Samia Companies LLC v. MRI Software LLC

Filing 97

Judge Nathaniel M. Gorton: ORDER entered. MEMORANDUM AND ORDER. "For the foregoing reasons, defendant's motion for summary judgment (Docket No. 73) is allowed, in part, and denied, in part. Claims I, III, V, VII and VIII asserted in the complaint filed on November 15, 2011 (Docket No. 1, Ex. 1) are dismissed. So ordered." (Patch, Christine)

United States District Court

District of Massachusetts

SAMIA COMPANIES LLC,
Plaintiff,
v.

MRI SOFTWARE LLC,
Defendant.

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Civil Action No.
ll-12329-NMG

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MEMORANDUM & ORDER
GORTON, J.
This case arises out of an alleged breach of a July 2009
Master License & Services Agreement

("Agreement U) between

plaintiff Samia Companies LLC ("plaintiff U or "Samia U) and
defendant MRI Software LLC ("defendant U or "MRI U).

Plaintiff is

one of the largest real estate management firms in Boston,
Massachusetts and defendant is a software company in the
business of computer-based real estate management.

MRI was

formerly known as Intuit Real Estate Solutions ("IntuitU).
Under the Agreement, plaintiff agreed to purchase computer
software, consulting services and technical support services
from the defendant.

Samia alleges that MRI breached the

Agreement, misrepresented the software components and
capabilities, converted Samia's funds and conducted unfair or

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deceptive acts or practices in violation of Mass. Gen. Laws ch.
93A.
Three of the ten Counts in the complaint were dismissed
after defendant filed a motion to dismiss.

Defendant now moves

for summary judgment on all remaining counts.
that follow,

the motion will be allowed,

For the reasons

in part, and denied, in

part.
I .

Background
A.

The Agreement

In July,

2009, Samia and Intuit entered into a Master

License & Services Agreement.

The contract called for Intuit 1)

to license and deliver to Samia a number of software programs
for performing accounting and administrative functions in the
real estate management business, 2)

to provide professional

consulting services during the implementation of the software,
3)

to provide any software updates, or "Software Maintenance

Services," for a period of one year and 4)

to provide technical

support services, or "Application and Technical Support," on an
as-needed and pay-as-you-go basis.

1

The Agreement contained a limited express warranty stating:
[MRI] warrants that for a period of thirty (30) days
(the "Warranty Period") following Delivery by [MRI] to
Client, any Licensed Program ... will conform in all
As set forth in Schedule A to the Agreement, the software
consisted of ten named Licensed Programs but none of them was
specifically described.

1

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material respects with the applicable Documentation
("Warranty Criteria") provided to Client by [MRI].
In
the event that Client determines that any Licensed
Program ... as delivered to Client by [MRI] fails to
conform to the Warranty Criteria and Client delivers
to [MRI] notice of such failure within the Warranty
Period ... [MRI] shall repair or replace the specific
non-conformities
as
soon
as
practicable
at
no
addi tional
charge
to
the
Client.
The
foregoing
warranty states Client's sole and exclusive remedy ...
The Agreement defines "Delivery" of the software to occur on the
date that Intuit provides Samia with the Licensed Programs set
forth in Schedule A in person, via common carrier or made
available for Samia to download, whichever date is the earliest.
B.

Subsequent developments and alleged breach

Installation and implementation of Intuit's software
programs onto Samia's computer system began in September, 2009.
During that period, Samia requested that the software be capable
of generating certain custom documents.

The parties agreed that

the request was outside the scope of the Agreement so Intuit
drafted a proposed work authorization No. 27661

("custom

documents proposal") in October, 2009 to customize the software
to perform Samia's desired functions.
In January, 2010, Intuit was acquired by investors and
later was re-constituted as defendant MRI.

Samia asserts that

software development, installation and training on software
components ceased during the transition period.

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It alleges that

communications with MRI became particularly frustrating and
difficult because of personnel changes at MRI.
Nonetheless, Samia launched the new software in March,
2010.

It then signed the custom documents proposal which was

incorporated into the original Agreement.

MRI completed work on

the custom documents project the following month.

Samia

believed that the software had certain defects, however, and
decided to hire an outside IT consultant, Chris Patten, to
modify the customizations.

In August, 2010, Samia informed MRI

that the document-generating programs were fully functional and
that based on what it had paid Mr. Patten for his services,
Samia was only willing to pay one-half of the fees MRI had
invoiced for its customization work.
Another source of friction between the parties related to
the Tax Form 1099-INT, a document that Samia was required to
provide to certain tenants for tax return purposes.

