FILED: NEW YORK COUNTY CLERK 06/22/ /12/ :16 04:56 PM INDEX NO /2016 NYSCEF DOC. NO RECEIVED NYSCEF: 06/22/2016

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1 FILED: NEW YORK COUNTY CLERK 06/22/ /12/ :16 04:56 PM INDEX NO /2016 NYSCEF DOC. NO RECEIVED NYSCEF: 06/22/ /12/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK PERSEUS TELECOM LTD., v. Plaintiff, INDY RESEARCH LABS LLC Index No /2016 AFFIDAVIT OF MITCH SONIES Defendant. STATE OF NEW YORK } } ss.: COUNTY OF NEW YORK } MITCH SONIES, being duly sworn, deposes and says: 1. I am a managing member of Indy Research Labs, LLC ( Indy ). I have personal knowledge of the facts and circumstances recited herein. 2. Indy is a quantitative trading firm that was established in July 2015 and began developing its proprietary trading system in September Quantitative trading firms are critically dependent on high-speed telecommunications networks and computer servers, so that they can remain in constant contact with electronic trading exchanges. This places extreme demands on the firms network and datacenter infrastructure. Many firms, particularly smaller firms like Indy, rely on colocation vendors to provide and manage this infrastructure. 4. In June 2015, Indy began evaluating Perseus Telecom Ltd. ( Perseus ) as a possible provider of colocation services. We were hoping to start our trading system development in September 2015 and begin live trading in mid Both of these stages depended on having colocation services available. 1 of 5

2 5. On August 12, 2015, Perseus ed us a draft of its Service Order Form, which itemized the colocation services we were discussing and the related one-time activation expenses and monthly recurring fees for them. The draft Service Order Form also listed the pricing of computer server and networking equipment to be owned by Indy that Perseus could potentially purchase on Indy s behalf. The draft Service Order Form provided, in a section titled Approval, that so long as a Master Services Agreement had not been entered into, Perseus s Master Terms & Conditions would apply to the Service Order Form, after which the Master Services Agreement would replace the Master Terms & Conditions. A true and correct copy of Perseus s and the draft Service Order Form attached to it is attached hereto as Exhibit A. 6. On the same day, August 12, 2015, Perseus also ed us a draft of its form Master Services Agreement. A true and correct copy of that and the draft Master Services Agreement attached to it is attached hereto as Exhibit B. 7. On August 21, 2015, Perseus s President of Global Financial Services Anthony Gerace ed us an updated draft of the Service Order Form, reflecting the parties negotiations since August 12, This draft included the same provisions referring to the Master Terms & Conditions and the Master Services Agreement that were included in the August 12 draft. A true and correct copy of Perseus s and its attachments is attached hereto as Exhibit C. 8. We at Indy carefully reviewed the draft documents and determined that we could not agree to the Master Terms & Conditions or the Master Services Agreement. Many of the provisions were unacceptable, particularly given how dependent our business would be on the colocation services Perseus was to provide. For example, the terms did not require Perseus to actually meet our specific deadlines, only to use commercially reasonable efforts to do so, and did not require them to meet our required service levels, only to be substantially in conformity 2 2 of 5

3 with them. We would be required to pay all invoices in full regardless of any dispute. And if Perseus did not materially breach these terms, we would not be able to terminate the agreement or any part of it unless we paid for a full three years of services. 9. I discussed these concerns with Perseus over the telephone, and confirmed in an on August 28, 2015, that Indy could not agree to these terms, noting some of our concerns, in particular that they did not include sufficient remedies for Indy if Perseus underperformed. I proposed new language for the Approval section of the Service Order Form that would replace the references to the Master Terms & Conditions and Master Services Agreement, instead turning the Service Order Form into a limited, standalone agreement that would obligate Indy only to (1) work in good faith to negotiate final terms for a Master Services Agreement, and (2) pay Perseus for any out-of-pocket costs for equipment procured on our behalf and project management services during the negotiation period. A true and correct copy of my is attached as Exhibit D. 10. In response, Perseus proposed adding a clause that would protect Perseus in the event that 60 days passed and Indy was using Perseus s colocation services without a Master Services Agreement in place. In that case, if Indy continued to use the colocation services and was not negotiating the Master Services Agreement in place, it would be obligated to purchase the colocation services subject to Perseus s standard terms and conditions. I agreed to that addition. A true and correct copy of that exchange is attached as Exhibit E. 11. On August 31, 2015, Gerace sent me a new draft of the Service Order Form, in which Perseus had added the newly negotiated language to the Circuit Description & Special Instructions section of the form rather than the Approval section. The references to the Master Terms & Conditions and the Master Service Agreement remained in the Approval section. Gerace told me in an that he was only able to edit the Circuit Description & 3 3 of 5

