, 246 (9th Cir. 1990)). "[U]ltimately, the difference between a statement of fact and mere puffery rests in the specificity or generality of the claim." Newcal Indus., Inc. v. Ikon Office Sols., 513 F.3d 1038, 1053 (9th Cir. 2008). "[A]dvertising which merely states in general terms that one product is superior is not actionable." Cook, Perkiss & Liehe, 911 F.2d at 246 (quoting Smith-Victor Corp. v. Sylvania Elec. Prods., Inc., 242 F.Supp. 302, 308 (N.D. Ill.1965)). "However, misdescriptions of specific or absolute characteristics of a product are actionable." Id. (quoting Stiffel Co. v. Westwood Lighting Grp., 658 F.Supp. 1103, 1115 (D. N.J. 1987)). Whether an alleged misrepresentation is a non-actionable statement of puffery is a question of law. Id.
The following advertisements and communications are not actionable because they are general, exaggerated assertions about characteristics of NetSuite's product: SAC ¶¶ 15, 21, 27, 31, 33, 63, 64, 67, 69, 70, 71, 75, 83, 85, 86, 89, 90. Examples of these statements include:
• "Every company wants to deliver the commerce experience that Apple delivers to customers—an experience that recognizes the customer regardless of channel or device, and efficiently delivers goods and services in world-class fashion, projecting a powerful brand message. NetSuite SuiteCommerce is architected to enable companies of all sizes to deliver this type of rich, touch-point agnostic experience to their customers." (¶ 15)
• "As the No. 1 cloud business management suite, NetSuite meets the in-store retailing needs of multi-channel and multi-location retailers with a modern POS solution that enables retailers to streamline and accelerate the transaction process, while also delivering personalized customer service. . ." (¶ 29)
• "NetSuite further represented at the meeting that the SuiteCommerce software could and would provide Grouse River with an Ecommerce solution that makes is "fast & easy to find products", and allow Grouse River's customers to shop efficiently through any touchpoint including social media and mobile devices." (¶ 71)
A reasonable consumer would not interpret these statements as a factual claim upon which he or she could rely. To the extent that Grouse River brings claims for fraud and misrepresentation based on these paragraphs, the court dismisses the claims.
The remaining advertisements (SAC ¶¶ 17, 19, 23, 25, 31, 35, 37) and communications (SAC ¶¶ 53, 55, 57, 65, 68, 73, 76, 77, 78, 79-82) are actionable because they make specific assertions about how NetSuite's product functions. They all state absolute characteristics of the product, such as (1) the ability to see customer "purchase history and communications with your company and whether they interacted with your brand online, at a brick-and-mortar store location or with a sales representative," and (2) the ability for shoppers to "create and manage lists of favorite or frequently purchased items." These specific statements are distinguishable from generalized "puffery" about the superiority of a product.
In addition, NetSuite's representation that it could deliver a software system that would have the capability to meet Grouse River's requirements is not puffery. Grouse River provided NetSuite with a specific list of requirements. NetSuite said it could meet those requirements. In a different context, a statement that a product could meet a customer's needs might be generalized "puffery." But in the case here, given that Grouse River asked if NetSuite could meet specific requirements, it was plausibly reasonable for Grouse River to rely on the representation that NetSuite would deliver a product that met those specifications. NetSuite's representation that it could meet the requirements outlined by Grouse River therefore is not mere "puffery."
2.2 Statements About Future Events
NetSuite contends that the allegations in SAC ¶ 84 regarding NetSuite's communications with Grouse River are non-actionable because they were statements about future events. Grouse River alleges that NetSuite falsely and fraudulently "committed to have a four month implementation cycle, a top tier team of consultants on the project, 30 minute status calls every two weeks, had the clout to get things done and intended to keep the project on track."23 The court agrees with NetSuite that the statements are not actionable fraud.
Statements that are predictions of future events or commitments to take some action in the future generally are not actionable fraud. Tarmann v. State Farm Mut. Auto. Ins. Co., 2 Cal.App.4th 153, 158 (1991). "Certain broken promises of future conduct may, however, be actionable." Id. "To maintain an action for deceit based on a false promise, one must specifically allege and prove. . . that the promisor did not intend to perform at the time he or she made the promise and that it was intended to deceive or induce the promise to do or not do a particular thing." Id. at 159.
