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Murray v. ILG Technologies, LLC

United States District Court, S.D. Georgia, Savannah Division

March 28, 2019

LLOYD DAN MURRAY, JR. and JENNIFER McGHAN, Individually and on behalf of all others similarly situated, Plaintiffs,
v.
ILG TECHNOLOGIES, LLC, d/b/a ILG INFORMATION TECHNOLOGIES, and BARIS MISMAN, Individually and as Sole Proprietor of ILG INFORMATION TECHNOLOGIES, Defendants.

          ORDER

          R. STAN BAKER UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on a number of motions including Defendants' Motion for Summary Judgment, (doc. 10), Plaintiffs' Motion for Class Certification, (doc. 55); Defendants' Supplemental Motion for Summary Judgment, (doc. 65); Plaintiffs' Motion for Partial Summary Judgment, (doc. 94); and Plaintiffs' Request for Oral Argument on All Pending Motions, (doc. 101). Plaintiffs Lloyd Murray, Jr. (“Mr. Murray”) and Jennifer McGhan (“Ms. McGhan”) filed this putative class action against Defendants ILG Technologies, LLC (“ILG”) and Baris Misman (“Mr. Misman”), based on allegations that a software created by Defendants incorrectly calculated Plaintiffs' bar exam scores. (Doc. 1-3.) Plaintiffs originally filed this suit in the Superior Court of Bryan County, (id.), and Defendants subsequently removed to this Court, (doc. 1). After Defendants filed their first Motion for Summary Judgment, (doc. 10), Plaintiffs filed a Response, (doc. 38), and Defendants filed a Reply. (Doc. 44.) Plaintiffs subsequently filed an Amended Complaint, (doc. 63).[1] Defendants filed a Supplemental Motion for Summary Judgment addressing the additional causes of action, (doc. 65), to which Plaintiffs responded, (doc. 77), and Defendants replied, (doc. 79).

         This case arises out of a cruel twist of events. Plaintiffs were originally told that they had failed the exam to gain admission to the State Bar of Georgia only to find out months later that they had actually passed the exam. Plaintiffs contend that Defendants are to blame for their agonizing and costly journey because ILG, a company solely owned by Mr. Misman, provided a software system to aid in the administration of the entire bar admission process. ILG provided this system pursuant to a contract with the Georgia Office of Bar Admissions. In their initial Complaint, Plaintiffs levy claims of Breach of Contract, Negligence, and Negligent Misrepresentation. (Doc. 1-3.) Plaintiffs also assert a claim for the Regrading of Bar Exams. (Id. at p. 10.) In their Amended Complaint, Plaintiffs reassert their original claims (with the exception of their request for a regrade) and allege additional claims of Defamation, Negligent Design, and Strict Liability. (Doc. 63.) Factually, the parties dispute whether the disastrous glitch in grading Plaintiffs' exams was caused by errors in Defendants' software or errors elsewhere in the examination, grading, and communication process. Regardless, in their Motions for Summary Judgment, Defendants contend that even if their software factually caused the grading error, Plaintiffs cannot legally recover the damages they seek through any of the asserted claims.

         Defendants' Motions call for this Court to resolve the parties' arguments based on the substantive law of Georgia as set forth by the Georgia General Assembly and the state's appellate courts. After a thorough review of that law and its application to the facts of this case, the Court finds that it must grant Defendants' Motions. As explained below, Plaintiffs cannot recover for breach of contract because they are not in privity of contract with Defendants and are not third-party beneficiaries of Defendant ILG's contract with the Office of Bar Admissions. Moreover, Georgia's economic loss rule bars Plaintiffs' general negligence, strict liability, and negligent design claims, and the undisputed evidence thwarts Plaintiffs' claims of negligent misrepresentation and defamation. The Court is mindful that this result may seem like another hapless turn in Plaintiffs' harrowing saga. However, this Court's obligation is to say what the law is, not what it should be. Having fulfilled that responsibility and applied that law to the facts of this case, the Court GRANTS Defendants' Motions for Summary Judgment, (docs. 10, 65) and DENIES as moot all other pending motions in this case.

         BACKGROUND[2]

         The incidents giving rise to this action came to light on September 6, 2016. (Doc. 10-2, p. 1.) On that day, the Georgia Board of Bar Examiners announced that ninety people who took the July 2015 and February 2016 Georgia bar exams-forty-five from each exam-were incorrectly assigned failing scores. (Id.) In fact, these ninety individuals had passed their respective exams. (Id.) Plaintiffs Murray and McGhan were two such persons. (Doc. 1-3, p. 2.) Plaintiffs filed this putative class action against Defendants on behalf of all ninety test takers. (Id. at pp. 3, 6.)

