United States Court of Appeals
For the First Circuit
Nos. 10-1305, 10-2432
THE CAPABILITY GROUP, INC.,
Plaintiff, Appellant,
v.
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.,
Defendant, Appellee.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Douglas P. Woodlock, U.S. District Judge]
Before
Torruella, Boudin and Thompson,
Circuit Judges.
Peter A. Biagetti with whom Amanda B. Carozza and Mintz,
Levin, Cohn, Ferris, Glovsky & Popeo, P.C. were on brief for
appellant.
John F. Farraher, Jr. with whom Zachary C. Kleinsasser, Louis
Smith and Greenberg Traurig, LLP were on brief for appellee.
September 9, 2011
BOUDIN, Circuit Judge. This appeal arises out of a
contract dispute between two companies: American Express Travel
Related Services Company, Inc. ("AmEx") and The Capability Group,
Inc. ("Capability"). AmEx is in the business of global payments
and travel services, while Capability trains other companies in a
method of increasing business efficiency called Six Sigma. The
lawsuit, brought by Capability against AmEx, was resolved in the
latter's favor on summary judgment.
Six Sigma, broadly speaking, is a business management
approach that aims at improving outputs using certain quality
control and statistical techniques. See generally Newcombe, Law
Firm Convergence Meets Six Sigma, Of Couns., May 2007, at 7 (2007).
It can be adapted to many industries and embodied in training
materials directed to a specific company's business operations.
Six Sigma has been used by various consultants and companies for
several decades.
In the late 1990s, AmEx was assisted by another Six Sigma
consultant who in turn used Capability as a sub-contractor. After
this initial exposure to Capability, AmEx contracted directly with
Capability to provide Sigma Six training and related materials to
AmEx employees. The agreement, entered into on August 14, 2000,
and later amended, promised Capability (1) a guaranteed, fixed base
compensation of $4 million, and (2) a "gain sharing fee" to be paid
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only if AmEx surpassed savings in calendar year 2001 of $106
million as a result of Capability's work.1
AmEx's Global Six Sigma Performance Group ("Performance
Group") was responsible for tracking and for assisting with
implementation of Six Sigma projects across the company. Janet
Young headed the Performance Group, which comprised about 25-30
employees, and David Hudson, another Performance Group employee,
created a database that tracked financial and other project
information supplied by each project team for all of the hundreds
of Six Sigma projects at AmEx.
In September 2000, Capability hired a consultant--BGM
Services, Inc. and its principal Arthur Zentner-–to assist with the
development of course materials and training, and in the same month
Capability and BGM offered the first training course. Capability
completed its work under the agreement by December 31, 2001. There
was little discussion between Capability and AmEx as to the results
of the savings tracking until rather late in the process, but a few
clues could have encouraged optimism on Capability's part starting
in mid-2001.
1
The agreement provided: "As additional compensation
hereunder, [AmEx] agrees to pay [Capability] an additional fee
("gain sharing") based on the calculated benefit of the net savings
to [AmEx], its parent or affiliates realized during calendar year
2001 resulting from the materials, training, coaching and
development of personnel contemplated by this Agreement. The
additional gain sharing payment will be calculated as set forth in
this Section 8 and on Exhibit E." All of the pertinent provisions
are in an addendum to this decision.
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In August 2001 Zentner participated in a monthly
conference call with AmEx and Capability personnel and heard an
AmEx employee comment in substance that "the savings target was
achieved," which Zentner took to mean that AmEx had reached $106
million in savings. In mid-December 2001, Janet Young sent an e-
mail to Kevin Weiss, the CEO of Capability, relating in part to the
gain sharing fee calculation; it included the statement: "Current
projected Net Savings as of November, 2001: $102mm. Final
calculation to be completed Dec. 31, 2001."
A couple of months later, after AmEx computed the final
net savings at around $90 million, Young supplied Capability
savings reports showing gross savings of $149 million, and a
spreadsheet file titled "Final-TCG Contract Pay-out Final gain
share analysis" that explained the $90 million net figure--but a
second, never fully explained worksheet contained different numbers
and specified a net savings figure of over $107 million.
In the same time frame, Capability raised questions as to
whether AmEx was fully complying with confidentiality provisions in
the contract designed to protect Capability's training materials.
One alleged breach concerned an IBM contractor who refused to sign
a confidentiality agreement before being trained with protected
materials, and another involved a third-party vendor to AmEx, The
Quality Group, that incorporated protected information into an
online demonstration product.
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On November 5, 2002, Capability rejected AmEx's
calculations as inconsistent with the agreement, demanded an
explanation for the conflicting spreadsheets, and asserted
knowledge of new confidentiality violations related to five former
AmEx employees taking confidential materials with them to new jobs.
