JJCK LLC v. Project Lifesaver International
Filing
82
OPINION re 15 motion to dismiss amended complaint. Signed by Judge Leonard P. Stark on 7/1/11. (ntl)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
JJCK, LLC,
d/b/a EMFINDERS,
Plaintiff,
Civ. No. 10-930-LPS
v.
PROJECT LIFESAVER
INTERNATIONAL,
Defendant.
OPINION
Joseph H. Huston, Jr., Wilmington, DE; Stacey A. Scrivany, Reading, PA, STEVENS & LEE,
Attorneys for Plaintiff.
Robert K. Beste, III, SMITH, KATZENSTEIN, & JENKINS LLP, Wilmington, DE; Jonathan D.
Frieden, ODIN, FELDMAN, & PITTLEMAN PC, Fairfax, V A, Attorneys for Defendant.
July 1,2011
Wilmington, DE
(JL-9, ~
u.s.
Stark;
District Judge:
Pending before the Court is Defendant Project Lifesaver International's Motion to
Dismiss Amended Complaint. (D.1. 15) For the reasons that follow, the Court will grant in part
and deny in part this motion.
I.
BACKGROUND
Plaintiff JJCK, LLC ("Em Finders") is a Texas limited liability company that does
business under the name EmFinders. 1 (Am. Compl. (D.1. 10) at 1) EmFinders utilizes cellular
and other technology, called "EmSeeQ," to assist in locating persons with impairments ("PWI"),
such as people who suffer from Alzheimer's or autism, who may have wandered away and
cannot be located. (Jd. at 2) EmSeeQ functions by having a PWI wear a watch-like device that,
when triggered remotely, will initiate a 9-1-1 telephone call to provide the location of a missing
PWI. (Jd.)
Defendant Project Lifesaver International ("PLI") is a Virginia non-profit entity that
provides services to various public organizations, governmental agencies, or non-profit agencies
(collectively referred to herein as public service agencies or, simply, "PSAs"). Among other
things, PLI assists PSAs in protecting individuals at risk for wandering by researching and
recommending various search and rescue services, as well as by selling tracking equipment and
services used to locate PWIs who are missing. (Am. Compl. at 2-3) PLI also sometimes assists
in the rescue process.
All factual allegations, which for purposes of this motion the Court must accept as true,
are taken from the Amended Complaint. See, e.g., Erickson v. Pardus, 551 U.S. 89 (2007).
Additionally, for clarity's sake, the Court will cite to the Amended Complaint throughout this
Opinion as "Am. Compl."
1
1
PLI had existing arrangements with Proximity RF Systems, a company that, like
EmFinders, provides location services for PWIs. (Am. CompI. at 3) In early 2010, EmFinders
and PLI began exploring the possibility of entering into a joint business arrangement. Under the
terms of the arrangement, EmFinders would pay PLI a monthly fee and, in exchange, PLI would
provide certain services to EmFinders related to the sale, distribution, funding, support, training,
and operation of EmFinders' EmSeeQ location services. (Jd) As part of the negotiation process,
PLI extensively tested and evaluated EmSeeQ, including in several successful trials. PLI
determined that the EmFinders system was the preferred technology in the coverage area. (ld at
3-4)
On July 8, 2010, EmFinders and PLI entered into a contract, entitled the "Services
Agreement" ("Services Agreement" or "Agreement"). (Am. CompI. at 4) Article 2 of the
Services Agreement describes "PLI Obligations." (Am. CompI. Ex. A at 3) Specifically, Article
2 provides that PLI agrees to:
2.1. Apply its best efforts to promote and maximize
distribution of the EmSeeQ System in the Coverage
Area;
2.2. Provide EmSeeQ services in a prompt,
professional and workmanlike manner;
2.3. Employ (directly or indirectly) sufficient
personnel as reasonably required to meet its
obligations hereunder;
2.4. Accurately represent the capabilities of the
EmSeeQ System;
2.5. Maintain such records concerning the
distribution of the EmSeeQ and the provision of
EmSeeQ Services, which PLI shall furnish
2
EmFinders from time to time as requested, as may
be necessary to enable EmFinders to comply with
all related requirements imposed under any
applicable federal, state or local laws or regulations;
2.6. Conduct its affairs in an ethical and
businesslike manner, and comply with all applicable
present and future laws, federal, state and local
ordinances and regulations relating to the EmSeeQ
Services; and
2.7. Promptly advise EmFinders of any information
that comes to PLI's attention which may be helpful
to EmFinders, including any complaints or claims of
damage in connection with the EmSeeQ System.