         I. The Bar Admission Process and Exam Scoring

         A person who wishes to practice law in the state of Georgia must first be admitted pursuant to the Rules promulgated by the Supreme Court of Georgia. (Doc. 10-3, p. 5.) This process is handled by two boards-the Board to Determine Character and Fitness, and the Board of Bar Examiners. (Doc. 38, p. 3.) The Office of Bar Admissions (“OBA”) provides administrative support to both Boards. (Id.) Prior to sitting for the Georgia Bar Exam, applicants' credentials are reviewed by the Board to Determine Character and Fitness. (Doc. 37-12, p. 9.) Applicants who pass this stage are then permitted to take the bar exam. (Id.)

         The bar exam itself is a two-day test that is written and administered by the Board of Bar Examiners. (Doc. 38, p. 3.) The exam consists of a multiple-choice component known as the “MBE” and two separate writing components-two essays collectively called the “MPT” and four Georgia-specific essays. (Id.) After the exam, the completed MBE answer sheets are sent to the National Conference of Bar Examiners to be graded by a machine. (Doc. 37-12, p. 33.) The scores are sent to the OBA, and any individual who does not score at least a 115 on the MBE portion of the exam is deemed an “automatic fail, ” meaning the applicant's essays are not submitted for grading. (Doc. 38, p. 7.) The essays that are submitted for grading are then graded by the Board of Bar Examiners, and the completed scores are entered into a database. (Id. at p. 5.) A score of 270 or higher qualifies as a “passing score.” (Id.) Before the scores are finalized, the essays of individuals who received an initial score within five points below 270-or 265 to 269-are regraded. (Id.) Once the regrades are complete, the new scores are entered into the database. (Id.) Applicants are then notified of the results electronically. (Doc. 10-2, p. 4.)

         II. The Software Program and Underlying Contract

         Defendant ILG is a technology company that creates custom software, and Mr. Misman is ILG's sole proprietor. (Doc. 37-9, p. 16; doc. 38, p. 3.) At all times relevant to this action, Defendants had a contract with the OBA to create and provide a computer program that would facilitate the entire bar admission process (hereinafter “the Contract”). (Doc. 38, p. 3; doc. 38-1.) It is undisputed that Plaintiffs were not parties to the contract between Defendants and the OBA. (Doc. 10-1, p. 2; doc. 38-6, p. 2.) The Contract states that Defendants “promise[d] to provide, and OBA promise[d] to pay for, a complete, customized, turn-key system of enterprise for digitizing and electronically administering the entire bar admission process.” (Doc. 38-1, p. 3.) The system was intended to be a “user-friendly” way for the OBA to organize “the data that is received from the fitness application and the data that's received from the [] bar examination process.” (Doc. 38, p. 3.) It was also intended to efficiently and effectively communicate the relevant data to bar applicants. (Id.)

         The software designed by Defendants was used by the OBA and the Boards to calculate the scores and communicate the results of the July 2015 and February 2016 bar exams. (Doc. 10-1, pp. 2-3; doc. 38-6, pp. 2-3.) All communications through the software came from the OBA and the Board of Bar Examiners; Plaintiffs were never contacted by Defendants. (Doc. 38-6, p. 2.)

         III. Overview of Claims

         In this lawsuit, Plaintiffs request relief for: (1) the cost of taking additional bar exams; (2) the cost of additional study materials; (3) loss of income; (4) injury to their property right in the employment of the legal profession; and (5) injury to their reputations. (Doc. 63, pp. 8-9.) To seek these damages, Plaintiffs assert six theories of liability. First, Plaintiffs allege that Defendants committed acts of negligence by “failing to accurately calculate, record, and/or report Plaintiffs' and the class members', Bar Exam Grades.” (Id. at p. 8.) Plaintiffs also argue that Defendants breached their contract with the OBA, and that Plaintiffs were third-party beneficiaries to that contract. (Id. at pp. 11-12.) Further, Plaintiffs claim that because they relied on the incorrect results to their detriment, Defendants are liable to them for negligent misrepresentation. (Id. at p. 10.) Plaintiffs also allege Defendants breached their duties to exercise reasonable care in designing a software free of unreasonable risks and to provide a merchantable product, meaning Plaintiffs are entitled to damages in strict products liability and for negligent design. (Id. at pp. 12-13.) Additionally, Plaintiffs argue that the software's incorrect results constitute false publications and that Defendants are thus liable for defamation. (Id. at 13.)

