Gadre v. Hexanika, Inc.

Background

Makarand Gadre brought this action against Hexanika, Inc. seeking unpaid wages and other compensation. Gadre alleged that he worked for Hexanika as a consultant and chief technology officer from 2015 through 2021 and was owed $120,500 in unpaid monthly wages. Hexanika disputed the scope of his work and asserted counterclaims for breach of contract, unjust enrichment, and fraud.

The dispute involved agreements entered in 2015, 2017, 2018, 2020, and 2021. Hexanika contended that Gadre failed to provide functioning software, did not adequately address coding problems, failed to turn over code for repair and integration, and did not obtain requested liability insurance. Hexanika also presented evidence that it paid Gadre approximately $157,000 between 2018 and 2020, spent an estimated $160,000 on code cleanup and related work, and lost or risked losing client business because of software problems. Gadre disputed Hexanika’s account and argued that Hexanika had not shown adequate performance or damages.

The opinion noted a close question concerning subject-matter jurisdiction because Gadre was domiciled in India and Hexanika stated that it had principal places of business in Arkansas and India. The court concluded that Gadre’s allegations, together with Hexanika’s acknowledgment that Arkansas was one of its principal places of business, appeared sufficient to support diversity jurisdiction, and Hexanika had not adequately challenged jurisdiction.

Summary-judgment standard

Summary judgment is appropriate when there is no genuine dispute about a material fact and the moving party is entitled to judgment as a matter of law. The court must view the evidence in the light most favorable to the party opposing the motion. A genuine dispute exists when a reasonable jury could find for that opposing party.

Breach of contract

The court denied Gadre’s motion for summary judgment on Hexanika’s breach-of-contract counterclaim. Under New York law, the claim required Hexanika to show an agreement, Hexanika’s adequate performance, Gadre’s breach, and damages.

The court found sufficient evidence to create trial-worthy factual disputes about each element. The agreements required Gadre to use his best efforts, perform services competently and professionally, and maintain liability insurance when requested. Hexanika’s evidence that the software repeatedly failed tests, lacked basic functions, contributed to client cancellations or threatened cancellations, and was not repaired despite requests created a factual dispute about whether Gadre breached those obligations.

There was also a factual dispute about whether Hexanika adequately performed its own obligations. The payment records tended to show that Hexanika paid Gadre approximately $157,000, while the agreements required payment only for actual services rendered and, under the 2017 agreement, conditioned payment on Hexanika’s receipt of client payment. The court also could not determine as a matter of law whether Gadre’s alleged breach excused Hexanika from further performance.

The court further concluded that Hexanika had not completely failed to provide evidence of damages. Its evidence included the estimated $160,000 cost of repairing the software and a client’s alleged cancellation of a $78,000 contract. The court declined to decide damages because liability had not yet been determined, making a summary-judgment ruling on damages premature.

Unjust enrichment

The court denied Gadre’s motion for summary judgment on Hexanika’s unjust-enrichment counterclaim. Under New York law, unjust enrichment requires proof that the defendant benefited, that the benefit came at the plaintiff’s expense, and that fairness requires restitution.

An unjust-enrichment claim generally cannot proceed when an express contract covers the same subject matter, but it may be pleaded as an alternative when it is uncertain whether a contract governs. Here, the parties disputed the periods during which Gadre worked for Hexanika, and the submitted agreements did not expressly cover January 1, 2016, through August 31, 2017. The court therefore found that some work might fall outside the express contracts. It also found evidence that Hexanika paid Gadre while he allegedly had not fulfilled his duties. The court denied summary judgment, while noting that Hexanika could not obtain a double recovery for the same injury.

Fraud

The court granted Gadre’s motion for summary judgment on Hexanika’s fraud counterclaim. Under New York law, fraud requires clear and convincing evidence of a material misrepresentation or omission, knowledge that it was false, an intent to defraud, reasonable reliance, and resulting damages.

Hexanika alleged that Gadre intentionally misrepresented that Hexanika had entered into a second service agreement in order to make Hexanika commit to repaying allegedly owed money. But Hexanika’s factual statement and supporting affidavit did not identify evidence of a material misrepresentation or omission made with knowledge of falsity and an intent to defraud. The court therefore concluded that the fraud claim had to be dismissed.

Disposition

The court granted in part and denied in part Gadre’s motion for summary judgment on Hexanika’s counterclaims. The motion was granted as to the fraud claim and denied as to the breach-of-contract and unjust-enrichment claims. The Clerk of Court was directed to close the motion at Docket Number 65.