Opinion
Case No. 16-cv-02954-LB
01-05-2018
GROUSE RIVER OUTFITTERS LTD, Plaintiff, v. NETSUITE, INC., Defendant.
AMENDED ORDER REGARDING NETSUITE'S RULE 12(C) MOTION Re: ECF No. 76
This amended order changes only the caption, the last line of the introduction, and the first line of the conclusion to clarify that the court's order addresses only which allegations sound in fraud.
INTRODUCTION
This case is a commercial contract dispute. Plaintiff Grouse River Outfitters, Ltd. is an outdoor-equipment retailer; defendant NetSuite, Inc. provides commercial software systems that integrate various aspects of retailers' businesses. The parties entered a series of written agreements under which NetSuite would install the software system. Grouse River alleges that NetSuite breached its contractual commitments and also misrepresented the capabilities of its software, its experience in installing such a system, and ultimately its ability to provide a system that could work as promised.
Second Amend. Compl. ("SAC") - ECF No. 43. Citations are to material in the Electronic Case File ("ECF"); pinpoint citations are to the ECF-generated page numbers at the top of documents.
Id. at 46 (¶ 257).
Id. at 41-45 (¶¶ 216-265).
NetSuite moves for judgment on the pleadings to strike certain allegations in the complaint on the ground that they are not actionable fraud. The court grants the motion in part in that it identifies which allegations sound in fraud.
Mot. - ECF No. 76 at 2 (the challenged allegations are SAC ¶¶ 15, 17, 19, 21, 23, 25, 27, 29, 31, 33, 35, 37, 39, 41-51, 53, 55, 57, 63-65, 67, 68-71, 73, 75-86, 89-93, 102, 114, 124, 130, 135, 139 and 147).
STATEMENT
The court assumes familiarity with its prior orders, which recount Grouse River's claims that the integrated software system it purchased from NetSuite was installed late and never worked as promised. The basic allegations are as follows. In 2012, Grouse River began searching for an "integrated software system" that would help its retail operations grow. Grouse River read (and later relied upon) false statements made in NetSuite's advertising material about its capabilities to implement software solutions. Grouse River later relied on express statements that NetSuite made that it could deliver a software system that would have the capability to meet Grouse River's requirements. The parties entered into a pair of written contracts in March 2014. The NetSuite system was not installed and operational by its original deadline of September 12, 2014. The system never met its promised capabilities.
Orders - ECF No. 41, 54.
SAC - ECF No. 43 at 2 (¶¶ 8-9).
Id. at 3-9 (¶¶ 15-40).
See id. at 3 (¶ 14), 9-17 (¶¶ 41-92), 41 (¶¶ 219-21), 43 (¶¶ 231-35), 44-45 (¶¶ 241, 245, 248).
See ECF No. 25-1 at 5-55. The parties' relationship comprised a handful of agreements related to the retail software system. After the initial contracts of March 2014, these seem to have consisted of project extensions and refinements. See id. at 20-65.
SAC - ECF No. 43 at 18 (¶ 100).
SAC - ECF No. 43 at 28-33 (¶¶ 148-182).
Grouse River eventually filed this lawsuit. NetSuite moved to dismiss the fraud claims, and the court dismissed them with leave to amend. The court found — among other things — that Grouse River had adequately pleaded justifiable reliance but had not pleaded fraud with sufficient particularity. Grouse River filed a second amended complaint with five claims: (1) fraudulent misrepresentation; (2) negligent misrepresentation; (3) fraud in the inducement; (4) violation of California's Unfair Competition Law (Cal. Bus. & Profs. Code § 17200); and (5) breach of contract. NetSuite moved again to dismiss the fraud claims for failing to plead fraud sufficiently under Rule 9(b). The court denied the motion, primarily because the statements were at least identified particularly. Reading Rule 9(b)'s pleading requirement in harmony with Rule 8(a)'s requirement of a "short and plain" statement of the facts, the court's view was that the lawsuit survived the pleadings stage.
Order - ECF No. 41 at 12-17.
Id.
See generally SAC - ECF No. 43.
Motion - ECF No. 46.
Order - ECF No. 54 at 4-5.
Id.
NetSuite now moves to strike some of the allegations. The court held a hearing on December 14, 2017.
Motion - ECF No. 76.
Minute Order - ECF No. 82.
