ComSpec Int'l, Inc. v. Uniface B.V.
| Decision Date | 14 September 2021 |
| Docket Number | 2:20-cv-10067-TGB-EAS |
| Parties | COMSPEC INTERNATIONAL, INC., Plaintiff, v. UNIFACE B.V., ET AL., Defendants. |
| Court | U.S. District Court — Eastern District of Michigan |
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS (ECF NO. 44)
This is a business dispute between ComSpec (Plaintiff), a Michigan developer and provider of software information systems, and Uniface (Defendant), a foreign limited liability software corporation organized under the laws of the Netherlands. After Plaintiff filed a Second Amended Complaint (ECF No 28), Plaintiff filed a motion for partial summary judgment on the breach of contract claim. Additionally, Defendants filed a motion to dismiss for lack of personal jurisdiction pursuant to 12(b)(2) (ECF No. 43) and a motion to dismiss for failure to state a claim pursuant to 12(b)(6) (ECF No. 44). On May 10, 2021, this Court held a hearing on all three of the pending motions. From the bench, the Court granted Defendants' motion to dismiss for lack of personal jurisdiction as to certain defendants and denied Plaintiff's motion for partial summary judgment. Still pending is Defendants' motion to dismiss for failure to state a claim, which shall be GRANTED.
Defendant Uniface offers a universal programming language, which allows software developers to “develop and deploy their own software applications to end user customers.” ECF No. 28, PageID.770. The Uniface Software is protected by multiple copyrights. Plaintiff ComSpec develops software information systems. One of the components of ComSpec's system, Empower, utilizes Uniface Software to develop user interfaces. ECF No. 28, PageID.773.
On June 10, 1994, Plaintiff ComSpec entered into a license agreement with Defendant Uniface, in which ComSpec agreed to pay a total license fee of $1, 000 per year. ECF No. 28, PageID.774. Later that year, Defendant Uniface was purchased by Compuware as a stand-alone company. Five years later, on June 11, 1999, Compuware and Plaintiff ComSpec entered into a value added reseller license agreement, which granted Plaintiff a non-exclusive license to use the Uniface Software to develop and deploy ComSpec's Uniface Application for its end user customers. Under this agreement, ComSpec would pay an initial “deployment royalty equal to 10% of the current selling price of ComSpec's Uniface application for each of its end user customers (“Royalty”) and for each year of the term thereafter, an end user support fee of 1.5% of the selling price (“Annual Maintenance”).” ECF No. 28, PageID.774. On March 23, 2004, the agreement was amended by Compuware, to change the Royalty to 7.5% and the Annual Maintenance fee to 1%.
On January 31, 2014, Defendant Marlin Equity purchased assets from Compuware, including Compuware's Uniface business unit and the agreement with ComSpec. ECF No. 28, PageID.775. As a result of this transaction, Defendant Marlin Equity owns, operates, and controls Defendant Uniface and is the owner and assignee of the agreement which is the center of this dispute. Plaintiff ComSpec alleges that after the sale, Compuware confirmed that ComSpec was paid up and did not owe anyone for any past royalties. ECF No. 28, PageID.777. On September 30, 2014, the agreement was once again amended, which changed the Royalty to 10% and the Annual Maintenance to 1%. ECF No. 28, PageID.778. The agreement was amended two more times, in 2016 and 2019.
According to ComSpec, the process for paying royalties during the entire life of the reseller agreement was as follows:
The customary business practice between Uniface and ComSpec since 2014 has been that for every new customer, ComSpec would inform Uniface of the new customer. Uniface would then send an invoice to ComSpec for 10% of the selling price of ComSpec's Uniface Application as the Royalty a deployment royalty for that new customer and for each year thereafter, annual maintenance of 1% of the selling price. ComSpec would pay Uniface the invoiced amount after receiving the invoice. No. accounting was required for continuing customers after the first year because Uniface had the necessary information to issue an invoice, i.e., customer name and the selling price. If a customer was no longer using the Empower software, then ComSpec would inform Uniface after receiving the associated invoice, at which point Uniface would adjust the next invoice.