4 Special Instructions section of the form. A true and correct copy of these s are attached as Exhibit F. 12. To make sure our intentions were absolutely clear, I suggested adding the phrase Notwithstanding any contrary provision under Approval below to the new language in the Circuit Description & Special Instructions section. Gerace directed me to add that language directly onto the form before I signed it. I did so, signed the Service Order Form on behalf of Indy with this modification, and ed a copy back to Gerace. A true and correct copy of that and its attachment is attached as Exhibit G. 13. Neither I nor anyone else at Indy ever signed or otherwise agreed to the Master Terms & Conditions or any form of the Master Services Agreement. Perseus s counsel was slow to respond to our attempts to negotiate the terms of the service documents. In fact, as late as October 2015, I was still asking Perseus s counsel to send me new versions of service documents referenced in the draft Master Services Agreement that set forth key requirements for the colocation services. A true and correct copy of an from Perseus s counsel stating that they are working on revised language for these documents is attached as Exhibit H. 14. At the time I signed the Services Order Form, Perseus proposed to begin providing colocation services to Indy by the end of September During September and October 2015, it became clear that Perseus could not meet the deadline it had initially promised. Perseus repeatedly moved its timeline back, and as of October 30, 2015, none of the colocation services Perseus was supposed to provide were yet active. 16. Indy was very dissatisfied with Perseus s repeated delays and failures to communicate. On October 30, 2015, I therefore called Gerace and told him that we no longer had confidence in Perseus as a business mission-critical service provider and had decided not to 4 4 of 5

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6 FILED: NEW YORK COUNTY CLERK 06/22/ :16 PM INDEX NO /2016 NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 06/22/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK PERSEUS TELECOM LTD., v. Plaintiff, Index No /2016 INDY RESEARCH LABS LLC Defendant. MEMORANDUM OF LAW IN SUPPORT OF DEFENDANT INDY RESEARCH LABS LLC S MOTION TO DISMISS THE COMPLAINT PURSUANT TO CPLR 3211(a)(1) AND 3211(a)(7) CLARICK GUERON REISBAUM LLP Emily Reisbaum Sarah Louise Bishop 220 Fifth Avenue, 14th Floor New York, New York (212) Attorneys for Defendant Indy Research Labs LLC 1 of 19

7 Table of Contents Table of Authorities...ii Preliminary Statement...1 Statement of Facts...1 I. Background...1 II. Perseus and Indy Discuss Two Contracts but Agree on Only One...2 III. Indy Lost Confidence in Perseus and Called Off the Work When It Became Clear that Perseus Would Not Be Able To Get the Colocation Services up and Running in a Timely Way...5 IV. This Litigation...6 Argument...6 I. Perseus s Breach of Contract Claims Should Be Dismissed...8 A. Perseus Has Failed To Plead Breach of Contract Claims Based on the Master Services Agreement...8 B. The Master Services Agreement s Liquidated Damages Clause Is Unenforceable as a Matter of Law...11 II. Plaintiff s Breach of Covenant Claim Must Be Dismissed Because It Is Duplicative of the Breach of Contract Claims and Is Governed by an Existing Contract...13 A. Plaintiff Has Failed To Plead a Claim for Breach of the Covenant of Good Faith and Fair Dealing...13 B. Perseus May Not Sustain a Claim in Quasi-Contract or for Promissory Estoppel Because a Valid Contract the Service Order Form Governs Its Claim...14 Conclusion...15 i 2 of 19

8 Table of Authorities Cases 150 Broadway N.Y. Assocs., L.P. v. Bodner, 14 A.D.3d 1 (1st Dep t 2004)... 6, Van Duzer Realty Corp. v. Globe Alumni Student Assistance Ass n, Inc., 24 N.Y.3d 528 (2014) W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144 (2002) Third Ave. Co. v. M.W. Realty Assocs., 58 N.Y.2d 447 (1983)... 7 Acme Supply Co. v. City of N.Y., 39 A.D.3d 331 (1st Dep t 2007) Basic Yield Alpha Fund (Master) v. Goldman Sachs Group, Inc., 115 A.D.3d 128 (1st Dep t 2014)... 7 Biondi v. Beekman Hill House Apartment Corp., 257 A.D.2d 76 (1st Dep t 1999)... 7 Chatterjee Fund Mgmt., L.P. v. Dimensional Media Assocs., 260 A.D.2d 159 (1st Dep t 1999)... 9 Facebook, Inc. v. DLA Piper LLP (US), 134 A.D.3d 610 (1st Dep t 2015)... 7 Flomenbaum v. N.Y. Univ., 71 A.D.3d 80 (1st Dep t 2009)... 8 IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132 (2009) J.R. Stevenson Corp. v. Westchester Cty., 113 A.D.2d 918 (2d Dep t 1985) ii 3 of 19

