In the United States District Court for the Western District of Pennsylvania

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IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

CRICKET GROUP, LTD, d/b/a PPM ) TRANSPARENCY GROUP, ) Plaintiff, ) ) vs ) Civil Action No. 16-1141 ) Judge Bissoon HIGHMARK, INC., ) Magistrate Judge Mitchell Defendant. )

I. Recommendation

It is respectfully recommended that the partial motion to dismiss the Second Amended

Complaint filed by the Defendant (ECF No. 53) be granted with respect to Count IV of the

Second Amended Complaint and denied with respect to the requests for consequential damages and lost expectation damages in Count I.

II. Report

Plaintiff, Cricket Group, Ltd. d/b/a PPM Transparency Group (“Cricket”), brings this action under Pennsylvania law arising out of a Master Services Agreement (“MSA”) and

Statements of Work (“SOWs”) pursuant to which Cricket was to perform certain consulting services for Defendant, Highmark, Inc. (“Highmark”). The Second Amended Complaint

(“SAC”) alleges claims of breach of contract, unjust enrichment, quantum meruit and intentional misrepresentation based upon Highmark’s termination of the MSA effective July 31, 2015 and alleged failure to pay Cricket for all work performed and for work Plaintiff expected to perform.

Presently submitted for disposition is a partial motion to dismiss the SAC for failure to state a claim upon which relief could be granted, filed by the Defendant. Specifically, Defendant seeks to dismiss Count IV (the claim for intentional misrepresentation), the request for consequential damages in Count I and the request for lost expectation damages in Count I. For Case 2:16-cv-01141-CB-RCM Document 58 Filed 03/31/17 Page 2 of 16

the reasons that follow, the motion should be granted with respect to Count IV of the Second

Amended Complaint and denied with respect to the requests for consequential damages and lost expectation damages in Count I.

Facts

On or about November 1, 2013, Cricket and Highmark entered into an MSA respecting certain consulting services to be performed by Cricket at the request of Highmark. The MSA had a stipulated term running from November 1, 2013 through November 1, 2016. Pursuant to the

MSA, Cricket was to provide services to Highmark pursuant to SOWs to be agreed upon between the parties with fees being due and payable pursuant to the SOW. (SAC ¶¶ 7-8 & Ex.

A.)1

Pursuant to the MSA and SOW No. 1, Cricket was to generally provide Clarity software application development, implementation and support services, project management process and procedure development, project management office and master scheduling consulting services

(collectively, the “Consulting Services”) to Highmark for an initial engagement term running from November 1, 2013 through January 30, 2015 (estimated). From the start of the engagement,

Cricket and Highmark anticipated the need for additional SOWs. (SAC ¶ 12 & Ex. A at 35-38.)

Cricket indicates that this engagement term was later extended and Highmark ultimately requested additional Consulting Services from it supplied by Plaintiff from February 1, 2014 through June 30, 2015. (SAC ¶ 13.)

Highmark submitted a time-extension and labor change request to Cricket, designated by

Highmark as CR No. 1, and requested that Cricket perform additional work under SOW No. 1.

Cricket states that, due to Highmark’s budget constraints, it specifically requested that Cricket

1 ECF No. 51. 2

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not invoice for SOW No. 1, CR No. 1, until all changes were completed. Cricket accommodated this request. (SAC ¶¶ 14-15.)

Highmark submitted SOW No. 2 to Cricket. Cricket performed the work and Highmark paid related invoices. Highmark submitted SOW No. 3 to Cricket. At this time, Highmark still had not paid for SOW No. 1, CR No. 1. On September 22, 2014, at or about the time Cricket began performing requested Consulting Services pursuant to SOW No. 3, Highmark asked

Cricket to defer until January 2015 invoicing for Consulting Services supplied in 2014, due to

Highmark’s budgetary constraints. At the same time, Highmark asked Cricket to increase the number of workers Cricket provided, in addition to deferring 50% of the invoiced amount for

SOW No. 2 to 2015. (SAC ¶¶ 16-19.)

