NATHANIEL M. GORTON, District Judge.
ORDER entered. After consideration of defendant's objections thereto, Report and Recommendation accepted and adopted.
DEIN, United States Magistrate Judge.
This action arises out of a Master License and Services Agreement under which the plaintiff, Samia Companies LLC ("Samia"), agreed to purchase computer software, consulting services and technical support services from the defendant, MRI Software LLC ("MRI"), which was previously known as Intuit Real Estate Solutions ("Intuit").
The matter is presently before the court on "Defendant MRI Software LLC's Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6)" (Docket No. 8), by which MRI is seeking the dismissal of all of Samia's claims for failure to state a claim. For all the reasons detailed herein, this court recommends to the District Judge to whom this case is assigned that MRI's motion be ALLOWED IN PART and DENIED IN PART. Specifically, this court recommends that the misrepresentation claims found in Counts IV, VI and IX be dismissed, but that MRI's motion otherwise be denied.
When ruling on a motion to dismiss brought under Fed.R.Civ.P. 12(b)(6), the court must accept as true all well-pleaded facts, and give the plaintiff the benefit of all reasonable inferences. See Cooperman v. Individual, Inc., 171 F.3d 43, 46 (1st Cir.1999). "Ordinarily, a court may not consider any documents that are outside of
The plaintiff, Samia, is a real estate management firm which is responsible for managing more than 100 properties, including over 2,800 apartment units located primarily in eastern Massachusetts. (Compl. ¶ 5).
Throughout the course of his discussions with Stublarec, Saab allegedly made it clear that any software package purchased by Samia had to include a 1099 interest reporting component for residential tenant deposits (the "1099 Interest Component") that would be acceptable to the Internal Revenue Service and would produce forms that could be sent to Samia's tenants. (See id. ¶ 11). He also emphasized that the 1099 Interest Component was the most important software component to Samia, and that the company was unwilling to purchase any system that did not contain such a Component. (Id. ¶ 15). Samia claims that Stublarec acknowledged this requirement, and assured Saab that the Intuit Real Estate Solutions ("IRES") Program he was proposing to sell to Samia included a 1099 Interest Component. (Id. ¶¶ 12, 16). In fact, during a demonstration of Intuit software at Samia's offices, Stublarec showed Saab a 1099 component of the software program that calculated the total funds paid to a given vendor, and assured Saab that the 1099 Interest Component for residential tenant deposits would operate in a similar manner. (Id. ¶ 14).
Allegedly based on Stublarec's representations, Samia decided to purchase the IRES Program from Intuit. (Id. ¶ 17). Accordingly, on July 31, 2009, Samia and Intuit entered into a Master License & Services Agreement ("Agreement") under which Samia agreed to purchase the IRES Program, as well as software maintenance services, technical support services and consulting services, from Intuit for a total initial price of $93,337. (Agreement at 2).
According to Samia, the process of installing the IRES Program at Samia's offices began in September 2009. (Compl. ¶ 18). Karyn Publicover ("Publicover") acted as Samia's initial contact person at Intuit for purposes of developing and installing the software, and Saab had frequent communications with Publicover throughout October and November 2009. (Id. ¶¶ 18-19). Samia claims, however, that there was no progress on the development of the 1099 Interest Component despite Publicover's efforts to draw Intuit's attention to that issue. (See id. ¶ 20 & Ex. 2).
On November 20, 2009, Saab and Samia's Senior Property Administrator, Lynn Mark, held a telephone conference with Publicover, Stublarec, and a third Intuit employee, Jyl Jarnigan ("Jarnigan"), to address a number of issues concerning the development of the IRES Program for Samia. (Compl. ¶¶ 23-24). Among the issues that were discussed was the lack of development of the 1099 Interest Component. (Id. ¶ 23). During the course of the conversation, Stublarec allegedly confirmed that he had told Saab that a 1099 Interest Component was included as part of the Intuit IRES Program. (Id. ¶ 25). However, he stated that contrary to his earlier representation, the IRES Program contained no such Component. (Id.).
