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HomeMy WebLinkAbout2002-1584 Civil PERFECT SOLUTIONS, INC., IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA Plaintiff v. Civil Action-Law PROTOLOGICS CORPORATION, Defendant NO. 02-1584 CIVIL TERM IN RE: DEFENDANT'S PRELIMINARY OBJECTIONS TO PLAINTIFF'S COMPLAINT BEFORE HOFFER, P.J., OLER and JUIDO, JJ. OPINION and ORDER OF COURT OLER, 1., December 29,2004. For disposition in this civil case-in which Perfect Solutions, Inc., has sued Protologics Corporation for damages arising out of a business relationship-are Defendant's preliminary objections to Plaintiffs complaint. 1 The preliminary objections being pursued by Defendant are, inter alia, in the nature of demurrers,2 of motions to strike for failure to conform to rule of court3 and inclusion of scandalous and impertinent matter,4 and a motion for a more specific complaint. 5 The preliminary objections were argued before the court on September 22, 2004. For the reasons stated in this opinion, the preliminary objections will be sustained in part and denied in part. 1 Defendant's Preliminary Objections to Plaintiffs Complaint, filed July 15, 2004 (hereinafter Preliminary Objections). 2 See id. at paras. 26-44. 3 See id. at paras. 3-18. 4 See id. at paras. 19-25. 5 See id. at paras. 45-48. STATEMENT OF FACTS The facts of the case, as averred in Plaintiff s complaint and for purposes of the preliminary objections at issue, are to the following effect:6 Plaintiff Perfect Solutions, Inc., is a corporation organized under the laws of Pennsylvania, with its principal place of business in Mechanicsburg, Cumberland County, Pennsylvania. 7 It is engaged in the business of providing healthcare management consultation services.8 Defendant Protologics Corporation is a corporation organized under the laws of Maryland, with offices in Baltimore, Maryland, and is engaged in the business of developing computer software. 9 At some point in time, Plaintiff became aware of Defendant's ProtoMED software program,lO and through, inter alios, Lawrence Walsh, an individual associated with Defendant,11 Defendant maintained that the ProtoMED program would create advantages for Plaintiff s clients.12 In particular, Defendant's agents and/or employees represented to Plaintiff, in some detail, the performance, state of development and implementation, the availability of user manuals, as well as customer support associated with its ProtoMED software program. 13 With respect to several components of the ProtoMED software program-the Claims Management Data Manager and the Electronic Medical Records features-Defendant misrepresented them as unique, when in fact they were substantially similar to existing competitors' software. 14 Additionally, after 6 In reciting these allegations, the court is in no way expressing an opinion as to their accuracy. 7 Plaintiffs Complaint at para. 1, filed June 15, 2004 (hereinafter Complaint). 8 Id. at para. 5. 9Id. at paras. 2, 6. 10 See id. at para. 7. 11 See id. at 8-9. 12Id. at para. 8. 13 Id. at para. 9. With respect to user manuals and customer support, each are critical to medical consultants and their customers. Id. at para. 10. 14 See id. at paras. 11-12. 2 Defendant terminated development of its Electronic Medical Records feature, Defendant promised to integrate another company's product, which it failed to adequately integrate. 15 Defendant made further misrepresentations with respect to its fiscal solvency, maintaining that it was a solvent, ongoing concern, when in fact it had "lost money" over each of the previous five years, and was, in reality, "judgment proof.,,16 As a result of the representations made to Plaintiff by Defendant, Plaintiff entered into a contract entitled "Independent Dealership Agreement.,,17 In the contract, Plaintiff purchased five licenses for the ProtoMED software from Defendant for a total of $55,000.00, which it then intended to resell.18 In reliance on the representations made by Defendant with respect to the state of development and implementation of the ProtoMED software, as well as the promised availability of user manuals and customer support, Plaintiff tasked existing employees, and retained additional employees, to develop and implement a sales plan for the newly acquired ProtoMED software licenses.19 Pursuant to one of the covenants of the contract, Defendant was to assist in the marketing of the ProtoMED software licenses by providing certain marketing materials at no additional charge; however, Defendant in fact offered the marketing materials only for an additional fee?O With respect to the user manuals promised by Defendant, no user manuals were ever provided; this omission made Plaintiff s potential clients wary and unwilling to purchase the software?1 The lack of user manuals necessitated 15Id. at para. 13. 