Maroon Soc'y v. Unison Consulting Inc.

MAROON SOCIETY, a California Corporation, Plaintiff, v. UNISON CONSULTING INC., an Illinois Corporation, doing business in California, Defendant.

No. 19 C 05117

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

August 26, 2020

Judge Mary M. Rowland

MEMORANDUM OPINION & ORDER

For the reasons set forth below, Defendant's motion to dismiss is granted. Counts II and V are dismissed with prejudice. All other Counts are dismissed without prejudice. The Court grants Plaintiff leave to file an amended complaint by September 30, 2020. But if Plaintiff intends to replead a claim under California False Claims Act, (Count IV), it must first seek leave of court.

BACKGROUND

The Court has gleaned the following factual background from Plaintiff's Complaint. Maroon Society (Maroon or Plaintiff), a California corporation, provides data compilation and data analysis services to various other entities. (Dkt. 1, ¶¶ 1, 8). Unison Consulting Inc. (Unison or Defendant), an Illinois corporation, is a consulting firm that provides guest satisfaction surveys for airports. (Id. at ¶ 2). Plaintiff was hired by Defendant as a subcontractor to participate in several survey projects between 2011 and 2016. (Id. at ¶ 9). The crux of this suit derives from two subcontracts related to work performed for the Los Angeles International Airport ("LAX").

Plaintiff alleges that Unison entered into a prime contract ("2015 Prime Contract") with the City of Los Angeles ("City") on or about January 14, 2015 for LAX's 2015 Survey project ("2015 Survey"). (Dkt. 1, ¶ 10). Unison then entered into a subcontract with Plaintiff for the 2015 Survey on February 24, 2015 ("2015 Subcontract"). (Id. at ¶ 11). While Plaintiff was performing under the 2015 Subcontract, LAWA, the governmental authority in charge of operating LAX, released a request for proposal for the design and performance of guest satisfaction surveys at LAX. (Id. at ¶ 12). Unison requested that Maroon prepare a sub-bid to incorporate into Unison's bid for the request for proposal. Maroon submitted a sub-bid in the amount of $99,300. (Id. at ¶ 13).

Unison submitted its bid to LAWA. Plaintiff alleges that Unison's June 2015 bid identified Plaintiff as the subcontractor, but Unison unilaterally reduced the amount of Plaintiff's sub-bid to $88,505. (Dkt. 1, ¶¶ 14-15). When confronted in May 2016 about the sub-bid reduction, Defendant apparently represented to Plaintiff that it had reduced Plaintiff's sub-bid further to $80,450. (Id.). LAWA accepted Unison's bid and, on December 3, 2015, LAWA entered into a prime contract with Unison for the guest surveys at LAX ("2016 Prime Contract"). (Id. at ¶¶ 19-20). The term period in the 2016 Prime Contract stated: "...the term of this Contract shall commence on the Effective Date and shall expire no later than one (1) year thereafter, unless earlier terminated pursuant to the terms of the Contract. Notwithstanding the foregoing,City shall have two (2) one-year option to extend the term of this contract...." (Dkt.1, Ex. C, 20).

In March 2016, Plaintiff alleges that it was not receiving timely payments for work under the 2015 Subcontract. (Dkt. 1, ¶¶ 29, 31). When Plaintiff confronted Unison, Unison promised to monitor the payment intervals by LAWA on behalf of Plaintiff and that Unison would grant Plaintiff an additional contract if Plaintiff continued working on the 2015 and 2016 surveys. (Id. at ¶¶ 31, 36). Plaintiff argues that Unison's response constitutes a binding oral agreement.

Plaintiff was apparently satisfied by Unison's response and continued to work on the surveys. In May of 2016, Unison had still failed to pay Plaintiff's invoices. Plaintiff then demanded full payment of outstanding invoices for that work. (Dkt.1, ¶ 31). At that time, Plaintiff learned that Unison had unilaterally reduced Plaintiff's sub-bid to $80,450 without Plaintiff's knowledge. (Id. at ¶ 32). Plaintiff attempted to negotiate with Defendant to have the subcontract reflect the original amount of the sub-bid, $99,300. The declaration attached to Plaintiff's response brief states that Plaintiff negotiated with Unison to have the written subcontract reflect the original $99,300 sub-bid, but that such efforts were unsuccessful.¹

On June 20, 2016, despite the unilateral reduction in Plaintiff's sub-bid, Plaintiff and Defendant entered a written subcontract for the 2016 LAX survey work("2016 Subcontract"). (Dkt. 1, ¶ 23).² The 2016 Subcontract included an Illinois choice of law provision.³ The 2016 Subcontract also included the following integration clause: "Entire Agreement. This Agreement contains the entire agreement and understanding of the parties with respect to the subject matter hereof, and supersedes and replaces any and all prior discussion, representations and understandings, whether oral or written." (Dkt. 1, Ex. D, ¶ 19(j)). Regarding manner and timing of payment, the 2016 Subcontract states:

Once each month, Subcontractor shall by the 10th day of each month prepare and submit to UNISON an invoice showing services performed, fees earned during the preceding month calculated in accordance with the Payment Schedule, and expenses incurred during the preceding month, together with such supporting documentation as may be required by UNISON. Unison shall pay the Subcontractor within seven (7) days after receipt of payment from [LAX] attributable to Subcontractor's services.

