CDK GLOBAL, LLC v. TULLEY AUTOMOTIVE GROUP, INC.

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

CDK GLOBAL, LLC, as successor-in-

Civ. No. 15-3103 (KM) (JBC)

interest to ADP DEALER SERVICES,

INC.,

OPINION

Plaintiff,

v.

TULLEY AUTOMOTIVE GROUP, INC.,

and JOHN DOE CORPORATIONS 1-5,

Defendants.

KEVIN MCNULTY, U.S.D.J.:

This matter arises out of the contract to lease certain equipment and

installation of computer software, also known as a dealer management system

(“DMS”), designed to help car dealerships with their daily operations. The

plaintiff, CDK Global, LLC (“CDK”), as successor-in-interest to ADP Dealer

Services, Inc., sells DMS products and services associated with the installation,

implementation, and maintenance of DMS. CDK sold DMS products and

associated services to defendant Tulley Automotive Group, Inc. (“Tulley”), an

automobile dealership with locations in New Hampshire. In essence, CDK

alleges that Tulley breached the parties’ contract when Tulley terminated the

agreement early, triggering various contractual provisions, including

acceleration of payments owed, liquidated damages, and the return of leased

equipment.

CDK filed a complaint against Tulley asserting four causes of action:

breach of contract, replevin, contractual attorneys’ fees, and conversion. (DE

1.) Tulley answered the complaint and also asserted five counterclaims against

CDK: fraudulent inducement, rescission, breach of contract, violation of New

Jersey Consumer Fraud Act, § 56:8-1 et seq. (“NJCFA”), and unjust

enrichment. Earlier in this case, CDK filed a motion to dismiss all of Tulley’s

counterclaims. (DE 86.) I granted the motion to dismiss as to Tulley’s

counterclaim for rescission (solely on grounds of superfluity), but otherwise

denied it. (See DE 103, 104.)

Now before the Court are the following motions: (1) CDK’s motion for

summary judgment against Tulley’s four remaining counterclaims (DE 265); (2)

Tulley’s motion for summary judgment on CDK’s claims (DE 266); and (3)

CDK’s motion to voluntarily dismiss its own replevin and conversion claims

against Tulley pursuant to Fed. R. Civ. P. 41(a)(2). (DE 290.) For the reasons

set forth below, I will grant in part and deny in part CDK’s motion for summary

judgment on Tulley’s counterclaims, deny Tulley’s motion for summary

judgment on CDK’s claims, and grant CDK’s motion to voluntarily dismiss its

replevin and conversion counts.

I. Background1

CDK provides integrated computerized transaction processing, data

communications, and other information services to various industries

throughout the United States. (Compl. ¶ 9.) It is incorporated in State of

Delaware and has its principal place of business in Illinois. (Id. ¶ 1.) CDK sues

as the successor-in-interest to ADP Dealer Services, Inc. (“ADPDS”), the entity

1 For ease of reference, certain key items from the record will be abbreviated as

follows:

“Compl” = CDK’s Complaint [ECF no. 1]

“AC” = Tulley’s Amended Answer and Counterclaims [ECF

no. 22]

“Pl. Ex. ___” = Plaintiff CDK’s exhibits in connection with their

motion for summary judgment [ECF nos. 267-2 –

267-6.]

“Def. Ex. ___” = Defendant Tulley’s exhibits in connection with their

motion for summary judgment [ECF nos. 274-1 –

274-26; 276-1 – 276-25; 277-1 – 277-31]

that actually entered into the contract at issue. (For simplicity, references to

CDK will be deemed to include the predecessor ADP entity.)2

Tulley is an automobile dealership that sells BMW, Buick, GMC, and

Mazda vehicles in Manchester and Nashua, New Hampshire. (AC ¶¶ 1, 13.)

Tulley is incorporated and has its principal place of business in New

Hampshire.3 (Compl. ¶ 2.)

One of the products which CDK sells is a dealer management system or

DMS called “Drive,” which consists of hardware and computer software that

supports the daily operations for automobile dealerships, such as payroll,

accounting, inventory, and itemizing the costs of deals. (AC ¶¶ 7–8.) CDK sells

its DMS system to automobile dealerships, but also to repair facilities and

original equipment manufacturers in the agriculture, construction, marine,

powersports, and recreational vehicle industries. (AC ¶¶ 20, 25.)

2 The ADP name seems to encompass a number of entities. Unhelpfully, the

record contains references to “ADP” which do not always specify which ADP entity is

meant. The actual contracting entity, ADPDS, was spun off from the parent ADP entity

on October 1, 2014, resulting in the current configuration of CDK, which succeeded to

all of the agreements of ADPDS. (Compl. ¶¶ 7–8) ADPDS was a Delaware corporation.

(DE 292 at 8) CDK submits an affidavit of the former Assistant General Counsel and

VP of ADPDS (he now holds the same position at CDK), which states that the “global

headquarters” of ADPDS was located in Illinois in 2012, 2013, and 2014, and that the

headquarters of CDK has been at the same location since the spinoff transaction. (Pl.

Ex. T, DE 292-3) On the other hand, according to the affidavit of the controller of

ADPDS, dated March 18, 2013, submitted in another D.N.J. action regarding a Master

Servicing Agreement, ADPDS had its principal place of business in Roseland, New

Jersey. (Def. Ex. III ¶ 3 (DE 277-9) (ADP has “its principal place of business in New

Jersey.”)). ADPDS’s application to transact business in the State of Illinois, filed in

2012, states that its principal office is located in New Jersey. (Def. Ex. JJJ (DE 283-

10)). See also Def. Ex. Ex. YY (DE 276-25) (Correspondence sent to Jane Copeland on

behalf of Tulley in 2015 from CDK’s regional sales manager in Parsippany, New

Jersey); Ex. KKK (DE 277-11) (April 2015 letter threatening litigation sent by CDK’s

senior counsel in Parsippany)). Here, CDK was perhaps drawing a distinction between

its “headquarters” and its “principal place of business.” Cf. Hertz Corp. v. Friend, 559

U.S. 77, 130 S. Ct. 1181 (2010) (discussion of then-conflicting approaches to

corporate citizenship for purposes of diversity jurisdiction). At any rate, it is fairly clear

that CDK/ADPDS is and was conducting substantial business activities in New

Jersey.

3 Jurisdiction is proper pursuant to 28 U.S.C. § 1332(a), because there is

complete diversity of citizenship and the amount in controversy exceeds $75,000.

CDK first reached out to Tulley in late 2011 for a potential sale of CDK’s

DMS products. (Pl. Ex. A at 87:1–91:25.) At that time, Tulley was using another

DMS system called Dealertrack (also referred to as Arkona throughout the

record). (Id.) In March 2012, two CDK sales representatives, Stephanie Manzoli

and Joseph Zarra, met with Tulley representatives to discuss the possibility of

having Tulley switch over to CDK Drive for their DMS software. (Pl. Ex. J at

CDK015027–15119.) A month later, Mark Tulley from Tulley Automotive Group

informed Stephanie Manzoli that after reviewing CDK’s proposal, Tulley would

not be moving forward with purchasing Drive due to Drive’s installation and

continuing monthly fees. (Pl. Ex. K at TULLEY0004460.0003.) Eventually, Mark

Tulley stopped responding to Ms. Manzoli’s emails.

In April 2013, CDK and Tulley resumed communication regarding the

possibility of having Tulley switch to Drive for their DMS system. (Pl. Ex. K at

TULLEY0003238.0001–0003238.0002.) The emails between Jeff Evans from

CDK and Julie Loud, Tulley’s Corporate Controller, emphasized the need for

CDK to meet Tulley’s operation requirements within Tulley’s budget. (Id.) On

May 1, 2013, Jeff Evans met with various Tulley personnel, including Bryan

Tulley, Mark Tulley, and John Murphy, Tulley’s Director of Fixed Operations.

According to Tulley’s counterclaims, Jeff Evans had allegedly made various

representations during this meeting that CDK Drive would create more

efficiencies for Tulley and could configure a program that would meet Tulley’s

operating needs. (Def. Ex. K at 8–10; Def. Ex. UUU at 116:17–117:25, 118:3–

119:1, Def. Ex. VVV at 61:7–20, 99:2–11.)

As discussions between Tulley and CDK continued, Bryan Tulley

obtained the contact information of an individual named Jane Copeland who

Tulley believed had knowledge in DMS systems, including CDK’s Drive system.

(Pl. Ex. M at API000206–207; Pl. Ex. A at 162:162:15–164:11). Tulley, however,

did not contact Ms. Copeland to assist them on the transaction between Tulley

and CDK prior to entering into their contract with CDK. (Pl. Ex. A at 167:5–10;

Pl. Ex. E at 69:22–70:8.)

After CDK provided Tulley a copy of their initial proposal, the parties

engaged in a series of negotiations. (Pl. Ex B at 98:20–99:9; Pl. Ex. C at 106:7–

107:14.) An email from Jeff Evans demonstrates that he reviewed line by line

the items of the proposal with Tulley, however, neither Mark nor Bryan Tulley

recall having this call with him. (Pl. Ex. J at CDK014980–14981, Pl. Ex B. at

92:6–93:1, Def. Ex. UUU at 139:10–14.) Tulley argues that the only thing they

negotiated was the price that Tulley would have to pay for the CDK Drive

program, and that they did not engage in discussions regarding the selection of

specific software because they relied on CDK’s expertise to do so. Regardless of

whether Tulley negotiated any of the software included in its DMS system, it

seems that Tulley was able to negotiate some of the terms of the Master

Services Agreement (“MSA”) that the parties eventually executed. For example,

Bryan Tulley from Tulley Automotive testified that he negotiated the length of

time in one of the MSA addendums signed by the parties. (Pl. Ex. A at 157:4–

158:23.) Jane Copeland also testified during her deposition that based on her

knowledge, dealerships do have the ability the negotiate the terms of an MSA.

(Pl. Ex. E at 87:16–20.)

Eventually, the parties came to an agreement, embodied in the MSA. (Pl.

Ex. J at CDK000001–28, DE 267-4.) Tulley signed the MSA, including all

schedules and addenda, on June 26, 2013. The MSA states that the parties

agree that Tulley would lease software from CDK4 for a non-cancellable five-

year term, and that Tulley would pay both a start up fee and monthly fees to

CDK during that term. (Id.) The MSA also includes an integration clause, a

section limiting CDK’s liabilities, a provision that states that there are no

express or implied warranties with respect to CDK’s services and software, and

that Tulley waives the right to rely on any representation or warranty not

contained in the Agreement. (Id. ¶¶ 12, 13, 17.) The MSA also contains a

4 Again, for clarity, the actual contracting party was CDK’s predecessor,

ADP Dealer Services, Inc.

section that provides CDK remedies in the event Tulley defaults on any of its

contractual obligations. (Id. ¶ 16.)

