Sweetser v. Netsmart Technologies, Inc.
| Decision Date | 27 May 2008 |
| Docket Number | Civil No. 07-202-P-S. |
| Citation | 558 F.Supp.2d 108 |
| Parties | SWEETSER, Plaintiff v. NETSMART TECHNOLOGIES, INC., Defendants. |
| Court | U.S. District Court — District of Maine |
Jeffrey W. Peters, Preti, Flaherty, Beliveau, Pachios & Haley, LLP, Portland, ME, for Plaintiff.
Adam M. Bialek, Frederick R. Kessler, Wollmuth Maher & Deutsch LLP, New York, NY, Jerrol A. Crouter, Drummond, Woodsum & MacMahon, Portland, ME, for Defendants.
ORDER DENYING IN PART AND GRANTING IN PART DEFEDANT'S MOTION TO DISMISS
Plaintiff Sweetser has brought a fourcount Complaint against Defendant Netsmart alleging breach of contract (Count I), breach of express warranties (Count II), unjust enrichment (Count III) and negligence (Count IV). Now before the Court is Netsmart's Motion to Dismiss seeking dismissal of all counts pursuant to Fed. R.Civ.P. 12(b)(1) and 12(b)(6). Sweetser opposes dismissal of its breach of contract and breach of warranties claims, but agrees to the dismissal of the unjust enrichment and negligence claims. Therefore, the discussion below will only address Plaintiffs claims for breach of contract and breach of express warranty.
Netsmart's Motion to Dismiss invokes Rules 12(b)(1) and 12(b)(6). When a defendant moves to dismiss pursuant to Rule 12(b)(1), the plaintiff bears the burden of demonstrating that subject-matter jurisdiction exists. Lundquist v. Precision Valley Aviation, Inc., 946 F.2d 8, 10 (1st Cir.1991); Lord v. Casco Bay Weekly, Inc., 789 F.Supp. 32, 33 (D.Me.1992). Both parties may rely on extra-pleading materials. 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1350 at 213 (2d ed.1990); see also Hawes v. Club Ecuestre El Comandante, 598 F.2d 698, 699 (1st Cir.1979) ().
"In ruling on a motion to dismiss [under Rule 12(b)(6)], a court must accept as true all the factual allegations in the complaint and construe all reasonable inferences in favor of the plaintiffs." Alternative Energy, Inc. v. St. Paul Fire & Marine Ins. Co., 267 F.3d 30, 33 (1st Cir.2001). With respect to a Rule 12(b)(6) motions, the Supreme Court recently has clarified:
While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiffs obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level.
Bell Atlantic Corp. v. Twombly, ___ U.S. ___, ___ - ___, 127 S.Ct. 1955, 1964-65, 167 L.Ed.2d 929 (2007) (citations omitted). Ordinarily, in weighing a Rule 12(b)(6) motion, "a court may not consider any documents that are outside of the complaint, or not expressly incorporated therein, unless the motion is converted into one for summary judgment." Alternative Energy, 267 F.3d at 33. "There is, however, a narrow exception for documents the authenticity of which are not disputed by the parties; for official public records; for documents central to plaintiffs' claim; or for documents sufficiently referred to in the complaint." Id. (citation and internal quotation marks omitted). In this case, the contract that the parties entered into was attached to the Complaint and both parties rely on its terms in the briefing of the Motion to Dismiss.
The Complaint includes the following relevant factual allegations. Sweetser is a Maine non-profit corporation with its principal place of business located in Saco, Maine. Sweetser provides comprehensive mental health services for children, adults, and families in Maine. Sweetser offers services that address emotional disturbances, mental illnesses, behavioral disorders, and learning disabilities through a network of educational programs, preventive services, community-support services, residential homes, and outpatient services. Sweetser relies on its computer systems and associated software to provide efficient and effective support services to its clients. Netsmart is a Delaware corporation with a principal place of business located in Islip, New York, which supplies enterprise-wide software systems and related services to health and human services providers.
Sweetser solicited bids to upgrade its computer hardware and software systems through a Request-for-Proposal ("RFP") process. Sweetser intended these upgrades to help it improve its operations, level of services to its clients and provide more services to the communities it serves. Netsmart responded to Sweetser's RFP and the parties entered into discussions regarding Sweetser's needs and expectations for the system. During the RFP process, Sweetser specifically provided Netsmart with all billing requirements for the software. These same requirements were contained within the RFP and were subsequently discussed extensively with Netsmart. Netsmart represented to Sweetser that its product would meet all requirements stated in the RFP and as discussed with Sweetser.
