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Microstrategy Services Corp. v. Openrisk, LLC

United States District Court, E.D. Virginia, Alexandria Division

June 17, 2015

OPENRISK, LLC, Defendant.


JAMES C. CACHERIS, District Judge.

This matter is before the Court on MicroStrategy Services Corp.'s ("MicroStrategy") Motion for Partial Summary Judgment [Dkt. 129] and OpenRisk LLC's ("OpenRisk") Motion to Dismiss for Lack of Jurisdiction or in the Alternative for Judgment on the Pleadings or Summary Judgment [Dkt. 132]. For the following reasons, the Court denied OpenRisk's motion to dismiss for lack of jurisdiction from the bench. The Court denied both parties' motions for summary judgment. This Memorandum Opinion memorializes the Court's reasoning.

I. Background

The following facts are not disputed. MicroStrategy and OpenRisk entered into a contract in September 2011 wherein MicroStrategy was to provide cloud service technologies to OpenRisk. (OpenRisk's Mem. in Supp. of Mot. to Dismiss [Dkt. 133] at 4.) The terms of the contract were in the master subscription agreement ("subscription agreement") and corresponding order form ("order form"). ( Id. ) The subscription agreement states that "[a]ll payment obligations are non-cancelable [.]" (MicroStrategy's Mem. in Supp. of Summ. J. [Dkt. 130], Donald Burke Aff., Ex. 1, at 6.) Should OpenRisk or MicroStrategy terminate the agreement, OpenRisk "will be obligated to pay the balance due on [its] account computed in accordance with the Charges and Payment of Fees section above." ( Id. at 7.) That section required OpenRisk to pay all fees or charges in accordance with the terms set forth in the order form. ( Id. at 6.)

As stated on the order form, OpenRisk's monthly recurring fee was $21, 000, which was billed quarterly. (Burke Aff., Ex. 2, at 14.[1]) The initial invoice was for $93, 000. ( Id. ) It was broken into smaller payments as follows: (1) a $15, 000 set up fee due on October 31, 2011; (2) an additional $15, 000 set up fee due on November 30, 2011; and (3) the first quarterly payment of $63, 000 due on January 1, 2012. ( Id. ) The second invoice, which was to be issued on or about December 30, 2011, was due on March 1, 2012; all other invoices were due in full thirty days after the date of the invoice. ( Id. ) The order form had a term of sixty months. ( Id. at 13.) Shajy Mathai ("Mathai"), an OpenRisk employee, was listed as the subscription coordinator, though at some point in early October, he resigned from OpenRisk. (OpenRisk's Mem. in Supp. at 5, 13.)[2] The order form was signed by OpenRisk on September 28 and by MicroStrategy on September 29, 2011. ( Id. at 15.)

Jordan Christopher ("Christopher"), the MicroStrategy account executive on the OpenRisk account, repeatedly advised OpenRisk in advance of its first payment due date of October 31 that missing a payment would jeopardize the relationship between the two companies. (OpenRisk's Mem. in Supp. at 5.) On October 31, Mathai, who had already resigned from OpenRisk, made a $15, 000 payment to MicroStrategy, the amount due under the terms of the subscription agreement and order form. ( Id. at 6.) This $15, 000 payment from Mathai was labeled "FBO OPEN RISK LLC" and was applied to OpenRisk's invoice for the $15, 000 payment due that day. ( Id. )

Christopher did not inform OpenRisk of Mathai's payment. ( Id. ) Rather, after receiving the payment from Mathai, Christopher contacted James Aylward ("Aylward"), OpenRisk's CEO, on November 1 stating that MicroStrategy expected to receive the $15, 000 payment that day. ( Id. ) Aylward replied, stating that a deal for a potential buyer for OpenRisk had fallen through. (Def. App. [Dkt. 135] at 71.) He then stated: "All that said, obviously we can no longer raise funds or continue as a going concern. We have no cash and no way to fund operations, and will be shutting down over the next few weeks. Please give me a call over the next few days and we can discuss." ( Id. ) On November 9, Aylward sent another email to Christopher. Aylward wrote: "Our Board of Directors this week has determined that we cannot continue as a going concern and will be closing company operations effective immediately. Please discontinue all services to OpenRisk, LLC." ( Id. at 73.)

Meanwhile, two other high-ranking OpenRisk employees, in addition to Mathai, left the company, joining forces with Marc Roston ("Roston") to form Spectant Group, LLC ("Spectant"). OpenRisk had another payment deadline looming on November 30, 2011. (OpenRisk's Mem. in Supp. at 7.) Spectant paid MicroStrategy $15, 000 on November 29, 2011.[3] ( Id. )

January 1, 2012 came and went without a payment from OpenRisk as required under the terms of the order form. (OpenRisk's Mem. in Supp. at 9.) MicroStrategy sent OpenRisk a termination letter on January 20, 2012 pursuant to section eight of the subscription agreement. (Def. App. at 60.) MicroStrategy provided a thirty-day cure period. ( Id. ) If payment was not received by the end of that period, the subscription agreement, the order form, and all of MicroStrategy's obligations thereunder would terminate. ( Id. ) OpenRisk did not provide payment within the thirty-day period, and as such MicroStrategy terminated OpenRisk's cloud services contract for non-payment. (OpenRisk's Mem. in Supp. at 9.)

MicroStrategy filed this action in September of 2014 alleging one count of breach of contract. (Complaint [Dkt. 1].) Soon thereafter, OpenRisk moved to dismiss the action for lack of subject matter jurisdiction, arguing the amount in controversy requirement was not satisfied. (OpenRisk's Mot. to Dismiss [Dkt. 10] & Mem. in Supp. [Dkt. 11].) The Court denied the motion. (11/19/14 Hr'g Tr. [Dkt. 19] at 4.)[4] After the close of discovery, the parties filed the instant motions. Having been fully briefed and argued, these motions are ripe for disposition.

II. Analysis

A. Subject Matter Jurisdiction

Federal courts are "courts of limited jurisdiction... possess[ing] only that power authorized by Constitution and statute." Exxon Mobil Corp. v. Allpattah Servs., Inc., 545 U.S. 546, 552 (2006) (citation and internal quotation marks omitted). Congress has conferred on the district courts original jurisdiction in federal question cases - civil actions that arise under the Constitution, laws, or treaties of the United States - and diversity cases. Id .; see 28 U.S.C. §§ 1331, 1332. Diversity cases are civil actions between citizens of different States, between U.S. citizens and foreign citizens, or by foreign states against U.S. citizens. Id. (citing 28 U.S.C. § 1332). "To ensure that diversity jurisdiction does not flood the federal courts with minor disputes, § 1332(a) requires that the matter in controversy in a diversity case exceed a specified amount, currently $75, 000." Id.

Subject matter jurisdiction may be challenged at any time during the proceeding. The Court may raise the issue sua sponte or a litigant may move under Federal Rule of Civil Procedure 12(b)(1) to dismiss for lack of subject matter jurisdiction. Under such a motion, subject matter jurisdiction may be challenged on the face of the pleadings or based on the evidence. Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982). OpenRisk has already challenged this Court's subject matter jurisdiction based on ...

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