CDK began installing Drive for Tulley in mid-August 2013. (Pl. Ex. J at

CDK012792–12793.) Usually, the training and implementation process for

Drive occurs in six steps. (Pl. Ex. J atCDK013021.) The first step is called

“Implementation Discovery,” which is when CDK personnel meet with a

dealership’s managers and key stakeholders in order to understand the

dealership’s specific needs from a DMS system. (Id., Pl. Ex H at 57:8–18.)

Tulley acknowledged receiving worksheets in connection with the

Implementation Discovery process, which they filled out. The first day a

dealership begins using the new DMS software is known as the “go-live date,”

which is another step in the implementation process. (Id.) Prior to the “go-live

date,” CDK will verify with the client the specifications of the DMS system they

installed. (Pl Ex. C at 149:5–10; Pl. Ex. E at 106:13–15.) During this time, a

dealership is responsible for ensuring that all their employees complete CDK’s

Drive training before launching the new DMS system. Mark Tulley testified that

he was aware of this requirement. (Pl. Ex. B at 145:14–21.) According to CDK’s

records, however, Tulley personnel only completed 68% of the Drive training

prior to the go-live date. (Pl. Ex. J at CDK007474–7476.) Tulley contends that

that percentage does not accurately reflect the amount of training Tulley

employees undertook since CDK’s training tracker was not accurately reflecting

the training progress for some of Tulley’s employees. (Def. Ex. AA.)

Tulley’s new DMS system went “live” on December 3, 2013. Ms. Copeland

testified that it usually takes approximately six months for a dealership to fully

adjust to a new DMS system. (Pl. Ex. E at 70:10–15.) Soon after Drive

launched, Tulley began experiencing issues with the system, which they

communicated to CDK. In response, CDK began trying to address Tulley’s

issues through in person meetings and trainings at Tulley and internally at

CDK with their own consultants and account managers. (Pl. Ex. J at

CDK010577–10583, CDK011531–011532, CDK021732; Pl. Ex. K at

TULLEY0003279.0001.) Internally, CDK recognized that one of the problems

was that each dealership should have had a separate logon. (Def. Ex. BB at

CDK007373.)

Tulley’s issues with Drive continued, and on February 17, 2014, Bryan

Tulley reached out to Jane Copeland for her advice. (Pl. Ex. K at

TULLEY0006044.0001–2.) Tulley began expressing the possibility of no longer

continuing with Drive around this time as well. In addition to the myriad of

installation issues they faced, Tulley felt that the “[f]unctionality of the system

[was] not what they expected and sold” by CDK. (Pl. Ex. J at CDK012269–

12270, CDK012274–12278.) Throughout this time, CDK and Tulley were in

communication with one another, and CDK personnel were visiting Tulley’s

dealership locations. (Id. at CDK011529–11530.)

However, by April 2014, Tulley ceased communication with CDK and

instructed their employees to not respond to any of CDK’s phone calls and

instead voice their concerns or issues with Drive to their internal manager. (Pl.

Ex. K at TULLEY0003013.0001; Pl. Ex. J at CDK008846–8847; Pl. Ex. M at

API003734–3735.) Around the same time, Tulley began discussing the

possibility of returning to DealerTrack for its DMS system. (Pl. Ex. E at 144:1–

11; Pl. Ex. M at API003734–3735.) In a letter from Tulley’s attorney to CDK

dated April 21, 2014, Tulley delineated all the issues they experienced with

Drive. (Pl. Ex. J at CDK017851–17853.) The letter states that it is serving as a

formal notification that if the complaints as set forth in this letter .

. . are not addressed immediately and resolved within thirty (30)

days and the ADP system is not made to function without the

necessity of purchasing further ADP products . . . [Tulley] intends

to terminate the contract for a gross breach of contract, failure to

provide services and equipment per the technical and functional

specifications and contrary to the representations made by the

sales force of ADP . . .

Id.

Bryan Tulley subsequently met with CDK on May 7, 2014, and the

parties resumed communication with one another in order to address Tulley’s

issues with Drive. (Pl. Ex. N at TAG0000142.) At that meeting, CDK presented

two potential solutions for Tulley: one would give Tulley additional logons to

separate out each automobile manufacturer they sell, and the other would be

to split Tulley up into a “multi-company environment” where each “company”

would have a separate log on. (Pl. Ex. H at 76:10–77:19.) Both solutions would

require Tulley to invest more time and effort to reconfigure their current Drive

system. (Id. at 78:5–80:1; Def. Ex. PP at CDK001932.) Andy Freedman, a Vice

President of Business Development at CDK, also testified that CDK told Tulley

that reconfiguring Tulley’s current Drive system would not cost them any

additional money. (Pl. Ex. H at 81:6–22.) Tulley disputes this fact and asserts

that CDK never represented to them that the new set of logons would be free or

that installing the new logons would not result in additional expense. (Def. Ex.

B ¶ 20; Def. Ex. XX ¶¶ 4–5.) Contemporaneous emails demonstrate that CDK

discussed internally the possibility of offering to reconfigure Tulley’s system

and provide additional logons at no charge to Tulley. (Def. Ex. WW at

CDK010326.)

Ultimately, Tulley did not move forward with either proposal to

reconfigure Drive. (Pl. Ex. B at 232:8–22.) John Murphy testified that Tulley

never responded to CDK’s proposals because Tulley did not want to go through

a “complete restart” with the Drive program. (Def. Ex VVV at 176:8–13.)

CDK re-offered the reconfiguration of Tulley’s Drive system on January 9,

2015 to Jane Copeland on behalf of Tulley. (Pl. Ex. K at

TULLEY0005941.0001–2, TULLEY0005942.0001; Pl. Ex. M at API00019–20.)

Ms. Copeland then forwarded the offer to Bryan Tulley and told him that Tulley

needed to give CDK an “official response” and explain why each of CDK’s offers

was unacceptable. (Pl. Ex. M at API00019–20.) Tulley again declined CDK’s

proposal.

By the end of February 2015, Tulley had decided to return to Dealertrack

as their DMS provider. (Pl. Ex. L at Dealertrack00085–00087.) On March 30,

John Murphy confirmed with CDK that the GM Retail Inventory Management

(“RIM”) was to be turned off because Tulley was looking at other DMS service

providers. (Pl. Ex. J at CDK014919–14120.) On March 31, 2015, CDK’s counsel

sent a letter to Tulley and their counsel stating that by turning off GM’s RIM

because Tulley was planning to return to Dealertrack constituted a termination

of the MSA and a breach of their obligations under the MSA. (Pl. Ex. J at

CDK015132.) The letter states that Tulley’s actions would accelerate the

balance due under the MSA, but that CDK would be willing to accept 70% of

that obligation, or $382,428.52. (Id.) On April 1, 2015, CDK sent a follow up

letter advising Tulley that pursuant to 18 U.S.C. § 1030, unless authorized

under the Agreement, Tulley is not authorized to use CDK hardware or

software to facilitate the transfer of data “to a computer system of a purchaser

without the express written permission [from CDK].” (Pl. Ex. K at

TULLEY0002836.0001.) Additionally, Tulley “is NOT authorized to use the CDK

licenses/equipment in any manner other than prescribed by the terms of the

Agreement between the parties.” (Id.) On April 3, 2015, John Murphy at Tulley

emailed CDK to inform them to “discontinue the GM RIM program for Tulley

Buick/GMC.” (Pl. Ex. K at TULLEY0004873.0001.)

On April 6, 2015, Tulley’s attorney responded to CDK’s March 31 and

April 1 letters. The letter provides an overview of Tulley’s issues with the Drive

system and CDK’s proposed solutions and confirms that Tulley would be

moving on to another DMS provider. (Pl. Ex. J at CDK014924–14928.) The

letter informs CDK that it was CDK that failed “to provide products and

services required under [the MSA]” by not providing Tulley a working system.

(Id.) The letter also alleges that Tulley has suffered damages and losses as a

“direct consequence of the fraudulent representations made at the time of sale

of the MSA and the failure to deliver the product sold.” (Id.) The letter informs

CDK that Tulley

has not terminated its contract with CDK and has continued to

make payments under the [MSA]. Tulley reserves its right to use its

own data, even if the same is currently sored on CDK equipment,

particularly given that the data which was developed on CDK

equipment came from my client and its supplier preceding ADP.

(Id.) Finally, the letter states that Tulley would “be happy to discuss with [CDK]

a potential mutual agreement as to the resolution of the competing claims of

your company and my client.” (Id.)

On April 7, 2015, CDK’s counsel responded to Tulley’s April 6, 2015

letter. According to CDK’s counsel, CDK had provided a working system and

had gone above and beyond what was required. (Pl. Ex. M at API000364–366

(DE 267-5 at 20)) The letter takes the position that Tulley has decided to move

forward with another DMS provider for its own reasons, rather than any defect

in the Direct system, and is therefore financially liable. (Id.) The letter

concludes with CDK’s attorney offering to find an “amicable resolution of this

matter to avoid court intervention.” (Id.)

Based on a letter dated April 22, 2015, Tulley had authorized Jane

Copeland to represent them in possible negotiations with CDK to find a mutual

resolution regarding the “termination of Tulley Automotive Group, Inc.’s

contracts with CDK Global.” (Id. at API004043.) CDK again reiterated their

position that they would be willing to settle the dispute for $382,428.52 and

that pursuant to 18 U.S.C. § 1030, Tulley is not authorized to transfer the data

in Drive to another computer system without express permission from CDK.

(Pl. Ex. K at TULLEY0005990.0001–2.) Tulley’s counsel responded with a

counteroffer of $25,000 to settle the dispute. (Pl. Ex. J at CDK022480.)

CDK then proceeded to file this lawsuit asserting claims for breach of

contract, replevin, contractual attorneys’ fees, and conversion. After filing its

complaint, Tulley and CDK arranged a date on which CDK would turn off

Tulley’s Drive service and pick up its equipment. (Pl. Ex. K at

TULLEY0004884.0001–8.) CDK also requested that Tulley provide a formal

termination notice to them, which Tulley did not do, on the premise that it was

CDK, and not Tulley, which had terminated the MSA. (Def. Ex M.)

Tulley answered CDK’s complaint and asserted five counterclaims

against CDK: fraudulent inducement, rescission, breach of contract, violation

of New Jersey Consumer Fraud Act, § 56:8-1 et seq. (“NJCFA”), and unjust

enrichment. In my earlier opinion, I dismissed Tulley’s rescission counterclaim,

but allowed the other counterclaims to move forward. Now before me are CDK’s

motion for summary judgment on Tulley’s remaining counterclaims, and

Tulley’s motion or summary judgment on CDK’s four claims.5

5 CDK notes that Tulley’s response to their Statement of Undisputed Facts (DE

278) violates both Fed. R. Civ. P. 56 and Local Rule 56.1, and as a result, the Court

should deem as “admitted” their statement of material facts. (See DE 291.) Local Rule

56.1 states in part,

[t]he opponent of summary judgment shall furnish, with its opposition

papers, a responsive statement of material facts, addressing each

paragraph of the movant’s statement, indicating agreement or

disagreement and, if not agreed, stating each material fact in dispute and

citing to the affidavits and other documents submitted in connection

with the motion . . . [e]ach statement of material facts . . . shall not

contain legal argument or conclusions of law.