         Plaintiffs initially requested a regrade of July 2015 and February 2016 bar exams scoring between 259 and 264. (Id.) However, Plaintiffs “withdrew” this claim in their Response to Defendants' Motion for Summary Judgment, (doc. 38, p. 26), and indicate the claim as “withdrawn” in their Amended Complaint, (doc. 63, p. 10). Finally, Plaintiffs seek attorney's fees due to Defendants' alleged bad faith, stubborn litigiousness, and having caused Plaintiffs unnecessary trouble and expense. (Id.) In their Motions, Defendants seek summary judgment on all of Plaintiffs' claims asserted in Plaintiffs' initial and Amended Complaints. (Docs. 10-2, 65.)

         STANDARD OF REVIEW

         Summary judgment “shall” be granted if “the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A fact is “material” if it “might affect the outcome of the suit under the governing law.” FindWhat Inv'r Grp. v. FindWhat.com, 658 F.3d 1282, 1307 (11th Cir. 2011) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A dispute is “genuine” if the “evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id.

         The moving party bears the burden of establishing that there is no genuine dispute as to any material fact and that it is entitled to judgment as a matter of law. See Williamson Oil Co. v. Philip Morris USA, 346 F.3d 1287, 1298 (11th Cir. 2003). Specifically, the moving party must identify the portions of the record which establish that there are no “genuine dispute[s] as to any material fact and the movant is entitled to judgment as a matter of law.” Moton v. Cowart, 631 F.3d 1337, 1341 (11th Cir. 2011). When the nonmoving parties would have the burden of proof at trial, the moving party may discharge its burden by showing that the record lacks evidence to support the nonmoving parties' case or that the nonmoving parties would be unable to prove their case at trial. See id. (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986)). If the moving party discharges this burden, the burden shifts to the nonmovants to go beyond the pleadings and present affirmative evidence to show that a genuine issue of fact does exist. Anderson, 477 U.S. at 257.

         In determining whether a summary judgment motion should be granted, a court must view the record and all reasonable inferences that can be drawn from the record in a light most favorable to the nonmoving parties. Peek-A-Boo Lounge of Bradenton, Inc. v. Manatee County, 630 F.3d 1346, 1353 (11th Cir. 2011) (citing Rodriguez v. Sec'y for Dep't of Corr., 508 F.3d 611, 616 (11th Cir. 2007)). However, “facts must be viewed in the light most favorable to the non-moving parties only if there is a ‘genuine' dispute as to those facts.” Scott v. Harris, 550 U.S. 372, 380 (2007). “[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Id. (citation and emphasis omitted).

         DISCUSSION

         I. Choice of Law

         In this diversity action, the Court must apply the choice-of-law rules of its forum state of Georgia to determine which state's substantive laws apply. Boardman Petroleum, Inc. v. Federated Mut. Ins. Co., 135 F.3d 750, 752 (11th Cir.1998). The claims discussed in this Order resound in contract and tort. The at-issue contract between the OBA and Defendants contains a choice of law provision, wherein the parties agreed that the contract “will be governed by and construed solely in accordance with the law of the State of Georgia.” (Doc. 38-1, p. 23.) Georgia courts generally enforce choice-of-law provisions unless the application would contravene public policy. See Becham v. Synthes USA, 482 Fed.Appx. 387, 390-91 (11th Cir. 2012) (per curiam). The parties have not provided any reason for the Court not to follow the Contract's choice of law provision in this case. Accordingly, Plaintiffs' breach of contract claim will be analyzed under Georgia law. See Interface Kanner, LLC v. JPMorgan Chase Bank, N.A., 704 F.3d 927, 932 (11th Cir. 2013) (“The parties have not offered any reason why the choice-of-law provision above contravenes strong public policy, and the court is aware of no such reason. Accordingly, [the law of the forum designated in the choice of law provision] applies in determining whether [the plaintiff] is an intended third-party beneficiary to [the contract].”)

         As to Plaintiff's tort claims, in tort actions, “Georgia continues to apply the traditional choice of law principles of lex loci delicti.” Willingham v. Glob. Payments, Inc., No. 1:12-CV-01157-RWS, 2013 WL 440702, at *14 (N.D.Ga. Feb. 5, 2013). “The rule of lex loci delicti [] requires application of the substantive law of the place where the tort of the wrong occurred.” Carroll Fulmer Logistics Corp. v. Hines, 710 S.E.2d 888, 889 (Ga.Ct.App. 2011). The parties do not dispute that the events giving rise to this action took place in the state of Georgia. Thus, Plaintiffs' claims for negligence, negligent misrepresentation, negligent design, product defect, and defamation are governed by Georgia law.[3]

         II. Defendants are Entitled to Summary Judgment on Claims of Breach of Contract

         Plaintiffs assert a breach of contract claim against Defendants, arguing that “Plaintiffs and those similarly situated were intended beneficiaries of the contract” between the OBA and Defendants (“the Contract”). (Doc. 63, p. 11.) In their original Motion for Summary Judgment, Defendants argue that, because Plaintiffs are not parties to the Contract, they cannot recover. (Doc. 10-2, p. 19.) Defendants also allege that Plaintiffs failed “as a matter of law to establish that they are third-party beneficiaries.” (Id.)

