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Myservice Force, Inc. v. American Home Shield and Servicemaster Consumer Services

January 17, 2013

MYSERVICE FORCE, INC.
v.
AMERICAN HOME SHIELD AND SERVICEMASTER CONSUMER SERVICES LIMITED PARTNERSHIP



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

MEMORANDUM

Plaintiff myServiceForce, Inc. ("mSF") has brought this action against Defendants alleging claims for breach of contract, unjust enrichment, promissory estoppel and tortious interference with contract arising out of the parties' four year relationship. Defendants have moved for summary judgment in connection with all of mSF's claims. For the following reasons, the Motion is granted in part and denied in part.

I. BACKGROUND

A.The Parties

mSF, formerly known as Field Master Solutions, is a software company that provides internet based software to service companies. (Rawding Decl. ¶ 2.) mSF is a Pennsylvania Corporation and maintains its principal place of business in Pennsylvania. (Compl. ¶ 1; Marzola Decl. ¶ 7.) Defendants American Home Shield ("AHS") and Service Master Consumer Services Limited Partnership ("SVM") are both Delaware corporations that maintain their primary places of business in Tennessee. (Compl. ¶¶ 2-3; Answer ¶¶ 2-3.) AHS, a subsidiary of SVM, sells home warranties that cover major systems and appliances in the home. (Quandt Dep. at 36-37.) SVM is a family of brands, which, in addition to AHS, includes Terminix, TruGreen LandCare, Merry Maids, ServiceMaster Cleaning, AmeriSpec, and Furniture Medic. (Id. at 37.) AHS hires HVAC, plumbing, electrical, and appliance service contractors to perform the work under its warranties. (Wanninger Dep. at 23-27; Marzola Decl. ¶ 5.) AHS engages three classes of contractors: (1) call committed contractors, also referred to a preferred contractors, who have operations agreements with AHS, pursuant to which AHS promises them a certain number of service calls per year; (2) network contractors, who have contracts with AHS but do not receive call commitments from AHS; and (3) direct dispatch contractors, who do not have formal service agreements with AHS. (Wanninger Dep. at 25-28.)

In 2006, mSF had a product known as FieldMasterPro ("FMPro") that provided work order management and field service technician productivity tools. (Joint Services and Pilot 1 Agreement at 1.) John Lenihan, Project Manager of SVM, reached out to mSF in late December 2006, looking for software based on mSF's existing products that could be used by AHS's 14,000 contractors. (Marzola Decl. ¶ 2, 5, 7.) In the spring of 2007, Jim Goetz, CIO of SVM, informed mSF that, once mSF had successfully customized FMPro, SVM and AHS would enroll AHS's contractors into the project and the contractors would pay mSF directly to use the customized software. (Marzola Decl. ¶¶ 9, 11.) mSF calculated that revenue from the project, assuming that all 14,000 of AHS's contractors were enrolled, would be at least $70,000,000. (Id. ¶ 10.)

B.The Mutual Non-Disclosure Agreement

In connection with these discussions, the parties entered into a Mutual Non-Disclosure Agreement ("NDA") on January 18, 2007, which they re-executed on August 17, 2007. (Compl. Ex. A; Def. Ex. G.) The NDA prohibits a Recipient of Confidential Information from using that Confidential Information for its own benefit or for the benefit of another without the prior consent of the Discloser. (NDA ¶ 2.) The NDA also prohibits a Recipient of Confidential Information from disclosing the Confidential Information to any person outside of its organization. (Id.) The NDA defines Confidential Information as follows: any and all information concerning the business of a Party and such Party's customers, including without limitation, any and all current and future technical, operational or financial information, marketing or business plans, unpublished financial information or business results, forecasts, customer names, customer addresses, and related customer data, partners' names and information, vendor names and information, employee names and information, contracts, practices, services and support, procedures, trade secrets, and other business information including, but not limited to, technical data, know-how, software, reports, methods, strategies, plans, documents, drawings, designs, tools, models, inventions, patent disclosures, and Requests for Proposals that may be disclosed between the parties whether in written, oral, electronic, website-based, or other form, which is designated as Confidential Information by each party disclosing such Confidential Information ("Discloser") . . . . (NDA ¶ 1.) John Lenihan executed the NDA on behalf of SVM; Sean Marzola, Chief Operating Officer and Vice President of Business for mSF, executed the NDA on behalf of mSF. (NDA.)

