WPI Decisionkey v. Volvo Truck Parts CV-97-467-JD 02/23/99 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

WPI Decisionkey, Inc.

v. Civil No. 97-467-JD

Volvo Truck Parts Corp.

O R D E R

The plaintiff, WPI DecisionKey, Inc. ("WPI"), brings this

action against the defendant, Volvo Truck Parts Corporation

("Volvo"), asserting claims for breach of contract, breach of

covenant of good faith, and unjust enrichment. On December 23,

1997, Volvo filed its answer in which it asserted counterclaims

of breach of contract, breach of covenant of good faith, and

unjust enrichment. Before the court is Volvo's motion for

summary judgment on all claims (document no. 13).

Background

In late 1994 or early 1995, Volvo decided to develop a

"global software solution" known as IMPACT that would assist

mechanics servicing its trucks. The IMPACT project consisted of

a number of sub-projects that each addressed different components

of the final product. One component was the development of a

Service Information Database ("SID") which stored information

about Volvo trucks. This was to be developed by a Volvo affiliate, Volvo Data. A second component was the development of

a "method" authoring tool and a "diagnostic" authoring tool. The

method authoring tool was to enable technical writers to write

repair procedures using information stored in SID, while the

diagnostic authoring tool was to enable the technical writers to

write diagnostic procedures using information stored in SID.

From late 1994 through November 1995, Volvo and WPI

discussed the possibility of WPI providing the method and

diagnostic tools to Volvo. This culminated in a November 1995

WPI proposal to develop the tools, which Volvo accepted.

WPI was to customize its standard software product, IDEA, by

integrating IDEA with data structures and databases specific to

Volvo. WPI representatives traveled to Sweden to meet with Volvo

representatives and identify Volvo's reguirements for the method

and diagnostic tools. Although no formal agreement was executed,

Volvo and WPI jointly developed specifications for the customized

IDEA project and WPI began customizing IDEA in March 1996.

The parties entered a formal agreement in June 1996,

controlling the transaction. The agreement provided a schedule

pursuant to which WPI was to deliver various stages of the final

product. Volvo in turn had to supply necessary information

regarding SID, among other things, to WPI so that WPI could

design the tools appropriately. The contract provided that if

2 the final product was not delivered and accepted by Volvo by

January 7, 1997, Volvo could terminate the contract and seek a

refund of its expenditures. There were clauses establishing

payment schedules and requiring any modification of the

specifications to be in writing and accepted by the parties.

At the time the agreement was signed both parties were

already experiencing difficulties. At WPI development proceeded

more slowly than expected. Moreover, WPI experienced changes in

management and personnel. In assuming responsibility for the

Volvo project, the new WPI personnel began to realize the extent

of WPI's commitments and re-evaluate its ability to meet them

within budget and on time. Volvo was also flagging. The

development of SID and the provision of information necessary for

WPI to meet its obligations had fallen behind schedule.

The parties therefore included in the June 1996 agreement an

addendum that modified the schedule in the body of the contract

by adding one month to each of the original dates. Moreover, the

addendum modified the work that WPI was to perform. Rather than

developing a system that integrated with SID, WPI was to develop

a stand alone system.

Difficulties in meeting obligations persisted. In response

to a September 27, 1996, letter from WPI seeking to modify the

schedule and establish a release date for certain phases in

3 November and December, 1996, Volvo asserted that WPI was in

material breach. Throughout October the parties negotiated,

culminating in an apparent agreement in late October or early

November on a new schedule that identified various "deliverables"

and the dates on which they were to be delivered. WPI sent Volvo

a letter identifying the project schedule and deliverables, and

Volvo responded by providing its schedule and deliverables,

stating that they hoped it did not differ from WPI's but that

discussions would follow. The new schedule provided that the

final product was to be delivered by May 1, 1997. Internal

memoranda of WPI indicate that WPI identified incongruities

between its expectations and Volvo's.

