Intercall, Inc. v. Examination Management Services, Inc.

Filing 48

MEMORANDUM AND ORDER -The Motion for Summary Judgment or, in the alternative, Partial Summary Judgment (Filing No. 22 ) filed by Plaintiff InterCall, Inc., is denied; The Motion for Partial Summary Judgment (Filing No. 25 ) filed by Defendant Examination Management Services, Inc., is granted in part, as follows: a. The Court finds that InterCall failed to deliver or implement the Rapid Learning enhancements as promised in the InterCall Order Form and thereby breached the terms of the InterCall Order Form; b. The Motion is otherwise denied; and The Motions to Strike (Filing Nos. 28 and 44 ) filed by Defendant Examination Management Services, Inc., and the Motion to Strike (Filing No. 31 ) filed by Plaintiff InterCall, Inc., are denied as moot, without prejudice to reassertion. Ordered by Chief Judge Laurie Smith Camp. (MKR)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
INTERCALL, INC.,
a Delaware corporation,
CASE NO. 8:13CV175
Plaintiff,
vs.

MEMORANDUM
AND ORDER

EXAMINATION MANAGEMENT
SERVICES, INC.,
Defendant.

This matter is before the Court on the Motion for Summary Judgment or, in the
alternative, Partial Summary Judgment (Filing No. 22) filed by Plaintiff InterCall, Inc.
(“InterCall”), and the Motion for Partial Summary Judgment (Filing No. 25) filed by
Defendant Examination Management Services, Inc. (“EMSI”). Also before the Court are
EMSI’s Motions to Strike (Filing Nos. 28 and 44), and InterCall’s Motion to Strike (Filing
No. 31). For the reasons stated, InterCall’s Motion for Partial Summary Judgment will be
denied, EMSI’s Motion for Partial Summary Judgment will be granted in part, and the
Motions to Strike will be denied as moot.
FACTUAL BACKGROUND
I.

Undisputed Facts
Unless otherwise indicated, the following facts were presented in the parties’

briefs and were supported by pinpoint citations to admissible evidence in the record that
the parties have admitted, or that the parties have not properly resisted as required by
NECivR 56.11 and Fed. R. Civ. P. 56.

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“Properly referenced material facts in the movant’s statement are considered admitted unless
controverted in the opposing party’s response.” NECivR 56.1(b)(1). For simplicity, the Court recites the

InterCall is a Delaware corporation with its principal place of business in Omaha,
Nebraska. Intercall provides audio, web, and video conferencing services. EMSI is an
information service provider and a Nevada corporation with its principal place of
business in the state of Texas. The parties assert diversity jurisdiction under 28 U.S.C.
§1332(a).
In providing its services, EMSI regularly makes presentations for training and
information sharing purposes. On August 23, 2010, EMSI executed a Subscription
Order Form (the “Brainshark Order Form”) with Brainshark Inc. (“Brainshark”) for use of
the “Brainshark Presentations Package” software to fulfill EMSI’s presentation and
training needs. The initial term of the Brainshark Order Form commenced on August 23,
2010, and was to renew automatically on each anniversary thereafter unless terminated
according its terms, or terminated by one of the parties in the event of an uncured
breach of the agreement. The Brainshark Order Form required notice by the terminating
party. EMSI asserts that no notice of termination or default of the Brainshark Order
Form was given or received by EMSI, and the Brainshark Order Form was not
terminated. (Filing No. 27-1 ¶ 7.)
During the first term of the Brainshark Order Form, EMSI contemplated
enhancing EMSI’s use of Brainshark’s “Rapid Learning” services with functionality that
would better report training completed and certificates obtained by EMSI personnel.

properly referenced facts in both parties’ Motions. InterCall’s brief in support of its Motion contains a
numbered statement of material facts, but also recites a “Statement of Facts” that does not comply with
the local rule. The Court further notes that EMSI’s Brief in Opposition to InterCall’s Motion (Filing No. 40)
does not contain a response to the statement of material facts asserted in InterCall’s Brief. Instead, EMSI
filed motions to strike various parts of InterCall’s Index of Evidence. Accordingly, all properly referenced
facts in InterCall’s statement of material facts that are supported by admissible evidence are considered
admitted.

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EMSI approached Brainshark about obtaining customized access to Rapid Learning.
Brainshark proposed certain product enhancements, but to expand its services,
Brainshark required EMSI to prepay the entire fee for the first year’s use. EMSI rejected
Brainshark’s proposal because of the up-front billing and payment requirements.
Brainshark referred EMSI to InterCall to see whether InterCall could arrange the
enhanced Rapid Learning services through Brainshark, while allowing EMSI to make
monthly payments. InterCall and Brainshark previously entered into a reseller
agreement allowing InterCall to act as an outside independent sales representative for
Brainshark’s services. On June 30, 2011, EMSI and InterCall entered into the
“Brainshark Unlimited Edition Services Order Form” (the “InterCall Order Form”) (Filing
No. 27-5 or Filing No. 24-4 at ECF 13), with an effective date of July 1, 2011. The
InterCall Order Form gave EMSI access to “Brainshark Unlimited Edition” that permitted
unlimited use of Brainshark’s “Content Management” software. (Id.) The InterCall Order
Form also provided for other Brainshark services, including the requested product
enhancements to Brainshark’s Rapid Learning software. (Id.) The total annual fee under
the InterCall Order Form was $174,000.
The InterCall Order Form stated: “This Order Form shall automatically renew
without interruption for successive 12 month periods unless customer gives written
notice of its intent not to renew the Order Form at least 30 days before the beginning of
any renewal term.” (Filing No. 27-5 at ECF 1; see also Filing No. 24-4 at ECF.) The
InterCall Order Form incorporated InterCall’s own Terms and Conditions or, if

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applicable, a written service agreement executed by the parties. 2 (Id.) The Terms and
Conditions permitted either party to terminate the InterCall Order Form for cause upon a
material breach by the other party after written notice. (Filing No. 24-4 at ECF 17.) With
respect to notices, the Terms and Conditions stated: “Notices to InterCall must be sent
to the address mentioned in InterCall’s invoice to Customer with a courtesy copy to
8420 W. Bryn Mawr Ave., Suite 400, Chicago, Illinois 60631, Attn: Legal Department;
Fax: [phone]; Email: [e-mail].”3 (Filing No. 24-4 at ECF 22.)
Over the first four months of the InterCall Order Form, Brainshark attempted to
develop specific plans to provide EMSI with the enhancements requested for the Rapid
Learning software, but Brainshark was unable to implement Rapid Learning services for
EMSI. By letter dated November 14, 2011, and addressed to Jon Davagian of
Brainshark, EMSI attempted to terminate the InterCall Order Form for cause for several
reasons, including Brainshark’s failure to complete and implement the enhancements to
Rapid Learning on behalf of InterCall. EMSI did not send the November 14, 2011, letter
to InterCall, nor is there evidence of any written notice to InterCall of termination for
cause, or notice to InterCall that EMSI did not intend to renew the InterCall Order Form.
II.

Disputed Facts
InterCall seeks to recover damages for EMSI’s failure to pay for the unlimited use

of Brainshark’s Content Management services as agreed in the InterCall Order Form.

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The parties admit they did not enter into a written service agreement.

3

InterCall asserts that its invoices to EMSI mention the address “15272 Collections Center Drive,
Chicago, IL 60693.” (Affidavit of Kumi Reed, Filing No. 24-4 ¶ 6.) InterCall’s statement of facts does not
reference the invoices themselves, and EMSI has challenged the admissibility of the Affidavit of Kumi
Reed (Filing No. 28).