AmEx responded in March 2003 that it stood by its calculations and
methodolody, dismissing the second spreadsheet as a draft.
Following a nearly five-year hiatus, Capability filed
suit against AmEx on January 29, 2008. In Count I, the complaint
charged breach of contract based both on the failure to pay a gain
sharing fee and on alleged breaches of the confidentiality
provisions. Count II sought an accounting for disclosures or uses
of the Capability materials inconsistent with the copyright license
provided by the agreement. After discovery, the district court
granted AmEx summary judgment on both counts.
Starting with the gain sharing fee, the district court
ruled that the contract was unambiguous, that the gross savings
figure generated by the system was not decisive because a net
figure was contemplated, and that Capability had failed to show
that the $90 million net calculation was erroneous. As to
confidentiality breaches, the court found that they were largely
minor or technical, and that no damages had been established. It
also rejected the copyright claim on limitations grounds, and
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Capability appealed only from the judgment rejecting the contract
claim.
While that appeal was pending, Capability moved for
relief from judgment in the district court, Fed. R. Civ. P. 60(b),
arguing that its attorney's poor performance and suspension from
practice shortly after summary judgment proceedings justified
relief. After a hearing, the district court denied Capability's
motion, and Capability timely appealed from that order. We
consolidated the two appeals and now affirm.
The standard of review on summary judgment is de novo,
drawing inferences in favor of the non-moving party. Landrau-
Romero v. Banco Popular de P.R., 212 F.3d 607, 611 (1st Cir. 2000).
The contract provides that New York law governs its interpretation.
Review of an order denying a post-trial motion under Rule 60(b) is
for abuse of discretion, Karak v. Bursaw Oil Corp., 288 F.3d 15, 19
(1st Cir. 2002), which in practice means de novo review of strictly
legal determinations and deference to the extent that the denial
turns on factual or judgmental determinations.
The gain sharing fee. Capability first argues that the
agreement unambiguously required AmEx to use the $149 million
savings figure reported by its internal savings system--without
subtraction of savings not attributable to Capability's Six Sigma
efforts--as the trigger for additional payment. Capability does
not, however, dispute that the $149 million figure included savings
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from 715 Six Sigma projects, some of which were unrelated to
Capability's own work, and failed to exclude certain costs of
implementing the Six Sigma program.2
Capability's most far-reaching argument for rejecting the
net $90 million figure is that the agreement implicitly required
use of the gross figure because (1) it provided that the
calculations derived from AmEx's system would be determinative, and
(2) no further massaging of numbers was permitted. The first
proposition is true but not the second. The argument emphasizes
the underscored language in the agreement:
The gain sharing shall be determined by [AmEx]
using the system it uses itself to internally
track and report on such savings for internal
business purposes. [AmEx] will provide
regular reports off of this system to
[Capability], redacting any confidential
information as appropriate. The savings
calculations from [AmEx's] system shall be
determinative and not subject to challenge by
[Capability].
But this language must be read together with the
agreement's gain sharing provision. It explicitly provides that
the gain sharing fee is to be "based on the calculated benefit of
the net savings to [AmEx] . . . resulting from the materials,
2
The record shows that the $149 million was reduced to $90
million by subtracting: $43,502,206 in savings from projects that
Janet Young's team determined were not connected in any manner with
Capability's work; $7,131,946 in savings from projects completed
before November 2000 (because the first Capability training course
was not completed until December 2000); and $8.1 million in program
operating costs and vendor payments.
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training, coaching and development of personnel contemplated by
[the] Agreement." See note 1, above (emphasis added). Exhibit E,
cross-referenced in this provision, also refers to "realized actual
net savings."
Nor is the language relied on by Capability inconsistent
with AmEx's derivation of the net figure. AmEx's calculation did
"us[e] the system" to generate a number that reflected actual net
savings "shown on" and "from" the system. It then permissibly
removed other savings "shown on" and "from" the system unrelated to
Capability's work and--consistent with the aim of deriving a final
net number--it reduced the relevant savings by the costs of
implementing the Six Sigma program.
Capability points to the second sentence of the excerpt
quoted above, saying that the requirement of regular reports
generated by the AmEx system would be meaningless if the numbers in
those reports did not establish the final figure. But Capability
had good reasons to monitor the changing gross savings as they were
reported, and to insist that the final reported number be a
starting point for calculations, even though the final net numbers
might be determined only later in the day.
