United States District Court, W.D. New York
Brittany Trulaine Simon, Esq., Kathryn Anne Furfari Martinez, Nixon Peabody LLP, Rochester, New York, for Plaintiff.
James P. Domagalski, Esq., Kimberly A. Colaiacovo, Esq., Hiscock & Barclay LLP, Buffalo, New York, Jillian Rae Harris, Esq., Jackson Walker, LLP, Dallas, Texas, for Defendant.
DECISION AND ORDER
CHARLES J. SIRAGUSA, District Judge.
This is a diversity action for breach of contract and tort under New York State law. Now before the Court is Defendant's motion (Docket No. [#10]) for partial dismissal of certain damages claims, pursuant to FRCP 12(b)(6). The application is granted.
The following information from the Complaint [#1] is presumed to be true for purposes of this Decision and Order. In March 2011, the parties agreed that Defendant would build a Global Intranet for Plaintiff, using Oracle Corporation ("Oracle") software and products, in exchange for $509, 750.00. Plaintiff chose Defendant for this job in part because Defendant represented that it had special expertise in using Oracle's technology. On March 28, 2011, the parties executed a written "Master Independent Contractor Agreement" ("the contract"). Of particular significance to the instant motion is paragraph seven of the contract, entitled "Limitation on Liability, " that states in pertinent part:
a. No Incidental or Consequential Damages. ... IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL, INDIRECT OR PUNITIVE DAMAGES ARISING IN ANY WAY OF OF THE SERVICES, A DELIVERABLE FOR THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, DAMAGES FOR LOST PROFIT, LOST REVENUE, LOSS OF USE, LOSS OF DATA, COSTS OF RECREATING LOST DATA, THE COST OF ANY SUBSTITUTE EQUIPMENT, PROGRAM, OR DATA, OR CLAIMS BY ANY THIRD PARTY, WHETHER ARISING OUT OF CONTRACT, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE.
b. Limitation of Liability. ... THE CUMULATIVE, AGGREGATE LIABILITY OF KESTE TO CLIENT FOR ALL CLAIMS RELATED TO THE SERVICES, DELIVERABLES AND THIS AGREEMENT, WHETHER ARISING OUT OF CONTRACT, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE, WILL NOT EXCEED THE GREATER OF (I) THE AMOUNT OF FEES PAID BY CONSTELLATION TO KESTE FOR THE SERVICES PERFORMED AND/OR DELIVERABLES DELIVERED UNDER ANY [STATEMENT OF WORK] ["(]SOW[")] GIVING RISE TO A CLAIM UNDER THIS ARTICLE 7; OR (II) TWO HUNDRED-FIFTY THOUSAND DOLLARS ($250, 000).
Docket No. [#10-2] at p. 8. Together, these clauses indicate, first, that Defendant has no liability whatsoever for any consequential or punitive damages, and second, that Defendant's total monetary liability for any allowable type of damages is limited to the amounts set forth therein.
Plaintiff hired Defendant to create a global company intranet, for use by Plaintiff's employees, including "a content management system [with which Plaintiff] could regularly create and update content to be displayed on the intranet, " that would "simplify and streamline technical and content administration and maintenance while providing a single location for all internal company information." Complaint ¶ ¶ 17-18. The specifics of the project were spelled out in the contract and in a separate document, referenced earlier, entitled "Statement of Work" ("SOW").
While Defendant was working on the project, Plaintiff pointed out various problems and "bugs" in Defendant's work, including the fact that the intranet website's "pages took multiple seconds to load, well beyond a commonly acceptable page load time." Id. at ¶ 36. Plaintiff also complained that the intranet's "content management features and processes were overcomplicated" and "onerous." Id. at ¶ 38. For example, the website "required [Plaintiff's] content managers to spend upwards of fifty steps, totaling eighty minutes, to update simple site content." Id. at ¶ 39. The pleading alleges, however, that rather than fix those serious problems immediately, Defendant instead focused on addressing more "cosmetic" problems. Id. at ¶ 42. At the same time, though, Defendant acknowledged that the more serious problems existed, and assured Plaintiff that it would fix them. See, id. at ¶ 48 ("Keste represented that it could and would fix the Website's fundamental content management and performance issues to meet Constellation's expectations."); see also, id. at ¶ ¶ 50-52 (Defendant indicated that it would make the website pages load faster, and would simplify the content-management process).
The contract initially indicated that Defendant would complete the work by July 26, 2013, but as of October, 2013, the work was not completed. However, the parties amended the agreement to provide that Defendant would finish the work by December 13, 2013. Complaint [#1] at ¶ 53. By December, though, Defendant still had not corrected the aforementioned problems. Nevertheless, in January 2014, Plaintiff agreed to have Defendant make one last attempt to fix the problems. However, after two additional weeks, Defendant still had not resolved the issues. Consequently, Plaintiff consulted with Oracle, which examined the website and concluded that it was irretrievably flawed, due to the fact that Defendant had incorporated "excessive and unnecessary customization resulting in decreased functionality and subpar performance." Id. at ¶ 68. Oracle further indicated that it "was not feasible to attempt to fix the [problems with the intranet site]." Id.
On May 20, 2014, Plaintiff commenced this action. The Complaint [#1] purports to assert three causes of action: 1) breach of contract; 2) breach of the implied covenant of good faith and fair dealing; and 3) negligent misrepresentation. Plaintiff's theory is that Defendant knew that it was incapable of fixing the serious underlying problems with the intranet, but nevertheless misled Plaintiff into believing that it could do so. On this point, the pleading contains the following statements that are designed to show intentional wrongdoing and/or bad faith by Keste:
43. Keste did not disclose to Constellation that Keste lacked the capacity or ability to correct the fundamental performance issues and defects presented by Keste's work. 44. As a result, and unbeknownst to Constellation, Constellation was induced and lulled into expending additional time, money, resources, and effort on a Website whose design by Keste could not support the requirements and needs that Constellation had communicated and Keste had accepted.
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54. Upon information and belief... Keste was aware that it did not have the resources or ability to fix the outstanding performance issues within the time frame that it promised, and that it could not fix the outstanding Website issues because its coding and design work would not support the [level of] performance it was agreeing to deliver.
55. Constellation relied upon Keste's false representations that it would and could fix the outstanding performance issues and that it had the resources, special expertise ...