Talkdesk, Inc. v. DM Trans, LLC d/b/a Arrive Logistics ( 2024 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
TALKDESK, INC., )
)
Plaintiff, ) C.A. No. N23C-08-005 MAA CCLD
)
v. )
)
DM TRANS, LLC d/b/a ARRIVE )
LOGISTICS, )
)
Defendant. )
)
Submitted: February 9, 2024
Decided: May 31, 2024
Upon Plaintiff’s Motion to Dismiss:
GRANTED in Part, and DENIED in Part.
MEMORANDUM OPINION
Peter H. Kyle, Esquire, and Daniel P. Klusman, Esquire, of DLA PIPER LLP,
Wilmington, Delaware, and Matthew J. Jacobs, Esquire (Argued), Jessica S. Heim,
Esquire, and Emily Margolis, Esquire, of DLA PIPER LLP, San Francisco,
California, Attorneys for Plaintiff/Counterclaim Defendant Talkdesk, Inc.
Rudolf Koch, Esquire, Elizabeth J. Freud, Esquire, and Nicholas F. Mastria, Esquire,
of RICHARDS, LAYTON & FINGER P.A., Wilmington, Delaware, and Michael
T. Jones, Esquire (Argued), and Ashley V. Hart, Esquire, of HOLLAND & KNIGHT
LLP, Boston, Massachusetts, Attorneys for Defendant/Counterclaim Plaintiff DM
Trans, LLC (d/b/a Arrive Logistics).
Adams, J.
1
I. INTRODUCTION
Talkdesk, Inc. (“Talkdesk”) entered into a contract with DM Trans, LLC d/b/a
Arrive Logistics (“Arrive”) wherein Talkdesk would provide communication
services for Arrive’s use in conducting Arrive’s business. Arrive alleges that it
indicated its needs, prompted primarily by the COVID-19 pandemic, to which
Talkdesk repeatedly affirmed that Talkdesk’s products could meet those needs.
Talkdesk and Arrive subsequently entered into a contract outlining Talkdesk’s
services. After multiple years of Arrive informing Talkdesk of problems with the
products and requesting improvements, Arrive terminated the contract and asserts
several claims, via Counterclaims, against Talkdesk. Talkdesk filed a Motion to
Dismiss Arrive’s Counterclaims. For the reasons that follow, the Motion to Dismiss
is GRANTED in Part, and DENIED in Part.
II. FACTS1
A. THE PARTIES
Plaintiff/Counterclaim Defendant Talkdesk is a Delaware corporation with its
headquarters in San Francisco, California.2 Talkdesk is a cloud-based call-center
software provider.3
1
The facts are drawn from Defendant’s Answer, Affirmative Defenses and Counterclaims to
Plaintiff’s Complaint. D.I. 4 [hereinafter “Countercl.”]. The Court acknowledges that Defendant
is also Counterclaim Plaintiff, but for clarity, the Court will continue to refer to Talkdesk as
Plaintiff and Arrive as Defendant.
2
Countercl. ¶ 1.
3
Id. ¶ 6.
2
Defendant/Counterclaim Plaintiff, Arrive, has its principal place of business
in Austin, Texas.4 Arrive is “a leading North American freight broker that provides
transportation logistics services to parties seeking to ship goods by utilizing Arrive’s
network of third-party carriers.”5 Arrive has received several awards and high
recognition from its customers for excellent customer service.6
B. ARRIVE’S BUSINESS OPERATIONS
Arrive has over 2,000 employees, 6,000 customers, 38,000 active motor
carriers, and about 70,000 motor carriers under contract, making it one of the largest
freight brokerage firms in the industry.7 The Business Development and Carrier
Sales teams work in a shared space—a total of approximately 1500 employees.8 The
employees make and receive a high number of phone calls with customers, shippers,
and motor carriers.9 The effectiveness of Arrive’s entire business relies on efficient
and reliable communication methods so as to avoid the possibility of a competitor
taking the opportunity from Arrive.10 “Telephone usage, along with Arrive’s
industry leading proprietary transportation management system software and related
applications, is the heartbeat of Arrive’s core operations.”11
4
Id. ¶ 2.
5
Id. ¶ 5.
6
Id.
7
Id. ¶ 7.
8
Id. ¶¶ 8–9.
9
Id. ¶¶ 9–15.
10
Id. ¶¶ 10–12.
11
Id. ¶ 16.
3
C. THE IMPACT OF COVID ON ARRIVE
When the COVID-19 pandemic forced businesses to transition to remote
work, Arrive struggled because of its heavy reliance on its “telephony systems to
carry out their necessary work.”12 The company’s first solution, use of personal
phones, was insufficient because of security concerns, confidentiality concerns, less
reliable and clear service, and an inability to track key performance metrics.13 Arrive
determined it would instead need to find a vendor that could handle a high volume
of inbound and outbound calls.14 Arrive created a 150-question Request for
Information (“RFI”) for potential vendors to indicate their capacity.15
In late-April 2020, Talkdesk responded affirmatively to every question on the
RFI and the two companies began to discuss solutions and pricing. 16 Over the next
few months, on at least ten occasions, members of both companies engaged in email
and virtual meetings to explore Talkdesk’s products and how those products could
suit Arrive’s needs.17 Arrive clearly described the capabilities it would need for its
business, all of which Talkdesk’s representatives assured Arrive it could provide.18
Arrive received other vendor proposals, but based on Talkdesk’s assurances of its
12
Id. ¶ 17.
13
Id. ¶ 18.
14
Id. ¶ 19.
15
Id. ¶ 20.
16
Id. ¶¶ 21–22.
17
Id. ¶¶ 23–28, 83.
18
Id. ¶¶ 28–31, 84–85.
4
ability to meet Arrive’s needs, Arrive chose Talkdesk as Arrive’s cloud-based
telephony provider.19
D. THE MASTER SUBSCRIPTION AGREEMENT
On approximately June 30, 2020, Arrive and Talkdesk entered into the Master
Subscription Agreement (the “Agreement” or “MSA”).20 The Agreement contained
multiple terms outlining Talkdesk’s services including a “minimum service level
commitment.”21 The Agreement provided for termination in the event either party
“materially breached this agreement and such breach remains uncured at the
expiration of such thirty (30) day period[.]”22 Arrive also insisted in Schedule A of
the Agreement (the “Order Form”) that Arrive may terminate the Agreement with
written notice to Talkdesk within 30 days “[i]n the event (a) Talkdesk Service fails
to achieve 98% Availability for three consecutive months, or (b) Talkdesk Service
is unavailable for more than 24 consecutive hours for two consecutive months[.]”23
E. TALKDESK’S ALLEGED BREACH OF THE AGREEMENT
Arrive learned early on that Talkdesk’s product was “not at all suitable for the
needs of” Arrive.24 Arrive’s employees dealt with a variety of issues with
Talkdesk’s services including connection failures, audio issues, stuck status, lack of
19
Id. ¶ 31.
20
Id. ¶ 32.
21
Id. ¶¶ 33–34.
22
Id. ¶¶ 35–36.
23
Id. ¶ 37.
24
Id. ¶ 38.
