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ACI Worldwide Corp. v. Churchill Lane Associates, LLC

United States District Court, D. Nebraska

March 4, 2019



          Laurie Smith Camp Senior United States District Judge.

         This matter is before the Court on the Motion for Partial Summary Judgment, ECF No. 228, filed by Defendant Churchill Lane Associates, LLC, and the Motions to Exclude Opinion Testimony, ECF Nos. 234 & 237, filed by Plaintiff ACI Worldwide Corp. For the reasons stated below, the Motion for Partial Summary Judgment will be granted in part, and the Motions to Exclude will be denied.


         The following facts are those stated in the parties' briefs, supported by pinpoint citations to admissible evidence in the record, in compliance with NECivR 56.1[1] and Federal Rule of Civil Procedure 56. The Court has also drawn facts from its prior Memoranda and Orders, ECF Nos. 109 & 182, and the Court of Appeals' opinion, ECF No. 115, ACI Worldwide Corp. v. Churchill Lane Assocs., LLC, 847 F.3d 571 (8th Cir. 2017).

         Nestor, Inc., developed and acquired a series of credit card fraud detection software products and, in February 2001, entered into a License Agreement with ACI, wherein Nestor granted ACI a license “to copy, use, modify, enhance, market, sub-license [ ], maintain, and support the Software Products, ” subject to certain terms and conditions. License Agreement § 2.1, ECF No. 52, Page ID 398. The License Agreement also specifically permitted ACI to use the Software Products to develop its own software, which the License Agreement refers to as “New Technology, ” but Nestor retained ownership of any New Technology and the New Technology was deemed licensed to ACI by Nestor as if it were part of the Software Products. Id. § 2.3. Section 2.1 of the License Agreement provided that “[a]ny ACI “Affiliate”[2] may exercise any of ACI's rights hereunder.” Id. § 2.1. ACI agreed to pay Nestor periodic royalties in the amount of fifteen percent of any sublicensing and maintenance fees ACI or its Affiliates received from their customers for using the Software Products. Id., Attach. A § 1.5, ECF No. 52, Page ID 406.

         Section 9.2 of the Licensing Agreement permitted either Nestor or ACI to terminate the License Agreement if the other became insolvent, and § 9.3 provided that, “[n]otwithstanding any termination of this Agreement, the License and any sublicenses shall continue in effect with respect to any sublicenses granted by ACI prior to termination; and ACI shall remain liable to Nestor for royalties accruing with respect thereto.” License Agreement, ECF No. 52, Page ID 402.

         In 2002, Nestor and ACI executed Amendment 2 to the Licensing Agreement, ECF No. 52, Page ID 416-17, wherein ACI agreed that Nestor could assign its royalty rights to a third party. At some point thereafter, Nestor notified ACI that it had sold and assigned its royalty rights to Churchill, and ACI began paying the royalties to Churchill directly. In 2008, Nestor sold and assigned all its rights in the New Technology to ACI for $500, 000. In 2009, Nestor became insolvent, went into receivership, and sold all its remaining rights in the License Agreement and the Software Products to American Traffic Solutions.

         ACI sought to acquire the royalty rights from Churchill, but Churchill declined ACI's offers. On July 20, 2014, ACI acquired from American Traffic Solutions Nestor's remaining rights, title, and interest in the License Agreement and the Software Products. The next day, July 21, 2014, ACI terminated the License Agreement and took the position that it unilaterally and simultaneously amended the License Agreement to eliminate its obligation to pay Churchill post-termination royalties under § 9.3. ACI also sent Churchill a check for $967, 736.02 as a full and final payment of royalties, but Churchill did not deposit the check.

         ACI filed this action seeking a declaratory judgment to determine its rights and obligations under the Licensing Agreement, and Churchill counterclaimed for breach of contract. On review of this Court's ruling on the parties' motions for summary judgment, ECF Nos. 109 & 110, the U.S. Court of Appeals for the Eighth Circuit concluded that although ACI validly terminated the License Agreement, “ACI did not validly amend the License Agreement to eliminate the post-termination royalties provision, and royalties are still due to Churchill for any sublicenses granted by ACI prior to July 21, 2014.” 847 F.3d at 576-77. Specifically, the Eighth Circuit found that Churchill acquired the “legal protections of a third-party beneficiary or assignee[, ]” meaning “neither ACI nor Nestor could prejudice Churchill's rights to the royalties without Churchill's consent.” Id. at 578-79. ACI does not, however, “owe Churchill royalties on any sublicenses that ACI has granted since July 21, 2014 or that it will grant in the future.” Id. at 583. The case was remanded for further proceedings.

