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Copywatch, Inc. v. American National Red Cross

United States District Court, District of Columbia

March 12, 2018

COPYWATCH, INC., Plaintiff,



         Plaintiff CopyWatch, Inc. (“CopyWatch”) is a consulting firm that advises businesses how they can reduce their copying and printing expenses. CopyWatch claims that it provided such advice to Defendant American National Red Cross (“Red Cross”). According to CopyWatch, Red Cross improperly and unjustly used that advice without paying for it, in breach of express and implied agreements between the parties.

         Red Cross has moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that CopyWatch has failed to state a claim. ECF No. 15; see also ECF No. 15-1 (“Def's Br”); ECF No. 17 (“Pl.'s Opp'n”); ECF No. 18 (“Def's Reply”). For the reasons explained below, the motion is DENIED.

         I. Factual and Procedural Background

         CopyWatch, a corporation headquartered and incorporated in New York, alleges that it is “an industry leader in document expense auditing and reduction services.” ECF No. 13 (“Am. Compl.”) ¶¶ 5, 11. It claims to have developed a “confidential and proprietary audit and document management process” that allows its clients to reduce their document-related expenses, including through its expertise in negotiating with vendors. Id. ¶¶ 13-15. CopyWatch asserts that its customary fee is 30% of the cost savings achieved, which clients often prefer because “it does not require any new expenditures on their part.” Id. ¶ 17.

         Red Cross is a corporation chartered by Congress and headquartered in the District of Columbia. Id. ¶ 6; see 36 U.S.C. § 300101. In June 2015, CopyWatch personnel met with Red Cross's “IT Procurement leader, ” Michael Macon, to discuss a possible business relationship. Am. Compl. ¶¶ 21-22. Shortly before the meeting, the parties executed a Non-Negotiable Confidential Disclosure Agreement (the “NDA”). Id. ¶ 23; see also ECF No. 15-2 (“Wright Decl.”) App. 1, at 5-6 (copy of NDA).[1] The NDA provided, among other things, that the parties would not disclose any “Confidential Information, ” defined as “certain confidential information relating to copier and printer cost recovery service.” Wright Decl. App. 1, at 5. The NDA further provided that the parties would “only use the Confidential Information to the extent necessary to achieve or advance the Purpose, ” defined as “explor[ing] business opportunities of mutual interest.” Id.; see Am. Compl. ¶ 25.

         According to CopyWatch's Amended Complaint, Red Cross agreed during the June 2015 meeting that CopyWatch “would provide its services to [Red Cross], including auditing [Red Cross's] document expense costs for all copiers . . ., multi-functional devices, and printers.” Am. Compl. ¶ 28. The parties also agreed that CopyWatch would prepare a written audit report detailing Red Cross's costs and proposing strategies for reducing them. Id. ¶ 29. Moreover, CopyWatch alleges, Red Cross agreed that it would handle all information arising from the audit “in accordance with the NDA” and that CopyWatch “would be paid, ” although the parties did not reach an agreement regarding the specific terms of payment. Id. ¶¶ 30-31.

         After the June 2015 meeting, Macon allegedly “sent correspondence to CopyWatch reflecting that [Red Cross] understood that CopyWatch expected to be compensated for its services” and “confirming that CopyWatch would begin work while the parties worked out payment terms.” Id. ¶ 32. CopyWatch claims that it relied on these commitments in pursuing its work, which included talking to copier and printer vendors. Id. ¶¶ 33-37. Red Cross has attached what it represents is the Macon email to its motion to dismiss. See Wright Decl. App. 3, at 12.

         CopyWatch's original complaint described the interactions between the parties in the summer of 2015 somewhat differently. As set forth in the original complaint, the parties reached their understanding that CopyWatch would perform the audit not at the June 2015 meeting, but on “August 10, 2015.” See ECF No. 1 (“Orig. Compl.”) ¶ 25. According to Red Cross, this was an implicit reference to a Memorandum of Understanding (the “MOU”) executed by the parties on that same date. See Def.'s Br. at 5. Red Cross has now attached the MOU to its motion to dismiss. Wright Decl. App. 2, at 8-10.

