A-1 Packaging v. Firefly RFID Solutions Court Allows Some Breach of Contract Claims to Proceed for Misrepresenting Capacity to Complete Construction Project and Dismisses Some Claims Against Officers and Directors — Best Chicago Business Dispute Lawyers

When officers of a corporation misrepresented the capacity of the corporation to meet requirements of an RFID manufacturing project, the district court allowed some claims for breach of contract, quantum meruit, and unjust enrichment to proceed. The court also dismissed some claims against the individual officers of the corporation, based on questions regarding the existence of valid contracts between the client and the officers.

A-1 Packaging Solutions, Inc. is a corporation that selects and provides RFID (Radio Frequency Identification) technologies from a variety of manufacturers to provide custom solutions for customers. Fiberteq hired A-1 to design an asset and inventory tracking system for its facility in Danville, Illinois. A-1 contacted several manufacturers and distributors who provided the relevant technology, in search of options to complete the system.

Dr. William Davidson and Jan Svoboda, the Chief Technology Officer and President of Firefly RFID systems, were one company contacted by A-1. In response, Davidson and Svoboda told A-1 that Firefly had expertise in RFID hardware and deployments, and had the capability to build the system that A-1 had designed. As part of the negotiation, A-1 specified to Firefly that any rights to the software created by Firefly were required to be transferred to A-1. Firefly agreed. A-1 then retained Firefly to assist in designing and building the RFID system for Fiberteq.

Despite assurances that the project would be completed within three months of the initial deposit, Firefly did not begin to ship parts of the system’s hardware until six months after the first deposit. The hardware shipped by Firefly was also defective, as it lacked required firmware. Six months after the first deposit, A-1 also learned that Firefly had failed to even begin work on the software portion of the project. A-1 later learned that no one at Firefly had the technical expertise to deploy the hardware associated with the project and that Davidson’s assertions that he had deployed a similar system for General Electric in the past were false.

In order to complete the project, A-1 retained other suppliers and manufacturers and spent approximately $395,542.38. Firefly refused to pay A-1 any of the amounts that A-1 spent to complete the project. Firefly also demanded further payment from A-1 in return for the transfer of the license to the software built for the project. In September 2017, A-1 sued Firefly in the federal district court for the Central District of Illinois. A-1 alleged breach of contract, fraudulent inducement, fraudulent misrepresentation, tortious interference with prospective business relations, unfair competition, quantum meruit, and unjust enrichment.

Firefly moved to dismiss the fraudulent inducement and misrepresentation, unfair competition, quantum meruit, and unjust enrichment claims. The district court began by finding that the fraudulent inducement and misrepresentation claims were properly pled by A-1. The district court stated that, at the current stage of the litigation, the specific representations made by Firefly to A-1 were not present before the court, and that dismissal based on the content of the representations was therefore inappropriate.

Next, the court dismissed the claims for quantum meruit against the individual defendants but refused to dismiss the claim against Firefly itself. The court found that A-1 had not sufficiently alleged a benefit received by the officers of Firefly, beyond the legal conclusion that the officers of Firefly benefitted from A-1’s assumption of Firefly’s work. Finally, the court dismissed portions of the unjust enrichment claim. The court stated that the claim could not proceed against Davidson, as A-1 had alleged the existence of an oral or written agreement between it and Davidson. The court therefore granted in part and denied in part Firefly’s motion to dismiss.

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