JUSTAD v. BANK OF AMERICA CORPORATION et al

Filing 18

MEMORANDUM OPINION AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE L. Patrick Auld, signed on 08/09/2017. It is RECOMMENDED that Bank of America's Motion for Judgment on the Pleadings be denied. (Coyne, Michelle)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
PAUL JUSTAD,

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Plaintiff,
v.
BANK OF AMERICA CORPORATION
and BANK OF AMERICA,
NATIONAL ASSOCIATION,
Defendants.

1:17CV219

MEMORANDUM OPINION AND RECOMMENDATION
OF UNITED STATES MAGISTRATE JUDGE
This

case

comes

before

the

undersigned

United

States

Magistrate Judge for a recommendation on Bank of America’s “Motion
for Judgment on the Pleadings” (Docket Entry 10) (the “Motion”).
For the reasons that follow, the Court should deny the Motion.
BACKGROUND
Paul

Justad

Corporation

and

filed
Bank

a

Complaint
of

against

America,

Bank

National

of

America

Association

(collectively, “Bank of America”) for copyright infringement. (See
Docket Entry 1, ¶ 44.)1

The Complaint alleges as follows:

Justad holds a federally registered copyright in the “Host
Robot,” a computer program that functions as a “PC-to-Mainframe
automation tool.”

1

(Id., ¶¶ 12, 13, 15.)

In or around 2000, Bank

Bank of America, National Association constitutes a wholly
owned subsidiary of Bank of America Corporation. (Docket Entry 1,
¶ 3.)

of America engaged Justad as a software consultant.

(Id., ¶ 16.)

During the consulting period, Justad aided Bank of America with
their “Account Control Automation Project” (the “ACAP”).
¶ 17.)

(Id.,

“[A]s part of the proof of concept phase,” Justad used the

Host Robot to demonstrate an automated method for conducting
“mainframe transactions, like debit and credit card exceptions.”
(Id., ¶ 18.)
still

under

Following September 11, 2001, while the ACAP was
development,

Bank

of

America

terminated

several

contractors, including Justad. (Id., ¶¶ 24, 25.)
Twelve years later, Bank of America again engaged Justad as a
consultant.

(Id., ¶ 27.)

At that time, Justad discovered that,

following his previous termination, Bank of America had installed
the Host Robot on multiple servers, and “during the entire period
from 2001 forward” continued to use, copy, and deploy the “Visual
Basic 6.0 modules” that constitute the Host Robot.
30.)

(Id., ¶¶ 28-

As of 2015, Bank of America employed the Host Robot to

automate “thousands of debit/credit card claims” daily, a practice
that Justad believes continues to occur.

(Id., ¶¶ 28-30, 33, 36.)

Bank of America did not and does not possess a license or Justad’s
permission to use, copy, distribute, display, or reproduce that
software following Justad’s involvement in the concept phase,
including in any production environment. (See id., ¶¶ 30, 32, 44.)

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In response to these allegations, Bank of America filed an
Answer to which it attached a General Release and Program Agreement
(Docket Entry 9-1) (the “Agreement”), which, according to Bank of
America’s Brief in Support of the Motion, bars Justad’s claim (see
Docket Entry 12 at 1-2).

More specifically, Bank of America

contends that, in executing the Agreement to receive severance
benefits

upon

relinquished

his
his

infringement claim.

termination

ability

to

(See id.)

in
bring

September
the

2015,

instant

Justad

copyright

As such, Bank of America maintains

that the Court should enter judgment in its favor on the pleadings.
(See id.)

Justad disputes Bank of America’s contentions.

(See,

e.g., Docket Entry 16 at 3 (“While Mr. Justad contends that the
Agreement presents no bar to his claims, by its terms it does not
bar his claim for copyright infringement occurring after September
24, 2015.”).)
DISCUSSION
I. Relevant Standards
“After the pleadings are closed–but early enough not to delay
trial–a party may move for judgment on the pleadings.”
P. 12(c).

Fed R. Civ.

In evaluating a Rule 12(c) motion, the Court considers

only the pleadings, (i) taking all factual allegations in the
Complaint as true, (ii) taking all factual allegations in the
Answer as “true only where and to the extent they have not been
denied or do not conflict with the [C]omplaint,” and (iii) drawing

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all

reasonable

inferences

in

favor

of

the

nonmoving

party.

Alexander v. City of Greensboro, 801 F. Supp. 2d 429, 433 (M.D.N.C.
2011) (internal quotation marks omitted). “The test applicable for
judgment on the pleadings is whether or not, when viewed in the
light most favorable to the party against whom the motion is made,
genuine issues of material fact remain or whether the case can be
decided as a matter of law.”