9 JMD Holding Corp. v. Cong. Fin. Corp., 4 N.Y.3d 373 (2005)... 11, 12 LeRoy v. Sayers, 217 A.D.2d 63 (1st Dep t 1995) Logan Advisors, LLC v. Patriarch Partners, LLC, 63 A.D.3d 440 (1st Dep t 2009) MBIA Ins. Co. v. GMAC Mortg. LLC, 914 N.Y.S.2d 604 (Sup. Ct. 2010) Montefiore v. Soja, 292 A.D.2d 241 (1st Dep t 2002)... 9 Motichka v. Cody, 5 A.D.3d 185 (1st Dep t 2004) Richard Feiner & Co. Inc. v. Paramount Pictures Corp., 95 A.D.3d 232 (1st Dep t 2012) Schroeder v. Pinterest Inc., 133 A.D.3d 12 (1st Dep t 2015) Sheiffer v. Shenkman Capital Mgmt., Inc., 291 A.D.2d 295 (1st Dep t 2002) Sina Drug Corp. v. Mohyuddin, 122 A.D.3d 444 (1st Dep t 2014) Taussig v. Clipper Group, L.P., 13 A.D.3d 166 (1st Dep t 2004) Truck Rent-A-Ctr., Inc. v. Puritan Farms 2nd, Inc., 41 N.Y.2d 420 (1977) Rules C.P.L.R , 6, 7 iii 4 of 19

10 Defendant Indy Research Labs LLC ( Indy ) respectfully submits this memorandum of law in support of its motion to dismiss the Complaint filed by Perseus Telecom Limited ( Perseus ), pursuant to Section 3211 of the Civil Practice Law and Rules. PRELIMINARY STATEMENT Perseus s claims against Indy are shamelessly dishonest. Perseus seeks more than $1.25 million as a termination fee under a draft agreement that Indy not only never signed, but explicitly rejected. Perseus s allegations are flatly contradicted by the documents attached to its Complaint, and by the parties written negotiations of the only contract they actually entered into. The Complaint should be dismissed in its entirety, with prejudice. STATEMENT OF FACTS 1 I. Background Defendant Indy is a quantitative trading firm that was established in July 2015 and began development of its proprietary trading system in September (Compl. 4; Sonies Aff. 2.) A quantitative trading firm is critically dependent on high-speed telecommunication networks and computer servers to remain in constant contact with electronic trading exchanges, placing extreme demands on its network and datacenter infrastructure. (Sonies Aff. 3.) Many firms, and in particular smaller firms such as Indy, rely on colocation vendors to provide and manage this infrastructure. 1 These facts are drawn from the allegations of the Complaint (attached as Ex. 1), the Affidavit of Mitch Sonies, dated June 22, 2016 ( Sonies Aff. ), and the exhibits to each. Because, as explained below (see infra Argument 1.A), Perseus misleadingly attached to its Complaint as a single Exhibit A two separate contracts one of which Indy entered into and one of which it did not for clarity s sake, the two contracts are reattached, separately, in Exhibits B and G to the Sonies Affirmation. 1 5 of 19

11 In June 2015, Indy began evaluating Plaintiff Perseus as a potential colocation services provider, hoping to start trading system development in September 2015 and begin live trading in mid-2016, each of which depended on the availability of such colocation services. (Id. 4.) II. Perseus and Indy Discuss Two Contracts but Agree on Only One On August 12, 2015, Perseus sent Indy for its review and comment a draft of its Service Order Form, which itemized the colocation services under discussion and the related monthly recurring fees and non-recurring activation expenses, as well as the pricing of computer server and networking equipment to be owned by Indy that Perseus would purchase on Indy s behalf. (Sonies Aff. 5 & Ex. A.) As initially drafted, the Service Order Form obligated Indy to purchase the services as described therein. The draft Services Order Form also referenced a separate form of Master Services Agreement, an initial, non-negotiated draft of which Perseus sent to Indy on the same day. (Sonies Aff. 6 & Ex. B.) The Master Services Agreement is a lengthy document containing comprehensive terms and conditions relating to the delivery of the colocation services and the respective obligations of the parties in relation thereto. (Id. Ex. B-3.) The draft Service Order Form provided, in a section titled Circuit Description, that the parties would work in good faith to negotiate a Master Services Agreement. (Id. Ex. A.) It also provided, in a section titled Approval, that for so long as a Master Services Agreement had not been entered into, Perseus Master Terms & Conditions would apply to the Service Order Form, after which the Master Services Agreement would replace the Master Terms & Conditions. Perseus and Indy continued to negotiate the technical scope and fees, resulting in a new draft of the Services Order Form on August 21, (Sonies Aff. 7 & Ex. C.) As part of its review of the terms, Indy identified numerous unacceptable provisions of the draft Master Services Agreement and the Master Terms & Conditions, particularly given how dependent 2 6 of 19

