Deere & Co. v. Xapt Corp.
| Decision Date | 10 December 2021 |
| Docket Number | 4:19-cv-04210-SLD-JEH |
| Court | U.S. District Court — Central District of Illinois |
| Parties | DEERE & COMPANY, Plaintiff, v. XAPT CORPORATION, XAPT SOLUTIONS PTY LTD, XAPT KFT, and COSMO CONSULT BUSINESS SOLUTIONS S.R.L., Defendants. |
Before the Court are Defendant Cosmo Consult Business Solutions S.R.L.'s (“Cosmo”) Motion to Dismiss Under Fed.R.Civ.P. 12(b)(2), ECF No. 96; Plaintiff Deere & Company's (“Deere”) Motion to Conduct Jurisdictional Discovery Re: Cosmo Consult, ECF No. 99; Defendant XAPT KFT's Motion to Dismiss Under Fed.R.Civ.P 12(b)(2), ECF No. 108[1]; Defendant XAPT Corporation's (“XAPT Corp.”) Motion to File Exhibits Under Seal, ECF No. 116; XAPT Corp.'s Motion to Dismiss or Stay the Second Amended and First Supplemental Complaint, ECF No 118; Cosmo and XAPT KFT's Motion to Dismiss or Stay Under Fed.R.Civ.P. 12(b)(1), (6), ECF No. 119; Defendant XAPT Solutions Pty Ltd's (“XAPT Solutions”) Motion to Dismiss Under Fed.R.Civ.P. 12(b)(2), ECF No. 129; Deere's Motion to File Certain Omnibus Response Exhibits Under Seal, ECF No. 132; XAPT Corp., XAPT KFT, XAPT Solutions, and Cosmo's (collectively “Defendants”) Motion to Set Status Conference, ECF No. 145; and Defendants' Motion for Leave to File Replies to Deere's Filing Set Forth in ECF # 131, ECF No. 155. For the following reasons, Cosmo's Motion to Dismiss Under Fed.R.Civ.P. 12(b)(2) is DENIED; Deere's Motion to Conduct Jurisdictional Discovery Re: Cosmo Consult is MOOT; XAPT KFT's Motion to Dismiss Under Fed.R.Civ.P. 12(b)(2) is DENIED; XAPT Corp.'s Motion to File Exhibits Under Seal is DENIED; XAPT Corp.'s Motion to Dismiss or Stay the Second Amended and First Supplemental Complaint is DENIED; Cosmo and XAPT KFT's Motion to Dismiss or Stay Under Fed.R.Civ.P. 12(b)(1), (6) is DENIED; XAPT Solutions' Motion to Dismiss Under Fed.R.Civ.P. 12(b)(2) is DENIED; Deere's Motion to File Certain Omnibus Response Exhibits Under Seal is DENIED; Defendants' Motion to Set Status Conference is DENIED; and Defendants' Motion for Leave to File Replies to Deere's Filing Set Forth in ECF # 131 is DENIED.
BACKGROUND[2]
Deere offers services related to heavy machinery through dealers situated around the world. In 2013, to facilitate the dealers' work, Deere decided to develop a fully integrated computer software system that would bring together the many facets of its dealers' business in one “Dealer Business System” (“DBS”). This required a developer to create the system. Deere solicited demonstrations from potential system developers, including XAPT Corp. Throughout the vetting process, XAPT Corp. consistently represented to Deere that it was capable of undertaking a project of this size. After extensive discussions, demonstrations, and meetings, Deere selected XAPT Corp. to develop the DBS.
Deere and XAPT Corp. signed four principal contracts pertaining to the development of the DBS (the “DBS Project”): the Master Services Agreement (“MSA”); the Work Order Template-Global Template (“Global Template SOW”), which was amended on February 11, 2019 (“Amendment 1”); the Work Order-Governance (“Governance SOW”); and the XAPT Subscription Delivery Agreement (“SDA”) (collectively, the “Contracts”).
It soon became clear to Deere that XAPT Corp. had misrepresented its abilities to handle the challenge. XAPT Corp. not only failed to meet deadlines for delivering installments of the product but produced code that was full of errors. Because XAPT Corp. had miscalculated the effort it would take to bring its own system in line with Deere's requirements, in June of 2018, XAPT Corp. sought a $10 million increase in the project price. The parties entered negotiations, which resulted in the aforementioned Amendment 1 six months later. Deere and XAPT Corp., however, had differing opinions about what Amendment 1 meant for the project: Deere believed that XAPT Corp. was still obligated to perform all of the tasks as initially agreed, while XAPT Corp. insisted that Amendment 1 had removed one of XAPT Corp.'s original duties from the scope of the project-service module integration-while still requiring Deere to pay for it. Deere learned of XAPT Corp.'s alternative interpretation and brought it to the attention of XAPT Corp.'s president, Dejan Popovic, on April 23, 2019. In response, Popovic stated that he “of course” knew that Amendment 1 would have this effect and that he was aware that Deere had a different expectation. Second Am. & First Suppl. Compl. (“SAC”) 23, ECF No. 60. XAPT Corp. continued to refuse to provide service module integration work.
