BVS, Inc. v. CDW Direct, LLC

Citations: 88 F. Supp. 3d 948; 2015 WL 641452Docket: No. 11-CV-79-LRR

Court: District Court, N.D. Iowa; February 13, 2015; Federal District Court

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The document outlines a court order issued by Chief Judge Linda R. Reade regarding motions for summary judgment filed by Arrow Electronics, Inc. (Arrow), TSSLink, Inc. (TSSLink), and NetApp, Inc. (NetApp). It includes a structured table of contents detailing various sections, including the procedural history of the case, subject matter jurisdiction, summary judgment standards, relevant factual background, choice of law, and the motions by each party.

In the procedural history, it details that BVS, Inc. initially filed a complaint against CDW Direct, LLC (CDW), Arrow, and TSSLink on July 19, 2011, alleging multiple claims including breach of contract and unjust enrichment. BVS later moved to dismiss Arrow and TSSLink from the case, which the court granted without prejudice. Following the dismissal, BVS filed an Amended Complaint against CDW, asserting several claims such as breach of express and implied warranties, fraud, and fraudulent nondisclosure.

CDW subsequently filed a Third-Party Complaint against NetApp, Arrow, and TSSLink, seeking contribution and indemnity, and alleging contractual breaches by Arrow and TSSLink. Responses to these claims were filed by the respective parties, with denials and assertions of affirmative defenses, including NetApp's counterclaim for attorneys' fees against CDW.

This summary captures the essential elements of the document, including the procedural timeline, the nature of the claims, and the responses from the involved parties.

On December 13 and 14, 2012, Arrow, NetApp, and TSSLink filed motions for summary judgment. On March 28, 2013, the court granted CDW's motion for summary judgment against BVS and denied the other motions as moot. The Eighth Circuit Court of Appeals reversed this decision on July 17, 2014, in BVS, Inc. v. CDW Direct, LLC, 759 F.3d 869, 873 (8th Cir. 2014). Subsequently, on September 5, 2014, Arrow, TSSLink, and NetApp refiled their motions. CDW responded to these motions on September 26, 2014, and the respective parties filed replies between October 3 and 7, 2014. A hearing was held on February 12, 2015, where further arguments were presented, and the matters were deemed ready for decision. 

The court possesses diversity jurisdiction over the case due to complete diversity between BVS and CDW and an amount in controversy exceeding $75,000, pursuant to 28 U.S.C. § 1332. If complete diversity is lacking with any third-party defendants, the court maintains supplemental jurisdiction over related claims under 28 U.S.C. § 1367. 

Summary judgment can be granted when there is no genuine dispute over material facts and the movant is entitled to judgment as a matter of law according to Fed. R. Civ. P. 56(a). A genuine dispute exists if reasonable evidence could lead a jury to favor either party, while a material fact is one that impacts the case's outcome. Self-serving statements do not suffice to create a genuine issue of material fact. The nonmoving party must provide substantial evidence beyond speculation to withstand a summary judgment motion, with the court viewing the evidence favorably towards that party and allowing reasonable inferences.

The non-moving party in a legal context must present specific facts to demonstrate a genuine issue for trial, as established in relevant case law. A failure to show an essential element of their case renders all other facts immaterial. In the case at hand, BVS, an Iowa corporation providing online training to financial institutions, sought to upgrade its storage area network (SAN) due to dissatisfaction with its previous provider, ECM. BVS initiated discussions with CDW, an Illinois-based technology reseller, in fall 2010, to explore SAN options. CDW's account manager, Amer Harb, coordinated with NetApp representatives Ben Knorr and Michelle Schmidt to develop a SAN solution tailored to BVS's needs, which included regular data backups to a disaster recovery site in Omaha, Nebraska. While CDW facilitated the communication, it relied on NetApp and Arrow, which was tasked with installation and implementation, rather than its own architects for the SAN's design and implementation.