The parties proceeded to perform under the altered time

frames. However, in a January 30, 1997, letter, WPI indicated to

Volvo that there was additional work to be done beyond the

original scope of the agreement and that this would take

additional time and money. Volvo responded that there was

nothing new beyond the original scope of the project. After

reviewing its records, WPI found past documents that included

those features WPI had thought were new and constituted

additional work. In a February 7, 1997, letter, WPI wrote Volvo

acknowledging the fact that the contested features were included

in earlier specifications. However, WPI asserted that in

4 November the parties had restarted the project and had come to a

similar level of understanding regarding the work to be done,

which did not include the contested features.

On February 26, 1997, WPI sent a letter to Volvo proposing a

solution that would address the contested features, stating that

"numerous additional items would not make the May deliverable"

and that there was "too much work to do and [WPI'] list of

enhancements seems to grow by the week." La Liberte Aff. Ex. 42.

"Should Volvo wish to accelerate the schedule for these items, we

would need to add contract programmers to the project and would

propose charging Volvo our cost for these additional resources."

Id. On March 27, 1997, Volvo asserted that WPI was in material

breach of the contract and terminated the agreement.

On September 18, 1997, WPI filed this action asserting

breach of contract, breach of covenant of good faith, and unjust

enrichment. Volvo answered and similarly asserted counterclaims

of breach of contract, breach of covenant of good faith and

unjust enrichment. In this motion Volvo seeks summary judgment

on WPI's claims because WPI allegedly repudiated the contract.

Volvo also seeks summary judgment on its claims asserting that it

is entitled to reimbursement of all money paid by Volvo to WPI

pursuant to the contract, as well as to attorney fees.

5 Discussion

The role of summary judgment is "to pierce the boilerplate

of the pleadings and assay the parties' proof in order to

determine whether trial is actually reguired." Snow v.

Harnischfeger Corp.,

(1st Cir. 1993) (guoting

Wynne v. Tufts Univ. Sch. of Med.,

(1st Cir.

1992)). The court may only grant a motion for summary judgment

where the "pleadings, depositions, answers to interrogatories,

and admissions on file, together with the affidavits, if any,

show that there is no genuine issue as to any material fact and

that the moving party is entitled to a judgment as a matter of

law." Fed. R. Civ. P. 56(c). The party seeking summary judgment

bears the initial burden of establishing the lack of a genuine

issue of material fact. See Celotex Corp. v. Catrett,

(1986); Quintero de Quintero v. Aponte-Rogue,

(1st Cir. 1992). The court must view the entire

record in the light most favorable to the nonmovant, "'indulging

all reasonable inferences in that party's favor.'" Mesnick v.

General Elec. Co.,

(1st Cir. 1991) (guoting

Griqqs-Rvan v. Smith,

(1st Cir. 1990)) .

However, once the defendant has submitted a properly supported

motion for summary judgment, the plaintiff "may not rest upon

mere allegation or denials of his [its] pleading, but must set

6 forth specific facts showing that there is a genuine issue for

trial." Anderson v. Liberty Lobby, Inc.,

(1986) (citing Fed. R. Civ. P. 56(e)).

As a preliminary issue, WPI asserts that Volvo is barred

from asserting anticipatory repudiation in support of summary

judgment because it is an affirmative defense and Volvo failed to

assert it in its answer. See Fed. R. Civ. P. 8(c). Volvo

contests the characterization of anticipatory repudiation as an

affirmative defense. It also asserts that its answer

sufficiently raised the defense and that in any event WPI had

notice of it and suffered no prejudice given Volvo's answer and

counterclaims.

"Generally speaking, failure to plead an affirmative defense

results in a waiver of the defense and the exclusion of all

evidence relevant to it." Conjugal Partnership Comprised of

Joseph Jones and Venetta Jones v. Conjugal Partnership Comprised

of Arthur Pineda and Joni Pineda,

(1st Cir.

1994). This rule is intended to ensure that the opposing party

has "notice of the defense and a chance to develop evidence and

offer arguments to controvert the defense." Wolf v. Reliance

Standard Life Ins. Co.,

(1st Cir. 1995). Given

the purpose behind the 'raise or waive rule,' the First Circuit

has held that "'[w]hen there is no prejudice and when fairness

7 dictates, the strictures of [the raise or waive] rule may be

relaxed.'" Jones v. Pineda,

(quoting Jakobsen v.

Massachusetts Port Authority,

(1st Cir. 1975)).

As specifically pertinent to this case, where there is no

prejudice, courts have allowed parties to raise affirmative

defenses for the first time in post-answer motions. See Sanders

v. Department of the Army,

(8th Cir. 1992)

(affirmative defense raised in motion to dismiss allowed and

formality of amended complaint unnecessary); Grant v. Preferred

Research, Inc.,

(11th Cir. 1989) (no prejudice

where plaintiff received notice of affirmative defense in summary

judgment motion); Rivera v. Anaya,

(9th Cir.

1984); Devito v. Pension Plan of Local 819 I.B.T. Pension Fund,

(S.D.N.Y. 1997) ("numerous courts have held

that '[a]bsent prejudice to the plaintiff, a defendant may raise

an affirmative defense [such as statute of limitations] in a

motion for summary judgment for the first time.'") (quotations

and citations omitted) (citing cases) .

The court assumes for the purposes of this discussion that

anticipatory repudiation is an affirmative defense under Federal

Rule of Civil Procedure 8 (c). WPI has not asserted that it would

be prejudiced by Volvo's late assertion of anticipatory

repudiation. Nor under the circumstances of this case would prejudice seem likely. In its anticipatory repudiation defense,

Volvo alleges that WPI clearly and unequivocally stated it would

not deliver the specified software on time. Similarly, in its

counterclaim Volvo asserted WPI had breached its agreement by

attempting to change the specifications of the software and

failing to comply with delivery dates.1 Given the congruent

allegations underlying Volvo's counterclaim and its anticipatory

repudiation defense, the element of surprise in this case is

minimal. WPI had fair notice of Volvo's general assertions and

an opportunity to conduct discovery on them. This is evidenced

by WPI's well documented opposition to Volvo's motion for summary

judgment. In light this, and of WPI's failure to allege

prejudice, fairness dictates that Volvo be allowed to raise the

defense at this time.

Specifically, in its answer, Volvo counterclaims that "WPI breached the contract by, inter alia, failing to deliver any of the software phases on time, attempting to change the specifications of the software, and completely failing to deliver several of the software phases." Volvo Answer at 11. Volvo further states that it "has been excused from performance by reasons of WPI's acts or conduct."

Volvo asserts as its tenth defense "[b]y its acts and conduct, the plaintiff has waived any rights it may have against the defendant . . . ." Volvo Answer at 9. I. Anticipatory Repudiation

Volvo asserts that it was entitled to terminate the contract

because WPI committed an anticipatory repudiation. Volvo bases

its defense of anticipatory repudiation on two letters sent by

Bradford Wild, the president of WPI, to Volvo on February 7,

1997, and February 26, 1997, as well as internal WPI memoranda.

Volvo asserts that in WPI's February correspondence Wild clearly

and unequivocally stated that WPI would not honor its obligations

under the contract. WPI asserts that a genuine issue of material

fact exists as to whether the parties modified their agreement,

replacing the specifications initially included in the June

agreement with other specifications and altering delivery dates.

WPI also asserts that the statements at issue were not

sufficiently unequivocal, definite statements of repudiation, but

were instead offers to compromise.