According to Samia, Saab immediately stated that without the 1099 Interest Component, the deal would be off and Samia would terminate the Agreement. (Id. ¶ 26). In response, Stublarec allegedly promised that the 1099 Interest Component would be developed and delivered to Samia as part of the purchased IRES Program. (Id. ¶ 27). He further assured Saab that Intuit would do "whatever it took" to accomplish that work. (Id.). Samia claims that Saab agreed to proceed with the development and installation of the IRES Program on the basis of Stublarec's representation. (Id. ¶ 28).
Samia contends that development work on the software system, including the 1099 Interest Component, continued slowly through December 2009. (Id. ¶ 29). Although there were many outstanding issues that had to be resolved before the IRES Program could operate, Samia allegedly paid all of Intuit's outstanding invoices. (Id. ¶ 30). Consequently, by the end of 2009, according to Samia, the plaintiff had paid over $60,300 under its Agreement with Intuit. (Id.).
Unbeknownst to Samia, Intuit was sold to MRI. (Id. ¶ 37). Thereafter, Saab allegedly stopped hearing from Publicover or anyone else at the defendant's company. (See id. ¶¶ 31, 37). Moreover, Saab's efforts to contact Publicover and Stublarec, and to obtain information regarding their whereabouts, were unsuccessful. (Id. ¶¶ 33-36, 38). Consequently, when Saab received an invoice from MRI for $12,017.72, he decided to withhold payment until the 1099 Interest Component of the IRES Program became fully operational. (Id. ¶¶ 39-40 & Ex. 5).
Saab subsequently learned that Jarnigan remained employed with MRI, and he allegedly notified her of his decision to withhold payment of MRI's invoice. (Id. ¶ 41). Additionally, in an email dated January 23, 2010, Saab notified Jarnigan that there were a number of outstanding issues relating to the development of the IRES Program for Samia. (Id. ¶ 42 & Ex. 7). Those issues concerned, among other things, the 1099 Interest Component, the legal tracking system component of the IRES Program, and scheduling for the
Following Jarnigan's disappearance, David Love ("Love") became Samia's contact person at MRI. (Id. ¶ 45). However, Love was soon replaced by Eric Moorfoot ("Moorfoot"), who was subsequently replaced by Tom Martin. (Id.). Although each of these individuals allegedly acknowledged MRI's commitment to provide the 1099 Interest Component, as well as other items such as the legal tracking system and the Access 24/7 Resident Portal, Samia contends that the constant change in personnel caused significant delays in the development work. (Id. ¶¶ 46-50). It further claims that despite many months of effort, only about 80% of the 1099 Interest Component was ever completed. (Id. ¶ 51).
Notwithstanding the alleged difficulties Samia was experiencing in its relationship with MRI, on March 6, 2010, the plaintiff executed a Work Authorization ("Work Authorization # 27661"), pursuant to which it authorized MRI to perform additional work for Samia. (Id. ¶ 53 & Ex. 9). Work Authorization #27661 was specifically made part of and incorporated into the parties' Agreement. (Compl., Ex. 9 at 2). Thereunder, Samia agreed to engage MRI to create six separate customized documents and letters, including a 14 Day Notice to Quit Letter, an Amendment to Lease, a Standard Apartment Lease, an Intent to Vacate Letter, a Roommate Substitution Agreement, and a Roommate Addition Agreement. (Id. at 2 & attachments). The project was estimated to cost $16,380, and was scheduled to be completed within 3 weeks. (Id. at 4).
The plaintiff claims that the documents and letters called for under Work Authorization #27661 were critical to Samia's ability to conduct the day-to-day management of its properties. (Compl. ¶ 55). It also claims that the timing of the project was critical because the work was scheduled to take place contemporaneously with the removal of Samia's existing property management software. (Id. ¶ 56). However, MRI allegedly failed to complete the work on time or to deliver a product that functioned properly. (Id. ¶¶ 61-69).
Specifically, Samia alleges that MRI's David Morgan ("Morgan") took primary responsibility for performing the work called for under Work Authorization #27661. (Id. ¶ 58). According to the plaintiff, Morgan made little progress and was unresponsive to Samia's requests for updates about the project. (Id. ¶¶ 59-61). It also claims that on or about April 19, 2010, after a full six weeks had passed, Morgan produced a Functional Report Design containing a written description of the project's components, but abandoned the project before the work necessary to complete it had been done. (Id. ¶¶ 61-65; see also Compl., Ex. 10 at Ex. 2 thereto). Consequently, the documents and letters called for under Work Authorization #27661 allegedly remained incomplete, inaccurate or entirely missing, and the customer requirements failed to function properly. (Id. ¶¶ 65-67).
