North MS Med Ctr v. Quartiz
U.S. Court of Appeals for the Fifth Circuit
North MS Med Ctr v. Quartiz
Opinion
Case: 23-60483 Document: 74-1 Page: 1 Date Filed: 01/28/2025
United States Court of Appeals
for the Fifth Circuit
____________ United States Court of Appeals
Fifth Circuit
No. 23-60483
FILED
January 28, 2025
____________
Lyle W. Cayce
North Mississippi Medical Center, Inc., Clerk
Plaintiff—Appellee,
versus
Quartiz Technologies, doing business as Value Ascent, Inc.,
Defendant—Appellant.
______________________________
Appeal from the United States District Court
for the Northern District of Mississippi
USDC No. 1:23-CV-3
______________________________
Before Higginbotham, Stewart, and Haynes, Circuit Judges. *
Patrick E. Higginbotham, Circuit Judge: **
In August 2018, North Mississippi Medical Center, Inc. and Quartiz
Technologies entered into a three-year Masters Services Agreement, by
which Quartiz would configure and manage a database for NMMC. In May
2022, NMMC requested a database backup, which Quartiz promptly
delivered. Quartiz then sought a preliminary injunction to prevent its use by
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*
Haynes, Circuit Judge, concurring in judgement only.
**
This opinion is not designated for publication. See 5th Cir. R. 47.5.
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No. 23-60483
NMMC, which the district court denied. Quartiz timely appealed. Finding
that the district court did not abuse its discretion in denying this relief, we
AFFIRM.
I.
In August 2018, North Mississippi Medical Center, Inc. (“NMMC”)
entered into a Master Services Agreement (“MSA” or “the Agreement”)
with Quartiz Technologies (“Quartiz”) to configure and manage a
PeopleSoft database for three years. 1 The MSA and subsequent Statements
of Work (“SOW”) transferred most of NMMC’s data management needs to
Quartiz. 2 Under a September 2019 SOW, NMMC and Quartiz agreed that
Quartiz would migrate NMMC’s database to the cloud, optimize database
functionality, and manage the data for the duration of the contract term.
Quartiz’s performance was satisfactory for the duration of the contract.
In the spring of 2022, however, NMMC began taking steps to move
the administration of its PeopleSoft database in-house. In March 2022,
NMMC entered into an MSA with SpearMC Consulting, Inc.
(“SpearMC”), a contractor in PeopleSoft data management services.
NMMC and SpearMC executed their first SOW in May 2022, which
specified that SpearMC would provide Amazon Web Services (“AWS”)
migration services and related PeopleSoft database management support.
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1
PeopleSoft is a software owned by Oracle Corporation that provides human
resource management systems, financial management solutions, and other enterprise-
related management functionalities to business entities.
2
In relevant part, the MSA states: “1. Deliverables, Work Products, Services.
Company shall provide services for purposes of maintenance, configuration, support, error
corrections, installation, hosting, and other related services (‘Services’) of Business,
Information, and Computer systems to the Client as described on one or more Statements
of Work signed by Company and Client that reference this Agreement (‘SOW’ or
‘Statement of Work’).” (emphasis in original). Though “Statement of Work” is not
officially defined in the Agreement, it describes the services that Quartiz is to provide
NMMC in further detail.
2
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In May 2022, emails between Daphne Clement, NMMC’s IT
Business Manager and Eldo Mathew, Quartiz’s co-founder and lead on the
NMMC contract, show that NMMC requested a full database backup from
Quartiz. Quartiz provided that backup five days later. NMMC and Quartiz
dispute whether NMMC requested the database backup with the intent of
sharing it with SpearMC or whether it was “solely for security and auditing,”
as Clement had represented in her May 2022 email. Regardless, neither party
disputes that NMMC provided SpearMC with access to this database
backup, and it has been using the database backup to complete its work on
database migration for NMMC ever since.
In October 2022, NMMC made a formal request to Quartiz for the
return of the PeopleSoft database. Quartiz responded, stating that it could
not comply with the request because doing so would require Quartiz to
provide NMMC with its intellectual property (“IP”), which Quartiz alleged
it retained the rights to. Quartiz also addressed the May 2022 database
backup, and ordered NMMC to “not use, copy, or redistribute any software
components or custom programs” delivered along with the database backup,
and to destroy any off-site copies, or copies used outside of the purposes of
security and auditing.
In November 2022, Bruce Toppin, NMMC’s chief legal officer
replied, again requesting the return of NMMC’s database; Toppin stated
that failure to return the database would prompt NMMC to explore “all legal
remedies, both civil and criminal.” NMMC and Quartiz ultimately could not
agree on an acceptable format for the return of the database. This lawsuit
followed.
II.
In December 2022, NMMC filed a complaint against Quartiz in the
Circuit Court of Lee County, Mississippi, seeking a preliminary injunction
and a permanent injunction requiring the immediate return of the data and
database to NMMC, and money damages associated with maintaining
3
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Quartiz as its vendor. Quartiz then filed a timely notice of removal to the
Northern District of Mississippi, asserting diversity jurisdiction.
A month later, Quartiz filed its answer and counterclaim, alleging that
NMMC, without right or authority, possessed and was using the May 2022
database backup that Quartiz had sent NMMC. Quartiz asserted six claims:
(1) breach of contract; (2) conversion; (3) state law misappropriation of trade
secrets under the Mississippi Uniform Trade Secrets Act; (4) federal law
misappropriation of trade secrets under 18 U.S.C.A. § 1836; (5) per se
negligence under the Mississippi Computer Crimes and Identity Theft Act;
and (6) breach of duty of good faith and fair dealing.
Subsequently, Quartiz filed its motion for injunctive relief, seeking to
affirmatively require NMMC to destroy the May 2022 database backup or to
restrain NMMC from using or disseminating the database backup. 3 On
August 9, 2023, the district court denied Quartiz’s requests for injunctive
relief. 4 Quartiz timely appeals.
III.
The granting of a preliminary injunction is an “extraordinary and
drastic remedy.” 5 The decision to deny a preliminary injunction lies within
the sound discretion of the district court and may be reversed on appeal only
by a showing of abuse of discretion. 6 This Court “will not find an abuse of
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3
Quartiz also filed a separate motion seeking a Temporary Restraining Order..
4
The district court also denied Quartiz’s request for the Temporary Restraining
Order.
5
Anibowei v. Morgan, 70 F.4th 898, 902(5th Cir. 2023), cert. denied sub nom. Anibowei v. Mayorkas,144 S. Ct. 551
(2024) (citing Apple Barrel Prods., Inc. v. Beard,730 F.2d 384
, 386 (5th Cir. 1984)).
6
Id.
4
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discretion unless the district court’s factual findings are clearly erroneous or
incorrect legal standards were applied.” 7 A movant must show:
(1) a substantial likelihood that plaintiff will prevail on the
merits, (2) a substantial threat that plaintiff will suffer
irreparable injury if the injunction is not granted, (3) that the
threatened injury to plaintiff outweighs the threatened harm
the injunction may do to defendant, and (4) that granting the
preliminary injunction will not disserve the public interest. 8
The movant “bears the burden of persuasion on all four factors in order to be
entitled to the extraordinary relief of a preliminary injunction.” 9 Failure to
establish any one of the four factors defeats the right to injunction. 10
The district court’s order denying Quartiz’s request for injunctive
relief assumes that “the third and fourth elements of the preliminary
injunction standard are satisfied[.]” As NMMC does not contest this finding
in its appellate brief, we focus our review on the first two elements of the
preliminary injunction standard. 11
IV.
We hold that the district court did not abuse its discretion in denying
the requested preliminary injunction, as Quartiz has not shown a substantial
likelihood that it would succeed on the merits of its claims.
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7
In re Coastal Plains, Inc., 179 F.3d 197, 205(5th Cir. 1999) (quoting Latvian Shipping Co. v. Baltic Shipping Co.,99 F.3d 690, 692
(5th Cir. 1996)).
8
Id.
9
Piedmont Heights Civic Club, Inc. v. Moreland, 637 F.2d 430, 435 (5th Cir. 1981)
10
See Roho, Inc. v. Marquis, 902 F.2d 356, 361 (5th Cir. 1990).
