ZEN42 LLC v. The Washington and Lee University

Filing 27

MEMORANDUM OPINION. Signed by Judge Norman K. Moon on October 10, 2017. (ca)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF VIRGINIA

10/10/2017

LYNCHBURG DIVISION
ZEN42 LLC,
Plaintiff,
v.

CASE NO. 6:17-cv-00053

MEMORANDUM OPINION

WASHINGTON AND LEE UNIVERSITY.
Defendant.

JUDGE NORMAN K. MOON

This diversity case involves a contract dispute between the supplier of water treatment
systems, Plaintiff ZEN42, LLC (“Zen42”) and a purchaser, Defendant Washington and Lee
University (“W&L”). Zen42 asserts a single breach of contract count based on two theories—
that W&L prematurely terminated the contract on May 19, 2016 and that it failed to make
monthly payments to Zen42 after that date. (Complaint ¶¶ 30–31). Zen42 now seeks judgment
on the pleadings, claiming W&L’s answer to the Complaint admitted facts that prove W&L’s
liability as a matter of law. But the pleadings construed in W&L’s favor do not entitle Zen42 to
judgment, so the motion will be denied.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(c) permits a party to “move for judgment on the
pleadings” after “the pleadings are closed.” “The federal courts have followed a fairly restrictive
standard in ruling on motions for judgment on the pleadings” because “hasty or imprudent use of
this summary procedure by the courts violates the policy in favor of ensuring to each litigant a
full and fair hearing on the merits of his or her claim or defense.” 5C Wright and Miller et al.,
Federal Practice and Procedure § 1368 (3d ed. Westlaw). In one sense, a Rule 12(c) motion is
the mirror image of a Rule 12(b) motion. Whereas a defendant moves to dismiss under Rule

12(b) after the plaintiff files a complaint, Rule 12(c) affords the plaintiff a chance to obtain
judgment after the defendant files his answer.1
A “party moving for a judgment on the pleadings impliedly admits [for purposes of the
motion] the truth of its adversary’s allegations and the falsity of its own assertions that have been
denied by that adversary.” 5C Wright and Miller et al., Federal Practice and Procedure § 1370
(3d ed.); see Volvo Const. Equip. N. Am., Inc. v. CLM Equip. Co., Inc., 386 F.3d 581, 588 n.4
(4th Cir. 2004) (noting that facts are viewed on a motion for judgment on the pleadings “in the
light most favorable to the nonmoving party”). So when “the plaintiff moves for judgment on
the pleadings, the motion should be granted if, on the undenied facts alleged in the complaint and
assuming as true all the material allegations of fact in the answer, the plaintiff is entitled to
judgment as a matter of law.” Walker v. Liberty Mut. Ins. Co., No. 4:16-CV-01388-RBH, 2017
WL 1020884, at *1 (D.S.C. Mar. 16, 2017); see Smurfit-Stone Container Enterprises, Inc. v.
Nat’l Interstate Ins. Co., No. 3:08CV093-HEH, 2008 WL 4153762, at *4 (E.D. Va. Sept. 5,
2008); see, e.g., A. S. Abell Co. v. Baltimore Typographical Union No. 12, 338 F.2d 190, 192–93
(4th Cir. 1964) (affirming plaintiff’s motion for judgment “since the pleadings raised no issue of
fact”).

Accordingly, the Court first reviews the allegations in Zen42’s complaint before

considering them vis-à-vis the answer.
THE COMPLAINT AND ATTACHMENTS
Zen42 alleges that, in September 2012, it and W&L entered into a Water Services
Agreement, or WSA, which Zen42 attached to the Complaint.

1

(Complaint ¶¶ 5–6).

A defendant may also make a 12(c) motion, provided he waits until “the pleadings are
closed,” i.e., after he has answered. Fed. R. Civ. P. 12(c). The standard of review for a
defendant’s 12(b)(6) motion and his 12(b)(c) are the same—the Court must in each instance
construe the facts in plaintiff’s favor. Belmora LLC v. Bayer Consumer Care AG, 819 F.3d 697,
702 (4th Cir. 2016); Massey v. Ojaniit, 759 F.3d 343, 353 (4th Cir. 2014).
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Amendments to the WSA were made on March 13, 2013, and June 30, 2015. (Id. ¶ 5). Zen42
asserts that the “WSA constitutes an enforceable contract” between the parties.

Many of

Zen42’s allegations consist of quotations from the purported contract.
The WSA had a 60-month term beginning on July 1, 2014. (Id. ¶¶ 7–8). Zen42 quotes §
8(b)(ii), which gave Zen42 60 days to correct noncompliance with the WSA’s “minimum
performance standard.” (Id. ¶¶ 10).

After the 60-day cure period, W&L was permitted to

terminate the WSA with 20-days written notice. (Id. ¶ 11).
Zen42 asserts W&L terminated the contract by letter on May 19, 2016. (Complaint ¶ 12).
The letter is attached to the Complaint. (Dkt. 1-2 at ECF 2). It first thanks Zen42 for providing
two documents from April 2016, although those documents are not presently in the record. (Id.).
It then recounts issues dating back to April 2014 with “seed crystals” in Zen42’s water treatment
system. (Id.). For instance, the letter references and attaches an email where a representative of
Zen42 acknowledged the system was not performing well. (Id. at ECF 2, 12).

