Declude, Inc. v. Perry, No. 08-11072-NMG.

CourtUnited States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Massachusetts
Writing for the CourtGorton
Citation593 F.Supp.2d 290
PartiesDECLUDE, INC. and DNSstuff, LLC, Plaintiffs, v. R. Scott PERRY, Defendant.
Docket NumberNo. 08-11072-NMG.
Decision Date22 December 2008
593 F.Supp.2d 290
DECLUDE, INC. and DNSstuff, LLC, Plaintiffs,
v.
R. Scott PERRY, Defendant.
Civil Action No. 08-11072-NMG.
United States District Court, D. Massachusetts.
December 22, 2008.

Page 291

COPYRIGHT MATERIAL OMITTED

Page 292

Asha A. Awad, Eric D. Levin, Hinckley, Allen and Snyder, LLP, Boston, MA, for Counter Defendant/Plaintiffs.

Natalie U. Luongo, Steven T. Sager, Sager & Schaffer LLP, Westborough, MA, for Counter Claimant/Defendant.

MEMORANDUM & ORDER

GORTON, District Judge.


On June 25, 2008, plaintiffs Declude, Inc. ("Declude") and DNSstuff, LLC ("DNS"), companies which took their name from the software they produce, filed a complaint against software designer R. Scott Perry

Page 293

("Perry"). Perry has denied the allegation against him and filed a counterclaim with respect to certain counts of which the counterclaim defendants have moved to dismiss.

I. Background

This suit arises out of two software programs, known as "Declude Software" and "DNSstuff Software", developed by Perry in 2000. The Declude Software uses a particular kind of source code ("the Declude Source Code"), a verbatim copy of which is contained in the DNS Software ("the DNS Source Code").

As memorialized in the "Asset Purchase Agreement" dated April 9, 2004, Perry sold all the assets used in and associated with the Declude Software, including the Declude Source Code, to plaintiff Declude, which at that time was known as Computerized Horizons, LLC.1 In consideration, Perry received $700,000, a four-year employment contract and royalties. The purchase price was paid in the form of a $60,000 deposit, a $265,000 payment at the closing and a promissory note for $375,000. The employment contract provides that Perry would serve as Director of Software Architecture of Declude and receive an annual salary of $125,000. It also contains a liquidated damages provision whereby Perry is entitled to a minimum of $500,000 for his employment so long as he is not terminated for cause or does not voluntarily resign.

Almost immediately, Declude failed to comply with the terms of the promissory note and subsequently defaulted on it. Moreover, in January, 2005, Perry resigned from his position at Declude. He alleges that, in fact, he was constructively discharged due to a hostile work environment created by Declude but he continued to provide services to the company even after he had officially resigned.

Pursuant to the "Asset Contribution Agreement" dated August 30, 2006, Perry sold the DNSstuff Software to DNS, a company organized at that time. Under that Agreement, Declude and Perry both received an "ownership stake" in DNS (consisting of 60,000 "Class A units" for Declude and 40,000 "Class A units" and 10,000 "Class B units" for Perry).2 Contemporaneously, under a "Stock Subscription Agreement", Perry received one percent (1%) of the total issued and outstanding stock of Declude and, under a "Contribution Agreement", Declude agreed to provide certain services in support of DNS. Finally, Declude and Perry entered into an "Operating Agreement" with respect to the management of DNS.

The plaintiffs allege they discovered for the first time in January, 2008, that the Declude Source Code was copied into the DNS Source Code. Believing that they had, in effect, purchased from Perry the same source code twice, Declude and DNS brought suit alleging counts of copyright infringement, breach of contract, misrepresentation, conversion, unjust enrichment and conduct in violation of the Massachusetts Consumer Protection Act, M.G.L. c. 93A. Perry denies all material allegations of the complaint and asserts numerous affirmative defenses and a ten-count counterclaim against the plaintiffs and three officers of Declude and DNS, namely, Charles K. Stefanidakis ("Stefanidakis"),

Page 294

Arik Keller ("Keller") and Richard Person ("Person").

The counterclaim defendants, in turn, have filed a motion to dismiss Counts II, IV, V, VI and X of the counterclaim for failure to state a claim under Fed.R.Civ.P. 12(b)(6) and/or for failure to meet the heightened pleading requirements of Fed. R.Civ.P. 9(b). Perry opposes that motion, which is now before the Court.

II. Legal Analysis

A. Legal Standard

In order to survive a motion to dismiss for failure to state a claim upon which relief may be granted under Fed. R.Civ.P. 12(b)(6), a complaint must contain factual allegations sufficient "to raise a right to relief above the speculative level". Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007). In considering the merits of a motion to dismiss, the court may look only to the facts alleged in the pleadings, documents attached as exhibits or incorporated by reference in the complaint and matters of which judicial notice can be taken. Nollet v. Justices of the Trial Court of Mass., 83 F.Supp.2d 204, 208 (D.Mass.2000) aff'd, 248 F.3d 1127 (1st Cir.2000). Furthermore, the court must accept all factual allegations in the complaint as true and draw all reasonable inferences in the plaintiffs favor. Langadinos v. American Airlines, Inc., 199 F.3d 68, 69 (1st Cir.2000). If the facts in the complaint are sufficient to state a cause of action, a motion to dismiss the complaint must be denied. See Nollet, 83 F.Supp.2d at 208. Mere "bald assertions, unsupportable conclusions, periphrastic circumlocutions, and the like" do not constitute sufficient allegations. Doyle v. Hasbro, Inc., 103 F.3d 186, 190 (1st Cir.1996) (citation and internal quotation marks omitted).

