DRL Software Solutions, LLC v. Journeypure, LLC

Filing 77

OPINION AND ORDER......DRLs September 26, 2018 partial motion for summary judgment on its termination breach of contract claim is denied. JourneyPures September 26, 2018 partial motion for summary judgment on DRLs software access and derivation breach of contract claims and on DRLs claim for loss of opportunity damages is granted. (Signed by Judge Denise L. Cote on 12/6/2018) (gr)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
DRL SOFTWARE SOLUTIONS, LLC,
:
:
Plaintiff,
:
:
-v:
:
JOURNEYPURE, LLC,
:
:
Defendant.
:
:
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17cv9125(DLC)
OPINION AND ORDER

For the plaintiff:
Galen Joseph Criscione
M. Salman Ravala
Nadin Rabelo Linthorst
Criscione Ravala, LLP
90 Park Avenue, Suite 1700
New York, New York 10016
For the defendant:
Eugene David Kublanovsky
Kublanovsky Law, LLC
817 Broadway, 5th Floor
New York, New York 10003
Joy Boyd Longnecker
Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C.
Baker Donelson Center, Suite 800
211 Commerce Street
Nashville, Tennessee 37201
DENISE COTE, District Judge:
This dispute involves a contract for use of a software
program between plaintiff DRL Software Solutions, LLC (“DRL”)
and defendant JourneyPure, LLC (“JourneyPure”).

Both parties

have moved for partial summary judgment on DRL’s breach of

contract claims.

For the reasons that follow, DRL’s motion is

denied and JourneyPure’s motion is granted.

Background
The following facts are undisputed or taken in the light
most favorable to the non-moving party, unless otherwise noted.
JourneyPure provides addiction, substance abuse, and behavioral
health services at rehabilitation centers across the United
States.

In July 2014, JourneyPure entered into a contract with

DRL, pursuant to which DRL agreed to provide JourneyPure with a
software platform intended for use by patients or service
providers (“the Agreement”).
The Agreement provided that, in exchange for use of DRL’s
software platform, JourneyPure would pay an initial set-up fee
and then would be invoiced for a monthly fee to vary based upon
the number of JourneyPure clients who had used the software in
the previous month.

The Agreement also specified that

JourneyPure had to pay a minimum of $1,500 per month and a
minimum of $45,000 per year to DRL.
The Agreement contains a termination provision, section
5.2, which lists a number of grounds upon which DRL may
terminate the agreement and which also states that JourneyPure
“may terminate the contract if DRL does not comply with the
service and performance requirements as listed in exhibit C.”
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Exhibit C lists the type of customer services that DRL will
provide and the target availability of these services.

The

subsequent provision of the Agreement, section 5.3, provides for
the effects of termination.

It states, in relevant part, that

“[u]pon the termination of this Agreement for any reason (a)
[JourneyPure] shall immediately pay DRL all amounts due to DRL
under this Agreement.”
Section 9.2 of the Agreement lists warranties by which
JourneyPure agrees to abide “in its use of the Software and the
Hosted Services.”

Of relevance to this dispute, the parties

agreed in this section that JourneyPure would
(e) not attempt to gain unauthorized access to, or
disrupt the integrity or performance of, the Software
or the Platform, or the data contained therein; (g)
not modify, copy or create derivative works based on
the Software or any of the Services; (h) not reverse
engineer the Software or any of the Services; (i) not
access the Software or the Platform for the purpose of
building a competitive product or service or copying
its features or user interface for its own use or for
distribution to others; (j) not permit access to the
Software or the Platform by a competitor of DRL.
The Agreement also provides that it would be governed by
New York Law.

The parties also agreed that the venue for any

dispute arising under the agreement would be in federal or state
court in New York City.
On October 20, 2015, in response to JourneyPure entering
into a software subscription agreement with a third party named
Sierra Tucson, JourneyPure and DRL amended the Agreement (“the
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Amendment”).

The Amendment extended the terms of the original

contract until October 31, 2017 and amended section 5.2 of the
Agreement to provide for payment between the parties in the
event that JourneyPure terminated the Agreement due to
termination of its third-party software subscription agreement
with Sierra Tucson.

This amendment to section 5.2 of the

Agreement states:
(h) Customer may terminate this Agreement without
cause upon thirty (30) days’ advance written notice on
or before October 31, 2017 in the event Customer’s
agreement with Sierra Tucson is terminated. In the
event of termination under (h), Customer shall
immediately pay the full amount of Renewal
Subscription Term, as set forth in Exhibit F-1.
Exhibit F-1, attached to the Amendment, provides that
JourneyPure may either elect to pay DRL $112,000 each year or
“Renewal Subscription Term,” or may pay according to a payment
schedule that includes an upfront $20,000 per Renewal
Subscription Term and a monthly fee of $9,970 plus a graduated
monthly expense charge based on the number of clients who use
the system each month.
In early 2016, JourneyPure contracted with Bob Wind, a
software consultant, to develop a JourneyPure branded version of
an addiction recovery software program.

Wind testified that

soon after he began consulting for JourneyPure he accessed DRL’s
software platform.

According to his testimony, he obtained

access to the software through a link to the platform that was
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provided to him in an email.

He also testified that he only

accessed the software once and for “probably 45 seconds.”

Wind

further testified that, while he was working with JourneyPure to
develop the new software program, JourneyPure never referenced
DRL’s software and never told him they wanted his software to
have any of the same functions as DRL’s software.
On June 26, 2016, JourneyPure provided DRL with written
notice that it was terminating the Agreement.

After this

termination notice, DRL continued to send JourneyPure invoices
for several months.

According to JourneyPure’s President and

CEO, after terminating the Agreement, JourneyPure paid all
amounts owed to DRL for services rendered through the date of
termination.
On November 21, 2017, DRL filed a complaint against
JourneyPure asserting claims for breach of contract, unjust
enrichment, fraudulent misrepresentation, innocent
misrepresentation, and copyright infringement.

On March 8,

2018, this Court granted JourneyPure’s motion to dismiss DRL’s
copyright and unjust enrichment claims.

Both parties filed

partial motions for summary judgment on DRL’s breach of contract
claim on September 14, 2018.

The motions became fully submitted

on October 22, 2018.

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Discussion
Summary judgment may not be granted unless all of the
submissions taken together “show[ ] that there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.”

Fed. R. Civ. P. 56(a).

“Summary

judgment is appropriate when the record taken as a whole could
not lead a rational trier of fact to find for the non-moving
party.”

Smith v. Cnty. of Suffolk, 776 F.3d 114, 121 (2d Cir.

2015) (citation omitted).

The moving party bears the burden of

demonstrating the absence of a material factual question, and in
making this determination, the court must view all facts in the
light most favorable to the non-moving party.

See Eastman Kodak

Co. v. Image Technical Servs., Inc., 504 U.S. 451, 456 (1992);
Gemmink v. Jay Peak Inc., 807 F.3d. 46, 48 (2d Cir. 2015).
“[W]here the evidentiary matter in support of the motion does
not establish the absence of a genuine issue, summary judgment
must be denied even if no opposing evidentiary matter is
presented.”

Sec. Ins. Co. of Hartford v. Old Dominion Freight

Line Inc., 391 F.3d 77, 83 (2d Cir. 2004) (citation omitted)
(emphasis omitted).
Once the moving party has asserted facts showing that the
non-movant’s claims or affirmative defenses cannot be sustained,
“the party opposing summary judgment may not merely rest on the
allegations or denials of his pleading; rather his response, by
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affidavits or otherwise as provided in the Rule, must set forth
specific facts demonstrating that there is a genuine issue for
trial.”

Wright v. Goord, 554 F.3d 255, 266 (2d Cir. 2009)

(citation omitted).

“[C]onclusory statements, conjecture, and

inadmissible evidence are insufficient to defeat summary
judgment,” Ridinger v. Dow Jones & Co. Inc., 651 F.3d 309, 317
(2d Cir. 2011) (citation omitted), as is “mere speculation or
conjecture as to the true nature of the facts.”

Hicks v.

Baines, 593 F.3d 159, 166 (2d Cir. 2010) (citation omitted).
Unopposed facts set forth in a moving party's Rule 56.1
statement are ordinarily deemed admitted.

See Local Civil Rule

56.1(c); Titan Indem. Co. v. Triborough Bridge & Tunnel Auth.,
Inc., 135 F.3d 831, 835 (2d Cir. 1998).

But, “[b]efore summary

judgment may be entered, the district court must ensure that
each statement of material fact is supported by record evidence
sufficient to satisfy the movant's burden of production even if
the statement is unopposed.”
189, 194 (2d Cir. 2014).

Jackson v. Fed. Exp., 766 F.3d

Only disputes over material facts will

properly preclude the entry of summary judgment.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

Anderson v.
“An issue of

fact is genuine and material if the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.”
Cross Commerce Media, Inc. v. Collective, Inc., 841 F.3d 155,
162 (2d Cir. 2016).
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The pending motions for summary judgment primarily focus on
DRL’s three allegations of breach of contract.

First, that

JourneyPure breached its Agreement with DRL by failing to pay
all amounts due under the Agreement upon termination; second,
that JourneyPure breached the Agreement by permitting
unauthorized access the DRL software by a third party; and,
third, that DRL breached the Agreement by creating a software
program derived from DRL’s software.
The elements of a breach of contract claim under New York
law are well established.1

They are “(1) the existence of an

agreement, (2) adequate performance of the contract by the
plaintiff, (3) breach of contract by the defendant, and (4)
damages.”

Eternity Global Master Fund Ltd. v. Morgan Guar.

Trust Co. of N.Y., 375 F.3d 168, 177 (2d Cir. 2004).
Under New York law, “a fundamental objective of contract
interpretation is to give effect to the expressed intention of
the parties.”
2017).

In re MPM Silicones, 874 F.3d 787, 795 (2d Cir.

If the intent of the parties is clear from the four

corners of a contract, its interpretation is a matter of law
that the court may determine by summary judgment.

American Home

Assur. Co. v. Hapag Lloyd Container Linie, GmbH, 446 F.3d 313,
316 (2d Cir. 2006).

“The initial inquiry is whether the

In the Agreement, the parties chose New York law to govern the
terms of the Agreement.
1

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contractual language, without reference to sources outside the
text of the contract, is ambiguous.”

In re MPM Silicones, 874

F.3d at 795.
An ambiguity exists where the terms of the contract
could suggest more than one meaning when viewed
objectively by a reasonably intelligent person who has
examined the context of the entire integrated
agreement and who is cognizant of the customs,
practices, usages, and terminology as generally
understood in the particular trade or business.
Law Debenture Trust Co. of New York v. Maverick Tube Corp., 595
F.3d 458, 466 (2d Cir. 2010) (citation omitted).

By contrast, a

contract is unambiguous if its “language has a definite and
precise meaning about which there is no reasonable basis for a
difference of opinion.”

Keiler v. Harlequin Enters. Ltd., 751

F.3d 64, 69 (2d Cir. 2014).
“If a contract is clear, courts must take care not to alter
or go beyond the express terms of the agreement, or to impose
obligations on the parties that are not mandated by the
unambiguous terms of the agreement itself.”
356 F.3d 238, 245 (2d Cir. 2004).

Torres v. Walker,

In interpreting contracts,

“words should be given the meanings ordinarily ascribed to them
and absurd results should be avoided.”

Mastrovincenzo v. City

of New York, 435 F.3d 78, 104 (2d Cir. 2006) (citation omitted).
Additionally, “an interpretation of a contract that has the
effect of rendering at least one clause superfluous or
meaningless is not preferred and will be avoided if possible.”
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LaSalle Bank Nat. Ass'n v. Nomura Asset Capital Corp., 424 F.3d
195, 206 (2d Cir. 2005) (citation omitted).
In addition to the breach of contract allegations,
JourneyPure’s motion for summary judgment also seeks to dismiss
DRL’s claim for loss of opportunity damages.

Damages for lost

profits may only be awarded where the “amount of such damages
[are established] with reasonable certainty.”
Hilliard, 218 F.3d 164, 172 (2d Cir. 2000).

Schonfeld v.
“Although lost

profits need not be proven with mathematical precision, they
must be capable of measurement based upon known reliable factors
without undue speculation.”

Id. (citation omitted).

Evidence

will support an award for lost profits where the figure is a
“just and reasonable inference,” as opposed to “speculation or
guesswork.”

Autowest, Inc. v. Peugeot, Inc., 434 F.2d 556, 566

(2d Cir. 1970) (citation omitted).
DRL’s Motion
DRL has moved for partial summary judgment on its first
allegation of breach -- that JourneyPure violated the
termination provision of the Agreement by failing to pay DRL the
outstanding fees that would be due to DRL through the end of the
term of the Agreement, which DRL asserts is $191,520.

This

allegation turns on interpretation of section 5.3 of the
Agreement.

This section provides that “[u]pon termination of

this Agreement for any reason: (a)[JourneyPure] shall
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immediately pay DRL all amounts due to DRL under the Agreement.”
This provision of the Agreement is ambiguous.

The Agreement

provides no further definition of “amounts due.”

This provision

could reasonably be read either to require payment of the
Agreement’s required monthly invoiced payments up to the date of
termination, which was June 26, 2016, or to require payment of
the sum of the outstanding monthly payments and/or annual
minimum payments through October 31, 2017, the end date of the
amended Agreement.
Aside from insisting that the terms of the contract are
clear, DRL provides no argument as to why section 5.3 should be
interpreted to require payment through the end date of the
amended Agreement.

Because DRL has not carried its burden of

showing that no rational factfinder could interpret the
Agreement otherwise, its motion for summary judgment on this
breach of the Agreement’s termination provision is denied.
JourneyPure’s Motion
JourneyPure’s partial motion for summary judgment seeks
dismissal of DRL’s second and third allegations of breach of
contract and of DRL’s damages claim for loss of opportunity.
its second breach allegation, DRL claims that JourneyPure

In

breached the Agreement’s representations and warranties
provision by “disclosing Plaintiff’s proprietary software to a
third party without Plaintiff’s written authorization.”
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DRL’s

third breach theory alleges that JourneyPure breached the
Agreement by creating and using a new software that was derived
from DRL’s software.

