FILED Jul 27 2020, 8:49 am
CLERK Indiana Supreme Court Court of Appeals and Tax Court
ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE Peter J. Rusthoven Brian C. Hewitt John R. Maley Christopher J. Mueller Leah L. Seigel Hewitt Law & Mediation, LLC Barnes & Thornburg LLP Indianapolis, Indiana Indianapolis, Indiana
IN THE COURT OF APPEALS OF INDIANA
ShermansTravel Media, LLC, July 27, 2020 Appellant-Defendant, Court of Appeals Case No. 19A-PL-3024 v. Appeal from the Marion Superior Court Gen3Ventures, LLC, The Honorable Appellee-Plaintiff. John M.T. Chavis, II, Judge Trial Court Cause No. 49D05-1701-PL-2105
Kirsch, Judge.
[1] ShermansTravel Media, LLC (“Shermans”) appeals the trial court’s entry of
summary judgment in favor of Gen3Ventures, LLC (“Gen3”). Following the
breakdown of the parties’ business relationship, in which Gen3 provided
subscriber lists to Shermans for Shermans’s use in its travel advertising business,
the parties entered into a settlement agreement. Shermans agreed to make
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 1 of 28 periodic payments to Gen3 and to delete Gen3’s subscriber data, and each party
would dismiss its claims. Gen3 refused to dismiss its claims against Shermans
on the basis that Shermans had not completely performed its obligation to
delete Gen3’s subscriber data. The parties filed cross-motions for summary
judgment, and the trial court determined that Shermans breached the settlement
agreement and entered summary judgment in favor of Gen3. Finding the
question of whether Shermans substantially performed its obligations under the
parties’ settlement agreement is a disputed issue of material fact, we reverse and
remand.
Facts and Procedural History [2] Shermans is an online travel media company whose business consists of selling
advertising placements to travel suppliers. Appellant’s App. Vol. II at 39. The
advertising placements appear in Shermans’s email products, which are
distributed to a list of millions of email subscribers. Id. Gen3 is a marketing
technology company, and its business includes the ownership and operation of
websites that focus on the travel industry from which it collects subscriber email
addresses. Id. at 13. In April of 2014, Shermans bought subscriber names from
Gen3 to add to its list of subscribers. Id. at 39.
[3] Based on the performance of the subscriber names Shermans had previously
bought from Gen3, in April of 2015 the parties entered into an Email Delivery
Agreement (“the Agreement”). Id. at 39-40; Appellant’s App. Vol. III at 3. On
December 17, 2015, the parties modified the Agreement and entered into an
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 2 of 28 Amended Email Delivery Agreement along with an Insertion Order,
collectively (“the Contract”). Appellant’s App. Vol. II at 22. The Contract
provided that the parties would share revenue generated from email
advertisements sent to subscribers collected and identified by Gen3 and its
affiliates and that Shermans would send emails both to its subscribers and to
Gen3’s subscribers. Id. at 158. Shermans used an email management vendor,
Sailthru, Inc. (“Sailthru”) to maintain its database of email addresses, send
emails, and track user data, including the information for Gen3 subscribers.
Appellee’s App. Vol. II at 23. The Sailthru database housed a category of lists
referred to as “All Primary Lists[,]” which added a new subset, called “Gen3
Lists[,]” that was kept separate from the ShermansTravel National List and the
approximately 2,000 targeted, special interest lists were built off both of these
separately maintained subsets of “All Primary Lists[,]” as illustrated below:
Appellant’s App. Vol. II at 105, 119. In the latter part of 2016, a dispute arose
between Shermans and Gen3, in which Gen3 alleged that Shermans failed to
provide activity reports to Gen3 and pay outstanding invoices as required by the
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 3 of 28 Contract while Shermans contended that Gen3’s quality of contract
performance and the subscriber list data it provided to Shermans was poor. Id.
at 26.
[4] On January 17, 2017, Gen3 filed a Verified Complaint for Breach of Contract
(“the Complaint”) against Shermans. Id. at 3. The Complaint alleged that
Shermans committed multiple breaches of the Contract, including that
Shermans had failed to deliver data that Gen3 owned and that Shermans had
stopped sending emails to Gen3 subscribers on January 1, 2017. Appellee’s App.
Vol. II at 2-9. On January 19, 2017 and February 20, 2017, Gen3 owner
Matthew Erdos monitored a Gen3 email account that was on Gen3’s subscriber
list, seed@gen3ventures.com (“the seed email address”), learned the seed email
address had received emails from Shermans on those dates, and forwarded the
Shermans emails to Gen3 co-owner Mason Hewitt. Appellant’s App. Vol. III at
54-55.
[5] On March 13, 2017, Shermans filed its Answer to Plaintiff’s Verified Complaint
and Counterclaims Against Plaintiff, which included claims for breach of
express warranty, breach of implied warranty of fitness for a particular purpose,
breach of implied warranty of merchantability, promissory estoppel, unjust
enrichment, and fraudulent inducement. Appellant’s App. Vol. II at 3, 21-50.