Smith v. McDonald, 562 F. Supp. 829,

842 (M.D.N.C. 1983), aff’d, 737 F.2d 427 (4th Cir. 1984), aff’d,
472 U.S. 479 (1985). In resolving a motion for judgment on the
pleadings, “the [C]ourt may consider the [C]omplaint, the [A]nswer,
and any documents incorporated by reference into these pleadings.”
Crisp v. Allied Interstate Collection Agency, 149 F. Supp. 3d 589,
594 n.5

(M.D.N.C.

2016).

Notably,

“[b]ecause

the

burden

of

establishing an affirmative defense[, such as a release agreement,]
rests on the defendant asserting it, a motion under . . . Rule
12(c) is generally not the appropriate vehicle to mount such a
challenge.”

McQuade v. Xerox Corp., No. 5:10–CV–149, 2011 WL

344091, at *3 (E.D.N.C. Feb. 1, 2011).

It is only in the “rare

circumstances” where “all facts necessary to deciding the issue
clearly appear” on the face of the pleadings that “the [C]ourt will
reach an affirmative defense through a motion under Rule 12(c).”
Id.
When asked “[t]o enter judgment [on the pleadings] on the
basis of a plaintiff having signed a release agreement, the [C]ourt

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conducts a two-step analysis to determine (1) whether the release
agreement is valid; and (2) if it is, whether the agreement’s plain
language bars the plaintiff’s claims.”

Harris v. Ann’s House of

Nuts, No. 4:13–CV–0039, 2013 WL 5592936, at *2 (E.D.N.C. Oct 10,
2013).

Under North Carolina law, “[w]hen the language of the

contract is clear and unambiguous, construction of the agreement is
a matter of law for the [C]ourt[,] and the [C]ourt cannot look
beyond the terms of the contract to determine the intentions of the
parties.”

Piedmont Bank & Trust Co. v. Stevenson, 79 N.C. App.

236, 240, 339 S.E.2d 49, 52 (1986).2
II. Analysis
A. Validity
Justad does not dispute the authenticity of the Agreement
(see Docket Entry 16 at 3), but he does not concede the validity of
the Agreement (see id. (“Justad contends that the validity of the
Agreement may be in question.”)).

Moreover, Justad asserts that

the Court cannot reach the issue of validity on a motion for
judgment on the pleadings.

(See id. at 6 & n.1 (asserting that a

determination of the Agreement’s validity would “involve[] matters
that go beyond the pleadings”).)

Justad’s argument possesses

merit.

2

North Carolina law governs the Agreement.
Entry 9-1, ¶ 14.f.)
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(See Docket

When a plaintiff’s pleadings address a release agreement, a
court may address validity. See, e.g., Harris, 2013 WL 5592936, at
*1, *3 (observing that “[i]n his amended complaint [the plaintiff]
alleges that he signed the release agreement” and concluding that
“[t]he release agreement at issue here is valid”); McQuade, 2011 WL
344091, at *3-*4 (explaining that “[i]n her complaint, [the]
plaintiff alleges that she executed [a release]” and analyzing
validity).

The Complaint does not reference the Agreement.

generally Docket Entry 1.)

(See

Bank of America contends that Justad

cannot contest the Agreement’s validity because he accepted its
benefits

(Docket

Entry

9

at

7-8),

and,

as

a

general

rule,

acceptance of severance benefits precludes a challenge to the
validity of the severance agreement, see VF Jeanswear Ltd. P’ship
v. Molina, 320 F. Supp. 2d 412, 422 (M.D.N.C. 2004) (“If [a party]
knew the facts and circumstances of the execution of the release
and knew its provisions, and then accepted its benefits he is
thereby estopped to deny its validity.” (citing Presnell v. Liner,
218 N.C. 152, 154, 10 S.E.2d 639, 640 (1940))); see also Harris,
2013 WL 5592936, at *3 (“[A] plaintiff seeking to invalidate a
contract

because

consideration
omitted)).

of

fraud

received

or

duress

pursuant

to

must

that

first

return

contract.”

any

(footnote

Bank of America’s Answer states that it “made all

severance payments due to Plaintiff under the . . . Agreement, and
[that] Plaintiff accepted and deposited those payments into his

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account.”

(Docket Entry 9 at 7-8.)

Bank of America also maintains

that Justad “never sought to repudiate, void, or contest the . . .
Agreement.”

(Id. at 8.)

As with the Agreement, however, the Complaint does not mention
any severance payments.
America’s

(See generally Docket Entry 1.)

allegations regarding

the

Agreement’s

Bank of

validity thus

qualify as contested, thereby precluding judgment on the pleadings.
See 6 Charles Alan Wright et al., Federal Practice and Procedure
§ 1279 (3d ed. 2017) (“[S]ince no responsive pleading to an answer
is permitted, facts raised for the first time in an answer are
considered

denied,

thus

presenting

material

precluding a Rule 12(c) adjudication.”).

issues

of

fact

Because “all facts

necessary to deciding the issue” do not appear on the face of the
pleadings, the Court cannot “reach [Bank of America’s] affirmative
defense.”