Capability's fallback position is to argue first that at
least the agreement should be taken to be ambiguous, permitting
consideration of parol evidence. The parol evidence rule does
invite resort to extrinsic evidence, such as negotiations between
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the parties, where a contract's terms are unclear. But here there
is nothing ambiguous in the agreement's explicit specification of
net savings resulting from Capability's contribution. E.g.,
Teitelbaum Holdings, Ltd. v. Gold, 396 N.E.2d 1029, 1031 (N.Y.
1979).
Capability also argues that it was a shared purpose of
the parties to achieve savings of $106 million. That figure was
certainly an objective; but it is also evident that AmEx intended
to limit its payment to Capability if that goal was not achieved.
Nor is it apparent why Capability should expect to receive a
performance-based payment for $59 million in savings unrelated to
its own work under the contract.
Capability's final fallback argument is that there was at
least a material issue of fact as to the correctness of the
subtractions, and this in turn necessarily generated material
issues of fact precluding summary judgment. This would indeed be
a promising line of attack if Capability had attempted to identify
evidence at the summary judgment stage that any one of the
individual components of any of the subtracted figures--for
example, a subtracted project that reduced the net savings--did
result from use of Capability's training or materials.
Capability points us to no such evidence. Instead,
Capability chooses to argue that the overall correctness of the $90
million calculation is globally impeached not by particular errors
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but by three pieces of evidence already adverted to: an AmEx
employee's statement during a conference call in August 2001, Janet
Young's December 12, 2001, e-mail, and the second spreadsheet that
identified $107 million in savings.
As already noted, Zentner testified at his deposition
that during a conference call with AmEx, he heard an AmEx employee
comment to the effect that "the savings target was achieved." But
the call was among Six Sigma representatives from across AmEx,
which had its own internal savings target, and the vague comment
left unstated which "target" the employee was referring to--not to
mention leaving unclear whether the savings were projected or
actual and whether they were gross or net.
As for Young's e-mail, the sentence to which Capability
points--"[c]urrent projected Net Savings as of November, 2001: $102
mm"--expressly cautioned that it was a projection, i.e., estimate,
and came immediately after a warning that AmEx was in the process
of adjusting savings projections as a result of the events of
September 11, 2001. Capability was free to explore in discovery
how the estimate was altered by events and the revising-down
process; if it did so, nothing helpful to Capability has been
called to our attention.
As for the mysterious $107 million spreadsheet, AmEx
produced admissible evidence identifying the $90 million
spreadsheet as the final calculation and explaining how it
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conducted its analysis in arriving at that figure. Despite
discovery, Capability has failed to adduce any meaningful evidence
refuting the propriety of Capability's calculations or showing that
the $107 million spreadsheet was the final version rather than some
interim or incomplete calculation or projection.
Its closest attempt is a strained reading of a footnote
in the $90 million spreadsheet that identified a large deduction as
"categorized under a subset of Six Sigma unrelated to
[Capability's] work but tracked via [AmEx's] system." Capability
wishfully suggests that anything under the banner of Six Sigma had
to be credited toward the gain sharing fee, regardless of whether
it derived from Capability's work. This misreads the agreement for
reasons already explained.
In its reply brief, Capability for the first time
stresses that AmEx's spreadsheet describes the starting $149
million savings figure as being "net of costs to implement,"
arguing that this is inconsistent with an additional subtraction
for $8.1 million in program costs; but the uncontradicted evidence
from Janet Young's deposition was that the $149 million figure was
net of "project cost[s] for individual projects," not overarching
costs such as operating the Performance Group itself.
The reply brief also contends that an internal AmEx
memorandum represents a fourth piece of evidence creating a genuine
issue of material fact in stating, "Through the third quarter, we
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already exceeded our goal of delivering $100 million in benefits
for the year with 293 completed Six Sigma projects across the
company." Nothing indicates that this is a net figure reflecting
only Capability-assisted projects.
Confidentiality claims. Capability also appeals from
summary judgment on its contract claim based on the agreement's
confidentiality provisions. One such provision gave AmEx a license
to distribute and use the materials created under the agreement
for training AmEx employees as well as "contractors and consultants
who [AmEx] determines are integral to [AmEx] business initiatives,"
provided that the latter and their employers also sign
confidentiality agreements restricting their use of the materials.
The alleged breaches consisted of distributing
confidential materials to contractors and consultants who had not
signed, or whose employers had not signed, confidentiality
agreements; allowing former employees to retain materials after
they left AmEx; and permitting an unauthorized third-party company,
The Quality Group, to use and distribute the materials. AmEx
virtually concedes that it had in some instances not properly
policed its materials or obtained the proper signatures.
However, AmEx also asserts that the breaches were minor,
that none of the materials are now being distributed outside the
company or have been since 2005, and that Capability has not been
damaged in any of the episodes. The district judge agreed and, as
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to The Quality Group's arguable unauthorized use, found that a May
2005 license by Capability granted The Quality Group use of the
material in exchange for a fee paid to Capability.
Capability's position is that the materials had inherent
value evidenced by AmEx's payments to Capability under the
contract; and so, Capability asserts, a jury could conclude that
but for AmEx's failure to secure confidentiality agreements, the
recipient companies would otherwise have paid Capability for the
right to use the materials. But the materials were furnished to
help these third parties in AmEx's business and were not otherwise
used.
The one exception--The Quality Group's incorporation of
protected materials into an online demonstration product--was
ultimately covered by a license and license fee. It appears from
the license agreement that it covered The Quality Group's pre-
license uses and, in any event, Capability does not suggest
otherwise. Thus, the district judge correctly concluded that it
would be double recovery to require any payment from AmEx on
account of this episode.
The contract also stipulated that breaching the
confidentiality provisions would amount to "irreparable and
continuing damage or injury" entitling the nonbreaching party to
request an injunction, as well as attorneys' fees incurred for that
purpose. Capability claimed in the district court that it is
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entitled to both an injunction and fees, but the district court
found that no further threat of improper disclosure existed, AmEx
having long since ceased providing the materials to outsiders.
Although Capability still insists that it is entitled to
the injunction even without such a threat, injunctions are almost
always discretionary exercises of the court's equity powers, and
are rarely warranted where no threat of future harm exists.3 The
agreement's language might suffice to avoid proof of irreparable
injury in the case of continuing disclosure, but the parties have
no power to compel a court to grant equitable relief that the court
finds to be unnecessary. E.g., Fireman's Ins. Co. of Newark, N.J.
v. Keating, 753 F. Supp. 1146, 1154 (S.D.N.Y. 1990).
Capability's Rule 60(b) motion. Capability sought by
post-judgment motion, Fed. R. Civ. P. 60(b), and the district court
denied, relief from the judgment on the grounds that its own trial
attorney's negligence and misconduct (counsel was replaced for the
appeal) denied it an opportunity to fully litigate its claims.
Capability contended that its trial attorney was suffering through
3
Goodwin v. C.N.J., Inc., 436 F.3d 44, 49 (1st Cir. 2006) (an
injunction is inappropriate when "intervening events have
eliminated any reasonable anticipation that the aggrieved party
will, in the future, be faced with a recurrence of the alleged
harm"); accord Coady Corp. v. Toyota Motor Distribs., Inc., 361
F.3d 50, 61 (1st Cir. 2004) ("[I]njunctions are normally a matter
of equity and the court is not required to waste resources where
there is no ongoing harm and reasonable threat of recurrence.").
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personal and family distractions, undisclosed to Capability, that
compromised his ability to conduct the lawsuit.
On this appeal, Capability says that the denial of such
relief was error. In civil cases, inadequate representation is
normally a matter to be resolved between the attorney and his
client, cf. Dávila-Álvarez v. Escuela de Medicina Universidad
Central del Caribe, 257 F.3d 58, 66 (1st Cir. 2001), but perhaps in
unusual circumstances it could be a basis for Rule 60(b) relief.
See Chang v. Smith, 778 F.2d 83, 85 (1st Cir. 1985) (reserving the
question). But at a minimum this would require both incompetent
performance that the client could not have forestalled and a
showing of likely prejudice.
Without describing the travails of Capability's former
counsel in any detail, we will assume arguendo that his performance
was seriously compromised by circumstances not disclosed to his
client. But Capability's Rule 60(b) motion failed to show that
superior representation would likely have altered the result. On
the contrary, nothing in the four pieces of omitted evidence now
identified by Capability suggests that, singly or together, the
outcome might have been different.
Capability first says its then counsel should have told
the court the identity of the AmEx employee, Mark LeFort, who
commented during the August 2001 conference call with Zentner that
"the savings target was achieved"; but as already explained, the
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remark is too murky to reinforce Capability's case regardless of
who made it. The second piece of evidence allegedly overlooked by
counsel, an internal AmEx memorandum referencing third-quarter
savings, is (as we have said) similarly imprecise.
The last two items, an e-mail from AmEx to Capability
containing discussion points for the contract negotiations and an
internal AmEx PowerPoint presentation bearing on AmEx's internal
savings goals, are also of no help to Capability. They are
advanced as parol evidence of the parties' intentions as to how the
agreement's gain sharing provisions should be read. But, as we
have already explained, parol evidence was not admissible to
contradict the unambiguous contract language.