In order to survive a motion to dismiss pursuant to Fed.R.Civ.P. 9(b), a complaint alleging fraud or mistake must do so with particularity. Under that heightened standard, a plaintiff must identify the fraudulent statement or representation, the person making the statement, and when the statement was made. See Rodi v. S. New England Sch. of Law, 389 F.3d 5, 15 (1st Cir.2004). The purpose of that standard is three-fold:

(1) to place the defendants on notice and enable them to prepare meaningful responses; (2) to preclude the use of a groundless fraud claim as a pretext to discovering a wrong or as a "strike suit"; and (3) to safeguard defendants from frivolous charges which might damage their reputations.

New England Data Servs., Inc. v. Becher, 829 F.2d 286, 289 (1st Cir.1987).

B. Application

1. Count II

Count II of the counterclaim alleges that Declude breached express and implied provisions of its employment agreement with Perry by constructively discharging Perry and failing to pay him liquidated damages. Perry claims that he was forced to resign from his position at Declude because he was

forced to endure intolerable and hostile work conditions, including an excessive workload, impossible demands and deadlines, humiliation by the repeated assignment of menial tasks, and verbal abuse directed towards him by Stefanidakis.

Perry's employment agreement with Declude states, in the two relevant parts,

(1) The Employer employs Employee as Director of Software Architecture to perform such acts and duties for the Employer that are customarily performed

Page 295

in connection with and related to that position....

5(b) Upon the Termination Date, unless such results from Discharge for Cause or a Termination by Employee pursuant to Paragraph 5(a)(ii), the Employer shall pay the Employee a lump sum equal to (i) any Base Salary accrued through the Termination Date, and (ii) Five Hundred Thousand Dollars ($500,000) less all Base Salary prior paid to or for the benefit of Employee...

To continue reading

Request your trial
20 practice notes
  • Metro. Prop. & Cas. Ins. Co. v. Savin Hill Family Chiropractic, Inc., CIVIL ACTION NO. 15–12939–LTS
    • United States
    • U.S. District Court — District of Massachusetts
    • July 21, 2017
    ...the core of the action[,]" the complaint must meet the heightened pleading requirements of Fed. R. Civ. 9(b). Declude, Inc. v. Perry, 593 F.Supp.2d 290, 297 (D. Mass. 2008). "That rule mandates that in all averments of fraud or mistake, ‘a party must state with particularity the circumstanc......
  • Watkins v. OMNI LIFE SCIENCE, INC., Civil Action No. 09-10857-RGS.
    • United States
    • United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Massachusetts
    • March 9, 2010
    ...the requirements of the heightened pleadings standard regardless of what label the pleader assigns to it." Declude, Inc. v. Perry, 593 F.Supp.2d 290, 297 (D.Mass.2008). "The hallmarks of fraud are misrepresentation or deceit." Ed Peters Jewelry Co., Inc. v. C & J Jewelry Co., Inc., 215 F.3d......
  • Korsak v. Honey Dew Associates, Inc., C.A. PC 13-0105
    • United States
    • Superior Court of Rhode Island
    • September 15, 2015
    ...the plaintiff in front of clients was sufficient evidence, if proved, to constitute a constructive discharge); Declude, Inc. v. Perry, 593 F.Supp.2d 290, 296 (D. Mass. 2008) (noting that "[h]umiliation and verbal abuse . . . can . . . constitute constructive discharge in some circumstances"......
  • Korsak v. Honey Dew Associates, Inc., C.A. PC 13-0105
    • United States
    • Superior Court of Rhode Island
    • September 15, 2015
    ...the plaintiff in front of clients was sufficient evidence, if proved, to constitute a constructive discharge); Declude, Inc. v. Perry, 593 F.Supp.2d 290, 296 (D. Mass. 2008) (noting that "[h]umiliation and verbal abuse . . . can . . . constitute constructive discharge in some circumstances"......
  • Request a trial to view additional results
20 cases
  • Metro. Prop. & Cas. Ins. Co. v. Savin Hill Family Chiropractic, Inc., CIVIL ACTION NO. 15–12939–LTS
    • United States
    • U.S. District Court — District of Massachusetts
    • July 21, 2017
    ...core of the action[,]" the complaint must meet the heightened pleading requirements of Fed. R. Civ. 9(b). Declude, Inc. v. Perry, 593 F.Supp.2d 290, 297 (D. Mass. 2008). "That rule mandates that in all averments of fraud or mistake, ‘a party must state with particularity the circu......
  • Watkins v. OMNI LIFE SCIENCE, INC., Civil Action No. 09-10857-RGS.
    • United States
    • United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Massachusetts
    • March 9, 2010
    ...the requirements of the heightened pleadings standard regardless of what label the pleader assigns to it." Declude, Inc. v. Perry, 593 F.Supp.2d 290, 297 (D.Mass.2008). "The hallmarks of fraud are misrepresentation or deceit." Ed Peters Jewelry Co., Inc. v. C & J Jewelry ......
  • Korsak v. Honey Dew Associates, Inc., C.A. PC 13-0105
    • United States
    • Superior Court of Rhode Island
    • September 15, 2015
    ...the plaintiff in front of clients was sufficient evidence, if proved, to constitute a constructive discharge); Declude, Inc. v. Perry, 593 F.Supp.2d 290, 296 (D. Mass. 2008) (noting that "[h]umiliation and verbal abuse . . . can . . . constitute constructive discharge in some circumsta......
  • Korsak v. Honey Dew Associates, Inc., C.A. PC 13-0105
    • United States
    • Superior Court of Rhode Island
    • September 15, 2015
    ...the plaintiff in front of clients was sufficient evidence, if proved, to constitute a constructive discharge); Declude, Inc. v. Perry, 593 F.Supp.2d 290, 296 (D. Mass. 2008) (noting that "[h]umiliation and verbal abuse . . . can . . . constitute constructive discharge in some circumsta......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT