Locus Techs. v. Honeywell Int'l, Inc.

LOCUS TECHNOLOGIES, Plaintiff, v. HONEYWELL INTERNATIONAL, INC., Defendant.

No. 19-CV-11532 (PGG) (KHP)

United States District Court, S.D. New York

April 7, 2022

Alexander Wilson Barnett-Howell, John Giardino, Michelman & Robinson, LLP, New York, NY, for Plaintiff.

Christine M. Haaker, Thompson Hine LLP (Columbus), Columbus OH, Emily Joy Mathieu, Thompson Hine LLP (NYC), New York, NY Sean Patrick McCormick. Thompson Hine LLP, Miamisburg, OH, for Defendant.

REPORT & RECOMMENDATION ON DEFENDANT'S MOTION TO DISMISS

KATHARINE H. PARKER, UNITED STATES MAGISTRATE JUDGE

*1 TO: HON. PAUL G. GARDEPHE, United States District Judge

Plaintiff Locus Technologies (“Locus”) filed suit against Defendant Honeywell International Inc. (“Honeywell”) on December 17, 2019 alleging three causes of action arising out of the parties' almost 20-year business relationship. Locus alleges that Honeywell breached various contractual agreements, including a licensing agreement and an agreement entered into for the joint development of new software. Locus also brings a claim for accounts stated, stemming from unpaid invoices issued pursuant to those various agreements, and for misappropriation of its trade secrets under the Delaware Uniform Trade Secret Act (“DUTSA”). Honeywell has moved to dismiss the Complaint pursuant to Fed.R.Civ.P 12(b)(6) for failure to state a claim upon which relief can be granted.

For the reasons that follow, I recommend granting Honeywell's motion as to the RIMS Invoices under the account stated claim, and denying the remainder of the motion.

FACTUAL ALLEGATIONS^[1]

Locus is a technology company, founded and located in California, which develops software related to environmental governmental regulations that allows its users, such as property owners and site managers, to collect relevant data and better navigate those regulations. (Compl. ¶ 2, ECF No. 1.) Honeywell is an international conglomerate, incorporated in Delaware and headquartered in North Carolina, that operates across several technological industries. On June 1, 2003, Locus and Honeywell entered into a Software License Agreement (the “License Agreement”) through which Honeywell acquired the ability to license and use several of Locus's software products. (See generally Ex. 1 to Compl., ECF No. 1-1 (hereinafter “License Agreement”).) Exhibit B to the License Agreement, entitled “Scope of Work, Services and Maintenance” specified the scope of Locus's obligations with respect to its products, such as Honeywell-specific modifications to the products, training and technical support. (License Agreement Ex. B at Task 1, ECF No. 1-1.) The products included Locus's Environmental Information Management module (“EIM”) and LocusFocus Portal (“ePortal”). EIM, one of Locus's first software products, is a “cloud-based ... data management and compliance system for the environmental industry.” (Compl. ¶ 22.) Locus's ePortal served as a “web portal for multiple Honeywell sites” including functions such as document storage and management, a schedule management tool, and “other collaborative applications.” (License Agreement Ex. B at Task 1.) The License Agreement was set to run for an initial term of three years and then automatically renew for four, one-year terms; thereafter it was to automatically renew indefinitely for one-year terms. (License Agreement § 3.2.) Under the License Agreement, Honeywell could prevent the renewal of a new term by providing notice at least 60 days prior to the end of any term. Honeywell also had the unilateral right to terminate the contract for convenience upon 60-days' notice to Locus. (Id. § 6.3.) Both parties maintained the right to terminate the License Agreement for cause in the event of the other's material default if timely notice was provided and the defaulting party failed to adequately cure the default within 30 days. (Id. § 6.2.) Under the License Agreement, Locus was to bill Honeywell on a monthly or bi-monthly basis with payment due to Locus within 60 days of the invoice date. (License Agreement Ex. E § IV.) All unpaid invoices were then subject to interest at a rate of 1.5% per month beginning on the first late day. Finally, as relevant to this litigation, Section 12.5 of the License Agreement provided that it could only be amended or modified through signed writings and that the terms of the License Agreement were to prevail over any potentially conflicting terms in any other writing, including purchase orders, provided that the other writing did not expressly incorporate the License Agreement. (License Agreement § 12.5 (“No amendments or modifications shall be effective unless in writing signed by authorized representatives of both parties.”)

