ACI Worldwide Corp. v. Churchill Lane Associates, LLC

Filing 182

MEMORANDUM AND ORDER - The Motion for Partial Summary Judgment, ECF No. 150 , filed by Plaintiff ACI Worldwide Corp., is denied, as follows: a. The portion of the motion that asks the Court to find that "when ACI validly terminated the License Agreement on July 21, 2014, the rights granted to and the obligations assumed by both ACI and the ACI Affiliates likewise terminated" is denied with prejudice; b. The motion is otherwise denied without prejudice to reassertion. The Motion to Den y or Defer Ruling, ECF No. 159 , on the Motion for Partial Summary Judgment, filed by Defendant Churchill Lane Associates, LLC, is granted. The Objection to Declarations of La Dell Diaz, Jerod L. Sands, and Minja Herian, ECF No. 175 , filed by Defendant Churchill Lane Associates, LLC, is overruled without prejudice to reassertion. Ordered by Chief Judge Laurie Smith Camp. (KLF)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA

ACI WORLDWIDE CORP.,
Plaintiff,

8:14CV249

vs.
CHURCHILL LANE ASSOCIATES, LLC,

MEMORANDUM
AND ORDER

Defendant.

This matter is before the Court on the Motion for Partial Summary Judgment,
ECF No. 150, filed by Plaintiff ACI Worldwide Corp. (ACI), the Motion to Deny or Defer
Ruling, ECF No. 159, on the Motion for Partial Summary Judgment, filed by Defendant
Churchill Lane Associates, LLC (Churchill), and the Objection to Declarations of La Dell
Diaz, Jerod L. Sands, and Minja Herian, ECF No. 175, filed by Churchill.

For the

reasons stated below, the Motion for Summary Judgment will be denied, in part with
prejudice, and in part without prejudice to reassertion; the Motion to Deny or Defer
Ruling will be granted; and the Objection will be overruled, without prejudice to
reassertion.
BACKGROUND
The following facts are those stated in the parties’ briefs, supported by pinpoint
citations to evidence in the record, and admitted, or not properly resisted, by the
opposing party as required by NECivR 56.11 and Federal Rule of Civil Procedure 56.

1

See NECivR 56.1(b)(1) (effective December 1, 2015):

The party opposing a summary judgment motion should include in its brief a concise
response to the moving party’s statement of material facts. The response should
address each numbered paragraph in the movant’s statement and, in the case of any

The Court has also drawn facts from its prior summary judgment order, ECF No. 109,
and the Eighth Circuit Court of Appeals’ opinion, ECF No. 115.
I. Factual Background
In February 2001, Nestor, Inc., (Nestor) entered into an agreement (Licensing
Agreement) for ACI to use, modify, enhance, market, sublicense, maintain, and support,
certain credit card fraud detection software (Licensed Software Technology), 2
developed by Nestor. Under the Licensing Agreement, Nestor would own any new
technology (New Technology) ACI developed using the Licensed Software Technology.
ACI agreed to pay royalties on any fees paid by its customers for use of the New
Technology.
Section 2.1 of the Licensing Agreement stated:
Nestor hereby grants to ACI a world-wide, perpetual (except as
provided in article 9.0), non-revocable (except as provided in article 9.0),
non-transferable, non-exclusive license (the “License”) to copy, use,
modify, enhance, market, sub-license (directly or through its customary
and usual distribution channels for its other products), maintain and
support the Software Products, all subject to the terms and conditions of
this Agreement and the Attachments.
ECF No. 52, Page ID 398.
Section 2.4 of the Licensing Agreement stated:
ACI shall be limited to distributing (sub-licensing) the Software
Programs in object-code format. Except pursuant to the escrow terms in
the customer’s Software Agreement (which terms for the Software
Programs shall be no different from ACI’s standard escrow terms for its
other software which it licenses to customers), ACI shall be prohibited
from (i) sub-licensing or otherwise distributing, transferring or disclosing
disagreement, contain pinpoint references to affidavits, pleadings, discovery responses,
deposition testimony (by page and line), or other materials upon which the opposing party
relies. Properly referenced material facts in the movant’s statement are considered
admitted unless controverted in the opposing party’s response.
2
For consistency, the Court employs the terminology used by the Eighth Circuit Court of
Appeals. See ECF No. 115.

2

the Software Programs source code or its proprietary design to any thirdparty and (ii) licensing the Software Programs to any third-party for use as
a development platform. ACI shall prohibit all Software Program licensees
from translating, reverse engineering, decompiling or disassembling the
Software Program object code or otherwise attempting to derive its source
code or its proprietary design therefrom. ACI [unreadable] distributors
shall sub-license the Software Products under the terms of the license
agreement set forth on Attachment C. ACI may modify or replace the
license agreement at any time, in whole or in part, provided no
modification or replacement will diminish protection of Nestor’s
confidentiality or intellectual property rights or increase Nestor’s potential
liability. ACI will effectively enforce against all customers that obtained the
Software Products from ACI the provisions of the Software Agreement that
affect Nestor’s confidentiality or intellectual property rights in the Products.
ECF No. 52, Page ID 398–99.
Section 9.3 of the Licensing Agreement stated:
Upon the termination of this Agreement by either party, ACI shall
(a) cease all marketing and sublicensing activities under the Agreement,
(b) within (10) calendar days pay all amounts due and amounts due and
outstanding hereunder and (c) deliver to Nestor or its designee all copies
of the Software Products within ACI’s possession, custody or control
(together with a certificate of an officer of ACI certifying such delivery);
provided ACI may retain sufficient copies of the Software Products to be
able to support, maintain and enhance the Software Products that have
been sublicensed to customer prior to the termination until such time as
such sublicenses shall expire or terminate.
Notwithstanding any termination of this Agreement, the License and
any sublicenses shall continue in effect with respect to any sublicense
granted to ACI prior to termination and ACI shall remain liable to Nestor
for royalties accruing with respect thereto. Termination of this Agreement
and the License shall not release ACI from any of its obligations, or
liabilities accrued, or licensed under this Agreement, or rescind or give rise
to any right to rescind any payment made or other consideration given
hereunder.
Id., Page ID 402.
In 2002, Nestor and ACI executed Amendment 2 to the Licensing Agreement, by
which ACI consented to an assignment by Nestor “to a third party of Royalties due
Nestor under the [Licensing] Agreement.” ECF No. 52, Page ID 417. Nestor eventually
3

entered into an agreement (Assignment of Royalty Stream) with Churchill, by which
Nestor assigned to Churchill Nestor’s right to future royalties under the Licensing
Agreement.
In 2008, Nestor and ACI executed Amendment 5 to the Licensing Agreement, by
which Nestor assigned and transferred all rights in the New Technology to ACI.
Amendment 5 also stated that Nestor had “irrevocably assigned all monies due and to
become due under the [Licensing] Agreement” to Churchill, id., Page ID 426, and that
ACI would continue to pay royalties to Churchill on fees it collected for customers’ use
of the New Technology, id. Page ID 425–26.
In 2009, Nestor became insolvent and entered receivership. The court-appointed
receiver sold Nestor’s rights in the Licensing Agreement and the Licensed Software
Technology to American Traffic Solutions (ATS). On July 20, 2014, ACI purchased
those same rights from ATS. The next day, ACI executed a document terminating the
Licensing Agreement. ECF No. 52, Page ID 428–29. The document stated “Licensor
and Licensee hereby terminate the Licensing Agreement as of the Effective Date and
agree that all provisions of the Licensing Agreement that were designated to survive
termination are likewise terminated as of the Effective Date.” ECF No. 52, Page ID 428.
Several weeks later, ACI sent Churchill a letter stating that ACI had terminated the
Licensing Agreement, and with it, ACI’s obligation to pay royalties on the Licensed
Software Technology and New Technology. With the letter, ACI also included a check,
which represented the full balance of royalties due Churchill. Churchill disputed that
ACI was no longer obligated to pay royalties.

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II. Procedural Background
On October 20, 2014, ACI filed this action, seeking a declaratory judgment that,
among other things, ACI validly amended the Licensing Agreement to remove any posttermination obligation to Churchill; ACI validly terminated the Licensing Agreement; and
ACI rendered full and final payment to Churchill on all remaining royalties.
This Court granted summary judgment in favor of ACI on March 9, 2016, finding
that ACI validly amended and terminated the Licensing Agreement and therefore was
not liable to Churchill for any additional royalties after the Licensing Agreement’s
termination. Churchill appealed, and on January 27, 2017, the Eighth Circuit Court of
Appeals issued an opinion affirming the Court’s order, in part; reversing it, in part; and
remanding for further proceedings. The Eighth Circuit held that although ACI validly
terminated the Licensing Agreement, ACI’s amendment of the agreement to eliminate
§ 9.3’s post-termination royalty obligation was invalid because it violated Churchill’s
rights as an assignee to the Licensing Agreement without Churchill’s consent.
Therefore, ACI remained obligated to pay royalties to Churchill on any sublicenses
granted before the termination of the Licensing Agreement on July 21, 2014, but ACI did
“not owe Churchill royalties on any sublicenses that ACI has granted since July 21,
2014 or that it will grant in the future.” ECF No. 115, Page ID 1738.
ACI filed the present Motion for Partial Summary Judgment, ECF No. 150, on
October 19, 2017, asking this Court to find that:
(1) when ACI validly terminated the License Agreement on July 21,
2014, the rights granted to and the obligations assumed by both ACI and
the ACI Affiliates likewise terminated; (2) ACI does not owe Churchill any
Royalties for any licenses granted since July 21, 2014, regardless of
whether the license was between ACI and an ACI Affiliate or ACI and a
customer; (3) ACI and its customers could terminate the sublicenses that
5

