Genetec, Inc. v. PROS, Inc

Background

Genetec sued PROS after contracting for a three-year subscription to PROS’s Smart CPQ software and related implementation and training services. Genetec asserted intentional and negligent misrepresentation claims. It alleged that PROS misrepresented, among other things, its customer history, the number and nature of its CPQ products, and Smart CPQ’s compatibility with Microsoft Dynamics and the Dynamics mobile application.

PROS moved for summary judgment, a procedure allowing judgment without a trial when the evidence shows no genuine dispute over a fact that could affect the outcome. PROS sought judgment on Genetec’s surviving misrepresentation claims and on PROS’s breach-of-contract counterclaim. The court had previously dismissed Genetec’s breach-of-contract claims.

Genetec’s Misrepresentation Claims

The court analyzed the claims under New York law. An intentional-misrepresentation claim required Genetec to show a material false statement or omission, knowledge of its falsity, an intent to defraud, reasonable reliance, and resulting damages. A negligent-misrepresentation claim required a material false statement or omission, reasonable reliance, resulting damages, a duty arising from a special relationship, and that PROS should have known the information was false.

Alleged Separate CPQ Product

Genetec argued that PROS failed to disclose that it was developing a separate Performance Quoting product and intended to implement it for Genetec. The court held that Genetec had not pleaded this particular omission with the required detail in its operative complaint. It also held that Genetec could not raise a new misrepresentation theory for the first time in its opposition to summary judgment.

The court added that, even if it considered the theory, Genetec had not identified a specific statement or omission by PROS. The pre-sale presentations were general overviews and generic demonstrations of Smart CPQ’s capabilities, not descriptions of the precise configuration that Genetec would receive. The parties were expected to determine those details later in a Solution Design Document. The court therefore granted summary judgment to PROS on this theory.

Alleged Statements About Customers

Genetec argued that PROS misrepresented that Smart CPQ had many longstanding satisfied customers. The court rejected the claim. It found that the presentation’s statements about PROS’s more than 900 implementations, renewal rate, professionals, and customers in more than 55 countries referred broadly to PROS’s overall performance. They did not state that customers in those categories were using the particular version of Smart CPQ that Genetec would receive.

The court reached the same conclusion about a case study involving an unidentified United Kingdom-based company and a slide stating that Honeywell had achieved a faster quote turnaround. Neither presentation identified which CPQ product those customers used or represented that Genetec would receive the same product. The court also found that Genetec had not identified a particular false statement in later presentations. It granted summary judgment to PROS on the customer-related theories.

Compatibility with Microsoft Dynamics

Genetec claimed that PROS represented that Smart CPQ was compatible with Dynamics “out of the box,” meaning without extensive or complex additional engineering and development. The court found that the October 2019 document relied on by Genetec said only that Smart CPQ could be accessed from Dynamics through the application or a web browser. It did not say that the integration would be out of the box. The court found no other evidence of such a representation.

Genetec also claimed that PROS falsely represented that Smart CPQ worked through the Dynamics mobile application. The court acknowledged that the October 2019 document stated that users could access Smart CPQ through that application. But Genetec did not show that the statement was false when made. Evidence that a later version required access through a supported web browser did not establish that the earlier statement was false in October 2019. The court also found that any alleged omission about mobile-app compatibility was immaterial because Genetec had not identified the issue in its vendor analysis, negotiations, requirements list, or solution-design discussions, and the person who led its negotiations testified that he had not reviewed or considered the document before selecting PROS.

The court therefore held that PROS had made no material misrepresentation or omission supporting Genetec’s intentional or negligent misrepresentation claims and granted summary judgment to PROS on those claims.

PROS’s Breach-of-Contract Counterclaim

The parties had entered into a Subscription and Services Agreement, a Subscription Order, and a Work Order. The court held that the elements of PROS’s breach-of-contract claim were satisfied: an agreement existed, PROS had adequately performed, Genetec breached the agreement, and the breach caused damages.

Under the agreement, Genetec could terminate the subscription agreement for PROS’s material breach only if PROS failed to cure that breach within 30 days after written notice. The court held that PROS had not breached the agreement and that Genetec had terminated it without giving PROS the required opportunity to cure. Genetec also revoked PROS’s system access, did not restore it after PROS requested access, and therefore prevented PROS from addressing the claimed problems.

PROS sought $697,924.48 for unpaid subscription fees, unpaid professional services, attorneys’ fees, and interest. Genetec primarily argued that New York’s Uniform Commercial Code allowed it to reject nonconforming goods. The court held that Genetec had forfeited that defense by not raising it earlier. It also held that the Uniform Commercial Code did not apply because the agreement primarily involved software-as-a-service and web-based access, not the sale of tangible goods. New York common law therefore governed the contract. The court granted summary judgment to PROS on its breach-of-contract counterclaim.

Disposition

The court granted PROS’s motion for summary judgment. It entered judgment for PROS on Genetec’s misrepresentation claims and granted PROS summary judgment on its breach-of-contract counterclaim. The Clerk was directed to terminate the motion and close the case.