Judge: Salvatore Sirna, Case: 23PSCV03865, Date: 2025-03-05 Tentative Ruling
Case Number: 23PSCV03865 Hearing Date: March 5, 2025 Dept: G
Plaintiff Open Envoy Inc.’s Motion for Summary Adjudication
Respondent: Defendant Alliance Environmental Group, LLC
TENTATIVE RULING
Plaintiff Open Envoy Inc.’s Motion for Summary Adjudication is GRANTED.
BACKGROUND
This is a breach of contract action. In November 2022, Plaintiff Open Envoy Inc. (Open Envoy) entered into an agreement with Defendant Alliance Environmental Group, LLC (Alliance) in which Open Envoy agreed to provide Alliance access to an automated accounting service in exchange for receiving payments from Alliance. Subsequently, Open Envoy alleges Alliance breached the agreement by failing to make $120,000.00 in payments.
On December 13, 2023, Open Envoy filed a complaint against Alliance and Does 1-10, alleging the following causes of action: (1) breach of contract, (2) quantum meruit, and (3) unjust enrichment.
On December 20, 2024, Open Envoy filed the present motion for summary adjudication. A hearing on the present motion is set for March 5, 2025. A final status conference is also set for March 25, 2025, with a jury trial set for April 8, 2025.
EVIDENTIARY OBJECTIONS
To the extent Open Envoy has made evidentiary objections to Alliance’s evidence, the court will not consider them as they have not been made in compliance with Rule 3.1354, subdivision (b) of the California Rules of Court.
ANALYSIS
Open Envoy moves for summary adjudication of the first cause of action for breach of contract. For the following reasons, the court GRANTS Open Envoy’s motion.
Legal Standard
Summary Adjudication
A motion for summary judgment or adjudication provides “courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) It must be granted “if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119, quoting Code Civ. Proc., § 437c, subd. (c).) To establish a triable issue of material fact, the opposing party must produce substantial responsive evidence. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.) Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.) “A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Code Civ. Proc., § 437c, subd. (f)(1).)
Breach of Contract
To succeed on a cause of action for breach of contract, a plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)
Discussion
In this case, the following facts are undisputed. On November 9, 2022, Open Envoy and Alliance entered into a contract by signing an Enterprise Subscription Order Form that incorporated an agreement entitled Master Services Terms and Conditions (Services Agreement). (Plaintiff’s Separate Statement (PSS), ¶ 1.) Pursuant to the Services Agreement, Alliance agreed to pay Open Envoy for an invoice automation service that digitized, deduplicated, audited, and reconciled invoices. (PSS, ¶ 2.) Open Envoy’s services included processing up to 1,800 invoices per month for $108,000.00 a year and a one-time integration fee of $12,00.00 for set-up and ongoing maintenance. (PSS, ¶ 4.) After the first year, a referral discount of $24,000.00 would be applied. (PSS, ¶ 5.) In exchange, Alliance was required to provide all reasonably required cooperation in a diligent and timely manner. (PSS, ¶ 7.) Open Envoy began performance pursuant to the agreement on November 15, 2022, by providing Alliance access to their services. (PSS, ¶ 8.) In December 2022, Open Envoy began sending monthly invoices to Alliance that went unpaid. (PSS, ¶ 9-10.)
What the parties dispute is the length of Alliance’s subscription. Open Envoy states Alliance enrolled in the enterprise subscription plan for one (1) year and agreed to pay for the services as set forth in the agreement. (PSS, ¶ 3.) In support, Open Envoy provides a copy of an enterprise subscription order form signed by Alliance that lists a plan term of twelve months from January 1, 2023, to December 31, 2023. (Yee Decl., Ex. 1, p. 1.) The order form also includes notes titled “High level plan” that state as follows:
“1. Order Form signature on or before 11/9/2022
2. Project kickoff 11/15/2022 or as close to that date as possible
- Process 3 months of invoices for the period of 10/1/2022-12/31/2022.
- Establish discrepancy resolution workflows and setup Oracle/API Integration.