The parties engaged in mediation and entered into a Settlement Agreement,
Mutual Release, and Covenant Not To Sue (“the Settlement Agreement”) on
April 3, 2017 to “compromise and settle completely the disputes between them”
and to “avoid the uncertainty and expense of continued litigation” and without
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 4 of 28 any admission of liability. Appellant’s App. Vol. III at 18-22. The Settlement
Agreement, which included a payment schedule for Shermans to make
payments on the $290,080.39 it owed to Gen3, also provided as follows:
4. The following pleadings shall be prepared and filed:
a. In accordance with paragraph 7 below, on or before April 4, 2017, Shermans shall prepare and file a notice of dismissal of the Counterclaims with prejudice.
b. Within five business days of receipt of all Payments, and in accordance with paragraph 8 below, Gen3 shall prepare and file a stipulation of dismissal with prejudice.
....
8. Upon timely receipt of Payments under paragraph 3 and complete performance under paragraph 9, Gen3 hereby forever releases and discharges Shermans, its parent companies, owners, members, subsidiaries, shareholders, predecessors, successors, affiliates, assigns, insurers, agents, heirs, personal representatives, and attorneys, and all other persons or entities who might be liable, none of whom admit any liability to Gen3, but who all dispute any liability to Gen3, of and from any and all manner of actions, causes of action, suits, accounts, contracts, debts, claims, and demands whatsoever, at law or in equity, and however arising, on or before the date of this release, including but not limited to, all matters asserted, or which could have been asserted, by Gen3 against Shermans in that certain action pending in the Marion Superior Court, State of Indiana, as above entitled under Cause No. 49D05-1701-PL-002105. However, if Shermans fails to timely deliver all Payments under paragraph 3 and completely perform it[s] obligations under paragraph 9, the previous sentence shall be deemed ineffective, and Gen3 shall
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 5 of 28 retain all rights to pursue all claims under the Amended Email Delivery Agreement including [those] asserted in the Lawsuit, less set off for payment made by Shermans.
9. Effective upon execution of this Settlement Agreement, Shermans shall cease to utilize any data relating to All Gen3 Subscribers in any form. Within 20 days from the date of this Agreement, Shermans shall deliver to Gen3 any data relating to All Gen3 Subscribers in any form, including without limitation clicks, opens, subscriber’s subscription status, and Shermans’ data describing the segment or segments applicable to each subscriber. Upon returning all data described in this paragraph and after Gen3 instructs Shermans to do so, Shermans shall remove any data related to All Gen3 Subscribers from Shermans’ database(s) and shall destroy any other form of records applicable to All Gen3 Subscribers. Shermans shall execute an affidavit in confirmation that Shermans has complied with the data deletion requirements of this paragraph.
[6] Id. at 18-20 (emphasis in original). Paragraph 11 of the Settlement Agreement
also provided, in part, that performance of the Settlement Agreement’s terms
“is made and accepted in full accord and satisfaction of, compromise of, any
and all disputes, that do, or may exist, between the Parties and for the purpose
of terminating all such disputes and associated litigation.” Id. at 21. The
following day, Shermans filed its notice of dismissal of its counterclaims, with
prejudice, against Gen3, and Gen3 filed an agreed motion to stay the
proceedings and to dismiss the matter with prejudice. Appellee’s App. Vol. II at
10, 12.
[7] On April 5, 2017, Shermans sent Gen3 data concerning all Gen3 Subscribers
via Dropbox, which was contained in two files named “ingestion_gen3_rs Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 6 of 28 (2).csv” and “ingestion_gen3_vg (2).csv” (“the April 5 Files”). Id. at 24, 80.
On that same day, the trial court stayed the proceedings, pending “complete
performance” of the Settlement Agreement. Id. at 14. On April 15, 2017, the
seed email address received a Shermans email. Appellant’s App. Vol. III at 55.
On April 18, 2017, Shermans sent Gen3 fifty-six spreadsheets via Dropbox
(“the April 18 Files”), which included data for Gen3 Subscribers who were on
the Shermans special interest groups. Appellee’s App. Vol. II. at 15, 80-81. Gen3
compared the April 5 Files and the April 18 files, and its comparison revealed
that 68,521 emails were sent to 10,094 distinct Gen3 Subscribers in the thirteen-
day period after the effective date of the Settlement Agreement. Id. at 82. On
May 25, 2017, Gen3 confirmed to Shermans that Gen3 downloaded the April 5
Files and the April 18 Files it received from Shermans and directed Shermans to
delete the Gen3 subscriber data. Id. at 26. The seed email address received
another Shermans email on June 8, 2017. Appellant’s App. Vol. III at 55. On
June 15, 2017, Shermans requested that Sailthru permanently delete all Gen3
subscribers from the Shermans database, which Sailthru manages. Appellee’s
App. Vol. II at 26. On July 13, 2017, the seed email address received another
Shermans email. Appellant’s App. Vol. III at 55. Shermans engaged Sailthru to
delete all the Gen3 subscriber data from the Shermans database, which was
executed on July 19, 2017, and on July 27, 2017, Sailthru reported to Shermans
that it completed the deletion of all Gen3 subscribers from the Shermans
database. Appellee’s App. Vol. II at 26, 47. On August 28, 2017, Shermans
provided Gen3 with an affidavit stating it had deleted all Gen3 subscriber data
from its database, as required by the Settlement Agreement. Id. at 34. Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 7 of 28 [8] Shermans made each payment required by the Settlement Agreement, and on
November 24, 2017, six days before the Settlement Agreement’s payment
deadline, made its final payment to Gen3. Appellant’s App. Vol. II at 106.
