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PaySys International, Inc. v. Atos Se, Worldline SA

United States District Court, S.D. New York

July 7, 2017

PAYSYS INTERNATIONAL, INC., Plaintiff,
v.
ATOS SE, WORLDLINE SA, ATOS IT SERVICES LTD., Defendants. ATOS SE, WORLDLINE SA, ATOS IT SERVICES LTD., Counterclaim Plaintiffs,
v.
PAYSYS INTERNATIONAL, INC. and FIRST DATA CORPORATION, Counterclaim Defendants.

          OPINION & ORDER

          KATHERINE B. FORREST, UNITED STATES DISTRICT JUDGE

         This Memorandum Decision & Order resolves three motions in this protracted litigation between PaySys International, Inc. (“PaySys”) and defendants Atos Se, Worldline SA (“Worldline”) and Atos IT Services Ltd. (“Atos IT”) (collectively, “Atos”) regarding the rights to CardPac, a computer program owned by PaySys.

         Now before the Court are PaySys's motion to voluntarily dismiss the complaint with prejudice (ECF No. 275), Atos's motion for summary judgment (ECF No. 280) and PaySys's motion for partial summary judgment (ECF No. 286). For the reasons set forth below, the Court hereby GRANTS PaySys's motion for voluntary dismissal and dismisses the action with prejudice under Federal Rule of Civil Procedure 41(a)(2), subject to the terms set forth herein. The motions for summary judgment at ECF Nos. 280 and 286 are hereby terminated as moot.

         I. BACKGROUND

         This case began in late 2014. After nearly three years of litigation and several rulings on dispositive motions-the history of which has been recounted elsewhere[1]-this case was set to proceed to trial on June 5, 2017 on the only remaining claims: PaySys's first cause of action for breach of contract (see ECF No. 103 (“SVAC”) ¶¶ 156-62) and Atos's second, fourth and fifth counterclaims for declaratory judgments concerning the parties' contract (see ECF No. 108 (“Answer”) ¶¶ 51-53, 57-59, 60-62).

         At issue here is a license agreement first executed in 1988 and later amended in 1990 and 2001 (the Software Acquisition Agreement, or “SAA”), pursuant to which PaySys's predecessor licensed Atos certain rights to a computer program known as “CardPac.” PaySys alleges that Atos breached its agreements with PaySys by (1) granting rights to licensees in violation of the agreements' territorial restrictions, and (2) selling a software known as “APS” and its derivatives without following certain contractual procedures, including paying certain fees to PaySys. (SVAC ¶¶ 156-62.) Atos, in turn, contends that no such breach occurred (Answer ¶¶ 51-53 (second cause of action)), that PaySys lacks ownership rights in certain programs (id. ¶¶ 60-62 (fifth cause of action)) and that the SAA, as amended, confers no audit rights on PaySys (id. ¶¶ 57-59 (fourth cause of action)).

         The 2001 amendment to the SAA (the 2001 Confidential Settlement Agreement, or “CSA”) contains a fee-shifting provision, Section 6(e). Section 6(e) provides that:

In the event of litigation between the parties with respect to any claim that [Atos's predecessor] or any of [its] [a]ffiliates has committed a territorial violation, the prevailing party shall be entitled to an award of its reasonable attorneys' fees.

(ECF No. 130 Ex. 4 § 6(e) (“Section 6(e)”).)

         The Court now must decide three dispositive motions filed on the eve of the April 7, 2017 summary judgment deadline: PaySys's motion to voluntarily dismiss the complaint with prejudice (ECF No. 276) and two dueling summary judgment motions seeking dismissal of all, in the case of Atos's motion (ECF No. 280), or part, in the case of plaintiff's motion (ECF No. 286), of PaySys's remaining contractual claim.

         The parties' positions with regard to these motions are set forth not only in their respective briefs, but also in various letter submissions filed in response to the Court's inquiries.[2] PaySys seeks to voluntarily dismiss the case with prejudice and, as a condition of dismissal, agrees to grant Atos “an unqualified covenant not to sue with an unrestricted, perpetual, assignable global license to CardPac and CardPac derivatives with no further obligations to PaySys.” (ECF No. 309 at 2 (alterations omitted); see also ECF No. 276 at 6-8 (discussing offer to grant license); ECF No. 303 at 4 (same).) Atos consents to a dismissal on these terms, provided the Court additionally finds that Atos, as the “prevailing party” under Section 6(e), is entitled to its reasonable attorneys' fees. (ECF No. 296; ECF No. 306 at 5; ECF No. 312 at 6-8. The parties agree that granting PaySys's 41(a)(2) motion in any form-that is, regardless of whether the Court awards Atos attorneys' fees-moots the parties' pending motions for summary judgment and defendants' remaining counterclaims. (ECF No. 303 at 4; ECF No. 306 at 5.) The Court therefore considers PaySys's Rule 41(a)(2) motion first.

