Livery Coach Solutions, LLC v. Music Express/East, Inc.

Filing 33

MEMORANDUM OPINION re 8 motion to dismiss. Signed by Judge Leonard P. Stark on 3/29/17. (ntl)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
LIVERY COACH SOLUTIONS, L.L.C.,
Plaintiff,
Civ. No. 16-143-LPS

v.
MUSIC EXPRESS/EAST, INC.,
Defendant.
MUSIC EXPRESS, INC.,
·Counterclaim-Plaintiff,
v.
LIVERY COACH SOLUTIONS, L.L.C.,
DAVID HIRSCH, and JACOB BOWMAN, :
Counterclaim-Defendants.

Peter Murphy, ECKERT SEAMANS CHERIN & MELLOTT, LLC, Wilmington, DE,
Gary Schildhorn.and Heather Olson, ECKERT SEAMANS CHERIN & MELLOTT, LLC, .
Philadelphia, PA
Attorneys for Plaintiff and Counterclaim-Defendants.

Jack B. Blumenfeld and Michael J. Flynn, MORRIS, NICHOLS, ARSHT & TUNNELL LLP,
Wilmington, DE,
Timothy B. Yoo, BIRD, MARELLA, BOXER, WOLPERT, NESSIM, DROOKS,
LINCENBERG, & RHOW P.C., Los Angeles, CA,
Attorneys for Defendant/Counterclaim-Plaintiff.

MEMORANDUM OPINION

March 29, 2017
Wilmington, Delaware

I.

. INTRODUCTION
On March 7, 2016, Livery·Coach Solutions, L.L.C. ("Livery") filed a breach of contract

suit against Music Express/East, Inc. ("Music Express"). (D.I. 1) On May 9, 2016;-Music
Express 1 answered Livery's complaint and brought counterclaims of fraudulent inducement,
negligent misrepresentation, breach of contract, federal unfair competition, violation of the
· Delaware Deceptive Trade Practices Act, and revocation of acceptance against Livery, Livery
President David Hirsch ("Hirsch"), and Livery Director of Support Jacob Bowman ("Bowman")
(collectively, the "Counterclaim-Defendants"). (D.I. 5) On May 31, 2016, CounterclaimDefendants filed the pending Motion to Dismiss, seeking to dismiss all but the breach of contract
counterclaims under Federal Rule of Civil Procedure 12(b)(6): (D.I. 8)
II.

BACKGROUND
Music Express provides chauffeured ground transportation in the United States, servicing

more than 600 rides on.a daily basis. (D.I. 5 (Counterclaims, hereinafter, "D.I. 5") ar,-r 11)
Livery develops software solutions for the limousine industry, such as limousine reservation,
billing, and dispatch management software. (D.I. 1 at·,-r 9; D.I. 5 at,-r 14-15) Livery offers two
versions of its software, the older "Classic" version and the newer ".Net" version, named
respectively solely for purposes of this motion. (D.I. 5 at,-r,-r 19-20, D.I. 9 at 5 n.1)
Music Express and Livery - through Hirsch and Bowman _, began conversations about
Livery's-software in February 2015. (D.I. 5 at ,-r,-r 15-16) The parties met frequently, as often as

1

Defendant Music Express/East, Inc. was not a party to the contract that is the subject of
Livery's complaint. The correct party is Music Express, Inc.
1

twice a week, to discuss Music Express' software needs and to view demonstrations of the Livery
software. (Id.

at·~

17) Throughout these meetings, the parties discussed the differences between

Livery's two software versions, which Livery maintained was "primarily aesthetic." (D.I. 5 at
·~

20) Furthermore, during one software demonstration, Livery told Music Express it was being

shown the .Net version, but Music Express maintains it was _in fact shown the older Classic
version. (Id.

at~

19) Livery assured Music Express that it would receive both versions of the

software and that it would be able to take the software "live" by September 1, 2015. (Id. at
~~

19, 21) Livery also provided Music Express with a list of companies that were purportedly

operating Livery's software and encouraged Music Express to check those references. (Id. at
~

22) Eventually, on June 16, 2015, the parties entered into an End User Software License

Agreement and Software Maintenance Agreement (collectively, the "Agreement"). (D.I. 1 at
~~