5
call-waiting and call transfer functions, lack of hard phone (SIP device)
functionality, and inaccurate usage data.25 These issues amounted to a failure to
“achieve 98% Availability for any month during the parties’ relationship” as was
required by the Agreement.26 Arrive employees stopped using Talkdesk products
altogether and returned to using their personal phones for work.27 Arrive “promptly
and consistently raised these and other issues with Talkdesk,” but Talkdesk “failed
to address or cure these problems.”28 Talkdesk instead “responded by indifference,
dragging their feet, ignoring the problems or trying to blame Arrive for the issues.”29
Arrive eventually learned from Talkdesk’s own employees that “Talkdesk had
sold Arrive the wrong solution for Arrive’s needs in order to license [Talkdesk’s]
higher-priced Professional Plus solution and lock in a more lucrative contract.”30
Talkdesk employees on multiple occasions admitted that Talkdesk’s products were
not suited for Arrive’s needs.31 These employees’ allegations were supported by an
independent consultant retained by Arrive, “who advised Arrive that Talkdesk had
indeed oversold them on Talkdesk’s most expensive solution designed for call
centers (not a brokerage operation like Arrive operates), lacking the features and
25
Id. ¶ 39.
26
Id. ¶ 40.
27
Id. ¶ 41.
28
Id. ¶¶ 42–43.
29
Id. ¶ 43.
30
Id. ¶ 44.
31
Id. ¶¶ 45–47.
6
functionality that Arrive did need, and including at a significant cost features that
Arrive would never use.”32
Over the course of the parties’ relationship, Arrive has paid nearly $6.5
million to Talkdesk.33 On July 12, 2023, Arrive sent Talkdesk a letter terminating
the Agreement.34 The letter served as thirty days’ notice, and Arrive continued to
pay Talkdesk for the costs and fees incurred up to August 12, 2023.35
III. PROCEDURAL HISTORY
On August 1, 2023, Talkdesk filed a Complaint alleging four counts: (1)
Anticipatory Breach of Contract;36 (2) Breach of Contract;37 (3) Attorneys’ Fees;38
and (4) Declaratory Judgment.39 On August 28, 2023, Arrive filed an Answer,
Affirmative Defenses and alleged eight Counterclaims: (1) Breach of Contract;40 (2)
Declaratory Judgment—Termination was Valid;41 (3) Breach of Covenant of Good
Faith and Fair Dealing;42 (4) Unconscionability;43 (5) Fraud in the Inducement;44 (6)
32
Id. ¶ 48.
33
Id. ¶ 49.
34
Id. ¶ 50.
35
Id.
36
Compl. ¶¶ 27–30.
37
Id. ¶¶ 31–34.
38
Id. ¶¶ 35–37.
39
Id. ¶¶ 38–41.
40
Countercl. ¶¶ 52–56.
41
Id. ¶¶ 57–62.
42
Id. ¶¶ 63–70.
43
Id. ¶¶ 71–79.
44
Id. ¶¶ 80–94.
7
Unjust Enrichment;45 (7) Breach of the Implied Warranty of Fitness for a Particular
Purpose;46 and (8) Violation of California’s Unfair Competition Law.47 On
September 18, 2023, Talkdesk filed a Motion to Dismiss all eight of Arrive’s
Counterclaims for failure to state a claim.48 Briefing concluded on December 6,
2023. The Court held oral argument on February 9, 2024, dismissed Counterclaim
(3), and reserved decision on all other Counterclaims.
IV. STANDARD OF REVIEW
The law governing a motion to dismiss for failure to state a claim pursuant to
Superior Court Civil Rule 12(b)(6) is well settled. A court will dismiss for failure
to state a claim “only if ‘it appears with reasonable certainty that the plaintiff could
not prove any set of facts that would entitle him to relief.’”49 The court must “‘accept
all well-pleaded factual allegations in the Complaint as true and draw all reasonable
inferences in favor of the plaintiff.’”50 “[E]ven vague allegations are ‘well-pleaded’
if they give the opposing party notice of the claim[.]”51 The court, however, need
45
Id. ¶¶ 95–97.
46
Id. ¶¶ 98–103.
47
Id. ¶¶ 104–107.
48
D.I. 6.
49
Doe v. Cahill, 884 A.2d 451, 458 (Del. 2005) (quoting Ramunno v. Cawley, 705 A.2d 1029,
1034 (Del. 1998)).
50
Stillwater Mining Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, P.A., 289 A.3d 1274, 1282
(Del. 2023) (quoting City of Fort Myers Gen. Emps.’ Pension Fund v. Haley, 235 A.3d 702, 716
(Del. 2020)).
51
Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (citing Precision Air v. Standard
Chlorine of Del., 654 A.2d 403, 406 (Del. 1995)).
8
not “accept as true conclusory allegations ‘without specific supporting factual
allegations.’”52
V. ANALYSIS
A. BREACH OF CONTRACT
1. The Parties’ Contentions
Talkdesk asserts that breach of contract should be dismissed for two reasons:
(1) “Arrive does not allege that Talkdesk violated any provision of the MSA” and
(2) “Arrive concedes that it did not follow the MSA’s notice requirements even if
Talkdesk had breached the MSA.”53 As to the first issue, Talkdesk notes that the
only challenged provision is that Talkdesk failed to provide 98% Availability, which
is not supported by the pleadings.54 As to the second issue, Talkdesk argues that
even if Talkdesk breached the Agreement, Arrive failed to follow any of the
Agreement’s three required notice provisions of which compliance are “conditions
precedent to Arrive’s ability to receive any benefit under any of these three
provisions[.]”55 Talkdesk asserts that these notice provisions allow Talkdesk an
opportunity to cure before Arrive can terminate the contract.56
52
In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 168 (Del. 2006) (In re Santa Fe Pac.
Corp. S’holder Litig., 669 A.2d 59, 65–66 (Del. 1995)).
53
Pl.’s Br. in Supp. of Pl.’s Mot. to Dismiss [hereinafter “Pl.’s Br.”] at 20.
54
Id. at 21–23.
55
Id. at 23–24 (referring to Compl. Ex. 1, Master Subscription Agreement [hereinafter “The
Agreement”], § 4(a), Schedule A Order Form, and § 13.3 of the Agreement).
56
Id. at 24–25.
9
Arrive disputes these allegations by detailing the issues it was having with
Talkdesk and how Talkdesk failed to remedy them, including, but not limited to,
issues that indicated Talkdesk failed to achieve “98% Availability.”57 As to the
notice requirements, Arrive argues that “Arrive was in constant communication with
Talkdesk regarding the technical issues and lack of availability, giving Talkdesk
both notice and the opportunity to cure.”58 Arrive also argued the notice requirement
should be excused because compliance was “futile.”59
Talkdesk emphasizes that to sufficiently plead a breach of contract, Arrive
must plead what specific contract provision was breached, and Arrive failed to do
so. Instead, Arrive only “tosse[d] against the wall a series of alleged failures by
Talkdesk but none what [sic] is required under the contract itself.”60 The only
provision Talkdesk credits is that Talkdesk failed to achieve 98% Availability, but
argues even that fails because “Availability” is a defined term and Arrive did not
plead a failure under the definition.61 Talkdesk also notes that the facts pled do not
establish “futility.”62
57
Def.’s Opp’n to Pl.’s Mot. to Dismiss [hereinafter “Def.’s Opp’n”] at 23–26.
58
Id. at 26–27 (citing Countercl. ¶¶ 42–49 as examples).
59
Id. (quoting Optical Air Data Sys., LLC v. L-3 Commc’ns Corp., 2019 WL 328429, at *4 (Del.
