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Livery Coach Solutions, L.L.C. v. Music Express/East, Inc.

United States District Court, D. Delaware

March 29, 2017

LIVERY COACH SOLUTIONS, L.L.C., Plaintiff,
v.
MUSIC EXPRESS/EAST, INC., Defendant. MUSIC EXPRESS, INC., Counterclaim-Plaintiff,
v.
LIVERY COACH SOLUTIONS, L.L.C., DAVID HIRSCH, and JACOB BOWMAN, Counterclaim-Defendants.

          Peter Murphy, ECKERT SEAMANS CHERIN & MELLOTT, LLC, Wilmington, DE, Gary Schildhorn and Heather Olson, ECKERT SEAMANS CHERIN & MELLOTT, LLC, Philadelphia, PA Attorneys for Plaintiff and Counterclaim-Defendants.

          Jack B. Blumenfeld and Michael J. Flynn, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, DE, Timothy B. Yoo, BIRD, MARELLA, BOXER, WOLPERT, NESSIM, DROOKS, LINCENBERG, & RHOW P.C., Los Angeles, CA, Attorneys for Defendant/Counterclaim-Plaintiff.

          MEMORANDUM OPINION

          STARK, U.S. District Judge

         I. INTRODUCTION

         On March 7, 2016, Livery Coach Solutions, L.L.C. ("Livery") filed a breach of contract suit against Music Express/East, Inc. ("Music Express"). (D.I. 1) On May 9, 2016, Music Express[1] answered Livery's complaint and brought counterclaims of fraudulent inducement, negligent misrepresentation, breach of contract, federal unfair competition, violation of the Delaware Deceptive Trade Practices Act, and revocation of acceptance against Livery, Livery President David Hirsch ("Hirsch"), and Livery Director of Support Jacob Bowman ("Bowman") (collectively, the "Counterclaim-Defendants"). (D.I. 5) On May 31, 2016, Counterclaim-Defendants filed the pending Motion to Dismiss, seeking to dismiss all but the breach of contract counterclaims under Federal Rule of Civil Procedure 12(b)(6). (D.I. 8)

         II. BACKGROUND

         Music Express provides chauffeured ground transportation in the United States, servicing more than 600 rides on a daily basis. (D.I. 5 (Counterclaims, hereinafter, "D.I. 5") at ¶ 11) Livery develops software solutions for the limousine industry, such as limousine reservation, billing, and dispatch management software. (D.I. 1 at ¶ 9; D.I. 5 at ¶ 14-15) Livery offers two versions of its software, the older "Classic" version and the newer ".Net" version, named respectively solely for purposes of this motion. (D.I. 5 at ¶¶ 19-20, D.I. 9 at 5 n.1)

         Music Express and Livery - through Hirsch and Bowman - began conversations about Livery's software in February 2015. (D.I. 5 at ¶¶ 15-16) The parties met frequently, as often as twice a week, to discuss Music Express' software needs and to view demonstrations of the Livery software. (Id. at ¶ 17) Throughout these meetings, the parties discussed the differences between Livery's two software versions, which Livery maintained was "primarily aesthetic." (D.I. 5 at ¶ 20) Furthermore, during one software demonstration, Livery told Music Express it was being shown the .Net version, but Music Express maintains it was in fact shown the older Classic version. (Id. at ¶ 19) Livery assured Music Express that it would receive both versions of the software and that it would be able to take the software "live" by September 1, 2015. (Id. at ¶¶ 19, 21) Livery also provided Music Express with a list of companies that were purportedly operating Livery's software and encouraged Music Express to check those references. (Id. at ¶ 22) Eventually, on June 16, 2015, the parties entered into an End User Software License Agreement and Software Maintenance Agreement (collectively, the "Agreement"). (D.I 1 at ¶¶1, 6;D.I. 5 at ¶32)

         The parties agree that Livery delivered the software in August 2015, but Music Express alleges that (1) it only received the .Net version, not the Classic version which it had been shown and on which it had relied in entering the Agreement, and (2) the .Net version was an untested beta version of the software, containing programming bugs, and not operable as a commercially viable solution. (D.I. 5 at ¶ 23, 34; D.I. 1 at ¶ 11) Music Express argues that Livery repeatedly misrepresented the software capability throughout the parties' meetings leading up to the Agreement. (D.I. 5 at ¶¶ 18-32) For example, in addition to misrepresenting which version Music Express was shown and which version it would receive, Livery represented that: its software could integrate seamlessly with Music Express' accounting/financial management software, Livery's system would accommodate Music Express' account number convention, an auto-billing feature was already operational on Livery's software, and Livery would provide a team of "17 programers" for technical support. (Id. at ¶¶ 24, 26, 2730) Music Express maintains that each of these representations induced it to enter into the Agreement with Livery, but none of them turned out to be true. (Id. at ¶¶ 24-32, 34)

