Veliq USA, Inc. v. Mobillogix, LLC

Filing 71

Judge Allison D. Burroughs: ORDER entered. MEMORANDUM AND ORDER. "...For the foregoing reasons, the Court hereby ORDERS that: (1) VeliQ USAs Complaint [ECF No. 1-1] is dismissed with prejudice; (2) Counts I and II of Mobillogixs Amended Third P arty Complaint and Counterclaim [ECF No. 38] are dismissed with respect to VeliQ USA only; and (3) default judgment is entered against VeliQ B.V. on Counts I and II of Mobillogixs Amended Third Party Complaint and Counterclaim and against VeliQ USA on Count III of Mobillogixs Amended Third Party Complaint and Counterclaim. The Clerk shall enter judgment against VeliQ USA and VeliQ B.V. in favor of Mobillogix in the amount of $667,732.36. So Ordered."(Folan, Karen)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
VELIQ USA, INC.,
Plaintiff/Counter-Defendant,
v.
MOBILLOGIX, LLC,
Defendant/Counter-Plaintiff.
MOBILLOGIX, LLC,
Third Party Plaintiff,
v.
VELIQ B.V.,
Third Party Defendant.

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Civil Action No. 15-cv-10197-ADB

MEMORANDUM AND ORDER
June 15, 2016
BURROUGHS, D.J.
I.

Introduction

This action arises out of the Master Service Agreement (“MSA”) entered into between
VeliQ USA, Inc. (“VeliQ USA”) and Mobillogix LLC (“Mobillogix”) in February 2014. Under
the MSA, Mobillogix was to purchase licenses to VeliQ USA’s mobile device management
platform, incorporate that platform into Mobillogix’s own product, and then sell that product to
Mobillogix’s end user customers. On December 18, 2014, VeliQ USA filed a Complaint in
Massachusetts state court against Mobillogix, alleging that Mobillogix breached the MSA by
refusing to pay for the licenses it had agreed to purchase. [ECF No. 1-1]. Mobillogix removed
the case to this Court on January 23, 2015. [ECF No. 1].

Mobillogix moved to dismiss VeliQ USA’s complaint for lack of personal jurisdiction
and the Court denied the motion. [ECF No. 14]. Thereafter, Mobillogix filed a Counterclaim
against VeliQ USA and a Third Party Complaint against VeliQ B.V., VeliQ USA’s parent
company, in which Mobillogix asserted counts for fraud (Count I) and unfair and deceptive trade
practices in violation of Mass. Gen. Laws 93A, § 11 (Count II) against both VeliQ USA and
VeliQ B.V. and a count for breach of the MSA against VeliQ USA (Count III). [ECF No. 21].
Mobillogix filed an Amended Third Party Complaint and Counterclaim on July 8, 2015, with the
same three counts. [ECF No. 38]. Mobillogix alleged that VeliQ’s product, the “MobiDM,” did
not work as promised and that during negotiations, both VeliQ USA and VeliQ B.V. made
knowingly false statements about the MobiDM’s capabilities in order to induce Mobillogix to
enter into the MSA. On August 10, 2015, both VeliQ USA and VeliQ B.V. moved to dismiss
Counts I (fraud) and II (Chapter 93A) of the Amended Third Party Complaint and Counterclaim.
[ECF No. 43]. Mobillogix opposed the motion on August 24, 2015 [ECF No. 47], and the Court
has yet to resolve it.
On September 29, 2015, VeliQ’s counsel filed a Motion for Leave to Withdraw, stating
that it needed to withdraw because of irreconcilable differences with VeliQ. [ECF No. 49].1 The
Court granted the motion. [ECF No. 50]. Since then, no attorney has entered an appearance for
VeliQ USA or VeliQ B.V. On October 19, 2015, Mobillogix moved to compel discovery from
VeliQ. [ECF No. 51]. It requested, among other things, that VeliQ produce documents
responsive to Mobillogix’s document requests and provide more detailed responses to its

