Policy Admin. Solutions, Inc. v. QBE Holdings, Inc.

POLICY ADMINISTRATION SOLUTIONS, INC., Plaintiff, v. QBE HOLDINGS, INC. and QBE AMERICAS, INC., Defendants.

No. 15-CV-2473 (CS)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

August 30, 2019

OPINION & ORDER

Appearances:

David K. Fiveson

Claudia G. Jaffe

Butler, Fitzgerald, Fiveson, & McCarthy, PC

New York, New York

Counsel for Plaintiff

Jason R. Fathallah

Mark F. Foley

von Briesen & Roper, s.c.

Milwaukee, Wisconsin

Leonard F. Lesser

Simon Lesser PC

New York, New York

Counsel for Defendants

Seibel, J.

Before the Court is the motion to compel arbitration and stay proceedings of Defendants QBE Holdings, Inc., and QBE Americas, Inc., (collectively "QBE"). (Doc. 120.) For the reasons set forth below, Defendants' motion is GRANTED.

I. BACKGROUND

A. Facts

The following facts are taken from the pleadings and the declarations submitted in support of and opposition to the instant motion.¹ Defendants QBE Holdings, Inc., and QBE Americas, Inc., are Delaware corporations doing business in New York. (Doc. 20 ("AC") ¶¶ 2-3.) Plaintiff Policy Administration Solutions, Inc. ("PAS") is a New York corporation doing business in New York. (Id. ¶ 1.) Plaintiff is the author of pasExecutive.Net (the "Software"), a software system "used by insurance companies to calculate underwriting risks and price insurance policies according to those risks." (Id. ¶ 8.) Defendants are engaged in the business of underwriting insurance and were licensed by PAS to use pasExecutive.net. (Id. ¶¶ 15-16.)

1. License Agreement and Confidentiality Agreement

On August 22, 2005, Clarendon Insurance Group, Inc. ("Clarendon") entered into a License Agreement under which Plaintiff granted Clarendon a license to use the Software. (License Agreement.)² Clarendon and Plaintiff also entered into a maintenance agreement under which Plaintiff would provide support services. (Doc. 122 ("Fathallah Aff.") Ex. C ("Maintenance Agreement").) The License Agreement contemplated that after initial installationof and training on the Software - which came to be known as the "First Instance" - Clarendon and Plaintiff would execute Statements of Work for subsequent services. (License Agreement § 3.3.)

The License Agreement includes an arbitration clause that provides: "In the event that the parties are unable to resolve a dispute relating to this Agreement, the parties hereby agree to binding arbitration in New York City, New York pursuant to the Rules of the American Arbitration Association [("AAA")] at New York City, New York." (Id. § 9.6.) Section 4 of the License Agreement, entitled "Proprietary Rights, Trade Secrets and Copyright," contains various provisions governing each party's rights and obligations regarding the other's party's confidential information. (Id. §§ 4.1-4.10.)

On September 8, 2005, Clarendon and Plaintiff purportedly executed a Confidentiality Agreement. (Fathallah Aff. Ex. B ("Confidentiality Agreement").) Defendants dispute the authenticity and enforceability of this document.³ The Confidentiality Agreement is an agreement "by and between CLARENDON INSURANCE GROUP, INC., a Delawarecorporation . . . on behalf of itself and its subsidiaries and affiliates ("CLARENDON") and Policy Administration Solutions." (Id. pmbl.) The Confidentiality Agreement contains a merger clause, entitled "Entire Agreement," which provides:

This Agreement shall supersede and prevail over any other prior agreements, either oral or written, as to [PAS] Confidentiality Information received under this agreement. The Agreement constitutes the entire agreement between the parties on the subject matter of this Agreement and shall not be amended, except in writing signed by an officer of both parties.

Id. ¶ 9.

The Confidentiality Agreement does not contain an arbitration clause but rather contains a "Governing Law" provision, which states:

This Agreement shall be construed according to the laws of the State of New York without regard to principles of conflict of laws. The courts of the State of New York, to the personal jurisdiction of which each party to this Agreement voluntarily submits, shall have the exclusive jurisdiction to hear and decide and [sic] dispute or controversy concerning this Agreement.

Id. ¶ 10.

2. The Creation of Praetorian and Its Sale to QBE

On October 26, 2005, Praetorian Financial Group, Inc. ("Praetorian") was incorporated. (Fathallah Aff. Ex. D at 2.) In October 2006, Praetorian, Clarendon, and Plaintiff executed Amendment 1 to the License Agreement and Maintenance Agreement, (License Agreement amend. 1), which changed the licensee from Clarendon to Praetorian and provided that "[a]ll obligations of Licensee, including but not limited to payment obligations, in connection with the Agreement and the Software Maintenance Agreement are transferred to Praetorian, except that Clarendon shall remain bound by the provisions of the Agreement relating to Confidential Information," (Fathallah Aff. Ex. D at 2).

