SteppeChange LLC v. Veon Ltd.

354 F.Supp.3d 1033

STEPPECHANGE LLC, Plaintiff,

v.VEON LTD., et al., Defendants.

Case No. 18-cv-04842-WHO

United States District Court, N.D. California.

Signed December 5, 2018

Denise M. De Mory, Aaron Richard Hand, Hillary Noelle Bunsow, Bunsow De Mory LLP, Redwood City, CA, for Plaintiff.

Andrea N. Hadjiyianni, Courtney Chin Aasen, Matthew Stewart Kahn, Ian Thompson Long, Daniel J. Kuo, Gibson, Dunn and Crutcher LLP, Benedict Y. Hur, Travis S. Silva, Franco Emilio Muzzio, Jose Luis Martinez, Attorney at Law Keker, Van Nest & Peters LLP, San Francisco, CA, Michael D. Celio, Gibson, Dunn & Crutcher LLP, Palo Alto, CA, for Defendants.

ORDER DENYING STEPPECHANGE'S MOTION TO REMAND; GRANTING VEON'S MOTION TO COMPEL ARBITRATION; GRANTING WIND'S MOTION TO COMPEL ARBITRATION IN PART; GRANTING VEON'S MOTION TO SEAL

Re: Dkt. Nos. 27, 33, 35, 3

William H. Orrick, United States District Judge

Plaintiff SteppeChange LLC ("SteppeChange") brings suit against VEON Ltd. ("VEON") and Wind Tre S.p.A. ("Wind"), alleging that it was never paid for one of two software projects it developed on defendants' behalf. Defendants move to compel arbitration and to dismiss the complaint. In support of their motions to compel arbitration, defendants contend that a contract relating to the other software project delegates questions of arbitrability to the arbitrator and requires that SteppeChange's claims against VEON be sent to arbitration to at least decide this threshold issue. As I find that questions of arbitrability have clearly and unmistakably been delegated to the arbitrator and that VEON's assertion of arbitrability is not wholly groundless, I grant VEON's motion to compel arbitration. This case is stayed as to both defendants to prevent confusion, waste of judicial resources, and inconsistent results.

SteppeChange also moves to remand this case back to state court, arguing that removal was untimely. I deny the motion to remand because removal was timely under 28 U.S.C. § 1446(b) and California Code of Civil Procedure § 415.50.

BACKGROUND¹

SteppeChange is a Palo Alto, California based technology company that provides big-data analytics and digital-transformation services. Complaint attached as Ex. A to the Notice of Removal [Dkt. No. 1-3] ("Compl.") ¶¶ 1, 19. VEON provides cellular phone and data services in Europe, Africa, and Asia through its subsidiaries, including Wind. Id. at ¶ 2. VEON is incorporated under the law of Bermuda with a registered business office in the Netherlands. Id. at ¶ 20. Wind is incorporated and has a registered office in Italy. Id. at ¶ 21.

SteppeChange alleges that, through intermediaries, it worked on two projects for the benefit of VEON and Wind. The first project, referred to as "Button," was to develop a customer messaging and interaction platform. Id. at ¶ 64. In or around May 2015, VEON contracted with nonparty company GS & CO to create Button. Id. GS & CO then engaged SteppeChange via an oral time-and-materials agreement to design and develop Button. Id. VEON and Wind were informed and aware that SteppeChange was the driving force behind the design, development, and implementation of the Button project. Id. at ¶ 66. Button was released to VEON customers in the Italian Wind-branded markets on or about October of 2016. Id. at ¶ 67.

I. THE DMP PROJECT

The second project, and the one that is the subject of this suit, was to create, implement, manufacture, and support a digital customer-data marketing and management strategy and platform including a data management platform solution (the "DMP Project").Id. at ¶ 69. On or about May 4, 2016, Wind entered into a joint venture with nonparty meForo Limited ("meForo") to jointly fund and share in the proceeds of the DMP Project, with meForo ultimately operating and licensing the DMP Project to various telecommunications providers, including Wind, other subsidiaries of VEON, and other non-affiliated entities. Id. at ¶ 72. The Wind-MeForo Joint Venture was overseen by a six-member project board, with three of the six members appointed by VEON's CEO and chairman. Id. at ¶ 73. The parties estimated that it would cost Wind and meForo €24,000,000 each to fully develop the DMP Project. Id. at ¶ 74. The DMP Project was to be divided into 15 "use cases," with the development of every three use cases constituting a separate phase of the DMP Project. Id. Under the terms of the joint venture, Wind was entitled to discounted licensing for its own iteration of the DMP software and a percentage of the revenues collected from third parties. Id. at ¶ 75. Neither defendant would obtain any intellectual or proprietary interest in the DMP software, although they would receive a limited license corresponding to continued payments for their use of the DMP software and a limited option to purchase the DMP software. Id.