12 Indy s business would be on Perseus s ability to provide the colocation services. (Sonies Aff. 8.) For example, Perseus was required only to use commercially reasonable efforts to meet Indy s deadlines (Sonies Aff. Ex. B-3 3.1); the colocation services needed only to operat[e] substantially in conformity with the levels the parties agreed to (id. 3.2); Perseus itself would decide whether the services it provided, were substantially in conformity with the parties agreements (id. 3.2); Indy was required to pay all invoices in full regardless of whether it disputed them (id. 2.4(i), 2.7); and as long as Perseus managed not to materially breach these extremely lenient terms, Indy could not terminate the relationship unless it paid, as a termination fee, 100% of the fees for the full, three-year term of the agreement (id. 4.3), totaling more than $1.25 million. (Sonies Aff. 8 & Ex. B-3; see Compl ) After discussing these concerns with Perseus, on August 28, 2015, Indy confirmed in writing that it would not sign the Service Order Form in its most recent form because Indy was unwilling to be subject to the Master Terms & Conditions, which could apply indefinitely if the parties were unable to agree on acceptable terms for the Master Services Agreement. (Sonies Aff. 9 & Ex. D.) Indy therefore proposed new language for the Approval section of the Services Order Form that would turn it into a limited, standalone agreement that, instead of obligating Indy to purchase the services described in the Service Order Form, would obligate it only to (i) work in good faith to negotiate final terms for a Master Services Agreement and (ii) reimburse Perseus for any out-of-pocket costs for equipment and project management services during the period of negotiation. (Id.) Perseus agreed to this new language with a modification that protected Perseus against Indy s continued use of the colocation services where a Master Services Agreement had not been agreed to as a result of Indy s failure to work in good faith to finalize the agreement. (Sonies Aff. 10 & Ex. E.) Specifically, the modification provided that if, after 60 days from the date of the 3 7 of 19

13 Service Order Form all of the following conditions were met: (1) a Master Services Agreement was not in place, (2) Indy had violated the commitment to work in good faith to finalize a Master Services Agreement, (3) Perseus had provided the colocation services, and (4) Indy continued to use those colocation services, then (5) Indy would be obligated to purchase the colocation services subject to Perseus standard terms and conditions. (Id.) On August 31, 2015, Perseus sent an updated draft of the Services Order Form, in which Perseus had added the newly negotiated language to the section of the Services Order Form titled Circuit Description & Special Instructions, rather than the Approval section where Indy had suggested. (Sonies Aff. 11.) Anthony Gerace, Perseus s President of Global Sales, told Indy that he could not edit the Approval section of the form directly, but that the agreed language modifying or overriding the Approval section could go elsewhere in the document. (Id.) To ensure that the parties intentions were clear, Indy suggested adding the phrase Notwithstanding any contrary provision under Approval below and was directed by Gerace to insert this language directly onto the execution form prior to signing. (Sonies Aff. 12.) The Services Order Form was executed by Indy with this modification as of August 31, (Id. Ex. G.) The resulting final language of the Circuit Description & Special Instructions section therefore reads in full as follows: Notwithstanding any contrary provision under Approval below, this Service Order Form constitutes only Customer s binding commitment to (a) pay Perseus the non-recurring charge for (i) the Servers (and any related infrastructure) to be procured by Perseus on Customer s behalf and (ii) any Professional Services delivered by Perseus in anticipation of delivery of the Services, in each case as provided in this Service Order Form, and (b) to negotiate in good faith to expeditiously negotiate the final terms and conditions of the Master Services Agreement, related Service Schedules, and Statement of Work referred to above (the Services Documents ). Upon Customer s execution of the Services Documents, this Service Order Form will become its binding commitment to purchase the Services, on the terms provided herein and subject to 4 8 of 19