Although Gen3 had not previously raised an issue to Shermans concerning data
deletion, payments, and other matters covered by the Settlement Agreement, on
November 30, 2017 Gen3 sent a letter to counsel for Shermans setting forth
what Gen3 considered as breach on the part of Shermans and that it would not
be dismissing the Complaint as required by the Settlement Agreement.
Appellant’s App. Vol. III at 23-40. Gen3’s letter indicated that it considered the
retention of Gen3 data on folders contained in GoogleDocs, GoogleDrive and
Dropbox, which the parties used when they worked together, to be a breach of
the Settlement Agreement’s data deletion requirements. Id. at 42-43; Appellee’s
App. Vol. II at 39. On December 5 and 6, 2017, Shermans engaged an e-
discovery vendor, Qdiscovery, to delete the Gen3 data on the GoogleDrive,
GoogleDocs, and Dropbox folders, and Qdiscovery retained a copy. Appellee’s
App. Vol. II at 27, 53-68.
[9] On December 13, 2017, Gen3 filed a Motion for Pre-Trial Conference in which
it sought to lift the stay and proceed with the litigation on the Contract, which
the trial court granted on December 19, 2017. Id. at 15, 18. Shermans
responded on January 17, 2018 with a Motion to Enforce Settlement and a
Brief in Support of Motion to Enforce Settlement Agreement and Dismiss
Claims. Appellant’s App. Vol. II at 51-79. On March 16, 2018, Gen3 filed its
Response to [Shermans’] Motion to Enforce Settlement Agreement. Id. at 82-
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 8 of 28 104. On August 7, 2018, Shermans filed a reply in support of its motion to
enforce the Settlement Agreement. Id. at 112-29.
[10] On June 13, 2019, Sailthru, in response to non-party discovery requests it had
received from Gen3, provided data to Gen3 concerning Gen3 Subscribers (“the
June 13 Files”). Appellee’s App. Vol. II at 90. Based on Gen3’s analysis of the
June 13 Files, it identified several data points, which included: (1) the user’s
email address; (2) the user’s unique Profile ID assigned when the user is
uploaded to the Sailthru database; (3) the date each email was sent to the user;
(4) the source of the user’s signup (whether Gen3 or another vendor); (5)
whether the user resubscribed to the list at any time; (6) information used to
target users for special interest group emails; (7) the user’s original signup date;
(8) the lifetime messages to such user; and (9) the date of the last email sent to
such user. Id. at 82-83. Gen3’s analysis of the June 13 Files indicated that
11,630 users matched the email address and Profile ID of a subscriber on the list
of Gen3 Subscribers and identified the signup source for such user as either of
the Gen3 subscriber lists provided to Shermans, which also showed that those
users received at least 3,575,536 emails from the date of the Settlement
Agreement through June 13, 2019 with some users receiving an email in
January of 2019. Id. at 84, 86. In its analysis of the June 13 Files, Gen3 also
concluded that 10,341 user profile data did not include a resubscribe date, from
which it concluded that 10,341 Gen3 Subscribers were still on Shermans’
current subscriber list and that the particular subset of Gen3 Subscribers
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 9 of 28 received at least 3,202,262 emails from the date of the Settlement Agreement
through June 13, 2019. Id. at 86.
[11] On September 3, 2019, the parties filed cross-motions for summary judgment,
briefs in support of the respective summary judgment motions, and designations
of evidence. Appellant’s App. Vol. II at 10-11. On October 3, 2019, each party
filed a response to the other’s motion for summary judgment.1 Id. at 11. The
trial court held a hearing on the parties’ respective motions for summary
judgment on October 29, 2019. At the hearing, counsel for Shermans argued
that Shermans had complied with the data deletion requirement of Paragraph 9
of the Settlement Agreement because it ceased to utilize the Gen3 subscriber
data, stating that “under the plain language of that obligation Shermans has
ceased to utilize the Gen3 data, stopped selling against the Gen3 list, stopped
initiating sends to the Gen3 list – so [Shermans] has ceased to utilize Gen3’s
data . . . .” Tr. Vol. I at 15. Counsel for Shermans further asserted that
“inadvertent sends that Shermans wasn’t aware of and didn’t benefit from is not
practical or effective use of data that’s contemplated by the settlement
agreement’s use of the phrase ‘cease to utilize.’” Id. at 22. Gen3’s counsel
maintained that, although Shermans indicated it had deleted Gen3 subscriber
data based on Shermans’s August affidavit stating it had done so, when Gen3
1 We note that Shermans argued as part of its response to Gen3’s motion for summary judgment briefing that Gen3’s “new argument [concerning the June 13 Files] should not even be considered by the [trial court], and Shermans moves to exclude it, as well as Exhibits E, I, J, and K, as irrelevant, unreliable and ultimately inadmissible.” Appellant’s App. Vol. II at 230-32. There is nothing in the record to indicate that the trial court entered a ruling on this request.