1, 6; D.I. 5 at ~32)
The parties agree that Livery delivered the software in August 2015, but Music Express

alleges that ( 1) it only received the .Net version, not the Classic version which it had been shown
and on which it had relied in entering the Agreement, and (2) the .Net version was an untested
beta version of the software, containing programming bugs, and not operable as a commercially
viable solution. (D.I. 5 at~ 23, 34; D.I. 1 at~ 11) Music Express argues that Livery repeatedly
misrepresented the software capability throughout the parties' meetings leading up to the
Agreement. (D.I. 5 at ~if 18-32) For example, in addition to misrepresenting which version
Music Express was

~hown

software could integrate

and which version it would receive, Livery represented that: its

seamles~ly

with Music Express' accounting/financial management

software, Livery's system would accommodate Music Express' account number convention, an

2

auto-billing feature was already operational on Livery's software, and Livery worild provide a
team of "17 programers" for technical support. (Id. at iii! 24, 26, 27 30) Music Express
maintains that each of these representations induced it to enter into the Agreement with Livery, but none of them turned out to be true. (Id. at iii! 24-32, 34)
Ultimately, Music Express claims that Livery pulled a "bait and switch" by showing them
the Classic version, misrepresenting its capabilities, and thereafter delivering the unworkable
.Net version. (Id. at ifif 23, 34) Music Express was not able to take the software "live" until
September 6, 2015 and, even then, the program operated too slowly and experienced numerous
issues, requiring 110 revisions between September 2015 and February 2016. (Id. at ,-rir 34-38)
These defects resulted in, "among other things: (1) countess broken customer invoices;
(2) broken credit card files; and (3) missing invoices altogether," eroding Music Express'
customers' confidence and goodwill, and requiring Music Express employees to work aroundthe-clock for weeks to address the various software problems. (Id. at ~ii 39-40) Further, Livery
never provided adequate technical support, in part because Livery support teams were "too busy
re-writing the software for the .Net platform." (Id. at"ifif 46-47) Music Express thereafter
requested the Classic version - which it believed it had originally contracted to receive - in
·place of the unworkable .Net version, but Livery refused to provide it, stating that the two
versions were "foundationally incompatible" and could not be switched. (Id. at iii! 51-52)
In February 2016, Music Express notified Livery that it was terminating the Agreement,

effective immediately, and that, in any event, the agreement was not valid because it had been
improperly obtained. (Id. at if 56) Music Express only made two payments before terminating
the Agreement, leading Livery to sue for breach of contract on March 7, 2016 (D .I. 1 at ifil 14-

3

15), and Music Express to countersue on May 9, 2016 (D.I. 5).

III.

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, 3 72
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 orily if, after "accepting all well-pleaded
· allegations in the complaint as true, and viewing them in the light mostfavorable to plaintiff,
plaintiff is not entitled to relief." Maio v. Aetna, Inc., 221 F.3d 472, 482 (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 Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). A claim is facially plausible
"when the plaintiff pleads factual content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). At bottom, "[t]he complaint must state enough facts to raise a reasonable expectation
· that discovery will reveal evidence of [each] necessary element" of a plaintiffs claim. Wilkerson
v. New Media Tech. Charter Sch. Inc., 522 F.3d 315, 321 (3d Cir. 2008) (internal quotation
marks omitted).
The Court is not obligated to accept as true "bald assertions," Morse v. Lower Merion
4

Sch. Dist., 132 F .3d 902, 906 (3d Cir. 1997) (internal quotation marks omitted), "unsupported
conclusions and unwarranted inferences," Schuylkill Energy Res., Inc. v. ,Pennsylvania Power &

Light Co., 113 F.3d405, 417 (3d Cir. 1997), or allegations that are "self-evidently false," Nami v.
Fauver, 82 F.3d 63, 69 (3d Cir. 1996).

IV.

DISCUSSION
A.

