Cygnus Systems, Inc. v. Microsoft Corporation, et al

Filing 574

Cygnus Systems, Inc. v. Microsoft Corporation, et al

Doc. 574

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Bryan Cave LLP Two North Central Avenue, Suite 2200 Phoenix, Arizona 85004-4406 [phone]

George C. Chen, #019704 Debra A. Winiarski, #024197 Jonathan G. Brinson, #025045 BRYAN CAVE LLP, #00145700 Two North Central Avenue, Suite 2200 Phoenix, Arizona 85004-4406 Telephone: [phone] Fax: [phone] E-mail: [e-mail] E-mail: [e-mail] E-mail: [e-mail] Attorneys for Plaintiff MiniSoft, Inc. UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA MINISOFT, INC., Plaintiff, vs. Case No.
COMPLAINT

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(Demand for Jury Trial)

ELITE INFORMATION SYSTEMS, INC., 16 THOMSON ELITE, a business of THOMSON CORP., THOMSON LEGAL & 17 REGULATORY APPLICATIONS, INC., and THOMSON LEGAL & REGULATORY 18 GROUP,
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Defendants. Plaintiff Minisoft, Inc. hereby alleges the following claims for (1) breach of contract, (2) unjust enrichment, (3) declaratory judgment pursuant to Federal Rule of Civil Procedure 57, and (4) injunctive relief against Defendants Elite Information Systems, Inc., Thomson Elite, Thomson Corp., Thomson Legal & Regulatory Applications, Inc., and Thomson Legal & Regulatory Group ("Defendants"):

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Dockets.Justia.com

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THE PARTIES 1. Plaintiff Minisoft, Inc. ("MiniSoft") is a corporation organized and existing

under the laws of the State of Arizona with its principal place of business at 10030 North 25th Avenue, Phoenix, Arizona 85021. 2. Defendant Elite Information Systems, Inc. ("Elite") has its principal place of

business at 5100 West Goldleaf Circle, Suite 100, Los Angeles, California 90056. 3. Defendant Thomson Elite is the wholly owned subsidiary of Thomson Corp.,

with its principal place of business at 610 Opperman Drive, Eagan, Minnesota 55123. 4. Defendant Thomson Corp. is a corporation organized and existing under the

laws of Ontario, Canada, with its principal place of business at Suite 2706, TorontoDominion Centre, Toronto, Ontario M5K 1A1. 5. Defendant Thomson Legal & Regulatory Applications, Inc. is a corporation

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organized and existing under the laws of the State of Delaware with its principal place of business at 610 Opperman Drive, Eagan, Minnesota 55123. 6. Thomson Legal & Regulatory Group is a corporation organized and existing

under the laws of the State of Delaware with its principal place of business at 610 Opperman Drive, Eagan, Minnesota 55123. 7. Plaintiff MiniSoft has a contractual relationship with Defendant Elite

Information Systems, Inc. 8. Defendants Thomson Corp., Thomson Elite, Thomson Legal & Regulatory

Applications, Inc., and Thomson Legal & Regulatory Group ("Thomson") are successors in interest to Elite Information Systems, Inc. and now own and operate the business of Elite Information Systems, Inc. JURISDICTION AND VENUE 9. This Court has original jurisdiction over this action pursuant to 28 U.S.C.

§ 1332, because the amount in controversy exceeds the value of $75,000.00, exclusive of interest and cost, and is between citizens of different States.

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10.

