“When deciding whether claims fall within an arbitration agreement, courts employ a strong presumption in favor of arbitration.”
How later courts described this case
- “When deciding whether claims fall within an arbitration agreement, courts employ a strong presumption in favor of arbitration.”
Written by the judges who cited it.
The opinion
ACCEPTED
01-15-01006-CV
FIRST COURT OF APPEALS
HOUSTON, TEXAS
12/10/2015 3:42:59 PM
CHRISTOPHER PRINE
CLERK
NO. 01-15-1006-CV
___________________________________________________________________
FILED IN
1st COURT OF APPEALS
IN THE COURT OF APPEALS HOUSTON, TEXAS
FOR THE FIRST DISTRICT OF TEXAS 12/10/2015 3:42:59 PM
CHRISTOPHER A. PRINE
___________________________________________________________________
Clerk
PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.,
Appellant
v.
WEST GULF MARITIME ASSOCIATION INC.,
Appellee
___________________________________________________________________
Appealed From the 151st Judicial District Court
Harris County, Texas
Trial Court Cause No. 2012-58827,
the Honorable Mike Engelhart, Presiding.
___________________________________________________________________
APPELLANT’S EMERGENCY MOTION FOR TEMPORARY RELIEF
___________________________________________________________________
TO THE HONORABLE FIRST COURT OF APPEALS:
Pursuant to Rule 29.3 of the Texas Rules of Appellate Procedure, Appellant
Professional Advantage Software Solutions, Inc. files this Emergency Motion for
Temporary Relief requesting that the Court stay all proceedings in the trial court.
THE NEED FOR TEMPORARY RELIEF
Appellant Professional Advantage Software Solutions, Inc. (“PA”) filed its
Notice of Appeal on November 25, 2015, appealing the trial court’s interlocutory
Order Denying PA’s Motion to Compel Arbitration and Stay Proceedings, signed
November 18, 2015. However trial is currently set for January 18, 2016. Unless the
Court grants temporary relief by staying all proceedings, PA will be prejudiced by
having to proceed with pre-trial motions and trial while its interlocutory appeal—
which could nullify the need for a trial if the case is sent to arbitration—is pending in
this Court. Thus, PA requests that this Court stay the proceedings.
BRIEF FACTUAL BACKGROUND
Appellee West Gulf Maritime Association, Inc. alleges that it hired several
companies, including Appellant PA, to replace and upgrade its payroll and benefits
processing system.1 (See Tab A, First Amended Petition). Appellee claims that
Appellant PA represented that it had software, referred to as Personnel Agency
Management module (“PAM module”), which could accomplish Appellee’s “goals
without the need for extensive and costly modification” or re-inventing the wheel. (Id.
at ¶ 13). In reliance on these representations, Appellee contends that it signed
Appellant PA’s Functional Design Specifications (“FDS”) and Statement of Work
(“SOW”) on November 5, 2010. (Id. at ¶ 15).
Appellee also agreed to the provisions on the Software License Agreement (the
“Agreement”). While neither party executed the Agreement after Appellee received it
from Appellant PA, Appellee concedes that “[PA] did indeed license the software to
1
Appellee also sued Business Microvar, Inc. d/b/a Interdyn BMI and Technology Support, Inc.,
2
[Appellant] . . . and “[t]he [Agreement] on one hand and the SOW and FDS on the
other, were completely separate free standing contracts.” (See Tab B, Motion to
Compel Arbitration and Stay Proceedings, Exhibit A: Affidavit of Appellee’s President
and Corporate Representative Nathan Wesely at ¶¶ 21-22). The Agreement provides
that Appellant PA grants Appellee the right to “execute and use the Software for
[Appellee’s] internal business operations . . . .” (See Tab B, Motion to Compel
Arbitration and Stay Proceedings, Exhibit B: Agreement at ¶ 1(b)). Without the
Agreement, Appellee would not have a right to use and evaluate the PAM module.
As part of the Agreement, Appellant PA warranted, in part, that the PAM
module’s functionality would be free from material defects. (Id. at ¶ 3). In its First
Amended Petition, Appellee alleges that Appellant PA “breached its contracts with
[Appellee] by failing to design and install a fully functional PAM module that would
meet [Appellee’s] specific requirements.” (Tab A at ¶ 33). Specifically, Appellee
claims that Appellant PA was unable to provide it with correct overtime calculations
and reporting because the PAM could not properly calculate overtime calculations in
accordance with Appellee’s requirements. (Id. at ¶ 25). Thus, Appellee’s breach of
contract claims flow directly from the Agreement.
The Agreement contains an arbitration provision that provides:
10. ARBITRATION AND GOVERNING LAW
but it subsequently settled with these defendants.
3
(a) Disputes. Any dispute, controversy, cause of action, or claim, of any
kind or nature whatsoever, whether legal or equitable, including, but not
limited to, claims sounding in contract, torts or products liability and
claims based upon alleged violations of consumer protection laws, which
arise out of or related to (1) this Agreement, or the breach, termination or
invalidity of this Agreement, (2) the sale, installation, modification or use
of the [PAM module], or (3) any services rendered in connection with the
sale, installation, modification, or use of the [PAM module] shall be
finally and exclusively settled by arbitration in accordance with the
Arbitration Rules of the American Arbitration Association as then in
effect by one (1) arbitrator appointed in accordance with such Rules. The
place of arbitration shall be Fargo, North Dakota . . . .
(b) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the state of North Dakota without regard
to the choice of law or conflict of law principles.
(See Tab B, Agreement at ¶ 10).
Based on this provision of the Agreement, on October 19, 2015, PA filed its
Motion to Compel Arbitration and Stay Proceedings. (See Tab B).
The trial court denied that motion, specifically stating that the motion was
denied “on the basis of waiver by [Appellant PA].” (See Tab C, Order). Appellant PA
filed a Motion to Stay the Proceedings in which it requested that the trial court stay all
proceedings and remove the trial, which is currently set on January 18, 2016, from the
trial court’s docket during the pendency of the appeal.2 Appellant PA then took an
interlocutory appeal to this Court. See TEX. CIV. PRAC. & REM. CODE ANN. 51.016;
see also TEX. CIV. PRAC. & REM. CODE ANN. § 171.098(a)(1); In re Santander
2
The trial court denied the Motion to Stay the Proceedings on December 8, 2015. (See Tab D,
Order Denying Stay).
4
Consumer USA, Inc., 445 S.W.3d 216, 217 (Tex. App.—Houston [1st Dist.] 2013,
orig. proceeding) (providing that Texas appellate courts have jurisdiction over
interlocutory orders denying a motion to compel arbitration).
Since filing its notice of appeal, Appellant PA has been working diligently to
have the record filed in this Court. The reporter’s record, containing the November 9,
2015 hearing on PA’s Motion to Compel Arbitration and Stay Proceedings, has been
transcribed and the court reporter paid. The district clerk’s record, which also has been
requested and is voluminous, is not yet complete.
ARGUMENT
A. This Case is Subject to Arbitration.
The issue pending before this Court is whether the entire case is subject to
arbitration. In order for a court to compel arbitration, the party seeking arbitration
must show that (1) a valid arbitration agreement exists, and (2) the dispute falls within
the scope of that agreement. TEX. CIV. PRAC. & REM. CODE § 171.021. If the answer
to both questions is yes, the trial court must compel arbitration. 950 Corbindale, L.P.
v. Kotts Capital Holdings Ltd. P’ship, 316 S.W.3d 191, 195–96 (Tex. App.—Houston
[14th Dist.] 2010, no pet.).
Texas public policy strongly favors arbitration. Id. The Texas Supreme Court
has made clear that a written agreement to arbitrate must be enforced if the claims
asserted are within the scope of the agreement. See, e.g., Cantella & Co. v. Goodwin,
5
924 S.W.2d 943, 944 (Tex. 1996); Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896,
899 (Tex. 1995). A court must compel arbitration “unless it can be said with positive
assurance that an arbitration clause is not susceptible of an interpretation which would
cover the dispute at issue.” 950 Corbindale, 316 S.W.3d at 195–96 (quoting Marshall,
909 S.W.2d at 899) (emphasis added). Any doubts about arbitrability must always be
resolved in favor of arbitration. Cantella, 924 S.W.2d at 944; see also In re Rubiola,
334 S.W.3d 220 (Tex. 2011) (“When deciding whether claims fall within an arbitration
agreement, courts employ a strong presumption in favor of arbitration.”). As discussed
above, there is a broad arbitration provision in the Agreement, and Appellee’s claims
fall within the broad language in the provision. Based on Appellee’s arguments to the
trial court, it does not appear to dispute this fact. (See Tab E, Response to Motion to
Compel Arbitration and Stay Proceedings).
B. Appellant PA Has Not Waived Its Right to Arbitration.
Rather, Appellee argues that Appellant PA waived its right to arbitrate. (Id.).
However, because Texas strongly favors arbitration, there is a strong presumption
against its waiver. See Perry Homes, 258 S.W.3d at 584. “[T]his hurdle is a high
one.” Id. at 590; see Richmont Holdings, Inc. v. Superior Recharge Sys., L.L.C., 455
S.W.3d 573, 574 (Tex. 2014) (per curiam) (listing numerous cases in which the Texas
Supreme Court has found no waiver). “[C]ourts should resolve any doubts as to the
6
agreement’s scope, waiver, and other issues unrelated to its validity in favor or
arbitration.” Ellis v. Schlimmer, 337 S.W.3d 860, 862 (Tex. 2011) (emphasis added).
To establish that Appellant PA waived their right to arbitration, Appellee must
establish that (1) Appellant PA substantially invoked the judicial process, and (2)
Appellee was prejudiced as a result. See Perry Homes, 258 S.W.3d at 589–90. To
decide whether a party substantially invoked the judicial process, courts look to the
totality of the circumstances, considering factors such as when the movant knew of the
arbitration clause, how much discovery has been conducted, who initiated it, whether
that discovery related to the merits rather than arbitrability or standing, how much of
the discovery would be useful in arbitration, and whether the movant sought judgment
on the merits. Id. at 591–92. But “even substantially invoking the judicial process
does not waive a party’s arbitration rights unless the opposing party proves that it
suffered prejudice as a result.” Id. at 594. Prejudice, in this context, is “the inherent
unfairness in terms of delay, expense, or damage to a party’s legal position that occurs
when the party’s opponent forces it to litigate an issue and later seeks to arbitrate that
same issue.” Id. at 597.
As counsel for Appellant PA argued during the hearing on its Motion to Compel
Arbitration and Stay Proceedings, despite the length of time the case has been pending,
Appellant PA has not been aggressively litigating the case. (See Tab F, Transcript of
November 9, 2015 Hearing at 10). Even if Appellant PA had, as counsel for Appellant
7
argued, Appellee could not show that it had been prejudiced. (See id. at 5–10, 19).
Prejudice in this context means “the inherent unfairness in terms of delay, expense, or
damage to a party’s legal position that occurs when the party’s opponent forces it to
litigate an issue and later seeks to arbitrate that same issue.” Perry Homes, 258 at 597.
Nothing of the sort has occurred here. Rather, there is no prejudice to either party in
determining the arbitration now. Both parties, however, will be prejudiced if the case
goes to trial in January while the case is up on appeal, and this Court concludes that
this case is ripe for arbitration.
C. Temporary Relief Is Necessary to Preserve Appellant’s Rights on
Appeal.
Trial is set in this case for January 18, 2016. PA anticipates that this appeal will
still be pending in January 2016. A stay of all proceedings preserves the status quo and
protects both the jurisdiction of this Court to rule on the interlocutory appeal and PA’s
ability to benefit from its contractual right to arbitrate. An appellate court “may make
any temporary orders necessary to preserve the parties’ rights until disposition of the
appeal.” See TEX. R. APP. P. 29.3; Oryx Capital Int’l, Inc. v. Sage Apartments, L.L.C.,
167 S.W.3d 432, 438 (Tex. App.—San Antonio 2005, no pet.) (“When this Court
stayed all proceedings in the trial court, the parties and the trial court were ordered to
take no further action on the case until they received further orders from this court or
we resolved the [interlocutory] appeal.”); see also EnerVest Operating, L.L.C. v.
8
Molett, No. 03-11-00823-CV, 2012 WL 1647991, *1 (Tex. App.—Austin, May 1,
2012, no pet.) (order) (per curiam) (discussing that the “appellant filed an interlocutory
appeal from the district court’s order denying its motion to compel arbitration [and
u]pon the appellant’s request, the court of appeals stayed the commencement of trial
pursuant to Rule 29.3 pending its disposition of the interlocutory appeal.”). A stay of
all proceedings is necessary in this case to protect the PA’s interests and this Court’s
jurisdiction.
CONCLUSION AND PRAYER
For all the reasons set forth herein, Appellant respectfully requests that this
Court grant this Motion for Temporary Relief and stay all trial proceedings until
conclusion of this interlocutory appeal. Appellant requests all other appropriate relief
to which it may be entitled.
Respectfully submitted,
/s/ Thomas C. Wright
Thomas C. Wright
State Bar No. 22059400
Natasha N. Taylor
State Bar No. 24071117
WRIGHT & CLOSE, LLP
One Riverway, Suite 2200
Houston, TX 77056
(713) 572-4321
(713) 572-4320 (fax)
wright@wrightclose.com
taylor@wrightclose.com
9
/s/ Jamey L. Voge (w/permission)
Jamey L. Voge, SBN 24033424
Brian Cooper, SBN 24012451
STUBER COOPER VOGE PLLC
2600 Network Blvd., Suite 305
Frisco, Texas 75034
Telephone: (214) 472-2770
Fax: (214) 472-2790
jvoge@scvlaw.net
bcooper@scvlaw.net
ATTORNEYS FOR APPELLANT
PROFESSIONAL ADVANTAGE
SOFTWARE SOLUTIONS, INC.
10
CERTIFICATE OF COMPLIANCE
I certify that the foregoing motion is in compliance with Texas Rule of
Appellate Procedure 9.4 because it contains 1,958 words and has been prepared in a
proportionally spaced typeface using Microsoft Word 2007 in 14-point Times New
Roman font for text and 12-point Times New Roman font for footnotes, which meets
the typeface requirements.
/s/ Natasha N. Taylor
Natasha N. Taylor
CERTIFICATE OF SERVICE
I hereby certify that on December 10, 2015, a true and correct copy of this
Motion was forwarded to the following counsel by electronic service.
