WC BRADLEY CO v. ITELLIGENCE INC
Filing
36
ORDER granting in part and denying in part 33 Motion for Judgment on the Pleadings. Ordered by US DISTRICT JUDGE CLAY D LAND on 06/12/2018. (CCL)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
COLUMBUS DIVISION
W.C. BRADLEY CO.,
*
Plaintiff,
*
vs.
*
ITELLIGENCE, INC.,
*
Defendant.
CASE NO. 4:17-CV-208 (CDL)
*
O R D E R
Plaintiff W.C. Bradley Co. needed help with a major software
overhaul.
had
Defendant itelligence, Inc. told W.C. Bradley that it
experienced
solution
that
consultants
met
W.C.
who
could
Bradley’s
implement
needs.
After
a
software
extensive
negotiations, W.C. Bradley entered an agreement with itelligence
to implement the new software system.
According
to
W.C.
Bradley,
it
was
Then the trouble began.
a
classic
bait-and-switch:
although itelligence had knowledgeable personnel who said all the
right things during the sales process, the consultants who were
actually assigned to the project did not have the capability or
the expertise to implement the new software system successfully,
and itelligence’s software solution was not sufficiently tailored
to meet W.C. Bradley’s needs.
After the first major rollout of
the new software failed, W.C. Bradley made a list of grievances
and threatened to fire itelligence.
itelligence convinced W.C.
Bradley that it would fix the problems and get the project back
on track, so W.C. Bradley gave itelligence another shot.
The
problems
continued.
W.C.
Bradley
the
contract
and
this
action
fraudulently
brought
induced
it
to
enter
ultimately
alleging
the
terminated
that
initial
itelligence
agreement
and
committed additional fraud to keep W.C. Bradley from terminating
the agreement.
W.C. Bradley seeks rescission of the agreement
and damages resulting from itelligence’s alleged fraud.
In the
alternative, W.C. Bradley alleges that itelligence breached its
contract with itelligence, including express warranties in that
contract.
Presently pending before the Court is itelligence’s
motion for judgment on the pleadings as to W.C. Bradley’s fraud,
negligent misrepresentation, and certain express warranty claims.
As discussed below, that motion (ECF No. 33) is denied except as
to W.C. Bradley’s breach of express warranty claims set forth in
paragraphs 158 and 159 of the Amended Complaint.
JUDGMENT ON THE PLEADINGS STANDARD
“Judgment on the pleadings is appropriate where there are no
material facts in dispute and the moving party is entitled to
judgment as a matter of law.”
Cannon v. City of W. Palm Beach,
250 F.3d 1299, 1301 (11th Cir. 2001).
The Court “must accept the
facts alleged in the complaint as true and view them in the light
most favorable to the nonmoving party.”
Id.
The Court may
consider written instruments attached to the complaint or answer
in
ruling
on
a
motion
for
judgment
2
on
the
pleadings
without
converting that motion to a summary judgment motion under Federal
Rule
of
Civil
Procedure
12(d)
because
Rule
7(a)
defines
“pleadings” to include the complaint and answer, and Rule 10(c)
provides that a copy of a written instrument “that is an exhibit
to a pleading is a part thereof for all purposes.”
Fed. R. Civ.
P. 10(c); accord Horsley v. Feldt, 304 F.3d 1125, 1134 (11th Cir.
2002).
If exhibits to a pleading “contradict the general and
conclusory
allegations
of
the
pleading,
the
exhibits
govern.”
Griffin Indus., Inc. v. Irvin, 496 F.3d 1189, 1206 (11th Cir.
2007).
FACTUAL ALLEGATIONS
W.C. Bradley alleges the following facts in support of its
claims.
The Court must accept these facts as true for purposes
of the pending motion.
In 2014, W.C. Bradley decided to perform a global systems
upgrade to replace its various business units’ “disparate and
aging”
information
enterprise
resource
technology
planning
systems
solution
with
to
provide
consolidated view of operations and finances.”