On December 13, 2006, Hannover Re, the parent company of Praetorian and Clarendon, agreed to sell Praetorian to QBE Insurance Group Ltd., (id. Ex. E at 5),⁴ and on March 30, 2010, QBE Holdings, Inc. and Praetorian merged and QBE Holdings Inc. survived, (see id. Ex. D at 2-3). Defendants thereby "assume[d Praetorian's] liabilities and obligations." (Id. Ex. D at 3.)

3. QBE's Alleged Modification of PAS's Code and the Second Instance

On December 15, 2010, Plaintiff informed Defendants that it believed that Defendants had made unauthorized changes to the Software in violation of the Maintenance Agreement. (Id. Ex. H.) Plaintiff (but not Defendants) executed an amendment to the Maintenance Agreement extending maintenance services to the new version of the Software (the "Second Instance"). (Id. Ex. L.) Defendants directed Plaintiff to suspend performance on all open Statements of Work sometime before May 30, 2014, (id. Ex. M at 2-3), and on July 3, 2014, Defendants sent Plaintiff written notice that Defendants were "terminating all software maintenance services for the [F]irst [I]nstance . . . effective August 22, 2014," (id. Ex. N at 3). Four days later, Plaintiff advised Defendants that Plaintiff considered the termination "a breach of the agreement" because the Maintenance Agreement's term renewed for one year to June 2015 when Defendants "fail[ed] to provide 30 day notice of termination by May 2014." (Id. Ex. O at 2.)

On October 14, 2014, Plaintiff's counsel sent Defendants' counsel a letter stating that Defendants breached the License Agreement by failing to sign the Maintenance Agreement and failing "to pay the maintenance due October 1, 2014." (Id. Ex. P at 2.) Plaintiff stated that if Defendants did not pay, Plaintiff would terminate the license for the Second Instance and Defendants would have to "return to [Plaintiff] all materials and documentation containingconfidential information and certify in writing that [they have] complied." (Id.) Defendants accepted Plaintiff's termination and stated that they would "return or destroy all materials containing Confidential Information (as defined in the License Agreement) within 60 business days of October 20, 2014. (Id. Ex. Q at 2 (emphases in original).) Plaintiff "confirm[ed Defendants'] understanding of [their] obligation . . . as correct." (Id. Ex. R at 2.) On December 11, 2014, Plaintiff sent the Confidentiality Agreement to Defendants and requested that they "return . . . [Plaintiff's] confidential information, as opposed to . . . merely certifying the destruction of the information." (Id. Ex. U at 2.) On June 11, 2015, Plaintiff sent to Defendants a "copy of the complete and signed [C]onfidentiality [A]greement." (Id. Ex. W at 2.)

B. Procedural History

Plaintiff filed the instant action on April 1, 2015, (Doc. 1), and amended the complaint on June 16, 2015. (AC.) In Counts One and Two of the AC, Plaintiff asserts claims under § 502(a) of the Copyright Act, 17 U.S.C. § 502(a), that Defendants failed to return and continue to use confidential information provided in connection with the First and Second Instances, thereby infringing Plaintiff's copyright and breaching the License Agreement. (Id. ¶¶ 66-70, 72-74.) In Count Three, Plaintiff alleges that Defendants breached the License Agreement. (Id. ¶¶ 76-78.) In Count Four, Plaintiff seeks attorney's fees and costs under the § 505 of the Copyright Act, 17 U.S.C. § 505, (id. ¶¶ 80-82), and in Count Five, Plaintiff seeks statutory damages under § 504(c)(2) for willful copyright violation, (id. ¶¶ 84-86). In Count Six, Plaintiff alleges that Defendants breached the Confidentiality Agreement by breaching "Plaintiff's copyright interest in the System" and their "obligations to return Confidential Information." (Id. ¶ 89.) In Count Seven, Plaintiff alleges that Defendants were unjustly enriched "by the retention and use of Confidential Information for the System for the First and Second Instance." (Id. ¶ 91.)

On August 28, 2015, this Court entered an ex parte order to show cause and temporary restraining order ("TRO") enjoining Defendants from destroying Plaintiff's confidential information provided in connection with the Second Instance. (Doc. 34.) I denied Plaintiff's motion for a preliminary injunction and vacated the TRO on September 3, 2015, following oral arguments. (Minute Entry dated Sept. 3, 2015.)

On November 5, 2015, the parties completed briefing on Defendants' motion to dismiss under Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. (Docs. 70-76.) After a hearing, I denied Defendants' motion without prejudice to renewal pending the resolution of state court proceedings related to an arbitration award arising out of Defendants' alleged breaches of the Maintenance Agreement and several Statements of Work,⁵ (Minute Entry dated Apr. 28, 2016), and, as discussed at the hearing, I stayed proceedings in this case.

On July 20, 2018, Plaintiff moved to vacate the stay in this Court, (Doc. 102), and I lifted the stay on August 13, 2018, following a...