Judge Tosses Most Claims in CVS IT Contractual Dispute, But Preserves One

A case arising from the contract to rebuild pharmacy chain CVS’ intranet platform has been largely, but not completely, dismissed on CVS’ motion for judgment on the pleadings. The case, brought before the District of New Jersey by Logical Design Solutions (LDS), purports that CVS breached its contract by failing to pay LDS for increased time spent on the project, despite instructing them to continue work after the budget limit was exceeded.

The opinion, issued by Judge Stanley R. Chesler, opened by explaining the contract at issue. The contract divided the project into phases, each with a set budget, the opinion explained; CVS required VP-level approval of budget overages for any given segment, as well as a written change order from the relevant CVS department. As the work began on the design phase, “it became clear to LDS that CVS’s design needs exceeded the scope of services set forth in the Design [statement of work].” The opinion said LDS was told to continue working by the CVS Project Manager and with the approval of executives. When LDS submitted a change order for over double the original budget, or nearly $2 million, CVS only paid the original amount, leading to the suit.

LDS charged CVS with breach of contract, fraudulent inducement, unjust enrichment, and breach of the duty of good faith and fair dealing. The court dismissed the first two counts without prejudice for failure to state a claim, holding that the complaint did not sufficiently describe the specific provisions breached. The unjust enrichment claim was dismissed with prejudice as it was precluded by New York law. Finally, the good faith and fair dealing claim survived dismissal, as the complaint specifically referred to the change order process, satisfying the pleading requirements.

The plaintiff is represented by K&L Gates LLP, while CVS is represented by Fox Rothschild LLP.