Compliance Source, Inc., et al v. Greenpoint Mortgage Funding

Filing

PUBLISHED OPINION FILED. [09-10726 Affirmed in Part, Reversed in Part and Remanded.] Judge: EHJ , Judge: ECP , Judge: HSO. Mandate pull date is 11/08/2010 [09-10726]

Compliance Source, Inc., et al v. Greenpoint Mortgage Funding

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IN THE UNITED STATES COURT OF APPEALS United States Court of Appeals FOR THE FIFTH CIRCUIT Fifth Circuit FILED
October 18, 2010 N o . 09-10726 Lyle W. Cayce Clerk

T H E COMPLIANCE SOURCE, INC.; DIGITAL DOCS, INC., P la in t iffs -C r o s s Defendants­ A p p e lla n t s -C r o s s Appellees v. G R E E N P O I N T MORTGAGE FUNDING, INC., D e fe n d a n t -C r o s s Plaintiff­ A p p e lle e -C r o s s -A p p e lla n t

A p p e a l from the United States District Court fo r the Northern District of Texas

B e fo r e JONES, Chief Judge, PRADO, Circuit Judge, and OZERDEN * , District Judge. P R A D O , Circuit Judge: T h e Compliance Source, Inc. and Digital Docs, Inc. (collectively, " P la in t iffs " ) appeal the district court's grant of summary judgment in favor of G r e e n P o in t Mortgage Funding, Inc. ("GreenPoint") on Plaintiffs' claim that G r e e n P o in t breached a licensing agreement between the parties. Plaintiffs lic e n s e d form-database technology to GreenPoint, and GreenPoint allowed its

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District Judge of the Southern District of Mississippi, sitting by designation.

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No. 09-10726 a t t o r n e y s , McGlinchey Stafford and Youngblood & Bendalin LLP ("MSYB"), to a c c e s s and use the technology to prepare loans for GreenPoint. Plaintiffs argue t h a t the district court erred when it found that GreenPoint's provision of the t e c h n o lo g y to MSYB did not violate the licensing agreement because MSYB's use o f the technology was "on behalf of and for the benefit of" GreenPoint. I n addition, GreenPoint cross-appeals the district court's grant of s u m m a r y judgment in favor of Plaintiffs on GreenPoint's counterclaim that P la i n t i ffs breached a settlement agreement between the parties by pursuing c la im s other than the sole sublicensing claim left open by the settlement a g r e e m e n t. B e c a u s e the licensing agreement expressly prohibited any use of the lic e n s e d technology not explicitly permitted by the agreement itself, and because t h e agreement did not explicitly permit the type of input access that GreenPoint p r o v id e d to MSYB, the district court erred by granting summary judgment to G r e e n P o in t on Plaintiffs' claim for breach of the licensing agreement. Accordingly, we reverse and remand to the district court for consideration of G r e e n P o in t 's waiver and statute-of-limitations defenses. On GreenPoint's

c o u n t ercla im , however, we affirm the district court's grant of summary judgment t o Plaintiffs, because all of the claims Plaintiffs pursued after the settlement a g r e e m e n t were related to GreenPoint's provision of the licensed technology to M SYB.

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No. 09-10726 I . FACTUAL AND PROCEDURAL BACKGROUND A. F a c t u a l Background C o m p lia n c e Source develops, licenses, and sells mortgage-financing forms t o residential lenders. Digital Docs develops, licenses, and supports computer s o ft w a r e that prepares residential-mortgage loan documents. Plaintiffs jointly d e v e lo p e d form-database technology that allows mortgagees to merge their own t r a n s a c t io n -s p e c ific information with Plaintiffs' proprietary forms and prepare c u s t o m iz e d disclosures, mortgage-loan calculations, and loan documents.1 I n 2002, GreenPoint, a mortgage-financing company, signed a licensing a g r e e m e n t with Plaintiffs to use the form-database technology to streamline its lo a n -p a c k a g in g process. lic e n s e s to GreenPoint: S e c t io n A. Grant of License for Use of Forms. In consideration fo r [GreenPoint]'s payment of the fees referred to herein, C om p lian ce Source hereby grants to [GreenPoint], and [GreenPoint] a c c e p t s , a non-exclusive, annually renewable license to use C o m p lia n c e Source's proprietary electronic files containing c o m p u t e r coded images of the Standard Forms, Modified Standard F o r m s and Custom Forms developed by Compliance Source and a c c e s s to the Form Database described herein in strict accordance w it h the various terms and conditions of this Agreement. Compliance Source understands and agrees that [GreenPoint]'s O r ig in a t in g Lenders will have access to use the Closing Documents fo r loans which [GreenPoint] is purchasing and to Disclosure D o c u m e n t s and Closing Documents for loans closing in the name of [G r e e n P o in t ] through a customized link on [GreenPoint]'s website a n d hereby consents to this arrangement between [GreenPoint] and it s Originating Lenders. Except as specifically provided in this A g r e e m e n t , [Plaintiffs] have not granted, and [GreenPoint] has not
The technology at issue in this case is a combination of two copyrighted technologies: Compliance Source's Form Database and Digital Docs's Software Products.
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Article III of the agreement granted the following

