Supply Chain Products, LLC v. NCR Corporation

Background

Supply Chain Products, LLC sued NCR Corporation on two breach-of-contract claims. The claims arose from a 2011 Software and Original Equipment Manufacturer Distribution Agreement between Supply Chain and Retalix USA, Inc., NCR’s predecessor. NCR later acquired Retalix’s parent company and assumed Retalix’s obligations under the agreement.

Count I concerned unpaid license and annual maintenance royalties for Supply Chain’s Balances invoice-reconciliation software. The agreement generally required royalties based on the greater of a percentage of the customer license fee or a fixed minimum amount. It also contained provisions requiring modifications to be in a signed writing and stating that a party’s failure to insist on strict performance would not waive its rights.

Count II concerned the agreement’s non-compete provision. That provision generally barred Retalix, while it continued to license Supply Chain’s software, from developing, acquiring, marketing, selling, licensing, or distributing products similar in form or function to Prompt, invoice reconciliation, or Balances. The provision included exceptions for additional licenses to existing Prompt customers and for similar software acquired as part of a broader software suite.

Both parties moved for summary judgment under Rule 56, which allows judgment without a trial when the evidence shows that no material factual dispute requires a trial. Supply Chain also moved to seal certain exhibits.

Count I: Unpaid royalties

For the first group of customers—Associate Growers of Baton Rouge, Fairway Markets, Earth Fare, Piggly Wiggly, and Cardenas—the court granted Supply Chain’s motion for summary judgment. The court found no material factual dispute that NCR sold the relevant Balances licenses in 2017 and 2018, that the agreement established how the royalties were calculated, and that NCR had not paid the royalties due.

The court rejected NCR’s arguments that emails, partial performance, estoppel, or waiver changed the payment terms. The emails did not show an agreement on a specific discount or otherwise define modified contract terms, and therefore did not satisfy the agreement’s signed-writing requirement. NCR also did not adequately identify the alleged oral modification, when it was made, or how it changed the agreement. The court further found no evidence that Supply Chain voluntarily and intentionally abandoned its contractual rights.

For the second group of customers—Love’s Travel Stop, Roche Bros., Giant Eagle, Kinney Drug, and Fresh Thyme—the court granted NCR’s motion for summary judgment. The court found that NCR conceded it owed unpaid maintenance royalties for 2020 and 2021 and that Supply Chain had established the elements of breach of contract for those payments.

For the additional Giant Eagle and Fresh Thyme locations, NCR moved for summary judgment on whether it had to pay royalties for customer use that NCR did not authorize. The court granted NCR’s motion on that legal issue, holding that the agreement required NCR to pay royalties only for Balances licenses that NCR granted or authorized. The written addenda changed the payment structure for certain locations but did not change the agreement’s basic requirement that the relevant licenses be granted by NCR.

The court denied Supply Chain’s motion for summary judgment concerning the additional Giant Eagle and Fresh Thyme locations. It found a genuine factual dispute about whether NCR granted or authorized additional Balances licenses and, if so, how many. Evidence that Balances was used at additional locations did not conclusively establish that NCR had granted those additional licenses.

Count II: Non-compete provision

The court granted NCR’s motion for summary judgment on the non-compete claim and denied Supply Chain’s motion. Applying New York’s rule for restrictive provisions in ordinary commercial contracts, the court considered whether the clause protected a legitimate business interest, was reasonable in geographic scope and duration, and imposed an undue hardship.

The court held that the provision was unenforceable because it was overly broad and unreasonable in scope. Supply Chain did not adequately explain how the provision protected against unfair competition, goodwill-related harm, or misuse of proprietary information. The agreement’s confidentiality provision addressed confidential information, and the court found that Supply Chain had not shown why that provision was insufficient.

The court also found that the non-compete had no geographic limitation and could burden NCR wherever it wanted to sell or market invoice-reconciliation software, including places where Supply Chain did not compete. In addition, the provision covered any product similar in form or function to invoice reconciliation, creating uncertainty about which software products were prohibited and imposing an undue hardship on NCR. The court declined to narrow the provision by removing some of its language because the record did not sufficiently establish the capabilities and functions of the software products involved.

Other rulings and disposition

The court granted Supply Chain’s motions to seal certain exhibits after finding that confidentiality interests outweighed the value of public access to that information. The court declined to decide Supply Chain’s attorney-fee application at that stage because the application lacked billing records and supporting affidavits or declarations. The court stated that Supply Chain could renew the fee motion at the conclusion of the action.

The court concluded that the parties’ summary-judgment motions were granted in part and denied in part. It directed the parties to file a joint status report about the next steps within 21 days and requested that the clerk terminate the pending motions.