3. Go-live 1/1/2023 – beginning of 1 year term.
4. Monthly payments for first term in the amount of $8,000/month
The order form also incorporates by reference the Services Agreement. (PSS, ¶ 1; Yee Decl., Ex. 1, p. 1.) The Services Agreement states as follows under the section titled “Termination”:
“9.1 Term. The term of this Agreement will commence on the Effective Date and continue until terminated as set forth below. The initial term of each Order Form will begin on the Order Form Effective Date of such Order Form and will continue for the subscription term set forth therein. Except as set forth in such Order Form, the term of such Order Form will automatically renew for successive renewal terms equal to the length of the initial term of such Order Form, unless either party provides the other party with written notice of non-renewal at least thirty (30) days prior to the end of the then-current term.
9.2 Termination. Each party may terminate this Agreement upon written notice to the other party if there are no Order Forms then in effect. Each party may also terminate this Agreement or the applicable Order Form upon written notice in the event (a) the other party commits any material breach of this Agreement or the applicable Order Form and fails to remedy such breach within thirty (30) days after written notice of such breach or (b) subject to applicable law, upon the other party’s liquidation, commencement of dissolution proceedings or assignment of substantially all its assets for the benefit of creditors, or if the other party become the subject of bankruptcy or similar proceeding that is not dismissed within sixty (60) days.” (Yee Decl., Ex. A, Services Agreement, §§ 9.1, 9.2.)
The Services Agreement also required Alliance to pay Open Envoy the fees set forth in the order form within thirty (30) days of receipt of invoice. (PSS, ¶ 6; Yee Decl., Ex. A, Services Agreement, § 3.1.) Open Envoy states Alliance now owes an outstanding balance of $112,576.00 which includes monthly fees of $8,000.00 for twelve months plus a monthly one-percent interest charge for unpaid invoices. (PSS, ¶ 11, Yee Decl., ¶ 19.)
In opposition, Alliance points to the following facts. During pre-contract negotiations in September 2022, Open Envoy CEO Matthew Tillman sent an email on September 26, 2022, to Alliance that stated Alliance would be granted a 60-day opt-out option from the time of signing the order form. (Defendant’s Additional Undisputed Material Facts (DAUMF, ¶ 1.) Specifically, Tillman stated “given that this is an Incline referral, there are a few perks.” (Solehjou Decl., ¶ 6, Ex. A.) The “perks” Tillman listed included a twenty-percent (20%) annual discount, tiered pricing after 50,000 invoices per year, a discount to nullify overage fees mandated by the order form, and a “60-day opt-out from the time of signing the order form.” (Solehjou Decl., ¶ 6, Ex. A.)
On October 12, 2022, an Open Envoy employee named Bill Aston sent an email to Alliance that offered a one-to-three month retroactive proof of concept. (DAUMF, ¶ 2.) According to Alliance, Open Envoy would only proceed with implementation of the project if Alliance found the proof of concept (POC) to be successful and worth the investment. (DAUMF, ¶ 2.) That material fact, however, is not supported by the evidence cited. In Aston’s email, Aston stated “[b]ecause of the relationship that we have with Incline, we are going to offer you what we call a Retroactive Proof of Concept. What we do here is essentially use documentation for a prior period of 1-3 months and run the reconciliation for that time period.” (Solehjou Decl., Ex. B.) After previewing the different outcomes of the proof of concept, Aston then stated as follows:
“In order to do this, we need some kind of agreement that says that if the POC is successful, Alliance will move forward with the implementation. We are confident and willing to make that up-front investment. We simply need to know that Alliance would proceed if it proves out.
“Would you be available to discuss this with us? If so, let me know or go ahead and grab a time from my calendar by hitting the ‘Meet with me’ button below my signature on this email.” (Solehjou Decl., Ex. B.)
Contrary to what Alliance’s separate statement suggests, Aston did not promise Open Envoy would only proceed if Alliance found the proof of concept acceptable. Instead, Aston framed the proof of concept as a potential option that could be discussed further. And the separate statement is notably silent on whether Alliance ever engaged in further discussions on this issue with Aston or anyone else at Open Envoy. Thus, Alliance has failed to establish this was a term that the parties agreed to.