BVS received the NetApp goods as invoiced, and Arrow engaged TSSLink for services related to the installation and implementation of a SAN system. A kickoff call on February 7, 2011, included participants from CDW, BVS, TSSLink, and Arrow to discuss project details. Initially proposed for January 27-28, 2011, the installation was rescheduled to March 1-3, 2011, after BVS declined the earlier dates. Arrow requested Gary Praegitzer to complete a configuration worksheet, which he submitted on February 25, 2011, although he noted he was missing some information. Matt Romo from TSSLink executed the Arrow services from March 1-3, 2011, and completed a project form indicating that four services were finished while one was incomplete. Romo later attempted to finalize the installation through additional calls and troubleshooting, but by April 14, 2011, Praegitzer expressed dissatisfaction with the system's functionality. NetApp's Ben Knorr proposed to send an engineer to assist, but BVS declined. On May 19, 2011, BVS sought to return the hardware due to ongoing issues, but CDW refused the return. The case involves multiple contracts with differing governing laws; however, all parties have agreed that Iowa law applies without conflict, allowing for its use in the summary judgment motions. In the NetApp Motion, NetApp seeks summary judgment on CDW’s claims regarding common liability, contribution, and contractual indemnity.

NetApp seeks summary judgment on CDW’s common liability and contribution claims, arguing that CDW has failed to demonstrate any fault on NetApp's part regarding the SAN's architecture. CDW counters that its claim for contribution is valid under common law, independent of the Iowa Comparative Fault Act, and argues that issues exist regarding NetApp's potential breaches of warranties, contracts, or fraud, which could establish common liability regarding the SAN's quality and functionality.

The law states that common liability arises when both the party seeking contribution and the party from whom contribution is sought are liable to the injured party for the same damage. A party can seek contribution based on shared liability, even if their liability stems from different legal theories. However, if the burdens on the liable parties differ, they are not considered in equitable positions, which precludes contribution.

CDW must demonstrate that BVS has a legally cognizable remedy against NetApp and that this remedy implicates both CDW and NetApp for the same damage. CDW argues that common liability exists based on various factors, including express warranties and breach of contract.

Specifically, CDW claims that express warranties in the Reseller Agreement between NetApp and CDW create liability, as BVS is identified as the "End User." CDW contends that NetApp breached these warranties, which cover hardware operation, software performance, and service delivery. CDW references a finding by the Eighth Circuit indicating a factual dispute regarding the services rendered during the NetApp installation, suggesting that whether NetApp or its authorized providers failed to meet warranty standards is a factual issue to be resolved.

CDW alleges that NetApp breached its warranty because its approved service providers did not install the SAN properly. NetApp argues that the warranty does not cover installation and configuration services, which it categorizes as 'Professional Services' excluded from the warranty definition in the Reseller Agreement. However, the Reseller Agreement was amended to include Professional Services within the definition of 'Services,' thereby warranting installation and configuration services to BVS, the end user. 

The court acknowledges that NetApp has provided sufficient evidence to support its motion, including testimonies indicating a lack of complaints about NetApp's performance from BVS's owner, its corporate representative, and experts for both BVS and CDW. These testimonies suggest that NetApp did not perform inadequately regarding the SAN solution. 

To counter this, CDW must provide specific evidentiary materials showing a genuine issue for trial. However, CDW relies on insufficient 'if us then them' reasoning without presenting factual evidence. Consequently, as CDW fails to demonstrate a genuine issue of material fact regarding its liability connected to NetApp's actions, the court grants NetApp's motion for summary judgment against CDW's claim of breach of express warranty.

CDW asserts that BVS claims the goods received breached the implied warranties of merchantability and fitness for a particular purpose, arguing that if a factual dispute exists, NetApp is liable for contribution as the supplier. CDW maintains that BVS has a valid claim against NetApp for these breaches, while NetApp contends it has disclaimed such warranties. Under Iowa Code § 554.2314, implied warranties apply unless explicitly excluded or modified, with § 554.2315 elaborating that a seller must understand the buyer's specific needs to trigger an implied warranty of fitness. Iowa Code § 554.2316 outlines the requirements for excluding these warranties, stating that disclaimers must be clear and conspicuous. The Reseller Agreement between NetApp and CDW explicitly disclaims all implied warranties, including those of merchantability and fitness for a particular purpose. Consequently, CDW has not demonstrated NetApp's liability to BVS, leading the court to grant NetApp's motion for summary judgment regarding CDW's claims of common liability for breach of implied warranties.