15-17, ECF No. 8.
one
integrated
a
“single,
Am. Compl. ¶¶ 2,
W.C. Bradley needed an enterprise resource
planning system that could “provide dynamic business analytics
and
real-time
lingual,
reporting,
foreign
tax,
accommodate
and
other
multi-currency,
international
multi-
regulatory
requirements that are inherent in a global business operation.”
3
Id. ¶ 17.
W.C. Bradley recognized that the upgrade project would
be complex and that its in-house information technology personnel
could not complete the project on their own.
Therefore, W.C.
Bradley formed a selection team to investigate and document its
business needs and search for available software solutions.
One software provider, SAP AG, recommended that W.C. Bradley
partner with itelligence to design and implement a SAP system
suitable for W.C. Bradley’s business needs.
itelligence
and
other
potential
W.C. Bradley had
vendors
software solutions to the selection team.
demonstrate
their
And, itelligence had
an opportunity “to participate in extensive information-gathering
sessions”
to
understand
W.C.
Bradley’s
enterprise resource planning solution.
sessions,
itelligence
learned
about
requirements
Id. ¶ 21.
W.C.
for
the
During those
Bradley’s
business
processes, existing software, and IT personnel capabilities.
After
issued
a
the
preliminary
request
for
discovery
proposals
sessions,
inviting
W.C.
potential
Bradley
vendors
to
submit their plans for a global enterprise solution for W.C.
Bradley.
W.C.
implementation
itelligence
partner
that
solutions
enterprise
resource
Bradley
and
submitted
planning
itelligence
a
had
proven
retain
proposal
software
represented
emphasized
that
that
it
abilities
to
experienced
suggesting
a
implement
resources.
enterprise
its
proposal,
In
its
would
solution
an
SAP
solution.
4
wanted
exceed
W.C.
Bradley’s
functional
and
technical
requirements
by
meeting
today’s requirements and serving “as a flexible, scalable and
stable
platform
for
innovation
and
growth.”
Id.
¶ 25.
itelligence also stated that it had “deep expertise” and “proven
delivery methods” with SAP software products, as well as a “deep
understanding of specific regional and local requirements.”
¶¶ 24-25.
Id.
itelligence further represented that it would bring
the “most qualified resources” with industry and SAP expertise to
create an effective program on time and on budget.
Id. ¶ 25.
And,
knowledge
itelligence
represented
that
it
would
deliver
transfer and training to ensure that W.C. Bradley would be selfsufficient by the end of the project.
After
analyzing
the
Id. ¶ 26.
proposals
it
received,
W.C.
Bradley
invited itelligence and two other vendors for an on-site demo
day.
itelligence
“pre-sales”
consultants
itelligence’s SAP software solution.
Id. ¶ 27.
demonstrated
And, over the
course of several months, itelligence representatives convinced
the selection team that itelligence’s global template solution
would
work
for
W.C.
Bradley’s
business,
that
itelligence
personnel had the skills and experience necessary to customize
the SAP solution to meet W.C. Bradley’s requirements, and that
itelligence could deliver a SAP solution “with less effort and
expense than competing . . . vendors through the use of a global
template.”
Id. ¶¶ 4, 27.
W.C. Bradley was concerned about the
5
price
of
the
project,
so
itelligence
proposed
splitting
global implementation of the SAP solution into two phases.
I
would
include
business
units:
W.C.
Zebco
Bradley’s
Holdings
corporate
and
W.C.
operations
Bradley
Phase
and
Real
the
two
Estate.
Phase Two would include the two remaining business units, CharBroil, LLC and Lamplight Farms Inc.
And, by the end of Phase I,
itelligence would train W.C. Bradley’s IT personnel so that they
could lead the Phase II rollout at a significantly lower cost.
Id. ¶¶ 4, 28.
W.C.
Bradley
asserts
that
when
itelligence
made
these
representations and proposals, it knew that W.C. Bradley really
needed
a
solution
requirements
template
tailored
and
that
solution
would
to
meet
itelligence’s
not
work
for
its
complex
business
pre-configured
W.C.
Bradley’s
global
business
without significant customization, which would be upsold to W.C.
Bradley at additional cost in terms of both money and time.
W.C.
Bradley further asserts that itelligence knew when it proposed
the two-phase rollout plan that W.C. Bradley would not be able to
implement Phase II on its own.