I find that many of Tulley’s responses to CDK’s statement of material facts

contain legal arguments, in contravention of Local Rule 56.1. I also find that much of

the information contained in the responses should have been submitted as a “separate

supplemental statement of disputed material facts, in separately numbered

paragraphs citing to the affidavits . . . to substantiate the factual basis for the

opposition,” id., in order to allow CDK to properly respond to Tulley’s statements. I will

not, however, automatically deem all of CDK’s statement of material facts as

“admitted.” The Court has looked at the parties’ respective exhibits to substantiate

their assertions and has summarized the background information in Part I of this

Opinion based on what the evidence reflects. I note however, that Tulley’s response

made it much more difficult to identify the universe of uncontested facts and was quite

burdensome for the Court. See Durkin v. Wabash Nat., No. 10-cv-2013, 2013 WL

1314744, at *6 (D.N.J. Mar. 28, 2013).

II. CDK Motion to Voluntarily Dismiss Counts II and IV of its

Complaint

CDK has filed a motion to voluntarily dismiss Counts II and IV of its

Complaint with prejudice pursuant to Fed. R. Civ. P. 41(a)(2). (See DE 290.) As

stated above, CDK filed this action against Tulley on May 1, 2015. Counts II

and IV of the Complaint assert claims of replevin and conversion against Tulley

because at that time the Complaint was filed, Tulley was still in possession of

CDK’s hardware. A few weeks after CDK filed suit, Tulley arranged for CDK to

pick up the equipment that is the subject of the replevin and conversion

claims. (See DE 268 at 10–11.) Although CDK repossessed its hardware, it did

not move to voluntarily dismiss those claims at that time, and this lawsuit

continued to proceed through discovery and various dispositive motions.

Approximately five years later, on January 21, 2020, Tulley filed its

motion for summary judgment on all counts, including CDK’s replevin and

conversion claims. (See DE 266.) In its Opposition Brief, CDK noted that it

would be moving to voluntarily dismiss those two counts before Tulley’s motion

for summary judgment was fully briefed. (See DE 275 at 21.) CDK proposed to

Tulley a joint stipulation to dismiss the replevin and conversion claims. Tulley

did not agree; it wanted entry of a judgment on the merits for those two claims.

(See DE 290-3.) CDK therefore filed a motion to voluntarily dismiss the replevin

and conversion claims pursuant to Fed. R. Civ. P. 41(a)(2).

Federal Rule of Civil Procedure 41 governs voluntary dismissals of civil

actions. Where, as here, the opposing party has already filed an answer to the

complaint or a motion for summary judgment, an action may only be dismissed

by court order. See Fed. R. Civ. P. 41(a)(2). “Whether to grant or deny a motion

for voluntary dismissal is ‘within the sound discretion of the district court.’”

Bringa v. Roque, No. CIV. 2:13-3296 KM-MA, 2015 WL 857884, at *2 (D.N.J.

Feb. 27, 2015) (citing Hayden v. Westfield Ins. Co., No. 12-0390, 2013 WL

5781121, at *2 (W.D. Pa. Oct. 25, 2013). Generally, a Rule 41 motion should be

granted unless the “defendant will suffer some prejudice other than the mere

prospect of a second lawsuit.” Emmanouil v. Mita Mgmt., LLC, No. CIV. 11-5575

MAS TJB, 2015 WL 5023049, at *2 (D.N.J. Aug. 24, 2015). In determining

whether a voluntary dismissal will result in prejudice to the defendant, courts

look to a variety of factors including, “(1) the expense of a potential second

litigation; (2) the effort and expense incurred by defendant in preparation for

trial in the present case; (3) the extent to which the case has progressed; and

(4) plaintiff's diligence in bringing the motion to voluntarily dismiss.” Id. (citing

Shamrock Creek, LLC v. Borough of Paramus, No. 12–2716, 2015 WL 3902307,

at *2 (D.N.J. June 23, 2015)).

The first two factors weigh in favor of granting the motion to dismiss.

First, Tulley would not be exposed to further litigation, because CDK is moving

to dismiss these claims with prejudice; second, the parties did not engage in

any substantive discovery or litigation specifically in relation to those counts,

which Tulley does not dispute.6 On the other hand, the case has been pending

for five years, and CDK clearly did not exercise diligence in seeking dismissal.

“The touchstone is prevention of substantial prejudice to the parties.”

See Bringa, 2015 WL 857884, at *2 (citing DuToit v. Strategic Minerals Corp.,

136 F.R.D. 82, 85 (D. Del. 1991)). Tulley will not be significantly prejudiced by

dismissal of these claims. It does not appear that their presence in the case has

significantly altered the course of discovery or litigation. Tulley was surely

aware at all times that the equipment had already been returned, so that the

requested relief was moot. 7

6 Tulley did not move to dismiss any of the counts in CDK’s Complaint.

Additionally, Tulley did not extensively brief these two claims in its motion for

summary judgment, likely because the claims were already moot.

7 Proceeding to a decision on the merits would pose problems of its own. Article

III of the Constitution requires that “‘an actual controversy must be extant at all

stages of review, not merely at the time the complaint is filed.’” Camesi v. Univ. of

Pittsburgh Med. Ctr., 729 F.3d 239, 247 (3d Cir. 2013) (citing Genesis Healthcare Corp.

v. Symczyk, 569 U.S. 66, 71, 133 S. Ct. 1523, 1528, 185 L. Ed. 2d 636 (2013)). “An

action is rendered moot when ‘an intervening circumstance deprives the plaintiff of a

‘personal stake in the outcome of the lawsuit,’ at any point during the

litigation.” Id. (quoting Lewis v. Cont'l Bank Corp., 494 U.S. 472, 477–78, 110 S. Ct.

1249 (1990)). Here, the replevin and conversion claims at least arguably became moot

once CDK repossessed the equipment from Tulley, since CDK no longer had a

I will therefore grant CDK’s motion to voluntarily dismiss its replevin and

conversion counts. The dismissal is with prejudice.

III. Motions for Summary Judgment

Both CDK and Tulley have filed motions for summary judgment seeking

dismissal of all claims asserted against them. Tulley alleges claims for common

law fraud, violation of the NJCFA, breach of contract, and unjust enrichment.

CDK’s remaining claims against Tulley are for breach of contract and attorney’s

fees. I will first consider CDK’s motion for summary judgment on Tulley’s fraud

claims, then proceed to the parties’ dueling summary judgment motions for

breach of contract, and then resolve some miscellaneous issues.

a. Legal standard

Federal Rule of Civil Procedure 56(a) provides that summary judgment

should be granted “if the movant shows that there is no genuine dispute as to

any material fact and the movant is entitled to judgment as a matter of law.”

See Kreschollek v. S. Stevedoring Co., 223 F.3d 202, 204 (3d Cir. 2000);

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In deciding a motion

for summary judgment, a court must construe all facts and inferences in the

light most favorable to the nonmoving party. See Boyle v. Cnty. of Allegheny

Pennsylvania, 139 F.3d 386, 393 (3d Cir. 1998) (citing Peters v. Delaware River

Port Auth. of Pa. & N.J., 16 F.3d 1346, 1349 (3d Cir. 1994)). The moving party

bears the burden of establishing that no genuine issue of material fact

remains. See Celotex, 477 U.S. at 322–23. “[W]ith respect to an issue on which

the nonmoving party bears the burden of proof . . . the burden on the moving

party may be discharged by ‘showing’ — that is, pointing out to the district

court — that there is an absence of evidence to support the nonmoving party’s

case.” Id. at 325.

“personal stake” in the outcome of these claims. A jurisdictional dismissal, ironically,

would be without prejudice, a counterproductive outcome from Tulley’s point of view.

Once the moving party has met that threshold burden, the non-moving

party “must do more than simply show that there is some metaphysical doubt

as to material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475

U.S. 574, 586, 106 S. Ct. 1348 (1986). The opposing party must present actual

evidence that creates a genuine issue as to a material fact for trial. Anderson,

477 U.S. at 248; see also Fed. R. Civ. P. 56(c) (setting forth types of evidence on

which nonmoving party must rely to support its assertion that genuine issues

of material fact exist).

Unsupported allegations, subjective beliefs, or argument alone, however,

cannot forestall summary judgment. See Lujan v. Nat’l Wildlife Fed’n, 497 U.S.

871, 888, 110 S. Ct. 3177 (1988) (nonmoving party may not successfully

oppose summary judgment motion by simply replacing “conclusory allegations

of the complaint or answer with conclusory allegations of an affidavit.”); see

also Gleason v. Norwest Mortg., Inc., 243 F.3d 130, 138 (3d Cir. 2001) (“A

nonmoving party has created a genuine issue of material fact if it has provided

sufficient evidence to allow a jury to find in its favor at trial.”). Thus, if the

nonmoving party fails “to make a showing sufficient to establish the existence

of an element essential to that party’s case, and on which that party will bear

the burden of proof at trial . . . there can be ‘no genuine issue of material fact,’

since a complete failure of proof concerning an essential element of the

nonmoving party’s case necessarily renders all other facts immaterial.” Katz v.

Aetna Cas. & Sur. Co., 972 F.2d 53, 55 (3d Cir. 1992) (quoting Celotex, 477

U.S. at 322–23).

Moreover, the “mere existence of some alleged factual dispute between

the parties will not defeat an otherwise properly supported motion for summary

judgment; the requirement is that there be no genuine issue of material fact.”

Anderson, 477 U.S. at 247–48. A fact is only “material” for purposes of a

summary judgment motion if a dispute over that fact “might affect the outcome

of the suit under the governing law.” Id. at 248. A dispute about a material fact

is “genuine” if “the evidence is such that a reasonable jury could return a

verdict for the nonmoving party.” Id.

b. Tulley’s Counterclaim 1: Fraudulent Inducement

i. Choice of law

As a preliminary matter, the parties dispute the scope of the choice of

law provision in the MSA. The MSA contains the following clause:

This Agreement shall be governed in all respects by the laws of the

State of New Jersey, without giving effect to principles of conflicts

law. Client hereby consents to the jurisdiction of any federal or

state court located in the State of New Jersey for all actions arising

out of this Agreement and designates the County of Morris or the

U.S. District Court, District of New Jersey, Newark, New Jersey as

a proper venue for any such action against the Client and the

exclusive forum for any action against ADP. . . .

(See DE 267-4, Pl. Ex. J at CDK000014.) The parties concede that that the

choice-of-law provision requires that New Jersey law be applied their

contractual claims; they disagree, however, as to whether it applies to Tulley’s

fraudulent inducement claim as well.8

CDK argues that because Tully’s fraudulent inducement claim is not

based on the MSA itself, the MSA’s choice-of-law provision does not apply to it.

(See DE 267 at 11.) New Hampshire, says CDK, is where Tulley’s alleged

injuries took place, and thus has the most significant relationship to the tort

claims, which should be decided under New Hampshire law. Tulley responds

that New Jersey law should apply to all claims because the choice-of-law

clause is broad enough to encompass them, and because New Jersey has a

substantial relationship to the case. (See DE 273 at 15.)

In diversity cases such as this one, we look to the choice-of-

law rules of the forum state—the state in which the District Court

sits—in order to decide which body of substantive law to apply to

a contract provision, even where the contract contains a choice-

of-law clause. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S.

487, 496, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941) (holding that a

8 I discuss the NJCFA claim separately infra.

federal court sitting in diversity must apply the choice-of-law rules

of the forum state); Kruzits v. Okuma Mach. Tool, Inc., 40 F.3d 52,

55 (3d Cir. 1994) (applying Pennsylvania’s choice-of-law rules in

diversity case, despite the presence of choice-of-law clause

selecting Illinois law, and concluding that Illinois law governs

interpretation of indemnity clause of a lease agreement); see

also Weber, 811 F.3d at 770-71 (explaining that “the presence or

absence of a specific choice-of-law clause does not alter the core

obligation of a federal court, sitting in diversity, to ascertain which

body of substantive law to apply by implementing the choice-of-

law rules of its home jurisdiction”); Fireman’s Fund Ins. Co. v.

Great Am. Ins. Co. of N.Y., 822 F.3d 620, 641 (2d Cir. 2016); H & R

Block Tax Servs. LLC v. Franklin, 691 F.3d 941, 943 (8th Cir.

2012); Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 623-

24 (4th Cir. 1999); Kohler v. Leslie Hindman, Inc., 80 F.3d 1181,

1184-85 (7th Cir. 1996).

Zydus Worldwide DMCC v. Teva API Inc., No. CV1917086KMJBC, 2020 WL

2570043, at *7 (D.N.J. May 20, 2020) (citing Collins On behalf of herself v. Mary

Kay, Inc., 874 F.3d 176, 183 (3d Cir. 2017) (emphasis added)). New Jersey

courts will “generally uphold[] choice-of-law clauses, so long as the clause ‘does

not violate New Jersey's public policy.’” Carrow v. Fedex Ground Package Sys.,

Inc., No. 16-3026 (RBK/JS), 2017 WL 1217119, at *3 (D.N.J. Mar. 30, 2017)

(citing North Bergen Rex Transp., Inc. v. Trailer Leasing Co., 730 A.2d 843, 847

(N.J. 1999)). New Jersey applies Section 187 of the Restatement (Second) of

Conflicts of Laws, which states that the law of the state chosen by the parties

will apply unless:

(a) the chosen state has no substantial relationship to the

parties or the transaction and there is no other reasonable basis for

the parties' choice, or

(b) application of the law of the chosen state would be

contrary to a fundamental policy of a state which has a materially

greater interest than the chosen state in the determination of the

particular issue and which * * * would be the state of the applicable

law in the absence of an effective choice of law by the parties.

Portillo v. Nat'l Freight, Inc., 323 F. Supp. 3d 646, 651–52 (D.N.J. 2018)

(citing Instructional Sys., Inc. v. Computer Curriculum Corp., 130 N.J. 324, 342,

614 A.2d 124, 133 (1992) (citing Restatement (Second) of Conflicts of Laws §

187)); see generally Brauser Real Estate, LLC v. Meecorp Capital Markets, LLC,

No. CIV.A.06CV01816 (SDW), 2008 WL 324402 at *3 (D.N.J. Feb. 4, 2008),

aff'd, 484 F. App'x 654 (3d Cir. 2012) (application of § 187)..

Tulley points to the broad phrase “in all respects” in the choice-of-law

clause. (See DE 273 at 17.) Tulley also argues that its fraudulent inducement

claim is not independent of or incidental to the contractual relationship; rather,

it is aimed at the enforceability of the MSA itself. (Id.)

A narrowly drawn choice-of-law clause may legitimately be confined to

matters of contract interpretation and breach. In Portillo, for example, this

Court considered the following choice-of-law provisions:

23. GOVERNING LAW AND FORUM. This Agreement shall be

interpreted in accordance with, and governed by, the laws of the

United States and, of the State of New Jersey, without regard to

the choice-of-law rules of New Jersey or any other jurisdiction. . . .

J. GOVERNING LAW. This Agreement shall be governed by

laws of the State of New Jersey, both as to interpretation and

performance.

323 F. Supp. 3d at 648–49. Portillo reasoned that those provisions were drafted

“narrowly” and did not apply “to any and all disputes arising out of the

contracts, but rather only to ‘interpretation’ of the ‘Agreement.’” Therefore, the

court held, the contractual choice-of-law clause did not extend to plaintiffs’

state statutory wage violation claims and other common law claims. Similarly,

the Third Circuit considered the following choice-of-law provision:“This

agreement will be governed by, and construed and enforced in accordance with,

the laws of [Pennsylvania].” Black Box Corp. v. Markham, 127 F. App'x 22, 25

(3d Cir. 2005) (emphasis added). That clause, the Court held, was narrowly

drafted to encompass only the agreement itself, “and not necessarily the entire

relationship” among the parties.

On the other hand, even a facially contractual choice-of-law clause may

extend to claims in tort:

Where a contract's choice of law provision is “broad and all-

encompassing,” the provision “encompasses all tort claims that

may arise from the [contract].” Sullivan v. Sovereign Bancorp Inc. .,

33 F. App'x 640, 642 (3d Cir.2002) (unpublished); see also Verizon

N.J., Inc. v. DMJM Harris, Inc., No. 08–3028, 2009 WL 1283173, at

*4 (D.N.J. May 1, 2009) (holding that a contract's forum selection

clause applied to tort claims because the claims “stemmed from

the performance of the contract itself”); Pro v. Hertz Equip. Rental

Corp., No. 06–3830, 2008 WL 5218267, at *5 (D.N.J. Dec.11, 2008)

(“Choice of law clauses that use the language ‘governed and

construed by’ ... are considered to be broad capturing both

contract and tort claims, particularly tort claims that relate to the

contract.”), amended on other grounds. 2009 WL 1010622 (D.N.J.

Feb.3, 2009); Delany v. Am. Express Co., No. 06–5134, 2007 WL

1420766, at *3, 5 (D.N.J. May 11, 2007) (applying New Jersey law

to all of the plaintiff's claims, including fraud claims, where the

contract at issue stated that it was “governed by the laws of the

state in which it is delivered”). On the other hand, contract

provisions which only use the term “construed under” are

considered narrower and “sometimes [are] limited to contract

claims and generally do not apply to tort claims that arise

independent of the contract.” Hertz Equip, 2008 WL 5218267, at *5

(emphasis added). In Hertz Equip, the court distinguished between

cases where the tort claims “could be decided without

consideration of the terms of the contract at issue” and those

where the tort claims are “closely tied to the contract.” Id. at *6.

Demmick v. Cellco P'ship, No. CIV.A. 06-2163 JLL, 2010 WL 3636216, at *3

(D.N.J. Sept. 8, 2010)

So even a clause phrased in terms of “this Agreement” may be broad

enough to cover a tort claim, if the tort claim is closely related to the issue of

the validity and enforceability of the contract. In Sullivan v. Sovereign Bancorp,

Inc., No. Civ.A. 99-5990, 2001 WL 34883989 (D.N.J. Jan. 19, 2001), the clause

read, “This Agreement shall be governed by and construed in accordance with

the domestic internal law (including the law of conflicts of law) of the

Commonwealth of Pennsylvania.” That clause, the court held, was

“sufficiently broad to encompass contract-related tort claims such

as fraudulent inducement.” 2001 WL 34883989, *5–*6. The Third Circuit

affirmed on that point. See Sullivan v. Sovereign Bancorp, Inc., 33 F. App'x 640,

642 (3d Cir. 2002) (“the district court correctly concluded that the breadth of

the choice of law provision in the Agreement is ‘broad and all-encompassing.’

Accordingly, it encompasses all tort claims that may arise from the Agreement”)

(internal citations omitted)).

I am persuaded by the reasoning of Sullivan. Like the clause in that case,

the clause in the MSA provides that “[t]his Agreement,” not the parties’

relationship generally, “shall be governed in all respects by the laws of the

State of New Jersey.” Such a choice-of-law clause, if not broad enough to cover

all potential claims, is broad enough to cover a tort, like fraudulent

inducement, that is closely allied to the issue of the validity and enforceability

of the contract.

Taking the analysis to the next step, I do not find that either of the

exceptions outlined in Restatement § 187 applies here.

First, the state whose law is chosen, New Jersey, does not lack a

substantial relation to the parties or the transaction. Although neither CDK nor

Tulley is incorporated in the State of New Jersey, CDK is authorized to conduct

business activities in this State and concedes that it does so. (Compl. ¶ 1.)

More pertinently, Tulley has submitted evidence that, at the time of execution

of the MSA, the predecessor contracting entity, ADPDS, likewise conducted

substantial operations in New Jersey. Indeed, there is significant evidence, in

the form of sworn statements by responsible representatives of ADPDS, that

New Jersey was the site of ADPDS’s principal office or principal place of

business (See p. 3 n. 2, supra.) Oddly, there seems to be some conflict on that

point, but at the very least there is a triable issue. Emails suggest that

employees at an ADPDS’s office in Parsippany, New Jersey, Terry McCoy and

Peter Mari, exercised oversight over installation and Tulley’s subsequent

complaints about the operation of the system. (See Pl. Ex. J. at CDK007474-

76, CDK008415-22, CDK010577-83 (DE 273-4).)9 New Jersey therefore does

9 Tulley executed an Equipment Lease with another ADP entity, ADP

Leasing LLC, in order to rent certain hardware for their DMS configuration. (See Def.

Ex. T.) Tulley submitted a declaration from the account collections manager for ADP

have a sufficient relationship to the parties and the transaction at hand. In

addition, it does not appear that there is “no other reasonable basis for the

parties' choice.” Rest. § 187. The New Jersey choice-of-law provision is part of a

standard contract that CDK/ADPDS used with many customers in many

locations. Its self-evident purpose was to provide uniformity and predictability,

and it was promulgated for that reason by the very party which now seeks to

avoid it and obtain application of some other state’s law.10

Concededly, were it not for the contractual choice-of-law clause drafted

by CDK/ADPDS, the most-significant-relationship analysis might or might not

suffice to require application of New Jersey law. The critical May 1, 2013

meeting, for example, took place in New Hampshire. But these New Jersey ties,

even if not independently sufficient to require application of New Jersey law,

are sufficient to require that the Court hold CDK to its own contractual choice

of New Jersey law. Summary judgment for CDK is denied on this point.

Regarding the second § 187 exception, I do not find that the application

of New Jersey law would be contrary to any fundamental policy of the State of

New Hampshire. Nothing about protection of a New Hampshire party from

fraud would offend the public policy of that state. Cf. MacDonald v. CashCall,

Inc, No. CV 16-2781, 2017 WL 1536427, at *8 (D.N.J. Apr. 28, 2017), aff'd, 883

F.3d 220 (3d Cir. 2018) (choice-of-law clause invoking tribal law was contrary

to public policy where it would expose New Jersey resident to illegal, usurious

loan extended at rate of 116% p.a. by unlicensed lender). Indeed, the elements

Leasing in connection with another lawsuit stating that ADP Leasing is a Delaware

company with its headquarters located in Parsippany, NJ. (See Def. Ex. LLL ¶ 6).]

10 I observe in passing that CDK, which now claims the matter has little or

no connection to New Jersey, sued in New Jersey based on the New Jersey forum-

selection clause, which is contained in the same paragraph as the choice-of-law

provision. CDK also cited New Jersey law in connection with the earlier motion to

dismiss.

of a claim for fraudulent inducement and misrepresentation are substantially

the same under the laws of both states.11

Accordingly, I will apply New Jersey law to the fraudulent inducement

counterclaim asserted by Tulley against CDK.

ii. Fraudulent inducement counterclaim: analysis

Tulley alleges that CDK knowingly made material misrepresentations

about the Drive program in order to fraudulently induce Tulley to switch DMS

systems and enter into the MSA with CDK. Under New Jersey law, a claim for

fraudulent inducement comprises the following five elements: (1) a material

representation of a presently existing or past fact; (2) made with knowledge of

its falsity; (3) with the intention that the other party rely thereon; (4) resulting

in reliance by that party; (5) to his detriment. Metex Mfg. Corp., 2008 WL

877870, at *4 (citing Jewish Ctr. of Sussex County v. Whale, 432 A.2d 521, 524

(N.J. 1981)). The material misrepresentation must be shown by “clear and

convincing evidence.” CPS MedManagement LLC v. Bergen Reg'l Med. Ctr., L.P.,

940 F. Supp. 2d 141, 159 (D.N.J. 2013) (citing Alexander v. CIGNA Corp., 991

F. Supp. 427, 435 (D.N.J. 1998)). “Thus, to defeat a defendant’s motion for

11 Compare RNC Sys., Inc. v. Modern Tech. Grp., Inc., 861 F. Supp. 2d 436, 451

(D.N.J. 2012) (“In order to establish a claim for fraudulent inducement, five elements

must be shown: (1) a material representation of a presently existing or past fact; (2)

made with knowledge of its falsity; and (3) with the intention that the other party rely

thereon; (4) resulting in reliance by that party; (5) to his detriment.”) (citing Metex Mfg.

Corp., 2008 WL 877870, at *4), with Caledonia, Inc. v. Trainor, 123 N.H. 116, 124, 459

A.2d 613, 617–18 (1983) (In order to prove a claim for fraudulent misrepresentation, a

“plaintiff must prove that the defendant intentionally made material false statements

to the plaintiff, which the defendant knew to be false or which he had no knowledge or

belief were true, for the purpose of causing, and which does cause, the plaintiff

reasonably to rely to his detriment.”).

As to fraudulent inducement, ordinary choice-of-law principles might thus

result in a New Jersey court’s defaulting to forum law in the absence of an actual

conflict. P.V. v. Camp Jaycee, 197 N.J. 132, 143 (2008) (“Procedurally, the first step is

to determine whether an actual conflict exists. That is done by examining the

substance of the potentially applicable laws to determine whether there is a distinction

between them.”) (internal quotations omitted). “[I]f no conflict exists, the law of the

forum state applies.” Snyder v. Farnam Companies, Inc., 792 F. Supp. 2d 712, 717

(D.N.J. 2011) (quoting P.V., 197 N.J. at 143).

summary judgment, a plaintiff must meet his or her ‘burden of coming forward

with evidence which could lead a jury to find clear and convincing proof of

fraud . . . .” Id.

Tulley alleges that during the course of negotiations, CDK made the

following representations, which Tulley relied on to its detriment:

• During a May 1, 2013 meeting between Jeff Evans and Patti

Krueger from CDK and Bryan Tulley, Jack Tulley, Mark Tulley,

and John Murphy from Tulley Automotive, CDK represented

that the Drive system would “reduce complexity” and “was more

intuitive in sales and service, and . . . would reduce the number

of steps to complete a process.”

• CDK represented that the Drive DMS would save Tulley “time

and money” and would make Tulley “more profitable.”

• CDK represented that the new DMS “could handle all of the

functions provided by Tulley Automotive’s then-current DMS

vendor Arkona (or DealerTrack), as well as the functions

provided by DealerSocket, Firstlook, and Tulley Automotive’s

payroll company known as Trivantis Corporation, Inc.”

• Mr. Evans furnished a cost comparison analysis, comparing

Tulley’s current DMS and payroll setup to CDK’s setup, which

was deceptive and misleading.

• CDK represented that the Drive DMS would save Tulley time

when doing its payroll.

• CDK represented that the Drive DMS would (1) integrate with

Tulley’s own payroll setup and (2) integrate with DealerSocket

and Firstlook.

• CDK represented that all the information in Tulley’s current

DMS product would transfer easily and accurately to CDK’s

DMS product.

• CDK represented that it would be capable of serving Tulley’s

needs as a multi-dealer business.

See AC ¶¶ 28–43. Tulley alleges that but for these material misrepresentations,

Tulley would not have entered into the MSA with CDK.

CDK argues that summary judgment should be granted in its favor on

Tulley’s fraudulent inducement claim because Tulley has not presented

sufficient evidence to demonstrate fraud based on Mr. Evans’s alleged

misleading statements. First, CDK states that Tulley has not presented clear

and convincing evidence that Mr. Evans made any of those alleged statements

at the May 1, 2013 meeting because none of the Tulley representatives at the

meeting could quote them precisely. I disagree. Even if the Tulley brothers

cannot reproduce Jeff Evans’s precise language, John Murphy’s

contemporaneous notes from the May 1 meeting support Tulley’s allegations as

to the substance of Evans’s statements: i.e., that the Drive system was suitable

for Tulley’s needs and that it would fully integrate with Tulley’s other software

programs. (See Def. Ex. SSS.)

The record contains further corroboration in the form of emails

demonstrating that Mr. Evans made statements to Tulley regarding the efficacy

of Drive prior to signing of the MSA. For example, an April 13, 2013 email from

Evans to Julie Loud states the following:

If the Tully’s are willing to plug existing profit leaks , increase CSI

and SSI by being able to respond internally and externally quicker

and reduce expenses by eliminating third party vendors with

[CDK]'s integrated solution at a very competitive price yet increase

over what you pay for Arkona today;. Then I am your man and

[CDK] is your company.

See Pl. Ex. K at TULLEY0003238.0001. Viewing this evidence in the light most

favorable to Tulley, I find sufficient evidence to create and issue as to whether

CDK made certain representations to Tulley about the capabilities and

suitability of the DMS system.

Even if Jeff Evans made these representations about Drive, however, I

cannot ultimately find that they are actionable on a fraud theory. Fraud is a far

narrower theory than breach of contract; it does not cover an ordinary breach

of promise about future events. The first element of a fraud claim is that a

party has made a “material representation of a presently existing or past fact.”

CPS MedManagement LLC, 940 F. Supp. 2d at 158. Predictions, promises, and

statements about future profitability are typically viewed as falling outside the

category of actionable fraud. Id. at 159. Statements about “future or contingent

events, to expectations or probabilities, or as to what will or will not be done in

the future, do not constitute misrepresentations, even though they may turn

out to be wrong.” Alexander v. CIGNA Corp., 991 F. Supp. 427, 435 (D.N.J.

1998) (citing Chatlos Systems, Inc. v. National Cash Register Corp., 479 F.

Supp. 738, 749–49 (D.N.J.1979), aff'd in part, rev'd in part, 635 F.2d 1081 (3d

Cir.1980)). Additionally, “statements that can be categorized as ‘puffery’ or

‘vague and ill-defined opinions’ are not assurances of fact and thus do not

constitute misrepresentations.” Id. (citing Diaz v. Johnson Matthey, Inc., 869

F.Supp. 1155, 1165 (D.N.J. 1994)).

I find that some of Jeff Evans’s statements were not statements of fact at

all, but fall within the category of “vague and ill-defined opinions” about future

events. For example, any statements that the Drive system would save Tulley

“time and money,” would make Tulley “more profitable,” and would reduce

complexity, are generalities about the future, and thus cannot be the basis of a

fraudulent inducement claim. See Alexander, 991 F. Supp. at 436 (“predictions

of the future, which were believed when made, cannot serve as a basis for a

fraud claim just because they subsequently turn out not to be true.”).

On the other hand, some of Mr. Evans’s other statements are at least

factual in nature. For example, Evans stated that Drive would integrate with

Tulley’s preexisting software programs, such as “Dealersocket” and “First

Look”; John Murphy testified that this turned out to be untrue, because Drive

DMS did not integrate with Dealersocket “one hundred percent.” (See Pl. Ex. K

at TULLEY0004582.0001–2; Pl. Ex. B at 179:20–181:6; Pl. Ex. A at 205:18–

206:25; Pl. Ex. E at 120:14-16; Ex. C at 90:15–22.) Tulley also alleges that Mr.

Evans represented that all the information in Tulley’s current DMS product

would transfer easily and accurately to the Drive DMS product; there is

evidence, however, that Tulley’s data in its prior DMS system did not transfer

easily or accurately to Drive. Tulley also asserts that Mr. Evans represented

that CDK would be capable of serving Tulley’s needs as a multi-dealer

business, but CDK was unable to correctly assess their needs as a multi-

franchise dealership at the outset. These statements are at least reasonably

specific, and I cannot simply set them aside as non-factual “puffery.”

Nevertheless, even as to these statements, Tulley has not presented clear

and convincing evidence that Mr. Evans knew they were false when he made

them. Tulley argues that CDK was aware of Tulley’s business needs and that

they should have given Tulley three separate logons from the very beginning.

(See DE 273 at 26–28.) However, much of the evidence that Tulley relies on to

prove fraudulent intent are emails or testimonies from Tulley employees dating

from the period when Tulley was experiencing issues with Drive. These

documents do not show that Mr. Evans or CDK knew that their statements

regarding the suitability of Drive were false at the time they were made—i.e.,

when Evans was inducing Tulley to enter into the contract. Tulley points to

evidence from veteran CDK employees who stated that it was inappropriate to

sell a single-logon system to a dealership that has multiple franchises. (See

Def. Ex. A at 20, Def. Ex. DDD.) The claim, however, is one of fraud, not

negligence or malpractice. At any rate, this opinion evidence, which came from

CDK employees not involved in the Tulley transaction, does not establish that

Evans, for example, knew from the outset that the single-logon system would

not work and concealed that fact. In fact, CDK has presented evidence that

from 2013-2018, about 50% of the Drive installations for multi-franchise

dealerships, like Tulley’s, were successfully set up with a single logon and that

deciding whether to provide a single or multiple logons is a judgment call, site-

specific to each particular dealership. (See Pl. Ex. H at 53:10–54:16; Pl. Ex. J at

CDK022483.) So even if things did not turn out well, I do not find sufficient

evidence that CDK had the requisite knowledge and intent to defraud Tulley at

the time of contracting, when it made the alleged representations.

