Judge grants Project Management Institute's dismissal of software suit

By John Severance | Apr 15, 2019

SAN DIEGO – A federal judge split the difference in a project management software case involving defendant Project Management Institute and the plaintiff Workplace Technologies Research Inc.

Judge Jeffrey T. Miller of the U.S. District Court of the Southern District of California denied PMI’s motion to dismiss for lack of personal jurisdiction but granted its motion to dismiss for failure to state a claim in a ruling filed March 18.

The case had its beginnings in late 2013 when WTRI asked PMI for a letter of support in hopes of submitting a grant proposal to the National Science Foundation. WTRI and PMI were collaborating in their quest to develop educational project management virtual software. They hoped that the software that they developed would allow users to build their own project management skills in a virtual world, the ruling states.

The ruling states that PMI "conditioned its letter of support to the NSF on WTRI agreeing to enter into a software development and purchase contract."

Originally, "PMI agreed to pay at least $10 million to WTRI for development of the software, an interest in the completed software, and the exclusive sales channel for the finished product. WTRI then informed NSF of its forthcoming joint grant proposal with PMI," the ruling states.

According to the ruling, "the NSF ultimately invested $1.25 million in the proposal, with $500,000 of that amount representing a matching contribution to PMI’s first payment of $1 million under the parties’ proposed development agreement. After PMI knew that WTRI had committed to the NSF, PMI reduced the amount it was willing to pay to $4 million. WTRI alleges that it was unable to decline this offer as it had already committed to the NSF.’’

In this case, to state a claim of fair dealing, WTRI has to allege that there is a contract, and "'(1) the existence of a contract; (2) [its] performance of the contract, or a legally cognizable excuse for nonperformance; (3) defendants’ breach; and (4) resulting damage,” the ruling states.

PMI argued WTRI did not state a claim because it was similar to the breach of contract claim.

Miller wrote that WTRI alleges that PMI breached its duty to act fairly and in good faith for three reasons. First, by “knowingly and willfully misrepresenting its intent to perform its obligations under the development agreement.” 

The first amended complaint states that "PMI never intended to comply with the services agreement and that WTRI was informed, at some unstated point of time by an unnamed person, that PMI’s senior vice president 'had made the decision ‘some time ago’ to ‘fix things’ and ‘transform’ PMI by, in part, ‘killing’ the Alpha software project,'” according to the ruling.

As for the jurisdiction argument, the judge turned to the 9th Circuit Court of Appeals for some guidance when it comes to a nonresident defendant satisfying due process.

The 9th Circuit Court of Appeals uses a three-way test: 

"The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws; (2) the claim must be one which arises out of or relates to the defendant’s forum-related activities; and (3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable,” Miller cited.

"The plaintiff bears the burden of establishing the first two prongs and if successful, the burden shifts to the defendant to present a case that the exercise of jurisdiction would not be reasonable," Miller wrote.

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