JOHN W. DeGRAVELLES, District Judge.
This matter comes before the Court on Merge Healthcare Solutions, Inc's ("Merge" or "Defendant") Motion to Dismiss Claims Brought by Plaintiffs Performance Labs, LLC and Prestige Healthcare Solutions, LLC (Doc. 39) ("MTD II"). Plaintiffs Performance Labs, LLC ("Performance"), and Prestige Worldwide Leasing, LLC ("Prestige"), two of the three plaintiffs in this suit, oppose the motion.
The Court has carefully considered the law, facts in the record, and arguments and submissions of the parties and is prepared to rule. For the following reasons, the Defendant's motion is granted in part and denied in part. First, Performance and Prestige's claims for redhibition and rescission of contract for fraud are dismissed. Neither Plaintiff alleged a contract for sale or any obligation independent of the January 11, 2016 Sales Order. On its face, the Sales Order is exclusively between Trinity and Merge, so Performance and Prestige cannot recover under it. Second, Performance and Prestige's tort claims (negligence, negligent misrepresentation and unfair trade practices) may proceed as Plaintiffs have sufficiently alleged that Merge had a duty to all Plaintiffs. And third, Performance and Prestige cannot recover as third party beneficiaries under the January 11, 2016 Sales Order because the contract unambiguously precludes any non-party from claiming such status.
The relevant factual allegations are taken from Plaintiffs' Second Amended Petition (Doc. 38) ("SAP"). All allegations are assumed to be true for purposes of this motion and construed in a light most favorable to Plaintiff. Thompson v. City of Waco, Tex., 764 F.3d 500, 502-03 (5th Cir. 2014). The allegations are also taken from the January 11, 2016 Sales Order (Doc. 39-2) attached to Defendant's MTD II, as it is referenced in the SAP and central to Plaintiffs' claims.
This suit arises out of an alleged software defect in an operating system sold and installed by Defendant. Trinity, Performance, and Prestige (collectively, "Plaintiffs") all performed toxicology testing services and related services in Louisiana. (SAP ¶¶ 1-3, Doc. 38.) Trinity operated a clinical laboratory in Mandeville, Louisiana, which specialized in clinical medication monitoring through toxicology testing. (Id. ¶ 1.) Performance is owned by Trinity and provided medication monitoring for patients using toxicology testing. (Id. ¶ 2.) Trinity also owned Prestige, which provided employee leasing services and laboratory management services to clinical and toxicology laboratories located in Louisiana and Mississippi. (Id. ¶ 3.)
The toxicology testing performed at these laboratories involved collecting biological samples from medical patients and testing those samples for chemicals, drugs (legal and illegal), and toxins, which could affect those patients' medical treatment options. (Id. ¶ 8.) Since patient outcomes are highly regulated by both industry regulations as well as federal and state laws and regulations, (SAP ¶ 11, Doc. 38), toxicology laboratories are concerned with using programs and operating systems that will meet the requirements to protect patient safety and data security. (Id. ¶ 13.)
Merge is a developer and manufacturer of clinical laboratory software systems, including the Merge LIS™ software at issue in this case. (Id. ¶¶ 18-23.) Plaintiffs allege that they expressly communicated to Merge that they required operating software that met the industry and legal requirements, which Merge allegedly confirmed its LIS™ software would provide. (Id. ¶¶ 26-28.) Plaintiffs claim that Merge's representations about the software's reliability and security substantially influenced their decision to select Merge as their new operating platform provider. (Id. ¶ 32.)
Plaintiffs contend that, when Merge was marketing its software, Merge knew and intended that its product would be used by and for the benefit of all Plaintiffs. (Id. ¶ 33.) Before the purchase could be perfected, Plaintiffs had to submit to a credit check through Byline Financial Group ("Byline"), Merge's preferred financing company. (SAP ¶ 39, Doc. 38.) In response, Trinity's Chief Operating Officer submitted credit applications for both Performance and Trinity. (Id. ¶ 40.) The Chief Operating Officer explained he submitted two credit checks to provide "a more accurate financial representation," as Trinity's activity occurs through Performance and Prestige. (Id.) Thereafter, Plaintiffs contend, emails from Byline refer to Trinity and Performance as "Co-lessee's" [sic]. (Id. ¶¶ 43-44.) Additionally, Plaintiffs allege that Merge knew that Performance was a "smaller lab" where Merge LIS™ would be installed. (Id. ¶¶ 45-49.)
