Arkray Am., Inc. v. Navigator Bus. Sols.

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ARKRAY AMERICA, INC., Plaintiff, v. NAVIGATOR BUSINESS SOLUTIONS, INC. AND N'WARE TECHNOLOGIES, INC., Defendants.

C. A. No. N20C-12-012 MMJ CCLD

Superior Court of Delaware

July 18, 2023

Submitted: May 16, 2023

Redacted: July 31, 2023

On Plaintiff Arkray's Motion for Partial Summary Judgment GRANTED IN PART AND DENIED IN PART

On Defendant Navigator Business Solutions, Inc.'s Motion for Partial Summary Judgment GRANTED IN PART AND DENIED IN PART

On Defendant N'Ware Technologies, Inc.'s Motion for Partial Summary Judgment GRANTED IN PART AND DENIED IN PART

On Plaintiff Arkray's Motion to File a Sur Reply DENIED

Jennifer C. Wasson, Esq., Carla M. Jones, Esq., Potter Anderson & Corroon LLP, Wilmington, DE, Julia E. Markley Esq. (pro hac vice) (Argued), Perkins Coie LLP, Portland, OR, Lindsey E. Dunn, Esq. (pro hac vice) (Argued), Perkins Coie LLP, Denver, CO, Attorneys for Plaintiff/Counterclaim Defendant Arkray America, Inc. Stephen J. Kraftschik, Esq., Christina V. Vavala, Esq., Polsinelli PC, Wilmington, DE, Eric E. Lynch, Esq. (pro hac vice) (Argued), Polsinelli PC, Phoenix, AZ, Attorneys for Defendant/Counterclaim Plaintiff Navigator Business Solutions, Inc.

Scott B. Czerwonka, Esq., R. Stokes Nolte, Esq., Wilks Law, LLC, Wilmington, DE, Mark K. Thompson, Esq. (pro hac vice) (Argued), MKT Law PLC, Minneapolis, MN, Attorneys for Defendant N'Ware Technologies, Inc.

OPINION

HONORABLE MARY M. JOHNSTON, J.

FACTUAL AND PROCEDURAL CONTEXT

This is a contract dispute. ARKRAY America, Inc. ("Arkray") is a Delaware corporation. Arkray is a wholly-owned subsidiary of ARKRAY Global Business, Inc., which is a wholly-owned subsidiary of the Japanese parent company, ARKRAY, Inc. ("Arkray Japan"). "Arkray manufactures and sells blood-glucose testing, diabetes management equipment, and laboratory equipment and testing supplies."^[1] Navigator is a Utah corporation that sells and implements Enterprise Resource Planning ("ERP") solutions. N'Ware Technologies, Inc. ("N'Ware") is a Delaware corporation that developed a warehouse management and shipping software called LISA. N'Ware also sells and implements ERP solutions. Both Navigator and N'Ware resell SAP's Business One and By Design software as the foundation for their ERP solutions. LISA is an add-on to SAP's ERP software-Business One and By Design.

In 2015, Arkray contacted Navigator to implement an SAP-driven ERP system. Between April and June of 2015, Navigator visited Arkray twice to scope out the project. To address Arkray's warehouse management and shipping needs, Navigator introduced Arkray to N'Ware as a "best in breed" partner for its LISA software. N'Ware joined Navigator for the second visit with Arkray in 2015. After multiple proposals, Navigator and Arkray executed a final contract in February 2016 (the "Navigator Agreement"), whereby Navigator agreed to implement an SAP driven ERP system for Arkray. In April 2016, Arkray and N'Ware executed the N'Ware Technologies Solution License Agreement (the "N'Ware Agreement").

The implementation did not go as planned. Arkray alleges that Navigator, together with N'Ware, failed to provide the fully integrated and functioning ERP system as expected. Arkray filed its complaint on December 1, 2020. In its complaint, Arkray alleges: (Count I) breach of contract against Navigator; (Count II) breach of warranty against Navigator; (Count III) breach of warranty against N'Ware; (Count IV) fraudulent misrepresentation against Navigator; (Count V) fraudulent misrepresentation against N'Ware; (Count VI) violation of Minnesota Unlawful Trade Practices Act ("MUTPA") against Navigator; and (Count VII) violation of MUTPA against N'Ware.

Navigator and N'Ware moved to dismiss Counts III-VII. All counts survived the Motion to Dismiss. The Court resolved the parties' Motions to Dismiss, finding:

The Court holds that Utah law governs ARKRAY's contract-based claims against Navigator in Counts I and II and Delaware law governs ARKRAY's breach of warranty claim against N'Ware in Count III. There are no conflicts of law related to fraudulent misrepresentation or the economic loss doctrine, so the Court need not engage in a conflict-of-law analysis for Counts IV and V. Additionally, a conflict-of-law analysis is not necessary for Counts VI and VII because Delaware public policy will not be offended by applying the Minnesota UTPA statute. The Court further finds that ARKAY's claims are not barred by the economic loss doctrine or Delaware's bootstrapping doctrine. ARKRAY's claims are sufficiently pled. The Rule 9(b) particularity requirements are met, and a more definite statement is not necessary. Based on the contractual provisions contained in the N'Ware License agreement, the Court finds that ARKRAY contractually waived its right to a trial by jury for Count III. Finally, the Court finds that it would be premature to decide the limitation of damages issue at this time.^[2]

After the Court's ruling on the Motion to Dismiss, Navigator filed the following counterclaims against Arkray: (Counterclaim I) breach of contract; (Counterclaim II) breach of the duty of good faith and fair dealing; (Counterclaim III) fraudulent misrepresentation; and (Counterclaim IV) declaratory judgment as to the parties' rights and duties under the Navigator Agreement.