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VeliQ USA and VeliQ B.V. were represented by the same counsel. At times, this Memorandum
and Order refers to VeliQ USA and VeliQ B.V. collectively as “VeliQ.”
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interrogatories. Id. VeliQ did not appear at the November 10, 2015 motion hearing and the Court
granted Mobillogix’s motion to compel. [ECF No. 59].
Even after the Court’s order, VeliQ has continued to disregard its discovery obligations.
It has still not produced any documents responsive to Mobillogix’s document requests and
appears to have abandoned the case. As a result, on December 7, 2015, Mobillogix filed a motion
pursuant to Rules 37 and 41(b) of the Federal Rules of Civil Procedure requesting that the Court
(a) dismiss VeliQ USA’s claims against it and (b) enter a default judgment against VeliQ USA
and VeliQ B.V. on its Counterclaim and Third Party Complaint, as a sanction for VeliQ’s
inaction. [ECF No. 60]. The Court held a hearing on Mobillogix’s motion on January 28, 2016.
[ECF No. 65]. As with the previous motion to compel hearing, counsel for VeliQ did not appear.
The next day, in response to Mobillogix’s motion, the Court entered an Order to Show Cause
requesting that VeliQ USA explain why its Complaint should not be dismissed for failure to
prosecute. [ECF No. 63]. VeliQ USA did not file a response.
II.

Discussion
a. VeliQ’s Motion to Dismiss

Before evaluating Mobillogix’s motion, the Court must first assess VeliQ’s outstanding
motion to dismiss Mobillogix’s Amended Third Party Complaint and Counterclaim. [ECF No.
43]. Mobillogix contends that because corporations cannot act pro se, this motion is moot now
that VeliQ’s counsel has withdrawn. [ECF No. 67]. The motion to dismiss, however, was fully
briefed before VeliQ’s counsel withdrew, and Mobillogix has not provided any authority that
supports mooting a ripe motion because of counsel’s subsequent withdrawal.
As alleged in Mobillogix’s Amended Third Party Complaint and Counterclaim, which the
Court accepts as true for purposes of VeliQ’s motion to dismiss, Mobillogix and VeliQ USA

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entered into the MSA on or about February 26, 2014. [ECF No. 38 ¶ 13]. Under the MSA, VeliQ
USA was to provide Mobillogix with MobiDM—a software application that VeliQ represented
was a scalable and configurable security solution for mobile devices—such that Mobillogix
could sell MobiDM to third parties as part of its comprehensive enablement solution. Id. ¶ 1.
Although the MSA was signed by VeliQ USA, no one employed by VeliQ USA had any
involvement with the development or maintenance of MobiDM, or efforts to license MobiDM to
Mobillogix. Id. ¶ 11. These efforts were led by VeliQ B.V. Id. ¶¶ 10-12.
Mobillogix contends that to induce it into entering into the MSA, VeliQ USA and VeliQ
B.V. made representations regarding MobiDM’s then available functionalities and capabilities
that they knew were false. For example, Mobillogix alleges that during the period of time from
late 2013 until execution of the MSA in February 2014, VeliQ B.V. employees made
representations that MobiDM was designed to easily support hundreds of thousands of devices
within a single corporation, which they knew was not true. Id. ¶ 37. They allegedly made further
false representations regarding MobiDM’s configurability and monitoring capabilities. Id. ¶ 38.
First, the Court finds that the fraud and Chapter 93A claims against VeliQ USA should be
dismissed. Although the Amended Third Party Complaint and Counterclaim asserts identical
Chapter 93A and fraud claims against VeliQ USA and VeliQ B.V., it does not identify a single
representation made by a VeliQ USA employee during the course of the negotiations. The
Amended Third Party Complaint and Counterclaim states that “all representations regarding
MobiDM’s technical capabilities and specifications made by them during the efforts to induce
Mobillogix to enter into a licensing agreement came from VeliQ B.V. . . .” Id. ¶ 12 (emphasis

