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TA Operating LLC v. Comdata, Inc.

Court of Chancery of Delaware

September 11, 2017

TA OPERATING LLC, Plaintiff, Counterclaim-Defendant,
v.
COMDATA, INC., and FLEETCOR TECHNOLOGIES, INC., Defendants, Counterclaimants.

          Date Submitted: June 16, 2017

          Robert S. Saunders, Joseph O. Larkin, and Jessica R. Kunz, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, Wilmington, Delaware; Jane E. Willis, Matthew L. McGinnis, and C. Thomas Brown, ROPES & GRAY LLP, Boston, Massachusetts; Attorneys for Plaintiff.

          David E. Ross, ROSS ARONSTAM & MORITZ LLP, Wilmington, Delaware; Evan R. Chesler, Kevin J. Orsini, CRAVATH, SWAINE & MOORE LLP, New York, New York; Attorneys for Defendants.

          MEMORANDUM OPINION

          BOUCHARD, C.

         This post-trial decision resolves a contractual dispute between TA Operating LLC and Comdata, Inc., which have been business partners for more than two decades. TA is one of the three largest operators of travel centers in the United States, specializing in providing fuel and other amenities to professional truck drivers along America's highways. Comdata is one of the largest fuel card providers to the trucking industry.

         In early 2011, in response to competitive pressures, Comdata wanted to implement a cardless fueling solution, which was touted as a way to combat fraudulent fuel transactions. Comdata adopted as its solution a radio frequency identification ("RFID") technology known as SmartQ and, in the fall of 2011, approached TA with a proposal for TA to implement SmartQ at its travel centers. The discussions quickly led to simultaneous negotiations of a new RFID agreement to implement SmartQ and, at TA's request, an amendment to the then-governing merchant agreement between TA and Comdata, which sets the prices TA must pay Comdata for the fueling transactions it processes.

         A new RFID agreement and the amendment were signed together in December 2011. The amendment extended the term of the merchant agreement for another six years, replacing the original expiration date of January 2, 2016 with a new expiration date of January 2, 2022, and reduced the transaction fees Comdata was entitled to charge TA. The amendment expressly referred to the RFID agreement as part of the consideration for the amendment. The RFID agreement did not include a specific deadline for implementing SmartQ or indicate that time was of the essence for its implementation. Instead, it provided that TA and Comdata would "reasonably cooperate" to complete the integration of the RFID system with TA's point of sale system "as soon as reasonably practical."

         The parties performed under the RFID agreement and the merchant agreement, as amended, for almost five years, during which TA encountered a number of difficulties implementing SmartQ. In particular, TA ran into problems integrating the SmartQ technology with its point of sale system, which TA decided to replace when its point of sale system became unstable. During this five-year period, Comdata never suggested to TA that it had failed to comply with its obligations under the merchant agreement or the RFID agreement. That changed in 2016, after FleetCor Technologies, Inc. had acquired Comdata and installed a new CEO at Comdata, who was intent on raising the revenues Comdata derived from its three largest travel center customers.

         On September 7, 2016, as part of the new CEO's revenue-enhancement strategy, Comdata sent TA a notice of default, asserting (1) that TA had breached the RFID agreement by failing to install SmartQ at all of its travel centers, (2) that TA's agreement to purchase and install the RFID technology was the consideration for Comdata to enter into the amendment to the merchant agreement in 2011, and thus (3) that Comdata would terminate the merchant agreement amendment unless TA cured the alleged default within thirty days. On October 13, 2016, the last day of the cure period, TA reported to Comdata that it had successfully installed SmartQ at approximately 90% of its travel centers and thus had substantially performed its obligations under the RFID agreement. Comdata disagreed and notified TA a few weeks later that it had failed to cure its breach of the RFID agreement, and thus that the merchant agreement, as amended, was terminated immediately. Contending it no longer was contractually limited in the fees it could charge TA, Comdata began charging TA significantly higher transaction fees effective February 1, 2017.

         Soon after receiving the notice of default, TA filed this action asserting, among other claims, that Comdata breached the merchant agreement, as amended. For the reasons explained below, I conclude based on the weight of the evidence adduced at trial, (1) that the RFID agreement was partial consideration for Comdata to enter into the amendment, (2) that TA did not materially breach its obligation in the RFID agreement to reasonably cooperate to complete the integration of SmartQ with TA's point of sale system as soon as reasonably practical, and, in any event, (3) that Comdata's own material breach of the RFID agreement excused any purported failure of TA to cure an alleged breach of the RFID agreement. Thus, under Tennessee law, which governs the claims in this case, Comdata was not entitled to terminate the merchant agreement, as amended.

