RESQSOFT, INC. v. PROTECH SOLUTIONS, INC. and STATE OF ALASKA, DEPARTMENT OF REVENUE
Supreme Court No. S-17548; Superior Court No. 3AN-18-10376 CI
THE SUPREME COURT OF THE STATE OF ALASKA
June 18, 2021
Opinion No. 7539
WINFREE, Justice.
Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER. Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email corrections@akcourts.gov.
Appeal from the Superior Court of the State of Alaska, Third Judicial District, Anchorage, Yvonne Lamoureux, Judge.
Appearances: Eva R. Gardner and Jeffrey W. Robinson, Ashburn & Mason, P.C., Anchorage, for Appellant. Allison G. Strickland, Jermain, Dunnagan & Owens, Anchorage, for Appellee Protech Solutions, Inc. Rаchel L. Witty, Assistant Attorney General, Anchorage, and Kevin G. Clarkson, Attorney General, Juneau, for Appellee State of Alaska.
Before: Bolger, Chief Justice, Winfree, Maassen, and Carney, Justices. [Borghesan, Justice, not participating.]
I. INTRODUCTION
The superior court dismissed a subcontractor‘s claims against the contractor because a venue provision in the subcontract required that litigation be conducted in another state. The superior court also dismissed the subcontractor‘s unjust enrichment claim against
II. FACTS AND PROCEEDINGS
The State of Alaska, Department of Revenue solicited proposals for a technology project. Protech Solutions, Inc. submitted a competitive bid, identifying ResQSoft, Inc. as a subcontractor and technology partner. The State awarded Protech the nearly $3 million project; the State and Protech executed a contract for work to begin July 15, 2017 and end by June 30, 2020.
Although ResQSoft began work immediately, Protech and ResQSoft did not execute their subcontract until early Octоber 2017; the subcontract specified that ResQSoft was to perform technical work (other than testing and project management) and provide fixed-price products. The relationship between Protech and ResQSoft broke down, and in February 2018 Protech terminated the subcontract and replaced ResQSoft with a different subcontractor.
In November 2018 ResQSoft filed a lawsuit against Protech and the State. ResQSoft alleged that Protech had violated the Alaska Uniform Trade Secrets Act1 and the Alaska Unfair Trade Practices and Consumer Protection Act2 (UTPA) by misappropriating ResQSoft‘s proprietary information and trade secrets as an unfair trade practice. Without alleging a breach of contract claim, ResQSoft sought injunctive relief and damages, including compensation for work performed and products delivered. ResQSoft alleged that the State was unfairly enriched because ResQSoft‘s work and trade secrets had been wrongfully used in the project without payment, and it sought an equitable award of damages against the State.
Protech moved to dismiss ResQSoft‘s statutory claims for improper venue based on the subcontract‘s forum selection clause mandating suit in Dеlaware federal court.3 The State moved to dismiss the unjust enrichment claim for failure to state a claim upon which relief may be granted.4
The superior court granted Protech‘s dismissal motion “because the forum selection clause encompasses the subject matter of this dispute.” The court also granted the State‘s dismissal motion, determining that “ResQSoft fail[ed] to state a claim for unjust enrichment because as a matter of law, the State did not receive a windfall and contractual obligations and remedies between ResQSoft and Protech remain available such that the [c]ourt shоuld not impute a quasi-contract between ResQSoft and the State.”
After final judgments were entered and distributed, ResQSoft appealed, arguing that the superior court erred as a matter of law by granting Protech‘s dismissal motion for improper venue and by granting the State‘s dismissal motion for failure to state a claim for unjust enrichment.
III. STANDARD OF REVIEW
We review de novo a superior court‘s grant of an
IV. DISCUSSION
A. The Superior Court Did Not Err By Dismissing ResQSoft‘s Claims Against Protech.
1. Preliminary issue
“To withstand a [dismissal] motion based on improper venue, the plaintiff must present a prima facie case that . . . venue is proper. The trial court may consider evidence outside the pleadings but should take . . . uncontradicted allegations as true and construe reasonable inferences and factual conflicts in favor of the plaintiff.”9 An evidentiary hearing is required only when a material fact necessary for resolving the venue motion is disputed, but “[w]hether to hold a hearing is committed to the trial court‘s discretion.”10
ResQSoft argues that, when the superior court dismissed ResQSoft‘s claims against Protech because of improper venue, the court impermissibly considered Protech‘s “ten pages of new factual narrative, or ‘rebuttal’ to ResQSoft‘s [c]omplaint, unsupported by any affidavits.” ResQSoft contends that the material “clearly influenced” the court‘s decision and that the court failed to expressly specify which of ResQSoft‘s allegations in the complaint it “considered to be ‘uncontradicted,’ and [the court] did not ‘exprеssly exclude’ the additional material as required by . . . precedents.” Although we note that the superior court cited the complaint for the factual matters set out in its decision, we do not consider this argument because we review the superior court‘s decision de novo.11 We consider only ResQSoft‘s complaint and the unquestioned contract and subcontract documents.
2. Legal framework for forum selection clauses
We construe forum selection clauses broadly, releasing a party from a clause only when necessary to preserve justice or a compelling state interest.12 The party seeking to escape thе clause bears the burden of showing that enforcing the clause would be unjust.13
3. Why we affirm the superior court‘s decision that the forum selection clause applies to ResQSoft‘s claims
This case requires interpreting the subcontract‘s forum selection clause,14 which specifies:
In the event litigation is necessary to enforce any provision of or resolve any dispute arising out of this Agreement, the Parties agree that
any proceeding relating to or arising from the Agreement will be heard and litigated exclusively in the federal district court of Delaware. (Emphases added.)
ResQSoft argues, as it did in the superior court, that the “forum selection clause is drafted narrowly and applies only to claims ‘arising out of’ the [s]ubcontract.” ResQSоft specifically contends that the clause‘s opening phrase establishes a narrowly defined scope, covering only pure contract disputes, for triggering the forum selection clause. ResQSoft contends that the broader coverage of the second phrase simply identifies where contract disputes must be litigated. ResQSoft concludes that because it asserted no contract claims against Protech, the forum selection clause is not triggered. Protech responds, as it did in the superior court, that ResQSoft‘s claims, however described, arise out of the subcontract аnd cannot be resolved absent interpretation and application of the subcontract‘s terms.
The superior court considered but rejected ResQSoft‘s arguments, referring to the forum selection clause as “broad” and stating that the “dispute arises out of the subcontract, and evaluation of the merits of the Trade Secrets and UTPA claims would require interpretation of the rights and duties set forth in the subcontract.” We agree with the superior court.
The forum selection clause‘s “arising out of” language is sufficient to bring ResQSoft‘s claims within the clause‘s ambit regardless of the language difference in the forum selection clause‘s two phrases.15 Non-contractual claims, even those arising from Alaska statutory law and equitable principles, may be subject to a contract‘s forum selection clause if the claims arise out of or relate to the contractual terms.16 ResQSoft nonetheless relies on Bodzai v. Arctic Fjord, Inc.17 to argue that the forum selection clause should not apply to its non-contract claims. In Bodzai we overturned the application of an employment contract‘s forum selection clause to the employee‘s personal injury claims, concluding that the personal injury claims based on negligence
did nоt arise out of the employment contract but rather were grounded in the federal Jones Act and common law maritime law.18 But the contract in Bodzai differed greatly from the subcontract in this case; as the superior court pointed out, Bodzai‘s injury claims did not “arise under the terms” of his contract, unlike ResQSoft‘s statutory claims.
Neither the Trade Secrets Act nor the UTPA defines “proprietary information,” but the subcontract does:
[A]ll information and data relating to a party‘s technology, products, services or other business, including, without limitation: (i) product or service information, including designs and specifications, development plans, methodologies, technical approaches, and strategy; (ii) marketing information . . . ; (iii) computer software, including codes, flowcharts, algorithms, architectures, menu layouts, routines, report formats, data compilers and assemblers, templates, spreadsheets, functionality, concept, processes, internal structure, design, external elements, technology, and documentation; and (iv) financial information,
including sales, pricing and revenue information.
