Opinion
032277/2007
07-12-2013
Giumenta Corp, DBA ARCHITECTURAL GRILLE, Plaintiff(s) v. Desktop Solutions Software, Inc, Defendant(s)
Panteris & Panteris, LLP by George Panteris Esq. Attorneys for Plaintiff P.B. Tufariello, P.C. Attorney for Defendant
Panteris & Panteris, LLP by George Panteris Esq. Attorneys for Plaintiff
P.B. Tufariello, P.C. Attorney for Defendant
Andrew G. Tarantino, J.
Plaintiff commenced this action in October 2007, by filing a Summons and Verified Complaint. Its sole cause of action alleged that Defendant breached its contract with Plaintiff by which Defendant was to develop a working website. Plaintiff demanded damages in the amount of forty seven thousand nine hundred twenty eight dollars and thirty cents ($47,928.30). Defendant filed its Verified Answer in November 2007, and asserted a counterclaim which alleged that the Plaintiff subsequently used the "original, singular and concrete ideas" developed by Defendant to create a website "virtually identical" to the website created by Defendant. Defendant demanded damages in the amount of five hundred thousand dollars ($500,000.00). In February 2008, Plaintiff filed its Verified Reply to the Counterclaim. Following a series of motions made by both parties, the Supreme Court, Whelan, J., in April 2012, granted Plaintiff's Summary Judgment Motion and dismissed Defendant's counterclaims upon the basis that they were preempted by federal statute. In May 2012, pursuant to NY Civ. Pract. Laws & Rules §325(d), the matter was transferred to this Court for trial. Subsequent to a Trial Order in August 2012, the trial without jury was conducted over the course of five (5) full days in March 2013. The Court after hearing testimony reserved decision.
TESTIMONY
Steven Giumenta testified for Plaintiff, Giumenta Corp., doing business as Architectural Grille [hereinafter referred to as GIUMENTA]. Started in the 1940s by his grandfather, Giumenta Corp. fabricates decorative grilles for placement over vents. As its vice-president, Giumenta decided in 2005 he needed a new website in order to create a new presence and grow the business. Giumenta wanted a website that would permit prospective customers to provide job specs on line so that the company could respond with pricing. It was Giumenta's cousin who referred him to Desktop Solutions. In November 2005, Giumenta met Frank Imbrogio from Desktop Solutions.
Introduced into evidence was the proposal prepared by Desktop Solutions. The 21 page proposal began with a description of Desktop Solutions. It contained statements such as,
"Desktop Solutions specializes in providing our clients with customized internet software that harnesses the power of the web and puts it to work."The proposal then set out the recommendations for the website. It included,
"Out motto is Technology for Results, which means our sites are created with functionality first, last and foremost."
"Your software will be checked for bugs before it's released to you."
"We hate finger pointing. If it's our fault, we'll own up to it. And fix it. Fast."
Online Catalog System
Customer Recognition System
Customized Shopping Cart System
Online Order Tracking
Online Order History
The proposed budget was contained on the last two pages. It was segregated into,
Core System$ 17,375.00
Phase I Options13,125.00
Phase II Option48,680.00
Customer Relationship1,490.00
Hardware/software costs4,635.00
On December 7, 2005, Giumenta signed a contract totaling $26,660.00. The contract provided that "Desktop Solutions will make all attempts to complete the entire project by January 28th tradeshow, but cannot guarantee that all features listed can be made live by this deadline." Giumenta paid $17,375.00 to start the project.
Desktop Solutions asked Giumenta for product photographs and copy for the website. Giumenta stated he provided Desktop Solutions with a copy of the then current catalogue, which contained photographs and product descriptions. On or about January 17, 2006, Giumenta received comps of the proposed site, and approved them 2-3 weeks later. About a month later he was informed that Desktop Solutions was ready to proceed to the Request for Quote (RFQ) module. Desktop solutions then asked Giumenta for more money for what were called "changes." Giumenta objected to Desktop Solutions calling the modifications "changes" and described the modifications as "corrections."
Giumenta then coursed through the many emails introduced into evidence. He pointed to,
- August 7, 2006, wherein Desktop Solutions was told there were issues.Giumenta stated that the website always had a good look to it; it was just never functional. Finally in about July 2007, Giumenta wrote to Desktop Solutions about his dissatisfaction. He approached another advertising firm which, using the same information as he provided Desktop Solutions, had a website up-and-running in two weeks. He acknowledged it then took up to a year to complete the new website.