Samia contends that it made repeated efforts to obtain assistance from MRI with
Despite MRI's alleged failure to fulfill the terms of Work Authorization #27661, the defendant issued two invoices to Samia, totaling $16,380, for work associated with the project. (Compl., Ex. 10 at Ex. 3 thereto). Samia refused to pay MRI the total amount due. (See Compl., Ex. 10 at 1). Rather, in a letter to MRI dated August 24, 2010, Samia's counsel described Morgan's failure to complete the work called for under Work Authorization #27661, and tendered $8,380 as "payment in full" for MRI's efforts on the project. (Id.). Samia's counsel also explained that the tendered amount represented the difference between the total amount of MRI's invoices and the amount that Samia had been forced to spend on the IT support necessary to complete the project and render the documents and letters operational. (Id.).
Allegedly, MRI's Moorfoot assured Samia that the defendant would accept the $8,380 as payment in full for Work Authorization #27661. (Compl. ¶ 77). However, on November 17, 2010, Samia received a letter from MRI's General Counsel returning the $8,380 and rejecting it as payment in full for the invoices relating to Work Authorization #27661. (Id.; see also Compl., Ex. 11). Samia claims that MRI has continued to insist on full payment for this work even though it failed to complete it. (Compl. ¶¶ 78, 80).
At the time Samia entered into the Agreement with Intuit, the plaintiff also elected to purchase a technical support plan known as the Bronze Plan. (Agreement at Schedule B). On March 22, 2010, Samia and MRI entered into an Amendment to the Agreement in order to upgrade Samia's technical support plan to the Silver Plan. (Compl., Ex. 12). Under the Silver Plan, Samia was entitled to receive 25 hours of prepaid support at an annual cost of $3,000, and any additional support services provided by MRI were to be billed at a rate of $120 per hour. (Id. at 4). The term of the Silver Plan ran from the date of execution of the Amendment to August 31, 2010. (Id. at 4). Thereafter, the support plan agreement would "renew unless otherwise terminated by the Client." (Id.).
Samia claims that as the term of the Silver Plan was nearing expiration, MRI improperly eliminated the Silver Plan as a renewal option, and began instead to offer a series of confusing and often times conflicting support plans. (Compl. ¶¶ 82, 85). It also claims that the new plans offered unlimited hours of support for a higher annual cost than the Silver Plan. (Id. ¶ 84; see also Compl., Ex. 12 at 5). Because Samia found the rates for the new plans excessive, it attempted to renew the Silver Plan by sending MRI a $3,000 payment on September 29, 2010, nearly a month after the Plan had expired. (Compl. ¶¶ 84, 87; Compl., Ex. 12 at 1-2). At the same time, Samia sent MRI $9,018 to renew its support maintenance agreement with MRI, resulting in a total payment of $12,018. (Compl., Ex. 12 at 1-2). In its cover letter, Samia explained the purpose of its payments. (Id.). Samia's check was cashed by MRI "immediately." (Compl. ¶ 89).
The plaintiff claims that as a result of MRI's conduct, it has been left with a number of non-functioning or non-existent system components. (Id. ¶ 101). In addition to the 1099 Interest Component, which was allegedly 80% completed, the alleged non-functioning components include a lease renewal component and the legal tracking program, and the alleged non-existent components include the Access 24/7 Resident Portal and a promised correction for erroneously committed MRI SODAs following the vacancy of a rental unit. (Id. ¶¶ 51, 102-05). According to Samia, each of these components was required as part of the system that the plaintiff purchased from the defendant pursuant to the terms of the Agreement. (See id. ¶ 106).
Additional factual details relevant to this court's analysis are described below where appropriate.