16Id. at para. 14. 17 Id. at para. 18. 18 See id. at paras. 18,59. 19Id. at paras. 19-20. 20Id. at paras. 22-23. 21 Id. at para. 24. 3 greater dependence on telephone technical support-another contractual obligation-which was inadequate from the inception of the relationship and b . 1 22 ecame progressIve y worse. Additionally, the training Defendant was obligated to furnish under the contract was inadequately provided in that it simply identified the various menus/submenus of the software, and was not focused on simulated office scenarios.23 With respect to the sales support Defendant was obligated under the contract to provide, Defendant failed to provide timely answers to basic questions, which resulted in lost sales opportunities?4 Defendant also failed to provide updated software, and the installation instructions provided were incorrect, resulting in lost sales and wasted employee resources?5 Despite the foregoing, Plaintiff was able to secure a potential client for the ProtoMED software?6 However, the company (Oakwood Center) later terminated its agreement, due in part to protracted delay in the ProtoMED installation, which had been undertaken by Defendant because of problems associated with the software's installation.27 Additional reasons for the lost sale included Defendant's failure to provide timely telephone technical assistance-with some telephone calls going unanswered for months-as well as insufficient telephone technical support when rendered.28 During the period in question, Plaintiff regularly expressed its concerns to Defendant in a timely manner; however, in return, Plaintiff received only inadequate, sporadic and untimely responses.29 22 Id. at paras. 33-34. 23Id. at paras. 26-27. 24Id. at para. 28. 25Id. at para. 36. 26Id. at para. 37. 27Id. at paras. 37-42. 28Id. at paras. 43-44; see also paras. 52-54. 29Id. at para. 46. 4 Because of the foregoing, and after determining it could no longer ethically market the ProtoMED software, on October 24, 2001, Plaintiff requested a rescission of the contract from Defendant, and a refund of the licensing fees.30 The request was denied on October 31, 2001, with no attempt to rectify the problems.31 On April 2, 2002, Plaintiff initiated the instant action by filing a praecipe for writ of summons.32 A complaint was filed on June 15, 2004?3 The complaint consists of four counts. 34 Count one is a claim for rescission based upon fraudulent inducement,35 wherein Plaintiff requests the court to order the Defendant to return the $55,000.00 Plaintiff paid to Defendant for the five licenses under the contract,36 as well as to order the payment of $75,000.00 for damages incurred as a direct and proximate result of the fraudulent inducement. 37 Count two is a claim for fraud, in which Plaintiff avers Defendant made numerous intentional, material, and fraudulent misrepresentations, which were intended to, and did in fact, induce Plaintiff s reliance, to its detriment. 38 Plaintiff seeks "in excess of $130,000" in damages incurred as a direct and proximate result of its reliance on Defendant's misrepresentations. 39 Count three is a claim for negligent misrepresentation, which contends that, if any of the various misrepresentations made by Defendant were not intentional, they were then made 30 Id. at para. 47. 31 Id. at para. 48. 32 Praecipe for a Writ of Summons, filed April 2, 2002. 33 Complaint at para. 61; see generally id. 34 See generally id. 35Id. at paras. 63-66. 36 Id. at para. 65. 37Id. at para. 66. Plaintiff also seeks costs, prejudgment interests and any other relief deemed justified by the court in each of the four counts. Id.; see also id. at paras. 70, 74, 78. 38Id. at paras. 67-69. 39Id. at para. 70. At oral argument on September 22, 2004, counsel for both parties agreed that the entire damage figure claimed in the suit should be construed as "approximately" $130,000.00. 