C.The Joint Services and Pilot 1 Agreement

On September 17, 2007, mSF entered into the Joint Services and Pilot 1 Agreement ("Pilot 1 Agreement") with SVM to develop an enhanced version of FMPro that AHS's contractors could use to report the status of customer calls to AHS. (Pilot 1 Agreement (Defs. Ex. B) ¶ 1.3; Wanninger Dep. at 14-15; Rawding Dep. at 70-72; Compl. ¶ 17; Answer ¶ 17.) mSF and SVM had two objectives in entering into the Pilot 1 Agreement. (Pilot 1 Agreement Ex. A at A-1.) The "Ultimate Project objective" (Tier A) was "the development of a fully integrated Field Service Management ("FSM") software that is based upon, and delivered in the same manner as, FMPro and provided and supported by [mSF]." (Id.) This project was to include both back office and field features. (Id.) The second objective (Tier B) was that the final product, called FMPro, would meet certain minimum workflow interface requirements. (Id. at A-2.) The Pilot 1 Agreement provided that SVM, AHS and mSF intended to "partner in [the] process by sharing costs, cooperating closely and sharing in future revenue according to contract terms for each Project Step." (Id.) Project Step 1 was completion of Pilot 1 and Project Step 2 was the final design and engineering of the Tier A requirements and the completion of a Master Contract that included 10% revenue sharing by AHS and SVM of mSF's gross revenue from sales of FMPro to AHS's contractors and competitors. (Id.) The Scope of Work attached to the Pilot 1 Agreement states that there were two requirements for Pilot 1: (1) providing functionality that will deliver dispatches (i.e., jobs) electronically into FMPro through XML files attached to e-mails and (2) using the same functionality to provide status information on those jobs from contractors to AHS using FMPro. (Id. at B-3-4.) According to Lenihan, the goal of Project 1 was to add features to FMPro to enable AHS's 14,000 service contractors to directly link to AHS. (mSF Ex. 62 at 2.) FMPro was to "include automated dispatching of work to AHS contractors, automated status reports, and automated invoicing." (Id.)

The Pilot 1 Agreement provided that SVM would initially pay mSF $30,000 of the initial costs of the project and reimburse mSF 50% of the remaining costs up to $170,000. (Pilot 1 Agreement ¶¶ 2.1.1, 2.1.2.) The Pilot 1 Agreement had a term of not more than five continuous months. (Id. ¶ 3.1.) The NDA was incorporated into the Pilot 1 Agreement as Appendix C. (Id. ¶ 5.1.) The Pilot 1 Agreement contains an integration clause, which provides that the Agreement and Statements of Work issued thereunder "constitute the entire and final agreement between the Parties" and also provides that "[n]o waiver, consent, modification or change of terms of this Agreement will bind either Party unless agreed upon in writing and signed by both Parties." (Id. ¶ 12.8.) David J. Crawford, President of AHS and Vice President of SVM, executed the Pilot 1 Agreement on behalf of SVM; Gary A. Rawding, mSF's Chairman and CEO, executed the Pilot 1 Agreement on behalf of mSF. (Id. at 8, Crawford Dep. at 87-88.)

On February 12, 2008, Lenihan met with Marzola and Rawding to discuss an extension to the Pilot 1 Agreement. (Rawding Decl. ¶ 6.) During this meeting, Lenihan assured Marzola and Rawding that SVM and AHS would require AHS's contractors to enroll in the project. (Id.) On March 19, 2008, in a telephone call with Rawding, Crawford confirmed that AHS would require its 14,000 contractors to enroll in the project. (Id. ¶ 7.) On March 20, 2008, SVM and mSF entered into the Joint Services and Pilot 1 Agreement Extension, which extended the term of the Pilot 1 Agreement until June 30, 2008. (Pilot 1 Agreement Extension (Defs. Ex. C) at 3; Rawding Dep. at 75.) The parties also agreed in the Extension to immediately begin an Initial Limited Introduction of the AHS Contractor Edition of FMPro to between 50 and 100 AHS contractors. (Id. ¶ 4.1.1)

On May 29, 2008, Rawding e-mailed a PowerPoint presentation to Crawford, David Quandt, Senior Vice President of Service Operations for AHS, and Mike Morris. (mSF Exs. 69, 72.) The PowerPoint concerned mSF's concept for a contractor dashboard to enhance FMPro. (mSF Ex. 69 at mSF 04067.) The proposed contractor dashboard would contain the following web-based features: one call scheduling and dispatch processing; an AHS communications center; a field authorization center; AHS invoicing and customer value reporting; points monitoring; and data management. (Id. at mSF 04071-72.) The PowerPoint also introduced optional components such as work order communications, field credit card processing, integrated printing for receipts and customer surveys, and voice communications. (Id. at mSF 04072.) mSF's business plan projected revenues of $332,500 per month based on use of the dashboard by 3500 contractors. (Id. at mSF 04084.) The optional features were projected to generate additional revenues; for example, field credit card processing was projected to bring in $150,000 per month based on use by 3500 contractors. (Id.) Total revenues from the contractor dashboard services, including the optional services, were projected at $8 million per year, based on use by 3500 contractors. (Id.)