         Under Georgia contract law, “[t]he doctrine of privity of contract requires that only parties to a contract may bring suit to enforce it. Wirth v. Cach, LLC, 685 S.E.2d 433, 434 (Ga.Ct.App. 2009). Here, it is undisputed that Plaintiffs are not parties to the Contract and, thus, are not in contractual privity with Defendants. (Doc. 38-6, p. 2.) “As a general rule, one not in privity of contract with another lacks standing to assert any claims arising from violations of the contract.” Dominic v. Eurocar Classics, 714 S.E.2d 388, 391 (Ga.Ct.App. 2011); see O.C.G.A. § 9-2-20(a). However, an exception to this rule is codified in O.C.G.A. § 9-2-20(b), which provides that “[t]he beneficiary of a contract made between other parties for his benefit may maintain an action against the promisor on the contract.” Such a person, known as a third-party beneficiary, has standing to enforce a contract where “the promisor engages to the promisee to render some performance to a third person.” Dominic, 714 S.E.2d at 391 (citations omitted).

         To decide whether a contract was intended to benefit a third party, courts must look at the contract itself. Where the parties do not dispute which writing constitutes the operative contract and the terms of the contract are not ambiguous, the determination of third-party beneficiary status is a question of law. See id. at 391 (treating question of third-party beneficiary status as question of law where contractual language was not in dispute); Kaesemeyer v. Angiogenix, Inc., 629 S.E.2d 22, 24 (Ga.Ct.App. 2006) (“Construction of a written contract is a question of law for the trial court based on the intent of the parties as set forth in the contract.”); cf. Encompass Indem. Co. v. Ascend Techs., Inc., No. 1:13-CV-02668-SCJ, 2015 WL 10582168, at *6 (N.D.Ga. Sept. 29, 2015) (finding fact dispute as to third party beneficiary status due to factual dispute as to whether contract existed); Arvida/JMB Partners, L.P.-II v. Hadaway, 489 S.E.2d 125, 128 (Ga.Ct.App. 1997) (trial court did not err in submitting ambiguous contract to jury where rules of construction failed to decipher meaning). In such a case, a court is not permitted to use parol evidence to interpret the terms of the contract. O.C.G.A. § 13-2-2(1) (parol evidence used to explain latent or patent ambiguities in a contract); see generally Fluid Equip. Int'l Ltd. v. Reddy-Buffaloes Pump, Inc., No. 2:16-CV-150, 2017 WL 4404247, at *4 (S.D. Ga. Sept. 29, 2017) (“[T]he court is generally permitted to use parol evidence to resolve ambiguities in contracts.”). However, even where parol evidence is permissible, “[p]arol evidence cannot confer third-party beneficiary status where the contract itself fails to do so . . . .” CDP Event Servs., Inc. v. Atcheson, 656 S.E.2d 537, 540 (Ga.Ct.App. 2008) (citation omitted)). Here, there is no question as to the relevant contract and neither party argues that the Contract's language is ambiguous. Thus, the Court will look only to the Contract itself to determine whether Plaintiffs are third-party beneficiaries to the Contract between Defendants and the OBA.[4]

         “A party's status as a third-party beneficiary depends upon the intention of the contracting parties to benefit the third party, and this intention is determined by a construction of the contract as a whole.” Am. Fletcher Mortg. Co. v. First Am. Inv. Corp., 463 F.Supp. 186, 195 (N.D.Ga. 1978). Additionally, the parties' intent must be identifiable on the face of the contract. Atcheson, 656 S.E.2d at 539. “[I]t must clearly appear from the contract that it was intended for [another's] benefit.” Boller v. Robert W. Woodruff Arts Ctr., Inc., 716 S.E.2d 713, 717 (2011) (citations omitted). Importantly, “a third party is entitled to enforce only those specific provisions of a contract of which he is an intended beneficiary.” Archer W. Contractors, Ltd. v. Estate of Pitts, 735 S.E.2d 772, 779 (Ga. 2012); see also City of Atlanta v. Atl. Realty Co., 421 S.E.2d 113, 118 (Ga.Ct.App. 1992) (“In appearing that Atlantic is an intended third party beneficiary to that paragraph 16 of the construction contract, Atlantic has the requisite standing to sue Banks, the promisor of that provision, for any breach of that provision, pursuant to OCGA § 9-2-20(b).” (emphasis added)).