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No. 09-10726 r e c e iv e d , a license or any other right to copy, make, use, have made, s e ll, support, or sub-license the Form Database, or any part thereof. S e c t io n B. Grant of License for Use of Software. Digital Docs h e r e b y grants to [GreenPoint] and [GreenPoint] hereby accepts from D ig ita l Docs a non-transferable, non-exclusive license (the "Software L ic e n s e ") to use the Software Products in a Production Environment a t the Customer Site Locations, all in strict accordance with the v a r io u s terms and conditions of this Agreement. Except as s p e c ific a lly provided in this Agreement, Digital Docs has not g r a n t e d , and [GreenPoint] has not received, a license or any other r ig h t to copy, make, use, have made, sell, support, or sub-license the S o ft w a r e Products, or any part thereof. [GreenPoint] may only use t h e Software Products for itself. [GreenPoint] may not sub-license t h e Software Products to third parties. I n exchange, GreenPoint agreed to pay a transaction-based fee for each m o r t g a g e it financed using the technology. Article III of the agreement also e x p r e s s ly provided that the agreement did not convey or transfer any ownership in t e r e s t in the technology to GreenPoint: S e c t io n E. No Ownership or Proprietary Interest Conveyed. [GREENPOINT] HEREBY SPECIFICALLY ACKNOWLEDGES A N D THE PARTIES AGREE: (i) THAT NO PROVISIONS OF T H I S AGREEMENT SHALL BE CONSTRUED TO CONVEY OR T R A N S F E R ANY OWNERSHIP OR PROPRIETARY INTEREST IN A N Y STANDARD FORMS, COMPUTER SOFTWARE OR R E L A T E D INTELLECTUAL PROPERTY WHICH IS OR MAY BE S U B J E C T TO THIS AGREEMENT, (ii) THAT ALL SUCH O W N E R S H I P AND PROPRIETARY INTEREST IS AND SHALL R E M A I N THE SOLE PROPERTY OF [PLAINTIFFS]; (iii) THAT [G R E E N P O I N T ] WILL NOT ATTEMPT TO REVERSE COMPILE O R REVERSE ENGINEER THE SOFTWARE PRODUCTS, FORM D A T A B A S E O R D O C U M E N T E N G IN E ; A N D T H A T [G R E E N P O I N T ] WILL TAKE ALL STEPS NECESSARY TO P R E V E N T ANY THIRD PARTY WITH WHICH IT MAY DO B U S I N E S S FROM TIME TO TIME FROM DOING THE ACTS 4

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No. 09-10726 P R E V I O U S L Y MENTIONED IN THIS PARAGRAPH OR FROM O T H E R W IS E ACTING IN ANY WAY THAT IS INCONSISTENT W I T H [GREENPOINT]'S OBLIGATIONS UNDER THIS AGREEM EN T. T h e agreement restricted third-party access to and use of the licensed t e c h n o lo g y in four other provisions outside of Article III: 1. A r t ic le IV, Section A(3): "The use of the Standard Forms does not im p ly or grant permission to reproduce or alter them in any manner n o t expressly stated in this Agreement." A r t ic le IV, Section A(4): "Except as permitted hereunder with r e s p e c t to Originating Lenders, [GreenPoint] will not use the S t a n d a r d Forms in competition with Compliance Source." A r t ic le XIII, Section A: "Neither party may resign, assign or pledge it s rights or delegate its duties under this Agreement without the o t h e r party's prior written consent . . . ." A r t ic le XIII, Section J: "Except as expressly provided herein, n o t h in g in this Agreement is intended to confer any right, remedy, o b lig a t io n or liability upon any person or entity other than the p a r t ie s hereto and their respective successors and permitted a s s ig n s ."

