Nowcom v. Dquifax Credit Information Services, Inc., B209781 (Cal. App. 10/28/2009)

Decision Date28 October 2009
Docket NumberB209781
PartiesNOWCOM CORPORATION, Plaintiff and Appellant, v. EQUIFAX CREDIT INFORMATION SERVICES, INC., et al. Defendants and Respondents.
CourtCalifornia Court of Appeals Court of Appeals

Appeal from a judgment of the Superior Court of Los Angeles County, No. BC361149, Richard L. Fruin, Jr., Judge. Affirmed.

Barger & Wolen, John C. Holmes, Richard B. Hopkins II, and James C. Castle for Plaintiff and Appellant.

Orrick, Herrington & Sutcliffe, William A. Molinski and Frank D. Rorie for Defendants and Respondents.


Plaintiff and appellant Nowcom Corporation (Nowcom) appeals from a trial court order awarding summary judgment to defendants and respondents Equifax Credit Information Services, Inc. and Equifax Information Services, LLC (Equifax). Nowcom contends that the trial court erred in finding that Equifax had the right to terminate the parties' agreement.

We affirm.

The Parties

Equifax is one of three national repositories of credit information in the United States. It provides its information, in the form of credit reports and services, to individual consumers, as well as to a variety of business and credit grantors that require regular access to credit information.

Equifax is a dual distributor of credit information to auto dealers: (1) It sells credit information directly to auto dealers; and (2) it sells information to auto dealers through resellers.

Nowcom provides Web-based information services to auto dealers, including the provision of credit reports. In this capacity, it resells credit information to auto dealers across the country.

The Parties' Agreement

On July 20, 2001, Equifax and Nowcom entered into an agreement for resale of information services (the agreement). Under the terms of the agreement, Equifax charged Nowcom a competitive rate for credit information based on a volume-tiered pricing scheme.

Negotiation of the Agreement and Relevant Sections of the Agreement

The agreement was negotiated primarily by Rufus Hankey (Hankey) on behalf of Nowcom and Dennis Mohagen on behalf of Equifax. Equifax supplied the initial version of the agreement, and Nowcom made revisions, including changes to paragraph 7.1, which governs the term of the agreement.

Paragraph 7.1 originally provided: "This Agreement . . . will continue for an initial term of one (1) year and shall automatically renew for successive one (1) year periods unless terminated by either party in writing at least ninety (90) days in advance of the then current term." This provision was unacceptable to Nowcom because Nowcom did not want a reseller agreement that would permit Equifax to arbitrarily cut Nowcom off from Equifax consumer credit reports; in other words, Nowcom did not want an agreement that allowed Equifax to terminate the agreement for any reason in any given year. Equifax informed Nowcom that it would not agree to change the termination provisions. It did, however, assure Hankey that Equifax's business model was not to have resellers build a dealer network and then shut down the reseller.

Ultimately, Nowcom proposed the following modification to paragraph 7.1: "This Agreement . . . will continue for an initial term of one (1) year and shall automatically renew for successive one (1) year periods unless terminated by either party, in writing, in the event of a material breach of this Agreement by the other party, after giving the breaching party a thirty (30) day period to cure such breach." Equifax accepted this modification. However, Nowcom never informed Equifax that it thought that this change would lock Equifax into an indefinite or perpetual term contract (that could only be terminated because of an uncured material breach or other condition of termination).

The agreement also provides, at paragraph 7.2: "This Agreement will terminate (a) in the event that Equifax or [Nowcom] ceases to conduct business in a normal course, becomes insolvent, makes a general assignment for the benefit of creditors, suffers or permits the appointment of a receiver for its business or assets, or avails itself of, or becomes subject to, any proceeding under the Federal Bankruptcy Code of 1978, as amended, or any similar state insolvency or bankruptcy statutes (each, an `Insolvency Event'), and the other party gives written notice of termination to the party that is subject to the Insolvency Event following that event; or (b) as otherwise provided in this Agreement. In addition, if either party materially breaches this Agreement, the nonbreaching party may terminate this Agreement after providing written notice of the breach to the breaching party with thirty (30) days to cure. Equifax may, in its own discretion, suspend services during any cure period. Either party, by written notice to the other party, may immediately terminate this Agreement or suspend any services if based on a reasonable belief that the other party has violated or is violating the FRCA, the ECOA, any of the state law counterparts to the FCRA or ECOA, or any other applicable law or regulation."