Super. Jan. 23, 2019)).
60
Pl.’s Reply in Supp. of Pl.’s Mot. to Dismiss [hereinafter “Pl.’s Reply”] at 17.
61
Id. at 18.
62
Id. at 19.
10
2. Arrive has sufficiently pled a limited breach of contract claim, but only
as to “Availability.”
To survive a motion to dismiss a breach of contract, Arrive must allege “(1)
the existence of a contract; (2) that the contract was breached; and (3) damages
suffered as a result of the breach.”63 Arrive must “demonstrate substantial
compliance with all provisions of the contract” to recover damages.64 The court, at
the motion to dismiss stage, will not “choose between two differing reasonable
interpretations of ambiguous provisions.”65 Dismissal is “‘proper only if
[Talkdesk’s] interpretation is the only reasonable construction as a matter of law.’”66
Arrive must establish an “express contractual obligation that was breached”
to proceed on a breach of contract claim.67 For example, in Ryan v. Buckeye
Partners, L.P.,68 the Court of Chancery dismissed a breach of contract claim where
the plaintiff failed to cite any provision of the contract that was purportedly
breached.69 The court noted that “[t]his failure is not a technical foot fault; it reflects,
63
Khushaim v. Tullow Inc., 2016 WL 3594752, at *3 (Del. Super. June 27, 2016) (citing
eCommerce Indus., Inc. v. MWA Intel. Inc., 2013 WL 5621678, at *13 (Del. Ch. Sept. 30, 2013)).
64
Sorantino v. Newton, 2019 WL 2355018, at *1 (Del. Super. June 4, 2019) (citing Shah v. Am
Sols., Inc., 2012 WL 1413593, at *2 (Del. Super. Mar. 8, 2012)).
65
VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 615 (Del. 2003) (citing Vanderbilt
Income & Growth Assocs. v. Arvida/JMB Managers, Inc., 691 A.2d 609, 613 (Del. 1996)).
66
Khushaim, 2016 WL 3594752, at *3 (quoting Vanderbilt Income & Growth Assocs., 691 A.2d
at 613) (emphasis in original).
67
Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 901 A.2d 106, 116 (Del. 2006).
68
2022 WL 389827 (Del. Ch. Feb. 9, 2022).
69
Id. at *6.
11
instead, a fundamental failure to give the [defendants] fair notice of the claim
asserted against them[.]”70
The Court holds that Arrive fails to allege specific contractual provisions or
obligations that Talkdesk breached, with the exception of the requirements of
Availability. The Court acknowledges that notice pleading is sufficient for a breach
of contract claim at the motion to dismiss stage.71 Nonetheless, generalized
grievances over the performance of Talkdesk’s product fail to put Talkdesk on notice
of how it breached the Agreement. Without clear terms in the Agreement detailing
performance expectations Arrive cannot allege a breach of those requirements.
For example, “[f]ailing to provide the correct and proper solutions to allow
Arrive to conduct its business”72 is entirely too vague and subjective to allow
Talkdesk to prepare any defense. Similarly, “[f]ailing to provide the service required
under the Agreement as evidenced by constant service connection issues, audio
failures, stuck call statuses, inaccurate usage recording, and the inability to
effectively support hard phones (SIP devices)”73 is not specifically tied to any
contractual provision that the parties bargained for and agreed to. Like in Ryan, the
70
Id.
71
See, e.g., VLIW Tech., 840 A.2d at 611 (internal quotations omitted) (“In alleging a breach of
contract, a plaintiff need not plead specific facts to state an actionable claim. Rather, a complaint
for breach of contract is sufficient if it contains ‘a short and plain statement of the claim showing
that the pleader is entitled to relief.’”).
72
Countercl. ¶ 55.
73
Id.
12
Court finds that there is insufficient notice to Talkdesk as to how it breached the
Agreement as to all but the Availability allegations. If Arrive wanted specific
product performance, it needed to be bargained for in the terms of the contract. The
Court will not read in contract expectations that Arrive failed to negotiate for because
Arrive is not satisfied with the result.
The only claim that survives the Motion to Dismiss is the “Availability”
provision. Schedule C of the Agreement sets forth the “Minimum service level
commitment” that “Talkdesk shall maintain 100% monthly minimum availability
for the Talkdesk Service[.]”74 The Agreement further defines “Availability” as “if:
(1) the Customer is able to make and receive voice calls and (2) call quality is
sufficient to allow participants in calls to hear and understand each other.” 75 The
availability is further calculated as:
76
The Agreement allows Arrive to terminate the Agreement “[i]n the event (a)
Talkdesk Service fails to achieve 98% Availability for three consecutive months, or
(b) Talkdesk Service is unavailable for more than 24 consecutive hours for two
consecutive months[.]”77
74
The Agreement, Schedule C (2).
75
Id. at Schedule C (3)(a).
76
Id. at Schedule C (3)(b).
77
Id. at Schedule A Order Form.
13
Arrive pleads that there were issues with making and receiving voice calls,
and the quality of those calls.78 The Court determines that the liberal pleading
standard79 has been met regarding a failure to achieve 98% Availability at this stage.
Talkdesk’s skepticism as to whether “directly and negatively impacted” is sufficient
to meet the definition of “Availability” and the corresponding calculation is a
question better reserved for after discovery. The Court therefore denies the Motion
to Dismiss as to the issue of “Availability” but grants the motion as to all other
allegations of breach not tied to a specific contractual obligation.
3. Arrive has sufficiently pled notice, and the Court declines to decide on
the futility of the notice requirement at this stage.80
The Agreement provides that Arrive can terminate the Agreement in three
ways.81 The first is for failure to achieve 98% Availability for three consecutive
months “with written notice to Talkdesk within 30 days of such event.” 82 It
continues: “Termination as provided under this clause, if elected, is Customer’s sole
78
E.g., Countercl. ¶ 39 (“Business Development and Carrier Sales team members regularly
reported dropped connections, resulting in lost calls;” “Business Development and Carrier Sales
team members regularly encountered issues on calls where either they or the person on the other
end of the line could not hear”), ¶ 40 (“The connection failures, audio issues, stuck status situations,
and lack of effective hard phone integration directly and negatively impacted the Availability of
the Talkdesk Service at Arrive”), ¶ 55 (“Failing to achieve 98% Availability for any month during
the parties’ relationship”).
79
See, e.g., VLIW Tech., 840 A.2d at 611 (citing Michelson v. Duncan, 407 A.2d 211, 217 (Del.
1979)).
80
This section will assume that a material breach of the agreement has occurred and solely address
the applicability of the notice requirements.
81
Pl.’s Br. at 23.
82
The Agreement, Schedule A Order Form.
14
remedy.”83 The second termination option is in Schedule C, wherein the Agreement
provides:
If the Customer believes the Talkdesk Service has not met the minimum
service level commitment in a given month, the Customer may request
an SLA credit as detailed in the table below. To be eligible for an SLA
credit, the Customer must deliver its request for an SLA credit no later
than 7 days after the end of the month for which the SLA credit is
requested and must include in its request a detailed description of the
time and circumstances during which the Talkdesk Service was
unavailable.84
The third option is detailed in § 13.3 of the Agreement, stating: “Either party may
terminate the Service Term upon at least thirty (30) days prior written notice in the
event (1) the other party has materially breached this agreement and such breach
remains uncured at the expiration of such thirty (30) day period . . .”85
Talkdesk argues Arrive did not provide notice sufficient for any of the three
options.86 Arrive argues it did provide notice because “Arrive was in constant
communication with Talkdesk regarding the technical issues and lack of availability,
giving Talkdesk both notice and the opportunity to cure.”87
83
Id.
