Supply Chain Prods. v. NCR Corp.

• Decision Date: 30 March 2023
• Docket Number: 19-CV-11376 (ALC)(JLC)
• Parties: SUPPLY CHAIN PRODUCTS, LLC, Plaintiff, v. NCR CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of New York

1

SUPPLY CHAIN PRODUCTS, LLC, Plaintiff, v. NCR CORPORATION, Defendant.

No. 19-CV-11376 (ALC)(JLC)

United States District Court, S.D. New York

March 30, 2023

OPINION AND ORDER

ANDREW L. CARTER, JR., UNITED STATES DISTRICT JUDGE:

Plaintiff Supply Chain Products, LLC (“Supply Chain” “SCP” or “Plaintiff”) brings this suit against NCR Corporation (“NCR” or “Defendant”) alleging two counts of breach of contract related to NCR's alleged failure to pay royalties to Plaintiff pursuant to a 2011 software license agreement. (See generally Compl., ECF No. 1-1.) Currently pending before the Court is Plaintiff's motion summary judgment and Defendant's motion for partial summary judgment under Rule 56 of the Federal Rules of Civil Procedure. (ECF Nos. 105, 117.) For the reasons that follow both motions are GRANTED IN PART and DENIED IN PART.

BACKGROUND

I. Procedural History

This action was removed to federal court on the basis of diversity jurisdiction on December 12, 2019. (ECF No. 1.) The Complaint alleges two causes of action for breach of contract. (Compl ECF No. 1-1.) Count I seeks damages in connection with NCR's alleged non-payment of license and maintenance royalties provided for by the licensing agreement entered into by the parties. (Id. ¶¶ 40-50.) Count II seeks damages in connection with NCR's alleged violation of the licensing agreement's non-compete provision. (Id. ¶¶ 51-58.)

Defendant filed a motion for partial summary judgment on April 1, 2022. (ECF No. 96.) Plaintiff filed its motion for summary judgment the same day. (ECF No. 99.) Both Plaintiff and Defendant also filed motions to seal certain of the documents attached to its declaration in support of their motions. (ECF Nos. 105, 117.)

II. Relevant Facts

The following facts are taken from allegations contained in the Complaint, the parties' Rule 56.1 statements and the documents and affidavits submitted in support of their motions.

A. General Background

Supply Chain provides software and supply chain serves to customers in the retail and wholesale distribution industries, including an invoice reconciliation software program known as Balances. (Compl., ECF No. 1-1 ¶ 6.) NCR is a software company located in Atlanta, Georgia. (Id. ¶ 7.)

Invoice reconciliation is a business function that allows a purchaser to compare or match its cost or quantity information with the cost or quantity information that a purchaser receives from its vendor. (Pl. 56.1 Stmt., ECF No. 106 ¶ 3.) Balances is a “standalone” invoice reconciliation program that automatically performs a “3-way match” between a retailer's invoices, purchase orders, and receipts in order to resolve any potential discrepancies. (Id. ¶ 7; Def.'s 56.1 Stmt., ECF No. 112 ¶ 18.)

B. The Agreement

Supply Chain entered into a Software and OEM Distribution Agreement (the “Agreement”) with Retalix USA, Inc. (“Retalix”), NCR's predecessor, on October 11, 2011. (Def.'s 56.1 Stmt., ECF No. 112 ¶ 1; Pl.'s 56.1 Stmt., ECF No. 106 ¶ 11.) At that time, in early 2011, Retalix owned Prompt, an earlier iteration of the invoice reconciliation functionality in Balances, and was also developing new invoice reconciliation software that would improve on Balances' functionality. (Id. ¶¶ 2, 9.) NCR acquired Retalix's parent company in 2013 and assumed its obligations under the Agreement. (Id. ¶¶ 66-71.)

i. Schedule of License Royalties and Annual Maintenance Royalties

As part of the Agreement, Retalix agreed that it would pay Supply Chain licensee royalties for sales of Balances to Retalix's customers, as well as an annual maintenance royalty. (Id. ¶ 13.) The license royalty fee owed to Supply Chain would equal the greater of i) a percentage of the license fee that Retalix charged its customer:

75% if Balances was sold alone, or 25% if Balances was bundled with Purchasing (Retalix's new warehouse purchasing software), or

ii) a minimum fixed amount: $150,000 if Balances was sold alone, or $100,000 if Balances was bundled with Purchasing.

(Id. ¶ 17.) Retalix was also required to pay an annual maintenance fee to Supply Chain equal to 15% of the license fee it received from its customer. (Id. ¶ 19.)