Based upon paragraphs 7.1 and 7.2, Nowcom understood that the agreement would automatically renew each year and continue on a long-term basis so long as neither party breached the agreement and the conditions for termination set forth in paragraph 7.2 did not exist. Nowcom never informed Equifax of this interpretation of the agreement.

Paragraph 17 of the agreement contains a choice of law provision. "This Agreement will be governed by and construed in accordance with the laws of the State of Georgia, without regard to the principles of conflicts of law."

Finally, paragraph 23 of the agreement, titled "ENTIRE AGREEMENT," provides: "This Agreement, including exhibits and attachments, constitutes the entire Agreement between the parties with respect to the subject matter hereof and supersedes and cancels any and all prior contemporaneous agreements, understandings, and commitments between the parties relating to its subject matter."

The Agreement's Initial Terms and Four Consecutive Renewal Terms

The initial term of the agreement lasted one year and ran from July 20, 2001, through July 19, 2002. Thereafter, the agreement automatically renewed for four consecutive renewal terms. Neither Equifax nor Nowcom voiced any opposition or withheld its consent to these renewals of the agreement.

Efforts to Negotiate a New Agreement

In early 2006, Equifax attempted to negotiate a new agreement with Nowcom for the provision of Equifax credit information. Specifically, Equifax sought to adjust Nowcom's pricing so that it would be consistent with the pricing that Equifax was charging other resellers for Equifax credit information. In April 2006, Equifax presented Nowcom with a new agreement for its review and signature. Nowcom refused to sign.

Termination of the Agreement

On June 26, 2006, after months of trying to negotiate a new agreement with Nowcom, Equifax notified Nowcom that it was terminating the agreement effective July 20, 2006, at the conclusion of the then current term. While Equifax wanted the parties' relationship to continue, Nowcom's refusal to accept a new agreement with pricing that was consistent with what Equifax was charging other resellers left Equifax with no choice but to terminate.

Continuing Efforts to Negotiate a New Agreement

After Equifax gave notice that it was terminating the agreement, Nowcom expressed a desire to continue its business relationship with Equifax. As an accommodation to Nowcom, Equifax agreed to postpone the termination of the agreement to give the parties additional time to negotiate. While communications were exchanged and the parties attended at least one meeting, ultimately the parties were unable to come to a consensus on terms.

The 2006 Agreement

On October 13, 2006, Equifax notified Nowcom that it would no longer delay in terminating the agreement. Equifax sent Nowcom a new broker agreement for resale of Equifax credit information (the 2006 agreement). It advised Nowcom that the continued provision of credit information to Nowcom after October 20, 2006, would be deemed acceptance of the 2006 agreement.

Nowcom did in fact continue to access Equifax credit information after October 20, 2006, and Nowcom paid for this information.

Nowcom Initiates This Action

On October 31, 2006, Nowcom filed its original complaint against Equifax.

The operative pleading is the second amended complaint, which sets forth the following causes of action: two for declaratory relief, one for injunctive relief, one for interference with contractual relations, one for interference with prospective economic advantage, and one for promissory estoppel. The gravamen of the second amended complaint is that Equifax did not have the authority to terminate the agreement.

The Parties' Motion for Summary Judgment

On February 21, 2008, Equifax moved for summary judgment and/or summary adjudication of issues. It argued that pursuant to Georgia law, Equifax was allowed to terminate the agreement because mutual assent was required for the agreement to renew; thus, Equifax was within its rights to terminate the agreement on its anniversary date.

At the same time, Nowcom filed a cross-motion for summary adjudication, seeking a judicial declaration that Equifax could not terminate the agreement; therefore, the agreement was still in force and effect. In support of its motion, Nowcom offered a declaration from Hankey, which purported to set forth Nowcom's intent in entering into the agreement.

Trial Court's Order Granting Equifax's Motion for Summary Adjudication

On May 8 and 13, 2008, the trial court heard oral argument on the parties' competing motions. Thereafter, the trial court granted Equifax's motion for summary adjudication1 of Nowcom's first (declaratory relief), second (declaratory relief), third ...

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