         At some point following the Eighth Circuit's January 27, 2017, ruling, ACI and at least five of its Affiliates executed Mutual Termination agreements. ECF No. 231-1, Page ID 3197-3215. Each of these agreements recited the facts above and stated that the existing agreements by which ACI and its Affiliates sublicensed the Software Products to their customers were terminated retroactively, effective July 21, 2014-the date ACI terminated the License Agreement. According to ACI, it and its Affiliates terminated the sublicenses with their customers effective July 21, 2014, and then granted the same customers new licenses that are not subject to the License Agreement's post-termination royalty provision in § 9.3. Yet ACI and its Affiliates permitted the customers to use the Software Products without interruption.

         A bench trial to determine ACI's post-termination royalty obligations and the amount of royalties to which Churchill is entitled is scheduled for the week of April 16, 2019. In its Motion for Partial Summary Judgment, Churchill asks the Court to find that

1. Section 9.3 of the License Agreement is unambiguous and requires ACI to pay post-termination royalties to Churchill on all license and maintenance fees paid by customers of ACI and its affiliates that had a sublicense to the New Technology[3] as of July 21, 2014 until such time as the customer ceases possessing and using the New Technology[;][4]
2. The purported “mutual terminations” executed by ACI and its affiliates in 2017 have no effect on Churchill's right to post-termination royalties pursuant to § 9.3 of the License Agreement[;] [and]
3. Churchill is entitled to partial judgment on undisputed pre-termination royalties in the amount of $967, 736.02, together with pre-judgment interest under applicable New York law at the rate of 9% per annum or $238.62 per day from July 21, 2014 until the date this Court enters judgment.

Mot. for Partial Summ. J., ECF No. 228.[5]


         “Summary judgment is appropriate when the evidence, viewed in the light most favorable to the nonmoving party, presents no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.” Garrison v. ConAgra Foods Packaged Foods, LLC, 833 F.3d 881, 884 (8th Cir. 2016) (citing Fed.R.Civ.P. 56(c)). “Summary judgment is not disfavored and is designed for every action.” Briscoe v. Cty. of St. Louis, 690 F.3d 1004, 1011 n.2 (8th Cir. 2012) (quoting Torgerson v. City of Rochester, 643 F.3d 1031, 1043 (8th Cir. 2011) (en banc)). In reviewing a motion for summary judgment, the Court will view “the record in the light most favorable to the nonmoving party . . . drawing all reasonable inferences in that party's favor.” Whitney v. Guys, Inc., 826 F.3d 1074, 1076 (8th Cir. 2016) (citing Hitt v. Harsco Corp., 356 F.3d 920, 923-24 (8th Cir. 2004)). Where the nonmoving party will bear the burden of proof at trial on a dispositive issue, “Rule 56(e) permits a proper summary judgment motion to be opposed by any of the kinds of evidentiary materials listed in Rule 56(c), except the mere pleadings themselves.” Se. Mo. Hosp. v. C.R. Bard, Inc., 642 F.3d 608, 618 (8th Cir. 2011) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986)). The moving party need not produce evidence showing “the absence of a genuine issue of material fact.” Johnson v. Wheeling Mach. Prods., 779 F.3d 514, 517 (8th Cir. 2015) (quoting Celotex, 477 U.S. at 325). Instead, “the burden on the moving party may be discharged by ‘showing' . . . that there is an absence of evidence to support the nonmoving party's case.” St. Jude Med., Inc. v. Lifecare Int'l, Inc., 250 F.3d 587, 596 (8th Cir. 2001) (quoting Celotex, 477 U.S. at 325).

         In response to the moving party's showing, the nonmoving party's burden is to produce “specific facts sufficient to raise a genuine issue for trial.” Haggenmiller v. ABM Parking Servs., Inc., 837 F.3d 879, 884 (8th Cir. 2016) (quoting Gibson v. Am. Greetings Corp., 670 F.3d 844, 853 (8th Cir. 2012)). The nonmoving party “must do more than simply show that there is some metaphysical doubt as to the material facts, and must come forward with specific facts showing that there is a genuine issue for trial.” Wagner v. Gallup, Inc., 788 F.3d 877, 882 (8th Cir. 2015) (quoting Torgerson, 643 F.3d at 1042). “[T]here must be more than the mere existence of some alleged factual dispute” between the ...

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