were in place before July 21, 2014 and enter into new licenses after July
21, 2014 that are free of the Royalties obligation; (4) ACI and ACI Affiliates
could execute the Mutual Terminations effective July 21, 2014; (5) the
termination of the License Agreement did not impair Churchill’s rights, and
likewise the termination of sublicenses between ACI and ACI Affiliates and
ACI and its customers, cannot impair Churchill’s rights; and (6) when ACl’s
customers purchased Annual Product Support that expired or terminated
sometime post-July 21, 2014, the obligation to pay Royalties to Churchill
on such Annual Product Support expired or terminated as well.
Id., Page ID 2211–12.
In its Statement of Material Facts, ECF No. 151, Page ID 2218–23 (Statement),
ACI cited primarily to the Eighth Circuit Opinion3 and the Licensing Agreement,4 as well
as a limited number of other documents5 already in the record.
Churchill has moved under Rule 56(d) for the Court to deny or defer ruling on the
summary judgment motion until further discovery is conducted. Churchill has a pending
motion to compel discovery, ECF No. 135, before Magistrate Judge Michael D. Nelson,
seeking, among other things, evidence of terminations of sublicense agreements
between ACI and its customers, and ACI affiliates and their customers, as well as
evidence regarding ACI’s current contractual relationships with its customers and
affiliates.

3

Cited at Statement ¶¶ 1, 26, 27.
Cited at Statement ¶¶ 2–10, 13, 15, 18–20, 27.
5
These documents consisted of a declaration of attorney Minja Herian, ECF No. 148-1, cited at
Statement ¶¶ 10–11; deposition excerpts of Alan Wiener, ECF Nos. 52 & 53, cited at ¶¶ 12, 14, & 17; the
Assignment of Royalty Stream, ECF No. 52, cited at Statement ¶¶ 14 & 16; the Asset Purchase
Agreement between Nestor and ATS, ECF No. 53, cited at Statement ¶¶ 21 & 22; Answers to certain
interrogatories, ECF No. 53, cited at Statement ¶¶ 21 & 22; the Asset Purchase Agreement between ATS
and ACI, ECF No. 52, ex. 1, cited at Statement ¶ 23; the Termination of the Licensing Agreement, ECF
No. 52, ex. 1C, cited at Statement ¶ 24; the Mutual Termination between ACI and ACI Worldwide (Asia)
Pte Ltd, ECF No. 138-11, cited at Statement ¶ 26; and a declaration by Kimberly Haluska, ECF No. 61-2,
Page ID 783–84, cited at Statement ¶ 28.
4

6

STANDARD OF REVIEW
I. Summary Judgment
“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).

7

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 parties in order to overcome summary judgment.

Dick v.

Dickinson State Univ., 826 F.3d 1054, 1061 (8th Cir. 2016) (quoting Vacca v. Viacom
Broad. of Mo., Inc., 875 F.2d 1337, 1339 (8th Cir. 1989)).
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.” Wagner, 788 F.3d at 882 (quoting Torgerson, 643 F.3d at
1042). 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 of
material fact” for trial and summary judgment is appropriate. Whitney, 826 F.3d at 1076
(quoting Grage v. N. States Power Co.-Minn., 813 F.3d 1051, 1052 (8th Cir. 2015)).
II. Motion to Deny or Defer Ruling on Summary Judgment
“The general rule is that summary judgment is appropriate ‘only after the
nonmovant has had adequate time for discovery.’” Jackson v. Riebold, 815 F.3d 1114,
1121 (8th Cir. 2016) (quoting Toben v. Bridgestone Retail Operations, LLC, 751 F.3d
888, 893 (8th Cir. 2014)). “Pursuant to Rule 56(d), a party opposing summary judgment