         Defendants argue that the Contract does not contain language indicating that Plaintiffs have standing to enforce it. Specifically, Defendants note that the Contract does not “identify Plaintiffs or other bar applicants as intended beneficiaries, ” “promise specific benefits [or] offer [Plaintiffs] any warranties, ” and “does not expressly state that bar applicants can sue Defendants.” (Doc. 10-2, p. 20.) In response, Plaintiffs rely on Section 1.1 of the Contract, which states in relevant part,

ILG promises to provide, and OBA promises to pay for, a complete, customized, turn-key system of enterprise software for digitizing and electronically administering the entire bar admission progress (hereinafter the “Solution”). The Solution will include a . . . system for OBA's correspondence with applicants . . . .
The Solution will come with complete instructions and will provide for receiving and processing the [applications] and for conducting all related activities of OBA and the Bar admission process. Toward this end, ILG will provide to OBA, tailor to OBA's particular activities, license, install, populate with existing data, and support and maintain [the software] . . . .

(Doc. 38, p. 24; doc. 38-1, pp. 3-4.) The parties disagree on how this section should be interpreted. According to Plaintiffs, “[t]he whole purpose of the contract, as stated on the contract's first page [in Section 1.1], was to benefit the Plaintiffs[.]” (Doc. 38, p. 25.) Plaintiffs claim Section 1.1's use of the word “applicants” demonstrates that “[t]he cornerstone of the contract was to communicate with bar applicants regarding whether the applicants were admitted to the practice of law.” (Id.)

         The record before the Court demonstrates that, as a matter of law, Plaintiffs are not third-party beneficiaries of the contract between Defendants and the OBA for purposes of this action. As noted above, “a third party is entitled to enforce only those specific provisions of a contract of which he is an intended beneficiary.” Archer, 735 S.E.2d at 779. Looking to the language in Section 1.1-the provision used to support Plaintiffs' claim-it does not “clearly appear from the contract itself that both contracting parties intended to benefit [Plaintiffs.]” Kaiser Aluminum & Chemical Corp. v. Ingersoll-Rand Co., 519 F.Supp. 60, 72 (S.D. Ga. 1981). In fact, Section 1.1 unambiguously provides that ILG was to: (1) create software for the OBA; (2) tailor it to the OBA's particular needs; (3) so the OBA could carry out its duties of facilitating admission to the Georgia bar. (Doc. 38-1, pp. 3-4.) Contrary to Plaintiffs' interpretation, the mention of “applicants” in this section is in the course of describing how the software created by ILG will assist the OBA in their communication with bar applicants-a necessary aspect of the OBA's admission process. See, e.g., Kaiser, 519 F.Supp. at 72 (“The fact that a third party is mentioned in [a] contract does not necessarily indicate that a third party beneficiary situation is created.”). Because the contracting parties, Defendants and the OBA, did not intend for Plaintiffs to be beneficiaries of the contractual provisions Plaintiffs allege Defendants breached, Plaintiffs cannot sue to enforce those provisions as third-party beneficiaries.

         In comparison, other provisions in the Contract could render Plaintiffs third-party beneficiaries as to those provisions. “Georgia law is clear that there must be ‘a promise by the promisor to the promisee to render some performance to [the] third person[.]'” AT&T Mobility, LLC v. Nat'l Ass'n for Stock Car Auto Racing, Inc., 494 F.3d 1356, 1361 (11th Cir. 2007). Thus, for Plaintiffs to be deemed third-party beneficiaries, there would need to be an agreement between the promisor-Defendants-and the promisee-the OBA-that Defendants would do something for Plaintiffs. The Contract has several provisions in which Defendants promised to provide support and make certain features available to applicants. Specifically, Defendants promised to: (1) make an electronic communication portal for use by bar applicants, (doc. 38-1, p. 4); (2) provide support to bar applicants who sought to use Defendants' software or encountered difficulty, (id. at pp. 9, 11); and (3) maintain the confidentiality of all information regarding individual bar applicants, (id. at p. 16). While Plaintiffs may have been intended beneficiaries of these contractual provisions, they are not intended to be beneficiaries of the provisions that they claim Defendants breached. As discussed above, the contractual provision that Plaintiffs are attempting to enforce provides that Defendants promised the OBA to create a ...


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