Transverse, L.L.C. v. Iowa Wireless Services, L.L.C.

617 F. App'x 272
CourtCourt of Appeals for the Fifth Circuit
DecidedJune 11, 2015
Docket13-51098
StatusUnpublished
Cited by5 cases

This text of 617 F. App'x 272 (Transverse, L.L.C. v. Iowa Wireless Services, L.L.C.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Transverse, L.L.C. v. Iowa Wireless Services, L.L.C., 617 F. App'x 272 (5th Cir. 2015).

Opinion

PER CURIAM: **

Iowa Wireless Services (IWS) hired Transverse to develop customized billing software. When the parties’ business, relationship unraveled, they sued each other for breach of a “Supply Contract,” breach of a non-disclosure agreement, and on several claims sounding in tort. After the dust settled in the district court, Transverse was awarded $11.7 million in damages for IWS’s breach of the Supply Contract, but the district court rejected Transverse’s tort claims and its claim that IWS breached the non-disclosure agreement. Each party appealed various aspects of the judgment. As we explain below, we affirm in part, reverse and render in part, vacate in part, and remand for further proceedings consistent with this opinion. 1

I.

The parties in this case are IWS, a wireless telephone service provider, and Transverse, a telecommunications billing software development company. For several years, IWS had used a billing system developed and maintained by a company called Convergys. However, in late 2008, Convergys notified IWS that it (i.e., Con-vergys) would discontinue its billing system in March 2010. IWS set out to find a replacement billing system, eventually hiring Transverse to develop a billing system based on Transverse’s software, which was known as “blee(p).” 2 Although the billing *274 system would be based on blee(p), it was not to be an off-the-shelf product; rather, it was to be customized to meet IWS’s particular needs and specifications. IWS and Transverse signed two separate agreements to govern their relationship. The first was a “Mutual Non-Disclosure Agreement” (NDA), in which IWS agreed not to use or disclose Transverse’s “Confidential Information.” The second was a Supply Contract purportedly- obligating Transverse to develop customized billing software for IWS.

The Supply Contract called for the mutual development of a “Controlling Specification” and “acceptance criteria” — i.e., customized features and functionality that Transverse needed to build into the billing software to satisfy its end of the bargain. According to the Supply Contract, Transverse was required to “satisfy the [acceptance criteria no later than 11:59 PM Central Standard Time February 28, 2010,” which was the date when Convergys planned to discontinue IWS’s old billing system. However, the acceptance criteria were not enumerated in the Supply Contract; rather, the parties agreed to negotiate and develop a “User Acceptance Test” (UAT) document that would contain the acceptance criteria. To that end, after signing the Supply Contract, IWS and Transverse met several times to discuss IWS’s needs and blee(p)’s capabilities. A draft UAT document was created, and IWS employees recorded the content of the parties’ discussions in a set of meeting notes.

In early February 2010, the parties agreed that the project was behind schedule. IWS, without “waiving any rights or terms under the original contract,” agreed to a timeline change that divided delivery of the system into four parts over an extended period of time. IWS also procured an extension with Convergys through June 2010 and reached out to IDI, a competitor of Transverse’s, about the possibility of IDI’s developing a billing system for IWS. To help bring IDI up to speed on IWS’s needs, IWS sent IDI the draft UAT document and the meeting notes from the various meetings between IWS and Transverse.

February 28 came and went, and IWS and Transverse still had not finalized the UAT document (for reasons the parties vigorously dispute). Because the UAT document was not finalized, no acceptance criteria existed and, needless to say, Transverse had not satisfied the acceptance criteria.

IWS and Transverse finally agreed to a UAT document containing the acceptance criteria on March 13, 2010. Two months later, Transverse still had not satisfied the acceptance criteria (or even delivered the first part of the divided delivery plan). IWS then terminated the Supply Contract, claiming that Transverse had materially breached the contract by not delivering an “acceptable billing system on or before February 28, 2010.” After IWS terminated the Supply Contract, it procured an additional extension from Convergys and formally contracted with IDI.

Transverse filed a lawsuit against IWS in Texas state court, alleging, inter alia, breach of the Supply Contract, breach of the NDA, misappropriation of trade secrets, violation of the Texas Theft Liability Act, and conversion. IWS removed the case to federal district court and counterclaimed for, inter alia, breach of the Supply Contract. The parties’ claims alleging breach of the Supply Contract were tried to the jury, while Transverse’s claims for breach of the NDA, trade secret misappropriation, conversion, and violation of the Texas Theft Liability Act were tried to the bench pursuant to a jury-waiver provision in the NDA.

*275 The jury found in favor of Transverse, determining that IWS breached the Supply Contract by wrongfully terminating it and by “giving a competitor access to the Service,” in violation of an express prohibition in the Supply Contract. The jury awarded Transverse $10 million for lost profits, $1.7 million in reliance damages, and $9.3 million for lost value of blee(p) as a result of IWS’s “access to the Service” breach. However, the district court set aside the $9.3 million award, finding that it was not supported by legally sufficient evidence. The district court ruled against Transverse on its tort claims and on its claim for breach of the NDA. The parties cross-appealed.

II.

We review the district court’s factual findings for clear error and its legal conclusions de novo. Arete Partners, L.P. v. Gunnerman, 594 F.3d 390, 394 (5th Cir.2010). The question of whether a contract is enforceable is a legal question, Westlake Petrochemicals, L.L.C. v. United Polychem, Inc., 688 F.3d 232, 238 (5th Cir.2012), as is the interpretation of contract terms, In re Isbell Records, Inc., 586 F.3d 334, 336 (5th Cir.2009). 3

III.

We begin with the breach-of-contract claims arising out of the Supply Contract. As noted, the jury found that IWS breached the Supply Contract in two separate ways: (1) by terminating the contract on May 3, 2010, and (2) by providing IDI with “access to the service.” On appeal, IWS argues that the Supply Contract was unenforceable and, even if it was enforceable, that Transverse breached first and that Transverse’s “access to the Service” claim is untenable as a matter of law. IWS also insists that all damages awards must be vacated. Transverse defends its judgment by arguing that the Supply Contract was valid and' enforceable, that the “access to the Service” claim properly was submitted to the jury, and that the damages awards were proper.

A.

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Bluebook (online)
617 F. App'x 272, Counsel Stack Legal Research, https://law.counselstack.com/opinion/transverse-llc-v-iowa-wireless-services-llc-ca5-2015.