New Hampshire law provides that in certain circumstances a

party aggrieved by another party's repudiation of a contract not

yet fully performed may resort to any remedy for breach. See New

Hampshire Rev. Stat. Ann. ("RSA") § 382-A:2-6102. The official

comment to section 610 provides that "anticipatory repudiation

centers upon an overt communication of intention or an action

2Neither party disputes the applicability of New Hampshire's version of the UCC, and given their mutual reliance on it, both have implicitly acknowledged it controls the instant case.

10 which renders performance impossible or demonstrates a clear

determination not to continue with performance." RSA § 382-A:2-

610 comment 1. "[A] statement of intention not to perform except

on conditions which go beyond the contract" is a repudiation.

Id., comment 2. To constitute anticipatory repudiation, courts

have required statements to be clear, positive, and unequivocal.3

See Wallace Real Estate Inv. Inc. v. Groves,

(Wash. 1994) (en banc); Flat & Sons Co. v. Schupf,

(111. A p p . C t . 1995). Whether a party has indeed

anticipatorily repudiated a contract is a question of fact. See

Grace v. Insurance Co. of North America,

(Alaska 1997) (reversing and remanding summary judgment order

"for a factual determination whether INA in fact anticipatorily

repudiated its contractual obligations"); Alaska Pacific Trading

Co. v. Eaaon Forest Products Inc.,

(Wash. C t .

App. 1997) ("[T]he question of anticipatory repudiation is one of

fact. . . . This issue, too, may only be decided on summary

judgment if, taking all evidence in the light most favorable to

3Although the New Hampshire Supreme Court has not had the opportunity to address the statutory provisions for anticipatory repudiation, in section 610 New Hampshire has followed the Uniform Commercial Code's provisions regarding anticipatory repudiation of contracts. See RSA § 382-A:2-610 ("RSA"). The court therefore finds other states' treatment of their analogous versions of the UCC provision regarding anticipatory repudiation to be persuasive.

11 the non-moving party, reasonable minds can reach only one

conclusion."); Flat & Sons Co. v. Schupf,

(111. App. C t . 1995) ("Whether an anticipatory repudiation

occurred is a question of fact . . . ."); Jones v. Solomon,

(Ga. C t . App. 1993) ("It is a question for the

trier of fact as to whether any action of one party is sufficient

to constitute a repudiation of the contract and amount to an

anticipatory breach.").

The correspondence in which Volvo asserts WPI repudiated its

agreement employs language such as " [m]y current position is

. . . ," " [w]e must get together and discuss this topic in more

detail and " [w] e believe this work can be accomplished

but is beyond the scope of the current project." Tule Aff., Ex.

40 at 1, 3. WPI requests Volvo's "guidance as to replanning or

setting of priorities on additional work items." Id. at 3.

Wild's letter of February 26, 1997, speaks in terms of a

proposal. See Tule Aff. Ex. 42 ("I am prepared to offer a

proposal . . . .") .4 On the other hand. Wild states that certain

specifications would:

require additional YEARS - not months. The current

4Because there must have been an overt communication by WPI to Volvo establishing WPI's intention not to perform, Volvo's reliance on WPI's internal memorandum in this case is unwarranted.

12 DecisionKey/Volvo contractors and personnel cannot deliver these additional works items . . . .

Tule Aff., Ex. 42. He also stated that WPI's current position

was that it "could not commit to include [certain features] in

the current schedule." Tule Aff. Ex. 40 at 1.

The language employed, such as use of the term proposal,

implies a desire to negotiate. In contrast, WPI's statement that

it would take years to develop certain features might in some

circumstances strongly suggest repudiation. However, the facts

of this case undermine their significance in the summary judgment

context because the terms that the parties were operating under

are unclear on this record.

WPI and Volvo entered a formal agreement in June 1996, that

established specifications and delivery dates and governed the

parties' mutual obligations. After a conflict in which Volvo

asserted WPI was in material breach, WPI and Volvo appeared to

reach a compromise agreement. In an October 30, 1996, letter to

Volvo, WPI set out a new "scope of work and schedule of

deliverables for the remainder of the project through May 1,

1997." La Liberte Aff. Ex. W. Volvo responded sending WPI a

list of its expectations on deliverables and dates:

13 We have discussed the proposed delivery plan and made our notes and interpretations of what we expect in each delivery. Please take a look at Volvo's expectations. I hope that they do not differ from what is planned from WPI. We can discuss them in detail next Monday.