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 10 of 28 discovered in late November of 2017 it “knew Shermans had its data and
became extremely concerned it was using the Gen3 subscriber list. That is what
compelled Gen3’s demand in November of 2017, not the three seed e-mails.
And that is why the litigation ensued that we’re here for today.” Id. at 34.
Gen3’s counsel argued that the Settlement Agreement did not provide for
substantial performance based on its use of “unqualified, unconditional words
like ‘complete performance,’ ‘all,’ ‘in any form,’ ‘destroy any other form of
records,’ and ‘without limitation[,]’” which rendered the doctrine of substantial
performance inapplicable. Id. at 57. Shermans’s counsel also addressed the
deletion of the Gen3 subscriber data on Dropbox, GoogleDocs, and
GoogleDrive, indicating that it retained QDiscovery to complete the deletion in
a “defensible way” to prevent a “spoliation concern” and that Shermans does
not access those documents. Id. at 59.
[12] On November 27, 2019, the trial court issued an order granting Gen3’s motion
for summary judgment and denying Shermans’ motion for summary judgment.
In the order, the trial court reasoned:
Gen3’s release of Shermans and its obligation to dismiss were contingent upon Sherman’s “complete performance” under paragraph 9. Shermans was required to cease to use Gen3 subscriber data, return any data relating to Gen3 subscribers to Gen3, and upon returning the data and Gen3 instructions for Shermans to do so, Shermans was required to remove any Gen3 data in Shermans’ databases and destroy any other form of records applicable to All Gen 3 subscribers. Shermans sent millions of emails to thousands of Gen3 subscriber[s] after the date of the Settlement Agreement.
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 11 of 28 Not all data related to Gen 3 subscribers did Shermans return or destroy. If Shermans inadvertently continued to send emails to Gen3 subscribers, they are essentially still utilizing the data related to Gen3 Subscribers. Assuming Gen3 failed to advise Shermans that Gen3 subscribers were still receiving emails from Shermans, that does not absolve Shermans of this contractual responsibility. Shermans argues that a strict liability or absolute guarantee that its efforts to halt all sends to Gen3 subscribers was not what Gen3 bargained for in the Settlement Agreement. There has been no evidence presented regarding what Gen3 bargained for other than the terms and conditions contained within the Settlement Agreement nor can the Court entertain such when its terms and conditions are unequivocal. Nevertheless, paragraph 8 of the Settlement Agreement calls for, inter alia, complete performance under paragraph 9. [Paragraph 9] required Shermans to cease to utilize any data relating to All Gen3 subscribers in any form and that, unfortunately, did not take place. Even disregarding the opinions of the Gen3 owners because Gen3 failed to lay the foundation for their opinions, both parties recognized that there were breaches by Shermans of the Settlement Agreement, i.e. DropBox, Google Drive, QDiscovery and GoogleDocs. The Court is relegated to applying the agreement as written and cannot impose its [own] views or disregard certain provisions of the agreement.
Appellant’s App. Vol. II at 17-18. Shermans now appeals.
Discussion and Decision [13] Shermans argues that summary judgment should not have been granted to
Gen3. Shermans contends that the Settlement Agreement is subject to the
substantial performance doctrine, and that there are material issues of fact as to
whether it substantially performed, which would preclude summary judgment
in favor of Gen3. Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 12 of 28 [14] On appeal from a grant of summary judgment, we stand in the shoes of the trial
court and apply a de novo standard of review. Poiry v. City of New Haven, 113
N.E.3d 1236, 1239 (Ind. Ct. App. 2018). Summary judgment is appropriate
where the designated evidence establishes that there are no genuine issues of
material fact and the moving party is entitled to judgment as a matter of law.
Row v. Holt, 864 N.E.2d 1011, 1013 (Ind. 2007). “A fact is ‘material’ if its
resolution would affect the outcome of the case, and an issue is ‘genuine’ if a
trier of fact is required to resolve the parties’ differing accounts of the truth, or if
the undisputed material facts support conflicting reasonable inferences.”
Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014). We consider only those
materials properly designated pursuant to Indiana Trial Rule 56 and construe
all factual inferences and resolve all doubts in favor of the non-moving party.
Young v. Hood’s Gardens, Inc., 24 N.E.3d 421, 424 (Ind. 2015). We may affirm
an entry of summary judgment “if it can be sustained on any theory or basis in
the record.” DiMaggio v. Rosario, 52 N.E.3d 896, 904 (Ind. Ct. App. 2016),
trans. denied. The fact that the parties have filed cross-motions for summary
judgment does not alter this standard of review or change our analysis: the
party that lost in the trial court has the burden of persuading us that the trial
court erred. Denson v. Estate of Dillard, 116 N.E.3d 535, 539 (Ind. Ct. App.
2018).
[15] Shermans argues that the Settlement Agreement is subject to the doctrine of
substantial performance and cites Gen. Disc. Corp. v. Weiss Mach. Corp., 437
N.E.2d 145 (Ind. Ct. App. 1982) in support of its position. It also argues that
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 13 of 28 the trial court’s interpretation of the Settlement Agreement contravened other
rules applicable to the construction of contracts, and that Gen3 relies on an
overly literal reading of the term “complete” which effectively relieved Gen3 of
showing material breach. Gen3 maintains that “complete performance” of the
Settlement Agreement was a “condition precedent” to Gen3’s obligation to
dismiss the action and release Shermans. Appellee’s Br. at 24. Gen3 contends
that because Shermans did not completely perform the data deletion
requirement substantial performance does not apply, and it cites Gibson v.
Neu, 867 N.E.2d 188 (Ind. Ct. App. 2007) and Dove v. Rose Acre Farms, Inc., 434
N.E.2d 931 (Ind. Ct. App. 1982) in support of its position that the doctrine of
substantial performance is inapplicable to the Settlement Agreement.
[16] Interpretation of a settlement agreement presents a question of law and is
reviewed de novo. Bailey v. Mann, 895 N.E.2d 1215, 1217 (Ind. 2008).
Construction of settlement agreements is governed by contract law. Ind. State
Highway Comm’n v. Curtis, 704 N.E.2d 1015, 1018 (Ind. 1998). If a contract’s
terms are clear and unambiguous, courts must give those terms their clear and
ordinary meaning. Dunn v. Meridian Mut. Ins. Co., 836 N.E.2d 249, 251 (Ind.
2005). Courts should interpret a contract so as to harmonize its provisions,
rather than place them in conflict. Id. at 252.
[17] Contract law has long recognized substantial performance rather than strict
performance as being sufficient in many situations. General Discount, 437
N.E.2d at 151. The doctrine of substantial performance “applies where
performance of a nonessential condition is lacking, so that the benefits received
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 14 of 28 by a party are far greater than the injury done to him by the breach of the other
party.” Dove, 434 N.E.2d at 933. Indiana courts have applied the substantial
performance doctrine in a variety of scenarios. See Johnson v. Taylor Bldg. Corp.,
171 Ind. App. 674, 676, 371 N.E.2d 404, 405 (1978) (holding that a contractor’s
failure to secure a septic permit before construction did not bar his recovery
under a mechanic’s lien where the contractor substantially fulfilled all
requirements of the contract except for the final act of installing the septic
system); McConnell v. Fulmer, 230 Ind. 576, 588, 105 N.E.2d 817, 819 (1952)
(explaining, in the context of a challenge to rescind a deed requiring the
appellant to provide living quarters to the appellee, that “the performance of
[such a contract to provide living quarters] does not require perfection, but a
reasonably strict and substantial compliance is sufficient.”); Sanderson v. Trump
Mfg. Co., 180 Ind. 197, 102 N.E. 2, 11 (1913) (applying the doctrine of
substantial performance in favor of an engineering company in the context of a
dispute concerning the specifications, delivery, and installation, of turbine
engines.)
[18] However, Indiana courts have also addressed cases in which substantial
performance was held not to apply. See Gibson, 867 N.E.2d at 195 (holding, in
the context of payments under a mortgage, that substantial performance did not
apply where the “timely payment of the debt was an essential condition of the
promissory note, mortgage, and release provision of the mortgage.”);
Greenhaven Corp. v. Hutchcraft & Assocs., Inc., 463 N.E.2d 283, 286 (Ind. Ct. App.
1984) (stating that “the doctrine of substantial performance does not apply in an
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 15 of 28 action on account.”); Dove, 434 N.E.2d at 935 (holding that the doctrine
of substantial performance did not apply to an employee bonus agreement
where the employee violated the bonus agreement’s tardiness and absenteeism
rules which was an essential condition of the bonus agreement.).
[19] Shermans directs us to General Discount, which we find instructive. In General
Discount, an agreed judgment required defendants to pay $21,844.83 to the
plaintiff and return certain collateral by a specified date. 437 N.E.2d at 146.
