Certified Collectibles Grp., LLC v. Globant, LLC
| Decision Date | 31 March 2021 |
| Docket Number | CASE NO. 8:19-cv-1962-SDM-AEP |
| Parties | CERTIFIED COLLECTIBLES GROUP, LLC, et al., Plaintiffs, v. GLOBANT, LLC, GLOBANT S.A., et al., Defendants. |
| Court | U.S. District Court — Middle District of Florida |
Anticipating a surge in business, Certified Collectibles Group and its affiliates (collectively Certified) contracted with a company acquired by Globant, LLC, to develop a new software system that could manage Certified's growing business. After collecting more than $10 million in fees, Globant allegedly "botched" the project during five years of work and lied about the project's progress. Certified sues Globant for breach of contract. Also, Certified sues both Globant and Globant S.A. (a parent company and affiliates) for fraud, for negligent misrepresentation, for professional negligence, for unjust enrichment, and for a violation of Florida's Deceptive and Unfair Trade Practices Act (FDUTPA). Moving to dismiss for failure to state a claim, Globant and Globant S.A. argue that Certified's fraud claims are "re-styled" claims for breach of contract. (Docs. 73, 104)
Certified specializes in collectable "grading," which entails establishing and certifying the authenticity, the quality, and the condition of a collectable, such as an antique coin or a vintage comic book. Using a software system, "The Next Level" (the legacy system), Certified's employees grade collectables, share information, and organize projects. Swelling to more than 265 employees and surpassing $80 million in annual revenue, Certified's success strained the legacy system's ability to manage business. Fearing that the legacy system was ill-equipped to handle Certified's growth, Certified undertook to replace the legacy system with a software system designed "to handle Certified's expanded product offerings, higher transaction volumes, and the language and currency requirements stemming from Certified's overseas expansion." (Doc. 67 at 10-11)
In February 2016, Certified retained PointSource, a software consulting firm, to "evaluate and analyze Certified's business processes" and design an "enterprise resource planning system" (the new system) that "accomplishes everything necessary to take Certified to the next level." Certified wanted "all the functionality of [Certified's] legacy system, plus new features, scalability, and flexibility for continuous upgrades." (Doc. 67 at 12, 14) Certified alleges that PointSource understood the "objectives of Certified's software upgrade project." Further, Certified alleges that PointSource repeatedly assured Certified that implementation"would be easy" and that PointSource would encounter "no issues" designing the new system to meet Certified's needs. (Doc. 67 at 12-13, 15)
Between February 2016 and July 2016, PointSource conducted "due diligence to evaluate and analyze Certified's business processes to enable [PointSource] to make informed decisions about how to design both the new [ ] system" and the computer program that would integrate the new system into Certified's existing computer network. (Doc. 67 at 14-15) Charging $500,000 for this due diligence, PointSource produced a Business Requirements Document, which summarizes "the business requirements that are needed from a [new] system to successfully replace [the legacy system]." Although acknowledging that the business requirements "are not necessarily all solvable by solely [the new system]," the Busines Requirements Document states that PointSource will "ensure that the new system accomplishes everything necessary" to improve Certified's current system. (Doc. 67-1 at 42) The Business Requirements Document describes several features considered "in scope" and critical to PointSource's design plan. (Doc. 67-1 at 43) Also, the Business Requirements Document explicitly describes "out of scope" features "unrelated to the [legacy system's] transformation" and "not necessarily for PointSource [to address] as a whole." (Doc. 67-1 at 44-45)
PointSource supplemented the Business Requirements Document with a proposal — a "Roadmap" — that describes PointSource's plan for implementing "inscope" features and for completing the new system. Defining the Roadmap as a "living document," PointSource explains that:
[The Roadmap] serves as the baseline for the overall scope, scheduling, estimates, and timelines for the Certified [ ] replacement project. As with any project of this magnitude with this many unknowns, the schedule and scope will need to be flexible in order to accommodate unforeseen challenges that always pop up when implementing long-term strategic technical investments.