The letter

concludes by stating “it’s in the best interest of the University to discontinue our reliance on this
system for condenser water management. To that end, this letter constitutes written notice of
termination of our contract with Zen42LLC.” (Id. at ECF 2; Complaint ¶ 14).
Zen42 alleges W&L did not have grounds to terminate the contract, and thus the
termination was a breach. (Complaint ¶ 15). It quotes the WSA’s “minimum performance
standard” as stating that “[c]ycles of concentration will be controlled at a minimum set point of
1250 PPM TDS.” (Id. ¶ 17). Zen42 does not explain this jargon, but it does allege conclusorily
that “the presence or absence of ‘seed crystals’” is nowhere mentioned in the WSA. (Id. ¶ 18).
Additionally, Zen42 contends W&L breached the contract by failing to allow Zen42 a 60day cure period and by failing provide the requisite 20-days written notice of termination after

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the cure period. (Complaint ¶¶ 19–20).
Finally, Zen42 alleges that W&L “made no further monthly payments” to Zen42 after the
May 19, 2016 letter, and that the failure to do so was an event of default under the WSA.
(Complaint ¶¶ 24–25).
THE ANSWER
W&L’s answer denies most of these allegations. Three admissions are key to Zen42’s
motion, however.
First, in response to Zen42’s allegations about the existence of the WSA, W&L “admits
that it entered into a Water Services Agreement . . . and certain amendments thereto
(collectively, ‘Agreement’), which Agreement speaks for itself.”

(Answer ¶ 5 (emphasis

added)). W&L thus concedes an agreement of some sorts with Zen42. (Id. ¶ 6 (emphasis
added)).
Second, W&L admitted that the letter attached to the Complaint “is a letter sent from
[W&L] to [Zen42] on or about May 19, 2016, which letter speaks for itself.” (Answer ¶ 12).
W&L denied the remainder of Plaintiff’s allegations, which include the contention that, by the
letter, W&L terminated the WSA. (Complaint ¶ 12).
Third, W&L admitted that “[f]ollowing the May 19, 2016 letter, [it] made no further
monthly payments” to Zen42. (Complaint ¶ 24; Answer ¶ 24).
The answer also listed five defenses: (1) failure to state a claim; (2) absence of a breach;
(3) a first breach by Zen42; (4) damages caused by Zen42’s own actions, and; (5) failure to
mitigate damages.
ANALYSIS
Zen42’s motion is thin gruel—for example, it does not attempt to define, interpret, or

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explain important contractual terms or industry lingo such as “seed crystals,” “cycles of
concentration,” or “minimum set point.” The motion also relies on an overly favorable (to
Zen42) interpretation of W&L’s answer. In fairness, W&L’s answer is not a model of precision
either.

“It is evident that, in its answers [W&L] intended a somewhat delicate parsing of

[Zen42’s] allegations,” Equitable Prod. Co. v. Elk Run Coal Co., No. CIV. A. 2:08-00076, 2008
WL 2858525, at *2 (S.D.W. Va. July 22, 2008), a point confirmed by the fine distinctions in
W&L’s brief. W&L admits, for instance, to the existence of some kind of agreement between
the parties. But it indicates that the documents attached to the Complaint do not represent the
complete nature of that agreement. (E.g., Answer ¶¶ 5–6; dkt. 16 at 2–6).
In any event, the Court must keep in mind the general judicial policy of resolving cases
on the merits, as well as the standard of review, which commands that factual disputes and all
reasonable inferences be drawn in W&L’s favor. W&L’s denials and the gaps in the evidentiary
record, which are expected at this early stage, are enough to avert judgment on the pleadings and
move this case forward to discovery.
Zen42 contends, and W&L does not dispute, that Virginia law governs this case. When a
contract is unambiguous, the Court must interpret its terms; but when it is ambiguous, its
meaning should be decided by the jury. See Online Res. Corp. v. Lawlor, 285 Va. 40, 54 (Va.
2013); Greater Richmond Civic Recreation, Inc. v. A. H. Ewing’s Sons, Inc., 200 Va. 593, 596
(Va. 1959).
Zen42, then, must argue (as it does) that the contract is unambiguous. (Dkt. 12 at 8). It
bases this stance on W&L’s statement that the documents at issue “speak for themselves.”
According to Zen42, this is an admission of unambiguous language, per Brown v. Cranberry
Iron & Coal Co., 72 F. 96, 102 (4th Cir. 1896), which stated in passing: “The deed speaks for