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T h e agreement contained two provisions that expressly granted access to t h e licensed technology to a party other than GreenPoint. First, Article III, S e c t io n A granted "Originating Lenders" limited access to certain closing d o c u m e n t s and disclosures through a customized link on GreenPoint's Web site fo r loans purchased by GreenPoint or for loans closing in GreenPoint's name. Second, Article VI, Section A provided that Plaintiffs' general counsel, P e ir s o n P a t t e r s o n , LLP, "in conjunction with local counsel where appropriate," w o u l d perform "preparation" or "review" services if necessary to comply with v a r io u s states' laws that require licensed attorneys to prepare or review loan

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No. 09-10726 d o c u m e n t s .2 G r e e n P o in t installed the form-database technology on July 6, 2003. It im m e d ia t e ly granted MSYB access to the technology so that MSYB could p r o d u c e loan packages for GreenPoint loans. Soon after, Chris Peirson, one of t h e principals of Plaintiffs, expressed her concerns to Charles Pignuolo, counsel t o Plaintiffs, about MSYB's level of access to the technology. Later that month, J a m e s Manion, GreenPoint's then-general counsel,3 sent an e-mail to Peirson, in fo r m in g her that GreenPoint was paying $150 per loan to Akin Gump 4 to pull t h e loan documents off of the form-database system, check the loan package to t h e approval screens, and send the loan to closing. On August 15, Pignuolo sent a letter to Peirson, which stated that it had come to his attention that one of G r e e n P o in t 's third-party vendors5 had direct access to the technology. Pignuolo s e t up a meeting at GreenPoint to discuss the issue. At the meeting, which took p la c e on August 20, GreenPoint assured Plaintiffs that MSYB merely had viewo n ly access, which Plaintiffs found acceptable under the agreement. T w o months later, Plaintiffs received an e-mail from an MSYB employee a b o u t a problem with printing a form. As a result, on October 2, Peirson sent an e -m a il to Manion asking for reassurances that GreenPoint's representations at t h e August 20 meeting about MSYB's level of access to the technology were c o r r e c t . Manion responded that GreenPoint had represented itself truthfully at

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GreenPoint never availed itself of PeirsonPatterson's services. Manion left GreenPoint and began working for Plaintiffs in December 2003.

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Manion was referring to MSYB, which was formed by a group of former Akin Gump attorneys.
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Peirson later testified that the third-party vendor was MSYB.

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No. 09-10726 t h e meeting and that MSYB's level of access to the technology had not changed s in c e then. Peirson responded the next day, emphasizing the importance of the t e c h n o lo g y to Plaintiffs and stressing that allowing a third party to have access t o the technology could threaten Plaintiffs' position in the market. Plaintiffs a p p a r e n t ly dropped the issue after this communication. In 2006, GreenPoint t e r m in a t e d the license agreement. B. P r o c e d u r a l Background P la in t iffs filed this lawsuit on June 14, 2006. Initially, Plaintiffs brought s e v era l claims against GreenPoint that were unrelated to GreenPoint's provision o f the licensed technology to MSYB.6 On August 29, 2007, GreenPoint's Rule 3 0 (b )(6 ) representative, Kim Koreen, testified that GreenPoint had allowed M S Y B to enter data and print documents using the technology. The following d a y , another GreenPoint Rule 30(b)(6) representative, Leslie Gibin, testified that a lt h o u g h she was not familiar with MSYB's level of access to the technology, she d id not believe MSYB had access to change code. On November 14, MSYB's Rule 3 0 (b )(6 ) representative, Ronald Bendalin, testified that MSYB had input access t o the technology. Plaintiffs assert that this was the first time they had learned o f the extent of MSYB's access to the technology, and they moved to file their T h ir d Amended Complaint, which alleged that GreenPoint had impermissibly s u b lic e n s e d the technology to MSYB and provided MSYB with unauthorized a c c e s s to the technology in violation of the licensing agreement. W h ile Plaintiffs' motion to amend their complaint was pending, the parties r e a c h e d a partial settlement, whereby Plaintiffs agreed to release all of their c la im s against GreenPoint except for the so-called "Sublicensing Claim." The

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None of those claims are at issue here.