         II. DISCUSSION

         PaySys's motion under Rule 41(a)(2), and Atos's conditional consent thereto, raises two key questions: First, does PaySys's voluntary dismissal of its contractual claim render Atos the “prevailing party” with regard to “any claim that [Atos] . . . committed a territorial violation, ” such that Atos is entitled to an award of its reasonable attorneys' fees under Section 6(e) of the parties' contract? Second, if so, may this court condition approval of PaySys's Rule 41(a)(2) motion on the award of reasonable attorneys' fees to Atos? For the reasons set forth below, the Court answers both questions in the affirmative.

         A. Interpretation of the Term “Prevailing Party”

         In deciphering what the parties intended by the term “prevailing party, ” the Court turns to well-established principles of contractual interpretation. In the absence of any alleged ambiguity or contrary intent, contractual terms must be accorded their plain meaning. E.g., Law Debenture Trust Co. of N.Y. v. Maverick Tube Corp., 595 F.3d 458, 467-68 (2d Cir. 2010) (“Thus, a written agreement that is complete, clear and unambiguous on its face must be interpreted according to the plain meaning of its terms, without the aid of extrinsic evidence”) (alterations, quotation marks and internal citations omitted); R/S Assocs. v. N.Y. Job Dev. Auth., 771 N.E.2d 240, 242 (N.Y. 2002) (same). An ambiguity does not exist merely because a term is undefined, as courts in such cases will treat “an established definition provided by state law . . . as a default rule, and that definition will control unless the parties explicitly indicate, on the face of their agreement, that the term is to have some other meaning.” Hugo Boss Fashions, Inc. v. Fed. Ins. Co., 252 F.3d 608, 617-18 (2d Cir. 2001). If “neither the contract nor state law defines a disputed term, ” courts should then turn to federal law for guidance, provided the “contracting parties use terms and concepts that are firmly rooted in federal law, and where there are no explicit signals to the contrary.” Id. at 618.

         Here, the SAA expressly states that it “shall be governed by and construed in accordance with the laws of the United States and of the State of New York.” (ECF No. 130 Ex. 1 § 17(a).) The Court understands this provision to mean that the contract is governed by New York law-as the Court has previously held (see ECF No. 232 at 3), as PaySys has insisted (see ECF No. 345 at 4-6) and as Atos has previously intimated (see Answer ¶ 27)-and that federal law serves as a backdrop where state law authority is lacking. Put differently, the Court reads the parties' contract as perfectly tracking the interpretive default rule set forth in Hugo Boss. New York's established definition of the term “prevailing party, ” therefore, should govern the dispute at hand.[3]

         The Court also recognizes, however, that other courts in this district have turned to federal law to define the term “prevailing party” in New York-based contracts, see, e.g., Great Earth Int'l Franchising Corp. v. Milks Dev., Inc., No. 01-CV-141 (AKH), 2004 WL 2049268, at *2 (S.D.N.Y. Sept. 13, 2004), and the parties' initial briefing on this motion focused on case law analyzing the federal law interpretation of the term (see ECF No. 312 at 7-8; ECF No. 327 at 2-3). Though the Court believes New York law ought to govern this issue, it matters little whether the parties intended New York or federal definitions to apply, as Atos is the “prevailing party” under either framework.

         i. New York Law

         Under New York law, “[i]n determining whether a party is a prevailing party, a fundamental consideration is whether that party has ‘prevailed with respect to the central relief sought.'” Chainani v. Lucchino, 942 N.Y.S.2d 735, 736 (App.Div. 2012) (quoting Nestor v. McDowell, 615 N.E.2d 991, 994 (N.Y. 1993)). “[S]uch a determination requires an initial consideration of the true scope of the dispute litigated, followed by a comparison of what was achieved within that scope.” Excelsior 57th Corp. v. Winters, 641 N.Y.S.2d 675, 676 (App.Div. 1996) (citing Solow v. Wellner, 613 N.Y.S.2d 163 (1994), aff'd, 658 N.E.2d 1005 (N.Y. 1995)). “Prevailing party” status is determined on the matter as a whole, not on a claim-by-claim basis. See Wiederhorn v. Merkin, 952 N.Y.S.2d 478, 482 (App.Div. 2012) (“It is not necessary for a party to prevail on all of his claims in order to be considered ‘prevailing'”); see also Matsumura v. Benihana Nat'l Corp., No. 06 CIV. 7609 ...


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