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EMSI states that it is excused from payment under the InterCall Order Form because
InterCall failed to provide the enhancements to Brainshark’s Rapid Learning software,
as contemplated by the InterCall Order Form. Further, EMSI seeks damages, in part, for
InterCall’s breach of the InterCall Order Form related to Rapid Learning services.
The parties’ dispute at this stage centers on which order form governs EMSI’s
use of Brainshark’s “Content Management” services from July 1, 2011, through January
11, 2013. EMSI argues that its legal obligation to pay for Content Management was
governed by the terms of the Brainshark Order Form because the Brainshark Order
Form continued in effect after execution of the InterCall Order Form, and any services
EMSI used were covered by the terms of the Brainshark Order Form. EMSI also claims
that it validly rescinded the InterCall Order Form following InterCall’s failure to provide
the promised enhancements to Brainshark’s Rapid Learning.
InterCall argues that the InterCall Order Form replaced and extinguished the
Brainshark Order Form, and that the InterCall Order Form governs EMSI’s legal
obligation because EMSI used Content Management on an unlimited-seat basis from
July 1, 2011, through January 11, 2013, rather than a ten-seat limited basis as
contemplated by the Brainshark Order Form. Further, InterCall argues that EMSI’s
unlimited use of Content Management, irrespective of the failure to have Rapid Learning
implemented, waived any claim or defense based on InterCall’s alleged breach of the
InterCall Order Form.
STANDARD OF REVIEW
“Summary judgment is appropriate when, construing the evidence most favorably
to the nonmoving party, there is no genuine issue of material fact and the moving party
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is entitled to judgment as a matter of law.” Crozier v. Wint, 736 F.3d 1134, 1136 (8th Cir.
2013) (citing Fed. R. Civ. P. 56(c)). “Summary Judgment is not disfavored and is
designed for every action.” Briscoe v. Cnty. of St. Louis, 690 F.3d 1004, 1011 n. 2 (8th
Cir. 2012) (quoting Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011)
(en banc) cert. denied, 132 S.Ct. 513 (2011)) (internal quotations omitted). In reviewing
a motion for summary judgment, the court will view “all facts and mak[e] all reasonable
inferences favorable to the nonmovant.” Gen. Mills Operations, LLC v. Five Star Custom
Foods, Ltd., 703 F.3d 1104, 1107 (8th Cir. 2013). “[W]here 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.” Celotex Corp. v. Catrett,
477 U.S. 317, 324 (1986). The moving party need not negate the nonmoving party’s
claims by showing “the absence of a genuine issue of material fact.” Id. 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.” Id.
In response to the movant’s showing, the nonmoving party’s burden is to produce
specific facts demonstrating “‘a genuine issue of material fact’ such that [its] claim
should proceed to trial.” Nitro Distrib., Inc. v. Alticor, Inc., 565 F.3d 417, 422 (8th Cir.
2009) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586
(1986)). 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.” Briscoe, 690 F.3d at 1011 (quoting
Torgerson, 643 F.3d at 1042) (internal quotations omitted). “‘[T]he mere existence of
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some alleged factual dispute between the parties’” will not defeat an otherwise properly
supported motion for summary judgment. Quinn v. St. Louis Cty., 653 F.3d 745, 751
(8th Cir. 2011) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)).
In other words, in deciding “a motion for summary judgment, facts must be
viewed in the light most favorable to the nonmoving party only if there is a genuine
dispute as to those facts.” Guimaraes v. SuperValu, Inc., 674 F.3d 962, 972 (8th Cir.
2012) (quoting Torgerson, 643 F.3d at 1042) (internal quotations omitted). Otherwise,
where the Court finds that “the record taken as a whole could not lead a rational trier of
fact to find for the non-moving party,” there is no “genuine issue for trial” and summary
judgment is appropriate. Torgerson, 643 F.3d at 1042 (quoting Ricci v. DeStefano, 557
U.S. 557, 586 (2009)) (internal quotations omitted).
DISCUSSION
I.

Operative Agreement
A.