Timothy McCloskey
Blake Rizzo
Carrigan, McCloskey & Roberson LLP
945 Heights Blvd
Houston, Texas 77008
tmccloskey@cmrllp.com
brizzo@cmrllp.com
/s/ Natasha N. Taylor
Natasha N. Taylor
11
APPENDIX
A. Plaintiff’s Amended Petition
B. Motion to Compel Arbitration and Stay Proceedings, Exhibit A: Affidavit of
Appellee’s President and Corporate Representative Nathan Wesely, Exhibit
B: Agreement
C. November 18, 2015 Order
D. December 8, 2015 Order
E. Response to Motion to Compel Arbitration and Stay Proceedings
F. Transcript of November 9, 2015 Hearing
12
TAB A
9/22/2014 4:18:35 PM
Chris Daniel - District Clerk
Harris County
Envelope No: 2579298
By: GONZALEZ, VERONICA
CAUSE NO. 2012-58827
WEST GULF MARITIME ASSOCIATION, § IN THE DISTRICT COURT
§
Plaintiff, §
§
vs. §
§
BUSINESS MICROVAR, INC. D/B/A § OF HARRIS COUNTY, TEXAS
INTERDYN BMI, PROFESSIONAL §
ADVANTAGE SOFTWARE SOLUTIONS, §
INC., and TECHNOLOGY §
SUPPORT, INCORPORATED, §
§
Defendants. § !51st WDICIAL DISTRICT
PLAINTIFF WEST GULF MARITIME ASSOCIATION'S
FIRST AMENDED ORIGINAL PETITION
TO THE HONORABLE JUDGE OF SAID COURT:
COMES NOW, PLAINTIFF WEST GULF MARITIME ASSOCIATION ("WGMA") and
files this First Amended Original Petition against DEFENDANTS BUSINESS MICROV AR, INC.
D/B/A INTERDYN BMI ("BMI"), PROFESSIONAL ADVANTAGE SOFTWARE
SOLUTIONS, INC. ("ProFad"), and TECHNOLOGY SUPPORT, INCORPORATED ("TSI")
("collectively, Defendants"), and states as follows:
I.
DISCOVERY CONTROL PLAN
1. Plaintiff requests that Discovery Control Plan III, pursuant to Texas Rule of Civil
:! Procedure 190, be implemented.
"
M
~ II.
"' PARTIES
j
~
2. WGMA is a domestic nonprofit corporation authorized to do and doing business in
~
a Houston, Texas. WGMA is represented by Timothy M. McCloskey, Carrigan, McCloskey &
tl
0
Ci
il
~ Plaintiffs First Amended Original Petition
iJ Page 1
u
Roberson, L.L.P., 945 Heights Blvd., Houston, Texas 77008.
3. BMI is a Minnesota corporation doing business in Houston, Texas. BMI has been
served and has appeared herein.
4. ProF ad is a foreign corporation doing business in Houston, Texas. ProF ad has been
served and has appeared herein.
5. TSI is a Texas corporation doing business in Houston, Texas. TSI has been served
and has appeared herein.
Ill.
VENUE
6. Venue is proper in Harris County pursuant to Section 15.001 of the Texas Civil
Practice and Remedies Code because all or part ofWGMA' s cause of action accrued in this county,
the agreements were executed in Harris County, TSI's principal place of business is in Harris
County, and all of the Defendants conduct business in Harris County. The Court has jurisdiction
over this matter as WGMA's damages are within the jurisdictional limits of this Court.
IV.
FACTUAL BACKGROUND
7. WGMA ts m the business of negotiating and administering multiemployer
collective bargaining agreements on behalf of stevedores that employ International
Longshoremen's Association labor in the ports from Brownsville, Texas, to Lake Charles,
Louisiana. Administration of the collective bargaining agreements includes facilitating the
adjudication of grievances under the grievance and arbitration procedure, training workers, and
processing payroll. WGMA also provides payroll, human resources, and benefit services to a
variety of businesses, including providing assistance and advice on day-to-day personnel issues.
8. BMI is an IT company that "provides Microsoft Dynamics services and solutions,"
and boasts that its "world class consulting team" includes "industry specialists that have extensive
Plaintiff's First Amended Original Petition
Page 2
experience implementing vertical market business intelligence solutions" for many industries.
BMI claims to offer "the experience, technical skill, and ability to locally deploy consulting
professionals and implement business solutions in a timely and cost-effective manner."
9. ProFad is an affiliate of BMI. ProFad claims to "provide specific industry
functionality to staffing organizations to help them improve their performance and the return in
their IT investment." ProF ad also claims that it has a "number of cross industry solutions designed
to help customers by enhancing their Microsoft Dynamics solutions."
10. TSI claims to help "businesses plan and install the most efficient and useful
infrastructure to meet their specific needs. It claims that its capabilities include "optimization,
routing and switching, wireless/mobility components, client computers, servers, security and
storage/data management." Id.
11. Originally, WGMA ran its payroll and benefits processing through an IBM AS400
system. In 2010, WGMA decided to upgrade its system to keep up to date with current technology
and provide a more streamlined and efficient payroll and benefits processing system. It began
interviewing software companies to design, implement, and configure a suitable software program
to upgrade WGMA's financial accounting, reporting, and payroll processing. WGMA interviewed
several software companies before deciding to enter into a contract with BMT to implement
Microsoft Dynamics Great Plains ("GP") and Personnel Agency Management ("PAM") software
systems to meet WGMA's needs.
12. In order to facilitate BMI's due diligence, WGMA afforded BMI unrestricted
access to WGMA's user and executive teams, in order to enable BMT to understand WGMA's
precise needs. WGMA also provided BMT with access to third-party payroll personnel that
depended on WGMA. ProF ad similarly conducted its own due diligence to understand WGMA's
Plaintiffs First Amended Original Petition
Page 3
requirements and whether PAM software could be used to accomplish those specific requirements.
BMl and ProFad's due diligence was also conducted to ensure that the architecture of the
infrastructure they were providing would support the applications being provided, and to enable
BMI and ProF ad to provide WGMA with expected costs and a target date on which the System
would be fully operational.
13. Throughout the course of their due diligence and negotiations with WGMA, BMI
and ProF ad made specific representations to WGMA for the purpose of inducing WGMA to enter
into contracts with them. BMI and ProFad engaged in frequent conversations with WGMA, in
which they aggressively touted their abilities to work with companies similarly situated to WGMA.
BMI and ProFad repeatedly represented that ProFad had PAM software that could accomplish
WGMA's goals without the need for extensive and costly modification. BMI and ProFad
represented that they had installed this particular system on several occasions, and thus, there
would be no need to re-invent the wheel with customized software for WGMA. Moreover, BMI
and ProF ad assured WGMA that ifWGMA retained BMI, WGMA would be able to save the cost
of customization by utilizing the PAM software, which BMI and ProF ad represented would meet
all ofWGMA's functional business requirements with minimal modification. In fact, BMI insisted
that ProFad and the PAM software be used for the WGMA project. WGMA had never heard of
either ProF ad or PAM, and relied on BMI and its professed expertise in this area. Based on BMI's
industry expertise, its relationship with ProFad, and BMJ's repeated representations regarding
ProFad's and PAM's capabilities, WGMA entered into agreements with BMJ and ProFad for the
project.
14. On or about October 4, 2012, WGMA entered into an agreement with BMI (the
"BMI Agreement"), in which BMI guaranteed that the System would "(a) run a payroll system
Plaintiff's First Amended Original Petition
Page4
with at least the same functionality as ["WGMA's] current system," (b) maintain worker records
in the payroll system with at least the level of detail as [WGMA's] current system," and (c) run
accounting programs for [WGMA] and its affiliated entities and benefit programs,'' BMI promised
that "[t]he accounting systems will be installed and functional by October 31, 201 0," and "[t]he
payroll system will be live on December 23, 2010." BMI represented that the total cost for the
System, including any additional vendors that might be necessary, would be approximately
$600,000. The BMI Agreement was modified on November 5, 2010 to change the "go live" date
from December 23, 2010 to February 18, 2011, with the understanding that WGMA would be able
to process payroll solely using the new System on March 28, 2011. BMI never signed the BMI
Agreement.
15. After reviewing ProFad's Functional Design Specifications ("FDS") and
Statement of Work ("SOW"), WGMA determined that despite ProFad's purported due diligence,
ProF ad did not understand WGMA's business and functional requirements. In an effort to assist
both BMI and ProFad in better understanding WGMA's functional requirements, WGMA
provided BMI and ProFad with a requirements/activities list, yet despite the
requirements/activities list and further unfettered access to WGMA, Pro Fad's SOW and FDS were
still incomplete on the day of the anticipated contract signing. WGMA personnel spent an
additional couple of days with ProF ad's due diligence team working on extensive revisions to
ProF ad's FDS, and on or about November 5, 2010, WGMA signed the FDS and SOW. ProF ad,
however, never signed either agreement.
16. On or about October 8, 2010, WGMA also entered into an agreement with TSI (the
"TSI Agreement") to provide Infrastructure as a Service ("IaaS") on a private cloud-based
platform, including provision and support for computer hardware, computer operating systems,
Plaintiffs First Amended Original Petition
Page 5
storage, backup, IT user administration, User Help Desk, desktop support, security, and email
support. Like BMI and ProFad, TSI also flaunted its qualifications and skill sets and reassured
WGMA on a number of occasions that it would be able to provide WGMA with all of its hosting
needs. TSI represented that it had the necessary resources and could provide WGMA with a stable
platform as it had done with its other customers. TSI represented that it could meet all ofWGMA's
needs without any problems at a cost of only $4,000 per month.
17. From the inception, during negotiations, and throughout the entire business
relationship between WGMA and the Defendants, the Defendants represented both verbally and
in writing that they would provide a complete and functioning System for WGMA. The System,
as it turned out, has been a colossal failure.
18. Not once during the many meetings and telephone conversations between BMI,
ProF ad and WGMA, did BMI or ProF ad even suggest that the GP software was unsuitable for
WGMA' s business, that it could not be installed in a reasonably functioning form, and that it would
require extensive modification and several months of installation lead time-in fact, BMI and
ProFad's representations were all directly contrary. It was only after WGMA's internal
investigation into GP in December 2010 that WGMA discovered that GP may not be a stable
platform, that GP may not be capable of processing the payroll run by WGMA because of
'Co
~
architectural limitations inherent in GP, and that extensive modification to PAM would be
'"'0
'Co
necessary to meet WGMA's payroll needs. On December 10, 2010, WGMA wrote to BMI
~
0..
expressing its concern that "GP would not be a stable platform and may require, at some point,
:!:
"'
~
;!;
'Co
extensive modification." WGMA expressed "serious questions as to whether Dynamics GP can
] process payroll with the requirements inherent in [WGMA's] business environment. Moreover,
6
z
~
!i
6
"
8"
1l
~ Plaintiffs First Amended Original Petition
'13 Page 6
u
the potential inability of Dynamics GP to meet our requirements is caused by limitations of the
architecture of Dynamics GP."
19. Likewise, at no time during the due diligence process, did ProFad advise WGMA
that PAM would need extensive modifications. Both BMI and ProF ad repeatedly represented that
minimal modifications would be needed, in order to induce WGMA into entering into agreements
with them for the project.
20. BMI and ProF ad grossly misrepresented their capabilities and those of the System,
in order to induce WGMA to enter into the agreements with them. For example, when asked about
how its meeting with WGMA went in September 2010, BMI responded that discussions were
ongoing, and that it planned to determine "if and to what extent we have a solution," and that it
was BMI's opinion that "we can handle their payroll, but will do some customization to the GP
system of course, to make it work." According to Britton Sudduth, a BMI Senior Sales Consultant,
the big question for BMI was deciding whether to "propose this deal or not" to WGMA, inquiring
of Mr. Wilton of BMI, "Did you have any brilliant brain revelations this weekend on how we're
going to make GP work?"
21. In internal documents, ProF ad also demonstrated a low level of confidence that it
could deliver on its promises to WGMA. Brent Hitterdal of ProF ad specifically inquired whether
ProFad knew enough about WGMA's current system to "be sure" that it could promise that the
"payroll system and worker records will have the same or more functionality as the current
system." Kathi Halvorson of ProF ad responded that she was "not happy to agree to limits" as
ProFad had "not done a full scoping yet." Ms. Halvorson stated that she had "only spent 12-14
hours" with WGMA, and her estimates were "very high level" and needed to be confirmed. She
also stated that she gave an example in a document provided to WGMA, but was "not real
Plaintiff's First Amended Original Petition
Page 7
forthcoming with invoicing details and payroll items." Joel Ellingson, also of ProF ad, wrote to
Ms. Halvorson that ProF ad did not really "have much for details on what needs to be done," and
that "[i]fthese items get very complicated ... they make take longer." He also cautioned that if
"they do get too complicated, we may need to build PAM and other processes specific for them,
not generic PAM."
22. None of BMI's and ProFad's concerns about their abilities to deliver a fully
functional System were ever communicated to WGMA. When BMI and ProFad finally
implemented the System, the System was a total failure. The failure was due primarily to BMI's
and ProFad's failure to accurately define WGMA's necessary business and functional
requirements, and to provide the resources needed for the System to work properly. The System's
inability to meet WGMA's business requirements was or should have been apparent to BMI and
ProF ad at the outset. BMI and ProF ad lacked the appropriate personnel to implement the System,
and knew or should have known from the start that the System would not be able to provide
WGMA with the functionality that WGMA required.
23. There were several root causes for the failure of the System, including poor
consultant resourcing, improper configuration, lack of testing and training, poor communication
and documentation, and general avoidance of and disregard for standard project management
:::; practices. These were the responsibility of BMI and ProF ad, which should have been identified,
communicated, and addressed during BMI's and ProF ad's implementation of the System.
24. BMI failed to accurately define the business and functional requirements necessary
to allow the ERP application suite to go-live as originally agreed. BMI also failed to acknowledge
the limitations of the core GP system, despite the fact that BMI knew or should have known that
the core GP system would not be able to fulfill WGMA's requirements. Rather than express the
Plaintiff's First Amended Original Petition
Page 8
limitations of GP to WGMA, BMI moved forward on a project it knew or should have known
could not be accomplished. Despite BMT' s promises that GP could provide WGMA with the
needed functionality, WGMA learned after the October 20 II go-live attempt that the GP system
still had major limitations and would require even more modification. For example, WGMA
identified the following problems with the System after it went live:
a. District COPE was calculated at 0.25% of Total Pay; it should have been calculated
at 0.1% of Straight Time Pay.
b. District Service Charge was calculated at 0.1% of Total Pay; it should have been
calculated at 0.9% of Straight Time Pay.
c. Local COPE was deducted for every local with which a worker had an agreement;
it should have been calculated only for the local for which the worker worked in the
pay period.
d. Local Service Charges that are a percentage ofNet Pay were not calculated correctly
in GP because GP did not subtract social security from Gross Pay in calculating Net
Pay.
e. Insurance deductions calculated in GP were usually different than the insurance
deductions calculated in the AS400.
f. Child support deductions were doubled in GP for some workers.
g. Child support deductions were not the same in GP as in the AS400 for some workers.
h. Credit union deductions were not the same in GP as in the AS400 for some workers.
i. For some workers Local COPE was deducted in GP when it was not deducted in the
AS400.
j. For some workers Local COPE was deducted in the AS400 when it was not deducted
inGP.
k. For some workers there was no federal income tax in GP when there was federal
income tax in the AS400.
