Samia Companies LLC v. MRI Software LLC

Citations: 53 F. Supp. 3d 385; 2014 U.S. Dist. LEXIS 144361; 2014 WL 5242869Docket: Civil Action No. 11-12329-NMG

Court: District Court, D. Massachusetts; October 9, 2014; Federal District Court

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A breach of a Master License Services Agreement from July 2009 is at the center of this case involving plaintiff Samia Companies LLC and defendant MRI Software LLC. Samia, a major real estate management firm in Boston, entered into the Agreement with Intuit (MRI's predecessor) to purchase software, consulting, and technical support services. Samia alleges breaches by MRI, including misrepresentation of software capabilities, unauthorized conversion of funds, and unfair practices under Massachusetts law. The defendant's motion resulted in the dismissal of three of the ten counts in Samia's complaint, and MRI now seeks summary judgment on the remaining counts.

The Agreement mandated that MRI provide software for accounting functions, consulting during implementation, annual software updates, and technical support. It included a limited warranty for 30 days post-delivery, stating that any software failing to conform to specified criteria would be repaired or replaced at no additional charge, which constituted Samia's sole remedy. Delivery was defined as the earliest date the software was provided to Samia.

Following the Agreement, software installation began in September 2009, during which Samia requested additional custom document capabilities. This request was deemed outside the Agreement's scope, leading to a custom proposal. In January 2010, Intuit was acquired and became MRI, causing a halt in software development and installation, which Samia claims complicated communications. Despite these issues, Samia launched the software in March 2010 and subsequently signed the custom proposal, which was added to the original Agreement. However, Samia later identified defects in the software and engaged an outside IT consultant for modifications.

In August 2010, Samia informed MRI that its document-generating programs were operational but asserted that, given the payment to Mr. Patten, it would only pay half of MRI's invoiced fees for customization work. A significant issue arose regarding Tax Form 1099-INT, which Samia needed to provide to tenants. Initially, Samia discovered the software could not perform 1099-INT functions, claiming that an Intuit sales representative had promised that functionality, a claim Intuit denied. In November 2009, Intuit proposed a work authorization for the 1099-INT customization for $9,000, which Samia did not sign, arguing the work should be free based on the alleged promise. As tensions escalated, Samia withheld payments to pressure MRI into providing the 1099-INT customization at no cost, leading to a lawsuit against MRI. Samia's claims included breach of contract for failing to deliver promised software components, incomplete development, improper termination of paid technical support, and sale of non-functional system components. Since initiating the lawsuit, Samia has continued using MRI’s software without any technical support or maintenance agreement.

In November 2011, Samia filed a complaint in Suffolk Superior Court against MRI, alleging breach of contract, negligent misrepresentation, conversion, and violations of Massachusetts General Laws Chapter 93A. The case was removed to federal court, where MRI moved to dismiss all claims in February 2012. In September 2012, the court accepted a report recommending the dismissal of certain misrepresentation claims but denied the motion on other grounds. In July 2014, MRI moved for summary judgment on the remaining claims. Samia's claims included perceived breaches related to the 1099-INT functionality, software defects, custom document services, pricing issues for technical support, misapplication of payments, and negligent misrepresentation regarding software capabilities.

Summary judgment aims to evaluate the need for trial by assessing pleadings, discovery, and affidavits to determine if there are genuine issues of material fact. The moving party must demonstrate there are no such issues and that they are entitled to judgment as a matter of law (Fed. R. Civ. P. 56(c)). A material fact is one that could influence the case's outcome under the applicable law, and a genuine issue exists if reasonable evidence could lead a jury to favor the non-moving party. If the moving party meets its burden, the non-moving party must present specific facts to show a triable issue exists. The court evaluates the record favorably for the non-moving party, and summary judgment is granted if no genuine issues remain and the moving party is entitled to judgment.

The case involves two counts related to allegations that MRI's software failed to meet the Agreement's requirements. Count I claims a breach due to the lack of 1099-INT functionality, while Count VIII alleges other software components were defective or missing. MRI argues that acceptance of the software delivery in September 2009 limits Samia to specified contractual remedies, referencing the Uniform Commercial Code and the Agreement's explicit warranty terms. The warranty allows for repairs of non-conformities reported within 30 days after delivery, which is deemed the sole remedy, with all other remedies disclaimed.

Samia, however, contends that MRI never delivered the software, thus negating the need for conformity notices. Samia maintains that the absence of the 1099-INT component constitutes a breach. Legally, delivery occurs when goods or services are tendered, regardless of conformity to contract specifications, supported by case law indicating that goods are considered delivered even if defective or non-conforming.

