Case 3:22-cv-01175-JCH Document 181 Filed 09/25/24 Page 1 of 24
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`UNITED STATES DISTRICT COURT
`DISTRICT OF CONNECTICUT
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`JUICE CREATIVE GROUP, LLC,
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`Plaintiff
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`UNCOMMONGOOD, INC.,
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`Defendant.
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`CIVIL CASE NO.
`3:22-CV-01175 (JCH)
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`SEPTEMBER 25, 2024
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`RULING ON DEFENDANT’S MOTION TO DISMISS (DOC. NO. 175)
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`I.
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`INTRODUCTION
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`Plaintiff Juice Creative Group, LLC (“Juice”) brings this action against
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`UncommonGood, Inc. (“UG”), alleging copyright infringement under 17 U.S.C. § 101, et
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`seq., fraud in the inducement, breach of contract, breach of implied covenant of good
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`faith and fair dealing, unjust enrichment, quantum meruit, and entitlement to a
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`declaratory judgment that Juice has not breached its contract obligations. See Am.
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`Compl. (Doc. No. 174). UG moves to dismiss all of Juice’s claims. See Mot. to Dismiss
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`(Doc. No. 175); see Memorandum of Law in Support of Motion to Dismiss (“Def.’s
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`Mem.”) (Doc. No. 176); see Defendants’ Reply Memorandum (“Def.’s Reply”) (Doc. No.
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`178). Juice opposes this Motion. See Memorandum of Law in Opposition to Motion to
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`Dismiss (“Pl.’s Opp.”) (Doc. No. 177).
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`For the reasons discussed below, the Motion is denied.
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`1
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`Case 3:22-cv-01175-JCH Document 181 Filed 09/25/24 Page 2 of 24
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`II.
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`BACKGROUND
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`A.
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`Factual Background1
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`Juice is a “full-service digital agency and business consultant” operating in
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`Norwalk, Connecticut that offers services such as “web design, branding, and other
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`advertising and marketing”. Am. Compl. at ¶¶ 9, 15. UG is based in Greenwich,
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`Connecticut, and describes itself as a financial technology company that facilitates
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`internet-based funding and promotes awareness for non-profit organizations. See id. at
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`¶ 10.
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`In March 2020, UG solicited Juice’s services to, among other things, build a
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`website and help develop a suite of digital products. See id. at ¶ 17. The parties began
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`working together without a signed contract. See id. at ¶ 18. In or around August 2021,
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`UG asked Juice to add new features to UG’s web application. See id. at ¶ 20. UG and
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`Juice entered into a Master Services Agreement (“MSA”) to govern the execution of this
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`work. See id. at ¶¶ 2, 21. Effective August 10, 2021, the MSA called “for Juice to
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`design, code and build out a series of robust web-based features for the basic UG web
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`application that Juice had already created for use by UG.” Id.
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`Importantly, the MSA states that Juice is the owner of all intellectual property
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`rights to works created and developed by Juice. Id. at ¶ 24. Beginning in February
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`2022, Juice filed for copyrights to “six features it built for UG’s web application: (1) Non-
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`profit Sweepstakes Tool; (2) Non-Profit CRM; (3) Non-Profit Fundraiser Tool; (4) Non-
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`1 As it must, the court draws the facts in this section from the well-plead allegations in Juice’s
`Amended Complaint. See Am. Compl. (Doc. No. 174.) As this is the second Motion to Dismiss before
`the court, the court provides only an abbreviated version of prior allegations and includes new allegations
`in the Amended Complaint.
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`2
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`Case 3:22-cv-01175-JCH Document 181 Filed 09/25/24 Page 3 of 24
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`Profit Media Library Tool; (5) Non-Profit Donation Tools; and (6) Non-Profit Email. See
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`id. at ¶ 29. Juice successfully obtained copyright registrations for these features. Id.
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`On September 28, 2021, Carolyn Driscoll, President of UG and signatory of the
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`MSA on behalf of UG, sent a message to Carter Grotta, Managing Partner and Creative
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`Director of Juice, via Slack, informing Mr. Grotta that she wanted Juice to halt work on
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`certain features, focus on the features that were currently in development, and allow for
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`user testing. See id. at ¶ 31. Juice alleges that this message took the following four
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`features out of scope: (1) Stories, (2) Chat, (3) Auctions, and (4) Analytics (collectively,
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`“Four Features”). See id. at ¶ 30. After September 28, 2021, Juice did not continue
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`development on these Four Features. See id. at ¶ 39. In an October 1, 2021 meeting
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`between the parties, Ms. Driscoll again reiterated the instruction to stop work on the
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`Four Features, and at no point after was Juice instructed to restart its work on them.
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`See id. at ¶¶ 33, 42.
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`After UG raised a large capital investment in or about October 2021, UG began
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`trying to wind down its relationship with Juice. See id. at ¶ 48. UG representatives
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`expressed that they wanted to take into their exclusive control all aspects of the UG
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`website, including underlying source code. See id. at ¶ 49. However, UG allegedly
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`refused to pay Juice anything for it. See id. at ¶ 50. Beginning December 2021, the
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`parties began negotiating the contract that would govern the termination of their working
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`relationship, which culminated in the execution of the Transfer Agreement on March 7,
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`2022. See id. at ¶ 49. In exchange for the transfer of ownership of the “website and
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`web-based application, underlying source code, software, and all other functionality” as
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`well the “means to access and operate the website and application”, Juice “sought
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`3
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`Case 3:22-cv-01175-JCH Document 181 Filed 09/25/24 Page 4 of 24
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`payment of outstanding invoices and fair terms for the transfer of ownership and
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`possession of the source code”. Id. ¶¶ 47, 49. Under the Transfer Agreement, UG
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`agreed to pay 50 percent of these invoices as “full and final satisfaction of any and all
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`outstanding payments owed to [Juice] . . . .” Id. ¶ 53; Pl.’s Ex. D, Transfer Agreement
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`(Doc. No. 174-4) at 4, § 4.
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`To avoid future disputes, prior to executing the Transfer Agreement, the parties
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`followed a series of procedures meant to ensure UG understood exactly what would be
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`transferred. See Am. Compl. at ¶ 54. Juice allowed a “View Access Period,” in which it
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`provided access for UG representatives to view “all existing materials, including source
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`code, with no exceptions or reservations.” Id. at ¶ 56. On a February 2022 telephone
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`call, UG’s counsel verbally represented that what they saw in the View Access Period
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`was precisely what would be transferred, and that the language of the Transfer
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`Agreement states that UG would accept it “as is.” See id. at ¶ 57.
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`The parties signed the Transfer Agreement on March 7, 2022. See id. at ¶ 3.
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`The Agreement acknowledges that the View Access period took place and that
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`materials provided therein included “all computer code and information in Juice’s
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`possession that is used to operate the UG website in its most up-to-date form . . . .” Id.
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`at ¶ 59; see also Transfer Agreement at 1.
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`Juice transferred possession of all existing computer code, files, and information
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`to UG. See id. at ¶ 61. However, five or so hours after Juice completed the transfer,
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`and, allegedly before UG would have had time to inspect what Juice delivered, UG’s
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`counsel emailed Juice to protest that UG did not receive, inter alia, any code for the
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`4
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`Four Features. See id. at ¶ 65-66. In response, Juice declared that no code for the
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`Four Features existed because UG had halted their development. See id. at ¶ 70.
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`Through the end of March and beginning of April 2022, UG made various “threats
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`and spurious claims” against Juice. Id. at ¶ 72. On April 19, 2022, Juice wrote to UG,
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`stating that it believed the matter resolved but did not receive a reply from UG for four
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`months. See id.
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`On August 4, 2022, UG’s counsel emailed Juice an attached draft complaint
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`alleging Juice breached the Transfer Agreement. See id. at ¶ 73. UG’s counsel stated
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`that he would file the complaint unless Juice “complete[d] its performance” under the
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`Transfer Agreement, or “remit[ted] a refund of $200,000 for the undelivered items.” Id.