Novation

It is not apparent from the face of the order forms or the undisputed facts that the
InterCall Order Form extinguished the rights and obligations of the Brainshark Order
Form. See Forest Products Indus., Inc. v. ConAgra Foods, Inc., 460 F.3d 1000, 1003
(8th Cir. 2006) (quoting Simpson v. Norwesco, Inc., 583 F.2d 1007, 1012 (8th Cir.
1978)) (“There is no doubt that the parties to a contract may, by their mutual agreement,
enter into a new or modified contract and extinguish the obligations of the old
contract.”). InterCall argues that the InterCall Order Form constituted a novation of the

7

Brainshark Order Form. Under Nebraska law,4 “[t]wo conditions must be met in order for
an agreement to constitute a novation: (1) The agreement must completely extinguish
the existing liability, and (2) a new liability must be substituted in its place.” Mackiewicz
v. J.J. & Associates, 514 N.W.2d 613, 624 (Neb. 1994). “A novation will never be
presumed. The complete discharge of the original debtor must be shown to have been
expressly agreed upon or must be necessarily and clearly inferred from the express
terms of the agreement.” Id.
The Court cannot conclude as a matter of law that the parties agreed the
InterCall Order Form would extinguish the obligations of the Brainshark Order Form.
See Mackiewicz, 514 N.W.2d at 624 (stating that where previous contracts were never
extinguished, a new contract cannot constitute a novation). The InterCall Order Form
and its incorporated documents do not reference the obligations of the Brainshark Order
Form in any way. Further, no evidence in the record demonstrates the parties intended
to extinguish the rights and obligations of the Brainshark Order Form. InterCall states in
its brief (though not in its statement of material facts) that when the parties entered into
the InterCall Order Form, Brainshark ceased invoicing EMSI for Content Management
under the Brainshark Order Form. (Pl. Br., Filing No. 23 at 13.) While such an action
could be evidence that the parties extinguished the Brainshark Order Form, the
evidence InterCall cites to does not support this assertion. The Affidavit of Sandeep
Malhotra (Filing No. 24-1), even if admissible, does not mention Brainshark’s invoicing
actions, nor do the accompanying exhibits. Based on the record, the Court cannot

4

The parties agree that the contracts and disputes in this case are governed by Nebraska law.

8

conclude as a matter of law that the InterCall Order Form completely extinguished the
rights and obligations of the Brainshark Order Form.
InterCall argues that the parties’ conduct demonstrates a novation because EMSI
used Brainshark’s Content Management on an unlimited basis after the InterCall Order
Form went into effect. InterCall suggests that such use implies a novation because the
InterCall Order Form permitted unlimited Content Management use, while the
Brainshark Order Form did not. However, this inference cannot be drawn from the face
of the order forms. The Brainshark Order Form lists EMSI’s subscription service as
“Unlimited Edition (up to 10 employees),” and included the “Unlimited Brainshark
Presentations Package.” (Filing No. 24-3 at ECF 19.) The InterCall Order Form lists
“Brainshark Content Management (unlimited views)” with the short description
“Brainshark Unlimited Edition.” (Filing No. 24-4 at ECF 13.) EMSI argues that the
“Unlimited Brainshark Presentations Package” packages permitted unlimited views of
uploaded content. Thus, EMSI states that its “unlimited” use of Content Management
would have been consistent with the Brainshark Order Form. Both order forms describe
“unlimited” services, and, at the least, the scope of the order forms is ambiguous.
Davenport Ltd. P'ship v. 75th & Dodge I, L.P., 780 N.W.2d 416, 422 (Neb. 2010) (“The
meaning of an ambiguous contract, however, is generally a question of fact.”).
Accordingly, a novation cannot clearly be inferred from the express terms of the order
forms or the record before the Court.
B.