14 the Services Documents. Provided, however that in the event that the Services Documents are not, in good faith, agreed to by the parties within [60] days of execution of this Service Order Form and the Customer continues to use the Services, this Service Order Form shall automatically become a binding commitment to purchase the Services and shall be governed by the Perseus standard terms and conditions and applicable service schedules. (Compl. Ex. A; Sonies Aff. Ex. G-1, at 1.) In sum, the Service Order Form negotiated by the parties and executed by Indy explicitly and intentionally did not incorporate the terms of a Master Services Agreement or any other nonnegotiated terms and conditions. It explicitly states that it is a standalone agreement obligating Indy only to work in good faith to negotiate final documentation, including a Master Services Agreement and to reimburse Perseus for any equipment procured for Indy or setup costs. It did not actually obligate Indy to purchase the colocation services at issue. If, after at least 60 days had passed, Perseus had activated the colocation services, and Indy was using those services without working in good faith to put final service agreements in place, then (and only then) Indy would be obligated to purchase those services subject to Perseus standard terms and conditions. III. Indy Lost Confidence in Perseus and Called Off the Work When It Became Clear that Perseus Would Not Be Able To Get the Colocation Services up and Running in a Timely Way At the time Indy signed the Services Order Form, Perseus proposed to begin providing colocation services by the end of September (Sonies Aff. 14.) Over the next several weeks, it became clear that Perseus had overpromised, and the timeline was repeatedly moved back. (Id. 15.) Perseus s counsel was also slow to respond to Indy s attempts to negotiate the terms of a Master Services Agreement. (Id. 13.) On October 30, 2015, none of the services Perseus was supposed to provide were yet active, and Indy still had not received a final draft of the Master Services Agreement. (Id. 13, 15.) That day, Indy told Perseus that it no longer had confidence in Perseus s ability to deliver 5 9 of 19

15 the services Indy needed, and that it had therefore decided not to move forward with Perseus. (Id. 16) Indy told Perseus that it should stop its setup work and stop procuring equipment. (Id.) Over the following weeks, Indy repeated numerous times both orally and in writing that it had decided not to hire Perseus as its colocation services provider (id. 17 & Ex. I), and offered to honor its obligations under the Services Order Form and pay for any equipment procured and the setup work Perseus had done up until October 30, 2015, (id. 18 & Ex. J.). Perseus simply disregarded these communications, and on January 29, 2016, sent Indy a Notice of Breach and claiming that Indy owed it $1,250,650 as a termination fee under the draft Master Services Agreement. (Id. 19; see Compl. 34 & Ex. B.) IV. This Litigation In this action, Perseus seeks $1,250,650 in damages as compensation for Indy s supposed breach of the Master Services Agreement an agreement Indy never entered into as well as $167, for Perseus s alleged detrimental reliance. Indy now moves to dismiss the Complaint in its entirety, under C.P.L.R. 3211, because Perseus s allegations about the terms and execution of the Service Order Form and the Master Services Agreement are directly contradicted by the documents themselves, and, at base, because Perseus cannot bring a claim against Indy based on an agreement that Indy indisputably never entered into. Moreover, even if Indy had agreed to the Master Services Agreement which it did not the penalty clause on which Perseus bases its exorbitant damages claims is unenforceable under longstanding New York law. ARGUMENT Dismissal of a complaint pursuant to CPLR 3211(a)(1) is warranted where the documentary evidence submitted conclusively establishes a defense to the asserted claims as a 6 10 of 19

16 matter of law. 150 Broadway N.Y. Assocs., L.P. v. Bodner, 14 A.D.3d 1, 5 (1st Dep t 2004) (citation omitted). Where a plaintiff attaches the contract at issue to its complaint, the contract becomes part of the pleading for all purposes, and its provisions establish the rights of the parties and prevail over conclusory allegations of the complaint. 805 Third Ave. Co. v. M.W. Realty Assocs., 58 N.Y.2d 447, 452 (1983). This is so regardless of any extrinsic evidence or self-serving allegations offered by the proponent of the claim. 150 Broadway N.Y. Assocs., 14 A.D.3d at 5. On a motion to dismiss under CPLR 3211(a)(7), the factual allegations of the complaint may properly be negated by affidavits and documentary evidence. Facebook, Inc. v. DLA Piper LLP (US), 134 A.D.3d 610, 613 (1st Dep t 2015). [A]llegations consisting of bare legal conclusions, as well as factual claims either inherently incredible or flatly contradicted by documentary evidence, are not presumed to be true [or] accorded every favorable inference. Biondi v. Beekman Hill House Apartment Corp., 257 A.D.2d 76, 81 (1st Dep t 1999) (citation omitted), aff d, 94 N.Y.2d 659 (2000). When a defendant submits evidence in support of its motion, the standard morphs from whether the plaintiff stated a cause of action to whether it has one. Basic Yield Alpha Fund (Master) v. Goldman Sachs Group, Inc., 115 A.D.3d 128, 135 (1st Dep t 2014); see Biondi, 257 A.D.2d at (reversing lower court s denial of motion to dismiss; where defendant presents extrinsic evidence, the correct standard is whether [plaintiff] has a cause of action, not whether he has stated one ). In this case, Perseus s two claims for breach of contract are directly contradicted by the documents themselves and therefore fail as a matter of law. Moreover, the clause Perseus seeks to enforce is unenforceable under longstanding New York law. Perseus s remaining noncontract claim fails because it simply duplicates Perseus s breach of contract claims. For these reasons, Perseus s Complaint should be dismissed in its entirety, with prejudice of 19

