United States District Court, D. Minnesota
H. Walsh and Matthew J. Piehl, Hogan Lovells U.S. LLP,
Minneapolis, MN; and Daniel D. Zegura, Rogers & Hardin
LLP, Atlanta, GA, for plaintiff International Decision
Richard M. Blaiklock, Michael D. Heavilon, and Aaron Grant,
Lewis Wagner, LLP, Indianapolis, IN; and Stanley E. Siegel
and David J. Warden, Nilan Johnson Lewis PA, Minneapolis, MN,
for defendant JDR Solutions, Inc.
OPINION AND ORDER
C. TOSTRUD UNITED STATES DISTRICT COURT JUDGE.
Decision Systems and JDR Solutions entered into a contract
effective February 1, 2007. In October 2018, International
commenced this diversity case under Minnesota law alleging
that-from the contract's inception and continuing to the
present- JDR has failed to pay commissions and provide
reports as required by the contract. International seeks over
$3.2 million in damages and declaratory relief. JDR has moved
to dismiss International's complaint under Federal Rule
of Civil Procedure (“Rule”) 12(b)(6) contending
that Minnesota's six-year breach-of-contract statute of
limitations bars International's claims.
International's complaint establishes that some of
International's claims are timely and that others accrued
more than six years before International commenced this suit.
As a result, JDR's motion to dismiss will be granted in
part. The dismissal will be without prejudice to
International's right to seek leave to amend its
complaint in accordance with the Pretrial Scheduling Order
issued in this case and any amendments to that Order.
and JDR pursue overlapping business activities and are of
diverse citizenship. International describes itself as
“a global provider of asset finance origination and
portfolio management software and related services.”
Compl. ¶ 2 [ECF No. 1]. International's customers
include financial institutions and equipment manufacturers
who use International's software and services “to
automate the asset finance origination process, as well as
manage the associated accounting, administration and
compliance requirements of an asset finance portfolio.”
Id. International is incorporated under Delaware law
and maintains its principal place of business in Minneapolis.
Id. ¶ 3. According to International, “JDR
resells certain [International] software and provides
professional services to [International's]
customers” under the contract at issue in this case.
Id. ¶ 4. JDR is incorporated under Indiana law
and maintains its principal place of business in
Indianapolis. Id. ¶ 6.
and JDR entered into a contract effective February 1, 2007.
Id. ¶¶ 9- 10. Though the contract has
several parts and seems potentially complex, see
id., four of the contract's terms provide the core
legal basis for International's claims in this case, and
these terms seem relatively straightforward. First,
the contract authorizes JDR “to use and resell”
International's software and “to provide specified
services to [International's] customers.”
Id. ¶ 11. Second, the contract
requires JDR “to pay [International] a monthly
commission equal to twenty-five percent (25%) of the received
charges” for services provided to International's
customers. Id. ¶ 13. The payment of any
commissions owed by JDR is “due on the first day of
each month for the applicable charges received by [JDR] from
the [International] Customer during the prior month.”
Id. Third, the contract requires JDR
to provide International with “a quarterly report no
less than thirty days after the end of each quarter setting
forth the amount of JDR's Professional Services sold,
amounts collected and the amounts remitted to
[International].” Id. ¶ 18.
Fourth, the contract requires the Parties to
“keep accounts and records in sufficient detail and
containing such information as is necessary to enable fees
due hereunder to be calculated” and provides each of
them the right to audit the other's “accounts and
records” subject to several conditions. Id.
factual basis for International's claims arises from its
exercise of its contractual right to audit JDR's accounts
and records. In April 2017, approximately ten years after
entering into the contract, International notified JDR that
it “wished to conduct an audit of JDR's accounting
records to determine whether the monthly commissions mandated
by [the contract] had been properly paid to
[International].” Id. ¶ 21. “After
JDR delayed the audit process for more than two months,
” International retained an accounting firm in June
2017 to conduct the audit. Id. ¶ 22.
“After additional delays caused by JDR, the audit
process finally began on September 8, 2017.”
Id. ¶ 23. International alleges that the audit
process showed that “JDR had not sufficiently
maintained” accounts and records “to allow for
ready calculation of commissions owed, ” and that
JDR's failure to maintain sufficient records
“greatly increased the complexity and cost of [the]
audit.” Id. ¶ 24. International received
a report of the audit from its retained accountants dated
March 23, 2018. Id. ¶ 25. International's
accountants determined that JDR had been paid at least $13,
063, 482 “through and including June 30, 2017, ”
for services subject to the contract's 25% commission
requirement, meaning “JDR therefore owes
[International] commissions of at least $3, 265, 870”
for services it provided to International's customers
under the contract. Id. ¶¶ 26-27.
asserts three claims in its complaint. It alleges that JDR
breached the contract by failing to pay commissions, failing
to maintain adequate accounts and records, and failing to
provide quarterly commission reports. Id.
¶¶ 32-39 (Count I). It seeks a judgment under
Minnesota's Uniform Declaratory Judgments Act, Minn.
Stat. § 555.01 et seq., declaring the
Parties' rights and obligations under the contract.
Id. ¶¶ 40-46 (Count II). Specifically,
International seeks declarations that the contract is
“valid and enforceable under Minnesota law, ”
that JDR is obligated to pay commissions under the contract,
and “that JDR breached its obligations under the
[contract] by refusing to pay commissions.”
Id. ¶¶ 44-46. Finally, International
alleges that JDR's failure to pay commissions breached a
duty of good faith and fair dealing implied in the contract
under Minnesota law. Id. ¶¶ 47-50 (Count
responded to International's complaint with a motion to
dismiss under Rule 12(b)(6). ECF No. 15. JDR contends that,
as pleaded, all of International's claims “accrued
more than a decade ago” and that, as a result, the
claims are barred by Minnesota's six-year
breach-of-contract limitations period. Mem. in Supp. at 2
[ECF No. 17].
this action is in federal court based on diversity of
citizenship, state law governs substantive law issues.”
Paine v. Jefferson Nat'l Life Ins. Co., 594 F.3d
989, 992 (8th Cir. 2010) (citation omitted); see also
Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). The
Parties agree that Minnesota law governs here. Though the
basis for this understanding is not identified in
International's complaint or the Parties' briefs, it
can be found in a document that JDR filed as part of its
motion to supplement the record with the audit report
prepared by International's accountants. ECF No. 36. The
audit report includes a copy of a part of the Parties'
contract entitled “Attachment No. 1 to the Master
Software License, Value Added Reseller, Application Service
Provider and Maintenance and Services Agreement.” Mem.
in Supp. of Mot. to Suppl. Ex. A [ECF No. 37 at 13-28]. And
Paragraph 14.5 of that document provides:
Governing Law. This Master Agreement shall
be deemed to be made in the State of Minnesota and shall in
all respects be interpreted, construed, and governed by and
in accordance with the laws of the State of Minnesota,
specifically excluding any conflict of law provisions. The
parties expressly reject the application of the United