ESCO Elec. Co. v. Viewpoint, Inc.
| Decision Date | 28 July 2022 |
| Docket Number | 3:21-cv-00743-AR |
| Parties | ESCO ELECTRIC COMPANY, an Iowa corporation, Plaintiff, v. VIEWPOINT, INC., a Delaware corporation, Defendant. |
| Court | U.S. District Court — District of Oregon |
ESCO ELECTRIC COMPANY, an Iowa corporation, Plaintiff,
v.
VIEWPOINT, INC., a Delaware corporation, Defendant.
No. 3:21-cv-00743-AR
United States District Court, D. Oregon
July 28, 2022
FINDINGS AND RECOMMENDATION
JEFFRK STEAD United States Magistrate Judge
After months of discussions, plaintiff ESCO Electric Company and defendant Viewpoint, Inc. entered into an agreement for the purchase of software. Shortly after ESCO bought the software from Viewpoint, it found that the software did not work in the way ESCO says was represented by Viewpoint during the presale discussions. ESCO brings this diversity action, alleging that Viewpoint fraudulently and negligently misrepresented its software's capabilities,
breached its agreement with ESCO, and was unjustly enriched by selling software that did not meet ESCO's requirements. First. Am. Compl. (FAC) ¶ 2, ECF No. 13.
Two motions are pending before the court: Viewpoint moves to dismiss ESCO's FAC and ESCO moves for leave to file a second amended complaint. Mot. to Dismiss, ECF No. 37; Mot. to Amend, ECF No. 40. For the following reasons and as stated below, the court recommends that both motions be GRANTED IN PART and DENIED IN PART.[1]
BACKGROUND
The court construes as true the factual allegations of ESCO's FAC. SeeWeston Family P'ship LLLP v. Twitter, Inc., 29 F.4th 611, 617 (9th Cir. 2022) (“When assessing the adequacy of a complaint, we accept all factual allegations as true and view them in the light most favorable to the plaintiff.”).[2]
A. Precontractual Discussions
ESCO is an automation, electrical, and instrumentation services company. FAC ¶ 3. In 2018, ESCO began soliciting bids to develop custom Enterprise Resource Planning (ERP) software for use at its Iowa facilities. Id. ¶ 1. To ensure the software had certain functions, ESCO sent solicitation emails to multiple software companies. Id. ¶ 8. Each email included a “User Requirements Spreadsheet,” listing sixty-nine functional requirements and inviting the software companies to indicate “Y/N” whether their software met each requirement. Id. ¶ 15, Ex. 2. The spreadsheet also contained a column for “vendor input,” where the companies could provide more detail about each requirement. Id.
In December 2018, ESCO sent a solicitation email and the User Requirements Spreadsheet to Viewpoint, a software company principally based in Portland, Oregon. Id. ¶¶ 4, 9. Viewpoint responded with an initial offer to provide ERP software to ESCO. Id. ¶ 11. The parties entered precontractual discussions, and Frank Schroeder, a Viewpoint sales representative, became ESCO's primary point of contact. Id. ¶ 12.
During the next several months, Schroeder communicated frequently with ESCO about the capabilities of Viewpoint's software. Id. ¶ 13. On January 23, 2019, Schroeder held an initial telephone conference with ESCO's Chief Financial Officer, Director of Quality, and Quality Engineer. Id. Following that conversation, Schroeder emailed ESCO a completed version of the User Requirements Spreadsheet and indicated that he had “answered the questions as [he] understood them.” Id. ¶¶ 14-15, Ex. 1-2. In the completed spreadsheet, Schroeder represented that Viewpoint's software met sixty-seven of the sixty-nine listed requirements and included further explanation in the vendor input column. Id. ¶ 15, Ex. 2.
Schroeder discussed the capabilities of Viewpoint's software with ESCO employees at product demonstrations on May 15, June 20, and July 11, 2019. Id. ¶¶ 19, 24-25. ESCO alleges that at these demonstrations, Schroeder represented the software could perform the following functions:
• Bill to multiple POs on a single job and bill from multiple jobs to a single PO
• Import billing rates from Excel for standard rates with effective dates, meaning if an employee's standard hourly rate was set to increase on a specific date, that information could be imported from Excel and the software would automatically start applying that rate on the effective date.
• Automatically apply billing rates by Labor Class, overtime, double time, Union, or Task, meaning the software could automatically apply a rate set for that task by, for example, a union contract, and automatically calculate and apply an employee's overtime rate based on [the] standard rate already in the system.
• Allow hierarchy for billing rates as 1. Job union, 2. Customer Service, 3. Employee. The purpose of this function was to allow ESCO to bill different rates for different tasks performed by the same employee on the same job.
Id. ¶ 25. These alleged representations are reflected in notes of ESCO employees taken during the May and July demonstrations. Id. ¶ 20, 26, Ex. 4-5. ESCO alleges that “Viewpoint's software's ability to [bill multiple jobs to a single PO] was one of the primary reasons it chose to purchase the software from Viewpoint,” as ESCO's existing system lacked this feature. Id. ¶ 23.