I. Garnishments such as child support and student loan repayment that are based on
net income were different in GP the in the AS400 because of differing federal
income tax and because social security was not subtracted in calculating Net Pay.
Plaintiffs First Amended Original Petition
Page 9
m. Some workers had negative social security withholdings in GP, resulting in higher
Net Pay than Gross Pay.
n. Louisiana State Tax was calculated differently in GP than in the AS400.
25. ProFad similarly grossly misrepresented the capabilities of its PAM application,
failed to define the limits of its PAM application, and was unable to meet WGMA's requirements
for a fully operational system. During the entire process, and continuing to the present, ProF ad
has been unable to provide WGMA with correct overtime calculations and reporting. From the
beginning of the project, the PAM application was unable to process overtime ("OT") calculations
in accordance with WGMA's requirements. ProFad was aware of PAM's inability to calculate
OT in early 2011. In April2011, Craig Erickstad, suggested that ProF ad develop a custom PAM
application to calculate OT in accordance with WGMA's requirements. The custom OT
application was in testing from June 2011 to the end of the project. PAM's failure to properly
calculate OT was a continuous issue throughout the project that was discussed with WGMA and
ProF ad personnel on a weekly basis. PAM was subjected to testing on a regular basis, and ProF ad,
throughout the term of the project, was unable to ever determine a solution for PAM's failure to
properly calculate OT. Rather, each week ProF ad would simply say to WGMA, "we're working
on it."
26. Failed attempts to go live on the dates promised by BMI and ProFad included
December 24, 20 I 0, March 31, 2011, and October 4, 20 II. Although the System finally went live
on January 3, 2012, the PAM application provided by ProF ad did not go completely live on January
3, 2012, as the OT issue had not been resolved by ProF ad by the go-live date. Rather, in order to
calculate OT, WGMA was forced to calculate OT using the old AS400 system and continued to
approve the OT using the old AS400 system. In fact, WGMA still uses this duplicative method
for calculating OT today due to ProF ad's failure to meet WGMA's functional requirements.
Plaintiff's First Amended Original Petition
Page 10
27. TSI also lacked the level of expertise necessary to recommend or deploy an TaaS
platform as WGMA required, and misrepresented its level of capability in supporting clients with
needs similar to that of WGMA. TSI failed to follow standard best practice configuration for
Microsoft Windows Active Directory, Exchange email, along with collaboration and personal
information management. WGMA experienced significant problems with TSI's platform,
including but not limited to, poor customer service and significant cost overruns.
28. Despite their assurances to the contrary, BMI and ProF ad were unable to provide
the specific requirements that WGMA needed to run normal operations, such as standardized
email, collaboration, timesheet upload, worker garnishments, worker taxes, regulatory reporting,
and worker overtime. WGMA, at its own cost, has had to add additional software or custom
programming which was not originally specified in the Defendants' budgets, and in some cases
has had to hire additional experts to resolve functionality issues such as system configuration,
document management, timesheet processing, worker garnishments, and negative pay. As a result,
WGMA incurred additional significant delays and cost overruns. In order to operate its business
without impacting its customers, WGMA also had to hire temporary workers and independent
consultants to assist regular personnel with manual data entry and to process payroll transactions
that were not supported by the System as configured.
29. WGMA incurred significant damages as a result of Defendants' conduct, including
the difference between the $600,000 that the System was represented to cost, and the amount it
did cost, over $2,000,000; the amount overcharged by ProF ad; the cost currently being spent to
replace the PAM module by Ignite, which has been estimated at $135,000; the cost of additional
personnel to run the BMI system because of the reduced functionality compared to the AS400; the
additional personnel costing approximately $250,000 per year for the life of the BMI system; and
Plaintiff's First Amended Original Petition
Page 11
the difference between the value of what WGMA received in the transaction and the purchase
price or value given for it.
v.
CAUSES OF ACTION
A. BREACH OF CONTRACT (all Defendants)
30. WGMA repeats and realleges the allegations set forth above as if the same were set
forth more fully and at length herein.
31. WGMA entered into separate contracts with each of the Defendants. Defendants
breached their contracts by failing to provide the goods and/or services promised under their
respective agreements.
32. Specifically, BMI breached its contract by failing to provide a System that would
run a payroll system with at least the same functionality as WGMA's current system, maintain
worker records in the payroll system with at least the level of detail as WGMA's current system,
and run accounting programs for WGMA and its affiliated entities and benefits programs. BMI
also failed to have the System installed and functional on the promised dates.
33. ProF ad breached its contracts with WGMA by failing to design and install a fully
functional PAM module that would meet WGMA's specific requirements.
34. TSI breached its agreement to provide an IaaS platform that would meet WGMA's
specific requirements, including failing to follow standard best practice configuration for, among
other things, Microsoft Windows Active Directory, Exchange email.
35. WGMA satisfied all conditions precedent and performed all of the requirements
under each the contracts prior to the Defendants' breaches. The Defendants' breaches of their
contracts caused injury to WGMA, for which WGMA seeks to recover the amount of actual
damages resulting from the Defendants' breaches of their contracts. To the extent Defendants
Plaintiffs First Amended Original Petition
Page 12
attempt to avoid liability for their breaches based on contractual disclaimers, waivers, or
limitations ofliability, they are unenforceable because they are nonexclusive, not conspicuous, fail
of their essential purpose, and/or are unconscionable.
B. NEGLIGENT/FRAUDULENT INDUCEMENT (BMI and ProFad)
36. WGMA repeats and realleges the allegations set forth above as if the same were set
forth more fully and at length herein.
37. BMI and ProFad negligently and intentionally misrepresented material facts and or
omitted material information for the purpose of inducing WGMA to enter into the contracts with
BMI and ProF ad. These misrepresentations and/or omissions were knowingly false, and were the
type of information on which WGMA would be reasonably expected to rely in its business, and
which WGMA did, in fact, rely on to its detriment.
38. Specifically, BMT and ProFad intentionally and grossly misrepresented their
capabilities and those of the System. Although BMI and ProF ad were aware that GP and PAM
would require significant modifications and customizations in order to meet WGMA' s needs, if at
all, BMT and ProFad misrepresented to WGMA that GP and PAM would require little or no
modification, and that the System would be fully functional and be able to meet WGMA's needs
on the agreed upon go live date, when, in fact, BMI and ProF ad had no confidence that GP and
PAM could do so. BMI and ProF ad knew or should have known from the start that the System
would not be able to provide WGMA with the functionality that WGMA required.
39. BMT and ProF ad misrepresentations were made negligently and/or fraudulently in
order to induce WGMA to enter into agreements with them for the System. WGMA relied on their
misrepresentations, and as a result, suffered damages as a proximate result ofBMT's and ProFad's
misrepresentations and omissions, and seeks recovery of damages proximately resulting
Plaintiffs First Amended Original Petition
Page 13
therefrom. To the extent BMI and ProFad attempt to avoid liability for their negligent and/or
fraudulent misrepresentations based on contractual disclaimers, waivers, or limitations of liability,
they are unenforceable because they are nonexclusive, not conspicuous, fail of their essential
purpose, and/or are unconscionable.
C. BREACH OF EXPRESS AND IMPLIED WARRANTIES (BMI and ProFad)
40. WGMA repeats and realleges the allegations set forth above as if the same were set
forth more fully and at length herein.
41. BMI and ProF ad breached the implied warranties of fitness and merchantability in
Sections 2.314 and 2.315 of the Texas Business and Commerce Code (U.C.C.). Both BMI and
ProF ad new the particular purpose for which the System was required and that WGMA was relying
on their skill and judgment to select and furnish a fully functional System that would meet
WGMA's precise requirements. Moreover, the System provided by BMT and ProFad was not fit
for the ordinary purpose for which such systems are used.
42. ProF ad also breached its express warranty that it would "[p]erforrn the services and
produce the deliverables described [in the SOW] in a professional and workmanlike manner
consistent with the highest standards practiced in Professional Advantage's industry."
43. BMI also breached its express warranty that the System would "(a) run a payroll
system with at least the same functionality as ["WGMA's] current system," and (b) maintain
worker records in the payroll system with at least the level of detail as [WGMA's] current system."
44. WGMA suffered damages as a result of BMI's and ProF ad's breaches of implied
and express warranties, and seeks recovery of damages resulting therefrom. To the extent BMI
and ProF ad attempt to avoid liability for their negligent and/or fraudulent misrepresentations based
on contractual disclaimers, waivers, or limitations ofliability, they are unenforceable because they
Plaintiffs First Amended Original Petition
Page 14
are nonexclusive, not conspicuous, fail of their essential purpose, and/or are uuconscionable.
VI.
ATTORNEYS' FEES
45. As a result of the Defendants' breaches of their agreements and other acts and/or
omissions as described above, WGMA has been forced to retaiu counsel and incur reasonable and
necessary attorneys' fees. WGMA seeks to recover its reasonable and necessary attorneys' fees
pursuant to TEXAS CIVIL PRACTICES & REMEDIES CODE § 38.001 et seq., and TEXAS BUSINESS AND
COMMERCE CODE §§ 17.50(d) and 24.013, as well as conditional awards for any appeals.
Additionally, the TSI Agreement and the BMI Agreement (which expressly provides that it "does
pertain to affiliates and subsidiaries of [BMI] unless otherwise noted") each provide for an award
of attorneys' fees to the prevailing party in an action pertaining to those agreements.
PRAYER
WHEREFORE, PREMISES CONSIDERED, Plaintiff, WEST GULF MARITIME
ASSOCIATION, respectfully prays that it be awarded the following relief:
a) Judgment against Defendants for a sum within the jurisdictional limits of the Court;
b) Prejudgment interest at the maximum amount provided by law;
c) Post judgment interest at the maximum amount allowed by law
d) Costs of suit; and
e) Reasonable attorneys' fees.
PlaintifPs First Amended Original Petition
Page 15
Respectfully submitted,
CARRIGAN, McCLOSKEY & ROBERSON, L.L.P.
By: Is/Timothy M. McCloskey
Timothy M. McCloskey
SBOT: 13417650
Blake E. Rizzo
SBOT: 24034073
945 Heights Blvd.
Houston, Texas 77008
713-868-5581
713-868-1275 (fax)
ATTORNEYS FOR WEST GULF MARITIME
ASSOCIATION
..
:::;
0
:::;
~
"';:!;'
:g"
"'""
]
~
I.,
Cl
0
~ Plaintiffs First Amended Original Petition
·~ Page 16
u
I, Chris Daniel, District Clerk of Harris
County, Texas certifY that this is a true and
correct copy of the original record filed and or
recorded in my office, electronically or hard
copy, as it appears on this date.
Witness my official hand and seal of office
this December 10.2015
Certified Document Number: 62443714 Total Pages: 16
Chris Daniel, DISTRJCT CLERK
HARRJSCOUNTY,TEXAS
In accordance with Texas Government Code 406.013 electronically transmitted authenticated
documents are valid. If there is a question regarding the validity of this document and or seal
please e-mail support@hcdistrictclerk.com
TAB B
10/19/2015 1:10:26 PM
Chris Daniel - District Clerk Harris County
Envelope No. 7432987
By: VERONICA GONZALEZ
Filed: 10/19/2015 1:10:26 PM
CAUSE NO. 2012-58827
WEST GULF MARITIME ASSOCIATION § IN THE DISTRICT COURT OF
INC. §
§
VS. §
§ HARRIS COUNTY, TEXAS
BUSINESS MICROVAR, INC. D/B/A §
INTERDYN BMI, PROFESSIONAL §
ADVANTAGE SOFTWARE SOLUTIONS, §
INC., AND TECHNOLOGY SUPPORT, INC. § 151ST JUDICIAL DISTRICT
DEFENDANT PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.’S
MOTION TO COMPEL ARBITRATION AND STAY PROCEEDINGS
Defendant Professional Advantage Software Solutions, Inc. (“PA”) files this Motion to
Compel Arbitration and Stay Proceedings and respectfully states the following:
SUMMARY OF MOTION
1. PA seeks to compel Plaintiff, West Gulf Maritime Association Inc. (“WGMA”), to
arbitrate the claims asserted against PA in this lawsuit. WGMA’s claims are within the scope of a
very broad arbitration provision in a Software License Agreement (“SLA”), which is one of three
valid, enforceable contracts between WGMA and PA. The SLA provides, in part, that any dispute
arising out of or relating to the installation, modification or use of the software provided by PA to
WGMA shall be settled by binding arbitration.
2. Each of the asserted claims falls within the scope of the agreement to arbitrate,
which is broadly written and encompasses all claims, sounding in contract, tort, or otherwise
arising out of or related to PA’s involvement on the project. As a result, WGMA’s claims should
be stayed in this litigation and brought in an arbitration proceeding.
BACKGROUND
3. The project at issue involves WGMA’s replacement and upgrade of its payroll and
benefits processing system. This dispute arises out of the design, sale, modification,
PROFESSIONAL ADVANTAGE SOFTWARE SOLUTION’S MOTION TO COMPEL ARBITRATION AND STAY PROCEEDINGS - PAGE 1 OF 7
W:\Professional Advantage-1584\West Gulf-1584001\Pleadings\PA Motion Compel Arbitration\Motion to Compel Arbitration Final.docx
implementation, and use of a software package involving all of the defendants. WGMA entered
into multiple, separate agreements with each defendant, but has subsequently settled with all of
the other defendants, leaving only its claims against PA. WGMA has claimed that PA “breached
its contracts with WGMA by failing to design and install a fully functional PAM module that
would meet WGMA’s specific requirements.” See Plaintiff’s First Amended Petition at ¶33.
WGMA also claims PA negligently and intentionally misrepresented material facts for the purpose
of inducing WGMA to enter into the contracts with PA. Id. At ¶¶37-39. Each of WGMA’s other
claims arise out of or relate to PA’s scope of work on the project.
4. PA’s scope of work on the project was limited to designing a portion of the payroll
software package commonly referred to as the Personnel Agency Management module (“PAM
Module”), and then implementing the PAM Module for WGMA’s use. WGMA contends that there
are at least three different contracts between WGMA and PA, including the Functional Design
Specifications (“FDS”), Statement of Work (“SOW”) and the aforementioned SLA. While neither
party executed the SLA after WGMA received it from PA, WGMA concedes that “[PA] did indeed
license the software to WGMA . . . and “[t]he License on one hand and the SOW and FDS on the
other, were completely separate free standing contracts.” See Affidavit of Plaintiff WGMA’s
President and Corporate Representative Nathan Wesley, attached hereto as Exhibit A at ¶21-22.
The FDS sets forth the technical specifications for the PAM Module. The SOW defines the scope
of work for the design and implementation of the PAM Module. And, the SLA ultimately grants
WGMA the right to use the PAM Module. The three agreements are interrelated.
5. The SLA grants WGMA the right to install the PAM Module software and use it
for its internal business operations. See SLA, attached hereto as Exhibit B at ¶1(b), pg.
PA0014610-11. Without the SLA, WGMA has no right to use and evaluate the functionality of
the PAM Module. Pursuant to the SLA, PA warrants, in part, the PAM Module’s functionality
PROFESSIONAL ADVANTAGE SOFTWARE SOLUTION’S MOTION TO COMPEL ARBITRATION AND STAY PROCEEDINGS - PAGE 2 OF 7
W:\Professional Advantage-1584\West Gulf-1584001\Pleadings\PA Motion Compel Arbitration\Motion to Compel Arbitration Final.docx
shall be free from material defects. Id. at ¶3, pg. PA0014612. WGMA now claims that the PAM
Module provided by PA is defective and not fully functional.
6. The SLA contains an arbitration provision as follows:
“10. ARBITRATION AND GOVERNING LAW
(a) Disputes. Any dispute, controversy, cause of action, or claim, of any kind
or nature whatsoever, whether legal or equitable, including, but not limited to,
claims sounding in contract, torts or products liability and claims based upon
alleged violations of consumer protection laws, which arise out of or related to
(1) this Agreement, or the breach, termination or invalidity of this Agreement,
(2) the sale, installation, modification or use of the [PAM Module], or (3) any
services rendered in connection with the sale, installation, modification, or use
of the [PAM Module] shall be finally and exclusively settled by arbitration in
accordance with the Arbitration Rules of the American Arbitration Association
as then in effect by one (1) arbitrator appointed in accordance with such Rules.
The place of arbitration shall be Fargo, North Dakota.
* * *
(b) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the state of North Dakota without regard to the
choice of law or conflict of law principles.”
See SLA, attached hereto as Exhibit B at ¶10, pg. PA0014616.
ARGUMENT & AUTHORITIES
7. Federal and state policies strongly favor agreements to settle disputes through
arbitration. See, e.g. United Steelworkers of Am. V. Warrior & Gulf Navigation Co., 363 U.S. 574,
582-83 (1960); Jack B. Anglin Co. v. Tipps, 842 S.W.3d 266, 272-73 (Tex. 1992) (orig.
proceeding). For this reason, Courts must construe arbitration clauses “as broadly as possible.”
S.A. Mineracao da Trindale-Samitri v. Utah Int’t, Inc., 745 F.2d 190, 194 (2nd Cir. 1984). The
United States Supreme Court has held that when there is a dispute as to whether an arbitration
clause applies in a given situation,
[t]here is a presumption of arbitrability in the sense that ‘[a]n order
to arbitrate the particular grievance should not be denied unless it
may be said with positive assurance that the arbitration clause is not
susceptible of an interpretation that covers the asserted dispute.
Doubts should be resolved in favor of coverage.’
PROFESSIONAL ADVANTAGE SOFTWARE SOLUTION’S MOTION TO COMPEL ARBITRATION AND STAY PROCEEDINGS - PAGE 3 OF 7
W:\Professional Advantage-1584\West Gulf-1584001\Pleadings\PA Motion Compel Arbitration\Motion to Compel Arbitration Final.docx
AT&T Tech., Inc. v. Communications Workers of Am., 475 U.S. 643, 650 (1986) (quoting Warrior
& Gulf, 363 U.S. at 582-83) (emphasis added).
8. If the trial court finds there is a valid agreement to arbitrate, the burden shifts to the
party opposing arbitration to prove his affirmative defenses to enforcing arbitration. J.M.
Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003). Once a valid agreement to arbitrate
has been established, the court must then determine whether the arbitration agreement covers the
nonmovants' claims. In re First Merit Bank, N.A., 52 S.W.3d 749, 753 (Tex. 2001) (orig.
proceeding). To determine whether an existing arbitration agreement covers a party's claims, a
court must "focus on the complaint's factual allegations rather than the legal causes of action
asserted." Id. at 754. Federal policy embodied in the FAA favors agreements to arbitrate, and courts
must resolve any doubts about an arbitration agreement's scope in favor of arbitration. Id. at 753.
If the arbitration agreement encompasses the claims and the party opposing arbitration has failed
to prove its defenses, the trial court has no discretion but to compel arbitration and stay its own
proceedings. Id. at 753-54; D.R. Horton, Inc. v. Brooks, 207 S.W.3d 862, 866-67 (Tex. App.--
Houston [14th Dist.] 2006, no pet.); Feldman/Matz Interests, L.L.P. v. Settlement Capital Corp.,
140 S.W.3d 879, 883 (Tex. App.--Houston [14th Dist.] 2004, no pet.). Hartford Life Ins. Co. v.
Forman, 2009 Tex. App. LEXIS 3923, *8-9, 2009 WL 1546924 (Tex. App. Corpus Christi June
3, 2009)
9. North Dakota courts hold likewise: “there is a strong state and federal public policy
favoring the arbitration process, and where there is a broad arbitration clause and no exclusion
clause, any doubts concerning the scope of arbitrable issues should be resolved in favor of
arbitration.” See State ex rel. Stenehjem v. Philip Morris, Inc., 732 N.W.2d 720 (N.D. 2007)(citing
PROFESSIONAL ADVANTAGE SOFTWARE SOLUTION’S MOTION TO COMPEL ARBITRATION AND STAY PROCEEDINGS - PAGE 4 OF 7
W:\Professional Advantage-1584\West Gulf-1584001\Pleadings\PA Motion Compel Arbitration\Motion to Compel Arbitration Final.docx
Gratech Co., Ltd. v. Wold Eng'g, P.C., 672 N.W.2d 672 (N.D. 2003); State v. Stremick Constr.
Co., 370 N.W.2d 730, 732 (N.D. 1985)).
B. WGMA’s Claims Are Subject to Arbitration
10. WGMA has asserted claims against PA for, among other things, breach of contract,
breach of warranties, and negligent/fraudulent inducement. However, PA’s only involvement in
this matter related to the PAM Module, which PA provided to WGMA for its use subject to the
SLA. WGMA’s claims, just as the three contracts governing the relationship between PA and
WGMA, are interrelated and subject to the arbitration provision.
11. At its most basic, WGMA alleges that PA failed “to design and install a fully
functional PAM module.” See Plaintiff’s First Amended Petition at ¶33. The arbitration provision
in the SLA specifically includes “[a]ny dispute, controversy, cause of action, or claim, of any
kind or nature whatsoever, whether legal or equitable, including, but not limited to, claims
sounding in contract, torts or products liability…which arise out of or related to (1) this
Agreement, or the breach, termination or invalidity of this Agreement, (2) the sale, installation,
modification or use of the Software, or (3) any services rendered in connection with the sale,
installation, modification, or use of the Software shall be finally and exclusively settled by
arbitration….” See Exhibit B at ¶10, pg. PA0014616 (emphasis added). As a result, each of
WGMA’s claims are subject to the arbitration provision in the SLA, should be stayed in this
present lawsuit, and submitted to arbitration in accordance with the agreement between WGMA
and PA.
PRAYER FOR RELIEF
Defendant Professional Advantage Software Solutions, Inc. files this Motion to Compel
Arbitration and Stay Litigation, asking that the claims asserted by Plaintiff be stayed in their
PROFESSIONAL ADVANTAGE SOFTWARE SOLUTION’S MOTION TO COMPEL ARBITRATION AND STAY PROCEEDINGS - PAGE 5 OF 7
W:\Professional Advantage-1584\West Gulf-1584001\Pleadings\PA Motion Compel Arbitration\Motion to Compel Arbitration Final.docx
entirety and that the disputes between Plaintiff and Defendant Professional Advantage Software
Solutions, Inc. be referred to arbitration; that all costs of Court be taxed against Plaintiff; and that
Defendant Professional Advantage Software Solutions, Inc. have such further and other relief,
general and special, both at law and in equity, to which Defendant Professional Advantage
Software Solutions, Inc. may show itself to be justly entitled.
Respectfully submitted,
STUBER COOPER VOGE PLLC
/s/ Jamey L. Voge
Jamey L. Voge, SBN 24033424
Brian Cooper, SBN 24012451
2600 Network Blvd., Suite 305
Frisco, Texas 75034
Telephone: (214) 472-2770
Fax: (214) 472-2790
Email: jvoge@scvlaw.net
bcooper@scvlaw.net
ATTORNEYS FOR DEFENDANT PROFESSIONAL
ADVANTAGE SOFTWARE SOLUTIONS, INC.
CERTIFICATE OF CONFERENCE
I certify that I have contacted counsel for Plaintiff and he is opposed to the relief sought in
Defendant’s Motion to Compel Arbitration and Stay Arbitration Proceedings. Therefore, this
matter is presented to the Court for determination.
/s/ Jamey L. Voge
Jamey L. Voge
PROFESSIONAL ADVANTAGE SOFTWARE SOLUTION’S MOTION TO COMPEL ARBITRATION AND STAY PROCEEDINGS - PAGE 6 OF 7
W:\Professional Advantage-1584\West Gulf-1584001\Pleadings\PA Motion Compel Arbitration\Motion to Compel Arbitration Final.docx
CERTIFICATE OF SERVICE
I certify that on this 19th day of October, 2015, a true and correct copy of the foregoing
has been sent to all parties in accordance with Texas Rule of Civil Procedure 21(a) as follows:
Via email tmccloskey@cmrllp.com Via email stolson@mcglinchey.com
Via email brizzo@cmrllp.com Stephanie Tolson
Timothy McCloskey McGlinchey Stafford
Blake Rizzo 1001 McKinney, Suite 1500
Carrigan, McCloskey & Roberson LLP Houston, Texas 77002
945 Heights Blvd
Houston, Texas 77008
Via email smarrs@bmpllp.com Via email ks@lorancethompson.com
Scott Marrs Katherine Sunstrom
Andrew McGill Lorance & Thompson, P.C.
Beirne, Maynard & Parsons, LLP 2900 North Loop West, Suite 500
1300 Post Oak Blvd, Suite 2500 Houston, Texas 77092
Houston, Texas 77056
/s/ Jamey L. Voge
PROFESSIONAL ADVANTAGE SOFTWARE SOLUTION’S MOTION TO COMPEL ARBITRATION AND STAY PROCEEDINGS - PAGE 7 OF 7
W:\Professional Advantage-1584\West Gulf-1584001\Pleadings\PA Motion Compel Arbitration\Motion to Compel Arbitration Final.docx
EXHIBIT A
NO. 2012-58827
WEST GULF MARITIME § IN THE DISTRICT COURT
ASSOCIATION §
Plaintiff, §
§
vs. § ~SCOUNTY,TEXAS
§
BUSINESS MICROVAR, INC. D/B/A §
INTERDYN BMI, PROFESSIONAL §
ADVANTAGE, AND TECHNOLOGY §
SUPPORT INCORPORATED §
Defendants. § 151ST JUDICIAL DISTRICT
AFFIDAVIT OF NATHAN WESELY
BEFORE ME, the undersigned notary, on this day personally appeared Nathan Wesely, a
person whose identity is known to me. After I administered an oath to him, upon his oath, he said:
1. "My name is Nathan Wesely. I am over the age of 18, of sound mind, capable of
making this Affidavit, and fully competent to testify to the matters stated in this Affidavit. I have
never been convicted of a felony or a crime of moral turpitude.
2. I am the President and Corporate Representative of the West Gulf Maritime
Association ("WGMA"), the plaintiff in this lawsuit. I have personal knowledge of the facts stated
in this Affidavit and am able to provide this Affidavit. The facts stated are true and correct.
3. WGMA is in the business of negotiating and administering multiemployer
collective bargaining agreements on behalf of stevedores that employ ILA labor in the ports from
Brownsville, Texas, to Lake Charles, Louisiana. Administration of the collective bargaining
agreements includes facilitating the adjudication of grievances under the grievance and arbitration
procedure, training workers, and processing payroll. In addition, WGMA provides payroll, human
resource and benefit services to a variety of businesses, including providing assistance and advice
Page I EXHIBIT
6
on day to day personnel issues. WGMA's payroll system is quite complex, because it requires
WGMA to process payroll for thousands of longshore workers who may potentially work for
several different companies who employ labor under the collective bargaining agreement.
4. Originally, WGMA ran its payroll and benefits processing through an IBM AS400
system. The AS400 was an antiquated system that was developed by an employee ofWGMA. The
AS400 system used proprietary software in a programming language that has fallen out our favor
and few software programmers know or use this language. In 2010, WGMA decided to upgrade
its system to keep up to date with current technology and provide a more streamlined and efficient
payroll and benefits processing system.
5. In ~010, WGMA began interviewing software compames to design and or
implement and configure a software program to upgrade WGMA's financial accounting, reporting
and payroll processing. WGMA interviewed approximately three or four different companies.
Ultimately, WGMA agreed to enter into contracts with BMI, ProFad and TSI to implement
Microsoft Dynamics Great Plains ("GP") and Personnel Agency Management ("PAM") for
WGMA's financial accounting, reporting, payroll processing, and related applications (the
"System").
6. As the President of WGMA, I was significantly involved with all aspects of the
implementation of the System at issue in this lawsuit. I was involved in the process from the
beginning when WGMA interviewed different software companies, I negotiated and signed the
various contracts at issue, I was the recipient of representations from the Defendants, I participated
in a number of weekly meetings during the implementation of the System and I routinely and
regularly communicated with the project manager and WGMA employees regarding the
Page 2
implementation. I am an expert in the payroll processing system WGMA used, including the
system's infrastructure and functional requirements.
7. Prior to signing its contract with WGMA, ProFad was given unbridled access to the
user and executive teams at WGMA in order to facilitate ProFad's due diligence. ProF ad was also
given access to third-party payroll personnel that depended on WGMA. ProFad spent
approximately two weeks conducting due diligence in order to understand the specific functional
requirements ofWGMA.
8. During the course of its investigation and negotiation with WGMA, ProFad made
specific representations to WGMA that induced WGMA to enter into the contracts with ProF ad.
ProFad engaged in frequent telephone and face-to-face discussions in which it aggressively touted
its abilities and experiences with similarly situated companies like WGMA. ProFad represented
that it had PAM software that could accomplish WGMA's goals without the need for extensive
modification. ProFad represented that it had installed this particular system on several occasions
and thus, there would be no need to re-invent the wheel with customized software for WGMA.
Moreover, ProF ad assured WGMA that if it retained ProFad, WGMA would be able to save the
cost of customization by utilizing the PAM software, software that ProFad claimed would meet all
ofWGMA's functional business requirements with minimal modification, including running with
the same functionality as the AS400. Based on ProFad's alleged expertise in the industry, and their
continual representations regarding ProFad's and PAM's capabilities, WGMA agreed to have
ProFad work on the project.
9. During the negotiation process, ProF ad extolled to WGMA the virtues of the PAM
software, the number of successful implementations that ProFad had completed, the installation
Page 3
lead time, and ProFad's own capabilities. This information was provided to WGMA to induce and
influence WGMA in its decision to hire ProF ad and proceed with the PAM application. In reliance
upon ProFad's claimed expertise and many specific promises and assurances that PAM would
meet WGMA's needs, including but not limited to the fact that the new System would run with
the same functionality as the AS400, and upon ProFad conducting what they claimed was the
necessary due diligence, WGMA entered into a contract with ProFad to implement the System.
10. Not once during the meetings and telephone conversations between ProFad and
WGMA, however, did ProFad notify WGMA that the software was unsuitable for WGMA's
business, that it could not be installed in a reasonably functioning form, that it would not meet the
AS400's functionality, and that it would require extensive modification and several months of
installation lead time. It was only after WGMA's internal investigation into the process of
installing GP in December 2010 that WGMA discovered that GP may not be a stable platform,
that GP may not be capable of processing the payroll run by WGMA because of architectural
limitations inherent in GP, and that extensive modification to PAM would be necessary to meet
WGMA's payroll needs.
11. ProFad's due diligence, as it turned out, was woefully inadequate, and resulted in
delays in the implementation of the system. After reviewing the original Statement of Work
("SOW") and Functional Design Specifications ("FDS") ProFad submitted, WGMA determined
that ProFad did not understand WGMA's business and functional requirements. In order to assist
BMI and ProFad with further due diligence, WGMA agreed to provide BMI and ProFad with a
requirements/activities list to help both BMI and ProFad understand the functional requirements
ofWGMA. All parties agreed that the requirements/activities list would be beneficial in assisting
Page 4
BMI and ProFad with their due diligence. Despite the requirements/activities list and unfettered
access to WGMA, ProFad's SOW and FDS were still incomplete on the day of the anticipated
contract signing. WGMA personnel spent an additional couple of days with ProFad's due diligence
team working on extensive revisions to ProFad's FDS. At no time during the due diligence process,
did ProF ad advise WGMA that PAM would need extensive modifications. In fact, ProFad
repeatedly represented that minimal modifications would be needed, which was one ofthings that
made their proposal attractive to WGMA. After ProFad's due diligence was complete, WGMA
finally signed the SOW on November 5, 2010.
12. On or about October 4, 2012, WGMA entered into an agreement with BMI (the
"Agreement"). Consistent with the representations made by BMI and ProFad, the Agreement
stated that the System would "(a) run a payroll system with at least the same functionality as
["WGMA's] current system," (b) maintain worker records in the payroll system with at least the
level of detail as [WGMA's] current system," and (c) run accounting programs for [WGMA] and
its affiliated entities and benefit programs." Id. The Agreement also stated that "[t]he accounting
systems will be installed and functional by October 31, 2010," and "[t]he payroll system will be
live on December 23, 2010." ld. BMI represented that the total cost for the System, including any
additional vendors that might be necessary, would be approximately $600,000. The Agreement
was modified on November 5, 2010 to change the "go live" date from December 23, 2010 to
February 18, 2011.
13. When ProFad finally implemented the System, the System was a total failure. The
failure was due primarily to ProFad's failure to accurately define WGMA's necessary business
and functional requirements, and to provide the resources needed for the System to work.
Page 5
14. ProF ad grossly misrepresented the capabilities of its PAM application, failed to
define the limits of its PAM application, and was unable to meet WGMA's requirements for a fully
operational system with the same functionality as the AS400. During the entire process, and
continuing to the present, ProFad has been unable to provide WGMA with correct overtime
calculations and reporting. From the beginning of this project, the PAM application was unable to
process overtime ("OT") calculations in accordance with WGMA's requirements. ProFad was
aware of PAM's inability to calculate OT. Even though the System should have been able to
calculate overtime by the original deadline of December 2010, in April 2011, ProFad began
developing a custom PAM application to calculate OT in accordance with WGMA's requirements.
The custom OT application was in testing since June 2011 to the end of the project. PAM's failure
to properly calculate OT was a continuous issue throughout the project that was discussed with
WGMA and ProFad personnel on a weekly basis. PAM was subjected to testing on a regular basis
and ProFad, throughout the term of the project, was unable to ever determine a solution for PAM's
failure to properly calculate OT. Rather, each week ProFad would simply say "we're working on
it."
15. Upon WGMA's attempts to go-live on October 3, 2011, it was confirmed by
WGMA and ProFad that the OT calculations were still incorrect.
16. Although the system went live on January 3, 2012, the PAM application provided
by ProFad did not go completely live on January 3, 2012, because the OT issue had not been
resolved by ProF ad by the go-live date. Rather, in order to calculate OT, WGMA was forced to
calculate OT using the old AS400 system and continued to approve the OT using the old AS400
system. In fact, WGMA still uses this duplicative method for calculating OT today due to ProFad's
Page 6
inability to meet WGMA' s functional requirements and the failure of the PAM application.
17. In the end, WGMA, at its own cost, has had to add additional software or custom
programming which was not originally specified in the budget, and in some cases has had to hire
additional experts to resolve functionality issues such as system configuration, document
management, timesheet processing, worker garnishments, and negative pay. As a result, WGMA
incurred additional significant delays and cost overruns.
18. In addition, WGMA had to hire temporary workers and independent consultants to
assist regular personnel with manual data entry and to process payroll transactions that were not
supported by the System as configured. The hiring of additional personnel was necessary for
WGMA to operate its business without impacting its customers.
19. WGMA incurred the following expenses in connection with the implementation of
the System:
$176,139.42 Ignite Media (Hired to Replace PAM software)
$945,982.67 Payments to BMI and ProFad (Estimated to be $600,000)
$75,570.00 Dave Kesian (Additional Personnel)
$304,456.53 Sirius Solutions (Project Management)
$333,127.93 Tatum (Project Management)
$228,804.00 Technisource, Inc. (Additional Personnel)
$123,000.00 Additional Personnel for Marine Terminal and AS400
$46,843.06 Payments to Technology Support
$66,033.77 Tribridge Holdings (Replaced Technology Support)
$2,299,957.38 Total
20. At a minimum, not including tort damages and any other available remedies under
the UCC, WGMA has incurred the following hard expenses attributable to ProFad in connection
with the implementation of the System:
$176,139.42 Ignite Media (Hired to Replace PAM software)
$207,281.65 Payments to ProFad
Page 7
$75,570.00 Dave Kesian (Additional Personnel)
$481,434.70 Sirius Solutions and Tatum (Project Management)
$123,000.00 Additional Personnel for Marine Terminal and AS400
$1,063,425.77 Total
2 I. As a result, WGMA has sued ProFad on the Agreement, the SOW and the FDS. In
its First Amended Original Petition WGMA has asserted claims against ProFad for breach of
contract claim, negligent and fraudulent misrepresentations and express and implied warranties
claims. WGMA is not suing ProFad under the unsigned License. Profad did indeed license the
software to WGMA, the problem is the software does not work or comply with the FDS or SOW.
22. The SOW and FDS dealt with the scope of work involved in the customization and
implementation of the PAM module along with the timeline for implementation and the parties'
responsibilities. The License, on the other hand, simply dealt with licensing of the PAM software
and quite frankly was so unimportant to the transaction at issue, was not signed by either party.
The License on one hand and the SOW and FDS on the other, were completely separate free
standing contracts.
23. I am the custodian of records for WGMA. All of the exhibits referenced below that
are attached to the summary judgment response are true and correct copies of records that are kept
by WGMA in the ordinary course of business or produced by the other Defendants during
litigation. It was in the regular course of business for an employee or representative of WGMA
who had knowledge ofthe act, event, condition, or opinion recorded, to transmit information to be
included in such record. The record was made at or near the time the act, event, condition, or
opinion recorded or reasonably soon thereafter. The exhibits are exact duplicates of the originals.
Page 8
Exhibit First Amended Original Petition
A
Exhibit Statement of Work
c
Exhibit Functional Design Specification
D
Exhibit Software License Agreement
E
FURTHER AFFIANT SAYETH NOT."
[Signature Page Follows]
Page 9
SUBSCRIBED AND SWORN TO BEFORE ME, the undersigned authority, on this 9th day of
September, 2015.
My Commission Expires: s· ature ofNotary Public
;e -.:t.:l- ;uJ/1'
l!twJatzL&~ds
Page 10
EXHIBIT B
/ "-.,
'
I
t
, From: Craig Erickstad
Sent: Thursday, November 11, 2010 7:48AM
To: Hall, Derek; Daphne Bemicker
•Jbject: WGMA- PAM software license agreement.
( PAM License Agreement_revised03_2007.pdf
. ..ttachments:
Derek, Daphne
Attached is the PAM software license agreement. Please review find return a the signed document. This will need to be signed
by December gth.
Let me know if you have any questions.
Craig Erickstad
Microsoft Dynamics Fits Your Staffing Company- Your System Your Way
lStaff and Personnel Agency Management (PAM) Module
Professional Advantage
Phone : (701) 235 ~363 Ext 203
Web: www,dynamicsstaffing.com
**Personnel Agency Management- Staffing Solution** Business Intelligence** National Accounts**Coinpany Data Archive** Retail
Solutions**
o ilcrosoft Inner Circle Partner 1999 - 2008
-
1
PA0014609
,......,
(
'. J
.
( r~ professional
.: ·
~ l.dvantage
Software License Agreement
Personnel Agency Management (PAM)
DO NOT ALTER OR AMEND TIDS AGREEMENT IN ANY MANNER
WITHOUT THE CONSENT OF PROFESSIONAL ADVANTAGE. ANY
ALTERATIONS OR AMENDMENTS WITHOUT SUCH CONSENT WllL VOID
THIS AGREEMENT AND YOUR LICENSE TO USE THE SOFTWARE.
This Agreement is entered into by and between Professional Advantage, Inc. ("PA") and
the undersigned licensee ("Licensee") and shall be effective as of the date set forth below.
This agreement covers the PAM Core Module and other products associated with and/or
utilizing this module, including: Webhouse, Web Based Timesheets, and Timesheet entry
and Imaging.
1. LICENSES
(a) Definitions.
(i) "Software" means the core module of the Personnel Agency Module (PAM)
software product, as marked, including enhancements delivered by P A during
such period Licensee remains a member of the PA Enhancement Program:
(ii) "Documentation" means any user and technical documentation for the
Software in electronic or printed format that is delivered to Licensee with the
Software.
(b) Grant of License. PA grants Licensee the non-exclusive and non-transferable
right to:
(i) copy the server portion of the Software onto a Designated Server or in a
"Cluster'' which includes the Designated Server Computer. A "Cluster''
shall mean two or more server computers which are interconnected. Use in
a Cluster is only permitted if no module of the Software is active on more
than one server computer at any given time. Licensee shall notify P A in
advance in the event that it intends to relocate or change the Designated
Server Computer. Licensee may maintain a separate non-productive
PA0014610
.--,.
r'.. I.
disaster recovery and testing site provided that the installation is used
solely for the purposes of backup and emergency use. Licensee may not
.( have more than one active installation of the Software on the Designated
Server Computer or a Cluster unless Licensee purchases additional
Software licenses;
(ii) copy the client portion of the Software onto an unlimited number of
computers provided that all software so installed references a single
database on the Designated Server Computer.
(iii) execute and use the Software for Licensee's internal business operations; and
(iv) use the associated Documentation and make a reasonable number of copies
or printouts thereof for Licensee's internal use.
(v) Licensee's license to use the Software is perpetual.
(c) Database Software. Licensee is required to license the appropriate database
software, including the appropriate number of user licenses, from the
corresponding third party provider.
(d) Sublicensing/Transfer. Licensee shall not grant sublicenses, rent, transfer copies
of or otherwise assign the Software or Documentation or the right to use the same
to benefit any third party. Any attempt to grant sublicenses, transfer any rights,
rent or otherwise assign or deal in the Software or Documentation shall be
considered a breach of this Agreement by Licensee.
(e) Backup Copy. Licensee may make a reasonable number of backup copies of the
Software which shall also be subject to the terms and conditions of this
Agreement. Licensee must mliintain an accurate record of the location of ~ch
backup copies at all times. Such record may be inspected and verified by P A at
any time during Licensee's business hours upon notice by PA. Licensee
acknowledges the need to maintain regular back-up copies and to adopt other such
management procedures to avoid the consequence of loss of data in the event of
any equipment or software malfunction.
(f) Restrictions on Use. Licensee may use the Software and Documentation only in
the conduct of its internal business operations and those of a Company as defined
in this Section. "Company" shall mean a business entity which is "Controlled" by
or under common "Control" with Licensee. "Contr<:>l" of any entity for the
purposes of this section ineans ownership of at least 50% of the shares of an entity
or entitlement to elect a controlling interest of the board ·o f directors of such entity
or other management relationship sufficient to control the entity's business
policies and activities. The Software may not be used directly or indirectly for
any entity that is not a Company and may not be used to operate a service bureau
or provide hosting, outsourcing or subscription services. Any unauthorized use of
the Software will automatically void this license and subject Licensee and others
to legal claims by PA for copyright infringement and unauthorized use, including
claims for injunctive relief and monetary damages.
2. PROPRJETARY RIGHTS
(a) Ownership. All title and rights of ownership in the Software and Documentation
remain with PA and/or its suppliers or licensors and are protected by applicable
copyright, patent, trademark and trade secret laws. Licensee agrees to take any
PA0014611
reasonable step necessary to protect the proprietary rights ofPA and its suppliers
c or licensors in the Software and Documentation, including, but not limited to, the
proper display of copyright, trademark, trade secret and other proprietary notices
on any copies of the Software or Documentation. Licensee must keep the
Software free and clear of any claims or liens by third parties. All rights and
licenses granted under or pursuant to this Agreement are and sh~l otherwise be
deemed to be, for purposes of Section 365(n) of the U.S . Bankruptcy Code,
licenses of rights to "intellectual property" as defined under section 101(56) of the
U.S. Bankruptcy Code.
(b) Decompilation. Licensee shall not disassemble, decompile or otherwise reverse
engineer the Software except and only to the extent that such activity is expressly
permitted by applicable law.
3. WARRANTIES, EXCLUSIONS AND LIMITATIONS
(a) Warranties.
(i) Product Warranty. PA warrants that, for a period of sixty {60) days from the
date the Software is delivered to Licensee, the Software's functionality
and performance shall be free of material defects and shall substantially
conform to the Documentation, provided that it is properly used with the
operating system for which it was designed.
(ii) Media Wamin.ty. PA warrants that the Software will be properly copied onto
diskettes or other media and that the diskettes and media will be free from
defects in materials and workmanship under normal use and services for a
period of sixty {60) days from the date the Software is delivered to
Licensee.
