Cinglevue Int'l Pty, Ltd. v. Exo Platform Na, LLC

• Decision Date: 10 July 2014
• Docket Number: 1:13-cv-818 (GLS/RFT)
• Parties: CINGLEVUE INTERNATIONAL PTY, LTD., Plaintiff, v. EXO PLATFORM NA, LLC, Defendant.
• Court: U.S. District Court — Northern District of New York

CINGLEVUE INTERNATIONAL PTY, LTD., Plaintiff, v. EXO PLATFORM NA, LLC, Defendant.

1:13-cv-818 (GLS/RFT)

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF NEW YORK

Dated: July 10, 2014

APPEARANCES:

FOR THE PLAINTIFF:

Squire, Patton Law Firm

FOR THE DEFENDANT:

Olshan, Frome Law Firm

OF COUNSEL:

RICHARD J. OPARIL, ESQ.

KYLE C. BISCEGLIE, ESQ.

MASON A. BARNEY, ESQ.

Gary L. Sharpe

Chief Judge

MEMORANDUM-DECISION AND ORDER

I. Introduction

Plaintiff CingleVue International Pty Ltd. commenced this diversity action against defendant eXo Platform NA, LLC, alleging New York common law causes of action for fraud, rescission, and breach of theimplied covenants of good faith and fair dealing, as well as a claim pursuant to California's unfair competition and false advertising law.¹ (See generally Am. Compl., Dkt. No. 11.) eXo filed a pre-answer motion, pursuant to Fed. R. Civ. P. 12(b)(6), seeking dismissal of all of CingleVue's claims. (Dkt. No. 14.) For the reasons that follow, the motion to dismiss is granted.

II. Background²

This dispute arises out of a business transaction between CingleVue, a technology company that provides software systems integration services to its clients, (Am. Compl. ¶ 6), and eXo, which provides online platforms and services for managing web-based content and related services, (id. ¶ 8). At some time in 2011, the portal technology being used by CingleVue at the time became unable to meet all of CingleVue's technical requirements, so CingleVue sought out a new social collaboration platform from eXo. (Id. ¶ 9.) The eXo platform was marketed and advertised as capable of integration with certain technologies and services that were used by CingleVue. (Id. ¶ 10.) Additionally, in October2011, CingleVue communicated its specific requirements to eXo representatives, who expressed their willingness to provide CingleVue with eXo's platform product, and indicated that their product could meet CingleVue's requirements. (Id. ¶¶ 11-12.)

Ultimately, the parties entered into a partnership agreement, executed on November 17, 2011, under which CingleVue paid eXo approximately $125,000 in exchange for a license from eXo to install and use eXo's platform (hereinafter "the product") on CingleVue computers. (Id. ¶¶ 9, 14; Dkt. No. 11, Attach. 1 at 49-62.)³ That same day, eXo provided the product to CingleVue. (Am. Compl. ¶ 17.a.) The agreement permitted CingleVue to incorporate eXo's software into CingleVue's applications, thus creating a bundled product, and CingleVue could sublicense and distribute eXo's product only as part of this bundle. (Id. ¶ 15.) As a term of the agreement, the parties agreed that eXo disclaimed certain warranties, including "warranties of merchantability, title, non-infringement, quiet enjoyment, accuracy of data, system integration, courseof performance or fitness for a particular purpose." (Dkt. No. 11, Attach. 1 at 50.) Additionally, the agreement provided that CingleVue was receiving the product "as is," and eXo did not "guarantee or warrant that the use of the product will be uninterrupted or error free." (Id.) Further, the agreement stated that "[n]o claim or action, regardless of form, arising out of this [a]greement . . . may be brought by either party more than one (1) year after the cause of action has accrued." (Id. at 52.)

Beginning in November 2011, shortly after receiving the product, CingleVue experienced difficulties with integrating the product into a bundle; CingleVue alleges that the product as provided by eXo was "woefully inadequate for the tasks for which CingleVue licensed the [p]roduct." (Id. ¶¶ 16-17.) CingleVue reported these issues to eXo, and upon learning of these problems, eXo suggested that CingleVue agree to purchase an upgraded product from eXo; CingleVue alleges that "eXo represented that the [u]pgraded [p]roduct would resolve the problems and deficiencies in the [p]roduct and allow CingleVue to use the [u]pgraded [p]roduct for the intended purpose." (Id. ¶ 19.) The parties subsequently entered into an amended partnership agreement on January 26, 2012, with all terms of the original agreement remaining the same except for theaddition of the upgraded product. (Id. ¶ 20; Dkt. No. 1, Attach. 1 at 80.)

The upgraded product "was still woefully inadequate" for CingleVue's purposes, and throughout 2012, beginning in February 2012, CingleVue communicated several issues to eXo regarding the upgraded product's failures. (Am. Compl. ¶ 22.) CingleVue representatives communicated with eXo support teams "at least twenty times by telephone and e-mail messages" during September and October 2012, but the parties were unable to determine a solution. (Id. ¶¶ 23, 25-26.) CingleVue alleges that these problems caused it to "delay[ its] contractual delivery of its solution to an independent school system customer." (Id. ¶ 27.)

