Qwerty Software, Inc. v McKinsey & Co., Inc.

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[*1] Qwerty Software, Inc. v McKinsey & Co., Inc. 2005 NY Slip Op 51390(U) [9 Misc 3d 1103(A)] Decided on July 11, 2005 Supreme Court, New York County Heitler, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on July 11, 2005
Supreme Court, New York County

Qwerty Software, Inc., Plaintiff,

against

McKinsey & Company, Inc., MCKINSEY & COMPANY, INC. UNITED STATES and GLOBAL CONSULTANCY, INC., Defendants.



601340/02

Sherry Klein Heitler, J.

Plaintiff Qwerty Software, Inc. (Qwerty) commenced this action, sounding in contract and tort, to recover damages from defendants as a result of failed software consulting arrangements. Prior motion practice resulted in a dismissal of two causes of action. The remaining causes of action, that of breach of contract, tortious interference with contract, and conspiracy, are the subject of defendants McKinsey & Company, Inc. and McKinsey & Company Inc., United States' (together, McKinsey) current motion. McKinsey now seeks an order, pursuant to CPLR 3212, dismissing plaintiff's complaint as against McKinsey, as well as an order granting summary judgment in its favor on its cross claim for indemnification against co-defendant Global Consultancy, Inc. (Global).

The facts of this matter were set forth at length in this court's previous decision and order dated January 8, 2004. As relevant here, on or about January 1, 2001, Qwerty and McKinsey entered into a one-year contract (Qwerty-McKinsey contract) for Qwerty to develop software involving an internet-based resume tracking system (tracking software). This contract was signed by Qwerty president, Suresh Easwar (Easwar) and by McKinsey project manager John Elliot, and specifically incorporates certain terms from a 1998 consulting agreement (1998 Agreement) between McKinsey and another consulting company owned by Easwar, Sigma Technologies, Inc. (Sigma). Approximately two months after, in March of 2001, Qwerty subcontracted with Global (Global sub-contract) to engage the services of Global's president Santosh Otwani (Otwani), to help with the development of McKinsey's tracking software. By prior order of this court, it was determined that the Qwerty-McKinsey contract provided for McKinsey's ownership of the tracking software. Upon the completion of discovery and the filing of the note of issue, McKinsey again seeks a judgment in its favor, this time calling into question the viability of plaintiff's remaining causes of action.

With respect to plaintiff's breach of contract claim, it is undisputed that McKinsey unilaterally terminated the Qwerty-McKinsey contract on August 3, 2001. This decision, effectively, halted the work of Otwani and another programmer, Raja Alagarsamy, who had been working on the development of the tracking software pursuant to the Global sub-contract with Qwerty. However, it is also undisputed that shortly after McKinsey terminated the Qwerty-McKinsey contact, [*2]it executed an agreement with Global, the Global Consulting Agreement, pursuant to which Otwani was to return to McKinsey to perform computer/ software-related services. McKinsey asserts that the contract between McKinsey and Qwerty had an at-will provision, entitling it (McKinsey) to terminate the agreement at any time and for any reason or no reason. Having terminated that contract, McKinsey believed itself free to contract with any party, including Global, for software-related consulting services.

Qwerty disputes whether its agreement with McKinsey was an at-will contract, and whether the services which Otwani performed for McKinsey, under the Global Consulting Agreement, were a continuation of the tracking software project. Qwerty claims this was improper under the Global sub-contract. These issues are still in dispute.

The evidence submitted in support of the motion reveals a copy of the January 1, 2001 letter from McKinsey to Easwar, which purports to be a one-page, written contract, that makes reference to, and incorporates large parts of, the 1998 Agreement. The letter states, in relevant part: This letter will confirm our understanding regarding certain additional services which we have requested, and which you have agreed to render to us. McKinsey . . . and Qwerty . . . are parties to a Consulting Agreement dated as of November 1st, 1998 (the "Agreement") which confirms certain understandings and business arrangements in connection with the engagement of Consultant by McKinsey to provide certain consulting services.In addition to the Services (as defined in the Agreement), Consultant hereby agrees to provide the additional services set forth on Exhibit A annexed hereto and incorporated herein by reference (the "Additional Services"). Except as set forth below, the parties hereby agree that the terms and conditions of the Agreement shall govern all such Additional Services:¶ With respect to the Additional Services, the termination date of the Agreement shall be January 2, 2002.

¶ Aggregate fees for the Additional Services shall not exceed $190 per hour. If this letter correctly sets forth our understanding, please sign below whereupon it will constitute a binding agreement between us. (See, Defendant's Exhibit 11.)

Accepting the terms as written, Easwar signed and dated the agreement on February 9, 2001, effectively creating the Qwerty-McKinsey contract. Among the terms of the 1998 Agreement

which were incorporated into the contract, were the following provisions found in paragraph One,

"Services/ Payment": McKinsey may terminate the Services at any time, for any or no reason, and shall be liable only for a pro rata portion of Consultant's [Sigma's] time and materials (if any) up to the time of termination. Consultant may terminate its Services only for cause. Should any work other than the Services be provided, or should such work or the Services be provided after the anticipated completion date, such "Additional Services" shall be subject to the terms of this [*3]Agreement, except Consultant shall be compensated at McKinsey's discretion, which may be significantly less than Consultant's current compensation. It is Consultant's responsibility to secure written approval of any particular compensation or other terms regarding Additional Services.

The evidence is clear that when Easwar executed the contract on February 9, 2001, he agreed to the above provision which allowed McKinsey to terminate Qwerty's services "at any time, for any or no reason." McKinsey has made a prima facie showing of entitlement to a summary dismissal of the breach of contract cause of action.

In opposition, plaintiff points to the fact that Easwar signed his own name to the Qwerty-McKinsey contract, without providing any indication as to whether he was executing the agreement in an individual capacity or in his capacity as the president of Qwerty. Qwerty's attempt to create a question of fact out of his February 9, 2001 signature is unavailing. As stated in the prior order, a pattern of doing business emerged, over the course of several years, which demonstrates that McKinsey and a company in which Easwar was a principal, routinely entered into agreements for Easwar's services, and that Easwar routinely signed these agreements without an indication of representative capacity.

Plaintiff also argues that factual questions exist as to the parties' intent and understanding when they entered into the contract. Easwar argues that his understanding of the agreement was that he could reasonably rely on having one year's worth of work and compensation, and that McKinsey did not have the ability to fire him/ Qwerty prior to the completion of that period of time. When faced with the definition of an "at-will" contract, Easwar expresses dissatisfaction with what he calls McKinsey's standard operating procedure of requiring consultants, such as himself, to sign a preprinted, vendor consulting agreement at the moment it is proffered, without allowing vendors, including himself, an opportunity to show it to an attorney for an explanation of, or for negotiation of, any of the stated terms, including the "at-will" provision.

Despite the unfortunate result for Qwerty, the clear, unambiguous terms of the Qwerty-McKinsey contract cannot be avoided by claims of misunderstanding, or of uneven bargaining power. It is irrelevant that a party was ignorant of the legal ramifications of an agreement (Columbus Trust Co. v Campolo, 110 AD2d 616, 617 [2nd Dept], affd 66 NY2d 701 [1985]), or did not read it (Union Natl. Bank v Schurm, 87 AD2d 682, 683 [3rd Dept 1982]), or was confronted with "a pile of papers . . . [shoved] under my nose" (Norstar Bank of Upstate NY v Office Control Sys., 165 AD2d 265, 267 [3rd Dept 1991]). In short, plaintiff is bound by the agreement it signed, not by what Easwar allegedly understood. No confusion exists regarding the contracting parties' decision to incorporate considerable portions of the 1998 Agreement into the Qwerty-McKinsey contract. The fact that Easwar provided services to McKinsey through various corporate entities does not alter the at-will provisions which were incorporated, directly or by reference, into each subsequent agreement. There are no questions of material fact with respect to plaintiff's claim for breach of contract, and this cause of action is, accordingly, dismissed.