5 negligently, and that, therefore, Plaintiff should be awarded the damages sought based upon its reasonable reliance thereupon.4o Count four is a claim for breach of contract, in which Plaintiff alleges material breaches by Defendant of both express and implied obligations under the contract.41 Due to these breaches, Plaintiff was unable to market the licenses, and incurred additional consequential damages associated with the initial attempted marketing thereof, all of which were foreseeable.42 On July 15, 2004, Defendant filed eight preliminary objections.43 The first of these is entitled "Motion to Strike Pursuant to Pa. RC.P. No. 1028(a)(2) for Failure to Conform to Rule of Court (Failure to Attach Written Contract).,,44 Essentially, the Defendant asks the court to strike the Plaintiff s complaint for the Plaintiff s failure to attach the written contract, pursuant to Pennsylvania Rule of Civil Procedure lOl9(i).45 Defendant's second preliminary objection is entitled "Motion to Strike Pursuant to Pa. RC.P. No. 1028(a)(2) for Failure to Conform to Rule of Court (Lack of Specificity of Damages).,,46 Defendant asks the court to strike the Plaintiff s complaint for Plaintiff s alleged failure to state with sufficient specificity damages characterized as special, pursuant to Pennsylvania Rule of Civil Procedure lOl9(f), relating to the $75,000.00 consequential damages figure claimed by Plaintiff. 47 40Id. at paras. 71-74. 41 Id. at para. 76. 42Id. at paras. 75-78. 43 See generally Preliminary Objections. 44 Id. at pg. 2. 45Id. at paras. 3-8. 46Id. at pg. 2. 47Id. at paras. 9-18. 6 Defendant's third preliminary objection is entitled "Motion to Strike Scandalous and Impertinent Matter Pursuant to Pa. RC.P. No. 1028(a)(2).,,48 Defendant asserts that the material included in paragraphs 14 and 62 of Plaintiff s complaint, respectively relating to the fiscal history and solvency of Defendant (para. 14) and unsuccessful settlement attempts (para. 62), is irrelevant, immaterial and inappropriate, and, therefore, should be stricken. 49 Defendant's fourth preliminary objection is entitled "Demurrer (Count I - Rescission - Fraudulent Inducement).,,50 Defendant maintains that Plaintiff has failed to plead fraudulent inducement with sufficient specificity, as required by Pennsylvania Rule of Civil Procedure 10 19(b), and, therefore, asks the court to dismiss Count I of Plaintiff s complaint for legal insufficiency pursuant to Pennsylvania Rule of Civil Procedure 1028(a)(4).51 Defendant's fifth preliminary objection is entitled "Demurrer (Count II - Fraud - Intentional Misrepresentation).,,52 Defendant again claims Plaintiff has failed to plead with sufficient specificity, and, therefore, asks the court to dismiss Count II of Plaintiffs complaint. 53 Defendant's sixth preliminary objection is entitled "Demurrer (Count III - Negligent Misrepresentation).,,54 Defendant maintains that Plaintiff has failed to plead the elements of negligent misrepresentation, and, therefore, asks the court to dismiss Count III of Plaintiff s complaint. 55 48Id. at pg. 4. 49Id. at paras. 19-25. SOld. at pg. 5. slId. at paras. 26-30. 52Id. at pg. 5. 53Id. at paras. 31-35. 54Id. at pg. 6. 55Id. at paras. 36-39. 7 Defendant's seventh preliminary objection is entitled "Demurrer (Count IV - Breach of Contract).,,56 Defendant maintains that Plaintiff has failed to plead the elements of a claim for breach of contract, and again refers to Plaintiff s failure to attach a copy of the contract to the complaint. 57 Defendant therefore asks the court to dismiss Count IV for legal insufficiency pursuant to Pennsylvania Rule of Civil Procedure 1028( a)( 4).58 Defendant's eighth preliminary objection is entitled "Insufficient Specificity of Complaint.,,59 Defendant maintains that the complaint lacks sufficient specificity to apprise the Defendant of the issues being litigated and/or allow it to mount a defense to the allegations, and, therefore, asks the court to dismiss the complaint in its entirety. 