GOVERNING LAW
"After the pleadings are closed—but early enough not to delay trial—a party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c). "[T]he same standard of review applicable to a Rule 12(b) motion applies to its Rule 12(c) analog," because the motions are "functionally identical." Dworkin v. Hustler Magazine, Inc., 867 F.2d 1188, 1192 (9th Cir. 1989). A Rule 12(c) motion may thus be predicated on either (1) the lack of a cognizable legal theory or (2) insufficient facts to support a cognizable legal claim. See Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). When considering a motion to dismiss under Rule 12(c), the court "must accept all factual allegations in the complaint as true and construe them in the light most favorable to the non-moving party." Fleming v. Pickard, 581 F.3d 922, 925 (9th Cir. 2009). "A judgment on the pleadings is proper if, taking all of [plaintiff]'s allegations in its pleadings as true, [defendant] is entitled to judgment as a matter of law." Compton Unified Sch. Dist. v. Addison, 598 F.3d 1181, 1185 (9th Cir. 2010).
ANALYSIS
The motion is procedurally appropriate and valid at least in part. A chart with the court's conclusions about each challenged statement is set forth at the end of the order.
1. The Rule 12(c) Motion Is Procedurally Appropriate
Grouse River argues that the court should deny NetSuite's motion for judgment on the pleadings because "it is nothing more than a disguised motion to have the Court rehear NetSuite's prior Rule 12(b)(6) motion the Court carefully considered, and carefully denied. . ." The precise argument — whether the statements in the complaint are not fraud because they are mere puffery — was not raised in the earlier motions or addressed in the court's two prior orders.
Opp. - ECF No. 77 at 1.
As the court said at the hearing, its prior order denying the motion to dismiss was aimed at moving the case forward through discovery. Moreover, there are so many allegations that might or might not — depending on context — sound in fraud that the court essentially kicked the fraud can down the road. The court anticipated that the defense was better raised later and (perhaps naively) thought that the parties might resolve their contract dispute with some discovery.
Order - ECF No. 54 at 5.
In any event, it was not the court's intent to foreclose the issue. It is procedurally appropriate. Fed. R. Civ. P. 12(h)(2); In re Apple iPhone Antitrust Litig., 846 F.3d 314, 320 (9th Cir.) cert. docketed, 2017 WL 3393652 (Aug. 8, 2017).
2. Statements That Are Actionable Fraud
Under California law, the elements of fraud and deceit are: (1) misrepresentation; (2) knowledge of falsity; (3) intent to defraud; (4) justifiable reliance; and (5) resulting damages. Lazar v. Superior Court, 12 Cal. 4th 631, 638 (1996). "The same elements comprise a cause of action for negligent misrepresentation, except there is no requirement of intent to induce reliance." Cadlo v. Owens-Illinois, Inc., 125 Cal. App. 4th 513, 519 (2004). "In both causes of action, the plaintiff must plead that he or she actually relied on the misrepresentation." Id.
NetSuite argues that certain allegations in the Second Amended Complaint ("SAC") are not fraud because they are either (1) "mere puffery," (2) statements about future events; or (3) not alleged to be false.
2.1 Statements That Are "Mere Puffery"
NetSuite argues that the advertisements and communications described in the second amended complaint are "mere puffery." Some are "mere puffery," but others are actionable because they refer to specific aspects of NetSuite's product and services.
The challenged allegations are SAC ¶¶ 15, 17, 19, 21, 23, 25, 27, 29, 31, 33, 35, 37, 39, 41-51, 53, 55, 57, 63-65, 67-71, 73, 75-86, 89-93, 102, 114, 115, 124, 130, 135, 139, and 147.
Statements constituting mere "puffery" cannot support liability under a claim for fraud or negligent misrepresentation. Glen Holly Entm't, Inc. v. Tektronix, Inc., 100 F. Supp. 2d 1086, 1093 (C.D. Cal. 1999). "Puffery" has been described "as making generalized or exaggerated statements such that a reasonable consumer would not interpret the statement as a factual claim upon which he or she could rely." In re All Terrain Vehicle Litig., 771 F. Supp. 1057, 1061 (C.D. Cal. 1991) (citing Cook, Perkiss & Liehe, Inc. v. Nor. Cal. Collection Serv., 911 F.2d 242, 246 (9th Cir. 1990)). "[U]ltimately, the difference between a statement of fact and mere puffery rests in the specificity or generality of the claim." Newcal Indus., Inc. v. Ikon Office Sols., 513 F.3d 1038, 1053 (9th Cir. 2008). "[A]dvertising which merely states in general terms that one product is superior is not actionable." Cook, Perkiss & Liehe, 911 F.2d at 246 (quoting Smith-Victor Corp. v. Sylvania Elec. Prods., Inc., 242 F. Supp. 302, 308 (N.D. Ill.1965)). "However, misdescriptions of specific or absolute characteristics of a product are actionable." Id. (quoting Stiffel Co. v. Westwood Lighting Grp., 658 F. Supp. 1103, 1115 (D. N.J. 1987)). Whether an alleged misrepresentation is a non-actionable statement of puffery is a question of law. Id.