And, W.C. Bradley contends that
itelligence knew or should have known that its electronic data
transfer tool was not capable of handling the data migration from
W.C. Bradley’s legacy software systems to the new SAP solution.
But itelligence repeatedly assured W.C. Bradley in “dozens of
conversations
and
written
communications”
6
that
its
template
solution and the two-phase rollout plan would work despite the
significant differences between the business processes of W.C.
Bradley’s business units and the limitations of W.C. Bradley’s IT
personnel.
Id. ¶¶ 6, 29-32.
Ultimately, itelligence presented an implementation services
proposal to the W.C. Bradley selection team representing that
Phase I of the project, which would roll out the SAP solution for
Zebco and W.C. Bradley’s corporate operations, would be done in
42 weeks
and cost
approximately $6 million.
Phase II, which
would cover Char-Broil and Lamplight, would be done in 24 weeks
and
cost
approximately
$475,000,
with
W.C.
Bradley
personnel
having enough training and knowledge transfer from itelligence to
lead Phase II.
When W.C. Bradley expressed concerns about the feasibility
of
the
program
timeline
and
management
Bradley
itelligence
methodology
would be successful.
W.C.
budget,
would
represented
ensure
that
that
the
its
project
And when W.C. Bradley questioned whether
personnel
would
be
able
to
lead
Phase
II,
itelligence assured W.C. Bradley that the work from Phase I would
be reusable and that W.C. Bradley personnel would be able to lead
Phase II with itelligence in a support role.
After considering the proposals from the vendor candidates,
W.C. Bradley decided to use the SAP enterprise resource planning
software platform because of its ability to provide immediate
7
business analytics in real time.
And, based on itelligence’s
representations and proposals regarding
its SAP implementation
skills, the feasibility of its global template solution, and its
ability
to
provide
local
expert
consultants
at
each
of
W.C.
Bradley’s international business locations, W.C. Bradley selected
itelligence as the implementation vendor for the project.
February
24,
Agreement
2015,
governing
the
parties
the
terms
under
provide services on the project.
was
later
amended,
and
the
entered
a
which
Master
On
Services
itelligence
would
The Master Services Agreement
parties
also
executed
multiple
statements of work, change orders, and amendments regarding the
specific services to be provided by itelligence on the project.
The
statements
of
work,
change
orders,
and
amendments
issued
under the Master Services Agreement were incorporated as part of
the
Master
Services
Services
Agreement
Agreement.
1,
ECF
Def.’s
No.
19-1.
Answer
Ex.
The
Master
A,
Master
Services
Agreement provided that itelligence’s services would be provided
on a time and materials basis unless the applicable statement of
work provided for a fixed fee.
Id. §§ 3.4-3.5.
It also provided
a “good faith estimate of itelligence time and materials” for the
project.
Id.
§
1.3
&
Ex.
A.
warranties” provision.
Id. § 9.
Agreement
it
stated
that
It
contained
an
“exclusive
Finally, the Master Services
constituted
the
complete
agreement
between the parties and superseded all proposals, discussions,
8
and negotiations prior to the execution of the agreement.
Id.
§ 25.
Phase I of the project officially began in March 2015.
October
2015,
the
two-phase
rollout
itelligence
Bradley turned into an eight-phase rollout.
was to Zebco’s non-U.K. European operations.
Printers
and
business
forms
did
not
sold
to
By
W.C.
The first rollout
It did not go well.
work;
invoices
were
incorrectly translated, did not reflect the correct discounts,
and violated E.U. tax requirements; electronic data interchange
“was a complete failure” that required W.C. Bradley to perform
its inventory manually; and interfaces between the new SAP system
and the legacy systems did not work.
Am. Compl. ¶ 98.
And,
itelligence billed W.C. Bradley for the cost of fixing its own
mistakes.
After
the
Zebco
EU
rollout
failure,
W.C.
Bradley
itelligence a Notice of Material Breach on May 9, 2016.
sent
Def.’s
Answer Ex. I, Letter from D. Freeman to T. Breen (May 9, 2016),
ECF No. 19-84.
breaches
The letter demanded that itelligence “cure its
under
the
[Master
Services
misrepresentations within 30 days.”
