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Heartland Payment Systems, LLC v. Inteam Associates, LLC

Supreme Court of Delaware

August 17, 2017

HEARTLAND PAYMENT SYSTEMS, LLC, Defendant/Counterclaim Plaintiff Below-Appellant,
v.
INTEAM ASSOCIATES, LLC and LAWRENCE GOODMAN, III, Plaintiff/Counterclaim Defendants Below-Appellees. INTEAM ASSOCIATES, LLC, Plaintiff/Counterclaim Defendant Below-Appellee/ Cross-Appellant,
v.
HEARTLAND PAYMENT SYSTEMS, LLC, Defendant/Counterclaim Plaintiff Below-Appellant/ Cross-Appellee.

          Submitted: June 14, 2017

         Court Below - Court of Chancery of the State of Delaware C.A. No. 11523.

         Upon appeal from the Court of Chancery: AFFIRMED in part and REVERSED in part and REMANDED.

          Jeffrey L. Moyer, Esquire (argued), Travis S. Hunter, Esquire, and Nicole K. Pedi, Esquire, Richards Layton & Finger, P.A., Wilmington, Delaware for Appellant/Cross-Appellee Heartland Payments Systems, LLC.

          Thad J. Bracegirdle, Esquire (argued), and Andrea S. Brooks, Esquire, Wilks, Lukoff & Bracegirdle, LLC, Wilmington, Delaware for Appellees/Cross-Appellant in TEAM Associates, LLC and Lawrence Goodman, III.

          Before STRINE, Chief Justice; VALIHURA, and SEITZ, Justices.

          SEITZ, Justice

          In 2010, Congress enacted the Healthy, Hunger-Free Kids Act which made major changes to the national school lunch program. The Act required the United States Department of Agriculture (the "USDA") to develop new regulations to take effect in 2012 to address new nutritional guidelines. In 2011, Heartland Payment Systems, Inc. ("Heartland"), a credit card processing company, wanted to expand its school operations. To pursue this strategy, Heartland purchased some of the assets of School Link Technologies, Inc. ("SL-Tech"). SL-Tech marketed software products to schools to manage their foodservice operations.

         Through the purchase of SL-Tech, Heartland acquired WebSMARTT, a software program that allowed schools to monitor school meal nutrition through point of sale, free and reduced meal eligibility tracking, menu planning, nutrient analysis, and recordkeeping. Carved out of the transaction, however, was a consulting division of SL-Tech called inTEAM and its software, Decision Support Toolkit ("DST"), which was still in development at the time of the transaction. inTEAM was designing DST for school districts as a complementary product to WebSMARTT. It was intended to collect menu plan data from WebSMARTT and similar applications and then use the data to model the effect of menu plans on staffing, equipment, and other costs.

         The parties executed three contracts involving Heartland, SL-Tech, and SL-Tech's CEO, Lawrence Goodman. The contracts contained non-compete, non- solicitation, exclusivity, cross-marketing, and support obligations. Through the carve-out of SL-Tech's inTEAM business, the parties agreed that inTEAM could continue with the "inTEAM Business as currently conducted" after closing.

         With the transaction in the rear-view mirror, the parties quickly lost sight of their post-closing contractual obligations. inTEAM developed a new software program module, Menu Compliance Tool, with overlapping capabilities with WebSMARTT-specifically, nutrient analysis and menu planning. Goodman tried to solicit one of Heartland's customers. Heartland paired with one of inTEAM's biggest competitors to submit a bid to provide software to the Texas Department of Agriculture.

         The disputes eventually found their way to the Court of Chancery through breach of contract claims and counterclaims. After a four-day trial, the Court of Chancery found inTEAM did not breach any of its contractual obligations, but Goodman and Heartland had breached certain of theirs. According to the court, although WebSMARTT and the Menu Compliance Tool module both analyzed nutrients, the USDA approved each of the software programs for nutrient analysis under different standards. Thus, they did not compete with each other. The Court of Chancery also found that the carve-out for the "inTEAM Business as currently conducted" allowed in TEAM to develop software with menu planning functionality-the same functionality also present in the WebSMARTT software program.