*2 The parties operated under the License Agreement until 2013, seemingly in heavy reliance on the indefinite one-year automatic renewals. (Compl. ¶ 34 (“The License Agreement remained in full force and effect from its inception through 2012 ....”).) Then, on October 16, 2012, the parties signed an order form (hereinafter, the “Order Form”), changing the terms of the EIM and ePortal subscriptions for 2013, 2014, and 2015; Locus alleges the Order Form operated as “an amendment of the License Agreement.” (Id. ¶ 43; see also Ex. 2 to Compl., ECF No. 1-2 (hereinafter, “Order Form”).) While the term “amendment” is absent from the Order Form, the parties incorporated the License Agreement by reference except as to those terms modified in the Order Form, which included modifications to the pricing structure and overall cost, the cancellation provisions, and the addition of a provision regarding a termination fee. Specifically, the Order Form converted the line-item pricing table in Exhibit C of the License Agreement to a fixed annual price for year-long subscriptions to EIM and ePortal. The Order Form's effective date was January 1, 2013 and provided for a “Contract End Date” of December 31, 2015 with no provisions or terms for the renewal of the Order Form. (See Order Form at 1-2.) The billing period also changed from monthly or bi-monthly to annual, with payment due 90 days from the invoice date, as opposed to 60 days under the License Agreement. (Id. at 1.) The Order Form provided for a termination fee based on the volume of records and data provided by Honeywell that Locus would have to transfer back to it. (Id. at 2.) Finally, and perhaps most important to this litigation, the subscriptions to the EIM and ePortal products became “noncancelable before their annual End Date, ” which was the last day of a given year during the Order Form's life. (Id. at 2.) Although the parties never entered into any written extension of the term of the Order Form, they continued to do business under the pricing and billing terms of the Order Form through 2018, renewing on an annual basis. (Compl. ¶¶ 54-55.)

On June 26, 2018, Honeywell terminated its ePortal subscription-it did not seek to terminate the EIM subscription at this time. (Id. ¶¶ 100-02.) Locus asserts that while Honeywell was free to terminate its ePortal subscription, it nonetheless remained responsible for paying the full-year subscription, as any cancellation did not take effect until the following year. Honeywell, in its motion, asserts that it was free to terminate its ePortal subscription on 60-days' notice per the terms of the Licensing Agreement. On October 24, 2018, Honeywell told Locus that it planned to issue a request for proposal (“RFP”) to replace its need for Locus's EIM software. (Id. ¶ 116.) At the same time, Honeywell asked to switch the billing period for the EIM subscription from annual to quarterly, starting with its 2019 subscriptions. (Id. ¶ 117.) Locus agreed to change from annual to bi-annual billing for 2019. (Id.) While the fact that the parties changed to bi-annual billing for 2019 is not disputed, the parties dispute whether this change simply divided the annual billing period into two invoices while maintaining the yearlong non-cancellable nature of the subscription (as contemplated by the Order Form), or rather, whether this division of the billing period converted the annual subscription to a six-month subscription.

On October 25, 2018, Locus issued an invoice to Honeywell for 2019 EIM services EIM totaling $348, 855 (the “EIM F2019 First Half Invoice).^[2] This invoice covered the EIM subscription for the first six months of 2019 and contained a 90-day payment term. Honeywell paid this invoice on February 19, 2019, which was 117 days after the invoice date. (Id.)

On December 20, 2018, Honeywell issued an RFP to solicit bids from other companies to replace Locus's EIM software, including from Locus's “major competitors.” (Id. ¶ 118.) The RFP disclosed Locus's pricing structure under the Order Form, the “high-level data flow” of Locus's EIM software, the “software setup” that disclosed the “parameters and methods” of Locus's products, “software outputs” of the products, and “data dumps” containing Locus's products' “internal tools and processes.” (Id. ¶ 119.) Locus alleges that the RFP's contents were not standard practice in the industry, revealed proprietary information, and also contained some falsehoods about Locus's products. (Id. ¶ 120-21.) Locus attempted to talk with Honeywell to remedy the situation, but Honeywell rebuffed Locus. (Id. ¶ 121-23.)

On April 3, 2019, Locus issued an invoice for the EIM subscription for the second half of 2019 (“EIM 2019 Second Half Invoice”), totaling $359, 321, which Honeywell has never paid. (Id. ¶ 110.) On May 2, 2019, Honeywell gave Locus notice of termination for the EIM subscription purporting to cancel it per the 60-day notice of cancellation for convenience provision in the Licensing Agreement. (Id. ¶ 102; see also License Agreement § 6.3.) However, Honeywell...