On May 30, 2008, Rawding sent an e-mail to Crawford and Quandt recapping the telephone conference. (mSF Ex. 70.) In this e-mail, Rawding noted that both mSF and AHS "would like to move forward with a master contract that will be 'long term and exclusive.'" (Id. at mSF 04103.) Rawding also expressed a need to know whether AHS was opposed to making the project mandatory for its contractors. (Id. at mSF 04104.) Crawford responded by e-mail later that day, stating that he "couldn't agree with you more on your expressed concern of a slow, 1 by 1 contractor roll-out program. This needs to be mandated or not rolled out . . . ." (Id. at mSF 04103.)

On June 24, 2008, mSF gave a presentation about the AHS Contractor Edition of FMPro! ("ACE") to AHS personnel in Memphis, Tennessee. (Quandt Dep. at 253; mSF Ex. 50.) During this presentation, mSF detailed the features and functions of ACE and discussed future options for the project, including one call scheduling, an AHS Communications Center, field authorization, and integrated invoicing. (mSF Ex. 50 at mSF 307353-59.) mSF also explored issues that slowed the acceptance of ACE by contractors, including "resistance to change," cost, and "fear, uncertainty, & doubt/distrust." (Id. at mSF 307368.) One option that mSF suggested to resolve this issue was mandatory participation of preferred contractors at a reduced monthly fee. (Id. at mSF 307372.) mSF also discussed its contractor dashboard concept during the presentation. (Id. at mSF 307374-75.) mSF estimated that, if AHS made use of ACE mandatory for its preferred contractors by the first quarter of 2009, the project had revenue potential of approximately $5.9 million in 2010 and $9.5 million in 2011. (Id. at mSF 307399-406.) mSF also made it clear, in its presentation, that the mandatory enrollment of 3000 preferred contractors was necessary to ensure that the project generated sufficient revenue to cover development costs. (Id. at mSF 307413.)

At Quandt's request, Rawding sent him a follow-up letter the day after the presentation, summarizing the features and benefits of ACE. (mSF Ex. 93.) Rawding mentioned, in his e-mail, that mSF's business plan was based on the following three assumptions: (1) the project will be mandatory for approximately 3000 customers; (2) AHS will agree to a long term commitment when the Pilot 1 Agreement expires; and (3) that AHS will enter into an exclusive agreement with mSF. (Id. at mSF 00662.)

D.The Joint Services Agreement

mSF successfully completed Pilot 1 and the parties decided to continue to work together. (Morris Dep. at 32.) During the late summer and fall of 2008, mSF and AHS began to negotiate the terms of a new contract. (See mSF Exs. 26, 72, 73, 95; Rawding Dep. at 100-01.) On September 1, 2008, Rawding sent a draft letter of intent to Quandt, outlining the terms of a proposed master agreement between AHS and mSF. (mSF Ex. 74.) Those terms included a three year initial term, the requirement that AHS would enroll no less than 1000 of its preferred contractors in ACE in 2009, and expected start-up costs of $5,000,000. (Id. at mSF 04372-74.) Quandt forwarded the draft letter of intent to SVM Vice President and Deputy General Counsel Mark Lightfoot on September 2, 2008. (Pl. Ex. 48.) A month later, Quandt scheduled a meeting with Rawding for October 24, 2008 to discuss the proposed agreement. (mSF Ex. 46.) In an e-mail agreeing to the meeting, Rawding stressed that AHS had to make contractor participation in ACE mandatory, or its contractors would not participate in the project. (Id.) Quandt agreed that, at a minimum, AHS should make participation mandatory for contractors doing more than 100 orders or more a month for AHS. (Id.; Quandt Dep. at 285.)