8

may move for a continuance ‘until adequate discovery has been completed if they
otherwise cannot present facts sufficient to justify their opposition’ to a summaryjudgment motion.” Id. (quoting Toben, 751 F.3d at 893).
The party seeking additional discovery must establish “(1) that [he] ha[s] set forth
in affidavit form the specific facts that [he] hope[s] to elicit from further discovery, (2) that
the facts sought exist, and (3) that these sought-after facts are essential to resist the
summary judgment motion.” Id. (alteration in original) (internal quotation marks omitted)
(quoting Toben, 751 F.3d at 895). “As to the second element, ‘[i]t is well settled that
Rule 56([d]) does not condone a fishing expedition where a plaintiff merely hopes to
uncover some possible evidence of [unlawful conduct].’”

Id. (alteration in original)

(quoting Toben, 751 F.3d at 895).
DISCUSSION
ACI argues that, once the Licensing Agreement was terminated, any new
licenses issued to customers by ACI or its affiliates were free of the Licensing
Agreement’s royalty obligation, even if the new license was issued to a customer with
whom ACI had a sublicensing agreement prior to July 21, 2014.
Churchill argues that, under § 9.3, the sublicenses survived termination of the
Licensing Agreement as well as the termination of any agreements governing the
sublicenses between ACI and its customers or an ACI affiliate and its customers. In
other words, Churchill asserts that the royalty obligation is conditioned on the
customer’s use of the licensed technology, not the continued operation of the
agreement governing the sublicense to use the technology. According to Churchill, “the
‘sublicenses’ are the right of the customers to use the New Technology,” while “[t]he

9

‘Software Agreements’[6] set the financial and other terms relating to the ‘sublicense.’”
ECF No. 157, Page ID 2315. In Churchill’s view, even if a sublicense agreement is
terminated, the royalty obligation continues as long as the customer uses the licensed
technology—even if the customer ceases using the technology for any length of time
and resumes using it upon entering a new licensing agreement with ACI.
ACI asserts that a “royalty stream” “outliv[ing] the agreement that supports it”
defies common sense. ECF No. 168, Page ID 2394. However, ACI has not presented
any authority for the proposition that such is true as a matter of law, sufficient to
override the parties’ contract.7

Thus, the Court must examine the status of the

sublicense agreements and their relationship to the Licensing Agreement.
First, neither ACI nor Churchill disputes that royalties are owed Churchill on any
fees ACI has collected pursuant to any sublicense agreements with ACI’s customers
that have continued uninterrupted—without cancellation or renewal8—since before July
21, 2014. See Reply Brief, ECF No. 168, Page ID 2392 (“ACI knows that sublicense
agreements granted before July 21, 2014 and that remain in effect are not free of the
Royalties obligation set forth in § 9.3.”). However, ACI claims it is free of the royalty
obligation with respect to sublicenses it cancelled in favor of new agreements with the

6

Churchill notes that §§ 2.4 and 3.3 of the Licensing Agreement use the term “Software
Agreements” to refer to those agreements governing sublicenses with customers. See ECF No. 52, Page
ID 398–99.
7
ACI cites to Sybron Transition Corp. v. Nixon, Hargrave, Devans & Doyle, 770 F. Supp. 803,
813 (W.D.N.Y.,1991), for the proposition that, absent the right to use intellectual property, “a license
agreement necessarily fail[s] for lack of consideration and impossibility of performance.” ECF No. 168,
Page ID 2411. The Court finds Sybron inapplicable because, here, there is no risk of an agreement
failing for lack of consideration. Section 9.3 merely states that any sublicenses may continue beyond the
termination of the Licensing Agreement, provided that ACI pays royalties on any fees collected for use of
the New Technology.
8
ACI disputes that any agreements it entered into with existing customers after July 21, 2014,
constituted “renewals” of prior agreements. The Court uses the term merely to distinguish between
agreements that expired automatically at the end of a set time from agreements that were affirmatively
terminated before expiration.