(Am. CompI. Ex A. at 3-4)
The Services Agreement also contains restrictions on PLI's conduct involving other
location service companies. Article 3 of the Agreement, entitled "Restrictions," provides that
PLI agrees:
3.1.1. Not to promote, distribute, resell or
otherwise support any GPS or Cellular Based
Location System, other than the EmSeeQ System;
3.1.2. Not to promote any other location product or
service that provides a similar function as the
EmSeeQ System, including without limitation
Proximity RF Systems, in the Coverage Area, other
than the EmSeeQ System.
3.2. For the avoidance of doubt, nothing in this
Agreement prohibits PLI from selling, servicing and
supporting Proximity RF Systems in the Coverage
Area where (i) required by a contractual
commitment entered into prior to ther (sic) Effective
Date or (ii) where specifically required by the PSA
or Caregiver.
3
(Am. Compi. Ex. A at 4)
Article 7 provides guidelines for the parties' use of each others' trademarks and brand
name. Article 7.3 is entitled "Ownership and Use of Marks and Content." (Id at 5) Article
7.3.4 states that:
Neither Party will engage in any activity that may be
harmful to the other Party's goodwill or may reflect
unfavorably on its Marks. This prohibition
includes, without limitation, the commission of any
unfair trade practice, the publication of any false,
misleading or deceptive advertising, or the
commission of any fraud or misrepresentation.
Each Party agrees that it will not challenge the title
or any rights of the other Party in and to its
respective Marks during the term of this agreement
or thereafter.
(Id at 5-6)
The Services Agreement also contains provisions for terminating the arrangement and for
limitations on the parties' liabilities. Article 11, entitled "Term and Termination," provides:
"Either party may terminate [the] Agreement immediately by written notice: (a) ifthe other party
commits a non-remediable material breach; or (b) if the other party fails to cure any remediable
breach within thirty days after written notice is given to the breaching party." (Id at 7)
Additionally, Article 16 limits the liability of the parties. This section, in all caps and bold,
provides:
16.1 WITH EXCEPTION OF INDEMNITY
OBLIGATIONS AND CLAIMS RELATED TO
CONFIDENTIALITY HEREUNDER:
16.1.1 IN NO EVENT SHALL EITHER
PARTY BE LIABLE TO THE OTHER PARTY
FOR ANY INDIRECT, INCIDENTAL,
4
SPECIAL OR CONSEQUENTIAL DAMAGES,
OR DAMAGES FOR LOSS OF PROFITS,
REVENUE, DATA OR USE (WHETHER IN
CONTRACT, NEGLIGENCE, TORT OR
OTHERWISE) ARISING OUT OF OR
RELATING TO TIDS AGREEMENT, EVEN IF
SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
16.1.2 WITHOUT LIMITING THE
FOREGOING, IN NO EVENT SHALL
EMFINDERS AGGREGATE LIABILITY
UNDER THIS AGREEMENT FOR ANY
DAMAGES FROM ANY CAUSE
WHATSOEVER, REGARDLESS OF FORM
OR ACTION (WHETHER IN CONTRACT,
NEGLIGENCE, TORT OR OTHERWISE)
EXCEED THE AMOUNT OF ANNUAL
SERVICES FEES OWNED HEREUNDER
LESS ANY PORTION ALREADY PAID.
(Id. at 9)
From EmFinders' perspective, the parties experienced problems from the beginning of
their arrangement. In July 2010, the same month the parties entered into the Services Agreement,
PLI refused to make any formal announcement to any of the PSAs that it serviced. (Am. CompI.
at 5) Instead, PLI repeatedly represented to EmFinders that it would begin to actively promote
EmFinders' products at PLI's annual convention in early October 2010. Thus, EmFinders made
two monthly installment payments under the Services Agreement on July 29, 2010 and August
27,2010. (Jd. at 6)
PLI's annual convention occurred during early October 2010. During his opening
remarks to the conference, PLI's CEO Gene Saunders did not provide a flattering portrayal of the
EmSeeQ System. Instead, Saunders told the convention attendees that it was "not clear" that the
5
EmSeeQ System would replace "current technology" and advised interested PSAs to "take a
serious look" at the EmSeeQ System. (Id. at 6) The "current technology" referenced by
Saunders was a Proximity RF System, a direct competitor of EmFinders in this market. (Id.)
From EmFinders' perspective, this negative reference to EmFinders was followed by an
enthusiastic endorsement of Proximity RF Systems. PLI also allowed Proximity RF Systems to
set up a convention display immediately beside EmFinders' display. (Id.) In EmFinders' view,
PLI spent the remainder of the convention actively recommending the Proximity RF Systems,
while doing little to promote EmFinders' system. PLI apparently offered a price break to any
convention attendee that purchased Proximity RF equipment. (ld.)