Fraudulent Inducement and Negligent Misrepresentation

Music Express' First and Second Claims for Relief allege Fraudulent Inducement and
Negligent Misrepresentation based on Livery's various representations (made through Hirsch and
Bowman)

~eading up

to the Agreement, that Livery knew were false - or that Livery made

recklessly without regard for their truth - and that Music Express reasonf!bly relied on in
· executing the Agreement. (D .I. 5 at ,-ril 61-7 6) Counterclaim-Defendants assert that both claims
are barred by two doctrines: the "gist of the action" doctrine and the economic loss rule. (D.I. 9
at 8)
The gist of the action doctrine is a common law theory "designed to maintain the
conceptual distinction between breach of contract claims and tort claims." Frank C. Pollara

Group, LLC v. Ocean View Inv. Holding, LLC, 784 F.3d 177, 186 (3d Cir. 2015) (quoting eToll,
Inc. v. Elias/Savion Adver., Inc., 811 A.2d 10, 14 (Pa. Super. Ct. 2002)). It precludes tort suits
for mere contractual breaches, requiring a plaintiff to point to independent events giving rise to
the tort. See id. The doctrine does not preclude a breach of contract from ever giving rise to an
actionable tort, but it does require that "the wrong ascribed to defendant must be the gist of the
action, the contract being collateral." Pediatrix Screening, Inc. v. TeleChem Intern., Inc., 602
)

F.3d 541, 548 (2010).
5

Counterclaim-Defendants argue that the dispute between Livery and Music Express is a
breach of contract at its core, amounting to "nothing more than a simple dispute -between a seller
and [a] disappointed customer."_ (D.I. 9 at 9) Counterelaim-Defendants assert that Music
Express' claims for fraudulent inducement and negligent misrepresentation merely revolve
around Music Express' view that the software failed to conform to Music Express'
specifications, an issue that is in dispute in the breach of contract claims. (Id. at 10)
Music Expressresponds2 that Counterclaim-Defendants breached a duty"separate and
distinct" from the contractual duties that arose from the Agreement. (D.I. 10 at 9) Music
Express insists that Livery, Hirsch, and Bowman's misrepresentations "were-in breach of a duty
not to commit intentional (or negligent) torts imposed by society." (Id. at 10) Because each of
the recognized misrepresentations occurred prior to the signing of the contract, rather than during
the performance of the contract or in contravention of a duty created by it, Music Express
contends the gist of the action doctrine. cannot bar its claims. (Id. at 11)
The Court finds Music Express' claims of fraudulent inducement and negligent
misrepresentation are not barred, per se, by the gist of the action doctrine. However, because
application of the gist of the action doctrine turns on the particulars, the Court reviews each

2

Music Express also contends that the gist of the action doctrine is unrecognized in
Delaware. (D.I. 10 at 7) While Delaware courts have not specifically adopted the "gist of the
action" doctrine, Delaware has recognized the general notion behind the doctrine: namely, "[a]s a
general rule under Delaware law, where an action is based entirely on a breach of terms of a
contract between the parties, and not on a violation of an independent duty imposed by law, a
plaintiff must sue in contract and not in tort." Greenstar, LLC v. Heller, 934 F. Supp. 2d 672,
696 (D. Del. 2013); see also Kuroda v. SPJS Holdings LLC, 971A.2~872~ 971 (Del. Ch. 2009)
(finding that "in order to assert a tort claim along with a contract claim, the plaintiff must
generally allege that the defendant violated an independent legal duty, apart from the duty
·
imposed by contract").
6

claim of misrepresentation individually, and finds that only two may support a valid tort claim.

See Frank C. Pollara Group, 784 F .3d at 186 ("[A]pplication of this doctrine frequently requires
courts to engage in a factually intensive inquiry as to the nature of a plaintiffs claims.") (internal
quotation marks omitted).
Music Express bases its claims of fraudulent inducement and negligent misrepresentation
on the same seven alleged misrepresentations by Counterclaim-Defendants. (D.I. 5 at ifif 62-63,
71-72) These are the representations, made by Livery through Hirsch and Bowman, that:
(1) Music Express would receive the Classic version of the software; (2) Livery would be
prepared to take the software live by early September 2015; (3) several other companies were
operating on the very same Livery software that Music Express would receive; (4) Livery
software could integrate seamlessly with Music Express' accounting/financial management
software; (5) Livery's system would accommodate Music Express' account number convention;
(6) Livery's auto-billing feature was already operational on its software; and (7) Livery's "Livery
to Livery" functionality would permit Music Express to transmit data seamlessly between users
of the Livery software. (Id.)
Only representations (1) and (3) can support Music Express' tort claims. These are
misrepresentations as to which version of the software Livery would be delivering (.Net instead
of Classic) and as to whether other companies were supposedly using that same version. Music
Express has stated a plausible claim that, in making these misrepresentations, Livery violated a
societal duty not to make false statements and defraud others. See Greenstar, 934 F. Supp. 2d at
696 ("Claims for fraud can coexist with claims for breach of contract where a defendant
committed intentional fraud, or acted with an illicit state of mind, in the sense that the

