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Blue Rooster LLC v. Perficient, Inc.

United States District Court, E.D. Missouri, Eastern Division

May 2, 2019

BLUE ROOSTER LLC, Blue Rooster,
v.
PERFICIENT, INC., Perficient.

          MEMORANDUM AND ORDER

          AUDREY G. FLEISSIG UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on Plaintiff Blue Rooster LLC's motion (ECF No. 35) for partial summary judgment on Count I, and Defendant Perficient, Inc.'s cross motion (ECF No. 55) for summary judgment on all Counts of Blue Rooster's complaint. The Court heard oral argument on both motions on April 4, 2019. For the reasons set forth below, the Court will grant Perficient's motion and deny Blue Rooster's motion.

         BACKGROUND

         This breach of contract action arises out of Perficient's purchase of Blue Rooster's proprietary software known as Rise Foundation (“Rise”). Perficient agreed to pay Blue Rooster a royalty on certain revenue it earned from Rise, after the deduction of certain costs, for a three-year period. The parties' dispute centers on how that royalty payment was to be calculated. For the purpose of the motions before the Court, the record establishes the following.

         Rise is a “package of products and services, ” that “[w]hen deployed on a company's system, . . . quickly builds an inward-facing website that sits on top of [Microsoft] SharePoint and Office 365, making those products customized and user-friendly.” Compl., ECF No. 1 ¶ 15. According to the complaint, Rise is “effectively, ‘intranet-in-a-box,' and because it is software sold on a subscription basis, it is considered ‘software as a service' or ‘SaaS.'” Id. ¶ 17.

         “Rise intranet is standardized, but companies . . . can easily customize it with branding, add-on products, and specialized applications.” Id. at ¶ 18. When Blue Rooster owned Rise, in addition to the subscription fees charged for access to Rise, Blue Rooster offered consulting services to help customers customize Rise, and Blue Rooster charged separate fees for these services. Id.

         Asset Purchase Agreement (“APA”)

         Perficient purchased Rise pursuant to the APA, signed on October 12, 2015. ECF No. 1-1. The opening paragraphs of the APA defined Perficient as the “Buyer” and Blue Rooster as the “Seller, ” and stated, in relevant part:

Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, certain of Seller's assets and properties used or held for use in connection with Seller's Rise Foundation software-as-a-service (the “Product”), and in connection therewith, Buyer has agreed to assume certain of the liabilities of Seller relating to the Product, all on the terms and conditions set forth herein (the “Acquisition”).[1]

         APA at 1 (emphasis in original).

         Section 2.05 set forth the “Purchase Price and Related Matters” for Perficient's purchase of Rise. This section stated:

2.05 Purchase Price and Related Matters. In consideration of the sale and transfer of all of Seller's rights, title and interests in the Acquired Assets, Buyer shall:
(a) assume the Assumed Liabilities;[2]
(b) once the Closing Date Deferred Revenue Amount[3] has been recouped by Buyer in full, during the Payment Period[4] and subject to the aggregate cap stated below, pay to Seller on the 15th day of each month the Monthly Payment Amount, if any, as calculated in accordance with Schedule I attached hereto and incorporated herein, which aggregate amount of monthly payments shall in no event exceed Five Million Dollars ($5, 000, 000); and
(c) pay to Seller on the 15th day of each month, the amount of all unpaid PreClosing Accounts Receivable,
collectively, items (a) and (b) above shall be deemed the “Purchase Price”.

APA § 2.05 (emphasis in original).

         Schedule I, in turn, stated, in relevant part:

The Payment Period and all payments under this Schedule I shall terminate on October 12, 2018, or earlier upon the payment of an aggregate amount of $5, 000, 000. For the avoidance of doubt, in no event shall the aggregate Monthly Payment Amounts exceed $5, 000, 000.
Monthly Payment Amounts
During the Payment Period, the Monthly Payment Amount, if any, shall be (a) an amount equal to the product of (i) 30% and (ii) the Rolling License Fee Excess less (b) the aggregate amount already paid to Seller during the Payment Period.
Rolling License Fee Excess means an amount equal to (a) the cumulative Product license fees received by Buyer through the current monthly reporting period since the Closing Date less (b) the Cumulative Break-Even Amount.
The Cumulative Break-Even Amount shall be an amount equal to the Closing Date Deferred Revenue Amount plus the product of (a) $54, 000 and (b) the number of months (which number shall be an integer) concluded within the Payment Period

APA Schedule I.

         The term “Product license fees” is not defined in Schedule I or anywhere else in the APA. It is undisputed that the Cumulative Break-Even Amount, and, specifically, the $54, 000 cumulating on a monthly basis, was intended to compensate Perficient for the salaries it would pay to three Blue Rooster employees who supported Rise (the “Rise employees”) and who would be transferring to Perficient.

         Schedule I included a few sample payment calculations, using hypothetical numbers, and then concluded with the following paragraphs:

Further Agreements:
Seller currently sells the Product on a subscription basis - this subscription is monthly in nature and for a period of 3 years renewable annually. Clients are inclined to pay for all SaaS services up front for the entire year and some have requested to pay for the three year period on an upfront basis.
Amounts due hereunder shall be calculated using the entire revenue received by Buyer; provided, however, if Buyer returns any portion of the up front fees to the client for any reason, Seller shall reimburse Buyer for its allocable share of the returned fees upon demand by Buyer and Buyer shall be entitled to withhold payment of and offset against payment of the Monthly Payment Amount any amount due hereunder from Seller to Buyer as a result of any such returned fees. The right of offset is cumulative to any other rights or remedies Buyer may have.

Id.[5]

         Monthly ...


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