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`at ¶ 73. Together, the email and draft complaint allege that Juice invoiced UG for the
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`development of the Four Features and “implicit[ly] den[y] that the MSA . . . is a valid and
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`binding agreement of the parties.” Id. at ¶ 74. Juice alleges this demand was made in
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`bad faith, that UG never planned to honor the Transfer Agreement, and that UG always
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`planned to demand more money or code from Juice after the Transfer Agreement was
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`executed. See id. at ¶¶ 66, 68, 75.
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`On August 22, 2022, Juice’s counsel sent UG’s counsel a Cease-and-Desist
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`Letter to which UG never responded. See dd. at ¶ 76; see Ex. E to Am. Compl. (“Cease
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`and Desist Letter”) (Doc. No. 174-5). The Cease and Desist Letter alleges that UG
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`fraudulently induced Juice to enter the Transfer Agreement, and that the Transfer
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`Agreement was therefore voidable at Juice’s option. Cease-and-Desist Letter at 5. The
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`letter contains the following passages:
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`“Because UG fraudulently induced Juice to enter into the Transfer
`Agreement, the Transfer Agreement is voidable at Juice’s option, which it
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`hereby exercises. Harold Cohn & Co. v. Harco Int’l, LLC, 804 A.D.2d 218,
`223 (Conn. App. Ct. 2002) (“A defrauded party has the option of seeking
`rescission or enforcement of the contract and damages.”). Without the
`Transfer Agreement, UG has no basis to use, replicate, further develop,
`modify, upload, download, or create any derivative works from the source
`code to the above Existing Materials.”
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`“Juice therefore demands that UG cease and desist any and all use of the
`[deliverables] by no later than September 2, 2022 and provide to Juice a
`sworn certification that all such source code has been permanently
`destroyed or returned to Juice. Juice will maintain the $23,462 received
`pursuant to the Transfer Agreement in escrow and will return the funds to
`UG upon receipt of proof that the infringement has ceased. The parties will
`return to their positions immediately preceding execution of the Transfer
`Agreement.”
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`Cease-and-Desist Letter at 5, 1-2. UG did not respond, but instead filed suit
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`against Juice in Connecticut state court. See Am. Compl. at ¶ 78. In the time
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`since UG took possession of Juice’s code, it has “manipulated Juice’s
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`copyrighted source code to add several new features to the Web-Based
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`Application” and made “improvements and additions” to it. Id. at ¶¶ 79-80.
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`B.
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`Procedural Background
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`On September 8, 2022, UG filed suit against Juice in Connecticut Superior Court,
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`Judicial District for Norwalk and Stamford, alleging breach of contract, fraud, violation of
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`CT Unfair Trade Practices Act, breach of implied covenant of good faith and fair dealing,
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`and unjust enrichment. See Def.’s Mem., Ex. 1, UG’s State Complaint (Doc. No 31-1).
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`The plaintiff initiated the instant suit on September 16, 2022. See Complaint
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`(Doc. No. 1). In Count One of the original Complaint, Juice alleges that it owns the
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`copyright of the material at issue and that UG obtained possession of the copyrighted
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`material through fraudulent means. See Compl. at ¶¶ 72-83. In Count Two, Juice
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`claims that UG falsely represented that it intended to terminate its relationship with
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`Juice through the Transfer Agreement in order to induce Juice into entering the contract
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`and subsequently turning over copyrights. See id. at ¶¶ 84-94. Count Three asserts
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`breach of the Master Services Agreement. See id. at ¶¶ 95-102. In Count Four, Juice
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`claims UG breached the implied covenant of good faith and fair dealing under the
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`Transfer Agreement. See id. at ¶¶ 103-106. Count Five alleges UG was unjustly
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`enriched by material to which UG otherwise would have no rights in. See id. at ¶¶ 107-
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`113. In Count Six, Juice brings a claim for equitable remedy under the theory of
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`quantum meruit for providing UG with the copyrighted materials. See id. at ¶¶ 114-121.