McKinsey's motion for summary judgment dismissing plaintiff's cause of action for tortious interference with a contract is, however, denied.

McKinsey argues that it cannot be guilty of intentional interference with the contract between Qwerty and Global because the at-will provision in the Qwerty-McKinsey contract entitled McKinsey to terminate its contract with Qwerty at any time prior to completion. The effect of its [*4]decision to terminate its contract with Qwerty was to render Global's performance under the Global sub-contract impossible. According to McKinsey, this, in effect, freed up Global/Otwani to find other avenues for work, and when McKinsey sought to hire Otwani to work on other software-related projects, there was no longer an existing, breachable contract between Global and Qwerty. In response, Qwerty argues the very same facts in support of its claim for tortious interference with a contract.

The elements of a tortious interference claim are: the existence of a valid contract between the plaintiff and a third party; the defendant's knowledge of that contract; the defendant's intentional procurement of the third party's breach of the contract without justification; and an actual breach of the contract and damages resulting from such breach (Israel v Wood Dolson Co., 1 NY2d 116, 120 [1956]). To this end, Qwerty argues that prior to the August 3, 2001termination date, McKinsey took all necessary steps to cut Qwerty out of the picture, causing a breach in Qwerty's sub-contract with Global. In other words, McKinsey knew about Qwerty's contractual agreement with Global, and with intent to disrupt that arrangement, McKinsey sought out the services of, and hired, Otwani/Global to complete the tracking software project, thereby causing Qwerty to lose expected income.

In an effort to obtain a dismissal of the tortious interference charge, McKinsey offers selected portions of the parties' deposition testimony. Unfortunately, neither party provided the court with a complete transcript of any of the depositions to which they make repeated reference, or from which they selected brief quotes. In this motion for summary judgment, the court finds itself hard-pressed to render the drastic relief requested by McKinsey, that of dismissing all remaining causes of action, based on what appear to be random selections from deposition transcripts, which are submitted out of context and without a framework, from which a true understanding cannot be had. As the procedural equivalent of a trial, summary judgment is only appropriate when it is clear that no triable issue of fact exists (Andre v Pomeroy, 35 NY2d 361, 364 [1974]). In this highly contentious action, the deposition excerpts submitted as proof often raise more questions than they resolve, require inferences to be drawn, and compel credibility determinations to be made. It is not the court's function, on a motion for summary judgment, to assess credibility, to draw inferences, or to make findings of fact (Ferrante v American Lung Assn., 90 NY2d 623, 631 [1997]; Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395, 404 [1957]). Defendant has, therefore, not met its burden on its motion for a summary judgment dismissal of the tortious interference claim, requiring this court to deny the motion at this time.

That aspect of McKinsey's motion that seeks a dismissal of Qwerty's cause of action for conspiracy is, however, granted. Under Qwerty's conspiracy theory, McKinsey and Global acted together to bypass, or to cut out, Qwerty from the tracking software project, causing Qwerty to sustain damages.

It is undisputed that under the Qwerty-McKinsey contract, McKinsey agreed to pay Qwerty at a rate of $190 per hour to work on the tracking software project, and that under the Global sub-contract, Qwerty agreed to pay Global at a rate of $75 per hour to work on the McKinsey tracking software project. According to Qwerty, a few months after Global (specifically, Otwani) began working on the project, McKinsey and Global got together and decided to eliminate Qwerty from the equation. McKinsey terminated its contract with Qwerty on August 3, 2001, and almost simultaneously, entered into an agreement with Global, obligating Otwani (by name) to complete [*5]the tracking software project, and McKinsey agreed to pay Global at a rate of $85 per hour for this work, or $10 an hour more than Global was receiving under its sub-contract with Qwerty. By eliminating Qwerty's participation, and by directly retaining Otwani, McKinsey allegedly caused Global to breach its contract with Qwerty.

