Horsetail Techs., LLC v. Del. State Police Fed. Credit Union

Decision Date19 June 2020
Docket NumberCivil Action No. ELH-18-556
CourtU.S. District Court — District of Maryland



This case arises from a dispute concerning a series of agreements for information technology ("IT") services. Plaintiff Horsetail Technologies, LLC ("Horsetail"), which does business as Think|Stack, is a Baltimore-based provider of computer software and hardware as well as IT services. Defendant and counter-claimant Delaware State Police Federal Credit Union ("DSP") is a non-profit financial cooperative with approximately 10,000 members. Between 2012 and 2017, Horsetail provided hardware and IT services to DSP, pursuant to six contracts. Unfortunately, things soured between the parties, and DSP terminated the relationship in January 2018. Horsetail and DSP now disagree as to which party breached the various agreements.

Horsetail filed suit against DSP, alleging breach of contract and anticipatory breach of contract. ECF 1 (the "Complaint"). Jurisdiction is founded on diversity of citizenship. Id. ¶ 9; see 28 U.S.C. § 1332. DSP filed a combined answer and counterclaim. ECF 9 (the "Counterclaim"). DSP asserts a claim for breach of contract and also seeks declaratory judgment, to include rulings that it effectively terminated the agreements and does not owe any money to Horsetail. Both sides seek attorneys' fees and costs. See ECF 1, ¶ 67; ECF 9, ¶ 133.

After a lengthy discovery period, Horsetail filed a motion for summary judgment as to all claims and counterclaims. ECF 49. The motion is supported by a memorandum of law (ECF 49-1) (collectively, the "Horsetail Motion") and 31 exhibits. ECF 49-3 to ECF 49-34. DSP opposes the Horsetail Motion and filed a cross-motion for partial summary judgment. ECF 57. That motion is also supported by a memorandum (ECF 57-1) (collectively, the "DSP Motion") and many exhibits. ECF 57-2 to ECF 57-26. Horsetail filed a combined opposition to the DSP Motion and a reply in support of its own summary judgment motion. ECF 58. DSP has replied. ECF 59.

The motions are fully briefed, and no hearing is necessary to resolve them. See Local Rule 105.6. For the reasons that follow, I shall deny the Horsetail Motion. And, I shall grant the DSP Motion in part and deny it in part.

I. Background1
A. The Parties

Horsetail, a Maryland limited liability company based in Baltimore, was formed in July 2011. ECF 1, ¶ 7; ECF 57-12 (Mark Berman Deposition) at 16. Horsetail, now doing business as Think/Stack, designs and provides technology services and solutions for credit unions and other financial institutions. ECF 49-3 (Christopher Sachse Affidavit), ¶ 3. At all relevant times, Christopher Sachse was Horsetail's Chief Executive Officer ("CEO"); Travis Sachse was the Chief Financial Officer ("CFO"); and Mark Berman was the Chief Information Officer ("CIO"). ECF 49-3, ¶ 2; ECF 49-6 (Travis Sachse Affidavit), ¶ 2; ECF 49-12 (Mark Berman Affidavit), ¶ 2.2

DSP is a not-for-profit financial cooperative, established under the Federal Credit UnionAct, codified as amended at 12 U.S.C. § 1751 et seq. ECF 57-2 (Ina Fitch Affidavit), ¶ 2. It is principally based in Georgetown, Delaware and has additional branches in Cheswold and New Castle, Delaware. Id. Comprised of approximately 10,000 members, DSP primarily serves individuals in law enforcement or those who are employed or previously employed by federal, state, and local government. Id. ¶ 3. In total, DSP has deposits of roughly $ 122,000,000. Id. As a federally chartered credit union, DSP is subject to oversight by the National Credit Union Administration ("NCUA"), an independent federal regulator, and it must also comply with the basic standards of the Federal Financial Institutions Examinations Council. Id. ¶ 8.

Steve Cimo served as DSP's CEO from at least 2012 until October 23, 2017, when Ina Fitch became DSP's CEO. Id. ¶ 4. Blanche Jackson served as DSP's Executive Vice President from at least 2012 until September 12, 2016, when she resigned from DSP to take a position at the Sussex County Federal Credit Union. ECF 49-10 (Jackson Deposition) at 78; ECF 49-18 (9/12/2016 email from Jackson to Berman). In addition, Jackson served on Horsetail's Board of Advisors from at least November 2011 until September 2012. ECF 57-8 (Horsetail Board of Advisors emails). It is unclear if and when Jackson stepped down from her advisory role at Horsetail. Throughout the relevant time, Regina deFreitas served as DSPS's System Administrator. ECF 57-2, ¶ 28.

DSP and Horsetail entered into a business relationship in January 2012, by which Horsetail provided DSP with computer hardware and IT services. Horsetail asserts that the parties entered into a series of written agreements over the next five years to memorialize various deals.