Tulley also bases its fraud claim on alleged material omissions.

Specifically, Tulley alleges that CDK ignored and concealed known issues about

the Drive system and concealed the fact that CDK customers across the

country had voiced the same complaints as Tulley regarding the Drive system.

(See AC ¶¶ 77–86, 95.) Tulley supports its fraudulent-omission claim by

pointing to lawsuits in which automobile dealerships have raised issues similar

to the ones that Tulley has raised in this suit. Tulley also points to letters

written by other dealerships expressing their frustrations with the Drive

system. (See id.) Nondisclosure of a material fact may “constitute fraud, but

only when there is a duty to speak.” Multicultural Radio Broad., Inc. v. Korean

Radio Broad., Inc., No. CV 15-1961 (SRC), 2015 WL 13229231, at *4 (D.N.J.

Nov. 20, 2015) (citing Baldasarre v. Butler, 254 N.J. Super. 502, 521 (N.J.

Super. Ct. App. Div. 1992), aff'd in part, rev'd in part, 132 N.J. 278 (N.J. 1993)).

I find that Tulley has not presented sufficient evidence to demonstrate a claim

for fraudulent omission. First, Tulley has not pointed to an affirmative duty on

the part of CDK to inform prospective clients like Tulley about pending lawsuits

related to Drive. Additionally, Tulley has not pointed to any evidence that Jeff

Evans or any of the individuals involved in the Tulley transaction actually knew

about the pending lawsuits or purposefully concealed this information from

Tulley in order to induce them to enter into the MSA.

Because Tulley has not presented clear and convincing evidence to

demonstrate that CDK had the requisite intent to defraud Tulley with the

alleged misrepresentations, or that CDK made material omissions to defraud

Tulley, I will grant CDK’s motion for summary judgment on Tulley’s

counterclaim for fraud in the inducement.

c. Tulley’s Counterclaim 4: NJCFA

Tulley also alleges that CDK violated the New Jersey Consumer Fraud

Act based on the same alleged misrepresentations and fraudulent omissions

that underlie the common law fraudulent inducement claim. CDK argues that

it is entitled to summary judgment on this claim because the NJCFA does not

apply to out-of-state consumers’ claims, CDK’s Drive system does not fall

within the definition of “merchandise” under the NJCFA, and because Tulley

has not presented sufficient evidence to establish a prima facie NJCFA claim.

At the outset, CDK argues that the NJCFA cannot apply to the claim of

an out-of-state consumer, such as Tulley, which is based in New Hampshire.

This argument is related to the earlier issue concerning the contractual choice-

of-law provision and the fraudulent inducement claim. I therefore incorporate

the analysis from Section III.b.i, supra. This is not a case in which New Jersey

has “no substantial relationship to the parties or the transaction” and “there is

no other reasonable basis for the parties' choice.” Rest. § 187.

CDK cites Maniscalco v. Brother Int’l (USA) Corp., in which the Third

Circuit held that the NJCFA did not apply to the plaintiff/appellant’s consumer

fraud claim because his home state of South Carolina had the most significant

relationship to the case, notwithstanding that the defendant corporation was

headquartered in New Jersey. 709 F.3d 202, 204 (3d Cir. 2013). Maniscalco is

distinguishable from this case, however, because there was no contractual

choice of law clause, so the choice-of-law analysis relied solely on the most-

significant-relationship test.

Here, as discussed above, the MSA does contain a New Jersey choice-of-

law provision. That choice-of-law provision was drafted by CDK (or rather its

predecessor, ADPDS) in its own interest. True, the clause might not be broad

enough to cover a NJCFA claim arising incidentally from the parties’ ongoing

relationship. Tulley emphasizes, however, that its NJCFA claim is aimed more

narrowly at the validity and enforceability of the MSA—implying that it is

essentially the fraudulent inducement claim in statutory guise. For the reasons

stated above, then, I hold that the choice-of-law provision is broad enough to

require application of the NJCFA. See Section III.b.i, supra.

The question remains whether the NJCFA claim, like its common law

counterpart, falls short on the merits. I conclude that it does not.

NJCFA prohibits “[t]he act, use, or employment by any person of any

unconscionable commercial practice, deception, fraud, false pretense, false

promise, misrepresentation, or the knowing concealment, suppression, or

omission of any material fact with intent that others rely upon the act in

connection with the sale or advertisement of any merchandise . . . .” N.J. Stat.

Ann. § 56:8–2. The statute’s “history has been ‘one of constant expansion of

consumer protection.’” All the Way Towing, LLC v. Bucks Cty. Int'l, Inc., 236 N.J.

431, 442 (2019) (citing Gennari v. Weichert Co. Realtors, 148 N.J. 582, 604, 691

A.2d 350 (1997)). The NJCFA protects the public, “even when a merchant acts

in good faith.” Id. (citing Cox v. Sears Roebuck & Co., 138 N.J. 2, 16, 647 A.2d

454 (1994)). Courts have consistently recognized that the NJCFA must be

liberally construed because of the Act’s “original remedial purpose and its

subsequent and continuous expansion by the Legislature. . .” Id. Thus, it is

against that backdrop that I will assess whether CDK’s Drive system is

considered merchandise underneath the NJCFA.

It is well-established that the NJCFA applies to certain commercial

transactions. Id. at 443. The statute defines “person” to include business

entities, and “a corporation may qualify as a person under the Act when it finds

itself in a consumer[-]oriented situation.” Trocki v. Penn Nat'l Mut. Cas. Ins. Co.,

Inc., No. 119CV13638NLHKMW, 2020 WL 3468217, at *3 (D.N.J. June 24,

2020) (citing BOC Group, Inc. v. Lummus Crest, Inc., 597 A.2d 1109, 1112 (N.J.

Super. Ct. Law Div. 1990)). As stated in my prior opinion to CDK’s motion to

dismiss Tulley’s NJCFA claim, “[t]o fall within the scope of the NJCFA, goods

and services need not be only those that are purchased by ‘average

consumers’; the statute may also cover merchandise that is ‘expensive,

uncommon, or only suited to the needs of a limited clientele.’” CDK Glob., LLC

v. Tulley Auto. Grp., Inc., No. 15-3103 (KM) (JBC), 2016 WL 1718100, at *6

(D.N.J. Apr. 29, 2016) (citing Prescription Counter v. AmeriSource Bergen Corp.,

2007 WL 3511301, at *14 (D.N.J. Nov. 14, 2007)).

The NJCFA also defines “merchandise” to include “any objects, wares,

goods, commodities, services or anything offered, directly or indirectly to the

public for sale.” N.J. Stat. Ann 56:8-1(c). If the business itself consumes or

uses the goods and services, as opposed to being purchasing them for resale,

designs, and franchises, the transaction may be covered by the NJCFA. Id. at

*6. Whether the sale of “merchandise” in a business-to-busines transaction

falls within the scope of the NJCFA depends on the nature of the transaction.

All the Way Towing, LLC, 236 N.J. at 408. To make that determination, a court

should consider the following four factors:

(1) the complexity of the transaction, taking into account any

negotiation, bidding, or request for proposals process; (2) the

identity and sophistication of the parties, which includes whether

the parties received legal or expert assistance in the development

or execution of the transaction; (3) the nature of the relationship

between the parties and whether there was any relevant underlying

understanding or prior transactions between the parties; and, as

previously noted; (4) the public availability of the subject

merchandise.

All the Way Towing, LLC, 236 N.J. at 447–48.

CDK argues that under the four All the Way factors, the Drive system

would not be considered merchandise underneath the NJCFA. I disagree. At

the very least, there are underlying factual disputes that would preclude

granting summary judgment to CDK on the “merchandise” issue.

First, CDK and Tulley did not have a relationship prior to their

negotiation regarding the Drive system in 2013. Second, even though CDK

presents evidence demonstrating the sophistication of Tulley’s business

practices, that alone does not demonstrate that Tulley was a sophisticated

consumer in this particular transaction. Tulley has presented evidence that it

had no specialized knowledge of the Drive DMS system and relied on CDK to

provide a DMS program suited to CDK’s needs. Indeed, “a business entity can

be, and frequently is, a consumer in the ordinary meaning of that terms.”

Hundred East Credit Corp. v. Eric Shuster Corp., 212 N.J. Super 350, 354–56,

515 A.2d 246 (N.J. Super. Ct. App. Div. 1986). The Hundred East court

recognized that “[e]ven the most world-wise business entity can be

inexperienced and uninformed in a given consumer transaction.” Id. at 356.

Furthermore, unlike the business consumer in Maruka USA, Inc. v. Specialty

Lighting Indus., Inc., Tulley argues that it did not have more specialized

knowledge on DMS systems than the general public, and also did not

communicate with experts or legal counsel prior to entering into the MSA. See

No. A-2220-17T4, 2019 WL 5690501, at *7 (N.J. Super. Ct. App. Div. Nov. 4,

2019), appeal denied, 241 N.J. 53, 224 A.3d 1065 (2020).

Third, I find that there are material factual disputes that preclude a

determination on whether the transaction between Tulley and CDK would be

considered “complex” under the All the Way factors. CDK argues that this

transaction was more akin to the transaction found in Princeton Healthcare

System v. Netsmart New York, Inc., 422 N.J. Super. 467, 29 A.3d 361 (N.J.

Super. Ct. App. Div. 2011). In Princeton Healthcare, the court found that the

NJCFA did not apply to the transaction at issue, which was a negotiated

contract for the installation and implementation of a complex computer

software system for a healthcare facility. There, the plaintiff hospital and

healthcare provider asked for requests for proposals, to which defendant

submitted a 149-page response. Id. at 469–70. The transaction also entailed a

lengthy process of evaluation and detailed negotiations that required the input

of plaintiff’s computer consultant and legal counsel prior to entering into the

contract. Id.

CDK argues that Tulley entered into an agreement for a “complex

software system” that required two years of negotiations and that their DMS

system needed substantial customization. (See DE 267 at 21–22.) I find

however, material differences between this transaction and the one in Princeton

Healthcare. Here, Tulley never put out requests for proposals and did not seek

legal advice prior to entering into the MSA. Although Tulley considered

reaching out to Jane Copeland, an expert on DMS products, for advice, Tulley

ultimately decided not to. Furthermore, while the Drive system was customized

to Tulley’s business needs, the NJCFA may apply to custom-made goods. See

All the Way Towing, LLC, 236 N.J. at 444. CDK and Tulley also negotiated the

details of the MSA over the course of several months, not two years, as CDK

contends. (CDK reached out to Tulley in April 2013 and the parties entered into

the MSA in June 2013.) While it seems that Tulley was able to provide input on

some of the terms of the MSA, for the most part, the MSA that the parties

executed is CDK’s standard form contract. See Def. Exs. OOO–QQQ. There are

issues of fact to be resolved in order to determine whether the transaction

between CDK and Tulley was too complex to be covered by the NJCFA.