10

same customers or that expired and were renewed. Therefore, the Court must look to
any purported cancellations or renewals of sublicense agreements, and the evidence
supporting them, in order to determine whether ACI owes royalties on particular
sublicenses.
I. The ACI Affiliates’ Mutual Termination
As stated, ACI asks this Court, inter alia, to find as a matter of law that (1) “ACI
does not owe Churchill any Royalties for any licenses granted since July 21, 2014,
regardless of whether the license was between ACI and an ACI Affiliate or ACI and a
customer;” (2) “ACI and ACI Affiliates could execute the Mutual Terminations effective
July 21, 2014;” and (3) “the termination of the License Agreement did not impair
Churchill’s rights, and likewise the termination of sublicenses between ACI and ACI
Affiliates and ACI and its customers, cannot impair Churchill’s rights.” ECF No. 150,
Page ID 2211–12. These questions turn, at least in part, on the effect of any purported
terminations of agreements between ACI and its affiliates (Mutual Terminations)
regarding the affiliates’ right to sublicense—or, as ACI terms it, “sub-sublicense”—the
New Technology.
Section 2.1 of the Licensing Agreement stated that “Nestor hereby grants to ACI
a world-wide, perpetual . . . license (the “License”) to copy, use, modify, enhance,
market, sub-license (directly or through its customary and usual distribution channels for
its other products), maintain and support the Software Products,” and that “[a]ny ACI
Affiliate[9] may exercise any of ACI’s rights hereunder.” ECF No. 52, Page ID 398.

9

Section 1.1 of the Licensing Agreement defined “Affiliate” as:

[A]ny corporation that (a) directly or indirectly controls, is controlled by, or is under
common control with the party. ACI shall promptly notify Nestor of any Affiliate to which

11

Churchill argues that any use of the New Technology by ACI Affiliates’ customers
is still subject to the royalty obligation, regardless of Mutual Terminations between ACI
and its affiliates, and that ACI’s backdating of the Mutual Terminations—to the extent
any backdating occurred—impairs Churchill’s rights to any fees that accrued between
July 21, 2014, and the date—known only to ACI and its affiliates—the Mutual
Terminations were executed.
The only Mutual Termination cited by ACI is one between ACI and an ACI
affiliate—“ACI Worldwide (Asia) Pte Ltd a Singapore Company” (ACI Asia)—
purportedly dated July 21, 2014. See ECF No. 138-11, Page ID 1980–82. ACI argues
that this document did not effect a termination of the sublicense, but rather,
“document[ed]” or “memorialized” the termination that occurred by virtue of the
termination of the Licensing Agreement on that date, and that ACI is only liable for
royalties prior to July 21, 2014.

The Court will address ACI’s argument before

discussing the lack of evidence of other Mutual Terminations.
A. Effect of Mutual Termination between ACI and ACI (pte) Asia
To the extent ACI entered into contracts with affiliates for the affiliates to
sublicense the New Technology, 10 ACI and some or all of its affiliates executed

ACI gives a copy of the source code for the Software Programs. The current list is set
forth on Attachment F. Control means the ownership of more than 50% of the voting
securities of an entity. A party and any and all of its Affiliates exercising any rights under
this Agreement shall be jointly, severally responsible and liable for any and all of the
duties, obligations and liabilities under this Agreement of such party or Affiliates.
ECF No. 52, Page ID 398.
10
ACI states in its Statement of Material Facts that it entered into agreements with its affiliates to
sublicense the “New Technology.” Supp. Brief ¶ 12, ECF No. 151, Page ID 2220. However, as with
several of the parties’ asserted facts, the cited evidence does not support the assertion. ACI cites to a
deposition in which the deponent states that ACI developed and sublicensed the New Technology to
customers pursuant to the Licensing Agreement. See Wiener Dep. 170:11–171:20, ECF No. 53, Page ID
542–43. There is no mention of affiliates.

12

terminations of some or all of these contracts at some point in time. However, more
specific evidence of these terminations, save one, is not before the Court.
Paragraph 26 of ACI’s Statement of Material Facts states that ACI “documented
that approved termination of all sublicense agreements by way of mutual termination
agreements between ACI and its Affiliates, using the same date affirmed by the Eighth
Circuit as the proper termination date.” ECF No. 151, Page ID 2222–23 (citing ECF
Nos. 115 & 138-11). ACI cites to the Eighth Circuit opinion, which does not mention
ACI affiliates, see ECF No. 115, and the Mutual Termination between ACI and ACI Asia,
ECF No. 138-11.

Because ACI has only cited to this document as evidence of a

termination between ACI and an affiliate, the Court will consider its effect only as
between these two entities.
ACI argues that “when the [Licensing] Agreement was terminated on July 21,
2014, the rights granted to and the obligations assumed by both ACI and the ACI
Affiliates likewise terminated,” ECF No. 151, Page ID 2225, and that these rights
included “ACI’s rights to sublicense to customers and to ACI Affiliates, and ACI
Affiliates’ rights to sub-sublicense,” id., Page ID 2224. “After that date, only ACI, the
owner of the [Licensed Software Technology and New Technology], could grant ACI
Affiliates the right to sublicense the Technology . . . .”

