Aithent, Inc. v. Nat'l Ass'n of Ins. Comm'rs
| Decision Date | 24 May 2013 |
| Docket Number | Case No. 11-00173-CV-W-GAF |
| Parties | AITHENT, INC., Plaintiff, v. THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS, Defendant. |
| Court | U.S. District Court — Western District of Missouri |
Presently before the Court is Plaintiff Aithent, Inc.'s ("Plaintiff") Motion for Summary Judgment as to Counts I through IV of its Complaint (Doc. # 93) pursuant to Federal Rule of Civil Procedure 56.1 (Doc. # 90). Defendant The National Association of Insurance Commissioners' ("Defendant") opposes. (Doc. # 115). Also before the Court are Defendant's Motions for Summary Judgment as to Counts I, II, III, and V, pursuant to Federal Rule of Civil Procedure 56. (Docs. ## 84, 86). Plaintiff opposes. (Docs. ## 111, 113). For the reasons set forth below, Plaintiff's Motion is DENIED and Defendant's Motions are GRANTED in part and DENIED in part.
DISCUSSION
Plaintiff is a technology company, incorporated in New York, that develops and implements software systems. (Complaint ¶¶ 1, 12). Defendant is an association of insurance regulatory officials from all fifty (50) states, including the District of Columbia and five (5) U.S. territories, incorporated in Delaware. (Id. ¶¶ 3-4). This action involves a License Agreement between the parties to develop a software system to assist state insurance departments
State insurance departments perform insurance consumer services and regulatory functions. (See August 19, 2002, Memorandum ("8/19/02 Mem."), 1). The departments license insurance agents and brokers, called producers, who sell insurance in their state. (Defendant's Statement of Facts as to Counts I, II, and V ("DSoF I") ¶ 15). The act of licensing a producer in a state is called a producer licensing transaction. (Id.). Producer licensing transactions include appointments and appointment renewals, terminations, resident licensing and renewals, non-resident licensing and renewals, and continuing education transactions. (Id. ¶ 16). State insurance departments also handle other regulatory functions, such as consumer complaints, regulatory actions, fraud investigations, examinations, rate and form filings, and revenue management. (See July 2001 Proposal, 3; November 10, 2006, Historical Overview and Proposed Strategies ("2006 SBS Overview"), 5-9).
A state insurance department either licenses, purchases, or develops its computer system for its regulatory and licensing functions. (8/19/02 Mem., 3). There are two (2) types of systems used to process a state insurance department's licensing functions: a front-end system and a back-office system. (DSoF I ¶¶ 17, 50). A front-end system is "a piece of technology that collects information from one end-user and transmits it in a form compatible with a separatesystem used by different end-users." (Id. ¶ 50). A back-office system handles "producer and company information to ensure compliance with the regulations state insurance departments are charged to enforce." (Id. ¶ 17). There are three (3) types of back-office systems: (1) state-developed; (2) Sircon for States ("Sircon"); and (3) State Based Systems ("SBS"). (Id. ¶¶ 33, 51). The front-end and back-office systems operate together: the front-end system accepts transactions, such as producer licensing transactions, from insurance producers and companies and, thereafter, transmits the information to a state insurance department's back-office system. (Id. ¶ 51).
Plaintiff developed the Licensing Information Online Network ("LION") in 1996 for the New York State Insurance Department ("NYSID"). (License Agreement § 1(d); Plaintiff's Statement of Facts as to Counts I through IV ("PSoF") ¶ 1). NYSID used LION to manage its regulatory requirements, including the licensing of producers to sell insurance in New York. (Id. ¶ 2). Initially, LION was designed only for back-office use in state insurance departments. . Prior to 2001, Plaintiff enhanced LION into "LION Web" to have a front-end system to be used in conjunction with LION's back-office system. (Id. ¶ 6). During 1999 and 2000, Plaintiff began developing the Licensing Environment Online ("LEO"), and by 2001 it began marketing its first version of LEO. (Id. ¶ 7). LEO was "a proprietary web-based system developed by [Plaintiff] to electronically accept, process and manage state licensing and regulatory information." (License Agreement § 1(c); DSoF I ¶ 81).
