The Capability Group Inc v. Am. Express Travel Related Serv. Co. Inc
| Decision Date | 12 February 2010 |
| Docket Number | Civil Action No. 08-cv-10136-DPW. |
| Citation | 706 F.Supp.2d 146 |
| Parties | The CAPABILITY GROUP, INC., Plaintiff,v.AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC., Defendant. |
| Court | U.S. District Court — District of Massachusetts |
COPYRIGHT MATERIAL OMITTED
Brett N. Dorny, Law Office of Brett N. Dorny, Northboro, MA, for Plaintiff.
Louis Smith, John F. Farraher, Jr., Zachary C. Kleinsasser, Greenberg Traurig LLP, Florham Park, NJ, for Defendant.
American Express Travel Related Services Company, Inc. (“AMEX”) contracted with The Capability Group (“TCG”) to train AMEX employees and develop course materials in Six Sigma, a methodology designed to improve corporate efficiency. On January 29, 2008, TCG sued AMEX, seeking damages and an injunction, based on breach of contract for failure to pay full compensation and breach of the contract's license and confidentiality provisions, and also asserting a claim styled “Accounting for Copyright License.” On August 28, 2009, following completion of discovery, AMEX brought the motion now before me for summary judgment on all counts of the complaint.
In accordance with the summary judgment standard, I view the record in the light most favorable to TCG, as the non-moving party. See Scott v. Harris, 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007) ().
AMEX, a New York corporation, is a leading global payments and travel company. TCG, a Nevada corporation with a principal place of business in Boston, Massachusetts, trains companies in the principles of Six Sigma, a process improvement methodology that increases business effectiveness.
In 1998, TCG, as an independent contractor for a company called Six Sigma Academy, trained AMEX employees and certain outside contractors and consultants in the Six Sigma methodology. The Six Sigma training was implemented and monitored across all of AMEX's business units and divisions by AMEX's Global Six Sigma Performance Group (“Performance Group”). Six Sigma Academy provided services to AMEX through late 2000 and assisted with the implementation of hundreds of Six Sigma projects. As of late 2000, the Performance Group had approximately 25-30 employees and its Vice President was Janet Young.
AMEX tracked financial and other project information relating to Six Sigma projects on a computer system called “Quality Management System” (“QMS”) that was later upgraded to a faster “R6” system (the “System”). The System was used to track two types of savings on a project-by-project basis: “projected” (or forecast) savings (i.e., the savings that a project might achieve upon completion) and “actual” savings (i.e., the savings that a project actually achieved). The projected savings changed over the course of the project, but the actual savings, once determined and approved by the project's finance person, did not change. Most Six Sigma projects continued to generate savings for several years after their completion; AMEX tracked such savings for two years beyond the project completion date.
In 2000, AMEX approached TCG directly about providing Six Sigma course materials and training. At that time, TCG had severed its relationship with Six Sigma Academy. In August 2000, AMEX engaged TCG to replace Six Sigma Academy, to develop Six Sigma training materials, and to provide Six Sigma training for certain AMEX employees, consultants, and contractors. The parties entered into a contract titled the American Express Process Improvement Support Agreement (the “Agreement”) on August 14, 2000; the Agreement was later amended on March 7, 2001.
Under the Agreement, TCG agreed to provide Six Sigma training and to develop a variety of course materials. (Agreement ¶ 2.) TCG estimates the value of the materials and training desired by AMEX to be $6 million. In exchange for these services, AMEX agreed to pay a co-development fee (including “Base Compensation” of $4 million), additional compensation for miscellaneous services by TCG, and a “gain sharing” fee, subject to certain conditions. ( Id. at ¶ 8; Amendment, Ex. E.) TCG acknowledges that AMEX paid “all required compensation” except for the gain sharing fee.