Id., Page ID 2225.

Thus,

according to ACI, the Mutual Termination was made “effective as of the date that the
Eighth Circuit held that the [Licensing] Agreement (together with the rights and
obligations of ACI and its Affiliates) terminated.

This is the one and only date the

termination could be, according to the Eighth Circuit.” Id., Page ID 2226.11

11

ACI’s argument also begs the question: If the Mutual Termination was merely a
memorialization or documentation of the termination of the sublicenses effected by the termination of the

13

ACI is incorrect that its termination of the Licensing Agreement affected the
sublicenses between ACI affiliates and their customers. The Eighth Circuit stated that,
under § 9.3, ACI remained liable to pay royalties to Churchill on sublicenses granted
before July 21, 2014. Section 2.1 of the Licensing Agreement granted ACI affiliates the
same rights as ACI. See ECF No. 52, Page ID 398. Therefore, sublicenses granted by
ACI affiliates and sublicenses granted by ACI are treated the same by the Licensing
Agreement, and the sublicenses survived termination of the Licensing Agreement by
virtue of § 9.3. ECF No. 52, Page ID 402 (“Notwithstanding any termination of this
Agreement, the License and any sublicenses shall continue in effect with respect to any
sublicense granted to ACI prior to termination and ACI shall remain liable to Nestor for
royalties accruing with respect thereto.”). For this reason, the portion of ACI’s summary
judgment motion that asks this Court to find that “when ACI validly terminated the
[Licensing] Agreement on July 21, 2014, the rights granted to and the obligations
assumed by both ACI and the ACI Affiliates likewise terminated” will be denied.
Although ACI and Churchill dispute whether the Licensing Agreement authorized
ACI to terminate the agreement with ACI Asia, two parties are free to terminate an

Licensing Agreement, then what purpose did the Mutual Termination serve? According to ACI, it chose
“to memorialize the termination, so that contractual provisions would reflect the new reality established by
ACI's valid termination of the [Licensing] Agreement and ACI's ownership of the Nestor Technology.” Id.,
Page ID 2226. Clearly, if ACI was correct, and the Mutual Termination carried no legal effect, then there
would be nothing for the Court to rule on regarding whether or not ACI could execute a meaningless
document. Ringo v. Lombardi, 677 F.3d 793, 796 (8th Cir. 2012) (“[A] federal court has neither the power
to render advisory opinions nor ‘to decide questions that cannot affect the rights of litigants in the case
before them.’”) (alteration in original) (quoting Preiser v. Newkirk, 422 U.S. 395, 401 (U.S. 1975))). The
Court need not dwell on this argument, however, because the terms of the Mutual Termination show that
it unambiguously terminated the agreement between ACI and ACI Asia. Mutual Termination ¶ 1, ECF No.
138-11, Page ID 1981 (“Company and Distributor hereby mutually terminate the Distribution
Agreement . . . .”); see Faulkner v. Nat’l Geographic Soc., 452 F. Supp. 2d 369, 375 (S.D.N.Y. 2006)
(holding that when contractual language is unambiguous, “courts may not consider extrinsic evidence of
the parties’ intent, instead determining the meaning of the contract ‘from the terms expressed in the
instrument itself.’” (quoting Metro. Life Ins. v. RJR Nabiso, Inc., 906 F.2d 884, 889 (2d Cir. 1990))).

14

agreement upon mutual assent, and neither Churchill nor ACI has argued that the
Licensing Agreement required ACI to continue its agreements with customers and
affiliates ad infinitum.12

Rather, § 9.3 stated that the termination of the Licensing

Agreement would not affect the sublicenses between ACI and its customers.
However, hand-in-hand with the termination of the agreement between ACI and
ACI Asia is the issue of possible retroactivity and its effect on Churchill’s rights.
Churchill argues that ACI and ACI Asia executed the Mutual Termination after July 21,
2014, but stated that the effective date was July 21, 2014. As stated, ACI’s termination
of the Licensing Agreement did not automatically terminate the agreement between ACI
and ACI Asia, at least with regard to sublicenses granted by ACI Asia. Thus, the date
when the Mutual Termination was actually executed is relevant to the Motion for
Summary Judgment.
ACI argues that even if the Licensing Agreement’s termination did not, in and of
itself, terminate the agreement between ACI and ACI Asia, ACI was still free to date the
Mutual Termination retroactively to July 21, 2014. According to ACI, such retroactive
dating could not impair the rights of Churchill. However, not only has ACI not disclosed
the date of the Mutual Termination’s drafting or execution, it has not acknowledged
whether any retroactive dating of the agreement occurred at all. The Court will deny
these portions of the Motion for Summary Judgment, pending further discovery.
B. Summary of Other Mutual Terminations
In addition to the Mutual Termination between ACI and ACI Asia, ACI filed a
“Summary of License and Maintenance Fees,” ECF No. 169-3 (Summary), offered

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For this reason, the Court does not reach the parties’ argument regarding the interpretation of
§ 2.4 of the Licensing Agreement.