- August 14, 2006, wherein a comment was made about sending the program to India to slice and dice.
- September 14, 2006, wherein Desktop Solutions was informed that items were not corrected.
- April 5, 2007, wherein Desktop Solutions' internal email stated issues were still being corrected.
- April 17, 2007, an internal email wherein a Desktop Solutions' employee asked another "What did you do?"
- April 19, 2007, another internal email wherein it was stated there are 2 key issues.
- April 26, 2007, wherein Giumenta said the website was "looking great" but still had errors, such as the RFQ containing the wrong product specs.
On cross-examination, Giumenta was shown a document which clarified that his approval of the January 13, 2006 comps was not made 2-3 weeks later, but in March 2006. When asked why no text was provided to Desktop Solutions for the website, Giumenta explained that he was waiting for the site to go live so that text could be inserted directly. But the system never went live. He also maintained that any text which Giumenta would have provided existed in the then current catalogues which he provided Desktop Solutions in December 2005. Giumenta was then led through another course of emails by Defendant's counsel. When questioned about providing Desktop Solutions with text, a June 14, 2006, email from Desktop Solutions to Giumenta acknowledged that a hi-res version of the catalogue, which had everything, was received by Desktop Solutions.
Plaintiff's expert witness was Thomas Christopher Tidwell. Tidwell currently owns, and is vice president of sales and marketing, for a web development company. His background included his work in an advertising agency for twelve years, and the development of upwards of 300 websites. His knowledge and skill was self taught; as he stated: one reads, studies and applies web development skills. He opined that going to school was useless because the technology is progressing faster than what can be taught in the classroom. He has a BS in Marketing, and a BA in Science. Before being qualified on consent as an expert, Tidwell responded to Defendant's counsel's voir dire that he started writing "code" in 1995, and that he currently writes all the coding for his company's web development.
Tidwell said he developed a customer relationship with Giumenta in about 2004. In 2007, Giumenta informed Tidwell about the ongoing issues with Desktop Solutions. Tidwell said he viewed the demo web page Desktop Solutions created and that there were problems. However, because of the coding format he was unable to ascertain the cause of the problems. Upon his direction, the web pages were transferred to a different server where Tidwell was able to inspect the coding further. He noticed that in the Architectural Grille database being used by Desktop Solutions there were items such as cameras, music, and other items not being sold by Giumenta. Based upon this observation, Tidwell believed that the Desktop Solutions web design was not custom created, but was a pre-built website which Desktop Solutions was trying to modify to Architectural Grille's needs. He stated there were over 8,000 lines of coding for camera equipment. He also observed notes in the coding which indicated that portions of the web design were created over-seas in locations such as India and Uzbekistan. He also observed that certain parts of the web program contained copyrights. Admittedly he did not know the legal ramifications of the copyrights, but stated that it was a basis for concern. Tidwell said that he was unable to fix the program that Desktop Solutions was creating; it was too complicated to try to fix a program he did not write. Tidwell provided Giumenta with an initial $9,000.00 proposal to create a new website, which increased to $20,000.00 after customer accommodations. This new proposal would include the RFQ which Giumenta desperately wanted to implement. Tidwell then coursed through reams of paper containing the Desktop Solutions website code and dissected it to support his opinions previously placed on the record. In short, Tidwell concluded that Desktop Solutions' web design was like putting "lipstick on a pig."
On cross-examination, Defendant's counsel traveled back through the reams of paper containing the code. He acknowledged there were instances where "place holders" were contained in the code. He then pointed to where erroneous text, such as "prepared for Lynette" would appear on the website. He acknowledged that when he observed the website, the navigation appeared to be working. Tidwell explained further that "library files" should never be in the "root file,", but it was so in the Desktop Solutions design. He was also asked if he knew the difference between the different types of protection licenses; he admitted he did not, and that those were issues for the attorneys. As Tidwell was led through the pages of coding, he pointed to where there were unnecessary extra files in the program that could interfere with the proper operation of the website.
