United States District Court, W.D. Washington
ZENWORK, INC. f/k/a TECHATLANTIS, INC., Plaintiff,
AVALARA, INC., Defendant. AVALARA, INC., Counterclaim Plaintiff,
ZENWORK, INC. f/k/a TECHATLANTIS, INC. d/b/a EXAKTO.COM; 1099ONLINE.COM, TAX1099.COM; EZ2290; EZIFTA; EZEXTENSION; and FBARONLINE, Counterclaim Defendants.
HONORABLE RICHARD A. JONES JUDGE
matter comes before the Court upon Defendant Avalara,
Inc.'s Partial Motion for Summary Judgment. Dkt. # 38.
Plaintiff Zenwork, Inc. (formerly known as Tech Atlantis)
opposes the motion. Dkt. # 42. Having considered the
submissions of the parties, the relevant portions of the
record, and the applicable law, the Court finds that oral
argument is unnecessary. For the reasons that follow, the
Court GRANTS Defendant's Motion.
is a provider of web-based corporate tax calculation and
filing services. Dkt. # 1. Defendant provides web-based
services for data collection and electronic filing of
employment income returns. Id. at ¶ 6. On
November 24, 2014, Plaintiff and Defendant entered into a
Reseller Agreement (the “Agreement”).
Id. at ¶ 8. Under the Agreement, Plaintiff
would provide web-based services for the preparation and
filing of IRS 1099 forms and other IRS tax forms, Defendant
would brand Plaintiff's website and services with its own
name, and then Defendant would market and sell the service as
“Avalara1099”. Id. at ¶ 9.
Defendant would then collect the revenue from customers of
Avalara1099 and pay a portion of that revenue to Plaintiff.
customers could purchase “add-on” services in
addition to the basic online form-filing service. One such
add-on service was called Enterprise. Enterprise allowed a
customer to assign specific rights to different users. For
example, a customer could allow a supervisor to access their
employees' data but not allow the employees to access
each other's data. Dkt. ## 39, 45. Plaintiff would then
invoice Defendant for 40% of the purchase price of these
additional services. Dkt. # 1 Ex. A.
Agreement also allowed Defendant to sell Avalara1099 Prepaid
Forms (“Prepaid Forms”) separately from the
Avalara1099 website. Avalara1099 accounts were provisioned
for the use of Prepaid Forms. Defendant was allowed to
“set customer pricing, process orders, collect payment
and process all cancellations with respect to the Prepaid
Forms.” Id. Defendant agreed to pay Plaintiff
$0.60 per form for the first 200, 000 Prepaid Forms ordered
by Defendant for Avalara1099 each sales year and $0.45 for
each Prepaid Form above the first 200, 000. Defendant also
agreed to pay Plaintiff “an annual fee of $75 for each
customer that purchases Enterprise services (i.e. enterprise
workflow and rights management features).” Id.
point after the parties entered into the Agreement, Defendant
made the decision to bundle additional services, including
Enterprise services, into Avalara1099. Every customer that
purchased Prepaid Forms and through those forms, Avalara1099
services, also received Enterprise services. Dkt. # 39 Ex. 1.
On October 15, 2015, Defendant entered into a contract with
H&R Block Tax Group, Inc. (“H&R Block”).
Dkt. # 40. H&R Block purchased Avalara1099 services for
its own internal corporate use and for use by its individual
franchise offices. Id. Under the terms of H&R
Block's agreement with Defendant (“HRB
Agreement”), H&R Block would pay $0.60 per Prepaid
Form for the first 45, 000 forms used, and $1.50 per Prepaid
Form after that. Id. H&R Block agreed to be
invoiced for 20, 000 Prepaid Forms upon execution of the HRB
Agreement, with any Prepaid Forms in excess of 20, 000 to be
charged as incurred. Dkt. # 43 Ex. E. H&R Block received
use of the Avalara1099 services, and through bundling,
Enterprise services, in exchange for this initial purchase.