The Trade Secrets Act defines “trade secret.”19 The subcontract does not, but the statutory definition does not conflict with or alter the subcontract‘s provision about improper trade secret disclosures and misappropriation of proprietary information: “Both Parties agree that each will not disclose [proprietary information as previously
defined in the subcontract] to third parties without the written consent of the transmitting Party, provided, however, that the recipient Party shall not be liable for any disclosure of such information to others under [certain conditions].”
The subcontract — to which the State is not a party — further specifies that the State retains ownership of any work product generated in the course of the project:
Any delivered code or database structures that arе converted [or] generated from the code provided by the State of Alaska using ResQSoft tools will be the unencumbered property of the State of Alaska. Related delivered documentation will also be the unencumbered property of the State of Alaska. In effect, the items that are delivered under this contract become the property of the State upon payment for those deliverables to ResQSoft as defined in the project schedule. (Emphases added.)
ResQSoft claims Protech shared ResQSoft‘s trade secrets, misappropriated its proprietary information, and engaged in unfair trade practices in violation of the Trade Secrets Act and the UTPA, but a court could not resolve those claims without looking to the subcontract‘s provisions about trade secrets, proprietary information, and ownership of and payment for proprietary information. Reviewing and interpreting the subcontract was necessary to deciding: (1) ownership interests in computer code or database structures; (2) what constitutes proprietary information; and (3) whether either entity failed to perform contractual duties regarding trade secrets, proprietary information, and contract payments. The subcontract governs the legitimacy of ResQSoft‘s claims and whether they fall under the Trade Secrets Act or the UTPA, thus triggering the forum selection clause.
4. Why we affirm the superior court‘s enforceability decision
We address four arguments against enforcing the contract‘s forum selection clause, and we outline the reasons each is unavailing.
a. Public policy argument
An otherwise applicable forum selection clause may be voided for public policy reasons: “A contractual choice-of-forum clause should be held unenforceable if enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statutе or by judicial decision.”20 In the superior court ResQSoft argued it would be against public policy to enforce the subcontract‘s forum selection clause because the State and Protech‘s contract contained a forum selection clause designating an Alaska forum and because the State has a strong public policy favoring litigating Alaska law violations in Alaska courts. But ResQSoft does not expressly make that public policy argument on appeal.
b. Unavailable remedy in chosen forum argument
A forum selection clause also may be unenforceable if the designated forum is so impracticable that no remedy is available:
[I]t should be incumbent on the party seeking to escape [a] contract to show that trial in the contractual forum will be so gravely difficult and inconvenient that [the party] will for all practical purpose be deprived
of [the party‘s] day in court. Absent that, there is no basis for concluding that it would be unfair, unjust or unreasonable to hold that party to [the] bargain.21
In the superior court ResQSoft argued that the chosen Delaware forum was inconvenient and unconnected to the parties and the subject matter of the litigation. But on appeal ResQSoft — a Virginia corporation — does not expressly make that argument for keeping its claims against Protech — an Arkansas corporation — in Alaska. Nor has ResQSoft asserted on appeal, and nothing suggests, that ResQSoft would be unable to obtain relief in Delaware federal court for valid claims.
c. Adhesion contract argument
In an adhesion contract a forum selection clause may be unenforceable if the party received no actual notice.22 An adhesion contract exists if “the parties are ‘of such disproportionate bargaining power that the [party in the weaker position] could not have negotiated fоr variations in the terms of the standard [contract].’ ”23 An agreement negotiated at arm‘s length between equally situated parties is not an adhesion contract.24
ResQSoft argues on appeal that the subcontract is an adhesion contract because Protech delayed finalizing until ResQSoft had invested so much time and money in the project that it had no choice but to sign if it hoped to recoup its costs. But ResQSoft did not make this argument to the superior court in written opposition to Protech‘s dismissal motion; ResQSoft briefly alluded to the issue during oral argument but waived the argument by not sufficiently raising it.25
ResQSoft points to no factual allegations in its complaint suggesting that the subcontract terms were not the terms agreed to during negotiations, that it was at a disadvantage during contract negotiations, or that it lacked notice of the forum selection clause designating Delaware as the forum (mentioned three times in the subcontract). And ResQSoft undercuts its adhesion argument by explaining how critical it was for Protech to have a technology partner like ResQSoft to win the State‘s bid for the project.