In its defense, Frank Imburgio testified as owner of Desktop Solutions. He described the company as an e-commerce company working with web based applications. Including himself, there are three employees in the company. He acknowledged that he uses freelancers to help compile code; and most of today's freelancers are based in India. Imburgio confirmed meeting Giumenta in December 2005. His statement of circumstances differed in that the RFQ initially was to be a simple process through which prospective customers would submit an email to Giumenta. He explained how the plan then transformed into a series of drop-down boxes and radio-buttons by which customers would select project specifications. Imburgio acknowledged that Giumenta provided him the full product catalogue at the December meeting. However, he told Giumenta that the photographs were not of sufficient quality to import to the website. Giumenta was then supposed to get color photographs of the products for Desktop Solutions to use. As development progressed, Imburgio acknowledged that Giumenta was very responsive to emails. Imburgio then said Giumenta approved the web graphics in March 2006. He said he demonstrated the final version of the website in April 2006, then waited for the updated photographs. Based on the original contract, the website would have been ready to "go live" in July 2006, if it was approved by Giumenta. Instead, he said, Giumenta wanted additional revisions of which, Imburgio admitted, he had no recollection to explain further. He just remembered that the website was never approved to go live. After referring to some emails in evidence, Imburgio acknowledged that Desktop Solutions was informed about some changes which were legitimately requested by Giumenta. He also acknowledged that Giumenta did not request "new" items for the website, but that the changes involved moving items within the website. As additional changes were requested to the RFQ portion of the website, there was a corresponding increased charge of $13,000.00. The "Dell Style" RFQ was completed in April 2007.
As part of its defense, the Defendant then logged onto the website. Although it had never gone live, the proposed website was parked on a Desktop Solutions server which was accessed through a laptop and projected onto the courtroom wall. Imburgio testified that the website being accessed was unchanged since 2007, and would have been the "live" website if it had been approved by Giumenta. The Court observed the website as if it was a prospective customer.
The first page was the home page. At the bottom of the page was written, "with the help of Federico." Each of the pages had typed across its bottom, "Desktop Solutions." When the parametric search was attempted, it did not function.
Giumenta took the stand in rebuttal. He pointed to the pages where product descriptions were missing, although he had provided Desktop Solutions with the catalogue containing the description which should have appeared. Giumenta also pointed out the places where product photographs were missing, despite having provided Desktop Solutions with hi-res photographs. For stock items, there were no descriptions. Icons were not operating. In the RFQ module, Giumenta input the requested information, such as name, address, and such. When he clicked "enter" the website was directed back to another page which was improper. On cross examination, Giumenta was guided through the RFQ to precisely input information; when he clicked "enter" the website continued to the appropriate page. However, Giumenta then pointed out that the drop-down menus were missing from the selections. He also pointed to where information was incorrect. For example, if a customer clicked on the product Grecian 202, and selected type of finish, the program defaulted to "anodized" which was not available for that product. Also, when a customer was asked to select the number of "doors" on a particular product, there was no selection for "0" doors, the default was "1."
The Court reserved decision.
ANALYSIS
In a matter such as this, it is the province and indeed the obligation of the trial court to assess and determine matters of credibility. Morgan v McCaffrey, 14 AD3d 670, 789 N.Y.S.2d 274 (2d Dep't 2005); Matter of Liccione v John H., 65 NY2d 826, 493 N.Y.S.2d 121 (1985). Here, the burden is upon the plaintiff to plead and prove its direct case by a fair preponderance of the credible, relevant and material evidence with the same burden imposed upon the Defendant respecting his claim against the Plaintiff. Prince-Richardson on Evidence, §3-210; Torem v 564 Central Avenue Rest., 133 AD2d 25, 518 N.Y.S.2d 620 (1st Dep't 1987). Credible evidence has been defined as evidence that proceeds from a credible source and reasonably tends to support the proposition for which it is offered and is evidentiary in nature and not merely a conclusion of law, nor mere conjecture. Baudille v Kelly, 31 Misc 3d 1232(A), 932 N.Y.S.2d 759 (NY Supreme, NY County, 2011).
Based upon the Court's observations of both Giumenta's and Imburgio's demeanor, as well as the manner of their testimony, it finds each of them to be credible in their recollection of the circumstances presented herein. The Court could find no showing by either party of a willful intent to lie about any important facts. Similarly, based upon his demeanor and manner, the Court finds the Plaintiff's expert, Tidwell, credible. Finding the testimony of each of the witnesses credible compounds the task placed before the Court to determine this matter. That task would have been more daunting had the Court not been provided the opportunity to view the website "live."
