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VeliQ USA, Inc. v. Mobillogix, LLC

United States District Court, D. Massachusetts

June 15, 2016

VELIQ USA, INC., Plaintiff/Counter-Defendant,
v.
MOBILLOGIX, LLC, Defendant/Counter-Plaintiff. MOBILLOGIX, LLC, Third Party Plaintiff,
v.
VELIQ B.V., Third Party Defendant.

          MEMORANDUM AND ORDER

          ALLISON D. BURROUGHS, U.S. DISTRICT COURT JUDGE

         I. Introduction

         This action arises out of the Master Service Agreement (“MSA”) entered into between VeliQ USA, Inc. (“VeliQ USA”) and Mobillogix LLC (“Mobillogix”) in February 2014. Under the MSA, Mobillogix was to purchase licenses to VeliQ USA’s mobile device management platform, incorporate that platform into Mobillogix’s own product, and then sell that product to Mobillogix’s end user customers. On December 18, 2014, VeliQ USA filed a Complaint in Massachusetts state court against Mobillogix, alleging that Mobillogix breached the MSA by refusing to pay for the licenses it had agreed to purchase. [ECF No. 1-1]. Mobillogix removed the case to this Court on January 23, 2015. [ECF No. 1].

         Mobillogix moved to dismiss VeliQ USA’s complaint for lack of personal jurisdiction and the Court denied the motion. [ECF No. 14]. Thereafter, Mobillogix filed a Counterclaim against VeliQ USA and a Third Party Complaint against VeliQ B.V., VeliQ USA’s parent company, in which Mobillogix asserted counts for fraud (Count I) and unfair and deceptive trade practices in violation of Mass. Gen. Laws 93A, § 11 (Count II) against both VeliQ USA and VeliQ B.V. and a count for breach of the MSA against VeliQ USA (Count III). [ECF No. 21]. Mobillogix filed an Amended Third Party Complaint and Counterclaim on July 8, 2015, with the same three counts. [ECF No. 38]. Mobillogix alleged that VeliQ’s product, the “MobiDM, ” did not work as promised and that during negotiations, both VeliQ USA and VeliQ B.V. made knowingly false statements about the MobiDM’s capabilities in order to induce Mobillogix to enter into the MSA. On August 10, 2015, both VeliQ USA and VeliQ B.V. moved to dismiss Counts I (fraud) and II (Chapter 93A) of the Amended Third Party Complaint and Counterclaim. [ECF No. 43]. Mobillogix opposed the motion on August 24, 2015 [ECF No. 47], and the Court has yet to resolve it.

         On September 29, 2015, VeliQ’s counsel filed a Motion for Leave to Withdraw, stating that it needed to withdraw because of irreconcilable differences with VeliQ. [ECF No. 49].[1] The Court granted the motion. [ECF No. 50]. Since then, no attorney has entered an appearance for VeliQ USA or VeliQ B.V. On October 19, 2015, Mobillogix moved to compel discovery from VeliQ. [ECF No. 51]. It requested, among other things, that VeliQ produce documents responsive to Mobillogix’s document requests and provide more detailed responses to its interrogatories. Id. VeliQ did not appear at the November 10, 2015 motion hearing and the Court granted Mobillogix’s motion to compel. [ECF No. 59].

         Even after the Court’s order, VeliQ has continued to disregard its discovery obligations. It has still not produced any documents responsive to Mobillogix’s document requests and appears to have abandoned the case. As a result, on December 7, 2015, Mobillogix filed a motion pursuant to Rules 37 and 41(b) of the Federal Rules of Civil Procedure requesting that the Court (a) dismiss VeliQ USA’s claims against it and (b) enter a default judgment against VeliQ USA and VeliQ B.V. on its Counterclaim and Third Party Complaint, as a sanction for VeliQ’s inaction. [ECF No. 60]. The Court held a hearing on Mobillogix’s motion on January 28, 2016. [ECF No. 65]. As with the previous motion to compel hearing, counsel for VeliQ did not appear. The next day, in response to Mobillogix’s motion, the Court entered an Order to Show Cause requesting that VeliQ USA explain why its Complaint should not be dismissed for failure to prosecute. [ECF No. 63]. VeliQ USA did not file a response.

