Mission Measurement Corp. v. Blackbaud, Inc.

Mission Measurement Corporation, Plaintiff, v. Blackbaud, Inc., et al., Defendants.

Case No: 16 C 6003

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

October 8, 2019

Judge Ronald A. Guzmán

MEMORANDUM OPINION AND ORDER

For the reasons stated below, Defendants' motions for summary judgment [279, 291, 299] are granted. All other pending motions are stricken as moot. Within 7 days of the date of entry of this order, Plaintiff shall submit a statement as to whether any claims or defendants remain.

STATEMENT

Background

The instant lawsuit stems, as so many do, from a business relationship gone bad. Mission Measurement ("MM") is a consulting firm working in the philanthropic sector and has described itself as a "global leader in measuring social impact" by using "data to help clients increase their impact and solve social problems more efficiently." (Pl.'s Ex. 12, Dkt. # 321-9, at 2.) In 2012, Jason Saul, Chief Executive Officer of MM, began talking to employees of MicroEdge about the two companies working together to create a new software product for the nonprofit sector that would assist philanthropic foundations and grant recipients in tracking the value of their investments in social endeavors. (Pl.'s Resp. Blackbaud's Stmt. Facts, Dkt. # 320, at 1, ¶ 1.) MM had a database of information it called the Outcomes Taxonomy that could be used to measure social impact. (Id. ¶ 2.) MM and MicroEdge entered into a Letter of Intent ("LOI") in January 2013 regarding the joint development of the aforementioned product, with the intention to negotiate toward a final agreement by May 1, 2013.

The LOI provided in part, as follows:

1. Services: MicroEdge and [MM] agree that the following services shall be performed by both parties. The parties acknowledge that the precise amount of resource input by each party for these services cannot be determined exactly. The intent of the services is to create the proposed outputs to determine the commercial viability of a product concept combining MicroEdge and [MM] assets.

(a) Joint product development:

MicroEdge and [MM] will collaborate to create a product consisting of software combining [MM]'s Outcomes Taxonomy and MicroEdge accounting and grants management software (the "Software"), consulting services to support use of the software and ongoing software and taxonomy maintenance. The output of this collaboration will be a product concept or set of product concepts that reasonably describe customer benefit, software functionality, approximate price point(s) and user experience such that reasonable market research can be conducted for purposes of commercial concept evaluation (collectively, the "product Concepts").

(b) Joint technology development[:]

To evaluate the feasibility of combining the Outcomes Taxonomy and MicroEdge software, [MM] will provide a copy and description of the OutcomesTaxonomy to MicroEdge; MicroEdge will be subject to the Restrictions outlined in section 11 regarding this software.

(c) Joint sales pitch meetings:

MicroEdge and [MM] will create work product to facilitate product concept pitches and sales pitches to the philanthropy sector. The output of this collaboration will be to meet with 8-12 very large foundations on the product concept(s) for the purposes of concept evaluation and potential early adopter recruiting.

(d) Market research:

As part of this product concept creation and evaluation, MicroEdge will engage a third-party researcher to contact clients and conduct product concept evaluation for purposes of commercial viability. This market research will be funded solely by MicroEdge.

(LOI, Dkt. # 16, ¶ 1.)

No additional agreement was signed after May 1, 2013. MicroEdge subsequently marketed itself for sale, and Blackbaud bought MicroEdge in October 2014 for $140 million. In 2016, Blackbaud launched "Blackbaud Outcomes," which the parties agree does not incorporate MM's Outcomes Taxonomy. Additional facts are discussed as necessary in the text of the order.

MM filed the instant lawsuit in June 2016 against Blackbaud, MicroEdge, and VistaEquity Partners,¹ alleging various claims, including breach of contract, tortious interference, federal and state-law trade secret violations, and unjust enrichment. The Defendants have filed separate summary judgment motions, which are addressed in turn below.

Summary Judgment Standard

Summary judgment is proper where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A genuine factual dispute exists when there is enough evidence that a reasonable jury could find in favor of the nonmoving party. Whiting v. Wexford Health Sources, Inc., 839 F.3d 658, 661 (7th Cir. 2016). In construing the evidence and facts supported by the record in favor of the non-moving party, the Court gives the non-moving party "the benefit of reasonable inferences from the evidence, but not speculative inferences in [its] favor." White v. City of Chi., 829 F.3d 837, 841 (7th Cir. 2016) (internal citations omitted).

