United States District Court, D. Oregon
Allyson B. Baker, Sameer P. Sheikh, Erin Z. Cass, and Michael
J. Marusak, Venable LLP, Ciaran P. A. Connelly, BALL JANIK
LLP, of Attorneys for Plaintiff.
R. Ast, Scharnhorst Ast Kennard Griffin PC, Stephen P.
Yoshida and Michael J. Farrell, MB Law Group LLP, of
Attorneys for Defendant Ethan Schulton.
Stephen Nakamura, Merle Brown & Nakamura PC, John C.
Rothermich, K&L Gates LLP, of Attorneys for Defendant
ScholarChip Card, LLC.
OPINION AND ORDER ON SCHOLARCHIP'S MOTION FOR
Michael H. Simon, United States District Judge.
ScholarChip Card, LLC (“ScholarChip”) moves for
summary judgment against all claims asserted against
ScholarChip by Plaintiff University Accounting Service, LLC
(“UAS”). For the reasons that follow, the Court
denies ScholarChip's motion.
is entitled to summary judgment if the “movant shows
that there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). The moving party has the burden of
establishing the absence of a genuine dispute of material
fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986). The court must view the evidence in the light most
favorable to the non-movant and draw all reasonable
inferences in the non-movant's favor. Clicks
Billiards Inc. v. Sixshooters Inc., 251 F.3d 1252, 1257
(9th Cir. 2001). Although “[c]redibility
determinations, the weighing of the evidence, and the drawing
of legitimate inferences from the facts are jury functions,
not those of a judge . . . ruling on a motion for summary
judgment, ” the “mere existence of a scintilla of
evidence in support of the plaintiff's position [is]
insufficient . . . .” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 252, 255 (1986). “Where the
record taken as a whole could not lead a rational trier of
fact to find for the non-moving party, there is no genuine
issue for trial.” Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citation
and quotation marks omitted).
UAS is a student loan servicing company and a wholly owned
subsidiary of Transworld Systems, Inc. (“TSI”), a
debt collection and receivables management company. The
customers of UAS are lenders who provide student loans. UAS
assists its customers by documenting when student loan
payments are made, ensuring that loan balances are accurately
tracked, and maintaining loan documents.
ScholarChip is a technology company that provides software
development and data security services. Dr. Maged Atiya
(“Dr. Atiya”) founded ScholarChip in 2000 and
currently is its Chief Technology Officer
(“CTO”). Defendant Ethan Schulton
(“Schulton”) worked for ScholarChip from 2003
through the end of 2017, when he resigned. At the time of his
resignation, Schulton was one of the leading software
developers at ScholarChip.
31, 2006, UAS entered into three contracts with ScholarChip.
They are referred to as: (1) the Master Terms and Conditions
(“MTC”); (2) the Software Development Agreement
(“SDA”); and (3) the Hosting Support Services
Agreement (“HSSA”) (collectively, the
“Agreements”). Through the Agreements, UAS hired
ScholarChip to create for UAS a unique, proprietary software
platform (“eUAS Software”) and to host data
provided to or accessed by ScholarChip for the benefit of UAS
and its customers (“Client Data”). Client Data is
described in the MTC as “including but not limited to
all reports provided by ScholarChip” to UAS concerning
services such as hosting, maintenance, and support services.
The MTC also includes confidentiality provisions requiring,
among other things, that ScholarChip “shall take
appropriate action, by instruction to or agreement with its
employees, ” to maintain the confidentiality of
confidential information including all information defined
under the MTC as “Confidential Information.”
