TIBCO Software Inc. v. Procare Portal, LLC

Background

TIBCO Software Inc. licensed several software products and related maintenance to Procare Portal, LLC under a three-year agreement. The agreement required ProCARE to pay a total subscription fee of $124,020 in installments. It also contained warranty, termination, payment, and late-fee provisions.

TIBCO alleged that ProCARE terminated the agreement and stopped making payments, leaving an unpaid balance. ProCARE alleged that TIBCO had represented during negotiations that its products could integrate successfully with ProCARE’s existing system, that any needed customization or coding was within TIBCO’s ability, and that the integration costs were included in the total software price. ProCARE further alleged that the software and integration did not work as promised and that it had to develop a workaround at significant time and expense.

ProCARE brought counterclaims for breach of contract, breach of express warranty, intentional misrepresentation, negligent misrepresentation, and breach of the covenant of good faith and fair dealing. TIBCO moved to dismiss only the intentional- and negligent-misrepresentation counterclaims, which were ProCARE’s third and fourth counterclaims.

Legal Standard

The court explained that Federal Rule of Civil Procedure 9(b) requires a party alleging fraud to state the circumstances of the alleged misconduct with particularity. In practical terms, the pleading must provide the relevant “who, what, when, where, and how.” The rule allows a party to allege a person’s intent and knowledge generally, but requires more specific factual allegations about the alleged misrepresentation.

Under California law, intentional misrepresentation requires a false representation, knowledge that it was false, an intent to induce reliance, justifiable reliance, and resulting damage. Negligent misrepresentation does not require knowledge that the statement was false, but requires a factual misrepresentation by someone who lacked reasonable grounds to believe it was true.

Analysis

The court held that ProCARE had not pleaded either misrepresentation claim with the required particularity. ProCARE alleged that an unidentified TIBCO sales representative contacted it at some point, that TIBCO made general assurances during negotiations about integration and cost, and that the products later failed to integrate and had other problems.

The court found that these allegations did not identify the specific statements TIBCO made, explain how the statements were false, identify who made them, or state when and where they were made. Allegations that a product did not work as promised, without the required details about the alleged false statements, were insufficient under Rule 9(b).

Disposition

The court granted TIBCO’s motion to dismiss ProCARE’s third and fourth counterclaims. The court granted the motion with leave to amend, and ordered ProCARE to amend its counterclaims within 45 days after the parties’ mediation unless the parties stipulated otherwise or the court issued a further order. The order disposed of ECF No. 16.