Educ. Logistics, Inc. v. Laidlaw Transit, Inc.

• Decision Date: 08 March 2012
• Docket Number: CV 07-06-M-DWM
• Parties: EDUCATION LOGISTICS, INC., a Montana corporation and LOGISTICS MANAGEMENT, INC., a Washington corporation, Plaintiffs, v. LAIDLAW TRANSIT, INC., a Delaware corporation, Defendant.
• Court: U.S. District Court — District of Montana

EDUCATION LOGISTICS, INC., aMontana corporation and LOGISTICSMANAGEMENT, INC., a Washington corporation, Plaintiffs,

v.LAIDLAW TRANSIT, INC., a Delaware corporation, Defendant.

CV 07-06-M-DWM

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MONTANA MISSOULA DIVISION

Dated: March 8, 2012

ORDER

Education Logistics, Inc., ("Edulog") and Laidlaw Transit, Inc., both move for summary judgment. (Dkt # 195, 198). Laidlaw argues that it is entitled to summary judgment on three categories of damages claimed by Edulog: "look-up-access" damages, royalties, and lost profits. Edulog argues that it is entitled to summary judgment on Laidlaw's counterclaim that the 1992 Agreement is terminable at will. The Court grants both motions in part and denies them in part.

BACKGROUND

At the heart of this case is a 1992 contractual agreement ("Agreement")between the parties in which Laidlaw agreed to use its "best efforts" to promote Edulog's bus-routing software to its school-district customers (Section 2.3.3 of the Agreement). The Agreement also required Laidlaw to pay Edulog royalties for each bus on which the software was installed. In exchange, Edulog granted Laidlaw an exclusive license that, upon its contractual expiration, became a nonexclusive license. In its complaint, Edulog claims, among other things, that Laidlaw breached its royalty and best-efforts obligations.

Edulog also claims that Laidlaw breached the Agreement by providing "look up access" to its school-district customers. As this Court explained, Laidlaw "argues . . . the contract contemplates that the software would be loaded onto customer computers so a school district can view its bus route or bus schedule information. Laidlaw calls this limited access 'look-up access.'" (Dkt # 184). Edulog argues that Laidlaw must pay an additional licensing fee if it provides look-up access.

The Court has already addressed motions for summary judgment in this case. The Court previously determined that Edulog's claims based on conduct prior to January 11, 2003, are barred by the statute of limitations. (Dkt # 128). The Court also determined that the best-efforts provision did not survive the expiration of Laidlaw's exclusive license. (Dkt # 60). Edulog appealed those rulings to theNinth Circuit. Educ. Logistics, Inc. v. Laidlaw Transit, Inc., 390 Fed. Appx. 742, 744 (9th Cir. 2010).

The Ninth Circuit agreed that the statute of limitations applied, but it concluded that the best-efforts provision could still be enforced. Educ. Logistics, 390 Fed. Appx. at 744. The court also concluded that Edulog has submitted sufficient evidence to raise a genuine issue of material fact as to whether Laidlaw "engaged in new breaches of the contract since January 11, 2003." Id. The court, however, did not specifically identify that evidence.

On remand, this Court issued a new scheduling order, setting the discovery deadline for November 9, 2011 and the motions deadline for December 9, 2011. (Dkt # 186). The jury trial is scheduled for July 9, 2012. (Dkt # 250). Laidlaw and Edulog both timely filed their motions for summary judgment on November 18, 2011. (Dkt # 195, 198).

SUMMARY JUDGMENT STANDARD

The Court shall grant summary judgment if the moving party shows there is no genuine dispute as to any material fact and it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). In In re Oracle Corp. Securities Litigation, the Ninth Circuit comprehensively discussed the summary judgment standard:

The moving party initially bears the burden of proving the absence of a

genuine issue of material fact. Where the non-moving party bears the burden of proof at trial, the moving party need only prove that there is an absence of evidence to support the non-moving party's case. Where the moving party meets that burden, the burden then shifts to the non-moving party to designate specific facts demonstrating the existence of genuine issues for trial. This burden is not a light one. The non-moving party must show more than the mere existence of a scintilla of evidence. The non-moving party must do more than show there is some "metaphysical doubt" as to the material facts at issue. In fact, the non-moving party must come forth with evidence from which a jury could reasonably render a verdict in the non-moving party's favor. In determining whether a jury could reasonably render a verdict in the non-moving party's favor, all justifiable inferences are to be drawn in its favor.