However, prior to contracting with Plaintiffs, Merge allegedly became aware of a "software design" defect during or around March 2015. (SAP ¶ 51, Doc. 38.) Plaintiffs claim that the defect resulted in the LIS™ software creating "duplicate container numbers . . . for patients." (Id.) Plaintiffs assert that the software created duplicate records for a single toxicology test, which eventually could result in the software deleting both entries in error. (Id. ¶ 54.) Plaintiffs claim that this compromised laboratory reliability and testing accuracy because it increased the risk that the testing laboratory would fail to perform the requested toxicology test. (Id.) Plaintiffs allege that Merge never informed them of the software issue, either prior to installing the LIS™ software or after installation, even though Merge recalled the software. (Id. ¶ 55.)
In January 2016, Trinity contracted with Merge to purchase the LIS™ software. (Id. ¶¶ 66-68.) The only two parties referenced in the Sales Order are Merge and Trinity. (Doc. 39-2 at 3.) The contract enumerates twenty-four different items that Trinity would purchase, including installation and training under the heading "PROFESSIONAL SERVICES." (Id. at 4-6.) Two provisions of note under the heading "TERMS AND CONDITIONS OF SALES ORDER" are "No Third Party Beneficiaries" and "Governing Law." The former states that "nothing in this Agreement will be construed as giving any right, remedy or claim to an entity other than the Parties..." (Id. at 9.) The latter clause states the Sales Order shall be governed by and construed in accordance with the laws of the State of Delaware. (Id.)
The software was installed at Trinity's toxicology laboratory in April 2016. (SAP ¶¶ 66-68.) Plaintiffs began using the LIS™ software when it went "live" in late May 2016. (Id. ¶ 74, Doc. 38.) Plaintiffs allege that they "immediately" noticed defects in the software, including the duplicate container defects along with others, which made the software incompatible with meeting the law and regulatory requirements. (Id. ¶ 75.)
Plaintiffs include a list of several alleged defects in the LIS™ software including (but not limited to): "lack of audit tracking defect," "user manual defect," "illegible comments defect," "incorrect sample date defect," "no rejected samples defect," "re-preparation sample limbo defect," "no disabled users defect," "rejected report defect," and "back-dating defect." (Id. ¶ 76.) Generally, Plaintiffs contend that these defects have the same effect as the duplicate container issue, in that the defects compromise patient safety and data security. In addition, Plaintiffs note that Merge failed to meet industry standards regarding security protocols, resulting in a security defect that "would allow a party to access the user's system and take, corrupt, or destroy the information contained in a customer's database." (Id. ¶ 77.) As to this last issue, Plaintiffs claim that Merge could easily resolve this security defect in a short amount of time, but that Merge failed to correct the purported flaw. (Id.)
Plaintiffs indicate that they notified Merge upon their discovery of the software defects, which Merge was either "incapable of or unwilling" to resolve. (Id. ¶ 80.) As a result, Plaintiffs claim they acted in good faith and at their expense to create software "work-arounds" that would make the LIS™ software compatible with laws and regulations. (SAP ¶ 81, Doc. 38.) Purportedly, the software defects and the subsequent "work-arounds" proved to be such a financial and labor-intensive expense that Plaintiffs were unable to return their laboratories to full capacity. (Id. ¶¶ 83-84.) Plaintiffs claim that they were eventually "forced" to close their Louisiana laboratories and lost their management contracts for the Mississippi contracts due to the financial issues they faced as a result of the Merge LIS™ software defects. (Id. ¶¶ 88-90.)
Additionally, Plaintiffs contend that Merge was unable or unwilling to remedy the software defects or collaborate with Plaintiffs to find a solution. (Id. ¶ 92.) Plaintiffs assert that they warned Merge of the risk that the software defects posed to patient safety, but Merge failed to correct the software issues or inform other Merge LIS™ software users of the deficiencies. (Id.) In May 2017, Merge emailed its customers to announce that they were exiting the laboratory information system market and that they would end support of their current system on December 31, 2018. (Id. ¶ 98.)
