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D&B II Enterprises, LLC v. Universal Tax Systems, Inc.

United States District Court, N.D. Illinois, Eastern Division

March 31, 2018

D&B II ENTERPRISES LLC d/b/a BAIN ACCOUNTING/TAX, on behalf of itself and all other similarly situated, Plaintiff,
v.
UNIVERSAL TAX SYSTEMS, INC. d/b/a CCH SMALL FIRM SERVICES, Defendant.

          MEMORANDUM OPINION AND ORDER

          REBECCA R. PALLMEYER UNITED STATES DISTRICT JUDGE

         Plaintiff D&B II Enterprises, LLC bought computer software from Defendant Universal Tax Systems, Inc. for the purpose of preparing and filing customers' tax returns. The software suffered from numerous performance problems, and Plaintiff sued Defendant for fraud. After Judge Zagel, to whom this case was assigned, dismissed the fraud counts, Plaintiff added several contract and quasi-contract claims and moved to certify a class of persons who purchased the relevant software for the 2012 tax year. Defendant has moved for summary judgment. For the reasons explained below, Defendant's motion is granted, Plaintiff's motion to reconsider the dismissal of the fraud claims is denied, and Plaintiff's motion for class certification is stricken as moot.

         BACKGROUND

         The facts of this case are largely undisputed. Plaintiff D&B II Enterprises, LLC, is a Missouri limited liability company with its principal place of business in Florissant, Missouri. The company provides tax and accounting services for individual and business clients. (Def.'s Statement of Material Facts (hereafter “DSOF”) [233], at ¶¶ 1, 4.) D&B's founder, Bradley Bain, was the company's owner and president from 1991 until December 2015, when “certain assets” were sold to H&R Block. (Id. at ¶¶ 2-3.) Bradley Bain holds undergraduate and graduate degrees in Business Administration from the Southern Illinois University, and in 2012 Bain was certified by the Internal Revenue Service as a Registered Tax Return Preparer. (Id. at ¶ 5.) At the time of the events relevant to this lawsuit, D&B employed two accountants (of whom Mr. Bain was one), an office manager, and a receptionist. (Id. at ¶ 4.)

         Defendant Universal Tax Systems, Inc. is a Virginia corporation “with offices in Kennesaw, Georgia” (the court presumes this is Universal's principal place of business). (Id. at ¶ 7.) From its Georgia offices, the company does business under the trade name “CCH Small Firm Services” and develops “ATX” brand tax software, which it sells to tax preparers for use in the preparation of tax returns for clients. (Id.)

         Plaintiff is a long-term customer of Defendant; Plaintiff purchased ATX-brand software every year from 1991 through 2012. (Id. at ¶ 11.) Prior to 2012, ATX software worked well on D&B's computer network and assisted D&B in preparing tax returns for clients. (Id. at ¶ 15.) At his deposition, Bradley Bain testified that he could not recall using any other brand of tax software at any point in D&B's history, but that he did recall “enter[ing] into a lot of licensing agreements” for software. (Id. at ¶ 12; Bain Dep. 71.) Bain was asked whether, prior to the 2012 tax season, he “would just sort of automatically re-up to buy the ATX software every year, ” and Bain answered “yes.” (Dep. of Bradley Bain (hereafter “Bain Dep.”) 26, Ex. 1 to DSOF.) Prior to purchasing ATX 2012 software, D&B received “promotional materials” for “competing software products.” (DSOF ¶ 16.) Bain testified that he “didn't do any big analysis” of whether to purchase ATX software in 2012, rather than the software of a competitor. (Bain Dep. 30.)

         I. D&B's Purchase of ATX 2012

         On August 16, 2012, Universal sales representative Parul Patel invited Bain via e-mail to take advantage of an “early renewal discount” on the purchase ATX software for the 2012 tax season. (Patel E-Mail of Aug. 16, 2012, Ex. 7 to DSOF.) Bain called Patel the same day and confirmed that D&B wished to purchase the 2012 ATX software. (Bain Dep. 36-37.) Someone associated with Universal (the parties do not specify whom) then e-mailed Bain a document titled Deferred Payment Agreement. (DSOF ¶ 20). Bain testified that he signed the agreement even though he “didn't read all the terms and conditions. I purchased [the ATX 2012 software] because of my prior experience with ATX.” (Bain Dep. 41.)

         The Deferred Payment Agreement provided, inter alia, that D&B agreed to purchase the ATX 2012 software for $1318, with $69 due immediately on August 16 and the remaining balance of $1249 due on December 5, 2012. (DSOF ¶ 22; Deferred Payment Agreement (hereafter “DPA”) 2012 Invoice and Payment Plan, Ex. 8 to DSOF.) The Deferred Payment Agreement also stated that it “in no way modifies or amends the CCH SFS Software License Agreement or the CCH SFS Refund Policy (see www.cchsfs.com/legal) to which Customer acknowledges it is subject to by purchasing and using the software.” (Id. at § 3(c).)

         Neither Bain nor any other representative of D&B clicked on the link noted above, or searched Universal's website for a “CCH SFS Software License Agreement” or a “CCH SFS Refund Policy, ” before D&B entered into the Deferred Payment Agreement (Pl.'s Resp. to DSOF [246], at ¶ 29.) If Bain had followed the link, he would have been presented with a website that contained several additional links, titled “Standard Software License Agreement, ” “Client Accounting Suite License Agreement, ” “Intelliforms Software License Agreement, ” and “PaperlessPLUS (Scan&Fill) Software License Agreement.” (Pl.'s Statement of Add'l Material Facts (hereafter “PSAMF”) [247], at ¶ 36; Ex. 44 to PSAMF; Def.'s Resp. to PSAMF [257], at ¶ 36.) The website also contained a link titled “Software Refund Policy (current).” (Ex. 44 to PSAMF.)

         A user who clicked the link titled “CCH SFS Refund Policy” on August 16, 2012, would have been presented with a document titled “CCH Small Firm Services Software Refund Policy.” (Decl. of Dennis Brown (hereafter “Brown Decl.”), at ¶ 5, Ex. 19 to Def.'s Resp. to PSAMF; CCH Refund Policy, Ex. 9 to DSOF.) This document states, inter alia, that CCH “will provide a full refund for tax preparation software for tax year 2012 purchased directly from CCH SFS, ” so long as the software was not used to file more than one tax return and the refund was requested by February 28, 2013. (CCH Refund Policy § I(A).) “If the software was used for filing of returns, ” the Refund Policy continues, “a service charge of $20.00 per filed return, starting with the 2nd return filed, will be deducted from the refund amount.” (Id.)

         A user who clicked the link “Standard Software License Agreement” on August 16, 2012, would have been presented with a document titled “CCH Small Firm Services Standard Software License Agreement.” (Brown Decl. ¶ 6.) Section 8.3 of this document, titled “Limited Warranty, ” reads as follows:

EXCEPT AS STATED IN SUBSECTION 8.1, [1] THE SOFTWARE, THE DELIVERABLES AND ANY THIRD PARTY SOFTWARE ARE PROVIDED “AS IS” WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED. CCH SFS DISCLAIMS AND EXCLUDES ANY AND ALL OTHER WARRANTIES INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF TITLE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, IRRESPECTIVE OF ANY COURSE OF DEALING OR PERFORMANCE, CUSTOM OR USAGE OF TRADE. CUSTOMER BEARS THE ENTIRE RISK AS TO THE QUALITY AND PERFORMANCE OF THE SOFTWARE AND THE DELIVERABLES. CCH SFS DOES NOT WARRANT THAT THE SOFTWARE OR DELIVERABLES WILL BE UNINTERRUPTED, THAT THEIR USE OR OPERATION WILL BE ERROR OR DEFECT FREE, THAT ALL APPLICATION DEFECTS WILL BE CORRECTED, OR THAT THE SOFTWARE WILL PROPERLY OPERATE ON ANY SPECIFIC OPERATING SYSTEM OR COMPUTER HARDWARE OR CONFIGURATIONS OR BEFORE/AFTER ANY SPECIFIC DATE OR TIME PERIOD . . . . NO EMPLOYEE OR AGENT OF CCH SFS OR ANY OF ITS SUBSIDIARIES OR AFFILIATES IS AUTHORIZED TO MAKE ANY STATEMENT THAT ADDS TO OR AMENDS ANY OF THE WARRANTIES OR LIMITATIONS CONTAINED IN THIS AGREEMENT.

         (Standard Software License Agreement (hereafter “2011 SSLA”) § 8.3, Ex. C to Decl. of Dennis Brown, Ex. 19 to Def.'s Resp. to PSAMF.) Section 8.4, in turn, disclaims liability “FOR ANY LOSS OF PROFITS, SALES, BUSINESS, DATA OR OTHER INCIDENTAL, CONSEQUENTIAL, OR SPECIAL LOSS OR DAMAGE, ” and states that CCH SFS's “total liability” in any dispute arising out of the agreement “WILL NOT EXCEED THE TOTAL FEES PAID OR PAYABLE FOR THE SOFTWARE HEREUNDER BY CUSTOMER.” (Id. at § 8.4.)

         Section 11.1 states that “[t]his agreement, along with the Order Confirmation and any other terms referenced by this Agreement but otherwise published by CCH SFS outside of this Agreement, constitutes the entire and exclusive agreement . . . between Customer and CCH SFS with respect to the Software and Deliverables to be furnished hereunder.” (Id. at § 11.1.) It also states that “[o]ral statements made about the Software and/or Deliverables do not constitute warranties, will not be relied on by Customer, and will not be binding or enforceable, ” and that “[n]o supplement or amendment of this Agreement will be binding unless executed in writing by CCH SFS and Customer after reasonable opportunity to accept or reject such supplement, modification or amendment.” (Id.)

         On September 4, 2012, Defendant's Digital Marketing Manager published an updated version of the Standard Software License Agreement at the URL that previously hosted the document quoted above. (Brown Decl. ¶¶ 7-8.) The portions of the two documents that are relevant to this case are materially identical, except that the language located in sections 8.1, 8.3, 8.4, and 11.1 of the 2011 version appeared at sections 7.1, 7.3, and 7.4, and 10.1 of the 2012 version. (Id.; 2011 SSLA §§ 8.1, 8.3, 8.4, 11.1; 2012 SSLA §§ 7.1, 7.3, 7.4, 10.1, Ex. 11 to DSOF.)

         D&B received the ATX 2012 software in the mail in either November or December of 2012. (DSOF ¶ 36; Pl.'s Resp. to DSOF ¶ 36.) In December 2012, Bain directed the company's third-party technology consultant to install the software on D&B's server at its office in Florissant, Missouri. (Id.) During the installation process, a pop-up box appeared on the computer screen used by the consultant. (Id. at ¶ 37.) The pop-up box presented the consultant with the opening paragraph of the 2012 SSLA, which stated that “[b]y installing and/or using the Software or by otherwise indicating acceptance (electronically or otherwise) of this Agreement, Customer acknowledges agreement to the terms set forth below.” (Id. at ¶ 38.) The pop-up box directed, but did not require, the consultant to “Press the PAGE DOWN key to see the rest of the agreement.” (Id.) A scroll bar, which allowed users to scroll down and view the entire 2012 SSLA, also appeared to the right of the text on the pop-up screen. (Id.) At the bottom of the pop-up screen, the following text appeared: “Do you accept the terms of the preceding License Agreement? If you select No, the setup will close. To install ATX 2012, you must accept this agreement.” (Id.)

         Bain admitted at his deposition that the technology consultant “consulted with” Bain before clicking the “Yes” button, thereby accepting the agreement and beginning the installation. (Bain Dep. 57-58.) Bain did not scroll down to read the full text of the agreement before he directed the consultant to click “Yes.” (Id.) “I trusted CCH, ” Bain testified. “I mean, I didn't need to read the information. I had used them for years and I trusted CCH.” (Id. at 59.)

         II. Problems with ATX 2012 Emerge

         D&B first tried to use the ATX 2012 software on or shortly after the day it was installed on D&B's server. (Bain Dep. 159, Ex. 42 to PSAMF.) The ATX 2012 software “crashed” immediately. (Id. at 69.) It “crashed” the following day as well, and on numerous occasions thereafter. (Id. at 160.) Even when the software did not crash, it did not perform according to D&B's expectations. It processed data slowly, failed to “roll over” customers' returns from previous years, and was unable to “complete complex business returns.” (PSAMF ¶ 47; Def.'s Resp. to PSAMF ¶ 47; First Am. Compl. [32], at ¶ 38(a).) Sometimes, the software presented “calculations” on printed forms that were different from those “actually included in returns electronically filed with the IRS.” (Id.) Bain and/or D&B's technology consultant communicated with Defendant's technical service representatives 20 to 25 times between January 2013 and April 2013. (Bain Dep. 75-76, 125-26.) Defendant's representatives initially told Bain that the issues he reported were caused by D&B's computer systems, rather than the ATX 2012 software. (Id. at 77.)[2] At some point, however-Bain does not specify when-unidentified individuals from Defendant's “support line” began saying “[t]here's a new release coming out. There's a new release coming out. We're going to fix that problem. We're going to fix that problem.” (Id. at 90-91.)

         D&B was not alone in experiencing problems with ATX 2012. On January 15, 2013, Defendant's Vice President of Customer Experience, Rusty Tillman, wrote an e-mail titled “SFS Weekly Update” that reported, among other things, “serious concerns on the floor regarding ATX performance.” (Ex. 22 to PSAMF.) According to Tillman, “[s]preadsheet functionality, splitting out payroll forms and speed/performance are the three main issues we are dealing with multiple times a day.” (Id.) On February 19, 2013, Product Support Supervisor Douglas R. Brown wrote an e-mail to CCH SFS's new President, Jason Marx, outlining possible strategies to “stem the tide of calls” about ATX's “performance.” (Ex. 10 to PSAMF.) This e-mail noted that “[a] large number of calls are from customers who are unable to rollover returns from the prior year software, or are unable to open rolled over returns. This is the first thing most customers ...


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