B. The Contracts
I. The 2012 Services Agreement

The relationship between Horsetail and DSP began on December 13, 2011, when the partiesentered into the DSP Services Agreement, which went into effect in January 2012 (the "2012 Services Agreement"). ECF 49-4 at 3; see ECF 49-1 at 2; ECF 57-1 at 16.3 Jackson, then DSP's Executive Vice President, executed the agreement. ECF 49-4 at 14. She was also identified as the "primary Client contact." Id. at 15. The 2012 Services Agreement identified "Gina deFreitas" as Horsetail's "secondary Client contact." Id. Christopher Sachse was listed on the contract as the "Account Manager/ Primary Contact." Id.

The 2012 Services Agreement required Horsetail to provide certain "Managed Services" for a $1,500 setup fee and a monthly fee of $2,500. Id. at 3, 24. The contract's "Period of Service" provides for an initial term of 14 months. Id. at 3. Further, the contract provides, id.: "This Agreement shall renew automatically at the end of the Initial Term (March 15, 2012) for a period of twelve (12) months, and for successive twelve (12) month periods thereafter ('each a Renewal Term') unless Horsetail or [DSP] affirmatively gives notice of its intent to terminate this Agreement at least thirty (30) days prior to the start." Under the 2012 Services Agreement, either party could terminate the contract if, among other things, "Horsetail fails to perform its obligations under this Agreement and such failure continues for a period of thirty (30) days after written notice from Client of the default . . . ." Id. at 9.

It is undisputed that DSP paid all monthly fees required by the 2012 Services Agreement until August 2016, at which point Horsetail began billing DSP, pursuant to a new Master Services Agreement. See ECF 49-6, ¶ 3; see also ECF 49-1 at 2; ECF 57-1 at 17.

II. The 2012 Email Agreement

The parties executed a one-page addendum to the 2012 Services Agreement on February 7, 2012, by which Horsetail agreed to provide DSP with certain email security services (the "2012 Email Agreement"). ECF 49-7. Specifically, Horsetail agreed to provide "HT Cloud Email Encryption" services for 38 email accounts and "HT Cloud Email Security" services for 57 emails accounts, each at a cost of $10 per unit per month. Id. Horsetail also charged DSP a one-time installation fee of $750. Id. The contract was prepared by Christopher Sachse and executed by Jackson on behalf of DSP. Id.

The 2012 Email Agreement provides: "This quote is an addendum of the existing Service Agreement, terms and conditions are as stated in the agreement except term." Id. (emphasis added). As to the length of the contract, the 2012 Email Agreement provided that it is a "3 year agreement paid monthly," with $1,415 due "immediately" and the remaining 35 payments invoiced monthly. Id.

According to C. Sachse, the parties understood at the time of contracting that the phrase "Service Agreement" in the 2012 Email Agreement referred to the 2012 Services Agreement. ECF 49-3, ¶ 8. As to the renewal of the contract, Christopher maintains that Jackson "agreed that at the end of the initial 3-year term of the 2012 Email [Agreement], this addendum would to continue [sic] automatically renewing for successive 12-month periods, just as the 2012 Services [Agreement] renews, unless either party gave notice of its intention to terminate." ECF 49-3, ¶ 9. Therefore, because DSP did not send notices of termination on or by February 15 in 2015, 2016, 2017, 2018, or 2019, C. Sachse posits that the 2012 Email Agreement renewed each of those years for 12 months. Id. ¶ 10.

Likewise, Travis Sachse is of the view that because DSP has never sent a notice of termination, the 2012 Email Agreement is valid until March 2020. See ECF 49-6, ¶ 7. Travis attests that DSP paid every monthly invoice under the 2012 Email Agreement between January 2012 and October 2017. ECF 49-6, ¶ 5. He maintains that when DSP severed ties with Horsetail in November 2017, Horsetail was providing security services for 53 "DSP users and mailboxes," for a total cost of $795 per month. Id. ¶ 6; see also id. at 10 (11/10/2017 invoice; charging $530 for "Email Encryption Service" and $265 for "Email Security Service"). The number of DSP accounts increased to 54 in December 2017, resulting in a charge of $810.00 per month for email security services. Id. ¶ 6; see also id. at 12 (12/10/2017 invoice). Therefore, Horsetail has invoiced DSP for 54 mailboxes from November 2017 until March 2020. Id. ¶ 7.

According to Horsetail, the total contract fees owed by DSP from November 2017 through March 2020 amount to $22,665. Id. ¶ 9. Accounting for service costs, Horsetail calculates that it is entitled to recover $19,240.59 in lost profits due to DSP's breach of the 2012 Email Agreement. ECF 49-1 at 5; ECF 49-6, ¶ 9. Further, because the 2012 Email Agreement provides that "Interest Charges on Past Due Accounts and Collection Costs Overdue amounts shall be subject to a monthly finance charge," ECF 49-7, Horsetail contends that it is entitled to interest on all 22 unpaid invoices generated under the 2012 Email...

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