ACI Worldwide Corp. v. Baldwin Hackett & Meeks, Inc.
| Decision Date | 09 June 2017 |
| Docket Number | No. S-16-358.,S-16-358. |
| Citation | 896 N.W.2d 156,296 Neb. 818 |
| Parties | ACI WORLDWIDE CORP., a Nebraska corporation, appellant, v. BALDWIN HACKETT & MEEKS, INC., et al., appellees. |
| Court | Nebraska Supreme Court |
Gregory C. Scaglione, Patrice D. Ott, and John V. Matson, of Koley Jessen, P.C., L.L.O., Omaha, and Eric J. Magnuson, Ryan W. Marth, and Christopher P. Sullivan, of Robins Kaplan, L.L.P., for appellant.
Michael F. Coyle, Timothy J. Thalken, and Robert W. Futhey, of Fraser Stryker, P.C., L.L.O., Omaha, for appellees.
In September 2012, ACI Worldwide Corp. (ACI) sued Baldwin Hackett & Meeks, Inc. (BHMI); its cofounders; and other BHMI principals. The primary claims involved in this case are ACI's claim that BHMI misappropriated its trade secrets and BHMI's counterclaims that ACI tortiously interfered with a business relationship, breached a nondisclosure agreement, and violated provisions of Nebraska's unlawful restraint of trade statutes (referred to as the "Junkin Act").1 In a 2014 trial, a jury found that ACI had not met its burden of proof with respect to its misappropriation claim. In a 2015 trial, a jury found in favor of BHMI on all of its counterclaims and awarded BHMI $43,806,362.70. The district court awarded BHMI $2,732,962.50 in attorney fees and $7,657.93 in costs.
ACI filed motions to vacate the 2014 and 2015 judgments, reopen the evidence, and grant ACI a new trial on the basis that it had discovered new evidence. This "new" evidence was trade secret information, which the district court had previously ruled could not be discovered until ACI conducted more non-trade-secret discovery to support its claims. However, ACI obtained the evidence in a federal action against one of BHMI's customers. The district court overruled ACI's posttrial motions, and ACI appeals.
ACI and BHMI are competitors in the business of developing and licensing electronic payment processing software, including "middleware." Middleware is computer software that enables other software applications to communicate with one another by routing messages between them. Two different middleware programs are involved in this case: (1) ACI's middleware, "NET24-XPNET" (XPNET), and (2) BHMI's middleware, "Concourse—TMS" (TMS).
ACI's XPNET software has been the primary middleware in the electronic payments market for the past 40 years, and it generates approximately $52 million in annual revenue for ACI. Of the approximately 350 worldwide customers in the market, approximately 300 customers use XPNET. One of those customers is MasterCard International, LLC (MasterCard).
By itself, XPNET does not do anything. In order for a customer like MasterCard to use XPNET, it must purchase or develop a program to "bolt onto" XPNET. To "bolt onto" XPNET, MasterCard purchased a program known as the MasterCard Debit Switch or MDS.
In a March 2008 letter, ACI announced to MasterCard and other customers that it intended to transition all customers from "BASE24," which XPNET is a part of, and which runs exclusively on Hewlett Packard (HP) NonStop hardware, to "BASE24-eps," which would run on IBM hardware. In the letter, ACI advised its customers that it would no longer provide routine enhancements or support for BASE24.
After the March 2008 announcement, ACI's customers became concerned that they would have to license all new software and purchase new IBM hardware, resulting in the loss of their significant investment in the HP NonStop hardware. MasterCard representatives met with HP representatives to discuss the future of HP hardware. When the topic of middleware came up, HP recommended that MasterCard take a look at BHMI, who had previously worked for HP on a project.
In April 2008, a sales representative from HP contacted BHMI to see if BHMI would be interested in developing an XPNET replacement for MasterCard. BHMI indicated that it was interested, and in mid-April, HP, MasterCard, and BHMI had a preliminary conference call to discuss BHMI's capabilities and MasterCard's requirements and interest in replacing XPNET.
In April 2009, MasterCard entered into a contract with BHMI to develop the XPNET replacement. MasterCard wanted a middleware that could be used not only on HP NonStop hardware, but on other platforms as well. BHMI developed TMS, which was designed to run on all major types of hardware.
