United States District Court, E.D. Missouri, Eastern Division
MEMORANDUM AND ORDER
CHARLES A. SHAW UNITED STATES DISTRICT JUDGE
removed diversity matter is before the Court on remaining
defendant CenturyLink Communications, L.L.C.'s
(“CenturyLink”) motion to dismiss plaintiff
OS33's Petition (“complaint”) under Rules
12(b)(6) and 9(b), Federal Rules of Civil
Procedure. Plaintiff opposes the motion and it is
fully briefed. For the following reasons, the motion to
dismiss will be granted in part and denied in part.
OS33 (“plaintiff”) is a New York corporation that
provides cloud network and storage services to its clients.
Its principle place of business is in New York. Defendant
CenturyLink is a Delaware corporation with its principle
place of business in Louisiana. Compl. ¶¶ 1-2.
2011, plaintiff entered into a Master Services Agreement
(“MSA”) with nonparty Savvis Communications
Corporation (“Savvis”), under which Savvis would
provide certain services to plaintiff related to computer
hardware, maintenance, and storage services. Id.
¶ 5. Savvis underwent corporate restructuring and a name
change, and transferred to CenturyLink its accounts
receivable for plaintiff and the obligation to provide
plaintiff the computer-related services. Following the
transfer, CenturyLink provided services to plaintiff under
the MSA starting in 2011. Id. ¶¶ 6-8, 12.
services CenturyLink provided were also governed by a Savvis
Service Schedule and any subsequent Service Orders or
Statements of Work outlining services to be performed for
plaintiff under the MSA, as set forth in any such Service
Order or Statement of Work. Id. ¶¶ 11-12;
Ex. A., MSA at ¶ 1, ¶ 1. Under the terms of the
Savvis Service Schedule, the Term of Service of any Service
provided under the Service Orders is defined as:
2. Term. Services have a minimum term which
begins on the Billing Commencement Date (“BCD”)
and continues for the period set forth in the relevant
Service Order or SOW (the “Initial Term”), at the
conclusion of which, the Service will automatically renew for
successive periods equal to the Initial Term, unless
terminated by either party in writing at least 60 days prior
to the expiration of the then-current Service Term. The
Initial Term and any renewal terms are collectively referred
to as the “Service Term”.
Id. ¶ 13; Ex. B, Savvis Service Schedule at
¶ 1, ¶ 2. The Savvis Service Schedule further
provides that every service provided has its own Billing
Commencement Date that is independently applicable, and the
Billing Commencement Date of any service shall not affect
that of any other Service. Id. ¶ 14; Ex. B,
Savvis Service Schedule at ¶ 1, ¶ 3.
the parties' MSA, if a customer terminates any Service
after the Billing Commencement Date but prior to the
conclusion of the Service term, for any reason other than
cause, or if CenturyLink terminates during that time frame
then Customer shall be liable for: (a) an early termination
charge equal to 50% of the then current [Monthly Recurring
Charge] for the affected Services multiplied by the number of
months remaining in the Service term; (b) Service charges
accrued but unpaid as of the termination date; and (c) any
out-of-pocket costs incurred by or imposed upon Savvis (e.g.,
ordered equipment, licenses, carrier termination charges).
The parties agree that any cancellation fees and early
termination charges set forth in the Agreement constitute
liquidated damages and are not a penalty. If a particular
Service is terminated upon which another service is
dependent, all such dependent services shall be deemed to be
terminated as well.
Id. ¶¶ 15-16; Ex. A, MSA at ¶ 2,
August 2016, plaintiff requested the termination of certain
Services which it no longer required, as being unneeded or
obsolete. Id. ¶ 17. CenturyLink advised
plaintiff that cancellation of the Services would result in
Early Termination Charges of $626, 133.82, and stated it
determined this amount was due by taking 50% of the Monthly
Recurring Charges on each Service and multiplying each by the
number of months remaining in the Service Term. Id.
¶¶ 18-19. After being advised of the Early
Termination Charges, plaintiff requested that CenturyLink not
terminate the Services. Despite plaintiff's request,
CenturyLink terminated the Services and has claimed that
plaintiff is responsible for the alleged Early Termination
Charges. Id. ¶¶ 20-21.
alleges that the “Service Terms for the Services are
incorrect because [CenturyLink] would improperly restate the
Billing Commencement Date's [sic] for services any time a
change was made to a Service Order by the Parties.”
Id. ¶ 23. “For example, if an upgrade was
made to a leased server on July 1, 2015, with a Service Term
of 36 months, and a Billing Commencement Date of January 1,
2013, [CenturyLink] would change the Billing Commencement
Date for the 36 month Service Term for the server lease to
being July 1, 2015 - effectively changing the Service Term
from 36 months to 54 months.” Id. ¶ 24.
alleges that CenturyLink “would further change the date
of the Billing Commencement Date for calculating the Service
Term without advising Plaintiff of this change, and without
issuing a new written Service Order.” Id.
