Connect Your Care, LLC v. Conduent HR Services, LLC

Filing 31

MEMORANDUM. Signed by Judge Catherine C. Blake on 7/18/18. (krs, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
Connect Your Care, LLC
*
v.

*

Conduent HR Services, LLC

Civil Action No. CCB-17-2538

*
*
***
Memorandum

The plaintiff, Connect Your Care, LLC (CYC), agreed by contract to provide the
defendant, Conduent HR Services, LLC, consumer healthcare services. CYC now sues Conduent
claiming that it breached the terms of that agreement. Conduent has counter-sued asserting
claims for breach of contract and negligent misrepresentation.1 Although the parties are working
to resolve the parties’ dispute over the contract,2 CYC has moved to dismiss Conduent’s tort
counter-claims. For the reasons stated below, the court will grant CYC’s motion.
Background
CYC and Conduent entered a written agreement in 2013 with an initial term that would
end, if one or both parties desired, as early as 2016 but would otherwise be automatically
extended for two two-year terms. (Def.’s Counter-Claim, ECF No. 7 at ¶ 22). As part of the
agreement, CYC agreed to provide Conduent “recordkeeping services, reimbursement
distribution services, debit card services, consumer information tools, customer service, and
administrative services” to support Conduent’s administration of consumer-directed healthcare.
(Id. at ¶ 30). CYC also agreed to transfer Conduent’s accounts and data off CYC platforms at a
1

Conduent initially included a third counter-claim for tortious interference with prospective advantage, but has since
voluntarily withdrawn that claim. (ECF No. 27).
2
For that reason, Conduent’s breach of contract claim is not being challenged here. Thus, left open by the parties’
briefing and this memorandum is whether CYC met its transition obligations under the contract.

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commercially reasonable price upon termination of the agreement. (Id. at ¶ 25). Specifically, the
parties agreed that:
Upon notice of expiration or termination by either Party to this Agreement, [the
parties] shall mutually, expeditiously, and in good faith proceed to agree upon and
document a Transition Assistance plan . . . . [Conduent] shall pay CYC for CYC’s
commercially reasonable costs, [f]ees and expenses for the Transition Assistance
services to be performed by CYC and its Third Party Service Providers.
(Id.).
The agreement also was fully integrated. It provided that “[t]his Agreement . . .
constitutes the entire agreement between the Parties . . . [and] [e]ach Party hereby acknowledges
that it has not entered into this Agreement in reliance upon any representation made by the other
Party not set forth in this Agreement.” (ECF No. 23 at p. 9).
As the original agreement approached its termination date, CYC sought to negotiate new
terms. (ECF No. 7 at ¶ 9). Unable to reach an agreement, however, Conduent decided against
renewal, triggering the agreement’s transition provisions and setting the contract to lapse in
December 2016. (Id. at ¶ 10). Conduent soon discovered that CYC had never transitioned data as
complicated as its own, that CYC lacked the necessary “infrastructure, coding, personnel, and
other resources” to do so, and that it would cost millions of dollars for CYC to create the tools to
fulfill its contractual obligations. (Id. at ¶ 69). Faced with a transition bill between $2.9 million
and $3.7 million, Conduent asked CYC instead for a “data dump,” but CYC told Conduent that
even a data dump would “require thousands of hours of coding, increased staff, and increased
resources” and cost $3.7 million. (Id. at ¶ 73).

2

CYC filed suit against Conduent in September 2017 for breach of contract and
declaratory relief. (ECF No. 2). After Conduent answered and filed a counter-claim, (ECF No.
7), CYC filed its motion to dismiss, (ECF No. 23).
Standard of Review
To survive a motion to dismiss, the factual allegations of a complaint “must be enough to
raise a right to relief above the speculative level on the assumption that all the allegations in the
complaint are true (even if doubtful in fact).” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555
(2007) (internal citations omitted). “To satisfy this standard, a plaintiff need not ‘forecast’
evidence sufficient to prove the elements of the claim. However, the complaint must allege
sufficient facts to establish those elements.” Walters v. McMahen, 684 F.3d 435, 439 (4th Cir.
2012) (citation omitted). “Thus, while a plaintiff does not need to demonstrate in a complaint
that the right to relief is ‘probable,’ the complaint must advance the plaintiff’s claim ‘across the
line from conceivable to plausible.’” Id. (quoting Twombly, 550 U.S. at 570). And the plaintiff
typically must do so by relying solely on facts asserted within the four corners of his complaint.
Zak v. Chelsea Therapeutics Intern., Ltd., 780 F.3d 597, 606-07 (4th Cir. 2015).
Analysis
CYC’s motion to dismiss raises two disputes: (1) whether Maryland or Delaware law
applies to Conduent’s tort claim; and (2) whether under applicable law Conduent has sufficiently
stated a claim for negligent misrepresentation. Because under both Maryland and Delaware law
Conduent has failed to state a plausible claim that CYC negligently asserted a false statement,
CYC’s motion to dismiss will be granted.