Id. Ex. X. Although internal WPI memoranda indicate that WPI was

aware of certain discrepancies, the discussions that followed are

not in the record and the parties then proceeded to operate under

the apparently modified agreement. Indeed, in Volvo's final

termination letter of March 27, 1997, Volvo referred to their

agreement setting specifications and delivery dates "as modified

in May and October 1996." La Liberte Aff. Ex. HH.

Courts have concluded that whether parties have modified a

contract is a guestion of fact. Zemco Mfg. Co. v. Pecoraro,

(Ind. App. C t . 1998) ("Questions regarding the

modification of a contract are ones of fact, and are to be

determined by the trier of fact upon the evidence of the case.");

Kiwanis Club v. de Kalafe, __ So.2d __ ,

(Fla.

Dis. C t . App. 1998) ("Whether a written contract has been

modified by subseguent oral agreement or by course of dealing is

a guestion of fact for the jury."); ALCA Const. Co., Inc. v.

Waterburv Housing Auth.,

(Conn. App. C t . 1997)

("'Whether the parties to a contract intended to modify the

contract is a guestion of fact.'") (guoting Newman & Partners v.

CFC Constr. Ltd.,

(1996)); Mavville v. Peerless

14 Ins. C o .,

(1996); Park Square Auto Station v.

American Locomotive Co.,

(1920). On the record

before the court, reasonable people could find that the parties

modified the original June 1996 agreement on or about October or

November 1996. On this record it is unclear what the terms of

the modified agreement, if modified, are.

The court concludes that genuine issues of material fact

exist as to whether the parties modified the original agreement,

thereby altering the specifications and delivery dates, and as to

whether WPI anticipatorily breached its agreement with Volvo.

The court therefore denies Volvo's motions for summary judgment

on WPI's claims.

The court finds Volvo's reliance on Government of Republic

of China v. Compass Communication,

(D.C. 1979)

unpersuasive. Among other things, the court in Compass

specifically stated that the defendant had failed "to produce

evidence of a writing signed by plaintiff extending the time for

performance."

at 130 9. Here there is evidence that the

parties may have modified the contract.

II. Reimbursement

Volvo asserts that it has a contractual right to

reimbursement of funds paid to WPI. Volvo bases the assertion

15 upon section 3.2 of the original June 1996 agreement, titled

"Completion Date." La Liberte Aff. Ex. K at 4. Specifically,

Volvo relies upon the following language:

If the System has not been deemed accepted by Customer in accordance with Section 4 by January 7th, 1997, Customer, at its sole option and at any time prior to the System being accepted, may demand return of all payments made to Developer . . . .

This was modified once in addendum D of the original

agreement, extending the date by one month and altering the

deliverable. See

Addendum D. As discussed above, a genuine

issue of material fact exists as to whether the parties modified

the contract, extending delivery dates and the scope of work. A

reasonable inference is that such a modification might also

change the agreed upon completion date and affect this clause as

well. As such, Volvo's motion for summary judgment on this

ground is denied as well.

Conclusion

In light of the above discussion, Volvo's motion for summary

judgment is denied, as is its reguest for a hearing on the

summary judgment motion (document no. 13).

Based on what the court has learned of this case to date, it

is the opinion of the court that the parties would be well

advised to engage in some form of alternative dispute resolution

16 prior to trial. Therefore, the court directs counsel to explore

the matter and file a status report with the court by March 12,

1999.

SO ORDERED.

Joseph A. DiClerico, Jr. District Judge

February 23, 1999

cc: Thomas J. Donovan, Esquire John C. LaLiberte, Esquire

17