In Johnson v. City of Shelby, Miss., 135 S.Ct. 346 (2014), the Supreme Court explained "Federal pleading rules call for a `short and plain statement of the claim showing that the pleader is entitled to relief,' Fed. R. Civ. P. 8(a)(2); they do not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted." 135 S. Ct. at 346-47 (citation omitted).
Interpreting Rule 8(a) of the Federal Rules of Civil Procedure, the Fifth Circuit has explained:
Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 257 (5th Cir. 2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 1965 (2007)).
Applying the above case law, the Western District of Louisiana has stated:
Diamond Servs. Corp. v. Oceanografia, S.A. De C.V., No. 10-00177, 2011 WL 938785, at *3 (W.D. La. Feb. 9, 2011) (citation omitted).
The Fifth Circuit further explained that all well-pleaded facts are taken as true and viewed in the light most favorable to the plaintiff. Thompson v. City of Waco, Tex., 764 F.3d 500, 502-03 (5th Cir. 2014). The task of the Court is not to decide if the plaintiff will eventually be successful, but to determine if a "legally cognizable claim" has been asserted." Id. at 503.
In general, pursuant to Rule 12(d), "[i]f, on a motion under Rule 12(b)(6)[,]...matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56." Fed. R. Civ. P. 12(d); United States v. Rogers Cartage Co., 794 F.3d 854, 861 (7th Cir. 2015). There are some exceptions to this ostensibly ironclad standard. On a motion to dismiss, the court may consider "the complaint, its proper attachments, `documents incorporated into the complaint by reference, and matters of which a court may take judicial notice.'" Innova Hosp. San Antonio, Ltd. P'ship v. Blue Cross and Blue Shield of Georgia, Inc., No. 14-11300, 2018 WL 2943339, at *3 (5th Cir. June 12, 2018) (citing Wolcott v. Sebelius, 635 F.3d 757, 763 (5th Cir. 2011) (quoting Dorsey, 540 F.3d at 338) (citations and internal quotation marks omitted)).
As the Fifth Circuit has explained, "[i]f the district court does not rely on materials in the record, such as affidavits, it need not convert a motion to dismiss into one for summary judgment." U.S. ex rel. Long v. GSDMIdea City, L.L.C., 798 F.3d 265, 275 (5th Cir. 2015) (citing Davis v. Bayless, 70 F.3d 367, 372 n.3 (5th Cir. 1995)). "[T]he mere submission [or service] of extraneous materials does not by itself convert a Rule 12(b)(6) [or 12(c)] motion into a motion for summary judgment." Id. (quoting Finley Lines Joint Protective Bd. v. Norfolk S. Corp., 109 F.3d 993, 996 (4th Cir. 1997) (internal quotation marks omitted) (second alteration in original)). A district court, moreover, enjoys broad discretion in deciding whether to treat a motion to dismiss as a motion for summary judgment. See St. Paul Ins. Co. v. AFIA Worldwide Ins. Co., 937 F.2d 274, 280 n.6 (5th Cir. 1991).
The Fifth Circuit has recognized a limited exception to the general rules under Federal Rule of Civil Procedure 12(d) and related jurisprudence. The Fifth Circuit has approved district courts' consideration of documents attached to a motion to dismiss, when such documents are referred to in the plaintiff's complaint and are central to the plaintiff's claim. See Werner v. Dept. of Homeland Sec., 441 Fed. App'x. 246, 248 (5th Cir. 2011); Scanlan v. Texas A & M Univ., 343 F.3d 533, 536 (5th Cir. 2003); Collins, 224 F.3d at 498-99.
Here, Plaintiffs and Defendant have each submitted to this Court outside documents which they want the Court to consider. While the Court will not, in its discretion, convert this motion to dismiss to a motion for summary judgment, the Court will consider the January 11, 2016 Sales Contract based on the limited exception recognized by the Fifth Circuit. The contract is referenced throughout the SAP and is central to Plaintiffs' claims. However, the Court will decline to consider the deposition testimony of Ron Poe attached to Plaintiffs' Supplemental Memorandum, as it fails to meet the above exception.