There are no allegations in the complaint that NetSuite did not intend to carry out a four-month implementation cycle or provide other follow-up to keep the project on track. The statements in SAC ¶ 84 are not actionable fraud. For this paragraph only, Grouse River may amend to cure this deficiency if it can.
2.3 Statements Not Alleged To Be False
NetSuite contends that "throughout the SAC, Grouse River often suggests that various statements may form the basis of fraud claims without actually pleading them as such."24 More succinctly, the argument is that the SAC does not allege that these statements are false. The complaint, however, is very clear about what statements it alleges to be false and fraudulent, as it states "this representation was false and fraudulent" after many (but not all) of the allegations regarding NetSuite's statements.
The court concludes that the following statements are not actionable fraud because they are not alleged to be false: SAC ¶¶ 41-51, 91-93, 102, 114, 115, 124, 130, 135, 139, 147.
2.4 Chart Summarizing the Court's Conclusions
The chart below summarizes the court's conclusions with respect to each statement NetSuite challenges in its motion. Some of the statements are actionable in part as fraud, and the chart specifies which part of the statement is specific enough to be distinguished from mere "puffery."
SAC — Non-Actionable Statement
Paragraph *Statement summarized to reduce size of Analysis
Number table
15 Every company wants to deliver the commerce Non-actionable
experience that Apple delivers to customers—an
experience that recognizes the customer regardless "World-class fashion." "powerful brand
of channel or device. and efficiently delivers goods messages," "rich. touch-point agnostic
and services in world-class fashion. projecting a experience." "rich customer profiles."
powerful brand message. NetSuite SuiteCommerce "personalized experience. any time from
is architected to enable companies of all sizes to anywhere" are general. exaggerated
deliver this type of rich. touch-point agnostic assertions about characteristics of NetSuite's
experience to their customers. The secret sauce product which a reasonable consumer would
behind the Apple and NetSuite approach is an not interpret as a factual claim upon which he
integrated back-end system that combines core or she could rely.
business processing capabilities with rich customer
profiles. to deliver the brand promise of a
personalized experience. anytime from anywhere.
17 SuiteConunerce exposes native NetSuite conunerce Actionable
capabilities—including merchandising. pricing.
promotions. payment processing. support The statement is actionable in so far as it
management. and customer management—as specifies capabilities of the program.
services that can be leveraged by any presentation including "merchandising. pricing. payment
layer. while providing an integrated back-end processing. support management, and
business management system customer management."
The remaining parts of the paragraph are
non-actionable puffery.
19 Whereas the industry standard is sub 2-second page Actionable
load tune. SuiteConnnerce Experience offers
sub-second page times by avoiding the redundant
rendering and downloading associated with "Sub-second page times" is not puffery
traditional presentation frameworks. . . For because it is a quantified assertion of the
example. promotions can be implemented once and page-load time. See Cook Pet-kiss & Liehe.
enabled across online. telephone and in-store 911 F.2d at 246 (discussing Smith-Victor.
transactions to augment the core transactional 242 F. Stipp. at 308-309). The rest of the
capabilities. and customize the system to their exact statement primarily describes specific aspects
requirements. . . of the product: the ability to implement
Multi-Channel Business Logic: Since promotions across online. telephone and in-store
SuiteConunerce offers a single back-end system for transactions: a system to process orders.
processing orders. managing inventory and manage inventory. and generate offers: the
generating offers. a business rule such as a ability to set a maximum munber of
maximum number of purchases on a sale item. can purchases on a sale item.
be implemented once and enforced across the
website. in-store and via telesales.
21 NetSuite is the only cloud business software suite Non-actionable
that brings together every step of a multi-channel.
multi-location retail business—POS. econunerce. These statements are too general to be
CRM. marketing. inventory and order management. actionable fraud.
and fmancials. Only NetSuite gives you real-time
visibility into your entire retail operation.
accessible from anywhere at any time. With
NetSuite. you get a single view of the business
across all channels. ensuring that your customer.
order. inventory and financial information is always
up to date and that you deliver the personalized
experience your customers expect across every
touchpoint.
23 NetSuite for Retail Provides: Actionable:
• A single. integrated solution to manage your
entire retail business. The following statements are about specific
• Complete 360-degree view of the customer across aspects of the product: "mobile ready POS":
all channels and touchpoints. "Marketing tools to target and segment
• Support multiple locations, chancels and brands offers"; "Real-time inventory visibility
from a single platform. across all channels"; "Support multiple
• A full featured and mobile ready POS. locations, channels and brands from a single
• Powerful ecommerce capabilities on any device. platform"
• Central management of all pricing and
promotions. The remaining parts of the paragraph are
• Real-time inventory visibility across all channels. non-actionable puffery.