On October 31, 2008, Crawford informed Rawding that AHS's IT Department would not be able to support the full roll-out plan for ACE and the parties agreed to enter into a one-year agreement to roll out ACE to a limited number of contractors. (Rawding Decl. ¶ 11.) On December 12, 2008, AHS and mSF entered into the Joint Services Agreement ("JSA"), which had an effective term from December 12, 2008 until December 31, 2009. (JSA (Defs. Ex. D) ¶

5.) The JSA states that AHS had engaged mSF to provide the version of FMPro that mSF had developed during the Pilot 1 to its contractors. (JSA ¶¶ 1.1, 1.2.) The JSA required AHS to engage in a Preferred Contractor Program, the objective of which was the enrollment of 500 AHS preferred contractors into the program. (Id. ¶ 2.1.) AHS was also required to financially subsidize the Preferred Contractor Program by reimbursing participating contractors for hand held devices required for field technicians to operate FMPro. (Id. ¶ 3.) mSF was required to provide direct sales and marketing support for the Preferred Contractor Program and was also required to provide marketing materials for AHS's direct dispatch contractors. (Id. ¶¶ 4.2.1, 4.2.2.) The JSA also provides that it "supersedes all previous agreements" (id. ¶ 5) and incorporates the NDA (id. ¶ 8.1). The JSA also includes the following integration clause: "[t]his Agreement and the Statements of Work issued hereunder constitute the entire and final agreement between the Parties with regard to the subject matter hereof. No waiver, consent, modification or change of terms of this Agreement will bind either Party unless agreed upon in writing and signed by both Parties . . . ." (Id. ¶ 15.8.) The JSA was executed by Crawford on behalf of AHS and by Rawding on behalf of mSF. (Id. at 7.)

E.mSF's Concerns About AHS's Commitment to the Project and Misuse of mSF's Confidential Information___________________________________

While mSF was working to improve and market ACE in accordance with the JSA, its executives were becoming concerned that AHS was not committed to the project. By the end of July 2009, Rawding was concerned that AHS's Information Technology ("I.T.") Department could not support the use of ACE by AHS's contractors. (mSF Ex. 43.) He was also concerned that AHS had been putting off scheduled meetings to discuss future plans with mSF. (Id.) Quandt responded to Rawding's concerns by scheduling a conference call for August 3, 2009. (Id.) Rawding drafted an agenda for that call, which he sent to Quandt, Matt Wendl*fn1 and Marzola, setting forth the strategic direction and objectives for the ACE program, and establishing parameters for achievement of those objectives. (mSF Ex. 42.) Rawding and Marzola participated in the conference call for mSF and Crawford, Quandt, Wendl, and Mark Mills, AHS's Vice President of I.T., participated in the conference call for AHS. (Rawding Decl. ¶ 13; Mills Dep. at 8.) During the call, Crawford indicated his agreement with the strategic plan as it was laid out in Rawding's agenda.*fn2 (Rawding Decl. ¶ 13.)

Rawding continued to be concerned about AHS's commitment to mSF following this telephone conference and, on August 18, 2009, sent an e-mail to Quandt stating his belief that the parties would not be able to achieve the goals of the 2009 Plan. (mSF Ex. 109 at mSF 06087.) He also stated, in his e-mail, that he thought that the parties were four to six months "from being able to discuss [let] alone complete a master agreement" and suggested modifying the 2009 Agreement instead. (Id.) Rawding sent Quandt a follow-up to that e-mail on September 4, 2009, in which he expressed his disappointment with "[t]he inability of AHS to commit anything to mSF and ACE after 3 years" and with being left out of AHS's then current planning process for replacing its I.T.*fn3 (Id. at mSF 06086.)

On September 22, 2009, Quandt forwarded AHS's Project Charter for Contractor Web Site to Rawding and Marzola. (mSF Ex. 41 at mSF 06113.) The Project Charter encompassed what AHS envisioned as a web site that its contractors could use to "manage their work orders from end to end." (Id.) Quandt asked Rawding and Marzola to let him know whether they thought it would be possible to create the application described in the document. (Id.) The Project Charter had been prepared by Doug Wanninger (a Contract Relations Manager for AHS), Joe Eisenbacher (also a Contract Relations Manager for AHS), and Heather Orcutt (Project Specialist for Contractor Communications for AHS), under the supervision of Matt Wendl. (Id. at mSF 06115; Wanninger Dep. at 7; mSF Ex. 114 at Defs. Supp 000250; Orcutt Dep. at 5.) The purpose of the Project Charter was to develop a vehicle by which contractors could provide AHS and its customers with call status information. (mSF Ex. 41 at mSF 06118.) Quandt sent the Project Charter to mSF "to see if they can build and support this application." (Id. at mSF 06113.) mSF believed that the Project Charter encompassed ideas and proposals that it had previously provided to AHS and SVM as the projected final phase of the ACE project. (mSF Ex. 27 at AHS 06096-97.)

