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Financial Software Systems, Inc. v. Questrade, Inc.

United States District Court, E.D. Pennsylvania

June 27, 2018

QUESTRADE, INC., Defendant.




         Two sophisticated commercial entities are embroiled in a breach of contract and unjust enrichment dispute. The plaintiff, Financial Software Systems, is a Pennsylvania company that develops and licenses financial risk-management software. The defendant, Questrade, a Canadian brokerage firm, provides an online trading platform for investors.

         In 2011, Financial agreed to provide software services for Questrade's trading platform over a five-year period. After Questrade refused to pay invoices in 2016, Financial brought an action in state court for breach of contract. Questrade removed the case to this Court and filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(2). The gist of Questrade's motion is it lacks sufficient contacts with Pennsylvania to be subject to the specific personal jurisdiction of a Pennsylvania-based court.

         Because Questrade assumed long-term obligations to a Pennsylvania corporation, which included repeated communications and payments into Pennsylvania, this Court has personal jurisdiction over Questrade. Questrade's motion to dismiss is denied.


         I. The Parties

         Plaintiff Financial Software Systems is a Pennsylvania corporation that developed Spectrum Systems (“Spectrum”) risk-management software that facilitates online trading in foreign currency. Resp. Oppo. Mot. Dismiss, Ex. 1, Decl. ¶¶ 3, 5. Financial's website states that its headquarters are in Pennsylvania, with sales and support offices worldwide.

         Defendant Questrade is an online trading platform based in Ontario, Canada. It does not market to U.S. customers, owns no real property in Pennsylvania, does not pay taxes in Pennsylvania, and is not registered with the Pennsylvania Department of State.

         II. Questrade's Contacts - or Lack Thereof - with Pennsylvania

         Analytically, the facts relating to Questrade's contacts with Pennsylvania fall into three buckets: (1) the facts surrounding the parties' initial negotiations (contract formation), (2) the substance of the contract (contract terms), and (3) the parties' conduct during the life of the contract (contract performance).

         A. Contract Formation

         In 2011, Questrade searched online for vendors that could help facilitate its customers' ability to trade in the foreign exchange market. Mot. Dismiss, Ex. B ¶¶ 13-14.[1] After consulting the marketing materials of a “short list” of vendors, Questrade sought five proposals and received three responses, including one from Financial. Id. ¶¶ 15-19.

         Financial prepared and submitted its initial proposal in Pennsylvania. In the ensuing negotiations, Questrade sent multiple emails and made numerous phone calls to Financial's headquarters in Pennsylvania. Resp. Oppo. Mot. Dismiss, Ex. 1, Decl. ¶¶ 7-8. But Questrade officials never physically visited Financial's Pennsylvania location. Mot. Dismiss, Ex. B ¶ 22. Financial representatives, on the other hand, visited Toronto for in-person meetings with Questrade twice in mid-2011. Id. ¶¶ 21, 24.

         B. Contract Terms

         In August 2011, negotiations between Questrade and Financial culminated in an agreement for a five-year term. Mot. Dismiss, Ex. E ¶ 6. Of particular importance here, Financial agreed to provide services, such as trainings, which were to be performed remotely (from any of Financial's support locations, including those in Pennsylvania) or at Questrade's Toronto offices. Id. ¶ 9.

         The agreement also imposed limits on Questrade's use of Financial's Spectrum software. For example, Questrade personnel were permitted to access Spectrum “only . . . from Questrade's offices in Canada.” Mot. Dismiss, Ex. E ¶ 7(a).

         Finally, the agreement stated that it would be governed by New York law. Mot. Dismiss, Ex. D ¶ 19(c). It did not contain a forum-selection clause but specified that notices to Financial must be sent to Financial's headquarters in Horsham, Pennsylvania. Id. ¶ 17.

         C. Contract Performance

         The first four years of the agreement, from 2011 to 2015, proceeded smoothly. During this period, Financial employees in Pennsylvania fielded requests for support over the phone and online. Resp. Oppo. Mot. Dismiss, Ex. 1, Decl. ¶¶ 11-12. Virtually all of the support from Financial to Questrade came from Financial's headquarters in Horsham, Pennsylvania. Id. ¶ 15. Additionally, Questrade made several payments to Financial that were handled by Financial's accounts office based in Pennsylvania. Id. ¶ 10.

         III. Payment Dispute Leading to this Lawsuit

         In late 2015, Questrade contacted Financial in Horsham seeking to modify the termination provisions of the agreement, but Financial rejected the outreach. Compl. ¶ 11. In early 2016, Financial issued invoices totaling over $160, 000, which Questrade has refused to pay. Resp. Oppo. ...

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