11
See Rollins v. Home Depot USA, 8 F.4th 393, 397(5th Cir. 2021). See also Targeted Just., Inc. v. Garland, No. 23-20342,2024 WL 1007469
, *3 (5th Cir. Mar. 8, 2024) (“The
Plaintiffs have forfeited the remaining preliminary injunction factors by failing to brief them
on appeal.”).
5
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A.
To show a likelihood of success on the merits for a preliminary
injunction, Quartiz “is not required to prove [its] entitlement to summary
judgement,” but must at least present a prima facie case showing entitlement
to relief. 12 “Though there is no particular degree of likelihood of success that
is required in every case, the party seeking a preliminary injunction must
establish at least some likelihood of success on the merits[.]” 13 To determine
the likelihood of success on the merits, courts look to the standards provided
by the applicable substantive law. 14
B.
In denying Quartiz’s request for a preliminary injunction, the district
court correctly observed that “[w]hether NMMC has a license to possess
and/or use the database backup is central to the resolution of Quartiz’s
counterclaims.” If NMMC has a license to the database backup, then
NMMC has consent to possess and use the IP at issue and Quartiz cannot
prevail on its claims regarding breach of contract, conversion,
misappropriation of alleged trade secrets, and per se negligence under the
Mississippi Computer Crimes and Identity Theft Act. 15 We find that Quartiz
has not shown a substantial likelihood that NMMC lacks a license to the
database backup, and is unlikely to prevail on its breach of contract,
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12
Byrum v. Landreth, 566 F.3d 442, 446 (5th Cir. 2009).
13
Jefferson Cmty. Health Care Ctrs., Inc. v. Jefferson Par. Gov't, 849 F.3d 615, 626
(5th Cir. 2017).
14
See Janvey v. Alguire, 647 F.3d 585, 596 (5th Cir. 2011).
15
MISS. CODE ANN. § 97-45-1-et seq. (West). In relevant part, the Mississippi
Computer Crimes and Identity Theft Act identifies offenses against IP as “the intentional
disclosure, use, copying, taking or accessing, without consent, of intellectual property.”
Quartiz’s breach of contract, conversion, misappropriation of alleged trade secrets, and per
se negligence claims are premised on the use of property without consent (via right or
license).
6
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conversion, misappropriation of alleged trade secrets, and per se negligence
claims.
1.
Section 10 of the MSA is key to resolving Quartiz’s claims against
NMMC. Section 10 includes two relevant clauses:
(1) “Company grants Client a perpetual, non-exclusive and
non-transferable license to use, copy, reproduce, display, or
distribute the Deliverable” (the “Perpetual License Clause”);
and
(2) “Each party will retain exclusive interest in and ownership
of its Intellectual Property developed before the execution of
this agreement or outside the scope of this agreement” (the
“Exclusive Interest Clause”).
Mississippi law governs any dispute related to the MSA. 16 The
Supreme Court of Mississippi has established a three-tiered approach to
contract interpretation. 17 First, the “four corners” test is applied, wherein a
court must “read the contract as a whole, so as to give effect to all of its
clauses.” 18 Courts must “accept the plain meaning of a contract as the intent
of the parties where no ambiguity exists.” 19
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16
The MSA states: “18. Governing Law. This Agreement will be deemed to have
been made in, and shall be construed pursuant to the laws of the State of Mississippi, the
United States without regard to conflicts of laws provisions thereof.” (emphasis in
original). Neither party disputes the applicability of Mississippi law to the MSA.
17
See Royer Homes of Miss., Inc. v. Chandeleur Homes, Inc., 857 So. 2d 748, 752
(Miss. 2003)
18
Id.
19
Epperson v. SOUTHBank, 93 So. 3d 10, 16 (Miss. 2012).
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Second, where a contract is found to be ambiguous, courts should
apply discretionary canons of contract construction. 20 “A contract is
ambiguous if it contains conflicting clauses when the contract is read as a
whole.” 21 Where there is ambiguity, judicial “resolution of any uncertainties
will be [construed] against the drafter of the contract.” 22 With ambiguous
contracts, courts are permitted to “apply the doctrine of ejusdem generis, the
notion that specific language controls over general inconsistent language in a
contract.” 23 Third, if ambiguity continues, courts can then consider extrinsic
or parol evidence. 24 This includes “course of performance evidence.” 25
2.
