Creative Socio-Medics, Corp. v. City of Richmond, Civil Action No. 00-CV-6690.

• Decision Date: 21 August 2002
• Docket Number: Civil Action No. 00-CV-6690.
• Parties: CREATIVE SOCIO-MEDICS, CORP., Plaintiff, v. The CITY OF RICHMOND, Defendant.
• Court: U.S. District Court — Eastern District of New York

219 F.Supp.2d 300

CREATIVE SOCIO-MEDICS, CORP., Plaintiff, v. The CITY OF RICHMOND, Defendant.

Civil Action No. 00-CV-6690.

United States District Court, E.D. New York.

August 21, 2002.

COPYRIGHT MATERIAL OMITTED

Martin S. Siegel, Berlack, Israels & Liberman LLP, New York, NY, for plaintiff.

Timothy J. Dennin, New York, NY, for defendant.

MEMORANDUM AND ORDER

TRAGER, District Judge.

Plaintiff, Creative Socio-Medics Corp. ("CSM"), initially commenced an action against defendant, the City of Richmond, Virginia ("Richmond"), alleging breach of contract in the Supreme Court, State of New York, Suffolk County by filing a summons on July 19, 2000. On November 8, 2001, pursuant to 28 U.S.C. § 1331(a)(2) and (c)(1), defendant removed the state court action to this court. On November 20, 2000, Richmond filed and served a motion for judgment against CSM alleging, among other things, breach of contract in Virginia.¹ By stipulation, Richmond stayed the action in Virginia until resolution of the motion now before this court.

Defendant moves to dismiss plaintiff's complaint pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure ("FRCP") for lack of in personam jurisdiction and pursuant to Rule 12(b)(3) of the FRCP on the basis of improper venue or, in the alternative, to transfer to the Eastern District of Virginia pursuant to 28 U.S.C. § 1404(a).

Background

Plaintiff CSM is a corporation organized under the laws of the State of Delaware with its principal place of business in New York. See Compl. ¶ 1. CSM is engaged in the consulting business, providing software packages, training services, and ongoing technical support to those who purchased the software. See id. Defendant Richmond is a municipal corporation of the Commonwealth of Virginia. See id. ¶ 2. Richmond does not own, use or possess any real or tangible property located in New York. See Siegel Aff. Ex. 24. Richmond has escrow accounts with the Bank of New York but they relate to debt service on various bond issues. See id.

In November 1997, Richmond sought a vendor "to submit proposals for providing software packages, implementation and training services, and ongoing technical support for various functional areas" for the City of Richmond's agencies by issuing a Human Services Automation Request for Proposal No. 8C075 (the "RFP") specifying the details and scope of the project. See Dennin Aff. Ex. A. Richmond invited CSM to submit its bid by mailing a copy of the RFP to CSM in New York. See Siegel Aff. Ex. 24. Richmond normally sends out requests for proposal to companies that have asked to be on a bid list or companies in the business for sought products or services that Richmond is aware of. See id. Ex. 29.

On December 17, 1997, CSM submitted a Propsal for a Human Services Information System (the "Proposal") in response to Richmond's RFP. See Dennin Aff. Ex. B. In its response, CSM attached its standard long form license and service agreement. See Siegel Aff. Ex. 1. After CSM submitted the Proposal, Richmond invited James Gargiulo, the vice-president of sales and marketing of CSM, to demonstrate CSM's base-line software. See id. On February 4, 1998, CSM came to a meeting in Richmond to demonstrate the software and answer any questions that Richmond had about the Proposal. See Dennin Aff. Ex. D.

Subsequent to the demonstration, Richmond accepted CSM's Proposal and sent its standard form of services contract to New York. See Siegel Aff. Ex. 2. The negotiations relating to the terms of the contract were not extensive. See id. The principal negotiations related to pricing and the schedules attached to the contract, one of which was the software licensing agreement. See id. All the contract schedules, including the software license agreement, were prepared by CSM in New York and, with the exception of a March 2, 1998 meeting in Virginia, were negotiated by telephone and mail communications between CSM personnel in New York and Richmond personnel in Richmond, Virginia. See Dennin Aff. Ex. D. The purpose of the March 2, 1998 meeting was to discuss pricing and payment terms, and to determine the nature and number of licenses to be acquired by Richmond. See id.

