Niloy, Inc. v. Lowe's Companies, Inc.
5:16-cv-00029
W.D.N.C.Jan 3, 2017Background
- Niloy and Lowe’s entered a Master Professional Services Agreement (MPSA) in 2012 governing IT consulting; individual tasks were authorized by Statements of Work (SOWs) with specified prices and purchase orders.
- MPSA provided for one-year initial term with automatic renewals, allowed Lowe’s audits and setoffs for overpayments, required Lowe’s written consent for travel expenses, and required invoices to be paid within 30 days absent dispute.
- Lowe’s unilaterally terminated the MPSA in Feb. 2014 without providing the notice Niloy alleges was required; at termination Niloy had unpaid invoices (~$1.12M) and alleged additional performed work (~$565k).
- Lowe’s counterclaimed after an internal audit, alleging Niloy submitted undelivered deliverables and noncompliant expenses and demanded reimbursement (~$1.42M).
- Niloy sued asserting: (Count One) breach of contract and suit on an open account; (Count Two) breach of contract on behalf of subcontractors; (Count Three) breach of express and implied covenant of good faith; (Count Four) unjust enrichment (alternative); (Count Five) UDTP; and (Count Six) attorney’s fees.
- Lowe’s moved to partially dismiss; court granted dismissal of the open-account theory and all of Count Three, and denied dismissal as to Counts Two, Four, Five, and preserved related attorney-fee claim (Count Six) for surviving claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Open account (part of Count One) | SOWs operated under the MPSA as connected transactions, MPSA contemplated ongoing dealings and setoffs, so an open account existed | Each SOW was a separate transaction with its own PO/invoice; no running balance, regular statements, ledger, or credit line alleged | Dismissed: pleadings and attached invoices show separate billed transactions; plaintiff failed to plead other open-account elements |
| Subcontractor damages (Count Two) | Niloy can recover subcontractors’ damages because MPSA prevents subcontractors from suing Lowe’s directly; refusal would be unjust | MPSA disclaims third-party rights, assigns subcontractor liability to Niloy, and requires indemnity and binding subcontractor provisions — so Niloy lacks standing | Denied: court follows Metric Constructors — permitting contractor to recover subcontractor damages where contract would otherwise produce manifest injustice |
| Covenant of good faith (Count Three — express and implied) | Lowe’s breached express covenant in MPSA and the implied covenant by wrongful termination/nonpayment and allegedly falsifying audit | Claim is duplicative of breach of contract and cannot stand as separate cause of action | Granted in part: express covenant breach is subsumed by breach of contract; implied covenant claim dismissed as duplicative of Count One |
| Unjust enrichment (Count Four, alternative) | If MPSA unenforceable, equity supports recovery because Niloy conferred benefit and was not paid | An express, enforceable contract exists (MPSA and SOWs), so unjust enrichment cannot apply | Denied at this stage: parties did not produce SOWs; plaintiff may plead unjust enrichment in the alternative pending proof of contract enforceability |
| UDTP (Count Five) | Lowe’s termination, refusal to pay, and alleged falsification of audit/denial of receipt of deliverables amount to unfair/deceptive acts with proximate cause of damage | Mere breach of contract is insufficient; plaintiff must plead substantial aggravating circumstances beyond contract dispute | Denied: allegations that Lowe’s falsified audit and lied about deliverables, if proved, are substantial aggravating circumstances and plausibly caused nonpayment for pre-termination work |
Key Cases Cited
- Whitley’s Elec. Serv., Inc. v. Sherrod, 238 S.E.2d 607 (N.C. 1977) (defines factors for an open account)
- Metric Constructors, Inc. v. Hawker Siddeley Power Eng’g, Inc., 468 S.E.2d 435 (N.C. Ct. App. 1996) (contractor may recover subcontractor’s damages where contract would otherwise shield owner while exposing contractor)
- Dalton v. Camp, 548 S.E.2d 704 (N.C. 2001) (elements of a UDTP claim)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for pleading)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (limits on conclusory allegations under Rule 12(b)(6))