Beginning in early 2016, SteppeChange became involved with the DMP Project pursuant to an oral agreement with the Wind-meForo joint venture. Id. at ¶ 76. SteppeChange would ultimately delivered eight use cases to defendants. Id. at ¶ 78. They included detailed data-science analytical papers and reports, accompanying presentations, and source code. Id. The first six use cases correlated to completion of the first two phases of the DMP Project and were valued at a combined €22 million, made up of the initial €3 million investment, plus two €4 million milestones from each contributor under the terms of the Wind-meForo joint venture documents. Id. SteppeChange presented the six use cases, along with two additional use cases requested by Wind, to defendants for approval and made the software code available to defendants through remote-access servers. Id. at ¶ 79. Defendants were aware that the use cases were developed for their benefit and were in frequent contact with SteppeChange personnel. Id.

II. NONPAYMENT FOR THE BUTTON AND DMP PROJECTS

In Fall of 2016, SteppeChange stopped receiving payments for its work on the Button and DMP Projects. Id. at ¶ 82. From November 2016 to January 2017, SteppeChange sought to resolve these payments with nonparty intermediaries GS & CO and meForo. Id. at ¶¶ 83-84. After failing to secure payment, on February 7, 2017, SteppeChange suspended access to the Button and DMP Project source code repositories and test environments. Id. at ¶ 84. VEON CTO Yogesh Malik, and another VEON employee, Tero Kivisaari, reached out to SteppeChange almost immediately to determine the cause of the suspension and indicated that they would attempt to resolve the issue. Id. at ¶¶ 84, 88. SteppeChange alleges that the suspension of access caused defendants' senior executives, including VEON CEO Jean-Yves Charlier and VEON Chairman Alexey Reznikovich, to learn that SteppeChange had not been paid and that defendants did not own or control the intellectual property for either the Button or DMP Projects. Id. at ¶¶ 86, 89. SteppeChange's unpaid DMP Project invoices for the period between November 2016 and December 2017 add up to $6,429,500 with an additional $266,212.84 in expenses. Id. at ¶ 87.

Between February 14-16, 2017, SteppeChange CEO Igor Neyman held several discussions with Charlier and Reznikovich, including during a trip to San Francisco by Reznikovich, to determine what had happened and to negotiate the restoration of access to the software repositories. Id. at ¶¶ 92-97. Reznikovich's attempts to secure payment from GS & CO and meForo were unsuccessful. Id. at ¶ 95. On or around February 17, 2017, based on repeated promises by Charlier, Malik, and other VEON and Wind personnel that SteppeChange would be compensated for its work on both the Button and DMP Projects, SteppeChange restored server access. Id. at ¶ 98. Over the following months, defendants reiterated their promises to resolve the payment issues and to first deal with issues related to the Button Project followed by the DMP Project. Id. at ¶¶ 99-102.

In and around May and June 2017, the parties exchanged terms and draft agreements to resolve the Button issues. Id. at ¶ 104. On June 7, 2017, VEON, meForo, and SteppeChange executed a series of agreements (the "Button Deed") to resolve all outstanding claims related to the Button Project and VEON paid SteppeChange for its work and intellectual property rights related to the Button Project. Id. at ¶ 106. The agreements acknowledged the outstanding DMP Project issues but did not resolve them. Id.

III. NONRESOLUTION OF THE DMP PROJECT

On or about June 7, 2017, VEON Group Director of Digital Integration and Architecture and Head of DMP and Project Management for Data Analytics and Data Management Nuno Sousa emailed SteppeChange to request full access to the models and source code for the first three uses cases. Id. at ¶ 107. Several other VEON personnel also requested source code access. Id. On or around June 10, 2017, VEON and Wind personnel received access to SteppeChange's code repository for the DMP Project. Id. at ¶ 109. SteppeChange provided the requested workshop for the use cases three days later. Id.

SteppeChange continued to contact defendants regarding payment for the DMP Project. On August 3, 2017, Charlier reported to Neyman that VEON and Wind were, in line with the Button arrangement, working with meForo to negotiate a resolution between defendants and meForo so that defendants could directly deal with SteppeChange. Id. at ¶ 115. SteppeChange and VEON continued to communicate regarding payment for the DMP Project through January 2018 and defendants continued to represent that they intended to work together on the DMP Project as well as future projects. Id. at ¶¶ 116-120.

On January 16, 2018, Wind CTO Benoit Hanssen told Neyman that Wind had "some time ago, decided to go a different way" and had "engaged another party that has been progressively developing in conjunction with [their] teams the [use cases]" and that Wind did "not see an option to engage with SteppeChange at the same time." Id. at ¶ 122. On March 2, 2018, SteppeChange sent a letter to...