Id. at 1.
Agreement]
and
Those breaches
and misrepresentations included failure to properly implement the
Zebco EU project;
requisite
failure to provide consultants who had the
experience
for
the
project
and
understood
W.C.
Bradley’s business requirements; failure to use IT professionals
9
who
could
implement
the
electronic
data
interchange
and
electronic warehouse management; failure to point out that SAP
security functionality would cost extra; and problems with data
migration.
In response, itelligence acknowledged that some of
its electronic data interchange resources were not up to the
task; that it was not aware of SAP’s new electronic warehouse
management
release
at
the
time
of
contracting;
that
it
inadvertently omitted the SAP security piece from a statement of
work;
and
that
there
were
some
“post
implementation
issues.”
Def.’s Answer Ex. J, Letter from T. Breen to D. Freeman (May 19,
2016), ECF No. 19-85.
itelligence disagreed with the rest of
W.C. Bradley’s claims.
itelligence proposed a remediation plan
to fix the problems and keep W.C. Bradley’s business.
In the
remediation
issues
with
plan,
“[r]esource
itelligence
acknowledged
churn”
“resource
and
that
quality”
it
had
and
that
underestimated the complexity of W.C. Bradley’s businesses.
Compl. ¶ 100.
it
Am.
In the remediation plan, itelligence proposed a
revised budget with some discounts but an overall increase in
cost, committed to assigning solution architects that understood
W.C.
Bradley’s
business
requirements,
and
agreed
to
engage
additional vendors with the expertise necessary to complete the
project.
The remediation plan also stated that W.C. Bradley
would be able to lead the Char-Broil and Lamplight rollouts, with
itelligence in a supporting role.
10
After receiving the remediation plan, W.C. Bradley’s chief
information
officer
and
itelligence
executives
possible way forward.
chief
to
financial
discuss
the
officer
past
met
problems
with
and
a
itelligence convinced W.C. Bradley that it
would be able to deliver the project despite the past failures,
and
the
parties
renegotiated
the
contract
for
Phase
I.
The
amended contract provided for fixed fee payments based on the
achievement of milestones rather than payment based on time and
materials, and it transferred part of the scope of work from
itelligence to third-party vendors.
Based on the amended Master Services Agreement, the project
continued.
The
parties
agreed
to
new
statements
of
work,
amendments to existing statements of work, and various change
orders.
W.C.
Bradley
also
signed
off
on
the
completion
of
several project deliverables and continued to make payments to
itelligence.
the
system
operations.
After the amendment, there was a small rollout of
for
Bradley’s
corporate
and
real
estate
The next rollout, for Zebco North America, was in
November 2016.
well.
W.C.
Like the rollout for Zebco EU, it did not go
There were problems with forecasting data, and the system
“completely
lacked
any
reporting.”
Am.
Compl.
itelligence billed W.C. Bradley to fix these problems.
¶ 102.
Despite
the problems, W.C. Bradley did sign off on and make payments for
several deliverables related to the Zebco North America rollout.
11
W.C. Bradley evaluated the overall project and determined
that Phase II needed to be re-scoped and that the timeline had to
be extended.
itelligence repeatedly assured W.C. Bradley that it
“would make the necessary changes to salvage the Project.”
¶ 103.
Id.
In June 2017, W.C. Bradley required itelligence to make a
presentation to W.C. Bradley’s senior leadership.
meeting,
budget
itelligence
were
not
admitted
feasible
and
that
the
that
it
original
did
not
During that
timeline
have
management skills that were critical to the project.
and
warehouse
itelligence
offered to change project managers again and also offered another
mitigation plan.
firm
to
audit
But W.C. Bradley hired a third-party software
the
project,
and
the
auditor’s
preliminary
investigation concluded that itelligence had materially breached
the parties’ contract.
It also suggested that itelligence “had
knowingly and/or recklessly made false representations about” its
“skills
and
expertise,”
the
project’s
timeframe,
appropriateness of a global template solution.”
and
“the
Id. ¶ 121.
