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Pensford Financial Group, LLC v. 303 Software, Inc.

United States District Court, D. Colorado

May 10, 2019

PENSFORD FINANCIAL GROUP, LLC, Plaintiff,
v.
303 SOFTWARE, INC., MATTHEW JAFFE, and DAMON DELGADO, Defendants.

          ORDER

          RAYMOND P. MOORE United States District Judge.

         This matter is before the Court on Defendants' motion to dismiss six of the eight causes of action asserted against them by Plaintiff. (ECF No. 20.) The motion has been fully briefed. (ECF Nos. 28, 29.) The Court has reviewed the pleadings, case file, and applicable law. For the reasons stated below, the motion is granted in part and denied in part.

         I. LEGAL STANDARD

         In evaluating a motion to dismiss under Fed.R.Civ.P. 12(b)(6), a court must accept as true all well-pleaded factual allegations in the complaint, view those allegations in the light most favorable to the plaintiff, and draw all reasonable inferences in the plaintiff's favor. Brokers' Choice of Am., Inc. v. NBC Universal, Inc., 757 F.3d 1125, 1136 (10th Cir. 2014); Mink v. Knox, 613 F.3d 995, 1000 (10th Cir. 2010). The complaint must allege a “plausible” right to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 569 n.14 (2007); see also Id. at 555 (“Factual allegations must be enough to raise a right to relief above the speculative level.”). Conclusory allegations are insufficient, Cory v. Allstate Ins., 583 F.3d 1240, 1244 (10th Cir. 2009), and courts “are not bound to accept as true a legal conclusion couched as a factual allegation, ” Twombly, 550 U.S. at 555 (quotation omitted).

         To determine whether a claim is plausible, a court considers “the elements of the particular cause of action, keeping in mind that the Rule 12(b)(6) standard doesn't require a plaintiff to set forth a prima facie case for each element.” George v. Urban Settlement Servs., 833 F.3d 1242, 1247 (10th Cir. 2016) (quotation omitted). However, if the allegations “are so general that they encompass a wide swath of conduct, much of it innocent, ” the plaintiff has not “nudged [its] claims across the line from conceivable to plausible.” Khalik v. United Air Lines, 671 F.3d 1188, 1191 (10th Cir. 2012) (quotation omitted).

         II. BACKGROUND

         For present purposes, the Court accepts as true the allegations in the complaint. Plaintiff is an interest rate advisory firm that wanted to offer its clients a way to digitally and efficiently manage their commercial loan portfolios. (ECF No. 2 at ¶ 1, 11.) It began soliciting bids from software developers in August 2017. (Id. at 1.) Defendant 303 Software, Inc., develops custom web and mobile applications for businesses. (Id. at ¶ 12.) Defendants submitted a proposal to Plaintiff in September 2017, stating that they could complete the project within six months and at a cost lower than the other bids. (Id. at ¶ 1.) The proposal contemplated a four-phase approach that would cost between $200, 000 and $400, 000. (Id. at ¶¶ 17, 19.) Following weeks of negotiations, Defendants sent Plaintiff a revised proposal with a total cost of $537, 000. (Id. at ¶ 27.) Further negotiations ensued, and in November 2017 the parties executed two agreements-a Master Services Agreement (“MSA”) and a Statement of Work (“SOW”). (Id. at ¶ 36.)

         In December 2017, the first phase was completed, and Plaintiff authorized moving forward with the next phase of the project. (Id. at ¶ 42.) In March 2018, Defendants informed Plaintiff they had fallen behind schedule, and by July 2018, both parties recognized that the project would not be completed by September 2018. (Id. at ¶¶ 44, 51.) Defendants proposed a Second Statement of Work (“SSOW”), assuring Plaintiff that it would be completed under budget and without further delays. (Id. at ¶ 56.) Plaintiff relied on these assurances when the parties executed the SSOW. (Id. at ¶ 57.)

         In October 2018, Defendants informed Plaintiff that they could not meet that month's deadline and demanded additional payments to proceed with the project. (Id. at ¶ 64.) After failed attempts to negotiate terms on how to proceed, Plaintiff provided written notice of Defendants' breach of the MSA and SOW. (Id. at ¶ 73.) Defendants failed to cure the breach within thirty days. (Id. at ¶ 74.) By November 2018, Plaintiff had made payments of more than $600, 000 for amounts owed under the SOW and SSOW, yet it received no deliverables from Defendants. (Id. at ¶¶ 75, 76.)

         In December 2018, Plaintiff brought this lawsuit, asserting eight causes of action against Defendants. The first three are fraudulent inducement claims based on Defendants' various representations that caused Plaintiff (1) to enter the MSA and SOW, (2) to authorize moving forward with the development phase, and (3) to enter the SSOW. Plaintiff also asserts causes of action for (4) breach of contract, (5) violations of the Colorado Consumer Protection Act (“CCPA”), (6) breach of good faith, (7) unjust enrichment, and (8) negligent misrepresentation. Defendants have moved to dismiss all but the breach of contract and breach of good faith claims. The gist of the non-contractual claims is that Plaintiff was harmed because it relied on Defendants' representations about their capabilities and their assurances about the timeline and costs for completing the project. The parties agree that Colorado law governs this dispute.

         III. DISCUSSION

         A. Tort Claims

         Defendants argue that Plaintiff's fraudulent inducement and negligent misrepresentation claims are barred by the integration clause in the MSA and the economic loss rule. The Court disagrees.

         1. Integ ...


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