Palinode, LLC v. Plaza Servs.

1

PALINODE, LLC, Plaintiff, v. PLAZA SERVICES, LLC and PROVANA, LLC, Defendants.

Civil Action No. 21-1378-MN-SRF

United States District Court, D. Delaware

January 9, 2023

REPORT AND RECOMMENDATION

SHERRY R. FALLON, UNITED STATES MAGISTRATE JUDGE

Presently before the court in this diversity action is the partial motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c), filed by defendant Provana, LLC (“Provana”).^[1] (D.I. 195) For the following reasons, I recommend that the court DENY Provana's motion for judgment on the pleadings.

I. BACKGROUND^[2]

Plaintiff Palinode, LLC (“Plaintiff') is a leading provider of credit dispute resolution technology. (D.I. 122 at ¶ 8) Plaintiff developed proprietary credit dispute investigation software called “Sonnet,” which it licenses to customers by entering into Software-as-a-Service (“SaaS”) customer agreements. (Id. at ¶¶ 16,20) These customer agreements require customers to prevent unauthorized access to Sonnet and protect confidential, proprietary information regarding Sonnet. (Id. at ¶ 20) Provana is a competing SaaS provider that offers services similar to Plaintiff's Sonnet software, such as its Integrated Performance Audit and Compliance Software (“IP ACS”) and Comply ARM software. (Id. at ¶ 12)

Plaintiff filed a second amended complaint (“SAC”) on November 4, 2021, alleging five causes of action against Provana and defendant Plaza Services, LLC (“Plaza”). At issue in the pending motion for judgment on the pleadings is Count III of the SAC against Provana for procurement and/or inducement of breach of contract under Tenn. Code Ann. § 47-50-109 and at common law. (D.I. 122 at ¶¶ 87-98; D.I. 196 at 4) Relevant to this cause of action are Plaintiff's allegations that Provana induced Plaza to breach its SaaS agreement with Plaintiff by giving Provana unauthorized access to Plaintiff's Sonnet software. (Id. at ¶¶ 2, 32) This breach purportedly enabled Provana to use Plaintiff's trade secret information to improve its own competing IP ACS software product. (Id. at ¶¶ 4, 32-41)

Provana moved to dismiss the SAC on November 30, 2021. (D.I. 139) In pertinent part, Provana argued for dismissal of Counts II and III of the SAC based on its position that those counts are preempted by Plaintiff's trade secret misappropriation claims under the Tennessee Uniform Trade Secrets Act (“TUTSA”) and the Delaware Uniform Trade Secrets Act (“DUTSA”). (D.I. 140 at 3) The undersigned judicial officer issued a Report and Recommendation on January 18, 2022, recommending that the court grant the motion to dismiss Count II of the SAC and deny the motion to dismiss in all other respects. (D.I. 150) The Report and Recommendation was adopted in its entirety on February 14 2022. (D.I. 160) Two weeks later, the parties submitted a stipulation agreeing that Tennessee law governs Plaintiff's cause of action for procurement and/or inducement of breach of contract. (D.I. 162) The deadline to amend pleadings expired on June 3,2022. (D.L 159 at ¶ 2)

II. LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(c), a party may move for judgment on the pleadings “[a]fter the pleadings are closed - but early enough not to delay trial.” Fed.R.Civ.P. 12(c). When considering a Rule 12(c) motion for judgment on the pleadings, the motion is analyzed under the same standards that apply to a Rule 12(b)(6) motion and the court must “view the facts presented in the pleadings and the inferences to be drawn therefrom in the light most favorable to the nomoving party.” Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir. 2008) (quoting Jablonski v. Pan Am. World Airways, Inc., 863 F.2d 289,290-91 (3d Cir. 1988)).

“The purpose of judgment on the pleadings is to dispose of claims where the material facts are undisputed and judgment can be entered on the competing pleadings and exhibits thereto, and documents incorporated by reference.” Venetec Int'l, Inc. v. Nexus Med., LLC, 541 F.Supp.2d 612, 617 (D. Del. 2008); see also In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410,1426 (3d Cir. 1997). “The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.” Burlington Coat Factory, 114 F.3d at 1420. Ultimately, a motion for judgment on the pleadings can be granted “only if no relief could be granted under any set of facts that could be proved.” Turbe v. Gov't of Virgin Islands, 938 F.2d 427,428 (3d Cir. 1991).