(iii) Title Warranty. P A warrants that it is the owner or authorized licensee of the
Software or has the rights to license the Software to Licensee under the
terms of this Agreement.
(b) Limitations.
(i).PA does not warrant ~at the functions contained in the Software will meet
Licensee's requirements or that the operation of the Software will be
uninterrupt~.
(ii) In order to receive and maintain the above warranties, Licensee must (i) use
the Software in accordance with the Documentation; (ii) use the Software
on the hardware and with the operating system for which it was designed
and in accordance with operating requirements and procedures for such
hardware and operating systems; and (iii) allow only personnel trained on
the Software to operate the Software.
(iii) The above warranties are null and void if Licensee or any third party modifies
or changes the Software in any way beyond the scope of the customization
options contained in the Software, or otherwise than in accordance with
the requirements or procedures for such customization, or if failure of the
Software has resulted from accident, abuse or misapplication. The
warranties do not apply to errors or malfunctions caused by (i) machine
malfunction; (ii) equipment or software not licensed in this Agreement;
(iii) use of procedures or data by Licensee not in accordance with the
PA0014612
.· --.,
( i
Documentation; or (iv) any other cause not attributable to PA or the
.c software.
(iv) Licensee acknowledges that PAis not required to maintain compatibility
between the Software and software not specified in this Agreement,
including, but not limited to, versions of Software other than those listed
in this Agreement.
(v) PA will provide support for the current major version of the software and
the major version prior as part of software maintenance and the
enhancement plan. Any support provided for earlier versions will be
included as part of a maintenance contract as the sole discretion of PA or it
will be done on a consulting basis.
(c) Duty to Inform. If Licensee believes that the Software is not substantially
performing in accordance with the Documen~tioil, Licensee will promptly notify
PA in writing regarding any such non-performance and will provide a listing of
output and such other data as may be required by P A to reproduce operating
conditions as existed when the non-performance occurred.
(d) DISCLAIMER OF WARRANTY
(i) EXCEPT AS STATED ABOVE, PA MAKES NO OTHER WARRANTIES
REGARDING 1HE SOFTWARE OR DOCUMENTATION,
INCLUDING, WTIHOUT LIMITATION, EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIMS THEWARRANTIES
OF FITNESS FOR A PARTICULAR PURPOSE OR
MERCHANTABILITY, AND ANY OTHER WARRANTY, EXPRESS
OR IMPLIED.
(ii) Any statements made by a dealer or any other third party other than PA are
not warranties and cannot be relied on by Licensee.
(iii) PA shall not be liable for any claimed non-conformance of the Software
under Article 35(2) of the United Nations Convention on Contracts for the
International Sale of Goods, even if that Convention were to be
determined applicable to this Agreement and the underlying transactions.
(e) LIMITATION OF LIABILITY
(i) INNO EVENT SHALL PA OR ANYONE ELSE WHO HAS BEEN
INVOLVED IN TiiE CREATION, PRODUCTION OR DELIVERY OF
THE SOFTWARE OR THE DOCUMENTATION BE LIABLE FOR
ANY INCIDENTAL, SPECIAL, INDIRECT OR CONSEQUENTIAL
DAMAGES, LOSS OF BUSINESS, LOSS OF PROFITS, LOSS OF
GOOD~LORTORTIOUSCONDUCTHOWEVERCAUSED
(INCLUDING NEGLIGENCE) RELATING TO, CAUSED BY OR
ARISING OUT OF ANY BREACH OF OBLIGATIONS OR DELAY IN
DELIVERY OF SOFTWARE OR DOCUMENTATION UNDER TinS
AGREEMENT OR FROM LICENSEE'S USE OR INABILITY TO USE
THE SOFTWARE, EVEN IF PA HAS BEEN ADVISED OF THE
POSSffiiLITY OF SUCH LOSS.OR DAMAGES.
(ti) SOME STATES OR JURISDICTIONS DO NOT ALLOW TilE
EXCLUSION OR LIMITATION OF LIABILITY FOR
PA0014613
CONSEQUENTIAL OR INCIDENTAL DAMAGES SO THE ABOVE
c LIMITATION MAY NOT APPLY TO LICENSEE 1N SUCH
JURISDICTIONS.
(iii) EXCEPT FOR ANY LIABILITY WlllCH MAY ARISE UNDER SECTION
5, ANY DAMAGES THAT PAIS REQUIRED TO PAY FOR ANY
AND ALL CAUSES, WHETHER FOR NEGLIGENCE, BREACH OF
CONTRACT OR OTHERWISE, REGARDLESS OF THE FORM OF
ACTION, SHALL, IN THE AGGREGATE, BE LIMITED TO THE
PRICE PAID BY LICENSEE TO PA FOR THE SOFTWARE.
4.REMEDIES
Licensee's exclusive remedy relative to a breach of the warranties provided in Section
3(a) hereof shall be for P A, at its option to either: .
(a) replace the Software that does not meet the limited warranty described above and
. that is returned to PA on the original distribution media; or
(b) attempt to correct any errors which Licensee finds in the Software during the
warranty period and which prevent the Software from substantially peiforming as
described in the Documentation; or
(c) In the event PA determines that the remedies under subsections a) and b) above
are impracticable during the warranty period, PA shall refund to Licensee the
Software license fees (and no other fees) paid by Licensee. Any replacement
Software will be warranteq for a period of thirty (30) days from the date such
replacement Software is delivered to Licensee.
5. JNTELLECTUAL PROPERTY INFRINGEMENT/INDEMNIFICATION
P A shall defend, indemnify and hold harmless Licensee, its employees, officers and
directors, at PA' sole cost and expense, for any demand, claim, suit or proceeding
brought against Licensee which alleges that the Software, as delivered and used in
accordance with the terms of this Agreement, infringes any third party patent,
copyright or other intellectual property right, and to pay the amount of any judgment
or settlement, provided that Licensee gives PA prompt written notice of such claim,
suit or proceeding and gives P A full information and reasonable assistance in its
defense or settlement. P A shall be entitled to direct such defense and to settle or
otherwise dispose of such claim, suit or proceeding as it sees fit. If an injunction is
obtained in such action against Licensee's use of the Software, PA shall, at its option
and expense, either (1) obtain for Licensee the right to continue to use the SoftWare;
or (2) replace the Software with a product with Substantially equivalent functionality;
or (3) modify the Software so that it becomes non-infringing, while maintaining
substantially equivalent functionality; or, if (1 ), (2) or (3) above·are not practical,
terminate this Agreement and reimburse Licensee for the Software license fees
actually paid by Licensee to P A. The reasonable costs of Licensee's cooperation with
P A at PA's request, in accordance with this Section, shall be paid by PA and' shall
include the reasonable costs ofLicensee's initial consultation with its attorney. No
other costs or expenses shall be incurred for the account ofPA withoutPA's·prior
written consent. Licensee may participate with PAin Licensee's own defense in such
PA0014614
•·
claim, suit or proceeding, at Licensee's option and at Licensee's sole expense.
( Licensee agrees to defend and hold harmless PA and its officers and employees
against any loss, cost or expenses incurred as a result of a claim of infringement based
on modifications to the Software made by or for Licensee without PA's prior written
approval.
•
6. ENHANCEMENT PROGRAM
Licensee has also purchased a one-year subscription to the P A Enhancement Program
commencing on the date the software was invoiced. Under this program, P A will
provide to Licensee, at no additional charge, all updates, upgrades, refinements and
added features to the Software, which are commercially released by PA during the
subscription period. Enhancement plans for any future years, if made available by PA
and purchased by Licensee, are based on the then current P A list price for the
Software.
7. NO AGENCY OR P ARTNERSIDP RELATIONSHIP
(a) Independent Reseller. Licensee recognizes and acknowledges that any distributor
or authorized reseller of P A, through which Licensee has licensed the Software or
obtained services related to the Software, is not the agent or the partner ofPA.
Any such distributor or authorized reseller is an independent company, person, or
entity with no authority to bind PA or to make representations or warranties on
behalf ofPA. In this regard, PA makes no representation or warranties regarding
its software except as expressly set forth in this Agreement.
(b) Invoicing and Payment. PA acknowledges and agrees that if the license for the
software is purchased from an independent third party vendor then Licensee, upon
full payment of the license fees to such.vendor, will owe no license fees to PA.
8. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement of the parties hereto with respect to
the subject matter hereof and supersedes all previous proposals, oral or written,
express or implied, and all negotiations, conversations or discussions heretofore had
between the parties hereto related to the subject matter of this Agreement. To the
extent that the terms and conditions of this Agreement conflict with any other written
or oral statements or representations made by P A including, but not limited to, any
statements and representations set forth in the License Agreement contained in
shrink-wrapped packages of the Software or in electronic·on-line license agreements,
$e tenns and provisions of this Agreement shall be controlling.
9. 1ERM AND TERMINATION
(a) Term. The licenses granted under this Agreement shall commence on the date set
forth below and shall continue in effect perpetually unless terminated in
accordance with Section 9(b) below.
(b) Termination. Either party may immediately terininate this Agreement if the other
party breaches any material representation, warranty, obligation or provision of
this Agreement and does not cure such breach within thirty (30) days after receipt
PA0014615
c
of written notification fro the non-breaching party of such breach. Upon such
termination, Licensee, at the option of PA, shall either promptly return to.PA all
copies of the Software and Documentation in Licensee's possession or destroy all
such copies within a reasonable transition period not to exceed thirty (30) days
after the effective date of such termination, and shall certify in writing that all
such copies have been destroyed. PA has the right to inspect and audit Licensee's
computers to ensure compliance with the preceding requirement.
(c) Other Obligations. Termination of this Agreement does not affect or terminate
any agreement of commitments Licensee may have with other entities, including,
but not limited to, application service providers or leasing companies.
10. ARBITRATION AND GOVERNING LAW
(a) Disputes. Any dispute, controversy, cause of action, or claim, of any kind or
nature whatsoever, whether legal or equitable, including, but not limited to,
claims sounding in contract, torts or products liability and claims based upon
alleged violations of consumer protection laws, which arise out of or relate to (1)
this Agreement, or the breach, termination or invalidity of this Agreement, (2) the
sale, installation, modification or use of the Software, or (3) any services rendered
in connection with the sale, installation, modification or use of the Software shall
be finally and exclusively settled by arbitration in accordance with the
Arbitration Rules of the American Arbitration Association as then in effect by one
(1) arbitrator appointed in accordance with such Rules. The place of arbitration
shall be Fargo, North Dakota. Judgment upon the award of the arbitrators may be
entered in any court having jurisdiction thereof.
(b) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State ofNorth Dakota without regard to the
choice oflaw or conflict oflaw principles. The United Nations Convention on
Contracts for the International Sale of Goods shall not apply to this Agreement.
11. GENERAL TERMS AND CONDITIONS
(a) Listing. Licensee agrees to be listed (by name only) in PA's public customer list.
(b) Assignment. Licensee shall not assign or otherwise transfer any of its rights or
obligations under this Agreement without the prior written consent ofPA.
Consent shall not be unreasonably withheld provided, however, that no consent
shall be required for any assignment or transfer to a "Company" as defined in
Section l(f) herefor in the event of an initial public offering, merger~ acquisition,
consolidation, sale of all or substantially all ofLicensee's assets or stock except
that Licensee shall notify PAin writing prior to such assignment or transfer. This
Agreement shall inure to the benefit of and shall be binding on the successors of
the parties. This Agreement and the rights and obligation arising hereuri.der shall
not be affected by any change in the corporate structure or ownership of the
parties except where Licensee goes into liquidation, or becomes subject to
administration or is voluntarily or involuntarily wound up, in which case this
Agreement and by a receiver Licensee's rights and obligations arising hereunder
sball automatically terminate.
(c) Export Controls. Li.censee agrees that no technical data received from PA, nor
PA0014616
r-
·-. ;
,.---..,.
I'-. - )
[
the direct product thereof, will be shipped, transferred or exported, directly or
indirectly, to any country in violation of any applicable law, including the United
States Export Administration Act and the regulations there under.
(d) Amendment. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except in a writing
signed by both parties hereto.
(e) Severability. In the event that any or any part of the terms of this Agreement are
in conflict with any rule of law or statutory provision or are otherwise void,
unenforceable or illegal under the laws or regulations of any government or
subdivision thereof, such terms or parts thereof shall be deemed stricken from this
Agreement, but such invalidity, unenforceability or illegality shall not invalidate
any of the other terms of this Agreement, and this Agreement shall continue in
force, unless the invalidity, unenforceability or illegality of any such provisions
hereof does substantial violence to, or where the invalid, unenforceable or illegal
provisions comprise an integral part of, or are otherwise inseparable from, the
remainder of this Agreement. The validity or enforceability of that provision or
relevant part in any other jurisdiction is not affected.
(f) Waiver. No failure by either party hereto to take any action or assert any right
hereunder shall be deemed to be a waiver of such right in the event of the
continuation or repetition of the circumstances giving rise to such right.
(g) Language of Agreement The parties declare that ~ey have required that this
agreement and all documents related hereto, either present or future, be drawn up
in the English language only. Les parties declarent par les presentes qu'elles
exigent que cette entente et taus les documents y afferents, soit pour ie present ou
le futur, soient rediges en langue anglaise seulement.
(
PA0014617
["
\ J
r
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
c by their duly authorized representatives as of the last date indicated below.
PROFESSIONAL ADVANTAGE, INC. - - - - - - - - - - - -
(Licensee)
By: ______________________ By: _____________________
Title: -------------------- Title: ----------------------
Date:
-------------------
Licensee's Place of Business:
Tel:
FAX:
PA0014618
TAB C
11/18/2015 12:27 Remote ID Remote ID [j 2/2
11/17/201511:30:06 AM
Chris Daniel - District Clerk
Harris County
Envelope No: 7861370
By: GONZALEZ, VERONICA
Filed: 11/17/2015 9:59:27 AM
CAUSE NO. 2012-58827
\VEST GULF MARITIME ASSOCIATION ~ IN THE DISTRICT COURT OF
INC §
§
VS. §
~ HARRIS COUNTY, TEXAS
BUSINESS MICROVAR, INC. D/B/A §
INTERDYN BMI, PROFESSIONAL §
ADVANTAGE SOFTWARE SOLUTIONS, §
INC, AND TECHNOLOGY SUPPORT, fNC. i;i 151 ST JUDICIAL DISTRICT
ORDER ON DEFENDANT'S MOTION TO COMPEL ARBITRATION & STAY
PROCEEDINGS
On this day the Comi considered Defendant Professional Advantage Software Solutions,
Jnc. 's Ivfotion to Compel Arbitration and Stay Proceedings. After considering the motion, evidence
and arguments of counsel, the Court
XX DENIES the Motion., on the basis of waiver by Defendant Professional Advantage Software
Solutions, Inc. **
Ql? AJ)JT£ tl"li? P10ti0¥l aw~ sn!i®f.'l 'i'N@ {'3ett"tie:J tc wbihate tlrc di3putcs as set fmth iu
the arbitration provisions applicable to this mattif Tla~ conrt sta)HS thi fJfO€iiwli~g9 ~eNding ths
GJHllCQ-Pl5i of the 'lrhitration
SIGNED on this ~~~day of _ _ _ _ _ _ _ _ _, 2015.
