Opinion
No: 99-3753 Section "J" (3)
June 15, 2000
MINUTE ENTRY
Before the Court is plaintiffs Motion to Dismiss Counterclaims of South Louisiana Medical Associates (Rec. Doc. 5). Defendant opposes the motion. The motion, set for hearing on May 24, 2000, is before the Court on briefs without oral argument.
For the following reasons, the Court denies the motion, finding that a number of factual issues preclude dismissal of defendant's counterclaims at this early stage of the litigation.
BACKGROUND
The dispute giving rise to this litigation centers upon a contract entered into by plaintiff Nuesoft Technologies, Inc., ("Nuesoft") and defendant South Louisiana Medical Associates ("SLMA"). The contract stipulated that Nuesoft, a Georgia-based software manufacturer and marketing firm, would provide SLMA, a physician practice group, with computer software capable of updating its billing system in an effort to better measure physician productivity. SLMA paid Nuesoft $57,092.00 for the software. SLMA alleges that it became clear that, during the training sessions for the new system, the software could not perform as promised and refused to pay Nuesoft any additional monies under the contract
On December 15, 1999, Nuesoft filed its Complaint against SLMA, alleging breach of contract and seeking damages stemming from the breach. On March 3, 2000, SLMA answered the Complaint and asserted a number of counterclaims, including: (1) a declaration of nullity, (2) breach of contract, (3) breach of warranty, (4) redhibition, and (5) unfair trade practices. Plaintiff then filed the instant motion.
DISCUSSION
In its motion, Nuesoft argues that each of SLMA's counter-claims should be dismissed, except for SLMA's claim for breach of contract. Nuesoft maintains that the Louisiana Unfair Trade Practices Act ("LUTPA"), LA. REV. STAT. § 51:1401, et seq., does not apply because the contract contained a choice-of-law provision requiring that all claims arising out of the contract will be governed by Georgia law. Next, Nuesoft argues that SLMA' s claims of breach of warranty and redhibition fail because of the clear and express integration clause and waiver provision in the agreement. Lastly, Nuesoft asserts that SLMA has not sufficiently alleged claims for fraud and redhibition.
Before relying on contractual clauses, Nuesoft must first show that the contracts are valid and enforceable. At this time, the Court does not need to decide whether to apply Georgia or Louisiana law, as SLMA's allegations create factual issues precluding dismissal under either state's laws. Under Louisiana law, a contract is unenforceable if consent was obtained through error, fraud, or duress. See generally LA. Civ. CODE art. 1948. "Error vitiates consent when it concerns a cause without which the obligation would not have been incurred and that cause was or should have been known by the other party." Sigur v. Sigur, 652 So.2d 1046, 1048 (La.App. 4th Cir. 1995) (citing LA. CIV. CODE art. 1949). "Fraud is a misrepresentation or a suppression of the truth made with the intention either to obtain an unjust advantage for one party or to cause a loss or inconvenience to the other. Fraud may also result from silence or inaction." LA. Civ. CODE art. 1953.
Georgia law also provides for the rescission of a contract upon a finding of fraud. "A contract may be rescinded at the instance of the party defrauded; but, in order to rescind, the defrauded party must promptly, upon discovery of the fraud, restore or offer to restore to the other party whatever he has received by virtue of the contract if it is of any value." GA. CODE § 13-4-60. "If the party elects [timely] to rescind the contract as voidable, he is not bound by the provisions of the rescinded contract. If the defrauded party elects to affirm the contract and sue for damages for fraud and deceit he is bound by the contract provisions." Orion Capital Partners, L.P., v. Westinghouse Electric Corp., 478 S.E.2d 382, 385 (Ga.App. 1996) (quoting del Mazo v. Sanchez, 366 S.E.2d 333, 336 (Ga.App. 1983)). Fraud is its own cause of action, as well. See City Dodge. Inc., v. Gardner, 208 S.E.2d 794, 797 n. 1 (Ga. 1974).
In this case, accepting non-movant's averments as true, see Eason v. Holt, 73 F.3d 600, 601 (5th Cir. 1996), SLMA's factual allegations create issues concerning the viability of the contract under both Louisiana and Georgia law, as a contract induced by Nuesoft's fraudulent conduct. SLMA alleges: (1) Nuesoft could not, and did not, deliver the program after explicitly representing to SLMA that the program would meet the explicit needs of SLMA; (2) Nuesoft "misrepresented" its experience and ability to install the program; (3) the program was effectively useless; (4) SLMA would not have purchased the program had it known that it was patently incapable of its intended purpose; (5) Nuesoft knew that the program was incapable of the intended purpose but made explicit representations to the contrary; (6) SLMA promptly informed Nuesoft during the trial period that the program could not function as intended and was advised that any additional work on that program or installation of another program would require additional fees; and (7) Nuesoft accepted $57,092.00 from SLMA for the program. These allegations, if proven true, satisfy the elements of fraud.
Georgia's provision that a party asserting fraud may either rescind the contract or enforce the terms of the contract and seek damages does not affect SLMA's counterclaims because SLMA asserts the claim of fraud only as a basis to rescind the contract, not as a means to collect damages. SLMA seeks only the return of the money paid to Nuesoft, an amount it would be entitled to upon recision.
Accordingly,
IT IS ORDERED that Nuesoft's Motion to Dismiss Counterclaims of South Louisiana Medical Associates is DENIED.