EmFinders also points to other examples, in its view, ofPLI's bad faith in executing the
Services Agreement. For example, PLI misrepresented the reliability and effectiveness of the
EmSeeQ System by providing false or incomplete information about the tests and trial runs of the
EmSeeQ System. (Am. Compi. at 7-8) Also, PLI conducted an emergency conference call with
its state coordinators during which PLI again misrepresented the reliability and effectiveness of
the EmSeeQ System and encouraged its state coordinators not to adopt the EmSeeQ System.
(Id.) PLI employed only a single person to handle the entire EmSeeQ program nationwide, an
insufficient number to deal with PLI's 1,200 member PSAs. (ld.) Also, PLI instructed its single
employee dedicated to promoting the EmSeeQ System not to forward sales leads to EmFinders.
(Id. at 8)
EmFinders further points to an agreement with the Lynchburg, Virginia Sheriffs Office
that EmFinders submits was terminated because ofPLI's misconduct. The Lynchburg Sheriffs
Office had agreed to purchase a six-month subscription to the EmSeeQ services from EmFinders.
6
(Am. Compl. at 9) Just weeks after making the purchase, and after a successful rescue of a
missing child, Lynchburg terminated the EmSeeQ subscription. Saunders, PLI's CEO, is an
honorary deputy of the Lynchburg Sheriffs Office, and the decision by the Lynchburg Sheriffs
Office to terminate the EmSeeQ arrangement was the direct result of pressure by PLI. (Id)
PLI's conduct, in EmFinders' view, is directly contrary to the terms and spirit ofthe
Services Agreement. As such, EmFinders contends that PLI has breached several provisions of
the Agreement. Each of these breaches, in EmFinders' view, is non-remediable and, therefore,
cause for immediate termination pursuant to Article 11.2 ofthe Services Agreement. (Jd at 8)
Accordingly, on October 18,2010, EmFinders provided PLI with written notice of immediate
termination of the Agreement. (Jd)
EmFinders filed suit in this Court on October 29,2010, invoking the Court's diversity
jurisdiction.2 See 28 U.S.C. § 1332 (2006). In the original complaint, EmFinders sought a
declaratory judgment, as well as relief for breach of contract and "tortious interference with
contract and/or prospective contract." (Compl. (D.I. 1) at 9-10) PLI responded on November 24,
2010 by filing a motion to dismiss. (D.I. 8) Also that day, PLI filed a counterclaim against
EmFinders. (D.I. 9) On December 13,2010, EmFinders filed the Amended Complaint. (D.I.
10) EmFinders objected to PLI's counterclaim as procedurally improper. (D.I. 11)
Consequently, PLI voluntarily dismissed the counterclaim and filed a separate lawsuit against
EmFinders for breach of contract based on the same Services Agreement. (D.I. 13; see also Civ.
No.10-1143-LPS) PLI filed the instant motion on December 28, 2010, arguing that each of
2EmFinders alleges, and PLI does not contest, that the parties are diverse of citizenship
and that the amount in controversy exceeds $75,000, as required by statute. 28 U.S.C. § 1332
(2006).
7
EmFinders' causes of action should be dismissed for failure to state a claim. (D.l. 15) The
parties have now fully briefed the motion. (D.I. 16; D.l. 21; D.I. 22) The Court heard oral
argument on the motion on May 6,2011. (D.!. 70) (hereinafter, "Tr.")
II.
LEGAL STANDARDS
Evaluating a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) requires
the Court to accept as true all material allegations of the complaint. See Spruill v. Gillis, 372
F.3d 218,223 (3d Cir. 2004). "The issue is not whether a plaintiff will ultimately prevail but
whether the claimant is entitled to offer evidence to support the claims." In re Burlington Coat
Factory Sec. Litig., 114 F.3d 1410, 1420 (3d Cir. 1997) (internal quotation marks omitted).
Thus, the Court may grant such a motion to dismiss only if, after "accepting all well-pleaded
allegations in the complaint as true, and viewing them in the light most favorable to plaintiff,
plaintiff is not entitled to relief." Maio v. Aetna, Inc., 221 F.3d 472,481-82 (3d Cir. 2000)
(internal quotation marks omitted).