         Turning to Heartland, the Court of Chancery found Heartland breached the non-compete and exclusivity provisions of the co-marketing agreement by working with a known inTEAM competitor. The court decided that Heartland's breach began on March 17, 2014 and ran until September 8, 2015, and thus extended Heartland's non-compete restrictions for an additional eighteen months. For Goodman, the court determined that Goodman breached a non-solicitation provision in the consulting agreement by soliciting one of Heartland's customers. As the court held, Goodman's breach ran from July 24, 2014 to December 15, 2014, and thus the court extended Goodman's non-solicitation period by an additional six months. The Court of Chancery also ordered Goodman to pay Heartland damages equal to the salary he was paid while he was in breach, totaling $50, 003.01. The Court of Chancery did not award inTEAM attorneys' fees, finding that a cap on liability in the co-marketing agreement precluded the fee award. Both parties appealed.

         We reverse the Court of Chancery's finding that Goodman and inTEAM did not breach their non-compete obligations under the various agreements, but otherwise affirm the court's decision. Goodman was prohibited from providing any competitive services or products or engaging in any business that SL-Tech conducted as of the closing date. inTEAM had similar restrictions. At the time of the transaction SL-Tech had a software product, WebSMARTT, that was part of SL-Tech's business as of the closing date that performed nutrient analysis and menu planning. inTEAM did not. At closing, inTEAM's business was data analytics and modeling, not school lunch program data generation and menu planning for USDA compliance purposes. The transaction agreements prohibited inTEAM from developing a software product that competed head to head with WebSMARTT, a product Heartland paid SL-Tech $17 million to acquire. By changing direction and developing Menu Compliance Tool to perform nutrient analysis and menu planning, Goodman and inTEAM competed directly with WebSMARTT and breached the transaction agreements.

         As for the remaining issues, the Court of Chancery properly found that Heartland breached its contractual obligations by collaborating with an inTEAM competitor, and Goodman breached by soliciting a customer of Heartland. The court also did not abuse its discretion when it required an extension of the non-competes and assessed damages against Goodman.

         We therefore affirm in part and reverse in part the decision of the Court of Chancery. We remand the case to the Court of Chancery to exercise its broad discretion to craft a remedy sufficient to compensate Heartland for Goodman's and inTEAM's breaches of the transaction agreements.

          I.

         A.

         Since Congress passed the National School Lunch Act in 1946, the USDA has regulated and provided federal subsidies to state school lunch programs. From the mid-1940s into the 1990s, regulations focused on four meal components: meat, vegetables/fruit, grains, and milk. In the mid-1990s, regulations shifted to aged-based nutrient targets, which required schools to track extensive amounts of data to obtain their subsidies. Software developers designed programs to assist school districts in managing the data and submitting reimbursement claims to state agencies, which are charged with distributing federal funds made available by the USDA.

         In 2010, Congress passed the Healthy, Hunger-Free Kids Act ("HHFKA" or the "Act"), the first major change to the school lunch program in fifteen years. The Act set minimum standards for school wellness policies, mandated minimum fruit, vegetable, and whole grain servings, and set maximum sodium, sugar, and fat content of meals. It also authorized the USDA to set new standards for the school lunch program, and required the USDA to publish proposed meal pattern regulations within eighteen months of its enactment.[1]

          The newly issued USDA regulations went back to food group-based menu planning to replace nutrient-based menu planning. The new meal pattern requirements were centered around five main food groups: meat/high protein foods; whole grains; vegetables; fruit; and fat free/low-fat milk. Each food group has specified subcategories and nutrient targets for calories, saturated fat, trans fat, and sodium. The USDA first proposed the change on January 13, 2011. It became effective July 1, 2012.

         Although the new meal pattern requirements were mandatory, the USDA offered schools certified to be in compliance with the new regulations an additional six cents per meal to incentivize schools to implement the changes quickly.[2] To become certified, the school had to submit documentation to the governing state authority demonstrating its compliance with the meal pattern requirements. The state agency makes an initial certification determination, and then monitors each school district's ongoing compliance with the requirements through an administrative review process that occurs every three years. This process is known as "Six Cent Certification."