The following advertisements and communications are not actionable because they are general, exaggerated assertions about characteristics of NetSuite's product: SAC ¶¶ 15, 21, 27, 31, 33, 63, 64, 67, 69, 70, 71, 75, 83, 85, 86, 89, 90. Examples of these statements include:
• "Every company wants to deliver the commerce experience that Apple delivers to customers—an experience that recognizes the customer regardless of channel or device, and efficiently delivers goods and services in world-class fashion, projecting a powerful brand message. NetSuite SuiteCommerce is architected to enable companies of all sizes to deliver this type of rich, touch-point agnostic experience to their customers." (¶ 15)A reasonable consumer would not interpret these statements as a factual claim upon which he or she could rely. To the extent that Grouse River brings claims for fraud and misrepresentation based on these paragraphs, the court dismisses the claims.
• "As the No. 1 cloud business management suite, NetSuite meets the in-store retailing needs of multi-channel and multi-location retailers with a modern POS solution that enables retailers to streamline and accelerate the transaction process, while also delivering personalized customer service..." (¶ 29)
• "NetSuite further represented at the meeting that the SuiteCommerce software could and would provide Grouse River with an Ecommerce solution that makes is "fast & easy to find products", and allow Grouse River's customers to shop efficiently through any touchpoint including social media and mobile devices." (¶ 71)
The remaining advertisements (SAC ¶¶ 17, 19, 23, 25, 31, 35, 37) and communications (SAC ¶¶ 53, 55, 57, 65, 68, 73, 76, 77, 78, 79-82) are actionable because they make specific assertions about how NetSuite's product functions. They all state absolute characteristics of the product, such as (1) the ability to see customer "purchase history and communications with your company and whether they interacted with your brand online, at a brick-and-mortar store location or with a sales representative," and (2) the ability for shoppers to "create and manage lists of favorite or frequently purchased items." These specific statements are distinguishable from generalized "puffery" about the superiority of a product.
In addition, NetSuite's representation that it could deliver a software system that would have the capability to meet Grouse River's requirements is not puffery. Grouse River provided NetSuite with a specific list of requirements. NetSuite said it could meet those requirements. In a different context, a statement that a product could meet a customer's needs might be generalized "puffery." But in the case here, given that Grouse River asked if NetSuite could meet specific requirements, it was plausibly reasonable for Grouse River to rely on the representation that NetSuite would deliver a product that met those specifications. NetSuite's representation that it could meet the requirements outlined by Grouse River therefore is not mere "puffery."
2.2 Statements About Future Events
NetSuite contends that the allegations in SAC ¶ 84 regarding NetSuite's communications with Grouse River are non-actionable because they were statements about future events. Grouse River alleges that NetSuite falsely and fraudulently "committed to have a four month implementation cycle, a top tier team of consultants on the project, 30 minute status calls every two weeks, had the clout to get things done and intended to keep the project on track." The court agrees with NetSuite that the statements are not actionable fraud.
Motion - ECF No. 76 at 11 (quoting SAC - ECF No. 43 at 16 (¶ 84), 19 (¶ 91)).
Statements that are predictions of future events or commitments to take some action in the future generally are not actionable fraud. Tarmann v. State Farm Mut. Auto. Ins. Co., 2 Cal. App. 4th 153, 158 (1991). "Certain broken promises of future conduct may, however, be actionable." Id. "To maintain an action for deceit based on a false promise, one must specifically allege and prove . . . that the promisor did not intend to perform at the time he or she made the promise and that it was intended to deceive or induce the promise to do or not do a particular thing." Id. at 159.
There are no allegations in the complaint that NetSuite did not intend to carry out a four-month implementation cycle or provide other follow-up to keep the project on track. The statements in SAC ¶ 84 are not actionable fraud. For this paragraph only, Grouse River may amend to cure this deficiency if it can.
2.3 Statements Not Alleged To Be False
NetSuite contends that "throughout the SAC, Grouse River often suggests that various statements may form the basis of fraud claims without actually pleading them as such." More succinctly, the argument is that the SAC does not allege that these statements are false. The complaint, however, is very clear about what statements it alleges to be false and fraudulent, as it states "this representation was false and fraudulent" after many (but not all) of the allegations regarding NetSuite's statements.
Id. at 10 n. 4. --------
The court concludes that the following statements are not actionable fraud because they are not alleged to be false: SAC ¶¶ 41-51, 91-93, 102, 114, 115, 124, 130, 135, 139, 147.