Additionally, CDW claims BVS alleges a breach of contract related to the non-receipt of all goods and services, asserting that NetApp, having supplied these goods, could be liable for contribution. CDW references a contract in the context of BVS’s allegations against them, which seems to be the contract between BVS and CDW. Neither BVS nor CDW suggests that BVS entered into a contract with NetApp.

For BVS to establish a common liability claim against NetApp through CDW under a breach of contract theory, there must be a contractual relationship between BVS and NetApp, which is not alleged. Consequently, the court grants NetApp's motion for summary judgment concerning CDW’s breach of contract claim. Regarding unjust enrichment, CDW contends it could seek contribution from NetApp if found liable to BVS, asserting that NetApp's provision of goods and services to BVS under its contract with CDW forms the basis of BVS's claim. To succeed in an unjust enrichment claim, a plaintiff must demonstrate: 1) the defendant received a benefit; 2) the benefit was at the plaintiff's expense; and 3) it would be unjust for the defendant to retain the benefit. Typically, unjust enrichment cannot apply when a contract exists, although it may be pled as an alternative to an express contract claim. CDW fails to show how NetApp would be unjustly enriched at BVS's expense since any benefit NetApp received was from CDW. Thus, the court grants summary judgment on CDW’s unjust enrichment claim against NetApp. On the issue of fraud, CDW alleges that NetApp provided express warranties and representations that BVS relied upon, thereby claiming NetApp is liable for fraud. To prove fraud in Iowa, a plaintiff must establish several elements, including representation, falsity, materiality, scienter, intent to deceive, reliance, and resulting damages.

Scienter and intent to deceive are demonstrated when a speaker has actual knowledge of the falsity of their statements or acts with reckless disregard for their truth. An honest belief in the truth does not negate a finding of fraud; reckless misrepresentation can lead to liability. While mere statements of opinion are generally not actionable as fraud, misrepresentations of fact or insincere opinions intended to deceive can be. The determination of whether statements are fraudulent is typically a jury question. A future promise is only actionable if made with no intention to fulfill it, and a mere failure to perform does not imply deceit.

In this case, neither BVS nor CDW has alleged that NetApp made false representations to BVS. CDW attempts to assert that allegations against it may implicate NetApp; however, for NetApp to share liability, it must have made fraudulent representations to BVS. Since CDW does not claim that NetApp made such representations nor does it present evidence of a genuine issue regarding this, the court is inclined to grant summary judgment in favor of NetApp concerning CDW's common liability claim for fraud. 

Regarding CDW's contractual indemnity claim, NetApp seeks summary judgment, arguing that there are no supporting facts for its liability related to the SAN solution. CDW counters that NetApp must indemnify it if it acted negligently or fraudulently. However, CDW fails to provide evidence to substantiate its claims of NetApp's negligence or fraud, relying instead on general discussions held during a meeting about the SAN solution.

An indemnification agreement is established when one party expresses an intention to reimburse or protect the other party from losses, damages, or liabilities. Such agreements follow the same rules of formation and validity as other contracts, with the specific terms of the agreement determining the rights of the parties involved. In this case, the indemnity provision requires each party (the "Indemnitor") to defend, indemnify, and hold harmless the other party and its affiliates from any claims arising from the Indemnitor’s negligence or willful misconduct related to product sales or services. For NetApp to be liable for indemnifying CDW, CDW must prove that NetApp was negligent or engaged in willful misconduct toward BVS. 

NetApp has provided evidence indicating there is no genuine issue of material fact regarding its performance. This evidence includes statements from Roy Karon, owner of BVS, who acknowledged no complaints regarding NetApp’s conduct during the sale and implementation of the CDW SAN solution. Further support comes from depositions of CDW's corporate representative and experts, all of whom either do not recall any wrongdoing by NetApp or explicitly state they have no criticisms of NetApp's performance related to the SAN solution.

NetApp successfully argued that it did not engage in wrongful conduct regarding the solution architecture. To oppose summary judgment, CDW needed to present specific evidentiary materials demonstrating a genuine issue for trial, as outlined in Torgerson and Celotex. However, CDW's arguments relied on insufficient "if us then them" logic, failing to establish a genuine issue of material fact. Consequently, the court granted NetApp's motion for summary judgment concerning CDW's contractual indemnity claim.