Though both NMMC and Quartiz argue that Section 10 of the MSA
is unambiguous, the two parties disagree on the provision’s meaning,
particularly the interaction between the Perpetual License and Exclusive
Interest Clauses. NMMC argues that the two clauses—read together—give
NMMC a perpetual license for the IP embedded in the database backup,
while restricting ownership of the IP to Quartiz. Quartiz rejects this
interpretation, asserting that NMMC’s reading gives short shrift to the
meaning of “exclusive interest.”
Instead, Quartiz relies exclusively on the Exclusive Interest Clause of
Section 10 to argue that the MSA is unambiguous and that NMMC does not
have a license to the IP embedded in the database backup at issue. Quartiz
emphasizes the plain language meaning of “exclusive” and “interest”,
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20
Royer Homes of Miss., 857 So. 2d at 753.
21
Rosenfelt v. Miss. Dev. Auth., 262 So. 3d 511, 518 (Miss. 2018).
22
Dalton v. Cellular S., Inc., 20 So. 3d 1227, 1232 (Miss. 2009).
23
Miss. Transp. Comm'n v. Ronald Adams Contractor, Inc., 753 So. 2d 1077, 1085
(Miss. 2000).
24
Royer Homes of Miss., 857 So. 2d at 753.
25
Rosenfelt, 262 So. 3d at 518.
8
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asserting that the clause requires finding that NMMC does not have a license
to the IP at issue. 26
But under Mississippi case law, contracts must be read as a whole “to
give effect to all of its clauses.” 27 In other words, “[p]articular words should
not control; rather, the entire instrument should be examined.” 28 While
Quartiz’s interpretation of the Exclusive Interest Clause—in isolation—may
have purchase, Quartiz has not shown how this clause can be reasonably read
with the Perpetual License Clause that immediately precedes it, which states
that NMMC has “a perpetual, non-exclusive and non-transferable license to
use . . . the Deliverable.”
To support its interpretation, Quartiz raises two additional
arguments. First, Quartiz asserts that the Exclusive Interest Clause is a more
specific provision that controls and modifies the Perpetual License Clause
under Mississippi law. 29 Quartiz cites to language in sample licensing
contracts to illustrate that comparable exclusive interest clauses are
construed as specific provisions. Second, Quartiz argues that NMMC
admitted that no such license existed.
Neither argument is convincing. First, as NMMC points out, the
sample contract provisions that Quartiz cites to in its brief undercut
Quartiz’s argument: the general provision in those agreements is the
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26
Quartiz asserts: “If NMMC possesses an interest in all intellectual property
belonging to Quartiz contained in the PeopleSoft database (and the database backup
provided to NMMC), then Quartiz cannot be said to have an exclusive interest in any of
the intellectual property contained within the PeopleSoft database. This cannot be
reconciled with the plain language of the Agreement which provides that Quartiz retains
exclusive interest to intellectual property developed before the Agreement or outside the
scope of the Agreement.”
27
Royer Homes of Miss., 857 So. 2d at 752.
28
Epperson, 93 So. 3d at 18 (cleaned up).
29
See id. (“[S]pecific provisions control over general provisions[.]”). See also
RESTATEMENT (FIRST) OF CONTRACTS § 236(c) (1932).
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licensor’s reservation of rights (here, the Exclusive Interest Clause), and it is
modified by the more specific carve-out provision granting a license (here,
the Perpetual License Clause). 30 Quartiz argues that the MSA provision
differs from the sample agreements it cites in that it lacks explicit exemption
language. This distinction, however, creates a colorable argument that the
Exclusive Interest Clause and the Perpetual License Clause are both general
provisions that create inconsistency in meaning when read together. Under
the doctrine of ejusdem generis, Quartiz’s interpretation does not hold.
Moreover, given the ambiguity in meaning, Mississippi law would resolve the
provision in favor of the party who did not draft the contract; here, NMMC. 31
Second, Quartiz’s record citations take NMMC’s statements out of
context. Though NMMC acknowledged the Exclusive Interest Clause of the
MSA, NMMC did not say that the clause controlled over the “perpetual
license” clause.