MRI has moved to dismiss all of Samia's claims against it for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). Motions to dismiss under Rule 12(b)(6) test the sufficiency of the pleadings. Thus, when confronted with a motion to dismiss, the court accepts as true all well-pleaded facts and draws all reasonable inferences in favor of the plaintiff. Cooperman, 171 F.3d at 46. Dismissal is only appropriate if the complaint, so viewed, fails to allege a "plausible entitlement to relief." Rodriguez-Ortiz v. Margo Caribe, Inc., 490 F.3d 92, 95 (1st Cir.2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 559, 127 S.Ct. 1955, 1967, 167 L.Ed.2d 929 (2007)).
Two underlying principles must guide the court's assessment as to the adequacy of the pleadings to support a claim for relief. Maldonado v. Fontanes, 568 F.3d 263, 268 (1st Cir.2009). "`First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.' Such conclusory statements are `not entitled to the assumption of truth.'" Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009)) (internal citations omitted). "`Second, only a complaint that states a plausible claim for relief survives a motion to dismiss.'" Id. (quoting Ashcroft, 556 U.S. at 679, 129 S.Ct. at 1950). "This second principle recognizes that the court's assessment of the pleadings is `context-specific,' requiring `the reviewing court to draw on its judicial experience and common sense.' `[W]here
In Counts I, III, V and VIII, Samia has asserted claims for breach of contract based on the defendant's alleged failure to provide an operable 1099 Interest Component (Count I), alleged failure to complete Work Authorization #27661 (Count III), alleged actions in terminating Samia's technical support (Count V), and alleged conduct in leaving Samia with non-functioning and non-existent software system components (Count VIII). MRI has moved to dismiss each of these Counts for failure to state a claim. For the reasons that follow, this court recommends that MRI's motion be denied with respect to Samia's breach of contract claims.
In Count I of its Complaint, Samia alleges that the defendant breached the parties' Agreement by failing to provide Samia with an operable 1099 Interest Component. MRI argues that Count I fails to state a claim because the Agreement contains no terms which required MRI to provide Samia with an IRES Program containing a 1099 Interest Component, and the plain language of the Agreement precludes the plaintiff from relying either on evidence of Stublarec's pre-contract representations, or on statements made by Stublarec or others after the Agreement was executed, to broaden MRI's obligations under the Agreement. (Def. Mem. (Docket No. 9) at 9-13). As described below, this court finds that there is an ambiguity in the Agreement as to the components of the software that the defendant was obligated to provide to Samia. Therefore, Samia may rely on extrinsic evidence, including Stublarec's representations regarding the 1099 Interest Component, in order to establish the parties' intent at the time they entered into the Agreement.
The parties' dispute requires this court to interpret the Agreement to determine whether it excludes a 1099 Interest Component. It is undisputed that interpretation of the Agreement is governed by the law of Massachusetts.
Farmers Ins. Exchange v. RNK, Inc., 632 F.3d 777, 783 (1st Cir.2011).
"Once the contract is determined to be ambiguous, the court is free to look to extrinsic evidence in order to give a reasonable construction in light of the intentions of the parties at the time of formation of the contract." President & Fellows of Harvard Coll. v. PECO Energy Co., 57 Mass.App.Ct. 888, 896, 787 N.E.2d 595, 601 (2003) (internal citation omitted). "When such evidence is considered, it may be that a logical answer consistent with the purposes of the agreement[] and the intentions of the parties will emerge." Id.
When interpreting a contract under Massachusetts law, the court "must put [itself] in the place of the parties to the instrument and give its words their plain and ordinary meaning in the light of the circumstances and in view of the subject matter." Polito v. Sch. Comm. of Peabody, 69 Mass.App.Ct. 393, 396, 868 N.E.2d 624, 627 (2007) (quotations and citations omitted). "When construing a commercial contract, `[c]ommon sense is as much a part of contract interpretation as is the dictionary or the arsenal of canons.'" Teragram Corp. v. Marketwatch.com, Inc., 444 F.3d 1, 9 (1st Cir.2006) (quoting Fishman v. LaSalle Nat'l Bank, 247 F.3d 300, 302 (1st Cir.2001)).