the MTC, UAS's Confidential Information includes
“customer lists, customer and supplier identities and
characteristics, agreements, marketing knowledge and
information, sales figures, pricing information, marketing
plans and business plans.” MTC § 8.2. ScholarChip
must use the Confidential Information and the Client Data
solely for the purpose of performing its obligations under
the Agreements. MTC § 8.3. To the extent ScholarChip
discloses Confidential Information to “persons in its
organization who have a need to know for purposes of
performing the [Agreements] or for a purpose consistent with
the terms of the [Agreements], ” such disclosure must
be “then only pursuant to an agreement that such
persons will maintain the Confidential Information or Client
Data in confidence and will not use or disclose to others
except in accordance with this paragraph.” MTC §
was one of the principal software developers at ScholarChip
and was the chief architect of the eUAS Software. His
responsibilities included developing, coding, and maintaining
the eUAS Software, responding to questions and requests from
UAS and its customers, and ensuring the security and
safekeeping of UAS's Client Data and Confidential
Information. Schulton was UAS's primary contact at
ScholarChip for all technical needs and questions or requests
relating to the eUAS Software. In addition, Schulton was
responsible for providing “webinars, ” or
personalized tutorial sessions, to UAS's customers to
educate them about the features of the eUAS Software, provide
technical support to UAS's customers, and answer
customer-specific questions. UAS entrusted ScholarChip and
its employees, including Schulton, with access to UAS's
Client Data and Confidential Information, including customer
lists, customer preferences, and other customer-specific
intelligence that Schulton was exposed to while providing
eUAS webinars and other tasks.
to ScholarChip, in March 2015, TSI (UAS's parent company)
told ScholarChip that TSI wanted ScholarChip to split the
eUAS student loan servicing business into its own unit that
would then contract directly with TSI. In September 2015, TSI
informed ScholarChip that it no longer wanted to pursue the
proposal discussed in March. Instead, TSI told ScholarChip,
TSI and UAS wanted to separate from ScholarChip and to have
ScholarChip move, or migrate, the loan servicing platform
into TSI's own date center.
December 2015, as an interim pricing agreement was about to
expire, UAS requested a price extension through the end of
2016. Dr. Atiya told UAS that ScholarChip would only consider
a price extension through the end of 2016 in the context of a
transition agreement. The parties, however, did not reach an
agreement on new rates, and, according to ScholarChip, the
interim pricing agreement expired on December 31, 2015.
ScholarChip adds that in January 2016, TSI suggested to
ScholarChip that it send UAS a notice of ScholarChip's
intent to cease providing any further loan servicing services
to UAS. On February 3, 2016, ScholarChip sent a notice to
UAS, stating that ScholarChip would cease servicing UAS's
loan portfolio on June 30, 2016. According to UAS, in
February 2016 ScholarChip told UAS that it would have to pay
higher fees if it wanted to continue using the eUAS Software;
otherwise, UAS's access would be terminated. ScholarChip
later agreed to postpone the termination date.
March 29, 2016, Schulton sent an email to ScholarChip's
founder and CTO Dr. Atiya stating, among other things:
“To ensure UAS/TSI has no fuel for a lawsuit, should we
provide them with the source code now?” During the
following month, April 2016, Schulton sent an email to his
legal counsel, and copied others within ScholarChip. Schulton
discussed his plan to form a new legal entity, “Online
Financial Management Technologies, LLC.” In July 2016,
ScholarChip and UAS entered into a new pricing agreement
through March 2017.
2016, Tuition Management Systems (“TMS”), a
competitor of UAS, approached ScholarChip about using
ScholarChip's loan servicing platform to host TMS's
clients' student workout plans for a single university.
According to ScholarChip, it created a test environment using
simulated data to determine whether the eUAS platform could
service TMS's proposed student workout plan and
considered demonstrating this test environment to TMS. Also
according to ScholarChip, after internal testing ScholarChip
abandoned the idea of using portions of the eUAS platform for
workout plans for any entity, including TMS. Thereafter, this
potential product was never marketed or sold, and ScholarChip
asserts that it did not entertain any use of the eUAS
platform for any services other than those being provided to
UAS. In November 2016, ScholarChip proposed to UAS that they
enter into a new agreement under which ScholarChip would
compete directly with UAS using the eUAS Software. UAS did
not agree, and the parties did not adopt ScholarChip's
February 2017, UAS and ScholarChip met, and UAS explained
that it had identified an alternative platform and intended
to move, or migrate, its Client Data away from ScholarChip.
ScholarChip then demanded from UAS an increase in fees for
allowing UAS to migrate its Client Data. In March 2017,
Schulton declined a request from UAS to perform certain
software development work relating to eUAS. Schulton told UAS
that the requested modifications were no longer available to
UAS. By letter ...