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No. 09-10726 a g r e e d stipulation of dismissal, filed pursuant to the settlement agreement, d e fin e d the Sublicensing Claim by reference to certain portions of the pending T h ir d Amended Complaint: "paragraphs 52­55 thereof together with the s p e c ific a l l y related allegations in paragraphs 84­86, 87(k), and 88 (Count I), C o u n t VI (limited to breach of contract), and the associated requests for relief t o the extent recoverable at law or at equity in connection with unauthorized s u b lic e n s in g . . . ." I n its briefs, GreenPoint asserted that the settlement agreement left open o n ly a very narrow Sublicensing Claim involving GreenPoint's unauthorized t r a n s fe r or sublicense of the technology to MSYB. At oral argument, however, G r e e n P o in t 's counsel conceded that the settlement agreement left open the b r o a d e r claim that GreenPoint had provided MSYB with unauthorized access t o the technology. T h e district court dismissed the released claims, and the magistrate judge a s s ig n e d to the case granted the motion to amend the complaint, finding that P la in t iffs ' failure to amend before the deadline to do so was excusable because t h e y had had no reason to suspect MSYB had anything more than view-only a c c e s s until after the deadline. Plaintiffs then filed their Third Amended

C o m p la in t . In response, Greenpoint filed a counterclaim against Plaintiffs, c la im in g that Plaintiffs had breached the settlement agreement by adding c la im s to the Third Amended Complaint that had been already settled and d is m is s e d . Specifically, GreenPoint pointed to paragraphs 58(c), (d), and (e) of t h e Third Amended Complaint. G r e e n p o in t moved for summary judgment on Plaintiffs' claim for breach o f the licensing agreement and its counterclaim for breach of the settlement

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No. 09-10726 a g r e e m e n t .7 The district court granted summary judgment to GreenPoint on P la in t iffs ' claim for breach of the licensing agreement, relying on Geoscan, Inc. o f Texas v. Geotrace Technologies, Inc., 226 F.3d 387 (5th Cir. 2000), and Hogan S y s te m s , Inc. v. Cybresource International, Inc., 158 F.3d 319 (5th Cir. 1998), for t h e proposition that the use of licensed property by a third party solely on behalf o f and for the benefit of the licensee is not a transfer or sublicense of that p r o p e r t y . See Compliance Source, Inc. v. GreenPoint Mortg. Funding, Inc., No. 3 :0 6 -C V -1 0 5 7 -L , 2009 WL 1650021, at *5 (N.D. Tex. June 11, 2009). The district c o u r t found that because MSYB had "used the [licensed technology] only on b e h a lf of GreenPoint," GreenPoint was entitled to summary judgment. Id. O n the counterclaim, the district court denied GreenPoint's motion for s u m m a r y judgment and sua sponte awarded summary judgment to Plaintiffs. The district court found that paragraph 58 of the Third Amended Complaint c o n t a in e d prefatory language that limited the Sublicensing Claim to violations o f the licensing agreement "by and through Defendant's provision of Plaintiffs' I P to MS[BY]." Thus, the district court rejected GreenPoint's argument that p a r a g r a p h s 58(c), (d), and (e) of the Third Amended Complaint resurrected c la im s that had been released by the settlement agreement. P la in t iffs appeal the grant of summary judgment on its claim for breach o f the licensing agreement, and GreenPoint cross-appeals the grant of summary ju d g m e n t on its counterclaim for breach of the settlement agreement.

Plaintiffs also moved for summary judgment on Greenpoint's Rule 11 counterclaim, which is not at issue on appeal.

