Scholarchip Card, LLC v. Transworld Sys.
| Decision Date | 24 April 2020 |
| Docket Number | 17-CV-6296 (NGG) (SIL) |
| Parties | SCHOLARCHIP CARD, LLC, Plaintiff, v. TRANSWORLD SYSTEMS, INC. and UNIVERSITY ACCOUNTING SERVICE, LLC, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
SEALED MEMORANDUM & ORDER
Plaintiff ScholarChip Card, LLC ("ScholarChip") commenced this action on October 27, 2017 seeking a declaratory judgment and asserting various causes of action in contract and quasi-contract arising out of its agreements with Defendants to develop software for servicing student loans and to host related data. Now before the court is Defendants' motion for partial summary judgment and to strike certain portions of ScholarChip's Local Rule 56.1 Response. (See Mot. for Summ. J. (Dkt. 85); Defs. Rule 56.1 Reply ("56.1 Reply") (Dkt. 84-10) at 2 ().) Specifically, Defendants seek summary judgment on all of ScholarChip' claims except for its declaratory judgment claim. Defendants also move, with ScholarChip's consent, for leave to file certain documents and exhibits under seal. (See Dkt. 84.)
For the reasons that follow, Defendants' motion for summary judgment is GRANTED IN PART and DENIED IN PART. Defendants' motion to strike certain portions of ScholarChip's 56.1 Response is likewise GRANTED IN PART and DENIED IN PART. Finally, the court defers decision on the motion for leave to file under seal pending further submissions from the parties.
As an initial matter, the court cannot begin to set forth the summary judgment record without first addressing the serious defects in Scholarchip's Rule 56.1 Response and Counterstatement. Under Local Rule 56.1, a party moving for summary judgment must submit "short and concise statement, in numbered paragraphs, of the material facts as to which [it] contends there is no genuine issue to be tried," while the party opposing summary judgment must respond with "correspondingly numbered paragraphs responding to ... the statement of the moving party." Local R. 56.1(a)-(b). "Each statement by the movant or opponent ... including each statement controverting any statement of material fact, must be followed by citation to evidence which would be admissible." Local R. 56.1(d). "The purpose of Local Rule 56.1 is to streamline the consideration of summary judgment motions by freeing district courts from the need to hunt through voluminous records without guidance from the parties." Holtz v. Rockefeller & Co., 258 F.3d 62, 74 (2d Cir. 2001).1
Defendants' Local Rule 56.1 Statement generally adheres to these requirements. The same cannot be said, however, for ScholarChip's response. Rather than providing a concise response to each statement followed by a citation to admissible evidence, as the rule requires, ScholarChip opted to treat its responses as if it were objecting to discovery demands, burying its position beneath layers of improper form objections and legal argument. These practices are, in the best case, unproductive and contrary to the entire purpose of Local Rule 56.1 in that, rather than "assist[ing] the court bynarrowing the scope of issues to be adjudicated," Baity v. Kralik, 51 F. Supp. 3d 414, 418 (S.D.N.Y. 2014), they force the court to wade through pages of superfluous text to ascertain what, if anything, is legitimately disputed.
It would be one thing if this were simply a matter of overzealous lawyering and unfamiliarity with the court's local rules. Setting aside the fact that ScholarChip's counsel appears to primarily practice in this state, that theory cannot explain the substance of many of Plaintiff's objections. For example, there is no logical basis for Plaintiff to assert that Defendants' proffering of a statement made in a letter written by Plaintiff's principal cannot "seek to establish ... the truth" of such statement when it would be plainly admissible for that purpose under the Federal Rules of Evidence. (56.1 Resp. ¶ 30.) Likewise, ScholarChip asserts numerous objections that make no sense in context, such as when it objects to several communications dated before April 20, 2017 as not having been sent "until after ... April 20, 2017." Finally, some of ScholarChip's objections are simply so bizarre as to border on the absurd. (See, e.g., id. ¶ 25 ().) While the court will decide this case as it endeavors to decide every case that comes before it, on the merits, ScholarChip's counsel does himself and his client no favors by making that task needlessly difficult.2
Accordingly, the court will grant Defendants' motion to strike those portions of ScholarChip's responses to Defendants' 56.1 Statement that do not comply with Local Rule 56.1. Specifically, the court strikes all sentences that are not supported by citations to the record except those that begin with the word "Undisputed." To the extent that this leaves certain facts without anyresponse (e.g. id. ¶ 54), the court deems those facts undisputed for the purpose of deciding this motion so long as they are otherwise supported by the record.
