Opera Solutions, LLC v. Schwan's Home Service, Inc.

Filing 74

MEMORANDUM ORDER re 58 motion to dismiss. Signed by Judge Leonard P. Stark on 8/18/15. (ntl)

IN THE UNITED STATES DISTRICT COURT.
FOR THE DISTRICT OF DELAWARE
OPERA SOLUTIONS, LLC,
Plaintiff,
v.
SCHWAN'S HOME SERVICES, INC.,
Defendant.

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C.A. No. 15-287-LPS

MEMORANDUM ORDER
At Wilmington this 18th day of August, 2015:
On August 4, 2015, the Court held a hearing on Defendant's Motion to Dismiss. (D.I.
58) The Court announced its decision from the bench at the conclusion of the hearing. The
Court's reasoning was as follows:
The motion to dismiss is granted to the extent that count 2,
the breach of contract claim, is dismissed with prejudice and
denied in all other respects. That is, denied with respect to counts 3
through 6.
So the case will go forward on the implied covenant of
good faith and fair dealing as well as the alternative unjust
enrichment, promissory estoppel and quantum meruit claims. And
I'll explain why in a moment.
But a further part of my ruling is that plaintiff is, and will
be, directed to file an amended complaint within [thirty (30)] days
of today to clarify that the allegations in Claim[ s] 3 through 6 are
based on a procedural [theory], that is, based on a failure by
defendant to negotiate in good faith, for instance, by not
responding to phone calls or not responding to letters or e-mails or
failing to appear at places where the parties could negotiate, and to
make clear that the plaintiff is not alleging what for shorthand
purposes we have referred to as the substantive claim, that is,

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plaintiff is not alleging [breach based on] positions that defendant
advocated in negotiations. For example, that plaintiff should
obtain a smaller bonus or a less favorable bonus schedule than
maybe plaintiff wanted. [The] case is not going forward on that
theory. That is not what plaintiff intended to plead or believes it
has pled and, most importantly, it is not a theory that I think is a
viable one on which the case could go forward.
The amendment needs to make clear as well, to the extent
there is any doubt, that there is no allegation of fraud here. We had
some discussion today about a possible hypothetical fraudulent
theory. For example, that maybe defendant did in fact show up at
negotiations and to all appearances was negotiating in good faith
when in reality all along it secretly harbored a plan to make sure
there never would be an agreement reached with respect to a
bonus.
We have talked about that theory, but plaintiff
acknowledges that is not the theory it has pled or intends to plead.
I want to make sure that after the amended complaint is filed there
is no doubt that that is not part of the case.
So we will need the amendment to clarify all of that. And
the reasons I'm requiring that amendment are, first and foremost, to
give defendant adequate notice of the claims on which the case is
going forward and on which defendant must prepare a defense.
There has been to this point I think a lack of clarity as to
plaintiffs theory. There has been some inconsistency I think
between the complaint, the briefing, and the argument today. The
defendant is entitled to know the theories that the case is going
forward on.
As a further example, defendant is entitled to know what
we learned today, that the allegations in paragraphs 37 to 41 are not
allegations of bad faith negotiations on which plaintiffT's] claims
are made but are instead allegations that plaintiff satisfied the
conditions precedent to filing suit as required by Section 10.1 of
the parties['] agreement. Defendant is entitled to know that.
Defendant and the Court reasonably did not understand,
prior to today's.hearing, that those were not allegations of
negotiations. They were allegations again of compliance with

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10.1.
The amendment that I'm ordering is consistent with what
plaintiff has told me is the theory it believes it has stated in its
complaint. That is, that in a period prior to January 31st, 2011, the
defendant did not negotiate in good faith by failing and/or refusing
to discuss terms for the bonus schedule, which is a bit of a synopsis
of the allegation of paragraph 33.
Most importantly, the amendment that I'm ordering as well
as the dismissal of the breach of contract claim are required due to
what I have concluded is the proper application of the law to the
complaint. The amendments are needed again so that the case
proceeds only on the legal claims that survive dismissal.
Let me now tum to those claims and discuss them briefly.
Count 2 of the breach of contract claim must be, and will
be, dismissed because it is based on an unenforceable agreement to
agree.
The essence of count 2 is stated in paragraph 51 which
alleges that, "Schwan breached the Licens[ing] Agreement and the
· Amendment by failing and/or refusing to adopt 'a mutually agreed
upon written success measures and bonus payment schedule prior
to January 31, 2011. "'
The Court agrees with defendant that there is no objective
consideration or objective criteria in the contract by which a
fact-finder could conclude who is responsible for this failure to
reach an agreement on a new bonus schedule.
There is, as a result, no way a fact-finder could do anything
other than conclude there is shared responsibility for that failure.
The allegations do not plausibly suggest any basis on which
to blame Schwan for the failure to reach an agreement.
No basis has been given for why any amendment of this
claim would not be futile. So no leave to amend will be granted
with respect to count 2.
In essence, the alleged conduct is equally consistent with

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[a] claim on which the plaintiff might prevail and on which it
cannot prevail, meaning again there is no criteria by which we can
tell who is responsible for the failure to agree. That is not in the
contract. ·That leads to a claim that is not plausible, not one on
which relief can be granted, and for all those reasons count 2 is
dismissed.
Count 3, the implied covenant of good faith and fair dealing
will not be dismissed. The essence of this claim is set out in
paragraph 55 which alleges that "Schwan arbitrarily, unreasonably,
and in bad faith failed and/or refused to work with Opera to
develop and agree upon a Bonus Schedule and more than two years
have passed without a revised Bonus Schedule in place."
This allegation is supported by the allegation in paragraph
33 which I reiterate alleges in part that "Schwan has failed and/or
. refused to discuss terms for the Bonus Schedule."
While it is not entirely clear in the complaint but will be
made clear in the amended complaint, taking all well pleaded
factual allegations in the complaint as true, a reasonable inference
from the pleadings is that Schwan failed and/or refused to negotiate
in the relevant time frame, that is, prior to January 30th, 2011.
There was an implied obligation on Schwan during that
time as a result of its agreement to paragraph 5 of the amendment
that Schwan would show up and negotiate and engage in good faith
negotiations with an aim toward agreeing on a new bonus
schedule.
If evidence were to be developed that Schwan refused even
to discuss a new bonus payment schedule, for example, or simply
failed to negotiate, refuse to negotiate, that would be evidence
supporting a violation of the covenant of good faith and fair
dealing, and in that way there are objective standards by which that
daim can be assessed.

So that claim is plausible and the case will go forward on it,
provided that plaintiff files an amended complaint consistent with
what I have ordered here.
Counts 4, 5, and 6, which are pled in the alternative to
counts 2 and 3, will not be dismissed. Again, however, they go
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forward on what I have described as process claims and not [as]
claims that the substantive positions Schwan advocated in
negotiations were so unfair as to constitute bad faith.
Again, that must be clear. It must be made clear in the
amended complaint. With that limitation, they state claims upon
which relief may be granted in the alternative.
(Transcript of Aug. 4, 2015 hearing)

HON.LEONARDP. T
UNITED STATES DISTRICT JUDGE

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