At the

outset of the installation process, Samia had noticed that the
software was incapable of performing functions related to Form
1099-INT.

Samia insisted that Intuit's sales representative had

promised that the software could perform those functions and
that it would not have licensed the software otherwise.

Intuit

denied making such a promise but sent Samia a proposed work
authorization No. 27736 ("1099-INT functions proposal") in
November, 2009 to do the 1099-INT customization work for $9,000.

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Samia did not sign the 1099-INT functions proposal and contended
that the work should be done for free because the Intuit sales
representative had promised that functionality in the software.
The relationship between Samia and MRI continued to
deteriorate and Samia began withholding payment on invoices for
consulting services in order to leverage MRI to perform the
1099-INT customization without charge.
Samia then filed the instant case against MRI, alleging
that MRI 1)

failed to provide certain software components that

were promised as part of the Agreement, 2)

failed to complete

the development of certain work required under the contract, 3)
improperly terminated technical support for which Samia had paid
and 4)

sold Samia dysfunctional system components.

Since filing the lawsuit, Samia has continued to use MRI's
software in its business but has done so without any technical
support or software maintenance agreement with MRI.

II.

Procedural History
In November, 2011,

Plaintiff filed its complaint in Suffolk

Superior Court, asserting claims against defendant MRI for
breach of contract (Counts I,

III, V and VIII), negligent

misrepresentation (Counts II,

IV, VI and IX), conversion (Count

VII) and unfair or deceptive acts or practices in violation of
Mass Gen. Laws ch.

93A (Count X) .

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Defendant removed the case to this Court the following
month and,
complaint.

in February, 2012, moved to dismiss all claims in the
In September, 2012, Magistrate Judge Judith Dein

entered a Report and Recommendation ("R&R") that the
misrepresentation claims in Counts IV, VI and IX be dismissed
but that MRI's motion otherwise be denied.

After consideration

of the defendant's objections, this Court accepted and adopted
the R&R.
In July, 2014, defendant moved for summary judgment on all
of the remaining claims in the plaintiff's complaint.
III. Motion for Summary Judgment

Samia contends that MRI breached the Agreement by 1)
failing to deliver on an implied promise that the software would
perform the 1099-INT functions

(Count I), 2)

delivering software

that had other alleged defects

(Count VIII), 3) mishandling the

"custom documents" services under Work Authorization 27661
(Count III) and 4)

increasing the price for an annual prepaid

technical support plan

(Count V) .

Samia also claims that MRI misapplied a September, 2010
payment from Samia and is therefore liable for conversion (Count
VII) and that before the contract was signed, MRI negligently
misrepresented the software's ability to perform the 1099-INT
functions

(Count II).

violated Mass. Gen. L.

Finally, Samia claims that MRI's actions
ch. 93A

(Count X).
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A.

Summary Judgment Standard

The role of summary judgment is "to pierce the pleadings
and to assess the proof in order to see whether there is a
genuine need for trial." Mesnick v. Gen. Elec. Co., 950 F.2d
816, 822

(1st Cir. 1991)

895 F.2d 46, 50

(quoting Garside v. Osco Drug,

(1st Cir. 1990)).

Inc.,

The burden is on the moving

party to show, through the pleadings, discovery and affidavits,
"that there is no genuine issue as to any material fact and that
the moving party is entitled to judgment as a matter of law."
Fed. R. Civ. P. 56(c).
A fact is material if it "might affect the outcome of the
suit under the governing law." Anderson v. Liberty Lobby,
477 U.S. 242, 248

(1986).

Inc.,

A genuine issue of material fact

exists where the evidence with respect to the material fact in
dispute "is such that a reasonable jury could return a verdict
for the nonmoving party." Id.
If the moving party satisfies its burden, the burden shifts
to the non-moving party to set forth specific facts showing that
there is a genuine, triable issue. Celotex Corp. v. Catrett, 477
U.S. 317, 324

(1986).

The Court must view the entire record in

the light most favorable to the non-moving party and make all
reasonable inferences in that party's favor. O'Connor v.
Steeves, 994 F.2d 905,

907

(1st Cir. 1993).

Summary judgment is

appropriate if, after viewing the record in the non-moving
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party's favor,

the Court determines that no genuine issue of

material fact exists and that the moving party is entitled to
judgment as a matter of law.
This case is governed by Massachusetts law, as agreed to by
the parties in the Agreement's choice of law provision.