60 In the alternative, Defendant asks the court to require the Plaintiff to file a second complaint which more specifically states its claims against the Defendant, pursuant to Pennsylvania Rule of Civil Procedure 1028(a)(3).61 DISCUSSION Statement of the Law Preliminary Objections. In reviewing a preliminary objection in the nature of a demurrer, which challenges the legal sufficiency of a complaint, the court "must accept all material facts set forth in the complaint[,] as well as all the inferences reasonably deducible therefrom as true." Powell v. Drumheller, 539 Pa. 484, 489, 653 A.2d 619, 621 (1995). A preliminary objection in the form of a demurrer should be sustained only when, "on the facts averred, the law says with certainty that no recovery is possible." Id. at 489, 653 A.2d at 621. If any lingering doubt 56Id. at pg. 7. 57Id. at paras. 40-43. 58Id. at para. 44. 59Id. at pg. 8. 60Id. at paras. 45-47. 61 Id. at para. 48. 8 remains as to whether to sustain the demurrer, "this doubt should be resolved in favor of [the plaintiff]." Presbyterian Medical Center v. Budd, 2003 P A Super. 323, ,-r 6, 832 A.2d 1066, 1070 (Pa. Super. Ct. 2003). Claims Based upon a Writing. Pennsylvania Rule of Civil Procedure lOl9(i) provides, in relevant part: "When any claim or defense is based upon a writing, the pleader shall attach a copy of the writing [to the pleading] "Pa. RC.P. lOl9(i). Special Damages. Pennsylvania Rule of Civil Procedure lOl9(f) provides, in relevant part, that "items of special damage shall be specifically stated." Pa. RC.P. lOl9(f). Where a party has failed to plead special damages with sufficient specificity in an original complaint, it is within the discretion of the trial court to allow the party to amend the pleadings to conform to the rule. See, e.g., General State Authority v. Lawrie and Green, 24 Pa. Commw. 407, 412-13, 356 A.2d 851, 855 (Pa. Commw. Ct. 1976). Scandalous and Impertinent Material. A party may preliminarily object to the inclusion of scandalous or impertinent matters in pleadings. Pa. RC.P. 1028(a)(2). In order for averments to be stricken as scandalous or impertinent, they must be "immaterial and inappropriate to the proof of the cause of action." Common Cause/Pennsylvania v. Commonwealth, 710 A.2d 108, 115 (Pa. Commw. Ct. 1998) (citing Dept. Env. Res. v. Peggs Rune Coal Co., 55 Pa. Commw. 312, 423 A.2d 765 (Pa. Commw. Ct. 1980)). Fraudulent Inducement/Intentional Misrepresentation. In order to prove a claim of fraudulent inducement or intentional misrepresentation, the plaintiff must aver with particularity:62 1) that a representation was made; 2) that it was material to the transaction; 3) that it was made falsely, with knowledge of its falsity or with recklessness regarding its truth or falsity; 4) that it was made with the intent of leading another to rely upon it; 5) that it was justifiably relied upon; and 6) that the resulting injury was proximately caused by the reliance. Bortz v. Noon, 556 Pa. 62 See Pa. RC.P. 1019(b). 9 489, 499, 729 A.2d 555, 560 (1999) (citing Gibbs v. Ernst, 538 Pa. 193, 207, 647 A.2d 882, 889 (1994)). The requirements of this rule are met when the plaintiff pleads facts sufficient to permit the defendant to prepare a defense. Foster v. Peat Marwick Main & Co., 138 Pa. Commw. 147, 156, 587 A.2d 382, 387 (Pa. Commw. Ct. 1991). If the complaint, when read in its entirely, clearly reflects an alleged course of conduct which is fraudulent or misrepresentative, the defendant has been provided with sufficient information to allow him or her to mount a defense, and, as a consequence, the rule's requirements are met. See id. Negligent Misrepresentation. A claim of negligent misrepresentation requires the plaintiff to show: "(1) a misrepresentation of a material fact; (2) the representor must either know of the misrepresentation, must make the misrepresentation without knowledge as to its truth or falsity[,] or must make the representation under circumstances in which he ought to have known of its falsity; (3) the representor must intend the representation to induce another to act on it; and (4) injury must result to the party acting in justifiable reliance on the misrepresentation." Gibbs v. Ernst, 538 Pa. 193, 210, 647 A.2d 882, 890 (1994) (citing Page Keaton, Prosser and Keaton on the Law of Torts 9 107 (5th ed. 1984)). Thus, a claim for negligent misrepresentation is distinguishable from a claim for intentional misrepresentation in that the actor need not know of the falsity of his or her statements to be liable for negligent misrepresentation; however, the actor must have failed to make a reasonable investigation into their truth. Id. (citing Restatement (Second) of Torts 9 552). Breach of Contract. "A cause of action for breach of contract [is] established by pleading (1) the existence of a contract, including its essential terms, (2) a breach of a duty imposed by the contract[,] and (3) resultant damages." CoreStates Bank, NA. v. Cutillo, 723 A.2d 1053, 1058 (Pa. Super. Ct. 1999) (citing Gen. State. Auth. v. Coleman Cable & Wire Co., 27 Pa. Commw. 