          Schools have three options to obtain Six Cent Certification. Under the first option, schools submit one week of menus, a USDA menu worksheet, and a nutrient analysis with calories and saturated fat for each menu type. Schools that choose this option must use USDA-approved nutrient analysis software to compile the information.[3] According to the USDA, "[t]his option acknowledges that a large number of [schools] already use nutrient analysis software to monitor the nutrient levels in their meals."[4] Under the second option, schools submit one week of menus and a USDA menu worksheet, but submit a simplified nutrient assessment instead of the in-depth nutrient analysis.[5] As the USDA has stated, "[t]his option recognizes that not all [schools] use nutrient analysis software. A simplified nutrient assessment is intended to be a proxy for the nutrient analysis."[6] Under the third option, a state agency performs an on-site review to certify school compliance with the regulations.

         B.

         Goodman founded SL-Tech in 1985. SL-Tech provided software products to assist schools in tracking their child nutrition programs to obtain federal subsidies.

          The software included both front-of-house and back-of-house operations. Front-of-house operations means point of sale systems and application processing for free and reduced price meals. Back-of-house operations means purchasing, inventory, and menu planning.

         Before the transaction, a division of SL-Tech, inTEAM, was a "15 year-old management consulting company known historically for its hands-on workshops in financial management for school nutrition programs."[7] SL-Tech purchased inTEAM in 2004 to complement SL-Tech's existing software products. Its consulting services helped customers standardize their processes to collect and use the data generated from school nutrition programs to improve their operations.[8]

         SL-Tech had three software products relevant to this appeal: WebSMARTT, mylunchmoney.com, and DST. WebSMARTT was SL-Tech's "core product."[9]WebSMARTT was a fully integrated end-to-end foodservice management program that provided point of sale, free and reduced meal application processing, ordering and inventory, and menu planning and production.[10] Menu planning is "the heart" of WebSMARTT.[11] mylunchmoney.com was an online service that allowed parents to provide money for their children for cafeteria use, check their account balances, and to see what they were purchasing. It was used by over 900 school districts in forty-two states at the time of the transaction in 2011.

         DST was cloud-based software first developed as a prototype in 2007 for use as a modeling tool to collect and analyze the data from point of sale, back-of-house, financial management, and payroll systems. DST software allowed schools to make informed decisions about the operation of their school lunch programs.[12] As described in an internal document sent to Goodman in 2009:

The DST modeling component utilizes basic foodservice operating principles, recognized by inTEAM consultants as fundamental to achieving high performing school nutrition programs. DST uses a "systems approach" to assess, develop and refine key foodservice operating processes such as menu planning, work methods, equipment selection, employee scheduling and staff training.
DST is not intended to replace the current [point of sale] or back of the house transactional software. It simply uses data from the current transactional systems to identify limitations in [the] current operating process and allows the User to test the effect of making incremental changes in one or more of these processes. The transactional data sets used to drive the DST models and inTEAM consulting services will vary depending on District characteristics, however the process will remain consistent.
It is widely accepted in the industry that the menu is the driving force affecting all other aspects of a quantity foodservice operation. Thus, capturing the current school based menu plans is the first step in initiating the "what if" modeling capabilities of DST.[13]

DST relied on sources like WebSMARTT to provide the menu plan data.[14]

         SL-Tech planned to roll out DST in two phases. In Phase, 1 SL-Tech would develop a program to analyze sales and meal count data. In Phase 2, DST would use menu planning data to allow users to create operational models such as work methods, equipment availability, and procurement.[15]

         In 2009, SL-Tech engaged High5LA, LLC[16] to develop and write the functional specifications for DST Phase 2 (the "Functional Design Documents").

          According to the "overview" section of the Functional Design Documents, in DST Phase 2, school systems that had installed DST Phase 1 would

[B]e able to leverage menu planning as a tool to project the impact on staffing, equipment, and food/labor costs. They [would] also be able to model in advance menu plans, work schedules and financials to accurately predict the outcome under a variable set of assumptions. inTEAM philosophy and best practices drive the design of Phase 2, resulting in a product that allows school administrators to accurately model future scenarios and compare/evaluate it against reality.[17]

         C.

