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Forsythe Global, LLC v. QStride, Inc.

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

June 14, 2016

QSTRIDE, INC., Defendant.



         This matter is before the Court on Plaintiff Forsythe Global, LLC's ("Plaintiff" or "Forsythe") Motion to Dismiss Defendant QStride, Inc.'s ("Defendant" or "QStride") Counterclaims. For the following reasons, the Court grants Plaintiff's motion to dismiss and will dismiss Counts II and III of Defendant's Counterclaims without prejudice.

         I. Background

         At the motion to dismiss stage, the Court must read the complaint as a whole, construe the complaint in a light most favorable to the non-movant, and accept the facts alleged in the complaint as true. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         The following facts are taken from Defendant's Answer and Counterclaims [Dkt. 7] and incorporate, where noted, facts from Plaintiff's Complaint [Dkt. 1]. They are accepted as true only for purposes of this motion.

         Forsythe is a limited liability company organized under the laws of Virginia with its principal place of business in McLean, Virginia. (Compl., ¶ 4.) Forsythe provides a range of corporate consulting services. (Id.) QStride is a Michigan corporation with its principal place of business in Detroit, Michigan. (Id.) QStride also provides a range of corporate and IT consulting services. (Id.) On December 20, 2013, QStride and Forsythe entered into a Professional Services Agreement ("PSA") under which Forsythe agreed to provide future consulting services to QStride and several of QStride's "end customers" pursuant to subsequent individualized Statements of Work ("SOWs"). (Id. at ¶¶ 11-12.) The 2013 PSA also provides that in exchange for ancillary services, QStride was to pay twenty-five percent (25%) of either some, or all software license revenue generated by QStride. (Id. at ¶ 13; Answer, ¶ 13.) The PSA includes billing provisions which provide that QStride "shall pay the applicable amount of [Forsythe's monthly services invoice] within thirty (30) days after receipt, unless otherwise specified in the SOW." (Compl., ¶ 14.) The PSA contains detailed language regarding how QStride should dispute the amount Forsythe claimed in a monthly invoice. (Id.) Section V of the PSA includes a provision stating that for the duration of the PSA and for one year thereafter, Forsythe and its staff would "not directly or indirectly solicit or accept any engagement with [QStride]'s customers other than through [QStride], in which [QStride] has directly provided an introduction to [Forsythe], and to the extent that [QStride] has access to and knowledge of such engagement." (Id. at ¶ 15.) Section VI. (a) of the PSA provides for automatic annual renewal starting on November 21, 2014, and that any work on a specific SOW which continued beyond the life of the PSA would continue to be governed by the pertinent terms of the PSA. (Id. at ¶ 16.) Section VI. (b) of the PSA empowers QStride to terminate the PSA prior to the renewal date by providing Forsythe with ten days advance written notice of intent to terminate. (Id. at ¶ 17.) The PSA also includes clauses regarding waiver, attorney's fees, and the availability of remedies after the termination of the contract which are not at issue at this time. (Id. at ¶¶ 18-20.)

         During the course of the PSA, Forsythe issued a number of SOWs relating to services to be performed by Forsythe for the benefit of several of QStride's end customers, including Crystal & Company, Inc. ("Crystal"), NICE Systems, Ltd. ("NICE"), and TLE, Inc. ("TLE"). (Id. at ¶ 23.) In early November 2015, there were several outstanding invoices from Forsythe to QStride regarding work perfomed by Forsythe under SOWs for end customers Crystal, NICE, and TLE. (Id. at ¶ 24.) On November 9, 2015, QStride informed Forsythe that pursuant to Section VI. (a) of the PSA, QStride was terminating the PSA effective November 20, 2015. (Id. at ¶ 26.) That same letter, however, indicated that notwithstanding its intent to terminate the PSA, QStride was interested in entering a new agreement with Forsythe, a draft of which was attached. (Id. at ¶ 27.) Later, on December 5, 2015, QStride and Forsythe adopted an additional SOW relating to Forsythe's support of existing tasks and projects undertaken for the benefit of QStride's end customers Crystal and The Learning Experience, Inc. (Id. at ¶ 28.) This December 5 SOW went on to note a few aspects in which provisions of the PSA would be modified for purposes of the December 5 SOW. (Id.)