• Cross-channel order management and fulfillment.
• Marketing tools to target and segment offers.
• Easy custonnzation for your specific retail
requirements.
• A lower cost and less hassle than on-premise
retail systems
25 With NetSuite. you get a 360-degree view of each Actionable:
customer so that you can deliver personalized
service, build customer loyalty and provide a The following statements are specific aspects
relevant. engaging shopping experience with your of the product: "See their purchase history
brand. See their purchase history and and communications with your company and
conummications with your company and whether whether they interacted with your brand
they interacted with your brand online, at a online. at a brick-and mortar store location or
brick-and mortar store location or with a sales with a sales representative": "Provide
representative. Provide personalized marketing to personalized marketing to your customers
your customers based on their purchase history or based on their purchase history or
demographics. Offer customers self-service options demographics;" "Offer customers self-service
to view then' online purchase history, reorder and options to view their online purchase
fund answers to then. questions 24/7. history and reorder."
The remaining parts of the paragraph are
non-actionable puffery.
27 With NetSuite. integration is inherent in the Non-actionable
product. All enterprise functions are wrapped up in
a single database. application and version of code. These statements are too general to be
actionable fraud.
29 As the No. 1 cloud business management suite, Non-actionable
NetSuite meets the in-store retailing needs of
multi-channel and multi-location retailers with a modern These statements are too general to be
POS solution that enables retailers to streamline actionable fraud.
and accelerate the transaction process. while also
delivering personalized customer service. . .
31 Speed of deployment in months not years. Non-actionable
This statement is too general to be actionable
fraud.
33 NetSuite delivers a cloud-based. multi-channel Non-actionable
retail management software system that brings
together POS. econunerce. CRM and marketing. These statements are too general to be
merchandising and order management. financials, actionable fraud.
and warehouse management into a single.
centrally-managed solution. Our retail software solution is an
end-to-end suite designed especially for
multi-channel retailers that will enable enhanced
customer service across channels while driving
growth and increased revenue.
35 Site search. Solr provides capabilities like type Actionable
ahead recommendations and customized search
criteria settings to optimize results. Generate These statements represent that the product
SEO-friendly URL links. has the specific functions listed. While the
"Dynamic merchandising. Present upsells. statements mix in some "puffery" (e.g.
cross-sells and related products based on merchant-driven -dynamic merchandising." "responsive
rules such as location, browsing behavior. items in design") the majority of these statements
cart. best sellers or higher margins. refer to very specific features.
"Mobile. Responsive design enables sites to display
elegantly across all devices including desktops,
mobile phones and tablets.
"Searchandising. Promote products in search
results based on search keywords and phrases or
leverage product attributes such as top sellers, top
rated and new anivals.
"Inventory visibility. Show real-time product
availability on your web store. Automatically
removed out-of-stock items from your site.
"Sian in/sign up `forgot password. Enable account
creation. returning customer sign-in and password
reset.
"Returns. Enable self-service returns management
that allows shoppers to initiate an online return
authorization.
"Product/wish lists. Shoppers can create and
manage lists of favorite or frequently purchased
items."
37 NetSuite enhances inventory visibility with Actionable
tracking and control capabilities to manage every
stage of the lifecycle and control costs. . . . . The following statements describe specific
Serialized inventory to track purchases and sales by aspects of the product: "Serialized inventory
assigning a serial number to each item. to track purchases and sales by assigning a
Periodic inventory counts that automatically serial number to each item"; "Periodic
calculate on-hand items. Pick. pack and ship inventory counts that automatically calculate
management for high-volume order processing on-hand items": "Pick, pack and ship
enviromnents. management for high-volume order
processing."
The remaining parts of the paragraph are
non-actionable puffery.
39 NetSuite advertised and promised Grouse River Non-actionable
that its interne platform would be "world-class"
"[enabling] companies of all sizes to deliver. . .rich. These statements are too general to be
touch-point agnostic experience to their customers. actionable for fraud.
42 As we discussed previously. I have used your Non-actionable
requirements doctunents to call our natively
delivered functionality as well as customizations The complaint does not allege that this is
and partner solutions. false. These are allegations about what
Grouse River expressed it needed in its
software system.
