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Myservice Force, Inc. v. American Home Shield

April 24, 2013

MYSERVICE FORCE, INC.
v.
AMERICAN HOME SHIELD



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

MEMORANDUM

This is a breach of contract action arising from Defendant American Home Shield's ("AHS") alleged breach of its duty of good faith and fair dealing in connection with its performance of one of its duties under a Memorandum of Agreement ("MOA") entered into by the parties on January 27, 2010. Before the Court are Defendant's Motion to Strike Plaintiff's Experts, Defendant's Second Motion to Strike Plaintiff's Experts, and Defendant's Motion for Leave to File Motion for Summary Judgment. For the following reasons, the Motion to Strike Plaintiff's Experts is granted, the Second Motion to Strike Plaintiff's Experts is dismissed as moot, and the Motion for Leave to File Motion for Summary Judgment is granted.

I. BACKGROUND

A. Procedural Background

This action was filed on November 19, 2010. (Docket No. 1.) The Complaint asserted four causes of action against AHS and Service Master Consumer Services Limited Partnership ("SVM"): (1) a claim for breach of contract against AHS (Count I); a claim for unjust enrichment and promissory estoppel against AHS (Count II), a claim for breach of contract against SVM (Count III); and a claim for tortious interference with contract against SVM (Count IV). Defendants moved for summary judgment as to all four claims asserted in the Complaint and we granted that motion in part and denied it in part on January 17, 2013. See myServiceForce, Inc. v. American Home Shield, Civ. A. No. 10--6793, 2013 WL 180287 (E.D. Pa. Jan. 17, 2013). We denied the Motion for Summary Judgment as to myServiceForce, Inc.'s ("mSF") claim, in Count I of the Complaint, that AHS breached its duty of good faith and fair dealing with respect to its obligations under the parties' MOA to imposing status reporting requirements on its contractors. Id. at *27. We granted the Motion for Summary Judgment as to mSF's remaining claims for breach of contract asserted in Count I of the Complaint. Id. We also granted the Motion for Summary Judgment as to Counts II-IV of the Complaint and dismissed SVM as a Defendant in this action. Id. at *27-*28.

After we resolved the Motion for Summary Judgment, we gave the parties the opportunity to produce revised expert reports with respect to the sole claim remaining in the case. (See Docket No. 105.) We also scheduled the trial to commence on April 22, 2013. (See Docket No. 107.) AHS subsequently filed the instant Motions to Strike Plaintiff's Experts, seeking to preclude the introduction of mSF's experts' reports and opinions at trial, and the Motion for Leave to File Motion for Summary Judgment, seeking to file a Motion for Summary Judgment on the ground that mSF cannot establish that it was injured by AHS's alleged breach of its duty of good faith and fair dealing. We held argument on all three Motions on April 9, 2013.

B. Factual Background*fn1

AHS, a subsidiary of SVM, sells home warranties that cover major systems and appliances in the home. (Quandt Dep. at 36-37.*fn2 ) It engages three classes of contractors to perform the work under the warranties: (1) 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"), which provided work order management and field service technician productivity tools. (Joint Services and Pilot 1 Agreement ("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 contractors. (Marzola Decl. ¶¶ 2, 5, 7.) The parties entered into several contracts in connection with mSF's development of products for use by AHS's contractors: the January 18, 2007 Mutual Non-Disclosure Agreement, the September 17, 2007 Pilot 1 Agreement, the December 12, 2008 Joint Services Agreement, and the January 27, 2010 MOA. SVM paid mSF a portion of its initial costs to develop those products pursuant to the Pilot 1 Agreement, but the parties anticipated that mSF would be primarily compensated for its efforts through revenues from the sale of its products to AHS's contractors. (Pilot 1 Agreement ¶¶ 2.1.1, 2.1.2; Pilot 1 Agreement Ex. A at A-1.)

By the time the parties entered into the MOA, mSF had developed a service work order ("SWO") automation and status reporting product called myServiceACE ("ACE") that would enable AHS's contractors to report the statuses of their SWOs, such as the dates and times of customer appointments and the date and time an SWO had been completed, to AHS automatically and in real time. (MOA at 1.) Pursuant to the MOA, mSF was to provide SWO automation and status reporting software, sales and marketing support, and enhancements for ACE, including credit card processing, automatic invoicing, status reporting, field authorization and a bulk order management system. (Id. at 1-2.) The MOA was effective for a two-year term, with the objective of continuing "to grow the number of AHS contractors reporting statuses automatically and in real time to AHS." (Id. at 1.) The MOA required AHS to: (1) pay $250,000 to mSF "in full and final satisfaction of all obligations of AHS under the 2009 Plan;" (2) require Preferred and Network Contractors to "report Appointment Set within 24 hours and SWO Completion within 5 business days;" (3) continue a full time contractor support person; (4) support mSF's marketing of its products to AHS's contractor network; (5) work with mSF to develop and test a Field Authorization process in the first quarter of 2010; and (6) allow mSF to give presentations at regional AHS contractor events during the spring of 2010. (Id. at 2.)