These were sophisticated parties. Detailed, non-standardized subcontract language set out сritical terms of the parties’ business relationship, including provisions protecting ResQSoft‘s trade secrets and proprietary information. And the complaint did not contain any specific allegations that ResQSoft was forced to sign the subcontract or that it had no bargaining power regarding the forum selection clause. We thus are not persuaded by ResQSoft‘s newly minted argument that it was the victim of an adhesion contract.
d. Fraud argument
There also is a “reasonableness” standard when determining whether a forum selection clause is enforceable.26 Forum selection clauses are enforceable “absent a
was invalid for such reasons as fraud or overreaching.’ ”27 As to fraud, a forum selection clause generally is enforceable unless the clause itself is a product of the fraud.28 We have rejected the argument that “any time a dispute arising out of a transaction is based upon an allegation of fraud, the clause is unenforceable. Rather, the clause is enforceable unless ‘the inclusion of that clause in the contract was the product of fraud or coercion.’ ”29
ResQSoft‘s complaint does not expressly allege fraud by Protech. But ResQSoft argued in its written opposition to Protech‘s dismissal motion thаt “Protech‘s [f]raudulent [c]onduct” rendered the forum selection clause unenforceable. At oral argument to the superior court, ResQSoft was not specific about how its fraud assertions supported invalidating the forum selection clause and conceded there was no need for an evidentiary hearing to resolve disputed facts:
Court: [S]o with regards to the forum-selection clause argument that Protech is making, do you think that there are questions of fact?
[ResQSoft Counsel]: I think, yes. Number one, I think it‘s legally inapplicable, but there is an element of our argument that addresses whether there was . . . fraudulent inducement and whether there were errors or problems[,] . . . fraud in the formation of that contract, which would necessarily involve taking the testimony of the people who formed that contract.
Court: You‘re making a claim that there was fraudulent inducement of the contract?
[ResQSoft Counsel]: I can address that section when I get to Protech.
Court: Okay.
. . . .
Court: Where in the complaint does it talk about fraudulent inducement of the contract?
[ResQSoft Counsel]: The complaint doesn‘t specifically address the fraudulent inducement of the forum-selection clause.
Court: . . . So you‘re focused on fraud thаt occurred after the parties entered into the [sub]contract?
[ResQSoft Counsel]: Right.
. . . .
Court: What do you think are the factual matters in dispute that would warrant an evidentiary hearing at this point in time on the applicability of the forum-selection clause?
. . . .
[ResQSoft Counsel]: I don‘t know — Your Honor, I‘ll concede I don‘t know if there is a huge need. . . . I do think that it‘s mostly a legal determination that the court . . . can make based on the evidence before it.
The superior court later rejected ResQSoft‘s argument that Protech‘s alleged fraud invalidated the forum selection clause:
ResQSoft also asserts that Protech‘s allеged fraudulent conduct renders the forum selection clause unenforceable. ResQSoft does not assert in the Complaint that the inclusion of the forum selection clause was the product of fraud or otherwise raise a fraudulent inducement claim, but suggested at oral argument that Protech had a scheme all along to cut ResQSoft out of the contracted-for benefits of the transaction. . . . [B]ecause ResQSoft does not assert that the
forum selection clause was the product of fraud, the clause is enforceable.
