COMPLIANCE SOURCE v. GREENPOINT MORTG. FUNDING No. 09-10726.
624 F.3d 252 (2010)
THE COMPLIANCE SOURCE, INC.; Digital Docs, Inc., Plaintiffs-Cross Defendants-Appellants-Cross-Appellees, v. GREENPOINT MORTGAGE FUNDING, INC., Defendant-Cross Plaintiff-Appellee-Cross-Appellant.
United States Court of Appeals, Fifth Circuit.
October 18, 2010.
William Thomas Reid, IV, Phillip Jason Collins (argued), Nathaniel John Palmer, Reid Davis, L.L.P., Austin, TX, for Compliance Source, Inc. and Digital Docs, Inc.
Herbert Jay Hammond (argued), Adrienne Elizabeth Dominguez, Gerald W. Roberts, Scott Patrick Stolley, Thompson & Knight, L.L.P., Dallas, TX, for GreenPoint Mortg. Funding, Inc.
Before JONES, Chief Judge, PRADO, Circuit Judge, and OZERDEN, District Judge.
PRADO, Circuit Judge:
The Compliance Source, Inc. and Digital Docs, Inc. (collectively, "Plaintiffs") appeal the district court's grant of summary judgment in favor of GreenPoint Mortgage Funding, Inc. ("GreenPoint") on Plaintiffs' claim that GreenPoint breached a licensing agreement between the parties. Plaintiffs licensed form-database technology to GreenPoint, and GreenPoint allowed its attorneys, McGlinchey Stafford and Youngblood & Bendalin LLP ("MSYB"), to access and use the technology to prepare loans for GreenPoint. Plaintiffs argue that the district court erred when it found that GreenPoint's provision of the technology to MSYB did not violate the licensing agreement because MSYB's use of the technology was "on behalf of and for the benefit of" GreenPoint.
In addition, GreenPoint cross-appeals the district court's grant of summary judgment in favor of Plaintiffs on GreenPoint's counterclaim that Plaintiffs breached a settlement agreement between the parties by pursuing claims other than the sole sublicensing claim left open by the settlement agreement.
Because the licensing agreement expressly prohibited any use of the licensed technology not explicitly permitted by the agreement itself, and because the agreement did not explicitly permit the type of input access that GreenPoint provided to MSYB, the district court erred by granting summary judgment to GreenPoint on Plaintiffs' claim for breach of the licensing agreement. Accordingly, we reverse and remand to the district court for consideration of GreenPoint's waiver and statute-of-limitations defenses. On GreenPoint's counterclaim, however, we affirm the district court's grant of summary judgment to Plaintiffs, because all of the claims Plaintiffs pursued after the settlement agreement were related to GreenPoint's provision of the licensed technology to MSYB.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. Factual Background
Compliance Source develops, licenses, and sells mortgage-financing forms to residential lenders. Digital Docs develops, licenses, and supports computer software that prepares residential-mortgage loan documents. Plaintiffs jointly developed form-database technology that allows mortgagees to merge their own transaction-specific information with Plaintiffs' proprietary forms and prepare customized disclosures, mortgage-loan calculations, and loan documents.
In exchange, GreenPoint agreed to pay a transaction-based fee for each mortgage it financed using the technology. Article III of the agreement also expressly provided that the agreement did not convey or transfer any ownership interest in the technology to GreenPoint:
The agreement restricted third-party access to and use of the licensed technology in four other provisions outside of Article III:
The agreement contained two provisions that expressly granted access to the licensed technology to a party other than GreenPoint. First, Article III, Section A granted "Originating Lenders" limited access to certain closing documents and disclosures through a customized link on GreenPoint's Web site for loans purchased by GreenPoint or for loans closing in GreenPoint's name. Second, Article VI, Section A provided that Plaintiffs' general counsel, PeirsonPatterson, LLP, "in conjunction with local counsel where appropriate," would perform "preparation" or "review" services if necessary to comply with various states' laws that require licensed attorneys to prepare or review loan documents.