         Ultimately, Music Express claims that Livery pulled a "bait and switch" by showing them the Classic version, misrepresenting its capabilities, and thereafter delivering the unworkable .Net version. (Id. at ¶¶ 23, 34) Music Express was not able to take the software "live" until September 6, 2015 and, even then, the program operated too slowly and experienced numerous issues, requiring 110 revisions between September 2015 and February 2016. (Id. at ¶¶ 34-38) These defects resulted in, "among other things: (1) countess broken customer invoices; (2) broken credit card files; and (3) missing invoices altogether, " eroding Music Express' customers' confidence and goodwill, and requiring Music Express employees to work around-the-clock for weeks to address the various software problems. (Id. at ¶¶ 39-40) Further, Livery never provided adequate technical support, in part because livery support teams were "too busy re-writing the software for the .Net platform." (Id. at ¶¶ 46-47) Music Express thereafter requested the Classic version - which it believed it had originally contracted to receive - in place of the unworkable .Net version, but Livery refused to provide it, stating that the two versions were "foundationally incompatible" and could not be switched. (Id. at ¶¶ 51-52)

         In February 2016, Music Express notified Livery that it was terminating the Agreement, effective immediately, and that, in any event, the agreement was not valid because it had been improperly obtained. (Id. at ¶ 56) Music Express only made two payments before terminating the Agreement, leading Livery to sue for breach of contract on March 7, 2016 (D.I. 1 at ¶¶ 14- 15), and Music Express to countersue on May 9, 2016 (D.I. 5).

         III. LEGAL STANDARDS

         Evaluating a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) requires the Court to accept as true all material allegations of the complaint. See Spruill v. Gillis, 372 F.3d 218, 223 (3d Cir. 2004). "The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1420 (3d Cir. 1997) (internal quotation marks omitted). Thus, the Court may grant such a motion to dismiss only if, after "accepting all well-pleaded allegations in the complaint as true, and viewing them in the light most favorable to plaintiff, plaintiff is not entitled to relief." Maio v. Aetna, Inc., 221 F.3d 472, 482 (3d Cir. 2000) (internal quotation marks omitted).

         However, "[t]o survive a motion to dismiss, a civil plaintiff must allege facts that 'raise a right to relief above the speculative level on the assumption that the allegations in the complaint are true (even if doubtful in fact)."' Victaulic Co. v. Tieman, 499 F.3d 227, 234 (3d Cir. 2007) (quoting BellAtl. Corp. v. Twombty, 550 U.S. 544, 555 (2007)). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). At bottom, "[t]he complaint must state enough facts to raise a reasonable expectation that discovery will reveal evidence of [each] necessary element" of a plaintiffs claim. Wilkerson v. New Media Tech. Charter Sch. Inc., 522 F.3d 315, 321 (3d Cir. 2008) (internal quotation marks omitted).

         The Court is not obligated to accept as true "bald assertions, " Morse v. Lower Merion Sch. Dist, 132 F.3d 902, 906 (3d Cir. 1997) (internal quotation marks omitted), "unsupported conclusions and unwarranted inferences, " Schuylkill Energy Res., Inc. v. Pennsylvania Power & Light Co., 113 F.3d 405, 417 (3d Cir. 1997), or allegations that are "self-evidently false, " Nami v. Fauver, 82 F.3d 63, 69 (3d Cir. 1996).

         IV. DISCUSSION

         A. Fraudulent Inducement and Negligent Misrepresentation

         Music Express' First and Second Claims for Relief allege Fraudulent Inducement and Negligent Misrepresentation based on Livery's various representations (made through Hirsch and Bowman) leading up to the Agreement, that Livery knew were false - or that Livery made recklessly without regard for their truth - and that Music Express reasonably relied on in ' executing the Agreement. (D.I. 5 at ¶¶ 61-76) Counterclaim-Defendants assert that ...


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