84
Id. at Schedule C (4).
85
The Agreement, § 13.3
86
Pl.’s Br. at 23–24. Talkdesk also asserts in its Reply Brief that Arrive conceded it failed to give
proper notice in its Opposition. Pl.’s Reply at 19. The Court does not agree with that
characterization. Arrive appears to argue that it did give notice, but if the Court does not find
notice, then in the alternative it argues that notice was futile and thus excused. Def.’s Opp’n at
26–27.
87
Def.’s Opp’n at 26 (citing Countercl. ¶¶ 42–49).
15
The Court notes that both the Schedule A Order Form and Schedule C(4)
discuss notice as a requirement in order to obtain a “credit.” Arrive does not seek a
“credit” as is outlined in the Agreement; therefore, the Court deems these two notice
provisions inapplicable to the challenged action seeking monetary damages. Arrive
is precluded from seeking a remedy pursuant to either “credit” option.
Unlike the Schedule A Order Form and Schedule C(4), the unambiguous
terms of § 13.3 do not tie a remedy to any designated credit, and instead § 13.3
broadly addresses “termination.” Arrive alleges that on July 12, 2023, Arrive sent a
termination letter, giving Talkdesk 30-days advance notice of termination.88 The
Court thus finds at the very least, Arrive has sufficiently pled it complied with the
notice requirement indicating a material breach as of July 12, 2023.
The Court notes that Arrive pled that, prior to July 12, 2023, Arrive contacted
Talkdesk with problems, but never provided notice pursuant to § 13.3 until July 12,
2023.89 The length of time to which Arrive can credibly plead prior to July 12, 2023
that Talkdesk materially breached the Agreement based on the termination letter is
a question of fact.90
If Arrive seeks to assert breach based on conduct not indicated in the
termination letter, but still within the confines of the allowable narrowed claim for
88
Countercl. ¶ 50.
89
Id. at ¶¶ 42–49.
90
“[M]aterially breached” is not a defined term in the Agreement.
16
Availability, Arrive may proceed to discovery on the issue of whether or not notice
would have been futile. Arrive asserts in the alternative, allowing additional time to
cure would have been futile given Arrive’s previous notices to Talkdesk about the
issues. 91
Courts have applied a “two-part test for determining whether a notice and cure
provision was futile: (i) where ‘the defaulting party expressly and unequivocally
repudiates the contract,’ or (ii) ‘where the actions of the defaulting party have
rendered future performance of the contract by the defaulting party impractical or
impossible.’”92 To the extent Arrive may rely on futility, the Court deems the issue
a question of fact and not appropriate for decision at the motion to dismiss stage.93
B. UNCONSCIONABILITY
An unconscionable contract is “one which ‘no man in his senses and not under
delusion would make on the one hand, and as no honest or fair man would accept,
on the other.’”94 For a court to find unconscionability, “there must be an absence of
91
Def.’s Opp’n at 26–27.
92
Optical Air Data Sys., 2019 WL 328429, at *4 (quoting Cornell Glasgow, LLC v. LaGrange
Props., LLC, 2012 WL 6840625, at *13 (Del. Super. Dec. 7, 2012)).
93
Relatedly, Talkdesk moves to dismiss Counterclaim Count (2) for Declaratory Judgment
regarding the validity of the termination. Both parties agree the declaratory judgment claim rises
and falls with the breach of contract claim. While it is unclear what relief Talkdesk seeks that is
different than its breach of contract claim, the Court will nonetheless let Count (2) proceed as it
relates to termination for failure to achieve “Availability.”
94
Ketler v. PFPA, LLC, 132 A.3d 746, 748 (Del. 2016) (quoting Rsrvs. Mgmt., LLC v. Am. Acq.
Prop. I, LLC, 86 A.3d 1119 (TABLE), 2014 WL 823407, at *9 (Del. 2014)).
17
meaningful choice and contract terms unreasonably favor[] one of the parties.”95 A
“mere disparity between the bargaining powers of parties to a contract will not
support a finding of unconscionability.”96 Courts should “sparingly” find
unconscionability97 because it “requires a finding that ‘the party with superior
bargaining power used it to take unfair advantage of its weaker counterpart’” and
“its terms must be so one-sided as to be oppressive.”98 Unconscionability is
determined at the time the contract was formed99 and is classified as either
substantive or procedural; either are sufficient for a cause of action.100
Talkdesk quotes Arrive’s description of itself as evidence that Arrive is a
“sophisticated party in a strong position that flatly contradicts [Arrive’s] claim that
the parties held unequal bargaining power in their contracting relationship.”101
Talkdesk notes that, despite Arrive claiming it was under pressure from the
pandemic, “it still spent three months reviewing proposals and negotiating contract
terms with Talkdesk” which shows that the negotiation and resulting contract was
95
Tulowitzki v. Atlantic Richfield Co., 396 A.2d 956, 960 (Del. 1978).
96
Rsrvs. Mgmt., 86 A.3d 1119 (TABLE), 2014 WL 823407, at *9 (citing Tulowitzki, 396 A.2d at
960)).
97
Ketler, 132 A.3d at 748 (citing Progressive Int’l Corp. v. E.I. Du Pont de Nemours & Co., 2002
WL 1558383, at *11 (Del. Ch. July 9, 2002)).
98
Andor Pharms., LLC v. Lannett Co., 2024 WL 1855112, at *16 (Del. Super. Apr. 29, 2024)
(quoting Progressive Int’l Corp., 2022 WL 1558382, at *11).
99
James v. Nat’l Fin., LLC, 132 A.3d 799, 814 (Del. Ch. 2016) (citing Lecates v. Hertrich Pontiac
Buick Co., 515 A.2d 163, 173 (Del. Super. 1986)).
100
See id. at 815 (internal citations omitted) (“The two dimensions of unconscionability do not
function as separate elements of a two prong test. The analysis is unitary, and ‘it is generally
agreed that if more of one is present, then less of the other is required.’”).
101
Pl.’s Br. at 17–18.
18
not unconscionable.102 Arrive denies this and argues the pandemic “put Arrive at a
significant disadvantage to make a ‘meaningful choice,’ and resulted in Talkdesk
driving the negotiations and bargaining” (procedural unconscionability).103 Arrive
further asserts that Talkdesk intentionally oversold Arrive a product that did not suit
Arrive’s needs (substantive unconscionability).104
With regard to the procedural unconscionability, Talkdesk reinforces that “[i]f
anything, the Counterclaims depict Arrive as the party in the stronger bargaining
position here given that [Arrive] had multiple other providers competitively bidding
for its telecommunications needs and Talkdesk was merely one of ‘a number of
potential vendors.’”105 Talkdesk disputes that there is substantive unconscionability
because Arrive fails to cite which term(s) of the Agreement are unfair, or how they
are “shockingly unfair terms that warrant having the court intervene[.]”106
1. Arrive fails to plead substantive unconscionability.
Substantive unconscionability considers “if the terms evidence a gross
imbalance that ‘shocks the conscience.’”107 To find substantive unconscionability,
“the court will look to see if the terms of the contract were ‘atypical in the local
102
Id. at 18.