         Heartland provided payment processing services to merchants throughout the United States. In 2010, it entered the school services market through its School Solutions division to provide nutrition and payment solutions to K-12 schools. At the end of 2010, Heartland began considering opportunities to add to its School Solutions division. Heartland wanted to become the leading K-12 point of sale provider, and ultimately to offer online payments to all schools. To achieve its goal, Heartland believed it "needed to provide the full [point of sale] solution to schools" because schools "were not interested in buying . . . just the front-of-the-house solution that provided the checkout at the end of the ordering line. [Schools] also wanted to be able to have all of the back-of-the-house solutions integrated with the front-of-the-house solution. And so in order for [Heartland] to be successful in this market and selling credit card processing, it also required [Heartland] to enter the food service market with a full solution."[18]

         Heartland approached SL-Tech about a potential acquisition. It did not want to purchase SL-Tech's subsidiary inTEAM because inTEAM was primarily a consulting business, which Heartland did not view as key to its strategy of "acquiring companies that provided the point-of-sale solutions to K through 12 schools."[19] As a result, the parties separated SL-Tech's inTEAM division-with its DST software product in development-from the transaction. The parties eventually reached agreement and documented the transaction through three agreements: (1) the Asset Purchase Agreement; (2) the Co-Marketing Agreement; and (3) the Consulting Agreement.

         i. The Asset Purchase Agreement

         Under the Asset Purchase Agreement ("APA"), Heartland acquired substantially all of SL-Tech's assets for $17 million plus earn-out payments on each of the first three anniversaries of closing. Section 5(n) of the APA also included the following non-compete:

Covenant Not to Compete. For a period of five (5) years from and after the Closing Date, neither Seller nor the Major Shareholder will engage directly or indirectly, on Seller's or the Major Shareholder's own behalf or as a Principal or Representative of any Person, in providing any Competitive Services or Products or any business that School-Link conducts as of the Closing Date in any of the Restricted Territory . . . .[20]

         Under the APA, the "Seller" is SL-Tech, Goodman is the "Major Shareholder, " the "Closing Date" is September 30, 2011, and the "Restricted Territory" is the United States.[21] "Competitive Services or Products, " "School-Link, " and "inTEAM Business" are defined under the APA as follows:

"Competitive Services or Products" means a business that develops, manufactures, sells and services and maintains computer software and/or [point of sale] terminal hardware designed to facilitate (i) accounting and (ii) management and reporting of transactional data functions, of food services operations of K-12 schools (including point-of-sale operations, free and reduced application processing, ordering and inventory, and entry of meal and other payments by parents via the Internet or kiosk); provided, however, that for purposes of clarity, Competitive Services or Products shall not include the inTEAM Business as currently conducted.[22]
"School-Link" means the entirety of Seller's business, including the business of Seller known as "School-Link, " but excluding the inTEAM Business."[23]
"inTEAM Business" means certain Excluded Assets consisting of Seller's consulting, elearning and DST segments of the business known as "inTEAM" and including those products and services described in Exhibit C to the Co-Marketing Agreement.[24]

         ii. The Co-Marketing Agreement

         The Co-Marketing Agreement ("CMA") was a commission-based contract that gave both Heartland and inTEAM the right to market, advertise, and promote each other's products.[25] The CMA contained a five-year bilateral non-compete:

Except as otherwise provided herein, . . . (A) HPS shall not engage, directly or indirectly, on its own behalf or as a principal or representative of any person, in providing any services or products competitive with the inTEAM Business, and HPS hereby grants to inTEAM the exclusive right and license under any intellectual property of HPS (other than trademarks) to conduct the inTEAM Business and (B) inTEAM shall not engage, directly or indirectly, on its own behalf or as a principal or representative of any person, in providing any services or products competitive with the HPS Business, and inTEAM hereby grants to HPS the exclusive right and license under any intellectual property of inTEAM (other than trademarks) to conduct the HPS Business.[26]

         "HPS Business" is defined under the CMA as:

[T]he development, manufacture, or sale of computer software and/or [point of sale] terminal hardware designed to facilitate (A) accounting and (B) reporting of transactional data functions and management of [] food service operations of K-12 schools (including point-of-sale operations, free and reduced application processing, ordering and inventory, and entry of meal and other payments by parents via the Internet or kiosk).[27]

