Level One Technologies, Inc. v. Penske Truck Leasing Co., L.P. et al

Filing 197

MEMORANDUM AND ORDER : IT IS HEREBY ORDERED that Penskes Motion for Partial Summary Judgment 130 is GRANTED in part and DENIED in part. Subparagraphs 101(a), 101(b), 101(c), and 101(g) of Count I of Level Ones Second Amended Complaint are dismisse d with prejudice. Counts II, III, and IV of Level Ones Second Amended Complaint are dismissed with prejudice in their entirety.IT IS FURTHER ORDERED that Level One shall file an amended complaint no later than February 23, 2018. Signed by District Judge Rodney W. Sippel on 1/25/18. (ARL)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
LEVEL ONE TECHNOLOGIES,
INC.,
Plaintiff,

)
)
)
)
v.
)
)
PENSKE TRUCK LEASING CO.,
)
L.P., and PENSKE LOGISTICS LLC, )
)
Defendants.
)

Case No. 4:14 CV 1305 RWS

MEMORANDUM AND ORDER
Plaintiff Level One Technologies, Inc. (“Level One”) claims that Defendants
Penske Truck Leasing Co., L.P. and Penske Logistics LLC (collectively referred to
herein as “Penske”) failed to fulfill certain promises and duties concerning its use
of Level One’s transportation payment services. Penske submitted a motion for
partial summary judgment on five of six of Level One’s contractual and equitable
claims. Based upon a review of the record before me, I will grant in part and deny
in part Penske’s motion for partial summary judgment. I will grant summary
judgment as a matter of law and dismiss Level One’s volume-based contract,
fraud, negligent misrepresentation, and good faith and fair dealing claims under
Counts II, III, and IV and Subparagraphs 101(a), 101(b), 101(c), and 101(g) of
Count I of Level One’s Second Amended Complaint (the “SAC”). However, I will

deny summary judgment as to Level One’s unjust enrichment claim under Count
VI of the SAC.
I.

Background

The following facts in this matter are undisputed. Penske provides services
including transportation leasing, shipping services, and supply chain management.
Level One develops and markets software products. Level One developed Epay
Manager (“Epay”), a web-based electronic payment system that allows
transportation companies to send invoices and pay bills electronically. In early
2008, Level One and Penske representatives began discussing the possibility of
arranging for Penske using Epay to manage and process shipping transaction
payments for its customers. The parties met and exchanged various
communications concerning the terms of their potential business engagement.
On November 7, 2008, Level One and Penske Truck Leasing Co., L.P.
entered into a written Services Agreement (the “Services Agreement”), which
includes the following relevant terms. Under paragraph 1, the parties agree to an
initial term of sixty (60) months, unless earlier terminated by the parties, with
automatic renewal every two years. Under paragraph 5, Penske agrees to receive
electronic communications regarding Epay. Under paragraph 7, the parties agree
that Penske will pay Level One a nonrefundable fee of $1.55 per transaction, or
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$1.90 for each transaction processed through the ACH network. Under paragraph
14, Penske agrees to pay Level One a “termination penalty” of $150,000 if Penske
terminates the agreement prior to the processing of 100,000 transactions or two
years of processing time from the date of the agreement, whichever comes first.
Under paragraph 18, Penske may cancel its Epay membership at any time upon
prior written notice to Level One, and Level One may cancel the service at any
time. Under paragraph 27, the parties agree that the Services Agreement
“embodies the entire understanding among all of the parties with respect to its
subject matter and supersedes all previous communications, representations or
understanding, either oral or written.”
Following the execution of the Services Agreement, Penske began using
Epay to process transactions. In December 2008, Level One and Penske
representatives exchanged a series of communications concerning the scope of the
engagement. Jason Kirkpatrick of Level One requested that Penske provide
volume and scheduling projections for customers being moved to Epay, stating
“[o]bviously we won’t hold you to any of these schedules. Estimates are fine.”
Penske provided the requested estimates in a spreadsheet showing annual
transaction volumes for each customer to be moved to Epay. The total estimated
number of items was 913,846. Raymond Gaspari of Penske emailed, “[w]e need to
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drill down on these more, so don’t hold me to this yet, but for a first cut it should
work. As you know with all the variables in the marketplace right now, things
could change rather quickly.” In February 2009, Level One’s President, Thomas
Whaley, sent an email complaining of Penske’s average volume of 264
transactions per week. Penske representative Andrew Avtjoglou responded that
“[t]he volumes were never going to be guaranteed because we did not have
experience in the marketplace.” The parties amended the Services Agreement by a
First Amendment dated March 31, 2009. The First Amendment, inter alia,
provides for Penske to pay Level One a $250,000 advance against future
transaction fees, which is partially returnable to Penske if the agreement terminates
before the advance is fully used. The parties further amended the Services
Agreement by a Second Amendment dated November 17, 2009. The parties
continued to communicate about the transition of Penske customers to Epay and
estimated volumes. Penske processed thousands of transactions through Epay over
the next few years. However, the transaction volumes that Level One had
anticipated failed to materialize. Moreover, Penske developed its own electronic
payment system, known as “POPS.”
Level One brought this suit against Penske in June 2014. Penske moved for
partial summary judgment as a matter of law on five of six of Level One’s
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contractual and equitable claims – Counts I, II, III, IV, and VI of the SAC.1 Each
claim is discussed in more depth below.
II.

Legal Standard

Summary judgment is appropriate if the evidence, viewed in the light most
favorable to the nonmoving party, demonstrates 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. Lynn v. Deaconess Medical Center, 160 F.3d 484, 486 (8th Cir. 1998) (citing
Fed. R. Civ. P. 56(c)). The party seeking summary judgment bears the initial
responsibility of informing the court of the basis of its motion and identifying those
portions of the affidavits, pleadings, depositions, answers to interrogatories, and
admissions on file which it believes demonstrates the absence of a genuine issue of
material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). When such a
motion is made and supported by the movant, the nonmoving party may not rest on
his pleadings but must produce sufficient evidence to support the existence of the
essential elements of his case on which he bears the burden of proof. Id. at 324. In

See Doc. [99]. Penske has not asked for summary judgment on Level One’s
Count V: Misappropriation of Trade Secrets claim, which alleges that Penske used
information and knowledge from the Epay Manager electronic payment system to
develop its replacement “POPS” electronic payment system. With respect to
Count I: Breach of Contracts, Penske only asks for summary judgment for alleged
breaches of obligations concerning promised volumes, not with respect to the
portion of this claim concerning POPS development.
1

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resisting a properly supported motion for summary judgment, the plaintiff has an
affirmative burden to designate specific facts creating a triable controversy.
Crossley v. Georgia Pacific Corp., 355 F.3d 1112, 1113 (8th Cir. 2004).
III.

Discussion

Penske moved for summary judgment as a matter of law on Level One’s
claims for breach of contract, fraud, negligent misrepresentation, breach of the
duty of good faith and fair dealing, and unjust enrichment. After a review of the
record before me and based upon the reasons that follow, I find that Level One’s
volume-based contract, fraud, negligent misrepresentation, and good faith and fair
dealing claims fail as a matter of law. However, viewing the facts in the light most
favorable to the nonmoving party, Level One’s unjust enrichment claim survives.
As a result, I will grant in part and deny in part Penske’s motion for summary
judgment.
a. Count I: Breach of Contract – Volume Claims
Level One asserts that Penske is contractually liable for: (i) failing to use
Epay for all transactions and all customers; (ii) failing to use Epay for a minimum
of 913,846 transactions annually for certain identified customers; (iii) failing to
timely transition its customers to Epay; (iv) failing to pay Level One amounts due
under the Services Agreement; and (v) inappropriately directing its carriers to stop
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using Epay (collectively referred to herein as the “Volume Claims”).2 The Volume
Claims primarily rely upon Level One’s assertion that Penske made, and breached,
enforceable promises to process a higher volume of transactions using Epay than it
actually processed. Penske moves for summary judgment as to the Volume
Claims.3 For the reasons that follow, I will grant summary judgment in Penske’s
favor as a matter of law with respect to the Volume Claims.
To state a cause of action for breach of contract under Missouri law, a
plaintiff must allege “(a) the making and existence of a valid and enforceable
contract between the plaintiff and defendant, (b) the right of the plaintiff and
obligation of the defendant thereunder, (c) a violation thereof by defendant, and (d)
damages resulting to the plaintiff from the breach.” Union Elec. Co. v.
Consolidation Coal Co., 188 F.3d 998, 1001 (8th Cir. 1999) (quoting Gilomen v.
Southwest Mo. Truck Center, 737 S.W.2d 499, 500–01 (Mo.Ct.App.1987)). Both
parties acknowledge that the Services Agreement is valid, but they disagree as to
the scope of their agreement and intention. With respect to the Volume Claims,
Level One presents each of these claims under subparagraphs 101(a), 101(b),
101(c), and 101(g) of Count I of the SAC. Level One states in its response to the
summary judgment motion that items (i) and (ii) represent two separate breaches of
contract, while items (iii), (iv), and (v) are “factual examples of how Penske
breached obligations to use Epay for all transactions.” I will discuss and rule on
them together to the extent that they involve the same issues.
3
Penske has not moved for summary judgment with respect to the remaining
portion of Level One’s breach of contract claim, concerning POPS development.
2

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Level One asserts that the Services Agreement is either silent or ambiguous as to
the parties’ agreed-to transaction volumes. Additionally, Level One suggests that
the parties may have entered into at least one additional enforceable contract
concerning transaction volumes. Penske asserts that the Services Agreement
controls, and fails to support the Volume Claims because the agreement does not
require Penske to use Epay for a certain number of transactions.
Level One does not suggest that Penske breached any specific term of the
Services Agreement with respect to the Volume Claims. Instead, Level One
argues that Penske made additional promises beyond those expressly memorialized
in the Services Agreement. As a result, Level One requests that I consider
extrinsic evidence in support of the Volume Claims. Level One cannot submit
extrinsic evidence regarding the Volume Claims if the Services Agreement is
unambiguous and integrated. See, e.g., Royal Banks v. Fridkin, 819 S.W.2d 359,
361 (Mo.1991) (en banc) (“The parol evidence rule bars extrinsic evidence, unless
an integrated contract is ambiguous.”); Clearly Canadian Beverage Corp. v.
American Winery, Inc., 257 F.3d 880, 889 (8th Cir. 2001) (applying Missouri law)
(“The law conclusively presumes all prior and contemporaneous agreements have
been merged into an unambiguous written contract, which becomes the final
memorial of the agreement.”). Integration clauses are generally “intended to
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prevent extrinsic evidence of other agreements from influencing the interpretation
of a final written contract, preserving the sanctity of written contracts.” Johnson ex
rel. Johnson v. JF Enterprises, LLC, 400 S.W.3d 763, 768–69 (Mo. 2013) (en
banc) (citation omitted).
Penske asserts that the Services Agreement, which controls, precludes the
admission of parol evidence. Specifically, Penske references the penalty clause
under Paragraph 14 of the Services Agreement and the integration clause under
Paragraph 27 of the Services Agreement. Level One argues that these clauses are
unenforceable, and in any event are limited to items addressed by the agreement.
Rather than presenting any specific ambiguity in the Services Agreement, Level
One instead suggests generally that the fee, penalty, and integration clauses might
be ambiguous. In the alternative, Level One asserts that parol evidence is
admissible because the Services Agreement is silent as to the subject matter of the
Volume Claims. Level One maintains that because the Services Agreement does
not expressly address important conditions such as Penske’s promised transaction
volumes, parol evidence may be considered in interpreting the scope of the parties’
agreement.
Level One asserts that the parties consistently contemplated that Penske
would fully implement Epay, for all of its transactions, customers and carriers.
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Level One cites various oral and written communications between the parties in
support of the Volume Claims. In particular, Level One references several emails
which the parties exchanged in December 2008 regarding projected volumes.
Penske responds that the communications cited by Level One, if admissible, did
not amend the Services Agreement and would only serve to confirm that Penske
never made any enforceable promise that would support any of the Volume
Claims. Penske argues that Level One bases its assertions on self-serving
declarations and cites testimony by Level One’s corporate representatives in which
they allegedly admitted there was no written promise concerning volumes.
The emails and other communications cited by Level One in support of the
Volume Claims are extrinsic evidence that cannot be used to modify or interpret
the terms of the Services Agreement. Moreover, regardless of the scope of the
disputed terms of the Services Agreement, Level One has not shown sufficient
evidence of any additional binding contractual terms between the parties. Even if I
did consider extrinsic evidence here, Level One has not demonstrated how Penske
made any enforceable contractual promise concerning transaction volumes. Level
One has failed to point to any document besides the Services Agreement which
would constitute an enforceable contract. As a result, Level One has failed to
create a genuine issue of material fact in favor of the Volume Claims.
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Additionally, the statue of frauds precludes enforcement of the Volume
Claims. Mo. Rev. Stat. § 432.010 requires a contract that is not performable within
a year to be in writing and signed by the parties. To satisfy the statue of frauds,
Level One would need to provide a writing demonstrating the existence of an
agreement between the parties and setting forth essential terms, such as identity of
the parties, the subject matter, the price, and consideration. See Bayless Bldg.
Materials Co. v. Peerless Land Co., 509 S.W.2d 206, 210 (Mo. Ct. App. 1974).
Under Missouri law, a contract can be inferred from several different writings only
if the writings “in combination supply the essential terms” of the agreement. Vess
Beverages, Inc. v. Paddington Corp., 941 F.2d 651, 654 (8th Cir.1991) (citations
omitted) (noting that the documents constituting the contract must be signed, or, if
only one document is signed, the others must be significantly related to it.). Here,
the statue of frauds applies to the breach of contract claims because the Services
Agreement does not include the alleged promises concerning customer transaction
volumes, and the alleged promises would have constituted an essential contract
term. Nor can the proposed terms be shown by extrinsic evidence. The 2008
emails and other documents cited by Level One cannot constitute an enforceable
contract because they do not expressly contain the essential alleged volume

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promises, the alleged contract would not be performable within a year, and the
emails are not signed.4
Level One fails to present a genuine issue of material fact with respect to the
Volume Claims. The written Services Agreement governs the parties’ business
relationship. Level One fails to demonstrate that Penske breached any term of this
contract related to transaction volumes. Level One further fails to demonstrate that
the parties entered into any other enforceable contract with the alleged terms. As a
result, I will grant summary judgment in Penske’s favor on the breach of contract
claim with respect to the Volume Claims, as enumerated in subparagraphs 101(a),
101(b), 101(c), and 101(g) of Count I of the SAC.
b. Counts II and III: Fraud and Negligent Misrepresentation
Level One brings separate counts for fraud and negligent misrepresentation.
Because the parties apply the same arguments to both claims, I will discuss them
together. Level One alleges that Penske fraudulently induced Level One to provide
ongoing access to and knowledge of Epay, to expand Epay, and to enter into and
not terminate the Services Agreement. Level One asserts that Penkse improperly
Level One asserts that Paragraph 5 of the Services Agreement authorizes the
signature element of the statue of frauds to be satisfied by electronic means, so the
email communications could be used to amend the contract. However, under
Paragraph 5, Penske simply agrees to receive electronic communications and no
evidence shows that the parties had a pattern of entering into contracts
electronically.
4