Cricket provided Highmark the original cost and resource estimation based on a twelve- month term on October 31, 2014. Thereafter, on February 5, 2015, Highmark requested that

Cricket provide two additional alternative versions of SOW No. 3; one providing for a six-month term and one providing for a nine-month term. (SAC ¶ 20 & Exs. B, C, D.)

Cricket states that, after careful consideration of these three versions of SOW 3,

Highmark represented to Cricket that its services related to SOW 3 would be necessary until at least through September 30, 2015, necessitating a minimum nine-month term for SOW 3.

Cricket states that, as a result of the representations that it would be working for Highmark through September 2015, it ceased pursuit of several other opportunities for revenue during that time period. It states that, due to the commitment of resources to the Highmark project, it could not perform any other contracts simultaneously. (SAC ¶¶ 21-22.)

As required by the MSA, Cricket provided Consulting Services to Highmark from

November 2013 to June 30, 2015, pursuant to SOW Nos. 1, 2 and 3. (SAC ¶ 23 & Exs. E, F.)

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Highmark purportedly terminated the MSA effective July 31, 2015. Cricket notes that, pursuant to the MSA, either party may terminate the contract by providing 30 days’ written notice, but Highmark did not provide any notice, but terminated the MSA suddenly and effective immediately. (SAC ¶¶ 24-25.)

Cricket indicates that, at that time, Highmark owed it $987,773 on SOW No. 3, $901,800 on SOW No. 1, CR No.1 and $61,500 in travel expenses related to SOW No. 1, CR No. 1 and

SOW No. 3. Cricket states that it expected to bill Highmark for an additional three months through September 2015 in the amount of $399,960.00 pursuant to Highmark’s guarantee of the nine-month minimum term for SOW 3. Prior to termination, Cricket did not pursue other work during this time because of its reasonable expectation that its resources would be required by

Highmark through September 2015. (SAC ¶¶ 26-27.)

Cricket states that, to date, it has only received payment in full as to SOW No. 2. After crediting Highmark for all payments made through the filing of this Complaint, Cricket contends that it is still owed $1,951,073.00 for services provided and expenses incurred pursuant to SOW

Nos. 1 and 3. (SAC ¶¶ 28-29.)

Plaintiff alleges that, but for Defendant’s improper termination, it would have received an additional $399,960.00 for furnishing three months of services through September 2015.

Further, it alleges that, but for Defendant’s breach, it could have secured replacement work for the months of July through September of 2015, which would have produced revenue in the amount of $1,170,000.00. Plaintiff contends that it has suffered consequential damages due to

Defendant’s breach in the amount of $770,040.00. (SAC ¶¶ 30-31.)

Procedural History

On October 19, 2015, Plaintiff filed this action in the United States District Court for the

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District of Maryland. Jurisdiction was based upon diversity of citizenship in that: Plaintiff is a

Nevada corporation with its principal place of business in Swanton, Maryland; Defendant is a

Pennsylvania corporation with its principal place of business in Pittsburgh, Pennsylvania; and the amount in controversy exceeds the sum of $75,000.00, excluding interest and costs. (Compl.

¶¶ 1-4, 24-26, 31, 41.)2 The original complaint contained three claims: breach of contract (Count

I), unjust enrichment (Count II) and quantum meruit (Count III). On January 5, 2016, in response to Defendant’s motion to dismiss for lack of personal jurisdiction, Plaintiff filed an

Amended Complaint (ECF No. 17), which also contained the same three claims.

On January 13, 2016, Defendant filed a motion to dismiss the Amended Complaint (ECF

No. 18), in which it contended that the court could not exercise personal jurisdiction over it. On

July 29, 2016, Judge Motz filed a Memorandum in which he concluded that the court could not exercise personal jurisdiction over Highmark, but that, rather than dismiss the case, it would be transferred to this Court, where it could have been brought (ECF No. 30).