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`In Count Seven, Juice asserts it is entitled to declaratory judgment that Juice has not
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`breached the Transfer Agreement. See id. at ¶¶ 122-125. On December 1, 2022, UG
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`moved to dismiss Counts One through Six of the plaintiff’s Complaint. See First Motion
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`to Dismiss, (“First Mot. to Dismiss”) (Doc. No. 30). Juice opposed the Motion. See
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`Plaintiff’s Memorandum of Law in Opposition (Doc. No. 35).
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`On December 15, 2023, the court issued its Ruling on the Motion. See Ruling on
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`Defendants’ Partial Motion to Dismiss (“Ruling”) (Doc. No. 172). The Ruling granted the
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`Motion with respect to Juice’s copyright claim in Count One without prejudice, giving
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`Juice a right to replead. Ruling at 10-14. For Juice’s remaining claims, which Juice
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`brought under Connecticut state law2, the court declined to exercise supplemental
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`jurisdiction sua sponte. Ruling at 14-16.
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`2 As the court expressed in its prior Ruling, the court sees Count Seven as arising under state law
`because Juice does not rely on the federal Declaratory Judgment Act, 28 U.S.C. § 2201, as a basis for its
`declaratory judgment claim. See Am. Compl. at ¶¶136-138. Juice has contended, and continues to
`contend, that this court has jurisdiction under sections 1331 and 1338 of title 28 of the U.S. Code
`because Juice has asserted a claim under the Copyright Act of 1976, and that the court has supplemental
`jurisdiction with respect to Juice’s other claims. See id. at ¶¶ 11-12.
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`On January 5, 2024, Juice filed its Amended Complaint. See Am. Compl. On
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`January 19, 224, UG filed its second Motion to Dismiss. See Mot. to Dismiss; see
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`Def.’s Mem. On February 9, 2024, Juice filed its opposition. See Pl.’s Opp. On
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`February 23, 2024, UG filed its response. See Def.’s Reply.
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`III.
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`STANDARD OF REVIEW
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`To withstand a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6)
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`(“Rule 12(b)(6)”), “a complaint must contain sufficient factual matter, accepted as true,
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`to ‘state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662,
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`678 (2009) (quoting Bell Atl. Corp v. Twombly, 550 U.S. 544, 570 (2007)). “The
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`plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a
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`sheer possibility that a defendant has acted unlawfully.” Id. Reviewing a motion to
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`dismiss under Rule 12(b)(6), the court liberally construes the claims, accepts the factual
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`allegations in a Complaint as true, and draws all reasonable inferences in the
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`nonmovant’s favor. See La Liberte v. Reid, 966 F.3d 79, 85 (2d Cir. 2020). However,
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`the court does not credit legal conclusions or “[t]hreadbare recitals of the elements of a
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`cause of action.” Iqbal, 556 U.S. at 678. In deciding a motion to dismiss under Rule
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`12(b)(6), a complaint is deemed to include writings and documents attached to the
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`complaint, referenced in the complaint, or integral to the complaint. See Chambers v.
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`Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002).
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`IV.
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`DISCUSSION
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`UG moves to dismiss Juice’s copyright claim in Count One and argues that the
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`court should again decline to exercise supplemental jurisdiction over Juice’s remaining
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`claims. See Mot. to Dismiss. In the alternative, UG Moves to Dismiss all seven Counts
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`of the Amended Complaint. Id.
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`A.
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`Copyright Infringement
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`In its previous Ruling, the court held that Juice had failed to plead copyright
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`infringement on the grounds that Juice had transferred ownership of the copyrights as
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`issue to UG. See Ruling at 10-14. Critically, the court held that Juice had not
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`adequately pled its entitlement to the rescission of the Transfer Agreement, because it
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`had not alleged that it offered to return the benefit UG conferred to it. See id. In the
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`present Motion to Dismiss, UG argues that Juice has again failed to allege their
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`entitlement to rescission; Juice argues that they have adequately pled it. See Def.’s
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`Mem. at 4-19, Pl.’s Opp. at 13-15.