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itself. If there be no ambiguity in it, it explains itself.” There are several problems with Zen42’s
argument.2
First, as previously mentioned, Zen42 does not explain what the terms of art at issue here
mean. It is, for instance, critical whether the presence of “seed crystals” adheres to or violates
the requirement that “cycles of concentration . . . be controlled at a minimum set point of 1250
PPM TDS.” But that is not a matter of ordinary English, answerable by one without knowledge
of the water treatment system industry. The current record and briefs provide the Court with no
guidance on how to interpret these terms or intuit their meaning. As a sort of trump card, Zen42
asserts that “the presence or absence of ‘seed crystals’ is not recited” anywhere in the WSA.
(Dkt. 14 at 4; see id. at 10). That appears to be correct, yet it does not end the analysis. It is akin
to saying a contract to sell vegetables does not mention tomatoes—true enough, but the matter of
interpretation remains.
It may well be that “seed crystals” have nothing to do with “cycles of concentration” and
“minimum set points.” Or it might be true that seed crystals are encompassed by these terms.
The point is that, at this juncture, the Court simply cannot tell. As W&L recognizes:
Fundamentally, whether seed crystals, or the conditions which led to their
formation, constitute a breach of Plaintiff’s minimum performance standard that
“[c]ycles of concentration will be controlled at a minimum set point of 1250
PPMTDS,” or any other applicable performance standard, is a material disputed
issue ripe for discovery and clearly a subject matter that calls for expert
testimony. . . .
(Dkt. 16 at 7).
Second, the Court cannot at this stage assume that all relevant documents—including the
2

Although not raised by the parties, one difficulty is that Zen42 engages in the fallacy
known as “affirming the consequent.” When presented with a conditional statement (“If P, then
Q”), the reasoning “Q, therefore P” does not necessarily follow. Brown presents the conditional
statement “If it’s not ambiguous, then it speaks for itself.” Yet Zen42 flips this proposition,
essentially arguing “It speaks for itself, therefore it’s not ambiguous.”
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full extent of the purported contract—are before it. To prove a breach of contract, Zen42 must
establish the precise legal obligation the defendant has to it. Sunrise Continuing Care, LLC v.
Wright, 277 Va. 148, 154, 671 S.E.2d 132, 135 (2009). Here, W&L argues that—although it
admitted entering into “a” WSA with Defendant and “certain” amendments thereto (Answer ¶
5)—it has not admitted that the documents attached to the Complaint are the exclusive,
governing ones in this case. (Dkt. 16 at 5; see id. at 2 (“W&L has denied that Plaintiff’s version
of the alleged agreement constitute the full agreement between the parties”) (emphasis added)).
For instance, W&L notes that one email attached to the Complaint includes a proposed
amendment, yet that proposal was not included by Zen42 in the current record, nor is there an
indication whether it was executed. (Id. at 3 (citing dkt. 1-2 at ECF 16)). In light of W&L’s
denials and the attachments to the Complaint, and construing the facts and inferences in W&L’s
favor, it is reasonable to believe there may be other documents not presently before the Court
that form the complete basis of W&L’s obligations to Zen42. See Walker v. Liberty Mut. Ins.
Co., No. 4:16-CV-01388-RBH, 2017 WL 1020884, at *2 (D.S.C. Mar. 16, 2017) (holding
plaintiff not entitled to judgment where answer denied “the exact nature” of settlement
agreement).3 As a result, the Court will not set about deciding a breach of contract question
when it cannot be certain the entirety of the contract is before it to interpret.
Additionally, emails attached to the Complaint paint a broader picture of the alleged
termination than the one portrayed by Zen42. For instance, W&L points out that the emails
3

In its reply, Zen42 puts for forth a series of speculative estimations and theories about
W&L’s actions, which ultimately reduce to its sentiment that “common sense tells us that
[W&L] would have all of the factual support it needed to raise an actual factual dispute if such
facts were true.” (Dkt. 18 at 3–4 (emphasis in original)). This argument turns the rules of
procedure on their head. When answering a complaint and contesting a plaintiff’s motion for
judgment, a defendant is not obliged to try his case through the pleadings (or briefs). Rather, he
is entitled to deny the plaintiff’s allegations, proceed to discovery, and force him to prove his
case.
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reveal problems with Zen42’s water system over a year before the May 19, 2016 termination
letter. (Dkt. 16 at 3 (citing dkt. 1-2 at ECF 12, 16); see also dkt. 1-2 at ECF 14 (August 2015
correspondence)). From this, W&L’s denials, and the gaps in the evidentiary record, one could
reasonably infer that “there is simply more to the story of how the parties went through the full
process of formation, notice, opportunity to cure, and termination, and that story is not yet before
the Court.” (Dkt. 16 at 3–4).
*

*

*

In sum, this case is better suited for discovery and summary judgment instead of
judgment on the pleadings. 5C Wright and Miller et al., Federal Practice and Procedure § 1368
(3d ed. Westlaw) (The “the plaintiff may not secure a judgment on the pleadings when the
answer raises issues of fact that, if proved, would defeat recovery.”). Consequently, the motion
will be denied. An appropriate order will issue. The Clerk is directed to send a copy of this
opinion and the accompanying order to counsel.
10th
Entered on this ________ day of October, 2017.

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