Goods do not need to fully conform to the Agreement to be considered "delivered." Even if MRI's software had deficiencies, such as the lack of a 1099-INT function, Samia cannot claim non-delivery from September 2009. Samia was contractually required to reject the software and stop installation upon discovering any non-conformities, as stipulated by M.G.L. c. 106, 2-602. The Agreement outlines a specific process for asserting warranty rights, which Samia failed to follow by not providing written notice of non-conformities within 30 days of implementation. Even had notice been given, Samia's remedies would have been limited to repair or replacement of the non-conforming software, a limitation enforceable under Massachusetts law. The facts indicate Samia accepted the software, evidenced by its continued use over five years, thus barring any claims of non-delivery. Consequently, MRI is entitled to summary judgment on Counts I and VIII.

Regarding Count III, which claims MRI breached the Agreement by providing subpar services under a custom documents work authorization, the Court found no breach. The Agreement requires Samia to notify MRI of any deficiencies within 30 days after delivery, which it did not do; instead, Samia hired an outside consultant for modifications. The Court ruled that a claim of non-conforming services does not imply a failure to deliver services, and thus MRI will not be held liable. Summary judgment for Count III is permitted.

In Count V, Samia alleges that MRI breached the Agreement by raising prices for its annual technical support plan. Initially, Samia selected a "bronze" plan without upfront fees, later amending the Agreement in March 2010 to a "silver" plan for the remainder of the first contract year, for which it paid a pro-rated fee. The Agreement explicitly states that MRI can increase support prices after the first year, which supports MRI’s position.

The March 2010 amendment to the Agreement established that its provisions could not be altered unless explicitly stated, and that the technical support plan would be renewed unless terminated by the Client. Samia claims that the amendment's renewal language indicates MRI forfeited its right to increase prices after the first contract year, but the Court disagrees, finding no evidence that MRI waived its contractual rights to alter pricing. Consequently, MRI's motion for summary judgment is granted regarding Count V of Samia's complaint.

In Count VII, Samia alleges conversion, arguing that MRI misapplied a $12,018 check intended for renewing specific services. MRI renewed the Software Maintenance Services for $9,581.25 but did not renew the "silver" plan due to a dispute over terms and instead applied the balance to outstanding invoices. Conversion requires wrongful dominion over property, and while Samia claims lack of accounting for the payment, the Court finds that MRI had the right to retain the funds, especially since Samia had withheld payments on other invoices. Thus, the Court also grants summary judgment for MRI on Count VII.

For Count II, Samia's claim of negligent misrepresentation hinges on proving that MRI provided false information negligently, that Samia relied on this information, and suffered financial loss as a result. Samia contends that MRI misrepresented the software's capability to perform 1099-INT functions, relying on assurances from Intuit’s sales representative. However, MRI denies making such representations and argues that Samia incurred no damages during the relevant period. The Court notes that Samia was aware of the software's limitations by September 2009, which negated any reliance on the alleged misrepresentation. Consequently, Samia has not substantiated claims for damages within the time frame before discovering the software's deficiencies.

The Court rejects the defendant's interpretation regarding negligent misrepresentation damages under Massachusetts law, which follows Section 552B of The Restatement (Second) Torts (1977). This section allows recovery for the pecuniary loss caused by negligent misrepresentation, including the difference in value between what was received and what was paid, along with any additional losses from reliance on the misrepresentation. The Court determines that if the Plaintiff proves the first two elements of its claim, damages may include the costs incurred to obtain a separate software program that provides the promised functionality. 

There is a genuine issue of material fact regarding whether the 1099-INT functions were promised to the Plaintiff, leading to the denial of the defendant's motion for summary judgment on Count II. Regarding Count X, a claim under Massachusetts General Laws Chapter 93A, the Court notes that merely breaching a contract does not constitute an unfair trade practice without evidence of knowing and intentional misconduct aimed at securing unbargained benefits. Although the Plaintiff asserts difficulties in discovery due to personnel changes after an acquisition, mere promises to present evidence at trial are insufficient to counter a summary judgment motion. 

The Court finds no evidence of the defendant engaging in bad faith or seeking unbargained benefits, but recognizes that claims for negligent misrepresentation and Chapter 93A can be interlinked, allowing for potential recovery for negligence that constitutes a deceptive act. Since the negligent misrepresentation claim survives summary judgment, the motion regarding Count X is also denied. Ultimately, the defendant's motion for summary judgment is partially granted and partially denied, dismissing claims I, III, V, VII, and VIII, while allowing others to proceed. The software in question was identified generally, without specific descriptions.