Beginning on April 7, 2010, mSF gave presentations about its products and services to AHS's contractors at 14 regional roadshows. (Marzola Decl. ¶ 20.) Both contractor attendance at these events and the number of contractors purchasing mSF's products were lower than mSF's employees expected. (Id. ¶ 22.) In response to the lower than expected sales of mSF's products, on April 27, 2010, three months after mSF and AHS entered into the MOA, AHS asked mSF to prepare a proposal for making contractor enrollment in mSF's products mandatory, with AHS sharing the costs for certain classes of contractor. (mSF Ex. 102.) AHS ultimately decided not to enter into the proposed agreement to make its contractors' use of mSF's products mandatory because mSF's proposal was too costly (estimated costs for AHS included payments to mSF of $350,000/year for three years, additional payments of $10,000/month, and penalties of $100 per contractor under mSF's goal of 6000 contractors using the system). (mSF Ex. 103.) mSF subsequently filed this lawsuit.

C. mSF's Claim for Breach of the Duty of Good Faith and Fair Dealing

Count I of the Complaint included a claim that AHS breached its obligations under the MOA, including its obligation to require its Preferred and Network contractors to "report Appointment Set within 24 hours and SWO Completion within 5 business days" (the "status reporting requirements provision"). (MOA at 2.) In its first Motion for Summary Judgment, AHS moved for summary judgment on that breach of contract claim, arguing that it had complied with the status reporting requirements provision of the MOA by including requirements for status reporting in its agreements with its Preferred and Network Contractors. In 2010, AHS's operations agreements with its Preferred Contractors required that: "[s]cheduled appointments . . . be communicated to AHS immediately" and the "completion date . . . be provided to AHS within 24 hours of finishing the service call." (Wanninger Dep. at 81-83, 87-88.) AHS's 2010 service agreements with its Network Contractors similarly stated: "'For each Dispatch, Servicer shall (i) use every reasonable effort to immediately communicate to AHS the scheduled appointment date and time; (ii) provide to AHS the completion date for each dispatch within 24 hours of finishing the service call.'" (mSF Ex. 40 (quoting 2010 AHS Service Agreement, Part 8).) In its response to the first Motion for Summary Judgment, mSF did not deny that the obligations AHS placed on its Preferred and Network contractors in their 2010 agreements exceeded the status reporting requirements provision of the MOA. (Rawding Dep. at 225.) However, it contended that AHS breached its duty of good faith and fair dealing in its performance of its obligations under that provision of the MOA by failing to enforce the status reporting requirements it imposed on its contractors.

In analyzing this claim, we determined that there was evidence in the summary judgment record upon which a jury could find that AHS failed to mandate 100% timely compliance with the status reporting requirements it imposed on its contractors, failed to track the timeliness of its contractors' status reporting, and failed to uniformly enforce compliance with its status reporting requirements. myServiceForce, 2013 WL 180287, at *15. We concluded that there was, accordingly, a genuine issue of material fact in connection with mSF's claim that AHS breached its contractual duty of good faith and fair dealing in connection with its performance of its obligations pursuant to the status reporting requirements provision of the MOA by failing to enforce those requirements, and we denied the first Motion for Summary Judgment insofar as it pertained to that claim. Id. That is the sole claim remaining in this case. mSF has indicated that it will call four expert witnesses at trial to testify as to the damages mSF incurred as a result of AHS's alleged breach of its duty of good faith and fair dealing: Thomas Tinsley, Marc Reid (who jointly produced the "Tinsley/Reid Report"), David Chandler Thomas, and Bruce Luehrs. AHS has moved to strike the opinions and revised reports of Plaintiff's experts on the grounds that the opinions are unreliable and do not fit Plaintiff's sole remaining claim.

II.LEGAL STANDARD

The admissibility of expert testimony is governed by Federal Rule of Evidence 702, which provides as follows:

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if: (a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case.

