Opinion
No. 2013–5956.
07-22-2015
POMCO, INC., Plaintiff, v. HEALTHEDGE SOFTWARE, INC., Defendant.
Edward E. Kopko, Esq., for plaintiff. Mitchell J. Katz, Esq. and Teresa M. Bennett, Esq., of Menter, Rudin, Trivelpiece, P.C., for defendant.
Edward E. Kopko, Esq., for plaintiff.
Mitchell J. Katz, Esq. and Teresa M. Bennett, Esq., of Menter, Rudin, Trivelpiece, P.C., for defendant.
DONALD A. GREENWOOD, J.
The plaintiff, POMCO, Inc. commenced this action seeking monetary damages and equitable relief against defendant Healthedge Software, Inc. based upon the defendant's alleged failure to perform its duties in breach of the Software Licence Agreement (SLA) and Professional Services Agreement (PSA) executed between the parties. On March 26, 2010 the parties entered into the SLA wherein the defendant granted the plaintiff a nonexclusive license to use software known as HealthRules. Subsequently on April 1, 2010 the parties executed the PSA in connection with the implementation of the Software system. The plaintiff commenced this action in April of 2014 alleging eight causes of action, including breach of contract, breach of duty of good faith and fair dealing, breach of implied contract, unjust enrichment, recision, specific performance and piercing the corporate veil. The defendant now moves for summary judgment dismissal of the plaintiff's seventh cause of action which seeks specific performance of the agreements and requires defendant to turn over the Source Code and any other Software and Documentation to fulfill the contractual benefit to plaintiff. In addition, defendant seeks summary judgment on count five of its answer and counterclaim seeking to enjoin the plaintiff from any future retention, use, access to, disclosure of and/or benefit from the subject Software. The plaintiff opposes the defendant's motion and cross-moves for summary judgment on its claim for specific performance and alternatively seeks a preliminary injunction.
While plaintiff's Notice of Cross–Motion and the Affidavit of Donald Napier both indicate the aforementioned relief sought, the attorney's affidavit and Memorandum of Law both reference a cross-motion for a Declaratory Judgment. However, no argument regarding such relief is contained in the papers, nor is such a cause of action contained in the complaint.
In so moving, the defendant relies upon the language of the subject agreements and demonstrates that many facts are not disputed, specifically the execution of the SLA (which was subsequently amended on November 4, 2011) and the PSA, pursuant to which the parties agreed to four jointly prepared Statements of Work (SOW's) for various stages of implementation process and various amendments thereto. Pursuant to the SLA, defendant granted to plaintiff a "nonexclusive nontransferable license to use and operate in object code format only, the software in accordance with the associated documentation solely for the intended use during the term." SLA 3.1. Section 5.1 of the SLA addresses the consideration for defendant's grant of the license being the payment of certain fees. Schedule A of that section permits defendant to invoice plaintiff monthly license and maintenance fees, among other charges. In addition, in section 4.1 of the SLA, the defendant agreed to provide support and maintenance in return for the maintenance fees. There is no dispute that defendant delivered to plaintiff monthly invoices as required by the SLA and that plaintiff refused to pay the invoices for the license and maintenance fees, including invoices dated October 1, 2012, November 1, 2012 and December 1, 2012, totaling $94,687.50 within 30 days or any time thereafter.
With respect to the PSA, defendant has shown that it was to be compensated for professional services rendered in amounts set forth in the SOW's agreed to between the parties, together with out of pocket expenses, and defendant was authorized to deliver invoices to plaintiff for the time and expense of said services, with plaintiff being required to pay any invoice delivery pursuant to the PSA within 30 days of the invoice date. The PSA further provides that if plaintiff disputed any portion of the invoice plaintiff was obliged to pay any undisputed portion within 30 days of the invoice date. Failure to make payment of any undisputed amount of an invoice within thirty days resulted in the accrual of interest.
It is not disputed that plaintiff failed to pay PSA invoices between July 31, 2012 and November 30, 2012, totaling $583,641.36. As a result, a Notice of Intent to Terminate both Agreements was sent to plaintiff on January 14, 2013 providing written notice of the default. Pursuant to SLA section 6.2(a), defendant advised plaintiff of its intention to terminate the SLA if plaintiff failed to cure the default within ten days as required by the agreement. The Notice further advised the plaintiff due to its failure to pay amounts due under the PSA, that pursuant to section 9.3(a) defendant intended to terminate that agreement within 30 days as provided in that section. Plaintiff failed to make payments on the outstanding SLA invoices within the requisite ten days and on February 7, 2013 defendant notified plaintiff of its election to terminate the SLA effective February 6, 2013 and thereby demanded that plaintiff cease all use of the subject Software, that the Software be removed from all of plaintiff's systems and returned to defendant. Plaintiff subsequently notified defendant that payment of the outstanding invoices was being withheld as a result of Software deficiencies that had not been addressed by defendant and that on February 11, 2013 that plaintiff advised defendant that it was providing notice of a "materially diminished level of service in support of the software" and demanded that defendant release the Source Code being held in escrow pursuant to PSA section 2.2. Subsequently by letter dated February 28, 2015, defendant notified plaintiff that since more than 30 days had elapsed after the January 14, 2013 notice, that defendant terminated the PSA as of that date pursuant to section 9.3(a).
