CFA, INC. v. CONDUENT STATE & LOCAL SOLUTIONS, INC.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS DIVISION

CFA, INC., )

)

Plaintiff, )

)

v. ) Case No. 1:22-cv-01575-TWP-TAB

)

CONDUENT STATE & LOCAL SOLUTIONS, )

INC., Successor by Merger to CONDUENT )

HUMAN SERVICES, LLC, )

)

Defendant. )

ENTRY ON PENDING MOTIONS

This matter is before the Court on Defendant Conduent State & Local Solutions, Inc.'s

("Conduent"), Second Motion to Dismiss filed pursuant to Federal Rule of Civil Procedure

12(b)(6) (Filing No. 40), and Plaintiff CFA, Inc.'s ("CFA") Objection to Magistrate's Discovery

Order (Filing No. 50), Motion to Stay Briefing and Briefing Deadlines on Conduent's Second

Motion to Dismiss Pending a Ruling on CFA's Objection to Magistrate's Discovery Order (Filing

No. 51), Motion for Leave to File Second Amended Complaint (Filing No. 52), Motion for Leave

to File Reply Brief (Filing No. 60), and Objection to Magistrate's Briefing/Stay Order (Filing No.

61).

This action relates to a dispute over a Minority Business Enterprise (“MBE”) provision in

a prime government contract (the "Prime Contract") for staffing services between Conduent and

the Indiana Family and Social Services Administration ("FSSA"), and a related subcontract (the

"Subcontract") between Conduent and CFA. CFA alleges that Conduent breached both contracts

by failing to subcontract a certain amount of work to CFA, and that Conduent was unjustly

enriched when it performed that work itself. Conduent moves for dismissal of all claims with

prejudice and seeks attorneys' fees. For the following reasons, the Court grants Conduent's

Second Motion to Dismiss, albeit without prejudice as to some claims, denies Conduent's request

for attorneys' fees, denies in part as moot CFA's Motion for Leave to File Second Amended

Complaint, and denies as moot all remaining pending motions.

I. BACKGROUND

The following facts are not necessarily objectively true, but as required when reviewing a

motion to dismiss, the Court accepts as true all factual allegations in the Amended Complaint and

draws all inferences in favor of CFA as the non-moving party. See Bielanski v. County of Kane,

550 F.3d 632, 633 (7th Cir. 2008).

The facts alleged in the Amended Complaint are substantively the same as the facts alleged

in the original Complaint, which Senior Judge Robert L. Miller, Jr. ("Judge Miller") concisely

summarized in the Court's August 18, 2023 Opinion and Order in this case ("August 2023 Order"):

The Prime Contract provides that Conduent would provide staffing services

to the Indiana Family and Social Services Administration. It says the State awarded

the Prime Contract to Conduent in part because of its Minority and/or Women's

Business Enterprise ("MBE/WBE") participation plan. It lists CFA as an

MBE/WBE subcontractor that would participate in 15.26 percent of services under

the Prime Contract. The Prime Contract requires Conduent to submit copies of its

agreements with MBE/WBE subcontractors to the State's Department of

Administration, Division of Supplier Diversity. The Division of Supplier Diversity

must review and approve any requests for changes to the MBE/WBE participation

plan. Conduent's "failure to comply with the provisions in [the MBE/WBE] clause

may be considered a material breach of the [Prime] Contract."

The complaint includes excerpts from the Division of Supplier Diversity's

MBE/WBE policy statement, which says contractors must use MBE/WBE

subcontractors at their committed participation percentages and outlines the

procedures for modifying the MBE/WBE participation plan. Those procedures

involve the subcontractor signing a notification document and the Division

interviewing interested parties, including the subcontractor, to determine whether a

change is appropriate.

Conduent and CFA entered into the Subcontract pursuant to the Prime

Contract's directive. The Subcontract says CFA will perform services under the

Prime Contract for Conduent, as described in the Statement of Work. The Statement

of Work provides that CFA (but not Conduent) must comply with the terms of the

Prime Contract, and it incorporates particular parts of the Prime Contract by

reference. The Subcontract doesn't explicitly include the 15.26 percent participation

rate listed in the Prime Contract. . . .

The Subcontract provides that "Conduent has the primary responsibility for

performance under the Prime Contract" and may perform, obtain from another

entity, or otherwise remove any portion of the services being performed by CFA

with 30 days' written notice to CFA. Conduent agrees to pay CFA based on CFA's

invoices for services rendered and other pre-approved costs, subject to Conduent's

approval. The Subcontract says it is the entire agreement between the parties and

supersedes any prior agreements that aren't specifically referenced and incorporated

into the Subcontract.

CFA provided services as agreed, and, as of April 11, 2022, Conduent has

paid CFA $18,642,710.97. CFA alleges that Conduent has received $188,837,021

under the Prime Contract, so CFA is entitled to 15.26 percent (which it calculates

as $28,816,529.40). CFA alleges Conduent either performed services that should

have been allocated to CFA, contracted the services out to another subcontractor,

or a combination of the two, but did so without amending the Prime Contract's

MBE/WBE participation plan or giving it 30 days' notice under the Subcontract.

CFA sent Conduent an invoice for the difference between the amount

Conduent has paid and the amount it says Conduent owes. Conduent disputes that

it owes CFA the money and has refused to pay….

(Filing No. 31 at 2–4 (alterations in original) (footnotes and internal citations omitted).)

In July 2022, CFA initiated this action in state court. Conduent removed it to federal court

in August 2022 and, the next month, filed a motion to dismiss (Filing No. 1; Filing No. 10). On

August 18, 2023, Judge Miller dismissed CFA's claims without prejudice and granted leave to file

an amended complaint1 (Filing No. 31).

On September 7, 2023, CFA filed the operative Amended Complaint (Filing No. 35).

Conduent promptly filed a Second Motion to Dismiss (Filing No. 40) and a motion to stay

discovery pending the Second Motion to Dismiss (Filing No. 42). On November 2, 2023, the

Magistrate Judge granted Conduent's motion to stay discovery ("Discovery Stay Order") (Filing

1The Southern District of Indiana had one of the heaviest weighted caseloads in the country, and Judge Miller

graciously accepted a designation by the Seventh Circuit to hear cases in this district. With his retirement from the

bench, on August 29, 2023, this case was reassigned from Judge Miller to Chief Judge Tanya Walton Pratt (Filing No.

33).

No. 49). On November 10, 2023, CFA objected to the Discovery Stay Order (Filing No. 50) and

moved to stay briefing on the Second Motion to Dismiss pending the objection to the Discovery

Stay Order (Filing No. 51). CFA has also moved for leave to file a reply in support of its objection

to the Discovery Stay Order (Filing No. 60).

On November 16, 2023, CFA responded in opposition to Conduent's Second Motion to

Dismiss (Filing No. 53)2 and filed a Motion for Leave to File Second Amended Complaint

("Motion for Leave") (Filing No. 52). Then, on November 29, 2023, Conduent moved to stay

briefing on the Motion for Leave pending its Second Motion to Dismiss (Filing No. 56). The

Magistrate Judge granted Conduent's motion (Filing No. 57), to which CFA filed an objection

(Filing No. 61).

II. LEGAL STANDARDS

A. Motion to Dismiss

Federal Rule of Civil Procedure 12(b)(6) allows a defendant to move to dismiss a complaint

that has failed to "state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). When

deciding a motion to dismiss under Rule 12(b)(6), the court accepts as true all factual allegations

in the complaint and draws all inferences in favor of the plaintiff. Bielanski, 550 F.3d at 633.

However, courts "are not obliged to accept as true legal conclusions or unsupported conclusions

of fact." Hickey v. O'Bannon, 287 F.3d 656, 658 (7th Cir. 2002).