McQuade, 2011 WL 344091, at *3.

For this reason alone,

Bank of America’s Motion fails.
B. Language
In addition, the Court should not conclude (at least at this
stage of the proceedings) that the language of the Agreement bars
copyright claims arising after its execution.

As it concerns the

instant case, the Agreement provides:
a. I . . . fully waive, release and forever discharge
Bank of America . . . from any manner of suits, actions,
or causes of action, including any claim for attorney’s
fees or costs, existing at the time I sign this
Agreement, whether currently known or unknown to me,
under any possible legal, equitable, contract, tort or
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statutory theory. . . .
With the exception of those
claims set forth in paragraph 3(e), . . . this General
Release includes, but is not limited to, claims arising
out of or in any way related to my employment and/or
separation from employment . . . .
d. . . . I expressly agree that the General Release will
extend and apply to all claims, injuries and damages I
may have against Bank of America or any Released Parties
at the time I sign the Agreement . . . .
e. . . . I acknowledge that the General Release does not
prohibit the following rights or claims: 1) claims that
first arise after the date I sign the Agreement . . . .
(Docket Entry 9-1, at ¶ 3.)
Bank of America argues that the language of the Agreement
precludes Justad from bringing the instant claim for two main
reasons.

First, it maintains that the plain language of the

Agreement

(in

particular,

“future-oriented”

terminology)

bars

Justad from bringing claims for infringement after execution of the
Agreement.

(See Docket Entry 17 at 1-6.)

Second, Bank of America

highlights decisions indicating an obligation for a party to
expressly reserve the right to bring future claims when he or she
knows of facts giving rise to such claims at the time of a
settlement agreement’s execution.
Justad,

meanwhile,

(See id. at 6-8.)

emphasizes

that

the

Agreement’s

plain

language provides that he retains the right to bring claims arising
out of acts postdating the Agreement.

(Docket Entry 16 at 3.)

He

asserts that, because “[e]ach act of infringement is a distinct
harm giving rise to an independent claim for relief” (id. at 4
(quoting Stone v. Williams, 970 F.2d 1043, 1049 (2d Cir. 1992))),
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and, because “Bank of America here engaged in acts of infringement
after the date of the Agreement,” the Agreement does not bar him
from bringing the instant copyright claim, at least as it pertains
to Bank of America’s post-termination conduct, id.
With respect to Bank of America’s first contention, the
Agreement arguably contains some future-oriented language.

In

particular, Paragraph 3.d provides that Justad “expressly agree[s]
that the General Release will extend and apply to all claims,
injuries and damages [he] may have against Bank of America . . . at
the time [he] sign[s] this Agreement . . . .”
¶ 3.d (emphasis added).)

(Docket Entry 9-1,

To support this point, Bank of America

relies primarily on Augustine Med., Inc. v. Progressive Dynamics,
Inc., 194 F.3d 1367 (Fed. Cir. 1999), in which Augustine Medical,
Inc. (“Augustine”) sued Progressive Dynamics, Inc. (“Progressive”)
for patent infringement.

(See, e.g., Docket Entry 17 at 3 (“The

leading case on this issue is Augustine Med., Inc. . . .”).)

In a

previous dispute, Augustine sued Progressive for unfair competition
and

misrepresentation

stemming

from

Progressive’s

sale

of

convective warming blankets. See Augustine Med., 194 F.3d at 1369.
In resolving that dispute, the two parties entered a settlement
agreement providing that
[Augustine] does hereby . . . release and forever
discharge [Progressive] from any and all manner of
action or actions . . . that [Augustine] and/or its
owners . . . have, have had, or may have against
[Progressive] upon or by reason of or relating to any

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acts, omissions or statements made by [Progressive] on
or before the date of this Settlement Agreement.
Id. at 1371 (alteration in original) (emphasis added).
Later, Augustine sued Progressive for patent infringement,
where the patents at issue also related to Progressive’s convective
warming blankets.
identical”).

Id. at 1370 (describing blankets as “materially

Progressive maintained that the settlement agreement

precluded Augustine’s patent infringement claim.

Id.

The United

States Court of Appeals for the Federal Circuit rejected the
argument that the settlement agreement only applied to claims
arising before the date of its execution, stating that
[t]he phrase ‘may have’ is necessarily future-oriented.
In the context of the Settlement Agreement, it implies a
future possibility of Augustine having a claim.
Augustine argues that the phrase ‘have, have had, or may
have’ is restricted by the phrase which appears later in
the same paragraph, ‘on or before the date of this
Settlement Agreement,’ and argues that a claim could not
have existed on or before the date of the Settlement
Agreement because the post-settlement patent infringement
had not yet occurred. We find this interpretation to be
contrary to the clear language of the agreement. . . .
Id. at 1371 (emphasis in original).