However, "[t]o survive a motion to dismiss, a civil plaintiff must allege facts that 'raise a
right to relief above the speculative level on the assumption that the allegations in the complaint
are true (even if doubtful in fact).'" Victaulic Co. v. Tieman, 499 F.3d 227, 234 (3d Cir. 2007)
(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 1965 (2007)). While
heightened fact pleading is not required, "enough facts to state a claim to relief that is plausible
on its face" must be alleged. Twombly, 127 S. Ct. at 1974. At bottom, "[t]he complaint must
state enough facts to raise a reasonable expectation that discovery will reveal evidence of [each]
necessary element" ofa plaintiffs claim. Wilkerson v. New Media Technology Charter School
Inc., 522 F.3d 315, 321 (3d Cir. 2008) (internal quotation marks omitted). Nor is the Court
8
obligated to accept as true "bald assertions," Morse v. Lower Merion School Dist., 132 F.3d 902,
906 (3d Cir. 1997) (internal quotation marks omitted), "unsupported conclusions and
unwarranted inferences," Schuylkill Energy Resources, Inc. v. Pennsylvania Power & Light Co.,
113 F.3d 405,417 (3d Cir. 1997), or allegations that are "self-evidently false," Nami v. Fauver,
82 F.3d 63, 69 (3d Cir. 1996).
III.
DISCUSSION
EmFinders' Amended Complaint raises three claims for relief. Count I seeks a
declaratory judgment. Count II is for breach of contract. Count III is for tortious interference
with contractual rights and prospective business relationships. PLI seeks dismissal of each of the
claims.
A.
Count I - Declaratory Judement Claim
In its first cause of action, EmFinders requests a declaratory judgment determining that
the Services Agreement was properly terminated by EmFinders' October 18, 2010 written notice.
(Am. CompI. at 10) The Declaratory Judgment Act allows a federal court to resolve a dispute
between two adverse parties with an "actual controversy." See 28 U.S.C. § 2201 (2006).3 The
parties disagree about the necessity of having the Court resolve the dispute over the termination
date via a declaratory judgment claim.
PLI contends that EmFinders' declaratory judgment claim is inappropriate because all of
the legal and factual issues it presents will necessarily be decided by the parties' competing
3In relevant part, 28 U.S.c. § 2201 (a) provides, "In a case of actual controversy within its
jurisdiction, ... any court of the United States, upon the filing of an appropriate pleading, may
declare the rights and other legal relations of any interested party seeking such declaration,
whether or not further relief is or could be sought. Any such declaration shall have the force and
effect of a final judgment or decree and shall be reviewable as such."
9
causes of action, in particular, the breach of contract claims. PLI asserts that courts routinely
dismiss declaratory judgment claims when they "add nothing" to an existing lawsuit or when the
controversy will be resolved by the disposition of another claim in the case. (D.1. 16 at 8) In
such cases, the declaratory judgment claim is "redundant" and, in the interest ofjudicial
economy, the Court is within its powers to dismiss the declaratory judgment claim. (Id. at 9)
EmFinders does not quarrel with PLI's characterization of the Court's discretion to
dismiss redundant declaratory judgment actions. Instead, EmFinders submits that the only
requirement to bring a declaratory judgment action is the existence of a "real and substantial
controversy" between two parties that are adverse. (D.1. 21 at 10) According to EmFinders, the
existence of the two competing complaints, which involve the same parties and the same
Services Agreement, establishes that an actual controversy exists between the two parties. (Id. at
11) EmFinders further contends that the alternative causes of action will not necessarily be
dispositive of some key issues in the case, including whether EmFinders' termination was valid
under the Services Agreement and the date of the termination. (ld. at 12)
Under the Declaratory Judgment Act, the decision of whether to resolve cases brought
under § 2201 is vested in the Court's discretion. See Medlmmune, Inc. v. Genentech, Inc., 549
U.S. 118, 136 (2007) ("The Declaratory Judgment Act provides that a court may declare the
rights and other legal relations of any interested party, not that it must do so.") (emphasis in
original) (internal quotation marks and citations omitted); Wilton v. Seven Falls Co., 515 U.S.
277,282-83 (1995) (same). A threshold question for pursuing a declaratory jUdgment action is
whether there is an "actual controversy" sufficient to justify the Court's intervention. See Wyatt
v. Gov't o/the V.l, 385 F.3d 801,806 (3d Cir. 2004) ("It must be a real and substantial
10
controversy admitting of specific relief through a decree of a conclusive character, as
distinguished from an opinion advising what the law would be upon a hypothetical state of
facts.") (internal citations omitted). The parties do not seriously dispute that there is an actual
and substantial controversy at issue in this case. Nor do the parties dispute that this case is ripe.
See Wyatt, 385 F.3d at 806.
