Beta Data Services, Inc. v. Verizon Federal, Inc. ( 2014 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
BETA DATA SERVICES, INC., )
)
Plaintiffs, ) C.A. No.: N13C-12-268 EMD
)
v. )
) JURY TRIAL DEMANDED
VERIZON FEDERAL, INC., )
)
Defendants. )
Submitted: May 19, 2014
Decided: August 26, 2014
Upon Defendant Verizon Federal, Inc.’s Motion to Dismiss
DENIED
Lawrence Harbin, Esquire, Harbin & Hein PLLC, Washington, District of Columbia and
Xiaojuan Carrie Huang, Esquire, Wilmington, Delaware Attorneys for Plaintiff.
Sean F. Murphy, Esquire, and Christopher L. Harlow, Esquire, McGuireWoods LLP, McLean,
Virginia and Gregory P. Williams, Esquire, and Chad M. Shandler, Esquire, Richards, Layton &
Finger, P.A., Wilmington, Delaware Attorneys for Defendant.
DAVIS, J.
INTRODUCTION
This is a breach-of-contract action brought by Plaintiff Beta Data Services, Inc. (“Beta
Data”) against Defendant Verizon Federal, Inc. (“Verizon”). Beta Data seeks unpaid amounts
charged to Verizon under a purported retroactive increase in billing rates for subcontractor
services. Beta Data alleges that Verizon was incorrectly billed at a lower, five-year contract rate
as opposed to Beta Data’s higher, month-to-month rate. Beta Data contends that it charged the
lower rate because the parties intended to enter into a five-year written agreement that was never
formally executed by the parties.
In the Complaint, Beta Data seeks $4,815,941.86 in damages. Beta Data contends that
this amount represents the difference between Beta Data’s higher, month-to-month rate and the
amounts originally invoiced, which Beta Data alleges were improperly billed to Verizon under
the lower, five-year rate. Verizon has now moved to dismiss Beta Data’s claim, arguing that
Beta Data’s claims are (i) based on an unenforceable agreement-to-agree, (ii) barred by the
statute of limitations and (iii) contrary to the parties’ prior course of dealing. For the reasons set
forth in this opinion, Defendant Verizon Federal, Inc.’s Motion to Dismiss (the “Motion”) is
DENIED.
FACTUAL BACKGROUND
Between May 2005 and April 2010, Beta Data provided subcontractor services to
Verizon through an executed written agreement. The term of the written agreement was for one
year with annual renewal terms available under four one year options. Verizon exercised all four
options. As pled in the Complaint, Beta Data provided Verizon with various pricing terms for
continued subcontractor services in April 2010. According to Beta Data, Beta Data provided
Verizon with both month-to-month and five-year billing rates. Beta Data alleges that Verizon
opted for the five-year term in order to reduce costs. Beta Data further alleges that it extended
the five-year pricing with the understanding that a written agreement would soon follow. The
parties never entered into that written agreement.
On May 4, 2011, the parties held a teleconference. At that teleconference, Verizon
announced that Beta Data’s services were to be provided on a month-to-month basis. Beta Data
alleges that Beta Data then explained that, in that case, Verizon had been improperly billed at the
five-year rate as opposed to the higher, month-to-month rate. Beta Data contends that Verizon
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then promised again to submit a written subcontractor agreement. After the teleconference, Beta
Data continued to bill Verizon at the lower five-year rate.
In the beginning of January 2013, Beta Data alleges that Verizon canceled some of its
subcontractor services, announced that the remaining services were subject to “at will”
cancellation and informed Beta Data that it would not execute a new written agreement. On
January 29, 2013, Beta Data’s counsel, Lawrence Harbin, sent a letter to Verizon indicating that
Beta Data would be adjusting its subcontractor pricing structure to reflect month-to-month
pricing for services previously rendered. Thereafter, beginning in February 2013, Beta Data
included a notation on its invoices that its rates were subject to change after resolving the billing
rates.
Mr. Harbin sent a second letter to Verizon on March 7, 2013. On June 4, 2013, Mr.
Harbin telephoned Verizon’s Vice President and Deputy General Counsel, Jonathan Spear.
According to Verizon, Mr. Spear indicated that he would investigate the matter before providing
any response. On June 27, 2013, Mr. Spear telephoned Mr. Harbin and stated that he still lacked
adequate information for a response but would contact Beta Data within a week. The next day,
Mr. Spear e-mailed Mr. Harbin. In that e-mail, Mr. Spear requested a copy of the contract in
question with references to the clauses on which Beta Data was relying for the price-adjustment.
Mr. Harbin replied that Beta Data hoped to locate the agreement executed in 2005 within the
next couple of days and provide it to Mr. Spear. Mr. Harbin also indicated to Mr. Spear that
Beta Data took the position that the 2005 agreement had expired.
