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Rentpath, Inc. v. Cardata Consultants, Inc.

United States District Court, N.D. Georgia, Atlanta Division

February 9, 2015

RENTPATH, INC. and CONSUMER SOURCE HOLDINGS, INC., Plaintiffs,
v.
CARDATA CONSULTANTS, INC., Defendant.

ORDER

RICHARD W. STORY, District Judge.

This case comes before the Court on Defendant CarDATA Consultants, Inc.'s Motion to Dismiss [3]. After reviewing the record, the Court enters the following Order.

Background

This contract dispute arises out of Defendant CarDATA Consultants, Inc.'s ("CarDATA") alleged failure to properly advise Plaintiffs of California law's requirements related to reimbursing employees for business use of personally owned vehicles. Plaintiff RentPath, Inc. ("RentPath") operates an online business that helps consumers locate apartments available for rent nationwide. (Compl., Dtk. [1-1] ¶ 1.) Plaintiff Consumer Source Holdings, Inc. ("CSHI"), a wholly owned subsidiary of RenthPath with over three hundred employees, operates RentPath's largest apartment-locating website. (Id.)

In February 2007, John Domsy, an agent of Defendant CarDATA, approached CSHI and offered to conduct an analysis of CSHI's policy for reimbursing its employees for business use of personally owned vehicles, which Domsy represented was CarDATA's area of expertise. (Id. ¶ 7.) In an initial March 21, 2007 meeting, "Domsy claimed that CarDATA had unique expertise and knowledge in advising corporate clients on vehicle business expense reimbursement programs and in devising and administering legally-compliant programs using CarDATA's proprietary databases to develop market-specific reimbursement programs." (Id. ¶ 8.) Plaintiffs questioned CarDATA about Plaintiffs' risk and liabilty exposure and how CarDATA proposed to manage regional and market variations in costs. (Id.) Plaintiffs then engaged CarDATA to conduct a "Study & Analysis" of Plaintiffs' policies related to reimbursing employees for business use of their vehicles and to come up with "fair car allowance payments... for each market." (Id. ¶ 9.)

On June 21, 2007, Domsy reported CarDATA's findings to Plaintiffs, which showed that CSHI could provide its employees with a tax-free reimbursement plan. (Id. ¶ 10.) When Plaintiffs again questioned CarDATA about risks and how CarDATA managed regional and market differences in establishing it expense reimbursement plan, Domsy again claimed expertise in reimbursement policies and assured Plaintiffs that its program was "legally sufficient." (Id.)

At this meeting, however, CarDATA failed to advise Plaintiffs that the reimbursement program did not satisfy California Labor Code § 2802, which requires employers "to indemnify employees for all necessary expenditures incurred in direct consequence of the discharge of employment duties, " including expenses related to business use of personal vehicles, and states that any payments to employees "must be sufficient to fully indemnify the employee [for] actual expenses necessarily incurred." (Id. ¶ 12.) Apparently, CarDATA calculated lump-sum monthly payments that were not sufficient to indemnify California employees for actual business expenses necessarily incurred in the business use of personal vehicles. (Id. ¶ 13.)

Nevertheless, Plaintiffs and CarDATA then agreed to a one-year contract ("2007 Contract") on July 31, 2007, under which CarDATA would convert CSHI's reimbursement policies to a non-taxable allowance. (Compl., Dtk. [1-1] ¶ 1; see 2007 Serv. Agreement, Dkt. [3-2].) Under the 2007 Contract, CSHI's employees would enter their mileage online with CarDATA, and CarDATA would issue payment to the employees. (2007 Serv. Agreement, Dkt. [3-2] Schedule A.) The contract contained a merger clause that stated that the written agreement represented "the complete and exclusive statement of the contract between CarDATA and Customer, " superseding any other agreements or representations. (2007 Serv. Agrement, Dkt. [3-2] ¶ 20.) The clause also stated that there could be no modification of terms "unless in writing and signed by CarDATA and Customer." (Id.)

On July 31, 2008, Plaintiffs and CarDATA agreed to a second contract ("2008 Contract"), which appears to be similar to the 2007 Contract and contains the same merger clause. (Compl., Dtk. [1-1] ¶ 15; see 2008 Serv. Agreement, Dkt [3-3].) The 2008 Contract was set to expire on July 31, 2009, subject to an automatic one-year renewal unless either party provided notice of termination at least thirty days before the end of the one-year period. (Compl., Dtk. [1-1] ¶ 17.) Apparently, neither party timely terminated the agreement, and the contract renewed until July 31, 2010. (Id.) Plaintiffs allege, however, that after July 31, 2010, "the parties continued a de facto or implied contractual relationship, " with CarDATA providing its services in exchange for payment until July 2013. (Id.)

Moreover, the parties met in 2010 to provide an annual assessment for the previous year and to discuss any changes for the coming year. (Id.) Despite its purported expertise, like at other meetings Defendant failed to advise Plaintiffs that its expense reimbursement program did not satisfy California Labor Code § 2802, placing Plaintiffs at risk of significant liabilities. (Id.)

On December 17, 2012, Juanita Garner, an employee of CSHI, filed a class-action lawsuit in California against Plaintiffs. (Id. ¶ 19.) The lawsuit claimed that CSHI's reimbursement method did not properly and fully reimburse its employees for travel expenses in accordance with California law. Plaintiffs settled the lawsuit on October 10, 2013, incurring over $400, 000 in settlement and litigation costs. (Id. ¶¶ 19-21.)

Plaintiffs brought this action against Defendant CarDATA in Gwinnett County Superior Court alleging breach of contract, promissory estoppel, and breach of the implied covenant of good faith and fair dealing. Defendant removed the case to this Court pursuant to diversity jurisdiction. Defendant now moves to dismiss all claims for failure to state a claim.

Discussion

I. Motion to Dismiss ...


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