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added). 2 It only identifies one VeliQ USA employee, Edwin Vargas, and states that he “was not
involved in the development and maintenance of MobiDM, nor was he involved in the efforts to
license MobiDM to Mobillogix.” Id. Though Mobillogix has a viable breach of contract claim
against VeliQ USA, which VeliQ USA has not moved to dismiss, Mobillogix has not pled
plausible fraud and Chapter 93A claims against VeliQ USA. An essential element of a fraud
claim is a false representation of a material fact. See Slaney v. Westwood Auto, Inc., 366 Mass.
688, 703 (1975). Because the Amended Third Party Complaint and Counterclaim does not
identify any representations made by VeliQ USA, let alone false ones, the fraud claim against
VeliQ USA must be dismissed. Furthermore, because the Chapter 93A claim against VeliQ USA
is premised on the same allegations as the fraud claim, it also must be dismissed.
The fraud and Chapter 93A claims against VeliQ B.V., however, may proceed. The
Amended Third Party Complaint and Counterclaim identifies numerous representations made by
VeliQ B.V. employees to Mobillogix during the MSA negotiations. These include the following:


“[D]uring the period of time from late 2013 until execution of the MSA in late February
2014, Messrs. de Sterke and van Bijsterveld (VeliQ B.V. CTO), made representations to
Scott Jonasz and others at Mobillogix regarding the multi-tenancy, configurability and
monitoring capabilities of MobiDM.” [ECF No. 38 ¶ 16].



“[The] representations included many of the same false representations about MobiDM’s
scaleability, functionality and capability included in the Master Service Agreement

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See also [ECF No. 38 ¶ 23 (“Almost immediately after execution of the MSA, Mobillogix
learned that MobiDM failed to provide much of the functionality and capabilities identified in
the MSA and otherwise represented by VeliQ B.V. representatives to Mobillogix during
negotiations regarding the MSA.”), ¶ 24 (“VeliQ B.V. representatives had promised and
represented to Mobillogix that MobiDM provided a ‘swift and easy’ mobile device management
experience, and that deployment of MobiDM would be ‘instant and easy.’”), ¶ 25 (“Mobillogix
primarily communicated with VeliQ representatives in The Netherlands regarding MobiDM’s
failure to provide much of the functionality and capabilities identified in the MSA and otherwise
represented to Mobillogix by Joachim de Sterke (VeliQ B.V. CFO) and Ron van Bijsterveld
(VeliQ B.V. CTO), among others, prior to execution of the MSA.”) (emphasis added)].
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(‘MSA’) referenced below and were made by not only Messrs. Crummey, Dion and
Lake, but also Messrs. de Sterke and van Bijsterveld.” Id. ¶ 12.


“The MSA included a representation that MobiDM ‘is designed to easily support 10 to
100,000’s of devices.’ This same representation had been made many times by VeliQ
B.V.’s representatives during the discussions leading up to execution of the MSA to
induce Mobillogix to execute the MSA.” Id. ¶ 16.



“VeliQ B.V. representatives had promised and represented to Mobillogix that MobiDM
provided a ‘swift and easy’ mobile device management experience, and that deployment
of MobiDM would be ‘instant and easy.’” Id. ¶ 24.

In its motion to dismiss, VeliQ B.V. argues that Mobillogix has not pled fraud with particularity
and that in any event, the allegedly fraudulent statements are statements of opinion or belief that
cannot support a fraud claim. The Court is not persuaded by either argument.
First, Mobillogix has pled fraud with particularity—it has pled the who, what, when,
where, and how of the alleged fraud. U.S. ex rel. Heineman–Guta v. Guidant Corp., 718 F.3d 28,
36 (1st Cir. 2013). Under Fed. R. Civ. P. 9(b), a complaint alleging fraud must include “specifics
about the time, place, and content of the alleged false representations.” Juárez v. Select Portfolio
Servicing, Inc., 708 F.3d 269, 280 (1st Cir. 2013) (internal quotations omitted). “Conclusory
allegations are insufficient, but Rule 9(b) may be satisfied ‘when some questions remain
unanswered, provided the complaint as a whole is sufficiently particular to pass muster.’” United
States v. Medtronic, Inc., No. 11-10790-DPW, 2016 WL 2993167, at *3 (D. Mass. May 23,
2016) (quoting U.S. ex rel. Gagne v. City of Worcester, 565 F.3d 40, 45 (1st Cir. 2009)). Here,
Mobillogix alleges that during the MSA negotiations, which took place in late 2013 and early
2014, several VeliQ B.V. employees made knowingly false statements about the capabilities of
the MobiDM. Mobillogix identifies the specific employees and statements, as well as the
relatively short time period in which they were made. Mobillogix does not merely “recite the
elements of a fraud claim,” Pine Polly, Inc. v. Integrated Packaging Films IPF, Inc., No. 13-