17 I. Perseus s Breach of Contract Claims Should Be Dismissed Perseus s claims for breach of the Master Services Agreement should be dismissed because Perseus s allegations supporting the claim are utterly refuted by the documents attached to the Complaint; the Master Services Agreement is explicitly not incorporated into the Service Order Form, and Indy never executed the Master Services Agreement. Moreover, even if Indy had entered into the Master Services Agreement which it did not the penalty clause which Perseus seeks to enforce is unenforceable as a matter of New York law. Perseus s breach of contract claims should be dismissed with prejudice. A. Perseus Has Failed To Plead Breach of Contract Claims Based on the Master Services Agreement To state a claim for breach of contract, a plaintiff must allege: (1) formation of a contract between the parties; (2) performance by the plaintiff; (3) the defendant s failure to perform; and (4) resulting damages. E.g., Flomenbaum v. N.Y. Univ., 71 A.D.3d 80, 91 (1st Dep t 2009). Perseus s breach of contract claims fall at the first hurdle: Perseus s claims are based on the theory that Indy, in executing the Services Order Form, also agreed to be bound by the terms of the Master Services Agreement but Perseus s allegations are directly contradicted by the documents attached to its Complaint. Perseus has therefore failed to allege the formation of the contract upon which its claims are based, and accordingly, its first and second causes of action for breach of contract should be dismissed. Perseus claims that Indy breached various provisions of the Master Services Agreement, including the provision concerning curing monetary defaults (Compl. 32), the provision concerning written notices of termination (id. 40), and the provision regarding the termination fee (id. 43). To spin the fiction that Indy agreed to the Master Services Agreement, Perseus alleges, falsely, that the Service Order Form and the Master Services Agreement constituted a 8 12 of 19

18 single Agreement subject to the terms of the Master Services Agreement (id. 1, 20); that the Service Order Form was a binding commitment to purchase the services pursuant to the terms of the Agreement (id. 12); and that Indy executed the Agreement (id. 13). The falsity of these allegations is patent. The Court is not required to accept Perseus s allegations as true where they are contradicted by the documents themselves, see, e.g., Montefiore v. Soja, 292 A.D.2d 241, 242 (1st Dep t 2002), and even a cursory review of the documents reveals that these allegations are simply false. Indy executed the Service Order Form only; the Master Services Agreement is unsigned. (See Compl. Ex. A.) Perseus alleges that the Terms and Conditions section of the Service Order Form incorporates the terms of the Master Services Agreement (Compl. 20), but in fact the Terms and Conditions section says nothing of the sort (see Compl. Ex. A). Although the Approval section of the Service Order Form does state that the terms and conditions of the Master Services Agreement control, the preceding Circuit Description & Special Instructions section specifically repudiates that form language 2 : it states Notwithstanding any contrary provision under Approval below, this Service Order Form constitutes only Customer s binding commitment to pay Perseus for any equipment or preparatory work actually provided and to attempt in good faith to negotiate the final terms and conditions of the Master Services Agreement. (Compl. Ex. A (emphasis added).) 2 As noted above, this rather cumbersome structure came about because Perseus s representative claimed that he could not edit the Approval section of the form, and therefore put the parties negotiated language into the Circuit Description & Special Instructions section. (Sonies Aff. 11 & Ex. F.) To the extent the Court finds any ambiguity in this structure though Indy submits that when read as a whole the contract is perfectly clear that ambiguity must therefore be construed against Perseus, as a matter of law. See, e.g., Chatterjee Fund Mgmt., L.P. v. Dimensional Media Assocs., 260 A.D.2d 159, 159 (1st Dep t 1999) of 19