This court finds that the plain language of the Agreement can support reasonable differences of opinion as to whether the defendant was obligated to provide software containing a 1099 Interest Component. Pursuant to the Agreement, Intuit agreed, in relevant part, to grant Samia the right to install a copy of the "Licensed Programs" on its internal business computer system located at its offices in Brighton, Massachusetts. (See Agreement at Schedule A ¶¶ 1.5, 3.1). The term "Licensed Programs" is defined in the Agreement to mean "those software programs as defined in Schedule A/A1, if applicable." (Agreement ¶ 1.7). There is no Schedule A1. Schedule A defines the term "Licensed Programs" as "the machine-readable, object code version software as specified in this Schedule A, including any Updates and Upgrades thereto that Intuit delivers to the Client hereunder." (Id. at Schedule A ¶ 2.3). The "Intuit User Licensed Programs" specified in Schedule A consist of the following: "Residential Management," "Residential Management Electronic Lockbox," "Facility Management," "Accounts Payable," "General Ledger," "ReportDesign," "WebDesign," "Advanced User Security," "Virtual Site (Includes Distributive Processing)," and "1 SQL Database." (Id. at Schedule A). There is nothing in Schedule A or elsewhere in the Agreement which further defines the Licensed Programs or describes their content.
Samia argues that the programs listed in Schedule A provide "only a summary of broad based functionality" that do not expressly exclude a 1099 Interest Component as a component part of the software. (Pl. Mem. at 5). This court finds that Samia's interpretation of the Agreement is reasonable in light of the plain language used in Schedule A. Although certain of the Licensed Programs, such as the General Ledger and Accounts Payable programs, suggest a specific content relating to specific
MRI points out that Schedule I to the Agreement also contains no reference to a 1099 Interest Component. (Def. Mem. at 9). Schedule I consists of a work authorization regarding the implementation of certain software applications at Samia's facility, including the General Ledger, Accounts Payable, Residential Management, Facility Management, and Resident Portal Licensed Programs. (Agreement at Schedule I at 1). Again, however, there is nothing in Schedule I which further defines or describes the components of these applications, and there is nothing to suggest that the Residential Management or Facility Management applications excluded a 1099 Interest Component. Because the specific content of the applications is reasonably subject to dispute, the plain language of Schedule I does not establish that the Agreement contains no term requiring MRI to provide an IRES Program with a 1099 Interest Component.
This court's conclusion that there may be components of the Licensed Programs which are not specified is consistent with other allegations set forth in the Complaint regarding the content of the software that the defendant did provide to Samia. In particular, Samia alleges that the software included a legal tracking component that was installed on the plaintiff's system, but contained many bugs and crashed frequently. (Compl., ¶ 23 & n. 2). Schedule A does not list legal tracking among the Licensed Programs, and there appears to be no specific reference to legal tracking elsewhere in the Agreement. Therefore, these allegations support Samia's argument that the programs listed in Schedule A provide only a summary of broad based functionality that create an ambiguity with respect to their content.
MRI argues that the Agreement contains an integration clause, which prohibits Samia from relying on extrinsic evidence of Stublarec's oral representations to support its breach of contract claim with respect to the 1099 Interest Component. (Def. Mem. at 10). The integration clause reads in relevant part as follows:
(Agreement ¶ 11.1). Under the circumstances of this case, however, the existence of an integration provision does not bar Samia from introducing extrinsic evidence of the parties' intent at the time they entered into the Agreement.
In Counts III and VIII, Samia is seeking to hold MRI liable for breach of contract based on its alleged failure to complete Work Authorization #27661 and its alleged conduct in leaving Samia with non-functioning and non-existent software system components. MRI contends that these claims should be dismissed because the Agreement provides only limited warranty protection for such deficiencies, and Samia failed to comply with the notice requirements necessary to trigger those protections. (Def. Mem. at 13-17). For the reasons that follow, this court recommends that the motion to dismiss these Counts be denied, and that the plaintiff have an opportunity to develop the factual record with respect to these claims.
The Agreement expressly limits the warranty protections available to Samia for programs and services that the defendant agreed to provide under the Agreement. In particular, Section 3.8 of the Agreement provides in relevant part that
(Id. ¶ 5). Accordingly, under Sections 3.8 and 5 of the Agreement, the defendant agreed to provide Samia with limited relief, subject to Samia's timely notification, in the event the Licensed Programs failed to perform as promised in Intuit's written documentation, or in the event that the reports called for under Work Authorization # 27661 failed to comply with any applicable specifications.
In Section 6 of the Agreement, which is entitled "DISCLAIMER OF WARRANTIES," the defendant expressly disclaimed any further warranties relating to programs or services provided to Samia under the terms of the Agreement. As that provision states:
(Id. ¶ 6). Therefore, according to Intuit, Sections 3.8 and 5 set forth the sole remedies available to Samia with respect to any deficiencies in the reports and documents called for under Work Authorization #27661 and for the failure of the Licensed Programs to perform.
In order to satisfy the notice requirements necessary to trigger the protections set forth in Sections 3.8 and 5, Samia had to comply with the following notice provision set forth in Section 11.9 of the Agreement:
(Id. ¶ 11.9). In general, the failure to comply with this provision could preclude Samia from obtaining relief under Sections 3.8 and 5 of the Agreement. See Teragram Corp. v. MarketWatch.Com, Inc., No. Civ. A. 02-11138-DPW, 2004 WL 3086883, at *6 (D.Mass. Dec. 29, 2004) (failure of party to comply with warranty provisions by providing written notice of alleged breach within 30 days after delivery of software warranted summary judgment against that party on its breach of contract claim), aff'd, 444 F.3d 1 (1st Cir. 2006).
MRI argues that Samia's breach of contract claims relating to Work Authorization #27661 and the non-functioning and non-existent software system components must be dismissed because the only relief available for such deficiencies is the relief set forth in Sections 3.8 and 5 of the Agreement, and Samia has failed to allege that it provided the notice required to obtain that relief. This court finds that MRI's argument is not sufficient to defeat Counts III or VIII at this stage in the litigation.
As an initial matter, under the plain terms of the Agreement, the 30-day notice requirement set forth in Sections 3.8 and 5 was set to run from the date of delivery of the project elements or the Licensed Programs. However, Samia has alleged that the documents and letters called for under Work Authorization #27661 remained incomplete, inaccurate or entirely missing due to Morgan's abandonment of the project, and that MRI failed to provide it with certain components of the software system. (Compl. ¶¶ 65-66, 104-05). These allegations raise questions of fact as to when and to what extent delivery actually occurred under the Agreement, and whether the 30-day notice period even began to run with respect to that work. Because those questions cannot be resolved on a motion to dismiss, Samia should have an opportunity to develop the factual record relating to the claims set forth in Counts III and VIII.
In Count V of its Complaint, Samia alleges that MRI's actions in terminating its technical support, despite Samia's payment in full for such support, constitutes a breach of the Agreement. Although the question is a close one, this court recommends that the motion to dismiss Count V be denied. Despite the fact that Samia's allegations establish that its technical support plan expired on August 31, 2010, and that it did not make payment before then, there are also allegations that MRI offered conflicting and confusing plans, unilaterally attempted to terminate the Silver Plan, and accepted a late payment which was for the express purpose of extending the Silver Plan coverage. Thus, whether MRI was obligated to renew Samia's plan should be decided on a more complete record.
As described above, Samia alleges that the parties entered into an Amendment to the Agreement on March 22, 2010, under which the parties agreed to upgrade Samia's technical support plan to the Silver Plan. (Compl., Ex. 12). The annual cost of the Silver Plan was $3,000, and the term of the support services provided under the Amendment was due to expire on August 31, 2010. (Id. at 4). The Amendment provides that Samia's technical support plan would "renew unless otherwise terminated by the Client." (Id.).
Pursuant to the Amendment, the parties agreed that "[e]xcept as expressly provided herein, nothing in this Amendment shall be deemed to waive or modify any of the provisions of the Agreement, which otherwise remains in full force and effect." (Id. ¶ 3). Under the general provisions of the Agreement relating to renewals for technical support, the defendant agreed to send Samia an invoice prior to the expiration of its support plan, and to renew the plan as of its expiration date upon Samia's timely payment of the invoice.
Samia alleges that as the term of the Silver Plan was nearing expiration, the defendant unilaterally, and in breach of its terms, decided to terminate the Silver Plan, and to replace it with a higher cost option, which it offered to Samia in lieu of the Silver Plan. (Compl. ¶¶ 82-86 & Ex. 12 at 5). Samia further alleges that it declined to pay the higher rate for technical support, and instead decided to renew the Silver Plan by sending MRI a $3,000 payment nearly a month after its Plan had expired. (Id. ¶ 87 & Ex. 12 at 1-2). Samia further alleges that MRI accepted the late payment by immediately cashing the check. (Compl. ¶ 89). Since it cannot be stated with certainty that MRI had no obligation to provide Samia with a technical services contract, the motion to dismiss Samia's breach of contract claim based on MRI's termination of technical support should be denied.
MRI is also seeking to dismiss Counts II, IV, VI and IX in which Samia has asserted claims for negligent misrepresentation
Samia alleges, in Count II of its Complaint, that the defendant's statements regarding the inclusion of a 1099 Interest Component in the IRES Program constituted material misrepresentations on which Samia relied. MRI contends that this claim should be dismissed because any reliance on Stublarec's alleged pre-contract representations is barred by the integration clause of the Agreement, and because Stublarec's post-contract promises to build a 1099 Interest Component do not constitute actionable misrepresentations. (Def. Mem. at 6-8). For the reasons detailed herein, this court concludes that the presence of an integration clause does not defeat Samia's claim based on pre-contract representations.
In order to state a claim for negligent misrepresentation, the plaintiff must allege facts showing that the defendant,
Cumis Ins. Soc'y, Inc. v. BJ's Wholesale Club, Inc., 455 Mass. 458, 471-72, 918 N.E.2d 36, 48 (2009) (quotations, citations and punctuation omitted). Accordingly, "justifiable reliance is integral to a claim for negligent misrepresentation." Marram v. Kobrick Offshore Fund, Ltd., 442 Mass. 43, 59, 809 N.E.2d 1017, 1031 (2004). Moreover, "in some circumstances a plaintiff's reliance on oral statements in light of contrary written statements is unreasonable as a matter of law." Id.
MRI argues that in this case, the Agreement's integration clause constitutes a contrary written statement which makes Samia's reliance on Stublarec's pre-contract statements unreasonable as a matter of law. (Def. Mem. at 6-7). However, in Marram, the Supreme Judicial Court held that generally courts should not dismiss claims of negligent misrepresentation solely on the basis of an integration clause. Id. at 59-60, 809 N.E.2d at 1031 (finding that issue of plaintiff's reliance on oral representations was not ripe for decision at motion to dismiss stage despite existence of integration clause). Moreover, as in Marram, "there is no factual record that the specific oral representations [MRI] allegedly made to [Samia] were contradicted elsewhere." Id. at 60, 809 N.E.2d at 1031-32. As the Court explained in language applicable here, "without any factual record developed through discovery, [courts] cannot conclude that, as a matter of law, no factual scenario exists under which the plaintiff might establish a claim of negligent misrepresentation" notwithstanding the presence of an integration clause. Id. at 61, 809 N.E.2d at 1032. Regardless of whether the integration clause of the parties' Agreement may ultimately bar Samia's misrepresentation claim based on pre-contract assurances that the IRES Program contained a 1099 Interest Component, it would be inappropriate to dismiss that claim at this juncture in the case.
By its remaining Counts for negligent misrepresentation, Samia alleges that MRI's failure to provide documents pursuant to Work Authorization #27661, its conduct in terminating Samia's technical support despite payment in full, and its conduct in leaving Samia with non-functioning and non-existent software system components, constituted material misrepresentations on which the plaintiff relied. However, the "failure to perform a contractual duty does not give rise to a tort claim for negligent misrepresentation." Cumis Ins. Soc'y, Inc., 455 Mass. at 474, 918 N.E.2d at 49. Because Samia has not alleged that Intuit or MRI made any statements or representations relating to these
In Count VII, Samia is seeking to hold MRI liable for conversion based on the defendant's alleged failure to return or account for the $3,000 that Samia paid MRI for technical support on September 29, 2010. MRI argues that Samia's claim must be dismissed because it did not appropriate Samia's money for itself, but rather credited $2,436.75 of the funds to Samia's account, where they remain today for its use. (Def. Mem. at 19). Because MRI's argument is based on evidence outside the Complaint, which may not be considered on a motion to dismiss, this court recommends that its motion be denied with respect to Count VII.
