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Incites Investment Ltd. v. PQIL LLC

United States District Court, E.D. Michigan, Southern Division

August 18, 2017

PQIL LLC a/k/a PROQUEST, Defendant.



         This is a diversity case in which plaintiff brings four causes of action against defendant for breaching the two agreements defendant had with a third party. Before the Court is defendant's motion to dismiss the complaint for failure to state a claim. (Dkt. 13.) For the reasons set forth below, plaintiff's contract claims may proceed and its open account and quantum meruit claims are dismissed.

         I. Background

         Because the case is before the Court on defendant's motion to dismiss, the following background is drawn from plaintiff's complaint accepting all allegations as true and in the light most favorable to plaintiff, unless otherwise noted.

         Defendant is engaged in the business of delivering information, primarily to libraries worldwide, for use by researchers. (Dkt. 1 at 2.) Defendant contracted with Netcopy-a third party that has since gone out of business-to assist with delivering International Publishing Corporation's (“IPC's”) music magazine archives to the education market (the “Music Project”). (Id. at 3.) On or about July 9, 2012, Netcopy and defendant entered into a Master Services Agreement (“MSA”). (Id.) In accordance with the MSA, Netcopy and defendant entered into a specific Statement of Work, which set the terms for the work to be performed in connection with the Music Project. (Id.) Under the Statement of Work, Netcopy was to scan and process the original magazines for defendant's use in creating the required content. (Id.)

         While performing the services, Netcopy noticed that the original source material was in poor condition. (Dkt. 1 at 4.) Netcopy thus produced a sample batch for defendant to review. (Id.) After receiving the sample batch, defendant consented to Netcopy proceeding with the contracted work. (Id.) Although the scanned material was delivered to defendant at or in excess of specification, the product often reflected the known poor condition. (Id.) Defendant informed Netcopy that it would audit the Music Project scans, thereby putting the project on hold. (Id.) As of the time the project was suspended, Netcopy had scanned, processed, and delivered 346, 377 pages of content-work valued at £225, 145.05 pursuant to the MSA and Statement of Work. (Id.) Defendant has paid £117, 000, so there remains a £108, 145.05 balance, which has an approximate U.S. Dollar value of $140, 605.87. (Id.)

         On July 18, 2013, defendant and Netcopy entered into a second agreement, by email exchange, to scan approximately 600, 000 images related to a different archive of IPC (the “Country Life” project). (Dkts. 1 at 6, 1-3.) Netcopy scanned the source material and invoiced defendant for £36, 437.76-approximately $47, 374.92 in U.S. Dollar value. Defendant made no payments toward this outstanding balance. (Dkt. 1 at 6.)

         In May 2014, Netcopy became insolvent and its assets, including the indebtedness owing from the defendant, was placed with a receiver for liquidation under the laws of the United Kingdom. (Dkts. 1 at 5, 13 at 13.) The liquidators sold and assigned the balances owing from defendant to Half Baked Ideas Ltd. (Dkt. 1 at 5.) On July 24, 2015, Half Baked Ideas assigned the rights to the debt to plaintiff. Plaintiff now holds the right to any claims Netcopy may have related to these transactions. (Id.)

         Plaintiff initiated this action with the following counts: two claims for breach of contract (the “Music Project” and “Country Life” contracts, individually), an action for open account, and a claim for quantum meruit. (See Dkt. 1.) Defendant moved to dismiss all counts under Rule 12(b)(6) of the Federal Rules of Civil Procedure.

         II. Standard

         When deciding a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the Court must “construe the complaint in the light most favorable to the plaintiff and accept all allegations as true.” Keys v. Humana, Inc., 684 F.3d 605, 608 (6th Cir. 2012). “To 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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A plausible claim need not contain “detailed factual allegations, ” but it must contain more than “labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

         III. Analysis

         As set forth below, plaintiff is precluded from bringing Counts III and IV because there are express contracts between the parties. Thus, whether defendant's motion to dismiss is granted in its entirety turns on whether Counts I and II are sufficiently pleaded.

         “A party claiming a breach of contract must establish (1) that there was a contract, (2) that the other party breached the contract and, [sic] (3) that the party asserting breach of contract suffered damages as a result of the breach.” Dunn v. Bennett, 303 Mich.App. 767, 774 (2013) (quoting Miller-Davis Co. v. Ahrens Constr., Inc., 296 Mich.App. 56, 71 (2012)). It is undisputed that contracts govern both the “Music Project” and “Country Life” project. Thus, for defendant to prevail on its motion to dismiss, defendant must demonstrate that plaintiff fails to sufficiently plead that defendant breached the alleged contracts and that the breaches caused damage to plaintiff.

         a. Count I: The breach of contract claim as to the Music Project is sufficiently pleaded

         Defendant argues that “[b]ecause Netcopy failed to scan and convert all [600, 000 images], defendant in no way breached the agreement by failing to pay for services that were never performed.” (Dkt. 13 at 17.) According to defendant, plaintiff failed to state a claim because Netcopy failed to convert the 346, 377 images in accordance with the contract's specifications. (Id. at 16.) Defendant also argues that it complied with the agreement because the Music ...

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