         II. Discussion

         a. VeliQ’s Motion to Dismiss

         Before evaluating Mobillogix’s motion, the Court must first assess VeliQ’s outstanding motion to dismiss Mobillogix’s Amended Third Party Complaint and Counterclaim. [ECF No. 43]. Mobillogix contends that because corporations cannot act pro se, this motion is moot now that VeliQ’s counsel has withdrawn. [ECF No. 67]. The motion to dismiss, however, was fully briefed before VeliQ’s counsel withdrew, and Mobillogix has not provided any authority that supports mooting a ripe motion because of counsel’s subsequent withdrawal.

         As alleged in Mobillogix’s Amended Third Party Complaint and Counterclaim, which the Court accepts as true for purposes of VeliQ’s motion to dismiss, Mobillogix and VeliQ USA entered into the MSA on or about February 26, 2014. [ECF No. 38 ¶ 13]. Under the MSA, VeliQ USA was to provide Mobillogix with MobiDM-a software application that VeliQ represented was a scalable and configurable security solution for mobile devices-such that Mobillogix could sell MobiDM to third parties as part of its comprehensive enablement solution. Id. ¶ 1. Although the MSA was signed by VeliQ USA, no one employed by VeliQ USA had any involvement with the development or maintenance of MobiDM, or efforts to license MobiDM to Mobillogix. Id. ¶ 11. These efforts were led by VeliQ B.V. Id. ¶¶ 10-12.

         Mobillogix contends that to induce it into entering into the MSA, VeliQ USA and VeliQ B.V. made representations regarding MobiDM’s then available functionalities and capabilities that they knew were false. For example, Mobillogix alleges that during the period of time from late 2013 until execution of the MSA in February 2014, VeliQ B.V. employees made representations that MobiDM was designed to easily support hundreds of thousands of devices within a single corporation, which they knew was not true. Id. ¶ 37. They allegedly made further false representations regarding MobiDM’s configurability and monitoring capabilities. Id. ¶ 38.

         First, the Court finds that the fraud and Chapter 93A claims against VeliQ USA should be dismissed. Although the Amended Third Party Complaint and Counterclaim asserts identical Chapter 93A and fraud claims against VeliQ USA and VeliQ B.V., it does not identify a single representation made by a VeliQ USA employee during the course of the negotiations. The Amended Third Party Complaint and Counterclaim states that “all representations regarding MobiDM’s technical capabilities and specifications made by them during the efforts to induce Mobillogix to enter into a licensing agreement came from VeliQ B.V. . . .” Id. ¶ 12 (emphasis added).[2]It only identifies one VeliQ USA employee, Edwin Vargas, and states that he “was not involved in the development and maintenance of MobiDM, nor was he involved in the efforts to license MobiDM to Mobillogix.” Id Though Mobillogix has a viable breach of contract claim against VeliQ USA, which VeliQ USA has not moved to dismiss, Mobillogix has not pled plausible fraud and Chapter 93A claims against VeliQ USA. An essential element of a fraud claim is a false representation of a material fact. See Slaney v. Westwood Auto, Inc., 366 Mass. 688, 703 (1975). Because the Amended Third Party Complaint and Counterclaim does not identify any representations made by VeliQ USA, let alone false ones, the fraud claim against VeliQ USA must be dismissed. Furthermore, because the Chapter 93A claim against VeliQ USA is premised on the same allegations as the fraud claim, it also must be dismissed.

         The fraud and Chapter 93A claims against VeliQ B.V., however, may proceed. The Amended Third Party Complaint and Counterclaim identifies numerous representations made by VeliQ B.V. employees to Mobillogix during the MSA negotiations. These include the following:

• “[D]uring the period of time from late 2013 until execution of the MSA in late February 2014, Messrs. de Sterke and van Bijsterveld (VeliQ B.V. CTO), made representations to Scott Jonasz and others at Mobillogix regarding the multi-tenancy, configurability and ...

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