Pavonix, Inc. v. Barclays Bank PLC

PAVONIX, INC., Plaintiff, v. BARCLAYS BANK PLC, Defendant.

CIVIL ACTION NO. 13-10348-LTS

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

November 25, 2015

SEALED

REPORT AND RECOMMENDATION ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

DEIN, U.S.M.J.

I. INTRODUCTION

The plaintiff, Pavonix, Inc. (formerly known as Softscape, Inc. and referred to herein as "Softscape"), was a company engaged in the business of supplying software and service for online employee performance reviews. The defendant, Barclays Bank PLC ("Barclays"), was one of its customers pursuant to a contract that was set to expire in October 2009, but was extended by agreement through June 15, 2010. Softscape alleges that shortly before the time the contract was set to expire, Barclays wrongfully induced Softscape to update Barclays' software, at substantial cost to Softscape, by misleading Softscape into believing that Barclays intended to further extend its agreement with Softscape. In reality, according to Softscape, Barclays had no intention of entering into a new contract with Softscape, but was negotiating with, and eventually entered into a contract with, another software provider. Softscape has brought this action alleging that Barclays is liable for fraud (Count I), unjust enrichment (Count II), and unfair or deceptive trade practices in violation of Mass. Gen. Laws ch. 93A (Count III).

This matter is before the court on "Defendant Barclays Bank PLC's Motion for Summary Judgment." (Docket No. 85). By this motion, Barclays is seeking judgment in its favor on all counts of the Complaint on the grounds that (1) Softscape lacks standing to maintain this action because it allegedly sold these claims to a third party in 2010, (2) the claims of fraud and unjust enrichment are time-barred, (3) the 93A claims must fail either because the laws of England govern this dispute or because the alleged misconduct did not take place "primarily and substantially" within the Commonwealth of Massachusetts, (4) the fraud and 93A claims must fail because the undisputed facts establish that Softscape did not, as a matter of fact or law, rely on any oral representations, and (5) Softscape cannot maintain a claim for unjust enrichment as a matter of law Softscape opposes the motion for summary judgment in its entirety.

As detailed herein, this court finds that Softscape did not sell these claims to a third-party and has standing to maintain this action. This court finds further that there are material facts in dispute which preclude the entry of summary judgment on any of the claims. Therefore, this court recommends to the District Judge to whom this case is assigned that Barclays' motion for summary judgment (Docket No. 85) be DENIED.

II. STATEMENT OF FACTS¹

In ruling on a motion for summary judgment, the facts must be viewed in the light most favorable to the non-moving party. See Vineberg v. Bissonnette, 548 F.3d 50, 56 (1st Cir. 2008). Applying this principle, the relevant facts are as follows.

Overview of the Parties' Contractual Relationship

Softscape and Barclays are parties to an "Agreement for the Supply of Services," which commenced on November 15, 2006 and was initially set to expire on October 31, 2009. (Ex. 4; PF ¶¶ 1, 2). Pursuant to this Agreement, Softscape provided Barclays with software called "PD Online," which was used to conduct employee performance reviews. (DF ¶ 10). At the time the contract began, Barclays was provided with Version 10 of the software. (PF ¶ 3). In or about 2008/2009, Softscape began marketing Version 12, which it believed would improve the product and address various bugs in the software. (PF ¶ 4). In January 2009, Softscape and Barclays were engaged in discussions regarding the possibility of upgrading Barclays to Version 12, but Barclays was reluctant to do to so. (PF ¶¶ 6-7). Softscape, on the other hand, felt that the transition to Version 12 was necessary because Version 10 had become outdated and, in its view, Barclays' hardware was unable to properly accommodate Version 10 any longer. (PF ¶ 8). Moreover, there is evidence that Softscape was no longer intending to support Version 10. (See DR ¶ 8). The events surrounding the upgrade to Version 12 form the basis of this dispute.

The parties' Agreement provided that it could be terminated on at least three months' notice before the expiration of the Initial Term on October 31, 2009. (DR ¶ 10). It is Softscape's contention that instead of terminating the contract when faced with Barclays' reluctance to upgrade to Version 12, it undertook an extensive upgrade, including customization to meet Barclays' specific needs, based on representations made by Barclays that it would extend the parties' Agreement. It is further Softscape's contention that Barclays never had any intention to do so. As detailed herein, reading the record in the light most favorable to Softscape, there is evidence that Barclays represented to Softscape that it intended to try and reach a mutually acceptable contract extension, when, in fact, it never had any intention of signing such an agreement with Softscape.