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`“To prove a claim of copyright infringement, a plaintiff must show (1) ownership
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`of a valid copyright and (2) copying of constituent elements of the work that are
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`original.” Urbont v. Sony Music Ent., 831 F.3d 80, 88 (2d Cir. 2016). Copyright
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`ownership can be transferred by “assignment, mortgage, exclusive license, or any other
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`conveyance.” U.S. Naval Inst. v. Charter Commc’ns, Inc., 936 F.2d 692, 695 (2d Cir.
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`1991) (quoting 17 U.S.C. § 101). Once a contract for transfer of exclusive rights is
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`executed, the grantee is not liable for copyright infringement. See id. at 695; TVT
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`Records v. Island Def Jam Music Grp., 412 F.3d 82, 93 (2d Cir. 2005).
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`However, problems with the formation or execution of the contract may prevent
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`the legal transfer of rights over the copyrighted material, in which case, a copyright law
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`claim by the transferor is not precluded. Cf. Graham v. James, 144 F.3d 229, 237-38
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`(2d Cir. 1998). For instance, if the intended grantee fails to satisfy a condition
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`precedent to the transfer of rights over the copyrighted material, then the grantor retains
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`ownership rights and can sue the intended grantee under copyright law for any
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`unauthorized use, albeit the existence of a contract between the parties. See id. at 237.
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`Additionally, a party’s conduct may render a contract voidable, the rescission of which
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`would mean that copyright law governed use during the time the contract was intended
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`to be in effect. See id. at 237-38. However, “[f]ailing such rescission, . . . the grant
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`continues in place, thus precluding infringement liability until such time as the copyright
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`owner exercises his entitlement to rescind.” TVT Records, 412 F.3d at 93 (quoting 3
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`Nimmer on Copyright § 10.15 [A] (6th ed. 1978)); see also Rano v. Sipa Press, Inc., 987
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`F.2d 580, 586 (9th Cir. 1993).
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`Thus, as this court previously held, UG can only be liable for copyright
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`infringement if the Transfer Agreement is subject to rescission. However, rescission is
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`not automatic. “As a condition precedent to a rescission,” Juice is “required to allege . .
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`. that they had restored or offered to restore [the other party] to its former condition as
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`nearly as possible.” Keyes v. Brown, 155 Conn. 469, 476, 232 A.2d 486, 490 (1967).
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`In its previous Ruling, the court found that the only allegation in the original
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`Complaint relating to Juice seeking rescission was the alleged service of Juice’s Cease
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`and Desist Letter. Ruling at 13. The parties sharply disputed whether the letter
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`contained an offer to return the UG’s payment under the Transfer Agreement. Id.
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`However, the letter was not attached to the original Complaint as an exhibit, and the
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`Complaint did not otherwise allege Juice offered to return UG to its former condition. Id.
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`Accordingly, Juice failed to plead an entitlement to rescission, so the court dismissed
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`Juice’s copyright claim.
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`When it refiled its Amended Complaint, Juice attached the Cease-and-Desist
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`Letter as an exhibit.3 See Ex. E to Am. Compl. (“Cease and Desist Letter”) (Doc. No.
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`174-5). The Cease and Desist Letter contains the following passages:
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`“Juice therefore demands that UG cease and desist any and all use of the
`[deliverables] by no later than September 2, 2022 and provide to Juice a
`sworn certification that all such source code has been permanently
`destroyed or returned to Juice. Juice will maintain the $23,462 received
`pursuant to the Transfer Agreement in escrow and will return the funds to
`UG upon receipt of proof that the infringement has ceased. The parties
`will return to their positions immediately preceding execution of the
`Transfer Agreement.”