Instead, the crux of the dispute is whether the declaratory judgment action will serve a
useful purpose or is, instead, duplicative orredundant. See Alcoa v. Beazer E., 124 F.3d 551,
560 (3d Cir. 1997) ("Although a court has discretion to decline to adjudicate a declaratory
judgment action over which it has jurisdiction, a court should only exercise such discretion if it
determines that issuing a declaratory judgment would serve no useful purpose.") (emphasis
added and internal citations omitted); see also Tr. at 3 ("The issue and the gravamen of the
motion to dismiss is whether or not the declaratory judgment action is useful in light of the
competing claims that have been alleged in this suit and also the companion suit that was filed
.... ").
Federal Rule of Civil Procedure 57 governs the procedure for obtaining a declaratory
judgment. Rule 57 states that "[t]he existence of another adequate remedy does not preclude a
declaratory judgment that is otherwise appropriate." The Second Circuit has established the
following test for guiding district courts in deciding whether to hear a declaratory judgment
action: (1) whether the judgment will serve a useful purpose in clarifying or settling the legal
issues involved; and (2) whether a judgment would finalize the controversy and offer relief from
11
uncertainty.4 Dow Jones & Co. v. Harrods Ltd, 346 F.3d 357, 359 (2d Cir. 2003); see also
Charles Alan Wright, et aI., Federal Practice & Procedure: Civil § 2759 (3d ed. 1998)
(explaining that courts have often quoted this test or a similar one with approval).
The first inquiry considers the utility of allowing the declaratory action to proceed - that
is, will the declaratory judgment claim "serve a useful purpose" or is it, on the other hand,
"otherwise undesirable." See Alcoa, 124 F.3d at 360; see also United Sweetener USA, Inc. v.
Nutrasweet Co., 766 F.Supp. 212, 216 (D. Del 1991). Indeed, the Third Circuit has explained
that one of the most important principles in deciding whether to exercise discretion is the
"practical help, or utility, of that judgment." Step-Saver Data Sys., Inc. v. Wyse Tech., 912 F.2d
643,647 (3d Cir. 1990). Ifthe declaratory judgment claim bears "complete identity offactual
and legal issues" with another claim being adjudicated by the parties, the Court is within its
discretion to dismiss the declaratory judgment action. See Aldens, Inc. v. Packel, 524 F.2d 38,51
(3d Cir. 1975); see also Teamsters Pension Trust Fund & Vicinity v. Transworld Port & Distrib.
Servs., Inc., 2010 U.S. Dist. LEXIS 113111, at *7 (D.N.J. Oct. 25, 2010).
In this case, no useful purpose would be served by allowing the declaratory judgment
cause of action to proceed. As PLI points out, EmFinders effectively concedes that the
termination date is a "crucial issue" that the Court will necessarily need to decide in resolving the
parties' contract disputes. (D.!. 21 at 12) The parties have each brought breach of contract
claims against one another. By its declaratory judgment claim, EmFinders seeks a declaration
that it properly terminated the Services Agreement. This identical issue will necessarily be
4While the Dow Jones case arises in the Second Circuit, the Court nevertheless finds it to
be highly instructive and helpful - in determining the appropriate exercise of its discretion.
12
decided in resolving the breach of contract claims, and particularly PLI's breach of contract claim
against EmFinders in the related action. S As the declaratory judgment claim "adds nothing to an
existing lawsuit, it need not be permitted." Regus Mgmt. Group LLC v. Int '[ Bus. Mach. Corp.,
2008 WL 2434245, at *2 (N.D. Tex. June 17,2008). Accordingly, the Court will grant PLI's
motion to dismiss Count I.
B.
Count II - Breach of Contract
EmFinders' second cause of action seeks relief for PLI's alleged breach of contract. (Am.
Compi. at 11) In order to survive a motion to dismiss, EmFinders must set forth sufficient facts
to establish the prima facie elements of a breach of contract claim. In Virginia, the elements of a
breach of contract claim are: "(1) a legally enforceable obligation of a defendant to a plaintiff; (2)
the defendant's violation or breach of that obligation; and (3) injury or damage caused by the
breach of that obligation.'m Sunrise Continuing Care, LLC v. Wright, 277 Va. 148, 154, 671
S.E.2d 132, 135 (2009). The parties do not seriously dispute that a legally enforceable obligation
exists or that EmFinders has suffered an injury. Instead, the central dispute is whether
EmFinders has alleged enough facts to establish that PLI's conduct rises to the level of a breach
of the Services Agreement.
In this regard, PLI argues that EmFinders has not satisfied the required pleading standard.
In PLI's view, EmFinders' breach of contract claim consists of nothing more than "threadbare
SBy separate Order, the Court is today consolidating the instant action with PLI's related
action.
6As
I
,
i
I
!
j
the Court will explain in more detail later in this Opinion, the parties have not clearly
set forth their positions on which state's law applies. For argument's sake and for reasons that
will become evident later in the Opinion - the Court applies Virginia law.
13
recitals of the elements of a claim" and therefore lacks the "necessary particulars" to survive a
motion to dismiss after Twombly, 550 U.S. at 556, and Ashcroft v. Iqbal, 556 U.S. _ , 129 S.
Ct. 1937, 1949 (2009) (granting motion to dismiss based on "conclusory nature of respondent's
allegations"). (D.l. 16 at 4; see id. at 9). Thus, PLI marches through each of EmFinders'
assertions and argues either that EmFinders must point to a specific instance or incident ofthe
alleged conduct or, alternatively, that the alleged conduct on which EmFinders relies does not
constitute a breach of the Services Agreement. (D.l. 16 at 11) For example, EmFinders avers in
the Amended Complaint that PLI violated Sections 2.4 and 7.3.4 of the Agreement by publicly
disparaging the EmSeeQ System and EmFinders in blog posts, press releases, and statements
issued to its member PSAs. (Am. Compi. at 8) PLI contends that EmFinders must describe the
"specific statements alleged to be false or disparaging" or otherwise provide the necessary factual
basis for this conclusion. (D.l. 16 at 12) Likewise, PLI contends that using fees paid by
EmFinders to support and promote non-EmSeeQ services does not violate Article 2.6 of the
Services Agreement.
1
For its part, EmFinders submits that PLI's conduct violates several specific provisions of
the Services Agreement and that it has gone well beyond the pleading obligations imposed by the
Federal Rilles of Civil Procedure. (D.I. 21 at 12) EmFinders contends that it has pled a litany of
facts, including dates, names, places, and persons. Specifically, EmFinders argues that PLI's
conduct at the annual convention constitutes a breach of Article 2.1 of the Agreement, which
requires PLI to use its best efforts to promote and maximize distribution of the EmSeeQ System.
EmFinders points out that PLI's CEO made statements that it is "not clear that the [EmSeeQ
System] will replace current technology," and then followed these statements with an
14
enthusiastic endorsement of EmFinders' competitor, Proximity RF Systems. (D.!. 21 at 13)
The Third Circuit has established a two-part test to guide district courts in evaluating a
motion to dismiss. See Edwards v. A.H Cornell & Son, Inc., 610 F.3d 217,219 (3d Cir. 2010);
Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). First, the Court must separate
legal and factual conclusions. See id. At this step, the Court must accept the well-pled facts
contained in the Amended Complaint as true and consider the facts in the light most favorable to
EmFinders. See Spear Pharms., Inc. v. William Blair & Co., LLC, 610 F.Supp.2d 278, 281 (D.
Del. 2009). Next, the Court must determine whether the facts contained in the Amended
Complaint could give rise to a plausible claim for relief. See Fowler, 578 F.3d at 210.
The Amended Complaint must "raise a reasonable expectation that discovery will reveal
evidence supporting the claim." Spear Pharms, 610 F.Supp.2d at 283. Even after Twombly,
plaintiffs are not required to present "detailed factual allegations" in a complaint in order to
"cross the line from conceivable to plausible." Phillips v. County ofAllegheny, 515 F.3d 224,
231-34 (3d Cir. 2008) (internal quotations omitted); see also Spear Pharms., 610 F.Supp.2d at
283. Determining the sufficiency of factual averments will, in the end, be "a context-specific
task that requires the reviewing court to draw on its judicial experience and common sense."
Fowler, 578 F.3d at 211 (internal citations omitted).
Applying these principles here, EmFinders' claim for breach of contract does not warrant
dismissal. As for the first step of the inquiry, the Amended Complaint contains a host of specific
factual allegations, including:
•
EmFinders and PLI entered into a Services Agreement on July 8,
2010 that imposed certain obligations on PLI, including that PLI
use its "best efforts" to promote and distribute EmSeeQ Systems.
15
(D.1. 10 Ex. A)
•
The Services Agreement requires PLI, among other things, to
provide services in a prompt, professional, and workmanlike
manner; employ sufficient personnel to promote the EmSeeQ
System to PLI member-PSAs; accurately represent the capabilities
of the EmSeeQ Systems; and refrain from engaging in any activity
that would be harmful to EmFinders' goodwill or may reflect
unfavorably on EmFinders. (Id.)
•
PLI refused to announce to its member PSAs that it had entered a
business relationship with EmFinders. (D.1. 10 at 6)
•
PLI's CEO Gene Saunders disparaged the EmSeeQ System in his
opening remarks at the annual convention by discussing the
EmSeeQ System with, at the very least, hesitation. (Id.)
•
PLI accepted payments from EmFinders. (Id.)