The complaint must contain a "short and plain statement of the claim showing that the

pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). In Bell Atlantic Corp. v. Twombly, the United

States Supreme Court explained that the complaint must allege facts that are "enough to raise a

right to relief above the speculative level." 550 U.S. 544, 555 (2007). Although "detailed factual

2 The filing of CFA's response mooted its motion to stay briefing on the Second Motion to Dismiss (Filing No. 51).

allegations" are not required, mere "labels," "conclusions," or "formulaic recitation[s] of the

elements of a cause of action" are insufficient. Id.; see also Bissessur v. Ind. Univ. Bd. of Trs., 581

F.3d 599, 603 (7th Cir. 2009) ("it is not enough to give a threadbare recitation of the elements of a

claim without factual support"). The allegations must "give the defendant fair notice of what the

… claim is and the grounds upon which it rests." Twombly, 550 U.S. at 555. Stated differently,

the complaint must include "enough facts to state a claim to relief that is plausible on its face."

Hecker v. Deere & Co., 556 F.3d 575, 580 (7th Cir. 2009) (citation and quotation marks omitted).

To be facially plausible, the complaint must allow "the court to draw the reasonable inference that

the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(citing Twombly, 550 U.S. at 556).

B. Motion for Leave to Amend

Federal Rule of Civil Procedure 15(a)(1) allows a party to amend its pleading once as a

matter of course within twenty-one days after serving it, or "if the pleading is one to which a

responsive pleading is required, 21 days after service of a responsive pleading or 21 days after

service of a motion under Rule 12(b)." After a responsive pleading has been filed and twenty-one

days have passed, "a party may amend its pleading only with the opposing party's written consent

or the court's leave. The court should freely give leave when justice so requires." Fed. R. Civ. P.

15(a)(2). The Rule, however, "do[es] not mandate that leave be granted in every case. In particular,

a district court may deny a plaintiff leave to amend his complaint if there is undue delay, bad

faith[,] or dilatory motive . . . [,] undue prejudice . . . , [or] futility of amendment." Park v. City of

Chicago, 297 F.3d 606, 612 (7th Cir. 2002) (citation and quotation marks omitted). "Whether to

grant or deny leave to amend is within the district court's discretion." Campbell v. Ingersoll Milling

Machine Co., 893 F.2d 925, 927 (7th Cir. 1990).

III. DISCUSSION

To put it mildly, this dispute has been zealously litigated by both sides. In total, six motions

are pending before the Court. In this Order, the Court will discuss only Conduent's Second Motion

to Dismiss and CFA's Motion for Leave to File Second Amended Complaint, which are dispositive

of the remaining four motions. The arguments raised in the briefing on the Second Motion to

Dismiss were or could have been raised in briefing on Conduent's first Motion to Dismiss, and

many of them were addressed by Judge Miller in the August 2023 Order. Nevertheless, the Court

will offer additional analysis to help the parties streamline future briefing and avoid the

unnecessary repetition of unsuccessful arguments.

CFA's Amended Complaint, like its original complaint, asserts three claims: Count I for

breach of the Prime Contract, Count II for breach of the Subcontract, and Count III for unjust

enrichment. In its Second Motion to Dismiss, Conduent raises the same arguments it raised in its

first Motion to Dismiss: Count I must be dismissed because CFA is not a third-party beneficiary

to the Prime Contract; Count II must be dismissed because CFA cannot adequately state a claim

for a breach of any provision of the Subcontract; and Count III is barred by the existence of the

Prime Contract and Subcontract. Conduent also reasserts its request that the Court strike CFA's

request for attorneys' fees. Conduent asks that the Court dismiss all of CFA's claims with prejudice

and award it fees and costs. CFA's response, which is, in substance, a motion to reconsider Judge

Miller's August 2023 Order, argues that CFA's claims are adequately pled, and even if not,

dismissal with prejudice would be improper because no discovery has yet occurred. The Court will

address CFA's three claims in turn, and then discuss each party's request for attorneys' fees.

A. Count I: Breach of the Prime Contract

CFA's claim for breach of the Prime Contract is based on the Prime Contract's MBE/WBE

compliance provision (the "MBE/WBE Provision"), which states that Conduent will commit 15.26

percent of its work under the Prime Contract to CFA (Filing No. 35-1 at 16). CFA contends that

Conduent failed to subcontract at least 15.26 percent of its work to CFA in violation of the

MBE/WBE Provision. CFA is not a party to the Prime Contract but alleges it may enforce the

Prime Contract as a third-party beneficiary. Conduent argues that CFA has failed to sufficiently

allege its third-party beneficiary status, and that Count I should be dismissed with prejudice (Filing

No. 41 at 11–19). The Court will address whether the Amended Complaint adequately pleads a

third-party beneficiary claim before discussing whether dismissal with prejudice is appropriate and

whether leave to amend should be granted.

1. Whether CFA Has Sufficiently Alleged Breach of the Prime Contract

To enforce a contract as a third-party beneficiary, the third party must show (1) a clear

intent by the contracting parties to benefit the third party; (2) a duty imposed on a contracting party

in favor of the third party; and (3) that performance of the contract is necessary to render the

intended benefit to the third party. Luhnow v. Horn, 760 N.E.2d 621, 628 (Ind. Ct. App. 2001).

"[T]he intent to benefit the third party is the controlling factor and may be shown by specifically

naming the third party or by other evidence." Luhnow, 760 N.E.2d at 628. Intent "'must

affirmatively appear from the language of the instrument when properly interpreted and

construed,'" though the intent to benefit a third party need not be demonstrated any more clearly

than intent regarding any other terms of the contract." OEC-Diagnostics, Inc. v. Major, 674 N.E.2d

1312, 1314–15 (Ind. 1996) (quoting Freigy v. Gargaro Co., 60 N.E.2d 288, 291 (Ind. 1945)). The

requisite intent "is not a desire or purpose to confer a particular benefit upon the third-party nor a

desire to advance his interest or promote his welfare, but an intent that the promising party or

parties shall assume a direct obligation to him." Centennial Mortg., Inc. v. Blumenfeld, 745 N.E.2d

268, 276 (Ind. Ct. App. 2001); Kirtley v. McClelland, 562 N.E.2d 27, 37 (Ind. Ct. App. 1990) ("To

be enforceable, it must clearly appear that it was the purpose or a purpose of the contract to impose

an obligation on one of the contracting parties in favor of the third party."). "It is not enough that

performance of the contract would be of benefit to the third party." Kirtley, 562 N.E.2d at 37.

In the August 2023 Order, Judge Miller held that CFA's original complaint failed to

adequately allege that the contracting parties (Conduent and the FSSA) intended to directly benefit

CFA (Filing No. 31 at 5–10). Specifically, he held that the MBE/WBE Provision, without more,

did not adequately establish CFA's third-party beneficiary status. Judge Miller also rejected CFA's

attempt to distinguish analogous caselaw and its argument that the Prime Contract incorporated

certain State policies that impose duties in favor of CFA. Id. at 7–10.

Count I of the Amended Complaint is substantively the same as Count I of the original

complaint. The new allegations largely consist of legal arguments that are repeated in CFA's

response brief (Filing No. 35 at 6–7). Conduent therefore argues Count I should be dismissed for

the same reasons articulated in the August 2023 Order (Filing No. 41 at 11). CFA asserts a variety

of arguments in response, which the Court discerns as four primary arguments: (1) the Court

misapplied Indiana law in the August 2023 Order and in two cases on which the August 2023

Order relies; (2) the face of the Prime Contract establishes CFA's third-party beneficiary status;

(3) the parties' course of conduct demonstrates an intent to benefit CFA; and (4) evidence of

circumstances surrounding the execution of the Prime Contract establishes an intent to benefit

CFA.

a. Application of Indiana Law

CFA challenges Judge Miller's conclusion that being named a participant in the Prime

Contract's MBE/WBE Provision does not "automatically establish" that the contracting parties

intended to benefit CFA (Filing No. 53 at 7–8; Filing No. 31 at 10). In reaching this erroneous

conclusion, CFA contends, Judge Miller misapplied well-established Indiana law and improperly

relied on two other decisions from this Court—ESG Technical Services, LLC v. Advantage Health

Solutions, Inc. ("ESG") and Bucher & Christian Consulting, Inc. v. Novitex Enterprise Solutions,

Inc. ("Bucher")—that likewise misapplied Indiana law. (Filing No. 53 at 7–8); ESG, No. 09-cv-

00030, 2011 WL 2267550 (S.D. Ind. June 6, 2011) (Pratt, J.); Bucher, No. 15-cv-00010, 2015 WL

5210539 (S.D. Ind. May 22, 2015) (Pratt, J.). CFA states that this "'not automatically established'

rule is made of whole cloth" and "does not accurate [sic] reflect Indiana third-party beneficiary

law," and that ESG and Bucher should therefore be reconsidered (Filing No. 53 at 7–8).