GreenPoint installed the form-database technology on July 6, 2003. It immediately granted MSYB access to the technology so that MSYB could produce loan packages for GreenPoint loans. Soon after, Chris Peirson, one of the principals of Plaintiffs, expressed her concerns to Charles Pignuolo, counsel to Plaintiffs, about MSYB's level of access to the technology. Later that month, James Manion, GreenPoint's then-general counsel,
Two months later, Plaintiffs received an e-mail from an MSYB employee about a problem with printing a form. As a result, on October 2, Peirson sent an e-mail to Manion asking for reassurances that GreenPoint's representations at the August 20 meeting about MSYB's level of access to the technology were correct. Manion responded that GreenPoint had represented itself truthfully at the meeting and that MSYB's level of access to the technology had not changed since then. Peirson responded the next day, emphasizing the importance of the technology to Plaintiffs and stressing that allowing a third party to have access to the technology could threaten Plaintiffs' position in the market. Plaintiffs apparently dropped the issue after this communication. In 2006, GreenPoint terminated the license agreement.
B. Procedural Background
Plaintiffs filed this lawsuit on June 14, 2006. Initially, Plaintiffs brought several claims against GreenPoint that were unrelated to GreenPoint's provision of the licensed technology to MSYB.
While Plaintiffs' motion to amend their complaint was pending, the parties reached a partial settlement, whereby Plaintiffs agreed to release all of their claims against GreenPoint except for the so-called "Sublicensing Claim." The agreed stipulation of dismissal, filed pursuant to the settlement agreement, defined the Sublicensing Claim by reference to certain portions of the pending Third Amended Complaint: "paragraphs 52-55 thereof together with the specifically related allegations in paragraphs 84-86, 87(k), and 88 (Count I), Count VI (limited to breach of contract), and the associated requests for relief to the extent recoverable at law or at equity in connection with unauthorized sublicensing...."
In its briefs, GreenPoint asserted that the settlement agreement left open only a very narrow Sublicensing Claim involving GreenPoint's unauthorized transfer or sublicense of the technology to MSYB. At oral argument, however, GreenPoint's counsel conceded that the settlement agreement left open the broader claim that GreenPoint had provided MSYB with unauthorized access to the technology.
The district court dismissed the released claims, and the magistrate judge assigned to the case granted the motion to amend the complaint, finding that Plaintiffs' failure to amend before the deadline to do so was excusable because they had had no reason to suspect MSYB had anything more than view-only access until after the
GreenPoint moved for summary judgment on Plaintiffs' claim for breach of the licensing agreement and its counterclaim for breach of the settlement agreement.
On the counterclaim, the district court denied GreenPoint's motion for summary judgment and sua sponte awarded summary judgment to Plaintiffs. The district court found that paragraph 58 of the Third Amended Complaint contained prefatory language that limited the Sublicensing Claim to violations of the licensing agreement "by and through Defendant's provision of Plaintiffs' IP to MS[BY]." Thus, the district court rejected GreenPoint's argument that paragraphs 58(c), (d), and (e) of the Third Amended Complaint resurrected claims that had been released by the settlement agreement.
Plaintiffs appeal the grant of summary judgment on its claim for breach of the licensing agreement, and GreenPoint cross-appeals the grant of summary judgment on its counterclaim for breach of the settlement agreement.
II. STANDARD OF REVIEW
We review an order granting summary judgment de novo, applying the same standard as the district court. Jackson v. Cal-W. Packaging Corp., 602 F.3d 374, 377 (5th Cir.2010). "We view the evidence in the light most favorable to the non-moving party and avoid credibility determinations and weighing of the evidence." Id. (citation omitted). We will uphold a grant of summary judgment where "the competent summary judgment evidence demonstrates that there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law." Id. (citation omitted). "An issue of material fact is genuine if a reasonable jury could return a verdict for the nonmovant." Id. (citing Anderson v. Liberty Lobby, Inc.,
A. Breach of the Licensing Agreement
Plaintiffs argue that the district court erred when it granted summary judgment to GreenPoint on the claim for breach of the licensing agreement. They contend that the licensing agreement expressly
Because this is a diversity case, we apply Texas substantive law.
"In construing a written contract, the primary concern of the court is to ascertain the true intentions of the parties as expressed in the instrument." J.M. Davidson, Inc. v. Webster,
Given these rules of construction, we disagree with the district court that our decisions in Geoscan and Hogan Systems permit a court to look past the actual language of a licensing agreement and absolve a licensee who grants third-party access merely because that access is on behalf of, or inures to the benefit of, the licensee. Neither case stands for such an expansive proposition. Rather, Geoscan and Hogan Systems involved the interpretation of licensing agreements that explicitly granted limited rights to licensees to provide general third-party access. See Geoscan, 226 F.3d at 392 (quoting from and relying on the language of the licensing agreement, which expressly allowed the use of the licensed technology by third parties if such use was "by and on behalf of Licensee" (emphasis in original)); Hogan Systems, 158 F.3d at 322 (quoting from and relying on the language of the licensing agreement, which provided that the licensee could not make the licensed software available to anyone "except ... to other persons during the period such other persons are on [Licensee's] premises for purposes specifically relating to [Licensee's] authorized use of the licensed program").
The licensing agreement in this case is different. For one, the agreement
Because the licensing agreement in this case withholds rights not expressly given, Geoscan and Hogan Systems are of limited relevance, and we therefore decline to interpret the agreement to allow general third-party access on behalf of or for the benefit of GreenPoint.
The two provisions that grant third-party access to "Originating Lenders" (Article III, Section A) and PeirsonPatterson (Article IV, Section A) are consistent with our interpretation of the agreement. First, both provisions explicitly grant third-party access to specific parties, implying that as a general rule, the agreement does not permit third-party access. Second, both grants of access are limited in their scope: PeirsonPatterson's access is confined to only the preparation and review of loan packages in situations where state law requires a licensed attorney's services. Likewise, the Originating Lenders' access is restricted to certain closing documents and disclosure for GreenPoint loans through a customized link on GreenPoint's Web site. Neither provision grants input access to either party. To read into the agreement a general right to grant third-party access when such access would be on behalf of or for the benefit of GreenPoint would be to render these specific and limited grants of access superfluous.
The parties' intent in drafting the licensing agreement is clear from the face of the agreement. The evidence in the light most favorable to Plaintiffs establishes that GreenPoint gave MSYB input access. Even though MSYB's access to and use of the licensed technology may have been on behalf or for the benefit of GreenPoint, input access is not authorized by the agreement.
B. Breach of the Settlement Agreement
GreenPoint argues that the district court erred by awarding summary judgment to Plaintiffs on GreenPoint's counterclaim. GreenPoint asserts that Plaintiffs breached the settlement agreement by adding already settled claims to the Third Amended Complaint. Plaintiffs respond that the allegations in the Third Amended Complaint about which GreenPoint complains are "associated requests for relief," which were permitted by settlement agreement.
We affirm the district court's grant of summary judgment. As the district court correctly noted, paragraph 58 of the Third Amended Complaint limited the Plaintiffs' allegations to violations of the licensing agreement "by and through Defendant's provision of Plaintiffs' IP to MS[BY]." None of the allegations in paragraph 58 of
According to the evidence upon summary judgment, GreenPoint allowed MSYB to access and use the licensed technology in a manner that was not permitted by the licensing agreement. Therefore, we reverse the district court's grant of summary judgment to GreenPoint on Plaintiffs' claim for breach of the licensing agreement, and we remand to the district court for consideration of GreenPoint's waiver and statute-of-limitations defenses.
Plaintiffs' Third Amended Complaint did not raise any claims that were settled under the settlement agreement. Therefore, we affirm the district court's award of summary judgment to Plaintiffs on GreenPoint's counterclaim for breach of the settlement agreement.
AFFIRMED IN PART; REVERSED AND REMANDED IN PART.
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