Global Epoint, Inc. v. GTECH Corp.

58 F. Supp. 3d 178, 2014 U.S. Dist. LEXIS 157942, 2014 WL 5771801
CourtDistrict Court, D. Rhode Island
DecidedNovember 5, 2014
DocketC.A. No. 11-197 S
StatusPublished
Cited by6 cases

This text of 58 F. Supp. 3d 178 (Global Epoint, Inc. v. GTECH Corp.) is published on Counsel Stack Legal Research, covering District Court, D. Rhode Island primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Global Epoint, Inc. v. GTECH Corp., 58 F. Supp. 3d 178, 2014 U.S. Dist. LEXIS 157942, 2014 WL 5771801 (D.R.I. 2014).

Opinion

MEMORANDUM AND ORDER

WILLIAM E. SMITH, Chief Judge.

In 2001, Plaintiff Global ePoint, Inc. (“Global”) sold its lottery assets to Defendant GTECH Corporation’s (“GTECH”) predecessor, Interlott Technologies, Inc. [181]*181(“Interlott”).1 At the time the deal closed, Global received an initial payment of $13.5 million, and was entitled to receive additional payments of up to $15 million over the course of the next five years, if revenues and profits from these lottery assets reached certain benchmarks. Global claims that GTECH reneged on the agreement by failing to make all but a fraction of these payments; GTECH, in turn, claims that the requisite benchmarks were never reached, and that it owes Global nothing.

Both parties have moved for partial summary judgment. (ECF Nos. 58 and 65.) For the reasons set forth below, Global’s Motion for Partial Summary Judgment is GRANTED IN PART AND DENIED IN PART and GTECH’s Motion for Partial Summary Judgment is GRANTED IN PART AND DENIED IN PART.2

I. Background3

In the late 1990s, Global developed a mechanism it called a “helical separator” for use in instant lottery ticket vending machines. (Pl.’s Statement of Undisputed Facts (“PL’s SUF”) ¶2, ECF No. 59.) This mechanism cuts lottery tickets along a perforation, separating the tickets from one another, and dispensing them as requested. (Id.) Two machines manufactured by Global employed this technology — the Playpoint and the Counterpoint. (Id. at ¶ 5.) The Playpoint was a freestanding model, while the appropriately-named Counterpoint was designed to sit on the counter of a store. (Id.) GTECH offered a competing product called the EDS-Q, which also perforated and dispensed tickets. (Id. at ¶ 22.)

In the 2001 deal with Interlott, Global sold the helical separator technology, and the right to produce the machines that utilized it. (Id. at ¶ 9.) Global and Inter-lott memorialized the terms of this sale in an Asset Purchase Agreement. (Id. at ¶¶ 8-9.) In 2003, Interlott merged with GTECH, and GTECH expressly assumed Interlott’s responsibilities under the Asset Purchase Agreement. (Id. at ¶ 53.)

Two provisions of the Asset Purchase Agreement, the Deferred Payment Component and the Percentage Payment Component, are in issue in this case, because they establish the circumstances under which future payments must be made to Global. The Court begins by outlining the contours of these important (and confusing) provisions.

A. The Deferred Payment Component

The Deferred Payment Component required that GTECH pay Global $150,000 per month for 60 months, which amount could be decreased based on gross profits earned each quarter. (Pl.’s SUF ¶ 10 and Ex. 3.) To determine whether GTECH properly modified the payment, GTECH was required to provide “[quarterly] statement[s] of the gross profits earned by [GTECH] ... both from a combination of contract extensions and future orders from existing lottery customers of [Global] under [Global’s] lottery contracts conveyed [182]*182to [GTECH] under the Asset Purchase Agreement.” (Id.) Section 4.7 of the Asset Purchase Agreement identified the contracts transferred as part of the sale. (Id. at ¶ 13.)

Additionally, the Deferred Payment Component defined “existing lottery customers” to

include customers pursuant to public competitive bids that have been submitted prior to Closing, if, after the effective date of this Agreement, an award is made to [Global] or to [GTECH] pursuant to [Global’ s] bid, and [GTECH] enters into a contract with such customer either directly or by assignment from [Global], in either case pursuant to such outstanding bid.

(Id. at ¶ 10.) Finally, under the Deferred Payment Component, GTECH agreed that, during the five-year period in which it was making deferred payments, it would “exercise commercially reasonable best efforts to procure contract extensions and future orders from existing lottery customers of [Global] under [Global’s] lottery contracts conveyed to [GTECH] under the Asset Purchase Agreement.” (Pl.’s SUF Ex. 3 at 63.)

B. The Percentage Payment Component

The second key provision is the “Percentage Payment Component,” which required that for the five years following the closing of the transaction, GTECH would “deliver to [Global] a statement of Applicable Revenues and Applicable Counterpoint Revenues.” (Pl.’s SUF ¶ 11 and Ex. 4.) The Asset Purchase Agreement defined “applicable revenues” as “revenues generated by new sales or leases, other than revenues included in the calculation of the Deferred Payment Component, of Play-point, Counterpoint and other [Global]-designed lottery equipment.” (Pl.’s SUF ¶ 12 and Ex. 4.) The Percentage Payment Component required GTECH to make payments of 10 percent of these revenues until a cap of $3 million was reached. (Id.) If that initial $3 million cap was reached, GTECH was then required to make additional payments of 10 percent of revenues only on Counterpoint machines sold, to a maximum of an additional $3 million. (Id.) GTECH further agreed to “continue to market Playpoint and Counterpoint units (‘PC Units’)” during this five-year period “by offering in connection with new procurements as to which the PC units meet applicable procurement specifications, such equipment to prospective customers of [GTECH] at gross profit margins that are no greater than those at which [GTECH’ s] similar or competitive equipment is offered to the same customer in connection with such procurement.” (Id. at ¶ 11 and Ex 4.)

The proper scope of the Deferred Payment Component, and whether GTECH made payments under the Deferred Payment Component and Percentage Payment Component as required, are the central questions in this case. To answer these questions, the Court must delve into the meaning of the Asset Purchase Agreement and GTECH’s actions in several states and around the world.

C. Illinois

The State of Illinois awarded Global a lottery contract in 1994. (PL’s SUF ¶ 57.) Global and Illinois amended the contract several times. (Id. at ¶ 58.) When Global sold its assets to GTECH’s predecessor, Interlott, the Third Amendment to the Illinois contract was operative. (Id.) The Fourth Amendment extended - the agreement by one year from July 1, 2001 to June 30, 2002, and, among other things, included a 60-month lease term on all lottery machines leased by Illinois, meas[183]*183ured from their date of installation. (Id. at ¶ 59.) Several amendments followed, culminating with a Seventh Amendment to the contract between GTECH and Illinois, which again extended the agreement by one year from July 1, 2003 to June 30, 2004, and included the same 60-month lease on all lottery machines from their date of installation.4 (Id. at ¶ 61.) Unlike its predecessors, this Seventh Amendment to the Illinois contract contained no provision permitting an additional amendment, but it also did not preclude further amendment. (Def.’s Statement of Undisputed Facts (“Def.’s SUF”) ¶52, ECF No. 66; PL’s Statement of Disputed Facts (“Pl.’s SDF”) ¶ 52, ECF No. 76.)

By May 2004, 745 machines using Global’s technology were operating in Illinois under this 1994 contract and its amendments.

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Cite This Page — Counsel Stack

Bluebook (online)
58 F. Supp. 3d 178, 2014 U.S. Dist. LEXIS 157942, 2014 WL 5771801, Counsel Stack Legal Research, https://law.counselstack.com/opinion/global-epoint-inc-v-gtech-corp-rid-2014.