7

S~ller

knew that the representation was false and either communicated it to the Buyer directly itself or
knew that the Company had.") (internal quotation marks omitted). These representations do not
relate to Livery's contractual duty to deliver the software "free from defects that will
substantially and materially affect its performance." (D.I. 1-3 at 1, Exhibit A, Section 12.01
"Performance Warranty") Instead, they "involve either a past or contemporaneous fact [the
representation that other companies used the same version] or a future event [the representation
that Music Express would receive the Classic version] that falsely implies an existing fact."
Funari v. Wallpang, Inc., 2014 WL 1678419, at *8 (Del. Super. Ct. Apr. 16, 2014).

Counterclaim-Defendants' conduct in making these misrepresentations is, thus, separate and
distinct from the conduct that allegedly caused the breach - delivering defective software unable
to function within a commercially reasonable time. (D.I. 5 at 'if 79) Claims based on these
misrepresentations are not, therefore, barred by the gist of the action doctrine, and Music
Express' claims of fraudulent inducement and negligent misrepresentation are not precluded.
By contrast, misrepresentations (2) and (4) through (7) all relate to Livery's contractual

duty to deliver software free from defects. These representations were essentially incorporated
into the terms of the Agreement through Livery's warranty to deliver functional software. The
"heart" of these claims is that Counterclaim-Defendants delivered an unworkable product that
did not meet Music Express' expectations. These representations cannot form the basis for
claims of fraudulent inducement or negligent misrepresentation and are barred by the gist of the
action doctrine.
Application of the economic loss doctrine leads to the same conclusion. This doctrine is
rooted in products liability law, but has been expanded to other contexts. See Christiana Marine
8

Servs. Corp. v. Texaco Fuel and Marine Mktg. Inc., 2002 WL 1335360 (Del. Super. Ct. June 13,
2002). There are exceptions to the economic loss rule however, including claims of fraud, as
well as other intentional torts. See Commonwealth Constr. Co. v. Endecon, Inc., 2009 WL
609426, *5 (Del. Super. Ct. Mar. 9, 2009) (recognizing trend to exclude intentional torts,
including fraudulent misrepresentation, from economic loss doctrine). Furthermore, Delaware
recognizes an exception stated in the Restatement (Second) of Torts, which provides:
One who, in the course of his business, profession or employment,
or in any other transaction in which he has a pecuniary interest,
supplies false information for the guidance of others in their
business transactions, is subject to liability for pecuniary loss
caused to them by their justifiable reliance upon the information, if
he fails to exercis.e reasonable care or competence in obtaining or
communicating the information.

Restatement (Second) of Torts § 522; see also Del. Art. Mus. v. Ann Beha Architects, Inc., 2007
WL2601472, at* 2 (D. Del. Sept. 11, 2007). ·courts applying_this exception have found-that it
requires the showing of two elements: (1) the plaintiff must show that the defendant supplied
information to the plaintiff for use in business transactions with third parties; and (2) the
defendant must be in the business of supplying such information. See Christiana Marine Servs.

Corp., 2002 WL 1335360, at *5-6.
Counterclaim-Defendants argue that Music Express' losses "are purely economic." (D .I.
9 at 10) Music Express responds that the economic loss rule "does not preclude tort claims
directed at breaches of non-contractual duties." (D.110 at 12) Instead, courts have repeatedly
found fraud and intentional misrepresentation claims to be recognized exceptions to the rule ..