In 2019, Plaintiff ComSpec informed Defendant Uniface that it had entered into a letter of intent for the sale of ComSpec for $2, 500, 000. ECF No. 41, PageID.1028. Plaintiff ComSpec alleges that Defendant Uniface refused to consent to assigning the license agreement to the first potential buyer. Shortly after, Defendant Schouten requested an audit of Plaintiff ComSpec's books pursuant to the licensing agreement. After providing its financial information for the years 2017 to 2019, the results of the internal investigation alleged that Plaintiff ComSpec owed $5, 966, 579. According to Plaintiff, this was the first time they were informed of alleged past due payments and none of the alleged past royalty fees had been invoiced to them.
Defendants dispute these allegations. Rather, they assert that after asking to inspect ComSpec's records, they received a letter on July 31, 2019, “admitting that [ComSpec] had failed to pay Uniface tens of thousands of dollars in royalties under the Agreement, ” and asking Uniface to accept ComSpec's calculated underpayment of $60, 424. ECF No. 45, PageID.1474.
According to Plaintiff, Defendants contend the calculation of the alleged arrearage was based on “sales per customer, ” but that language does not appear in the agreement. Additionally, the calculation amount included estimates for the years 1994 to 2015, a period for which Plaintiff ComSpec did not provide financial information. Rather, Defendants “just repeated the same information as 2016.” ECF No. 41, PageID.1030. Defendants, however, assert that an inspection of Plaintiff's records found that ComSpec was using a “Software-As-A-Service” or “SAAS” model, “a model under which ComSpec should have been paying Uniface significantly higher royalties.” ECF No. 45, PageID.1475.
Due to the demand for payment and refusal to consent to assignment, the first potential buyer's letter of intent to purchase ComSpec expired. However, on November 9, 2019, Plaintiff ComSpec entered into a letter of intent with a second buyer for $2, 550, 000. Defendant Uniface sent a demand letter requesting the $5, 966, 579 be paid immediately otherwise it would sue for breach of contract and copyright infringement. Plaintiff informed Defendant Uniface that the demand was miscalculated, and Defendant responded by stating that it was terminating the agreement and provided a draft complaint of its claims of breach of contract and copyright infringement. Subsequently, the letter of intent with the second potential buyer expired without a completed sale.
In its Complaint, Plaintiff alleges that Defendants' $5.9 million demand was incorrect and that as a consequence of the wrongful termination of the agreement, ComSpec's owner and founder lost two opportunities to sell the business. Plaintiff alleges causes of action for (1) breach of contract, (2) illegal monopoly under the Sherman Act, (3) violation of RICO, (4) tortious interference with business expectancy, and (5) tortious interference with contract. ECF No. 28.
Plaintiff filed a motion for partial summary judgment (ECF No. 41), and Defendants filed a motion to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2) (ECF No. 43), as well as a motion to dismiss for failure to state a claim pursuant to 12(b)(6) (ECF No. 44). On May 10, 2021, this Court heard oral argument on all three of the motions. At the close of the hearing, the Court ruled from the bench as to two of the motions, dismissing Defendants Marlin Equity Partners, M4, Schouten, and Oirbans for lack of personal jurisdiction and denying Plaintiff's motion for partial summary judgment. ECF No. 63, PageID.2179-81. The Court took Defendant's motion to dismiss under 12(b)(6) under the advisement, stating that it would resolve that motion in a written opinion.
The Court now turns to Defendants' motion to dismiss pursuant to 12(b)(6). Defendants' raise four issues in their motion to dismiss, which aims to dismiss counts two, three, four, and five in their entirety, and count one against non-Uniface Defendants.
Rule 12(b)(6) of the Federal Rules of Civil Procedure authorizes courts to dismiss a lawsuit if they determine that the plaintiff has “fail[ed] to state a claim upon which relief can be granted.” In evaluating a motion to dismiss under Rule 12(b)(6), courts must construe the complaint in the light most favorable to the plaintiff and accept all well-pled factual allegations as true. League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007) (citing Kottmyer v. Maas, 436 F.3d 684, 688 (6th Cir. 2006)).
Although Rule 8(a) requires only that pleadings contain “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), plaintiffs must provide “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action” in support of their claims. Albrecht v. Treon, 617 F.3d 890, 893 (6th Cir. 2010) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 554, 555 (2007)).
Marlin Equity Partners, M4, Mr. Schouten, and Ms. Oirbans have already been dismissed from this action for lack of jurisdiction; therefore, the only remaining Defendants are Uniface, B.V. and Uniface USA. Defend...
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