A Wis. Corp.. v. Emigrant Sav. Bank

Decision Date30 August 2010
Docket NumberNos. 09-3007, 09-3996.,s. 09-3007, 09-3996.
Citation619 F.3d 748
PartiesMETAVANTE CORPORATION, a Wisconsin Corporation, Plaintiff-Appellee, v. EMIGRANT SAVINGS BANK, a New York Corporation, Defendant-Appellant.
CourtU.S. Court of Appeals — Seventh Circuit

OPINION TEXT STARTS HERE

COPYRIGHT MATERIAL OMITTED.

COPYRIGHT MATERIAL OMITTED.

COPYRIGHT MATERIAL OMITTED.

COPYRIGHT MATERIAL OMITTED.

Paul R. Garcia, Attorney, (argued), Andrew B. Bloomer, Attorney, Kirkland & Ellis LLP, Chicago, IL, for Plaintiff-Appellee.

Robert L. Begleiter, Attorney, Constantine Cannon, New York, NY, Robert F. Johnson, Attorney, Cook & Franke, Milwaukee, WI, David Boies, Attorney, (argued), Boies, Schiller & Flexner, Armonk, NY, for Defendant-Appellant.

Before RIPPLE, MANION and TINDER, Circuit Judges.

RIPPLE, Circuit Judge.

Metavante Corporation (Metavante) originally brought an action in Wisconsin state court against Emigrant Savings Bank (Emigrant) for breach of contract. The case was removed to the district court, and Emigrant counterclaimed for breach of contract and fraud. Following a bench trial, the district court entered judgment for Metavante on all claims. 1 Emigrant appealed.

While the appeal on the merits was pending, Metavante filed, in the district court, a petition for fees and costs pursuant to a fee-shifting provision of the contract. The district court granted the petition in full. We consolidated the appeal of the fee award with the appeal of the merits. For the reasons set forth in this opinion, we affirm the judgment of the district court. 2

IBACKGROUND
A.

Emigrant, founded in 1850, chose to expand its business by launching an on-line, direct bank, to be known as EmigrantDirect. Rather than develop the on-line system in-house, Emigrant decided to outsource this operation. Consequently, in 2004, it searched for a vendor to provide the on-line technology. Ted Morehouse, Emigrant's Senior Vice President of Marketing, testified that the bank's IT director, Dennis Healy, recommended Metavante, a vendor that provides electronic banking services and products to financial institutions. 3 Mr. Healy offered to have someone from Metavante call Mr. Morehouse; consequently, Barry Holst made contact with Emigrant in February 2004.

In March 2004, Mr. Holst, along with others from Metavante, visited Emigrant. The Metavante team gave a PowerPoint presentation which referred to Metavante as [t]he most complete offering of scalable, integrated solutions for financial services providers,” and noted its ninety million accounts processed and nine billion financial transactions. Ex. 1063 at EMI-0014995. 4 As a result of this presentation, Mr. Morehouse was confident that he would not have to worry about volume-related system problems. The same PowerPoint, however, listed “Application processing/account opening (workflow) as a “Related Project[ ]/Initiative[ ] of Metavante. Id. at EMI-0015002. Mr. Morehouse testified that he did not recall asking what was meant by that term, although he did acknowledge that he knew that “certain applications” were still being developed and that he “was willing to live with it because [he] thought they would be completed and in place well before we launched.” R.569 at 226. Mr. Morehouse admitted that he knew by June that on-line account creation did not “have some of the automation that we wanted.” Id. at 204. He admitted, however, that Emigrant “entered into the technology outsourcing agreement knowing that the online account creation was in a state of progress and would require further development for what Emigrant wanted.” Id. at 209.

Metavante subsequently circulated a proposal. The proposal stated, in part, that “Metavante offers a truly integrated banking system, fully scalable to large volumes, yet modular in nature. This scalable platform processes nearly 90 million accounts each and every night.” R.522 ¶ 22. According to Mr. Morehouse, the proposal's reference to existing clients that fit the direct bank profile and its general use of the present tense together indicated that Metavante's product already existed. The proposal also stated that [o]n occasion Metavante has made the determination that purchasing niche products with advanced capabilities made more sense than developing these systems. However, even in these situations Metavante has made it a top priority to build integration into these products so that customers on the Metavante core applications can continue to enjoy the integration they expect.” Ex. 1067 at EMI-0003078-79. Metavante offered as a reference another of its clients, Capital One, and Emigrant spoke to Capital One.

Over the next several months, Metavante and Emigrant negotiated a Technology Outsourcing Agreement (“the Agreement”). It was signed in August 2004. At some point in negotiations, Emigrant requested from Metavante a flow chart describing how the system worked so that the information could be shared easily within Emigrant. Metavante provided this flow chart in July; it did not specify that its subcontractor, Teknowledge, would control one segment of the system. Mr. Holst never said anything to Mr. Morehouse “to disabuse [him] of [the] impression” that Metavante would not outsource. R.569 at 191. According to Emigrant's First Vice President John McNally, Emigrant learned in early October that Metavante outsourced part of its application to Teknowledge. R.570 at 122. According to a document from Emigrant's files, however, Emigrant knew about Teknowledge on September 14; the document in question stated that: “The customer validation pages and processing will be done through the Metavante 3rd party partner application, Teknowledge.” Ex. 1134 at EMI-0025523; see also R.569 at 251-52.