B.

Breach of Agreement
1.

Non-conformities (Counts I and VIII)

Two of Samia's claims involve allegations that MRI's
software did not perform as required under the Agreement.

Count

I of the complaint asserts that defendant breached the Agreement
by failing to deliver on an alleged promise that the software
would perform the 1099-INT functions.

Count VIII asserts that

certain other software components were non-functioning or non­
existent.
Defendant responds that under Article 2 of the Uniform
Commercial Code, codified at M.G.L. c. 106 § 2-101 et seq., and
the terms of the Agreement, plaintiff accepted the delivery of
the software in September, 2009 and is therefore limited to the
contractual remedies set forth in the Agreement.

The Agreement

explicitly provides for an express warranty that is limited both
as to time (30 days after delivery) and scope (material
conformance with documentation provided by MRI).

Notices of

non-conformities made within the 30-day period were to be
repaired or replaced at no charge.
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That was the sole and

exclusive remedy under the contract and all other remedies were
disclaimed.

Because Samia failed to follow the procedure for

invoking its warranty rights when it discovered that certain
allegedly promised functions were missing or non-functional, MRI
contends that it is precluded from seeking rescission damages.
Plaintiff counters that MRI did not,

in fact, deliver the

software and therefore the terms of the Agreement relating to
notification of non-conformities were never implicated.

It

asserts that the failure to deliver the 1099-INT component in
itself constitutes a breach of the Agreement.
Samia confuses the matter of delivery of goods and services
with the question of whether they conformed to the Agreement.
As a matter of law, goods and related services are "delivered,"
thus requiring acceptance or rejection, when they are tendered
to the buyer, even if they allegedly fail to conform to contract
specifications. See New England Power Co. v. Riley Stoker Corp.,
20 Mass. App. Ct. 25, 29 (1985)

(holding that the allegedly

defective and non-conforming commercial boilers were delivered
when they were shipped to and installed at the plaintiff's
facility); Reed Tech. & Info. Servs.,

Inc. v. Future Vision

Holding, Inc., 1998 WL 1181781, at *6 (Mass. Super. July 7,
1998)

(concluding that software was delivered even though the

issue of whether the software conformed to the contracted

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specifications was in dispute).

Goods do not have to conform

fully to the parties' Agreement to be deemed "delivered."
Even assuming that the software provided by MRI contained
deficiencies such as the inability to perform 1099-INT function,
Samia cannot successfully contend non-delivery in September,
2009.

If Samia discovered missing functions,

it was

contractually obligated to reject the software and halt the
installation process upon discovering the non-conformities. See
M.G.L. c. 106

§

2-602.

Furthermore, the Agreement explicitly provides a procedure
for invoking warranty rights.
the missing functions,

Although Samia complained about

it failed to give written notice to MRI

detailing the specific non-conformities within 30 days of the
date of software implementation.

Even if it had, Samia's

remedies would have been expressly limited to the repair or
replacement of the non-conforming software.

Such contractual

limitations of warranty rights are entirely enforceable under
Massachusetts law. See Teragram Corp. v. MarketWatch.com, Inc.,
2004 WL 3086883 (D. Mass. Dec. 29, 2004)

(granting summary

judgment for a seller-licensor because the buyer failed to meet
explicit conditions imposed in a software license agreement to
receive limited warranty remedies) .
The factual record of the events surrounding the purchase,
installation, implementation and ongoing usage of the MRI
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software also demonstrates that Samia accepted MRI's delivery of
its product.

Not only did Samia fail to reject the software, it

has continued to use it for the past five years.

Plaintiff

cannot now claim that it was never delivered.
Having accepted MRI's delivery of allegedly non-conforming
software without meeting the conditions for obtaining remedies
under the Agreement, Samia is now barred from recovery as a
matter of law.

Accordingly, MRI is entitled to summary judgment

on Counts I and VIII.
2.

Deficiencies in services (Counts III and V)
i.

Custom documents

Count III of the complaint alleges that MRI breached the
Agreement by performing poor services under the custom documents
work authorization.

The Court perceives no such breach.

The Agreement contains a provision that explicitly
addresses potential defects in services.

With respect to any

services performed under the Agreement, the contract
specifically provides that Samia has 30 days after delivery to
test any proj ect elements ... and notify [MRI] of all
potential deficiencies
relative
to the
applicable
specifications for such work.
Upon such timely notification, MRI must "re-perform the
applicable Consulting Services required to meet the
specifications."