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No. 09-10726 I I . STANDARD OF REVIEW W e review an order granting summary judgment de novo, applying the s a m e standard as the district court. Jackson v. Cal-W. Packaging Corp., 602 F .3 d 374, 377 (5th Cir. 2010). "We view the evidence in the light most favorable t o the non-moving party and avoid credibility determinations and weighing of t h e evidence." Id. (citation omitted). We will uphold a grant of summary

ju d g m en t where "the competent summary judgment evidence demonstrates that t h e r e are no genuine issues of material fact and the moving party is entitled to ju d g m e n t 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., 477 U.S. 242, 248 (1986)). I I I . ANALYSIS A. B r e a c h of the Licensing Agreement P la in t iffs argue that the district court erred when it granted summary ju d g m e n t to GreenPoint on the claim for breach of the licensing agreement. They contend that the licensing agreement expressly prohibited any use of the lic e n s e d technology that was not explicitly authorized by the agreement itself, a n d that nothing in the agreement explicitly authorized GreenPoint to give M S Y B input access to the technology. GreenPoint responds that MSYB was an in d e p e n d e n t contractor or agent that could take only those actions with respect t o the licensed technology that GreenPoint could take itself, and that nothing in t h e agreement prohibited such use when it was done exclusively for the benefit o f or on behalf of GreenPoint. GreenPoint also argues that the two provisions o f the agreement that expressly granted third-party access to "Originating L e n d e r s " and PeirsonPatterson contemplate the type of input access that

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No. 09-10726 G r e e n P o in t granted to MSYB.8 B e c a u s e this is a diversity case, we apply Texas substantive law.9 Beavers v . Metro. Life Ins. Co., 566 F.3d 436, 439 (5th Cir. 2009). "If no state court d e c is io n s control, we must make an `Erie guess' as to how the Texas Supreme C o u r t would apply state law." Id. (citation omitted). "In construing a written contract, the primary concern of the court is to a s c e r t a in the true intentions of the parties as expressed in the instrument." J.M. Davidson, Inc. v. Webster, 128 S.W. 3d 223, 229 (Tex. 2003) (citations o m it t e d ). "To achieve this objective, we must examine and consider the entire w r it in g in an effort to harmonize and give effect to all provisions of the contract s o that none will be rendered meaningless." Id. (citation omitted). "No single p r o v is io n taken alone will be given controlling effect; rather, all the provisions m u s t be considered with reference to the whole instrument." Id. (citations o m itte d ). G iv e n these rules of construction, we disagree with the district court that o u r decisions in Geoscan and Hogan Systems permit a court to look past the a c t u a l language of a licensing agreement and absolve a licensee who grants t h ir d -p a r t y access merely because that access is on behalf of, or inures to the b e n e fit of, the licensee. Neither case stands for such an expansive proposition.
GreenPoint also raises waiver and statute-of-limitations defenses to Plaintiffs' claim. The district court did not reach these defenses, and we decline to consider them for the first time on appeal. "Generally, licensing agreements, like other contracts, are interpreted under state law." Womack+Hampton Architects, L.L.C. v. Metric Holdings Ltd. P'ship, 102 F. App'x 374, 378 (5th Cir. 2004) (unpublished) (per curiam) (citing Fantastic Fakes, Inc. v. Pickwick Int'l, Inc., 661 F.2d 479, 483 (5th Cir. Unit B 1981); Kennedy v. Nat'l Juvenile Det. Assoc., 187 F.3d 690, 694 (7th Cir. 1999)). We adopt Womack+Hampton's reasoning and apply Texas law to the licensing agreement in this case.
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No. 09-10726 R a t h e r , Geoscan and Hogan Systems involved the interpretation of licensing a g r e e m e n ts that explicitly granted limited rights to licensees to provide general t h ir d -p a r t y access. See Geoscan, 226 F.3d at 392 (quoting from and relying on t h e language of the licensing agreement, which expressly allowed the use of the lic e n s e d technology by third parties if such use was "by and on behalf of L ic e n s e e " (emphasis in original)); Hogan Systems, 158 F.3d at 322 (quoting from a n d relying on the language of the licensing agreement, which provided that the lic e n s e e could not make the licensed software available to anyone "except . . . to o t h e r persons during the period such other persons are on [Licensee's] premises fo r purposes specifically relating to [Licensee's] authorized use of the licensed p r o g ra m "). T h e licensing agreement in this case is different. For one, the agreement h e r e contains no provision that generally permits GreenPoint to grant thirdp a r ty access, whether or not such access would be on behalf of or for the benefit o f GreenPoint, and GreenPoint has not pointed to any provision that gives it that r ig h t . In fact, the agreement does exactly the opposite; it provides that it does n o t grant to GreenPoint any right to "copy, make, use, have made, sell, support, o r sub-license" the licensed technology except as specifically provided. In

a d d it io n , the agreement expressly prohibits transfer or sublicense of the t e c h n o lo g y ; withholds from GreenPoint any ownership or proprietary interest in t h e technology; and restricts GreenPoint's ability to reproduce or alter the t e c h n o l o g y , use the technology in competition with Plaintiffs, assign its duties u n d e r the agreement to a third party, or confer any right under the agreement u p o n a third party. Moreover, the agreement imposes upon GreenPoint the duty t o "take all steps necessary to prevent any third party with which it may do