2.4 Chart Summarizing the Court's Conclusions
The chart below summarizes the court's conclusions with respect to each statement NetSuite challenges in its motion. Some of the statements are actionable in part as fraud, and the chart specifies which part of the statement is specific enough to be distinguished from mere "puffery."
| SAC -ParagraphNumber | Non-Actionable Statement* Statement summarized to reduce size oftable | Analysis |
|---|---|---|
| 15 | Every company wants to deliver the commerceexperience that Apple delivers to customers—anexperience that recognizes the customer regardlessof channel or device, and efficiently delivers goodsand services in world-class fashion, projecting apowerful brand message. NetSuite SuiteCommerceis architected to enable companies of all sizes todeliver this type of rich, touch-point agnosticexperience to their customers. The secret saucebehind the Apple and NetSuite approach is anintegrated back-end system that combines corebusiness processing capabilities with rich customerprofiles, to deliver the brand promise of apersonalized experience, anytime from anywhere. | Non-actionable"World-class fashion," "powerful brandmessages," "rich, touch-point agnosticexperience," "rich customer profiles,""personalized experience, anytime fromanywhere" are general, exaggeratedassertions about characteristics of NetSuite'sproduct which a reasonable consumer wouldnot interpret as a factual claim upon which heor she could rely. |
| 17 | SuiteCommerce exposes native NetSuite commercecapabilities—including merchandising, pricing,promotions, payment processing, supportmanagement, and customer management—asservices that can be leveraged by any presentationlayer, while providing an integrated back-endbusiness management system | ActionableThe statement is actionable in so far as itspecifies capabilities of the program,including "merchandising, pricing, paymentprocessing, support management, andcustomer management."The remaining parts of the paragraph arenon-actionable puffery. |
| SAC -ParagraphNumber | Non-Actionable Statement* Statement summarized to reduce size oftable | Analysis |
|---|---|---|
| 19 | Whereas the industry standard is sub 2-second pageload time, SuiteCommerce Experience offers sub-second page times by avoiding the redundantrendering and downloading associated withtraditional presentation frameworks... Forexample, promotions can be implemented once andenabled across online, telephone and in-storetransactions to augment the core transactionalcapabilities, and customize the system to their exactrequirements...Multi-Channel Business Logic: SinceSuiteCommerce offers a single back-end system forprocessing orders, managing inventory andgenerating offers, a business rule such as amaximum number of purchases on a sale item, canbe implemented once and enforced across thewebsite, in-store and via telesales. | Actionable"Sub-second page times" is not pufferybecause it is a quantified assertion of thepage-load time. See Cook, Perkiss & Liehe,911 F.2d at 246 (discussing Smith-Victor,242 F. Supp. at 308-309). The rest of thestatement primarily describes specific aspectsof the product: the ability to implementpromotions across online, telephone and in-store transactions; a system to process orders,manage inventory, and generate offers; theability to set a maximum number ofpurchases on a sale item. |
| 21 | NetSuite is the only cloud business software suitethat brings together every step of a multi-channel,multi-location retail business—POS, ecommerce,CRM, marketing, inventory and order management,and financials. Only NetSuite gives you real-timevisibility into your entire retail operation,accessible from anywhere at any time. WithNetSuite, you get a single view of the businessacross all channels, ensuring that your customer,order, inventory and financial information is alwaysup to date and that you deliver the personalizedexperience your customers expect across everytouchpoint. | Non-actionableThese statements are too general to beactionable fraud. |
| 23 | NetSuite for Retail Provides:• A single, integrated solution to manage yourentire retail business.• Complete 360-degree view of the customer acrossall channels and touchpoints.• Support multiple locations, channels and brandsfrom a single platform.• A full featured and mobile ready POS.• Powerful ecommerce capabilities on any device.• Central management of all pricing andpromotions.• Real-time inventory visibility across all channels.• Cross-channel order management and fulfillment.• Marketing tools to target and segment offers.• Easy customization for your specific retailrequirements.• A lower cost and less hassle than on-premiseretail systems | Actionable:The following statements are about specificaspects of the product: "mobile ready POS";"Marketing tools to target and segmentoffers"; "Real-time inventory visibilityacross all channels"; "Support multiplelocations, channels and brands from a singleplatform"The remaining parts of the paragraph arenon-actionable puffery. |
| SAC -ParagraphNumber | Non-Actionable Statement* Statement summarized to reduce size oftable | Analysis |
|---|---|---|
