Bd. Am's. v. Sally Beauty Holdings, Inc.
| Decision Date | 27 February 2023 |
| Docket Number | Civil Action 1:22-CV-10595-AK |
| Parties | BOARD AMERICAS, INC. Plaintiff v. SALLY BEAUTY HOLDINGS, INC., and JAY DeBLANK Defendants. |
| Court | U.S. District Court — District of Massachusetts |
MEMORANDUM AND ORDER ON MOTION TO DISMISS FOR LACK OF JURISDICTION BY JAY DEBLANK AND MOTION TO DISMISS BY SALLY BEAUTY HOLDINGS, INC.
Board Americas, Inc (“Board”) brings this lawsuit against defendants Sally Holdings Inc. (“Sally”)[1] and Jay DeBlank (“DeBlank”). Board seeks damages against the defendants for their breach of a Software-as-a-Service Agreement (“SaaS Agreement”) for which they assert Sally owes $679,200 for the license to use Board's software and support services for a minimum of the next two years. Board asserts claims for breach of contract, quantum meruit, and violation of Mass. Gen. Laws Chapter 93A, Section 11. Defendants maintain that the SaaS agreement was merely a failed negotiation that never represented a final agreement.
DeBlank has filed a motion to dismiss the case pursuant to Fed.R.Civ.P. 12(b)(2) for lack of personal jurisdiction. [Dkt. 8]. Sally has filed a partial motion to dismiss with respect to Board's Chapter 93A claim.[2] [Dkt. 6].
For the following reasons, DeBlank's motion to dismiss for lack of personal jurisdiction [Dkt. 8] is DENIED. Sally and DeBlank's partial motion to dismiss as to Board's Chapter 93A claim [Dkt. 6] is GRANTED.
On or around July 2021, Board and Sally began discussions about an agreement in which Board would provide its software to help improve Sally's supply chain analytics. [Dkt. 1 (“Compl.”) at ¶¶ 10]. Between July and October 2021, DeBlank, Sally's Director of Supply Chain Analytics, began negotiating the scope and terms of the SaaS agreement on Sally's behalf. [Id. at ¶¶ 11-12]. Board is a Massachusetts corporation with its principal place of business in Boston. DeBlank resides in Dallas, Texas. [Id. at ¶¶ 3]. Board does not allege that they met with DeBlank in-person but rather that they negotiated over “numerous meetings, telephone calls, and emails.” [Id. at ¶ 12]. DeBlank told Board that he was in “constant communication” with Sally's Vice President and Head of Logistics, with Sally's legal and IT departments, and he would provide Board updates from them during the negotiations. [Id. at ¶ 14]. DeBlank represented to Board that he was expressly authorized to execute the SaaS agreement. [Id. at ¶¶ 15-16].
On or around October 5, 2021, Board and Sally entered into the SaaS agreement which DeBlank executed on Sally's behalf. [Id. at ¶¶ 18]. The agreement was accompanied by an Order Form which detailed the software ordered and was signed by DeBlank on behalf of Sally. [Id.; Dkt. 1-1]. The SaaS agreement and the service level agreement also are signed by DeBlank. [Dkt. 1-1 at 11; Dkt. 1-2 at 9]. The opening paragraph of the SaaS agreement and the service level agreement outlined the parties in the transaction as well as their respective addresses, including Board's address in Boston, Massachusetts. [Dkt. 1-1 at 1; 1-2 at 2]. The signed agreement in both the SaaS agreement and the service level agreement includes a governing law section which states that any disputes arising from the contract will be governed by the laws of Massachusetts and that the courts in Boston shall have exclusive jurisdiction to adjudicate any disputes. [Dkt. 1-1 at 10; 1-2 at 8].
According to the SaaS agreement, Board made its software available to Sally for $226,400 per year for a three-year term. [Compl. at ¶¶ 20]. Around the same time, Board and Sally entered into a service agreement, providing Sally with its “Gold” level support package for software. [Id. at ¶ 23]. The SaaS agreement provided that Board's support services could be purchased separately; the two parties engaged in discussions for an addendum to the SaaS and including discussing the possibility of having a third-party implement Board's software. [Id. at ¶ 25].
After the agreements were executed, the parties continued having meetings and phone calls about onboarding the software including to discuss “kickoff strategy.” [Id. at ¶ 30]. On October 15, 2021, Board began issuing invoices which according to their agreement Sally was obligated to pay within thirty days. [Id. at ¶ 26-27]. Sally declined to do so. [Id. at ¶ 28]. On November 10, 2021, DeBlank informed Board that Sally's Supply Chain Group had missed its budget target for the year and thus was coming under pressure from its new Chief Executive Officer. [Id. at ¶¶ 31-32].