This Court has jurisdiction to award a declaratory judgment pursuant to 28

U.S.C. § 2201 et seq. and A.R.S. § 12-1831 et seq. 11. Venue is proper in this Court pursuant to 28 U.S.C. § 1391(a)(2) because a

substantial part of the events or omissions giving rise to these claims occurred within this district. GENERAL ALLEGATIONS 12. Plaintiff incorporates by reference each and every allegation contained in

paragraphs 1 through 11 of this Complaint. 13. This is an action for breach of contract, unjust enrichment, declaratory

judgment, and an injunction. 14. Defendant Elite authored an EARC Software Distribution Agreement

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("EARC Agreement") it entered into with MiniSoft on September 30, 2001, regarding accounts receivable software. A true and correct copy of the EARC Agreement is attached as Exhibit "1." 15. Under the EARC Agreement, MiniSoft is responsible for providing licenses

and is "primarily responsible for providing customer support for the Products." [EARC Agreement, Exh. 1 at 2, par. 2.5] Accordingly, MiniSoft incurred the costs and labor associated with product development and the maintenance and support ("Support") thereof. 16. The EARC Agreement further provides that Minisoft will receive "[e]ighty-

five percent (85%) of the then current retail maintenance fees," leaving 15% for Defendant Elite. [EARC Agreement, Exh. 1 at "Exhibit B" (under "Support Fees")] 17. MiniSoft is also entitled to "Product Fees" under the EARC Agreement,

consisting of "[f]ifty percent (50%) of the then current retail license fees as published by MiniSoft . . . ." [EARC Agreement, Exh. 1 at "Exhibit B" (under "Product Fees")] 18. Defendant Elite was well aware, at the time of entering into the EARC

Agreement, of the EARC Agreement's provision granting MiniSoft the right to 85% of Support fees.

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19.

In 2003, Defendant Thomson acquired Elite and assumed all of its rights and

responsibilities under the EARC Agreement. 20. Under the EARC Agreement, Defendants unilaterally determine amounts

owing to MiniSoft on a monthly basis, without receiving invoices from MiniSoft. 21. Elite's and Thomson's course of dealing showed the parties' intention that

MiniSoft receive 85% of Support fees and 50% of license fees, as Defendants paid MiniSoft 85% of Support fees and 50% of license fees from September 30, 2001 to November 2006. 22. Although the parties regularly discussed proper amounts owing from various

accounts under the EARC Agreement, Defendants never questioned the EARC Agreement's meaning regarding MiniSoft's 85% share of Support fees and 50% of license fees. Rather, between September 30, 2001 and November 2006, Defendants made a

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monthly determination that MiniSoft was owed these amounts under the EARC Agreement. 23. On September 30, 2003, Defendants entered into an Omnibus Agreement

with MiniSoft, extending the EARC Agreement to September 15, 2008, and providing that "[a]ll other terms of the EARC[] Agreement shall remain unchanged, unaltered and/or unmodified by this [Omnibus] Agreement." [Omnibus Agreement, Exh. 2 at 2, par. 5] A true and correct copy of the Omnibus Agreement is attached as Exhibit "2." 24. Defendants were consistently paying MiniSoft 85% of Support fees and 50%

of license fees under the EARC Agreement at the time of entering into the Omnibus Agreement. 25. As Defendants are aware, MiniSoft would operate at a loss if it only received

50% of Support fees, rather than the 85% provided by the EARC Agreement. 26. Following its acquisition of Elite and a review of Elite's agreements,

Defendant Thomson disingenuously took the position in November 2006 that both MiniSoft and Elite had been mistaken over the previous five years as to the EARC Agreement's true meaning, claimed that MiniSoft was actually entitled to only 50%, rather

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than 85%, of Support fees, and stopped making payments to MiniSoft under the EARC Agreement. 27. In November 2006, Defendants altogether ceased paying MiniSoft any

Support fees or license fees, unilaterally claiming a "set-off" for past Support fees allegedly overpaid as a result of Defendant Thomson's new and disingenuous interpretation of the EARC Agreement. As Defendants are MiniSoft's primary source of revenue, the cessation of the payments has caused, and is causing, grave harm to MiniSoft. 28. On September 30, 2001 Defendant Elite and MiniSoft also entered into the

EPRS Software Distribution Agreement ("EPRS Agreement"), regarding professional reporting software. A true and correct copy of the EPRS Agreement is attached as Exhibit "3." 29. Under the EPRS Agreement, Defendants are required to pay MiniSoft 85% of