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through the affidavit of Minja Herian, id.,13 as evidence that it has terminated
agreements with other affiliates for sublicenses. This summary has columns to indicate
who, as of July 21, 2014, was the “Licensor and IP Owner,” the “Licensee,” the
“Sublicensee,” and any “Customer(s) of the Sublicensee.” See id., Page ID 2426. The
Summary also lists the “Sublicense Status” as either “Active” or “Terminated” and the
amounts totaling 15% of the “License Fees Invoiced” and “Maintenance Fees Invoiced.”
While the Summary identifies several sublicenses as “Terminated,” there is no
information regarding the date on which, or the mechanism whereby, these sublicenses
were terminated. As with the purported termination of the ACI Asia agreement, the
Court cannot rule on any alleged retroactive dating of the listed agreements, or the
effects on Churchill’s rights. The Court will grant Churchill’s 56(d) motion and deny
ACI’s motion for summary judgment pending further discovery regarding the
sublicenses granted by ACI affiliates before termination of the Licensing Agreement,
and the status of ACI’s, or its affiliates’, current contractual relationship with those
customers.
II. Individual Terminations by ACI and its Customers
As discussed, ACI asks this Court to find that “ACI does not owe Churchill any
Royalties for any licenses granted since July 21, 2014, regardless of whether the
license was between ACI and an ACI Affiliate or ACI and a customer;” and also to find
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Churchill objects, inter alia, to the Summary because Herian’s affidavit is not based solely on
her personal knowledge. The affidavit states that Herian “make[s] all statements herein with personal
knowledge, the knowledge of [Herian’s] legal team and information supplied by ACI Worldwide
representatives.” Id., Page ID 2424. NECivR 7.1(a)(2)(C) states “[a]n affidavit must identify and
authenticate any documents offered as evidence. The affidavit must be made on personal knowledge,
set forth facts that would be admissible in evidence, [and] show affirmatively that the affiant is competent
to testify to the matters stated . . . .” While the Court is unpersuaded by ACI’s argument that personal
knowledge is not required, the Court finds that the information in the Summary is insufficient regardless of
its propriety under NECivR 7.1. The Court will overrule the objection without prejudice to reassertion if
ACI should attempt to rely on it in the future.

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that “ACI and its customers could terminate the sublicenses that were in place before
July 21, 2014, and enter into new licenses after July 21, 2014, that are free of the
Royalties obligation;” and that “the termination of the [Licensing] Agreement did not
impair Churchill’s rights, and likewise the termination of sublicenses between ACI and
ACI Affiliates and ACI and its customers, cannot impair Churchill’s rights.” ECF No.
150, Page ID 2211–12.

As with the Mutual Terminations, the Court must look to

evidence of any terminations of sublicenses between ACI and its customers (Customer
Terminations) to answer these questions.
ACI argues that it was free to terminate its sublicenses with customers after July
21, 2014, and enter into license agreements free of the royalty obligation. ACI’s briefing
implies, but does not explicitly state, that ACI has terminated sublicense agreements
with some of its customers.

See ECF No. 151, Page ID 2228 (“With respect to

sublicenses granted before July 21, 2014, by ACI to its customers, as those sublicenses
terminated or expired after July 21, 2014, to the extent the customer wanted to continue
to use the software products, ACI granted new licenses.”); ECF No. 168, Page ID 2392
(“Certain, but not all licenses and sublicenses that ACI granted on or before July 21,
2014, have been terminated or expired, and new licenses or sublicenses granted.”); id.,
Page ID 2399 (“[A]ny rights Churchill had to Royalties were cut off as soon as ACI and
its customers terminated their licenses by mutual agreement.”); id., Page ID 2400 (“ACI
and its customers would have been within their rights to terminate their sublicense
agreement even before Nestor’s bankruptcy.”).
None of the statements concerning potential terminations is accompanied by
citations to evidence in the record that would indicate such terminations occurred. See