| 25 | With NetSuite, you get a 360-degree view of eachcustomer so that you can deliver personalizedservice, build customer loyalty and provide arelevant, engaging shopping experience with yourbrand. See their purchase history andcommunications with your company and whetherthey interacted with your brand online, at a brick-and mortar store location or with a salesrepresentative. Provide personalized marketing toyour customers based on their purchase history ordemographics. Offer customers self-service optionsto view their online purchase history, reorder andfind answers to their questions 24/7. | Actionable:The following statements are specific aspectsof the product: "See their purchase historyand communications with your company andwhether they interacted with your brandonline, at a brick-and mortar store location orwith a sales representative"; "Providepersonalized marketing to your customersbased on their purchase history ordemographics;" "Offer customers self-service options to view their online purchasehistory and reorder."The remaining parts of the paragraph arenon-actionable puffery. |
| 27 | With NetSuite, integration is inherent in theproduct. All enterprise functions are wrapped up ina single database, application and version of code. | Non-actionableThese statements are too general to beactionable fraud. |
| 29 | As the No. 1 cloud business management suite,NetSuite meets the in-store retailing needs of multi-channel and multi-location retailers with a modemPOS solution that enables retailers to streamlineand accelerate the transaction process, while alsodelivering personalized customer service... | Non-actionableThese statements are too general to beactionable fraud. |
| 31 | Speed of deployment in months not years. | Non-actionableThis statement is too general to be actionablefraud. |
| 33 | NetSuite delivers a cloud-based, multi-channelretail management software system that bringstogether POS, ecommerce, CRM and marketing,merchandising and order management, financials,and warehouse management into a single, centrally-managed solution. Our retail software solution is anend-to-end suite designed especially for multi-channel retailers that will enable enhancedcustomer service across channels while drivinggrowth and increased revenue. | Non-actionableThese statements are too general to beactionable fraud. |
| SAC -ParagraphNumber | Non-Actionable Statement* Statement summarized to reduce size oftable | Analysis |
|---|---|---|
| 35 | Site search. Solr provides capabilities like typeahead recommendations and customized searchcriteria settings to optimize results. Generate SEO-friendly URL links."Dynamic merchandising. Present upsells, cross-sells and related products based on merchant-drivenrules such as location, browsing behavior, items incart, best sellers or higher margins."Mobile. Responsive design enables sites to displayelegantly across all devices including desktops,mobile phones and tablets."Searchandising. Promote products in searchresults based on search keywords and phrases orleverage product attributes such as top sellers, toprated and new arrivals."Inventory visibility. Show real-time productavailability on your web store. Automaticallyremoved out-of-stock items from your site."Sign in/sign up/forgot password. Enable accountcreation, returning customer sign-in and passwordreset."Returns. Enable self-service returns managementthat allows shoppers to initiate an online returnauthorization."Product/wish lists. Shoppers can create andmanage lists of favorite or frequently purchaseditems." | ActionableThese statements represent that the producthas the specific functions listed. While thestatements mix in some "puffery" (e.g."dynamic merchandising," "responsivedesign") the majority of these statementsrefer to very specific features. |
| 37 | NetSuite enhances inventory visibility withtracking and control capabilities to manage everystage of the lifecycle and control costs. ....Serialized inventory to track purchases and sales byassigning a serial number to each item.Periodic inventory counts that automaticallycalculate on-hand items. Pick, pack and shipmanagement for high-volume order processingenvironments. | ActionableThe following statements describe specificaspects of the product: "Serialized inventoryto track purchases and sales by assigning aserial number to each item"; "Periodicinventory counts that automatically calculateon-hand items"; "Pick, pack and shipmanagement for high-volume orderprocessing."The remaining parts of the paragraph arenon-actionable puffery. |
| 39 | NetSuite advertised and promised Grouse Riverthat its internet platform would be "world-class" -"[enabling] companies of all sizes to deliver...rich,touch-point agnostic experience to their customers. | Non-actionableThese statements are too general to beactionable for fraud. |
| 42 | As we discussed previously, I have used yourrequirements documents to call our nativelydelivered functionality as well as customizationsand partner solutions. | Non-actionableThe complaint does not allege that this isfalse. These are allegations about whatGrouse River expressed it needed in itssoftware system. |
| SAC -ParagraphNumber | Non-Actionable Statement* Statement summarized to reduce size oftable | Analysis |
|---|---|---|
| 41-51 | General statements made by Grouse River as towhat it hoped NetSuite might be able to deliver.The statements are not specific functionality butinstead broad and general categories ofinformation. | Non-actionableThe complaint does not allege that this isfalse. These are allegations about whatGrouse River said it needed in its softwaresystem. |
