In Pilar Services, Inc. v. NCI Information, Inc., 2008 WL 2620172 (E.D. Va. June 30, 2008), the Court, faced with Cross-motions for Summary Judgment, granted the Defendant prime contractor’s Motion for Summary Judgment. The Court determined that the parties’ contract, and not Virginia’s Uniform Computer Information Transactions Act (“UCITA”), governed the relationship between the prime contractor and subcontractor. Because the parties’ contract contained a pay-if-paid clause and the prime contractor has not been paid for the subcontractor’s purported services, no breach of contract occurred. Even if the Court determined that UCITA and not the parties’ agreement controlled, summary judgment was still appropriate, as the subcontractor suffered no damages. Lastly, because the parties entered into an express contract governing the transaction, the subcontractor could not avail itself of certain remedies otherwise available under Virginia law.
Pilar Services, Inc. (“Pilar”) brought suit against NCI Information Systems, Inc. (“NCI”), a prime contractor under an agreement (“Prime Contract”) with the National Security Agency (“NSA”) to, inter alia, provide IT services. Pilar and NCI entered in a subcontract (“Subcontract”) under which Pilar would provide services to support NCI in its performance of the Prime Contract. The Subcontract contained a pay-if paid clause, setting forth that Pilar receives payment when and if NCI is paid by the NSA for Pilar’s work performed pursuant to the Subcontract.
Pilar is a reseller of a software program entitled “Cicero.” Pilar provided the NSA with a demonstration copy of the software. At Pilar's behest, the NSA arranged to purchase Cicero through NCI under the Prime Contract. However, NSA failed to execute the requisite licensing agreement, preventing the Cicero order from being filled. Pilar required the NSA to either execute the licensing agreement or de-install and destroy the demonstration copy. The NSA chose the later.
The NSA never remitted payment to NCI for its order and Pilar never remitted payment to Cicero’s producer. Pilar did incur an accounts payable related to the NSA’s order and brought suit against NCI seeking to recover the costs of the software under breach of contract, unjust enrichment, and quantum meriut theories of recovery.
In examining the propriety of the Cross-motions for Summary Judgment, the Court held that the Subcontract controls the terms of the underlying transaction, as UCITA allows for parties “in their agreement [to] choose the applicable law.” 2008 WL 2620172, at * 3. Therefore, the Subcontract terms applied. Because the Subcontract controlled, the pay-if paid clause provided NCI with an absolute defense under Virginia law, given that NCI did not receive payment from the NSA for Pilar’s services. Id. at *3-4 (citing Galloway Corp. v. S.B. Ballard Constr. Co., 250 Va. 493, 464 S.E.2d 349, 355 (1995)).
Even if the Court were to apply UCITA, Pilar suffered no damages because it incurred no liability to Cicero’s producer, as admitted by Pilar’s Chief Executive Officer in deposition. 2008 WL 2620172, at * 4-5. Because there were no damages, no breach of contract claim can lie. Id. (citing Carley Capital Group v. Newport News, 709 F. Supp. 1387. 1396 (E.D. Va. 1989)).
Lastly, the Court held that where parties enter into an express contract which governs their relationship, the equitable remedies of quantum meriut and unjust enrichment are not available. 2008 WL 2620172, at * 5 (citations omitted). Due to the existence of the Subcontract, Pilar’s equitable claims were improper and subject to Summary Judgment.
After examining these four separate legal issues, the Court granted NCI’s Motion for Summary Judgment and, in doing so, denied Pilar’s Motion for Summary Judgment.
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