An order was entered (ECF No. 31) and the case was transferred to this Court and docketed at Civil Action No. 16-1141. On August 19, 2016, Defendant filed an Answer and

Counterclaim against Plaintiff for breach of contract (ECF No. 35). On January 4, 2017,

Plaintiff filed a motion for leave to file a Second Amended Complaint (ECF No. 47), to which

Defendant responded on January 25, 2017 (ECF No. 49). As discussed at a status conference on

January 5, 2017, Defendant agreed to consent to the filing of the SAC without waiving its right to assert any defenses, objections, arguments or other challenges in response thereto. On January

26, 2017, an order was entered (ECF No. 50) granting Plaintiff’s motion and the SAC (ECF No.

51) was filed on January 30, 2017. For the first time, an additional claim of intentional

2 ECF No. 1. 5

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misrepresentation was asserted in Count IV.

On February 21, 2017, Defendant filed a partial motion to dismiss (ECF No. 53). On

March 14, 2017, Plaintiff filed a brief in opposition (ECF No. 56) and March 21, 2017,

Defendant filed a reply brief (ECF No. 57).

Standard of Review

The Supreme Court has issued two decisions that pertain to the standard of review for failure to state a claim upon which relief could be granted. The Court held that a complaint must include factual allegations that “state a claim to relief that is plausible on its face.” Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

“[W]ithout some factual allegation in the complaint, a claimant cannot satisfy the requirement that he or she provide not only ‘fair notice’ but also the ‘grounds’ on which the claim rests.”

Phillips v. County of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008). In determining whether a plaintiff has met this standard, a court must reject legal conclusions unsupported by factual allegations, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements;” “labels and conclusions;” and “‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Iqbal, 556 U.S. at 678 (citations omitted). Mere “possibilities” of misconduct are insufficient. Id. at 679. The Court of Appeals has summarized the inquiry as follows:

To determine the sufficiency of a complaint, a court must take three steps. First, the court must “tak[e] note of the elements a plaintiff must plead to state a claim.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1947, 173 L.Ed.2d 868 (2009). Second, the court should identify allegations that, “because they are no more than conclusions, are not entitled to the assumption of truth.” Id. at 1950. Third, “whe[n] there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.” Id. This means that our inquiry is normally broken into three parts: (1) identifying the elements of the claim, (2) reviewing the complaint to strike conclusory allegations, and then (3) looking at the well-pleaded

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components of the complaint and evaluating whether all of the elements identified in part one of the inquiry are sufficiently alleged.

Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011).

The Court of Appeals has explained that: “In deciding a Rule 12(b)(6) motion, a court must consider only the complaint, exhibits attached to the complaint, matters of public record, as well as undisputedly authentic documents if the complainant’s claims are based upon these documents.” Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010) (citation omitted). Thus, the documents that Plaintiff has attached to the SAC (the MSA and SOWs) may be considered in determining whether Plaintiff has stated a claim upon which relief may be granted.

Defendant contends that: 1) Plaintiff cannot state a claim for intentional misrepresentation, a tort, because of the gist of the action doctrine, which precludes tort claims arising out of contracts; 2) the claim must also be dismissed because of the parol evidence rule, which bars oral representations relating to integrated contracts; 3) the claim fails to meet the particularity requirements of Federal Rule of Civil Procedure 9(b); 4) Plaintiff cannot seek consequential damages in its breach of contract claim in Count I because that would represent a double recovery; and 5) Plaintiff also cannot seek lost expectation damages.

Plaintiff responds that: 1) fraud in the inducement claims are not barred by the gist of the action doctrine and Highmark induced Cricket to continue rendering services by pretending that payment would be forthcoming, and Highmark disclaims the existence of a contract for these services in any event; 2) the parol evidence rule bars statements made prior to a contract’s written form, not statements made subsequent thereto that alter the contract’s provisions; 3) the

SAC meets the requirements of Rule 9(b) and if not, Plaintiff requests leave to amend it; 4) by choosing the nine-month option, Highmark indicated that the contract would extend through

September 2015 and thus subjected Cricket to consequential damages for that time period; and 5)

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Highmark cannot rely on a Termination of Damages clause because it did not terminate the MSA pursuant to that provision and its argument is based on the word “only,” which does not appear in the MSA.