"inTEAM Business" is defined as:

[C]ertain Excluded Assets consisting of inTEAM's consulting, eLearning and DST segments of the business known as "inTEAM" and including those products and services described in Exhibit A[28] and those inTEAM products and services described in Exhibit C and Exhibit D.[29]

         Exhibit C states:

         Functional Specifications

Functional specifications for DST Phase 1 and add-ons and DST Phase 2 (future release); including unique state value added functionality (attached) Student Rewards functional specifications (attached) Off Campus Merchants Functional specifications (attached)[30]

         Attached to the CMA and incorporated by reference are the Functional Design Documents for DST Phase 2. Two Functional Design Documents were introduced and discussed at trial: "Milestone A - Menu Item" and "Milestone B - Menu Planning."[31] The Milestone A Functional Design Document describes its purpose as the following:

In order to support Operational and Financial Modeling, Milestone A introduces four new information categories to DST - Staff, Equipment, Work Method and Menu Item. This design specification is an anchor document that catalogs the functional requirements for DST Phase 2 - Milestone A - Menu Item.
It further states:
A Menu Item is a food item that is ultimately served to the student. Milestone A defines the setup of these items, while Milestone B will put collections of items onto menu plans for servicing building programs and generate work schedules that will model how build staffs and equipment will work to produce the items needed.[32]
The Functional Design Document for Milestone B describes its purpose as:
A central component to creating an Operational Model is the modeling of menus. This design specification is an anchor document that catalogs the functional requirements needed to create a subset of the WebSMARTT Menu Planning hierarchy as part of DST Phase 2 Milestone B. This specification contains high level workflows, page level design specifications, and page level interactions. This chapter provides a brief overview of each, with rest of the document providing a page level design specifications.[33]

         iii. The Consulting Agreement

         Goodman also executed a Consulting Agreement with Heartland under which Goodman agreed to act as "a strategic advisor and liaison with key industry stakeholders advancing Heartland's objectives at meetings and conferences, " among other duties.[34] Goodman was to be paid $16, 666.67 per month over the course of three years, totaling $600, 000. Under § 3 of the Consulting Agreement, "[i]n the event the Consultant breaches Sections 7, 8, 9, 10 or 11 of this Agreement, Heartland shall have no obligation to pay the Consultant any compensation set forth herein."[35] Section 11(a) of the Consulting Agreement includes another five year non-compete, and § 11(b) includes a non-solicitation provision.

         D.

          i. inTEAM Expands the Functionality of Its Software Products After Closing

         At the time of the transaction, inTEAM had finished developing and was marketing DST Phase 1. After the transaction closed, inTEAM continued to develop DST Phase 2. inTEAM decided to incorporate the USDA's simplified nutrient assessment components into the existing DST functions to create the "Menu Compliance Tool" module.[36] Unlike the modeling and forecasting functions contemplated by the Functional Design Documents, the module assisted customers with ensuring compliance with the USDA's meal-planning regulations that had been finalized in 2012.[37] The module can analyze nutrients such as calories, saturated fat, sodium, and carbohydrates-the same analysis done by WebSMARTT, but on a more limited basis.[38] It was the first USDA-approved menu planning tool for Six Cent Certification. It is not currently certified by the USDA as "nutrient analysis software." In 2014, inTEAM also added administrative review software to its product line.[39]

         inTEAM's employees questioned inTEAM's decision to create the new module. inTEAM's former Chief Operation Officer, Erik Ramp, wrote to inTEAM's Vice President of Operations, Geri Hughes, "you know [we're] basically developing a competing product with [Heartland] now. Chip doesn't think so . . . but I don't think an outsider will see it that way."[40]

         ii. inTEAM Employees E-mail Potential Customers

         On July 24, 2014, Goodman sent an e-mail to Hughes with the subject line "St. Paul Window of Opportunity." Goodman wrote in the e-mail "Did Mary Jo recap the opportunity to you?" to which Hughes replied, "Yes. I will discuss with you when we meet this afternoon. As you know, Jean's replacement (Jim) [has] not been as interested in help and this is her new approach."[41] Below Hughes' reply is the tagline: "Note to Jim Hemmen regarding our menu planning tool/production record alternative to WebSMARTT."[42]