With respect to the Six Sigma training materials, TCG was to provide AMEX with “Base Course Materials,” defined as “a base course system text that includes all requisite concepts, statistical theory, tools and software guides to meet the collaborative objectives of TCG and AMEX ....” (Agreement ¶ 2(b).) The Agreement also discussed the development of “Custom Course Materials,” which included any “modifications to the Base Course Materials that relate to AMEX or its business,” “the elements added or customized by AMEX (or by TCG, in consultation with AMEX),” “modifications made by TCG in response to AMEX's comments,” and “any AMEX-specific information identified by AMEX which was originally included by TCG in the Base Course Materials.” ( Id. at ¶ 2(c).) The Agreement also refers to “AMEX Process Improvement Course Materials,” which were to be the result of integrating the Custom Course Materials into the Base Course Materials. ( Id.) The term “Course Materials” in the Agreement refers, collectively, to Base Course Materials, Custom Course Materials, AMEX Process Improvement Course Materials, and any other materials created under the terms of the Agreement.1 ( Id. at ¶ 2(i).)
In September 2001, TCG hired BGM Services, Inc. and its principal Arthur Zentner to help develop the Course Materials and to provide Six Sigma training. At that time, none of the Course Materials had been created; they were developed over the following 12 to 15 months. The Custom Course Materials were never developed. Kevin Weiss, President of TCG, testified that he did not recall “anything that [AMEX] created that ... was put into our materials,” and therefore Weiss maintains that the AMEX Process Improvement Course Materials comprised solely of the Base Course Materials that TCG had provided to AMEX. AMEX, on the other hand, asserts that TCG never developed the AMEX Process Improvement Course Materials because nothing had been added beyond the Base Course Materials.
On December 31, 2001, TCG concluded its work under the Agreement.
The Agreement provided that, as additional compensation, AMEX would pay TCG a gain sharing fee “based on the calculated benefit of the net savings to AMEX ... realized during the calendar year 2001 resulting from the materials, training, coaching and development of personnel contemplated by this Agreement.” 2 (Amendment ¶ 9(c).) The parties expressly agreed that the gain sharing would be “determined by AMEX using the system it uses itself to internally track and report on such savings for internal business purposes,” i.e. the System described above, and that “[t]he savings calculations from AMEX's system shall be determinative and not subject to challenge by TCG.” (Agreement ¶ 8(c)(1).) AMEX agreed to “provide regular reports off of this system to TCG ....” ( Id.)
As agreed by the parties, the gain sharing payment only would be made “if realized actual net savings during the calendar Year 2001 equals or exceeds $106 million.” (Amendment, Ex. E.) If AMEX's “actual net savings shown on AMEX's tracking system described in Section 8.c.1 of this Agreement realized during the calendar year 2001 equals or exceeds $106 million,” then AMEX would pay TCG “a gain sharing payment equal to $1 million plus 10% of the amount by which such actual net savings realized during the calendar year 2001 exceed $106 million; provided however, that in no event will the total gain sharing payment made under this Agreement exceed $3 million.” ( Id.) If the $106 million savings threshold was not met, then no gain sharing payment would be due. ( Id.)
In August 2001, TCG claims, it was reported in a conference call that AMEX had achieved its $106 million savings target. On December 12, 2001, Janet Young of AMEX emailed TCG's President Weiss about the “[p]rinciples utilized to determine Gain Share Threshold,” stating “[b]ased on the calculated benefit of the net savings to AMEX realised during calendar year 2001 Calculated Net financial savings does not include projects completed prior to 08/00 with financial benefits in 2001,” i.e., before TCG began training AMEX. Though Weiss disagreed with the principles set forth in Young's email, he found no need to object because Young had indicated that the “Current projected Net Savings as of November, 2001” was $102 million and Weiss believed the $106 million threshold would be exceeded by the end of December.
In late 2001, Young and a team of executives from the Performance Group commenced a “four-month deliberative process” to determine whether AMEX achieved $106 million in net savings as a result of TCG's services. The team ultimately concluded that the realized actual net savings in 2001, attributable to TCG's services under the Agreement, was $90,862,649, well below the requisite $106 million threshold to be eligible for a gain sharing payment. TCG disputes that the team properly determined the actual net savings realized in 2001 within the terms of the Agreement. Citing language in Exhibit E that the gain share was to be paid if “AMEX actual net savings shown on AMEX's tracking system ... realized during the calendar year 2001 equals or exceeds $106 million,” TCG contends that the savings are evident in AMEX's “internal tracking system,” which AMEX identified as the QMS or R6 System.
On January 31, 2002, TCG's counsel David McAnaney wrote a letter to Young and Julie Schechter, AMEX's counsel, stating: ...
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