In September 2005, Sweetser and Creative Socio-Medics Corp. ("CSM") d/b/a Netsmart entered into and executed an Agreement.1 Pursuant to the terms of the Agreement, in exchange for Sweetser's total payment of $1,405,704, Netsmart was required to, among other things:
a. grant Sweetser "a non-exclusive, perpetual[,] non-transferable license" to software and related hardware that was to be specially developed and designed for Sweetser's purposes and usage (the "software and hardware");
b. install and implement the software and hardware on and into Sweetser's computer systems and operations;
c. provide Sweetser with training and continued learning services relating to the software and hardware;
d. deliver the software and hardware and certify that it was ready for testing; and
e. test the software and hardware in support of an acceptance process.
Pursuant to the Agreement, Netsmart expressly warranted to Sweetser that (a) the software and hardware would substantially conform in all material respects with its prescribed specifications and (b) it would correct all problems or defects in the software or hardware in a reasonably prompt fashion. Pursuant to the terms of the Agreement, Netsmart was to commence implementation of the software and hardware in October 2005. Sweetser alleges that Netsmart failed to deliver on its contractual promises relating to the functionality, performance and installation of its software and hardware as well as training on the same. For instance, after the contract was signed, Sweetser was informed that it was either not able to get certain requirements at all due to the way Netsmart's core system was built, or it was only able to obtain needed functionality at additional expense.
Sweetser promptly informed Netsmart of all implementation problems and deficiencies. Netsmart assured Sweetser that it would address and correct all problems and deficiencies with the software and hardware. Netsmart never successfully addressed or resolved the functionality problems with the software and hardware. As all of the problems and difficulties continued to accumulate, Sweetser asked Netsmart to replace the original project manager responsible for overseeing the various tasks and phases to be completed under the Agreement. Netsmart replaced the original project manager. However, ultimately, Netsmart failed to provide Sweetser with responses to important, time-critical requests.
In an effort to resolve its issues and concerns with Netsmart, particularly the billing module, Sweetser offered an alternative to Netsmart. In particular, Sweetser proposed that rather.than customizing the Netsmart system for what appeared to be a high cost and a long term process, Sweetser would use Netsmart's clinical module in tandem with its PsychConsult billing system. Netsmart refused to consider a "bidirectional interface" which would allow this alternative. Based upon Netsmart's continuing failure to fulfill its obligations under the Agreement and its failure to cure many known defects in the functionality of the software and hardware, in March 2007, Sweetser concluded that Netsmart had breached the Agreement. At that time, Sweetser had already paid Netsmart $1,252,222. Thereafter, Sweetser contracted with Askesis for products and services to take the place of those due from Netsmart under the Agreement.
The claims at issue in the Motion to Dismiss center on the Agreement entered into by the parties. . The agreement in this case provides, and the parties do not dispute, that New York law governs this action. Agreement ¶ 17(a); see also LaSalle Bank Natl Ass'n v. Nomura Asset Capital Corp., 424 F.3d 195, 205 n. 7 (2d Cir.2005) .
Netsmart argues that the Court lacks subject matter jurisdiction and thus the breach claims should be dismissed. Specifically, Defendant asserts that because Plaintiffs Complaint fails to allege it gave written notice of default and an opportunity to cure as required under the termination provision of the contract, the claims are not ripe for adjudication. Sweetser responds stating that a breach of contract cause of action accrues at the time of the breach. See Ely-Cruikshank Co., Inc. v. Bank of Montreal, 81 N.Y.2d 399, 599 N.Y.S.2d 501, 615 N.E.2d 985, 986 (1993); see also Argonaut Partnership, L.P. v. Bankers Trustee Co., Ltd., 1997 WL 45521 at *5 (S.D.N.Y.1997) (). Thus, Sweetser contends the Complaint's specific allegations of...
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...Outside the Proceedings For a motion pursuant to Rule 12(b)(1), parties may rely on extra-pleading materials. Sweetser v. Netsmart Techs., Inc. , 558 F.Supp.2d 108, 110 (D.Me.2008) ; United States v. Baxter , Civ. No. 1:10–cv–00435–JAW, 2011 U.S. Dist. LEXIS 55277, 2011 WL 1988437, at *2 (D......