The terms and conditions of the parties' agreements are clear and unambiguous and thus must be enforced according to the plain meaning of their terms. See, Kolbe v. Tibbetts, 22 NY3d 344 (2013). As such, the interpretation is a question of law for the court. See, Thompson v. McQueeney, 56 AD3d 1254 (4th Dept.2008). The record is clear that plaintiff failed to pay the PSA invoices between July 31, 2012 and November 30, 2012. The defendant sent the requisite Notice of Intent to Terminate both Agreements to plaintiff on January 14, 2013. The plaintiff failed to make payments on the outstanding invoices within ten days. On February 7, 2013 defendant notified plaintiff of its election to terminate the SLA effective February 6, 2013 and thereby demanded that plaintiff cease all use of the subject Software pursuant to the clear terms of the Agreements. It was not until four days later on February 11, 2013 that plaintiff notified defendant that it was providing notice of a "materially diminished level of service in support of the software" pursuant to PSA section 2.2, long after its breach.
The plaintiff is not entitled to specific performance here inasmuch as money damages are adequate to protect its expectation interest as the alleged injured party. See, Destiny USA Holdings, LLC v. Citigroup Global Markets Realty Corp., 69 AD3d 212 (4th Dept.2009). Such a remedy is appropriate only where the amount of damages is difficult to ascertain, based upon the unique nature of the subject matter of the contract or agreement or the lack of an established market value. See, JMG Custom Homes v. Ryan, 45 AD3d 1278 (4th Dept.2007). That is not the case here. Plaintiff has an adequate remedy at law in the form of money damages and the SLA provides a limitation on those damages to "the amounts actually paid by [plaintiff] to [defendant] under this agreement." SLA § 7.3. In addition, plaintiff's default under the payment terms prevents equitable relief in the form of specific performance. That relief must be denied where the party seeking it is in default under the contract where conditions set forth in the contract have not been performed. See, Panner Woodworking Co. v. Adair, 75 A.D.2d 553 (1st Dept.1980). Therefore, the defendant is entitled to summary judgment dismissal of the plaintiff's seventh cause of action seeking specific performance.
With respect to the motion for summary judgment on its counterclaim for temporary and permanent injunction, defendant must establish the following for such preliminary relief: likelihood of success on the merits, the prospect of irreparable injury if provisional relief is not granted and a balancing of equities in its favor. See, Invesco Institute, N.A., Inc. v. Deutsche Investment Management Ams., Inc., 74 AD3d 6964 (1st Dept.2010). While there is no licensing agreement in effect for the subject Software, there is no dispute that it is not operational by the plaintiff. The record is clear that the plaintiff does not have the Source Code, but rather is seeking it through this litigation. Further, the Software was never operated by the plaintiff for other than test purposes and was subsequently removed from the plaintiff's systems. Therefore, defendant has failed to show that plaintiff is engaging in an activity which defendant would be entitled to an injunction. In addition, defendant has failed to establish as a matter of law that the plaintiff violated the confidentiality terms as set forth in SLA 9.3. For an injunction to be granted before trial, the plaintiff must show irreparable damage factually and convincingly and mere apprehension does not suffice; the injunction will issue only upon a showing that defendant's wrongful acts are occurring or are threatened and reasonably likely to occur. See, Siegel New York Practice, 4th Ed., § 328. Thus, an issue of fact exists and defendant is not entitled to judgment as a matter of law.
According to the affidavit of Jeffrey Wincell, plaintiff's Chief Operating Officer, plaintiff stopped using the software on October 18, 2012 and the software was completely removed from the system on February 25, 2013.
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Defendant also seeks to strike the redacted part of Exhibit 43 of the affidavit of Donald Napier and references and arguments concerning same from the record in opposition to defendant's motion: The exhibit contains a projected profit and loss statement, which plaintiff claims contains proprietary information and was submitted only for in camera review. Only the Court and the plaintiff had a complete copy of the exhibit and therefore, that application is granted.
Therefore, counsel for the defendant is required to submit an Order consistent with this Decision on notice to the other party within thirty (30) days of this Decision.