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`“Because UG fraudulently induced Juice to enter into the Transfer
`Agreement, the Transfer Agreement is voidable at Juice’s option, which it
`hereby exercises. Harold Cohn & Co. v. Harco Int’l, LLC, 804 A.D.2d 218,
`223 (Conn. App. Ct. 2002) (“A defrauded party has the option of seeking
`rescission or enforcement of the contract and damages.”). Without the
`Transfer Agreement, UG has no basis to use, replicate, further develop,
`modify, upload, download, or create any derivative works from the source
`code to the above Existing Materials.”
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`Cease and Desist Letter at 1-2, 5. In the court’s view, Juice’s offer to “return the
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`funds to UG upon receipt of proof that the infringement has ceased” is, on its
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`face, an offer to return the benefit Juice received under the Transfer Agreement.
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`See Petrucelli v. Palmer, 596 F. Supp. 2d 347, 368 (D. Conn. 2009) (holding a
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`“condition precedent to rescission is the offer to restore the other party to its
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`former condition as nearly as possible”).
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`UG makes several arguments why the language in the Cease-and-Desist
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`Letter is insufficient, none of which is persuasive to the court. First, UG argues
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`that because Juice demanded “proof that the infringement has ceased,” Juice
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`was demanding an additional concession beyond the scope of an offer of
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`3 In deciding a motion to dismiss under Rule 12(b)(6), the complaint is deemed to include writings
`and documents attached to the complaint. See Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d
`Cir. 2002). Therefore, the Cease-and-Desist Letter is appropriately considered by the court.
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`rescission. Def.’s Mem. at 1-2. However, drawing inferences in Juice’s favor,
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`the court views this as a request for verification that UG was no longer using its
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`code, not as a demand for anything further.
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`UG also argues that Juice was not offering to restore it to its previous
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`position, because Juice was demanding that UG stop using its code entirely,
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`rather than that the parties return to status quo under the MSA, where UG could
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`use the features Juice created. Drawing all inferences in the plaintiff’s favor,
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`however, it is not clear from the face of the Complaint or Cease-and-Desist letter
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`that Juice was not seeking a return to the status quo, particularly as the letter
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`states: “the parties will return to their positions immediately preceding execution
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`of the Transfer Agreement.” Cease-and-Desist Letter at 2.
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`Third, UG argues that Juice unreasonably delayed in seeking rescission,
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`citing the delay between UG’s early demands in March and April 2022 and the
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`Cease-and-Desist Letter in August. Def.’s Mem. at 13. Juice responds that it
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`believed the matter resolved after April, and it was not until UG “reemerged with
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`its draft lawsuit in August” that Juice needed to promptly demand rescission.
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`Pl.’s Opp. at 19. Indeed, “[i]t is well established that ‘[w]here a party desires to
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`rescind upon the ground of . . . fraud, he must, upon the discovery of the facts, at
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`once announce his purpose, and adhere to it . . . . He is not permitted to play fast
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`and loose.” Cont'l Cas. Co. v. Marshall Granger & Co., LLP, 6 F. Supp. 3d 380,
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`393 (S.D.N.Y. 2014), aff'd sub nom. Cont'l Cas. Co. v. Boughton, 695 F. App'x
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`596 (2d Cir. 2017), quoting Grymes v. Sanders, 93 U.S. 55, 62 (1876). Drawing
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`all inferences, as it must, in the plaintiff’s favor, the court does not conclude that
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`a several week delay – during which Juice found legal counsel – was an
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`unreasonable delay in seeking rescission. In addition, “[o]rdinarily, the question
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`of what is a reasonable time for rescission is a question of fact.” Arthur
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`Properties, S.A. v. ABA Gallery, Inc., No. 11 CIV. 4409 LAK, 2012 WL 2886685,
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`at *3 (S.D.N.Y. July 16, 2012). Thus, in the court’s view, it would be
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`inappropriate at the motion to dismiss stage to deny rescission based on
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`unreasonable delay.