CFA argues that under Indiana law, "the intent to benefit the third party . . . may be shown

by specifically naming the third party or by other evidence," so being named in the MBE/WBE

Provision thus establishes CFA's third-party beneficiary status. Luhnow, 760 N.E.2d at 628; see,

e.g., St. Paul Fire & Marine v. Pearson Constr., 547 N.E.2d 853, 856 (Ind. Ct. App. 1989). CFA's

position appears to be based on a misunderstanding of the word "may". While Indiana courts have

consistently held that naming a third party in a contract may show an intent to benefit that third

party, no Indiana court has held that it does show intent. Importantly, Indiana courts construe and

use "may" as a permissive term, not a mandatory one. See Siddall v. City of Michigan City, 485

N.E.2d 912, 915 (Ind. Ct. App. 1985); Bochner v. State, 38 N.E.3d 228 (Table), 2015 WL 4468776,

at *2 (Ind. Ct. App. 2015) ("The term 'may' in a statute 'ordinarily implies a permissive condition

and a grant of discretion."); see also Journal-Gazette Co. v. Bandido's, Inc., 712 N.E.2d 446, 456

(Ind. 1999) ("A defendant's state of mind . . . may be shown by indirect or circumstantial evidence.

The question of whether there is sufficient evidence . . . . is a question of law . . . ." (emphasis

added)); Eifler v. State, 570 N.E.2d 70, 77 (Ind. Ct. App. 1991) (stating that intent to defraud "may

be shown by circumstantial evidence," but that evidence "must be sufficient" (emphasis added)).

This Court's conclusion that naming a third party only "may" show an intent to benefit that third

party, and does not "automatically" show intent, is based on the proper application of Indiana law.

CFA raises additional criticisms of the Court's analyses in ESG and Bucher. CFA argues

that in ESG, the Court improperly cited Seventh Circuit decisions that applied Illinois and New

Jersey law, and not Indiana law. The ESG court's citation to persuasive Seventh Circuit authority

was not improper. 2011 WL 2267550, at *6. And the Court's conclusion in ESG was appropriately

supported by the well-established principle that under Indiana law courts must determine the

contracting parties' intent by viewing "the contract as a whole and 'not from detached provisions

thereof,'" like a single reference to a third party. ESG, 2011 WL 227550, at *5–6 (citing McClain's

Estate v. McClain, 183 N.E.2d 842 (Ind. Ct. App. 1962)). As for Bucher, CFA takes issue with the

Court's analysis of Luhnow v. Horn, 760 N.E.2d 621 (Ind. Ct. App. 2001). In Luhnow, the plaintiff-

landowners, the Luhnows, sued for breach of contract as third-party beneficiaries, but the trial

court denied the claim on summary judgment. The Court of Appeals affirmed the denial, stating

that the contract "[did] not show a clear intent to directly benefit landowners, such as the Luhnows"

because: "[t]he Luhnows [were] not specifically named in the contract, nor [were] landowners as

a class named"; "the contract addresse[d] only the rights and obligations of the two contracting

parties"; and the "other evidence" of intent cited by the Luhnows showed, "at best," that the

contracting parties' knew the Luhnows "would derive an incidental benefit from the contract." Id.

at 629–30. CFA states: "[c]ritically, the Indiana Court of Appeals did not hold that such a specific

indication of the Luhnows would only be 'evidence of intent' that 'may' establish third-party

beneficiary status" (Filing No. 53 at 8 (emphasis in original)). But conversely, the Luhnow court

did not state that a specific reference to the Luhnows would have established their third-party

beneficiary status. The Luhnow court only explained that any evidence that might have shown an

intent to benefit the Luhnows—including, but not limited to, a name reference—was absent from

the contract. Luhnow, 760 N.E.2d at 629–30.

In sum, under Indiana law, a specific reference to a third party is only evidence of intent to

benefit that third party; it is not necessarily sufficient evidence. Stated differently, a reference to

a third party does not "automatically establish" third-party beneficiary status. See Ind. Gaming

Co., L.P., v. Blevins, 724 N.E.2d 274, 278 (Ind. Ct. App. 2000) (holding that technicians were not

third-party beneficiaries to contract, despite provision requiring that technicians be paid union

wages for work); see also Xirum v. U.S. Immigr. & Customs Enf't, No. 22-cv-00801, 2023 WL

2683112, at *16–21 (S.D. Ind. Mar. 29, 2023) (applying Indiana law, finding detainees were not

third-party beneficiaries to detention contract, despite being the subject of the contract). The Court

correctly applied Indiana law in ESG, Bucher, and its August 2023 Order.

CFA further argues that even if not erroneous, ESG and Bucher are distinguishable in two

ways. First, in those cases, the contractors and third-party MBE/WBEs never executed

subcontracts (Filing No. 53 at 20–24). CFA contends that if the subcontractors in ESG and Bucher

had executed subcontracts, like CFA did, then those subcontractors would have been third-party

beneficiaries to the prime contracts. Judge Miller called this reading of ESG and Bucher "too great

a stretch" (Filing No. 31 at 8), and it is. In ESG, the Court stated that "ESG and Advantage [the

contractor] had to reach a legally binding agreement before ESG had any enforceable rights." ESG,

2011 WL 2267550, at *7. CFA reads this statement to mean that ESG and Advantage needed to

execute a subcontract for ESG to have enforceable rights against Advantage under the prime

contract, but that is not what the Court held. The Court held that ESG and Advantage needed to

execute a subcontract for ESG to have any enforceable rights whatsoever against Advantage. The

ESG court explained that the prime contract "indicate[d] further steps were necessary before a

subcontractor gained any rights against Advantage. Any contractual rights of the subcontractors

would derive from being a party to the subcontract and not from being a third-party beneficiary to

the State contract." Id. at *7 (emphasis added).3 In Bucher, the Court similarly held that the prime

contract's "requirement of a separate, later-executed subcontract . . . supports the proposition that

the [prime contract] itself was not specifically intended to confer a benefit on [the subcontractor]."

Bucher, 2015 WL 5210668, at *12. So while the lack of subcontracts in ESG and Bucher factually

distinguishes those cases from this one, it does not support CFA's third-party beneficiary claim.

To the contrary, the fact that Conduent and CFA executed a Subcontract only confirms that

Conduent and the FSSA intended for the Subcontract, and not the Prime Contract, to govern CFA

and Conduent's relationship.

Second, CFA argues ESG and Bucher are distinguishable because in those cases, the prime

contracts did not impose any obligations on the contractor in favor of the subcontractors. But here,

CFA contends, the Prime Contract incorporates Indiana Department of Administration ("IDOA")

policies that impose obligations in CFA's favor, which shows that the parties intended to benefit

CFA.4 In the August 2023 Order, Judge Miller rejected this argument, finding that: (1) the Prime

Contract did not incorporate IDOA policies; and (2) even if it did, the IDOA policies only

established duties in favor of the State, not CFA (Filing No. 31 at 9). CFA challenges both

conclusions.