         Forsythe contends that at present, there are seven outstanding unpaid invoices for work performed under the PSA and various SOWs. (Id. at ¶ 29.) Specifically, Forsythe claims that it is owed $48, 720.04 for 7 specific SOWs covering work for the end clients Crystal, TLE, and NICE. (Id. at ¶ 30.) Additionally, Forsythe alleges that QStride has failed to pay interest owed for invoices which were satisfied more than 30 days after issuance, as required by Section III of the PSA. (Id.) Forsythe also claims it is owed 25% of approximately $165, 000 in estimated net software licensing revenue generated by QStride during the life of the PSA. (Id. at ¶¶ 32-40.)

         Forsythe alleges that, at the time the PSA was terminated, they were providing business services for end clients Crystal and TLE. (Id. at ¶¶ 43, 44.) Forsythe further alleges that these end clients communicated a desire for Forsythe to continue working with them past the termination of the PSA, that QStride then instructed Forsythe and the end clients to cease communication with each other or face legal action, and that Forsythe has subsequently refrained from direct solicitation of Crystal and TLE while maintaining they are not required to do so. (Id. at ¶¶ 47-53.)

         On January 29, 2016, Forsythe filed this lawsuit, alleging breach of contract, unjust enrichment, and tortious interference with a business expectancy and seeking damages, specific performance of QStride's alleged duty to conduct an accounting of software licensing sales revenue, and declaratory judgment that QStride has breached the PSA and Forsythe may engage in free business negotiations with TLE and Crystal. On April 11, 2016, QStride filed its Answer and Counterclaims denying liability on Forsythe's claims and alleging breach of contract, "Tortious Interference with Existing Contract", and "Tortious Interference with Prospective Business Relationships/Economic Advantages." (Counterclaims [Dkt. 7], ¶¶ 17-30). As relevant to this motion, QStride alleges that between November 20, 2015 and January 29, 2016, "Forsythe continued to directly and indirectly solicit business in violation of the Agreement from QStride customers." (Id. at ¶ 13.) Further, QStride alleges that Forsythe acted wrongfully by initiating "the instant unfounded lawsuit against QStride knowingly interfering with QStride's customer relationships." (Id. at ¶ 14.) QStride also alleges that Forsythe "knowingly disseminated false and disparaging statements about QStride to QStride customers harming the reputation of QStride including, but not limited to, the lawsuit itself as well as various false statements found in the Complaint." (Id. at ¶ 15.) QStride does not identify any specific statements as false. Finally, QStride levels the vague accusation that Forsythe has "continued to directly and indirectly solicit business from QStride customers" since the initiation of the contract. (Id. at ¶ 16.)

         On May 13, 2016, Plaintiff filed this Motion to Dismiss Counts II and III of Defendant's Counterclaims. [Dkt. 12.] On May 31, Defendant filed their Memorandum in Opposition. [Dkt. 14.] On June 4, Plaintiff filed their Response Memorandum [Dkt. 16], and oral arguments were heard on June 9. The motion is now ripe for decision.

         II. Legal Standard

         Defendants move to dismiss Plaintiff's claims pursuant to Federal Rule of Civil Procedure 12(b)(6). "The purpose of a Rule 12(b)(6) motion is to test the sufficiency of a complaint; importantly, [a Rule 12(b)(6) motion] does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Edwards v. City of Goldsboro, 178 F.3d 231, 243-44 (4th Cir. 1999) (citation omitted) (internal quotation marks omitted). "While the court must accept well-pleaded allegations as true when ruling on a Rule 12(b)(6) motion, the court need not accept as true legal conclusions disguised as factual allegations." Ashcroft v. Iqbal, 556 U.S. 662, 679-81 (2009). Therefore, a pleading that offers only a "formulaic recitation of the elements of a cause of action will not do." Iqbal, 556 U.S. at 678; Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007). Nor will a complaint that tenders mere "naked assertion[s]" devoid of "further factual enhancement." Iqbal, 556 U.S. at 678; Twombly, 550 U.S. at 557. Where pleadings contain "no more than legal conclusions, [they] are not entitled to the assumption of truth." Iqbal, 556 U.S. at 679.

         III. ...

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