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`Finally, UG argues the improvements UG has made to Juice’s code render it
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`impossible to put the parties back into their prior positions, making rescission
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`inappropriate. Def.’s Mot. at 17-19. And indeed, the Amended Complaint alleges that
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`following the execution of the Transfer Agreement, UG “manipulated Juice’s copyrighted
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`source code to add several new features.” Am. Compl. ¶ 79.
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`“A court of equity is always reluctant to rescind, unless the parties can be put
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`back in statu quo. If this cannot be done, it will give such relief only where the clearest
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`and strongest equity imperatively demands it.” Ballow Brasted O'Brien & Rusin P.C. v.
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`Logan, 435 F.3d 235, 240 (2d Cir. 2006), quoting Grymes v. Sanders, 93 U.S. 55, 62
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`(1876). In its previous Ruling, the court expressed concern over this issue in granting
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`Juice the right to replead. See Ruling at 14, fn. 2. However, after reviewing the parties
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`briefs, the court is reluctant to decide this issue on the face of the pleadings. In the
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`court’s view, whether the parties can be restored to the status quo involves questions of
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`fact that cannot be resolved at this stage. See Lipsky v. Commonwealth United Corp.,
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`551 F.2d 887, 898 (2d Cir. 1976) (holding that a decision to dismiss a complaint seeking
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`rescission was “premature” and “whether the status quo could be achieved is a question
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`Case 3:22-cv-01175-JCH Document 181 Filed 09/25/24 Page 14 of 24
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`of fact and could not be decided solely on the pleadings”). While UG’s changes to the
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`Juice’s software and code may pose difficulties in restoring the parties to their previous
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`positions, the court is not persuaded from the face of the Amended Complaint that it
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`would be impossible and therefore prohibited. Accordingly, the court will not dismiss
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`Count One on this ground.
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`The Motion to Dismiss with respect to Count One of the Amended Complaint is
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`denied.
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`B.
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`Supplemental Jurisdiction
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`Because the Motion with respect to Juice’s copyright claim is denied, and Juice’s
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`copyright claim is brought under federal law, a claim now remains over which this court
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`has original jurisdiction. 28 U.S.C. § 1331. Accordingly, the court no longer sees a
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`basis under section 1367(c) of title 28 of the U.S. Code for declining supplemental
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`jurisdiction. The court will therefore exercise its supplemental jurisdiction over Juice’s
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`remaining claims.
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`However, the court makes this determination for the purposes of the present
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`motion only, and may revisit whether to exercise supplemental jurisdiction if Count One
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`is dismissed at a later stage. The court remains mindful of comity and the need to avoid
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`conflicting judgments, and many of the same issues were before the Connecticut state
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`court in UG’s action against Juice. Accordingly, UG is not prejudiced from raising
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`arguments at a later stage about the appropriateness of this court deciding Juice’s state
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`law claims.
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`Case 3:22-cv-01175-JCH Document 181 Filed 09/25/24 Page 15 of 24
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`C.
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`Fraud in the Inducement
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`Count Two of the Amended Complaint is a state law claim of fraudulent
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`inducement. Juice alleges that UG fraudulently induced Juice to execute the Transfer
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`Agreement in order to obtain Juice’s source code and induce Juice to forgo half the
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`value of its outstanding invoices while UG had no intention of walking away. Am. Compl
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`.at ¶¶ 95-108. UG argues that Count Two should be dismissed, because Juice has
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`failed to allege the required elements of fraudulent inducement. Def.’s Mem. at 25-31.
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`The elements of fraudulent inducement in Connecticut are that “(1) a false
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`representation was made as a statement of fact; (2) it was untrue and known to be
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`untrue by the party making it; (3) it was made to induce the other party to act upon it;
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`and (4) the other party did so act upon that false representation to his injury . . . . Under
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`a fraud claim of this type, the party to whom the false representation was made claims
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`to have relied on that representation and to have suffered harm as a result of the
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`reliance.” Sturm v. Harb Dev., LLC, 298 Conn. 124, 142 (2010).