¶ 25. Plaintiff claims that by “failing to issue
new Service Orders showing the Change in the Billing
Commencement Date for the Service, [CenturyLink] made it
impossible for Plaintiff to track the Service terms for the
various Services which it requested [CenturyLink] to supply
pursuant to MSA.” Id. ¶ 26. Finally,
plaintiff alleges that “by failing to issue new Service
Orders showing the Change in the Billing Commencement Date
for the Service, Plaintiff never agreed in writing to any
change in the Billing Commencement Date or Service Term
regarding any Services provided by [CenturyLink].”
Id. ¶ 27.
of the complaint seeks a declaratory judgment that (1)
CenturyLink violated the MSA and the Service Schedule by
changing the Service Term and Billing Commencement Dates for
Services, without notice to plaintiff, whenever there was a
change to the original Service Order; (2) CenturyLink lacked
cause to terminate Services it was providing to plaintiff
after plaintiff withdrew its request for early termination;
(3) CenturyLink's claim for early termination charges is
improper based on its breach of the parties' agreement by
terminating Services without cause, and due to its improper
change in the Service Terms without notice to plaintiff; and
(4) plaintiff does not owe any early termination charges for
Services that were cancelled by CenturyLink. Id. at
II is a claim for common law fraud. Plaintiff alleges that
CenturyLink changed the Billing Commencement Date for
Services being provided, without notice to plaintiff, any
time the parties made a change to the Service. Plaintiff
asserts that changing the Billing Commencement Date altered
the Service Term under the original Service Order, and
CenturyLink knew that by making this change it was changing
the date upon which any Service would end or auto renew, and
therefore was changing the terms of the Service Orders
between the parties. Id. ¶¶ 38-41.
Plaintiff alleges CenturyLink knew the parties'
Agreement “did not allow for the Service Term
to be changed, as the Agreement only provided for the Service
Term to be renewed, ” but CenturyLink
“represented to Plaintiff the remaining terms for
various services which were cancelled based upon these
improperly altered changed dates.” Id.
¶¶ 42-43. Plaintiff alleges that CenturyLink
“represented these false and incorrect dates to
Plaintiff with the intention that Plaintiff rely upon them in
paying” early termination charges, although CenturyLink
knew its representation of the charges was “based upon
false and incorrect Service Term dates.” Id.
¶¶ 44-45. Plaintiff alleges that CenturyLink
intended for it to rely on the representations, which
plaintiff did not know were false when made, and plaintiff
relied on the representations. Id. ¶¶
moves to dismiss both counts of the complaint for failure to
state a claim upon which relief can be granted.
purpose of a motion to dismiss for failure to state a claim
is to test the legal sufficiency of the complaint. To survive
a motion to dismiss pursuant to Rule 12(b)(6) for failure to
state a claim upon which relief can be granted, “a
complaint must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on
its face.'” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). A claim for relief
“must include sufficient factual information to provide
the ‘grounds' on which the claim rests, and to
raise a right to relief above a speculative level.”
Schaaf v. Residential Funding Corp., 517 F.3d 544,
549 (8th Cir. 2008) (citing Twombly, 550 U.S. at 555
& n.3). This obligation requires a plaintiff to plead
“more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not
do.” Twombly, 550 U.S. at 555.
motion to dismiss, the Court accepts as true all of the
factual allegations contained in the complaint, even if it
appears that “actual proof of those facts is
improbable, ” id. at 556, and reviews the
complaint to determine whether its allegations show that the
pleader is entitled to relief. Id. at 555-56;
Fed.R.Civ.P. 8(a)(2). The principle that a court must accept
as true all of the allegations contained in a complaint does
not apply to legal conclusions, however. Iqbal, 556
U.S. at 678 (“Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do
courts are generally to consider only the complaint's
allegations in reviewing a Rule 12(b)(6) motion, they may
consider documents “necessarily embraced by the
complaint” without converting a motion to dismiss into
a motion for summary judgment. Ryan v. Ryan, 2018 WL
2089793, at *3 (8th Cir. May 7, 2018). This category includes
“documents whose contents are alleged in a complaint
and whose authenticity no party questions, but which are not
physically attached to the pleading.” Id.
(quoted case omitted). Here, the complaint refers to two
exhibits it states are attached, a Master Services Agreement
and a Savvis Service Schedule, Complaint ¶¶ 5, 11,
but no exhibits were filed with the complaint. CenturyLink
filed copies of these exhibits with its memorandum in support
of the motion to dismiss, and plaintiff attached the same two
exhibits to its memorandum in opposition. The Court finds the
two exhibits are necessarily embraced by the complaint and
are properly considered on the motion to dismiss.