         According to its terms, the MOU was “an expressly non-binding set of understandings” between CopyWatch and Red Cross. Id. at 8. The MOU explained that CopyWatch would prepare its audit report and that each party “intend[ed] to be solely responsible for its own costs incurred in connection with its efforts under this MOU.” Id. The MOU further stated that the parties' exchange of confidential information would be governed by the previously executed NDA. Id. Article VII of the MOU read as follows:

This MOU simply memorializes the Parties' current intent and does not constitute a legally binding agreement of the Parties to consummate any transaction outlined herein nor does it create any legal obligations on or provide any rights in favor of the Parties. If further discussions and negotiations occur, neither Party to the proposed transactions will be under any legal obligation with respect to the proposed transactions or any similar transactions unless and until the final, written agreements providing for the transaction have been executed and delivered by all Parties intending to be bound. No. offer, commitment, estoppel, undertaking or obligation of any nature whatsoever shall be implied in fact, law or equity until such final written agreements have been executed and delivered.
The Red Cross in its sole discretion shall decide whether or not to pursue any recommendations made by CopyWatch.

Id. at 9-10. Article VIII stated that the MOU “supersede[d] all prior agreements and understandings” related to the same subject matter. Id. at 10. The MOU concluded by reiterating: “Intending not to be bound by anything herein, the Parties intend this MOU to be a memorialization of their current intent and an aid to any future negotiations.” Id.

         The Amended Complaint claims that, on October 16, 2015, CopyWatch delivered its audit report, which explicitly stated that it was “confidential.” Am. Compl. ¶ 38. The report, by applying CopyWatch's “unique and proprietary industry expertise and know-how, ” allegedly told Red Cross how it could “substantially reduce its document expenses.” Id. ¶ 39. Red Cross has filed a copy of the audit report under seal. ECF No. 11 (“Audit Report”).

         After delivering the report, CopyWatch claims, it provided Red Cross with further helpful advice. Red Cross's Chief Information Officer allegedly “thanked CopyWatch for the ‘great' report” and asked several follow-up questions “concerning how CopyWatch would execute its plan.” Am. Compl. ¶ 44. In response, CopyWatch provided additional “details concerning execution of the strategies outlined in the Report.” Id. CopyWatch also delivered a “draft lease buyout letter” that Red Cross could send to its current vendor. Id. ¶ 45. CopyWatch claims that it had contacted the vendor directly over the previous months to negotiate better terms for Red Cross. Id. ¶ 47.

         CopyWatch alleges that Red Cross subsequently “us[ed] and rel[ied] on CopyWatch's audit analysis and findings to seek reduced copying and document expenses.” Id. ¶ 55. In addition, Macon allegedly sent the lease buyout letter CopyWatch had drafted to Red Cross's vendor. Id. ¶ 46. CopyWatch further claims that Red Cross's Director for Decision Support and Business Planning “made an unsolicited telephone call” to CopyWatch's president “boasting that, since having CopyWatch's work product, [Red Cross] had been able to drive down its cost-per-copy rate to 2.7 cents.” Id. ¶ 56. According to CopyWatch, that represented a total cost savings of over $15 million. Id. ¶ 57. CopyWatch's customary 30% fee would have therefore earned it over $4.5 million, and in May 2016, CopyWatch sent an invoice to Red Cross for that amount. Id. ¶ 60. Red Cross has attached what it represents is a copy of the invoice to its motion to dismiss. Wright Decl. App. 5, at 16-17.

         Red Cross refused to pay. According to CopyWatch, Red Cross had in fact schemed to avoid payment starting shortly after it began using CopyWatch's work product. Macon left Red Cross around that time, and CopyWatch asserts on “information and belief” that Red Cross “fired Mr. Macon as part of [Red Cross's] attempt to use CopyWatch's audit, analysis, and recommendations without compensating CopyWatch.” Am. Compl. ¶ 50. CopyWatch claims it sought to “finalize payment terms” with other Red Cross employees, id. ¶ 51, who “continued to seek and accept CopyWatch's services while stringing CopyWatch along” with respect to those terms, id. ¶ 53.

         In the Amended Complaint, CopyWatch has brought three claims for relief under District of Columbia law. In Count I, it claims that Red Cross violated the NDA by “exploit[ing] CopyWatch's confidential and proprietary know-how, analysis, work product, and strategies for its own personal gain . . . without permission from CopyWatch.” Id. ¶ 65. In Count II, CopyWatch claims that its dealings with Red Cross gave rise to an “implied-in-fact contract” that Red Cross breached by refusing to pay for CopyWatch's services. Id. ¶¶ 68-76. Similarly, in Count III, CopyWatch claims in the alternative that Red Cross unjustly enriched itself by retaining the benefit of CopyWatch's services without paying for them. Id. ¶¶ 77-82.

         Red Cross has moved to dismiss all three claims. ECF No. 15. Red Cross argues that CopyWatch's allegations that it breached the NDA are too conclusory to survive a motion to dismiss. See Def's Br. at 8-11. Red Cross further argues that CopyWatch's claims for breach of an implied-in-fact contract and unjust enrichment are untenable because express contracts (the NDA and the MOU) govern the parties' ...

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