•
PLI made public representations, including on its website, in
publications, and in press releases, about the reliability and
effectiveness of the EmSeeQ System to member PSAs, including
false or incomplete information about the test trials and runs that
PLI conducted prior to entering into the Services Agreement. (Id.
at 7-8)
•
PLI instructed its sole employee devoted to the EmSeeQ program
not to forward sales leads to EmFinders. (Id. at 8)
•
PLI continued to promote Proximity RF in the coverage area. (Id.
at 8)
•
PLI's CEO Saunders, who is an honorary deputy in the Lynchburg
Sheriffs Office, directly pressured the Sheriff s Office to terminate
a subscription for the EmSeeQ System. (Id. at 9)
•
As a result of PLI' s representations regarding the reliability of the
EmSeeQ System, two PSAs previously on the verge of purchasing
the EmSeeQ System have now backed away. (Id. at 10)
Turning to the second step, the Amended Complaint passes muster under the plausibility
standard. See Fowler, 578 F.3d at 212 (discussing how complaint "need only set forth sufficient
16
facts to support plausible claims"); Phillips, 515 F.3d at 233 (noting that providing fair notice to
defendant of nature of claims is critical inquiry on motion to dismiss). EmFinders' Amended
Complaint cannot fairly be characterized as "threadbare recitals" of the elements of a cause of
action, nor does it contain merely conclusory or barebones assertions about the wrongfulness of
PLI's conduct. Instead, EmFinders specifically alleges that PLI made false or disparaging
statements in press releases to its member PSAs, which would violate Article 7.3.4 of the
Services Agreement. EmFinders also alleges that PLI employed only one person to handle the
EmSeeQ programs on a national level, not "sufficient personnel" to enable PLI to meet its best
efforts obligation, constituting a violation of Article 2.3 of the Agreement. Furthermore,
EmFinders alleges that PLI expressly instructed this single employee not to forward potential
sales leads to EmFinders, a violation of several provisions of the Agreement, including 2.1, 2.6,
and 2.7. EmFinders alleges that PLI has directly, or indirectly through misrepresentations,
pressured some of its member-PSAs to refrain from purchasing EmSeeQ Systems. Taken as a
whole, there is sufficient factual heft to support a reasonable inference that, at a minimum, PLI
did not use its best efforts to promote the EmSeeQ System in contravention of Article 2.1 of the
Agreement. EmFinders' Amended Complaint provides PLI fair notice of the nature of the claims
against it and of the grounds upon which those claims rest.
In sum, EmFinders' factual allegations give rise to a plausible claim for relief. That is all
that is required at the motion to dismiss stage. Accordingly, the Court will deny PLI's motion to
dismiss Count II of the complaint.
C.
Count III - Tortious Interference with Contract and/or Business Expectancy
In its third claim for relief, EmFinders seeks to recover for PLI's alleged intentional
17
I
interference with potential or existing contractual relationships between EmFinders and various
PSAs across the country, including the Lynchburg, Virginia Sheriffs Office. (D.1. 10 at 12) PLI
advances two alternative theories for dismissing EmFinders' claim. First, PLI argues that the
Services Agreement contains a limitation of liability clause that forecloses EmFinders' tortious
interference claim. (D.1. 16 at 13-14) Second, even if the Agreement itself does not foreclose
EmFinders' claim, PLI contends that the complaint fails to establish a prima facie claim for
tortious interference under Virginia law. 7 (D.1. 16 at 17) The Court will take up each issue in
turn.
1.
Limitation of Liability Provision
The parties dispute the scope of the liability that the Agreement limits. Article 16 of the
Agreement is entitled "Limitation of Liability" and provides that, with the exception of
indemnity obligations and claims related to confidentiality,
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL,
SPECIAL OR CONSEQUENTIAL DAMAGES, OR
DAMAGES FOR LOSS OF PROFITS, REVENUE, DATA OR
USE (WHETHER IN CONTRACT, NEGLIGENCE, TORT
OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT, EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
7PLI argues that, based on Delaware choice of law principles, Virginia law should apply.
See, e.g., New Zealand Kiwifruit Mktg. Ed. v. City of Wilmington, 825 F.Supp. 1180, 1185 (D.
Del. 1993) ("A Federal District Court sitting in diversity must apply the choice-of-Iaw rules of
the state in which it sits to detennine which state's substantive law governs the controversy
before it."). While EmFinders does not concede that Virgina law applies, neither does it dispute
its application. (D.1. 21 at 15) The Court, following the example of the parties, will use Virginia
law in its analysis.
