Arkansas Realtors Ass'n v. Real Forms, LLC

2014 Ark. 385, 442 S.W.3d 845, 2014 Ark. LEXIS 502
CourtSupreme Court of Arkansas
DecidedSeptember 25, 2014
DocketCV-13-87
StatusPublished
Cited by9 cases

This text of 2014 Ark. 385 (Arkansas Realtors Ass'n v. Real Forms, LLC) is published on Counsel Stack Legal Research, covering Supreme Court of Arkansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Arkansas Realtors Ass'n v. Real Forms, LLC, 2014 Ark. 385, 442 S.W.3d 845, 2014 Ark. LEXIS 502 (Ark. 2014).

Opinions

DONALD L. CORBIN, Justice.

| ,This appeal arises from a breach-of contract action in which Appellee Real Forms, LLC, sued Appellant Arkansas Realtors Association, after Appellant terminated a software-development agreement. Appellant appeals an order of the Washington County Circuit Court denying its motion for judgment notwithstanding the verdict (“JNOV”) or, in the alternative, for new trial. For reversal, Appellant argues that the circuit court erred because substantial evidence does not support the jury’s finding on Appellee’s breach-of-contract claim; that, as a matter of law, three separate provisions of the parties’ agreement entitled Appellant to terminate the contract; that the circuit court abused its discretion by refusing to instruct the jury on the law of impossibility; and that the circuit court failed to make a record on the parties’ motions in limine. Appellee cross-appealed from the circuit court’s | gpostjudgment denial of its motion for attorneys’ fees and costs. We have jurisdiction pursuant to Arkansas Supreme Court Rule 1 — 2(b)(1) and (5) (2014), as this appeal presents issues of first impression and needing clarification of the law. We affirm the appeal, and we reverse and remand the cross-appeal.

I. Facts

Appellant, a statewide organization whose members work in the real-estate business, provides standard real-estate contract forms to aid its members in conducting real-estate transactions. Between 1997 and 1998, Appellant entered into a contract with Robert Bodily to create software for an electronic version of the contract forms so that Appellant’s members could prepare separate forms for each real-estate transaction and digitally edit each form. In 2008, Matt Hudson, through his company, Lynergy, negotiated a contract with Appellant to provide an online version of the software to complement Bodily’s desktop version. Appellant’s members were to use both the online and desktop versions and to synchronize them as needed. However, the online and desktop versions did not always synchronize properly, and Appellant solicited bids for another software vendor. Appellant ultimately hired Lynergy instead of Bodily. Hudson and his brother, David Hudson, who was Appellant’s Director of Technology, then formed Appellee.

On August 12, 2010, Matt Hudson, on behalf of Appellee, and Mike Henry, as Appellant’s president, entered into a custom-development agreement (“contract”), specifying that Appellee would provide Appellant with services, including software development, technical support, maintenance, and other related services for an initial period of five years. ^Pursuant to the parties’ agreement, Appellee’s software and computer programs were designed to meet the “business requirements” of Appellant and specifically “to create, execute, report, print, and manage all of the forms and contracts associated with a real-estate transaction in compliance with all governing laws, rules, and regulations.” Because Appellant’s 2010 contract forms were set to expire at the end of the calendar year, the parties’ contract required Appellee to complete installation of its software no later than December 1, 2010.

For several reasons, Appellee did not complete the installation of its software by the December 1, 2010 deadline. Appellant, as required by the contract, attempted to obtain a copy of Bodily’s software, but, as the sole owner, Bodily refused to release it to Appellant. Because of Bodily’s refusal to release his software, Appellant, contrary to the terms of the parties’ contract, provided its forms to Appellee in a format other than Microsoft Word. As a result, Appellee required additional time to develop its software, and Appellant allowed the additional time that Appellee requested. Appellant was also scheduled to provide Appellee with a Microsoft Word version of the contract forms no later than sixty days from the date of the contract. While Appellant made most of the revisions by November 2010, the last contract form in its final version was not submitted to Appellee until December 31, 2010.

On December 28, 2010, Karen Crowson, one of Appellant’s authorized representatives, gave Appellee permission to launch the software as it existed on that date with the understanding that Appellee would continue “to address function errors as those arise.” The next day, on December 29, 2010, Appellee launched its 2011 software system, which was available for purchase and use by Appellant’s members. However, those members 14experienced problems, which Appellant identified as (1) an exposure of Appellant’s financial account to improper access by third parties; and (2) an unintentional access of confidential data of other realtors’ clients. Subsequently, Appellee received a letter from Appellant alleging that the software “failed to protect adequately the confidential client information contained in the system,” and requiring Appellee to deactivate the software. Appellee honored Appellant’s request and deactivated the software that same day. On January 12, 2011, Ap-pellee met with Appellant’s leadership, staff, and legal team to discuss the specifics of the software deficiency.

In January 2011, Appellant learned that' Appellee had not acquired an “Error and Omissions” insurance policy for Appellant’s benefit, as required by the agreement, although Appellant had paid $1,500 to Ap-pellee for the insurance premium. Appellant requested that the insurance policy acquired by Appellee be amended to correct that deficiency, but it was never updated to cover Appellant. However, according to the testimony of David Hudson, he tried to obtain the insurance but learned that the “type of coverage that they were asking for” did not exist." When Hudson conveyed that information to Appellant, he never received a response.

On March 4, 2011, Appellee launched a final version of the software on Appellant’s website. Twenty-five of Appellant’s beta testers were given access to continue testing the software. J.D. Robinson, a beta tester and Director of Software Development at Mainstream Technologies, repeatedly gained unauthorized access to individual user’s software accounts. Appellant later notified Appellee by e-mail that it had allegedly identified “an issue regarding |5the security provided in the Real Forms software solution that has failed to protect the confidential client information contained in the system.”

On March 21, 2011, Appellant sent written notice terminating the parties’ contract pursuant to sections 16.2 and 16.4 of the contract based on its belief that the soft-, ware allowed users to access confidential client data improperly and that the software did not meet the requisite business requirements set forth in the contract. With the letter, Appellant also enclosed a video purportedly depicting the alleged software deficiency referenced in the notice. Appellant subsequently sent Appel-lee an additional notification, clarifying the reason for termination and citing in detail the alleged improper-access issue. In its communication, Appellant identified the reason for termination as follows:

The failure of the security in the system to protect confidential information is an error that prevents productive use of the system. The error was not corrected by Real Forms within two (2) business days of being notified. Therefore, the ARA has the right to and is terminating the contract under Paragraph 5.6 of the agreement.

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Arkansas Realtors Ass'n v. Real Forms, LLC
2014 Ark. 385 (Supreme Court of Arkansas, 2014)

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2014 Ark. 385, 442 S.W.3d 845, 2014 Ark. LEXIS 502, Counsel Stack Legal Research, https://law.counselstack.com/opinion/arkansas-realtors-assn-v-real-forms-llc-ark-2014.