         The net result of this decision is that TA is entitled to, among other things, an order requiring Comdata to specifically perform under the merchant agreement, as amended, as well as damages against Comdata for the difference between the transaction fees TA has paid to Comdata since February 1, 2017 and what it would have paid during this period under the fee structure in the amendment to the merchant agreement.

         I. BACKGROUND

         The facts recited in this opinion are my findings based on the testimony and documentary evidence of record from a four-day trial held in April 2017 during which six fact witnesses and one expert witness testified. I accord the evidence the weight and credibility I find it deserves.

         A. The Parties

         Plaintiff TA Operating LLC ("TA") is a Delaware limited liability company with its principal place of business in Westlake, Ohio.[1] TA operates a nationwide network of 225 full-service travel centers that are primarily located along the interstate highway system. These centers offer a broad range of fuel and nonfuel products and services, such as diesel fuel, gasoline, truck repair and maintenance, sit-down restaurants, convenience stores, showers, and other amenities.[2] TA's two major competitors are Pilot Travel Centers LLC ("Pilot") and Love's Travel Stops & Country Stores, Inc. ("Love's"), [3] which, together with TA, are the three largest travel center operators in the United States.[4] Tom O'Brien was the Chief Executive Officer of TA during all times relevant to the issues in this case.[5]

         Defendant Comdata, Inc. ("Comdata") is a Delaware corporation with its principal place of business in Brentwood, Tennessee.[6] Comdata provides payment methods for a number of industries, and currently is a leading provider of fuel cards to the trucking industry.[7] Fuel cards function like charge cards and allow truckers to purchase fuel, lodging, food, and related products and services at participating travel centers. They also allow trucking companies to access data that helps the trucking companies control and monitor their fleet operations.[8]

         Defendant FleetCor Technologies, Inc. ("FleetCor") is a Delaware corporation headquartered in Norcross, Georgia. Its stock is publicly traded on the New York Stock Exchange under the ticker symbol "FLT." FleetCor and its subsidiaries provide credit and debit payment services to third parties, including truckers, trucking companies, and merchants that sell goods and services to truckers and trucking companies.[9]

         On November 14, 2014, FleetCor acquired Comdata. Since the acquisition, Comdata has been a wholly owned subsidiary of FleetCor.[10] During the period relevant to this case, Comdata has had four different presidents. Steve Stevenson was the President of Comdata from February 2011 to December 2013, [11] when he was succeeded by Stuart Harvey.[12] After FleetCor's acquisition of Comdata in November 2014, Randy Morgan replaced Harvey as the President of North American Trucking.[13] In July 2015, Gregory Secord replaced Morgan as President of Comdata and President of North American Trucking at FleetCor.[14]

         B. TA and Comdata Negotiate the 2010 Merchant Agreement

         The business relationship between TA and Comdata spans more than two decades and involves a succession of merchant agreements.[15] These merchant agreements require TA to accept Comdata fuel cards and Comdata to process, and sometimes fund, transactions made at TA locations in exchange for transaction fees.[16] Comdata is TA's largest single processor of transactions, processing more than 40% or roughly $2 billion of TA's diesel fuel transactions in 2016.[17]

         In early 2010, with the then-operative merchant agreement set to expire, Comdata and TA began negotiating a new agreement.[18] Before 2010, TA paid a flat transaction fee to Comdata.[19] During the 2010 negotiations, Comdata proposed that TA pay a percentage fee based on the dollar value of each transaction, subject to a cap, for certain categories of transactions.[20] Comdata's proposal roughly would have tripled TA's cost of acceptance on those transactions.[21]

         On December 15, 2010, after almost one year of "tough" negotiations, [22] TA and Comdata executed a new merchant agreement (the "Merchant Agreement").[23]The Merchant Agreement reflects that TA was able to significantly limit the price increase that Comdata had proposed and to retain an option to pay a flat fee for each transaction-an option TA always utilized.[24] The Merchant Agreement had a five-year term and could be terminated only for an uncured material breach:

This Agreement shall remain in effect for a period beginning on the Effective Date and expiring on January 2, 2016. . . . Notwithstanding the term of this Agreement, in the event either party defaults in the performance of any material obligations, covenants, or conditions contained in this Agreement, and does not cure such default within thirty (30) days following receipt by such party of written notice describing such default from the other party to this Agreement, . . . the other party shall have the right, in its sole discretion, to terminate this Agreement immediately.[25]

         C. Cardless Technology Emerges

         Sometime between 2010 and 2011, Comdata learned that a fuel card competitor, Electronic Funds Source LLC ("EFS"), was partnering with Pilot-the largest truck stop chain at the time[26]-and a company called Zonar Systems, Inc. ("Zonar") to develop a cardless fueling technology for use by truckers and truck stops.[27] Zonar's system, known as "Z-Con, " was marketed as a way for fleets to combat fraudulent fuel transactions and reduce expenses, and caused an "uproar" in the market at a time when fuel costs were at "an all-time high."[28]

         The announcement of Z-Con sparked a sense of urgency in Comdata as its customers began to ask what Comdata was doing to combat fraudulent fuel transactions.[29] Comdata was concerned that it would lose market share if it did not develop its own competing solution because fleets typically do not carry more than one payment card.[30]

         After conducting some research, Comdata decided to develop a competing product using radio frequency identification (as defined above, "RFID") technology developed by a company called QuikQ, LLC and its affiliate QuikFIM LLC (together, "QuikQ").[31] QuikQ's RFID software is known both as "Fuel Island Manager" (or "FIM") and as "SmartQ."[32] I use these terms interchangeably in this opinion.

         In basic terms, an RFID system consists of an RFID tag, a corresponding RFID reader, and control and application software.[33] Similar to the Zonar system, the primary goal of the RFID system is to reduce fraud in fuel transactions by ensuring that only the truck with a unique RFID tag, which is associated with a unique fuel card number, receives the fuel being purchased.[34] The RFID system, however, does not allow truck drivers to purchase anything other than fuel.[35]

         On August 24, 2011, Comdata entered into an agreement with QuikQ to become the "limited exclusive reseller" of QuikQ's RFID technology.[36] The agreement had an initial term of five years, and would automatically renew for successive terms of one year each unless either party provided the other party with written notice of its intention not to renew.[37] Section 5 of the agreement provides that Comdata and QuikFIM shall each work to integrate the RFID technology with "(i) Comdata's current SmartDesq POS system . . . and (ii) the Fiscal and Retalix POS systems, all with the goal to provide Comdata customers a cardless fueling solution."[38]

         "POS system" refers to the "point of sale" system used by Comdata's merchants, such as TA.[39] The core functionality of a POS system is to authorize and record all electronic transactions.[40] The RFID software is an add-on feature that cannot operate without a functioning POS system.[41] Fiscal System, Inc. ("Fiscal") and Retalix Ltd. were two major providers of POS systems, [42] and Comdata had its own POS system called SmartDesq.[43] Evidence at trial suggests that Comdata did not perform proper due diligence on QuikQ's RFID system before signing its agreement with QuikQ.[44]

         Also in August 2011, Love's announced that it would roll out QuikQ's RFID technology at all of its locations nationwide.[45] Love's negotiated its contract directly with QuikQ, rather than through Comdata.[46]

         D. TA and Comdata Negotiate the RFID Agreement and the Merchant Agreement Amendment

         1. Comdata Approaches TA Regarding RFID Technology

         Around late 2010, QuikQ approached TA to discuss its RFID technology, but nothing materialized between the two companies.[47] In September 2011, Steve Stevenson, then-President of Comdata, reached out to Tom O'Brien, Chief Executive Officer of TA, to discuss initiatives on which TA and Comdata might work together.[48] One proposed initiative was to implement a "POS solution, including cardless options."[49] As Stevenson testified:

Pilot being the largest merchant out there . . . They had already gone down the path of installing the Zonar solution, which would not work with a Comdata card. It only worked with the EFS card . . . And so our whole strategy, Comdata's whole strategy, was, if we could secure Love's and TA, Number 2 and 3 in the industry, we could have a nice nationwide network to go out and sell to our fleets a pretty good story.[50]

         O'Brien recognized that TA was "potentially an important piece" to Comdata's cardless strategy, [51] and that Comdata was "anxious" to sign an RFID deal with TA to stay competitive.[52] O'Brien, however, had reservations about the RFID technology and "wasn't anxious at all" "about getting RFID up and running."[53]