On November 30, 2012, CingleVue requested a refund of all fees paid to eXo. (Id. ¶ 28.) CingleVue asserts that eXo "knew or should have known of the true . . . limitations of the [p]roduct and [u]pgraded [p]roduct," and did not disclose these limitations to CingleVue before the partnership agreement was signed, and that CingleVue would not have entered into the agreement had it been aware of the limitations of the product and the upgraded product. (Id. ¶ 29.) Ultimately, CingleVue commenced this action against eXo by filing a complaint on July 10, 2013. (Compl., Dkt. No. 1.) In response to eXo's pre-answer motion to dismiss the complaint,(Dkt. No. 7), CingleVue filed an amended complaint, asserting four causes of action, including fraud, rescission, breach of the implied covenants of good faith and fair dealing, and a claim pursuant to California's unfair competition and false advertising laws, (see generally Am. Compl.).

III. Standard of Review

The standard of review under Fed. R. Civ. P. 12(b)(6) is well settled and will not be repeated here. For a full discussion of the standard, the court refers the parties to its prior decision in Ellis v. Cohen & Slamowitz, LLP, 701 F. Supp. 2d 215, 218 (N.D.N.Y. 2010).

IV. Discussion⁴

eXo asserts in its motion to dismiss that CingleVue's common law contract claims are subject to dismissal because they are untimely pursuant to the parties' agreement. (Dkt. No. 14, Attach. 9 at 9-11.) Additionally, eXo argues that CingleVue's California statutory claims should be dismissed for lack of standing and because CingleVue has not alleged adequate injury. (Id. at 21-25.) CingleVue argues that the shortened limitations period agreed to by the parties is not binding here, and that itsclaim pursuant to the California unfair competition and false advertising laws is proper. (Dkt. No. 17 at 9-13, 21-24.) For the reasons that follow, eXo's motion is granted, and the complaint is dismissed.

A. Timeliness

eXo first argues that CingleVue's common law claims are time barred because the parties had explicitly agreed in the partnership agreement to a shortened, one-year limitations period. (Dkt. No. 14, Attach. 9 at 9-11.) In response, CingleVue argues that its common law claims are not time barred because claims for fraud in the inducement are not subject to shortened statutes of limitations, even if a contract between the parties contains a shorter limitations period. (Dkt. No. 17 at 9-13.) Additionally, CingleVue argues that eXo should be estopped from pursuing a statute of limitations defense. (Id.) The court agrees with eXo, and finds that CingleVue's claims here are untimely pursuant to the parties' agreement.

Generally, under New York law, actions for the breach of a sales contract are subject to a four-year limitations period, see N.Y. U.C.C. § 2-725(1), while fraud claims must be brought within the greater of six years from accrual or two years from when the plaintiff discovered or could have reasonably discovered the alleged fraud, see N.Y. C.P.L.R. § 213(8).Actions seeking the equitable remedy of rescission of a contract are usually governed by the six-year statute of limitations of C.P.L.R. § 213(1). See Hoffman v. Cannone, 206 A.D.2d 740, 740-41 (3d Dep't 1994); Brown v. Tonawanda Hous., Inc., 123 A.D.2d 493, 494 (4th Dep't 1986). However, parties may contract for a shorter limitations period. See N.Y. C.P.L.R. § 201 ("An action . . . must be commenced within the time specified in this article unless . . . a shorter time is prescribed by written agreement"); N.Y. U.C.C. § 2-725(1) ("By . . . agreement the parties may reduce the period of limitation [for a breach of contract action] to not less than one year"). "[A]n agreement which modifies the Statute of Limitations by specifying a shorter, but reasonable, period within which to commence an action is enforceable." Exec. Plaza, LLC v. Peerless Ins. Co., 22 N.Y.3d 511, 518 (2014) (internal quotation marks and citation omitted). The New York Court of Appeals has "enforced contractual limitation periods of one year." Id. "[U]nder New York law '[f]ailure to comply with a contractual limitations period will subject the action to dismissal, absent proof that the limitations provision was obtained through fraud, duress, or other wrongdoing.'" Infectious Disease Solutions, P.C. v. Synamed, LLC, No. 07-CV- 5423, 2012 WL 1106847, at *9 (E.D.N.Y. Mar. 30, 2012) (quoting Allman v. UMGRecordings, 530 F. Supp. 2d 602, 606 (S.D.N.Y. 2008)); see Kozemko v. Griffith Oil Co., Inc., 256 A.D.2d 1199, 1200 (4th Dep't 1998) (upholding a shorter limitations period provided by parties' contract because plaintiffs "failed to demonstrate any fraud, duress or misrepresentation regarding the agreement to shorten the period of limitations").

"As a general rule, under [N.Y. C.P.L.R.] § 203(a), a claim for fraudulent inducement in the execution of an agreement 'accrues upon the execution of the agreement,' i.e., the time the fraud was committed." Von Hoffmann v. Prudential Ins. Co. of Am., 202 F. Supp. 2d 252, 262 (S.D.N.Y. 2002) (quoting In re Estate of Blake, 282 A.D.2d 905, 906 (3d Dep't 2001)). Similarly, the...