Qwerty's conspiracy claim is, essentially, the underpinnings of Qwerty's tortious interference claim, and it has long been held that "'a mere conspiracy to commit a [tort] is never of itself a cause of action'" (Alexander & Alexander of New York, Inc. v Fritzen, 68 NY2d 968, 969 [1986];[quoting Brackett v Griswold, 112 NY 454, 467 [1889] [additional citations omitted]). In Brackett v Griswold, the Court of Appeals explained that: an allegation of conspiracy may be wholly disregarded and a recovery had, irrespective of such allegation, in case the plaintiff is able otherwise, to show the guilty participation of the defendant. In other words, the principles which govern an action for [the tort] are the same, whether the [tort] is alleged to have originated in a conspiracy, or to have been solely committed by a defendant without aid or co-operation

(id.).

On this motion for summary judgment, the court does not need to determine, or even to reach, the issue of whether McKinsey and Global conspired to interfere with the Global subcontract in order to grant McKinsey's motion for a dismissal of plaintiff's conspiracy claim. While Qwerty is not prevented from offering evidence of a conspiracy to prove its tortious interference claim, the conspiracy theory in and of itself, does not constitute a separate cause of action in this matter, and is, accordingly, dismissed.

The aspect of McKinsey's motion which seeks summary judgment in its favor on its cross claim for indemnification against Global is conditionally granted. McKinsey relies on paragraph eight of the Global Consulting Agreement, which specifically provides: [Global] agrees to indemnify McKinsey for any losses suffered by McKinsey resulting from the negligence of, willful misconduct of, infringement of another party's rights by or any failure to comply with this Agreement by, [Global], its employees or anyone working on its behalf, whether or not they have signed this Agreement and whether or not they were authorized by [Global] to receive any Confidential Information.

Global agreed to indemnify McKinsey in the event that McKinsey is held liable in this matter, as set forth above. Global's reliance on the fact that its signatory, Samir Doshi, did not review or understand the terms set forth in the "boilerplate" agreement with McKinsey, is unavailing. Neither Samir Doshi, nor any other party to this action, is relieved of the consequences of his failure to read and understand the contents of a document before signing it (Gillman v Chase Manhattan Bank, N.A., 73 NY2d 1 [1988]).

The court has considered Global's remaining arguments regarding McKinsey's claim for indemnification, and finds them to be unavailing.

Accordingly, it is

ORDERED that defendants McKinsey & Company, Inc. and McKinsey & Company Inc., United States' motion for summary judgment dismissing plaintiff's claim for breach of contract is granted; and it is further

ORDERED that defendants McKinsey & Company, Inc. and McKinsey & Company Inc., [*6]United States' motion for summary judgment dismissing plaintiff's claim for tortious interference with contract is denied; and it is further

ORDERED that defendants McKinsey & Company, Inc. and McKinsey & Company Inc., United States' motion for summary judgment dismissing plaintiff's claim for conspiracy is granted; and it is further

ORDERED that defendants McKinsey & Company, Inc. and McKinsey & Company Inc., United States' motion for summary judgment against Global Consultancy, Inc. is granted in its favor on the issue of contractual indemnify on the condition that plaintiff recovers against McKinsey & Company, Inc. and McKinsey & Company Inc., United States in the main action; and it is further

ORDERED that the motion in limine , which seeks evidentiary rulings is hereby referred to the trial court for resolution.

The parties are directed to appear for a conference on MONDAY, AUGUST 8, 2005 at 10:00 AM at 60 Centre Street, Room 438, New York, New York, 10007.

This constitutes the decision and order of the court.

Dated: JULY 11, 2005

ENTER:

__________________________

SHERRY KLEIN HEITLER

J.S.C.

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