On December 22, 2022, an Alliance employee named Judy Escoto contacted Open Envoy and requested the project start meeting be delayed until April 2023 due to personnel changes. (DAUMF, ¶ 4.) On January 20, 2023, another Alliance employee named Fitriana Zhong contacted Open Envoy and stated, “with the significant changes to our finance team with several departures—while we are trying to rebuild the team—we have to put this project on hold—which we have notified your team last month.” (DAUMF, ¶ 5; Solehjou Decl., Ex. E.) Although Alliance’s separate statement claims Zhong and Aston agreed to put the project on hold, Aston’s emailed response does not support that claim. (DAUMF, ¶ 5.) Specifically, Aston stated as follows:
“I appreciate you letting us know formally. You have 24,000 invoices that can be processed between now and 12/31/2023. So the earlier we can go live, the more likely you will be able to consume those invoices and drive value from the solution and your investment. I would expect a full ROI within the first 2-3 months of deployment, so the investment value will still be strong.
Our team would be happy to sit down with you and look at the job functions required when the solution is live and to assist in the process definitions to assure the strongest possible accounting controls and the greatest likelihood of catching erroneous billings. We have also done considerable work on getting the integration to Sage completed, so we do have a head start on the process.
If you would like to have a planning session between now and April 1, we can help bring any new people up to speed and educate them on how the solution works. Please advise.” (Solehjou Decl., Ex. E.)
Nowhere in the email does Aston suggest Open Envoy agrees to stop its service or suspend any billing for its services. In fact, Aston’s email suggests the opposite by pointing out the total of invoices that have yet to be processed and going over the benefits of moving forward. And even if, for argument’s sake, the 60-day opt-out period was a part of the terms the parties agreed to, these emails do not establish Open Envoy exercised that option.
Escota’s email requested a postponement of the start meeting due to personnel issues and did not request the project be cancelled or put on hold. Zhong’s email on January 20 also does not explicitly state the project is cancelled and instead requests the project be put on hold until the second quarter of 2023. (Solehjou Decl., Ex. E.) And even if this email qualified as a cancellation notice, the 60-day period to cancel after the signing of the order form had already expired on January 8, 2023.
Ultimately, the court determines that Alliance failed to establish the existence or applicability of additional terms to the Services Agreement. It is undisputed Open Envoy performed pursuant to the Services Agreement and Alliance failed to render payment. The only question that remains is whether the above emails by Escota and Zhong excused Alliance’s lack of performance. (PSS, ¶ 8, 10)
Under a section titled “Fees”, the Services Agreement states as follows:
“3.1 Fees. Customer will pay Open Envoy the fees set forth in the applicable Order Form. Unless otherwise specified in an Order Form, Customer shall pay those amounts due and not disputed in good faith within thirty (30) days of the date of receipt of the applicable invoice. Except as otherwise specified herein or in any applicable Order Form, (a) fees are quoted and payable in United States dollars and (b) payment obligations are non-cancelable and non-pro-ratable for partial months, and fees paid are non-refundable.” (Yee Decl., Ex. A, Services Agreement, § 3.1.)
By its explicit terms, the Services Agreement establishes the monthly fee schedule in the order form which is not subject to cancellation or pro-rating. Thus, the court finds that Alliance’s failure to utilize Open Envoy’s services did not excuse Alliance from its obligation to perform and to make the required monthly payments. To the extent Alliance suggests the parties mutually agreed to suspend the Services Agreement, Alliance failed to direct the court to evidence of such agreement from Open Envoy. In fact, the undisputed fact that Open Envoy began sending monthly invoices to Alliance in December 2022 is evidence to the contrary. (PSS, ¶ 9-10.) As a result, the court finds Open Envoy’s undisputed material facts establish Alliance breached the Services Agreement by failing to make timely payments. In opposition, Alliance failed to present evidence that establishes a triable issue of material fact with regard to whether Alliance had a legitimate excuse for nonperformance.
Accordingly, the court GRANTS Open Envoy’s motion for summary adjudication.
CONCLUSION
Based on the foregoing, Open Envoy’s motion for summary adjudication is GRANTED.