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maintenance fees for MiniSoft's Support of products under the EPRS Agreement. [EPRS Agreement, Exh. 3 at 10 (under "Support Fees"). 30. Defendants have refused to pay fees owing to MiniSoft under the EPRS

Agreement, unilaterally claiming a "set-off" for past Support fees allegedly overpaid under the EARC Agreement. 31. MiniSoft has continued to provide licenses and Support for the product, even

though Defendants have ceased paying MiniSoft for those licenses and Support. 32. The EARC Agreement only requires MiniSoft to continue its Support [EARC

services "[s]o long as Elite has paid the appropriate Support Fees . . . ." Agreement, Exh. 1 at 3, par. 6] 33.

On March 19, 2007 MiniSoft notified Defendants that their refusal to pay any

license and Support fees, let alone the full 85% of Support fees required under the EARC Agreement, constitutes a material breach of the EARC Agreement. A true and correct copy of that March 19, 2007 letter ("Letter") is attached as Exhibit "4."

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34.

The EARC Agreement provides that "[e]ither party may terminate this

Agreement upon the occurrence of a material breach hereof by the other party, which material breach has not been cured within ninety (90) days after receipt of written notice by the breaching party from the other party." [EARC Agreement, Exh. 1 at 6, par. 14.2] 35. The ninety (90) day cure period has now passed, and Defendants have

nevertheless continued to refuse to pay MiniSoft any license or Support fees under the EARC Agreement, and MiniSoft has not received any license or Support fees from Elite since November 2006. COUNT I (Breach of Contract) 36. Plaintiff incorporates by reference each and every allegation contained in paragraphs 1 through 35 of this Complaint. 37. The EARC Agreement entered into by MiniSoft and Elite on September 30,

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2001 is a valid contract. 38. The EPRS Agreement, also entered into by MiniSoft and Elite on September

30, 2001 is a valid contract. 39. The EARC Agreement, by its terms, was to remain in effect for a period of

five years, at which time Elite could terminate the EARC Agreement upon six months' written notice. 40. On September 30, 2003, MiniSoft and Defendants entered into an Omnibus

Agreement, extending the EARC Agreement's term to September 15, 2008. [Omnibus Agreement, Exh. 2 at 2, par. 5] 41. Defendants have breached, are breaching, and threaten to continue to breach

their obligations under the EARC Agreement by refusing to pay MiniSoft any license or Support fees. 42. Defendants have also breached, are breaching, and threaten to continue to

breach their obligations under the EPRS Agreement by refusing to pay MiniSoft maintenance fees owing thereunder.
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43.

MiniSoft has performed all of its obligations under the EARC Agreement and

EPRS Agreement, and indeed has continually provided licenses and Support for the product even when Defendants have ceased paying MiniSoft for those licenses and Support. 44. The EARC Agreement provides that MiniSoft may "terminate this

Agreement upon the occurrence of a material breach hereof by the other party, which material breach has not been cured within ninety (90) days after receipt of written notice by the breaching party from the other party." [EARC Agreement, Exh. 1 at 6, par. 14.2] 45. On March 19, 2007, MiniSoft informed Defendants by Letter that their

refusal to pay any license fees or Support fees, let alone the full 85% of Support fees required under the EARC Agreement, constituted a material breach of the EARC Agreement. 46. Defendants have nevertheless continued to refuse to pay MiniSoft any license

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fees or Support fees under the EARC Agreement, as MiniSoft has not received any license or Support fees from Defendants since November 2006. 47. The EARC Agreement provides that "Elite shall pay MiniSoft a late payment

charge at the rate of one percent (1%) per month or the maximum legal rate, whichever is less, for any outstanding fees or payments of any kind payable by Elite to MiniSoft and not paid as provided herein." [EARC Agreement, Exh. 1 at 3, par. 3.3] 48. MiniSoft. 49. Defendants' breach of contract has caused MiniSoft damages in the form of The EPRS Agreement also provides for interest on late payments made to

unpaid license and Support fees from November 2006 to the present, interest on the unpaid amounts, as allowed under the EARC Agreement and otherwise, and other damages to be shown by the evidence. WHEREFORE, with respect to Count I, Plaintiff respectfully requests judgment as follows:

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A.