H&R Block then made these services available to its
individual franchise offices at no charge. Dkt. # 41.
January of 2016, Plaintiff notified Defendant that it wished
to terminate the Agreement and sought to renegotiate its
terms. Dkt. # 1. On March 28, 2016, Plaintiff sent invoices
to Defendant for its share of revenues from sales of
Avalara1099 from May of 2015 through February of 2016. Dkt. #
39 Ex. F. Plaintiff invoiced Defendant $75 for each of the 7,
169 H&R Block franchise offices that had access to
Enterprise services. Id. Defendant refused to pay
the invoiced $534, 000, arguing that H&R Block was one
“customer” that purchased Enterprise services and
that pursuant to the Agreement, it owes Plaintiff one $75 fee
for that purchase. In Defendant's Motion, it requests
that the Court grant partial summary judgment on the issue of
Plaintiff's entitlement to Enterprise service fees with
respect to H&R Block's purchase of Avalara1099. Dkt.
judgment is appropriate if there is no genuine dispute as to
any material fact and the moving party is entitled to
judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving
party bears the initial burden of demonstrating the absence
of a genuine issue of material fact. Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). Where the moving
party will have the burden of proof at trial, it must
affirmatively demonstrate that no reasonable trier of fact
could find other than for the moving party. Soremekun v.
Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir.
2007). On an issue where the nonmoving party will bear the
burden of proof at trial, the moving party can prevail merely
by pointing out to the district court that there is an
absence of evidence to support the non-moving party's
case. Celotex Corp., 477 U.S. at 325. If the moving
party meets the initial burden, the opposing party must set
forth specific facts showing that there is a genuine issue of
fact for trial in order to defeat the motion. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). The court
must view the evidence in the light most favorable to the
nonmoving party and draw all reasonable inferences in that
party's favor. Reeves v. Sanderson Plumbing
Prods., 530 U.S. 133, 150-51 (2000).
Washington, contract interpretation is a question of law.
Tanner Elec. Coop. v. Puget Sound Power & Light,
128 Wash.2d 656 (Wash. 1996). In a contract case, summary
judgment is proper “if the written contract, viewed in
light of the parties' objective manifestations, has only
one reasonable meaning.” Wm. Dickson Co. v. Pierce
Cnty., 128 Wash.App. 488, 492 (2005). Where
interpretation “depend[s] on the use of extrinsic
evidence, ” or the extrinsic evidence admits more than
one “reasonable inference, ” the court cannot
interpret the contract as a purely legal matter.
Brotherson v. Prof'l Basketball Club, L.L.C.,
604 F.Supp.2d 1276, 1286 (W.D. Wash. 2009).
noted above, Section 5.3.2 of the Agreement states that
Defendant “shall pay [Plaintiff] an annual fee of $75
for each customer that purchases Enterprise services (i.e.
enterprise workflow and rights management features).”
Dkt. # 1 Ex. A. An “AVA Customer” is defined as
“any and all Customers of any AVA [Avalara] product
(including, without limitations, the AVA-branded Tax1099
Service [Avalara1099]). Id. According to the plain
language of the contract, Defendant must pay Plaintiff $75
for any and all customers of any Avalara product that
purchases Enterprise services.
Block purchased Avalara1099 Prepaid Forms and received
Avalara1099 and Enterprise services. These Prepaid Forms were
then used by 7, 169 of its individual franchise offices. Dkt.
# 39. Plaintiff agrees that the plain language of the
Agreement states that Defendant is obligated to pay Plaintiff
a $75 fee for each customer who purchases Enterprise
services, but argues it was Defendant's intent to charge
each individual customer who uses the Enterprise services,
and that each of the H&R Block offices that utilized
Enterprise services are customers. Dkt. # 42. However,
“the subjective intent of the parties is generally
irrelevant if the intent can be determined from the actual
words used. We generally give words in a contract their
ordinary, usual, and popular meaning unless the entirety of
the agreement clearly demonstrates a contrary intent.”
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