103
Def.’s Opp’n at 22.
104
Id. at 22–23.
105
Pl.’s Reply at 15 (emphasis in original).
106
Id. at 16.
107
James, 132 A.3d at 815 (internal citations omitted).
19
business community.’”108 A court can consider six factors: (1) a significant cost-
price disparity or excessive price; (2) the denial of basic rights and remedies; (3)
penalty clauses; (4) the placement of disadvantageous clauses in inconspicuous
locations or among fine print trivia; (5) the phrasing of disadvantageous clauses in
confusing language or in a manner that obscures the problems they raise; and (6) an
overall imbalance in the obligations and rights imposed by the bargain.109
Arrive has failed to indicate what portions of the Agreement are
unconscionable. Instead, Arrive only alleges that “the terms of the MSA provided
Arrive access to Talkdesk’s highest-priced solution, which Talkdesk knew was not
going to meet Arrive’s operational needs.”110 In the paragraphs from the
Counterclaim that Arrive cites to support its substantive unconscionability
argument, Arrive describes what it was hoping to purchase, and what it received
from Talkdesk’s products, but cited no portion of the Agreement itself. 111 Arrive
also fails to provide any comparable case where a contract was found to be
substantively unconscionable because the product bargained for did not meet the
negotiated qualifications. Arrive has failed to plead any of the six factors for
substantive unconscionability, to demonstrate that the terms of the agreement would
108
Rummel Klepper & Kahl, LLP v. Delaware River & Bay Authority, 2022 WL 29831, at *14
(Del. Ch. Jan. 3, 2022) (citing Tulowitzki, 396 A.2d at 960).
109
James, 132 A.3d at 815–16 (citing Fritz v. Nationwide Mut. Ins. Co., 1990 WL 186448, at *4–
5 (Del. Ch. Nov. 26, 1990)).
110
Def.’s Opp’n at 22.
111
See id. (citing Countercl. ¶¶ 44–49, 67, 76–78, 86–89, 91, 100).
20
shock the conscience. Even if the Court credits that Talkdesk knew the product
would not suit Arrive’s needs, Arrive does not explain how the terms of the contract
themselves amount to an unfair agreement.
2. Arrive fails to plead procedural unconscionability.
Procedural unconscionability “examines the procedures that led to the
contract with the goal of evaluating whether seemingly lopsided terms might have
resulted from arms’-length bargaining.”112 Courts will look at the “‘relative
bargaining strength of the parties and whether the weaker party could make a
meaningful choice.’”113 Courts consider factors including: (1) “[i]nequality of
bargaining or economic power;” (2) “[e]xploitation of the underprivileged,
unsophisticated, uneducated, and illiterate;” (3) “[t]he use of printed form or
boilerplate contracts drawn skillfully by the party in the strongest economic position,
which establish industry-wide standards offered on a take it or leave it basis to the
party in a weaker economic position;” and (4) “[t]he circumstances surrounding the
execution of the contract, including its commercial setting, its purpose, and actual
effect.”114 “[T]he court must find that the party with the superior bargaining power
used this disparity to take advantage of the weaker party, resulting in terms being
112
James, 132 A.3d at 815.
113
Chemours Co. v. DowDuPont Inc., 2020 WL 1527783, at *12 (Del. Ch. Mar. 30, 2020) (citing
James, 132 A.3d at 815)).
114
James, 132 A.3d at 826 (citing Fritz, 1990 WL 186448, at *4–5).
21
‘so one-sided as to be oppressive.’”115 Delaware courts have been “particularly
reluctant to find unconscionability in contracts between sophisticated
corporations.”116
Arrive describes itself as a “leading North American freight broker” that has
received “excellent customer service” praise, “has been recognized as a top
workplace by Inc., Fortune, Great Place to Work, the Austin American-Statesman
and The Chicago Tribune” and has been awarded Carrier of the Year by several
others.117 Arrive is also one of “the largest firms in the freight brokerage industry
with more than 2,000 employees, 6,000 customers, and 38,000 active motor carriers
in its network and 70,000 motor carriers under contract.”118 This description alone
suggests that Arrive is a sophisticated party, not one in an unequal bargaining
position. Arrive has not demonstrated that there is any unfair bargaining power
between itself and “a cloud-based call-center software provider.”119
Arrive’s reliance on the pressures of the COVID-19 pandemic are similarly
unconvincing. This Court recognizes the significant impact that the pandemic had
across the globe, but Arrive has failed to indicate how Arrive was uniquely impacted
in a way that all other in-person workplaces forced to shift to work-from-home
115
Rummel Klepper & Kahl, LLP, 2022 WL 29831, at *15 (citing Graham v. State Farm Mut.
Auto Ins., Co., 565 A.2d 908, 912 (Del. 1989)).
116
Rsrvs. Mgmt., 86 A.3d 1119 (TABLE), 2014 WL 823407, at *9 (internal citations omitted).
117
Countercl. ¶ 5.
118
Id. ¶ 7.
119
Id. ¶ 6.
22
solutions were not. The Court has reviewed Arrive’s description of its work process
and understands that shifting to a service provider during the pandemic may have
been crucial to its business, but that is the extent that the pandemic is relevant.
Arrive “engaged with a number of potential vendors” and asked “more than
150 questions” to each vendor to determine their capabilities.120 Talkdesk was “one
of the potential providers” that Arrive considered between April and June 2020.121
The parties met and communicated several times over the three month period to
discuss solutions and Arrive’s needs before entering into the contract.122 The Court
fails to see how there was any imbalance of bargaining power between two
sophisticated parties. Arrive had multiple options for vendors, took three months to
sign an agreement, and was, in the interim, managing to maintain its business
practices, however inconvenient or inefficient it may have been.
This is not the case of a business that was forced to shut down entirely, nor
does Arrive plead that it had to immediately enter into an agreement with Talkdesk
because Arrive had no other options. The COVID-19 pandemic undoubtedly caused
complications for Arrive, but the Court does not find that “one of the largest firms
in the freight brokerage industry” was at such an unequal bargaining power when
conversing with multiple vendors across multiple months that Arrive “could not
120
Id. ¶ 20.
121
Id. ¶ 21.
122
Id. ¶¶ 23–31.
23
make a meaningful choice.” The Court declines to find procedural unconscionability
present under these facts. Counterclaim Count (4) is therefore dismissed.
C. FRAUD IN THE INDUCEMENT
To sufficiently plead a claim for fraud in the inducement, the plaintiff must
allege: “‘1) a false statement or misrepresentation; 2) that the defendant knew was
false or made with reckless indifference to the truth; 3) the statement induced the
plaintiff to enter the agreement; 4) the plaintiff’s reliance was reasonable; and 5) the
plaintiff was injured as a result.’”123 “To establish th[e] requisite scienter, a plaintiff
can show the defendants either ‘committed the misstatement recklessly or with
intent.’”124 Recklessness is not “merely simple, or even inexcusable negligence, but
an extreme departure from the standards of ordinary care[.]”125
Talkdesk seeks to dismiss the fraud in the inducement claim for three reasons:
(1) the claim is foreclosed by the contract’s integration clause; (2) the economic loss
doctrine bars recovery; and (3) Arrive’s fraud in the inducement claim is not pled
with specificity as required by Superior Court Civil Rule 9(b). The Court finds that
although the integration clause lacks anti-reliance language that explicitly provides
123
ITW Glob. Invs. Inc. v. Am. Indus. P’rs Cap. Fund IV, L.P., 2017 WL 1040711, at *6 (Del.