Finally, I also find that there are material factual disputes as to the

public availability of the Drive DMS system. CDK argues that Tulley has not

demonstrated that the CDK DMS can be purchased by a member of the public

because CDK’s only clients are within the auto dealership industry; that the

general public has no use for CDK’s products and services; and that CDK

salespersons are only allowed to sell their Drive system to dealerships within a

defined database. (See Pl. Ex. H at 112:4–15.) Tulley, on the other hand, has

presented evidence that CDK sold its DMS product to a diverse client base

within the automotive retail industry, including dealerships and original

equipment manufacturers. Additionally, CDK’s 2019 10-K states that they

provide solutions to “retailers and manufacturers of heavy trucks, construction

equipment, agricultural equipment, motorcycles, boats, and other marine and

recreational vehicles.” (See DE 273 at 29.) Courts have found that products

suited to the needs of a limited clientele base can still be considered goods that

are available to the “public at large.” See Prescription Counter v.

AmerisourceBergen Corp., No. CIV A 04-5802 SRC, 2007 WL 3511301, at *16

(D.N.J. Nov. 14, 2007) (“Although the product may have been only suited to the

needs of only a limited clientele, it appears to be available to the public at

large.”); see also Naporano Iron & Metal Co. v. Am. Crane Corp., 79 F. Supp. 2d

494, 509 (D.N.J. 1999) (court found that purchaser of a large crane for

business use was a “consumer” within the meaning of the NJCFA). This record

presents issues of fact as to whether CDK’s DMS system is “merchandise” that

is available to the “public at large,” within the meaning of the NJCFA case law.

CDK argues more generally that Tulley has not presented sufficient

evidence to establish the elements of a prima facie NJCFA claim. I disagree.

The NJCFA requires a plaintiff to prove three elements: “(1) unlawful conduct

by the defendant; (2) an ascertainable loss by the plaintiff; and (3) a causal

connection between the defendant’s unlawful conduct and the plaintiff’s

ascertainable loss.” Dzielak v. Whirlpool Corp., No. CV 12-89 (KM) (JBC), 2019

WL 6607220, at *21 (D.N.J. Dec. 5, 2019), reconsideration denied, No. CV 12-

89 (KM) (JBC), 2020 WL 3989648 (D.N.J. July 15, 2020) (citing Bosland v.

Warnock Dodge, Inc., 197 N.J. 543, 557, 964 A.2d 741 (2009) (citations

omitted)). Under the NJCFA, “unlawful conduct” falls within three general

categories: “affirmative acts, knowing omissions, and violation of regulations

promulgated under N.J. Stat. Ann. §§ 56:8-2, 56:8-4.” Id. Unlike a claim for

common law fraud, if the alleged consumer-fraud violation consists of an

affirmative act under the NJCFA, intent is not an essential element, and the

plaintiff does not need to prove that the defendant intended to commit an

unlawful act. See Cox, 138 N.J. at 17–18, 647 A.2d at 462 (citing Chattin v.

Cape May Greene, Inc., 124 N.J. 520, 522, 591 A.2d 943 (1991) (Stein, J.

concurring)).

A reasonable jury could find that Jeff Evans’s alleged statements

constituted affirmative misrepresentations under the CFA. “An affirmative

misrepresentation under the CFA is one which is material to the transaction

and which is a statement of fact, found to be false, made to induce the buyer to

make the purchase.” Cold Star Sales & Leasing, Inc. v. TRU Aseptics, LLC, No.

119CV14030NLHAMD, 2020 WL 1910334, at *6 (D.N.J. Apr. 17, 2020) (citing

Chaudhri v. Lumileds LLC, No. CV182167KMCLW, 2018 WL 6322623, at *6

(D.N.J. Dec. 3, 2018) (internal quotation marks omitted)). For the same reasons

stated in Part III.b.ii, supra, I find that some of Mr. Evans’s statements could

constitute material misrepresentations of fact. Because the NJCFA, unlike

common law fraud, does not require proof of intent to defraud, I find that

Tulley could satisfy the first element of “unlawful conduct” to establish a

NJCFA claim.12

CDK also argues that Tulley has not demonstrated an ascertainable loss

under the NJCFA. A private cause of action under the NJCFA requires that the

plaintiff demonstrate “a loss attributable to conduct made unlawful by the

CFA.” BJ Am. Elec., LLC v. BMW N. Am., LLC, No. A-2517-17T1, 2019 WL

2028706, at *7 (N.J. Super. Ct. App. Div. May 8, 2019), cert. denied, 239 N.J.

599, 219 A.3d 154 (2019) (citing Dugan v. TGI Fridays, Inc., 231 N.J. 24, 50,

171 A.3d 620 (2017)). The ascertainable loss prong of a prima facie NJCFA case

requires the plaintiff to “suffer a definite, certain and measurable loss, rather

than one that is merely theoretical.” Id. (citing Bosland v. Warnock Dodge, Inc.,

197 N.J. 543, 558, 964 A.2d 741 (2009)). In other words, the loss must be

quantifiable or measurable, even if it is not necessarily monetary. Thiedemann

v. Mercedes-Benz USA, LLC, 183 N.J. 234, 248, 872 A.2d 783, 792 (2005). An

“ascertainable loss occurs when a consumer receives less than what was

promised.” Id. “In cases involving breach of contract or misrepresentation,

either out-of-pocket loss or a demonstration of loss in value will suffice to meet

the ascertainable loss hurdle and will set the stage for establishing the

measure of damages.” Id.

Tulley alleges that as a result of CDK’s misrepresentations, it has

incurred damages in an amount of at least $3.5 million. Tulley fails to

substantiate that figure with evidence. (See DE 22 ¶ 116.) Tulley also alleges

that it experienced a drop in customer satisfaction, that employee morale

diminished, and that it lost its “Center of Excellence” rating from BMW. These

12 Tulley has not, however, adduced sufficient evidence to go forward on an

omission theory. “[W]hen the alleged consumer fraud consists of an omission, the

plaintiff must show that the defendant acted with knowledge, and intent is an

essential element of the fraud.” Cox, 138 N.J. at 17–18, 647 A.2d at 462. Id. (emphasis

in original). As discussed above, Tully has not put forward evidence that CDK withheld

information about the Drive DMS with the intent to defraud Tulley. See Part IV.b,

supra.

sequelae, I find, cannot constitute an ascertainable loss under the NJCFA

because they are not expressed with enough specificity to be considered

quantifiable or measurable.

Tulley also argues, however, that the Drive System it obtained was worth

less than the one it bargained for. (See DE 273 at 34.) Assuming that the

system was subpar, as claimed, that theory is plausible. Flaws in the Drive

system, according to Tulley, also required them to hire and pay additional staff.

Either of these could constitute an ascertainable loss sufficient to satisfy the

third prong of an NJCFA claim.13

Finally, CDK also argues that Tulley cannot demonstrate an

ascertainable loss because they were willing to remedy all of Tulley’s issues at

no cost to Tulley. I find, however, that there are material factual disputes as to

whether such efforts had failed, and whether CDK ever communicated to Tulley

that it would not have to pay to reconfigure the Drive system. (See Part I,

supra.)

As a result, I will deny CDK’s motion for summary judgment on Tulley’s

NJCFA counterclaim.

d. Economic Loss Doctrine and the MSA’s Integration Clause

CDK reasserts its argument that Tulley’s fraud claims should be

dismissed pursuant to the economic loss doctrine and the MSA’s integration

clause. For reasons similar to those expressed in my prior opinion on the

motion to dismiss, I reject that argument. I find that the frauds alleged in

Tulley’s counterclaims are—to some degree—extrinsic to the MSA. See Petric &

Assocs., Inc. v. CCA Civil, Inc., No. A-3571-17T2, 2020 WL 3041418, at *11

(N.J. Super. Ct. App. Div. June 8, 2020) (“in order to maintain simultaneous

claims in tort and contract, a defendant must “cause harm to the plaintiff

distinct from those caused by the breach of contract.”) Grp., Inc. v. Philadelphia

13 I do not here propose to enumerate all possible elements of damages or

calculate their amount. I am merely determining whether some ascertainable loss,

sufficient to satisfy that essential element of the NJCFA, is present.

Elec. Co., 722 F. Supp. 184, 201 (D.N.J. 1989). As noted above, for example,

Tulley claims not merely traditional benefit-of-the-bargain contract damages,

but also consequential damages of a kind available only in tort.

e. The Breach of Contract Claim and Counterclaim

CDK and Tulley assert dueling claims of breach of contract. Tulley

alleges that CDK breached the contract by not providing equipment that was in

“good working order,” and that the services and software that did not “conform

to their respective functional and technical specifications” as set forth in the

MSA. See DE 22 ¶¶ 101–105. CDK alleges that Tulley breached the MSA when

it committed several “Events of Default”—chiefly, termination of the MSA prior

to the expiration of the contract term and failure to pay the liquidated damages

required under the MSA for any event of default. (DE 1 ¶¶ 32–38.)

Although CDK moved for summary judgment on Tulley’s breach of

contract counterclaim (see DE 265), it failed to include legal arguments on this

point in its memorandum of law. (See DE 267.) I will not hypothesize

arguments on CDK’s behalf. CDK’s motion for summary judgment on Tulley’s

breach-of-contract counterclaim is denied.

I turn to Tulley’s motion for summary judgment on CDK’s breach-of-

contract claim. Tulley denies that it committed an event of default under

Section 16 of the MSA when it decided to switch DMS providers before the term

of the MSA expired. Specifically, Tulley argues (a) that early termination of the

MSA is not listed as an event of default in the MSA, and (b) that even if it was,

there is no evidence that Tulley actually terminated the MSA, because Tulley

continued to make every monthly MSA payment until CDK filed this lawsuit.14

As to the issue of default, Section 16 of the MSA provides as follows:

14 Under New Jersey law, a breach of contract claim requires proof of three

elements: “(1) the existence of a valid contract; (2) a breach of that contract; and (3)

resulting damage to the plaintiff.” RNC Sys., Inc., 861 F. Supp. 2d at 444–45 (citing

Ramada Worldwide, Inc. v. Kim, No. 09–4534, 2010 WL 2879611 at *3 (D.N.J. July 15,

2010); AT & T Credit Corp. v. Zurich Data Corp., 37 F. Supp. 2d 367, 370 (D.N.J.

1999)). Tulley asserts in a footnote that it is moving for summary judgment based

solely on the second element, i.e., the existence of a breach. (DE 268 at 15 n.7.)