The agreed judgment also provided that failure “to perform any part of this
agreed judgment will constitute a default,” making the agreement “null and
void” and obligating defendants to pay $55,589.21 plus interest and other fees
and costs. Id. at 147. As a result of “a good faith mistake,” the defendants
failed to deliver timely one item of collateral but delivered the collateral when
they learned of the mistake. Id. at 148. The trial court rejected the plaintiff’s
effort to void the settlement based on the defendant’s failure to return the
specified collateral, noting that “the extent of nonperformance . . . is minor
when weighed in light of the full value of performance tendered” by defendants,
that the “defendants substantially performed[,]” and that the defendants
“substantially complied with their duties and obligations as required by the
Agreed Judgment.” Id. at 148-49. On appeal, plaintiff argued that the agreed
judgment “required complete compliance with the terms thereof,” and that it was
erroneous “to measure the compliance of the parties by a standard of
‘substantial compliance.’” Id. at 150 (emphasis added). This court disagreed,
noting that “[c]ontract law has long recognized substantial performance rather
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 16 of 28 than strict performance as being sufficient in many contractual situations.” Id.
at 151. We further explained that we saw “no reason why the standard should
not be applied to the contractual situation of a consent judgment,” when “the
nonperformance by [defendants] was minor, was not willful, and did not defeat
the purpose of the judgment.” Id.
[20] Here, Paragraph 8 of the Settlement Agreement required Shermans to make the
payments described in Paragraph 3 of the Settlement Agreement and to
completely perform its obligation to delete Gen3’s subscriber data as set forth in
Paragraph 9 of the Settlement Agreement. Appellant’s App. Vol. III at 19.
Paragraph 9 of the Settlement Agreement required Shermans to “cease to
utilize2 any data relating to All Gen3 Subscribers in any form” and to “remove
any data related to All Gen3 Subscribers from Shermans’[s] database(s) and
shall destroy any other form of records applicable to All Gen3 Subscribers.” Id.
at 20. Regarding the Settlement Agreement as a whole, we agree with Gen3
that the Settlement Agreement required Shermans to satisfy the conditions
established in both Paragraph 3 and Paragraph 9 before Gen3 was required to
dismiss the Complaint. Gen3 correctly cites authority concerning the effect of a
condition precedent contained within a contract; however, we disagree with
Gen3 that substantial performance does not apply to the conditions in this
particular situation and, unlike in Gibson and Dove, we conclude that substantial
2 The Settlement Agreement does not define “utilize.” Merriam-Webster’s dictionary defines utilize as “to make use of: turn to practical use or account.” See utilize, available at https://www.merriam- webster.com/dictionary/utilize (last visited June 30, 2020.)
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 17 of 28 performance is applicable to the parties’ obligations under the Settlement
Agreement. As discussed more fully below, whether Shermans substantially
performed is a disputed issue of material fact. We note that there is no express
provision in the Settlement Agreement stating that substantial performance
does not apply, and as in General Discount, where complete compliance with the
agreed judgment was not required, we see no reason why substantial
performance does not apply to the Settlement Agreement. 437 N.E.2d at 151;
see also Gen. Motors Corp. v. Northrop Corp., 685 N.E.2d 127, 135 (Ind. Ct. App.
1997), (noting that “[c]ourts do not have the power to create for the parties a
contract which they did not make, nor to insert language into a contract which
was not inserted by the parties . . . and we will not undertake to rewrite the
parties’ contract to include such a clause.) (citation omitted), trans. denied.
[21] We turn next to whether there are material issues of fact as to whether
Shermans substantially performed under the Settlement Agreement. Shermans
argues that it did not send “millions of emails to thousands of subscribers” as
the trial court stated in its order, that it deleted Gen3’s subscriber data after
Gen3 directed it to do so, and was unaware emails were “slipping through . . .
.” Appellant’s Br. at 22, 24. It also argues that it inflicted no “business harm on
Gen3” and was not “‘utilizing’ Gen3 data” to further its commercial interests.
Id. at 25. Shermans also maintains that it substantially performed its obligations
under the Settlement Agreement and did not materially breach the Settlement
Agreement, asserting that it had stopped “emailing Gen3 subscribers because
poor performance from such emails harmed Shermans’[s] business” and that
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 18 of 28 summary judgment should not have been granted. Appellant’s Br. at 26. Gen3
maintains that summary judgment was properly granted, and that the trial
court’s order should be affirmed.
[22] This court has long held that whether a party has committed a material breach
is a question of fact, the resolution of which is dependent on several factors.
Collins v. McKinney, 871 N.E.2d 363, 375 (Ind. Ct. App. 2007). When
determining whether a breach is material, Indiana courts generally apply the
factors articulated in the Restatement (Second) of Contracts § 241 (1981):
(a) the extent to which the injured party will be deprived of the benefit which he reasonably expected;
(b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;
(c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture;
(d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances;
(e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.
[23] Collins, 871 N.E.2d at 375 (citing Frazier v. Mellowitz, 804 N.E.2d 796, 803 (Ind.
Ct. App. 2004)). Related to the inquiry of whether a breach is material is
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 19 of 28 whether a party has substantially performed an obligation. See Restatement
(Second) of Contracts § 241 (1981) (stating that “[t]he considerations in
determining whether performance is substantial are those listed in § 241 for
determining whether a failure is material.”)