"State laws generally require that, before an insurance company may sell or amend any policy . . . in a state, the form of that policy must be submitted to . . . that state's insurance department." (DSoF I ¶ 70). Many states also require rates associated with insurance policies and products be reviewed and approved by the state's insurance department before being offered to the public. (Id. ¶ 71). In the mid 1990s, Defendant developed a web-based system called the System for Electronic Rate and Form Filing ("SERFF") to allow insurance companies to send rate and form submissions electronically to state insurance departments. (Id. ¶¶ 67, 73). "By the end of 2001 . . . [Defendant] had licensed SERFF to all 50 states, and it had been used for years to handle rate and form electronic transactions." (Id. ¶ 75). SERFF does not handle any producer licensing transactions. (Id. ¶¶ 68, 69). Defendant eventually offered an SBS Rate and Form Module that integrated SERFF. (See April 2003, NAIC/Aithent Meeting Agenda ("4/2003 Meeting"), Bates No. NAI01236; SBS Rate and Form Flier; 2008 PowerPoint, 6).
Defendant formed the National Insurance Producer Registry ("NIPR") in 1996 "to further the regulatory activities of [Defendant's] members as it related to producer licensing." (DSoF I ¶ 38). NIPR is a non-profit affiliate of Defendant incorporated in Missouri. (Id. ¶¶ 36, 37). In the 1990s, Defendant developed an electronic network called the Producer Information Network ("PIN"), which transmitted data about producers to and from the states. (PSoF ¶ 12). After NIPR was formed, NIPR developed an enhanced version of PIN, called Gateway, to promote uniformity and streamline producer licensing activities. (Id.; DSoF I ¶¶ 43, 44). Defendant licensed to NIPR the intellectual property that was the foundation for Gateway and provided NIPR financial support, services, and equipment to develop Gateway. (PSoF ¶ 15).
Gateway has two (2) sets of applications: "NIPR Gateway" applications and "NAIC Gateway" applications. (2006 Mutual Assignment of Rights ("2006 NIPR/NAIC Assignment"), Exhibits A and B). Defendant owned the NAIC Gateway applications and NIPR owned the NIPR applications. (2006 NIPR/NAIC Assignment §§ 1(B) and 2(B)).
Initially, Gateway had limited capabilities. By February 2002, Gateway only transmitted appointments, terminations, and non-resident licenses. . Today, Gateway is a front-end system for all producer licensing transactions. (DSoF I ¶ 50). To use Gateway, (Id. ¶ 52). Gateway transmitted transactions to any back-office system, regardless of the type. (Id. ¶¶ 51-52). Gateway did not perform any back-office system processing that back-office systems, like SBS, did for state insurance departments. (Id. ¶ 133).
Defendant desired to develop SBS to be "available for any state to use for all their internal processing for the department of insurance" and "provide one uniform system that could be used to complete the majority of any states regulatory tasks." (July 2001 Proposal, 3; 8/19/02 Mem., 3). Defendant proposed offering state insurance departments different "SBS Applications" or "Modules." (State Based System Project Summary ("SBS Summary"), 1); July 2001 Proposal, 3). The proposed Modules included Producer Licensing, Company Admissions and Tracking, Continuing Education, Consumer Services, Investigations and Fraud, Revenue Management, Rates and Forms Filings, Examinations Tracking, Financial Analysis, and SystemSecurity and Utilities. (July 2001 Proposal, 3). The first Module Defendant developed was the Producer Licensing Module. (See SBS Summary; July 2001 Proposal; June 14, 2001, Memorandum ("6/14/01 Mem.")). Originally, Defendant envisioned that this Module would be built to interface with Gateway. (Id. at 4).
Beginning in July 2001, Defendant researched ways to develop SBS. (DSoF I ¶ 79). Defendant had conversations with three (3) "vendors," including Sircon, Bisys, and Plaintiff, about partnering with Defendant to create SBS from established software in lieu of developing SBS "in-house."3 (October 3, 2001, Memorandum ("10/3/11 Mem."), 1). Plaintiff's system had the most parallels to what Defendant envisioned for SBS. (Id. at 2). Defendant opted to work with Plaintiff and use LEO as the foundation for SBS. (DSoF I ¶ 79).
On July 15, 2002, Plaintiff and Defendant entered into a License Agreement whereby Plaintiff exclusively licensed LEO to Defendant. (Id. ¶¶ 5, 80; License Agreement, Recitals). The License Agreement provided:
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