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11302-NMG, 2014 WL 1203106, at *4 (D. Mass. Mar. 19, 2014), but instead provides ample
details regarding the circumstances constituting the fraud.
Second, Mobillogix relies on actionable statements of fact, and not only on statements of
opinion or belief. “A statement giving rise to liability for misrepresentation must be one of fact,
i.e., something ‘susceptible of knowledge,’ rather than one of expectation, estimate, opinion, or
judgment.” Softub, Inc. v. Mundial, Inc., 53 F. Supp. 3d 235, 255 (D. Mass. 2014) (internal
quotations omitted). “A representation is ordinarily considered one of opinion instead of fact if
the statement merely expresses the maker’s ‘judgment as to quality, value, authenticity or other
matters of judgment. . . .’” Gianocostas v. RIU Hotels, S.A., No. MICV2000-02862-C, 2006 WL
1467557, at *8 (Mass. Super. May 24, 2006) (quoting McEneaney v. Chesnut Hill Realty Corp.,
38 Mass. App. Ct. 573, 575 (1995)). The Amended Third Party Complaint and Counterclaim
alleges that VeliQ B.V. made specific representations regarding the functionality and capabilities
of the MobiDM. While representations that MobiDM provided a “swift and easy” mobile device
management experience, and that deployment of MobiDM would be “instant and easy” might
constitute opinion, the Amended Third Party Complaint and Counterclaim also contains more
specific representations. As examples, it alleges that VeliQ misstated the multi-tenancy,
configurability and monitoring capabilities of MobiDM, including that it could accommodate
hundreds of thousands of devices. These representations regarding MobiDM’s capabilities are
actionable statements of fact.
Separately, VeliQ B.V. argues that the Chapter 93 claim should be dismissed because
Mobillogix has not satisfied Chapter 93A’s geographic requirements. Under Section 11 of
Chapter 93A, the unfair or deceptive acts at issue must occur “primarily and substantially within
the commonwealth.” Mass. Gen. Laws ch. 93A, § 11. The defendant bears the burden of

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showing that the unfair or deceptive act did not occur primarily and substantially in
Massachusetts. Id. Because this is a fact-intensive determination, courts are hesitant to grant
motions to dismiss on this ground. See Berklee Coll. of Music, Inc. v. Music Indus. Educators,
Inc., 733 F. Supp. 2d 204, 213 (D. Mass. 2010) (“Due to the fact-finding process necessarily
involved in evaluating the [primarily-and-substantially] issue, ‘this particular ground for
challenging a c. 93A claim—absent some extraordinary pleading concession by a claimant—
cannot be resolved on Rule 12 motions.’”); Workgroup Tech Corp. v. MGM Grand Hotel, LLC,
246 F. Supp. 2d 102, 118 (D. Mass. 2003) (noting that the “primarily and substantially” decision
“must be made on the basis of factual findings,” and that “[s]ince a Court does not make such
findings when ruling on a motion to dismiss, it would seem that a motion to dismiss is no longer
an appropriate vehicle for raising the issue”).
VeliQ B.V. has not met its burden, at least at the motion to dismiss stage, of showing that
the unfair or deceptive act did not occur primarily and substantially in Massachusetts. Mobillogix
has alleged substantial wrongful conduct by VeliQ B.V. in Massachusetts. [ECF No. 38 ¶¶ 4750]. For instance, Mobillogix has alleged that certain of VeliQ B.V.’s representatives, including
Joachim de Sterke (VeliQ B.V. CFO), Ron van Bijsterveld (VeliQ B.V. CTO), and Alex Bausch
(VeliQ B.V. Founder and CEO), made false and fraudulent statements to Mobillogix in
Massachusetts. See e.g., id. ¶¶ 4-6. Mobillogix has further alleged that VeliQ B.V. employee
Steve Crummey, who worked from VeliQ USA’s office in Boston, made false representations
regarding MobiDM’s technical capabilities and specifications. Id. ¶¶ 12-13. Moreover, in an
earlier filing in this matter, VeliQ itself represented that “during the course of the parties’
business relationship, Mobillogix personnel engaged in months of frequent contact with VeliQ
personnel within [Massachusetts],” and that “there were dozens if not hundreds of specific