         On December 15, 2014, Mary Jo Tuckwell[43] sent an e-mail to an administrator at St. Paul Public Schools which said, in pertinent part:

Based on the interactions I had with Jim at ANC in July I believe the department was still struggling with automating production records. In August there was discussion of me providing a demo to key central office staff of the inTEAM menu planning and production record modules as an alternative to the WebSMARTT BOH system. That offer remains open if your team is interested. I know the challenges of bringing establishing and maintaining a traditional BOH system. Yet, I can tell you that the quality of operational communication is enhanced tremendously by automated production records to accurately forecast and provide feedback to the menu planner on usage combinations. So whether you stay with WebSMARTT or are interested in an alternative, I would urge the team to prioritize this activity to achieve financial success.[44]

         Tuckwell forwarded the e-mail to Hughes. Hughes forwarded the e-mail to Goodman and Michael Sawicky[45] and wrote "FYI-- we have confirmed that Jim is leaving St Paul and he has been stopping our efforts so that is good. However, Jean is going to bring in a former St Paul director at the moment. I give MJ full credit for continuing to nurture this key relationship with Jean and for continuing to push for them to use our tools."[46]

         iii. Heartland Collaborates with Colyar

          On May 12, 2015, the Texas Department of Agriculture ("TDA") issued a request for proposals titled, "REQUEST FOR OFFERS TO PROVIDE Menu Analysis & Planning System (MAPS) Software Solutions, " asking vendors to solicit offers to provide web-based software to support the USDA's new meal pattern requirements.[47] On May 27, 2015, inTEAM contacted Heartland regarding a possible joint proposal, which Heartland declined. On June 19, 2015, Heartland submitted a joint bid with Colyar Technology Solutions, Inc.-an inTEAM competitor since 2014. inTEAM submitted a bid on the same day. In its proposal, inTEAM stated that its new software would be able to meet all of the TDA's requirements, including point of sale, nutrient analysis, and menu planning. Neither the inTEAM nor the Heartland/Colyar bids were selected by the TDA.

         iv. inTEAM Launches CN Central

         In July 2015, Goodman presented inTEAM's "Big Reveal" of its new software, CN Central. CN Central combined all of inTEAM's modules under one system, including Menu Compliance Tool, to create "a single destination that includes all of inTEAM's technology tools including: Menu Compliance, Menu Costing, Production Records, Administrative Reviews . . . Data Analytics, eLearning and Menu Sharing."[48] This brought together the ability to analyze nutrients, menu plan, menu search, menu share, and generate production records.[49]

         E.

         On July 20, 2015, after learning of Heartland's collaboration with Colyar, inTEAM notified Heartland in writing that it believed Heartland was in breach of the CMA. On September 21, 2015, inTEAM sued Heartland in the Court of Chancery alleging breach of contract claims. Heartland responded by asserting breach of contract counterclaims against inTEAM and Goodman.

         After a four-day trial, on September 30, 2016, the Court of Chancery issued its decision finding that inTEAM did not breach any of its contractual obligations, but Goodman and Heartland breached some of their post-closing obligations. The Court of Chancery found that because inTEAM's Menu Compliance Tool could only conduct a simplified nutrient assessment, and WebSMARTT could run a full nutrient analysis as defined by USDA guidelines, inTEAM did not violate the non-compete provisions. The Court of Chancery also found inTEAM's business activities did not breach the non-compete obligations under the APA or the CMA. As the court held, even though the products were directly competitive, the Functional Design Documents-which defined the carve-out of inTEAM's business from the transaction-described a product with menu planning functionality that would allow users to create, edit, copy, and save menu items, menu categories, and menus to be placed in menu cycles. Thus, the Court of Chancery determined that the CMA unambiguously included menu planning in the definition of the inTEAM business carved out of the transaction.

