Hov Servs., Inc. v. ASG Techs. Grp., Inc.

• Docket Number: 17134,Index No. 657346/20,Case No. 2022–00865
• Decision Date: 19 January 2023
• Citation: Hov Servs., Inc. v. ASG Techs. Grp., Inc., 212 A.D.3d 503, 183 N.Y.S.3d 66 (N.Y. App. Div. 2023)
• Parties: HOV SERVICES, INC., Plaintiff–Respondent–Appellant, v. ASG TECHNOLOGIES GROUP, INC., Defendant–Appellant–Respondent.
• Court: New York Supreme Court — Appellate Division

212 A.D.3d 503

183 N.Y.S.3d 66

HOV SERVICES, INC., Plaintiff–Respondent–Appellant,

v.ASG TECHNOLOGIES GROUP, INC., Defendant–Appellant–Respondent.

17134

Index No. 657346/20

Case No. 2022–00865

Supreme Court, Appellate Division, First Department, New York.

Entered January 19, 2023

Chiesa Shahinian & Giantomasi PC, New York (Ronald L. Israel of counsel), and Stokes Lawrence, P.S., Seattle, WA (Shannon Jost of the Bar of the State of Washington, admitted Pro Hac Vice, of counsel), for appellant-respondent.

Tarter Krinsky & Drogin, LLP, New York (Richard C. Schoenstein of counsel), for respondent-appellant.

Renwick, J.P., Webber, Moulton, Gonza´lez, Rodriguez, JJ.

Order, Supreme Court, New York County (Andrew Borrok, J.), entered January 28, 2022, which, insofar as appealed from as limited by the briefs, (a) granted defendant's motion to dismiss as to plaintiff's fraudulent inducement claim, but denied it as to plaintiff's breach of the implied covenant of good faith and fair dealing claim and affirmative defense and declaratory judgment claim; (b) granted defendant's motion for partial summary judgment as to plaintiff's fraud and waiver affirmative defenses, but denied it as to plaintiff's breach of the implied covenant of good faith and fair dealing claim and affirmative defense, declaratory judgment claim and duress affirmative defense, and estoppel affirmative defense; (c) granted plaintiff's motion for partial summary judgment to the extent of limiting defendant's counterclaim for breach of the overlapping customer restriction in Exhibit D to claims arising on or after November 30, 2016; and (d) excluded the opinion of plaintiff's expert that the parties’ databases were dissimilar, unanimously modified, on the law, to grant defendant's motion for partial summary judgment as to plaintiff's breach of the implied covenant of good faith and fair dealing claim and defense, estoppel defense, and declaratory judgment claim and duress defense, and it is declared that Exhibit E is an enforceable agreement and that it was not signed by plaintiff under duress or procured by defendant through fraud, and otherwise affirmed, without costs.

This dispute arises out of plaintiff's licensing of defendant's software pursuant to a 2005 software license agreement, as amended by Exhibit D, which extended the term of the license from September 30, 2015 through September 29, 2018, and Exhibit E, which extended the term of the license from September 30, 2018 through September 29, 2023.

Plaintiff's economic duress-based declaratory judgment claim and defense to enforcement of Exhibit E should be dismissed. Defendant had no duty to extend the term of or renew plaintiff's license on any particular terms and was well within its rights to allow the license to expire pursuant to the terms of Exhibit D (see 805 Third Ave. Co. v. M.W. Realty Assoc., 58 N.Y.2d 447, 453, 461 N.Y.S.2d 778, 448 N.E.2d 445 [1983] ; 767 Third Ave. LLC v. ORIX Capital Mkts., LLC, 26 A.D.3d 216, 218, 812 N.Y.S.2d 8 [1st Dept. 2006], lv denied 8 N.Y.3d 803, 830 N.Y.S.2d 699, 862 N.E.2d 791 [2007] ). In addition, the pressure experienced by plaintiff to renew the license so as to not lose access to customer data was partly of its own making insofar as it failed to take steps earlier to negotiate license renewal or make alternate arrangements, despite its awareness of the scheduled license expiration (see Philips S. Beach, LLC v. ZC Specialty Ins. Co., 55 A.D.3d 493, 493, 867 N.Y.S.2d 386 [1st Dept. 2008], lv denied 12 N.Y.3d 713, 2009 WL 1586786 [2009] ; Pilgrim Homes & Garages v. Fiore, 75 A.D.2d 846, 848, 427 N.Y.S.2d 851 [2d Dept. 1980], lv dismissed 51 N.Y.2d 702, 431 N.Y.S.2d 1030, 410 N.E.2d 1237 [1980] ). Plaintiff's claim that defendant refused to correct a premature license expiration until Exhibit E was executed is not supported by the record.

Plaintiff's breach of the implied covenant of good faith and fair dealing claim and defense to enforcement of Exhibit E should also be dismissed on the merits. As explained above, plaintiff had no contractual right to use defendant's software after its license expired and defendant had no duty to extend or renew the license on any particular terms. "No obligation can be implied ... which would be inconsistent with other terms of the contractual relationship" ( Murphy v. American Home Prods. Corp., 58 N.Y.2d 293, 304, 461 N.Y.S.2d 232, 448 N.E.2d 86 [1983] ; see also Fiore Fin. Corp. v. Gaea N. Am., LLC, 179 A.D.3d 621, 621–622, 114 N.Y.S.3d 878 [1st Dept. 2020] ; 87 Mezz Member LLC v. German Am. Capital Corp., 162 A.D.3d 524, 525, 81 N.Y.S.3d 1 [1st Dept. 2018] ).

Plaintiff's fraudulent inducement claim and fraud defense to enforcement of the overlapping customer restrictions were properly dismissed. Although issues of fact exist regarding defendant's knowledge of the existence of overlapping customers, plaintiff's claim must nonetheless fail because it is premised on an alleged omission and the parties were not in a fiduciary relationship (see Cobalt Partners, L.P. v. GSC Capital Corp., 97 A.D.3d 35, 42, 944 N.Y.S.2d 30 [1st Dept. 2012] ). It is also clear that defendant did not have any contractual duty to provide a customer list. Plaintiff's reliance on the "special facts" doctrine is misplaced because plaintiff was equally capable of discovering the existence of overlapping customers (see Silver Point Capital Fund, L.P. v. Riviera Resources, Inc., 198 A.D.3d 432, 433, 155 N.Y.S.3d 155 [1st Dept. 2021] ; see also generally Jana L. v. W. 129th St. Realty Corp., 22 A.D.3d 274, 277–278, 802 N.Y.S.2d 132 [1st Dept. 2005] ).

Plaintiff's waiver defense to enforcement of the overlapping customer restrictions was also properly dismissed as foreclosed by the license agreement's no-waiver and no-oral-modification provisions (see Plotch v. 375 Riverside Dr. Owners, Inc., 92 A.D.3d 478, 478, 938 N.Y.S.2d 524 [1st Dept. 2012] ). Although such provisions may themselves be waived, here, there was no clear manifestation of intent to do so and no more than a "passive acceptance" of benefits (see BDCM Opportunity Fund II, LP v. Yucaipa Am. Alliance Fund I, LP, 112 A.D.3d 509, 511, 978 N.Y.S.2d 10 [1st Dept. 2013], lv denied 22 N.Y.3d 1171, 985 N.Y.S.2d 472, 8 N.E.3d 849 [2014] ; see also generally Fundamental Portfolio Advisors, Inc. v. Tocqueville Asset Mgt., L.P., 7 N.Y.3d 96, 101, 104–106, 817...