In the Arrow Motion, Arrow sought summary judgment on multiple claims by CDW, including common liability, contribution, and breach of contract. Arrow contended that CDW failed to provide evidence linking Arrow's conduct to the failure of the SAN solution. In contrast, CDW argued that Arrow had common liability due to various legal theories, including third-party beneficiary breach of contract and implied warranties. 

Common liability requires that the injured party has a recognizable remedy against both parties, and it exists even when liability stems from different theories. CDW needed to demonstrate that BVS had a legally cognizable remedy against Arrow, which would confirm a shared liability for the same damages. CDW's claims of common liability included allegations of breach of contract and unjust enrichment, emphasizing that BVS was an intended third-party beneficiary of the Master Professional Services Agreement between CDW and Arrow, which Arrow allegedly breached. Iowa law supports this position, referencing the Restatement (Second) of Contracts section 302 on third-party beneficiaries.

In RPC Liquidation v. Iowa Dep’t of Transp., the Iowa Supreme Court outlines the criteria for determining an intended beneficiary under contract law, specifically referencing Restatement (Second) of Contracts § 302. A beneficiary is considered intended if recognizing their right to performance aligns with the parties' intentions, particularly if the promise fulfills a payment obligation or indicates the promisee's intent to benefit the beneficiary. The intention of the promisee is key, evaluated through the contract language and surrounding circumstances.

To establish a breach of contract claim, a plaintiff must demonstrate: (1) the existence of a contract, (2) the contract's terms, (3) their own performance under the contract, (4) the defendant's specific breach, and (5) resulting damages. In this case, CDW contends that Arrow intended to benefit BVS in a sale contract and claims Arrow breached warranties and failed to deliver goods and services. However, CDW does not clarify how Arrow specifically breached the contract nor provides supporting evidence.

Arrow counters that BVS is indeed a third-party beneficiary but argues CDW has not met its burden to show a genuine issue of material fact regarding Arrow's conduct causing system failure. Arrow references statements from CDW's project coordinator that affirm Arrow's performance was satisfactory. To oppose summary judgment, CDW must present specific evidentiary materials indicating a genuine issue for trial.

CDW failed to provide evidence demonstrating a genuine issue for trial regarding Arrow's alleged breach of contract with BVS. CDW acknowledged that the goods and services from Arrow met the contractual terms with BVS. For CDW to establish shared liability with Arrow to BVS, it must prove that Arrow breached its third-party beneficiary contract, but CDW did not present any evidence to support such a claim, leading the court to grant Arrow's motion for summary judgment on this issue.

Regarding an express warranty, CDW cited the Arrow Professional Services Services Brief, which stated that Arrow warranted its services would meet professional standards. CDW argued that if BVS could prove issues with the services, it could hold Arrow liable, thereby affecting CDW's liability. Arrow countered that CDW failed to show how any actions by Arrow caused the SAN system failure, and the court concurred, noting that CDW did not adequately demonstrate how Arrow breached its warranty. CDW's argument lacked sufficient evidence to suggest a genuine factual dispute, as the court emphasized that asserting a legal theory is insufficient to overcome summary judgment without supporting materials from the record.

CDW has failed to provide specific evidentiary materials demonstrating a genuine issue for trial regarding its claims against Arrow. Consequently, the court grants Arrow's motion for summary judgment on CDW’s claims related to breach of express and implied warranties. CDW's assertion that Arrow is liable for contribution based on an implied warranty breach is unsupported, as it does not present evidence showing Arrow's violation of any implied warranties. For CDW and Arrow to share liability, CDW must prove that Arrow breached an implied warranty to BVS, which it has not done.

Regarding the breach of contract claim, the court reiterates that CDW has not identified any contract between Arrow and BVS, essential for establishing shared liability. Since BVS and CDW do not allege a direct contract with Arrow, the court grants summary judgment on this claim as well.