Fed. R. Evid. 702. The proponent of the expert testimony has the burden of establishing its admissibility by a preponderance of the evidence. Padillas v. Stork-Gamco, Inc., 186 F.3d 412, 418 (3d Cir. 1999) (citing Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 592 n.10 (1993)). "Under Rule 702, the district court acts as a 'gatekeeper' to ensure that 'the expert's opinion [is] based on the methods and procedures of science rather than on subjective belief or unsupported speculation.'" ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254, 290 (3d Cir. 2012) (alteration in original) (quoting Calhoun v. Yamaha Motor Corp., U.S.A., 350 F.3d 316, 321 (3d Cir. 2003)). There are three requirements for the admissibility of expert testimony pursuant to Rule 702, "'qualification, reliability and fit.'" Calhoun, 350 F.3d at 321 (quoting Schneider v. Fried, 320 F.3d 396, 405 (3d Cir. 2003)). The United States Court of Appeals for the Third Circuit has explained these requirements as follows:

First, the witness must be qualified to testify as an expert. Qualification requires that the witness possess specialized expertise. We have interpreted this requirement liberally, holding that a broad range of knowledge, skills, and training qualify an expert as such. Second, the testimony must be reliable. In other words, the expert's opinion must be based on the methods and procedures of science rather than on subjective belief or unsupported speculation; the expert must have good grounds for his or her belief. An assessment of the reliability of scientific evidence under Rule 702 requires a determination as to its scientific validity. Third, the expert testimony must fit, meaning the expert's testimony must be relevant for the purposes of the case and must assist the trier of fact.

Id. (quotations omitted). The following factors are used as a guide for determining reliability:

"(1) whether a method consists of a testable hypothesis; (2) whether the method has been subject to peer review; (3) the known or potential rate of error; (4) the existence and maintenance of standards controlling the technique's operation; (5) whether the method is generally accepted; (6) the relationship of the technique to methods which have been established to be reliable; (7) the qualifications of the expert witness testifying based on the methodology; and (8) the non-judicial uses to which the method has been put." Id. (quoting In re Paoli R.R. Yard PCB Litig., 35 F.3d 717, 742 n.8 (3d Cir. 1994). The Third Circuit has explained that "'the reliability analysis [required by Daubert] applies to all aspects of an expert's testimony: the methodology, the facts underlying the expert's opinion, [and] the link between the facts and the conclusion.'" ZF Meritor, 696 F.3d at 291 (alterations in original) (quoting Heller v. Shaw Indus., Inc., 167 F.3d 146, 155 (3d Cir. 1999)). "'When an expert opinion is not supported by sufficient facts to validate it in the eyes of the law, or when indisputable record facts contradict or otherwise render the opinion unreasonable, it cannot support a jury's verdict.'" Id., at 290 (quoting Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp. 509 U.S. 209, 242 (1993); and Advo, Inc. v. Phila. Newspapers, Inc., 51 F.3d 1191, 1198 (3d Cir. 1995)).

The third requirement for admissibility under Rule 702, fit, requires that the expert testimony assist the trier of fact and, thus, pertains "'primarily to relevance.'" Meadows v. Anchor Longwall & Rebuild, Inc., 306 F. App'x 781, 790 (3d Cir. 2009) (quoting Lauria v. Amtrak, 145 F.3d 593, 599 (3d Cir. 1998)). "The expert's testimony must 'fit' under the facts of the case so that 'it will aid the jury in resolving a factual dispute.'" Id. (quoting Lauria, 145 F.3d at 600). This element "'requires a valid scientific connection to the pertinent inquiry as a precondition to admissibility.'" Id. (quoting Lauria, 145 F.3d at 600). "In other words, expert testimony based on assumptions lacking factual foundation in the record is properly excluded." Id. (citing Stecyk v. Bell Helicopter Textron, Inc., 295 F.3d 408, 414 (3d Cir. 2002)). Consequently, when we consider the admissibility of the reports and opinions of Tinsley, Reid, Thomas, and Luehrs, we must consider whether they would assist the jury in determining whether AHS breached its duty of good faith and fair dealing with respect to the status reporting requirements provision of the MOA, and, if so, whether these reports and opinions would assist the jury in its determination of the extent of damages (if any) that mSF incurred as a result of the breach. We are not concerned with the question of whether AHS required its Preferred and Network Contractors to use the best or most technologically advanced products for reporting statuses, we are concerned only with the issue of whether AHS breached its duty of good faith and fair dealing by failing to enforce the status reporting requirements that it imposed on its contractors.

III.DISCUSSION

AHS's argument that the opinions of all four of Plaintiff's experts should be stricken from this case focuses primarily on Tinsley's opinion concerning the manner in which AHS should have performed its obligations pursuant to the status reporting requirements provision of the MOA. AHS has asked us to strike Tinsley's opinion that the only way that AHS could comply with its obligations was to require its Preferred and Network Contractors to purchase mSF's products. (See 4/9/13 Arg. Tr. at 4.) AHS argues that Tinsley's opinion is unreliable and does not fit this case because, in order to reach this opinion, Tinsley assumed that AHS had to satisfy obligations that the MOA did not actually ...


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