19 Perseus s effort to interpret the Service Order Form so as to ignore the clear language of Circuit Description & Special Instructions section is untenable under New York law. Interpretation of a contract is a question of law for the court. Taussig v. Clipper Group, L.P., 13 A.D.3d 166, 167 (1st Dep t 2004). The cardinal principles of contract interpretation are that a written contract will be read as a whole and every part will be interpreted with respect to the whole. Richard Feiner & Co. Inc. v. Paramount Pictures Corp., 95 A.D.3d 232, 233 (1st Dep t 2012). [S]ingle clauses cannot be construed by taking them out of their context and giving them an interpretation apart from the contract of which they are a part. Id. at 239. A court should not adopt an interpretation which will operate to leave a provision of a contract without force and effect. Acme Supply Co. v. City of N.Y., 39 A.D.3d 331, 332 (1st Dep t 2007). Perseus s interpretation of the Service Order Form violates every one of these principles: it takes a single provision out of context, completely ignores the language that unambiguously limits that provision, renders the Circuit Description & Special Instructions section utterly without effect, and thereby defies any common sense reading of the document as a whole. Contra Perseus s self-serving interpretation, the Court must read the Service Order Form as a whole; and the first section of the contract references and repudiates any contrary language in the Approval section and explicitly limits Indy s obligations under the contract to paying for any services actually provided to it and negotiating in good faith towards final terms for later service agreements. (See Sonies Aff. Ex. G-1.) When read as a whole, the Service Order Form is perfectly clear and must be enforced according to the plain meaning of its terms. Perseus s claims based on the terms of the Master Services Agreement must therefore be dismissed. Though a mere review of the documents is sufficient to dismiss Perseus s claims, the written negotiations between the parties about the Service Order Form underscore the of 19

20 baselessness of Perseus s claims. As set out in detail above, the parties negotiated new language for the Services Order Form specifically so as not to incorporate the terms of the Master Services Agreement. (See supra Statement of Facts II; Sonies Aff & Exs. D-G.) Perseus s allegation now that the Services Order Form was subject to Perseus s standard terms of the Master Services Agreement (Compl. 20) is shockingly dishonest. B. The Master Services Agreement s Liquidated Damages Clause Is Unenforceable as a Matter of Law Even if Indy had agreed to the Master Services Agreement which it did not Perseus s extravagant damages claims are based on a penalty clause which is unenforceable as a matter of law. New York law does, of course, allow liquidated damages provisions, as long as they are neither unconscionable nor contrary to public policy, for example in situations where it would be difficult... to calculate the amount of actual damages. Truck Rent-A-Ctr., Inc. v. Puritan Farms 2nd, Inc., 41 N.Y.2d 420, 424 (1977). But [i]f the amount stipulated in the liquidated damage clause is manifestly disproportionate to the actual damage, then its purpose is not to provide fair compensation but to secure performance by the compulsion of the very disproportion, and the clause is unenforceable. J.R. Stevenson Corp. v. Westchester Cty., 113 A.D.2d 918, 920 (2d Dep t 1985) (quoting Truck Rent-A-Ctr., 41 N.Y.2d at 424). Whether a contractual provision is an enforceable liquidation of damages or an unenforceable penalty is a question of law, giving due consideration to the nature of the contract and the circumstances. 172 Van Duzer Realty Corp. v. Globe Alumni Student Assistance Ass n, Inc., 24 N.Y.3d 528, 536 (2014). A liquidated damages clause is unenforceable in two circumstances: (1) if the damages flowing from a breach of the contract were easily ascertainable at the time of execution; or (2) if the damages fixed were conspicuously disproportionate to the probable losses. JMD Holding of 19