| 53 | In an e-mail immediately following [a phone callwith G. Fallis] Mr. Waldron provideddocumentation representing that NetSuite couldmeet the vast majority of Grouse River'srequirements and stating "based on ourconversation the stage of growth you are at nowwith Grouse River is typically when we seecompanies coming to NetSuite in hopes of gaininga platform that is more unified and able to scale tofuture growth aspirations and this is just what weprovide." | ActionableThe statement that NetSuite "could meet thevast majority of Grouse River'srequirements" is a specific representationabout the functionality of the productbecause it was made in the context ofknowing what specific requirements GrouseRiver had asked for (see SAC ¶¶ 41-51). |
| 55 | In the same April 4 e-mail Mr. Waldron gave Mr.Fallis an estimate of rough project costs andrepresented that "recurring cost thereafter isextremely predictable (vs. the On Premise model)as NetSuite handles the upgrades for you with ourenhancement updates (twice a year) that areincluded with your subscription." | ActionableThese are specific characteristics of theproduct, to the extent that the statementasserts that NetSuite handles upgrades withenhancement updates (twice a year) that areincluded with the subscription.Non-ActionableThe statement that "recurring costs thereafteris extremely predictable (vs. the On Premisemodel)" is puffery because it is a generalstatement about the superiority of theproduct. |
| 57 | Following Mr. Waldron's e-mail on April 4,Grouse River was repeatedly told that versionupgrades would be seamless and automaticallyoccur twice a year. This is substantiated in the salespresentation review Mr. Waldron presented to Mr.Fallis on December 3, 2013 that claimed that"customizations migrate automatically" and thatNetsuite upgrades are "[Netsuite's] job". | ActionableThese are specific characteristics of theproduct, to the extent that the statementasserts that customizations migrateautomatically and that Netsuite handlesupgrades. |
| 63 | On September 25, 2013, Grouse River andNetSuite teams met for a review of purchasing andaccounting modules. This meeting was attended byparticipants from Grouse River . . . . The NetSuiteteam represented that NetSuite could and wouldmeet Grouse River's purchasing and accountingneeds. | Non-actionableThese statements are too general to beactionable fraud. |
| 64 | "As Owen mentioned on the phone today, yourecommerce requirements are a very strong fit forNetSuite ecommerce." | Non-actionableThese statements are too general to beactionable fraud. |
| SAC -ParagraphNumber | Non-Actionable Statement* Statement summarized to reduce size oftable | Analysis |
|---|---|---|
| 65 | On November 26, 2013, the NetSuite sales team. . .. visited Grouse River . . . and demonstrated mobilepoint-of-sale, responsive web design, advancedinventory reporting, and advanced marketing(tailored E-commerce user experience based onprevious shopping history) and represented toGrouse River that NetSuite could and wouldprovide this functionality to Grouse River. | ActionableThese statements are about specificcharacteristics of the product. |
| 67 | At the November 26, 2013 meeting, Mr. Waldronshowed the Grouse River team a presentationindicating that the average system implementationtime is five months and described implementationas "rapid" and "predictable" — necessarilyrepresenting that this could and would be the casewith NetSuite's implantation for Grouse River. | Non-actionableThese statements are too general to beactionable fraud. |
| 68 | The presentation further represented that NetSuite'ssoftware provides unique benefits including a"single version of the truth across all areas of thebusiness" and a "single, unified solution to manageyour retail business" with a POS system thatsupports "real-time inventory visibility, advancedstore reporting end of day processing, and, shoponline - pick up in store." | ActionableThese are specific characteristics of theproduct, to the extent that the statementasserts that the software allowed "real-timeinventory visibility" and "shop online - pickup in store." |
| 69 | The NetSuite presentation went on to show that thesoftware only requires a subscription andeliminates the need to back-up, upgrade, migrate,tune, or replace software. | Non-actionableThese statements are too general to beactionable fraud. |
| 70 | NetSuite also stated at this meeting that 0% ofGrouse River's resources are needed to attend tothe software's infrastructure upgrades and themigration of any customizations. | Non-actionableThese statements are too general to beactionable fraud. |
| 71 | NetSuite further represented at the meeting that theSuiteCommerce software could and would provideGrouse River with an Ecommerce solution thatmakes is "fast & easy to find products", and allowGrouse River's customers to shop efficientlythrough any touchpoint including social media andmobile devices. | Non-actionableThese statements are too general to beactionable fraud. |