InterCall’s Claim for Breach of Contract

Both parties assert in their Motions for Partial Summary Judgment that the other
party breached the InterCall Order Form. EMSI claims that InterCall breached the
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InterCall Order Form because it failed to provide the promised Rapid Learning
enhancements--the central purpose of the InterCall Order Form. InterCall argues that
even it did breach the InterCall Order Form by failing to provide the Rapid Learning
services, EMSI waived any breach by accepting the benefits of the InterCall Order Form
through continued use of Content Management on an unlimited-seat basis, and that
EMSI breached the InterCall Order Form by failing to make payments for EMSI’s use of
Brainshark’s Content Management Software.
“A written contract may be waived in whole or in part, either directly or
inferentially, and the waiver may be proved . . . by so neglecting and failing to act as to
induce the belief that it was the intention to waive.” Davenport Ltd. P'ship, 780 N.W.2d
at 425. “In order to establish a waiver of a legal right, there must be clear, unequivocal,
and decisive action of a party showing such purpose, or acts amounting to estoppel on
his or her part.” Davenport Ltd. P'ship, 780 N.W.2d at 425. “Though it is an equitable
doctrine, estoppel is an issue of fact under Nebraska law.” Roeder v. Metro. Ins. &
Annuity Co., 236 F.3d 433, 438 (8th Cir. 2001) (citing Woodard v. City of Lincoln, 588
N.W.2d 831, 836–37 (Neb. 1999) (internal marks and citations omitted). Further, “[t]he
general rule is that the assertion of the invalidity of a contract is nullified by the
subsequent acceptance of benefits growing out of the contract claimed to have been
breached.” Pearce v. ELIC Corp., 329 N.W.2d 74, 79 (Neb. 1982).
As noted above, the order forms are ambiguous as to the scope of the
subscription services provided. Both order forms contemplated similar services, and
both order forms described “unlimited” services. The parties dispute the nature and

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extent of the unlimited services in the two order forms.5 The Court cannot conclude as a
matter of law that the InterCall Order Form governed EMSI’s use of Content
Management from July 1, 2011, through January 11, 2013; that EMSI waived InterCall’s
alleged breach of the InterCall Order Form; or that EMSI breached the InterCall Order
Form.
C.

EMSI’s Motion for Partial Summary Judgment
1.

Rapid Learning Enhancements

First, EMSI requests a finding that InterCall failed to deliver any of the Rapid
Learning enhancements under the InterCall Order Form. InterCall admits that the Rapid
Learning enhancements were not implemented. (See Compl. ¶ 10; Pl. Br., Filing No. 35
at 5.) While questions of fact remain as to whether the InterCall Order Form was a
novation of the Brainshark Order Form, and/or whether EMSI’s use of unlimited Content
Management software estopped EMSI from asserting that the InterCall Order Form was
invalid, InterCall has not come forward with evidence of a clear, unequivocal, and
decisive action by EMSI demonstrating its waiver of InterCall’s obligation to deliver the
Rapid Learning enhancements. EMSI’s continued use of Content Management alone
does not constitute such a waiver. Accordingly, EMSI is entitled to partial summary
judgment on the question of InterCall’s breach of contract under the InterCall Order
Form.
5

EMSI asserts that the term “unlimited” as it appears in the Brainshark Order Form permitted ten
licensed EMSI employees to upload an unlimited amount of content to the Brainshark website that can be
viewed by an unlimited number of viewers. (Filing No. 27-1 ¶¶ 5-6; Filing No. 27-2.) InterCall denies that
content could be viewed by an unlimited number of viewers under the Brainshark Order Form, and states
that EMSI breached the InterCall Order Form by using Content Management on an “unlimited seat basis.”
(See Filing No. 24-1 ¶ 4.) However, the evidence InterCall cites does not provide evidence of what
constitutes a “seat” is, and the Court cannot determine as a matter of law whether EMSI’s use was
contrary to either order form.

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2.

Termination of the InterCall Order Form

Second, EMSI argues that the InterCall Order Form was terminated and of no
force and effect. InterCall argues that EMSI failed to terminate the InterCall Order Form
in the manner prescribed, and the InterCall Order Form remained in effect.

In

Nebraska:
[w]hen the right to terminate a contract on notice is reserved without any
fraud or mistake, but with the actual knowledge and consent of all parties
to the agreement, it is as valid in law as any other clause of the
instrument; and the courts, when called upon, will enforce it, unless to do
so would be manifestly contrary to equity and good conscience.
Johnson Lakes Dev., Inc. v. Cent. Nebraska Pub. Power & Irrigation Dist., 576 N.W.2d
806, 815 (Neb. 1998) (quoting Morrissey v. Broomal, 56 N.W. 383, 386 (Neb. 1893)).
InterCall argues that “[a]s a general rule, contractual requirements as to notice of
termination must be strictly observed. Indeed, it has been said that a notice of
cancellation which does not comply with the requirements of the contract is without
effect.” 17A Am. Jur. 2d Contracts § 544 (citations omitted). InterCall argues that
because EMSI failed to comply with the notice of termination requirements incorporated
into the InterCall Order Form, the InterCall Order Form continued in effect, and was
automatically renewed on July 1, 2012.
EMSI does not assert that it gave notice of termination of the InterCall Order
Form before automatic renewal. Instead, EMSI argues that even if it did not terminate
the InterCall Order Form before the renewal period and in the manner prescribed, the
InterCall Order Form was terminated because of InterCall’s material breach.
“Grounds for cancellation or rescission of a contract include, inter alia, fraud,
duress, unilateral or mutual mistake, and inadequacy of consideration, which may arise
12

