Tradeshift, Inc. v. BuyerQuest, Inc.

Background

Tradeshift and BuyerQuest worked together on a project for J.M. Smucker, Inc. Tradeshift contracted with Smucker to provide software and implementation services, while Tradeshift and BuyerQuest entered separate agreements governing BuyerQuest’s role and payments. Their Partner Agreement included a confidentiality clause restricting each party’s use of the other’s confidential information to purposes necessary to perform the agreement.

After Smucker terminated its agreement with Tradeshift, Tradeshift alleged that BuyerQuest had worked to replace Tradeshift, disparaged it to Smucker, and used Tradeshift’s confidential information to develop software for that purpose. BuyerQuest characterized its conduct as a good-faith effort to protect the project and improve its chances of being paid. It also disputed whether the information was confidential and argued that Smucker independently decided to terminate Tradeshift.

Tradeshift’s original complaint alleged that BuyerQuest breached the Partner Agreement, the Cross Selling Attachment, and the reseller order form by changing the scope of the Smucker project without consent, failing to provide required implementation support, and refusing to perform additional work. It also asserted claims for breach of the duty of good faith and fair dealing and tortious interference with Tradeshift’s Smucker agreement.

Discovery ruling

Tradeshift sought additional discovery concerning its theory that BuyerQuest misused confidential information. The magistrate judge denied that request because the theory was outside the complaint. Judge Seeborg reviewed that nondispositive ruling under the clearly erroneous or contrary-to-law standard and denied Tradeshift’s motion for relief. He concluded that the original complaint did not give BuyerQuest notice that Tradeshift accused it of breaching confidentiality provisions. The court stated that the complaint’s use of “for example” did not expand discovery to every possible breach theory.

Amendment of the complaint

The court granted Tradeshift leave to amend its complaint to add the confidential-information theory. Judge Seeborg concluded that the proposed theory was not futile because the contract prohibited improper use of confidential information, even without disclosure to a third party. Whether the documents were actually confidential and whether BuyerQuest used them improperly were factual questions for the jury.

Although the court found that Tradeshift arguably should have acted sooner, it found no substantial prejudice to BuyerQuest. The trial had already been delayed for unrelated reasons, leaving time for any additional discovery. The court therefore granted leave to amend.

Amendment of the answer

The court also granted BuyerQuest leave to amend its answer. BuyerQuest sought to withdraw some defenses, add factual support to others, and add defenses based on justification or privilege, limitation of liability, and setoff. The court found that BuyerQuest’s delay was undue and its original pleadings were inadequate in some respects, but concluded that Tradeshift had general notice of the defenses and would not suffer prejudice because the trial delay allowed additional discovery. The court found no sufficiently serious bad faith to deny amendment.

Summary judgment

Both parties’ motions for summary judgment were denied. Summary judgment is a ruling without a trial that is available only when no genuine dispute exists about a fact important to the outcome and the moving party is entitled to judgment as a matter of law.

On the contract claims, the court rejected BuyerQuest’s argument that Tradeshift’s lost-profit damages were necessarily barred as special damages. The court stated that lost profits can be general damages when they naturally and necessarily result from a breach, and that the alleged misuse of confidential information could have caused Tradeshift to lose profits from Smucker. Whether the contract’s liability provisions ultimately limit damages was left for the factfinder or trial as appropriate.

The court identified factual disputes concerning whether Tradeshift’s late payments were a material breach, whether Smucker’s termination was independently decided, whether the documents were confidential, and whether the parties’ agreements authorized BuyerQuest’s conduct.

The court also denied both sides’ requests for summary adjudication on tortious interference. It found factual questions about BuyerQuest’s intent and whether BuyerQuest’s conduct contributed to Smucker’s decision. The court stated that a factfinder would be needed to assess witness credibility and could find for either side.

BuyerQuest’s motion for summary judgment on the good-faith-and-fair-dealing claim was also denied. The court concluded that the claim was not entirely duplicative of the contract claim and that a material factual dispute remained about whether the parties intended the agreements to authorize BuyerQuest’s conduct.

Evidence objections

The parties’ separate evidentiary motions and replies were procedurally improper because the applicable local rules required evidentiary and procedural objections to be included in the underlying motion, opposition, or reply. The court therefore disregarded those improper filings. It considered properly raised objections in the briefs and denied them. The court also rejected BuyerQuest’s general objection that Tradeshift’s evidence was unauthenticated, while noting that more detailed objections could be raised later in proper form.

Sealing requests

The court denied the parties’ requests to seal documents and large portions of their papers without prejudice. It found the requests overbroad, inadequately tailored, and largely supported by boilerplate or confidentiality designations rather than specific reasons overcoming the presumption of public access. The parties could meet and confer and submit a narrower sealing proposal.

Disposition

The motion for relief from the magistrate judge’s order was denied. Leave to amend the complaint and leave to amend the answer were granted. Both summary judgment motions were denied. Improperly filed evidentiary objections were disregarded, properly raised evidentiary objections were denied, and the motions to seal were denied without prejudice.