| 73 | NetSuite's November 26, 2013 onsite presentationto Grouse River reinforced this information statingthat it provided "blazing fast websites" with anaverage response time of 0.45 seconds and "fasterthan any site in the Internet Retailer 500." | ActionableThe statement that NetSuite provided anaverage response time of .45 seconds is notpuffery because it is a quantified assertion ofthe page-load time.The remaining parts of the paragraph arenon-actionable puffery. |
| SAC -ParagraphNumber | Non-Actionable Statement* Statement summarized to reduce size oftable | Analysis |
|---|---|---|
| 75 | On December 11, 2013, more initial meetings tookplace [with OZlink and Pacejet]. The necessarypredicate for these meetings was the representationthat, working with NetSuite's on-line partners,NetSuite could meet Grouse River's stated businessneeds and objectives. | Non-actionableThese predicate "representations" are toogeneral to be actionable for fraud. There is nospecific assertion in this paragraph about afalse or misleading statement orrepresentation. |
| 76 | On January 6, 2014, Messrs. Fallis, Wronski, andHill from Grouse River met with Mr. Waldron andBranden Jenkins (in charge of NetSuite point ofsale) to dive deeper into POS functionality as itrelates to Grouse River's requirements. NetSuite'srepresentatives represented that NetSuite could andwould meet Grouse River's POS functionalityrequirements. | ActionableThe allegation that individuals at the meetingrepresented that NetSuite could meet GrouseRiver's POS functionality requirements is aspecific representation about NetSuite'sfunctionality. |
| 77 | On January 8, 2014, Grouse River's team . . .viewed a demonstration of integrated shipping viaPacejet, which Mr. Waldron had represented toGrouse River would work with NetSuite's systemto meet Grouse River's requirements for integratedCanadian shipping from its website and ERPsystem. | ActionableThe representation that Pacejet would workwith NetSuite's system and allow Canadianshipping from Grouse River's website andERP system is a specific representation aboutNetSuite's functionality. |
| 78 | That presentation necessarily represented that thesystem NetSuite was proposing to provide toGrouse River could and would meet GrouseRiver's stated requirements. | ActionableThese are specific characteristics of theproduct, to the extent that NetSuiterepresented that it could meet specific POSfunctionality requirements outlined byGrouse River. |
| 79-82 | At each of [the meetings on Feb. 7, Mar. 13&17,2014], and at all times leading up to the signing ofthe sales contract, NetSuite's sales team repeatedlyexpressed full confidence that NetSuite could andwould provide a system that would meet GrouseRiver's detailed stated business requirements. | ActionableThese are specific characteristics of theproduct, to the extent that NetSuiterepresented that it could meet specificrequirements outlined by Grouse River. |
| 84 | During the same March 27, 2014 call, NetSuite'sGary Specter and Michael Weiss committed thatNetSuite will have a four-month implementationcycle and that they had a top tier team ofconsultants on this project. Mr. Fallis asked aboutthe ability of the NetSuite team to execute againstthe project, emphasizing both the importance of thetimeframe and expense and the need to beginseeing positive results before year-end. Mr. Specterassured Mr. Fallis that this will be the case and thatthe project will have continuous senior-leveloversight, including Mr. Specter's owninvolvement, through "go-live" via twice-monthlygovernance calls. Summarized in an e-mail fromMr. Waldron to Mr. Fallis later that afternoon "Aswe discussed this afternoon we will hold a projectstatus alignment call for 30 minutes every twoweeks to check in and discuss the status of theproject until go-live." | Non-actionableThe statements that NetSuite will have afour-month implementation cycle, havesenior-level oversight, have twice-monthlygovernance calls, and other assurances arepromises about the future and there is noallegation that NetSuite did not intend tofulfill those promises. |
| SAC -ParagraphNumber | Non-Actionable Statement* Statement summarized to reduce size oftable | Analysis |
|---|---|---|
| 85-86 | Mr. Waldron and Mr. Weiss also represented toGrouse River that they were sales executives whohad the authority, experience, and the clout to getthings done. In fact, NetSuite's entire retail salesteam started between March and October of 2013and were brand new hires. | Non-actionableThese statements are too general to beactionable fraud. |
| 83 | On March 27, 2014 in a final call to review theproposal, Mr. Fallis asked NetSuite's sales leader,Gary Specter, if he had confidence that theprofessional services and project managementteams that were going to support implementationwere both capable and experienced and is assuredthis is the case. Mr. Specter answered affirmatively. . . . | Non-actionableThese statements are too general to beactionable fraud. |
| 89-90 | Prior to signing the contracts with NetSuite Mr.Fallis communicated . . . that it was critical that theproject implementation proceed on par withNetSuite's stated average implementation timeframe of four months as presented in on-sitepresentations in November 2013 . . . .Mr. Specter assured . . . that the team and resourcesthat would be assigned to the project were capableof meeting the objectives and time frame forimplementation. | Non-actionableThese statements are too general to beactionable fraud. |