The district court—without deciding the licensing issue—found that
Quartiz had not demonstrated a substantial likelihood of success on the
merits on these grounds. 32 As Quartiz has yet to offer an interpretation that
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30
The sample licensing agreements that Quartiz cites to includes: “Except for the
licenses express granted to Licensee in this Agreement, Licensee acknowledges that
all right title, and interest in and to the Work” [sic]; “Licensee acknowledges that Licensor
owns and retains all right, title, and interest in and to the Licensed Works, subject to the
license granted in Section 1.1.” (emphasis in original).
31
Miss. Transp. Comm'n v. Ronald Adams Contractor, Inc., 753 So. 2d 1077, 1085
(Miss. 2000) (applying both the canon of contract construction that ambiguities in a
contract are to be construed against the party who drafted the contract, and the doctrine
that specific provisions override more general language to interpret an ambiguous
contract). The doctrine of ejusdem generis states that specific language controls over general
inconsistent language in a contract.
32
The district court stated: “While [the exclusive interest] clause certainly
reserves each party’s interest and ownership rights in their respective intellectual
properties, Quartiz has not satisfactorily shown how it negates the perpetual license clause
that immediately precedes it. … It is enough that Quartiz has not demonstrated a
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“give[s] effect” to both the Exclusive Interest Clause and Perpetual License
Clause of the MSA provision on appeal, 33 we agree.
3.
Quartiz further argues that any license granted to NMMC under the
MSA does not include the right to possess the database backup. Quartiz
asserts that the term “Deliverable” is not defined in the MSA, so course of
performance evidence can be used to give meaning to the term, and that such
evidence reveals that “Deliverable” does not include backups of the
database. Specifically, Quartiz points to a September 2019 SOW, which gives
Quartiz the responsibility of maintaining database backups, and NMMC’s
May 2022 request from Quartiz for a database backup to establish Quartiz’s
designated responsibility of database maintenance.
Quartiz is mistaken. The term “Deliverable” is defined to be
synonymous with “Work Product” in the MSA. 34 Though “Work Product”
is undefined in the MSA, its ordinary meaning includes: “data and products
produced . . . including but not limited to, . . . software, databases, . . .
computer programs . . . to the extent provided by law.” 35 The plain meaning
of “Work Product”—and by association “Deliverable”—in this MSA
would encompass the database backup at issue.
Course of performance between the two parties further supports this
definition of “Deliverable” in the MSA: though the September 2019 SOW
gave Quartiz the responsibility of database maintenance, Quartiz willingly
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‘substantial’ likelihood of success on the merits to be entitled to a preliminary injunction
or temporary restraining order.”
33
Royer Homes of Miss., 857 So 2d. at 752.
34
“Company shall perform Services in a prompt manner and have Work Products
(“Deliverable”) ready as specified in the SOW.” (emphasis in original). Upon further
investigation, the term “Deliverable” lacks an applicable dictionary definition in
contemporaneous dictionaries.
35
Rustad, Michael, 1 COMPUTER CONTRACTS § 1.08-1.
11
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delivered a database backup to NMMC in May 2022 at NMMC’s request.
Quartiz argues that this database backup cannot be considered a
“Deliverable” because it provided the database solely to allow NMMC to
meet its security and auditing obligations. As the district court correctly
noted, however, Quartiz has failed to identify a contractual provision that
limits NMMC’s use of the database backup to those purposes. Without this,
Quartiz has not sufficiently shown that the database backup cannot be
considered a “Deliverable” under the Agreement.
Lastly, Quartiz argues that the MSA does not provide a license to the
source code of the database at issue, drawing from industry standards
regarding software licenses. This argument, however, is inapposite because
the MSA does not purport to grant a software license. As NMMC noted,
NMMC has no need for a license from Quartiz for the PeopleSoft software,
as NMMC licensed the program independently from Oracle. Instead,
NMMC correctly alleges that the MSA grants a license for any changes that
Quartiz made to the PeopleSoft database during their three-year contract.
C.
Quartiz’s claim for breach of the duty of good faith and fair dealing
exists independently of the resolution of the licensing issue. Quartiz has
similarly failed to establish likelihood of success on the merits on this claim.
Mississippi courts have held that “all contracts contain an implied
covenant of good faith and fair dealing in performance and enforcement.” 36
“Good faith is the faithfulness of an agreed purpose between two parties, a
purpose which is consistent with justified expectations of the other party.” 37
Bad faith, by contrast, “requires a showing of more than bad judgement or
negligence; rather, [it] implies some conscious wrongdoing because of
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36
Gulf Coast Hospice LLC v. LHC Grp. Inc., 273 So. 3d 721, 744 (Miss. 2019)
(citation omitted).
37
Id.
12
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dishonest purpose or moral obliquity.” 38 Mississippi courts have found that
“abusive, aberrant, intimidating, harassing behavior” that has made “life a
living hell” constitutes a breach of good faith and fair dealing. 39
Quartiz argues that NMMC has violated the duty of good faith and
fair dealing in three ways: (1) NMMC has continued to demand that Quartiz
return its database backups; (2) NMMC has threatened to refer Quartiz to
the U.S. Attorney’s office and the Federal Bureau of Investigation (“FBI”);
and (3) NMMC has used the May 2022 database backup it received from
Quartiz for purposes beyond its original representations.
None of NMMC’s alleged actions, however, rise to the level of bad
faith under Mississippi law. First, NMMC’s requests to Quartiz for database
backups do not arise out of “conscious wrongdoing,” but instead out of
NMMC’s justified expectations of the MSA. Second, while NMMC stated
that it would “look to explore all legal remedies, both civil and criminal,”
including referrals to the U.S. Attorney’s office and the FBI, this does not
rise to the level of a threat, and certainly does not constitute “abusive,
aberrant, intimidating, harassing behavior.” 40 Third, though NMMC has
used the May 2022 database backup for purposes other than auditing and
security, Quartiz has failed to point to a contractual provision in the MSA
that limits NMMC’s use of the database backup. 41 Quartiz has failed to
persuade with a substantial likelihood that it would succeed on the merits of
this claim.
V.
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38
Id. (cleaned up).
39
Cenac v. Murry, 609 So. 2d 1257, 1272 (Miss. 1992).
40
See id.
41
See supra, Sections IV(A)-(B).
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Quartiz has also failed to establish that there is a substantial threat that
Quartiz would suffer irreparable injury if the injunction were not granted.
A.
To satisfy the second element of the preliminary injunction standard,
Quartiz must “demonstrate that if the district court denied the grant of a
preliminary injunction, irreparable harm would result.” 42 “In general, a
harm is irreparable where there is no adequate remedy at law, such as
monetary damages.” 43 “The possibility that adequate compensatory or other
corrective relief will be available at a later date, in the ordinary course of
litigation, [weighs] heavily against a claim of irreparable harm.” 44
B.
Quartiz argues that the denial of the preliminary injunction would
result in irreparable harm because the disclosure of IP to third parties could
substantially harm Quartiz’s relationship with the contractors who co-
developed the IP at issue, and the disclosure of IP to a direct competitor
would be an existential threat to Quartiz’s existence.
Here, however, monetary damages are available. The district court, in
denying injunctive relief, noted that the evidentiary hearing confirmed that
“money damages could be calculated relatively easily.” And Quartiz
conceded as such. Furthermore, Quartiz’s claims that monetary damages are
inadequate are undercut by the fact that third party contractors have access
to the IP at issue and could share the IP with others at any time. Quartiz
admitted that it does not have confidentiality agreements with these third
_____________________
42
Janvey v. Alguire, 647 F.3d 585, 600 (5th Cir. 2011).
43
Id.
44
Dennis Melancon, Inc. v. City of New Orleans, 703 F.3d 262, 279 (5th Cir. 2012)
(citation omitted).
14
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parties, and that these third parties have used the IP at issue in at least “one
or two instances” for other clients.
For these reasons, the district court did not abuse its discretion in
finding that Quartiz failed to establish that there is a substantial threat that it
would suffer irreparable harm if the injunction were not granted.
VI.
Quartiz has not—at this juncture—provided a sufficient showing that
it is substantially likely to succeed on the merits and establish that there is a
substantial threat that it would suffer irreparable harm if the injunction were
not granted. We hold that the district court did not abuse its discretion in
denying the preliminary injunction and AFFIRM the district court’s order.
15
Reference
- Status
- Unpublished