41-51 General statements made by Grouse River as to Non-actionable
what it hoped NetSuite might be able to deliver.
The statements are not specific functionality but The complaint does not allege that this is
instead broad and general categories of false. These are allegations about what
information. Grouse River said it needed its software
system.
53 In an e-mail immediately following [a phone call Actionable
with G. Fallis] Mr. Waldron provided
documentation representing that NetSuite could The statement that NetSuite "could meet the
meet the vast majority of Grouse River's vast majority of Grouse River's
requirements and stating "based on our requirements" is a specific representation
conversation the stage of growth you are at now about the functionality of the product
with Grouse River is typically when we see because it was made in the context of
companies coming to NetSuite in hopes of gaining knowing what specific requirements Grouse
a platform that is more unified and able to scale to River had asked for (see SAC ¶¶ 41-51).
future growth aspirations and this is just what we
provide."
55 In the same April 4 e-mail Mr. Waldron gave Mr. Actionable
Fallis an estimate of rough project costs and
represented that "recurring cost thereafter is These are specific characteristics of the
extremely predictable (vs. the On Premise model) product. to the extent that the statement
as NetSuite handles the upgrades for you with our asserts that NetSuite handles upgrades with
enhancement updates (twice a year) that are enhancement updates (twice a year) that are
included with your subscription." included with the subscription.
Non-Actionable
The statement that "recurring costs thereafter
is extremely predictable (vs. the On Premise
model)" is puffery because it is a general
statement about the superiority of the
product.
57 Following Mr. Waldron's e-mail on April 4. Actionable
Grouse River was repeatedly told that version
upgrades would be seamless and automatically These are specific characteristics of the
occur twice a year. This is substantiated in the sales product. to the extent that the statement
presentation review Mr. Waldron presented to Mr. asserts that customizations migrate
Fallis on December 3. 2013 that claimed that automatically and that Netsuite handles
"customizations migrate automatically" and that upgrades.
Netsuite upgrades are "[Netsuite's] job".
63 On September 25. 2013. Grouse River and Non-actionable
NetSuite teams met for a review of purchasing and
accounting modules. This meeting was attended by These statements are too general to be
participants from Grouse River . . . . The NetSuite actionable fraud.
team represented that NetSuite could and would
meet Grouse River's purchasing and accounting
needs.
64 "As Owen mentioned on the phone today. your Non-actionable
ecommerce requirements are a very strong fit for
NetSuite econunerce." These statements are too general to be
actionable fraud.
65 On November 26. 2013. the NetSuite sales team. . . Actionable
visited Grouse River . . . and demonstrated mobile
point-of-sale, responsive web design. advanced
inventory reporting. and advanced marketing These statements are about specific
(tailored E-commerce user experience based on characteristics of the product.
previous shopping history) and represented to
Grouse River that NetSuite could and would
provide this functionality to Grouse River.
67 At the November 26. 2013 meeting. Mr. Waldron Non-actionable
showed the Grouse River team a presentation
indicating that the average system implementation These statements are too general to be
tune is five months and described implementation actionable fraud.
as "rapid" and "predictable" — necessarily
representing that this could and would be the case
with NetSuite's implantation for Grouse River.
68 The presentation further represented that NetSuite's Actionable
software provides unique benefits including a
"single version of the truth across all areas of the These are specific characteristics of the
business" and a "single, unified solution to manage product. to the extent that the statement
your retail business" with a POS system that asserts that the software allowed "real-time
supports "real-time inventory visibility, advanced inventory visibility" and "shop online — pick
store reporting/end of day processing. and. shop up in store."
online — pick up in store."
69 The NetSuite presentation went on to show that the Non-actionable
software only requires a subscription and
eliminates the need to back-up. upgrade. migrate. These statements are too general to be
tune. or replace software. actionable fraud.
70 NetSuite also stated at this meeting that 0% of Non-actionable
Grouse River's resources are needed to attend to
the software's infrastructure upgrades and the These statements are too general to be
migration of any customizations. actionable fraud.
71 NetSuite further represented at the meeting that the Non-actionable
SuiteConunerce software could and would provide
Grouse River with an Econunerce solution that These statements are too general to be
makes is "fast & easy to find products". and allow actionable fraud.
Grouse River's customers to shop efficiently
through any touchpoint including social media and
mobile devices.