18
(D.!. 10 Ex. A at 9)
PLI argues that when the terms of a contract limit liability, they are upheld so long as they
were made in good faith, are not unconscionable, and do not fail of their essential purpose. 8 In
PLI's view, EmFinders' tortious interference claim is nothing more than a claim for lost profits
arising from PLI's alleged breach of the Services Agreement, which is explicitly precluded by
Article 16 of the Agreement. (D.1. 22 at 4)
EmFinders responds that the limitation on liability clause is inapposite for two reasons.
First, the alleged tort occurred after EmFinders had terminated the Services Agreement on
October 18, 2010. Thus, it cannot fairly be said to "arise out of' the Agreement as the
Agreement was no longer in effect. (D.!. 21 at 14) Second, the basis for the tort - that is,
interference with an agreement of the Lynchburg Sheriffs Office to purchase a six-month
subscription from EmFinders - is a contract with a third party that is separate from the Services
Agreement. According to EmFinders, since the tortious interference claim against PLI is based
on the contractual relationship with a third party, it is properly characterized as a tort action that
does not seek lost profits "arising out of' the Services Agreement. (Id. at 15)
In the Court's view, the liability provision bars EmFinders' tortious interference claim.
The liability provision is concededly valid; EmFinders does not argue otherwise. Moreover, it is
a broad limitation. Article 16 states that "[i]n no event shall either party be liable to the other
party for ... loss of profits ... whether in contract, negligence, tort, or otherwise." (D.!. 10 Ex.
8PLI relies on Delaware law in support of its theory that, as a matter of contract law, the
limitation ofliability clause is valid and should be enforced. (D.1. 16 at 14) The Services
Agreement contains a choice of law provision mandating that it is governed by Delaware law.
(D.1. 10 Ex. A at 10)
19
A at 9) EmFinders acknowledges that the damages it seeks in its tortious interference claim are
the type of damages that are covered by Article 16. (Tr. at 24) Additionally, despite EmFinders'
protestations to the contrary, the limitation of liability provision survives beyond the termination
of the Services Agreement. The Agreement contains a survival provision that contemplates that
some obligations and rights under it will survive beyond the termination of the Agreement,
including the Article 16 limitation of liability provision. 9
The only dispute that remains is whether EmFinders' tortious interference claim "arises
out of' or "relates to" the Services Agreement. EmFinders submits that since the prospective
contracts at issue were between EmFinders and third parties, such as the Lynchburg Sheriffs
Office, those prospective contracts do not "arise out of' or "relate to" the Services Agreement.
On this point, EmFinders argues that because it was not under a duty to deal exclusively with
PLI, EmFinders had access to all of the PSAs as potential clients, completely separate and apart
from the Services Agreement; in EmFinders' view, thus, any contract with a third party cannot be
said to arise out of or relate to the Services Agreement. (Tr. at 21-23)
The Court disagrees. The parties entered into an Agreement under which PLI would
actively promote the EmSeeQ product and services. Instead of doing this, however, PLI did
exactly the opposite: disparage the EmSeeQ System and pressure PSAs to avoid using
EmFinders'technology. PLI's allegedly tortious conduct, therefore, plainly relates to a subject of
the Agreement, i.e., PLI's duties with respect to the EmSeeQ System.
9Article
19.7 provides: "SurvivaL Rights and obligations under this Agreement
(including any Exhibits) which by their nature should survive, will remain in effect after
termination of the Agreement; including, without limitation, Sections 7.3, 7.4,9, 10, 11, 12, 14,
15,16, 17,and 19." (D.I.lOEx.Aat 10)
20
The Court therefore finds that the Article 16 limitation of liability provision bars
EmFinders from asserting a claim for tortious interference with contract rights. Accordingly, the
Court will grant PLI's motion to dismiss this claim. 10
2.
Tortious Interference under Vireinia Law
Because the Court finds that the Services Agreement bars EmFinders' tortious
interference claim, the Court need not reach PLI's second argument, involving the sufficiency of
EmFinders' allegations under Virginia law.
IV.
CONCLUSION
For the foregoing reasons, the Court will grant PLI's motion to dismiss EmFinders'
declaratory judgment and tortious interference with contract rights claims for relief, but deny
PLI's motion to dismiss EmFinders' breach of contract claim. An appropriate Order follows.
At the oral argument, EmFinders requested leave from the Court to amend its complaint
in light of discovery that Em Finders suggests strengthens its tortious interference claim. CTr. at
19) Because the Court finds that the Article 16 limitation of liability provision covers the types
of claims that EmFinders seeks to assert in Count III, any amendment would have no impact on
the Court's resolution of the motion to dismiss the claim for tortious interference. Accordingly,
EmFinders' request for leave to amend its tortious interference claim is denied.
10
21
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?