(Doc. 67-1 at 89) Although reiterating that the Roadmap's timeline "is a best-case estimate," PointSource describes "milestones" that not only achieve "in scope" business requirements but also "deliver fast value" and "minimize disruption to core Certified business." (Doc. 67 at 90-92) Certified alleges that PointSource fraudulently "represented that it could design and implement the new [ ] system within two years, with a 'go-live' date of July 2017, for an estimated cost of $1.8 million." (Doc. 67 at 3)
Relying on the Business Requirements Document and the Roadmap, Certified and PointSource signed in October 2016 a Master Software Development Agreement (the master agreement), which promises "to complete the services set forth in the Business Requirements [Document] and the Roadmap" according to tasks, described as "statements of work." (Doc. 67-1 at 10) Under the master agreement, Certified must sign each statement of work, which accomplishes all or part of a "milestone" that the Roadmap proposes. Also, at least thirty days before the completion of each statement of work, PointSource must "provide [Certified] with a proposal for thenext statement of work as needed for [PointSource] to complete the services set forth in the Business Requirements [Document] and the Roadmap." (67-1 at 10) According to these statements of work, PointSource undertakes:
To design, develop, create, test, deliver, install, configure, integrate, customize, and otherwise provide and make fully operational software as described in the Business Requirements [Document], Roadmap, and each Statement of Work on a timely and professional basis in accordance with all terms, conditions, and specifications set forth in this agreement (including all Schedules and Exhibits attached hereto) and such Statement of Work.
(Doc. 67-1 at 11) In the first statement of work, which PointSource attached to the master agreement and which Certified signed, PointSource intended to create in four months a coin "grading screen" that "lay[s] the groundwork and plumbing for the entire [new design] solution." (Doc. 67-1 at 77-87)
Eight months later, PointSource allegedly had to "scrap" the new system's design because of defects, several of which PointSource allegedly concealed from Certified. (Doc. 67 at 19) Although Certified and PointSource agreed to a second statement of work to correct the grading screen and to accelerate the project, ongoing delays and "poor quality" jeopardized the project. (Doc. 67 at 20-21; Doc. 67-3) After the "go-live" date passed, Certified demanded in September 2017 assurances that PointSource could resuscitate the project within the agreed budget and within the agreed time. PointSource promised "to dedicate additional offshore resources to keep the project on track." (Doc. 67 at 21)
In October 2017, Globant S.A. acquired PointSource and merged PointSource with Globant (a subsidiary of Globant S.A.), which assumed PointSource's obligations under the master agreement. Certified alleges that Globant falsely assured Certified that Globant "had the ability and the intention to deliver the [new system] as planned and as scheduled." (Doc. 67 at 22) By this assurance, Globant allegedly misrepresented and concealed PointSource's design defects that would further delay the project. (Doc. 67 at 22-26) Skeptical that Globant could timely accomplish the project, Certified "demanded that Globant agree to a fixed-fee and firm deadline" to complete the project. (Doc. 67 at 23) Certified and Globant signed a third statement of work (Doc. 67-2), which set a firm deadline for Globant "to complete all remaining deliverables" under the master agreement. (Doc. 67 at 23)
But Certified alleges that Globant "knew or should have known that Globant would have to start the new system over from scratch because PointSource had failed to prepare core design documents and complete other essential deliverables." (Doc. 67 at 4, 43-44) Instead, Globant allegedly concealed the status of the project by "falsely assuring Certified, for months on end, [and for nearly two years], that the project was on track for an on-time and on-budget go-live [date]." (Doc. 67 at 24-31, 37, 43-44) Certified claims more than twenty breaches of contract, "which include a host of deficient project management practices and a defective system design." (Doc. 67 at 5, 35-44) After paying almost $10 million over five years for an allegedly defective system that Certified needed to re-design "from scratch," Certified suesGlobant and Globant S.A. "to recover the tens of millions in damages caused by [an] 'extortionate bait-and-switch.'" (Doc. 67 at 5, 45)
Certified asserts three categories of claims. First, Certified asserts several claims premised on fraudulent or deceptive conduct. In Count I, Certified claims that Globant fraudulently induced Certified to sign the statements of work by misrepresenting PointSource's progress on the new system. In Count II, Certified claims that Globant and Globant S.A. committed "common law fraud" by inducing Certified to assign the master agreement from PointSource to Globant and by misrepresenting the progress on the new system. In Count III, Certified claims that Globant and...
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