73 NetSuite's November 26. 2013 onsite presentation Actionable
to Grouse River reinforced this information stating
that it provided "blazing fast websites" with an The statement that NetSuite provided an
average response time of 0.45 seconds and "faster average response time of .45 seconds is not
than any site in the Internet Retailer 500." puffery because it is a quantified assertion of
the page-load time.
The remaining parts of the paragraph are
non-actionable puffery.
75 On December 11, 2013. more initial meetings took Non-actionable
place [with OZlink and Pacejet]. The necessary
predicate for these meetings was the representation These predicate "representations" are too
that. working with NetSuite's on-line partners. general to be actionable for fraud. There is no
NetSuite could meet Grouse River's stated business specific assertion in this paragraph about a
needs and objectives. false or misleading statement or
representation.
76 On January 6, 2014. Messrs. Fallis. Wronski. and Actionable
Hill from Grouse River met with Mr. Waldron and
Branden Jenkins (in charge of NetSuite point of The allegation that individuals at the meeting
sale) to dive deeper into POS functionality as it represented that NetSuite could meet Grouse
relates to Grouse River's requirements. NetSuite's River's POS functionality requirements is a
representatives represented that NetSuite could and specific representation about NetSuite's
would meet Grouse River's POS functionality functionality.
requirements.
77 On January 8, 2014. Grouse River's team . . . Actionable
viewed a demonstration of integrated shipping via
Pacejet. which Mr. Waldron had represented to The representation that Pacejet would work
Grouse River would work with NetSuite's system with NetSuite's system and allow Canadian
to meet Grouse River's requirements for integrated shipping from Grouse River's website and
Canadian shipping from its website and ERP ERP system is a specific representation about
system. NetSuite's functionality.
78 That presentation necessarily represented that the Actionable
system NetSuite was proposing to provide to
Grouse River could and would meet Grouse These are specific characteristics of the
River's stated requirements. product. to the extent that NetSuite
represented that it could meet specific POS
functionality requirements outlined by
Grouse River.
79-82 At each of [the meetings on Feb. 7. Mar. 13&17, Actionable
2014]. and at all times leading up to the signing of
the sales contract. NetSuite's sales team repeatedly These are specific characteristics of the
expressed full confidence that NetSuite could and product. to the extent that NetSuite
would provide a system that would meet Grouse represented that it could meet specific
River's detailed stated business requirements. requirements outlined by Grouse River.
84 During the same March 27, 2014 call. NetSuite's Non-actionable
Gary Specter and Michael Weiss committed that
NetSuite will have a four-month implementation The statements that NetSuite will have a
cycle and that they had a top tier team of four-month implementation cycle. have
consultants on this project. Mr. Fallis asked about senior-level oversight. have twice-monthly
the ability of the NetSuite team to execute against governance calls, and other assurances are
the project. emphasizing both the importance of the promises about the future and there is no
timeframe and expense and the need to begin allegation that NetSuite did not intend to
seeing positive results before year-end. Mr. Specter fulfill those promises.
assured Mr. Fallis that this will be the case and that
the project will have continuous senior-level
oversight, including Mr. Specter's own
involvement. through "go-live" via twice-monthly
governance calls. Siumnarized in an e-mail from
Mr. Waldron to Mr. Fallis later that afternoon "As
we discussed this afternoon we will hold a project
status alignment call for 30 minutes every two
weeks to check in and discuss the status of the
project until go-live."
85-86 Mr. Waldron and Mr. Weiss also represented to Non-actionable
Grouse River that they were sales executives who
had the authority, experience. and the clout to get These statements are too general to be
things done. In fact. NetSuite's entire retail sales actionable fraud.
team started between March and October of 2013
and were brand new hires.
83 On March 27, 2014 in a final call to review the Non-actionable
proposal. Mr. Fallis asked NetSuite's sales leader.
Gaiy Specter. if he had confidence that the These statements are too general to be
professional services and project management actionable fraud.
teams that were going to support implementation
were both capable and experienced and is assured
this is the case. Mr. Specter answered affirmatively
89-90 Prior to signing the contracts with NetSuite Mr. Non-actionable
Fallis communicated . . . that it was critical that the
project implementation proceed on par with These statements are too general to be
NetSuite's stated average implementation time actionable fraud.
frame of four months as presented in on-site
presentations in November 2013 . . ..
