Reefer Brief: High Hopes for an E-Commerce Website Are Disappointed

Kinzie Advanced Polymers, LLC (Kinzie) entered into a contract with Highopes LLC (Highopes) in February, 2022. According to the U.S. District Court for the Western District of Washington, Kinzie operates “in the cannabis industry,” doing business as Grove Bags. Highopes was to“[d]esign and develop a scalable [and] conversion optimized e-commerce website” and “begin utilizing [search engine optimization] marketing to regain and exceed past search rankings.”  The contract was to be completed within three months. The contract price was $23,000, plus a monthly fee of $2250 for maintenance of the product. The contract limited Kinzie’s entitlement to damages to the $23,000 initial contract price.

The project in fact took closer to a year to complete, and once it was completed it crashed for ten days, resulting in the opposite of optimization. Search rankings declined by 50%. Kinzie hired other companies for search optimization services. Kinzie then filed a claim in a District Court in Ohio, alleging breach of contract and fraud. Highopes successfully had the case removed to the Washington District Court and moved to dismiss, alleging lack of diversity and that the amount-in-controversy requirement was not met, and also moving for dismissal for failure to state a claim (12(b)(6)).

In Kinzie Advanced Polymers, LLC v. Highopes LLC, the District Court granted the motion in part and denied it in part. The Court found the diversity requirement satisfied and also found the amount-in-controversy satisfied, in part because Highopes impliedly conceded the point when it moved to remove and in part because Kinzie is challenting the contractual limitation on damages and has “conservatively” estimated its damages at around $75,000.

On the merits, the case is quite straightforward. Kinzie has alleged a breach of contract; it has not sufficiently alleged misrepresentation. The Court reminds Highopes that its characterization of the facts are not relevant to its 12(b)(6) motion. It also rejects Highopes’ argument that the limitation on damages is for some reason grounds to dismiss the breach of contract claim. As to the misrepresentation claim, Kinzie has alleged that Highopes made representations that turned out to be untrue. It has not made sufficient allegations that Highopes knew that the representations were untrue at the time they were made. Highopes motion for judgment on the pleadings was dismissed as premature because Highopes has not yet answered the amended complaint.