(Id.)
The Court agrees that Music Express' claims of fraudulent inducement and negligent

9

misrepresentation both fall within the exceptions to the economic loss doctrine and are, therefore,
not precluded. As addressed above, intentional torts such as fraudulent inducement have been
carved out of the economic loss doctrine. See Commonwealth Constr. Co. 2009 WL 609426, at
*5; Brasby v. Morris, 2007 WL 949485, at *7 (Del. Super. Ct. Mar. 29, 2007); see a"!so Cavi v ..
Evolving Sys., Inc., 2017 WL 658470, at *7 (D. Del. Feb. 17, 2017) (stating that "[a]llegations of

fraud that go directly to the inducement of the contract, rather than its performance, present a
viable claim" not barred by economic loss rule). Music Express has also satisfied both elements
of the Restatement exception for its negligent misrepresentation claim. Music Express has
adequately pled that Counterclaim-Defenda:µts supplied information to it for use in business
transactions with third parties (i.e., Music Express showed that Counterclaim-Defendants made
various representations about the capability·ofLivery's software, which was to be used by Music
Express in business transactions with its clients). Music Express also adequately pled that Livery
is in the business of providing software solutions for limousine companies and, therefore, in the
business of supplying information about the software Music Express contracted to use in dealings
with its clients.
Therefore, the Court will deny Counterclaim-Defendants' motion to dismiss Music
Express' claims (based on misrepresentations numbered ( 1) and (3) above) to the extent the
motion is ?ased on application of the "gist of the action" or economic loss doctrines. 3

3

Counterclaim-Defendants also argue that because the gist of the action is a breach of
contract matter, and "Delaware law clearly holds that officers of a corporation are not liable on
corporate contracts as long as they do not purport to bind themselves individually," claims
against Hirsch and Bowman individually must be dismissed. (D.I. 9 ~t 10 n.3) Because the
Court finds Music Express' claims are. not barred by the gist of the action doctrine, this argument
is unavailing.
10

B.

Federal Unfair Competition·

Music Express' Fourth4 Claim for Relief alleges that Livery's "bait and switch" of
demonstrating the Classic version and later delivering only the .Net version constitutes false or
misleading description and/or false or misleading representation and unfair competition under the
Lanhcim Act, codified at 15 U.S.C. § 1125. (D.I. 5 at·,-r 83) The Lanham Act protects persons
who are injured as a result of false association and/or false advertising. See Lexmark Int 'l; Inc. v.
Static Control Compone,nts, Inc., 134 S. Ct. 1377, 1384 (2014).

Counterclaim-Defendants argue that Music Express has failed to state a claim for relief
under Rule 12(b)( 6). because the Supreme Court precluded this type of claim as a matter of law.
(D.I. 9 at 11-12) Specifically, the Court in Lexmark stated, "[a] consumer who is hoodwinked
into purchasing a disappointing product ... cannot invoke the protection of the Lanham Act ."
Lexmark, 134 S. Ct. at 1390. Further, to show proximate cause, a plaintiffsuing under the

Lanham Act "must show economic or reputational injury flowing directly from the deception
wrought by the defendant's advertising; and that occurs when deception of-consumers causes

them to withhold trade from plaintiff." Id. at 1391 (emphasis added). Counterclaim-Defendants
argue that Music Express is barred from pursuing its claim because it states precisely the facts the
Supreme Court barred in Lexmark: that "Music Express was allegedly 'hoodwinked' by Livery
(and its officers and directors) when Livery delivered the current, '.Net' platform software to
Music Express rather than the obsolete, 'Classic' version." (D.I. 9 at 12) CounterclaimDefendants also argue that there is no proximate. causal link between the alleged

4

Livery has not moved to dismiss Music Express' s Third Claim for Relief, brought solely
against Livery, which alleges breach of contract.
11