Signed:~/~
11/18/2015
JUDGE PRESIDING
** The Court is not certain that findings of fact and conclusions of law are appropriate in this instance. If non-movant
would !ike the Court to make them, it should file a short brief in support of the necessity for them, and file proposed
findings and conclusions for the Court to sign.
TAB D
11 /24/2015 5:25:53 PM
Chris Daniel -District Clerk
Harris County
Envelope No: 7981952
By: RODRIGUEZ, JIMMY E
Filed: 11 /24/2015 5:25:53 PM
Pgs- 1
CAUSE NO. 2012-58827
STPRY
WEST GULF MARITIME ASSOCIATION § IN THE DISTRICT COURT OF
INC . §
§
vs. §
§ HARRIS COUNTY, TEXAS
BUSINESS MICROV AR, INC. D/B/A §
INTERDYN BMI, PROFESSIONAL §
ADVANTAGE SOFTWARE SOLUTIONS, §
INC., AND TECHNOLOGY SUPPORT, INC. § 151sT JUDICIAL DISTRICT
ORDER ON DEFENDANT'S MOTION TO STAY THE PROCEEDINGS
On this day the Court considered Defendant Professional Advantage Software Solutions,
Inc.'s Motion to Stay the Proceedings ("Motion"). Mter considering the Motion, evidence and
arguments of counsel, the Court; hereby
DENIES GIMN'fS the Motion;
Court STAYS all proceedings and remove the trial, which is cunentl
rofessional Advantage Software Solutions, Inc.
SIGNED on this ___ day of _ _ _ _ _ _ _ _ _ , 2015.
Si gned:~/~
12/8/2015
JUDGE PRESIDING
;..:
<1)
..0
E
z
.................
....··· f HA,I?~··· ...
..· ~ 0 ········ ~ ··..
. . -.
.. ·.0
. _......:~u····
.:#lit.:
....,...
.
.· •, ~
.. """-- ....
-
· . . :. ......
z:
..
~"'
.
!~~
(.)'
·~ ~-··. ..
.i---:
.,.,,
~ :
.·.
"• \J": .. ••
~~ ... ........ .. #'...
••• A.~ •••
* ~ ....··
,.-~
••••• '7()
···.................
I, Chris Daniel, District Clerk ofHarris
County, Texas certify that this is a true and
conect copy of the original record filed and or
recorded in my office, elech·onically or hard
copy, as it appears on this date.
Witness my official hand and seal of office
this December 10. 2015
Certified Document Number: 68146276 Total Pages: 1
Chris Daniel, DISTRICT CLERI<
HARRIS COUNTY, TEXAS
In accordance with Texas Government Code 406.013 electronically transmitted authenticated
documents are valid. If there is a question regarding the validity of this document and or seal
please e-mail support@hcdistrictclerk.com
TAB E
CAUSE NO. 2012-58827
WEST GULF MARITIME ASSOCIATION ' IN THE DISTRICT COURT
'
VS. '
'
BUSINESS MICROVAR, INC. D/B/A ' OF HARRIS COUNTY, T E X A S
INTERDYN BMI, PROFESSIONAL '
ADVANTAGE, and TECHNOLOGY '
SUPPORT, INCORPORATED ' 151st JUDICIAL DISTRICT
PLAINTIFF’S RESPONSE TO PROFESSIONAL ADVANTAGE
SOFTWARE SOLUTIONS, INC.’S MOTION TO STAY PROCEEDINGS
TO THE HONORABLE JUDGE OF SAID COURT:
Plaintiff WEST GULF MARITIME ASSOCIATION (“WGMA”) files this Response to
the Motion to Stay Proceedings (the “Motion”) filed by Defendant PROFESSIONAL
ADVANTAGE SOFTWARE SOLUTIONS, INC. (“ProFad”), and in support thereof, respectfully
states as follows:
1. WGMA invoked this Court’s jurisdiction over three years ago by filing the
underlying lawsuit. Defendant filed its counterclaim for breach of contract and declaratory
judgment over a year ago. Now, despite five prior trial settings, ProFad, and its new counsel, ask
the Court to stay the proceedings while ProFad appeals this Court’s denial of ProFad’s motion to
compel arbitration. Because the Court has already found that ProFad waived its right to arbitrate,
this Motion should be denied and the case should proceed to trial on January 19, 2016.
2. Pursuant to TEX. CIV. PRAC. & REM. CODE ANN. § 171.0259(a), the Court shall stay
a proceeding only if an order for arbitration was made. In this case, no such order was made and
a stay is not warranted. The decision to stay the proceedings is left to the court’s discretion. See
Williamson v. Tucker, 615 S.W.2d 881 (Tex. Civ. App.—Dallas 1981, writ ref'd n.r.e.) (stating
Plaintiff’s Response to ProFad’s Motion to Stay
Page 1
that “[a] motion to stay a state court proceeding is a matter directed to the discretion of the [trial]
court.”).
3. In order to prevail on appeal, ProFad will have to show that there was no evidence
to support this Court’s ruling and that this Court abused its discretion. See Pepe Int’l Dev. Co. v.
Pub Brewing Co., 915 S.W.2d 925, 929 (Tex. App. Houston [1st Dist.] 1996, no writ) (“In an
appeal from an interlocutory order denying a motion to compel arbitration, the applicable standard
of review is that of ‘no evidence.’ Under the ‘no evidence’ standard, the appellate court considers
only the evidence and inferences tending to support the finding under attack and disregards all
evidence and inferences to the contrary.”) Like the trial court in Pepe Int’l Dev. Co., this Court
did not enter findings of fact and conclusions of law1, thus the appellate court must affirm the trial
court’s order if “there is sufficient evidence to support it upon any legal theory asserted.” Id.
Here, the record is replete with evidence supporting this Court’s ruling and the likelihood of
ProFad’s success on appeal is slim.
4. The Court has already determined that ProFad waived its right to arbitrate and the
reasons were articulated to the parties at the hearing. This Motion should be taken for nothing
more than yet another attempt by ProFad’s new counsel to delay these proceedings and deny
WGMA its day in court.
5. Finally, ProFad argues that its motion should be granted because it would be “a
waste of resources for the parties to continue forward with pre-trial issues”. See Motion at ¶ 2.
This disingenuous argument ignores the fact that it was ProFad’s new counsel that insisted on
continuing the trial date and re-opening discovery to take additional depositions. Under the then-
1
Of course, it was the ProFad’s decision not to have findings of fact and conclusions of law
entered. After WGMA prepared findings of fact and conclusions of law, ProFad requested that
only a simply denial of the motion to arbitrate be entered.
Plaintiff’s Response to ProFad’s Motion to Stay
Page 2
current scheduling order, discovery was complete and the case was ready for trial. ProFad should
not be able to claim that conducting the additional discovery that it begged for would be a waste
of resources and a basis for granting the stay. Thus, any alleged inefficiency is of ProFad’s own
doing. Accordingly, ProFad’s Motion should be denied.
PRAYER
WHEREFORE, PREMISES CONSIDERED, PLAINTIFF WEST GULF MARITIME
ASSOCIATION respectfully requests that the Court deny Professional Advantage Software
Solutions, Inc.’s Motion to Stay Proceedings, and award WGMA such other and further relief to
which it may be justly entitled.
Dated: December 3, 2015.
Respectfully submitted,
CARRIGAN, McCLOSKEY & ROBERSON, L.L.P.
By: /s/Blake E. Rizzo
Timothy M. McCloskey
SBOT:13417650
Blake E. Rizzo
SBOT: 24034073
945 Heights Boulevard
Houston, Texas 77008
713-868-5581
713-868-1275 (fax)
ATTORNEYS FOR WEST GULF MARITIME ASSOCIATION
Plaintiff’s Response to ProFad’s Motion to Stay
Page 3
CERTIFICATE OF SERVICE
I certify that a true and correct copy of the above and foregoing has this 3rd day of
December, 2015, been sent in accordance with Texas Rule of Civil Procedure 21(a) to the
following:
Jamey L. Voge
Brian Cooper
STUBER COOPER VOGE, PLLC
2600 Network Blvd., Suite 305
Frisco, Texas 75034
Fax: (214) 472-2790
Thomas C. Wright
Natasha N. Taylor
WRIGHT & CLOSE, LLP
One Riverway, Suite 2200
Houston, TX 77056
Telephone: (713) 572-4321
Fax: (713) 572-4320
Attorneys for Defendant, Professional Advantage Software Solutions, Inc.
/s/Blake E. Rizzo
Blake E. Rizzo
Plaintiff’s Response to ProFad’s Motion to Stay
Page 4
TAB F
1 REPORTER'S RECORD
2 VOLUME 1 OF 1 VOLUME
3 CAUSE NO. 2012-58827
4 COURT OF APPEALS CASE NO. 01-15-01006-CV
5 WEST GULF MARITIME ASSOCIATION, )IN THE DISTRICT COURT
INC., )
6 Plaintiff, )
)
7 VS. )HARRIS COUNTY, TEXAS
)
8 BUSINESS MICROVAR, INC., D/B/A )
INTERDYN BMI, PROFESSIONAL )
9 ADVANTAGE SOFTWARE SOLUTIONS, )
INC., AND TECHNOLOGY SUPPORT, )
10 INC., )
Defendants. )151ST JUDICIAL DISTRICT
11
12
13 *********************************
14 MOTION FOR ARBITRATION
15 *********************************
16
17 On the 9th day of November, 2015, the
18 following proceedings came on to be heard in the
19 above-entitled and numbered cause before the Honorable
20 Mike Engelhart, Judge Presiding, held in Houston,
21 Harris County, Texas.
22
23 Proceedings reported by computer-aided
24 transcription/stenograph machine.
25
WEST GULF MARITIME ASSOCIATION, INC., VS. PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.
11/09/2015 MOTION FOR ARBITRATION
2
1 A P P E A R A N C E S
2
Mr. Timothy McCloskey
3 SBOT NO. 13417650
tmccloskey@cmrllp.com
4 Mr. Blake Rizzo
SBOT NO. 24034073
5 brizzo@cmrllp.com
CARRIGAN MCCLOSKEY & ROBERSON LLP
6 945 Heights Boulevard
Houston, Texas 77008
7 Phone: (713) 868-5581
ATTORNEYS FOR THE PLAINTIFF
8 WEST GULF MARITIME ASSOCIATION, INC.
9 - AND -
10 Mr. Jamey L. Voge
SBOT NO. 24033424
11 jvoge@scvlaw.net
STUBER COOPER VOGE PLLC
12 2600 Network Boulevard, Suite 305
Frisco, Texas 75034
13 Phone: (214) 472-2770
ATTORNEY FOR THE DEFENDANT
14 PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.
15
16
17
18
19
20
21
22
23
24
25
WEST GULF MARITIME ASSOCIATION, INC., VS. PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.
11/09/2015 MOTION FOR ARBITRATION
3
1 VOLUME 1 OF 1 VOLUME
2 MOTION FOR ARBITRATION
3 CHRONOLOGICAL INDEX
4 NOVEMBER 9, 2015 PAGE
5 Appearances . . . . . . . . . . . . . . . . . .2
6 Chronological Index . . . . . . . . . . . . . .3
7 Proceedings . . . . . . . . . . . . . . . . . .4
8 Statements by Mr. Voge . . . . . . . . . . . . 4
9 Response by Mr. Rizzo. . . . . . . . . . . . .11
10 Court's Ruling . . . . . . . . . . . . . . . .24
11 Recessed . . . . . . . . . . . . . . . . . . .26
12 Reporter's Certificate . . . . . . . . . . . .27
13 Word Index . . . . . . . . . . . . . . . . . .28
14 (No exhibits)
15
16
17
18
19
20
21
22
23
24
25
WEST GULF MARITIME ASSOCIATION, INC., VS. PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.
11/09/2015 MOTION FOR ARBITRATION
4
1 P R O C E E D I N G S
2 THE COURT: This is 2012-588227 West Gulf
3 Maritime versus Business Microvar, Inc., et al, page 7
4 of today's docket. And it is the Defendant's Motion to
5 Compel Arbitration. And there's a response on file.
6 Movant's counsel, would you tell us who you are and who
7 you represent, please.
8 MR. VOGE: Jamey Voge; Stuber, Cooper,
9 Voge. I represent Professional Advantage Software
10 Solutions, Inc., Defendant.
11 THE COURT: How do you spell your last
12 name? V-O-G-E, right?
13 MR. VOGE: Correct.
14 MR. RIZZO: Good morning, Your Honor.
15 Blake Rizzo, R-I-Z-Z-O, here with my partner Tim
16 McCloskey. We're here for West Gulf Maritime
17 Association.
18 THE COURT: Okay. I read the motion and
19 the response and I'm familiar with the law in this area.
20 So let me briefly hear you on your motion, and then I'll
21 hear their response.
22 MR. VOGE: Thank goodness. The issue
23 before you is very focused. We've got a valid agreement
24 to arbitrate. We've got no dispute over the scope of
25 that agreement. The allegation made by the Plaintiff is
WEST GULF MARITIME ASSOCIATION, INC., VS. PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.
11/09/2015 MOTION FOR ARBITRATION
5
1 that we have waived our right to compel arbitration.
2 THE COURT: Yes.
3 MR. VOGE: I'm happy to hear that you are
4 familiar with the law on this issue because there's a
5 lot of it.
6 The hurdle for the Plaintiff is huge.
7 According to our own Supreme Court, it's their burden of
8 proof to prove with evidence that the Defendant has
9 substantially invoked the litigation process to their
10 detriment and caused them prejudice.
11 I will submit to you that not only have we
12 not caused them prejudice, they have benefited from us
13 waiting to this point in the process to raise this
14 issue. Okay.
15 Bear in mind, this is a
16 multimillion-dollar dispute involving multiple parties.
17 When it was filed back in 2012, it's understandable why
18 all three Defendants were included in the lawsuit. The
19 Plaintiff picked this forum, not us.
20 And presumably, only Professional
21 Advantage had an agreement to arbitrate. So for three
22 years we rocked along with other parties in the case,
23 with streamline discovery, consolidated discovery and
24 pretrial. They have benefited from the consolidated
25 mediation effort. All of the discovery that has been
WEST GULF MARITIME ASSOCIATION, INC., VS. PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.
11/09/2015 MOTION FOR ARBITRATION
6
1 done, which I will submit to you is minimal -- we've
2 taken one deposition, the Defendant has, one.