         Next, the Court of Chancery found that Heartland breached its non-compete and exclusivity obligations under the CMA when it collaborated with Colyar, a direct inTEAM competitor, to submit a bid to the TDA. The Court of Chancery found that Heartland did not breach any obligations under the other agreements. Finally, the Court of Chancery found that Goodman breached his non-solicitation obligations under the Consulting Agreement by encouraging St. Paul Public Schools to terminate its relationship with Heartland.

         According to the Court of Chancery, Heartland's breach began on March 17, 2014, when its relationship with Colyar first began, and ran until September 8, 2015, when Heartland announced that the TDA had not selected its proposal. The court thus extended the non-compete for eighteen months, beginning September 30, 2016, and ending March 21, 2018. The Court of Chancery did not award inTEAM attorneys' fees, finding that there was a cap on liability in the CMA. As the court held, because inTEAM had not paid Heartland any fees under the CMA and did not argue that an exception applied, inTEAM was not entitled to any costs or fees.

          For Goodman, the court determined that his breach began on July 24, 2014, when Goodman asked Hughes to work on making St. Paul School District a customer, and ran to December 15, 2014 when Tuckwell's e-mail chain with a St. Paul Public School official was forwarded to Goodman, among other inTEAM employees. The court ordered a six-month extension of the non-solicitation period to begin on September 30, 2016 and end March 22, 2017. The Court of Chancery also ordered Goodman to pay Heartland damages equal to the salary he was paid during the three months he was in breach of the Consulting Agreement, totaling $50, 003.01.[50]

         This appeal and cross-appeal followed. Heartland claims the Court of Chancery erred by: (1) finding that inTEAM and Goodman did not breach their respective non-compete provisions; (2) holding that Heartland breached the non-compete provision under the CMA and ordering an eighteen-month injunction; and (3) requiring Goodman to return only $50, 003.01 of his $600, 000 salary. inTEAM argues the Court of Chancery erred by not awarding it attorneys' fees. We defer to the Court of Chancery's factual findings supported by the record, but review the Court of Chancery's contract interpretation de novo.[51]

          II.

         Before stepping through the specific contractual provisions it is helpful to look at the transaction from a distance, because "[i]n giving sensible life to a real-world contract, courts must read the specific provisions of the contract in light of the entire contract."[52] Heartland paid SL-Tech and Goodman $17 million for a substantial part of the SL-Tech business so Heartland could expand its presence in the school market. By acquiring SL-Tech, Heartland could offer schools not just a financial product, but, through WebSMARTT, a front to back foodservice solution, which included nutrient analysis and menu planning. WebSMARTT's nutrient analysis and menu planning features were at the heart of SL-Tech's business because they allowed schools to demonstrate compliance with USDA guidelines. To protect Heartland from post-closing competition by Goodman and inTEAM in the same business space, the parties agreed to non-compete and non-solicitation provisions.

         Heartland was not interested in inTEAM, SL-Tech's consulting business, or its DST software. SL-Tech marketed DST software as complementary to WebSMARTT. DST Phase 2, which was still in development, would use the menu planning and nutrient analysis data from WebSMARTT and similar programs to perform data analytics and forecasting. The parties carved out the inTEAM business "as currently conducted, " which included the DST software, from the transaction.

         Because the WebSMARTT and inTEAM businesses were complementary instead of competitive, the parties agreed to a co-marketing agreement, which allowed each of them to benefit from selling the other party's services and products. Except for the permitted cross-marketing activities, inTEAM protected its consulting business carve-out and DST software by imposing post-closing non-competition and non-solicitation obligations on Heartland. Because DST had not been fully developed by the time of closing, the parties described its intended uses by referring to technical documents. Heartland also protected its post-closing business with non-compete obligations.

         inTEAM's arguments on appeal in favor of being able to compete with Heartland by providing a software product that performs nutrient analysis and menu planning are in direct conflict with the spirit of the overall transaction. As Heartland points out, it never would have paid SL-Tech and Goodman $17 million for a business that inTEAM could compete with directly right after closing. What's worse, according to Heartland, is the CMA. If the Court accepts inTEAM's interpretation of the transaction agreements, Heartland would have agreed to cross-market a software program that competes directly with its WebSMARTT product. Like Goodman and inTEAM, Heartland has also tried to rewrite its non-competition obligations following ...


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