Section 3.6 of the MSA provides that XAPT Corp. may subcontract services to subcontractors approved by Deere and that before disclosing any of Deere's confidential information to an approved subcontractor, XAPT Corp. was to require the subcontractor “to execute a non-disclosure agreement in the form provided by Deere.” Id. at 11 (quoting MSA § 3.6). XAPT Solutions and XAPT KFT were subcontractors approved by Deere to work on the DBS Project. In October or November of 2019, Deere learned that XAPT Corp. was using an additional subcontractor on the project. This subcontractor, which had not been approved by Deere, operated under the email domain @cosmoconsult.com. Deere notified XAPT Corp. that it considered this a breach of Section 3.6 of the MSA and asked XAPT Corp. to explain its relationship with Cosmo. XAPT Corp. responded that Cosmo was the same as approved subcontractor XAPT KFT, although the entity's ownership had changed. In response to a renewed request for an explanation from Deere, XAPT Corp. then stated that S.C. XAPT Solutions SRL, an approved subcontractor, had changed its name to Cosmo. Because XAPT Corp. continued to use Cosmo as a subcontractor without authorization, Deere removed access to all @cosmoconsult.com email addresses. However, XAPT Corp. continued to share Deere's confidential information with Cosmo employees.
As of January 2020, the DBS was not available in a single country. Deere terminated the Contracts on January 24, 2020. It then asked XAPT Corp. to comply with all of its post termination obligations, which includes the return of Deere's confidential information. As of the date this case was filed, XAPT Corp. had not returned any materials or documents to Deere.
In a March 9, 2020 email, XAPT Corp. demanded that Deere “either return or destroy all . . . XAPT [i]ntellectual [p]roperty in its possession” and “cease using or accessing” such property. Id. at 29 (quotation marks omitted). Deere believes that it already owns or has a fully pre-paid perpetual and irrevocable license in and to the intellectual property.
Deere brought this lawsuit on October 18, 2019, ECF No. 1, then filed an amended complaint on October 23, 2019, ECF No. 5, to address deficiencies in its original jurisdictional statement. On December 12, 2019, the parties jointly asked to stay the case to allow them to pursue mediation. Joint Mot. Mediation 1-2, ECF No. 17. After mediation failed, XAPT Corp. filed a motion to dismiss the amended complaint, arguing that Deere had not complied with the mandatory pre-suit dispute resolution procedure contained in Section 15.6.1 of the Master Services Agreement (“Section 15.6.1”) and therefore could not bring this lawsuit. XAPT Corp. First Mot. Dismiss 1-2, ECF No. 24. Deere filed a response to the motion to dismiss, ECF No. 41, and, on the same day, a motion for leave to file the SAC, ECF No. 43, which added XAPT KFT, XAPT Solutions, and Cosmo as Defendants. XAPT Corp. filed a response opposing Deere's motion for leave, arguing that the proposed SAC would be futile because Deere failed to comply with the mutual dispute resolution procedures in Section 15.6.1, this Court lacked personal jurisdiction over XAPT Solutions, and Deere had no viable theory of liability against XAPT KFT, XAPT Solutions, and Cosmo. XAPT Corp. Opp'n Pl.'s Mot. Leave File Second Am. & First Suppl. Compl. 2-3, ECF No. 53.
On May 6, 2020, Magistrate Judge Jonathan E. Hawley granted Deere's motion. May 6, 2020 Order, ECF No. 59. XAPT filed an objection to Judge Hawley's order, making the same argument with respect to the dispute resolution procedure. Obj. 4-6, ECF No. 63. Reviewing for clear error, the Court affirmed Judge Hawley's ruling. Sept. 24, 2020 Order 11, ECF No. 101.
In the SAC, the operative complaint, Deere brings one claim for breach of contract against XAPT Corp. (Count I), two claims for breach of contract against all four Defendants (Count II, Count III), one claim for fraudulent inducement against XAPT Corp. (Count IV), and one claim for conversion against all four Defendants (Count VIII). SAC 33-40, 46. Deere seeks the reformation of Amendment 1, declaratory relief, injunctive relief, specific performance from all four Defendants, an order of replevin, a finding that the four Defendants are alter ego organizations, and damages. Id. at 40-46, 47-59.
On September 9, 2020, Cosmo filed a motion to dismiss the SAC against it for lack of personal jurisdiction. Cosmo 12(b)(2) Mot. Dismiss 1. In response, Deere asks the Court to stay briefing on Cosmo's motion to allow it to conduct jurisdictional discovery. Deere Mot. Conduct Jurisdictional Disc. 1. On October 8, 2020, XAPT KFT filed a motion to dismiss for lack of personal jurisdiction. XAPT KFT 12(b)(2) Mot. Dismiss 1. XAPT Corp. filed a motion to dismiss the SAC or stay the case on October 15, 2020, XAPT Corp. Mot. Dismiss or Stay 1, simultaneously filing a motion for leave to file exhibits under seal, XAPT Corp. Mot. Seal Exs. 1. Cosmo and XAPT KFT filed a similar motion to dismiss or stay the next day. Cosmo & XAPT KFT Mot. Dismiss or Stay 1. On ...
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