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ARMOUR Capital Management LP v. SS&C Technologies, Inc.

United States District Court, D. Connecticut

March 16, 2018

ARMOUR CAPITAL MANAGEMENT LP, Plaintiff,
v.
SS&C TECHNOLOGIES, INC., Defendant.

          ORDER ON MOTION TO DISMISS

          Jeffrey Alker Meyer United States District Judge

         This case arises from a contractual relationship between ARMOUR Capital Management LP (ACM), a registered investment advisor focusing on mortgage-related securities, and SS&C Technologies Inc. (SS&C), a provider of financial services software and software-enabled services. ACM alleges in essence that SS&C made misrepresentations and failed to comply with its contractual obligations to implement a new software system for ACM. SS&C now moves to dismiss the amended complaint. For the reasons set forth below, I will grant in part and deny in part SS&C's motion to dismiss.

         Background

         The following facts as alleged in the amended complaint are assumed to be true for purposes of this ruling. In 2014, ACM sought to upgrade its portfolio accounting to a full-service investment accounting platform, including software licenses and implementation. Doc. #35 at 5. To achieve this, ACM's executives researched several financial services software providers to find a platform that would serve ACM's needs. Ibid. ACM and SS&C engaged in a series of discussions about using SS&C's CAMRA software for the full-service investment accounting platform that ACM sought. Id. at 5-6.

         During a series of pre-contractual communications, SS&C allegedly made a series of misrepresentations that induced ACM to enter into a contract. ACM identifies three categories of pre-contract misrepresentations. First, SS&C represented that it had extensive experience and expertise regarding complex accounting operations, including those involving mortgage real estate investment trusts. Ibid. Second, SS&C represented that the “hosting” option for utilizing the CAMRA software would be appropriate for ACM's needs. Id. at 7. To that end, SS&C provided a written “proof of concept” to demonstrate that the CAMRA hosting option satisfied ACM's requirements. Ibid. Finally, SS&C represented that it was capable of implementing the software in a successful and timely fashion. Id. at 8. For example, in December of 2014, SS&C provided ACM with an implementation budget and proposed migration timeline which represented that SS&C could complete implementation within four to six months after contract execution. Ibid. ACM alleges that these misrepresentations induced it to enter into a contract with SS&C. Ibid.

         The parties entered into a “Master Agreement” on December 19, 2014. Id. at 9; Doc. #35-1 at 2-17. Under this agreement, ACM purchased a license for the CAMRA software and for implementation services and training for the software. Doc. #35-1 at 2. ACM maintains that SS&C was obligated under the contract to successfully implement the software, while SS&C contends that it was ACM who retained the ultimate responsibility for implementing CAMRA.

         The Master Agreement includes a “Time Limit to Claim Breach” provision stating that any court action for breach must be brought within one year of when a party knew or reasonably should have known of a breach:

No action arising out of any breach or claimed breach of this Master Agreement or transactions contemplated by this Master Agreement may be brought by either party more than one (1) year after the cause of action has accrued. For purposes of this Master Agreement, a cause of action will be deemed to have accrued when a party knew or reasonably should have known of the breach or claimed breach.

Id. at 10 (¶ 6.7.16).

         The Master Agreement also includes a provision regarding “Termination for Material Breach or Insolvency” which states that if either party materially breaches the contract, the non-breaching party may terminate the agreement after providing written notice to the breaching party and the breaching party fails to cure within 30 days. Id. at 7 (¶ 6.4.2.). In addition, the Agreement incorporates several attachments, including the License and Maintenance Program Agreement providing that ACM would perpetually license the software from SS&C and that SS&C would provide maintenance and support. Id. at 11-12. The Maintenance Program contains a limited 364-day warranty that CAMRA would perform in substantial accordance with SS&C's representations. Id. at 12.

         Apart from the Master Agreement, the parties entered into three Work Request Agreements, the first of which was contemporaneous with the Master Agreement. The first Work Request provides for the initial setup of CAMRA and includes the description of services to be performed. Id. at 16.

         After SS&C failed to implement the software, the parties agreed to Work Request Two effective as of March 21, 2016. This second work request further defines SS&C's obligations with respect to implementing the software and caps the fees set forth in Work Request One. Doc. #35-2 at 2-3. Work Request Two also “incorporates the terms of” the Master Agreement. Id. at 2.

         The parties then entered Work Request Three effective as of April 20, 2016, which provides for further onsite and remote implementation services. Doc. #35-3 at 2. Work Request Three states that “the Master Agreement remains in full force and effect.” Ibid. Additionally, under the terms of the Master Agreement, “The terms and conditions of this Master Agreement are incorporated into and made a part of each Work Request.” Doc. #35-1 at 5 (¶ 4.1).

         ACM alleges that SS&C continuously misrepresented that it was capable of implementing CAMRA and would do so in the near future but that it failed. At the start of the Master Agreement term, SS&C represented that it could successfully implement CAMRA in four to six months. Doc. #35 at 11. On March 31, 2015, three months after the effective date of the Master Agreement, SS&C provided an “Implementation Roadmap” that confirmed that it had “obtained sufficient information to scope out the necessary steps and criteria for a successful implementation of SS&C's applications.” Id. at 12.

         But then, after confronting difficulty with implementing CAMRA, SS&C delayed the deadline for implementation completion until early August 2015. Id. at 11. SS&C continued to delay this date until SS&C stopped providing a revised deadline altogether. Ibid. SS&C provided multiple reasons for the implementation failure to and continually assured ACM that it would soon complete the implementation. Id. at 11-12.

         In Fall of 2015, ACM began to withhold payments due to SS&C's failure to implement CAMRA. Id. at 13. ACM repeatedly notified SS&C in writing of its failure to implement CAMRA throughout 2015, 2016, and 2017. Ibid.

         ACM alleges that SS&C made specific misrepresentations to induce ACM to not make a warranty claim under the Master Agreement, to not terminate the Master Agreement, to release payments to which SS&C was not entitled, and to enter into further Work Requests. For instance, on December 18, 2015, two weeks before the expiration date of the warranty on December 29, 2015, ACM expressed concerns regarding the implementation of CAMRA and noted that ACM had a claim under the warranty. Id. at 13. SS&C reassured ACM that the problems with CAMRA were fixable and implementation was close to being completed. Id. at 14.

         In April 2016, ACM requested that SS&C extend the warranty, but SS&C declined because ACM had recourse under the Maintenance Agreement. Ibid. Based on this misrepresentation, ACM agreed to Work Request Three. Ibid. SS&C also induced ACM not to terminate the master agreement by providing new experts who would assure ACM that their expertise would solve the problems with CAMRA. Ibid. SS&C never successfully ...


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