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I.
CYC first argues that because the parties’ contract is governed by Delaware law the court
also should apply that law to Conduent’s counter-claim. Conduent rejects CYC’s position,
stating instead that because its claim sounds in tort rather than contract under Maryland choiceof-law rules Maryland law should apply. But really this is of no matter, Conduent continues,
because Delaware law on negligent misrepresentation is functionally equivalent to Maryland
law. Because Conduent accurately describes Maryland and Delaware law the court need not
resolve the parties’ choice-of-law dispute: Under either law, Conduent’s claim will be dismissed.
See World Fuel Services Trading, DMCC v. Hebei Prince Shipping Co., Ltd., 783 F.3d 507, 51415 (4th Cir. 2015); see also Cain v. Midland Funding, LLC, 156 A.3d 807, 813 n.9 (Md. 2017)
(explaining that under Maryland law a court may accept the parties’ assumption that Maryland
law applies).3
II.
Moving to the merits, Conduent claims that during contract negotiations CYC negligently
misrepresented its ability to transition Conduent’s data off its systems at a reasonable cost when
really it had no tools to do so and building those tools would be unreasonably costly. But
Conduent fails to show that its relationship with CYC was sufficient to give rise to a duty of
care, and even if it was, Conduent also fails to show that it was justified in relying on CYC’s precontractual representations after expressly disclaiming that it would do so in the contract.
Under Maryland law, a plaintiff alleging negligent misrepresentation must show that: “(1)
the defendant, owing a duty of care to the plaintiff, negligently assert[ed] a false statement; (2)
the defendant intend[ed] that his statement [would] be acted upon by the plaintiff; (3) the

3

The analysis below will expressly reference Maryland law, but will include citations to Delaware analogs.

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defendant ha[d] knowledge that the plaintiff [would] probably rely on the statement, which, if
erroneous, [would] cause loss or injury; (4) the plaintiff, justifiably, [took] action in reliance on
the statement; and (5) the plaintiff suffer[ed] damage proximately caused by the defendant’s
negligence.” Gross v. Sussex Inc., 630 A.2d 1156, 1162 (Md. 1993).4 Critically, “unless the
maker of the false statement owes a duty of care to the party who relies on it, there can be no
recovery for negligent misrepresentation.” Id. at 1163.
Maryland courts have held that “[f]or claims of economic loss due to negligent
misrepresentation” a defendant only owes a duty to a plaintiff if an “intimate nexus” exists
between them. Griesi v. Atlantic General Hosp. Corp., 756 A.2d 548, 554 (Md. 2000).5
Generally, arms length business negotiations do not give rise to an intimate nexus “unless they
invoke considerations of personal trust and reliance.” Dierker v. Eagle Nat. Bank, 888 F. Supp.
2d 645, 655 (D. Md. 2012); see also Sagent Technology, Inc. v. Micros Systems, Inc., 276 F.
Supp. 2d 464, 471-72 (D. Md. 2003) (holding the same); 21st Century Properties Co. v.
Carpenter Insulation and Coatings Co., 694 F. Supp. 148, 154 (D. Md. 1988) (holding the
same).6 This is true even for a “duty assumed or implied in contract:” a contract duty alone does

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In Delaware a plaintiff must show: “(1) a pecuniary duty to provide accurate information, (2) the supplying of false
information, (3) failure to exercise reasonable care in obtaining or communicating information, and (4) a pecuniary
loss caused by justifiable reliance upon the false information.” Pennsylvania Employee, Benefit Trust Fund v.
Zeneca, Inc., 710 F. Supp. 2d 458, 485-86 (D. Del. 2010) (applying Delaware law).
5
Delaware courts apply an even stricter rule: “[W]here an action is based entirely on a breach of the 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.” McKenna v. Terminex Intern. Co., 2006 WL 1229674 at *2 (Del. Super. Ct. Mar. 13,
2006); see also Brasby v. Morris, 2007 WL 949485 at *7 (Del. Super. Ct. Mar. 29, 2007) (“There exists no reason to
extend tort law into areas that can be adequately governed by contract law. The damages alleged were the
foreseeable consequence of the unfulfilled [contract].”); cf. Danforth v. Acorn Structures, Inc., 608 A.2d 1194,
1200-01 (Del. 1992) (“[W]e find that the economic loss doctrine,” a doctrine that prohibits the recovery under tort
law, “is especially suited to cases where privity of contract does exist. Because Conduent’s claim is “essentially
repeated in” its breach of contract claim the plaintiff fails to assert an independent tort duty under Delaware law.
6
Conduent cites J.E. Dunn Const. Co. v. S.R.P. Dev. Ltd. P’Ship, 2012 WL 4341582 (D. Md. Sept. 20, 2012) for the
proposition that all contract negotiations give rise to a duty of care. But J.E. Dunn. relied on two cases involving
special circumstances. 2012 WL 4341582 at *8. The first is Griesi v. Atlantic General Hosp. Corp., 756 A.2d 548
(Md. 2000) where the court held that in the employment context, an employer knows or should know that a potential
employee will rely on the employer’s statements during negotiations over an employment contract. 756 A.2d at 556.