[24] Here, the trial court premised its ruling that Shermans breached the Settlement
Agreement on the basis of emails sent in the April 5 Files and April 18 Files,
the subscribers identified in the June 13 Files, and the shared documents on
GoogleDrive, GoogleDocs, and Dropbox. There is no dispute that emails were
sent after the date of the Settlement Agreement, that Shermans executed an
affidavit indicating that it deleted the Gen3 subscriber lists and did not initiate
sends to Gen3 subscribers after July 27, 2017, and that Gen3 subscriber
information was still available on the shared documents on GoogleDrive,
GoogleDocs, and Dropbox after the date of the Settlement Agreement.
Nevertheless, the trial court failed to recognize that there are material, factual
disputes with respect to whether there was substantial performance of the
Settlement Agreement, or, stated differently, whether Shermans materially
breached the Settlement Agreement.
[25] First, regarding the 68,521 emails that were found to have been sent to Gen3
subscribers based on the April 5 Files and April 18 Files, the designated
evidence shows that after Shermans learned that emails were being sent to
Gen3 subscribers, it contacted Sailthru and began the process to delete the
Gen3 subscriber lists from the database. Appellant’s App. Vol. II at 108-109;
Appellant’s App. Vol. III at 74-75. The designated evidence also shows that over
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 20 of 28 the thirteen-day period relevant to the April 5 Files and the April 18 Files,
Shermans sent “over 22 million emails” to its subscribers and that the 68,521
emails sent to Gen3 subscribers “made up less than a third of one percent,
0.3%, of the volume of emails sent by Shermans during that time.” Appellant’s
App. Vol. III at 75. Gen3 disputes whether the 0.3% of emails sent during that
thirteen-day period matters and contends that each email sent is a breach of the
Settlement Agreement. These divergent views on the effect of the emails on the
data deletion requirement of Paragraph 9 requires the trier of fact to resolve
material issues of fact about whether Shermans substantially performed.
[26] Second, the results of Gen3’s analysis of the data contained in the June 13 Files
raises a factual question about the status of the subscribers; that is, whether the
subscribers are independently acquired Shermans subscribers who overlap with
Gen3 subscribers or whether they are Gen3 subscribers. Appellant’s App. Vol. III
at 63-71; Pltf.’s Exs. I-K. Shermans designated the affidavit of its digital
marketing consultant, Zhengda Guo, which indicated that the subscribers
highlighted by Gen3 were independently acquired by Shermans. Appellant’s
App. Vol. III at 76-99. In contrast, Gen3 points to its designated evidence
indicating that the subscribers were Gen3 subscribers and were not
independently acquired by Shermans. Id. at 63-71; Pltf.’s Exs. I-K.3 Thus, the
3 The trial court said that it was disregarding the “opinions of the Gen3 owners because Gen3 failed to lay the foundation for their opinions” with respect to Gen3’s view of the June 13 files; however, the trial court appears to have relied on that information for the view that “Shermans sent millions of emails to thousands of Gen3 subscriber[s] after the date of the Settlement Agreement.” Appellant’s App. Vol. II at 17.
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 21 of 28 designated evidence shows there is a dispute with respect to the status of the
subscribers in the June 13 Files.
[27] Third, Gen3 also points to the information from Gen3’s subscriber data that is
contained on GoogleDrive, GoogleDocs, and Dropbox as a breach of the
Settlement Agreement. The designated evidence shows that Shermans
immediately took steps to address the disclosure of that information on those
platforms following Gen3’s letter that it intended to enforce the Settlement
Agreement. Appellant’s App. Vol. II at 86. With respect to the information on
Dropbox, Gen3 had requested that Shermans use Dropbox to accomplish the
transfer of subscriber data to it. Id. at 106. On May 25, 2017, when Gen3
instructed Shermans to delete its subscriber lists, it indicated that the data “had
been downloaded, so [Shermans] can delete.” Appellant’s App. Vol. III at 29. It
is not entirely clear from the designated evidence whether that instruction was
an instruction to delete only the April 5 Files and the April 18 Files, or if
additional information needed to be deleted as the designated evidence shows
Gen3 did not specifically refer to the data remaining on Dropbox,
GoogleDrive, and GoogleDocs as problematic under the Settlement Agreement
until its November 30, 2017 demand letter to Shermans. Appellant’s App. Vol. III
at 42-43; Appellee’s App. Vol. II at 37-39. As noted above, Shermans worked
with Sailthru, who managed Shermans’s database, to take steps to delete the
Gen3 subscriber data, and Shermans deleted the Gen3 subscriber data on
Dropbox, GoogleDocs, and GoogleDrive when Gen3 brought that to its
attention. Appellant’s App. Vol. II at 108-09. The Settlement Agreement does
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 22 of 28 not include a specific date to delete the data, and although it includes broad
language requiring Shermans to “destroy any other form of records applicable
to All Gen3 Subscribers” there is a question as to whether the information
contained on those platforms was in fact a material breach of the Settlement
Agreement. Appellant’s App. Vol. III at 20. Thus, there is a disputed factual
question as to whether Shermans’s efforts to delete the data was substantial
performance of that obligation.