The elements of a cause of action for breach of contract are: (1) formation of a contract between the parties: (2) performance by plaintiff; (3) defendant's failure to perform; and (4) resulting damage. Palmetto Partners LLP v AJW Qualified Partners, LLC, 83 AD3d 804, 921 N.Y.S.2d 260 (2d Dept 2011); See also, Furia v. Furia, 116 AD2d 694, 498 N.Y.S.2d 12 (2d Dept 1986). The central issues regarding whether the parties had entered into a binding contract are: (1) meeting of the minds (mutual assent to the terms of the agreement by the parties); (2) definiteness (does the agreement establish the intention of the parties with sufficient certainty as to be enforceable by a court); and (3) consideration (was there a bargained for exchange of something of value between the parties). 28 New York Practice Series, Contract Law § 2:1. See also, T.H. Cheshire & Sons, Inc. v. Berry, 37 Misc 3d 1220(A), Slip Copy, 2012 WL 5512544 (Table), (N.Y.Co.Ct.,2012).
In order to make out a claim in quantum meruit, a claimant must establish (1) the performance of the services in good faith, (2) the acceptance of the services by the person to whom they are rendered, (3) an expectation of compensation therefor, and (4) the reasonable value of the services. Candreva v. Ultra Kote Applied Technology, Ltd., 44 AD3d 601, 844 N.Y.S.2d 48 (2nd Dept 2007). See also, Pulver Roofing Co., Inc. v. SBLM Architects, P.C., 65 AD3d 826, 884 N.Y.S.2d 802 (4th Dept 2009); Thomas J. Hayes & Associates, LLC v. Brodsky, 101 AD3d 1560, 957 N.Y.S.2d 473 (3d Dept 2012). Regarding the fourth element of quantum meruit, defendant Stein testified at his deposition that Brian Miller, who is affiliated with plaintiff, (a) sent him an e-mail with the number of hours that plaintiff had spent developing Dubset's website and (b) estimated that plaintiff had spent $30,000—$40,000 developing the site. Stein further testified that, from the above data, he could deduce that plaintiff spent $100—$200 per hour to develop the website. That is some evidence of the value of plaintiff's services (see Rolleston—Daines v. Estate of Hopiak, 263 AD2d 883, 885, 694 N.Y.S.2d 225 [3d Dept 1999] [plaintiff's "own cost estimates" were "the most probative evidence of the reasonable value of the services rendered." Caribbean Direct, Inc. v. Dubset, LLC., 100 AD3d 510, 954 N.Y.S.2d 66 (1st Dept 2012). The plaintiff asserting a valid claim in quantum meruit "recovers the reasonable value of his performance whether or not the defendant in any economic sense benefitted from the performance." Brennan Beer Gorman/Architects, LLP v. Cappelli Enterprises, Inc., 85 AD3d 482, 925 N.Y.S.2d 25 (1st Dept 2011)
Under [our] system of adversary litigation, the task of furnishing evidence rests solely upon the parties, neither the judge nor the jury having any obligation or duty in this regard. As a general rule, the party who has the burden of pleading a fact also has the burden of producing evidence and of persuading the trier of fact. [...] Fisch on New York Evidence, Second Edition, §1087, Lond Publications 1977/2008. The burden of proving compliance with the contract terms and conditions is upon the party suing for damages for its breach, and if he relies on the theory of substantial performance he has the burden of showing the nature of his defects and omissions, their unsubstantiality and the expense of making them good. Fisch on New York Evidence, Second Edition, §1098, Lond Publications 1977/2008.
