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Wal-Mart Stores, Inc. v. Cuker Interactive, LLC

United States District Court, W.D. Arkansas, Fayetteville Division

December 22, 2016

WAL-MART STORES, INC. PLAINTIFF/ COUNTER-DEFENDANT
v.
CUKER INTERACTIVE, LLC DEFENDANT/ COUNTER-CLAIMANT

          MEMORANDUM OPINION AND ORDER

          TIMOTHY L. BROOKS UNITED STATES DISTRICT JUDGE.

         Currently before the Court are:

         • Defendant Cuker Interactive, LLC's ("Cuker") Motion for Partial Summary Judgment (Doc. 121), Statement of Undisputed Material Facts (Doc. 122-1), and Brief in Support (Doc. 123-1); Plaintiff Wal-Mart Stores, Inc.'s ("Walmart") Response in Opposition (Doc. 128-1) and Response to Cuker's Statement of Undisputed Material Facts (Doc. 129-1); and Cuker's Reply (Doc. 132); and

         • Walmart's Motion for Summary Judgment as to Counterclaim (Doc. 86), Brief in Support (Doc. 87-1), and Statement of Undisputed Material Facts (Doc. 88-1); Cuker's Response (Doc. 108) and Statement of Disputed Material Facts (Doc. 109); and Walmart's Reply (Doc. 115-1).

         For the reasons given below, Cuker's Motion is DENIED, and Walmart's Motion is GRANTED IN PART AND DENIED IN PART.

         I. BACKGROUND

         On January 30, 2014, Walmart and Cuker signed a contract under which Walmart agreed to pay Cuker a fixed fee of $577, 719, in exchange for Cuker's provision of certain services to help make the website for Walmart's "ASDA Groceries business" responsive, irrespective of the device on which it is being viewed, such as a desktop or a mobile phone. See Doc. 124-7, pp. 8, 17. Walmart was facing very tight internal deadlines for this project, and the contract-negotiation process was a very speedy one, taking merely a few weeks rather than the months that were more typical. See Doc. 121-1, p. 3. The project launched almost immediately in early February, and by the end of that month the parties were already experiencing fundamental disagreements on matters such as whether various milestones for performance were strict deadlines or mere aspirations, when interim fee payments were due, how many rounds of revisions Walmart could require Cuker to make to its deliverables, and whether particular demands by Walmart were outside of the scope of work that Cuker had contracted to deliver.

         Eventually the relationship broke down irreparably, and the instant lawsuit commenced. In the most recent versions of the pleadings, Walmart asserts two claims against Cuker for breach of contract and declaratory judgment, and Cuker asserts six counterclaims against Walmart for declaratory judgment, fraudulent inducement, misappropriation of trade secrets, breach of contract, unjust enrichment, and injunctive relief. Walmart has moved for summary judgment on all of Cuker's counterclaims, and Cuker has moved for summary judgment solely on its counterclaim for declaratory judgment. Both motions have been fully briefed and are ripe for decision.

         II. LEGAL STANDARD

         "The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). When, as here, cross-motions for summary judgment are filed, each motion should be reviewed in its own right, with each side "entitled to the benefit of all inferences favorable to them which might reasonably be drawn from the record." Wermager v. Cormorant Twp. Bd., 716 F.2d 1211, 1214 (8th Cir. 1983); see also Canada v. Union Bee. Co., 135 F.3d 1211, 1212-13 (8th Cir. 1998). The moving party bears the burden of proving the absence of any material factual disputes. Fed.R.Civ.P. 56(c); Matsushita Bee. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). If the moving party meets this burden, then the non-moving party must "come forward with 'specific facts showing that there is a genuine issue for trial."' Matsushita, 475 U.S. at 587 (quoting Fed.R.Civ.P. 56(c)); Nat'l Bank of Commerce of El Dorado, Ark. v. Dow Chem. Co., 165 F.3d 602, 607 (8th Cir. 1999). These specific facts must be "such that a reasonable jury could return a verdict for the nonmoving party." Allison v. Flexway Trucking, Inc., 28 F.3d 64, 66 (8th Cir. 1994) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248(1986)).

         III. DISCUSSION

         A. Count One of Counterclaim: Declaratory Judgment that Contract is Void

         Under Arkansas law, "the essential elements of a contract are (1) competent parties; (2) subject matter; (3) legal consideration; (4) mutual agreement; and (5) mutual obligations." Independence Cnty. v. City of Clarksville, 2012 Ark. 17, at *6; 386 S.W.3d 395. In Count One of its Amended Counterclaim, Cuker seeks "a declaratory judgment that the Contract is void, invalid and unenforceable based on lack of mutual assent, " i.e., based on the absence of mutual agreement. (Doc. 61-1, fl 41). The parties have filed cross-motions for summary judgment on this Count.

         Arkansas courts are guided by two legal principles when deciding whether parties entered into a valid contract:

(1) a court cannot make a contract for the parties but can only construe and enforce the contract that they have made; and if there is no meeting of the minds, there is no contract; and (2) it is well settled that in order to make a contract there must be a meeting of the minds as to all terms, using objective indicators.

DaimerChrysler Corp. v. Smelser, 375 Ark. 216, 218-19; 289 S.W.3d 466 (2008). Whether a meeting of minds occurred is a question of fact. Id. at 219. Thus, when determining whether any material factual dispute exists on this point, the Court must "use an objective test for determining whether there was mutual assent without consideration of the parties' subjective opinions, " and with special attention to the language of the alleged contract as well as to the parties' actions. See FutureFuel Chem. Co. v. Lonza, Inc., 756 F.3d 641, 646-47 (8th Cir. 2014).

         The instant contract contains a general "Agreement" as well as, inter alia, a Statement of Work ("SOW"), attached to the Agreement as Exhibit A. See Doc. 124-7, p. 8. The Agreement explicitly obligates Cuker and Walmart to provide the services and pay the fees, respectively, that are identified in the SOW. Id. at p. 2, § 1. The services are described in Section III of the SOW, entitled "Scope of Work." Section VI of the SOW, entitled "Milestones, " sets forth a table containing "target milestones for the project timeline, " with target "Completion Date[s]" for thirteen separate "Milestones/Deliverables" which Cuker "will make the best possible effort to meet, " with accompanying fee amounts to be invoiced by Cuker and paid by Walmart, totaling a fixed fee of $577, 719. Id. at pp. 15-16. Section X of the SOW, entitled "Fees, " states that "[a]ll invoices for fees and expenses are payable 45 days after receipt of invoice." Id. at p. 17.

         Section 3 of the Agreement, entitled "Ownership of Deliverables, " states that "[e]xcept as . . . otherwise specified in a Statement of Work, all Deliverables (or any portion or [sic] a Deliverable) authored ... for Walmart by [Cuker] ... are the exclusive property of Walmart, id. at p. 2, § 3(a), that "Deliverables must not include, and [Cuker] may not incorporate, [Cuker]'s preexisting proprietary information, " id. at p. 3, § 3(c), and that if Cuker nevertheless includes such preexisting proprietary information among its Deliverables, then Cuker "grants to Walmart a nonexclusive, worldwide, royalty-free, irrevocable, perpetual license to use [etc.].. . [Cuker's] Intellectual Property, " id. Despite this apparently technical use of the word "Deliverables, " that word is never actually defined anywhere in the Agreement or the SOW, though as noted above, it appears to be identified with "Milestones" in Section VI of the SOW.

         At various points throughout the "Scope of Work" Section of the SOW, Cuker is obligated to provide "wireframes" and "[s]econdary page design comps" for "the sections listed in the site map below." Id. at p. 9, § III.e.2 & g.2 (emphasis added). Cuker is also obligated to "develop a responsive front-end by adding to the existing front-end code on all of the page templates defined in the scope, " Id. at p. 9, § III.h.2 (emphasis added), and to provide Walmart a "responsive template guide, " id. at p. 12, § III.1.1.a. Neither the Agreement nor the SOW ever actually defines the word "template." However, Subsection k of the "Scope of Work" Section of the SOW, entitled "Site Map, " opens with the following statement: "The site map below is a working version it [sic] will be refined during the design and planning process. The price is based upon the design of responsive desktop, tablet, and smartphone layouts for home page, navigation, 10 page templates, and responsive template guide." Id. at p. 11. The Agreement explicitly states that the scope of work may not be changed unless both parties to the Agreement sign a Project Change Request ("PCR") in the form attached as Exhibit B to the Agreement. See Id. at p. 2, § 1. The Agreement and the SOW both explicitly state that fixed fees for Services may not be increased through a PCR unless the PCR expressly provides for such increase. See Id. & at p. 17, §X.A.

         The Court interprets the site map in Subsection k of the SOW as being a "working" description of those portions of the ASDA website which Cuker was agreeing to help make responsive, with the specifics to "be refined during the design and planning process." But regardless of that site map's initial contents and regardless of what form its refinements would ultimately take, the Court also interprets Subsection k's language regarding what "[t]he price is based upon" as placing a hard categorical limit on the quantity of work that Cuker was agreeing to do for the fee of $577, 719. In other words, the contract does not permit the fee to be altered, or the scope of work to be expanded beyond "the design of responsive desktop, tablet, and smartphone layouts for home page, navigation, 10 page templates, and responsive template guide, " except through a PCR or new SOW. Refinement of Subsection k's site map without a PCR or new SOW neither alters the fee nor expands the scope of work; it simply fleshes out a description of the terrain where Walmart and Cuker have agreed the work may be done.

         In its briefing, Cuker points to an abundance of evidence in the record that throughout the parties' relationship, Walmart and Cuker held very different understandings of exactly how far the boundaries of the SOWs scope of work extended. However, as Walmart correctly points out, even if this mismatch were the result of some ambiguity in the contract, "ambiguity does not prevent the formation of a contract; rather, it calls for interpretation of a contract." Aon Risk Servs., Inc. v. Meadors, 100 Ark.App. 272, 282, 267 S.W.3d 603 (2007). At any rate, this is not a situation where the parties "agree[d] to terms that reasonably appealed] to each of them to be unequivocal" but that were subsequently revealed to be fundamentally incompatible. Cf. Colfax Envelope Corp. v. Local No. 458-3M, Chicago Graphic Comms. Int'l Union, 20 F.2d 750 (7th Cir. 1994) (referencing the famous English case of Raffles v. Wichelhaus, in which the parties contracted for shipment of goods with reference to a ship named "Peerless" without realizing they were each referring to different ships by the same name).

         Cuker further argues that aside from the scope of work, the contract also lacked mutual agreement as to the timing of performance. Cuker points out that although the SOW simply states that Cuker must "make the best possible effort to meet the timeline, " (Doc. 124-7, p. 14, § VI), several Walmart employees testified in their depositions that they believed the SOW's timeline presented hard deadlines, see, e.g. Doc. 124-8, pp. 63-64, lines 243:3-246:5; Doc. 124-9, p. 57, lines 216:7-216:20; Doc. 124-25, pp. 34-35, lines 125:25-128:7; Doc. 124-26, p. 41, lines 153:8-153:19. But as this Court explained above, it must "use an objective test for determining whether there was mutual assent without consideration of the parties' subjective opinions, " FutureFuel Chem. Co., 756 F.3d at 646, and to this Court's mind, a contractual obligation to "make the best possible effort" is simply nothing more and nothing less than a contractual obligation to "make the best possible effort." This Court is unaware of any Arkansas cases holding that "best efforts" provisions are unenforceable for vagueness or ambiguity, and recently had occasion to observe in a different case concerning New York[1] contract law that "whether such [an] obligation has been fulfilled will almost invariably... involve a question of fact." Active Marketing Grp., Inc. v. EB Brands Holdings, Inc., 2016 WL 6090959, at *3 (W.D. Ark. Oct. 17, 2016) (quoting Kroboth v. Brent, 215 A.D.2d 813, 814 (N.Y. Sup. Ct., App. Div., 3dDept. 1995)).

         Finally, Cuker argues that the contract also lacked mutual agreement as to the timing of payments. Again, Cuker points to different subjective interpretations by the parties of the SOW's requirements that "Walmart will provide feedback and approvals as required during every milestone, " (Doc. 124-7, p. 14, § VI), and that "[a]ll invoices for fees and expenses are payable 45 days after receipt of invoice, " id. at p. 15, ยง X.A. But again, the fact that the parties disagree on how to properly interpret these provisions does not mean the parties did not agree to be bound by them, and whatever ambiguities or vagaries they might ...


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