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Emerson Software Solutions, Inc. v. Regions Financial Corporation

United States District Court, N.D. Alabama, Southern Division

October 19, 2017

EMERSON SOFTWARE SOLUTIONS, INC., Plaintiff,
v.
REGIONS FINANCIAL CORPORATION, Defendant.

          MEMORANDUM OPINION AND ORDER [1]

          JOHN H. ENGLAND, III UNITED STATES MAGISTRATE JUDGE

         On March 17, 2017, Defendant Regions Financial Corporation (“Regions”) moved for the Court to enter an order compelling arbitration of all claims brought by Plaintiff Emerson Software Solutions, Inc. (“Emerson”) and staying this case. (Doc. 7). Emerson opposes the motion. (Doc. 11). The motion is fully briefed, (docs. 7, 11, & 14), and ripe for review. For the reasons stated more fully below, the motion is GRANTED.

         I. Factual and Procedural Background [2]

         Emerson and Regions have entered into several agreements in which Regions has obtained licenses to use software produced by Emerson. On May 24, 2004, the parties entered into a written End Use License Agreement for Risk Management Software, under which Emerson licensed “Risk Information Management Software” (“RIMS”) to Regions. (Doc. 1 at ¶ 6). Emerson and Regions executed several additional agreements related to RIMS. On October 27, 2006, the parties entered into a Master Agreement, a Software License Agreement, and a Software Maintenance Agreement. (Id. at ¶ 7). The Software License Agreement gave Regions a perpetual, royalty-free, nonexclusive license to install, execute, and use RIMS. (Id. at ¶ 8). The parties also entered into a new Software Maintenance Agreement effective September 30, 2011, which provided that Emerson would continue to maintain and provide technical support for RIMS. (Id. at ¶ 9).

         In 2010, Emerson presented a new piece of software, “eRIMS2, ” to Regions, and the parties developed a schedule for transitioning from RIMS to eRIMS2. (Id. at ¶ 11). Regions began using eRIMS2 in 2012, with significant modifications requested in 2013. (Id. at ¶¶ 10, 12). Unlike RIMS, eRIMS2 is cloud-based (rather than server-based) and is compatible with mobile devices; the software is also written using a different code and has a different feature set. (Id. at ¶ 13). Pursuant to an oral agreement between the parties, Regions was permitted to transition from RIMS to eRIMS2 and use eRIMS2 without paying a license fee as long as it continued paying Emerson's maintenance and technical support fees. (Id. at ¶ 14). No written purchase order was submitted for eRIMS2, nor was a written agreement ever made between the parties expressly concerning eRIMS2. (Id. at ¶¶ 15-16).

         Regions continued to pay technical support and maintenance fees to Emerson through September 30, 2016, and Emerson continued to provide maintenance and technical support for eRIMS2. (Id. at ¶ 17). However, in August 2016, Regions verbally informed Emerson it no longer intended to use eRIMS2 after September 30, 2016. (Id. at ¶ 18). Responding to an inquiry by Emerson, Regions informed Emerson on September 7, 2016, that it believed it could continue to use eRIMS2 after September 30, 2016, without paying Emerson's technical support and maintenance fees. (Id. at ¶ 19). Emerson responded via email, demanding Regions cease using eRIMS2 after September 30, 2016, and return all copies of the software to Emerson on October 1, 2016; however, Regions has retained possession of the software and has not paid technical support or maintenance fees for any period after September 30, 2016. (Id. at ¶¶ 20-21).

         On February 22, 2017, Emerson initiated this action, alleging claims for breach of contract, promissory estoppel, conversion, and unjust enrichment. (Id. at ¶¶ 22-33). It seeks injunctive relief and monetary damages. (Id.). On March 17, 2017, Regions filed the instant motion to compel arbitration, alleging an arbitration clause in the Master Agreement requires the matter to be submitted to arbitration. (Doc. 7).

         II. Discussion

         The Federal Arbitration Act, 9 U.S.C. § 1 et seq., (the “FAA”), evinces “a liberal federal policy favoring arbitration agreements.” CompuCredit Corp. v. Greenwood, 565 U.S. 95, 98, 132 S.Ct. 665, 669, 181 L.Ed.2d 586 (2012) (quoting Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). “Federal law establishes the enforceability of arbitration agreements, while state law governs the interpretation and formation of such agreements.” Employers Ins. of Wausau v. Bright Metal Specialties, Inc., 251 F.3d 1316, 1322 (11th Cir. 2001). Before a court sends a claim to arbitration, it must determine (1) whether a valid arbitration agreement exists; (2) whether it affects interstate commerce; and (3) whether the claim falls within the scope of the arbitration provision. See, e.g., Anders v. Hometown Mortg. Servs., Inc., 346 F.3d 1024, 1027 (11th Cir. 2003); Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265, 277 (1995). Any doubts as to the arbitrability of a claim are resolved in favor of coverage. International Association of Machinists and Aerospace Workers, Seminole Lodge 971 v. United Technologies Corp., 778 F.2d 1562, 1564 (11th Cir. 1986).

         Regions contends an arbitration provision found in the October 27, 2006 Master Agreement controls this dispute. That provision provides in relevant part:

REGIONS AND EMERSON AGREE THAT ALL DISPUTES, CLAIMS, AND CONTROVERSIES BETWEEN THEM, WHETHER INDIVIDUAL, JOIN, OR CLASS IN NATURE, ARISING FROM THIS AGREEMENT OR OTHERWISE, INCLUDING WITHOUT LIMITATION CONTRACT AND TORT DISPUTES, SHALL BE ARBITRATED IN BIRMINGHAM, ALABAMA, PURSUANT TO THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION UPON REQUEST OF EITHER PARTY. ANY DISPUTE AS TO WHETHER A PARTICULAR DISPUTE OR CLAIM IS SUBJECT TO ARBITRATION UNDER THIS SECTION SHALL BE DECIDED BY ARBITRATION IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION . . . NOTHING IN THIS SECTION SHALL PRECLUDE ANY PARTY FROM SEEKING EQUITABLE RELIEF FROM A COURT OF COMPETENT JURISDICTION . . . .

(Doc. 7-1 at 19, § 14). Neither party contests the validity of this agreement or that it affects interstate commerce; instead, the parties dispute whether the verbal eRIMS2 agreement falls within the scope of the Master Agreement's arbitration provision. Regions argues the broad language sweeps up all disputes between the parties, whether related to the Master Agreement and RIMS or not. (Doc. 7 at 5-6; doc. 14 at 2). Emerson contends disputes related to eRIMS2, a separate product, are not governed by the Master Agreement at all and, even if they are, Emerson's claims for equitable relief may nevertheless be pursued outside arbitration. (Doc. 11 at 2-3).

         A. Applicability of the Master Agreement

         Emerson's primary argument is the Master Agreement's arbitration clause does not apply because eRIMS2 is a distinct product not covered by the Master Agreement, which Emerson argues only relates to RIMS.[3] Emerson points to several sections of the Master Agreement to support this contention, beginning with an introductory clause of the agreement stating “Regions desires to utilize and receive certain Products and Services provided by Emerson and such other related tasks as Regions specifies, and Emerson agrees to provide to Regions . . ., ” (doc. 7-1 at 6). Next, Emerson highlights the Master Agreement's definition of the capitalized term “Products”: “‘Products' shall include, but not be limited to, all products to be provided by Emerson pursuant to an Order and/or that are subject to this Agreement, ” (id. at 7, § 1.20). The term “Order” is defined as “a purchase order, addendum, separate agreement, or [Statement of Work subject to the Agreement], together with this ...


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