627 F.3d 376, 387 (9th Cir. 2010).

ANALYSIS

I. Laidlaw's motion for summary judgment

Laidlaw argues that it is entitled to summary judgment on three categories of damages claimed by Edulog: look-up-access damages, lost royalties, and lost profits. The Court grants summary judgment in favor of Laidlaw as to lost profits but denies summary judgment as to look-up-access damages and lost royalties.

A. Look-up-access damages

Laidlaw claims that it is entitled to summary judgment on all, or nearly all, of the look-up-access damages proposed by Edulog's expert, Neil Beaton. Laidlaw bases its claim on three arguments: (1) many of the look-up-access damages arebarred by the four-year statute of limitation, (2) 12 of the districts never received look-up access, and (3) Edulog has not provided evidence of damages for breach of contract as to the look-up-access issue. Each of Laidlaw's arguments fails.

1. Look-up-access damages and the statute of limitations

Laidlaw claims that, given the statute of limitations, it is entitled to summary judgement on Edulog's look-up-access claim in 23 instances where it first provided a district with look-up access prior to January 11, 2003, and purportedly provided the district with software updates after that date. There are genuine issues of material fact that preclude summary judgment.

Section 4.7.3 of the Agreement requires Laidlaw to pay a license fee "for any installation with a Laidlaw Customer where the Laidlaw Customer requires its own ownership of the software license." (Emphasis added). Edulog argues that software updates are installations and that Laidlaw breached Section 4.7.3 each time it updated a school district's look-up access after January 11, 2003. Laidlaw, on the other hand, claims that software updates are not installations. Under Laidlaw's theory, if it provided initial access prior to the statutory period—January 11, 2003—then it cannot be liable for updates that it provided after that date.

The Court has already determined that there are genuine issues of materialfact as to whether Laidlaw's provision of look-up access (including the initial installation if there was one) is a breach of the Agreement. See (dkt # 184). The Court concluded that the parties' intent and the Agreement's fee structure are ambiguous. The same is true with respect to the alleged updates. The Court previously noted, for example, that the fees under Section 4.7.3 are substantial and might contemplate extensive use—e.g., covering both the initial software installation that allows look-up access, as well as subsequent software updates. If that is the case, then an update might not be a separate "installation" under Section 4.7.3 that would give rise to a separate breach of the Agreement. See Ford. v. Intl. Harvester Co., 399 F.2d 749, 752 (9th Cir. 1968) (holding that "natural and ordinary consequences of the initial wrong" are a "continuing breach" and do not constitute a separate breach). But, depending on the parties' intent, the opposite might be true, too.

The bottom line is that the Agreement and the parties' intent regarding lookup access is ambiguous. If this is true with respect to any initial installation, then it is certainly true with respect to subsequent updates. Given this ambiguity, there is a genuine issue of fact that the jury must resolve. Mary J. Baker Revocable Trust v. Cenex Harvest Sts., Coops., Inc., 164 P.3d 851, 866 (Mont. 2007) (holding that when a court determines a contractual ambiguity exists, "the evidence is presentedto the jury so that it may determine, on the basis of the written contract, as explained or supplemented by the extrinsic evidence, which of two or more meanings the parties intended." (citing Richard A. Lord, Williston on Contracts vol. 11, § 33:39, at 815-16 (4th ed., West 1999))).

Laidlaw alternatively claims that it is entitled to summary judgment for the 23 instances at issue because Edulog's damages expert—Mr. Beaton—merely assumed that the 23 school districts received updates after January 11, 2003. There is no evidence, Laidlaw claims, that those districts actually received the updates. Laidlaw itself, though, highlights a genuine issue of material fact. It acknowledges that Mr. Beaton contends that a spokesperson from one school district—Leslie Daniel—represented that she received updates after January 11, 2003. But, as Laidlaw also observes: "In her deposition . . . Ms. Daniel merely testified that she received updates and upgrades in unspecified years beginning in the 1990s. She did not testify that she ever received upgrades after January 11, 2003." Id.

Ms. Daniel's school is perhaps just one example. Edulog claims that Laidlaw, by its own admission: (1) provided look up access to several school districts after 2003 and (2) provided each of those schools with any software updates it received (33 in total after 2003). Edulog's Statement of Genuine Issues 60-65 (dkt # 233). Given the material factual dispute, Laidlaw is not entitled tosummary judgment on this issue.

2. Receipt of look up access

Laidlaw also claims it is entitled to summary judgment on Edulog's lookup-access claim as to 12 districts because there is no evidence that Laidlaw ever provided those districts with look up access. Edulog, on the other hand, claims there is a genuine issue of material fact as to whether Laidlaw provided look-up access to those 12 districts. In support of its position, Edulog points to the deposition of Bill Swendsen, a former Laidlaw employee. Mr. Swendson discussed each...