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GlassHouse Systems, Inc. v. International Business Machines Corp.

March 16, 2009

GLASSHOUSE SYSTEMS, INC., PLAINTIFF.
v.
INTERNATIONAL BUSINESS MACHINES CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Anita B. Brody, J.

MEMORANDUM AND ORDER

I. INTRODUCTION

This case arises from a dispute between the computer company International Business Machines Corporation ("IBM") and a company authorized to sell IBM's products. GlassHouse Systems, Inc., ("GlassHouse") complains that IBM promised to give it exclusive favorable pricing, induced it to expend resources cultivating a major client, and then scuttled GlassHouse's imminent deal with that client by giving favorable pricing to another seller. The Complaint asserts claims of promissory estoppel, breach of fiduciary duty, negligent misrepresentation, equitable estoppel, intentional interference with business advantage, and unjust enrichment. New York law applies to the adjudication of these claims.*fn1 Subject matter jurisdiction is exercised under 28 U.S.C. § 1332.*fn2

IBM has moved to dismiss the Complaint under Fed. R. Civ. Pro. 12(b)(6) for failure to state a claim upon which relief can be granted (Doc. #4). I will grant this motion in part. The claims of breach of fiduciary duty, negligent misrepresentation, and unjust enrichment (counts II, III, and VI) should be dismissed because they are precluded by a contract between IBM and GlassHouse. The claim of intentional interference with business advantage (count V) should be dismissed because the Complaint makes insufficient factual allegations. But the claims of promissory estoppel and equitable estoppel (counts I and III) should not be dismissed because IBM's promise of exclusive favorable pricing may have been extraneous to the contract.

II. BACKGROUND*fn3

IBM is a major technology company that makes and sells computer products and offers related services. Over ten years ago, GlassHouse and IBM entered into a contract ("Agreement") whereby GlassHouse became an IBM Business Partner ("BP") authorized to sell IBM products and services as an independent contractor.*fn4 (See Pl.'s Resp. Ex. A [hereinafter "Agr'm."].) IBM has nearly identical contracts with other BPs.

The Agreement describes IBM's relationship with GlassHouse and explains how IBM determines and communicates the terms and prices at which BPs may market and sell IBM products and services. (Agr'm. 10, 19, 25; Compl. ¶ 15.) Here are some material provisions:

! "Business Partner is a business entity which is approved by us to market Products and Services under this Agreement." (Agr'm. 8.)

! "[B]oth of us are independent contractors, and this Agreement is non-exclusive. . [E]ach of us is responsible for our own expenses regarding fulfillment of our responsibilities and obligations under the terms of this Agreement." (Agr'm. 10.)

! "As our IBM Business Partner . we approve you to market on our behalf at prices and terms established by IBM. . You agree to . actively market Products and Services." (Agr'm. 19.)

! "The price, charge and discount if we specify one, for each Product and Service will be made available to you in a communication which we provide to you in published form or through our electronic information systems or a combination of both." (Agr'm. 25.)

! "You earn your fee on the date of our invoice to the End User. . You are only entitled to compensation for orders IBM accepts during the contract duration." (Agr'm. 20.)

Although each BP must "actively market Products and Services," the Agreement also provides that IBM may offer special incentives such as letting a BP offer special pricing to customers. (Agr'm. 12, 19; Compl. ¶ 15.) The Agreement states: "We may provide marketing funds and promotional offerings to you. If we do, you agree to use them according to our guidelines." (Agr'm. 12.)

Several times before 2005 in publications and at conferences, IBM communicated to GlassHouse and others that when a BP has performed a certain amount of selling and marketing to develop an account with a customer, that BP will receive more favorable pricing for that customer than other BPs who have not performed such activities. Crucially, the Complaint does not specify whether this promise was made pursuant to the Agreement.

From 2002 to 2006, GlassHouse cultivated an account with SEI Investments, Inc., ("SEI") a company that provides financial services to individuals and businesses. Initially, SEI used non-IBM central processing units ("CPUs").*fn5 SEI became an IBM mainframe customer in 2006 when GlassHouse sold it new CPUs and mainframe technology made by IBM.

In October 2006, GlassHouse had several meetings with SEI about "migrating" to more advanced technology. On October 19, 2006, IBM approved GlassHouse's request to offer SEI special pricing for the migration. In December 2006, SEI agreed to buy the new technology. On December 14, 2006, IBM approved GlassHouse's second request for special pricing. ...


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