United States District Court, S.D. Texas, Houston Division
MEMORANDUM AND OPINION
Rosenthal Chief United States District Judge.
Pro Filters Inc. sued FrogSlayer, LLC, alleging that
FrogSlayer failed to work on a video-editing computer program
within the time and budget set out in the parties'
October 2017 Software Consulting Agreement. (Docket Entry No.
1). Polar Pro asserts claims for contract breach, negligent
misrepresentation, fraud, and violations of the Texas
Deceptive Trade Practices Act. (Id.).
moved to dismiss for failure to state a claim, arguing that
Polar Pro's allegations are facially implausible and do
not meet the federal pleading standard for fraud. (Docket
Entry No. 19). Polar Pro replied, arguing that
FrogSlayer's motion is untimely and that the complaint
sufficiently raises the claims, and FrogSlayer replied.
(Docket Entry Nos. 22, 23).
on the pleadings, the motions and responses, and the
applicable law, the court: (1) grants FrogSlayer's motion
to dismiss the fraud-based claims relating to statements made
before the parties entered the Agreement, about
FrogSlayer's ability to do the work, and the statement
made later about the software's functionalities, without
prejudice; (2) denies the motion to dismiss the fraud-based
claims relating to FrogSlayer CEO Ross Morel's statements
and contract-breach claim; and (3) grants Polar Pro leave to
amend, no later than November 11, 2019. The
reasons are explained below.
background is drawn from Polar Pro's complaint and the
documents referred to and central to the complaint. Brand
Coupon Network, L.L.C. v. Catalina Mktg. Corp., 748 F.3d
631, 635 (5th Cir. 2014).
Pro develops and sells camera software for various devices,
including drones and cellphones. (Docket Entry No. 1 at
¶ 6). In August 2017, Polar Pro contacted FrogSlayer, a
software developer, about “the possibility of
developing a proprietary, computer-based video editing
program.” (Id. at ¶¶ 7-8).
FrogSlayer represented that it had experience in
video-editing and media management. (Id. at ¶
9). On August 29, after “preliminary market research,
” FrogSlayer employees told Polar Pro that
“there's a good opportunity, and need, in this
space” and that “we really think this is a
project we can knock out of the park.” (Id. at
¶ 10). Polar Pro allegedly told FrogSlayer that it liked
the “design and style” of Apple's iMovie and
some of the features of Adobe's Premiere Pro.
(Id. at ¶ 11). Polar Pro and FrogSlayer
discussed the program's specifications and features
throughout September 2017. (Id. at ¶ 12). On
October 7, they “entered into a Software Consulting
Agreement where FrogSlayer agreed to provide consulting and
software development services described in Statements of
Work.” (Id. at ¶ 13; Docket Entry No.
sent Polar Pro a “Project Charter” on December
13, 2017, naming the project “The Ripper, ” and
detailing “approximately eight months of work for a
total cost of $262, 520.” (Docket Entry No. 1 at
¶¶ 14-15; Docket Entry No. 19-2). “Polar Pro
agreed that FrogSlayer could proceed working on the video
editing program based on the estimate laid out in the Project
Charter.” (Docket Entry No. 1 at ¶ 16). The
charter summarized the project purpose and scope, noting that
the goal is for “PolarPro customers [to] easily create
video compositions and feel like they are using a ‘pro
level' piece of software.” (Docket Entry No. 19-2
at 3). The charter specified that the project was not to
create software that would “attempt to compete with
Adobe Premier, FinalCut Pro and other professional level
video editing applications.” (Id. at 4). The
charter also included a list of key processes, project
requirements, and technical design elements. (Id. at
5- 11). On January 25, 2018, FrogSlayer sent Polar Pro a
“Roadmap” listing “the features the program
would have.” (Docket Entry No. 1 at ¶ 17).
12, 2018, Polar Pro told FrogSlayer that “version one
of The Ripper project was not close to working, ” even
though “$235, 000 had already been paid of the $262,
520 cost estimate.” (Id. at ¶ 19). On
June 17, Ross Morel, FrogSlayer's Chief Executive
Officer, admitted to Polar Pro that “hard facts”
had not initially been “presented” and
“sincerely apologize[d] for the delay.”
(Id. at ¶ 20). Morel stated that “version
one . . . would most likely cost [an additional] $106, 785 to
complete with approximately eleven weeks of schedule
remaining, ” as long as the scope and requested
features were not changed, and that “FrogSlayer will
agree to cover all costs exceeding our likely estimate [of
$106, 785].” (Id.). Relying on Morel's
statements and estimate, Polar Pro instructed FrogSlayer to
continue working on The Ripper, thanking FrogSlayer for
“ensuring [Polar Pro's] cost to complete [version
one] does not exceed: $106, 785.” (Id. at
sent Polar Pro an updated Roadmap on July 9, 2018.
(Id. at ¶ 22). The updated Roadmap color-coded
various features, indicating the features that would (green),
could (yellow), and would not (red) be in version one.
(Id. at ¶ 23). That same day, Jeff Overall,
Polar Pro's Chief Executive Officer, demanded that many
features in the yellow and red categories be in version one,
and FrogSlayer agreed. (Id. at ¶¶ 23-24).
On October 2, “FrogSlayer communicated to Polar Pro
that it would waive any further payments regarding its work
on version one of The Ripper project because ‘as per
the agreement sent by Mr. Morel on June 18, 2019[, ]' the
$106, 785 budget estimate had already been fulfilled and paid
by Polar Pro.” (Id. at ¶ 25 (alterations
January 18, 2019, Polar Pro asked FrogSlayer how the
“performance (e.g.[, ] speed)” of version one
“would be judged.” (Id. at ¶ 26).
FrogSlayer responded on January 30, “for the first time
since The Ripper project had been commenced, ” that
OpenShot, a “free, open-source, video editing
program” would be the benchmark. (Id. at
¶ 27). Polar Pro responded that this program “was
not a viable product or benchmark to The Ripper
Project.” (Id. at ¶ 28). In Polar
Pro's view, “iMovie and DaVinci Resolve” were
the proper benchmarks, and FrogSlayer agreed. (Id.
at ¶ 29).
February 2019, FrogSlayer “refused to perform any
further work on The Ripper project without additional
pay-contrary to its June 17, 2018 communication.”
(Id. at ¶ 30). FrogSlayer told Polar Pro that
the “additional costs necessary to complete version one
of The Ripper Project would be another $210, 000-$390, 000
and an additional six to nine months of work.”
(Id.). Morel told Polar Pro that FrogSlayer
“had ‘failed to navigate the risks
upfront'” and that “mistakes were made
early-on in the project.” (Id. (alterations
omitted)). According to the complaint:
The last version one demo of The Ripper Project provided to
Polar Pro fails to provide nearly every feature in the
‘in scope' section of the Roadmap and also fails to
provide most of the features in the ‘maybe in
scope' section of the Roadmap. The last version one demo
of the Ripper Project failed to meet the requirements and
functionalities set out by the Roadmap. The last version one
demo runs at a slower rate than industry standards and also
crashes when certain functions are activated. . . .
The last version one demo of The Ripper Project has no
commercial value and there is no market in which Polar Pro
can sell a defective software program to recoup any cost. It
cannot be sold to customers and would not even be able to be
given away due to its speed, the program crashing and lack of
functionalities. Polar ...