On May 26, 1998, CSM and Richmond entered into a five year services contract and a software license agreement, attached to the contract as Schedule 1 (collectively the "Agreement"). See Dennin Aff. Ex. C; Siegel Affid. Exh. 1. The Agreement was executed by CSM in New York and by Richmond in Richmond, although it is unclear which party was the last to sign the Agreement. See Dennin Aff. Ex. C. Pursuant to the software license agreement, CSM granted Richmond a non-exclusive, non-transferable license to use one copy of the licensed software. See id. Schedule 2(g) of the contract outlines the following charges for products and services provided by CSM pursuant to the Agreement: (1) $472,000 for licensed CSM programs; (2) development payment in the amount of $62,900; (3) $181,980 for installation services; (4) $8,000 for travel and living expenses; (5) $30,729 per quarter for support services provided in connection with CSM programs and $31,225 per year for support services in connection with third party software; and (6) $850-$1,000 per day, CSM's then current daily rate, for additional services. See id. In addition, schedule 2(b) lists charges for two third-party programs totaling $197,700 with an option to purchase additional users for $375 per user. See id.

CSM used third-party vendors on the project. It hired the Olson Group ("Olson"), a company located in Washington State, as a subcontractor in connection with development of the not-for-profit portion of the financial software. See id. Ex. 4. Olson was retained to license its software to provide an interactive interface between the Great Plains financial software and CSM's software. See id. The Great Plains interface was designed to share information between CSM Human Services Information System ("HSIS") products and the Great Plains financial application for the purpose of producing checks based upon the information sent from the CSM HSIS products. See id. Ex. 28. The CSM side of the Great Plains interface was written by CSM employees in its California office and then installed onto a machine in New York over a modem line using communications software. See id. After Olson's software was loaded onto the CSM hardware in New York, the interfaces between the various software products were tested in New York, then finally the software was loaded onto Richmond's computer. See id.

CSM also retained SolTech Group ("Sol-Tech") and Hi-Tech International Inc. ("Hi-Tech"), two companies located in Virginia, as subcontractors. SolTech performed services related to Great Plains and Olson software, including installation, training, and software specification documentation. See Dennin Aff. Ex. D. Hi-Tech was CSM's "implementation arm" for the project, performing training and project management with guidance from New York. See Siegel Aff. Ex. 27.

Between approximately June 1998 and April 2000, CSM provided software products and consulting services such as: implementation, customization, training, and ongoing technical support to Richmond. See Compl. ¶ 6. The CSM software licensed to Richmond was an "off the shelf" product developed by CSM in New York. See Siegel Aff. Ex. 3. The actual installation of the software took little more than one day. See id. However, CSM spent approximately 3,000 hours in New York customizing its software at the request of Richmond. See id. After the customizations were developed, they were tested on CSM computers in New York and then electronically transmitted to Richmond's computer in Virginia. See id. CSM prepared and verified a scope document detailing all the tasks to be performed by CSM, status reports, screen layouts, quality testing, address interface testing, designed the interface, performed data conversion, and project management in New York. See id. CSM also trained Hi-Tech on certain aspects of the project in New York and provided training to Richmond personnel in person in Richmond, via telephone, and by computer-to-computer connection. See id. In addition, CSM set up a Richmond group on its website as an alternative way for Richmond and CSM personnel to communicate directly. See id. Ex. 30.

Furthermore, there were numerous inperson meetings between CSM and Richmond personnel in relation to the project. Richmond claims that there were approximately fifty or more days in which CSM traveled to Richmond to attend meetings before and after the execution of the contract. See Dennin Aff. Ex. H; Memorandum of Law in Support of Defendant's Motion to Dismiss ("Def.'s Mem.") at 13. CSM disputes that number by pointing out that there were twenty-eight distinct visits because many of the visits were multipleday trips or were made by more than one CSM employee. See Siegel Aff. Ex. 3. On September 22, 1998, four of Richmond's personnel came to CSM's office in New York for a meeting to discuss the Agreement and services to be provided. See id.; Ex. 24. In August and November 1998, Jeanine Carroll, Richmond's project manager, visited CSM's offices in New York and discussed the project.² See id. Ex. 3.

Subsequent to the execution of the Agreement, at Richmond's request, CSM performed services that allegedly went beyond the scope of the Agreement. See id. ¶ 7. CSM also alleges that Richmond agreed to pay CSM for these additional services as well as the services previously performed by CSM that were within the scope of the Agreement. See id. By letter dated April 12, 2000, Richmond purported to terminate the Agreement pursuant to Article IV, paragraph 4.1 of the Agreement because, as Richmond alleges, CSM failed to meet any of the deadlines specified in the Agreement. See id. ¶ 8. By letter dated May 1, 2000, CSM acknowledged Richmond's termination of the Agreement and attached a summary detailing all outstanding fees...