3 The case was on file for 19 months before
4 we ever even sent a request for disclosure. I mean,
5 we've done nothing more as a Defendant other than the
6 bare minimum necessary to keep our head above the water.
7 So the little discovery that has been
8 done, was done in a consolidated manner with the other
9 Defendants involved as opposed to the alternative, which
10 would have been had we raised this issue from day one,
11 you would have had one dispute here pending in your
12 court with discovery ongoing in a trial at some point in
13 the future, and then you would have had a segregated
14 action against my client with presumably duplicative
15 discovery and the risk of inconsistent results.
16 Instead, they have essentially gotten the
17 benefit of a consolidation and up until the very end.
18 And now there's absolutely no evidence of any prejudice
19 to arise out of being compelled to live by the agreement
20 that they don't dispute exists.
21 There's no more money to be spent. We've
22 taken one deposition. We've agreed that we're going to
23 take a few more. The discovery has been done or will be
24 done. Everything that has been done could have been
25 done under the AAA rules. They're going to say, well,
WEST GULF MARITIME ASSOCIATION, INC., VS. PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.
11/09/2015 MOTION FOR ARBITRATION
7
1 you filed a counterclaim. Look at the counterclaim.
2 It's purely defensive. We've done almost -- it's a dec
3 action. And in response to a request for disclosure, we
4 don't even lay out a damage model, we don't even say
5 that we want money. We've done almost no discovery on
6 that affirmative claim, if it even is an affirmative
7 claim. We've not filed any motions for summary judgment
8 with respect to our counterclaim. We've merely played
9 defense.
10 The reason I'm here and the reason there's
11 been a change of lawyers in the past 60 days is because
12 so little has been done. I will submit to you that the
13 clients incurred more fees in the past 75 days with me
14 at the wheel than they've spent in the three years
15 before that. And bearing in mind, the three years
16 before that, that delay wasn't all our fault. It was
17 because you had multiple parties.
18 So there's nothing that's been done that
19 could have been avoided in arbitration. There's nothing
20 to be done that is any more expensive or more burdensome
21 than it will be in arbitration.
22 In fact, I will submit to you that there's
23 an additional benefit, in that it's going to be much
24 cheaper to present this highly technical software issue
25 to an arbitrator than it would be to come in here and
WEST GULF MARITIME ASSOCIATION, INC., VS. PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.
11/09/2015 MOTION FOR ARBITRATION
8
1 attempt to present the same case to a jury.
2 So in terms of the law, I don't think we
3 disagree much. The very Supreme Court case that they
4 cite, In re Vesta, is a case where the Court looked at
5 all the factors. And even though there had been a
6 counterclaim, there had been a motion for summary
7 judgment, there had been depositions taken, the Court
8 said, look, we agree essentially that under certain
9 circumstances a party can waive the right to
10 arbitration, but we disagree that the record here shows
11 that they did so. At least not to the degree necessary
12 to overcome the presumption against waiver.
13 Sure, could we have raised this issue
14 before now? Yes. And I can't explain to you why it was
15 never raised. I can tell you that the client was not
16 aware until 60 days ago that they even had this right,
17 which is why I'm the one standing here before you and
18 not my predecessor.
19 But they admit -- they being Plaintiff,
20 they admit in their response that the burden is theirs
21 and that the hurdle is a high one and that they must
22 show prejudice. And they go on to define it for us.
23 And they say in the context of waiver
24 under the FAA, it relates to inherent unfairness. I ask
25 you, where is the inherent unfairness? How is anybody
WEST GULF MARITIME ASSOCIATION, INC., VS. PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.
11/09/2015 MOTION FOR ARBITRATION
9
1 worse off if we now say, okay, let's go to North Dakota
2 and arbitrate this case, like we long ago agreed.
3 They go on to say that -- they cite this
4 case, the Perry Homes, which is an egregious case. I
5 mean, in that case it got all the way to the Supreme
6 Court and the party then attempting to avoid
7 arbitration -- or attempting to compel arbitration had
8 previously filed a 79-page brief saying that AAA was a
9 bunch of knotheads and that they were expensive and
10 inefficient. I understand why in that case the Court
11 said, wait a minute, you can't have it one way then and
12 another way now; you waived your right to arbitrate.
13 Since then there have been -- I think
14 there's one other Supreme Court opinion out of all the
15 cases on this issue where the Court has actually said,
16 okay, you've met this huge burden and you've actually
17 established waiver and that you've suffered some
18 prejudice. The problem here is the Plaintiff can't show
19 prejudice. There's no evidence before you whatsoever
20 that they're going to now be worse off than they would
21 have been.
22 Sure, they had to exchange documents with
23 us. You would have had to have done that under the AAA
24 rules. Sure, you had to respond to a more than one
25 motion for summary judgment. All of which were on
WEST GULF MARITIME ASSOCIATION, INC., VS. PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.
11/09/2015 MOTION FOR ARBITRATION
10
1 defensive matters. You would have had to have done that
2 under the AAA rules.
3 They suggest that we've purposefully and
4 unjustifiably -- that we're manipulating the exercise of
5 its arbitrable rights to gain an unfair tactical
6 advantage after aggressively litigating this case for
7 three years. That's laughable, "aggressively
8 litigating."
9 We've swapped documents, sent some very
10 generic written discovery and taken one deposition.
11 It's comical to suggest that we've been aggressively
12 litigating this for three years. We didn't even file a
13 counterclaim. It was less than a year ago when we filed
14 the counterclaim.
15 The unfair tactical advantage, I just --
16 again, I don't disagree with the law that they cite; but
17 there's no evidence that they have been prejudiced,
18 which they admit is their burden to prove. They say
19 that their legal position has been damaged. I just
20 don't -- I can't appreciate that there's any legitimate
21 reason that overcomes this huge burden of theirs in
22 favor of this notion that we've waived the right to
23 arbitrate through this aggressive litigation that we've
24 engaged in.
25 THE COURT: I get it. I get it. Do you
WEST GULF MARITIME ASSOCIATION, INC., VS. PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.
11/09/2015 MOTION FOR ARBITRATION
11
1 have anything new?
2 MR. VOGE: No.
3 THE COURT: Okay. Response?
4 MR. RIZZO: Yes, Your Honor. I think
5 what's laughable is the fact that we're --
6 THE COURT: Nothing is laughable. I'm not
7 a jury. Can we just talk about the law and the facts?
8 MR. RIZZO: Sure, Judge. I think that
9 this is a case that clearly shows that ProFad has waived
10 its right to arbitrate by substantially invoking the
11 judicial process.
12 There are three Texas Supreme Court
13 cases -- the Vesta case, the Perry Homes case and the
14 Fleetwood case -- that have specifically said that a
15 party that conducts full discovery, files motions going
16 to the merits, and seeks arbitrations on the eve of
17 trial waives any contractual right to arbitration. And
18 all three of those factors are present herein.
19 ProFad conducted full discovery. They
20 sent 71 requests for admissions, 17 interrogatories, 38
21 requests for production, which caused us to produce over
22 77,000 pages of documents at over 6 grand.
23 They submitted and responded to requests
24 for disclosures. They issued three third-party
25 subpoenas requesting documents, and they participated in
WEST GULF MARITIME ASSOCIATION, INC., VS. PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.
11/09/2015 MOTION FOR ARBITRATION
12
1 three depositions. They also filed five summary
2 judgment motions, Judge, two no-evidence and three
3 traditional. And to sit here and say that they were not
4 actively pursuing this litigation is just wrong.
5 If you look at their counterclaim, Your
6 Honor, which is tab 8 attached to my affidavit, they
7 claim that the damages -- WGMA's damages are limited to
8 the price paid by WGMA for the PAM software. That comes
9 from the very software licensing agreement at issue
10 right now. They filed a motion for summary judgment
11 trying to limit our damages based on that software
12 agreement.
13 They also claim in their counterclaim that
14 we have waived any implied or express warranties other
15 than those listed in the license agreement. They filed
16 a motion for summary judgment on that issue.
17 Their declaratory judgment action is
18 definitely affirmative in nature. They seek a dec
19 action and attorney's fees.
20 And they also sought arbitration on eve of
21 trial, Judge. And based on these factors alone, we
22 believe that Supreme Court authority is clear that they
23 have substantially invoked arbitration.
24 And the courts have said, well, if only
25 two of those factors are met, then you can look at the
WEST GULF MARITIME ASSOCIATION, INC., VS. PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.
11/09/2015 MOTION FOR ARBITRATION
13
1 totality of the circumstances. And again, courts have
2 outlined a number of factors, including filing an
3 answer, filing a counterclaim, pursuing discovery,
4 moving for a continuance, and timely -- and failing to
5 timely request arbitration. Again, all of those factors
6 are present in this case.
7 And we've cited in our reply, Your Honor,
8 several cases that are directly on point. Where, for
9 instance, starting on page 6 in our reply, the Ideal
10 Roofing case, arbitration is waived, where Ideal filed a
11 depositive motions (sic) on the merits in the form of a
12 summary judgment. Motion was set twice for hearing.
13 Appellants propounded written discovery on the merits,
14 attended a mediation and sought arbitration after the
15 case had been pending for 19 1/2 months. The Court
16 found waiver.
17 Again, Adams versus StaxxRing,
18 arbitration --
19 THE COURT: I'm sorry. Adams versus?
20 MR. RIZZO: StaxxRing, on page 6 --
21 THE COURT: No. Would you spell it for
22 our court reporter.
23 MR. RIZZO: Okay. S-T-A-X-X, capital
24 R-I-N-G.
25 THE COURT: Thank you.
WEST GULF MARITIME ASSOCIATION, INC., VS. PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.
11/09/2015 MOTION FOR ARBITRATION
14
1 MR. RIZZO: Arbitration was waived, where
2 Adams filed answer, affirmative defense, counterclaims,
3 brought in third parties, engaged in discovery, and
4 filed motions to compel.
5 Again, in the Christus case,
6 C-H-R-I-S-T-U-S, noting that actions inconsistent with
7 the right to arbitration include some combination of
8 filing an answer and counterclaim, conducting extensive
9 discovery, moving for continuance, and failing to timely
10 request arbitration.
11 Judge, all of the actions taken in this
12 case by ProFad have been specific and deliberate and
13 they've gone to the merits. They have clearly evinced
14 the desire to litigate the claims in this case.
15 Now, if you don't believe that the three
16 factors in the Supreme Court control, you also look to
17 prejudice. But Perry Hill has instructed that the
18 burden is much easier on prejudice when they have waited
19 a long time to bring the right to arbitrate.
20 Perry has also instructed that you look at
21 the fact of prejudice, not just the extent thereof.
22 And counsel quoted for you the definition
23 that Perry Hill's talked about when determining
24 prejudice. And they said it refers to the inherent
25 unfairness.
WEST GULF MARITIME ASSOCIATION, INC., VS. PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.
11/09/2015 MOTION FOR ARBITRATION
15
1 But it goes on to say inherent unfairness
2 in the terms of delay, which we have here, expense,
3 which we have as outlined in my affidavit, and damage to
4 a party's legal position that occurs when the party
5 opponent forces it to litigate an issue and later seeks
6 to arbitrate that same issue. That's exactly what we
7 have here, Your Honor.
8 Motions for summary judgment that were
9 filed in this case required us to basically marshal our
10 evidence and respond and give up our legal positions.
11 Counsel says, oh, they would have had to do that in
12 arbitration anyway. But that's not true, Your Honor.
13 If you look at the rules, and I have a
14 copy here if you would like to see them, Rule 33 says
15 that motions for summary --
16 THE COURT: Rule 33 of what, the AAA
17 rules?
18 MR. RIZZO: The AAA rules, yes. Rule 33
19 says that an arbitrator may allow summary judgment
20 motions but only if it determines that they're likely to
21 succeed on the merits.
22 Clearly no-evidence motions for summary
23 judgment wouldn't be allowed in arbitration. And I
24 think given the fact that all five of their motions for
25 summary judgment have been denied would be kind of
WEST GULF MARITIME ASSOCIATION, INC., VS. PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.
11/09/2015 MOTION FOR ARBITRATION
16
1 hard-pressed for an arbitrator to find that they would
2 likely proceed.
3 So again, Judge, the fact that we had to
4 actually respond to those --
5 THE COURT: You mean succeed.
6 MR. RIZZO: Succeed, yes.
7 THE COURT: And doesn't that argument kind
8 of cut in their favor, that they've lost --
9 theoretically that -- they've lost all these motions, so
10 they're not likely to -- you're not likely to have to
11 deal with any further motions in the arbitration
12 context?
13 MR. RIZZO: No. But it goes to the fact
14 that they have forced us to marshal our evidence and
15 show our legal position --
16 THE COURT: I understood that part.
17 MR. RIZZO: Yeah.
18 THE COURT: I understood that part. I was
19 just addressing the very last part that you made. But
20 please continue.
21 MR. RIZZO: Okay. In any event, Your
22 Honor, again, we cite on page 9, numerous cases which
23 have taken that exact definition that I just gave you
24 and found prejudice. Again, it's not a high burden,
25 because they waited so long.
WEST GULF MARITIME ASSOCIATION, INC., VS. PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.
11/09/2015 MOTION FOR ARBITRATION
17
1 For example, the Oak Partners case on page
2 9 says that -- they concluded that the Plaintiff showed
3 prejudice when the Defendant delayed 19 months before
4 moving to compel arbitration.
5 During which time it actively pursued
6 litigation, sought discovery and actively sought relief
7 from the Trial Court, which forced Plaintiff to respond
8 and incur attorney's fees. Jones v. Citibank, "holding
9 appellant waived her right to arbitrate when she waited
10 for over two years to request arbitration, and by that
11 time had filed numerous motions, including a motion to
12 dismiss, a counterclaim, and opposition to summary
13 judgment."
14 Judge, we believe that it's just clear
15 that they've waived their right to arbitrate in this
16 case.
17 And I would like to point out, based on
18 their reply and some of the other arguments that have
19 been made today, the Supreme Court in Perry Homes also
20 says that you can't look at what an arbitrator may or
21 may not do to deny prejudice.
22 In other words, just because an arbitrator
23 may allow extensive discovery doesn't mean that you
24 weren't prejudiced in this case by having to go through
25 that. Because the only thing that the rules say is that
WEST GULF MARITIME ASSOCIATION, INC., VS. PROFESSIONAL ADVANTAGE SOFTWARE SOLUTIONS, INC.
11/09/2015 MOTION FOR ARBITRATION
18
1 the arbitrator may allow the exchange of documents. It
2 doesn't say it will. And it also doesn't speak of
3 requests for admissions or interrogatories.
4 Under the Supreme Court authority we've
5 been prejudiced because you look at the fact, not the
6 extent. We had to respond to request for admissions.
7 We had to respond to interrogatories. We wouldn't do
8 that in arbitration.
9
This text is long and has been trimmed here. Open the source document for the complete record.