# Professional Advantage Software Solutions, Inc. v. West Gulf Maritime Asociation Inc. > Texas Court of Appeals, 1st District (Houston) · December 10, 2015 URL: https://www.frixlaw.com/law-library/cases/4074281 ## Case - **Court:** Texas Court of Appeals, 1st District (Houston) - **Decided:** December 10, 2015 - **Precedential status:** Published - **Opinion:** Opinion - **Cited by:** 0 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/4074281 ## Opinion text 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, court [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/4074281. Public record. Not legal advice.