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Samia, however, never notified MRI of any supposed
deficiencies after receiving the software in April, 2010.
Instead, it hired an outside IT consultant to customize the
software's performance.

In support of its claim, plaintiff

proffers the argument that the required customizations were
never "delivered" so as to implicate the provisions within the
Agreement.

The Court finds no genuine issue of material fact in

this dispute.

A claim of non-conforming services does not

equate to a failure to deliver services.

Defendant will not be

held liable for plaintiff's failure to comply in accordance with
the protocol specified within the Agreement and summary judgment
with respect to Count III will be allowed.
ii.

Failure to provide technical support

Count V alleges that MRI breached the Agreement by
increasing the price for its annual prepaid technical support
plan.

Samia initially elected a "bronze"

plan, under which it

would not pay an up-front fee and would receive support services
on a pay-as-you-go basis.

In March, 2010, the parties amended

the Agreement to reflect Samia's decision to upgrade to a
"silver" level support plan for the remainder of the first
contract year.

Samia paid a pro-rated, up-front fee for such

services.
The Agreement provided that after the first year of
support, MRI "reserves the right to increase the price for"
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application and technical support services.

The March, 2010

amendment specified that the Agreement provisions would not be
waived or modified unless otherwise expressly provided and that
the technical support plan would be "renew[ed] unless otherwise
terminated by the Client."
Samia contends that by inserting the renewal language in
the amendment, MRI gave up its earlier express right to increase
the price for application and technical support after the first
year of the Agreement.

The Court disagrees.

The record, viewed

in the light most favorable to the plaintiff, does not indicate
that the defendant voluntarily relinquished its contractual
right to alter prices.
Defendant's motion for summary judgment will be allowed
with respect to Count V of the plaintiff's complaint.

C.

Conversion (Count VII)

Samia asserts a claim for conversion on the grounds that
MRI misapplied funds paid for a specific purpose.

In September,

2010, it sent MRI a check for $12,018 with directions that it be
applied to renew Samia's annual Software Maintenance Services
agreement and the balance applied to renew the Application and
Technical Support "silver" plan for another year at the March
2010 price.

MRI renewed the Software Maintenance Services

agreement for one year for $9,581.25 but did not renew the
"silver" plan due to a disagreement with Samia regarding its
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terms.

Instead, MRI retained the balance on account for

application against the $29,000 in invoices that remained
unpaid.
A claim of conversion involves the intentional or wrongful
exercise of ownership, control or dominion over personal
property to which a defendant has not right of possession.
Abington Nat'l Bank v. Ashwood Homes, Inc., 475 N.E.2d 1230,
1233 (Mass. App. Ct. 1985).

Samia asserts that it was never

provided with an accounting for the amount paid to MRI.
However, it has failed to show that MRI had no right to retain
it.

The factual record instead indicates that Samia

intentionally withheld payment on invoices and that MRI was owed
an amount greater than that which was retained from that
particular transaction.
Accordingly, defendant's motion for summary judgment with
respect to Count VII will be allowed.
D.

Negligent misrepresentation (Count II)

In order to prevail on a claim for negligent
misrepresentation, plaintiff must establish that 1) MRI supplied
false information without reasonable care, 2)
relied on the information and 3)

Samia justifiably

it suffered pecuniary loss

caused by the justifiable reliance upon the information. Cumis
Ins. Soc'y, 455 Mass. at 471-72.

Plaintiff does not have to

prove an intent to deceive and "under Massachusetts law
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plaintiff[] need not prove that [defendant]

knew his statements

to be false." Nickerson v. Matco Tools Corp., Div. of Jacobs
Mfg. Co., 813 F.2d 529, 530 (1st Cir. 1987).
Samia asserts that MRI negligently misrepresented the
ability of the software to perform the 1099-INT functions.
According to the plaintiff, Intuit's sales representative
assured Samia that the software would contain the 1099-INT
functions and even provided a product demonstration during which
Samia was shown the 1099-INT component of the software program.
Samia contends that it relied on the promise and would not have
entered into the Agreement without such an assurance.
MRI denies that it made any such promise.

It argues that

even if such a representation was made, Samia cannot recover for
negligent misrepresentation because the factual record indicates
that it incurred no damages during the limited operative period.
Plaintiff alleges that the misrepresentation about the 1099-INT
functionality was made in or about June, 2009 and has
acknowledged that it learned that the software did not contain
such a component when the installation process began in
September, 2009.