         In an internal memorandum dated September 13, 2011, O'Brien wrote to TA's Chief Financial Officer Andy Rebholz and Chief Information Officer Michael Rowe outlining his goals for an upcoming meeting with Comdata about QuikQ:

I may or may not be in the meeting with QuikQ tomorrow. Here's what the meeting goals should be:
1. A proposal from Comdata to outfit the entire network with the equipment, including cost.
It is important that they be made to appreciate the fact that [Zonar] is also very interested in install and may be offering equipment at a lower price, possibly zero.
2. Find out what, if anything, they have done to address the interface with Fiscal and if they are planning to propose to fund this cost.
The general tone should be that the process will take time. We need time to test the product and to compare proposals and competing product (Zonar).[54]

         Around the same time TA was engaging in discussions with Comdata over the RFID technology, TA also solicited proposals from Zonar.[55]

         On November 10, 2011, as a follow-up to an in-person meeting, Stevenson emailed O'Brien a formal proposal "related to Comdata's card-less and POS solutions."[56] The proposal had three key terms concerning Comdata's cardless solution, i.e., the RFID technology. First, Comdata offered to front

all capital required for the hardware and software installation necessary to bring TA merchant locations into a production mode for the card-less payment solution-an outlay that Comdata estimates to be between $3.0 and $4.0 million in aggregate. TA would be responsible for the installation of the hardware at its locations.[57]

         Second, in order for Comdata to recoup the above-mentioned capital outlay, Comdata proposed to retain $0.05 per transaction (or $0.06 per transaction if TA used Comdata's cardless solution in a non-exclusive manner) on all TA transactions processed through Comdata (cardless or otherwise) for a six-year period.[58]

         Third, recognizing that its "relationship with TA [was] very strategic in the market place and in the transformation to a card-less environment" and to "incent TA to be an early adopter, " Comdata proposed that if "TA agrees by December 31, 2011, for Comdata to be its exclusive provider of card-less solutions, " Comdata would pay TA "20% of net proceeds (revenue less direct out-of pocket costs) of all hardware and software installations for the card-less solutions" during the first two years after execution of the proposal and 10% during the third year, "a revenue stream Comdata estimates to be between $0.7 million and $1.0 million over the full three year period."[59]

         Stevenson also informed O'Brien that "Quik-Q today is only fully interfaced with Retalix" and "is currently being integrated to Comdata's POS solution, " SmartDesq, which integration "is planned to be completed in early 2012." [60]Stevenson knew that TA used a different POS system developed by Fiscal called TravStar1.[61] Thus Stevenson proposed that, should TA choose to install Comdata's SmartDesq POS system, "Comdata would absorb 50% of TA's one-time license fees, " estimated at approximately $1.2 to $1.5 million, and integrate the RFID technology into SmartDesq "at no additional investment to TA."[62]

         On November 17, 2011, a week after O'Brien received the email proposal from Stevenson, O'Brien wrote an internal memorandum to Barry Portnoy, co-managing director of TA, in which he summarized TA's recent discussions with EFS, Comdata, and QuikQ over their respective cardless solutions.[63] O'Brien recited the Comdata proposal described above, noting that "for reasons previously discussed, " TA did not want to use Comdata's "SmartDesk POS system, "[64] and continued:

I think I should respond to Comdata as follows:
a. TA will purchase all necessary Fuel Island Manager equipment from Comdata for $4 million and install it in every site at TA's cost.
b. TA will cause its point of sales programs to interface with the Fuel Island Manager, at TA's cost.
c. The Comdata/TA contract will be amended as follows:
i. Term extension to May 21, 2031 (one day after my 65th birthday).
ii. Fees charged to TA for transactions will be revised [to be six cents lower per transaction than the current rate.]
iii. The schedule for "normal" settlements with TA will be revised [to shorten the settlement period.]
. . . At the "end of the day" though, I don't think a few million dollars is too much to pay for a long-term contract.[65]