Plaintiffs' first two causes of action are for redhibition and rescission of contract for fraud. Both claims require that Prestige and Performance had contracts with Merge. Defendant argues that no such contractual relationship existed. Having carefully considered the issues, the Court finds that neither Performance nor Prestige has alleged a contract with Merge, so these claims must be dismissed.
Defendant contends that, because Plaintiffs have failed to identify any contracts to which Prestige or Performance is a party, they cannot bring their claims for redhibition or rescission of contract for fraud. (MTD II, Doc. 39-1 at 6.) Citing to Okuarume v. Southern University of New Orleans, 17-0897, p.5 (La. App. 4 Cir. 4/25/18); 245 So.3d 1260, 1264, Defendant states that there are four elements required for a contract in Louisiana: (1) the capacity to contact, (2) mutual consent, (3) a certain object, and (4) lawful cause. (Id.) Additionally, "mutual consent" requires a plaintiff to show that there was offer and acceptance. (Id.)
Defendant's primary argument is that all communication occurred between Merge and Trinity and that Prestige and Performance were only mentioned as affiliates of Trinity. (Id.) Defendant asserts that Plaintiffs have failed to show that Prestige and Performance contracted with, negotiated with, or purchased or used software from Merge. (MTD II, Doc. 39-1 at 7.) Additionally, Defendant notes that Prestige is only mentioned once in the SAP in relation to Plaintiffs' contractual claims. (Id.) Defendant contends that Byline's characterization of Trinity and Performance as "co-lessee's" [sic] is insufficient to establish a contractual relationship because Byline is a separate and independent company from Merge. (Id.)
Plaintiffs argue that they have stated a plausible basis to establish (1) that Merge offered to provide industry-standard products and services to Performance and Prestige, (2) that Performance and Prestige accepted this offer, and (3) that such contractual obligations were independent of the sales contract with Trinity. (Doc. 41 at 4-5.) Plaintiffs do not allege that a sales contract existed between Performance or Prestige and Merge. Instead, Plaintiffs argue that Merge offered to provide software installation and services, and Performance and Prestige accepted Merge's offer. (Id. at 4.)
In support of their theory, Plaintiffs restate email correspondence attached to the SAP. First, Plaintiffs allege that on December 29, 2015, Trinity's Chief Operating Officer informed a Merge representative that Trinity's activity occurs through Performance and Prestige. (Id. (citing SAP ¶ 40, Doc. 38).) Further, Plaintiffs state that Merge, during email correspondence, referred to the project name as "Trinity Medical Services, dba Performance Laboratories." (Id.) Plaintiffs reiterate, also, that Byline referred to Performance and Trinity as "co-lessee's." [sic] (Id.) Additionally, Plaintiffs contend that Merge agreed, via email, to install LIS™ at Performance Labs. (Id.) Therefore, Plaintiffs argue that all this correspondence, taken together, creates a plausible basis for the existence of a contract between Performance and Merge. (Id. at 4-5.)
In reply, Defendant reiterates that Plaintiffs have failed to identify a contract between Performance or Prestige and Merge. (Doc. 43 at 2.) Defendant argues that all email correspondence referenced by Plaintiffs were between Trinity and Merge, so these communications cannot show mutual consent between Performance or Prestige and Merge. (Id.) Further, Defendant contends that the emails also lack substance. Defendant asserts that, to perfect a contract of sale in Louisiana, a price and a thing must be established. (Id. at 3.) Defendant states that the emails fail to discuss a price or a quantity. (Id.) Finally, while Defendant concedes that the correspondence may have shown it was aware of Performance and Prestige, Defendant maintains that knowledge of their existence is not synonymous with mutual consent.
Under Louisiana law,
A cause of action for redhibition is recognized in La. Civ. Code. art. 2520, et seq. However, "a redhibition cause of action relates to error in the cause of completed sales, and absent a sale, the rehibition articles do not apply." Alvis v. CIT Grp./Equip. Fin., Inc., 05-0563 (La. App. 3 Cir. 12/30/05); 918 So.2d 1177, 1183 (citing Stack v. Irwin, 246 La. 777, 167 So.2d 363 (1964)). To perfect a contract of sale, "[t]he thing, the price, and the consent of the parties" are required. La. Civ. Code art. 2439.