Super. Mar. 6, 2017) (quoting In re Student Fin. Corp., 2004 WL 609329, at *7 (D. Del. Mar. 23,
2004)).
124
Great Hill Equity P’rs IV, LP v. SIG Growth Equity Fund I, LLLP, 2018 WL 6311829, at *32
(Del. Ch. Dec. 3, 2018) (quoting Deloitte LLP v. Flanagan, 2009 WL 5200657, at *8 (Del. Ch.
Dec. 29, 2009) (emphasis in original).
125
Deloitte, 2009 WL 5200657, at *8.
24
that a party is not relying on any extra-contractual relations, Arrive’s fraud claim
still fails. This is because the essence of Arrive’s Counterclaim is based on future
performance, and the integration clause prevents the Court from finding justifiable
reliance. Thus, the Court need not reach the issue of the economic loss doctrine.
As a preliminary matter, Talkdesk argues that Sections 11.1 and 15.10 of the
Agreement, when read together, preclude Arrive’s fraud in the inducement claims.
Section 11.1 of the Agreement states:
Customer acknowledges and agrees that the services, marketplace and
documentation are provided on an ‘as is’ basis and Talkdesk does not
make any and hereby specifically disclaims any representations,
endorsements, guarantees, or warranties, express or implied, including,
without limitation, any of merchantability, fitness for a particular
purpose, title, or nonfringement of intellectual property rights. Content
and early access services are provided ‘as is,’ and as available exclusive
of any warranty whatsoever.126
Section 15.10 of the Agreement (the “Integration Clause”) reads:
This Agreement constitutes the entire and sole agreement among the
parties with respect to the subject matter hereof and supersedes any
previous and contemporaneous verbal agreements, negotiations,
understandings, or other matters, whether oral or written, with respect
to the subject matter hereof.127
To be effective, merger or integration clauses must clearly disclaim reliance
upon extra-contractual statements.128 “[S]tandard integration clauses without
126
The Agreement at § 11.1.
127
Id. at § 15.10.
128
See, e.g., Abry P’rs V, L.P. v. F & W Acq. LLC, 891 A.2d 1032, 1058–59 (Del. Ch. 2006).
25
explicit anti-reliance representations, will not relieve a party of its oral and extra-
contractual fraudulent representations.”129 To sufficiently bar fraud in the
inducement, an integration clause “must contain language that, when read together,
can be said to add up to a clear anti-reliance clause by which the plaintiff has
contractually promised that it did not rely upon statements outside the contract’s four
corners in deciding to sign the contract.”130 Delaware case law, since Kronenberg
v. Katz,131 has developed a well-worn path for parties wishing to disclaim reliance
on extra-contractual representations. Put simply, the Integration Clause here, even
when read with Section 11.1, does not amount to a clear “anti-reliance” provision.132
This, however, does not end the inquiry. Talkdesk argues that Arrive’s fraud
claims must fail because Arrive fails to plead justifiable reliance.133 The Court
agrees. “[W]hether a party’s reliance was reasonable is not generally suitable for
resolution on a motion to dismiss.”134 Nonetheless, “Delaware courts have found a
lack of justifiable reliance at the pleading stage when the dispute involves alleged
129
Id. at 1059 (citing Kronenberg v. Katz, 872 A.2d 568, 593 (Del. Ch. 2004)).
130
Kronenberg, 872 A.2d at 593.
131
872 A.2d 568 (Del. Ch. 2004)
132
Compare Prairie Capital III, L.P. v. Double E Hldg. Corp., 132 A.3d 35, 50–51 (Del. Ch. 2015)
(holding that the Exclusive Representations Clause and Integration Clause together identified
“with sufficient clarity the universe of information on which the contracting parties relied,” and
therefore “add[ed] up to a clear anti-reliance clause.”).
133
Pl.’s Reply at 6–10.
134
S’holder Rep. Srvs. LLC v. Albertsons Co., 2021 WL 2311455, at *11 (Del. Ch. June 7, 2021)
(quoting TrueBlue, Inc. v. Leeds Equity P’rs IV, LP, 2015 WL 5968726 (Del. Super. Sept. 25,
2015)).
26
prior misrepresentations or omissions that run expressly counter to the terms of a
fully integrated contract.”135 Two cases establish this point.
In Black Horse Capital, LP v. Xstelos Holdings, Inc.,136 the Court of Chancery
dismissed a fraud claim because there was no justifiable reliance on the allegedly
fraudulent statements.137 Plaintiffs alleged that defendants promised in 2010 that “if
Plaintiffs would make the [loan], Defendants would give an additional [defined
interest.]”138 The court held that it “is not reasonably conceivable that Plaintiffs
justifiably could have relied on that December 2010 promise as being enforceable
while executing multiple written agreements on January 3, 2011 in which Plaintiffs
disclaimed any and all prior promises, agreements, or understandings[.]”139 The
court distinguished this finding on the “future promise” compared to other cases
“which dealt with materially incorrect financial statements, reliance on which caused
the plaintiff buyers to overestimate how much the target company was worth.”140
Shareholder Representative Services LLC v. Albertsons Companies, Inc.,141
relied on Black Horse when it similarly found that an integration clause prevented
the court from finding justifiable reliance.142 The Court of Chancery held that “the
135
Id. at *11 (internal citations omitted).
136
2014 WL 5025926 (Del. Ch. Sept. 30, 2014).
137
Id. at *22.
138
Id.
139
Id.
140
Id. at *25.
141
2021 WL 2311455 (Del. Ch. June 7, 2021).
142
Id. at *12.
27
plain terms of the Merger Agreement contradict the alleged misrepresentations on
which [Plaintiff] claims it relied.”143 “As distinguished from a claim of extra-
contractual fraud based on a statement of fact, the fraud claim based on ‘future
promises’ amounts to an improper attempt to introduce ‘parol evidence that would
vary the extant terms in the subsequent integration writings.’”144 The plaintiff
alleged it was promised it would have the exclusive right to make all business
decisions, but the contract signed after the promise did not contain any such
promise.145 Had the plaintiff wanted contractual commitments as to how the parties
would operate post-contract, plaintiff “could and should have bargained for those
commitments[.]”146
There is no dispute that Section 15.5 of the Agreement is an integration clause
applicable to both parties. Like in Albertsons, if Arrive wanted to ensure it was
getting a particular product or service, Arrive “could and should have” specifically
bargained for those requirements to be outlined in the contract.147 Arrive, although
upset with the services it received, “cannot now claim fraud as the basis to avoid the
143
Id.
144
Id. (quoting Black Horse, 2014 WL 5025926, at *24).
145
Id.146
Id. at *13.
147
See Black Horse, 2014 WL 5025926, at *25 (“There is . . . considerable support in logic and
the law for the notion that it is efficient to hold parties to the promises they make in an integrated
writing, and only those promises.”).
28
deal it made in favor of the deal it now wishes it made.”148 Counterclaim Count (5)
is therefore dismissed.