N'Ware asserted the following crossclaims against Navigator: (Crossclaim I) seeking indemnification/contribution from Navigator for any amount N'Ware is found liable to Arkray; and (Crossclaim II) breach of contract.

Arkray, Navigator, and N'Ware each filed Motions for Partial Summary Judgment. Arkray moves for Summary Judgment on Navigator's Counterclaim IV and Navigator's affirmative defense of unclean hands. Navigator moves for Summary Judgment on Arkray's Counts IV and VI, and on its own Counterclaim IV. N'Ware moves for Summary Judgment on Arkray's Counts III, V, and VII. Arkray filed a Motion for Leave to File a Sur-Reply. The Court heard oral argument on May 16, 2023.

For purposes of judicial economy and expediency, the Court hereby DENIES Arkray's Motion for Leave to File a Sur-Reply. The Court considered the following during argument: (1) the affidavit and report from Arkray's expert, James Mottern (the "Mottern Affidavit"); (2) the affidavit of John McCrea (the "McCrea Affidavit"); and (3) the parties' related arguments.

SUMMARY JUDGMENT STANDARD

Summary judgment is granted only if the moving party establishes that there are no genuine issues of material fact in dispute and judgment may be granted as a matter of law.^[3] All facts are viewed in a light most favorable to the non-moving party.^[4] Summary judgment may not be granted if the record indicates that a material fact is in dispute, or if there is a need to clarify the application of law to the specific circumstances.^[5] When the facts permit a reasonable person to draw only one inference, the question becomes one for decision as a matter of law.^[6] If the non-moving party bears the burden of proof at trial, yet "fails to make a showing sufficient to establish the existence of an element essential to that party's case," then summary judgment may be granted against that party.^[7]

Delaware Superior Court Civil Rule 56(h) states:

Where the parties have filed cross motions for summary judgment and have not presented argument to the Court that there is an issue of fact material to the disposition of either motion, the Court shall deem the motions to be the equivalent of a stipulation for decision on the merits based on the record submitted with the motions.

However, where the moving parties continue to argue disputed facts, "the standard of review on cross-motions for summary judgment is equivalent to the situation where one party moves for summary judgment."^[8]

[T]he existence of cross motions for summary judgment does not act per se as a concession that there is an absence of factual issues. Rather, a party moving for summary judgment concedes the absence of a factual issue and the truth of the nonmoving party's allegations only for purposes of its own motion, and does not waive its right to assert that there are disputed facts that preclude summary judgment in favor of the other party. Thus, the mere filing of a cross motion for summary judgment does not serve as a waiver of the movant's right to assert the existence of a factual dispute as to the other party's motion.^[9]

ANALYSIS

ARKRAY'S MOTION FOR PARTIAL SUMMARY JUDGMENT

Limitation of Damages

The parties agree that a limitation of damages does not apply to non-contract claims.

Section 3.6.1 of the Navigator Agreement states:

3.6.1 EXCEPT FOR CLAIMS BROUGHT UNDER SECTIONS 3.4 AND 3.5 ANYTHING TO THE CONTRARY HEREIN OR DAMAGES RESULTING FROM UNAUTHORIZED USE OR DISCLOSURE OF PROPRIETARY INFORMATION AND [NAVIGATOR]'S RIGHT TO COLLECT UNPAID FEES, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY OR ITS AFFILIATES LICENSORS, CONSULTANTS OR CUSTOMERS BE LIABLE TO EACH OTHER OR ANY OTHER PERSON OR ENTITY FOR AN AMOUNT OF DAMAGES IN EXCESS OF THE LESSER OF EITHER THE FEES PAID FOR THE APPLICABLE SERVICES IN THE TWELVE (12) MONTH PERIOD PRECEDING THE DATE OF THE

CLAIM HEREUNDER OR ONE HUNDRED THOUSAND DOLLARS ($100,000.00 USD) DURING ANY TERM OR RENEWAL TERM OF THE AGREEMENT AND IN NO EVENT SHALL [NAVIGATOR]'S OR ITS LICENSORS' TOTAL LIABILITY EXCEED THREE HUNDRED THOUSAND DOLLARS ($300,000.00 USD) DURING THE ENTIRETY OF ALL TERMS OF THE AGREEMENT. WITHOUT LIMITING THE FOREGOING, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY, ITS AFFILIATES, LICENSORS, CONSULTANTS OR CUSTOMERS BE LIABLE TO EACH OTHER OR ANY OTHER PERSON OR ENTITY BE LIABLE IN ANY AMOUNT FOR SPECIAL, INCIDENTAL CONSEQUENTIAL OR INDIRECT DAMAGES, LOSS OF GOOD WILL OR BUSINESS PROFITS, WORK

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