In sum, the Court holds that Plaintiffs have failed to sufficiently allege that a contract existed between either Performance or Prestige and Merge. As a result, their claims for redhibition and rescission must be dismissed.
As to redhibition, the Court finds that no contract of sale existed between Performance or Prestige and Merge. Plaintiffs clearly argue that Performance and Prestige's claims are based on "contracted obligations...independent of the January 2016 Sales Order." (Doc. 41 at 5.) However, Plaintiffs have failed to plead that a price was affixed to these "contracted obligations" and, thus, have failed to allege that a contract of sale existed. See La. Civ. Code art. 2439. Consequently, their claim for redhibition must be dismissed. See Alvis, 918 So.2d 1183.
The rescission of contract for fraud claim fails as well. Plaintiffs attempt to show through certain correspondence that Merge made an offer to provide software installation and services and that Performance and Prestige accepted same.
Defendant next attacks three of Performance and Prestige's tort claims, specifically those of negligence, negligent misrepresentation, and unfair trade practices under the Louisiana Unfair Trade Practice Act ("LUPTA"). While all three claims have distinct elements, Defendant focuses on one common to each: whether Defendant owed these Plaintiffs a duty. Thus, the Court will bundle the analysis of these three claims.
Defendant has two arguments as to why these Plaintiffs' tort claims fail. First, Defendant argues that no communication existed between Merge and Performance or Prestige. (MTD II, Doc. 39-1 at 9.) Second, according to Merge, all of the alleged representations were made by Merge to Trinity and not Performance or Presitige. (Id.)
As to the first, citing to Durio v. Metropolitan Life Ins. Co., 653 F.Supp.2d 656 (W.D. La. 2009), Defendant contends that, in Louisiana, a duty to disclose only exists where there is privity of contract or a fiduciary relationship between the parties. (Id. at 9-10) Here, Defendant argues, there was no privity of contract or fiduciary relationship because there is no contract between Performance or Prestige and Merge. (Id. at 10.) Additionally, Defendant maintains that all communications giving rise to Plaintiffs' claims occurred between Trinity and Merge. (Id. at 10.) Defendant also characterizes Plaintiffs' assertation that Trinity attended meetings on behalf of all Plaintiffs as conclusory and unsupported by facts. (Id. at 11.)
Second, Defendant argues that the SAP lacks any allegation that Performance or Prestige relied on any alleged omission or representations by Merge. (MTD II, Doc. 39-1 at 11.) Defendant cites to Commerce & Indus. Inc. Co. v. Grinnell Corp., No. 97-803, 1999 WL 508357 (E.D. La. Jul. 15, 1999), for the proposition that the recipient of communications must rely on alleged misinformation or omissions to establish a misrepresentation claim. (Id.) Therefore, Defendant contends Performance and Prestige fail to establish that Merge owed a duty or committed any wrong.
Plaintiffs oppose MTD II on four grounds. (Doc. 41 at 5-8.) First, Plaintiffs assert that Defendant has conceded that Trinity stated viable claims for negligence, negligent misrepresentation, and unfair trade practice because MTD II only addresses Performance's and Prestige's claims. (Doc. 41 at 6.) Therefore, Plaintiffs contend, because Defendant owed the same duty to all Plaintiffs, Performance's and Prestige's claims should not be dismissed. (Id.)
Second, Plaintiffs argue that the Court is required to accept the facts in the SAP as true. (Id. at 7.) Specifically, Plaintiffs pled that Trinity's representative attended "web demos," where the alleged misrepresentations were made, on behalf of all Plaintiffs. (Id.) Plaintiffs contend that, at this stage, Defendant cannot insist that Trinity's representative did not attend on behalf of all Plaintiffs. (Id.) In the alterative, Plaintiffs assert that Trinity's knowledge of Merge's alleged misrepresentations should be imputed to Performance and Prestige, as they are wholly-owned subsidiaries. (Doc. 41 at 7.)