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contacts by Mobillogix into the Commonwealth including two in-person meetings with
Mobillogix’s CEO at VeliQ’s Boston headquarters; a plethora of emails and phone calls with
Massachusetts personnel related to the negotiation of the MSA. . . .” [ECF No. 12 at 2].
b. Mobillogix’s Motion to Dismiss and for a Default Judgment
Having determined which of the claims in Mobillogix’s Amended Third Party Complaint
and Counterclaim should remain—Counts I (fraud) and II (Chapter 93A) against VeliQ B.V. and
Count III (breach of contract) against VeliQ USA—the Court can now assess Mobillogix’s
pending motion. The motion requests, pursuant to Rules 37(b) and 41(b) of the Federal Rules of
Civil Procedure, that VeliQ USA’s Complaint be dismissed and that a default judgment be
entered against both VeliQ USA and VeliQ B.V. on Mobillogix’s Amended Third Party
Complaint and Counterclaim,.
Fed. R. Civ. P. 37(b)(2)(A) sets forth the sanctions that a court may impose for a party’s
failure to obey a discovery order, including an order granting a motion to compel discovery.
These sanctions include, among other things, dismissing the action and/or entering a default
judgment against the disobedient party. Fed. R. Civ. P. 37(b)(2)(A). “A district court has wide
discretion in choosing sanctions for discovery violations.” Samaan v. St. Joseph Hosp., 670 F.3d
21, 36 (1st Cir. 2012). “In determining the appropriate sanction, if any, a court should ‘consider
the totality of events and then choose from the broad universe of available sanctions in an effort
to fit the punishment to the severity and circumstances of the violation.’” United States v. Pfizer,
Inc., No. 10-11166-DPW, 2016 WL 3017381, at *8 (D. Mass. May 23, 2016) (quoting Young v.
Gordon, 330 F.3d 76, 81 (1st Cir. 2003)).
Under Fed. R. Civ. P. 41(b), a defendant may move to dismiss an action for plaintiff’s
failure to prosecute. This rule reinforces the “inherent power of trial courts to dismiss cases for

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want of prosecution or disregard of judicial orders . . . .” Chamorro v. Puerto Rican Cars, Inc.,
304 F.3d 1, 4 (1st Cir. 2002). Courts should only impose this severe sanction where the
plaintiff’s conduct is “extreme.” Id. “[E]xtreme misconduct comes in many shapes and forms,
ranging from protracted foot-dragging to defiance of court orders to ignoring warnings to other
aggravating circumstances.” Id. at *4-5.
First, the Court finds that VeliQ USA’s Complaint should be dismissed with prejudice
pursuant to Rules 37(b)(2)(A) and 41(b) of the Federal Rules of Civil Procedure. Although a
severe sanction, dismissal is warranted given VeliQ USA’s complete absence from this case
since September 2015. Since September 2015, VeliQ USA has defied a Court order, failed to
appear at two motion hearings, and defaulted on an order to show cause. Furthermore,
Mobillogix served its first set of document requests on May 6, 2015, and VeliQ still has not
produced a single responsive document. “[D]ismissal orders typically are measures of last resort,
reserved for extreme cases.” Torres-Vargas v. Pereira, 431 F.3d 389, 393 (1st Cir. 2005). VeliQ
USA’s complete lack of responsiveness either on paper or during scheduled court hearings
warrants this measure of last resort. See Young, 330 F.3d at 81 (“[D]isobedience of court orders
is inimical to the orderly administration of justice and, in and of itself, can constitute extreme
misconduct.”).
Second, because of the severity of VeliQ’s discovery violations, the Court agrees that
default judgment should be entered against VeliQ B.V. and VeliQ USA on the counts remaining
in Mobillogix’s Amended Third Party Complaint and Counterclaim. “Although a ‘drastic
sanction,’ ‘[t]he entry of a default judgment provides a useful remedy when a litigant is
confronted by an obstructionist adversary and plays a constructive role in maintaining the orderly
and efficient administration of justice.’” Crispin-Taveras v. Municipality of Carolina, 647 F.3d 1,

