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West IP Communications, Inc. v. Xactly Corp.

Superior Court of Delaware, New Castle

June 25, 2014

WEST IP COMMUNICATIONS, INC., Plaintiff,
v.
XACTLY CORPORATION, Defendant.

Submitted: April 30, 2014

Upon Consideration of Defendant's Motion to Dismiss – Motion GRANTED.

Daniel F. Wolcott, Jr., Esquire and Ryan M. Murphy, Esquire, Potter Anderson & Corroon LLP, Wilmington, Delaware, Attorneys for Plaintiff.

Richard L. Renck, Esquire, Duane Morris LLP, Wilmington, Delaware, Attorney for Defendant.

OPINION

STREETT, J.

Introduction

Plaintiff West IP Communications, Inc. ("Plaintiff") filed a Complaint against Defendant Xactly Corporation ("Defendant"), asserting breach of contract and unjust enrichment claims arising from Defendant's termination of their June 28, 2011 Master Service Agreement (the "Agreement")[1]. Plaintiff alleged that Defendant notified Plaintiff in September 2012 that the internet access and network services provided by Plaintiff were not in accordance with agreed-upon specifications. Plaintiff also alleged that Defendant ceased making monthly payments to Plaintiff thereafter.

Defendant has filed a Motion to Dismiss the Complaint pursuant to Superior Court Civil Rule 12(b)(1). Defendant asserts that Plaintiff's claims seek to enforce contractual obligations arising from the Agreement, thereby implicating the Agreement's alternative dispute resolution procedures.

Plaintiff responds that its claims involve a collection matter and, thus, are one of the Agreement's exceptions to alternative dispute resolution.

However, before the Court can determine whether Plaintiff's claims arise under the Agreement and are subject to the Agreement's alternative dispute resolution procedures, the Court must first determine whether a court or an arbitrator has the power to decide substantive arbitrability under the Agreement.

For the reasons set forth below, the Court finds that it does not have the power to determine whether Plaintiff's claims are subject to the Agreement's alternative dispute resolution procedures when the Agreement empowers an arbitrator to decide substantive arbitrability. Thus, an arbitrator must interpret the "Collection Actions" exception to the Agreement's alternative dispute resolution procedures and determine whether the exception applies to Plaintiff's claims in the instant case (i.e., substantive arbitrability). Accordingly, the Court grants the Motion to Dismiss without prejudice.

Facts

For the purpose of deciding the Motion to Dismiss, the facts set forth below are drawn from the Complaint in the light most favorable to the non-moving party (Plaintiff).[2]

On June 28, 2011, Plaintiff and Defendant, Delaware corporations, entered into the Agreement.[3] The Complaint avers that "Plaintiff agreed to provide . . . internet access and related network services in accordance with specific quantities and rates" to Defendant's San Jose, California and Bangalore, India "office location[s], " including a specified bandwidth for each office.[4]

In addition, the Complaint alleges that the following circumstances occurred:

On September 12, 2012, Defendant sent an e-mail to Plaintiff alleging that Plaintiff failed to "satisfy" the specified bandwidth for both office locations "in accordance with specifications of the [] Agreement."[5]

On September 19, 2012, Plaintiff sent a written response to Defendant and "explained that the required service had in fact been provided continuously" for both office locations.[6]

On October 12, 2012, Defendant sent an e-mail to Plaintiff "providing its notice of termination of the [] Agreement effective immediately."[7]

On October 26, 2012, Plaintiff sent a letter "informing Defendant that the October 12 Termination Notice was improper and without cause" and that, "pursuant to Section 2.5 of the [] Agreement, Defendant [was] subject to pay an early termination fee in the amount of $212, ...


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