21 Corp. v. Cong. Fin. Corp., 4 N.Y.3d 373, 380 (2005). New York courts routinely find liquidated damage clauses unenforceable if they fail this test. See, e.g., Sina Drug Corp. v. Mohyuddin, 122 A.D.3d 444, 445 (1st Dep t 2014) (holding that liquidated damages clause providing that defendants would pay $1 million if they refused to indemnify plaintiffs was an unenforceable penalty); Motichka v. Cody, 5 A.D.3d 185, 187 (1st Dep t 2004) (holding that provision requiring payment of $1,000 per day if defendant failed to pay within 60 days was an unenforceable penalty, since damages were easily ascertainable by calculating interest accrued from time of breach); LeRoy v. Sayers, 217 A.D.2d 63, (1st Dep t 1995) (invalidating lease term in which tenant forfeited $63,500 in deposits regardless of whether tenant terminated agreement with several months notice). The penalty clause that Perseus seeks to enforce fails both prongs of New York s test for enforceability. First, the damages that could be caused by Indy s early termination of the contract were clearly easy to ascertain at the time the contract was executed; Perseus knew exactly how much it would charge each month for its services, and set out those charges on the first page of the Service Order Form. (Compl. 8; id. Ex. A; Sonies Aff., Ex. G-1, at 1.) Second, the penalties imposed by the Master Services Agreement are massively disproportionate, requiring that no matter how early the customer chooses to terminate their agreement with Perseus, even if only one day into the contract, they must pay three years worth of Perseus s fees, amounting to $1.25 million. (Compl ; Sonies Aff., 8 & Ex. B-3, 4.3.) Indeed, Perseus s own calculation of its true damages is set out in its third cause of action and totals less than $170,000. (Compl. 58.) Indy of course reserves the right to dispute Perseus s calculation; but the allegation clearly demonstrates the conspicuous disproportion of the penalty payment Perseus seeks. The termination fee clause of the Master Services Agreement could not more obviously be punitive, and is therefore unenforceable under New York law of 19

22 II. Plaintiff s Breach of Covenant Claim Must Be Dismissed Because It Is Duplicative of the Breach of Contract Claims and Is Governed by an Existing Contract Finally, Perseus throws in a claim for detrimental reliance and breach of the covenant of good faith and fair dealing, which improperly duplicates its breach of contract claims and conveniently ignores the terms of the only agreement actually entered into in this case the Service Order Form. This claim, too, should therefore be dismissed. A. Plaintiff Has Failed To Plead a Claim for Breach of the Covenant of Good Faith and Fair Dealing Perseus styles its third claim as a breach of the covenant of good faith and fair dealing, but in fact it has pled nothing of the sort. The implied covenant of good faith and fair dealing embraces a pledge that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract. 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 153 (2002) (citation omitted). A claim for breach of the covenant may not arise from the same facts as a breach of contract claim. Logan Advisors, LLC v. Patriarch Partners, LLC, 63 A.D.3d 440, (1st Dep t 2009). The claim therefore will be dismissed as redundant if it merely pleads that defendant did not act in good faith in performing its contractual obligations. MBIA Ins. Co. v. GMAC Mortg. LLC, 914 N.Y.S.2d 604, 611 (Sup. Ct. 2010) (citing Amcan Holdings, Inc. v. Canadian Imperial Bank of Commerce, 70 A.D.3d 423 (1st Dept. 2010)). In this case, Perseus s claim for breach of the covenant of good faith and fair dealing merely duplicates the operative allegations of its breach of contract claims i.e., that Indy has failed to pay the amounts supposedly due under the Agreement. (See Compl ) The claim should therefore be dismissed of 19

23 B. Perseus May Not Sustain a Claim in Quasi-Contract or for Promissory Estoppel Because a Valid Contract the Service Order Form Governs Its Claim Perseus also styles its third claim as for detrimental reliance. Detrimental reliance is not a standalone claim under New York law. To the extent that Perseus is in fact attempting to assert a quasi-contract or promissory estoppel claim against Indy, the claim must still be dismissed. It is well settled under New York law that an unjust enrichment or quantum meruit claim may not be maintained where a valid, enforceable contract governs the subject matter in question. IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132, 142 (2009) (unjust enrichment); Sheiffer v. Shenkman Capital Mgmt., Inc., 291 A.D.2d 295, 295 (1st Dep t 2002) (quantum meruit). Similarly, a promissory estoppel claim is not viable where the conduct underlying the claim is governed by contract, and where the plaintiff fails to allege a duty independent of the contract. Schroeder v. Pinterest Inc., 133 A.D.3d 12, 33 (1st Dep t 2015). In this case, there is no dispute that Indy executed the Service Order Form, which requires Indy to reimburse Perseus for any infrastructure procured and preparatory work actually done for Indy. (Sonies Aff. 9 & Ex. G.) To the extent Perseus actually procured infrastructure and performed work (none of which, despite demand, has ever been made known to Indy), Indy s obligations to Perseus are governed by that valid written contract, and Perseus therefore may not maintain a claim against Indy in quasi-contract or for promissory estoppel over those same issues of 19

24 CONCLUSION F or the reasons stated above, Defendant Indy Research Labs LLC respectfully requests that the Court grant its motion to dismiss this case in its entirety, with prejudice. Dated: June 22, 2016 Emily Re' sbaum Sarah Lo 'se Bishop 220 Fifth Avenue, 14th Floor New York, New York Telephone: ereisbaum@cgr-iaw.com Attorneys for Defendant Indy Research Labs LLC of 19