D. UNJUST ENRICHMENT
Unjust enrichment refers to the “‘unjust retention of a benefit to the loss of
another, or the retention of money or property of another against the fundamental
principles of justice or equity or good conscience.’”149 Unjust enrichment “can
operate either as a cause of action or as a remedy.”150 To plead an unjust enrichment,
the plaintiff must assert: “(1) an enrichment, (2) an impoverishment, (3) a relation
between the enrichment and the impoverishment, [and] (4) the absence of
justification[.]”151
A claim for unjust enrichment must be dismissed “if there is a contract that
governs the relationship between parties that gives rise to the unjust enrichment
claim.”152 “‘[I]f recovery is possible under the contract,’ then the contract controls
and a duplicative unjust enrichment claim will be dismissed as an attempt to obtain
148
Albertsons, 2021 WL 2311455, at *13 (internal quotation omitted).
149
In re Verizon Coverage Appeals, 222 A.3d 566, 577 (Del. 2019) (quoting Nemec v. Shrader,
991 A.2d 1120, 1130 (Del. 2010)).
150
Garfield on behalf of ODP Corp. v. Allen, 277 A.3d 296, 341 (Del. Ch. 2022). “It remains
possible that even if the court dismissed the substantive claim for unjust enrichment, the court still
could award a restitutionary remedy that could be described as a remedy for unjust enrichment.”
Id. (citing Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 213–14 (2002)).
151
Nemec, 911 A.2d at 1130 (citing Jackson Nat. Life Ins. Co. v. Kennedy, 741 A.2d 377, 394
(Del. Ch. 1999)). See also State ex rel. Jennings v. Monsanto Co., 299 A.3d 372, 391 (Del. 2023)
(“The absence of an adequate remedy at law is required only if an unjust enrichment claim is
brought in the Court of Chancery and there is no other independent basis for equitable
jurisdiction.”).
152
Kuroda v. SPJS Hldgs., L.L.C., 971 A.2d 872, 891 (Del. Ch. 2009).
29
double recovery.”153 Where the enforceability of the contract is called into question
by the pleadings, an unjust enrichment claim may be pled as an alternative to a
breach of contract claim.154 Another exception to the duplicative limitation is where
the contract itself is the unjust enrichment.155 An unjust enrichment claim will not
be dismissed at the motion to dismiss stage if “‘[t]he contract itself is not necessarily
the measure of [the] plaintiff’s right where the claim is premised on an allegation
that the contract arose from wrongdoing (such as breach of fiduciary duty or fraud)
or mistake and the [defendant] has been unjustly enriched by the benefits flowing
from the contract.’”156
Talkdesk asserts that the claim for unjust enrichment must be dismissed
because the Agreement governs the parties’ relationship.157 Rather than pleading
the unjust enrichment as an alternative, Talkdesk points out that Arrive’s allegations
“are identical—they rely upon the same alleged conduct and the same damages.”158
Arrive’s response to this criticism is two-fold. Arrive first asserts (in its Answering
Brief, not its Counterclaim) that the Agreement itself is the unjust enrichment and
153
Intermec IP Corp. v. TransCore, LP, 2021 WL 3620435, at *17 (Del. Super. Aug. 16, 2021)
(quoting Envolve Pharmacy Sols., Inc. v. Rite Aid Hdqtrs. Corp., 2021 WL 140919, at *10 (Del.
Super. Jan. 15, 2021)).
154
See, e.g., Khushaim, 2016 WL 3594752, at *8 (citing Albert v. Alex. Brown Mgmt. Servs., Inc.,
2005 WL 2130607, at *8 (Del. Ch. Aug. 26, 2005)).
155
LVI Grp. Invs., LLC v. NCM Grp. Hldgs., LLC, 2018 WL 1559936, at *16 (Del. Ch. Mar. 28,
2018) (citing McPadden v. Sidhu, 964 A.2d 1262, 1276 (Del. Ch. 2008)).
156
Id. at *16 (internal citations omitted).
157
Pl.’s Br. at 18.
158
Id. at 19.
30
therefore the existence of the Agreement does not bar the claim.159 Arrive then
claims that alternative pleading, which Arrive did here, is permitted when the
enforceability of the contract is challenged, which Arrive argues (in its Answering
Brief, not its Counterclaim) it did by pleading that the contract was
unconscionable.160 Talkdesk reinforces that the claim for unjust enrichment is
“derivative of its contract claim and thus fails.”161
In Kuroda v. SPJS Holdings, L.L.C.,162 the Court of Chancery dismissed a
claim for unjust enrichment because the plaintiff’s relationship with the defendants
was governed by an express contract.163 The plaintiff asserted that “defendants were
unjustly enriched by the services ‘[the plaintiff] provided pursuant to the Consulting
Agreement’” when they failed to pay him.164 The unjust enrichment claim, thus,
“cannot lie alongside [the] breach of contract claim, [so] the unjust enrichment claim
must be dismissed.”165
In LVI Group Investments, LLC v. NCM Group Holdings, LLC,166 by contrast,
the Court of Chancery declined to dismiss an unjust enrichment claim as duplicative
159
Def.’s Opp’n at 32.
160
Id. at 33.
161
Pl.’s Reply at 22–23.
162
971 A.2d 872 (Del. Ch. 2009).
163
Id. at 891.
164
Id.165
Id.166
2018 WL 1559936 (Del. Ch. Mar. 28, 2018).
31
of the breach of contract claim.167 The plaintiff alleged that “it would never have
entered into the agreement but for” defendant’s false statements.168 The court held
that “because the Complaint adequately alleges that the [agreement] itself arose from
the Defendant’s fraud, the existence of that contract does not bar the unjust
enrichment claim.”169
The Court notes that the enforceability of the Agreement is not at issue
because of the Court’s decision to dismiss the unconscionability count; therefore,
Arrive’s argument that “the contract is unconscionable, and, therefore
unenforceable,” fails.170 While Talkdesk argues that the unjust enrichment claim is
based on the “same alleged conduct and the same damages” as the breach of contract
claim,171 the Court holds that the unjust enrichment claim is merely a dressed up
claim for fraudulent inducement. The only allegation in Count Six to support its
unjust enrichment claim is as follows:
Talkdesk induced Arrive to enter into the Agreement with the
understanding and promise that it would provide a Professional Plus
product solution for all of Arrive’s business needs. Talkdesk has failed
to live up to its obligations under the Agreement, and, therefore, has
been unjustly enriched in over $6,500,000 throughout the course of the
parties’ relationship.172
167
Id. at *17.
168
Id.
169
Id.
170
See supra Section V.B.
171
Pl.’s Br. at 19.
172
Countercl. ¶ 97.
32
Similarly, the Fraud in the Inducement count contains the following
allegation:
Talkdesk made the false representations about its Professional Plus
product and intentionally failed to disclose material information about
its capabilities to induce Arrive to execute the Agreement and oversell
a more expensive product.173
The Court struggles to find any meaningful difference between these two
allegations. Thus, although dressed up as a claim for “unjust enrichment,” the Court
finds that this is also a claim for fraud—and it fails for the same reasons outlined
above.174 Counterclaim Count (6) is therefore dismissed.
E. BREACH OF THE IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE
Implied warranty of fitness for a particular purpose requires a plaintiff to
prove that “(1) she had a special purpose for the goods; (2) defendant knew or had
reason to know of that purpose; (3) defendant knew or had reason to know that the
plaintiff/buyer was relying on the seller’s superior skill to select goods that fulfilled
that purpose; and (4) the plaintiff in fact relied on defendant’s superior skill.” 175
173
Id. ¶ 91.