| 91 | On March 28, 2014, Mr. Specter e-mailed Mr.Fallis stating that he intended to keep the project ontrack through the formation of a twice-monthly"Project Governance Call" and that he had "neverhad an unsuccessful deployment when this hasbeen instituted with both partners activelyparticipating." Mr. Specter went on to say that he"will ensure all of the key stake holders and projectleaders from NetSuite will attend." | Non-actionableThese statements are not alleged to be false. |
| 92 | Despite Mr. Specter's earlier assurances, when thesystem implementation started falling behindschedule there was not only a lack of resources butthen, over a dinner meeting on October 22, 2014,Mr. Specter indicated that he needed to haveapproval from others to escalate the situation as a"lighthouse" account but that Grouse River'saccount size would not warrant it to be among thecompany's top priorities. | Non-actionableThis statement is not alleged to be false. |
| 93 | On May 1, 2014, David Mason-Jocksch, theNetSuite project manager, provided a "go-live"schedule to Grouse River indicating a project kick-off date of May 5 (for initial training) and May 20for Business Process Mapping, with a "go-live"date of September 12, 2014. | Non-ActionableThis statement is not alleged to be false. |
| SAC -ParagraphNumber | Non-Actionable Statement* Statement summarized to reduce size oftable | Analysis |
|---|---|---|
| 102 | On October 22, 2014, Mr. Fallis met with NetSuite.. . . The NetSuite representatives acknowledge thatthe project is nowhere near on track. Mr. Spectertells Mr. Fallis that he is fighting to have theGrouse River account classified as a "lighthouse"account to get the necessary expertise and resourcesin order to get it back on track - thereby admittingthat, up until that point, NetSuite had not devotedthe necessary expertise and resources to the GrouseRiver contract. | Non-actionableThis statement is not alleged to be false. |
| 114 | On June 5, 2015, Mr. Fallis connected with Mr.Dinesh Chaurasia, the head of NetSuite's Retailand eCommerce Professional Services, whocommits to a rapid resolution of the outstandingdeliverables and issues stemming from NetSuite'srepeated mis-handling of the project | Non-actionableThis statement is not alleged to be false. |
| 115 | Mr. Fallis signs a document allegedly based onstatements made on a phone call with an employeeof NetSuite. Included in the e-mail from Mr. Fallisare suggestions that NetSuite said it was"committed to resolving all outstanding issues." | Non-actionableThis statement is not alleged to be false. |
| 124 | Mr. Swan disclosed for the first time the extent ofNetSuite's frauds, admitting that NetSuite venturedinto pioneering territory with Grouse River beingone of the very first customers to attempt to use thecombination of technology that it did, and thatGrouse River was also one of, if not the, firstNetSuite Point-of-Sale customer in Canada. | Non-actionableThis statement is not alleged to be false. |
| 130 | During their December 7, 2015 phone conversationMr. Swan agreed with Mr. Fallis that it wasobvious that NetSuite did not have the ability toprovide the functionality it committed to andreiterated an offer to have Grouse River walk awayfrom the platform without paying its outstandinginvoices or future invoices. | Non-actionableThis statement is not alleged to be false. |
| 135 | On December 17, 2015, Mr. Fallis received a replyfrom Mr. Swan indicating that he did "relay [Mr.Fallis'] position to the team here. And I agree therehave been challenges with the implementation,which is why we're proposing the below" (referringto the proposal for Grouse River to abandon theplatform without paying further licensing fees). | Non-actionableThis statement is not alleged to be false. |
| 139 | Mr. Nelson replied at 3:56 p m.: "Honestly, fromyour emails I just assumed nothing was working.Was just on your website as well. Looks awesomeand screams. Performing well above the industrynorms looking at our performance data." | Non-actionableThis statement is not alleged to be false. |
| SAC -ParagraphNumber | Non-Actionable Statement* Statement summarized to reduce size oftable | Analysis |
|---|---|---|
| 147 | As timelines started to slip on the project due toNetSuite's inability to provide the functionality ithad promised, NetSuite project managers PaulClarke and David Mason-Jocksch and members ofits services team expressed their frustration aboutthe commitments to functionality and to meetingthe time frame the NetSuite sales people hadpromised, indicating that they were overzealousand unrealistic, and that this was creatingsignificant internal strife among the NetSuite teamsthat were struggling to allocate sufficient resourcesto the project. | Non-actionableThis statement is not alleged to be false. |
CONCLUSION
The court giants in part NetSuite's motion and identifies the allegations that do and do not sound in fraud. For paragraph 84 only, Grouse River may amend to cure the deficiency. The court will discuss the timing of any amended complaint at the January case-management conference.
This disposes of ECF No. 76.
IT IS SO ORDERED.
Dated: January 5, 2018
/s/_________
LAUREL BEELER
United States Magistrate Judge