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Vantage Learning (USA), LLC v. Edgenuity, Inc.

United States District Court, E.D. Pennsylvania

March 30, 2017



          RUFE, J.

         Before the Court is the Motion by Defendant Edgenuity, Inc. to Dismiss Counts II, III, and IV of Plaintiff's Second Amended Complaint. For the reasons that follow, the motion will be granted.

         I. BACKGROUND

         The Second Amended Complaint alleges the following facts, which are taken as true for the purposes of this motion. Plaintiff Vantage Learning (USA), LLC is a software development company and the author of “adaptive” online learning software that enables schools to create individualized student lessons. Defendant Edgenuity, Inc. is a “blended learning company, ” which integrates online services, such as Plaintiff's software, with face-to-face learning in the classroom. Pursuant to a Master Service Agreement (“Agreement”), Plaintiff provided Defendant with use of its software for Defendant's use in school classrooms. Defendant would then administer a single essay exam to students, who were identified by a unique test number so that their identities remained unknown to Plaintiff. The completed exams would then be sent to Plaintiff for grading.[1] In return, Defendant agreed to compensate Plaintiff on a per-essay-submitted basis.

         In April and May 2014, thousands of duplicate essays were wrongly submitted by Defendant and graded by Plaintiff.[2] As a result, Plaintiff repeatedly rescored the same essays identified under different submission indication numbers as if they were separate unique essays, and billed Defendant accordingly. Defendant has not paid the April or May billings, nor has it paid 30 interest invoices resulting from a 1.5% per month interest charge on unpaid billings pursuant to the Agreement.

         Plaintiff seeks to recover the unpaid amounts and resulting interest under three theories: breach of contract (Count I), unjust enrichment (Count II), and negligence (Count III). Plaintiff also brings a copyright infringement claim (Count IV) seeking statutory damages and counsel fees, based on Defendant's alleged ongoing use of registered software after the Agreement expired on December 1, 2015. Defendant moved to dismiss Counts II, III and IV with prejudice.


         Dismissal of a complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted is appropriate where a plaintiff's “plain statement” does not contain enough substance to show that plaintiff is entitled to relief.[3] In determining whether a motion to dismiss should be granted, the court must consider only those facts alleged in the complaint, accepting the allegations as true and drawing all logical inferences in favor of the non-moving party.[4] Courts are not, however, bound to accept as true legal conclusions couched as factual allegations.[5] Something more than a mere possibility of a claim must be alleged; a plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.”[6] The complaint must set forth “direct or inferential allegations respecting all the material elements necessary to sustain recovery under some viable legal theory.”[7]

         III. ANALYSIS

         A. Unjust Enrichment (Count II)

         Defendant argues that Plaintiff's unjust enrichment claim should be dismissed because this claim is unavailable where an express written agreement governs the relationship of the parties. Plaintiff responds that Defendant's refusal to pay the invoices implies that Defendant disputes the validity of the contract, and that Plaintiff may therefore plead unjust enrichment as an alternative to a breach of contract claim under Fed.R.Civ.P. 8(d)(2).

         It is well-settled in Pennsylvania that the existence of a contract prevents a party from bringing a claim for unjust enrichment.[8] Rule 8(d)(2) nonetheless permits a plaintiff to plead unjust enrichment in the alternative in certain circumstances, “even where the existence of a contract would preclude recovery for unjust enrichment.”[9] Such circumstances require either that (i) the contract at issue covers only a part of the relationship between the parties, [10] or that (ii) the existence of a contract is uncertain or its validity is disputed by the parties.[11]

         The Agreement, by its terms, governs the entire relationship of the parties, and Defendant does not argue otherwise. Although Plaintiff claims that Defendant's refusal to pay the invoices necessarily implies that Defendant considers the Agreement void, Defendant never argues as much. Instead, Defendant contends that the Agreement's per-essay-submitted fee arrangement does not require compensation for essay duplicates-a dispute regarding the scope of the Agreement's fee ...

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