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not become a tort duty “absent a[n] [independent] duty or obligation imposed by law.” Jacques
v. First Nat. Bank of Md., 515 A.2d 756, 759 (Md. 1986). Ultimately, Maryland courts look “for
linking conduct—enough to show the defendant knew or should have known of the plaintiff’s
reliance.” Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl, LLP, 155 A.3d 445,
457 (Md. 2017).
The complaint makes clear that the parties’ business relationship was of the arms length
type, unattended by a long-standing business or personal relationship likely to give rise to mutual
trust, or any reasonable reliance on the other’s statements. Conduent and CYC are first time
business partners, unconnected by a personal relationship, or prolonged contract negotiations.
The complaint describes a routine business relationship, one in which Conduent and CYC could
be certain only that the other was pursuing its own interests. This alone cannot support an
intimate nexus.
Further, Conduent promised not to place any reliance on CYC’s pre-contractual
statements. In the contract, Conduent “acknowledge[d] that it ha[d] not entered into [the]
Agreement in reliance upon any representation made by the other Party not set forth in [the]
Agreement.” Because the complaint does not alleges any intimate nexus between CYC and
Conduent, and because CYC did not know or have reason to know about Conduent’s alleged
reliance, CYC did not owe Conduent a duty of care.
III.
But even if CYC did owe Conduent a duty of care, Conduent’s claim would still fail
under Rule 8. To start, Conduent’s counter-claim fails to identify the particular unlawful
The second is Brock Bridge Ltd. Partnership, Inc. v. Development Facilitators, Inc., 689 A.2d 622 (Md. Ct. Spec.
App. 1997) in which the court held that a person “knowledgeable in a particular field” knows or should know that a
person will rely on its representations on that subject. 689 A.2d at 631-32.

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representation made by CYC. Indeed, in different arguments Conduent identifies two different
versions of CYC’s alleged misrepresentation: CYC either represented that (1) it had the
experience and resources to transition Conduent’s data at the time the contract was formed; or
(2) that it merely would have the resources and experience to transition Conduent’s data when
required in the future. And it uses those two proposed representations as the law makes it
expedient to do so. Because each fails under Rule 8 for independent reasons, the court need not
decide which of the two Conduent truly asserts.
Take Conduent’s first theory first. Recall that to satisfy the standard for negligent
misrepresentation Conduent must have justifiably relied on CYC’s statements. But in the
contract Conduent expressly disclaimed reliance on any representations made during pre-contract
negotiations. And a plaintiff that does just that cannot “justifiably rely, and in fact d[oes] not
have a right to rely, on any alleged misrepresentations not in the [contract].” See In re Marine
Energy Systems Corp., 299 Fed. Appx. 222, 230 (4th Cir. 2008) (applying South Carolina law);7
see also Airborne Health, Inc. v. Squid Soap, LP, 984 A.2d 126, 140 (Del. Ch. 2009)
(recognizing that “Delaware permits parties to disclaim reliance on representations outside of [a]
written agreement” if the anti-reliance provision is explicit). Conduent thus was not justified in
relying on any of CYC’s pre-contractual representations.
Conduent makes use of its second version of CYC’s misrepresentation in response. It
tries to overcome the force of its contractual obligations through careful reading—it argues that it
did not disclaim reliance on all representations but rather just those not “set forth in th[e]
[a]greement.” And because CYC’s representation regarding the transition was set forth in the
agreement, Conduent had every right to rely on it. But the first version of CYC’s alleged
7

Unpublished cases are cited for the strength of their reasoning and not for any precedential value.

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misrepresentation is different from what was set out in the agreement—Conduent contends that
CYC represented it had the capability of transitioning Conduent’s data at the time the contract
was signed (version 1), but the contract only states that CYC promised to transition Conduent’s
data upon termination of the agreement (version 2). Those are two different representations, and
thus to the extent CYC allegedly represented during contract negotiations that it had the current
capability to transition Conduent’s data Conduent’s claim cannot be saved by its reliance on the
representation in the contract.
But even if Conduent means to argue that CYC represented that it would have the
capability to transition its data when needed in the future and therefore was justified in relying on
the representation under the contract, the complaint would still be dismissed because it fails to
show that CYC knew or should have known its representation was false. Conduent’s burden here
is more significant than it suggests: it cannot show just that CYC knew it lacked the capability at
the time the contract was signed, it must show that CYC knew it would lack the capability two
years later. The complaint, thin on the former showing, is utterly silent on the latter. As a result,
it fails to plausibly show that CYC knew or should have known its representation was false.
Conclusion
For the reasons stated above, Conduent’s counter-claim for negligent misrepresentation
will be dismissed. A separate order follows.

____ _7/18/2018_____________
Date

____________/s/____________
Catherine C. Blake
United States District Judge

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