On July 31, 2013, Mr. Harbin e-mailed Mr. Spear with an attached letter that laid out
Beta Data’s position on the facts regarding the cost of Beta Data’s services. On August 2, 2013,
Verizon’s Assistant General Counsel, Marion Spina, acknowledged Verizon’s receipt of Mr.
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Harbin’s letter and indicated that Verizon would contact Beta Data in the next week with a
response. Mr. Spina responded to the letter on August 16, 2013. Mr. Spina indicated that there
was no disagreement that the prior contract expired in 2010. Further, Mr. Spina stated that
Verizon saw no basis on which Beta Data was entitled to adjust the rates retroactively. Mr.
Spina also indicated that Verizon would be willing to consider a proposal for prospectively
revising the current billing rates.
Mr. Harbin replied on September 19, 2013, stating that it was Beta Data’s position that
the negotiations subsequent to the expiration of the 2005 contract yielded a consummated five-
year agreement governing the parties’ relationship. Mr. Harbin also discussed potentially
adjusting the retroactive billing to apply either: (i) after May 4, 2011, when Verizon stated that
the contract was to be month-to-month; (ii) after January 10, 2013, when Verizon notified Beta
Data of cancellation of part of its contract; or (iii) some other point in time between those two
dates.
On December 3, 2013, Verizon cancelled all remaining Beta Data services. On
December 12, 2013, Beta Data submitted invoices for a total of $4,815,941.86, representing the
difference between the month-to-month rate and the five-year rate for Beta Data’s subcontractor
services from May 2010 to November 2013.
Beta Data filed the Complaint on December 30, 2013. Verizon filed the Motion with the
Court on March 10, 2014. Beta Data filed Plaintiff’s Response to Defendant Verizon’s Motion
to Dismiss (the “Response”) on May 7, 2014. The Court heard oral arguments on the Motion on
May 19, 2014 and took the Motion under advisement.
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PARTIES’ CONTENTIONS
A. VERIZON
In the Motion, Verizon raises three arguments for dismissal. First, Verizon argues that
Beta Data’s claims do not set forth a valid enforceable contract. Verizon contends that Beta Data
is instead attempting to recover based on an agreement between the parties to negotiate a
contract in the future. Therefore, Verizon maintains that it is entitled to dismissal as Beta Data’s
claims are based on an unenforceable, agreement-to-agree.
Second, Verizon argues that Beta Data’s claims are barred by the statute of limitations.
Verizon argues that the three-year statute of limitations on Beta Data’s claims began to run after
the first alleged “partial payment” in May 2010. Verizon contends that under a theory of
continuing breach, the statute of limitations should begin to run from the date of the first alleged
breach. Verizon argues that this date would be when Verizon made the first “partial payment.”
Verizon notes that Beta Data filed its Complaint on December 30, 2013 – a date more than three
years after the May 2010 partial payment. Verizon contends that Beta Data’s claims should be
dismissed.
Third, Verizon argues that the course of dealing between the parties prevents Beta Data
from attempting to retroactively bill Verizon at a higher rate. Verizon points out that after the
expiration of the 2005 agreement Beta Data billed Verizon at the same rate for over three years
and that Verizon fully paid each monthly invoice during that period of time. Verizon contends
that therefore Beta Data does not have the right to retroactively modify its invoices in direct
contravention of the parties’ prior course of dealing.
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B. BETA DATA
In response, Beta Data argues that its claims are based on an enforceable, oral agreement
rather than merely an agreement-to-agree. Beta Data contends that, upon the expiration of the
2005 contract, Beta Data fully informed Verizon of Beta Data’s billing options and the
associated rates – including the five-year and month-to-month rates. Beta Data maintains that
upon being presented with those rates Verizon opted for the lower five-year rate and agreed to
submit a written contract at later date. Therefore, Beta Data argues that its claims are based on
an enforceable oral agreement between the parties, rather than a mere agreement-to-agree.
In response to the statute of limitations argument, Beta Data contends that, in accordance
with the applicable statute of limitations, the Complaint was filed within the three years of the
date on which the statute of limitations began to accrue. Beta Data argues that the statute of
limitations for breach-of-contract actions begins to run from the date of the breach. Beta Data
argues that breach did not occur until Verizon repudiated its agreement on May 4, 2011 -- a time
less than three years before the date when Beta Data filed the Complaint. As such, Beta Data
contends that the applicable statute of limitations does not bar its claims.