misrepresentations and Music Express' injury because the statements made during the course of
the parties' private dealings cannot be said to constitute "advertising" that deceived Music
Express' consumers and caused them to withhold trade from Music Express. (Id. at 12-13)
Music Express' response is to request leave to amend its claim. (D.I. 10 at 20)
The Court agrees with Counterclaim-Defendants. Not only did the Supreme Court refuse
to apply the Lanham Act to the "hoodwinked consumer," but it also explicitly stated that "[e]ven
a business misled by a supplier into purchasing an inferior product is, like consumers generally,
not under the Act's aegis." Lexmark, 134 S. Ct. at 1390. Further, the Court agrees that Livery's
statements to Music Express cannot constitute "advertising" to Music Express' customers that
caused them to withhold trade from Music Express. Therefore, even taking Music Express' wellpleaded allegations as true, Music Express has failed to state a claim on which relief may be
granted.
Based on the same reasoning, it would be futile to allow Music Express to amend its
claim. Rule 15(a) of the Federal Rules of Civil Procedure provides that after a responsive
pleading has been filed, a party may amend its pleading "only with the opposing party's written
consent or the court's leave," and "[t]he court should freely give leave when justice so requires."
The decision to grant or deny leave to amend lies within the discretion of the Court. In
exercising this discretion, the Court should consider such factors as "undue delay, bad faith,
dilatory motive, prejudice, and futility." In re Burlington Coat Factory Secs. Litig.; 114 F.3d at
1434 (internal citations omitted). An amendment is futile if it is frivolous, fails to state a claim
upon which relief can be granted, or "advances a claim or defense that is legally insufficient on
its face." Koken v. GPC Int'!, Inc., 443 F. Supp. 2d 631, 634 (D. Del. 2006). Here, a Lanham
12

Act claim would not survive a Rule 12(b)(6) motion even if pled with more particularity because
it has been expressly barred by Lexmark. Therefore, any amendment would be futile.
Accordingly, the Court will grant Counterclaim-Defendants' motion to dismiss this claim.

C.

Delaware Deceptive Trade Practices Act

Music Express' Fifth Claim for Relief alleges thatLivery violated the Delaware
Deceptive Trade Practices Act, codified in 6 Del. C. § 2532, which prohibits urilawful and
deceptive trade practices, including falsely representing that goods and services are of a particular
standard, quality or grade, when they are not. (D.I. 5 at'~ 86) Counterclaim-Defendants contend
that Music Express lacks standing to assert this claim. (D.I. 9 at 13-14)
To have standing, the Delaware Supreme Court has stated that a litigant must have "a
business or trade interest at stake which is the subject of interference by the unfair or deceptive
trade practices of another," adding that this interference must be "with the horizontal
relationships between various business interests." Grand Ventures, Inc. v. Whaley, 632 A.2d 63,

70 (Dei. 1993). A horizontal business relationship is one that "exists between at least two
businesses on the same market level, because they manufacture similar products in the same
geographic region, or are direct competitors." Chase Bank USA, NA. v. Hess, 2013 WL 867542,
at *5 (D. Del. Mar. 7, 2013), report and recommendation adopted, 2013 WL 5314706 (D. Del.
Sept. 20, 2013) (internal citations omitted).
No such horizontal relationship exists here because Music Express and Livery (and
further, Music Express and Hirsch and/or Bowman) are not direct competitors and do not
manufacture similar products. Because there is no potential of interference with a horizontal
relationship here, Music Express lacks standing to pursue a claim under the Delaware Deceptive
13

Trade Practices Act. In addition, any amendment here would be futile because no amount of
particularity could cure this defect in standing.
Counterclaim-Defendants' motion to dismiss this claim will, therefore, be granted.

D.

Revocation of Acceptance

In its Sixth Claim for Relief, brought solely against Livery, Music Express argues that if

it is found to have accepted the software, the Court should find it revoked that acceptance under
the Uniform Commercial Code. (D.I. 5 at~~ 90-92) Music Express argues that the nonconformity of the software could not have been reasonably discovered at the time Livery
tendered delivery and, had Music Express known the software was non-confirming, it would not
have accepted it. (Id.) fu support of this argument, Music Express points to both a Notice· of
Termination ("Notice") it sent Livery- asserting that the notice is "tantamount to a notice of
revocation in these circumstances" - and the filing of this lawsuit. (Id.

at~

94; D.I. 10 at 18)

Livery responds that "termination" and "revocation" are "inherently different and provide
for different remedies." (D.I. 9 at 15) While termination only eliminates the prospective
obligations of the parties, revocation restores the parties to the position they were in before the
contract existed. (Id. (citing 6 Del. C. § 1-101, et seq.)) Livery argues that Music Express only
provided notice of its intent to terminate the Agreement, but never notified Livery of its intent to

revoke the Agreement. (Id. at 15-16) Because revocation is not effective until notice has been
received, Livery argues the claim must fail as a matter of law. (Id.) Furthermore, Livery argues
that Music Express' actions were inconsistent with revocation since it continued to use the
software for weeks after the purported revocation. (Id. at 16 n. 8)
This issue does not present a meritorious basis on which to grant a motion to dismiss.
14

The Court has not had the opportunity to evaluate the Notice, nor have the parties taken any
discovery relating to it (or the intent behind it). Additionally, should the Notice be found to
constitute a notice of revocation, the ultimate question of whether Music Express provided it in a
timely manner is a question of fact, not amenable to resolution on the pending motion to dismiss.

See Mercedes-Benz ofN Am. Inc. v. Norman Gershman 's Things to Wear, Inc., 596 A.2d 1358,
1363 (Del. 1991) ("Whether a notice of revocation of acceptance is given within a 'reasonable
time' under 6 Del. C. § 2-608(2) is, as a general rule, a question of fact for the jury.").
The Court will, therefore, deny Counterclaim-Defendants' motion to dismiss Music
Express' claim of revocation.

E.

Damages

Lastly, Counterclaim-Defendants contest Music Express' request for recovery, arguing
that under the limited liability provision of the Agreement, Music Express is "barred from
recovering any damages in.excess of certain fees paid to Livery." (D.I. 9 at 16) CounterclaimDefendants thus assert that Music Express' damages cannot exceed $62, 715 .51 - the amount
Music Express paid Livery in connection with the Agreement. (Id. at 17) Music Express
responds that the enforceability of the limited liability clause presents a factual inquiry and
cannot be resolved on a motion to dismiss. (D.I. 10 at 13) Further, Music Express argues,
because the remedy provisions of the Agreement fail of their essential purpose, the limited
liability clauses should not be enforced. (Id. at 14) Counterclaim-Defendants rebut that the
matter is ripe for a motion to dismiss because any factors the Court would need to evaluate to
determine the liability provision's enforceability are all already known. (D.I. 11 at 5-6) (arguing
that both parties are sophisticated business entities, Agreement itself is only eight pages in
15

length, and in-house counsel reviewed Agreement for Music Express)
The Court finds this matter premature without additional discovery, especially in light of
claims that Music Express was fraudulently induced into entering the Agreement. See J.A. Jones

Const. Co. v. Ciy ofDover, 372 A.2d 540, 553 (Del. Super. Ct. 1977) ("It has been repeatedly
recognized that the issue of whether limitation provisions are enforceable under the contractual
relations of the parties and the nature of the contractual performance are matters which generally
should not be decided on the pleadings or on summary judgment."); see also Hampton v.

Warren-Wolfe Assocs., Inc., 2004 WL 838847 at *3 (Del. Super. Ct. Mar. 19, 2004) (stating that
"[ c]ontract clauses which exonerate a party from the consequences of its own actions are
disfavored by the Courts" and denying summary judgment as to limitation of liability clause
where questions remained for trier of fact). 5
Counterclaim-Defendants' motion with respect to damages will be denied.

IV.

CONCLUSION
For the reasons explained above, Counterclaim-Defendants' motion to dismiss will be

granted in part and denied in part. An appropriate Order follows.

5

Delaware courts have sometimes been able to resolve disputes as to enforceability of a
limited liability clause on summary judgment. See Column Form. Tech., Inc. v. Caraustar
Indus., Inc., 2014 WL 2895507, at *5 (Del. Super. Ct. June 10, 2014); RHA Constr., Inc. v. Scott
Eng'g, 2013 WL 3884937, at *8 (Del. Super. Ct. July 24, 2013); Donegal Mut. Ins: Co. v. TriPlex Sec. Alarm Sys., 622 A.2d 1086, 1090 (Del. Super. Ct. 1992). Here, the record is not as
developed as in those other cases. See, e.g., Donegal Mut. Ins. Co., 622 A.2d at 1089 ("If the
interrogatories had not been answered, it may have been inappropriate for the Court to grant
summary judgment.")