On January 23, 2022, citing pressure from his superiors in the company, DeBlank emailed Board asking if any alterations to the agreement could be made. [Id. at ¶ 33]. Board responded offering to split the past-due payments into three parts and to extend the term of the SaaS agreement for an additional three months without charge. [Id. at ¶¶ 35].
On January 27, 2022, Board received a response from Sally's Senior Counsel, Amy Dungan, that stated the following:
[Id. at ¶ 36]. Board responded with a letter of dispute. [Id. at ¶ 38]. Ms. Dungan further followed up reaffirming the lack of agreement and stating that DeBlank did not have the authority to execute the contracts.
On April 5, 2022, Sally filed a complaint in the United States District Court for the Eastern District of Texas seeking a declaratory judgment regarding the enforceability of the agreements. [Id. at ¶ 42]. In that complaint, Sally concedes that DeBlank signed those agreements but says that he did so to “lock-in-pricing.” [Id. at 44]. Board has not asserted in its Complaint that Sally ever accessed any of Board's software or licenses or that Board provided any services to Sally.
A Fed.R.Civ.P. 12(b)(2) motion to dismiss for lack of personal jurisdiction challenges the ability of the court to assert judicial power over the defendant. When personal jurisdiction is contested, the plaintiff has the “ultimate burden of showing by a preponderance of the evidence that jurisdiction exists.” Vapotherm, Inc. v. Santiago, 38 F.4th 252, 257 (1st Cir. 2022), quoting Adams v. Adams, 601 F.3d 1, 4 (1st Cir. 2010). To demonstrate this, the plaintiff should “proffer evidence which, taken at face value, suffices to show all facts essential to personal jurisdiction.” Baskin-Robbins Franchising LLC v. Alpenrose Dairy, Inc., 825 F.3d 28, 34 (1st Cir. 2016). The court shall review the pleadings, supplemental filings in the record, undisputed facts provided by the defendant, and then give credence to plaintiff's version of genuinely contested facts. Id. The burden of proof is “light” but nevertheless requires plaintiff to rely not on “mere allegations” alone but to point to specific facts in the record that support their claims. Jet Wine & Spirits, Inc. v. Bacardi & Co., 298 F.3d 1, 8 (1st Cir. 2002) (citing Daynard v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 290 F.3d 42, 51 (1st Cir. 2002).
To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a complaint must allege sufficient facts to state a claim for relief that is “plausible on its face” and actionable as a matter of law. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Reading the complaint “as a whole,” the Court must conduct a two-step, context-specific inquiry. Garda-Catalan v. United States, 734 F.3d 100, 103 (1st Cir. 2013). First, the Court must perform a close reading of the complaint to distinguish factual allegations from conclusory legal statements. Id. Factual allegations must be accepted as true, while legal conclusions are not entitled to credit. Id. A court may not disregard properly pleaded factual allegations even if actual proof of those facts is improbable. Ocasio-Hernandez v. Fortuno-Burset, 640 F.3d 1, 12 (1st Cir. 2011). Second, the Court must determine whether the factual allegations present a “reasonable inference that the defendant is liable for the misconduct alleged.” Haley v. City of Bos., 657 F.3d 39, 46 (1st Cir. 2011) (citation omitted). Dismissal is appropriate when the complaint fails to allege a “plausible entitlement to relief.” Rodriguez-Ortiz v. Margo Caribe, Inc., 490 F.3d 92, 95 (1st Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 559 (2007)).
DeBlank argues that Massachusetts cannot assert personal jurisdiction over him because he has not had any contacts with Massachusetts, that his actions negotiating the deal took place in Texas, and that he negotiated with other Texas-based Board employees. [Dkt. 8 at 2]. Board responds that DeBlank's contacts with Massachusetts are sufficient to authorize personal jurisdiction because he communicated regularly with Board employees in Massachusetts, he knew he was communicating with agents and employees of a Massachusetts company even when in Texas, and that he caused tortious injury to Board in Massachusetts. [Dkt. 11 at 2-3].
To establish personal jurisdiction over a nonresident defendant in a diversity case, the plaintiff must satisfy both the forum state's long-arm statute and the Due Process Clause of the Fourteenth Amendment. C.W. Downer & Co. v Bioriginal Food & Sci. Corp., 771 F.3d 59, 65 (1st Cir. 2014). Massachusetts' long-arm statute identifies causing tortious injury by act or omission in the Commonwealth, which Board alleges DeBlank has done here, as a...
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