[28] In light of the foregoing, the designated evidence leads to the conclusion that
there was a factual dispute as to whether Shermans substantially performed
under the Settlement Agreement. See Collins, 871 N.E.2d at 375 (explaining
that whether a party has committed a material breach is a question of fact);
Restatement (Second) of Contracts § 241 (1981) (describing the related nature of
material breach and substantial performance and setting forth the factors
relevant to both.) Thus, the resolution of “the parties’ differing accounts of the
truth” is for the trier of fact to determine. See Hughley, 15 N.E.3d at 1003; Smith
v. State Lottery Comm’n of Ind., 812 N.E.2d 1066, 1073 (Ind. Ct. App. 2004)
(noting that “[m]aterial questions of fact are not appropriate for resolution by
summary judgment.”), trans. denied. Because we conclude there are genuine
issues of material fact precluding summary judgment, we reverse the trial
court’s entry of summary judgment in favor of Gen3 and remand for further
proceedings.
[29] Reversed and remanded.
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 23 of 28 Brown, J., concurs with separate opinion.
Crone, J., dissents with separate opinion.
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 24 of 28 IN THE COURT OF APPEALS OF INDIANA
ShermansTravel Media, LLC, Court of Appeals Case No. 19A-PL-3024 Appellant-Defendant,
v.
Gen3Ventures, LLC, Appellee-Plaintiff.
Brown, Judge, concurring.
[30] I agree that the entry of summary judgment in favor of Gen3 was improper.
According to Gen3, 68,521 emails were sent to its subscribers between April 5
and April 18, 2017, by Shermans. According to Shermans, these were sent
inadvertently. In my view the number of improperly-sent emails or the ratio of
improperly-sent emails to the total number of sent emails is not dispositive as to
whether there was a breach of the Settlement Agreement’s “cease to utilize” or
other language proscription. See Appellant’s Appendix Volume III at 20.
“Utilize” connotes a benefit and there is no evidence of a benefit received by
Shermans. Other factual determinations include the extent to which Shermans
independently acquired the subscribers to which Gen3 points, the extent to
which the presence of information on shared platforms constituted a breach,
and the extent to which Shermans’ actions comported with standards of good
faith and fair dealing under the circumstances.
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 25 of 28 [31] Further, on August 28, 2017, Shermans provided Gen3 with an affidavit stating
it had deleted all Gen3 subscribers data from its database per the terms of the
Settlement Agreement. Almost three months later and ahead of its deadline,
Shermans made its final payment to Gen3 under the terms of the Settlement
Agreement. Only after that, and in “gotcha” litigation style did Gen3 send a
letter to Shermans’ counsel complaining about the data deletion, and six days
later Shermans engaged QDiscovery to delete Gen3 data on the GoogleDrive,
Google Docs, and Dropbox folders.
[32] Under the circumstances, the designated materials do not establish, as a matter
of law, that there are no genuine issues of material fact or that Shermans
breached its obligations under the Settlement Agreement, and thus the entry of
summary judgment was improper.
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 26 of 28 IN THE COURT OF APPEALS OF INDIANA
ShermansTravel Media, LLC, Court of Appeals Case No. 19A-PL-3024 Appellant-Defendant,
Crone, Judge, dissenting.
[33] I respectfully dissent. Assuming for argument’s sake that the substantial
performance doctrine applies here – a highly dubious assumption given that
paragraph 8 of the Settlement Agreement specifically requires “complete
performance” under paragraph 9 – I would hold that Shermans failed to
substantially perform under the agreement as a matter of law.
[34] Shermans overpromised regarding its ability to delete and cease utilizing
Gen3’s subscriber data, and it woefully underdelivered. The concurring
opinion posits that “‘[u]tilize’ connotes a benefit[,]” slip op. at 25, but the only
thing that one “utilizes” an email address for is to send an email. To say that
Shermans did not “utilize” Gen3’s subscriber data by sending emails is like
saying that I did not “utilize” my phone by making a phone call with it. The
lead opinion adopts Shermans’ sleight-of-hand focus on percentages, noting
that the 68,521 emails sent to Gen3 subscribers in April 2017 “‘made up less Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 27 of 28 than a third of one percent, 0.3%, of the volume of emails sent by Shermans
during that time.’” Id. at 20 (quoting Appellant’s App. Vol. 3 at 75). The total
number of emails that Shermans sent to its subscribers is irrelevant; the critical
fact is that Shermans breached its Settlement Agreement with Gen3 68,521
times. In no rational universe would this constitute substantial performance.
Cf. Gen’l Discount Corp., 437 N.E.2d at 151 (affirming trial court’s finding of
substantial performance where agreed judgment did not specifically require
complete performance and defendant corrected sole instance of
nonperformance by replacing two tractor buckets with original specified
bucket). Based on these breaches alone, I would affirm the trial court’s entry of
summary judgment for Gen3.
Court of Appeals of Indiana | Opinion 19A-PL-3024 | July 27, 2020 Page 28 of 28