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`
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`UG first argues that Juice fails to allege any false representation. Def.’s Mem. at
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`26-27. However, drawing all reasonable inferences in the plaintiff’s favor, the court
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`infers that UG’s alleged representation that it would accept Juice’s code “as is” was a
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`knowingly false statement. See Am. Compl. at ¶ 57. Juice has plausibly alleged that
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`UG knew the Four Features were incomplete; indeed, UG instructed Juice not to finish
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`them. See Am. Compl.at ¶¶ 31-33. UG was also given a “View Access Period” prior to
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`the execution of the Transfer Agreement in which it could inspect the code and features
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`as they existed. See id. at ¶¶ 54-56. There was no code for the Four Features shown
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`in the View Access Period, indeed, no code for the Four Features ever existed. See id.
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`Case 3:22-cv-01175-JCH Document 181 Filed 09/25/24 Page 16 of 24
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`at ¶ 70. These allegations give rise to the inference that UG knew it would not be
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`receiving the Four Features. Thus, UG’s near immediate demand that Juice hand over
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`the Four Features following the execution of the Transfer Agreement gives rise to the
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`inference that UG’s commitment to accept the code “as is” was a false representation.
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`UG represented that it would accept the code “as is”, allegedly knowing that it would
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`not. See Paiva v. Vanech Heights Const. Co., 159 Conn. 512, 515 (1970) (“a promise
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`to do an act in the future, when coupled with a present intent not to fulfil the promise, is
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`a false representation”). In the court’s view, at the present stage, that is sufficient to
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`satisfy the elements that UG made “(1) a false representation was made as a statement
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`of fact” and that “(2) it was untrue and known to be untrue by the party making it”.
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`Sturm, 298 Conn. at 142.
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`
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`Additionally, UG’s representation that it would accept code “as is” was made for
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`the purpose of inducing Juice to execute the Transfer Agreement, transfer its code and
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`intellectual property to UG, and accept a discount on its outstanding invoices. See Am.
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`Compl. ¶¶ 64-71. Accordingly, UG made it to “to induce the other party to act upon it;
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`and . . . the other party did so act upon that false representation to his injury”. Sturm,
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`298 Conn. at 142. Thus, in the court’s view, Juice has adequately pled the elements of
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`fraudulent inducement.
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`
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`UG also argues that Juice fails to abide by the heightened pleading standards for
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`allegations of fraud set forth by Federal Rule of Civil Procedure 9(b), which states that
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`“in alleging fraud . . . a party must state with particularity the circumstances constituting
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`fraud . . . .” See Fed. R. Civ. P. 9(b); Def.’s Mem. at 26. In interpreting 9(b), the
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`Second Circuit has stated that, to plead fraud with the required particularity, a party
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`Case 3:22-cv-01175-JCH Document 181 Filed 09/25/24 Page 17 of 24
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`must “(1) specify the statements that the plaintiff contends were fraudulent, (2) identify
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`the speaker, (3) state where and when the statements were made, and (4) explain why
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`the statements were fraudulent.” Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128
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`(2d Cir. 1994). In the court’s view, the Amended Complaint meets this standard.
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`
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`Take, for example, Juice’s allegation that UG falsely represented it would accept
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`Juice’s code “as is”, which the court finds is plausibly alleged as a knowingly false
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`statement. See, supra, at 15. In this example, Juice alleges specifically that, on
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`February 22, 2022, UG’s counsel told Juice Board member Rhonda Brown that “he left
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`the words ‘as is’ in the Transfer Agreement” and “told UG’s CEO . . . that what they saw
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`in the View Access was precisely what would be transferred under the Transfer
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`Agreement.” Am. Compl. at ¶ 57. The Amended Complaint goes on to allege that this
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`was one of several statements that were misrepresentations, because “UG . . . never
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`intended to abide by the Transfer Agreement or allow the Transfer Agreement to end
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`the parties’ relationship as promised.” Am. Compl. ¶ 64. In this example, the Amended
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`Complaint (1) identifies specific statements as misrepresentatio