On September 29, 2017, W.C. Bradley sent itelligence another
Notice of Material Breach and demanded that itelligence cease
work on the project so that W.C. Bradley could complete the audit
and determine the appropriate course of action.
20,
2017,
after
the
auditor
concluded
And on October
its
preliminary
investigation, W.C. Bradley delivered a notice of rescission to
itelligence.
12
W.C. Bradley has paid itelligence more than $20 million for
a project that was originally supposed to
cost
$6.5
million.
W.C. Bradley has also paid third-party vendors to fix problems
with the system, and its own employees have spent thousands of
hours
to
implement
the
new
system.
The
system,
which
was
supposed to be up and running for all business units by mid-2016,
has not yet been implemented for several business units.
The
part of the project that has been implemented does not fully meet
W.C.
Bradley’s
systems
have
business
become
requirements.
“crucially
Nonetheless,
entwined”
with
W.C.
the
new
Bradley’s
business operations, and it would cause W.C. Bradley “significant
hardship” to try to disentangle the new system and return it to
itelligence. Id. ¶ 123.
And, according to W.C. Bradley, the
systems “present no value or use to itelligence.”
Bradley
contends
“impractical,
that
under
unreasonable,
these
and
circumstances,
inequitable”
to
Bradley to tender the system back to itelligence.
W.C.
Bradley
brings
inducement, and deceit.
a
Id.
claim
for
it
W.C.
would
require
be
W.C.
Id.
fraud,
fraudulent
W.C. Bradley contends that itelligence
knowingly made material misrepresentations and concealed material
facts about its ability to deliver the project.
W.C. Bradley
relied on these misrepresentations and omissions and entered the
agreement with itelligence.
W.C.
Bradley
threatened
to
Then, when the problems began and
end
13
the
project,
itelligence
made
additional material misrepresentations and concealed additional
material
facts.
W.C.
Bradley
relied
on
these
additional
misrepresentations and omissions and continued the project until
additional project failures and a software audit revealed that
the project was not salvageable.
In the alternative, W.C. Bradley asserts breach of contract
and
breach
of
express
warranty
claims
and
alleges
that
itelligence breached the parties’ contract in more than twenty
ways.1
See
id.
¶ 43.
In a nutshell, W.C. Bradley contends
itellegence did not adequately plan for the project or provide
the right people for the project, which resulted in work product
that did not meet W.C. Bradley’s business needs despite being
significantly over time and over budget.
DISCUSSION
itelligence
seeks
judgment
on
the
pleadings
on
W.C.
Bradley’s fraud claims and two of its express warranty claims.
itelligence’s central argument is that W.C. Bradley waived its
right to rescind the contract and instead affirmed the contract,
so W.C. Bradley’s only recourse is to sue under the contract and
not in tort.
I.
Did W.C. Bradley Waive its Claim for Rescission?
W.C. Bradley alleges that it was fraudulently induced into
entering the contract with itelligence.
1
Therefore, W.C. Bradley
W.C. Bradley also brought a claim for breach of implied warranty, but
it withdrew that claim.
14
has “two options: (1) affirm the contract and sue for damages
from the fraud or breach; or (2) promptly rescind the contract
and sue in tort for fraud.”
Mitchell v. Backus Cadillac—Pontiac,
Inc., 618 S.E.2d 87, 92 (Ga. Ct. App. 2005) (quoting Brown v.
Garrett, 584 S.E.2d 48, 49 (Ga. Ct. App. 2003)).
itelligence
argues that the pleadings establish as a matter of law that W.C.
Bradley
affirmed
promptly
its
rescinding
agreement
it
once
it
with
itelligence
discovered
the
instead
alleged
of
fraud.
They do not.
A
plaintiff
seeking
to
rescind
due
“promptly” after discovering the fraud.
to
fraud
must
do
O.C.G.A. § 13-4-60.
so
If
a “defrauded party, ‘with knowledge of the fraud, does an act in
ratifying or affirming the contract which shows his intention to
abide by the contract as made, with the fraud in it, and thus
waives the fraud,’” he cannot rescind the contract and sue in
tort.