Analysis

A. Vista Equity Partners Management ("Vista")

Vista Management provided management services to MicroEdge pursuant to a management agreement dated October 1, 2009, as amended on December 27, 2012. Their relationship terminated upon the close of the MicroEdge sale to Blackbaud on October 1, 2014. Vista Management is affiliated with certain private equity funds, including VFF I AIV I, L.P. and VFF I AIV I-A, L.P. (the "Vista Funds"), which held a majority of MicroEdge's stock prior to the sale of MicroEdge to Blackbaud.² MM alleges claims of tortious interference with contract and prospective economic advantage and unjust enrichment against Vista.

As noted above, MM and MicroEdge discussed "integrating [MM]'s Outcomes Taxonomy into MicroEdge's . . . existing products." (Pl.'s Resp. Vista's Stmt. Facts, Dkt. # 320, at 54, ¶ 7.) MicroEdge and MM made a joint presentation containing a sample of MM's Outcomes Taxonomy at a MicroEdge user conference in October 2012. (Id. ¶ 8.) MM and MicroEdge entered into the LOI in January 2013. (Id. ¶ 9.) The LOI provided that "[i]t is the intention of the parties that they will negotiate in good faith and execute the final Agreement by May 1, 2013. In the event that the parties are unable to conclude a final Agreement by that date, this LOI and the intentions set forth herein expire." (Id. ¶ 10.) The parties did not enter into any other written agreement after the LOI. (Id. ¶ 11.)

In Illinois, tortious interference with a prospective business relationship has fourelements: "'(1) [the plaintiff's] reasonable expectation of entering into a valid business relationship; (2) the defendant's knowledge of the plaintiff's expectancy; (3) purposeful interference by the defendant that prevents the plaintiff's legitimate expectancy from ripening into a valid business relationship; and (4) damages to the plaintiff resulting from such interference.'" ATC Healthcare Servs., Inc. v. RCM Techs., Inc., No. 15 C 8020, 2019 WL 3554009, at *3 (N.D. Ill. Aug. 5, 2019) (citation omitted). Tortious interference with a contractual relationship is similar and requires a plaintiff to establish: "(1) the existence of a valid and enforceable contract between it and another; (2) [the defendant's] awareness of the contract; (3) [the defendant's] intentional and unjustified inducement of a breach of that contract; (4) a subsequent breach of the contract by the other, caused by [the defendant]; and (5) damages." Grecian Delight Foods, Inc. v. Great Am. Ins. Co. of N.Y., 365 F. Supp. 3d 948, 954 (N.D. Ill. 2019).³

Both tortious interference claims fail because MM points to no evidence supporting its claim for damages against Vista. Indeed, MM acknowledges that its damages expert, V. Walter Bratic, failed to compute damages for either tortious interference claim. (Pl.'s Resp. Vista's Stmt. Facts, Dkt. # 320, at 76, ¶ 41 (responding "Undisputed" to Vista's statement of fact that "Mr. Bratic did not calculate damages for either of Plaintiff's tortious interference claims.").) MM's entire response regarding its failure to establish tortious interference damages is as follows: "Defendants' argument that [MM] cannot support the element of damages would . . . require the Court to construe disputed issues of fact against [MM]." (Pl.'s Omnibus Resp., Dkt. # 322, at 39.) MM cites to its response to Blackbaud's statement of fact paragraph 69 in which it argues that it has been damaged, but admits that it is "[u]ndisputed that [it] has not disclosed a calculation of these damages." (Pl.'s Resp. Blackbaud's Stmt. Facts, Dkt. # 320, at 1, ¶ 69.) MM's assertion that it has damages but they simply have not been quantified is unavailing. "A nonmovant's failure to produce sufficient evidence of the damages element of its claim calls for the entry of summary judgment against that party." Dunkin' Donuts Inc. v. N.A.S.T., Inc., 428 F. Supp. 2d 761, 767 (N.D. Ill. 2005).

MM's tortious interference claims also fail because any alleged damages would be excluded under Federal Rule of Civil Procedure 37 given that MM failed to disclose any damages calculations and does not justify its failure to disclose or attempt to demonstrate that such failure is harmless. Indep. Tr. Corp. v. Fid. Nat. Title Ins. Co. of N.Y., 577 F. Supp. 2d 1023, 1048 (N.D. Ill. 2008) ("Failing to include a damage claim among initial or supplemented disclosures, or to disclose it in response to an interrogatory, mandates exclusion as a sanction, unless the party failing to make disclosures can show that its violation was justified or harmless."). For these reasons, Vista is entitled to judgment on MM's tortious interference claims.

MM also alleges unjust enrichment against Vista. "To recover under a theory of unjust enrichment, a plaintiff 'must show that defendant voluntarily accepted a benefit which would be inequitable for [it] to retain without...