CFA argues that Judge Miller erred in concluding "that Conduent had not incorporated the

IDOA/DSD compliance rules and regulations into the Prime Contract," but CFA fails to show how

Judge Miller's finding was erroneous (Filing No. 53 at 18). Instead, CFA simply recites the same

3 CFA contends that this statement is "mere dicta" (Filing No. 53 at 24), but it is not. This statement sets forth the

Court's reason for dismissing the plaintiff's third-party beneficiary claim. ESG, 2011 WL 2267550, at *10.

4 This argument conflates the first element of a third-party beneficiary claim—a clear intent to benefit a third party—

with the second element—a duty imposed on one of the contracting parties in favor of the third party. The alleged duty

imposed on Conduent in favor of CFA is the duty to assign 15.26 percent of its work to MBE/WBE (Filing No. 53 at

17), so the Court addresses this argument in context of the first element of CFA's third-party beneficiary claim.

contractual language that Judge Miller found unpersuasive. Id. CFA cites no caselaw, offers no

analysis, and gives the Court no reason to reconsider or depart from Judge Miller's analysis. For

the same reasons explained in the August 2023 Order, the Court concludes that the Prime Contract

did not incorporate IDOA policies (Filing No. 31 at 9–10).

Next, CFA argues that Judge Miller erred in concluding that even if an IDOA policy had

been incorporated into the Prime Contract, the "policy was not imposed in favor of the third party"

(Filing No. 31 at 9; Filing No. 53 at 18). CFA cites one new piece of evidence to show that IDOA

policies create duties to specific third parties—a DSD Change in Participation Notification form

(the "Change Form") (Filing No. 53 at 19, n. 17).5 CFA contends that the Change Form "confirms

that Conduent's MBE commitment, as provided in the Prime Contract, flows not simply to the

State of Indiana, but also to CFA in particular" (Filing No. 53 at 19 (emphasis in original)). But

the Change Form is merely a blank form. It is not an IDOA policy, it does not cite any IDOA

policy, it is not incorporated into any IDOA policy, and it does not refer to any particular MBE or

WBE. To the contrary, the Change Form's generic reference to "your firm" could apply to any

MBE or WBE. The Change Form does not show that the IDOA policies create any rights in favor

of CFA, or any particular MBE or WBE.

There was no error in the Court's application of Indiana law in Bucher, ESG, or the August

2023 Order. The Court finds no reason to depart from the analyses in those decisions and declines

CFA's invitation to reconsider them (Filing No. 53 at 8).

5 The Change Form was not attached to the pleadings or CFA's response brief (Filing No. 53 at 19). A footnote in

CFA's brief contains a URL that directs the Court to the form. But even if the Change Form were properly offered as

an exhibit and admissible, it would not show that IDOA's policies create any duties in favor of any specific entity,

much less CFA.

b. Face of Prime Contract as Evidence of Intent

CFA next argues that the contracting parties' intent to benefit CFA is evidenced by the

MBE/WBE Provision (Filing No. 53 at 9). For the reasons explained in the Court's August 2023

Order, under Indiana law, the MBE/WBE Provision, without more, does not demonstrate a clear

intent to directly benefit CFA. CFA contends that the Court only reached this conclusion by

inappropriately applying a more stringent standard for showing intent than what is required under

Indiana law. Id. But CFA fails to show where the Court allegedly applied an incorrect standard,

and CFA's disagreement with the Court's application of the correct standard does not save its claim

from dismissal.

c. Course of Conduct as Evidence of Intent

CFA further argues that the parties' course of conduct demonstrates Conduent's intent to

bestow third-party beneficiary rights on CFA. Specifically, Conduent's intent is shown by the fact

that "Conduent and CFA entered a subcontract [sic] to provide MBE subcontractor services" as

"contemplated by the Prime Contract" (Filing No. 53 at 16). This "course of conduct" does not

support CFA's position. To the contrary, it shows the parties' intent to have Conduent and CFA's

relationship governed by a separate subcontract.

CFA also contends that "[t]he intent to create a third-party benefit, under the Prime Contract

is also evidenced by the contracting parties' course of performance with other MWBE/IVOSB

subcontractors also named in the Prime Contract," namely MBC Group, Inc. ("MBC"). Id. CFA

fails to cite any authority supporting its position that Conduent's course of conduct with MBC,

evidences the intent of Conduent and the FSSA with respect to CFA. Regardless, this Court has

already held that Conduent's alleged "course of conduct" with MBC does not evidence an intent to

benefit MBC, so it surely does not evidence an intent to benefit CFA. MBC Group, Inc. v. Conduent

State & Local Solutions, Inc., No. 22-cv-1869, 2024 WL 757983, at *7 (S.D. Ind. Feb. 23, 2024).

d. Circumstances Surrounding Execution of Prime Contract

CFA lastly argues that certain extrinsic evidence of circumstances surrounding the

execution of the Prime Contract shows the contracting parties' intent to benefit CFA. CFA first

cites a section of the Indiana Administrative Code and statements on the website for the IDOA

Division of Supplier Diversity (Filing No. 53 at 13). None of this evidence was attached to CFA's

Amended Complaint, but even if the Court could consider it, it would not save CFA's third-party

beneficiary claim from dismissal.

The State of Indiana's institution of and commitment to an MBE/WBE program does not

demonstrate that the State intended for it or its contractors to assume direct obligations to

MBE/WBEs, and it certainly does not demonstrate an intent to directly benefit CFA in particular.

This evidence, at most, shows that the State has a desire to promote the welfare and success of

MBE/WBEs by increasing (though not guaranteeing) their participation in government contracts.

Centennial Mortg., Inc., 745 N.E.2d at 276. As the Court explained in ESG,

…there is no doubt the State has a noble goal of encouraging equal opportunity for

MBEs and WBEs to participate in the State's award of contracts. While the State

might intend to benefit or advance the interests of MBEs and WBEs as a whole, the

MBE/WBE program does not automatically establish [CFA] as a third-party

beneficiary. Therefore, for [CFA] to show that the parties intended to benefit it as a

third-party beneficiary, [CFA] must present evidence that the parties specifically

intended to benefit [CFA] and not simply an intent to benefit MBEs and WBEs

generally.

ESG, 2011 WL 2267550, at *5 (internal citations omitted).

CFA also cites certain procurement documents (the "Procurement Documents") as evidence

of the State's intent to directly benefit CFA. These documents, which CFA admits may not even be

complete, were not attached to the Amended Complaint. Nevertheless, even if the Court could

consider these documents, they do not support CFA's claim. The Procurement Documents contain

the same type of aspirational, non-specific language as the MBE/WBE Provision, including

statements that: the State has a "reasonable expectation" of MBE/WBE "subcontracting

opportunities"; Conduent "agrees to be bound by the regulatory process" governing the MBE/WBE

program; Conduent believes that "[p]artnering with [MBE/WBEs] first is a win-win for all

parties"; Conduent "is dedicated to including historically underutilized businesses" in its contracts;

and the Prime Contract was awarded to Conduent, in part, because of its commitment to

subcontracting a certain portion of work to MBE/WBEs. (Filing No. 53 at 15 (emphasis omitted).)

As Judge Miller explained in the August 2023 Order, this language of the Prime Contract does not

show an intent to benefit CFA (Filing No. 31 at 6–9). This language, like the MBE/WBE Provision,

does not even guarantee that CFA would receive any subcontracted work from Conduent. The

language merely shows that Conduent aspires to promote the welfare of MBE/WBEs generally.

CFA insists that evidence of other circumstances surrounding the execution of the Prime

Contract would show that it is an intended third-party beneficiary, but no such circumstances are

alleged in the Amended Complaint. As such, the Court is not persuaded to deviate from Judge

Miller's analysis in the August 2023 Order. Count I must be dismissed.