ResQSoft contends in its opening appeal brief that its сomplaint “contained adequate allegations to support an inference of fraud that warranted further exploration,” specifically fraud in the inducement,30 and it argues that the superior court erred by not allowing ResQSoft the opportunity either to amend its complaint or to conduct limited discovery to determine whether Protech intended
In Crowson we declined to enforce a forum selection clause because the entire contract was a product of fraud and bribery.32 In that case Crowson paid Sealaska‘s representative over $1.4 million in bribes to obtain the agreement.33 In essence “only one interest was represented at the bargaining table,” and we held that “everything in the contracts that works to Crowson‘s advantage was presumably done
in return for the bribe payments.”34 ResQSoft relies on Crowson to advocate the unenforceability of the subcontract‘s forum selection clause, but ResQSoft neither alleged nor otherwise provided evidence of the kind of fraudulent conduct evident in Crowson.35
B. The Superior Court Did Not Err By Dismissing ResQSoft‘s Unjust Enrichment Claim Against The State.
1. Legal framework for dismissal motions
2. Why we affirm the superior court‘s decision
Unjust enrichmеnt is an equitable doctrine applied only when no other legal remedy exists.40 “Unjust enrichment is a broad equitable concept . . . most closely linked with the law of restitution and implied (quasi) contracts.”41 “Quasi-contracts are not true contracts but are judicially created obligations to do justice.”42 There are three essential elements to a quasi-contract: “(1) a benefit conferred upon the defendant by the plaintiff; (2) appreciation by the defendant of such benefit; and (3) acceptance and retention by the defendant of such benefit under such circumstances that it would be inеquitable . . . to retain it without paying the value
The State had a contract obligating it to pay Protech for the project, and Protech had a subcontract obligating it to pay ResQSoft for work on the project. If Protech breached the subcontract, ResQSoft has a legal remedy in the form of a breach of contract claim, along with its statutory claims. And ResQSoft‘s contribution to the project cannot be a windfall to the State because the State must pay Protech the contract price for the benefits received; the State thus cannot receive “something for nothing.”46
To avoid this conclusion, ResQSoft argues that its extensive contacts with the State over the project‘s course, particularly given Protech‘s alleged dereliction of duties under its contract with the State and ResQSoft‘s alleged performance of those duties, equate to a separate quasi-сontract with the State. Although ResQSoft argued to the superior court that it was “not demanding the State pay for Protech‘s breach or non-payment,” ResQSoft also argued that the only reason its work product is not yet legally owned by the State is Protech‘s non-payment to ResQSoft under the subcontract. But ResQSoft contends on appeal that its putative quasi-contract entitles it to relief from the State regardless of any payment the State made to Protech under the terms of their contract.
ResQSoft‘s arguments have no merit. As the superior court noted, ResQSoft does not attempt to exрlain why legal remedies against Protech under the subcontract — or under the Trade Secrets Act and the UTPA — insufficiently protect ResQSoft‘s interests to make an equitable unjust enrichment claim against the State viable. Nor does ResQSoft attempt to explain why the State should be liable both to Protech (by contract) and ResQSoft (by quasi-contract) for ResQSoft‘s work and proprietary information on the project.
To avoid the subcontract‘s forum selection clause, ResQSoft emphasized that it is not bringing a contract action to enforce legal contractual remedies against Protech; rather, ResQSoft is seeking to enforce only its other legal statutory remedies. But as the superior court correctly observed: “There is no dispute that the work performed by ResQSoft, for which compensation is sought, is work performed as the subcontractor on the project governed by the contract and subcontract.” All aspects of ResQSoft‘s equitable unjust enrichment claim against the State for work done and proprietary materials provided for the project can be asserted as legal claims against Protech, regardless of possible change orders or contract adjustments that ResQSoft now speculates might show Protech gave the State contract discounts for the unpaid work and proprietary materials ResQSoft provided for the project. Even if the unpleaded speculation were true, that would not adversely affect ResQSoft‘s statutory claims or its presently unasserted contract claims against Protech.
ResQSoft‘s claim for unjust enrichment fails; the superior court correctly granted the State‘s dismissal motion.
V. CONCLUSION
We AFFIRM the superior court‘s dismissal of ResQSoft‘s claims against both Protech and the State.
WINFREE
Justice