B.

The Agreement required Metavante to perform certain services. These included “Electronic Banking Services,” which enabled users “to access, receive, collect, concentrate, and/or report data and/or initiate transactions.” PX 1, Agreement § 4.5. 5 Another service was “ACH Services,” by which funds would be transferred. Agreement § 4.6. Section 3.1 of the Agreement, entitled “Performance by Subcontractors,” provided in part that [c]ustomer understands and agrees that the actual performance of the Services may be made by Metavante, one or more Affiliates of Metavante, or subcontractors of any of the foregoing Entities.”

The Agreement contained a performance warranty that required Metavante to provide “all Services in a commercially reasonable manner.” Agreement § 6.1.

The Agreement also provided that the availability of several of Metavante's services was to be evaluated according to service levels; for example, a service level of 98% availability meant that a given service had to be available 98% of the time. Anything covered by a service level was exempt from the performance warranty. Emigrant does not dispute the service levels; rather, its argument is that service levels measured only system availability. Emigrant contends that defects not resulting in outages of the system were not reflected in the service levels and were subject to the performance warranty.

The Agreement also contained a Termination Clause. Agreement § 8.2. This clause provided that a party may terminate the Agreement for cause, but also specified that the parties enjoyed broad rights to cure. Even if a default was not capable of cure within thirty days, the defaulting party could avoid termination by implementing a plan for cure. Moreover, the Agreement provided that failure to perform services as required could be cured by re-performance.

If Emigrant terminated for convenience, rather than for cause, the Agreement required that Emigrant pay a termination fee. The Agreement provided for a reduced termination fee if Emigrant “migrate[d] its data processing for direct banking to an in-house solution.” Agreement, Termination Fee Schedule, § 1(b). The Agreement also contained a fee-shifting provision. Agreement § 17.8. 6

C.

EmigrantDirect launched in January 2005. The Online Account Creation service allowed consumers to open accounts, and was developed by Teknowledge, Metavante's subcontractor. The Consumer Electronic Banking service allowed consumers to manage accounts.

The EmigrantDirect system launched in January 2005 did not contain a “Good Funds Model.” This Model checks the account balance against the desired transaction amount to ensure that the account contains sufficient funds to carry out the transaction. Without such a model, a customer can transfer more money than is available in his account. Eileen Lyon, Emigrant's First Vice President of Marketing, testified that the subject of a Good Funds Model never had been discussed during the negotiations. Mr. Morehouse testified that he was comfortable launching without a Good Funds Model because he had been assured that Emigrant could work around the problem manually. R.569 at 272-73. A year before the contract was terminated, Metavante put in place a Good Funds Model at Emigrant's request.

EmigrantDirect had other flaws. According to Kimberly Romano, EmigrantDirect's Director of Operations, customers frequently received error messages and were unable to complete on-line applications, resulting in many calls to Emigrant's call center. Emigrant undertook mitigation measures, including sending paper applications to customers. The number of customer service representatives was increased from [s]ix or eight” to “in the 50s.” R.571 at 94. Emigrant also noticed that some transactions failed to process. Id. at 86-87. Emigrant's expert in computer science and software assurance, Roger Nebel, testified that Metavante failed to deliver its services in a commercially reasonable manner because its system was poorly integrated, poorly tested, poorly planned, not scalable and experienced degraded service. Ms. Romano testified that she “had never seen anything like this. The fact that things were identified, supposedly cured and they were recurring, just added...

To continue reading

Request your trial
380 cases
  • In re Dealer Mgmt. Sys. Antitrust Litig.
    • United States
    • U.S. District Court — Northern District of Illinois
    • 21 Enero 2022
    ...expert's testimony is not unreliable simply because it is founded on his experience rather than on data[.]" Metavante Corp. v. Emigrant Sav. Bank , 619 F.3d 748, 761 (7th Cir. 2010) ; see also Viamedia, Inc. v. Comcast Corp. , 951 F.3d 429, 484 (7th Cir. 2020) (district court erred by exclu......
  • United States v. Protho
    • United States
    • U.S. Court of Appeals — Seventh Circuit
    • 20 Julio 2022
    ...review unnecessary for expert's experience-based testimony on online strategies used by child predators); Metavante Corp. v. Emigrant Sav. Bank , 619 F.3d 748, 761–62 (7th Cir. 2010) ("An expert's testimony is not unreliable simply because it is founded on his experience rather than on data......
  • Uncommon, LLC v. Spigen, Inc.
    • United States
    • U.S. District Court — Northern District of Illinois
    • 26 Marzo 2018
    ...(7th Cir. 2000). The expert must explain his or her methodology and cannot "simply assert a bottom line." Metavante Corp. v. Emigrant Sav. Bank , 619 F.3d 748, 761 (7th Cir. 2010). Finally, the expert "may be qualified by knowledge, skill, experience, training, or education." See Smith , 21......
  • Rekhter v. State
    • United States
    • Washington Supreme Court
    • 3 Abril 2014
    ...to breach the implied duty of good faith even while fulfilling all of the terms of the written contract.” Metavante Corp. v. Emigrant Sav. Bank, 619 F.3d 748, 766 (7th Cir.2010), cert. denied,––– U.S. ––––, 131 S.Ct. 1784, 179 L.Ed.2d 653 (2011). Similarly, the California Supreme Court obse......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT