THOMAS L. LUDINGTON, District Judge.
Plaintiff Wildfire Credit Union filed a five-count complaint against Defendant Fiserv, Inc. on November 13, 2014. ECF No. 1. Wildfire's complaint seeks a declaratory judgment in Count I and alleges in Counts II-IV that Fiserv committed various torts related to non-contractual representations that Fiserv did not fulfill. In Count V, Wildfire alleges breach of contract. Fiserv moved to dismiss Counts I-IV of Wildfire's complaint. See Partial Mot. Dismiss, ECF No. 9. That motion was granted in part on August 10, 2015 and Counts I-IV of Wildfire's complaint were dismissed with prejudice. Aug. 10, 2015 Op. & Order, ECF No. 37.
The same day that Fiserv filed its motion to dismiss, it also filed a counterclaim against Wildfire. See Counterclaim, ECF No. 10. On September 29, 2015, Fiserv obtained permission to amend its counterclaim to include Open Solutions, LLC, as a counter-plaintiff against Counter-Defendant Wildfire. The amended counterclaim alleges that Wildfire breached the Master Agreement between the parties. See Am. Counterclaim, ECF No. 42. It further alleges that Wildfire is now liable to Counter-Plaintiffs Fiserv and Open Solutions for early termination fees in the form of accelerated maintenance fees that were accrued during the operative term of the Master Agreement.
Wildfire timely answered the amended counterclaim on October 20, 2015. See Answer to Counterclaim, ECF No. 45. It then moved for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). See Pl.'s Mot. J., ECF No. 46. It argues that Fiserv's claims in the Amended Counterclaim that arise under the DNA Software Schedule to the Master Agreement should be dismissed because Fiserv is not a party to the DNA Software Schedule and thus lacks standing to enforce it. Similarly, it argues that Open Solutions' claims in the Amended Counterclaim that arise under the Master Agreement itself should be dismissed because Open Solutions is not a party to the Master Agreement and thus lacks standing to enforce it. Next, Wildfire seeks dismissal of Counter-Plaintiffs' claims for accelerated maintenance fees because the condition precedent to Wildfire paying those fees never occurred and, alternatively, Counter-Plaintiffs breached the Master Agreement, relieving Wildfire of any obligation to pay the fees.
Wildfire is a Michigan-based credit union principally located in Saginaw, Michigan. Fiserv is a Wisconsin corporation headquartered in Brookfield, Wisconsin. It "is a global leader in financial services technology, providing, among other things, account processing systems, electronic payment processing, products and services, internet and mobile banking systems and related solutions to a wide variety of financial institutions, including credit unions." Am. Counterclaim ¶ 2, ECF No. 42. Open Solutions is a Delaware limited liability company that is headquartered in Glastonbury, Connecticut. It "is an `Affiliate' of Fiserv as defined by the parties' Master Agreement." Id. at ¶ 3.
In October of 2012, representatives from "Wildfire and Fiserv first met to discuss a potential change to Wildfire's core processing system from software provided by Symitar to solutions provided by Fiserv." Id. at ¶ 9. "A core system is the basic technology platform that a financial institution uses to perform and deliver banking services to its customers." Id. The core system marketed to Wildfire by Fiserv and Open Solutions was named DNA.
On July 18, 2013, the parties executed a "Master Agreement" that set forth the terms of Wildfire's transition to the core processing system provided by Counter-Plaintiffs. The Master Agreement contains a number of exhibits, schedules, appendices, and attachments all of which constitute the entire Master Agreement. Under the Master Agreement, Wildfire agreed to pay certain licensing fees to Counter-Plaintiffs for the use of the core processing system software. Wildfire also agreed to pay maintenance fees to Counter-Plaintiffs for maintenance services.
Following the execution of the Master Agreement, "the parties began the implementation and conversion process, during which Fiserv and Open Solutions trained Wildfire on how to use DNA and related programming tools, and the parties used DNA in a testing mode in an effort to customize its applications to Wildfire's unique institutional needs." Id. at ¶ 14.
On September 11, 2014, Wildfire's President and Chief Executive Officer wrote to Fiserv that Wildfire would be ending its conversion to the DNA core system. Wildfire "demanded a full refund of fees paid to Fiserv for DNA." Id. at ¶ 15. The letter preceded Wildfire's "live" date with the DNA core system. The "live" date "means the actual date on which the processing of [Wildfire]'s data in an actual production mode (as opposed to testing mode) using the Software System first occurs or [redacted date
Wildfire wrote to Fiserv again on October 7, 2014 and demanded termination of the Master Agreement. Wildfire alleged that Fiserv breached the Master Agreement "because the conversion of Wildfire to DNA cannot successfully occur within the timeline which Fiserv promised, and in the manner which Fiserv promised." Am. Counterclaim ¶ 16, ECF No. 42 (internal quotation marks omitted). Fiserv denied this allegation.
Counter-Plaintiffs, believing Wildfire to be in breach of the Master Agreement, sent an invoice to Wildfire on November 19, 2014. The invoice billed Wildfire for maintenance fees that accelerated under the Master Agreement following Wildfire's breach. Wildfire did not pay the invoice. Fiserv had also issued an invoice to Wildfire in October of 2014 "for Wildfire's first year of Maintenance Services for DNA." Id. at ¶ 18. Wildfire also did not pay that invoice. Wildfire has made no payments to date.
The current dispute between the parties involves seven different provisions of the Master Agreement and its associated exhibits, schedules, appendices, and attachments (however they are characterized).
Three of the relevant provisions are found in the body of the Master Agreement itself (that is, not in any attachment). The Master Agreement was directly executed between Fiserv Solutions, Inc., and Wildfire Credit Union. The first of these relevant provisions is the preamble to the Master Agreement:
Master Agreement Preamble, Ex. 1, Pl's Mot. J., ECF No. 46-2 (emphasis in original). The next relevant provision is the general agreement as to deliverables in the Master Agreement between Wildfire and Fiserv. The provision is as follows, in relevant part:
Master Agreement § 1(a), id (emphasis in original). The final relevant provision in the body of the Master Agreement itself is the termination provision. That section, in relevant part, provides:
Master Agreement § 8(b), id.
Immediately following the body of the Master Agreement is the "Software Products Exhibit to Master Agreement." Section 11 of the exhibit concerns termination and provides in pertinent part:
Software Products Exhibit to Master Agreement § 11(a), id.
The next document attached to the Master Agreement is the "DNA Software Schedule to the Software Products Exhibit." The first relevant portion of this document is its preamble:
DNA Software Schedule to the Software Products Exhibit Preamble, id. The next portion disputed by the parties is § 1(h)(i). Section 1 is the "License Section" of the DNA Software Schedule. Subsection (h)(i), in relevant part, sets forth "Additional License Terms" under the DNA Software Schedule:
DNA Software Schedule to the Software Products Exhibit § 1(h)(1), id. The final relevant provision of the DNA Software Schedule and the entire Agreement as provided by Wildfire is § 3. Subsections (a)&(b) govern the assessment of fees for maintenance services provided by Fiserv. The subsections provide:
DNA Software Schedule to the Software Products Exhibit § 3(a)&(b), id.
Wildfire has moved for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). "The standard of review for a [motion for] judgment on the pleadings [under rule 12(c)] is the same as that for a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6)." E.E.O.C. v. J.H. Routh Packing Co., 246 F.3d 850, 851 (6th Cir. 2001). This Court may dismiss a pleading for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). A pleading fails to state a claim if it does not contain allegations that support recovery under any recognizable legal theory. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In considering a Rule 12(b)(6) motion, the Court construes the pleading in the non-movant's favor and accepts the allegations of facts therein as true. See Lambert v. Hartman, 517 F.3d 433, 439 (6th Cir.2008). The pleader need not have provided "detailed factual allegations" to survive dismissal, but the "obligation to provide the `grounds' of his `entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). In essence, the pleading "must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570).
Wildfire makes two arguments in its motion for judgment on the pleadings. First, it argues that Fiserv's claims for early termination fees or maintenance fees must be dismissed for lack of standing and Open Solutions' claims under the Master Agreement must be dismissed for lack of standing. Second, Wildfire claims that Defendants' counter-complaint does not state a claim upon which relief may be granted because Wildfire is under no obligation to pay an early termination fee or an accelerated maintenance fee.
Wildfire's first argument need not be overly analyzed. Wildfire claims that Fiserv cannot enforce the DNA Software Schedule because it is not a party to that agreement. That agreement, it asserts, is between it and Open Solutions, and only Open Solutions. On the latter point, Wildfire is correct. But the language in the preamble to the DNA Software Schedule states unequivocally:
DNA Software Schedule Preamble, Ex. 1, Pl.'s Mot. J., ECF No. 46-2 (emphasis added). There can be no reasonable argument, especially at the Rule 12 stage, that the Master Agreement incorporates the DNA Software Schedule. It is further difficult to understand how Wildfire argues that the DNA Software Schedule is not incorporated into the Master Agreement but at the same time acknowledges that it knowingly and willingly entered into the DNA Software Schedule.
The same can be said about Wildfire's argument that Open Solutions is not an affiliate of Fiserv. Wildfire attempts to disprove Open Solutions' affiliate status by explaining that Open Solutions is wholly owned by Harpoon Acquisition, LLC, and that Harpoon Acquisition is wholly owned by Fiserv.
In any event, at the Rule 12 stage, everything in the pleadings must be construed in the light most favorable to the non-moving party and all facts in the non-movants pleading must be accepted as true. To that end, Fiserv and Open Solutions plead that "Open Solutions is an `Affiliate' of Fiserv as defined by the parties' Master Agreement." Defs.' Counter-Compl. ¶ 3. To the extent this is a legal conclusion that need not be accepted, Wildfire has not provided any authority to the contrary, as just explained supra.
Finally, and perhaps most importantly, the preamble of the DNA Software Schedule, which was signed by Wildfire provides:
DNA Software Schedule Preamble, Ex. 1, Pl.'s Mot. J., ECF No. 46-2 (emphasis added). Wildfire has thus, on at least one prior occasion, admitted that Open Solutions is an affiliate of Fiserv. It now tries, unsuccessfully, to argue to the contrary.
Under the terms of incorporation in the DNA Software Schedule, Fiserv may enforce both the Master Agreement and the DNA Software Schedule. Similarly, under the affiliate inclusion in the Master Agreement and its designation as an affiliate in the DNA Software Schedule, Open Solutions may enforce both agreements. Both of Wildfire's arguments against these conclusions argue directly against the text of the agreement—the DNA Software Schedule—that it signed and ratified. Those arguments are meritless and not well placed.
Wildfire next argues that it is entitled to judgment on the pleadings because it has no obligation under the Master Agreement or its attachments to pay an early termination fee or accelerated maintenance fees.
First, Wildfire claims that it does not owe any accelerated maintenance fees because the condition precedent for Wildfire owing those fees—the DNA Software going "live"—was never met. The payment terms upon which Fiserv relies in its counter-complaint are § 1(h)(i)
The effect of termination on Wildfire's obligation to pay maintenance fees is found in DNA Software Schedule § 1(h)(i). That section states that
DNA Software Schedule § 1(h)(i). The "then current term of Maintenance Services" is in turn explained in § 3(a) of the DNA Software Schedule. That section explains that "[t]he initial term of Maintenance Services for Software . . . shall commence on the effective date of this Schedule and continue for 7 years from the Live Production Date." Id. at § 3(a). Per the terms of the contract, then, the term of maintenance services begins when the contract (here, the DNA Software Schedule) is executed and ends seven years after the "live production date."
The amount of fees owed, however, is a different matter, and is set forth in the next subsection, § 3(b). That section is titled "maintenance fees" and provides that "[t]he Maintenance Fee is due and payable on the Live Production Date on a pro rata basis for the year in which the Live Production Date occurs, and thereafter every year on the anniversary of the Live Production Date." Id. The applicable maintenance fees are "as set forth on Attachment 1" to the DNA Software Schedule. Id. The fees listed on that attachment are entirely redacted.
Accordingly, under § 3(a) of the DNA Software Schedule, Wildfire is responsible for fees arising out of maintenance work performed by Open Solutions from the time the DNA Software Schedule is executed between Open Solutions and Wildfire. That is, the current term for maintenance fees begins when the contract is executed. What § 3(b) provides, is the time when those accrued fees must be paid. Section 3(b) explains that the first payment of those fees is due on the "live production date." Wildfire is responsible to pay fees before that date if the DNA Software Schedule is "terminat[ed] for any reason other than Open Solutions' uncured material default pursuant to Section 8(b)(i) of the [Master] Agreement." Id. at § 1(h)(i). If the DNA Software Schedule is so terminated "an amount equal to [redacted] of all remaining Maintenance Fees through the end of the then current term of Maintenance Services shall be accelerated[.]" Id.
Counter-Plaintiffs allege that Wildfire breached the Master Agreement, triggering the acceleration provision. Taking the facts in the counter-complaint as true, as the Court must, Counter-Plaintiffs state a valid claim for accelerated Maintenance Fees under the DNA Software Schedule. Wildfire contends that the obligation to pay maintenance fees is contingent on the occurrence of a condition precedent—the live production date of the DNA software—that was not met. But as just explored, that is a condition precedent to Wildfire making a payment during the active term for maintenance services. It is not a condition precedent to Wildfire's obligation to pay the maintenance fees at some future date. The only condition precedent to Wildfire being subject to the duty to pay maintenance fees is it agreeing to the DNA Software Schedule with Open Solutions.
If Wildfire is contending that the failure of the condition precedent to its duty to pay means it is absolved of accrued maintenance fees, it is mistaken. The condition precedent falls away in the event of "termination for any reason other than Open Solutions' uncured material default pursuant to Section 8(b)(i) of the [Master] Agreement." DNA Software Schedule § 1(h)(i). In the event of termination the current maintenance term (which began when the contract was executed) ends and all accrued fees are immediately payable.
Ultimately, the dispute arises from Wildfire confusing the obligation to pay accrued maintenance fees with the obligation to make an actual payment against accrued maintenance fees. The two are different. Wildfire may begin accruing maintenance fees once the DNA Software Schedule is executed and assumes a liability to Open Solutions in the amount of those fees. By contrast, Wildfire is not obligated to make a payment toward those fees, barring termination under § 1(h)(i), until the live production date. Its liability for any accrued fees nevertheless remains and that liability can become immediately payable if the DNA Software Schedule terminates under § 1.(h)(i), as Open Solutions and Fiserv allege that it did.
Next, Wildfire argues that Counter-Plaintiffs' claim for accelerated maintenance fees should be dismissed because they materially breached the Master Agreement and that breach excused Wildfire's obligations under the Agreement. The claim is not supported by the pleadings. The Court is obligated to view the pleadings in the light most favorable to the non-moving party. Here, that party is Counter-Plaintiffs. Taken in that light, the pleadings allege that Wildfire was in material breach of its obligations under the Master Agreement. That allegation by Counter-Plaintiffs may be disregarded if contradicted by facts in the record at the pleading stage, which generally means documents attached to the parties' pleadings that then form a part thereof. But the only item attached to the pleadings is the Master Agreement, incorporated by being attached to Wildfire's motion for judgment.
Even if the pleadings were expanded beyond just the counter-complaint and Wildfire's answer, Wildfire could still not substantiate a breach by Counter-Plaintiffs as a matter of law at the judgment on the pleadings stage. The documents attached to Wildfire's complaint do not demonstrate anything more than a general dissatisfaction with the delivery of the DNA software product by Fiserv that then culminates in the termination of the project by Wildfire. Taken in a light most favorable to Counter-Plaintiffs, this does not amount to breach by Counter-Plaintiffs. Wildfire's argument is meritless.
Finally, Wildfire requests, in the alternative, that the Court convert its motion, if necessary, to one for summary judgment pursuant to Federal Rule of Civil Procedure 56(c). The motion will not be converted. Under Rule 12(d) a court considering a motion under Rule 12(b)(6) or 12(c) must convert the motion to one for summary judgment if "matters outside the pleadings are presented to and not excluded by the court." Fed. R. Civ. P. 12(d). No matters outside the pleadings have been presented so conversion is unnecessary. It would also be premature to convert the motion to one for summary judgment where the primary contentions of the parties concern which party breached the Master Agreement. This question requires factual exposition. Neither party has furnished any justification for how a conclusion on the question of breach can be reached without it.
Accordingly, it is
Wildfire, for its part, in response to Fiserv's request to substitute parties, opposed the request. It argued that fraud or abuse of the corporate form, under Delaware law, is a sufficient predicate for disregarding distinctions between related corporations:
Pl.'s Resp. 23, ECF No. 20.
Wildfire's present claim, in its motion for judgment on the pleadings, seeks protection based on the supposed differences between Fiserv, Inc., and Fiserv Solutions, Inc. It claims that Fiserv Solutions is certainly a party to the Master Agreement. But is Fiserv, Inc., a party? It's not so sure. The attempt to use the difference between the two as a sword and at other times a shield is, at the least, confusing. Wildfire elected to file suit against Fiserv, Inc., and attempted to keep Fiserv, Inc., in the case despite Fiserv's claims that Fiserv Solutions, LLC, was the proper party. Moreover, Wildfire, following Fiserv's motion to dismiss, began listing its case caption with the Defendant "Fiserv, Inc., a Wisconsin corporation, also known as Fiserv Solutions, Inc." See, e.g., Pl.'s Mot. J., ECF No. 46. It appears, then, that Wildfire does not know the difference between Fiserv, Inc., and Fiserv Solutions, Inc., or at least concedes they are the same entity. Absent any factual proof, any future argument that attempts to cloud the distinction between the two, or create a distinction where none exists, should be withheld.