Nalley v. Langdale, 734 S.E.2d 908, 918 (Ga. Ct. App.
2012) (quoting Tuttle v. Stovall, 67 S.E. 806, 808 (Ga. 1910)).
And, Georgia law requires that a party act “with that promptitude
which the nature of the case and environment of the circumstances
would require.” Newton v. Burks, 229 S.E.2d 94, 95 (Ga. Ct. App.
1976) (quoting Jordy v. Dunlevie, 77 S.E. 162, 165 (Ga. 1913)).
The
question
electing
rescission
to
whether
ratify
is
highly
a
a
party
waived
contract
instead
fact-specific,
15
its
so
right
to
rescind
of
promptly
it
is
by
seeking
ordinarily
a
question for the jury.
918
(stating
that
the
Id. at 96; accord Nalley, 734 S.E.2d at
question
whether
“a
ratification
has
occurred ‘is usually a fact question for the jury’” (quoting
Brock v. Yale Mtg. Corp., 700 S.E.2d 583, 588 (Ga. 2010))).
The
Court can only decide these issues as a matter of law if “the
facts and circumstances essential to the waiver issue are clearly
established.”
Denim N. Am. Holdings, LLC v. Swift Textiles, LLC,
532 F. App’x 853, 859 (11th Cir. 2013) (quoting Forsyth Cty. v.
Waterscape Servs., LLC, 694 S.E.2d 102, 110 (Ga. Ct. App. 2010)).2
Here,
itelligence
argues
that
it
is
clear
from
the
allegations in the Amended Complaint and from W.C. Bradley’s May
2016 letter that W.C. Bradley was on notice of itelligence’s
fraud but elected to affirm the contract.
The Court must view
the
in
allegations
in
the
Amended
2
Complaint
the
light
most
In the cases itelligence relies on, it was clear that the party
seeking rescission knew about the fraud but did not promptly rescind.
For example, in Swift Textiles, the evidence at trial established that
the plaintiff was aware of the defendants’ fraud and demanded
rescission of the parties’ contract but then invoked a provision of
that contract to request and receive a capital contribution from the
defendant—an act incompatible with contract rescission.
Swift
Textiles, 532 F. App’x at 859.
Therefore, the waiver issue could be
decided on a motion for judgment as a matter of law.
Similarly, in
Orion Capital Partners, L.P. v. Westinghouse Electric Corp., 478 S.E.2d
382 (Ga. Ct. App. 1996), the buyer of a pet food business discovered
immediately after the sale that the pet food was mislabeled and that
the business was not being conducted lawfully, contrary to the seller’s
representations. Instead of rescinding promptly after discovering this
fraud, the buyer continued to operate the business and spent months
trying to fix the problems.
Id. at 385.
And in Holloman v. D.R.
Horton, Inc., 524 S.E.2d 790 (Ga. Ct. App. 1999), the home buyers found
significant defects in their home and requested repairs under the
contract. Three months later, they sent a rescission letter. But then
they filed a complaint affirming the contract and seeking damages and
did not seek rescission. Thus, the home buyers waived their right to
seek rescission. Id. at 795-96.
16
favorable to W.C. Bradley at this stage of the proceedings.
In
that light, the Amended Complaint establishes that by May 2016,
W.C. Bradley was dissatisfied with the Zebco EU project due to a
number
of
problems
Complaint
also
itelligence’s
experience
and
requirements.
during
establishes
consultants
their
the
implementation.
that
W.C.
lacking
in
understanding
Bradley
terms
of
W.C.
The
found
of
Amended
some
their
Bradley’s
of
past
business
But nothing in the pleadings, viewed in the light
most favorable to W.C. Bradley, suggests that W.C. Bradley knew
or should have known about the fraud W.C. Bradley now alleges:
(1)
that
solution
itelligence
knowing
sold
that
the
W.C.
Bradley
system
on
would
a
not
global
work
template
for
W.C.
Bradley’s business and that after itelligence got in the door
with its “cost effective” global template plan, it could get W.C.