2. Whether Dismissal with Prejudice is Appropriate

Conduent argues that CFA has not and cannot adequately allege a third-party beneficiary

claim, so dismissal with prejudice is appropriate. CFA responds that dismissal with prejudice

would be improper because it has not yet conducted discovery, which CFA believes would yield

extrinsic evidence related to the contracting parties' intent (Filing No. 53 at 33). However,

contemporaneously with its response brief, CFA filed a proposed Second Amended Complaint

(Filing No. 52-1). As Conduent notes in its reply brief, CFA's filing of a Second Amended

Complaint contradicts its position that it needs to conduct discovery before it can adequately plead

a third-party beneficiary claim (Filing No. 59 at 18). CFA could have waited until the Court ruled

on its objection to the Discovery Stay Order, and, because no Case Management Order has been

entered, CFA was not subject to a deadline to move to amend its pleading. Yet CFA chose to file a

proposed Second Amended Complaint anyway. CFA must believe that its Second Amended

Complaint adequately pleads a third-party beneficiary claim, despite the stay of discovery, or else

CFA would not have filed it. Fed. R. Civ. P. 11(b)(2). The Court therefore concludes that the lack

of discovery does not preclude dismissal with prejudice.

Nevertheless, the Court declines to dismiss Count I with prejudice because CFA purports

to cite new extrinsic evidence of circumstances surrounding the execution of the Prime Contract.

As the Seventh Circuit has explained:

In determining the intention of the parties to a contract, Indiana courts—in addition

to ascertaining the plain meaning of the contract terms—have a "duty to consider

… the surrounding circumstances which existed at the time the contract was made,"

including "the nature of the agreement, together with all the facts and circumstances

leading up to the execution of the contract, the relation of the parties, the nature and

situation of the subject matter, and the apparent purpose of making the contract."

Rain v. Rolls-Royce Corp., 626 F.3d 372, 381 (7th Cir. 2010) (quoting Ruff v. Charter Behav.

Health Sys. of Nw. Ind., Inc., 699 N.E.2d 1171, 1176 (Ind. Ct. App. 1998)); see Closson v. Billman,

69 N.E. 449, 450 (Ind. 1904) ("In the construction of . . . every other contract, the true question is:

What was the intention of the parties, as disclosed by the instrument read in the light of the

surrounding circumstances?"); see also Brian v. Reg'l Innovation & Startup Educ., 225 N.E.3d 173

(Table), 2023 WL 8178663, at *4 (Ind. Ct. App. Nov. 27, 2023) ("When there is conflicting

evidence regarding the intended function of a writing, it is a fact-finder's role to weigh the

conflicting evidence and 'determine the true intent' of the writing." (citing Wecker v. Kilmer, 294

N.E.2d 132, 203 (Ind. 1973) (noting that at times "parol evidence should be permitted to determine

the intent of the parties"))); Randy Faulkner & Assocs., Inc. v. Restoration Church, Inc., 60 N.E.3d

274, 280 (Ind. Ct. App. 2016) ("We must give effect to the intentions of the parties, which are

ascertained from the language of the contract in light of the surrounding circumstances." (citing

HK New Plan Marwood Sunshine Cheyenne, LLC v. Onofrey Food Servs., Inc., 846 N.E.2d 318,

322 (Ind. Ct. App. 2006))); Centennial Mortg., Inc., 745 N.E.2d at 276 (considering extrinsic

evidence of circumstances surrounding formation of building renovation contract); Gordon v.

Finch, No. 21-CV-292, 2023 WL 3160297, at *4 (N.D. Ind. Apr. 28, 2023) (considering extrinsic

evidence of reason for including certain provisions in contract); Best Flooring, Inc. v. BMO Harris

Bank, N.A., No. 12-cv-5, 2013 WL 164237, at *4 (S.D. Ind. Jan. 15, 2013) (denying motion to

dismiss third-party beneficiary claim on motion to dismiss because a letter "and several other facts"

raised claim "beyond the speculative level").

In its Motion for Leave, CFA cites new extrinsic evidence regarding the State and

Conduent's intent, which could raise CFA's third-party beneficiary claim beyond the speculative

level. Count I is therefore dismissed without prejudice.

3. Whether Leave to Amend Should Be Granted

CFA asserts that it recently obtained an affidavit from former Conduent employee Therome

Buford (the "Buford Affidavit"), the Procurement Documents, and other IDOA documents

concerning the State's MBE/WBE participation program (Filing No. 52 at 2–3). In its Motion for

Leave, CFA acknowledges that this Court has "ruled that CFA being named in the Prime Contract

alone does not establish the requisite contractual intent to benefit a third-party," but argues that the

Buford Affidavit and IDOA documents demonstrate such an intent. Id. at 3–4.

The Court has already explained that the Prime Contract in this case, without more, is

insufficient to establish CFA's third-party beneficiary status. The Court also has explained that the

IDOA policies and Procurement Documents do not show the State's intent to benefit CFA in

particular. However, the Second Amended Complaint contains new allegations supporting CFA's

claim based on the Buford Affidavit. The Buford Affidavit describes the procurement process by

which Conduent obtained the Prime Contract, the reasons why Conduent made certain affirmations

during the procurement process, and the reason CFA was named in the Prime Contract. According

to Buford, the State's Request for Proposal ("RFP") for the Prime Contract provided that "extra

points were to be given based upon a company's commitment to the utilization of WMBE and

IVOSB subcontractors on the assignment" and "[o]nly one company would be awarded these extra

points" (Filing No. 52-1 at 199). Buford further states that as part of the procurement process for

the Prime Contract, Conduent "was required to affirm that it would abide by and be obligated to

perform all terms and requirements listed and outlined in the RFP—including, but not limited to,

its commitment to utilize the specific MBWE/IVOSB subcontractors listed at the stated

participation rates." Id. at 200. The affirmation serves to "prevent[] a prime contractor from

avoiding its WMBE/IVOSB commitment after it has been awarded a professional services

contract—which has historically been a problem in Indiana." Id. at 199. The affirmation also

"prevents a contractor from proposing to use a WMBE/IVOSB subcontractor at an overly inflated

rate (such as 75%) for no other reason than to simply be awarded the contract." Id. Buford also

asserts that "[i]n or about 2018, IDOA began requiring the WMBE/IVOSB subcontractors and

participation rates to be specifically listed on the face of the Prime Contract itself" to "assure[] that

Conduent would abide by the subcontractor commitment it had made in obtaining the award of the

[Prime Contract]." Id. at 200.

This evidence distinguishes this case from ESG and Bucher, which were decided on

summary judgment and were based on the language of the prime contracts alone. In light of the

surrounding circumstances alleged in the Buford Affidavit, it is plausible that the State and

Conduent intended for the MBE/WBE Provision to bestow third-party beneficiary rights on CFA

and allow CFA to enforce the Prime Contract itself.

The Court is not presently deciding whether CFA is a third-party beneficiary to the Prime

Contract, and it remains to be seen whether Count I will survive to trial. But the new allegations

in the Second Amended Complaint are enough to raise CFA's third-party beneficiary claim beyond

the speculative level, which is all that is required at the pleadings stage. See Best Flooring, Inc. v.

BMO Harris Bank, N.A., No. 12-cv-5, 2013 WL 164237, at *4 (S.D. Ind. Jan. 15, 2013). The Court

therefore grants CFA's Motion for Leave to File Second Amended Complaint as to Count I.6

B. Count II: Breach of the Subcontract

In Count II, CFA alleges that Conduent breached the Subcontract by failing to commit a

certain amount of work to CFA and by failing to timely notify CFA that Conduent would be

performing some work itself. Conduent argues that CFA's claim fails because the Subcontract does

not govern the amount of services Conduent must assign to CFA, and CFA's alleged damages for

breach of the Subcontract's notice requirements are barred by the Subcontract (Filing No. 41 at

21–27). The Court will discuss whether CFA has adequately stated a claim for breach of the

Subcontract before addressing Conduent's request for dismissal with prejudice and CFA's request

for leave to amend.