16. DEFAULT BY CLIENT; REMEDIES UPON DEFAULT

A. Should [Tulley] (i) fail to pay when due any sum of money due

hereunder or pursuant to any of the Schedules hereof, (ii) default

in the performance of any of its other obligations under this

Agreement or any of the Schedules hereto, (iii) default in the

performance of any of its obligations under any agreement with

any affiliate of [CDK] (or any assignee thereof or successor thereto),

or (iv) become the subject of any proceeding under the Bankruptcy

Code of any state bankruptcy law, or become insolvent, or have

any substantial part of its property become subject to any levy,

seizure, assignment, or application or sale for or by any creditor or

governmental agency, then in such event [CDK], at its option, may,

upon written notice thereof, (A) terminate this Agreement and/or

any or all of the Schedules hereto, (B) declare all amounts due and

to become due under this Agreement (including, in particular,

Paragraph 16.B below) and/or any or all of the Schedules hereto

immediately due and payable, (C) whether or not this Agreement or

a Schedule is terminated, render any Services or portions thereof

inoperable and/or inaccessible to [Tulley], and/or take immediate

possession of any or all of the Software and items of Equipment

not fully paid for, wherever situated, and for such purposes enter

upon any premises without liability for so doing, and (D) sell,

dispose of, hold, use or lease any items of Equipment not fully paid

for, as [CDK], in its sole discretion, may decide. [Tulley] agrees to

reimburse [CDK] for any and all expenses [CDK] may incur,

including reasonable attorney’s fees, in taking any of the foregoing

actions. The remedies contained in this Paragraph 16.A are

cumulative and are in addition to all other rights and remedies

available to [CDK] under this Agreement, by operation of law or

otherwise.

B. [Tulley] specifically acknowledges and agrees that if [Tulley]

terminates this Agreement and/or any Schedule (or any

Service, Maintenance Service, Support Service or license to

any Software set forth on any Schedule) or [CDK] terminates

this Agreement or any Schedule due to [Tulley’s] default

pursuant to Paragraph 16.A above, [CDK] shall be entitled to

recover agreed upon liquidated damages in an amount equal to

the product of: (i) the number of full monthly periods remaining

after the date of termination under the then end of the application

Schedule(s) of the Agreement, as applicable, (ii) the applicable

monthly charges of the applicable Services, Software, Equipment,

Support Services and Maintenance Services as of the effective time

of any such termination; and (iii) .70 (representing a reduction

facto which the parties have mutually determined to be fair and

reasonable in light of the anticipated harm to be caused by the

breach, the difficulties of proof of loss, and the unavailability of an

adequate remedy.

(Def. Ex. M ¶ 16 (emphasis added).) The MSA does not define or enumerate

every event of default. The MSA does specifically state that the scope of the

agreement is that CDK would provide Tulley all the services described in the

Schedules attached to the MSA, licenses and/or sublicenses to various

software, software support services, equipment listed in the MSA Schedule, and

maintenance for services of said equipment. (Id. ¶ 1.) The Schedules to the

MSA state that the term of the Agreement would last for a period of 60 months.

(Id. at CDK000016.)

“An ambiguity in a contract exists if the terms of the contract are

susceptible to at least two reasonable alternative interpretations[.]” Schor v.

FMS Fin. Corp., 357 N.J. Super. 185, 191, 814 A.2d 1108, 1112 (App. Div.

2002) (citing Nester v. O'Donnell, 301 N.J. Super. 198, 210, 693 A.2d 1214

(App. Div. 1997)). In order to determine the meaning of the terms of an

agreement, the terms of the contract “must be given their plain and ordinary

meaning.” Id. When “the terms of a contract are clear and unambiguous, there

is no room for interpretation or construction, and courts must enforce those

terms as written.” Id. The court cannot write a contract “merely because one

might conclude that it might well have been functionally desirable to draft it

differently.” Id. Reading the MSA’s various provisions together as a whole, it is

clear that the purpose of the MSA was for CDK to lease its DMS software to

Tulley, and to provide maintenance services for the rented software and

equipment should any issues arise, for a term of five years. Thus—absent other

facts—unilateral termination of the MSA and switching DMS providers prior to

the expiration of the contract’s five-year term would be an event of default

under Paragraph 16.A of the MSA.

Still, the factual issue of termination is cloudy. No doubt some

gamesmanship was going on, with each side attempting to provoke the other

into actually declaring the agreement to be terminated. A fact finder must look

to the substance of what occurred.

More importantly, the issue is tied up with another factual dispute:

whether a prior breach by CDK excuses any default by Tulley. The two sides’

duties—on the one hand, to install and maintain a functional system, and on

the other, to pay for it— were mutually dependent. Suppose, for example, that

CDK had done nothing at all to discharge its obligations to install and maintain

the Direct system. It would not be reasonable to say that Tulley was

nevertheless required to wait five years to secure a substitute system. The

issues of who breached, and when, are factual.

I will therefore deny both sides’ motions for summary judgment on the

breach of contract claims.

f. Contractual Limitation of Liability Clause

CDK also argues that summary judgment should be granted in their

favor on both of Tulley’s contractual and fraud-based claims because the MSA

specifically limits their liability for any breach of contract claim. The limitation

of liability section states in part:

[CDK’s] sole obligation in the case of any breach of any

representations and warranties set forth above . . . shall be . . . to

use reasonable efforts to correct any Services or Software which is

not in compliance with the warranties provided [above]. . . .

[CDK] shall not have any liability under this Agreement for any

money damages resulting from claims made by [Tulley] or any

third party for any and all causes covered by [the above]

paragraph. [CDK’s] sole liability under this Agreement for money

damages resulting from claims made by Client or any third party

arising from or related to any and all causes not covered by [the

above paragraph] shall not exceed the lesser of (i) the amount of

actual damages incurred by Client, and (ii) an amount which will

not exceed one month’s average total monthly charge paid by

Client for the particular Services, Software, Equipment, Support

Services or Maintenance Services. . . .

IN NO EVENT WILL [CDK] BE RESPONSIBLE FOR SPECIAL,

INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES WHICH

[TULLEY] MAY INCUR OR EXPERIENCE ON ACCOUNT OF

ENTERING INTO OR RELYING ON THIS AGREEMENT, EVEN IF

[CDK] HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH

DAMAGES.

(Defs. Ex. M at CDK000011–12.)

CDK argues that it complied with its contractual obligations and used

more than reasonable efforts to try to remedy Tulley’s issues with Drive. CDK

also argues that this provision bars any “incidental or consequential” damages

Tulley has incurred.

“In New Jersey, parties to a contract may agree to limit their liability as

long as the limitation does not violate public policy.” Prof'l Cleaning &

Innovative Bldg. Servs., Inc. v. Kennedy Funding, Inc., 245 F. App'x 161, 167 (3d

Cir. 2007) (citing Mayfair Fabrics v. Henley, 48 N.J. 483, 487, 226 A.2d 602

(1967)). However, “[t]he law is well-settled that fraud, be it common law or

statutory, provides a basis for rescinding a contract.” Id. at 167–68 (citing First

Am. Title Ins. Co. v. Lawson, 177 N.J. 125, 136, 827 A.2d 230 (2003);

Restatement (Second) Contracts § 164 (“If a party's manifestation of assent is

induced by either a fraudulent or a material misrepresentation by the other

party upon which the recipient is justified in relying, the contract is voidable by

the recipient.”)). Thus, if a jury finds that Tulley was deceived into entering the

contract by CDK’s misrepresentations, CDK cannot “rely on the protection of

the limitation of liability provisions contained in the [contract].” Id. (citing

Wärtsilä NSD North Am. Inc. v. Hill Int'l Inc., 342 F.Supp.2d 267, 289, 290

(D.N.J.2004)). Because I have denied CDK summary judgment on Tulley’s

NJCFA claim, I will deny summary judgment based on the limitation of liability

clause found in the MSA.15

That is not to say, however, that the limitation of liability clause is

without effect. New Jersey courts will uphold such clauses if they are not

15 In my prior opinion on the motion to dismiss (DE 103), I dismissed the claim

of rescission, but only on the grounds that it was superfluous. Rescission, I held, is

more properly viewed as a remedy where fraud is found, rather than an independent

cause of action.

unconscionable or in violation of public policy. Lucier v. Williams, 841 A.2d

907, 911 (N.J. Super. Ct. App. Div. 2004). The standard for unconscionability

is “lack of honesty in fact, good faith, and fair dealing.” Doe v. Bank of Am.,

N.A., No. CV 16-3075, 2018 WL 295565, at *8 (D.N.J. Jan. 3, 2018) (internal

citation omitted). In order to determine whether a limitation in liability clause

is unconscionable, courts will consider the following factors: the adhesive

nature of the contract, the subject matter of the contract, the parties’ relative

bargaining positions, the economic compulsion motivating the adhering party,

and any public interest that might be affected by the contract. Id.

Based on the factors above, I find that the limitation on liability clause in

the MSA is enforceable. The MSA was not one of adhesion, as Tulley had the

ability to negotiate the provisions contained within it and there is no evidence

that Tulley was in a weaker bargaining position than CDK. Moreover, both

parties were sophisticated business entities and were in a position to fully

understand all the provisions within the MSA. Because “[a] party who enters

into a contract in writing, without any fraud or imposition being practiced upon

him, is conclusively presumed to understand and assent to its terms and legal

effect[,]” I find that Tulley’s damages would be limited pursuant to the

limitation of liability clause found in the MSA. See Prescription Counter v.

AmerisourceBergen Corp., No. CIV A 04-5802 SRC, 2007 WL 3511301, at *11

(D.N.J. Nov. 14, 2007) (citing Rudbart v. North Jersey Dist. Water Supply

Comm’n, 127 N.J. 344, 353 (1992)). That would especially be true if, for

example, CDK were found liable for breach of contract but not for fraud under

the NJCFA.

g. Tulley’s Counterclaim 5: Unjust Enrichment; CDK’s Claim 3:

Attorney’s Fees

CDK also moves for summary judgment on Tulley’s unjust enrichment

claims. A claim for unjust enrichment is commonly asserted as an alternative

to a breach of contract claim. Palmeri v. LG Elects. USA, Inc. 2008 WL 2945985,

at *7 (D.N.J. July 30, 2008). I will permit it remain in the case on that basis.

Finally, I will deny Tulley’s motion for summary judgment on CDK’s

claim for contractual attorney’s fees. The issue remains open because CDK’s

breach of contract claim remains in the case.

IV. Conclusion

For the reasons set forth above, I will grant CDK’s motions for summary

judgment on Tulley’s common law fraud counterclaim (Counterclaim 1), but

otherwise deny their motion for summary judgment on other claims; deny

Tulley’s motion for summary judgment on CDK’s claims; and grant CDK’s

motion to voluntarily dismiss the replevin and conversion counts against

Tulley.

An appropriate order follows.

Dated: September 25, 2020

/s/ Kevin McNulty

____________________________________

Kevin McNulty

United States District Judge