The provision at issue in both allegations

is section 9.2 of the Agreement, but DRL does not specify which
sub-sections of this provision JourneyPure breached.
Both parties agree that JourneyPure permitted Bob Wind to
access the DRL software while under contract with JourneyPure to
develop a software application.

This may violate section 9.2(j)

of the Agreement, which forbids JourneyPure “permit[ting] access
to the Software or the Platform by a Competitor of DRL.”
JourneyPure argues, however, that because Wind only accessed the
DRL software for approximately forty-five seconds and did
nothing further with the software, DRL cannot show that any
damages resulted from its breach and so their breach of contract
claim fails as a matter of law.
In support of its argument that DRL cannot show that
damages resulted from Wind’s software access, JourneyPure
primarily relies on Wind’s deposition testimony asserting that
he only accessed the software for forty-five seconds, that the
software he developed for JourneyPure was developed from scratch
without any knowledge of the DRL software, and that JourneyPure
did not ask him to incorporate any features from DRL’s software
into the software he developed.

JourneyPure also points to

testimony from DRL’s corporate representative stating that DRL
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would suffer no monetary damages “[i]f all [a third party]
do[es] is see [the software] and do nothing with it.”

DRL

presents no evidence to rebut this testimony but argues that
summary judgment should be denied because a reasonable
factfinder could conclude that Wind’s forty-five seconds of
access to the software was sufficient to gain proprietary
knowledge.

DRL has produced no evidence from which a factfinder

could conclude that such a breach caused DRL damages.

The

theoretical possibility that this brief access could have
resulted in damages is insufficient to defeat summary judgment.
DRL has also failed to present sufficient evidence to rebut
JourneyPure’s motion for summary judgment to dismiss the third
breach allegation, which alleges that JourneyPure created a
software application that was derived from DRL’s software in
violation of section 9.2 of the Agreement.

JourneyPure

presented testimony from Wind, who developed JourneyPure’s
software, asserting that he created this software “from scratch”
and that JourneyPure never asked him to emulate DRL’s software.
DRL presents no evidence to rebut this assertion, arguing
instead that summary judgment should be denied because the
veracity of Wind’s statements must be evaluated by a factfinder.
This argument is insufficient to create a genuine dispute as to
whether the software Wind developed for JourneyPure was derived
from DRL’s software.
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Finally, JourneyPure moves for summary judgment to dismiss
DRL’s claim for approximately $2.5 million in loss opportunity
damages.2

DRL’s assertion of $2.5 million in damages is unduly

speculative and must be dismissed.

In support of this damages

calculation, DRL has produced a chart that purports to estimate
payments that DRL would have received from JourneyPure from June
2016, the month in which JourneyPure terminated the agreement,
through October 2018.

This chart also estimates payments that

DRL would receive over the same time period from two unnamed
companies and from an application called “MYDrl.”

According to

the testimony of the DRL corporate representative who created
this chart, these estimations rely on several assumptions,
including: (1) that JourneyPure would continue to grow its user
base for the two months following termination at the same rate
as it did during the first eight months of the amended
Agreement; (2) that, beginning the third month after
termination, JourneyPure would continue to have at least 175 new
users of the DRL software per month through its existing
contracts; and (3) that JourneyPure would enter into additional

There is some dispute between the parties regarding whether
this claim for damages arises from DRL’s breach of contract
claim or its fraudulent misrepresentation and innocent
misrepresentations claims, which are not the subject of the
pending motions. Regardless, such lost profit damages must be
reasonably certain. See Steitz v. Gifford, 280 N.Y. 15, 20
(1939).
2

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contracts with DRL in order to provide services to new
facilities or treatment providers.

DRL does not present any

evidence to support these assumptions, instead relying on its
complaint allegations regarding JourneyPure’s misrepresentations
about growth of its client base and expansions of its
relationship with DRL.

Given the evidence presented, no

reasonable factfinder could conclude that these loss opportunity
damages have been calculated with reasonable certainty.

Summary

judgment dismissing DRL’s claim for loss opportunity damages is
therefore appropriate.

Conclusion
DRL’s September 26, 2018 partial motion for summary
judgment on its termination breach of contract claim is denied.
JourneyPure’s September 26, 2018 partial motion for summary
judgment on DRL’s software access and derivation breach of
contract claims and on DRL’s claim for loss of opportunity
damages is granted.

Dated:

New York, New York
December 6, 2018
______________________________
DENISE COTE
United States District Judge
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