Count I - Declaratory Judgment/Breach of Contract
threshold matter, plaintiff argues in its opposition that the
motion to dismiss must be denied because Count I states a
cause of action under the Missouri Declaratory Judgment Act.
(Doc. 19 at 6-7.) This argument is not well taken. Although
plaintiff brought this action in state court under the
Missouri Declaratory Judgment Act, the state act is a
procedural remedy that does not control in federal court, and
upon removal the case becomes governed by the federal
Declaratory Judgment Act, 28 U.S.C. §§ 2201-02.
G.S. Robins & Co. v. Alexander Chem. Corp., 2011
WL 1431324, at *4 n.1 (E.D. Mo. Apr. 14, 2011). “The
Federal Rules of Civil Procedure apply to declaratory
judgment actions, see Fed.R.Civ.P. 57, and thus the
plaintiff must comply with the pleading requirements of
Rule 8(a)[.]” Karnatcheva v. JPMorgan Chase Bank,
N.A., 704 F.3d 545, 547 (8th Cir. 2013). “[I]t is
well settled that the [federal] declaratory judgment statute
is strictly remedial in nature and does not provide a
separate basis for subject matter jurisdiction.”
First Fed. Sav. & Loan Ass'n of Harrison, Ark. v.
Anderson, 681 F.2d 528, 533 (8th Cir. 1982). “A
successful action for declaratory judgment requires a viable
underlying cause of action.” Essling's Homes
Plus, Inc. v. City of St. Paul, Minn., 356 F.Supp.2d
971, 984 (D. Minn. 2004). Consequently, where a
plaintiff's underlying substantive claim fails, its
request for declaratory judgment fails as well. Salau v.
Denton, 139 F.Supp.3d 989, 1012 (W.D. Mo. 2015).
Count I, plaintiff seeks a declaratory judgment regarding
construction of the Agreement between the parties regarding
the calculation of Early Termination Charges and
CenturyLink's change of the Billing Commencement Date for
Services. Compl. ¶ 33. Plaintiff asserts that by
changing the BCD for Services, failing to give notice of
changes to the BCDs, and refusing to accept plaintiff's
withdrawal of its early termination request, CenturyLink has
breached the parties' Agreement. Id. ¶ 35.
The Court therefore examines Count I to determine whether
plaintiff adequately pleads an action for breach of contract.
diversity action, state law governs the rules for construing
contractual agreements. Orion Fin. Corp. of S. Dak. v.
American Foods Group, Inc., 281 F.3d 733, 738 (8th Cir.
2002). The parties agree that Missouri law governs this
action. In determining the scope of Missouri law,
the Court is bound by the decisions of the Missouri Supreme
Court. Taylor v. St. Louis County Bd. of Election
Comm'rs, 625 F.3d 1025, 1027 (8th Cir. 2010).
Decisions from the Missouri Court of Appeals are also
relevant and “must be followed when they are the best
evidence of Missouri law.” Id. at 1028, n.2
(quoting Bockelman v. MCI Worldcom, Inc., 403 F.3d
528, 531 (8th Cir. 2005)).
Missouri law, the essential elements of a breach of contract
action are: “(1) the existence and terms of a contract;
(2) that plaintiff performed or tendered performance pursuant
to the contract; (3) breach of the contract by the defendant;
and (4) damages suffered by the plaintiff.” Keveney
v. Missouri Military Acad., 304 S.W.3d 98, 104 (Mo.
2010) (en banc). A plaintiff must “identify which
rights or obligations [the defendant] breached under the
contract in order to establish a claim for breach of
contract.” Lucero v. Curators of Univ. of Mo.,
400 S.W.3d 1, 5 (Mo.Ct.App. 2013) (quotation and citation
Missouri, the interpretation of a contract is a question of
law. Leggett v. Missouri State Life Ins., 342 S.W.2d
833, 850 (Mo. 1960) (en banc). The “cardinal principle
for contract interpretation is to ascertain the intention of
the parties and to give effect to that intent.”
Butler v. Mitchell-Hugeback, Inc., 895 S.W.2d 15, 21
(Mo. 1995) (en banc) (citing Royal Banks of Missouri v.
Fridkin, 819 S.W.2d 359, 362 (Mo. 1991) (en banc)). It
is presumed that the natural and ordinary meaning of the
language used expresses the intent of parties to a contract.
J.E. Hathman, Inc. v. Sigma Alpha Epsilon Club, 491
S.W.2d 261, 264 (Mo. 1973) (en banc). Accordingly, “In
interpreting a contract, [courts] must use the plain,
ordinary, and usual meaning of the contract's words and
consider the whole document.” Butler, 895