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7 (1st Cir. 2011) (quoting Remexcel Managerial Consultants, Inc. v. Arlequin, 583 F.3d 45, 51
(1st Cir. 2009)). Even before its counsel withdrew, VeliQ had not produced a single responsive
document. Since its counsel withdrew, VeliQ has defied a court order compelling discovery and
still not produced any documents. VeliQ’s repeated discovery failures necessitate the entry of
default judgment. Cf. Companion Health Servs., Inc. v. Kurtz, 675 F.3d 75, 85 (1st Cir. 2012)
(holding that default judgment sanction was improper where the defendants’ single instance of
misconduct occurred while they were unrepresented and unaware of the deadline).
Mobillogix has requested a default judgment against VeliQ USA and VeliQ B.V. in the
amount of $909,532.36, the alleged out-of-pocket costs suffered by Mobillogix as a result of
VeliQ’s conduct. Mobillogix submitted an affidavit from Scott Jonasz, its founder and CEO,
verifying its damages calculation. Jonasz stated that damages were calculated as follows:
$100,000.00

Pre-payment of license fee (paid in or about March 2014).

$241,800.00

Mobillogix’s cost of development and integration of VeliQ’s
MobiDM platform.

$250,000.00: Mobillogix’s cost for de-coupling VeliQ’s MobiDM platform from
Mobillogix’s product ($8,200.00) and integrating AirWatch’s
platform into Mobillogix’s product ($241,800.00).
$10,000.00:

Mobillogix’s travel and related expenses as a result of VeliQ’s
conduct and the failure of MobiDM to work as promised.

$280,033.34

Legal fees and costs incurred by Mobillogix (as of October 31,
2015) from Whiteford, Taylor & Preston, LLP as a result of this
litigation.

$27,699.02:

Legal fees and costs incurred by Mobillogix (as of October 31,
2015) from Sherin & Lodgen (local counsel) as a result of this
litigation.

909,532.36

TOTAL

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[ECF No. 61-4 ¶ 4]. The Court will not award $241,800.00 twice—Mobillogix is not entitled to
both the cost of integrating VeliQ’s MobiDM platform and the cost of integrating AirWatch, the
platform it acquired to replace MobiDM. The Court otherwise approves Mobillogix’s proposed
amount and orders a default judgment in the amount of $667,732.36. This amount includes the
reasonable legal fees and costs incurred by Mobillogix.3
III.

Conclusion

For the foregoing reasons, the Court hereby ORDERS that: (1) VeliQ USA’s Complaint
[ECF No. 1-1] is dismissed with prejudice; (2) Counts I and II of Mobillogix’s Amended Third
Party Complaint and Counterclaim [ECF No. 38] are dismissed with respect to VeliQ USA only;
and (3) default judgment is entered against VeliQ B.V. on Counts I and II of Mobillogix’s
Amended Third Party Complaint and Counterclaim and against VeliQ USA on Count III of
Mobillogix’s Amended Third Party Complaint and Counterclaim. The Clerk shall enter judgment
against VeliQ USA and VeliQ B.V. in favor of Mobillogix in the amount of $667,732.36.
So Ordered.
Dated: June 15, 2016
Allison D. Burroughs
ALLISON D. BURROUGHS
U.S. DISTRICT COURT JUDGE

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Mobillogix has submitted invoices that support the requested legal fees and costs. [ECF Nos.
66, 70]. Legal fees and costs are recoverable against VeliQ USA pursuant to the MSA, which
provides that “in the event of any litigation or arbitration hereunder, the arbitrator or court shall
award costs and reasonable attorneys’ fees to the prevailing party.” [ECF No. 61-2 at 6].
Furthermore, fees and costs are recoverable against VeliQ B.V. under the defaulted Chapter 93A
claim. Mass. Gen. Laws. ch. 93A, § 11.
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