In a reply brief, Defendant argues that: 1) despite Plaintiff’s attempt to argue the contrary, the intentional misrepresentation claim does not relate to a fraud in the inducement, but merely a promise to fulfill a contractual obligation (as all contracts have) so it is barred by the gist of the action doctrine; 2) the MSA explicitly contemplated future SOWs, so they cannot be used to change the meaning of this integrated contract; 3) Cricket waited until now to admit that the SAC is insufficient and it should not be permitted to amend it yet again; 4) even under Cricket’s reasoning, it would only be entitled to payment for work actually performed during the 30-day notice period, and it performed no work at that time, and if as Cricket contends it could work on only one project, it cannot also collect for a second hypothetical project that it chose not to accept because it intended to work for Highmark; and 5) there is no timing element in Section 9 of the MSA and Cricket’s interpretation would render the section meaningless.

Count IV: Intentional Misrepresentation

In Count IV, Plaintiff alleges that, on several occasions, Highmark represented that it would pay for services in full and that, based on this misrepresentation, Cricket performed further work through September 2015. It therefore seeks $4,290,000.00 in damages it incurred from its reliance on Defendant’s misrepresentations.

Defendant argues that Plaintiff’s misrepresentation claim is barred by the gist of the action doctrine, that it is also barred by the parol evidence rule and that it does not allege fraud with specificity as required by Federal Rule of Civil Procedure 9(b). Plaintiff responds that the gist of the action doctrine and parol evidence rule do not apply to this situation and that it has

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met the requirements of Rule 9(b) or, to the extent it has not, it requests leave to file a further amended complaint. In a reply brief, Defendant argues that Plaintiff cannot assert a claim for fraudulent inducement, that Plaintiff cannot avoid the application of the parol evidence rule because the contract was integrated and any statements made after it was put in writing by definition could not have induced Plaintiff to enter into it and that further amendment of the SAC is not appropriate and should not be allowed.3

Determining State Law

The Court of Appeals has stated that:

In adjudicating a case under state law, we are not free to impose our own view of what state law should be; rather, we are to apply state law as interpreted by the state’s highest court in an effort to predict how that court would decide the precise legal issues before us. Kowalsky v. Long Beach Twp., 72 F.3d 385, 388 (3d Cir. 1995); McKenna v. Pacific Rail Serv., 32 F.3d 820, 825 (3d Cir. 1994). In the absence of guidance from the state’s highest court, we are to consider decisions of the state’s intermediate appellate courts for assistance in predicting how the state’s highest court would rule. McKenna, 32 F.3d at 825; Rolick v. Collins Pine Co., 925 F.2d 661, 664 (3d Cir. 1991) (in predicting state law, we cannot disregard the decision of an intermediate appellate court unless we are convinced that the state’s highest court would decide otherwise).

Gares v. Willingboro Township, 90 F.3d 720, 725 (3d Cir. 1996). Because this is a diversity action, the Court must predict how the Pennsylvania Supreme Court would rule if presented with this situation.4 Whether a doctrine applies in this case is an issue of law to be resolved by the court. Bohler-Uddehom America, Inc. v. Ellwood Group, Inc., 247 F.3d 79, 103 (3d Cir. 2001).

Gist of the Action Doctrine

For many years, the Pennsylvania Superior Court and federal courts predicted what the

3 Because the Court should grant Defendant’s motion on this ground, it need not address the alternative arguments about the parol evidence rule and failure to meet the requirements of Rule 9(b). 4 Section 17.1 of the MSA provides that it “shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to its conflict of law provisions and except to the extent federal law applies.” (SAC Ex. A at 23.) 9

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Pennsylvania Supreme Court would do if presented with questions concerning the gist of the action doctrine. See, e.g., Pediatrix Screening, Inc. v. Telechem Int’l, Inc., 602 F.3d 541, 548

(3d Cir. 2010); Reardon v. Allegheny College, 926 A.2d 477, 486 (Pa. Super. 2007). However, the Pennsylvania Supreme Court recently issued a decision which discusses the gist of the action doctrine at length. The court stated that:

The general governing principle which can be derived from our prior cases is that our Court has consistently regarded the nature of the duty alleged to have been breached, as established by the underlying averments supporting the claim in a plaintiff’s complaint, to be the critical determinative factor in determining whether the claim is truly one in tort, or for breach of contract. In this regard, the substance of the allegations comprising a claim in a plaintiff’s complaint are of paramount importance, and, thus, the mere labeling by the plaintiff of a claim as being in tort, e.g., for negligence, is not controlling. If the facts of a particular claim establish that the duty breached is one created by the parties by the terms of their contract—i.e., a specific promise to do something that a party would not ordinarily have been obligated to do but for the existence of the contract—then the claim is to be viewed as one for breach of contract. If, however, the facts establish that the claim involves the defendant’s violation of a broader social duty owed to all individuals, which is imposed by the law of torts and, hence, exists regardless of the contract, then it must be regarded as a tort. Although this duty- based demarcation was first recognized by our Court over a century and a half ago, it remains sound, as evidenced by the fact that it is currently employed by the high Courts of the majority of our sister jurisdictions to differentiate between tort and contract actions. We, therefore, reaffirm its applicability as the touchstone standard for ascertaining the true gist or gravamen of a claim pled by a plaintiff in a civil complaint.

Bruno v. Erie Ins. Co., 106 A.3d 48, 68-69 (Pa. 2014) (footnotes and citations omitted). In

Bruno, the plaintiff homeowners sued their insurer (Erie) after its adjuster and engineer came to their home to investigate black mold the Brunos found in their basement and told the Brunos that the mold was harmless, that it had no health consequences and that they should continue to tear out the paneling in their basement. The Brunos followed this advice, but suffered health problems from mold exposure and eventually the house became uninhabitable such that it had to be destroyed. Erie paid the Brunos $5,000, as owed under the insurance policy for testing and

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attempted remediation of the mold.

The court held that:

Accordingly, while Erie had contractual obligations under its policy to investigate whether mold was present, and also to pay for all property damage caused by mold, the substance of the Brunos’ allegations is not that it failed to meet these obligations; rather, it is that Erie, during the course of fulfilling these obligations through the actions of its agents, acted in a negligent manner by making false assurances regarding the toxicity of the mold and affirmatively recommending to the Brunos that they continue their renovation efforts, which caused them to suffer physical harm because of their reasonable reliance on those assurances. Consequently, these allegations of negligence facially concern Erie’s alleged breach of a general social duty, not a breach of any duty created by the insurance policy itself. The policy in this instance merely served as the vehicle which established the relationship between the Brunos and Erie, during the existence of which Erie allegedly committed a tort. We, therefore, reverse the order of the Superior Court affirming the trial court’s dismissal of the Brunos’ negligence claim on the basis of its application of the gist of the action doctrine.

Id. at 71 (footnote omitted).

Defendant argues that, following the law as outlined in Bruno, the “promises” to which

Plaintiff refers are merely Highmark’s promises to fulfill its contractual obligations. If Cricket’s argument is accepted, every contract would also generate a separate tort claim arising out the defendant’s promise to perform the contract, but this is precisely what the gist of the action doctrine seeks to prevent. Highmark’s duty to fulfill its contractual obligations would not have existed but for the contracts between the parties and therefore the gist of this action sounds in contract, not tort.

Plaintiff argues that the tort of fraudulent inducement is exempted from the gist of the action doctrine. The Court of Appeals recently addressed this argument:

Plaintiffs cannot rescue their claim by attempting to cast their complaint as one alleging breach of a different duty, such as fraud in the inducement or misrepresentation regarding how their money would be used. Pennsylvania state and federal courts have reached different conclusions about whether the gist of the action doctrine applies to fraudulent inducement claims. Compare Sullivan v. Chartwell Inv. Partners, LP, 873 A.2d 710, 719 (Pa. Super. Ct. 2005) (allowing

