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Fish Net, Inc., Trading As That Fish Place- That Pet Place v. Profitcenter Software

March 30, 2011

FISH NET, INC., TRADING AS THAT FISH PLACE- THAT PET PLACE, PLAINTIFF
v.
PROFITCENTER SOFTWARE, INC., ET AL., DEFENDANTS



The opinion of the court was delivered by: Stengel, J.

MEMORANDUM

In this diversity case, the plaintiff brings an action against the defendants alleging claims for fraud, breach of contract, breach of warranty, and unjust enrichment. The defendants have filed a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the following reasons, I will grant the motion in part and deny it in part.

I. BACKGROUND*fn1

The plaintiff is in the business of selling a wide variety of pet goods throughout the United States both wholesale and directly to customers through retail outlets, mail-order catalogs, and online channels. See Am. Compl. ¶ 2. Defendant ProfitCenter Software, a wholly-owned subsidiary of Defendant Systemax, Inc., purports to sell products involving customized hardware and software solutions to help merchants manage inventory, sales, website, and customer relations. Id. at ¶ 4. It also purports to provide services relating to the system and its own expertise in accounting, point of sale, product management, expense management, and business intelligence. Id. Defendant Systemax routinely markets ProfitCenter's products and services by reference to Systemax's own resources and experience. Id. at ¶ 6.

On December 23, 2005, the plaintiff and Defendant ProfitCenter entered into a "Software Master Agreement" and a "Professional Services Agreement." Id. at 14. The plaintiff alleges that these Agreements were signed after receiving repeated assurances by ProfitCenter's CEO that its application was the backbone of the Systemax operations. Id. at ¶ 15. The Agreements contain warranties of workmanship and services consistent with "general industry standards." Id. The Software Master Agreement promised that ProfitCenter would make its service available to the plaintiff, and it defined that service as "online customer relationship management, billing, order processing, web management, product management, data analysis and other ERP and CRM services." See Document #1 at 25. The Agreements also represent and warrant that ProfitCenter will provide the service in a manner consistent with general industry standards and warrant that the professional services will be performed in a professional and workmanlike manner, in accordance with generally accepted industry standards. See Am. Compl. ¶¶ 81, 90.

The service, provided by ProfitCenter's system, launched on January 10, 2007. It was allegedly a catastrophe for the plaintiff: the system duplicated customer charges, failed to fully process orders, inaccurately calculated sales tax, incorrectly priced items, failed to obtain and store accurate customer information, failed to accurately report inventory, failed to refund erroneous charges, failed to process online orders, and failed to produce financial and accounting information sufficient for the plaintiff to apply for loans or to complete state and federal tax filings. Id. at ¶¶ 17-27, 53-54, 59-66, 69, 71.

Throughout the implementation of the Agreements, ProfitCenter made numerous promises, representations and warranties about the functionality of the system. When the system repeatedly crashed, it made multiple representations about the support ProfitCenter would provide and the alleged minor nature of the problems. Id. at ¶¶ 47-51, 52-58.

By July 2007, the plaintiff was ready to abandon the project and hire a new service provider. Id. at ¶ 34. In response, Defendant Systemax, the owner of ProfitCenter, intervened and made multiple representations to the plaintiff about the support it would provide and about its abilities to rectify the problems with the system. Id. at ¶¶ 35-38. Systemax's assurances induced the plaintiff to stay with ProfitCenter's service and to enter into an addendum to their Agreements. Id. at ¶¶ 35-46; see also Document #1 at 40-42.

In October 2007, the parties discussed problems raised by the plaintiff's bank/lender regarding the plaintiff's inability to provide adequate financial documentation. At a meeting in December 2007, the defendants acknowledged their responsibility for the problems and promised the plaintiff and its bank/lender that they were close to resolving those problems. Id. at ¶¶ 59-69. The amended complaint alleges that the defendants have failed to perform on these promises, causing extraordinary damage to the plaintiff's business. Id. at ¶¶ 69, 89-93, 99-105.

The amended complaint also alleges that it has become obvious that the defendants' system and service ultimately never had the capabilities represented by the defendants both before and after execution of the Agreements, and that the representations made by the defendants as to the nature of the problems were false.

II. STANDARD OF REVIEW

A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted examines the legal sufficiency of the complaint. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). The factual allegations must be sufficient to make the claim for relief more than just speculative. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). In determining whether to grant a motion to dismiss, a federal court must construe the complaint liberally, accept all factual allegations in the complaint as true, and draw all reasonable inferences in favor of the plaintiff. Id.; see also D.P. Enters. v. Bucks County Cmty. Coll., 725 F.2d 943, 944 (3d Cir. 1984).

The Federal Rules of Civil Procedure do not require a plaintiff to plead in detail all of the facts upon which he bases his claim. Conley, 355 U.S. at 47. Rather, the Rules require a "short and plain statement" of the claim that will give the defendant fair notice of the plaintiff's claim and the grounds upon which it rests. Id. The "complaint must allege facts suggestive of [the proscribed] conduct." Twombly, 550 U.S. at 564. Neither "bald assertions" nor "vague and conclusory allegations" are accepted as true. See Morse v. Lower Merion School Dist., 132 F.3d 902, 906 (3d Cir. 1997); Sterling v. Southeastern Pennsylvania Transp. Auth., 897 F. Supp. 893 (E.D. Pa. 1995). The claim must contain enough factual matters to suggest the required elements of the claim or to "raise a reasonable expectation that discovery will reveal evidence of" those elements. Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556).

III. DISCUSSION

In its amended complaint, the plaintiff alleges a claim for fraud against ProfitCenter, two claims for breach of contract against ProfitCenter, a claim for breach of warranty against ProfitCenter, a claim for breach of contract against Systemax, and a claim for unjust enrichment against both ...


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