In June 2010, MasterCard sent ACI a notice that it would not renew its contract for XPNET. By May or June, TMS had been delivered to MasterCard, and MasterCard was testing it by running it on various components of its network. On August 20, MasterCard accepted TMS.
In December 2010, BHMI began to market TMS and issued a press release announcing that MasterCard had replaced XPNET with TMS and that TMS would be commercially available to other HP NonStop users.
In late December 2010, ACI contacted BHMI and requested a meeting to discuss ACI's concerns that BHMI had used ACI's proprietary information to develop TMS. BHMI denied ACI's accusation and agreed to meet so long as ACI provided an agenda prior to the meeting and signed a nondisclosure agreement. ACI and BHMI exchanged at least six versions of the nondisclosure agreement before agreeing on the final version. The final version of the nondisclosure agreement (NDA) contained a provision that ACI would not utilize the confidential information of BHMI in any manner, including in a legal action against BHMI or its customers.
After the NDA was signed, BHMI met with Charles Linberg, ACI's chief technology officer, and Alan Hoss, another ACI employee, to discuss how TMS operated. At the conclusion of the meeting, Linberg and Hoss requested to see the source code and manuals for TMS. After an internal discussion, BHMI agreed to allow Linberg and Hoss to review the technical manuals for TMS.
In September 2012, ACI filed a complaint against BHMI and its officers, alleging eight causes of action: breach of contract, misappropriation of trade secrets, fraud, unjust enrichment, tortious interference with business relations and expectations, conversion, trespass to chattels, and civil conspiracy. All of these claims, except for the claim of misappropriation of trade secrets against BHMI, were dismissed through pretrial motions. To support its claim of misappropriation of trade secrets, ACI alleged in its complaint that "BHMI agreed to allow ACI representatives to conduct an examination of the operations, configurations, and application programming manuals related to [TMS]" and that "[a]s a result of the inspection, ACI found a high degree of conceptual similarity...."
BHMI countersued, alleging that ACI had (1) breached the NDA by utilizing BHMI's confidential information in a legal action against BHMI; (2) tortiously interfered with BHMI's prospective business relationships by falsely claiming that TMS was the product of infringement, which placed a cloud over TMS and prevented BHMI from marketing or licensing it; and (3) violated the Junkin Act, which is Nebraska's counterpart to the federal antitrust laws, i.e., the Sherman Act and the Clayton Act.2
In November 2012, the first hearing was held. At the hearing, BHMI asked for expedited discovery because of the impact that the litigation was having on BHMI's ability to market TMS. Counsel for ACI stated that "we certainly welcome expedited discovery."
In December 2012, before ACI had even served written discovery on BHMI, ACI filed a motion to compel BHMI to produce trade secret information, including TMS' source code and manuals. In the same motion, ACI sought a protective order for its own trade secret information. In support of its motion to compel, ACI alleged that ACI employees had reviewed TMS manuals and found a high degree of similarity between XPNET and TMS. In the motion, ACI proposed that BHMI disclose its source code and manuals to an expert hired by ACI, who would review the information and provide to ACI an opinion as to whether misappropriation had occurred. ACI would then decide whether to continue its suit, and if it did, then ACI would submit its trade secret information to an expert hired by BHMI.
After three hearings on ACI's motion, which are described below, the district court overruled ACI's motion to compel, indicating that it would consider granting a similar motion in the future, provided that ACI conducted some non-trade-secret discovery.
The first hearing on ACI's motion to compel was held in February 2013. In opposition to the motion, BHMI argued that under Nebraska case law, before ACI could gain access to BHMI's trade secrets, ACI must set forth with particularity what trade secrets of XPNET it contends BHMI misappropriated. BHMI also expressed concern that under the plan proposed by ACI, BHMI's biggest competitor, ACI's expert would have access to its most sensitive information, and that if ACI decided not to continue the suit, then ACI would never have to disclose the information contained in the expert's report, nor would there be any "checks" on what ACI did with that information. ACI argued that it had pled its misappropriation claim with sufficient particularity when it pled that TMS and XPNET were similar in conception and implementation and that it needed BHMI's source code to prove its claims.
After hearing the parties' arguments, the district court told ACI:
I want you to get what you need, but I understand completely [BHMI counsel's] need to protect his client, too, at the same time. So—these trade secret cases and confidential information cases are kind of tricky sometimes, and I understand both needs here. You can't be so handcuffed you can't prove your case; but, on the other hand, I just don't think because they get sued they have to...
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