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No. 09-10726 b u s in e s s from time to time from . . . acting in any way that is inconsistent with G r e e n P o in t 's obligations" under the agreement. B e c a u s e the licensing agreement in this case withholds rights not e x p r e s s ly given, Geoscan and Hogan Systems are of limited relevance, and we t h e r e fo r e decline to interpret the agreement to allow general third-party access o n behalf of or for the benefit of GreenPoint. T h e two provisions that grant third-party access to "Originating Lenders" (A r t ic le III, Section A) and PeirsonPatterson (Article IV, Section A) are c o n s is t e n t with our interpretation of the agreement. First, both provisions e x p lic it ly grant third-party access to specific parties, implying that as a general r u le , the agreement does not permit third-party access. Second, both grants of a c c e s s are limited in their scope: PeirsonPatterson's access is confined to only the p r e p a r a t io n and review of loan packages in situations where state law requires a licensed attorney's services. Likewise, the Originating Lenders' access is r e s t r ic t e d to certain closing documents and disclosure for GreenPoint loans t h r o u g h a customized link on GreenPoint's Web site. Neither provision grants in p u t access to either party. To read into the agreement a general right to grant t h ir d -p a r t y access when such access would be on behalf of or for the benefit of G r e e n P o in t would be to render these specific and limited grants of access s u p e r flu o u s . T h e parties' intent in drafting the licensing agreement is clear from the fa c e of the agreement. The evidence in the light most favorable to Plaintiffs e s t a b lis h e s that GreenPoint gave MSYB input access. Even though MSYB's a c c e s s to and use of the licensed technology may have been on behalf or for the b e n e fit of GreenPoint, input access is not authorized by the agreement.

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No. 09-10726 B. B r e a c h of the Settlement Agreement G r e e n P o in t argues that the district court erred by awarding summary ju d g m e n t to Plaintiffs on GreenPoint's counterclaim. GreenPoint asserts that P la in t iffs breached the settlement agreement by adding already settled claims t o the Third Amended Complaint. Plaintiffs respond that the allegations in the T h ir d Amended Complaint about which GreenPoint complains are "associated r e q u e s ts for relief," which were permitted by settlement agreement. W e affirm the district court's grant of summary judgment. As the district c o u r t correctly noted, paragraph 58 of the Third Amended Complaint limited the P la in t iffs ' allegations to violations of the licensing agreement "by and through D e f e n d a n t 's provision of Plaintiffs' IP to MS[BY]." None of the allegations in p a r a g r a p h 58 of the Third Amended, therefore, go beyond this limitation. At o r a l argument, GreenPoint conceded that the settlement agreement left open the c la im that GreenPoint breached the licensing agreement by providing MSYB w it h unauthorized access to the licensed technology. Accordingly, we see no m e r it to GreenPoint's argument that the Third Amended Complaint added c la im s that were subject to the settlement agreement. I V . CONCLUSION A c c o r d in g to the evidence upon summary judgment, GreenPoint allowed M S Y B to access and use the licensed technology in a manner that was not p e r m it t e d by the licensing agreement. Therefore, we reverse the district court's g r a n t of summary judgment to GreenPoint on Plaintiffs' claim for breach of the lic e n s in g agreement, and we remand to the district court for consideration of G r e e n P o in t 's waiver and statute-of-limitations defenses. P la in t iffs ' Third Amended Complaint did not raise any claims that were

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No. 09-10726 s e t t le d under the settlement agreement. Therefore, we affirm the district court's a w a r d of summary judgment to Plaintiffs on GreenPoint's counterclaim for b r e a c h of the settlement agreement. A F F I R M E D IN PART; REVERSED AND REMANDED IN PART.

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