It is undisputed that the parties entered into an agreement in December 2005. Giumenta then advanced payments to Desktop Solutions. Notwithstanding Desktop Solutions' argument that it awaited hi-res photographs from Giumenta, Desktop Solutions acknowledged that Giumenta was very responsive throughout the process. The most perplexing element in Plaintiff's breach of contract action was whether Defendant failed to perform. There is no doubt that over the course of the almost 20 months the parties worked on this project, Desktop Solutions did invest work hours in the website development. This was evidenced by the voluminous emails exchanged between the parties, and the reams of paper containing the code. Putting aside, however, the technical issues addressed throughout the testimony, and whether the website was either "custom" made or "cut-and-pasted" from other websites, in the end, the Court finds that the website did not function sufficiently to be considered ready to go live. Some of the pages contained lorem ipsum in place of product descriptions, or failed to contain any text whatsoever. Yet, all of the product descriptions appeared in the catalogues provided to Desktop Solutions. Had it not been for Defendant meticulously inserting information into the Request For Quote page, the RFQ did not function properly. While Desktop Solutions may have known what to do to make the RFQ perform properly, it is presumable that a customer would not be so able. Further, Giumenta demonstrated for the Court the menu misdirections, incorrect default quantities, and the like, throughout the proposed website.
The case law submitted by Defendant to support its argument that it substantially performed its part of the bargain is not persuasive. For instance, in 845 UN Ltd. Partnership v Flour City Architectural Metals Inc., 28 AD3d 271, 831 N.Y.S.2d 404 (1st Dept 2006) it was determined that the Plaintiff substantially complied with its agreement by completing construction on 353 of 371 condominium units which was a calculable number. In Carefree Bldg. Prods. v Belina, 169 AD2d 956, 564 N.Y.S.2d 852 (3d Dept 1991) in which the jury determined a 25% deficiency and reduced Plaintiff's award by that amount was remanded, however, for a new trial holding that "the plaintiff must establish that its failure to perform was inadvertent or unintentional and that the defects were insubstantial;" a 25% deficiency was not insubstantial. In James E. McMurray Enters. v Frohlich, 309 AD2d 836, 766 N.Y.S.2d 78 (2d Dept 2003) the Court held that substantial performance was established by a certificate of occupancy indicating that construction of a residential home was 99% completed which allowed the party to reside in that home. Finally, in Jacob & Youngs Inc. v Kent, 230 NY 239, 129 N.E. 889 (1921), in which substituting one type of plumbing pipe for another of similar quality and value would have been insubstantial, the Court of Appeals stated, "substitution of equivalents may not have the same significance in fields of art on the one side and in those of mere utility on the other. Nowhere will change be tolerated, however, if it is so dominant or pervasive as in any real or substantial measure to frustrate the purpose of the contract." In the case at bar, based upon observing the parties navigate through the proposed website in court, it was apparent that the issues with the code were so pervasive that the proposed website was nonfunctional. There were no means provided to the Court to measure whether this was the result of completing 40% of the required coding, or 75% or 90%.
Giumenta did not bargain for reams of code; it bargained for a functional website which after almost twenty months remained unuseable. Plaintiff then proceeded with a different designer to have its website developed which has been functioning for the Plaintiff since 2008. Plaintiff proved by a fair preponderance of the credible evidence that the Defendant failed to perform its part of the bargain. As a result, based upon the proof submitted to the Court, Plaintiff was damaged in the amount of forty two thousand four hundred thirteen dollars and seventy cents ($42,413.70), together with interest from the date of this decision.
Although Defendant's counterclaims were dismissed by the prior court, after hearing the testimony and conforming pleadings to the proof, the Defendant has cognizable claims for breach of contract and for quantum meruit. However, the Defendant failed to establish either cause of action by a fair preponderance of the credible evidence.
As for the breach of contract, based upon the above, Desktop Solutions did not prove that it performed its part of the bargain. It did not deliver a fully functional website after almost twenty months of development. The Court understands Defendant's counsel's plea that it would be unfair for Desktop Solutions not to be paid anything, but the Court cannot be affected by sympathy, nor what the reaction of the parties may be to its decision. Thus, although on a quantum meruit claim the Defendant did prove the first three elements of such a cause of action, the Defendant failed to submit any evidence to establish the critical fourth element, i.e., the reasonable value of the services. The Court scoured the agreement submitted into evidence for any indication of hours spent, or costs per hour. There was nothing. The agreement set forth lump sum charges for each module of the website without even a projection of hours expected to be invested for each module. Those module categories were not itemized so the Court also was unable to determine what portion of the budget costs was attributable to the graphic layout the Court observed in the website presentation. And, without any time sheets or hourly records, or testimony about the industry standards or values for web designing, the Court was deprived of calculating any compensation to Desktop Solutions.
This constitutes the decision and order of the Court.
Submit judgment.
ENTER
_____________________________________
Judge