Tex. Ed Tech Sols. v. Authentica Sols.

TEXAS ED TECH SOLUTIONS, LLC, Plaintiff, v. AUTHENTICA SOLUTIONS, LLC and BRIGHTBYTES, INC., Defendants.

Civil Action No. 1:20-cv-00151-SDG

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION

April 1, 2021

OPINION AND ORDER

This matter is before the Court on Plaintiff Texas Ed Tech Solutions, LLC's (Texas Ed) motion to dismiss counterclaims asserted by Defendant Authentica Solutions, LLC (Authentica) [ECF 77]. For the following reasons, Texas Ed's motion is GRANTED IN PART and DENIED IN PART.

I. BACKGROUND

The facts alleged in Texas Ed's Amended Complaint are more thoroughly set forth in the Court's September 20, 2020 Order denying a motion to dismiss filed by Authentica and Defendant BrightBytes, Inc.¹ On October 19, Authentica filed its Answer and asserted three counterclaims against Texas Ed for (1) breach ofcontract, (2) money had and received, and (3) unjust enrichment.² On November 9, Texas Ed filed the instant motion to dismiss those counterclaims.³ Authentica filed its response in opposition to Texas Ed's motion to dismiss on November 23; Texas Ed filed its reply on December 7.⁴

II. LEGAL STANDARD

The Court evaluates a motion to dismiss a counterclaim pursuant to Federal Rule of Civil Procedure 12(b)(6) in the same manner as a motion to dismiss a complaint. United States v. Zak, 481 F. Supp. 3d 1305, 1307 (N.D. Ga. 2020). To survive a motion to dismiss under Rule 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). A claim is facially plausible if "the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556). At this juncture, "all well-pleaded facts are accepted as true, and the reasonable inferences therefrom are construed in the light most favorable to theplaintiff." FindWhat Inv'r Grp. v. FindWhat.com, 658 F.3d 1282, 1296 (11th Cir. 2011). Although the "plausibility standard is not akin to a probability requirement at the pleading stage," it demands "enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of the claim." Am. Dental Ass'n v. Cigna Corp., 605 F.3d 1283, 1289 (11th Cir. 2010) (citing Twombly, 550 U.S. at 556).

III. DISCUSSION

Texas Ed seeks the dismissal of each counterclaim asserted by Authentica. The Court addresses each in turn.

a. Breach of Contract (Counterclaim Count I)

Authentica alleges Texas Ed breached the sales referral agreement (Referral Agreement) between the parties by initiating this suit in the United States District Court for the Western District of Texas. The Referral Agreement contains a forum selection provision mandating that "Atlanta, GA shall be the venue for any and all litigation arising by or under this Agreement."⁵ On August 16, 2019, Texas Ed initiated this case in the Texas court.⁶ On January 10, 2020, the Texas court granted Defendants' motion to transfer, finding the forum selectionprovision valid and enforceable.⁷ Authentica alleges Texas Ed's incorrect choice of forum constituted a breach of the Referral Agreement, which caused it damages in the form of the attorneys' fees and litigation costs it had to expend enforcing the forum selection provision. Texas Ed, conversely, contends Authentica's breach counterclaim must be dismissed pursuant to Texas's election of remedies doctrine.⁸

The elements of a breach of contract claim are "(1) the existence of a valid contract; (2) the plaintiff performed or tendered performance; (3) the defendant breached the contract; and (4) the plaintiff was damaged as a result of the breach." Bank of Texas v. VR Elec., Inc., 276 S.W.3d 671, 677 (Tex. App. 2008). Texas Ed invokes the election of remedies doctrine, which "is an affirmative defense that, under certain circumstances, bars a claimant from pursuing two inconsistent remedies" and "may constitute a bar to relief when one successfully exercises an informed choice between two or more remedies, rights, or facts that are so inconsistent as to constitute manifest injustice." Stephens v. Dallas Area Rapid Transit, 50 S.W.3d 621, 628 (Tex. App. 2001).

