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ACI Worldwide Corp. v. Churchill Lane Associates, LLC

United States District Court, D. Nebraska

September 15, 2017

ACI WORLDWIDE CORP., Plaintiff,
v.
CHURCHILL LANE ASSOCIATES, LLC, Defendant.

          MEMORANDUM AND ORDER

          Laurie Smith Camp, Chief United States District Judge.

         This matter is before the Court on the Statement of Objections, ECF No. 129, filed by Plaintiff ACI Worldwide Corp. (ACI). For the reasons stated below, the Statement of Objections will be overruled.

         BACKGROUND

         In 2001, ACI entered into a Licensing Agreement with Nestor, Inc. (Nestor), through which ACI was permitted to use and sub-license portions of various software technology (“Licensed Software Technology”) developed and owned by Nestor. Under the Licensing Agreement, any new technology ACI developed using Nestor's software would be owned by Nestor. For use of the software, ACI agreed to pay Nestor ongoing, periodic royalties.

         In 2002, Nestor and ACI executed Amendment 2 to the Licensing Agreement, through which Nestor assigned its right to the royalties from the Licensing Agreement to Defendant Churchill Lane Associates, LLC (“Churchill”). Nestor and Churchill also entered into agreements through which Nestor irrevocably assigned its right to future royalties under the Licensing Agreement to Churchill and promised not to modify the Licensing Agreement without Churchill's consent.

         In 2009, Nestor became insolvent and entered receivership. The appointed receiver sold all of Nestor's rights in the Licensing Agreement and the Licensed Software Technology to American Traffic Solutions (“ATS”). In July of 2014, ACI purchased these rights from ATS. After this purchase, ACI notified Churchill that, because ACI believed it now owned all rights in the Licensing Agreement, ACI was unilaterally terminating the Licensing Agreement and no longer owed royalties to Churchill. ACI sent a check to Churchill for the remaining balance due under the Licensing Agreement. Churchill communicated to ACI that Churchill believed the Licensing Agreement remained in effect and that ACI continued to owe ongoing royalties to Churchill.

         On August 24, 2014, ACI filed this action, seeing a declaratory judgment that (1) ATS's assignment to ACI was valid and enforceable; (2) ACI was the owner of the Licensed Software Technology free and clear of any claim or right of Churchill; (3) ACI was the proper assignee of, and successor licensor under, the Licensing Agreement, free and clear of any claim or right of Churchill; (4) ACI validly terminated the Licensing Agreement effective July 21, 2014; (5) ACI tendered timely, final, and full payments of all amounts due to Churchill under the Licensing Agreement and no new amounts could become due; and (6) Churchill, as a non-party to the Licensing Agreement, did not have standing to challenge the assignment of the Licensed Software Technology or the assignment and termination of the Licensing Agreement.

         Churchill pled several affirmative defenses and counter-claims, and asked the Court to find that (1) the Licensing Agreement was not terminated and that ACI remained obligated to pay royalties to Churchill; (2) Churchill was due an accounting of the royalties outstanding per the terms of the Licensing Agreement; (3) ACI had to pay all royalties due under the Licensing Agreement; (4) Churchill was entitled to royalty payments on any fees paid to ACI or its affiliates for licensing or maintenance of the Licensed Software Technology or any part of the new technology; and (5) even if the Licensing Agreement was terminated, Churchill is still owed royalties on any sublicenses which were granted with respect to ACI and any third parties prior to the termination of the Licensing Agreement.

         On November 13, 2015, while cross-motions for summary judgment were pending, ACI filed a motion to amend its complaint, ECF No. 81, seeking amendments that included adding a claim of unjust enrichment, an affirmative defense of unclean hands, and an affirmative defense based on the Rule against Perpetuities.

         While the cross-motions for summary judgment and the motion to amend were pending, ACI filed a letter stating:

We respectfully submit that the Court need only decide the parties' competing summary judgment motions, a decision that likely will obviate the need to decide the discovery motions. Put simply, there is a straightforward basis for the Court to grant [ACI] judgment, now, on the existing summary judgment record. Undisputed facts applied to a clear written agreement demonstrate that [ACI] is entitled to summary judgment. . . . [I]f [ACI] is right that the entry of summary judgment now is appropriate, then the Court need not decide all of those other motions, discovery will be concluded, and trial preparation ended.

         Filing No. 102, Page ID 1579-80.

         In response to this letter, the Court entered an order on December 30, 2015, stating that “the Court will not address [ACI's] Motion to Amend Complaint, [ECF No. 81], at this time.” ECF No. 107. On March 9, 2016, the Court granted ACI's Motion for Summary Judgment as to claims (1) to (5) and dismissed all of Churchill's counter- claims. ECF No. 109. Churchill appealed, and on January 27, 2017, the Eighth Circuit Court of Appeals issued an opinion affirming in part and reversing in part the Court's summary judgment order. The Eighth Circuit held that ACI validly terminated the Licensing Agreement on July 21, 2014, and that ACI did not owe Churchill royalties on any sublicenses that ACI had granted since termination or that it will grant in the future. The Eighth Circuit also found that Churchill assumed the protections of an assignee in 2002 and that those protections were not eliminated by the 2007 amendment or the 2009 receivership sale of Nestor's assets to ATS. Thus, ACI owed Churchill royalties for all sublicenses granted prior to the Licensing Agreement's termination. The Eighth Circuit remanded the case to this Court for further proceedings.

         After the entry of the mandate, the Court allowed supplemental briefing on ACI's motion to amend. On August 4, 2017, Magistrate Judge Michael Nelson entered an order, ECF No. 126, denying the motion. ACI ...


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