Bradley to spend millions of dollars on customizations that were
necessary to make the software work; (2) that itelligence lied
about its experience and capabilities; and (3) that itelligence’s
estimates regarding the length and cost of the project were not
in good faith.
this
alleged
software
W.C. Bradley asserts that it did not learn about
fraud
auditor
until
completed
more
its
than
a
year
preliminary
later,
when
the
investigation
and
concluded that itelligence had knowingly or recklessly made false
representations about its skills, the project’s timeframe, and
the feasibility of using a global template solution.
17
Therefore,
the present record does not establish, as a matter of law, that
W.C. Bradley acted with knowledge of itelligence’s alleged fraud
when
it
accepted
Bradley
itelligence’s
sufficiently
alleges
remediation
that
it
plan.
did
And,
not
W.C.
discover
itelligence’s alleged fraud until September 2017, shortly before
it sent the October 2017 rescission letter.
Furthermore, the present record does not establish, as a
matter
of
law,
that
W.C.
Bradley
acquiesced
in
any
of
the
breaches or misrepresentations it knew about or suspected as of
May 2016.
Rather, the Amended Complaint and the May 9, 2016
letter suggest that W.C. Bradley insisted that the project would
terminate and itelligence would be fired unless itelligence fixed
the software problems and made a number of staffing and other
changes for future project phases.
W.C. Bradley further alleges
that in response to its concerns and to keep from losing the
business, itelligence made additional misrepresentations to lure
W.C. Bradley into a new agreement with a remediation plan that
promised to fix the problems W.C. Bradley raised and get the
project back on track.
For all of these reasons, the allegations
of the Amended Complaint do not establish, as a matter of law,
that W.C. Bradley’s acceptance of the remediation plan in May
2016
amounted
to
a
waiver
of
itelligence’s
rescission is no longer an available remedy.
18
fraud
such
that
II.
Is W.C. Bradley’s Fraudulent Inducement Claim Barred?
Relying on its argument that W.C. Bradley waived its right
to rescind, itelligence asserts that the contract’s merger clause
bars W.C. Bradley’s fraudulent inducement claim.
between
W.C.
agreement”
agreement
Bradley
clause
stating
between
discussions,
agreement.
and
and
the
itelligence
that
parties
negotiations
it
and
The agreement
contained
constituted
superseded
prior
to
the
an
“entire
the
all
complete
proposals,
execution
of
the
Normally, an entire agreement clause like this one
estops a party who elects to affirm a contract from claiming that
the
other
fraudulently
party’s
induced
extra-contractual
him
to
enter
the
misrepresentations
contract.
See,
e.g.,
Browning v. Stocks, 595 S.E.2d 642, 644 (Ga. Ct. App. 2004) (en
banc)
(finding
estopped
from
that
homebuyers
making
fraudulent
who
affirmed
inducement
contract
claim
based
were
on
misrepresentations about the house but concluding that they still
had a fraudulent inducement claim based on fraudulent concealment
of termite damage).
The rationale behind this rule is that an
essential element of a fraud claim is justifiable reliance; if a
contract contains a merger clause, then a party cannot argue that
he relied on representations other than those in the contract.
But a party who validly seeks rescission of the contract is not
bound by the merger clause.
See, e.g., Conway v. Romarion, 557
S.E.2d 54, 58 (Ga. Ct. App. 2001) (noting that homebuyers were
19
not bound by the merger clause in the purchase and sale agreement
in
asserting
inducement).
their
claim
for
rescission
based
on
fraudulent
As discussed above, itelligence is not entitled to
judgment on the pleadings on W.C. Bradley’s claim for rescission,
so the fraudulent inducement claim is not barred by the merger
clause at this time.
III. Does the Economic Loss Rule Bar W.C. Bradley’s Tort Claims?
Also relying on its argument that W.C. Bradley waived its
right to rescind, itelligence contends that W.C. Bradley’s tort
claims are all barred by the economic loss rule.
The economic
loss rule, which originated in the product liability context,
“generally provides that a contracting party who suffers purely
economic
losses
tort.”
ASC
must
Const.
seek
Equip.
his
remedy
USA,
Inc.
in
contract
v.
