Connect-Care, LLC v. The Echo Group CV-03-040-JD 10/15/03 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Connect-Care, LLC

v. Civil No. 03-40-JD Opinion No.

The Echo Group

O R D E R

Following an arbitration decision awarding damages to

Connect-Care, LLC, The Echo Group brought an action challenging

the decision in state court. Connect-Care brought an action in

this court to confirm the award and removed Echo's state court

action to this court. Those cases are now consolidated here.

Connect-Care moves for summary judgment to confirm the

arbitrator's decision, which Echo opposes.

Background

Connect-Care is a company located in Alpharetta, Georgia,

that develops, implements, and services customer relationship

management software.1 Echo is a software company, located in

Conway, New Hampshire. During the summer of 2000, Echo began to

shop for a software system to keep track of its customer

1Connect-Care was known as ProAmerica Systems, LLC. during its dealings with Echo. To avoid confusion, the court will refer to Connect-Care, rather than ProAmerica Systems. information and to perform certain customer operations.

On September 29, 2000, Connect-Care and Echo entered into

three separate agreements: a software license agreement, a

professional services agreement, and a software support

agreement. Schedule B of the license agreement provides the fee

and payment part of the agreement for the software licenses,

services, and maintenance. The total fee listed was $138,675, of

which Echo paid all but the last payment of $34,670. The license

agreement and services agreement had arbitration clauses. The

support agreement did not have an arbitration clause.

After their relationship broke down, Connect-Care filed a

demand for arbitration on February 12, 2002. Connect-Care

claimed Echo had breached the license agreement and sought

payment of $103,383.26, along with attorneys' fees, costs, and

interest. Echo filed its answer on June 4, 2002, denying that it

had breached the "software agreement," asserting a counterclaim

that Connect-Care breached "the Agreement," and demanding

$122,285.69, in refund of the fees it had paid to Connect-Care.

Echo's answer and counterclaim do not specify which agreement, of

the three, is at issue.

The arbitrator held a hearing in late September of 2002. In

the course of the hearing, the parties indicated that they

intended to submit all three agreements for arbitration, although

2 the support agreement did not have an arbitration clause. The

arbitration case manager sent a letter on September 27, 2002,

which noted the parties' intent to submit the services and

support agreements for arbitration, along with the license

agreement, and directed them to "file with the AAA the necessary

reguest to do so." In response, Connect-Care filed an amended

claim on October 17, 2002, in which it repeated its claim of

breach of the license agreement but also appended copies of the

services and support agreements, along with the license

agreement.

On October 25, 2002, the case manager again wrote to the

parties concerning the scope of the proceeding. The case manager

reported that the arbitrator had noted that Connect-Care's

amended demand for arbitration did not submit claims under all of

the agreements. Connect-Care was directed to file a second

amended demand "specifying that the claim is brought under two

written contracts containing an arbitration agreement (the

ProAmerica Systems, LLC Software License Agreement dated

September 29, 2000 and the ProAmerica Systems, LLC Professional

Services Agreement dated September 29, 2000)." As to the support

agreement, which lacked an arbitration clause, the case manager

stated the following: "Pursuant to their oral agreement

referenced above the parties should file with the American

3 Arbitration Association a written submission to arbitrate any and

all claims arising under the software support agreement, in

accordance with Commercial Dispute Resolution Procedures R-5."

On November 1, 2002, Connect-Care filed a second amended demand

for arbitration, stating that the claim was brought under the

license agreement and the services agreement. Neither party

complied with the AAA reguirements to submit the support

agreement to arbitration. Echo did not file an amended answer or

amended counterclaim.

In its brief submitted to the arbitrator, Connect-Care

stated that the primary issue was its claim that Echo breached

the license agreement. Connect-Care also argued that Echo acted

in bad faith. Echo stated in its brief that Connect-Care had

amended its demand for arbitration to include claims under both

the services and support agreements. Echo asserted that it did

not breach the parties' agreements but instead that Connect-Care

breached the agreements. Echo relied in part on the support

agreement.

The arbitrator issued his decision on December 12, 2002. In

his decision, the arbitrator explained that the parties had

agreed that the relevant documents were the license, services,

and support agreements. He noted that Connect-Care sought relief

under the license and services agreements only and that counsel

4 for Echo had not disputed those agreements as the bases for the

demand for arbitration. The arbitrator explained the scope of

his decision as follows:

Accordingly, my award and rulings are intended to dispose of all claims arising under the License Agreement and the Services Agreement. Claims arising under the Support Agreement, if any, are not comprehended in the original or the Second Amended Demand and my award and ruling is not intended to dispose of such claims, if any. I specifically rule that the Support Agreement, although referenced in the License Agreement at section 3.3, is a separate agreement that is excluded from the License Agreement by section 14.9 of the License Agreement as well as by its own terms (see section 7.1), that does not include an arbitration provision, and that is not a basis for any claim in this proceeding.

The arbitrator found that Connect-Care did not breach any

obligation under the license agreement and was entitled to an

award of the fees owed. The arbitrator found that Connect-Care

was also entitled to an award of attorneys' fees and costs, along

with interest on the amounts owed. The arbitrator denied Echo's

motion for a modification of the award. On January 29, 2003, the

arbitrator awarded $103,383.26 as breach of contract damages,

along with attorneys' fees, expenses, interest, an interest per

diem amount, and an estimated confirmation cost. The arbitrator

also calculated the administrative fees and expenses for the

proceeding and ordered Echo to pay Connect-Care that amount.

5 Discussion

Echo contends that the award should be vacated or modified

because the arbitrator improperly failed to consider Echo's

defenses and counterclaim under the support agreement but awarded

damages to Connect-Care under that agreement. Connect-Care moves

for summary judgment to confirm the award. Echo argues that

material factual issues preclude summary judgment.

Summary judgment is appropriate when "the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving party

is entitled to a judgment as a matter of law." Fed. R. Civ. P.

56(c). "Judicial review of [an] arbitrator's decision is

extremely narrow and exceedingly deferential." Wonderland

Greyhound Park, Inc. v. Autotote Sv s ., Inc.,

(1st

Cir. 2001) (internal guotation marks omitted). The court must

confirm an arbitration award "if it is in any way plausible, even

if [the court] think[s] [the arbitrator] committed serious

error." I d . (internal guotation marks omitted).

Because the parties have agreed to accept the arbitrator's

interpretation of their contract and the applicable facts, his

decision controls as long as "the arbitrator is even arguably

construing or applying the contract and acting within the scope

6 of his authority." Bull HN Info. Svs., Inc. v. Hutson,

(1st Cir. 2000). Echo invokes the statutory exceptions

which allow a court to vacate an arbitrator's decision "where the

arbitrator[] [was] guilty of misconduct ... in refusing to hear

evidence pertinent and material to the controversy . . . or where

the arbitrator[] exceeded [his] powers, or so imperfectly

executed them that a mutual, final, and definite award upon the

subject matter submitted was not made."

(a) (3) &

(4). Echo also contends, pursuant to

(b), that the

award should be vacated or modified because it was based on the

support agreement, a matter that the arbitrator ruled was not

within the scope of the proceeding.

It is undisputed that counsel for the parties agreed that

all three agreements would be submitted for arbitration.

Connect-Care presented its demand under only two of those

agreements, however: the license agreement and the services

agreement. Although the case manager reminded the parties that

the support agreement was not part of the demand and that it did

not have an arbitration clause. Echo did not clarify its intent

to proceed under the support agreement.2 More importantly, it is

2Echo's counterclaim does not specify which agreement Echo asserts was breached, and Echo never amended nor sought leave to amend the counterclaim.

7 undisputed that Echo did not file a written submission with the

AAA for permission to arbitrate claims under the support

agreement, despite the directive from the case manager to do so.

Based on these circumstances, Connect-Care did not bring a

claim under the support agreement, and Echo did not properly

present its claim under the support agreement. Therefore, the

arbitrator correctly ruled that no claim under the support

agreement was before him.

Echo also contends that the arbitrator awarded damages for

maintenance fees under the support agreement because Schedule B

of the license agreement includes fees for maintenance. In the

statement of the award, the arbitrator found no breach of the

license agreement and ruled that Connect-Care was entitled to an

award of the fees owed by Echo under that agreement. Schedule B

of the license agreement states the "License, Services and

Maintenance Fees." Although the maintenance fees in Schedule B

apparently relate to services performed under the support

agreement, the payment provision is part of the license

agreement. While more than one interpretation of the agreement

package might be possible, the arbitrator construed the license

agreement to obligate Echo to pay the fees demanded by Connect-

Care, including the maintenance fees, as part of the license

agreement. That is a plausible interpretation of the agreement. Conclusion

For the foregoing reasons, the plaintiff's motion for

summary judgment (document no. 10) is granted. The arbitration

award is confirmed.

The clerk of court shall enter judgment accordingly and

close the case.

SO ORDERED.

Joseph A. DiClerico, Jr. United States District Judge

October 15, 2003

cc: Roy S. McCandless, Esguire Robert R. Lucic, Esguire