Finally, Beta Data contends that the parties’ course of dealing did not determine the terms
of the agreement. Beta Data argues that Verizon was fully informed of the billing rates Beta
Data was offering after the expiration of the 2005 contract. Beta Data maintains that the parties
came to an agreement when Verizon selected the five-year billing rate and that Verizon later
repudiated that agreement seeking a month-to-month agreement. Beta Data contends that the
terms of the agreement were determined by Verizon’s selection of billing options rather than the
course of dealing between the parties.
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STANDARD OF REVIEW
Verizon seeks dismissal under Rule 12 of the Superior Court Rules of Civil Procedure.
With a motion to dismiss, the Court (i) accepts all well pleaded factual allegations as true, (ii)
accepts even vague allegations as well pleaded if they give the opposing party notice of the
claim, (iii) draws all reasonable inferences in favor of the non-moving party, and (iv) will only
dismiss a case where the plaintiff would not be entitled to recover under any reasonably
conceivable set of circumstances. 1 However, the Court must “ignore conclusory allegations that
lack specific supporting factual allegations.” 2
DISCUSSION
A. AGREEMENT-TO-AGREE
Verizon’s first argument is that Beta Data’s claims should be dismissed because they are
based on an unenforceable agreement-to-agree. Under Virginia law, “there must be mutual
assent of the contracting parties to terms reasonably certain under the circumstances in order to
have an enforceable contract.” 3 “Mere ‘agreements to agree in the future’ are ‘too vague and too
indefinite to be enforced.’” 4 To determine whether a contract is an enforceable contract or
merely an agreement to agree, Virginia courts consider whether the contract “includes the
requisite essential terms and also whether the conduct of the parties and the surrounding
circumstances evince the parties' intent to enter a contract.” 5
Beta Data’s claims, as they are alleged in the Complaint, are not based merely on an
“agreement-to-agree.” Beta Data alleges that in April 2010, upon the expiration of the 2005
1
Central Mortg. Co. v. Morgan Stanley Mortg. Capital Holdings LLC, 27 A.3d 531, 536 (Del. 2011); Doe v. Cedars
Academy, 09C-09-136, 2010 WL 5825343, at *3 (Del. Super. Oct. 27, 2010).
2
Ramunno v. Cawley, 705 A.2d 1029, 1034 (Del. 1998).
3
Allen v. Aetna Cas. & Sur. Co., 222 Va. 361, 364, 281 S.E.2d 818, 820 (1981).
4
Cyberlock Consulting, Inc. v. Info. Experts, Inc., 876 F. Supp. 2d 672, 678 (E.D. Va. 2012) (citing W.J. Schafer
Assocs, Inc. v. Cordant, Inc., 493 S.E.2d 512, 515 (Va. 1997); Beazer Homes Corp. v. VMIF/Anden Southbridge
Venture, 235 F. Supp. 2d 485, 490 (E.D. Va. 2002).
5
Cyberlock, 876 F. Supp. 2d at 678.
7
contract, Beta Data presented Verizon with both a five-year agreement rate and a month-to-
month rate. Beta Data contends that Verizon opted for the five-year rate and agreed to submit a
written five-year subcontractor agreement. As pled, the facts tend to show that Beta Data and
Verizon did in fact intend to enter into a contract rather than only agreeing to negotiate a contract
at a later date.
Further, according to the Complaint, although the billing rate and length of the contract
were not finalized in a written agreement, Beta Data did continue to provide subcontractor
services to Verizon. Moreover, Beta Data invoiced Verizon at the five-year rate and Verizon
paid for the subcontractor services. Even if the length of time and billing rates did remain to be
negotiated, the Complaint alleges enough facts for the Court to draw a reasonable inference that
the terms agreed to were certain enough to allow the parties to otherwise perform under the
contract. This indicates that the parties mutually assented to be bound by reasonably certain
terms at the time of the agreement. As the facts alleged indicate that the parties intended to enter
into a contract with reasonably certain terms, Beta Data does not base its claims on allegations of
a mere agreement-to-agree. Rather, Beta Data alleges that the parties entered into an enforceable
oral agreement with no uncertain terms. Drawing all reasonable inferences in favor of Beta
Data, the Court does not find that Verizon is entitled to dismissal based on this argument.
B. STATUTE OF LIMITATIONS
Verizon’s second argument is that Beta Data’s claims are barred by the three year statute
of limitations for claims based on unwritten contracts. In Virginia, “actions upon any unwritten
contract, express or implied,” must be brought within three years of the date the cause of action
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accrued. 6 Section 8.01-230 of the Virginia Code explains that in a breach-of-contract action, the
statute of limitations begins to run on the date of the breach:
In every action for which a limitation period is prescribed, the right of action shall
be deemed to accrue and the prescribed limitation period shall begin to run . . .
when the breach of contract occurs in actions ex contractu and not when the
resulting damage is discovered, except where the relief sought is solely equitable
or where otherwise provided under § 8.01-233, subsection C of § 8.01-245, §§
8.01-249, 8.01-250 or other statute. 7
The question therefore becomes: When did Verizon commit the breach according to Beta
Data’s allegations? Verizon argues that, according to the Complaint, the breach would have
occurred when Verizon made the first alleged partial payment. Beta Data contends that the
breach occurred on May 4, 2011, when Verizon announced that it wished to proceed on a month-
to-month basis instead of under a five-year agreement. Alternatively, it could also be argued that
Verizon did not commit a breach until it began to cancel Beta Data’s services.