In addressing the unjust enrichment claim, CDW must demonstrate that Arrow was enriched at BVS's expense, which it has not established. CDW's reliance on BVS's allegations against itself does not suffice to counter Arrow's motion. Therefore, for CDW and Arrow to have shared liability under unjust enrichment, CDW must prove Arrow's enrichment at BVS's expense, which remains unproven. Thus, the court grants Arrow's motion for summary judgment on all claims made by CDW.

The court grants the Arrow Motion for summary judgment on CDW’s common liability claim based on unjust enrichment. Regarding the contractual indemnity claim, CDW asserts that Arrow must defend and indemnify it due to allegations of issues stemming from Arrow’s installation services. Arrow acknowledges its obligation to indemnify CDW if CDW incurs losses from Arrow's services but contends that CDW lacks evidence proving that any failures were caused by Arrow's actions. The indemnification clause in their Master Professional Services Agreement mandates that Arrow defend and indemnify CDW against claims arising from Arrow's services or breaches. Since CDW failed to provide evidence showing a genuine issue for trial regarding the SAN solution's failure due to Arrow’s services, the court grants summary judgment on the contractual indemnity claim.

For the breach of contract claim, CDW alleges Arrow's liability under the Master Professional Services Agreement. Arrow argues that CDW has no evidence of any breach, and CDW does not contest this claim in its response. Due to the absence of a substantive response and supporting evidence from CDW, the court grants summary judgment on the breach of contract claim as well. The court concludes by granting the Arrow Motion in its entirety.

In the TSSLink Motion, TSSLink seeks summary judgment on CDW’s contribution and indemnity claim and on a breach of contract claim as a third-party beneficiary. TSSLink argues that CDW has not provided evidence to support its contribution claims and requests dismissal from the lawsuit based on a forum selection clause requiring litigation in New York. CDW contends that summary judgment is inappropriate.

CDW asserts that there are unresolved issues regarding the adequacy of services provided to BVS by TSSLink, arguing that this raises a factual dispute over TSSLink's potential breach of warranty. CDW claims that both it and TSSLink share common liability to BVS, contingent upon BVS having a legally cognizable remedy against TSSLink. Common liability is established when multiple parties are liable for the same damage, regardless of differing legal theories. For CDW to avoid summary judgment favoring TSSLink, it must demonstrate that BVS has a viable claim against TSSLink that aligns with a shared liability for the same damages.

CDW contends that a contract between Arrow and TSSLink, with BVS as a third-party beneficiary, supports this claim. CDW outlines that TSSLink is liable based on four grounds: express warranty, implied warranty of fitness, breach of contract, and unjust enrichment. Specifically, CDW emphasizes that TSSLink provided an express warranty concerning service standards, and past deficiencies in service to BVS are cited as evidence of potential breach. However, TSSLink counters that CDW has not presented sufficient evidence to establish its liability, with CDW's arguments relying on the assertion that its subcontractors did not err. Testimonies from BVS's expert and CDW's project manager indicate no critical findings against TSSLink’s performance, suggesting that CDW may struggle to substantiate its claims of shared liability for damages with TSSLink.

CDW's representatives acknowledged that TSSLink's installation of the SAN Solution did not cause any project issues and that there is no evidence of negligent installation or configuration. The court found that CDW failed to demonstrate how TSSLink breached its warranty, relying instead on unsubstantiated assertions. Under Federal Rule of Civil Procedure 56(c), CDW must provide specific factual evidence to support its claims; however, it did not submit adequate evidentiary materials to counter TSSLink's motion for summary judgment regarding the breach of express warranty. Consequently, the court granted TSSLink's motion against CDW's common liability claim based on this breach. 

CDW also claimed that TSSLink breached the implied warranty of fitness for a particular purpose, arguing that TSSLink's installation services for the NetApp SAN created such a warranty under Iowa Code section 554.2315. This section applies when a seller knows the buyer's specific purpose and the buyer relies on the seller's expertise to provide suitable goods. However, the court noted that TSSLink provided services, not goods, and thus the implied warranty under this statute does not apply. The court emphasized that for CDW to establish joint liability with TSSLink, it must show that TSSLink breached an implied warranty, which is not applicable in this case since only services were provided.