The court further elaborated

that, considered in the context of the surrounding language,
Augustine has discharged its ability to sue Progressive
not for claims that existed on or before the date of the
Settlement Agreement, but for claims related to any
actions taken by Progressive on or before the date of the
Settlement Agreement. Prior to and on the date of the
Settlement Agreement, as well as after the date of the
Settlement Agreement, Progressive was producing and
marketing the convecting warming blankets at issue.
Augustine’s claims for patent infringement then are
undeniably related to Progressive’s production and

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marketing of the goods at issue on or before the date of
the Settlement Agreement.
Id. (emphasis in original).

Here, by contrast, the Agreement only

discharges claims existing on or before the date of execution (not
claims related to any actions by Bank of America taken on or before
the date of the Agreement).

Bank of America’s future-oriented

language argument based on the Augustine Med. decision thus lacks
merit.3
Bank of America’s remaining argument that Justad should have
expressly reserved his claim similarly fails. As noted previously,
the Agreement states that it does not bar claims arising after the
date of execution, such that Justad bore no obligation to expressly
reserve

a

post-execution

copyright

infringement

claim.

Furthermore, in Augustine Med.,

3

Bank of America emphasizes that the Agreement also contains
some “related to” language.
(See Docket Entry 17 at 5 (citing
Docket Entry 9-1, ¶ 3.a.).) That language, however, does not link
claims arising after the date of the Agreement to actions occurring
before the date of the Agreement in the same fashion as did the
“related to” language at issue in Augustine Med.
Notably, the
sentence at issue in the Agreement refers to claims “related to
[Justad’s] employment and/or separation from employment” (Docket
Entry 9-1, ¶ 3.a.), not the broader phrasing from Augustine Med. of
claims “related to any actions taken by [the defendant] on or
before the date of the [s]ettlement [a]greement,” Augustine Med.,
194 F.3d at 1369.
Further, the “employment” and “separation”
mentioned in the Agreement concerns Justad’s second stint with Bank
of America, whereas the alleged misappropriation of the “Host
Robot” program occurred in connection with Justad’s first stint
with Bank of America. Moreover, the “related to” language in the
Agreement falls within the same sentence that notes “the exception
of those claims set forth in paragraph 3(e)” (Docket Entry 9-1,
¶ 3.a.), which includes “claims that arise after the date [Justad]
sign[ed] the Agreement” (id., ¶ 3.e.).
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[d]uring
the
negotiation
of
the
Settlement
Agreement . . . Progressive sought a license from
Augustine.
According to Augustine, it informed
Progressive that it would not agree to refrain from suing
Progressive in the future for patent infringement
occurring after the date of the Settlement Agreement.
. . . Augustine requested that the Settlement Agreement
be revised to specifically exclude claims of patent
infringement, but Progressive refused, and Augustine
signed the Settlement Agreement as drafted.
Id. at 1369.

Against that backdrop, the Federal Circuit concluded

that Augustine bore an obligation to expressly reserve future
patent infringement claims from the expansive “conduct”-related
settlement agreement.

See id. at 1373.

Here, by contrast, the Agreement bears the hallmarks of a form
document drafted by Bank of America. See generally McGhee v. Aetna
Life Ins. Co., 63 F. Supp. 3d 572, 578 (W.D.N.C. 2014) (quoting
sections of a Bank of America “General Release & Program Agreement”
identical to the Agreement in this case).

If so, the Court must

construe the ambiguous language at issue against Bank of America.
See, e.g., Novacare Orthotics & Prosthetics E., Inc. v. Speelman,
137 N.C. App. 471, 476, 528 S.E.2d 918, 921 (2000) (“[W]hen an
ambiguity is present in a written instrument, the court is to
construe the ambiguity against the drafter–the party responsible
for choosing the questionable language.”).

Thus, at least at this

stage,4 Bank of America’s reservation argument fails as to postexecution copyright claims.

4

Augustine Med. arose in the summary judgment (not judgment
on the pleadings) context. See Augustine Med., 194 F.3d at 1369.
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CONCLUSION
The Court cannot resolve Bank of America’s affirmative defense
based on the Agreement on the face of the pleadings. The pleadings
do not permit a determination of the Agreement’s validity, and the
plain language of the Agreement (at least if construed against Bank
of America as the drafter) does not bar Justad’s claim regarding
Bank of America’s post-execution conduct.
IT IS THEREFORE RECOMMENDED that Bank of America’s Motion for
Judgment on the Pleadings be denied.
This 9th day of August, 2017.
/s/ L. Patrick Auld
L. Patrick Auld
United States Magistrate Judge

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