III. DISCUSSION

I recommend that the court deny Provana's motion for judgment on the pleadings as an untimely motion for reconsideration of issues previously waived or raised and decided in connection with Provana's Rule 12(b)(6) motion to dismiss. See Bone v. Univ. of N. Carolina Health Care Sys., 2021 WL 395547, at *6 (M.D. N.C. Feb. 4,2021) (concluding that a Rule 12(c) motion does not provide an opportunity to relitigate issues raised and decided on a motion to dismiss), report and recommendation adopted, 2021 WL 3196437 (M.D. N.C. Mar. 31, 2021); River Cross Land Co., LLC v. Seminole Cty., 2019 WL 12518728, at *3 (M.D. Fla. Aug. 21, 2019) (same). The crux of Provana's motion for judgment on the pleadings is that Count III of the SAC for procurement and/or inducement of breach of contract should be dismissed because it is preempted under the TUTS A. (D.I. 196 at 4) But Provana previously argued that Count III of the SAC should be dismissed on preemption grounds in its Rule 12(b)(6) motion to dismiss. (D.I. 140 at 7-10)

In the Report and Recommendation denying Provana's motion to dismiss Count III of the SAC, the court rejected Provana's preemption argument for inducement of breach of contract, noting that Provana “substantively discuss[ed] only Count II and case authorities involving claims for tortious interference with business relations in their briefing on preemption. Indeed, Defendants do not identify the elements of a cause of action for inducement of breach of contract in their preemption analysis.” (D.I. 150 at 15 n.8) Provana's opening brief in support of its Rule 12(c) motion for judgment on the pleadings now presents more than six pages of argument to bolster its position that Count III of the SAC should be dismissed on preemption grounds under the TUTSA. (D.J. 196 at 8-14) Provana passed over the opportunity to present a preemption argument specific to Count III in its briefing on the motion to dismiss, and relief under Rule 12(c) is not available under these circumstances. See River Cross Land Co., 2019 WL 12518728, at *4 (“Judicial economy would indeed be undermined by allowing parties to revisit the issues they explicitly raised or necessarily should have addressed in a previous Rule 12(b)(6) motion.”).

Provana also raised its preemption argument regarding Count III in its limited objections to the Report and Recommendation on the motion to dismiss. (D.I. 156) In the objections, Provana changed its position regarding the substantive similarity of Delaware and Tennessee law as it pertains to preemption of Count III of the SAC and argued that the court erred as a matter of law by applying Delaware case law to the inducement of breach of contract claim brought under Tennessee law. (Id. at 4) The District Judge overruled Provana's objections and declined to consider Provana's new arguments that should have been addressed in the Rule 12(b)(6) motion to dismiss. (D.I. 160 at 3) Substantive consideration of Provana's Rule 12(c) motion on this record would amount to a third bite at the apple, after the District Judge already rejected Provana's attempt at a second bite. See In re Toyota Motor Corp. Sec. Litig, 2012 WL 3764903, at *1 (C.D. Cal. Feb. 21, 2012) (explaining that the various subsections of Rule 12 “do not provide an unfettered grant to seek reconsideration of arguments already raised and lost in a previous Rule 12(b)(6) motion.”).

Provana maintains that its motion for judgment on the pleadings is not an improper motion for reconsideration of the motion to dismiss because two events occurred after the court issued its Report and Recommendation that change the landscape. (D.I. 196 at 9) First, on February 28,2022, the parties stipulated that Tennessee law applies to Count III of the SAC. (D.I. 162) Second, the United States District Court for the Eastern District of Tennessee issued a decision three days after the Report and Recommendation in this case addressing a similar issue and determining that a claim for statutory procurement of breach of contract is preempted under the TUTSA. See Windrock, Inc. v. Resonance Sys., Inc., 2022 WL 202891, at *6 (E.D. Tenn. Jan. 21, 2022). Neither of these events alters the fact that Provana's Rule 12(c) motion for judgment on the pleadings is, at its core, a motion for reconsideration.

The parties' stipulation that Tennessee law applies to Count III of the SAC clarifies the record going forward as this case progresses to case dispositive motions. (D.I. 162); see River Cross Land Co., 2019 WL 12518728, at *4 (explaining that the denial of the Rule 12(c) motion as an improper motion for reconsideration did not preclude the defendant from seeking summary judgment on those same allegations). But it does not provide an opportunity for Provana to change tactics after grouping Counts II and III of the SAC under a single argument that addressed both Delaware and Tennessee law in its briefing on the motion to dismiss. (D.I. 140 at 7-11) The District Judge rejected Provana's attempt to shift its position in the objections to the Report and Recommendation, concluding that “those objections could have and should have been made in the motion addressed by the Magistrate Judge.” (D.I. 160 at 3) The same reasoning applies to Provana's Rule 12(c) motion.

...