The Upgrade to Version 12

As detailed above, in January 2009, Softscape and Barclays were discussing the need to upgrade Barclays to Version 12. (PF ¶ 6). According to Softscape's CEO, David Watkins, it was at this time that Barclays made oral representations that it was going to extend its contract with Softscape for an additional three years after it expired. (Ex. 1 at 146). While Mr. Watkins' characterization of the parties' discussions is disputed, it is agreed that as of March 26, 2009, Softscape and Barclays had agreed upon a plan to upgrade to Version 12 all divisions of Barclays that Softscape had already been servicing, including Barclaycard, Group Centre, GRCB Center and BCB. (PF ¶ 12). By June 5, 2009, Barclaycard was live on Version 12. (PF ¶ 13). The other divisions were reluctant to transfer to Version 12, as a result of which Softscape was being asked to support two systems. (Ex. 47). The other divisions did not go live on Version 12 until September 2009. (PF ¶ 14).

Cost for the Upgrade

It is Barclays' contention that Softscape agreed to complete the upgrade to Version 12 free of charge, and it points to various email communications, including an email dated December 23, 2008, in which Softscape wrote:

We will be upgrading the system in January (for no cost) and strongly recommend Barclays deploys it. One of the challenges we have had with performance issues we experienced in Q4 was that the platform is getting on for 3 years old. We believe v12 will correct the issues. There are also some hosting infrastructure discussions we'll need to have.

(DF ¶ 41; Ex. 9). Moreover, Barclays argues that Softscape was contractually obligated to provide the upgrade to Version 12 free of charge. (See DF ¶¶ 42, 43).

For its part, Softscape argues that the only reason it agreed to provide the upgrade, instead of simply letting the contract expire by its terms in October 2009, was because Barclays had represented that it intended to extend the contract. (Pl. Mem. (Docket No. 97) at 4-5; PF ¶¶ 10-11). Moreover, Softscape asserts that in connection with the upgrade, "Barclays had required of Softscape numerous customizations and enhancements none of which Softscape was obligated to migrate to an upgraded version of the software for free." (PR ¶¶ 42-43). Barclays agrees that it had to pay for some specific enhancements, but contends that it was entitled to other enhancements and customizations free of charge. (DR ¶¶ 7, 9). Based on the present record, it does not appear that Barclays was willing to accept Version 12 without enhancements and customizations. (See DR ¶ 9). The issue whether Softscape was contractually required to provide Version 12 in a form acceptable to Barclays free of charge, or whether it provided the acceptable Version 12 free of charge in reliance on Barclays' promise to renew the contract, remains in dispute.

Events of May 2009

As noted above, by June 5, 2009, Barclaycard was live on Version 12, but the other divisions were not by their own choice, and over Softscape's objection. (See Ex. 47). As a result, Softscape was obligated to maintain two support systems, and it submitted a bill to Barclays for this dual effort sometime in May 2009. (Ex. 47). As Barclays described in its internal communications, it responded to Softscape's bill by "politely" telling Softscape to "go shove it." (Ex. 47). In order to avoid paying Softscape, Barclays, again in its own words, held out the "carrot" of a contract renewal to Softscape. (Ex. 47). Thus, according to its internal communications, to get Softscape to back down on its efforts to collect payment for its work, and to give Softscape incentive to complete the upgrade in mid-August, Barclays "agreed" with Softscape "to extend the contract for 18 months" with "the option to extend for a further 12 months." (Ex. 47 ("Our strategy that has been agreed with David [Watkins] is to extend the contract for 18 months which will allow us to complete one full cycle (2010 PD). We will also have the option to extend for a further 12 months.")).

Despite its internal acknowledgment that it had "agreed" with Softscape to extend the contract, Barclays argues that Softscape, as a matter of law, cannot have reasonably relied on any such representation since it was clear that the material terms of any agreement remained open. In support of this position, Barclays points to its email to Softscape dated May 29, 2009 in which Barclays refused to pay for the dual support,² and did not confirm that an agreement had been reached, but rather stated that it would start negotiations. Specifically, Peter Gilbert of Barclays wrote in relevant part as follows:

I have discussed this with my senior management, and our position remains unaltered. We are not prepared to accept costs which have not been tabled up front and budgeted. However, we acknowledge the amount of investment

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