Regardless, based on the facts as pled in the Complaint, the earliest possible date in
which a breach could have occurred was on May 4, 2011. Beta Data alleges that, until May 4,
2011, Verizon had given no indication that it wished to proceed on a month-to-month basis
instead of on a five-year agreement. Also, the Complaint sets out that every invoice sent by Beta
Data to Verizon was paid in full. Therefore, until May 4, 2011, Verizon had not committed any
alleged act that could be considered a breach under Beta Data’s version of the agreement.
Beta Data filed the complaint on December 30, 2013. May 4, 2011 is less than three
years from that date. Therefore, as Beta Data filed the Complaint within the three-year statute of
limitations applicable to unwritten contracts, the statute of limitations does not bar Beta Data’s
claims.
6
Va. Code Ann. § 8.01-246.
7
Va. Code Ann. § 8.01-230 (emphasis added).
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C. COURSE OF DEALING
Verizon’s third argument is that, based on the course of dealing between the parties, an
implied-in-fact contract was formed. Verizon contends, under this theory, that any attempt by
Beta Data to retroactively raise the rates on that contract would be unenforceable due to a lack of
additional consideration. In Qwest Commc’ns v. Global NAPs, the United States District Court
for the Eastern District of Virginia dismissed a party’s counterclaim because there was no
additional consideration offered to justify a retroactive billing change from the price charged
under an implied-in-fact contract. 8
Similarly to the case now before the Court, in Qwest, a party continued to provide
services to another party after the expiration of a services contract. During this period, the
billing party invoiced the other party at the previous contract rate. 9 The Qwest court found that
the parties had formed an implied-in-fact contract because the invoices were being billed and
paid in full. 10 The Qwest court then determined that the billing party could not retroactively
raise its rates without providing any new consideration after the contract negotiations failed. 11
Although similar, the factual record in Qwest is different from the record before this
Court. In Qwest, the billing party chose the rate to charge after the contract was terminated. 12
Here, Beta Data alleges that it presented Verizon with a number of different billing rates which
changed based on the time period of the contract. This included both the five-year and month-to-
month billing rates. Beta Data further claims that Verizon opted for the five-year rate and agreed
to submit a written contract at a later date. According to Beta Data’s allegations, the parties’
8
2007 WL 7714219 (E.D. Va. Feb. 5, 2007).
9
Id.10
Id. at *4.
11
Id.
12
Id.
10
expressly entered into an oral contract, rather than forming an implied-in-fact contract based on
the parties’ course of dealing.
Drawing all reasonable inferences in Beta Data’s favor, the Court cannot determine that
an implied-in-fact contract rather than an express oral contract was created. Further, it is
reasonably conceivable that, after discovery, Beta Data will be able to prove that Verizon entered
in an oral agreement with knowledge that it would be subject to a retroactive rate increase if
Verizon chose to proceed on a month-to-month basis. On this record and at this time, the Court,
drawing all reasonable inferences in favor of Beta Data, cannot find that an implied-in-fact
contract was in fact created. Consequently, the Court cannot yet determine that Beta Data’s
retroactive rate change required additional consideration to be enforceable. Therefore, the Court
does not hold that Verizon is entitled to dismissal based on this argument.
D. FRAUD AND DETRIMENTAL RELIANCE CLAIMS
During the May 19, 2014 hearing on the Motion, Beta Data discussed potentially raising
a claim of fraud or a claim based on detrimental reliance. However, Beta Data’s current
Complaint fails to raise either claim. Therefore, should Beta Data wish to proceed based on
either of the theories mentioned above, Beta Data must file an amended complaint raising those
claims. Under the current Complaint, Beta Data may only proceed under a breach-of-contract
theory.
CONCLUSION
Based on the arguments above, drawing all reasonable inferences based on the facts
alleged in Beta Data’s favor, Verizon is not entitled to dismissal of Beta Data’s Complaint.
Therefore, Defendant Verizon Federal, Inc.’s Motion to Dismiss is hereby DENIED. Further, if
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Beta Data wishes to proceed on any theory other than breach-of-contract, it must file an amended
complaint raising such a theory.
IT IS SO ORDERED.
/s/ Eric M. Davis
Eric M. Davis
Judge
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