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claim for fraud in the inducement to proceed where defendant allegedly agreed to perform obligations it had no intention to perform to induce a change in the contract) with Vives v. Rodriguez, 849 F. Supp. 2d. 507, 518-20 (E.D. Pa. 2012) (collecting cases and holding a fraudulent inducement claim barred by the gist of the action doctrine); see Wen v. Willis, 117 F. Supp. 3d. 673, 681 (E.D. Pa. 2015) (“[W]here the precontractual statements that are the basis for the fraudulent inducement claim concern specific duties that the parties later outlined in the alleged contract,” the claim may be dismissed under the gist of the action doctrine) (quoting Integrated Waste Sol’ns, Inc. v. Goverdhanam, No. 10–2155, 2010 WL 4910176, at *11 (E.D. Pa. Nov. 30, 2010)). However, we need not decide whether fraud in the inducement claims are categorically barred under the gist of the action doctrine because the pleadings demonstrate that this case is about a failure to perform under the contract. Plaintiffs’ complaint demonstrates that the primary basis for alleging that fraudulent activity induced the contract is the fact that the notes were not all delivered in accordance with the contract, not a failure to fulfill a separate societal duty which may exist in other cases. Similarly, the allegation that Plaintiffs’ funds were used for transactions unrelated to purchasing the notes simply underscores the conclusion that Plaintiff's claim that the Defendants failed to hold up their end of the bargain. Because the “nature of the duty” alleged to be violated arises out of Defendants’ contractual promises to deliver the notes, and not a broader social duty, see Bruno, 106 A.3d at 68, we will affirm the District Court’s dismissal of the complaint pursuant to the gist of the action doctrine.

Downs v. Andrews, 639 F. App’x 816, 820-21 (3d Cir. 2016).

Similarly, the Court need not decide the thorny issue of whether fraudulent inducement claims are categorically barred under the gist of the action doctrine because the pleadings in this case demonstrate that the case is about Highmark’s alleged failure to perform under its contracts, not a separate societal duty which might exist in other cases. Therefore, with respect to Count

IV, Defendant’s motion to dismiss should be granted.

Count I Damages

In Count I, Plaintiff alleges that Defendant breached its contractual obligation to pay for work performed. It seeks the following types of damages: 1) amounts due for work performed but not paid, totaling $1,951,073.00; 2) expectation damages for work Plaintiff intended to perform for Highmark between July and September 2015 pursuant to SOW in the amount of

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$399,960.00; and 3) consequential damages for replacement work Plaintiff was not able to perform during this same time period in the amount of $770,040.00. The total of these amounts comes to $3,121,073.00.

Defendant argues that Plaintiff cannot recover consequential damages as that would constitute a double recovery and it cannot recover lost expectation damages because they are barred by the MSA. Plaintiff responds that Highmark cannot rely on what it claims is a cutoff provision in Section 9 of the MSA because it did not terminate the agreement pursuant to that section, and that its reading of the MSA renders certain other provisions meaningless. Defendant replies that, at most, Plaintiff’s argument provides only that it would be entitled to payment for work performed during the 30-day notice period that was not given (and no work was performed during that time), that Plaintiff’s reading of Section 9 is nonsensical and that, if Cricket had the resources to perform only one project, it obviously could not have performed two projects during this period of time.

The Pennsylvania Supreme Court has stated that:

In addressing the concept of remedies generally, we may note that in the law of contracts remedies for breach are designed to protect either a party's expectation interest “by attempting to put him in as good a position as he would have been had the contract been performed, that is, had there been no breach”; his reliance interest “by attempting to put him back in the position in which he would have been had the contract not been made”; or his restitution interest “[by requiring] the other party to disgorge the benefit he has received by returning it to the party who conferred it.”

Trosky v. Civil Serv. Comm’n, City of Pittsburgh, 652 A.2d 813, 817 (Pa. 1995) (quoting

Restatement (Second) of Contracts § 344, comment a.) In Trosky, where the Pennsylvania

Supreme Court concluded that the Court of Common Pleas put the plaintiffs in a better position than they would have been had the violation of the civil service laws not occurred, it held that the lower court abused its discretion and reversed. Id. at 818.