During the May demonstration, Schroeder also “represented that the software included built-in reports that were easy to customize and modify.” Id. ¶ 21. Previously, in the “vendor input” column on ESCO's User Requirements Spreadsheet, Schroeder had indicated that the software included: “Built-in Crystal Reports (all modifiable), Built in financial report designer, BI tool, InfoLink for connection to Excel/Word. Able to accommodate all report types listed.” Following their communications, ESCO decided to purchase software from Viewpoint. Id. ¶ 27.
B. Contractual Terms and Conditions
On October 30, 2019, ESCO agreed to purchase the software from Viewpoint. Id. ¶ 35. At the time, Viewpoint provided ESCO with a hard copy of the Agreement, which comprised an “Order” and a “Statement of Work.” Id. ¶ 31. The Agreement described the software's functionality in generalized terms, indicating that, among other capabilities, it had the following functions: “Accounts Payable, Accounts Receivable, Cash Management, General Ledger, Job Cost, Payroll . . . Human Resources, Document Management, Equipment, Order Processing, Inventory, Work Orders ....” Id. ¶ 28, Ex. 6 (emphasis added). The Agreement also stated that Viewpoint would provide ESCO with installation, training, and technical support. Id.
The Agreement also contained two clauses incorporating a web-based document of terms: the Master Software Licensing Agreement (MSLA).[3] Id. ¶ 28, Ex. 6 at 3, 7. The hyperlinks functioned the day ESCO signed the Agreement. Order of Transfer at 6, ECF No. 23.
The MSLA is an eight-page document addressing important terms affecting the parties' Agreement. Decl. of Lindsay Bregante Myers ¶ 2, Ex. 1 (MSLA), ECF No. 10-2. For instance, the MSLA contains a governing law provision specifying Oregon law as controlling and naming Portland, Oregon as the forum with exclusive jurisdiction over disputes arising from the Agreement. MSLA § 17. The MSLA also contains a disclaimer clause, providing:
THE EXPRESS WARRANTIES IN SECTION 9 ARE THE EXCLUSIVE WARRANTIES AND REPRESENTATIONS OFFERED BY VIEWPOINT, AND ALL OTHER REPRESENTATIONS AND WARRANTIES, INCLUDING, WITHOUT LIMITATION, THOSE OF FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGMENT, ACCURACY, QUIET ENJOYMENT, TITLE, MERCHANTABILITY, AND THOSE THAT ARISE FROM ANY COURSE OF DEALING OR COURSE OF PERFORMANCE ARE
HEREBY DISCLAIMED. VIEWPOINT DOES NOT WARRANT THAT THE SOFTWARE OR SERVICES WILL MEET CUSTOMER'S REQUIREMENTS OR THAT CUSTOMER'S USE OF THE SOFTWARE WILL BE UNINTERUPTED OR ERROR-FREE, OR THAT ERRORS WILL BE CORRECTED. CUSTOMER IS SOLELY RESPONSIBLE FOR CONFIRMING THE SUITABILITY OF THE SOFTWARE TO MEET CUSTOMER'S COMPLIANCE OBLIGATIONS AND OTHER REQUIREMENTS.
Id. § 9.4. Finally, the MSLA contains an integration clause, providing in part:
Collectively the [Agreement and MSLA] constitute[] the entire agreement between the parties with respect to the subject matter hereof and supersede[] all prior and contemporaneous agreements or communications, including, without limitation, any quotations or proposals submitted by Viewpoint.
Id. § 19.9 (emphasis added).
C. Installation and Software Problems
In early December 2019, Bob Dialoiso-a third-party contractor hired by Viewpoint- arrived at ESCO's Iowa office to install the software. FAC ¶¶ 36-37. During installation, ESCO employees asked Dialoiso questions about how to use the software and soon “learned that the software could not perform many of the functions promised by Mr. Schroeder during [pre-contractual] demonstrations.” Id. ¶ 38. ESCO alleges that these functional limitations “included, but were not limited to, the four functions specifically” represented by Schroeder at product demonstrations in May, June, and July 2019. Id.
Noting that Schroeder had represented that the software included “built in reports” at product demonstrations and in the User Requirements Spreadsheet, ESCO also questioned Dialoiso about customization of the software's “Analytics and Reporting” function. Id. ¶ 42. Dialoiso “stated that this [customization] function was not possible through the software.” Id. ¶ 45. Following Dialoiso's statements, ESCO emailed Schroeder and asked him to “clarify why Mr. Dialoiso was telling ESCO that the software could not perform specific functions that he . . .
promised it could perform.” Id. ¶ 39. Schroeder, who no longer worked at Viewpoint, responded that he did not have a “clear memory” about those representations and directed ESCO back to Dialoiso. Id. ¶¶ 39-50, Ex. 7. Dialoiso consistently stated that the functions Schroeder represented “were not possible with the Viewpoint software.” Id. ¶ 40.
ESCO next raised its concerns about the software's limitations with its new designated point-of-contact at Viewpoint, Bob Kelley. Id. ¶ 46. With respect to the built-in reports representation, Kelly informed ESCO that “it was not possible to...
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