City
and
not
Commercial
in
Real
Estate, Inc., 693 S.E.2d 559, 566 (Ga. Ct. App. 2010) (quoting
City of Cairo v. Hightower Consulting Eng’rs, 629 S.E.2d 518, 525
(Ga. Ct. App. 2006)).
Under this rule, a mere failure to perform
under a contract does not give rise to a tort claim.
But if the
party validly rescinds a contract, “in legal contemplation, there
is
no
contract
between
the
parties.”
Gardner, 208 S.E.2d 794, 798 (Ga. 1974).
City
Dodge,
Inc.
v.
As discussed above,
itelligence is not entitled to judgment on the pleadings on W.C.
Bradley’s claim for rescission, so W.C. Bradley’s tort claims are
not barred by the economic loss doctrine at this time.
20
IV.
Warranty Claims
Finally,
itelligence
seeks
dismissal
of
W.C.
Bradley’s
alternative breach of express warranty claims that are set forth
in paragraphs 158 and 159 of the Amended Complaint.3
argues
that
these
claims
are
barred
because
disclaimer in the Master Services Agreement.
of
itelligence
the
warranty
In paragraph 158,
W.C. Bradley alleges that itelligence “warranted to provide the
Project with team members ‘who are skilled and trained as SAP
consultants.’”
alleges
that
Am. Compl. ¶ 158.
“itelligence
In paragraph 159, W.C. Bradley
also
made
various
express
. . .
warranties in the Agreement as to the quality, performance, cost,
design,
integration,
and
consulting
provide to” W.C. Bradley.
these
express
warranty
services
Id. ¶ 159.
claims
are
it
contracted
to
itelligence argues that
barred
because
they
were
expressly disclaimed.
The
Master
warranties”
Services
provision.
Agreement
contained
an
itelligence
warranted
that
“exclusive
its
work
product would work in conformance with its documentation and that
itelligence had license rights to the software.
Agreement § 9.1.
Master Services
itelligence further warranted that it would
provide the services “in a good and workmanlike manner using the
highest industry commercial practices and standards.”
3
Id. § 9.2.
itelligence does not seek dismissal of the breach of express warranty
claims set forth in paragraphs 156 and 157 of the Amended Complaint
because they parallel the express warranties provided for in the Master
Services Agreement.
21
itelligence also warranted that if the work product failed to
perform as promised in § 9.1 and § 9.2, itelligence would repair
or replace it or, if that was not possible, issue a refund for
that work product.
Id. § 9.3.
Both parties warranted that they
had authority to enter the agreement.
Id. § 9.4.
The Master
Services Agreement also had a warranty disclaimer: the warranties
set
forth
in
itelligence
§§ 9.1
to
regarding
9.4
its
are
the
“exclusive
services
and
work
warranties
product,”
of
and
itelligence “makes no other warranties or guarantees to” W.C.
Bradley,
“whether
express
or
implied.”
Id.
§ 9.5
(emphasis
omitted).
In its response to itelligence’s motion for judgment on the
pleadings, W.C. Bradley asserted that the warranty alleged in
Paragraph 158 was made in the “Building Block” statement of work
and that the warranties alleged in Paragraph 159 were made in
unspecified
statements
of
work
and
change
orders.
But
the
Building Block statement of work and all other statements of work
were issued under the terms and conditions of the Master Services
Agreement, which explicitly disclaims all warranties that are not
set
forth
in
that
agreement.
The
Court
thus
finds
that
itelliegence is entitled to judgment as a matter of law on the
breach of express warranty claims set forth in paragraphs 158 and
159 of the Amended Complaint.
22
CONCLUSION
For
the
reasons
set
forth
above,
the
Court
denies
itelligence’s motion for judgment on the pleadings (ECF No. 33)
except as to W.C. Bradley’s breach of express warranty claims set
forth
in
paragraphs
158
and
159
of
the
Amended
Complaint.
itelligence’s motion for judgment on the pleadings as to those
two express warranty claims is granted.
IT IS SO ORDERED, this 12th day of June, 2018.
S/Clay D. Land
CLAY D. LAND
CHIEF U.S. DISTRICT COURT JUDGE
MIDDLE DISTRICT OF GEORGIA
23
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