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Hotel 71 Mezz Lender LLC v. National Retirement Fund, 778 F.3d 593, 601 (7th Cir.
2015) (“Where . . . the movant is seeking summary judgment on a claim as to which it
bears the burden of proof, it must lay out the elements of the claim, cite the facts which
it believes satisfies these elements, and demonstrate why the record is so one-sided as
to rule out the prospect of a finding in favor of the non-movant on the claim.”). Without
evidence that such terminations occurred, and under what terms, the Court cannot
evaluate ACI’s contention that it does not owe Churchill any further Royalties on fees
paid directly from its customers on sublicenses issued before July 21, 2014. The same
is true of sublicenses that expired at the end of a period set by the sublicense
agreement and were renewed by ACI and the customer. Summary Judgment will be
denied without prejudice to reassertion, pending further discovery regarding any
terminations or renewals of sublicenses that were in effect as of July 21, 2014, and
ACI’s current contractual relationship with customers with whom ACI had sublicense
agreements as of July 21, 2014.
III. Annual Product Support
Last is the issue of Annual Product Support. ACI asks the Court to rule that
“when ACl’s customers purchased Annual Product Support that expired or terminated
sometime post-July 21, 2014, the obligation to pay Royalties to Churchill on such
Annual Product Support expired or terminated as well.” ECF No. 15, Page ID 2211–12.
In addition to fees for the use of the New Technology, ACI agreed to pay
royalties on “maintenance fees,” referred to in the sublicense agreements as “product
support fees,” paid by customers using the New Technology.

ACI states that “the

customer agrees to purchase product support commensurate with the first year of the

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license agreement, and may thereafter discontinue such support, or may agree to
purchase such support for as many new one-year terms while the license is in effect.”
Supp. Brief ¶ 11, ECF No. 151, Page ID 2220.
ACI cites evidence regarding the Product Support Fees, including (1) a
declaration by Minja Herian, ECF No. 148-1, referring to an agreement between ACI
and one customer, ECF No.148-4 (Product Support Agreement), and (2) a summary of
product support fee terms contained in other agreements between ACI and certain
customers. ACI states in its reply brief that “[t]here is no obligation to purchase Annual
Product Support beyond one year, nor does the customer have the right up front to
purchase Annual Product Support beyond the one-year term” and that ACI “uses the
same or substantially similar language in each Annual Product Support provision.” ECF
No. 168, Page ID 2402. ACI cites, respectively, to the declaration of Jerod Sands, ECF
No. 169-2, and another declaration by Ms. Herian, ECF No. 169-3, which itself cites
generally to an attachment to an agreement between ACI and a customer, ECF 169-3,
Page ID 2452–58.
Essentially, ACI seeks summary judgment citing not to the relevant evidence
itself, but to its own its representation of what the evidence contains, or to a portion of
evidence with assurances that what remains undisclosed is substantially similar. The
Court has no reason to doubt these representations, but, as with the Mutual
Terminations and Customer Terminations, Churchill is entitled to the opportunity to
review the evidence itself in resisting summary judgment to see if any genuine issue of
material fact remains. Because the evidence has not yet been produced, the Court will

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deny the remainder of the motion for summary judgment without prejudice to
reassertion, pending further discovery.
CONCLUSION
For the reasons stated above, ACI’s Motion for Summary Judgment will be
denied, in part with prejudice, and in part without prejudice to reassertion pending
further discovery; Churchill’s Motion under Rule 56(d) will be granted; and Churchill’s
objection will be overruled without prejudice to reassertion. Accordingly,
IT IS ORDERED:
1. The Motion for Partial Summary Judgment, ECF No. 150, filed by Plaintiff ACI
Worldwide Corp., is denied, as follows:
a. The portion of the motion that asks the Court to find that “when ACI validly
terminated the License Agreement on July 21, 2014, the rights granted to
and the obligations assumed by both ACI and the ACI Affiliates likewise
terminated” is denied with prejudice;
b. The motion is otherwise denied without prejudice to reassertion;
2. The Motion to Deny or Defer Ruling, ECF No. 159, on the Motion for Partial
Summary Judgment, filed by Defendant Churchill Lane Associates, LLC, is
granted; and
3. The Objection to Declarations of La Dell Diaz, Jerod L. Sands, and Minja Herian,
ECF No. 175, filed by Defendant Churchill Lane Associates, LLC, is overruled
without prejudice to reassertion.

Dated this 7th day of February, 2018.

BY THE COURT:
s/Laurie Smith Camp
Chief United States District Judge

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