Third, Plaintiffs contend that Defendant had a duty to disclose under Louisiana law. Specifically, Plaintiffs argue "Louisiana follows the universal rule that a duty to disclose arise when a party makes a partial disclose that conveys a false impression." (Id.) Therefore, Defendant would have had a duty to disclose the Duplicate Container Defect and recall after their allegedly false representations at the "web demos." (Id. at 8.)
Finally, Plaintiffs argue that Merge ignored their allegations that it owed a duty to deliver a safe, accurate, and reliable laboratory software. (Id.) Plaintiffs assert that this duty arises from Merge's promise to provide software that met industry standards and regulatory requirements. (Id.) Defendant allegedly breached this duty by providing Plaintiffs with defective software. (Id.)
In reply, Defendant mostly restates its two main points from MTD II. First, Plaintiffs failed to allege any disclosure or partial disclosure to Performance or Prestige. (Doc. 43 at 4.) Defendant contends that Plaintiffs' claim that Trinity acted on behalf of Performance or Prestige is conclusory. (Id.) Second, Defendant argues that Plaintiffs have still failed to show a general duty owed by Merge to Performance or Prestige by Merge. Again, Defendant asserts that all alleged misrepresentations were made to Trinity. (Id.)
In determining whether a Defendant acted negligently, Louisiana uses a duty-risk analysis. See Baxter v. Anderson, 277 F.Supp.3d 860, 864 (M.D. La. 2017) (deGravelles, J.). To state a claim under Louisiana's duty-risk analysis, this Court has stated that the plaintiff is required to allege:
Id. (quoting Christy v. McCalla, 11-366 (La. 12/6/11); 79 So.3d 293, 299.
For a plaintiff to plead a claim for negligent misrepresentation, the Fifth Circuit has articulated the following test:
Kadlec Med. Ctr. v. Lakeview Anesthesia Assocs., 527 F.3d 412, 418 (5th Cir. 2008) (citing Brown v. Forest Oil Corp., 29 F.3d 966, 969 (5th Cir. 1994). The duty of the defendant to supply correct information does not immediately arise. "In Louisiana, `[a]lthough a party may keep absolute silence and violate no rule of law or equity...if he volunteers to speak and to convey information which may influence the conduct of the other party, he is bound to [disclose] the whole truth.'" Id. at 419 (quoting Am. Guar. Co. v. Sunset Realty & Planting Co., 208 La. 772, 914, 23 So.2d 409, 455-56 (1945). Further, "Louisiana courts have held that even when there is no initial duty to disclose information, `once [a party] volunteer[s] information, it assume[s] a duty to insure that the information volunteered [is] correct.'" Id. (quoting Pastor v. Lafayette Bldg. Ass'n, 567 So.2d 793, 796 (La. Ct. App. 1990)).
This Court has previously articulated the analysis for LUPTA:
J&J Sports Prods., Inc. v. Tienda y Taqueiria "La Frontera," LLC, No. 16-568, 2017 WL 3166734, at *13 (M.D. La. July 25, 2017). Additionally, "[t]he `defendant's motivation' is a critical factor—his `actions must have been taken with the specific purpose of harming the competition.'" IberiaBank v. Broussard, 907 F.3d 826, 839-40 (5th Cir. 2018) (quoting Monroe v. McDaniel, 16-214 (La. App. 5 Cir. 12/7/16, 10); 207 So.3d 1172, 1180).
This Court finds that Performance and Prestige have sufficiently alleged that Merge, through its partial disclosures, had a legal duty to supply Plaintiffs with accurate information and that Plaintiffs, through installation and use of Merge LIS™, relied on Merge's alleged misrepresentations. Again, the duty to disclose information does not automatically exist in Louisiana. Kadlec Med. Ctr., 527 F. 3d at 419. However, a partial disclosure of information gives rise to the duty to provide correct information. Id. Plaintiffs have set out in detail several alleged defects in LIS™ including (but not limited to): "the duplicate container defect," "lack of audit tracking defect," "user manual defect," "illegible comments defect," "incorrect sample date defect," "no rejected samples defect," "re-preparation sample limbo defect," "no disabled users defect," "rejected report defect," and "back-dating defect." (SAP ¶ 76, Doc. 38.) Plaintiffs' allegations center on the Duplicate Container Defect in that they allege Merge knew about this particular defect during or around March 2015. (Id. at ¶ 51.) Further, Plaintiffs detail multiple emails, phone conversation, and "web demos" in which Merge touted the reliability and performance of its product while failing to mention the Duplicate Container Defect. (Id. at ¶¶ 36-49, 56.) Thus, Merge, by partially disclosing incorrect information, created a duty to provide Plaintiffs with the correct information, including, any defects in Merge LIS™.