mSF responded to the Project Charter with an extensive proposal. (Id. at AHS 6098-6150.) The proposal described the ACE system, which was "based upon the combination of AHS Contractor Edition of FieldMasterPro and AHS internal systems presented in new web based dash board service." (Id. at AHS 6100.) The proposal also stated mSF's belief that the Project Charter "was born out of the presentation made [by mSF] to the AHS Senior Management Team in May 2008 where we presented the ACE Dash Board concept in great detail." (Id. at AHS 6107.) mSF also retained counsel, Stephen V. Siana, Esq., who sent a letter to Crawford on October 19, 2009, notifying him that mSF believed that AHS had breached its obligations under the JSA. (mSF Ex. 14.) According to Siana, AHS had breached the JSA by failing to meet service quality requirements set forth in the JSA; failing to take commercially reasonable steps to implement the Preferred Contractor Program; failing to use its best efforts to encourage its preferred contractors to enroll in the program; and failing to use its best efforts to require preferred contractors to commit to timely reporting of appointments and job completion statuses. (Id.) James Coggin, Vice President and Managing Attorney for AHS, responded to Siana's letter on October 19, 2009, denying that AHS had breached its obligations under the JSA. (mSF Ex. 15.) Coggin denied that AHS had failed to take commercially reasonable efforts to obtain contractor commitments, and detailed the efforts AHS had made to encourage its contractors to enroll in ACE. (Id.)

Quandt spoke with Rawding on November 1, 2009 and expressed AHS's interest in continuing to develop the ACE program. (mSF Ex. 99.) However, the next day, unbeknownst to mSF, Trafford Seymour, Director of Customer Relationship Solutions for AHS, sent an e-mail to Quandt, in which he stated that AHS was not able, at that time, to allow mSF to integrate into its accounting system and, as a result, "[i]t would be extremely difficult for us to support any development efforts by MyServiceForce until late next year." (mSF Ex. 29.) Consequently, he suggested that AHS "look at other alternatives to the current MyServiceForce contract" and discontinue discussions of integration efforts with mSF. (Id.)

F.SVM/AHS's Strategic Information Systems Plan and Project Genesis

In May 2009, SVM engaged KPMG to develop a long-term strategic plan, the Strategic Information System Plan ("SISP"), for which KPMG looked at SVM's existing technology platform and ability to execute certain "customer experience strategies." (Crawford Dep. at 141; Quandt Dep. at 165-66; Mills Dep. at 63.) As part of this effort, KPMG examined both adding to SVM's already existing I.T. systems and starting fresh with new technology. (Crawford Dep. at 141.) KPMG performed the same process for AHS in November and December 2009. (Mills Dep. at 15, 62-65.) mSF began to learn about SISP in the fall of 2009 and, on November 6, 2009, Siana sent a letter to Coggin, expressing concern that a request for proposal ("RFP") issued in connection with SISP related to the subject matter of the Pilot 1 Agreement and infringed on mSF's Confidential Information in violation of the NDA. (Siana Decl. ¶¶ 5-6.) Coggin left Siana several voice mails during the ensuing week, maintaining that AHS did not "intend to use any of [mSF's] confidential proprietary information." (Id. ¶ 7; mSF Ex. 17.) On November 20, 2009, Siana responded with an e-mail stating that mSF viewed the entire "project and all matters pertaining to it to be proprietary." (mSF Ex. 18.) mSF learned more about SISP when Quandt scheduled a telephone conference with Rawding and Marzola for December 15, 2009, and, in the notice for that call, informed Rawding and Marzola that SVM was "working with KPMG on a global System Information Strategy Plan for the entire ServiceMaster enterprise" and that AHS had "been directed not to go forward with any plans with technology till [sic] this strategy is presented." (mSF Ex. 101.)

Sometime in the third quarter of 2010, SVM chose to purchase an I.T. system called Siebel from Oracle at a cost of approximately $14.5 million. (Crawford Dep. at 142; Mills Dep. at 111-12.) SVM hired IBM Global Services to be its implementation partner for this project. (Mills Dep. at 110.) SVM also hired Oracle to provide hosting services for the project on its hosting site. (Id. at 111-12.) The implementation of SVM/AHS's new SISP became known as Project Genesis. (Id. at 108.)

Mark Mills has oversight responsibility for the I.T. portion of Project Genesis. (Mills Dep. at 21.) The I.T. portion of Project Genesis includes field services capabilities*fn4 and Mills believes that the field services capabilities in Project Genesis overlap in a broad way with some of the products created by mSF for AHS. (Id. at 196.) Several PowerPoints prepared in connection with the implementation of Project Genesis show that the field services aspect of Project Genesis includes functions that mSF was working to provide with its products, such as dispatch notification ...


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