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benefited from the services provided and costs incurred by Level One in enabling
Penske’s Epay access. For the reasons that follow, I will grant summary judgment
in Penske’s favor as a matter of law with respect to the fraud and negligent
misrepresentation claims.
Penske asserts that the law-of-the-case doctrine precludes Level One’s
misrepresentation claims. I previously dismissed Level One’s initial fraud in the
inducement and negligent misrepresentation claims with prejudice as preempted by
the Missouri Trade Secrets Act (“MUTSA”). See Doc. [25]; Mo. Rev. Stat. §
417.450, et seq. I previously dismissed Level One’s initial fraud claim without
prejudice for failure to meet the heightened particularity pleading requirement for
fraud under Fed. R. Civ. P. 9(b). See Doc. [25]. Under the law-of-the-case
doctrine, “when a court decides upon a rule of law, that decision should continue to
govern the same issues in subsequent stages of the same case.” Maxfield v. Cintas
Corp., No. 2, 487 F.3d 1132, 1335 (8th Cir. 2007) (internal quotation omitted).
Courts will “consider a previously decided issue under the law-of-the-case doctrine
only if substantially different evidence is subsequently introduced or the decision is
clearly erroneous and works manifest injustice.” Id. The MUTSA “displace[s]
conflicting tort, restitutionary, and other laws . . . providing civil remedies for
misappropriation of a trade secret.” Mo.Rev.Stat. § 417.463.1. “The crucial
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question is whether ‘the claims are no more than a restatement of the same
operative facts’ that formed the basis of the plaintiff’s statutory claim for trade
secret appropriation.” Secure Energy, Inc. v. Coal Synthetics, LLC, No.
4:08CV1719 JCH, 2010 WL 1691454, at *2 (E.D. Mo. Apr. 27, 2010) (internal
citations omitted). Penske asserts that Level One now impermissibly attempts to
re-litigate the previously dismissed fraud in the inducement and negligent
misrepresentation claims, which remain preempted by MUTSA. Level One argues
that law-of-the-case doctrine does not apply since I did not previously dismiss the
pending fraud claim as preempted by MUTSA and because Level One allegedly
raises new issues concerning transaction volumes and the transition of customers.
In its initial complaint, Level One presented issues including Penske’s
alleged taking and use of Level One’s trade secrets, transaction volumes, and
customer transitions. See Doc. [2]. Level One’s remaining MUTSA claim under
Count V of the SAC continues to encompass these issues. See Doc. [99]. Level
One provides some additional factual detail in the SAC, but the primary substance
of the restated fraud and negligent misrepresentation counts remains substantially
similar to and repetitive of the claims that I previously dismissed based on the
initial complaint – claims that Penske fraudulently induced Level One to enter into
and continue their business relationship, enabling Penske to misappropriate Epay14

