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Servco Pacific Inc. v. Skybridge Global Inc.

United States District Court, D. Hawaii

November 29, 2016

SERVCO PACIFIC, INC., a Hawaii corporation, Plaintiff,
v.
SKYBRIDGE GLOBAL, INC., a Georgia corporation, and DOES 1-25, inclusive Defendants.

          ORDER: (1) DENYING DEFENDANT'S MOTION TO TRANSFER VENUE; AND (2) GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS

          Derrick K. Watson United States District Judge.

         Servco alleges that SkyBridge failed to meet its contractual obligations to implement an Oracle software platform designed to serve Servco's automotive business. SkyBridge moves to either transfer this action to the Northern District of Georgia, pursuant to a contractual forum selection clause, or to dismiss this action in its entirety. Dkt. No. 27. Because the contract on which SkyBridge relies was not executed, and there is no other basis on the facts before the Court to uphold it, SkyBridge's motion to transfer is DENIED. Additionally, for the reasons that follow, the Court GRANTS SkyBridge's motion to dismiss Servco's implied covenant claim, but DENIES the motion to dismiss Servco's other five claims.

         BACKGROUND

         I. Factual Background[1]

         A. Servco's Negotiations With SkyBridge

         Servco, a Hawaii corporation with its principal place of business in Honolulu, distributes and sells automobiles, brokers specialty insurance, and distributes appliances. Complaint (“Compl.”) ¶¶ 9, 12. To operate its business, Servco relies on a complex network of retail, finance, and supply chains. Id. ¶ 13.

         In 2012, facing the impending end of its existing legacy computer systems, Servco began its search for a replacement. Id. ¶ 14. After consulting with Oracle regarding its business needs, Servco selected an Oracle E-Business Suite R12.2.4 package (“Oracle EBS”) and an Oracle Data Integrator (“ODI”) platform. Id. ¶ 15. Oracle recommended that Servco engage a software implementer that was an Oracle Platinum Level Partner or higher. Id. ¶ 16. Heeding that advice, Servco contacted several software implementers, including SkyBridge, a Georgia corporation with its principal place of business in Marietta, Georgia. Id. ¶¶ 10, 17.

         Servco scheduled a three-day meeting with SkyBridge at Servco's headquarters in Hawaii on December 15, 16, and 17, 2014. Id. ¶ 19. In preparation for the meeting, Servco provided SkyBridge with information regarding its business and bill of materials.[2] Id. ¶ 19. On December 15, 2014, Servco personnel met with SkyBridge's Executive Vice President, Gurmeet Bhatia, as well as with Tim Broderick and Pramod Alluri of SkyBridge. Id. ¶¶ 19, 21. At this meeting, SkyBridge stated: “We are Oracle and PeopleSoft experts, ” and the company “live[s] and breathe[s] Oracle EBS and PeopleSoft.” Id. ¶ 21. SkyBridge also represented that many of its consultants had more than twelve years of experience, emphasized that it was equipped to handle Servco's complex business needs, and touted its purported status as an Oracle Platinum Partner. Id. Based on these representations, and, in particular, its Platinum status, Servco selected SkyBridge as its systems integration and software project manager. Id. ¶ 22.

         B. The Contract Documents[3]

         In January 2015, SkyBridge provided Servco with a draft Statement of Work (“SOW”). Declaration of John Harris ¶ 4.[4] The SOW sets forth SkyBridge's services and responsibilities, which included developing and maintaining the project plan, maintaining day-to-day project tasks, ensuring the quality and timely completion of tasks, configuring and developing the Oracle EBS application, and providing training. Compl. ¶¶ 32-33.

         Over the next several months, the parties negotiated the terms of the SOW and exchanged several drafts. Id. Harris Decl. ¶ 4-7. On May 5, 2015, SkyBridge claims that Mr. Bhatia emailed a final version of the SOW to Servco for signature. Declaration of Gurmeet S. Bhatia ¶ 15; see also Dkt. No. 27-3, SkyBridge Exh. A. Although Servco disputes that the May 5, 2015 version was the “final” version, each side agrees that the parties executed a final SOW on May 8, 2015. Harris Decl. ¶¶ 7-8; Bhatia Decl. ¶ 17; Compl. ¶ 30.

         The final SOW cross-references a “services agreement” or what the parties sometimes refer to as a “Master Services Agreement” (“MSA”):

This Statement of Work (“SOW”) is executed by and between SkyBridge Global Inc. (“Company” or “SkyBridge”) and Servco Pacific, Inc. (“Servco”) pursuant and subject to the terms and conditions of that certain Services Agreement [e.g., the MSA] executed contemporaneously with this SOW by the parties (the “Agreement”).