CDW fails to provide adequate factual support for its claims against TSSLink regarding breach of implied warranty, leading the court to grant TSSLink's motion for summary judgment on this basis. Regarding breach of contract, CDW asserts that TSSLink breached its contract with BVS, which CDW claims establishes shared liability. However, neither BVS nor CDW contends that BVS had a contract with TSSLink, meaning CDW cannot prove TSSLink's breach of contract to establish common liability. Consequently, the court also grants summary judgment on this claim. For unjust enrichment, CDW argues that TSSLink was unjustly enriched at BVS's expense. However, CDW fails to demonstrate how TSSLink benefited from BVS, leading to the court granting summary judgment on this claim as well. Lastly, CDW claims to be a third-party beneficiary of the Consulting Agreement between TSSLink and Arrow, which includes a warranty for service standards. TSSLink concedes CDW's status as a third-party beneficiary for summary judgment purposes, implying potential liability if a breach is established.

TSSLink asserts entitlement to summary judgment, claiming CDW lacks evidence of TSSLink's breach of contract or demonstrable damages from TSSLink's work on the BVS project. The court acknowledges TSSLink has sufficiently outlined its basis for the motion, citing the absence of a genuine issue of material fact. Notably, CDW’s expert opined that TSSLink competently fulfilled its obligations, stating their services exceeded the requirements for installing the NetApp product. Multiple expert opinions support this assertion.

To counter TSSLink's motion, CDW is required to present specific evidentiary materials indicating a genuine issue for trial, which it failed to do. Consequently, the court will grant TSSLink's motion regarding CDW's third-party beneficiary breach of contract claim.

Regarding the forum selection clause in the Consulting Agreement between TSSLink and Arrow, which designates New York as the exclusive jurisdiction for claims, TSSLink argues for summary judgment based on this clause. CDW concedes the validity of the clause but suggests the court should consider TSSLink’s argument as a motion to transfer venue, contending that separate trials could lead to inconsistent results and be wasteful after extensive discovery.

The court disagrees with TSSLink’s use of summary judgment as a means to enforce the forum selection clause, referencing the Carnival Cruise Lines case, where the enforcement of such a clause was contested in relation to jurisdiction and transfer of venue. The Ninth Circuit ultimately ruled against the enforceability of the forum selection clause in that instance.

The Supreme Court did not address the personal jurisdiction issue but focused on the forum selection clause, which it deemed decisive, leading to the reversal of the Ninth Circuit's decision regarding its enforceability. The Court did not indicate that summary judgment was an appropriate method for enforcing such a clause, instead treating it as a motion to dismiss or transfer under 28 U.S.C. § 1406(a). TSSLink failed to provide authority supporting its claim that summary judgment is suitable for enforcing a forum selection clause, resulting in the court dismissing this argument as meritless. Additionally, the court concluded that TSSLink waived its defense of improper venue by not raising it in its responsive pleading, as required by Federal Rule of Civil Procedure 12(b). The court noted that a defense of improper venue must be asserted before any responsive pleading if permitted, and TSSLink's delay of over two years in raising the venue issue misled the plaintiff and wasted judicial resources. Despite this waiver, the court decided to grant TSSLink's motion.

The court grants the TSSLink Motion in its entirety. Summary judgment is granted for Third-Party Defendants NetApp, Inc., Arrow Electronics, Inc., and TSSLink, Inc., with the Clerk of Court directed to enter judgment in favor of these defendants and against CDW as the third-party plaintiff. The court identifies an error in the Amended Complaint, renaming the fraudulent nondisclosure claim as Count VII. CDW's claims against NetApp relate to the Iowa Comparative Fault Act and common law for contribution and indemnity. However, CDW's arguments in response to NetApp's motion focus solely on common law, leading the court to address only Iowa common law. There is a dispute regarding the inclusion of Protection Manager in the SAN solution, with testimonies from both NetApp and TSSLink presenting conflicting views. Nonetheless, CDW does not assert that this discrepancy is material to the SAN solution's failure, and no evidence suggests it is significant. Arrow Electronics acknowledges CDW's claim that it was a party to the Master Professional Services Agreement with Alternative Technology, Inc., for the purposes of its summary judgment motion.