from nonperformance of the agreement.” Eliker v. Chief Indus., 498 N.W.2d 564, 566
(Neb. 1993) (citing 13 Am.Jur.2d Cancellation of Instruments § 23 (1964)). Further,
“ground for equitable cancellation may arise from a breach of contract which is so
substantial and fundamental as to defeat the object of the parties in entering into the
contract.” Id. (citing Klapka v. Shrauger, 281 N.W. 612, 616 (Neb. 1938)). EMSI asserts
that its principal purpose for entering the InterCall Order Form was to obtain
enhancements to Brainshark’s Rapid Learning software. EMSI claims that InterCall’s
failure to provide the Rapid Learning enhancements was a substantial and fundamental
breach of the InterCall Order Form, and in itself was sufficient to terminate the InterCall
Order Form.
“The question of whether a breach was “substantial” or “material” is ordinarily a
question of fact.” Watts v. Butte Sch. Dist. No. 5, 939 F. Supp. 1418, 1428 (D. Neb.
1996) (citing E. Farnsworth, Contracts § 8.16 (2d ed. 1990)). Accordingly, the Court will
not grant summary judgment on the issue of whether or when the InterCall Order Form
was terminated.
II.

Motions to Strike
The Court has reviewed and considered the parties’ arguments with respect to

the Motions to Strike. The Court has not relied on any disputed evidence in reaching its
decision and, therefore, need not address the sufficiency or admissibility of the disputed
evidence at this time. Accordingly, the Motions to Strike will be denied as moot, without
prejudice to reassertion at a later stage of the proceedings.

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CONCLUSION
InterCall’s Motion for Summary Judgment, or in the alternative, Motion for Partial
Summary Judgment, will be denied. Issues of fact remain as to whether the InterCall
Order Form was a novation of the Brainshark Order Form, and/or whether EMSI’s use
of unlimited Content Management software estopped EMSI from asserting that the
InterCall Order Form was invalid or terminated.
EMSI’s Motion for Partial Summary Judgment will be granted in part because
there is no genuine dispute that InterCall failed to deliver or implement the Rapid
Learning enhancements as promised in the InterCall Order Form and thereby breached
the terms of the InterCall Order Form. However, factual issues remain as to whether
EMSI validly terminated the InterCall Order Form for cause, and/or whether InterCall’s
failure to provide the Rapid Learning enhancements was so substantial and
fundamental a breach of the InterCall Order Form as to defeat the object of the parties
and provide grounds for equitable termination of the InterCall Order Form.
Accordingly,
IT IS ORDERED:
1.

The Motion for Summary Judgment or, in the alternative, Partial Summary
Judgment (Filing No. 22) filed by Plaintiff InterCall, Inc., is denied;

2.

The Motion for Partial Summary Judgment (Filing No. 25) filed by
Defendant Examination Management Services, Inc., is granted in part, as
follows:

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a.

The Court finds that InterCall failed to deliver or implement the
Rapid Learning enhancements as promised in the InterCall Order
Form and thereby breached the terms of the InterCall Order Form;

b.
3.

The Motion is otherwise denied; and

The Motions to Strike (Filing Nos. 28 and 44) filed by Defendant
Examination Management Services, Inc., and the Motion to Strike (Filing
No. 31) filed by Plaintiff InterCall, Inc., are denied as moot, without
prejudice to reassertion.

Dated this 28th day of August, 2014.
BY THE COURT:
s/Laurie Smith Camp
Chief United States District Judge

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