An award against Defendants of compensatory damages in the amount

established by the evidence, including unpaid license and Support fees, fees under the EPRS Agreement, and other resulting damages; B. An award against Defendants of interest accrued on the unpaid license and

Support fees, and fees under the EPRS Agreement, as provided by the EARC Agreement, EPRS Agreement, and otherwise; C. An award against Defendants of reasonable attorneys' fees and costs and

disbursements for this action, as provided under the EARC Agreement, EPRS Agreement, common law, A.R.S. § 12-341, A.R.S. § 12-341.01, and other applicable law; D. For any and all pre-judgment and post-judgment interest at the rate applicable

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under the law; and E. For such other relief as this Court deems just and proper. COUNT II (Unjust Enrichment) 50. Plaintiff incorporates by reference each and every allegation contained in paragraphs 1 through 49 of this Complaint. 51. Defendants have collected license and Support fees from end users for

products and Support provided by MiniSoft, unjustly refusing to pay MiniSoft for such products and Support. 52. MiniSoft incurs the burden of providing customers with products and

Support, with Defendants merely collecting fees based on MiniSoft's efforts. 53. Defendants have profited, and will continue to profit, as a result of their

failure to pay for MiniSoft's products and Support, to the detriment of MiniSoft. 54. There is no justification for Defendants' enrichment in collecting license and

Support fees based on MiniSoft's products and Support, to the detriment of MiniSoft. 55. Defendants have caused injury to MiniSoft and there is no adequate remedy

at law to redress such injury.

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56.

MiniSoft is entitled to receive any and all amounts by which Defendants have

been unjustly enriched. WHEREFORE, with respect to Count II Plaintiff respectfully requests judgment as follows: A. An award against Defendants of the amount by which they have been unjustly

enriched, including all Support fees, licenses, and other benefits derived from MiniSoft's efforts; B. For any and all pre-judgment and post-judgment interest at the rate applicable

under the law; and C. For such other relief as this Court deems just and proper. COUNT III (Declaratory Judgment) 57. Plaintiff incorporates by reference each and every allegation contained in paragraphs 1 through 56 of this Complaint. 58. This controversy between MiniSoft and Defendants relates to the EARC

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Agreement and is present, substantial, and justiciable, and sufficiently invokes this Court's powers pursuant to 28 U.S.C. § 2201 et seq. to declare the Parties' rights and liabilities. 59. The actual controversy between the Parties warranting declaratory judgment

includes, but is not limited to, a declaration that: (1) the EARC Agreement is terminated, (2) the termination allows MiniSoft to provide Support services to the end users, (3) Defendants have no right to take an automatic set-off on amounts currently owing under the EARC Agreement, and (4) the EARC Agreement's termination requires Defendants "to immediately cease use of [MiniSoft's] Products." 60. The EARC Agreement provides that all ownership rights in the product are

held exclusively by MiniSoft. [EARC Agreement, Exh. 1 at 6, par. 12] 61. The EARC Agreement further states that, "[u]pon termination of this

Agreement for any reason, all rights and licenses granted by MiniSoft to Elite hereunder shall immediately cease," and that Elite's right to provide support services to end user
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customers will continue only "so long as all Support Fees are kept current for all Elite end user accounts." [Id. at 7, par. 14.5] 62. Defendants have failed to keep current the Support fees and license fees

owing to MiniSoft as of November 2006, claiming a unilateral right to retain such monies as a set-off for supposed overpayments made by Defendants over a period of five years. 63. The EARC Agreement requires Defendants to pay MiniSoft 85% of Support

fees and 50% of license fees for licenses and Support provided by MiniSoft. 64. Defendants materially breached the EARC Agreement by failing to pay

MiniSoft any license fees or Support fees as of November 2006. 65. The EARC Agreement further provides that "[u]pon termination of this