385, 365 A.2d 1347 (Pa. Commw. Ct. 1976). Every term of the contract need not be stated 10 in complete detail; however, every element must be pleaded. Id. (citing Snaith v. Snaith, 282 Pa. Super. 450,422 A.2d 1379 (Pa. Super Ct. 1980)). Insufficient Specificity of Complaint. Pennsylvania Rule of Civil Procedure lOl9(a) provides: "The material facts on which a cause of action. . . is based shall be stated in a concise and summary form." Pa. RC.P. lOl9(a). In order to satisfy this requirement, the complaint must apprise the defendant of the nature and extent of the pleader's claim(s) so that the defendant has notice of what plaintiff intends to prove at trial and so that he or she may prepare to meet such proof with evidence of his or her own. See Weiss v. Equibank, 313 Pa. Super. 446, 453, 460 A.2d 271, 274-75 (Pa. Super. Ct. 1983). Pennsylvania trial courts are allowed a degree of discretion in the determination of the amount of detail required to satisfy the concise and summary requirement. See, e.g., Pike County Hotels Corp. v. Kiefer, 262 Pa. Super. 126, 134, 396 A.2d 677, 681 (Pa. Super. Ct. 1978) (citing United Refrigerator Co. v. Applebaum, 410 Pa. 210, 213, 189 A.2d 253, 255 (1963)). Application of Law to Facts Motion to Strike Pursuant to Pa. R.C.P No. 1 028 (a) (2) for Failure to Conform to Rule of Court (Failure to Attach Written Contract). Plaintiff has conceded its failure to attach the contract at issue to its complaint;63 however, it maintains that it attached a copy of the contract to its response to Defendant's preliminary objections.64 A review of the document filed suggests that the attachment may have been inadvertently omitted or separated from the filing. Plaintiff further maintains that copies of the contract were exchanged between the parties during the period between the filing of the praecipe for writ of summons 63 See Response to Preliminary Objections, at para. 5, filed July 28, 2004. 64 See id. 11 and the filing of the complaint. 65 The plaintiff will be directed to file a copy of the contract as a supplement to the complaint. Motion to Strike Pursuant to Pa. R.CP No. 1 028 (a) (2) for Failure to Conform to Rule of Court (Lack of Specificity of Damages). At oral argument held before the court on September 22, 2004, the parties agreed to a construction of Plaintiff s complaint whereby Plaintiff s claim for damages was to be understood as limited to approximately $130,000.00. This figure was to represent both the actual cost of the licenses ($55,000.00), and the special damages associated with the attempted marketing thereof ($75,000.00). Further detail as to the latter figure will be relegated to the discovery process. Motion to Strike Scandalous and Impertinent Matter Pursuant to Pa. R. CP No. 1 028 (a) (2). The representations alleged to have been made with respect to the fiscal character and solvency of the Defendant contained in paragraph fourteen of Plaintiff s complaint are, in the court's view, not properly characterized as scandalous or impertinent material, as they constitute information which a prudent contracting party might require before entering into an agreement. Furthermore, the information is directly relevant to the fraudulent inducement claim. Therefore, Defendant's motion to strike paragraph fourteen of Plaintiff s complaint will be denied. The averments contained in paragraph 62, relating to attempted settlement discussions, are properly characterized as impertinent, as Plaintiff has acknowledged.66 Therefore, this paragraph will be stricken. Demurrer (Count I - Rescission - Fraudulent Inducement), Demurrer (Count II - Fraud - Intentional Misrepresentation) and Demurrer (Count III - Negligent Misrepresentation). The complaint, when read as a whole, is sufficient to plead a course of conduct which was either intentionally or negligently fraudulent and/or 65Id. 66 Plaintiff essentially conceded the impertinence of paragraph 62 of its complaint in paragraph 22 of its Response to Preliminary Objections, filed July 28, 2004. 