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Dylan Consulting Services LLC v. SingleCare Services LLC

United States District Court, D. Arizona

March 26, 2018

Dylan Consulting Services LLC, Plaintiff,
v.
SingleCare Services LLC, Defendant.

          ORDER

          Honorable G. Murray Snow, Judge

         Pending before the Court is the Motion for Summary Judgment of Defendant SingleCare Services LLC. (Doc. 42). For the following reasons, the Court grants the motion in part and denies the motion in part.

         BACKGROUND

         SingleCare Services (“SingleCare”) is a healthcare company that issues membership cards, entitling enrollees to discounts at specified healthcare providers. Dylan Consulting Services LLC (“Dylan”) is a consulting firm solely owned and operated by Wayne Goshkarian. In early 2016, SingleCare was a relatively new company looking to grow their networks of enrollees and partnering healthcare providers. SingleCare relies on distribution partners to market their discount card to potential enrollees. On April 18, 2016, SingleCare and Dylan entered into contracts, whereby Dylan would identify potential distribution partners for SingleCare.

         SingleCare and Dylan entered into two contracts to this effect. First, under the Group Sales Agreement (“GSA”), Dylan would introduce distribution partners to Single Care and receive a commission from any enrollees that the distribution partner signs up. Second, under the Retail Sales Agreement (“RSA”), Dylan would essentially act as a distribution partner itself and sign up enrollees directly, also receiving a commission for each enrollment. Both parties agree that all the work Dylan completed and for which it received compensation during the contract was under the GSA. (Doc. 44, ¶ 14; Doc. 52, ¶ 14).

         Section One of the GSA states that “[Dylan] agrees to introduce and represent SingleCare to large employer group customers, associations, affinity groups and/or other member aggregators for the purpose of enrolling members or employees into the SingleCare program.” (Doc. 43, Ex. 5). The contract further provides that “[Dylan] and SingleCare shall work together to qualify introductions as viable. [Dylan] shall provide SingleCare with the name, market segment and proposed distribution method for each prospect in advance of an introduction. Upon mutual agreement that the prospect is viable, an introduction via email, telephone call or in-person meeting shall be made.” Id. The contract terminates two years after the date of signing or if “[Dylan] purposefully misrepresents SingleCare or otherwise fails to comply with Section [One].” Id.

         SingleCare terminated both the GSA and the RSA on July 29, 2016. (Doc. 43, Ex. 11). SingleCare alleges that it is justified in terminating the GSA because Dylan materially breached the GSA contract by failing to comply with Section One's requirement that Dylan provide SingleCare with information about potential distribution partners before recruiting them as distribution partners. Dylan brought suit against SingleCare alleging breach of contract. (Doc. 1).

         DISCUSSION

         I. Legal Standard

         Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, demonstrates “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Substantive law determines which facts are material and “[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “A fact issue is genuine ‘if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'” Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002) (quoting Anderson, 477 U.S. at 248). When the nonmoving party “bear[s] the burden of proof at trial as to an element essential to its case, and that party fails to make a showing sufficient to establish a genuine dispute of fact with respect to the existence of that element, then summary judgment is appropriate.” Cal. Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986)).

         II. Analysis

         Defendant, SingleCare, seeks summary judgment (1) because Dylan materially breached the GSA contract, and thus SingleCare was entitled to terminate the contract for cause and (2) Dylan's measure of damages under either the GSA or the RSA are too speculative to sustain a claim.

         A. Material Breach of the GSA

         Under Arizona law, a claim for breach of contract has three elements: (1) a contract exists between the plaintiff and the defendant; (2) the defendant breached the contract; and (3) the breach resulted in damage to the plaintiff. See Frank Lloyd Wright Foundation v. Kroeter, 697 F.Supp.2d 1118, 1125 (D. Ariz. 2010). An “uncured material breach of contract relieves the non-breaching party from the duty to perform and can discharge that party from the contract.” Murphy Farrell Development, LLLP v. Sourant, 272 P.3d 355, 364 (Ariz.Ct.App. 2012) (citing Zancanaro v. Cross, 339 P.2d 746, 750 (Ariz. 1959). A claim of material breach is an affirmative defense to a breach of contract claim. See Frank Lloyd Wright Foundation at 1133. Therefore, ...


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