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EARC Agreement for any reason by either party, Elite shall immediately cease use of the Products . . . ." [Id. at 7, par. 14.6] 66. Plaintiff seeks, pursuant to 28 U.S.C. § 2201 et seq. and A.R.S. §§ 12-1831 et

seq., a judicial declaration by this Court that the EARC Agreement is terminated, that the termination allows MiniSoft to provide Support services to the end users, that Defendants have no right to take an automatic set-off on amounts currently owing under the EARC Agreement, and that the EARC Agreement's termination requires Defendants "to immediately cease use of [MiniSoft's] Products." 67. Such a judicial declaration is necessary and appropriate at this time under the

circumstances alleged. WHEREFORE, with respect to Count III, Plaintiff respectfully requests judgment as follows: A. A judicial declaration that (1) the EARC Agreement is terminated because

Defendants failed to cure a material breach within 90 days, (2) the termination allows MiniSoft to provide Support services to the end users, (3) Defendants have no right to take an automatic set-off on amounts currently owing under the EARC Agreement, and (4) the

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EARC Agreement's termination requires Defendants "to immediately cease use of [MiniSoft's] Products;" B. An award against Defendant of reasonable attorneys' fees and costs and

disbursements for this action, as provided under the EARC Agreement, the common law, and other applicable law; C. For such orders, including injunctive relief, as are necessary to preserve this

Court's jurisdiction over the parties and issues herein; and D. For such other and further relief as this Court deems just and proper. COUNT IV (Injunctive Relief) 68. Plaintiff incorporates by reference each and every allegation contained in paragraphs 1 through 67 of this Complaint. 69. Defendants' failure to cure their non-payment of license and Support fees

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within 90 days of MiniSoft's Letter informing Defendant of such breach has terminated the EARC Agreement according to its terms. 70. The EARC Agreement provides that "[u]pon termination of this EARC

Agreement for any reason by either party, Elite shall immediately cease use of the Products . . . ." [EARC Agreement, Exh. 1 at 7, par. 14.6] 71. Defendants continue to use MiniSoft's products after the EARC Agreement

has been terminated, although not authorized to do so. 72. The EARC Agreement further provides that "Elite shall not directly or

indirectly, copy, reproduce, distribute, transfer, reverse-engineer, de-compile or disassemble the Products or any portion thereof other than as permitted herein." [EARC Agreement, Exh. 1 at 6, par. 13] 73. Defendants have created collections software built for 3E architecture, which

was based on the knowledge derived from MiniSoft products.

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74.

Such use of the products causes harm to MiniSoft's ability to market and

service its own products, and violates various laws by interfering with MiniSoft's intellectual property rights. 75. In such circumstances, MiniSoft is entitled to injunctive relief because it will

be irreparably harmed by the actions of Defendants as alleged herein, unless Defendants are permanently enjoined by the Court from marketing, selling and/or servicing MiniSoft products, and from marketing or selling Defendants' collections software built for the 3E architecture. 76. MiniSoft has no adequate remedy at law to redress this aspect of its harm.

WHEREFORE, with respect to Count IV, Plaintiff respectfully requests judgment as follows: A. A permanent injunction enjoining Defendants from marketing, selling and/or

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servicing MiniSoft products in any way; B. A permanent injunction enjoining Defendants from marketing or selling the

collections software based on knowledge derived from MiniSoft products; C. An award against Defendants of reasonable attorneys' fees, and costs and

disbursements for this action, as provided under the EARC Agreement, the common law, and other applicable law; D. For such other and further relief as this Court deems just and proper. DEMAND FOR JURY TRIAL Plaintiff hereby demands a trial by jury pursuant to Fed. R. Civ. P. 38(b) on all issues so tryable.

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DATED this 20th day of June, 2007. BRYAN CAVE LLP

By: s/ Jonathan G. Brinson George C. Chen Debra A. Winiarski Jonathan G. Brinson Two North Central Avenue, Suite 2200 Phoenix, AZ 85004-4406 Attorneys for Plaintiff MiniSoft, Inc.

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