174
The Court notes that in LVI, the Court of Chancery permitted the unjust enrichment claim as an
alternative pleading to the fraud claim in that action. 2018 WL 1559936, at *16–17 (“If LVI were
to succeed in establishing that the EPP Defendants committed (or conspired to commit) fraud, it
would have an adequate remedy at law and unjust enrichment would be unnecessary. But LVI
may be unable to prove those claims. In that case, unjust enrichment might be invoked.”). Here,
the Court finds that the unjust enrichment claim is not in the alternative, but rather duplicative and
identical, to the fraud claim. As such, dismissal is appropriate.
175
Johnson v. Sleepy’s Hldgs., L.L.C., 2015 WL 3429518, at *2 (Del. Super. May 28, 2015) (citing
Atamian v. Ryan, 2006 WL 1816936, at *4 (Del. Super. June 9, 2006)).
33
Delaware allows parties to “exclude or modify any implied warranty of fitness” as
long as the exclusion is in “writing and conspicuous.”176 “[U]nless the
circumstances indicate otherwise, all implied warranties are excluded by expressions
like ‘as is’, ‘with all faults’ or other language which in common understanding calls
the buyer’s attention to the exclusion of warranties and makes plain that there is no
implied warranty[.]”177
Section 11.1 of the Agreement outlines:
General Disclaimer. Customer acknowledges and agrees that the
services, marketplace and the documentation are provided on an ‘as is’
basis and Talkdesk does not make any and hereby specifically disclaims
any representations, endorsements, guarantees, or warranties, express
or implied, including, without limitation, any of the merchantability,
fitness for a particular purpose, title, or noninfringement of intellectual
property rights. Content and early access services are provided ‘as is,’
and as available exclusive of any warranty whatsoever.178
Talkdesk asserts that the language of Section 11.1 is an exclusion of the
implied warranty of fitness for a particular purpose and therefore this claim must be
dismissed.179 Arrive argues that it has sufficiently pled under the low pleading
standards an implied warranty of fitness for a particular purpose and “[a]ny questions
regarding the provision in the MSA are questions of fact and, therefore,
176
6 Del. C. § 2-316(2). “Language to exclude all implied warranties of fitness is sufficient if it
states, for example, that ‘There are no warranties which extend beyond the description on the face
hereof.’” Id.
177
6 Del. C. § 2-316(3)(a).
178
The Agreement, Schedule B § 11.1 (emphasis added).
179
Pl.’s Br. at 19–20.
34
inappropriate at the pleading stage.”180 Talkdesk responds that interpretation of an
unambiguous contract, as is the case here, is a question of law, not fact, and therefore
this Court can proceed to dismiss the claim.181
The only case Arrive relies on to avoid dismissal is insufficient to overcome
an otherwise unambiguous contract term. While Anesthesia Services, P.A. v.
Winters holds that “[f]actual issues cannot be resolved at the motion to dismiss
stage,182 Arrive fails to explain how interpreting an explicit waiver of the implied
warranty of fitness for a particular purpose in a contract is a factual issue. Delaware
law has long considered contract interpretation a question of law, rather than a
question of fact.183 “The Court will interpret clear and unambiguous terms according
to their ordinary meaning.”184 A contract is ambiguous when “we may reasonably
180
Def.’s Opp’n at 27–28 (citing Anesthesia Servs., P.A. v. Winters, 2010 WL 4056141, at *3 (Del.
Super. Oct. 6, 2010)).
181
Pl.’s Reply at 20–21.
182
Anesthesia Servs., P.A., 2010 WL 4056141, at *3. This case deals with breach of contract
issues, but does not deal with a breach of the implied warranty of fitness for a particular purpose
at all.
183
See, e.g., Emmons v. Hartford Underwriters Ins. Co., 697 A.2d 742, 745 (Del. 1997) (“Under
Delaware law, the interpretation of contract language is treated as a question of law.”) (internal
citations omitted); Intel Corp. v. Am. Guarantee & Liab. Ins. Co., 51 A.3d 442, 446 (Del. 2012)
(“‘[I]nterpretation of an insurance policy is a question of law and follows the general rules of
contract interpretation.’”) (internal citations omitted); Pike Creek Recreational Servs., LLC v. New
Castle Cty., 238 A.3d 208, 213 (Del. Super. 2020) (“[T]he only remaining questions are those of
statutory and contract interpretation. Both topics are solely questions of law for the Court to
decide.”) (internal citations omitted); OSI Sys., Inc. v. Instrumentarium Corp., 892 A.2d 1086,
1090 (Del. Ch. Mar. 14, 2006) (“Under Delaware law, the ‘proper interpretation of language in a
contract, while analytically a question of fact, is treated as a question of law both in the trial court
and on appeal,’ and ‘judgment on the pleadings . . . is a proper framework for enforcing
unambiguous contracts.’”) (internal citations omitted).
184
GMG Cap. Invs., LLC v. Athenian Venture P’rs I, L.P., 36 A.3d 776, 780 (Del. 2012) (citing
Paul v. Deloitte & Touche, LLP, 974 A.2d 140, 145 (Del. 2009)).
35
ascribe multiple and different interpretations to a contract[.]”185 Arrive has not
alleged that the Agreement is in any way ambiguous. The Court also cannot read
any other reasonable interpretation than Talkdesk’s interpretation: “Talkdesk does
not make any and hereby specifically disclaims . . . fitness for a particular
purpose . . .”186 The use of “as is” language throughout Section 11.1 also reinforces
the disclaimer by mirroring language suggested in the Delaware Code. 187 The
ordinary meaning of the Agreement is that the parties specifically disclaimed any
claim for implied warranty of fitness for a particular purpose. As such, Counterclaim
Count VII is dismissed.
F. VIOLATION OF CALIFORNIA’S UNFAIR COMPETITION LAW
California’s Unfair Competition Law (“UCL”) prohibits “any unlawful, unfair
or fraudulent business act or practice and unfair, deceptive, untrue or misleading
advertising[.]”188
Talkdesk argues that, since all claims should be dismissed at the motion to
dismiss stage, Arrive has consequently also “failed to allege a cause of action under
California’s UCL.”189 Arrive argues that it only needs to sufficiently plead one of
185
Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1160 (Del. 2010) (citing Twin City Fire Ins.
Co. v. Delaware Racing Ass’n, 840 A.2d 624, 628 (Del. 2003)).
186
The Agreement, § 11.1.
187
6 Del. C. § 2-316(3)(a) (stating “all implied warranties are excluded by expressions like ‘as
is’”).
188
Cal. Bus. & Prof. Code § 17200, et seq.
189
Pl.’s Br. at 28.
36
an unlawful, unfair, or fraudulent business practice, and since Arrive asserts it has
sufficiently pled its claim for fraudulent inducement, the violation of the UCL has
also been pled.190 The Court notes that neither party argues for a choice of law
analysis at this stage, and both sides rely on their success on the other claims to
support their success as to the UCL. The Court, therefore, determines that Arrive
has failed to state a claim as to a violation of the UCL because the Court has already
determined that Arrive has not stated a claim as to fraudulent inducement.
VI. CONCLUSION
In conclusion, Plaintiff’s Motion to Dismiss Defendant’s Counterclaims is
Granted in Part, and Denied in Part.
IT IS SO ORDERED.
190
Def.’s Opp’n at 33–34.
37