         Compl, Exh. A. The draft of the services agreement attached to Mr. Bhatia's May 5, 2015 email purports to govern the SOW and includes provisions relating to, among other things, the content of the SOW, the manner of billing and payment, the venue for any legal action arising out of the parties' contract, and the governing law for the interpretation and enforcement of the agreement. See Dkt. No. 27-5, SkyBridge Exh. C. Although SkyBridge asserts that a final version of this agreement was provided to Servco for signature, it is undisputed that no such agreement was ever signed by the parties. See Bhatia Decl. ¶¶ 14-15; Harris Decl. ¶¶ 5-9.

         C. Breach of SkyBridge's Obligations Under the SOW

         The SOW obligated SkyBridge to an approximate nine-month implementation schedule for the finance project and a concurrent twelve-month schedule for the distribution project. This translated to planned “go-live” dates of January 4, 2016 and April 25, 2016, respectively. Id. ¶ 35. SkyBridge also agreed that “[t]he project budget is not to exceed the above estimated amount [$1, 991, 100 for consulting services and $352, 406.25 for travel expenses] unless the scope and approach of the project is changed and approved by the steering committee.” Id. ¶ 36; Dkt. No. 39 at 14.

         According to Servco, throughout 2015, SkyBridge provided repeated assurances that its work was both on track and on budget. These promises proved to be empty ones, however, as SkyBridge was unable to meet either the implementation schedule or the budget set forth in the SOW, resulting in SkyBridge unilaterally changing the project timeline to reflect a January 6, 2017 go-live date. Id. ¶¶ 37, 42. When Servco complained, and with SkyBridge unable to meet the SOW deadlines, the parties selected a new September 12, 2016 go-live date, but with an agreement to evaluate the project's progress in April 2016 to assess the project's viability. Id. ¶¶ 44-45.

         In April 2016, Servco opted to terminate SkyBridge because of SkyBridge's repeated delays, inexperience, and inability to lead the project. Id. ¶ 46.

         II. Procedural Background

         On May 26, 2016, Servco filed a Complaint, alleging the following causes of action: (1) breach of contract (Count I); (2) breach of the implied covenant of good faith and fair dealing (Count II); (3) fraud (Count III); (4) rescission (Count IV); (5) unjust enrichment (Count V); and (6) declaratory relief (Count VI). Dkt. No. 1. Servco asserts subject matter jurisdiction based on diversity of citizenship pursuant to 28 U.S.C. § 1332(a)(2). Id. In addition, Servco asserts that venue is proper in the District of Hawaii pursuant to 28 U.S.C. § 1391(b) because a substantial part of the events or omissions giving rise to its claims occurred in this district. Id.

         On August 11, 2016, SkyBridge filed a Motion to Dismiss or Transfer Venue to Georgia Pursuant to Mandatory Forum Selection Clause, or, in the alternative, Motion to Dismiss for Failure to State a Claim (Dkt. No. 27). The Court elected to decide the motion without a hearing pursuant to Local Rule 7.2(d). Dkt. No. 44.

         STANDARD OF REVIEW

         I. Rule 12(b)(3)

         Federal Rule of Civil Procedure 12(b)(3) provides that a Court may dismiss a claim for improper venue. Once venue is challenged, the plaintiff has the burden of proving that venue is proper in this district. See Piedmont Label Co. v. Sun Garden Packing Co., 598 F.2d 491, 496 (9th Cir. 1979). In considering a Rule 12(b)(3) motion, the Court may consider facts outside the pleadings and need not accept the pleadings as true. Kukje Hwajae Ins. Co. v. M/V Hyundai Liberty, 408 F.3d 1250, 1254 (9th Cir. 2005). If there are contested factual issues, the Court is obligated to draw all reasonable inferences and resolve the factual conflicts in favor of the non-moving party or hold a pre-trial evidentiary hearing on the disputed facts. Murphy v. Schneider Nat'l, Inc., 362 F.3d 1133, 1138-39 (9th Cir. 2004).

         Pursuant to 28 U.S.C. § 1406(a), “[t]he district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought.” The Court has discretion in determining whether to transfer or dismiss an action for improper venue. See King v. Russell, 963 F.2d 1301, 1304 (9th Cir.1992).

         II. Rule 12(b)(6)

         Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss for failure to state a claim upon which relief can be granted. Pursuant to Ashcroft v. Iqbal, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” 555 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 570 (2007)). “[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Id.

         Under Rule 12(b)(6), review is generally limited to the contents of the complaint. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); Campanelli v. Bockrath, 100 F.3d 1476, 1479 (9th Cir. 1996). However, courts may “consider certain materials-documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice-without converting the motion to dismiss into a motion for summary judgment.” United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).

         DISCUSSION

         I. SkyBridge's ...


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