related trade secrets. Although I allowed Level One leave to amend its fraud
claim, the new allegations are insufficiently distinctive from the prior fraud in the
inducement and negligent misrepresentation claims. To the extent that Level One
allegedly presents any new or different details with respect to its fraud and
negligent misrepresentation counts, its arguments remain preempted by MUTSA.
As a result, I will grant summary judgment in Penske’s favor on the fraud and
negligent misrepresentation claims.
c. Count IV: Good Faith and Fair Dealing
Level One asserts that Penske breached its implied duty of good faith and
fair dealing by failing to use Epay for customer transactions as promised and
impermissibly using Epay to develop its own POPS system, but fails to present a
genuine issue of material fact supporting such a breach. For the reasons that
follow, I will grant summary judgment in Penske’s favor as a matter of law with
respect to the good faith and fair dealing claim.
“In Missouri, all contracts have an implied covenant of good faith and fair
dealing.” Lucero v. Curators of Univ. of Missouri, 400 S.W.3d 1, 9 (Mo. Ct. App.
2013) (citation omitted). The covenant encompasses “an obligation imposed by
law to prevent opportunistic behavior, that is, the exploitation of changing
economic conditions to ensure gains in excess of those reasonably expected at the
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time of contracting.” Spencer Reed Group, Inc. v. Pickett, 163 S.W.3d 570, 574
(Mo. Ct. App. 2005). “[T]he plaintiff must show that the party exercised its
discretion ‘in such a manner as to evade the spirit of the transaction or so as to
deny [the other party] the expected benefit of the contract.’” BJC Health System v.
Columbia Cas. Co., 478 F.3d 908, 914 (8th Cir. 2007) (quoting Mo. Consol. Health
Care Plan v. Cmty. Health Plan, 81 S.W.3d 34, 45 (Mo. Ct. App. 2002))
(alterations in original). However, the “implied covenant will not...be imposed
where the parties expressly address the matter at issue in their contract.” State v.
Nationwide Life Ins. Co., 340 S.W.3d 161, 194 (Mo. Ct. App. 2011). The
covenant acts as a “gap filler” for unforeseen consequences, but “cannot give rise
to new obligations not otherwise contained in a contract’s express terms.” Stone
Motor Co. v. General Motors Corp., 293 F.3d 456, 466 (8th Cir. 2002) (applying
Missouri law).
In order to support its good faith and fair dealing claim, Level One would
need to present some evidence demonstrating that Penske evaded the spirit of the
parties’ agreement or denied Level One the expected benefit of the contract. As
discussed above with respect to the Volume Claims, the Services Agreement, as
amended, is the controlling contract. Level One asserts that Penske is liable for
contravening the purpose of the parties’ agreement and failing to satisfy Level
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One’s reasonable expectations. In particular, Level One argues that the purpose of
the parties’ agreement was to grant access to Penske to use Epay for all of its
customer transactions and to compensate Level One for that use. Level One
generally references certain representations made by Penske representatives and
the parties’ understanding, but does not point to any specific supportive piece of
evidence demonstrating how Penske evaded the spirit of the Services Agreement or
denied Level One any expected benefit, such as expressly contracted-for
transaction fees. I cannot read new terms into the Services Agreement. Moreover,
Level One does not connect Penske’s alleged actions and representations
concerning POPS development to the Services Agreement or any other contract
between the parties. Level One did not present a genuine issue of material fact in
favor of its good faith and fair dealing claim. As a result, I will grant summary
judgment in Penske’s favor with respect to this claim.
d. Count VI: Unjust Enrichment
Level One pleads unjust enrichment as an alternative theory of liability,
asserting that Penske was unjustly enriched by its alleged misconduct, including
using Level One’s Epay system to develop its copycat POPS program. For the
reasons that follow, I decline to grant summary judgment in Penske’s favor on the
unjust enrichment claim.
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In order to prevail on an unjust enrichment claim, a plaintiff must establish:
“(1) a benefit conferred upon the defendant by the plaintiff; (2) appreciation by the
defendant of such benefit; and (3) acceptance and retention of the benefit under
such circumstances that it would be inequitable for defendant to retain the benefit
without paying the value thereof.” Graves v. Berkowitz, 15 S.W. 3d 59, 61 (Mo.
Ct. App. 2000) (citation omitted). Level One asserts that Penske obtained
substantial profits and an enhanced reputation as a result of its actions and it would
be unjust to allow Penske to retain these benefits. Penske asserts that an express
contract, i.e., the Services Agreement, governs the subject matter of recovery
sought by Level One’s unjust enrichment claim, so recovery should not be
available under this theory. See, e.g., R & R Land Dev., L.L.C. v. Am.
Freightways, Inc., 389 S.W.3d 234, 243 (Mo.Ct.App.2012) (“[I]f the plaintiff has
entered into an express contract for the very subject matter for which he seeks
recovery, unjust enrichment does not apply, for the plaintiff's rights are limited to
the express terms of the contract.”). Level One argues that the contractual subject
matter does not fully and expressly control the subject matter and damages at issue.
Viewing the facts in the light most favorable to Level One, the nonmoving party, I
decline to dismiss the unjust enrichment claim. Level One’s remaining claims
relating to POPS development are not before me here. Although recovery would
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most likely not ultimately be allowed under both a POPS breach of contract claim
and the unjust enrichment claim, Level One’s unjust enrichment claim survives.
For the foregoing reasons, and based upon the record before me, I conclude
that Penske’s Motion for Partial Summary Judgment shall be granted in part and
denied in part.5 Level One shall have leave to amend its complaint in order to
remove the dismissed claims from the complaint.
Accordingly,
IT IS HEREBY ORDERED that Penske’s Motion for Partial Summary
Judgment [130] is GRANTED in part and DENIED in part. Subparagraphs
101(a), 101(b), 101(c), and 101(g) of Count I of Level One’s Second Amended
Complaint are dismissed with prejudice. Counts II, III, and IV of Level One’s
Second Amended Complaint are dismissed with prejudice in their entirety.
IT IS FURTHER ORDERED that Level One shall file an amended

I note that Penske filed a separate Motion for Summary Judgment on Counts I, II,
III, IV, and VI [185] (the “Second Summary Judgment Motion”), which has not
been fully briefed by the parties. Under the Second Summary Judgment Motion,
Penske moves for summary judgment on same claims that it challenges here.
When I rule on the Second Summary Judgment Motion, I will deny Penske’s
request for summary judgment as to Counts II, III, and IV as moot. As a result, the
parties should limit their responsive briefing on the Second Summary Judgment
Motion to Level One’s remaining claims under Counts I and VI of the SAC.
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complaint no later than February 23, 2018.

______________________________
RODNEY W. SIPPEL
UNITED STATES DISTRICT JUDGE
Dated this 25th day of January, 2018.

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