Mr. Specter assured . . . that the team and resources
that would be assigned to the project were capable
of meeting the objectives and tune frame for
implementation.
91 On March 28, 2014. Mr. Specter e-mailed Mr. Non-actionable
Fallis stating that he intended to keep the project on
track through the formation of a twice-monthly These statements are not alleged to be false.
"Project Governance Call" and that he had "never
had an unsuccessful deployment when this has
been instituted with both partners actively
participating." Mr. Specter went on to say that he
"will ensure all of the key stake holders and project
leaders from NetSuite will attend."
92 Despite Mr. Specter's earlier assurances. when the Non-actionable
system implementation started falling behind
schedule there was not only a lack of resources but This statement is not alleged to be false.
then. over a dinner meeting on October 22, 2014.
Mr. Specter indicated that he needed to have
approval from others to escalate the situation as a
"lighthouse" account but that Grouse River's
account size would not warrant it to be among the
company's top priorities.
93 On May 1, 2014. David Mason-Jocksch, the Non-Actionable
NetSuite project manager. provided a "go-live"
schedule to Grouse River indicating a project This statement is not alleged to be false.
kick-off date of May 5 (for initial training) and May 20
for Business Process Mapping. with a "go-live"
date of September 12, 2014.
102 On October 22, 2014. Mr. Fallis met with NetSuite. Non-actionable
. . The NetSuite representatives acknowledge that
the project is nowhere near on track. Mr. Specter This statement is not alleged to be false.
tells Mr. Fallis that lie is fighting to have the
Grouse River account classified as a `lighthouse.'
account to get the necessary expertise and resources
in order to get it back on track — thereby admitting
that. up until that point. NetSuite had not devoted
the necessary expertise and resources to the Grouse
River contract.
114 On June 5, 2015. Mr. Fallis connected with Mr. Non-actionable
Dinesh Chaurasia. the head of NetSuite's Retail
and eConunerce Professional Services. who This statement is not alleged to be false.
conunits to a rapid resolution of the outstanding
deliverables and issues stemming from NetSuite's
repeated mis-handling of the project
115 Mr. Fallis signs a document allegedly based on Non-actionable
statements made on a phone call with an employee
of NetSuite. Included in the e-mail from Mr. Fallis This statement is not alleged to be false.
are suggestions that NetSuite said it was
"conunitted to resolving all outstanding issues."
124 Mr. Swan disclosed for the first tulle the extent of Non-actionable
NetSuite's frauds, admitting that NetSuite ventured
into pioneering territory with Grouse River being This statement is not alleged to be false.
one of the very first customers to attempt to use the
combination of technology that it did. and that
Grouse River was also one of. if not the. first
NetSuite Point-of-Sale customer in Canada.
130 During their December 7, 2015 phone conversation Non-actionable
Mr. Swan agreed with Mr. Fallis that it was
obvious that NetSuite did not have the ability to This statement is not alleged to be false.
provide the functionality it conunitted to and
reiterated an offer to have Grouse River walk away
from the platform without paying its outstanding
invoices or future invoices.
135 On December 17, 2015. Mr. Fallis received a reply Non-actionable
from Mr. Swan indicating that he did "relay [Mr.
Fallis'] position to the team here. And I agree there This statement is not alleged to be false.
have been challenges with the implementation.
which is why we're proposing the below" (referring
to the proposal for Grouse River to abandon the
platform without paying further licensing fees).
139 Mr. Nelson replied at 3:56 p.m.: "Honestly. from Non-actionable
your emails I just assumed nothing was working.
Was just on your website as well. Looks awesome This statement is not alleged to be false.
and screams. Performing well above the industry
norms looking at our performance data."
147 As timelines started to slip on the project due to Non-actionable
NetSuite's inability to provide the functionality it
had promised. NetSuite project managers Paul This statement is not alleed to be false.
Clarke and David Mason-Jocksch and members of
its services team expressed their frustration about
the commitments to functionality and to meeting
the time frame the NetSuite sales people had
promised. indicating that they were overzealous
and unrealistic. and that this was creating
sigriificant internal strife among the NetSuite teams
that were struggling to allocate sufficient resources
to the project.
CONCLUSION
The court grants in part NetSuite's motion. For paragraph 84 only, Grouse River may amend to cure the deficiency. The court will discuss the timing of any amended complaint at the January case-management conference.
This disposes of ECF No. 76.
IT IS SO ORDERED.
