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BullsEye Telecom, Inc. v. BroadSoft, Inc.

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

July 31, 2018

BullsEye Telecom, Inc., Plaintiff,
v.
BroadSoft, Inc., Defendant.

          ORDER DENYING DEFENDANT'S MOTION TO DISMISS

          Victoria A. Roberts United States District Judge

         I. Introduction

         BullsEye is a telecommunications company looking to expand its digital voice services. To further this goal BullsEye licensed digital voice software from BroadSoft in 2006. This case arises from a contractual dispute over BroadSoft's ability to engage with BullsEye's end users.

         BullsEye alleges three counts: breach of contract, tortious interference with contractual relations, and tortious interference with economic expectancy. BroadSoft moves the court to dismiss the three counts pursuant to Rule 12(b)(6). BroadSoft argues the licensing agreement between the parties does not prohibit solicitation of BullsEye's end users. Oral argument was heard on July 23, 2018.

         While BullsEye fails to plead the required elements for Count I, it provided sufficient factual information in its Response to BroadSoft's Motion. The Court will allow an amended complaint for Count I and deny Defendant's Motion to Dismiss without prejudice. However, BullsEye does not sufficiently allege facts to satisfy Count II; the Court grants Defendant's Motion to Dismiss. In Count III, BullsEye does set forth sufficient allegations.

         Thus, for the reasons below, the Motion is denied without prejudice for Count I, granted for Count II, and dismissed with prejudice for Count III.

         II. Factual Background

         The License Agreement between BullsEye and BroadSoft, attached to the Amended Complaint, governs the parties' relationship. The License Agreement does not explicitly bar BroadSoft from selling directly to third parties, even BullsEye's own customers.

         In June 2017 BullsEye met with Tractor Supply Company (TSC) to pitch an expansion of TSC's digital voice services. BullsEye has provided the majority of TSC's telecommunication needs for the past nine years. At the meeting, TSC informed BullsEye that BroadSoft also bid on its expansion project. BullsEye wrote BroadSoft an August 2017 letter to express its dismay at BroadSoft's alleged interference with its end user. In reply, BroadSoft reminded BullsEye that the Licensing Agreement did not prohibit its interactions with TSC.

         Soon after, TSC selected BroadSoft to provide it with digital voice services. Further, TSC eventually transitioned almost all of its business to BroadSoft. In response to BullsEye's letter and TSC's actions, BroadSoft offered a refund to compensate for BullsEye's loss of business. However, BullsEye dismissed the offer as a minuscule portion of the true damage it suffered and filed this suit to recover damages.

         The License Agreement mandates that any breach of contract action is governed by New York law. Michigan law applies to the two tortious interference claims.

         III. Legal Standard

         A motion to dismiss under Fed.R.Civ.P. 12(b)(6) tests the legal sufficiency of the complaint. RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1134 (6th Cir. 1996). A court must “construe the complaint in the light most favorable to the plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of the plaintiff.” DirecTV, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007). A complaint must contain sufficient factual matter to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is plausible on its face “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556).

         Fed. R. Civ. P. 15(a)(2) allows a party to amend its pleading with the court's leave. A court “should freely give leave when justice so requires.”

         IV. Breach of Contract

         To sufficiently plead breach of contract under New York law, the plaintiff must allege the existence of a contract, plaintiff's performance of its obligation, breach of the contract by defendant, and damage as a result. Campo v. 1st Nationwide Bank, 857 F.Supp. 264, 270 E.D.N.Y. 1994). In its Amended Complaint, BullsEye fails to specify how BroadSoft breached; the Amended Complaint simply alleges that BroadSoft “has breached its agreement with BullsEye.” This is conclusory. And, BroadSoft's interference - selling to BullsEye's end users - clearly does not violate any express provision in the License Agreement. Only in its Response to BroadSoft's Motion does BullsEye allege a specific form of breach: breach of the covenant of good faith.

         A covenant of good faith is inherent in all New York contracts. Aventine Inv. Mgt. v. Canadian Imperial Bank of Commerce, 697 N.Y.S.2d 128, 130 (1999); Dalton v. Educ. Testing Serv., 639 N.Y.S.2d 977 (1995). A breach of the covenant is “a theory of contractual breach … rather than a separate cause of action, ” if the two claims are ...


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