1. Whether CFA Has Sufficiently Alleged Breach of the Subcontract

Count II alleges that Conduent breached two obligations under the Subcontract: its

obligation to commit a certain amount of work to CFA; and its obligation to notify CFA of changes

to the MBE/WBE participation plan. The Court will address each argument in turn.

6 Although CFA's Motion for Leave is not yet ripe, the Court finds that leave to amend should be granted based on the

Court's review of the proposed Second Amended Complaint and the liberal standard for granting leave to amend.

"Unless it is certain from the face of the complaint that any amendment would be futile or otherwise unwarranted, the

district court should grant leave to amend after granting a motion to dismiss." Runnion v. Girl Scouts of Grater Chicago

& Nw. Ind., 786 F.3d 510, 519–20 (7th Cir. 2015) (emphasis in original). "[T]he decision to grant or deny a motion to

file an amended pleading is a matter purely within the sound discretion of the district court." Brunt v. Serv. Employees

Int'l Union, 284 F.3d 715, 720 (7th Cir. 2002).

a. Breach of Obligation to Allocate Work

In the original complaint, CFA alleged that the MBE/WBE Provision was incorporated into

the Subcontract "by implication or reference," and that Conduent breached the Subcontract by

failing to allocate 15.26 percent of its work to CFA (Filing No. 1-2 at 7). Judge Miller concluded

that as a matter of law, the Subcontract did not incorporate the MBE/WBE Provision, so CFA could

not succeed on its breach of Subcontract claim (Filing No. 31 at 11–14). CFA now concedes that

the Subcontract does not incorporate the MBE/WBE Provision but still alleges that the Subcontract

obligates Conduent to commit a certain amount of work to CFA. Only CFA's legal theory has

changed (Filing No. 53 at 25–26).7

CFA contends that the Prime Contract and Subcontract must be construed together under

New York law, and, when construed together, a "latent ambiguity" arises "as to what services were

committed to CFA under the Subcontract." Id. at 26–27. CFA states that "Conduent's assertion

that it has no contractual duties to provide CFA with any work at all, under the Subcontract, as

interpreted by Judge Miller, cannot be squared with its express commitment of '15.26% of the total

contract value to CFA' as provided in the Procurement Documents." Id. at 27 (emphasis in

original). CFA's new argument does not save Count II from dismissal.

CFA's argument that the Prime Contract and Subcontract should be construed together is,

in substance, an argument that the Subcontract incorporates the Prime Contract's provisions, which

Judge Miller previously rejected (Filing No. 31 at 11–12). Regardless, CFA's present argument

about construing instruments together is unavailing. Under New York law, courts will construe

7 To the extent CFA's response brief purports to argue that the Subcontract incorporates the MBE/WBE Provision, that

argument is undeveloped and therefore deemed waived. M.G. Skinner & Assocs. Ins. Agency, Inc. v. Norman-Spencer

Agency, Inc., 845 F.3d 313, 321 (7th Cir. 2017) ("Perfunctory and undeveloped arguments are waived, as are arguments

unsupported by legal authority."); United States v. Berkowitz, 927 F.2d 1376, 1384 (7th Cir. 1991).

related instruments together only "[i]n the absence of anything to indicate a contrary intention."

BWA Corp. v. Alltrans Exp. U.S.A., Inc., 112 A.D.2d 850, 852 (N.Y. App. 1985) (citing Nau v.

Vulcan Rail & Constr. Co., 36 N.E.2d 106 (N.Y. 1941)). As Judge Miller noted, the Subcontract

and Prime Contract's integration clauses indicate that the parties intended for the instruments to be

construed separately (Filing No. 31 at 11–12). The fact that the Prime Contract and Subcontract

were executed by different parties more than a year apart further militates against reading these

instruments together. See In re Gulf Oil/Cities Service Tender Offer Litigation, 725 F. Supp. 712,

731–32 (S.D.N.Y. 1989) (declining to read a Merger Agreement and Offer to Purchase together

because both documents contained integration clauses and Merger Agreement was not physically

attached to the Offer to Purchase); see Murat v. S. Bend Lodge No. 235 of the Benev. & Protective

Order of Elks of the U.S., 893 N.E.2d 753, 757 (Ind. Ct. App. 2008) ("[T]he [contemporaneous

document doctrine] should be applied cautiously when the documents involve different parties.").

Further, the terms of the Prime Contract do not give rise to any latent ambiguity in the

Subcontract. Under New York law, a "latent ambiguity" arises when a contract provision could

apply to different facts, objects, or circumstances. Ezrasons, Inc. v. Travelers Indem. Co., 89 F.4th

388, 395 (2d Cir. 2023). For example, "[i]f a person contracts for value to bequeath 'my house to

my daughter,'" the contract would appear unambiguous on its face. Id. "Nonetheless, if application

of the terms of the contract to the facts reveals that the person making the commitment had two

houses (or two daughters) and nothing in the terms of the contract clarifies which house (or

daughter) was intended," then the contract would present a latent ambiguity. Id.

There is no similar ambiguity in the Subcontract. The Subcontract provides that CFA will

perform services for Conduent and that Conduent will compensate CFA for those services (Filing

No. 35-2 at 2). CFA identifies no ambiguity as to the type of work it was required to perform for

Conduent or the terms of payment. The parties' disagreement relates solely to the amount of

services Conduent must assign to CFA under the Prime Contract. The Subcontract is silent on that

topic, so the Subcontract contains no possible ambiguity as to that topic. CFA has failed to

adequately allege a claim for breach of the Subcontract based on an alleged obligation to commit

a certain amount of work to CFA.

b. Breach of the Subcontract's Notice Provision

The Subcontract contains a provision that permits Conduent to perform or outsource

staffing services, but only upon thirty days' notice to CFA (the "Notice Provision") (Filing No. 35-

2 at 43). In the August 2023 Order, Judge Miller found that CFA had failed to adequately allege

damages arising from a breach of the Notice Provision, though "[i]t might be possible" for CFA to

do so (Filing No. 31 at 13). The Amended Complaint expands on CFA's damages allegations,

alleging that "CFA was deprived of the opportunity to perform . . . staffing services committed to

it by Conduent under the Subcontract/Statement of Work. CFA, in turn, has suffered monetary

damages in an amount to be proven at trial." (Filing No. 35 at 9–10.)

CFA contends that the Amended Complaint alleges "[a]t a minimum, CFA has sustained

lost profits" (Filing No. 53 at 29). However, Conduent argues that the Subcontract precludes CFA

from recovering lost profits. The Subcontract states, in relevant part:

21. LIMITATION OF LIABILITY Except for liability provided under Sections 8

. . . Section 19 . . . and Section 20 of this Subcontract . . . , NEITHER PARTY

SHALL BE LIABLE, UNDER ANY CIRCUMSTANCES FOR ANY

ANTICIPATORY OR LOST PROFIT, LOST REVENUE, SPECIAL,

CONSEQUENTIAL, PUNITIVE, EXEMPLARY, INCIDENTAL, OR

INDIRECT DAMAGES OF ANY KIND . . . RESULTING FROM THE

PERFORMANCE OR NON-PERFORMANCE OF ITS OBLIGATIONS

UNDER THIS SUBCONTRACT EVEN IF THOSE NON-DIRECT

DAMAGES ARE ATTRIBUTED TO BREACH OF THIS SUBCONTRACT .

. . .

(Filing No. 35-2 at 6–7 (emphasis in original)).

The enforceability of a liability limitation provision, like the above provision, is an

affirmative defense. However, the Court may consider this affirmative defense at the motion to

dismiss stage. See Electron Trading, LLC v. Morgan Stanley & Co. LLC, 157 A.D.3d 579, 580

(N.Y. App. Div. 2018) (considering liability limitation affirmative defense on motion to dismiss).