True enough, cases often repeat the canonical language--
strictures against parol evidence to contradict unambiguous
language--while sometimes seeming to find ambiguities in part
because the parol evidence is itself so powerful. None of the
evidence identified by Capability, whether cited to the district
court originally or only in the Rule 60(b) motion, rises to this
level. The denial of Rule 60(b) relief was not an abuse of
discretion.
Affirmed.
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ADDENDUM
Gain Sharing Provisions:
[8]c. Gain Sharing. As additional
compensation hereunder, [AmEx] agrees to pay
[Capability] an additional fee ("gain
sharing") based on the calculated benefit of
the net savings to [AmEx], its parent or
affiliates realized during calendar year 2001
resulting from the materials, training,
coaching and development of personnel
contemplated by this Agreement. The
additional gain sharing payment will be
calculated as set forth in this Section 8 and
on Exhibit E.
(1) The gain sharing shall be determined
by [AmEx] using the system it uses itself to
internally track and report on such savings
for internal business purposes. [AmEx] will
provide regular reports off of this system to
[Capability], redacting any confidential
information as appropriate. The savings
calculations from [AmEx's] system shall be
determinative and not subject to challenge by
[Capability].
***
Exhibit E
A gain sharing payment will be made in
addition to the base compensation provided
for above if realized actual net savings
during the calendar Year 2001 equals or
exceeds $106 million. If this threshold is
not met, no gain sharing payment will be due.
No gain sharing payment will be made in
connection with anticipated savings or
savings not realized during the calendar year
2001.
If [AmEx's] actual net savings shown on
[AmEx's] tracking system described in Section
8.c.1 of this Agreement realized during the
calendar year 2001 equals or exceeds $106
million, [AmEx] will pay [Capability] a gain
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sharing payment equal to $1 million plus 10%
of the amount by which such actual net
savings realized during the calendar year
2001 exceed $106 million; provided however,
that in no event will the total gain sharing
payment made under this Agreement exceed $3
million.
Confidentiality Provisions:
[5]b. License to [AmEx]. [Capability] hereby
grants to [AmEx] a perpetual, irrevocable
(subject to release by [AmEx] only under the
circumstances provided in Section 9.f hereof,
nonexclusive, nontransferable, worldwide
license under [Capability's] copyright,
patent, trade secret rights, trade name,
and/or service mark to use the Course
Materials, in any and all media forms, for
the sole and express limited purpose of
[AmEx] utilization for training as provided
herein. No licenses under any other trade
secrets, patents, copyrights, mask works,
trademarks, or other intellectual property
rights other than the Course Materials are
granted. The license authorizes [AmEx] (i)
during or after the term of this Agreement,
to use, make ongoing changes to, and
distribute the Course Materials and to
provide associated training internally to its
employees, affiliates, and employees of its
affiliates; (ii) during and after the term of
this Agreement, to use, make ongoing changes
to, and distribute the Course Materials and
to provide associated training to contractors
and consultants who [AmEx] determines are
integral to [AmEx] business initiatives where
the quality tools and process improvement
philosophy are being deployed, provided that
the employers of any such contractors and
consultants, and the contractors and
consultants themselves, sign Confidentiality
Agreements substantially in the forms set
forth in Exhibits G and H hereto prior to
receiving the Course Materials or
participating in the training . . . .
***
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[9]g. Breach Involving Confidential
Information. As set forth in Section 4
hereof, both parties acknowledge that the
information, including, but not limited to
the format, structure, analysis, materials
and techniques that are integral to the
Course Materials, and the content of the
Custom Course Materials and the [AmEx]
Process Improvement Course Materials is
confidential and to the extent, and as set
forth in this Agreement, the property of each
respective party as allocated herein.
Accordingly, each party recognizes and agrees
that their compliance with the covenants and
agreements contained in this Agreement are
reasonable and necessary for the protection
of parties' rights. Each party recognizes
and agrees that any violation of any of the
covenants and agreements contained in this
agreement will cause irreparable and
continuing damage or injury to the other
party, the exact amount of which would be
difficult to ascertain and for which there
may be no adequate remedy at law, and that,
for such reasons, among others, each
respective party shall be entitled, as a
matter of course, to request an injunction
from any court of competent jurisdiction
restraining any further such violation as
well as recovery from the other party of any
and all costs and expenses sustained or
incurred by the complaining party in
obtaining such an injunction, including
without limitation reasonable attorneys'
fees. Such right to request an injunction
(and to recover such costs and expenses)
shall be cumulative and in addition to any
other rights and remedies to which the
complaining party may be entitled.
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