(Id. at ¶ 2(b)). The 2015 Subcontract has substantially similar terms, with the only difference being the last sentence which states: "Except as may otherwise be stated in the Payment Schedule, Unison shall use good faith efforts to pay Subcontractor within forty-five (45) days after receipt of Subcontractor's invoice...but not later than seven (7) days after receipt of payment from [LAX] attributable to Subcontractor's services." (Dkt. 1, Ex. B, ¶ 2(b)). Because Plaintiff was anxious about receiving timelypayments, the parties added specific language to Schedule B of the Payment Schedule in the 2016 agreement. That language states:

UNISON agrees to promptly submit its invoices to [LAX] and to use good faith efforts to obtain payment from [LAX] in accordance with [LAX's] prompt payment policies. If [LAX] has not paid UNISON within thirty (30) calendar days of UNISON's invoice to [LAX], UNISON will advise Subcontractor of payment status and continue to advise Subcontractor of payment status not less often than once every five (5) business days thereafter until payment is received from [LAX].

(Dkt. 1, Ex D, Payment Schedule ¶ 4). Those are the only terms regarding payment in the Subcontracts attached to Plaintiff's Complaint.⁴ Contrary to Plaintiff's allegations, there is no requirement in either Subcontract that Unison pay Maroon "within seven (7) days of receipt by UNISON of [Maroon's] invoices." (Dkt. 1, ¶ 27).

Plaintiff alleges that after entering into the 2016 Subcontract, Unison breached the agreement by failing to timely submit invoices to LAWA. (Dkt. 1, ¶ 40). The Complaint contains no examples of the delay, but Plaintiff's response brief states that Plaintiff submitted an invoice to Unison on July 25, 2016 and that Unison did not submit the invoice to LAWA until October 13, 2016. (Dkt. 58, 10). Plaintiff allegedly confronted Unison in October 2016, demanding that Unison deposit its own money in an account, in advance of work performed, to ensure timely payment to Plaintiff. (Id. at ¶¶ 42, 44). Unison declined to do so.

In addition to failing to timely pay invoices, Plaintiff alleges that Unison made several misrepresentations to the City. Maroon alleges that Unison falsely told theCity that "MAROON SOCIETY was demanding 50% advanced payments on work not yet performed," (Dkt. 1, ¶ 47), and that Maroon was "delaying the project" and "refusing to perform work on the project." (Id. at ¶ 91). According to Maroon, Unison feared that Maroon would report Unison's violations to LAWA, and Unison made these representations in an attempt to disparage Maroon before Maroon could report the violations. (Id. at ¶ 47).⁵

Unison terminated the Subcontract in January 2017, at or around the same time Unison paid all of Maroon's outstanding invoices. (Dkt. 1, ¶ 49) Indeed, an earlier declaration of Aaron Celious, attached to Unison's motion to dismiss, states that "[a]t and around the time of Unison's termination of Maroon, Unison made payments on all outstanding invoices owed to Maroon." (Dkt. 51, Ex. 2, ¶ 53) (emphasis added).

Plaintiff's eight count Complaint asserts breach of contract, interference with prospective business relationship, fraud, negligence, trade libel, violations of the California False Claims Act and California's unfair competition law. Defendant moves to dismiss.

LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), "[t]o survive a motion to dismiss, a complaint must contain sufficient factual allegations to state a claim for relief that is plausible on its face." Ill. Bible Coll. Ass'n v. Anderson, 870 F.3d 631, 636 (7th Cir. 2017), as amended (Oct. 5, 2017), cert denied sub nom. Ill. Bible Coll. Ass'n v. Cross, 138 S. Ct. 1021 (2018). "A claim has facial plausibility when the plaintiff pleadsfactual 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) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). "While a plaintiff need not plead 'detailed factual allegations' to survive a motion to dismiss, she still must provide more than mere 'labels and conclusions or a formulaic recitation of the elements of a cause of action' for her complaint to be considered adequate...." Bell v. City of Chi., 835 F.3d 736, 738 (7th Cir. 2016) (quoting Iqbal, 556 U.S. at 678).

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) challenges whether the court has subject matter jurisdiction to hear a case. Fed. R. Civ. P. 12(b)(1). If a court...