Under New York law, contractual liability limitations are generally enforceable. "The [New York]

Court of Appeals has recognized that '[a] limitation on liability provision . . . represents the parties'

Agreement on the allocation of the risk of economic loss in the event that the contemplated

transaction is not fully executed, which the courts should honor.'" Electron Trading, LLC, 157

A.D.3d at 580 (quoting Met. Life Ins. Co. v. Noble Lowndes Int'l, 643 N.E.2d 504 (N.Y. 1994)).

The contracting parties "'may later regret their assumption of the risks of non-performance in this

manner, but the courts let them lie on the bed they made.'" Noble Lowndes Int's, 643 N.E.2d at 507

(quoting 5 Corbin, Contracts § 1068, at 386).

CFA argues that the limitation on liability provision is unenforceable because Conduent

"committed the first material breach of the contract" and "has unclean hands" (Filing No. 53 at

30). However, the affirmative defenses cited by CFA are not the appropriate standard for

determining whether a limitation on liability provision is enforceable. Under New York law,

liability-limiting provisions are unenforceable only when,

in contravention of acceptable notions of morality, the misconduct for which it

would grant immunity smacks of intentional wrongdoing. This can be explicit, as

when it is fraudulent, malicious or prompted by the sinister intention of one acting

in bad faith. Or, when, as in gross negligence, it betokens a reckless indifference to

the rights of others, it may be implicit.

Kalish-Jarco, Inc. v. City of New York, 448 N.E.2d 413, 416–17 (N.Y. 1983). "The type of

intentional wrongdoing that could render a limitation [provision] unenforceable is that which is

unrelated to any legitimate economic self-interest. Stated otherwise, a party can intentionally

breach a contract to advance a legitimate economic self-interest and still rely on the contractual

limitation provision." Electron Trading, LLC, 157 A.D.3d at 581 (internal citations and quotation

marks omitted).

While the Amended Complaint may allege an intentional breach of the Notice Provision,

it does not allege the type of egregious, "sinister" wrongdoing necessary to invalidate the liability

limitation provision. At best, CFA alleges that Conduent intentionally breached the Subcontract

to retain a larger portion of funds under the Prime Contract, which would be in Conduent's

economic self-interest. Because CFA's Amended Complaint fails to allege a viable claim for

breach of the Subcontract, Count II must be dismissed.

2. Whether Dismissal with Prejudice is Appropriate

When a complaint fails to state a claim for relief, a plaintiff is ordinarily given a chance to

amend the complaint to correct the problem. See Bogie v. Rosenberg, 705 F.3d 603, 608 (7th Cir.

2013). However, leave to amend need not be granted if amendment would be futile. Garcia v.

City of Chi., 24 F.3d 966, 970 (7th Cir. 1994). Once a plaintiff has had one or more opportunities

to cure the defects but fails, the court may dismiss claims with prejudice. See Dittman v. ACS

Hum. Servs. LLC, No. 16-cv-16, 2017 WL 819685, at *5 (N.D. Ind. Mar. 1, 2017) (dismissing

plaintiff's third amended complaint with prejudice when plaintiff failed to allege sufficient factual

matter and it appeared he would never be able to do so); see also Norman v. N.W. Ind. CA Section

8, No. 21-CV-158, 2021 WL 4363012, at *5 (N.D. Ind. Sept. 24, 2021) (dismissing second

amended complaint with prejudice when the plaintiff had been given opportunities to amend her

complaint).

Here, CFA has had ample opportunity to plead a viable claim for breach of the Subcontract

but has been unable to do so. CFA has failed to show that the Subcontract incorporates the

MBE/WBE Provision or otherwise obligates Conduent to commit a certain amount of work to

CFA, and CFA fails to allege that it has suffered any recoverable damages because of Conduent's

breach of the Subcontract's Notice Provision.

CFA's proposed Second Amended Complaint shows that CFA would not be able to

successfully plead a claim for breach of the Subcontract even if given another opportunity to

amend. Count II of the proposed Second Amended Complaint repeats, almost verbatim, the latent

ambiguity arguments raised in CFA's response brief and alleges that Conduent's breach of the

Notice Provision caused CFA to suffer lost profits, which are not recoverable (Filing No. 52-1 at

20–23). CFA has been, and will be unable to, plead a viable claim for breach of the Subcontract.

Accordingly, Count II is dismissed with prejudice.

3. Whether Leave to Amend Should Be Granted

Because Count II is dismissed with prejudice, CFA's Motion for Leave is denied as moot

as to Count II.

C. Count III: Unjust Enrichment

In Count III, CFA alleges Conduent was unjustly enriched by its performance of services

that should have been subcontracted to CFA (Filing No. 35 at 9). Conduent argues this claim

should be dismissed with prejudice because the existence of the Prime Contract and Subcontract

bar any equitable recovery (Filing No. 41 at 28–29). As with CFA's first two claims, the Court

will discuss the adequacy of the claim, then Conduent's request for dismissal with prejudice, and

then CFA's request for leave to amend.

1. Whether CFA Has Sufficiently Alleged Unjust Enrichment

In the Amended Complaint, CFA clarifies that Count III is alleged in the alternative to

Count I only (Compare Filing No. 1-3 at 8 with Filing No. 35 at 9). Count III in the Amended

Complaint is otherwise identical to Count III in the original complaint. Conduent simply repeats

the same arguments raised in its first Motion to Dismiss—the existence of express contracts (the

Prime Contract and Subcontract) bars CFA's unjust enrichment claim (Filing No. 41 at 28). In

response, CFA argues that Count III is properly alleged in the alternative to Count I and that its

"unjust enrichment claim arises out of the 15.26% MBE provision in the Prime Contract only" and

"does not arise out of the Subcontract" (Filing No. 53 at 31). The Court will discuss whether the

existence of either contract precludes CFA's claim for unjust enrichment.

a. Whether Prime Contract Bars Unjust Enrichment

Conduent argues that CFA cannot seek equitable relief based on the MBE/WBE Provision

because Conduent admits that the Prime Contract exists, but CFA argues it may seek equitable

relief because the parties dispute whether CFA may enforce the Prime Contract. The pertinent

question, then, is whether a plaintiff may seek equitable relief based on an express contract to

which the plaintiff is not a party. Based on caselaw from the Indiana Supreme Court, the answer

is "yes."

In Zoeller v. East Chicago Second Century, Inc., 904 N.E.2d 213 (Ind. 2009), the City of

East Chicago (the "City") and Showboat Marina Partnership ("Showboat") entered into a

development agreement for the operation of a riverboat casino. The agreement provided that if

Showboat received a gaming license from the Indiana Gaming Commission ("IGC") and began

operating the casino, Showboat would contribute a portion of its revenue to organizations for the

benefit of the City. Showboat promised, in part, to donate one percent of its adjusted gross receipts

to East Chicago Second Century, Inc. ("Second Century"), and Second Century promised to

undertake local development activities. The IGC issued a gaming license to Showboat, based in

part on Showboat's and Second City's promises. Id. Over the next several years, Second Century

received approximately sixteen million dollars from Showboat. However, an investigation by the

Indiana Attorney General revealed that much of those funds "could not be accounted for and could

be traced to Second Century's principals." Id. Second Century filed a declaratory judgment action,

seeking to ensure that the revenue payments would continue. The Attorney General intervened

and alleged unjust enrichment. The Attorney General argued that "the State conferred a

measurable benefit on Second Century by 'mandating the payments in the first place as a condition

precedent to the [IGC's] authorization of the gaming license,'" and that it would be unjust "to allow

Second Century to retain the benefit of [the] funds without fulfilling its obligation to engage in the

economic development" of the City. Id.