12 misleading.67 Therefore, Defendant has been sufficiently apprised of the nature of the claims against it to allow it to prepare a defense. See Foster, 138 Pa. Commw. at 156, 587 A.2d at 387. Under the particular facts of this case, the court is of the opinion the requirements of Pennsylvania Rule of Civil Procedure 10 19(b) have been satisfied and that the grant a demurrer under Pennsylvania Rule of Civil Procedure 1028( a)( 4) as to Counts I, II or III, would be improper. See id. Accordingly, the Defendant's demurrers relating to these counts will be denied. Demurrer (Count IV - Breach of Contract). In the court's view, the averments of Plaintiff s complaint have sufficiently set forth the elements of a claim for breach of contract. 68 The demurrer to Count IV of Plaintiff s complaint will therefore also be denied. Insufficient Specificity of Complaint. As noted supra, the court finds unpersuasive Defendant's objections as to the sufficiency of the complaint with respect to its specificity. The Defendant has, in fact, been adequately informed of the claims against it and has been provided with sufficient notice of those claims to allow it to prepare a proper defense. See Weiss, 313 Pa. Super. at 453, 460 A.2d at 275. Therefore, Defendant's preliminary objection based upon insufficient specificity of the complaint will be denied. Based upon the foregoing, the following order will be entered: ORDER OF COURT AND NOW, this 29th day of December, upon consideration of Defendant's preliminary objections to Plaintiff s complaint, and for the reasons stated in the accompanying opinion, it is ordered and decreed as follows: 1. Paragraph 62 of the complaint is stricken as impertinent; 2. Plaintiff s complaint will be deemed stricken without further order of court unless, within twenty days of the date of this order, Plaintiff files a 67 See generally Complaint. 68Id. 13 supplement to the complaint in the form of an exhibit consisting of the written contract between the parties upon which Plaintiff s claims are based, or a verified statement indicating that no written contract is involved or that a written contract is involved but unavailable to Plaintiff; 3. The phrase "in excess of $130,000" as it occurs variously in the complaint is to be construed as "approximately $130,000"; and 4. Defendant's preliminary objections are otherwise denied. BY THE COURT, s/ 1. Wesley Oler, Jr. 1. Wesley Oler, Jr., 1. Andrew W. Barbin, Esquire Andrew W. Barbin, P.C. 5020 Ritter Road, Suite 109 Mechanicsburg, P A 17055 Attorney for Plaintiff R. James Reynolds, Jr., Esquire Thomas, Thomas, Armstrong & Niesen 212 Locust Street, Suite 500 Post Office Box 9500 Harrisburg, P A 17108-9500 Attorney for Defendant 14 15 PERFECT SOLUTIONS, INC., IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA Plaintiff v. Civil Action-Law PROTOLOGICS CORPORATION, Defendant NO. 02-1584 CIVIL TERM IN RE: DEFENDANT'S PRELIMINARY OBJECTIONS TO PLAINTIFF'S COMPLAINT BEFORE OLER, J. ORDER OF COURT AND NOW, this 29th day of December, 2004, upon consideration of Defendant's preliminary objections to Plaintiff s complaint, and for the reasons stated in the accompanying opinion, it is ordered and decreed as follows: 1. Paragraph 62 of the complaint is stricken as impertinent; 2. Plaintiff s complaint will be deemed stricken without further order of court unless, within twenty days of the date of this order, Plaintiff files a supplement to the complaint in the form of an exhibit consisting of the written contract between the parties upon which Plaintiff s claims are based, or a verified statement indicating that no written contract is involved or that a written contract is involved but unavailable to Plaintiff; 3. The phrase "in excess of $130,000" as it occurs variously in the complaint is to be construed as "approximately $130,000"; and 4. Defendant's preliminary objections are otherwise denied. BY THE COURT, 1. Wesley Oler, Jr., 1. Andrew W. Barbin, Esquire Andrew W. Barbin, P.C. 5020 Ritter Road, Suite 109 Mechanicsburg, P A 17055 Attorney for Plaintiff R. James Reynolds, Jr., Esquire Thomas, Thomas, Armstrong & Niesen 212 Locust Street, Suite 500 Post Office Box 9500 Harrisburg, P A 17108-9500 Attorney for Defendant