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In this case, Plaintiff seeks: a) damages for invoiced and unpaid services and expenses pursuant to SOW Nos. 1 and 3 in the amount of $1,951,073.00; b) lost expectation damages in the amount of $399,960.00 based on Highmark’s termination of a nine-month contract after only six months; and c) consequential damages in the amount of $770,040.00 based on its inability to pursue other contracts during the nine-month period. Defendant argues that the second and third kinds of damages are not recoverable because they would place Cricket in a better position than it would be if it had not contracted with Highmark in the first instance. Plaintiff responds that it is not claiming all three of these kinds of damages, but instead it reduced the total by

$399,960.00 to ensure that it did not have a double recovery.

The MSA provides that:

Either party may at any time and without cause terminate this Agreement by giving thirty (30) days written notice to the other party. Termination of this Agreement shall include all Appendices then in effect, unless the party requesting termination specifically states otherwise in the written notice of termination….

Upon termination under this Section, Highmark, Inc. shall pay [Cricket] the following amounts: (a) fees for all Services rendered as actual hours worked up through the termination date times the applicable rates set forth in an Attachment, Appendix, Exhibit or Purchase Order referencing this Agreement; and (b) expenses reasonably incurred prior to the termination date in accordance with and subject to the Invoices, Payment & Taxes Section above.

All provisions of this Agreement which are by their nature intended to survive the expiration or termination of this Agreement including without limitation those set forth in the Liability, Insurance, Confidentiality, Compliance with Laws, Privacy Standards Section shall survive any expiration or termination of this Agreement.

(SAC Ex. A § 9.)

Defendant contends that the MSA limits its liability as indicated in Section 9 to fees for all services rendered and expenses reasonably incurred prior to the termination date, but not any services rendered or expenses incurred thereafter. However, Plaintiff has alleged that Highmark did not terminate the MSA by providing thirty days written notice as indicated in Section 9 and

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therefore it cannot rely on the limitation set forth in this section. It also notes that Section 9 does not contain the word “only” and that Defendant’s reading of the section to include that word contradicts another section of the MSA, which provides that “[a]ll rights and remedies hereunder are cumulative and not exclusive.” (SAC Ex. A § 17.4.)

Neither party’s argument on this issue is persuasive. By including Section 9 in the MSA, the parties agreed that either side could cancel with 30 days’ written notice, indicating that work would continue for another 30 days and payment would be issued accordingly. After that, the parties would be free to negotiate other contracts. Thus, Plaintiff cannot seek payment for the remaining three months of the contract, because only 30 days’ worth of payment (for 30 days of work) was contemplated. Nor can Plaintiff seek payment for a hypothetical project that it would have taken if it knew that it was operating under a six-month contract rather than a nine-month contract.

On the other hand, Defendant should not be able to claim that it can be required to pay only for the work that Plaintiff actually performed during the 30-day notice period: Plaintiff was unable to perform any work because Defendant did not provide 30 days’ written notice as required by Section 9, but instead canceled without notice. In other words, Defendant is placing itself in a better position than it would have been in had it abided by the terms of the contract.

Rather, to place the parties in the position that they bargained for, Defendant should be required to pay for the work that Plaintiff would have performed during the 30-day notice period, however that amount is calculated. This issue cannot and need not be resolved at this time and therefore Defendant’s motion with respect to the damages requests should be denied.

For all the reasons cited above, it is respectfully recommended that the partial motion to dismiss the Second Amended Complaint filed by the Defendant (ECF No. 53) be granted with

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respect to Count IV of the Second Amended Complaint and denied with respect to the requests for consequential damages and lost expectation damages in Count I.

Litigants who seek to challenge this Report and Recommendation must seek review by the district judge by filing objections by April 14, 2017. Any party opposing the objections shall file a response by April 28, 2017. Failure to file timely objections will waive the right of appeal.

Robert C. Mitchell______ROBERT C. MITCHELL United States Magistrate Judge

Date: March 31, 2017