Second Century moved to dismiss the unjust enrichment claim as barred by the existence

of the development agreement. Id. at 220. The trial court dismissed the unjust enrichment claim,

but the Indiana Supreme Court held that the dismissal was erroneous. The Indiana Supreme Court

explained that "[t]here was an express contract in this transaction, but it was not one to which the

Attorney General or the State were parties. . . . That transaction is thus not a bar to the Attorney

General's claim for unjust enrichment, an equitable remedy." Id. at 221. The Zoeller court further

explained that the terms of the development agreement "were intended to control the rights and

duties of [Second Century] and the casino licensee in relation to each other; they were not intended

to control the rights of any non-parties." Id.

Under Zoeller, as long as the parties dispute whether CFA may enforce the Prime Contract,

the Prime Contract's existence does not bar CFA's alternative unjust enrichment claim.

b. Whether Subcontract Bars Unjust Enrichment

Conduent also argues that CFA has no equitable right to enforce the MBE/WBE Provision

"because CFA's agreement with Conduent is governed solely by the Subcontract, which does not

include the term CFA wishes to enforce" (Filing No. 59 at 17). CFA responds that the Subcontract

does not preclude equitable recovery because the unjust enrichment claim arises out of a provision

in the Prime Contract, not the Subcontract (Filing No. 53 at 31).

Under Indiana law, "[t]he existence of express terms in a valid contract precludes the

substitution of and the implication in law of terms regarding the subject matter covered by the

express terms of the contract." Keystone Carbon Co. v. Black, 599 N.E.2d 213, 216 (Ind. Ct. App.

1992) (emphasis added). "[T]he existence of an express contract will not prevent a party from

presenting to a jury a breach of contract theory and a quantum meruit theory if 'the express contract

arguably cover[s] a different subject matter than that upon which [the plaintiff] sought a remedy

in quasi-contract.'" Luse Thermal Techs., LLC v. Graycor Indus. Constructors, Inc., 221 N.E.3d

701, 719 (Ind. Ct. App. 2023) (quoting City of Indianapolis v. Twin Lakes Enters., Inc., 568 N.E.2d

1073, 1079 (Ind. Ct. App. 1991)); see Twin Lakes Enters., Inc., 568 N.E.2d 1073 (holding that trial

court did not err in instructing jury on breach of contract and unjust enrichment claims because

jury could have reasonably found that the parties' contract "arguably covered a different subject

matter than that upon which [the plaintiff] sought a remedy in quasi-contract").

So if the Subcontract covers a different subject matter than the MBE/WBE Provision,

which forms the basis of CFA's unjust enrichment claim, then the existence of the Subcontract

would not bar the unjust enrichment claim. However, the Amended Complaint alleges that the

Subcontract and MBE/WBE Provision both cover the same subject matter—namely, the amount

of services that Conduent must subcontract to CFA8 (Filing No. 35 at 4, 8–9; Filing No. 53 at 27).

Because CFA's unjust enrichment claim is not alleged in the alternative to its claim for breach of

the Subcontract, CFA's unjust enrichment claim must be dismissed.

8 The Court does not presently decide whether the Subcontract and MBE/WBE Provision cover the same subject

matter.

2. Whether Dismissal with Prejudice is Appropriate

The Court finds that dismissal of Count III would not be appropriate at this stage. For the

reasons explained above, Count III is subject to dismissal only because CFA's express allegations

about the scope of the Subcontract in Count II preclude equitable recovery. Because the Court is

dismissing Count II with prejudice and denying CFA's Motion for Leave as to Count II, CFA's

Second Amended Complaint may be able to properly plead Count III in the alternative to Count I.

The Court therefore dismisses Count III without prejudice.

3. Whether Leave to Amend Should Be Granted

As the Court explains above, neither the Prime Contract nor the Subcontract necessarily

bars CFA's unjust enrichment claim. The only reason why Count III must be dismissed is because

Count II in the Amended Complaint expressly alleges that the Subcontract covers the same subject

matter as the MBE/WBE Provision. Because Count II is now dismissed with prejudice, it is no

longer "certain from the face of the complaint that any amendment would be futile or otherwise

unwarranted." Runnion, 786 F.3d at 519–20 (emphasis in original). In light of the liberal standard

for amending pleadings, the Court grants CFA's Motion for Leave as to Count III.

D. CFA's Request for Attorneys' Fees

"A court may strike particular allegations if '[t]he Court unequivocally dismissed Plaintiff's

claims based on these allegations with prejudice, thereby precluding Plaintiff from raising them

again' in an amended complaint." VitalGo, Inc. v. Kreg Trerapeutics, Inc., 370 F. Supp. 3d 873,

880 –81 (N.D. Ill. 2019) (citation omitted) (alteration in original)); see Fed. R. Civ. P. 12(f) (stating

a court may strike "redundant, immaterial, impertinent, or scandalous matter"). The parties agree

that CFA's request for fees and costs is based exclusively on a fee shifting provision in the

Subcontract. Because the Court has dismissed CFA's claim for breach of the Subcontract with

prejudice, CFA no longer has any basis for seeking attorneys' fees or costs. CFA's request for

attorneys' fees and costs is therefore stricken, and CFA's Motion for Leave is denied as moot as

to CFA's request for attorneys' fees and costs.

E. Conduent's Request for Attorneys' Fees

The Subcontract provides that "[i]n the event of any claim, controversy, dispute, or

litigation between the parties arising out of or relating to this Subcontract, the prevailing party

will be entitled to recover from the losing party reasonable expenses, attorney fees and costs"

(Filing No. 35-2 at 11 (emphasis added)). In its request for fees, Conduent contends that all of

CFA's claims, not just the claim for breach of the Subcontract, arise out of or are related to the

Subcontract (Filing No. 59 at 16–17). Because the Court is not dismissing all claims with

prejudice, an order awarding Conduent its fees would be premature. The Court therefore denies

Conduent's request for attorneys' fees, without prejudice to refile.

IV. CONCLUSION

For the following reasons, the Court GRANTS Conduent's Second Motion to Dismiss

without prejudice as to some claims and DENIES Conduent's request for fees (Filing No. 40).

Count I is DISMISSED without prejudice, Count II is DISMISSED with prejudice, Count III

is DISMISSED without prejudice, and CFA's request for attorneys' fees and costs is

STRICKEN.

CFA's Motion for Leave to File Second Amended Complaint (Filing No. 52) is GRANTED

in part as to Counts I and III only and DENIED in part as moot as to Count II and CFA's request

for attorneys' fees and costs. The clerk is directed to re-docket the proposed Second Amended

Complaint submitted at Filing No. 52-1, and the Second Amended Complaint will become the

operative pleading as of the date of this Entry. Conduent is granted thirty (30) days to respond to

Counts I and III, only, of the Second Amended Complaint or to file a motion to dismiss, if

appropriate.

The Court also DENIES as moot CFA's Objection to Magistrate's Discovery Order (Filing

No. 50), Motion to Stay Briefing on Second Motion to Dismiss Pending a Ruling on CFA's

Objection to Magistrate's Discovery Order (Filing No. 51), Motion for Leave to File Reply Brief

(Filing No. 60), and Objection to Magistrate’ Judge's Briefing/Stay Order (Filing No. 61).

SO ORDERED.

Date: 4/29/2024 1 )

Ww

Hon. Tanya Walton Pratt, Chief Judge

United States District Court

Southern District of Indiana

Distribution:

Riley H. Floyd

HOOVER HULL TURNER LLP

rfloyd@hooverhullturmer.com

Andrew W. Hull

HOOVER HULL TURNER LLP

awhull@hooverhullturner.com

Matthew S. Tarkington

LEWIS & KAPPES PC

mtarkington@lewis-kappes.com

Finis Tatum, [IV

Hoover Hull Turner LLP

ftatum@hooverhullturner.com

Taylor Webster

Lewis Kappes, PC

TWebster@lewis-kappes.com

32