Once Samia became aware that the software

lacked the 1099-INT function, it was no longer relying on the
alleged misrepresentation.

MRI asserts that any recovery by

Samia with respect to its negligent misrepresentation claim

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would necessarily be limited to damages incurred between June
and September, 2009, but that Samia has alleged no such damages.
The Court disagrees with the defendant's assessment.
Massachusetts has adopted Section 5528 of The Restatement
(Second) Torts (1977) with respect to damages for negligent
misrepresentation. Danca v. Taunton Sav. 8ank, 385 Mass. 1, 9
(1982).

Section 5528 provides that:

(1)
The
damages
recoverable
for
a
negligent
misrepresentation are those necessary to compensate
the plaintiff for the pecuniary loss to him of which
the misrepresentation is a legal cause, including
(a) the difference between the value of what he
has received in the transaction and its purchase
price or other value given for it; and
(b)
pecuniary
loss
suffered
otherwise
as
a
consequence of the plaintiff's r e I iance upon the
misrepresentation.
The Restatement (Second) Torts

§

5528 (1977).

If Plaintiff

successfully proves the first two elements of its negligent
misrepresentation claim, it will be entitled to receive as
damages the difference in value between a software program with
1099-INT functionality and the one it received.

That may be

measured by the expenditures Samia subsequently made to obtain a
separate program offering 1099-INT capabilities.
The Court concludes that there remains a genuine issue of
material fact as to whether the 1099-INT functions were orally

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promised to Samia.

Accordingly, defendant's motion for summary

judgment will be denied with respect to Count II.
E.

Violation of Mass. Gen. Laws ch. 93A (Count X)

As Magistrate Judge Dien concluded in her September, 2012
R&R, "[aJ breach of contract, standing alone, is not an unfair
trade practice under c. 93A." Report and Recommendation at 33
(Docket No. 12)

(quoting Zabin v. Picciotto, 73 Mass. App. Ct.

141, 169 (2008)).

Instead, "a breach must be both knowing and

intended to secure unbargained-for benefits to the detriment of
the other party" and the breaching party's conduct must rise "to
the level of commercial extortion or a similar degree of
culpable conduct." Id.

(quotations and citations omitted).

Although the complaint does not identify any particular
conduct on the part of MRI that would meet this standard, the
Court allowed Samia to conduct discovery to develop its factual
basis for the Chapter 93A claim.
Samia asserts that it was useless to conduct such discovery
because most of the individuals who worked with Samia were
terminated when MRI purchased Intuit in January 2010.

Plaintiff

maintains that it nevertheless conducted an extensive
information gathering effort and is prepared to present its case
at trial.

A promise to proffer evidence at trial is, however,

inadequate to avoid summary judgment in these circumstances.
Griggs-Ryan v. Smith, 904 F.2d 112, 115 (1st Cir. 1990)
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.'

("Neither wishful thinking nor mere promises to produce
admissible evidence at trial ... will serve to defeat a properly
focused [summary judgment] motion"

(citations omitted)).

There is no evidence that MRI sought unbargained-for
benefits, engaged in commercial extortion or acted in bad faith.
Nevertheless, the Supreme Judicial Court of Massachusetts has
held that for the purposes of summary judgment, claims for
negligent misrepresentation and under Chapter 93A "stand or fall
together, as negligent misrepresentation may be a sufficient
basis for liability under G.L. c. 93A." DeWolfe v. Hingham Ctr.,
Ltd., 464 Mass. 795, n.9 (2013); see also Swanson v. Bankers
Life Co., 389 Mass. 345, 349 (1983)

("recovery may be had for a

deceptive act that is the result of a defendant's negligence ....
But not every negligent act is unfair or deceptive and thus
unlawful under G.L. c. 93A, § 2").
Because plaintiff's claim under negligent misrepresentation
will survive summary judgment, defendant's motion for summary
judgment with respect to Count X will also be denied.

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ORDER

For the foregoing reasons, defendant's motion for summary
judgment (Docket No. 73) is ALLOWED, in part, and DENIED, in
part.

Claims I,

III, V, VII and VIII asserted in the complaint

filed on November 15, 2011

(Docket No.1, Ex. 1)

are DISMISSED.

So ordered.

United States District Judge
Dated October

?,

2014

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