Further, in the SAP, Plaintiffs have specifically alleged that Trinity's representatives attended the "web demos" on behalf of all Plaintiffs. (SAP ¶ 63, Doc. 38.) Although Defendant has disputed that the representatives were in attendance for all Plaintiffs, the Court must accept Plaintiffs' well-pled factual allegations as true at this stage. See Twombly, 550 U.S. at 555 ("Factual allegations must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true." (internal citations omitted)). Plaintiffs have demonstrated that Trinity worked on behalf of Performance and Prestige previously, such as when Trinity's Chief Financial Officers submitted credit checks for both Trinity and Performance. (SAP ¶ 40, Doc. 38.) Accordingly, Merge had a duty to provide correct information, and because Trinity's representatives attended on behalf of all Plaintiffs, Merge had a duty to Performance and Prestige.
Finally, the Court rejects Defendant's argument that Plaintiffs did not reasonably rely on the allegedly false statements. Plaintiffs have affirmatively pled that they "suffered damages as a result of relying on Merge's omission, in the form of `additional expenses incurred as a result of constantly developing new work-arounds to compensate for the LIS™ operating system's defects' and `lost income caused by being unable to return their laboratories to full capacity." (Doc. 41 at 6 (quoting SAP ¶ 81, Doc. 38)). Therefore, Plaintiffs sufficiently alleged that they relied on Merge's misrepresentations.
In sum, Plaintiffs have adequately alleged that Merge owed a legal duty to Prestige and Performance and that Merge breached that duty. Accordingly, Defendant's motion to dismiss Prestige and Performance's tort claims is denied.
Plaintiffs next claim that Performance and Prestige are third-party beneficiaries to the 2016 Sales Order.
Regardless of what law governs,
Plaintiffs have requested leave to amend their complaint. Specifically, Plaintiffs argue in their opposition that they can amend to "add specificity." (Doc. 41 at 10.)
Federal Rules of Civil Procedure 15(a) "requires the trial court to grant leave to amend freely," further "the language of this rule evinces a bias in favor of granting leave to amend." Jones v. Robinson Prop. Grp., LP, 427 F.3d 987, 994 (5th Cir. 2005) (internal citations omitted). However, "leave to amend is in no way automatic, but the district court must possess a `substantial reason' to deny a party's request for leave to amend." Marucci Sports, L.L.C. v. Nat'l Collegiate Athletic Ass'n, 751 F.3d 368, 378 (5th Cir. 2014) (citing Jones, 427 F.3d at 994). The Fifth Circuit further described the district courts' discretion on a motion to amend as follows:
Id. 751 F.3d at 378.
In addition, the Fifth Circuit has made clear that "denying a motion to amend is not an abuse of discretion if allowing an amendment would be futile." Id. (citing Boggs v. Miss., 331 F.3d 499, 508 (5th Cir. 2003)). An amendment would be deemed futile "if it would fail to survive a Rule 12(b)(6) motion." Id.
Applying this standard, the Court will reject Plaintiffs' request for an additional amendment. Plaintiffs should have had notice of the need to add specificity from the Court's prior Ruling and Order on Defendant's original motion to dismiss. (See Doc. 35.) As stated above, "repeated failures to cure deficiencies by amendments previously allowed" is a factor to consider when granting or denying leave to amend, as is undue delay. Marucci Sports, 751 F.3d at 378 (citation omitted). Additionally, having already had an opportunity to amend the SAP, the Court believes any further effort to add specificity would be futile. For these reasons, the Court will deny Plaintiffs leave to amend and dismiss their claims with prejudice.
Accordingly,