The parties do not cite a case discussing whether a party may seek damages under a breach of contract theory for its opponent filing a lawsuit in an incorrect forum in the face of a valid forum selection clause. Texas Ed points to Tribble & Stephens Co. v. RGM Constructors, L.P., in which the Texas Court of Appeals held that "[t]he election of remedies doctrine precludes [defendant/counterclaim plaintiff] from attempting to sustain a cause of action for money damages for the breach of the venue provision." 154 S.W.3d 639, 659 (Tex. App. 2004) (emphasis added). In Tribble, the plaintiff/counterclaim defendant originally filed suit in Travis County, Texas in derogation of a choice of venue clause that mandated all suits involving the at-issue contract be resolved in Harris County, Texas. Id. at 658. Defendant/counterclaim plaintiff filed a motion to transfer venue, which the trial court granted. Id. Defendant/counterclaim plaintiff subsequently asserted a breach of contract counterclaim based on plaintiff/counterclaim defendant's failure to sue in the correct county in conformity with the choice of venue provision. Id. The trial court granted plaintiff/counterclaim defendant's motion for summary judgment on the breach of contract claim and the Texas Court of Appeals affirmed, holding:

[W]e decline to hold that [plaintiff/counterclaim defendant's] breach of the venue provision was a material breach sufficient to sustain a separate cause of action. [Defendant/counterclaim plaintiff] does not cite, and we have not found, any authority to support its claim that a separate cause of action exists for the breach of this venue provision. Importantly, to the extent the venue provision was breached, [defendant/counterclaim plaintiff] sought specific performance of that provision by filing its motion to transfer venue, and the motion was granted. Therefore, [defendant/counterclaim plaintiff] received a remedy for any breach of the venue provision when the suit was transferred. Accordingly, the trial court did not grant [plaintiff/counterclaim defendant] more relief than requested concerning [defendant/counterclaim plaintiff's] venue claim.

Id. (internal citations and punctuation omitted).

Authentica, conversely, points to the Northern District of Texas's decision in Vianet Group PLC v. Tap Acquisition, Inc., which found that the plaintiff may seek attorneys' fees as damages in a breach of contract action premised on the defendant's noncompliance with a forum selection clause when it initiated a prior case in state court. No. 3:14-cv-3601-B, 2016 WL 4368302, at *4 (N.D. Tex. Aug. 16, 2016). The Vianet court expressly limited its decision to whether a party may recover its attorneys' fees as damages for a breach of contract claim. Id. at *4, *7-*9. See also In re Nalle Plastics Family Ltd. P'ship, 406 S.W.3d 168, 175 (Tex. 2013) ("While attorney's fees incurred in prosecuting this claim are not compensatory damages, the fees comprising the breach-of-contract damages are. If the underlying suit concerns a claim for attorney's fees as an element of damages . . . then those fees may properly be included in a judge or jury's compensatory damages award.").

Crucial to this case, the Vianet court specifically noted: "Defendants do not raise an important predicate issue: whether, under Texas law, a damages remedy is available to a party whose forum selection clause has been breached, but who possibly could obtain other traditional remedies for such a breach. The Court assumes without deciding that such a remedy is available." Id. at *4 n.6 (citing Phoenix Network Techs. (Europe) Ltd. v. Neon Sys., Inc., 177 S.W.3d 605, 610 (Tex. App. 2005) ("A motion to dismiss is the proper procedural mechanism for enforcing a forum-selection clause that a party to the agreement has violated in filing suit."); MPVF Lexington Partners, LLC v. W/P/V/C, LLC, 148 F. Supp. 3d 1169, 1182 (D. Colo. 2015) (predicting that, under Colorado law, the Colorado Supreme Court would permit a damages remedy to party whose forum selection clause was breached because no other remedy was available)).

Authentica focuses on the precise question answered in Nalle Plastics and Vianet; i.e., whether it may properly seek its attorneys' fees and costs as damages for Texas Ed's alleged breach of the forum selection clause. However, the Court must first answer the threshold question not reached by the Vianet court; can Authentica seek redress through a breach of contract action when it has already sought and obtained a transfer to the correct forum? Although the Texas Supreme Court has not yet weighed in, the Tribble decision—relying on the election of remedies doctrine—prevents Authentica from doing so. The Court agrees with the Tribble court's reasoning and conclusion. Pursuant to the election of remedies doctrine, "[r]emedies are inconsistent when one of the remedies results from affirming the transaction and the other results from disaffirming the transaction." Calstar Props., L.L.C. v. City of Fort Worth, 139 S.W.3d 433, 440 (Tex. App. 2004) ("A party is entitled to sue and seek damages on alternative theories but is not entitled to recover on both theories; to do so is considered equivalent to a 'double recovery.'"). See also Fina Supply, Inc. v. Abilene Nat. Bank, 726 S.W.2d 537, 541 (Tex. 1987) ("The doctrine is designed to prevent a party who has obtained a specific form of remedy from obtaining a different and inconsistent remedy for the same wrong.").

Here, Authentica has already chosen its remedy; the Texas court enforced the forum selection clause—pursuant to Authentica's motion—and transferred the case to...