"The elements of conversion may be established by a showing that one person exercised dominion over the personal property of another, without right, and thereby deprived the rightful owner of its use and enjoyment." In re Hilson, 448 Mass. 603, 611, 863 N.E.2d 483, 491 (2007). In the instant case, Samia alleges that it overpaid MRI $3,000 for technical support that was redundant and unnecessary, and which MRI failed to provide. (See Compl. ¶¶ 87-90, 96). It also alleges that MRI refused to refund the money to Samia, despite the plaintiff's demand that it do so, and failed to account for the funds. (Id. ¶¶ 91-92). Accordingly, the plaintiff has stated a claim for conversion.
In support of its argument that it did not misappropriate Samia's money or deprive Samia of its funds, MRI relies on a document which purports to be a statement of Samia's account at MRI showing a credit of $2,436.75. (Def. Mem. at Ex. C). However, on a motion to dismiss under Fed.R.Civ.P. 12(b)(6), "the district court may properly consider only facts and documents that are part of or incorporated into the complaint[.]" Trans-Spec Truck Serv., Inc. v. Caterpillar, Inc., 524 F.3d 315, 321 (1st Cir.2008). It is only when "a complaint's factual allegations are expressly linked to — and admittedly dependent upon — a document (the authenticity of which is not challenged), that [a] document effectively merges into the pleadings and the trial court can review it in deciding a motion to dismiss under Rule 12(b)(6)." Id. (quoting Beddall v. State St. Bank & Trust Co., 137 F.3d 12, 16-17 (1st Cir. 1998)) (punctuation omitted). The document attached to MRI's memorandum does not meet this standard. In its Complaint, Samia makes no reference to an account statement or to any credit to Samia's account at MRI. Rather, it alleges that MRI refused to comply with its demand for a refund, and failed to explain what it did with Samia's funds. (Compl. ¶¶ 91-92). Therefore, this court declines to consider the document, and recommends that MRI's motion to dismiss the conversion claim be denied.
Finally, MRI has moved to dismiss Samia's claim under Mass. Gen. Laws ch. 93A ("Chapter 93A") on the grounds that the conduct Samia is challenging amounts to nothing more than a breach of contract, which is insufficient to support a claim under Chapter 93A. (Def. Mem. at 19-20). This court disagrees and concludes that
Admittedly, "[a] breach of contract, standing alone, is not an unfair trade practice under c. 93A." Zabin v. Picciotto, 73 Mass.App.Ct. 141, 169, 896 N.E.2d 937, 963 (2008). "Instead, to rise to the level of a c. 93A violation, a breach must be both knowing and intended to secure `unbargained-for benefits' to the detriment of the other party." Id. Additionally, "[t]he breaching party's conduct must exceed the level of mere self-interest, rising instead to the level of commercial extortion or a similar degree of culpable conduct." Id. (quotations and citations omitted). While not flushed out at this point, Samia has alleged that MRI abandoned its project completely while continuing to demand payment. Further factual development is appropriate before the court determines whether its conduct in failing to fulfill its contractual obligations rises to the level of a ch. 93A violation.
In any event, Samia may pursue a claim under Chapter 93A based on the defendant's alleged misrepresentations. Under Massachusetts law, "a negligent misrepresentation may be so extreme or egregious as to constitute a violation of G.L. c. 93A, § 11[.]" Marram, 442 Mass. at 62, 809 N.E.2d at 1032. Because Samia's claim for negligent misrepresentation remains viable and has yet to be fully developed, it would be inappropriate to dismiss the Chapter 93A claim at this juncture. See id. (ruling that Chapter 93A claim based on alleged negligent misrepresentations made to plaintiff prior to its investment in defendant's mutual fund survived motion to dismiss). Therefore, this court recommends that the motion to dismiss Count X be denied.
For all the reasons detailed above, this court recommends to the District Judge to whom this case is assigned that "Defendant MRI Software LLC's Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6)" (Docket No. 8) be ALLOWED IN PART and DENIED IN PART. Specifically, this court recommends that Counts IV, VI and IX be dismissed, but that MRI's motion otherwise be denied.
September 4, 2012.