For some of NCR's customers, the parties agreed to revised royalty payment structure based on the number of locations at which Balances was used. (See, e.g., id. ¶¶ 55, 82, 94.)

ii. Non-Waiver and Non-Oral Modification Clauses

The Agreement also includes a non-waiver and non-oral modification clauses. (Id. ¶ 20.) In Section 11.6 of the Agreement, the parties agreed that “[t]he failure of a Party to insist upon strict performance of any provision of this Agreement or to exercise any right arising out of this Agreement shall neither impair that provision or right nor constitute a waiver of that provision or right, in whole or in part, in that instance or in any other instance.” (Id. ¶ 21.) At Section 11.1, the parties agreed that “this Agreement cannot be modified or supplemented except in a writing expressly stated for such purpose and signed by SCP and Retalix.” (Id. ¶ 22.) Additionally, the royalty schedule includes an agreement that modifications could only be made in writing. (Id. ¶ 23 (“Except as noted in this Agreement or mutually agreed upon in writing by both Parties, payments will be based upon the chart below. Terms of this schedule of fees and royalties may be modified on an individual customer basis by mutual agreement in writing between the Parties.”))

iii. Non-Compete Provision

Section 4 of the Agreement contains a non-compete clause which provides that:

4.1. Retalix agrees that as of the Effective Date of this Agreement that it will cease any and all licensing or other distribution of the Retalix Invoice Reconciliation software (Prompt) and that for so long as Retalix continues to have a license to the SCP Software and Documentation under the terms of this Agreement, Retalix will not, subject to the exceptions listed in Sections 4.3 and 4.4 of this Agreement, by itself or in cooperation or though others, research, develop, acquire, market, sell, license, or in any way distribute any product that is similar to, whether in form or function, Prompt, invoice reconciliation, or SCP's Balances program.

4.2. Subject to and aside from the non-compete requirements and limitations of Section 4.1, nothing in this Agreement shall impair a Party's rights to use, market or distribute, without obligation to the other Party, similar ideas, concepts, software or products to those in the other party's software, which have been independently acquired or submitted by others to the Party, or which have been developed independently by the Party.

(Id. ¶¶ 33, 36.)

The non-compete provision contains two carve outs. First, Section 4.3 provides that:

Retalix reserves the right to continue offering Retalix Prompt customers existing as of the Effective Date of this Agreement additional licenses of the now-current version of the Prompt product and to continue to provide on-going support and professional services to those existing Retalix Prompt customers unimpeded by this Agreement.”

(Frey Decl., Ex. 3, ECF No. 113-3 § 4.3.) Second, Section 4.4 provides that:

Retalix reserves the right to acquire a product similar in function to SCP's Balances™ program only as a part of an overall suite of software products that offer substantial functionality beyond the functionality of SCP's Balances™ (collectively the “Acquired Product Suite[”]). Retalix shall only market, sell, license, or distribute the acquired functionality similar to SCP's Balances™ program and only as an integrated part of the Acquired Product Suite in existence at the time of the acquisition.

(Id. § 4.4.)

C. Balances Licenses Sold by NCR to its Customers

Plaintiff alleges that NCR and/or Retalix sold Balances to ten customers for which it owes Supply Chain license royalties and annual maintenance royalties. These customers can be grouped into three categories: customers for which NCR allegedly owes (1) royalties for licenses sold in 2017 and 2018; (2) royalties for licenses sold before 2016; and (3) royalties for licenses at additional Giant Eagle and Fresh Thyme locations.

i. Group One: Royalties Allegedly Owed for Licenses Sold in 2017 and 2018

NCR sold Balances licenses to five customers for which it alleges it is owed license royalties and annual maintenance royalties. NCR sold a license to Associate Growers of Baton Rouge (“AGBR”) in December 2017 (id. ¶¶ 123), two licenses to Fairway Markets in December 2017 (id. ¶¶ 128, 130), one license to Earth Fare in December 2017 (id. ¶¶ 135, 137), one license to Piggly Wiggly in 2018 (id. ¶¶ 143, 145), and one license to Cardenas also in 2018 (id. ¶¶ 155, 157.) Supply Chain never received licenses royalties or maintenance royalties from NCR for these licenses. (Id. ¶¶ 124, 132, 140, 146, 158.)

ii. Group Two: Royalties Allegedly Owed for NCR License Sales Made Before 2016

Plaintiff alleges that NCR has failed to pay license royalties and maintenance royalties for Balances licenses that NCR sold to five of its customers: Love's Travel Stop, Roche Bros., Giant Eagle, Kinney Drug and Fresh Thyme. (Id. ¶ 50-53, 57-61, 62-65, 84-87, 96-99.) Plaintiff notes that NCR paid the annual maintenance royalties it owed to Supply Chain for these customers prior between 2016 to 2020, but that NCR ceased paying royalties owed after 2020. (Id.)

iii. Group Three: Royalties Allegedly Owed for Licenses at Additional Giant Eagle and Fresh Thyme Locations

Plaintiff also alleges that it is owed royalties arising from the use of Balances at additional locations for two NCR customers Giant Eagle and Fresh Thyme. (Id. ¶¶ 81-83, 93-95.) The addendum to Schedule 1 in the Agreement for Giant Eagle requires NCR to pay Supply Chain...