Lynch v. Matterport, Inc

Background

Shawn Lynch brought this proposed class action against Matterport, Inc. and individual defendants. Matterport markets and sells 3D services, including software for manipulating 3D images and cloud storage. It also created the Matterport Service Partner program, which encouraged people to buy Matterport cameras and related subscriptions and then start businesses selling 3D scans.

Lynch alleged that Matterport’s marketing of the free program was deceptive. He said he invested money to qualify for and enroll in the program but received few of the expected benefits. He also alleged that Matterport’s Capture Services program competed with Matterport Service Partners and took away clients, including Cushman & Wakefield.

A previous order granted class certification only on whether the program’s terms of service barred a breach-of-contract claim based on Matterport’s Capture Services program. Matterport later obtained summary judgment on Lynch’s individual claims because the court found that those claims had already been litigated in a prior related proceeding. The court also ruled that I.C. Progress Inc. was the proper plaintiff for the implied-covenant claim, rather than Lynch individually, and allowed counsel to seek permission to amend if they could address the merits and show that I.C. Progress was in good standing under New York law.

Proposed Amendment

Rule 15 generally says that permission to amend a complaint should be freely given, but a court may deny amendment when it would be futile. An amendment is futile when it would not allow the complaint to proceed as a matter of law.

The court held that the proposed amendment was futile because the agreement did not create an implied duty requiring Matterport not to compete with Matterport Service Partners. Lynch relied on website statements saying that Matterport would match partners with nearby leads and provide tools and resources to support their businesses. The court found those statements too limited to support an implied promise not to compete.

The program’s written terms stated that Matterport might provide leads or marketing assistance in its discretion, was not required to promote any partner’s business, and could withhold promotion in its sole discretion. The court concluded that Matterport had not undertaken additional contractual obligations beyond possibly providing occasional leads and marketing assistance. It also noted that Lynch had received 44 leads, although he received none in 2022, and that the terms did not promise a particular number of leads.

The court distinguished a case involving a distributor’s failure to perform express contractual responsibilities. Here, the court found no express contractual duty that Matterport failed to perform. It further ruled that Matterport was free to compete for Cushman & Wakefield because nothing in the contract prohibited that competition.

Standing and Sealing

The court stated that I.C. Progress had standing to pursue the implied-covenant claim and that Lynch had provided a declaration stating that the corporation had been in good standing under New York law since its creation in 2013.

The court separately denied the administrative motion to seal the expert report of Brian Ellman. Judicial records are generally presumed open to the public, and a party seeking to seal them must provide specific, compelling reasons. The court found the request overbroad because it did not identify what information required sealing. Lynch’s counsel stated that he lacked personal knowledge of why the report had been designated confidential, and defense counsel did not provide a reason for sealing it. The court therefore found that the request was not narrowly tailored.

Disposition

The court denied plaintiff’s motion for leave to file a third amended complaint. It also denied plaintiff’s administrative motion to seal. The court stated that judgment would be entered for defendant.