Defendants also object to much of ScholarChip's Rule 56.1 Counterstatement, which comprises paragraphs 90-118 of its Rule 56.1 Response. (See 56.1 Reply at 1-4.) Many of these objections are also well founded; the 56.1 Counterstatement purports to assert facts for which the evidence cited is plainly incompetent (e.g. 56.1 Resp. ¶ 91 ()) and, in many cases, includes more than one fact in a single paragraph (e.g. id. at ¶ 95 ()). Notwithstanding these deficiencies, the court does not deem it necessary to strike the entirety of the counterstatement and thus denies Defendants' motion asking the court to do so. Instead, it will disregard those facts that are not material or for which there is no evidentiary support. See, e.g., Baity, 51 F. Supp. 3d at 418-19 (S.D.N.Y. 2014) (collecting cases).
The court draws the following statement of facts from the parties' Rule 56.1 statements (as modified) and the admissible evidence submitted therewith. The court construes the evidence in the light most favorable to ScholarChip and draws all reasonable inferences in its favor. See, e.g., Nationwide Life Ins. Co. v. Bankers Leasing Ass'n, Inc., 182 F.3d 157, 160 (2d Cir. 1999) (collecting cases). Where the facts are in dispute, the court credits ScholarChip's version of events if it is supported by record evidence. Id. However, where fails to controvert properly supported factual statements with citations to admissible evidence, the court credits Defendants' version of events and deems such facts undisputed for the purpose of deciding this motion. See, e.g.,Scott v. City of New York, No. 16-cv-834 (NGG), 2020 WL 208915, at *1 (E.D.N.Y. Jan. 14, 2020).
ScholarChip is a technology company servicing the education market. (56.1 Resp. ¶¶ 1-4.) ScholarChip was founded by Maged Atiya who, at all relevant times, was the company's Chief Technology Officer and co-owner. (Id.) Defendant University Accounting Service, LLC ("UAS") is a student loan servicing company. (Id. ¶ 8.) Defendant Transworld Systems, Inc. ("TSI") is the sole member of UAS. (Id. ¶ 6.)3
UAS hired ScholarChip in May 2006 to develop "eUAS," a loan servicing system for UAS intended to replace its existing system known as MACS, and to host necessary data related to such loans. (Id. ¶ 9.) The relationship between the companies was governed by three agreements, the Master Terms & Conditions ("MTC"), the Software Development Agreement ("SDA") and the Hosting Support Services Agreement ("HSA" and, together with the MTC and SDA, the "Agreements"). (Id. ¶ 10; see also MTC (Dkt. 84-4 at ECF 18-32); SDA (Dkt. 84-4 at ECF 34-41); HSA (Dkt. 84-4 at ECF 43-54).) Under the SDA, UAS was required to pay ScholarChip upon the achievement of three defined "milestones." (SDA § 3.) However, in July 2008, the parties executed an addendum to the SDA (the "Milestone Addendum"), which replaced the three milestones in the SDA with 17 smaller milestones and commensurately reduced milestone payments. Between 2009 and 2011, ScholarChip sent UAS invoices for the completion of milestones 2, 3, 4, 5, 6, 7, 10, 11, and 14—all of which UAS paid. (56.1 Resp. ¶¶ 12-13.) On April 28, 2011, ScholarChip confirmed that the remaining milestones were still "open and unbilled." (Id. ¶ 14.) In August 2011, ScholarChip confirmedto UAS that it had "invoiced UAS for all services, including custom programming, for all months prior to July 2011, and that there are no amounts payable by UAS that have not yet been invoiced to UAS for any period prior to July 2011. (Id. ¶ 18.) On October 23, 2013, ScholarChip issued UAS a statement of account as of that date that did not include any outstanding invoices for milestone payments. (Id. ¶¶ 20-21.)
The SDA and HSA contained, respectively, a three-year term and a two-year term subject to UAS's right to extend the agreement by three one-year terms upon sufficient notice to ScholarChip. (See SDA § 2; HSA § 3.) On August 5, 2011, ScholarChip agreed to continue providing interim services under the Agreements through September of that year, subject to a modified pricing scheme under which UAS would compensate ScholarChip based on the number of loans ScholarChip hosted. (56.1 Resp. ¶¶ 15-17.) Specifically, UAS...
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