         2. Comdata and TA Engage in Simultaneous Negotiations

         On December 2, 2011, Randy Morgan, then-Executive Vice President of Comdata, emailed O'Brien a proposed RFID agreement, noting that "it would be great if" O'Brien could announce TA's adoption of the RFID technology at an upcoming Comdata sales meeting.[66] The email also stated: "On another note, we have talked with Lisa (Legal). She is on holiday until Tuesday, but our goal would be to get you something next week addressing the merchant agreement."[67] O'Brien responded on the same day: "We will review straight away. It's important to me to have all the agreements done simultaneously . . . If you want us to take a first crack at the merchant agreement changes, we can do that and have a mark up for you before Lisa gets back." [68] Morgan replied: "That would be fine on the merchant agreement."[69]

         On December 5, 2011, O'Brien emailed Stevenson TA's initial markups of both the Merchant Agreement and the proposed RFID agreement.[70] O'Brien proposed to extend the Merchant Agreement to May 20, 2036, [71] and to reduce TA's transaction fees payable to Comdata by $0.06 per transaction for locations that have completed initial installation of the RFID technology.[72] O'Brien also made changes to the proposed RFID agreement, [73] including the following changes to Section 5:

Subsequent to the date of this agreement, Comdata and Customer will reasonably cooperate to integrate the FIM system and TA's point of sale and/or other relevant systems and to complete that integration as soon as reasonably practical. Comdata understands that a portion of the process of integration will need to be coordinated between Customer and Customer's vendors and that Customer will direct its vendors in Customer's discretion and at Customer's cost. Comdata will ship the System to theeach location designated by Customer, and Customer will be billed for the shipping and handling charges. Customer is responsible for installation of all System hardware and equipment or any hardware and equipment required to utilize the System. Comdata will assist Customer in locating a qualified installer. Comdata will install the FIM Software and assist Customer with the initial setup of the FIM Software.Comdata and Customer will reasonably cooperate regarding the installation and initial set up of the FIM Software.[74]

         At trial, O'Brien explained the purpose of his revisions as follows:

I wanted to make sure that everybody reading this was-and Comdata at the time-understood that this was going to need cooperation between the two companies. And also to express that this was not like a hair dryer that you plug in and it turns on. There is integration activity that needs to take place to connect their software for RFID to our point of sale system, which, again, is the lifeblood of our system and other systems besides. . . . This was to alert them that we all needed to rely upon people that were not us. Other vendors had to cooperate in order to get this done. Then it ends with assurances that we'll pay for it, meaning TA, but that we needed the discretion to direct those vendors, you know, as we saw fit. . . . I was really trying to make it abundantly clear that we were going to need to cooperate on all aspects of this, and that it, as I said before, was not a simple thing.[75]

         On December 8, 2011, Stevenson emailed O'Brien that "[t]here were a couple of open items" related to the two agreements.[76] Among other things, Comdata's General Counsel Lisa Peerman "was a little concerned with the length of the [Merchant Agreement]."[77] Stevenson nevertheless told O'Brien that "I told Lisa my intent was to make [the Merchant Agreement] as long as we could."[78]

         On December 9, 2011, after a call between O'Brien and Stevenson, Mark Young, the Executive Vice President and General Counsel of TA, sent another markup of both the Merchant Agreement and the proposed RFID agreement to Peerman.[79] The markup of the Merchant Agreement removed the condition in the prior markup tying TA's rate reduction to the installation of the RFID technology.[80]In other words, under this markup, TA would see its transaction fees payable to Comdata reduced by $0.06 per transaction for all transactions, effective immediately.[81] O'Brien testified that Stevenson proposed this change-even though it was not in Comdata's financial interest-presumably because technological issues at Comdata prevented Comdata from being able to lower transaction fees on a location-by-location basis to apply only to locations with RFID technology.[82] Other evidence corroborates O'Brien's testimony on this point.[83]

         On the morning of December 12, George Burke, a Comdata in-house attorney, emailed Young a revised draft of the RFID agreement.[84] In this revision, Comdata substantially accepted TA's modifications to Section 5 of the proposed RFID agreement quoted above.[85]

         Around the same time, Peerman converted O'Brien's revisions to the Merchant Agreement into a standalone amendment, with certain modifications, [86]which Morgan emailed to O'Brien in the afternoon of December 12.[87] Section 3 of the draft amendment proposed to change the expiration date of the Merchant Agreement from January 2, 2016, to January 2, 2022 (as opposed to TA's proposal of May 20, 2036).[88] Sections 1 and 4 of the draft amendment proposed to reduce the transaction fees payable by TA to Comdata by $0.08 per transaction for transactions at all TA-owned locations (whether or not the RFID technology had been installed) as well as at TA franchisees that had installed the RFID technology.[89]

         On December 13, 2011, Young sent Peerman additional edits on the Merchant Agreement amendment.[90] Significantly, Young added a new recital to the proposed amendment:

WHEREAS, on or about the date hereof, Merchant and Comdata entered into the FIM Solution Agreement pursuant to which Merchant has agreed to purchase and install RFID (Radio Frequency Identification), a technology distributed exclusively by Comdata, at all of its locations nationwide.[91]

         Young also revised the paragraph immediately after the recitals to the following by inserting the underlined phrase: "NOW, THEREFORE, in consideration of the foregoing and the other mutual covenants and agreements described in this Amendment, the parties hereby agree as follows." [92] Young did not change Comdata's proposed expiration date of January 2, 2022.[93]

         On December 14, 2011, TA and Comdata executed the RFID agreement (the "RFID Agreement"), which became effective on January 1, 2012, and the Merchant Agreement Amendment (the "Original Amendment"). [94] O'Brien signed both documents before attending a Comdata sales meeting at roughly the same time in the same conference room.[95]

         On January 5, 2012, Comdata and TA replaced the Original Amendment with an Amended and Restated Amendment to Comdata Merchant Agreement (the "Amendment") [96] The only change was to remove the term in the Original Amendment conditioning the reduced transaction fees at TA franchise locations on installation of the RFID system.[97] The Amendment referenced the execution date of the Original Amendment in the recitals, stating that it was "made and entered into as of the 14th day of December, 2011."[98]

         TA was "the first travel center to contract with Comdata to install the QuikQ RFID technology."[99] Rowe testified that before the RFID Agreement was signed, TA "did no testing of the SmartQ product."[100] Rowe also testified, however, that based on a personal visit to QuikQ offices in Tennessee in early 2011, and a meeting with Comdata representatives in summer 2011, he believed at that time that although the QuikQ system was "based on older technology, " it was "technically sound."[101]Rowe apprised O'Brien of his views of the RFID technology after his meetings with QuikQ and Comdata.[102]

         E. TA Begins the RFID Installation and Encounters Difficulties

         After the parties executed the RFID Agreement, TA promptly formed an internal team to work on the installations. [103] It also selected, at Comdata's recommendation, a company called Velociti, Inc. to assist with the installations.[104]

         On February 29, 2012, TA and Comdata held a kickoff meeting for the RFID project.[105] Lisa Spikes, a Senior Implementation Project Manager at Comdata, [106]wrote a project management plan that was reviewed at the kickoff meeting.[107]According to the project management plan, Spikes was the "Project Manager" and had "the overall authority and responsibility for managing and executing [the RFID] project according to this Project Plan and [its] Subsidiary Management Plans."[108] The project plan marked all deliverable dates for major tasks as "TBD."[109] Rowe testified that the dates were to be determined because "[t]his was the very beginning of the project . . . We did not know how long the work would take. We did not know how complex the work would be."[110]

         Rowe brought twenty questions to the kickoff meeting for discussion.[111] One of those questions asked: "Will SmartQ be launch [sic] before installation is complete at 100% of the sites?"[112] TA and Comdata discussed this question at the kickoff meeting and agreed that:

if you're going to be selling this to fleets, this needs to be something that's available at all sites in all lanes, not just at a small number in the network or a few diesel lanes at each location. . . . The plan was to roll out the software . . . and then activate the software, the solution, at all the sites at the same time.[113]

         As O'Brien testified, "it would have been pointless" to roll out RFID on a location- by-location basis because TA focused on "long-haul drivers" who tended to be "on the road for weeks" and "need[] to be able to fuel at any of [TA's] locations, " not just one or a handful of locations in a particular area.[114] Morgan also testified that in order to make a credible offer to fleet customers to use the RFID technology, "it would be nice to have every location equipped with every lane."[115]

         Following the kickoff meeting, Spikes led weekly RFID project meetings, during which project team members provided updates on the RFID installation process.[116] Around June 2012, Mia McCain, another project manager at Comdata, replaced Spikes as the RFID project manager.[117] Both Spikes and McCain circulated meeting minutes after the weekly meetings to keep all stakeholders informed.[118] TA regularly attended these meetings and provided updates.[119]

         As of early 2012, both TA and Comdata expected to complete the RFID rollout at all sites by the end of 2012 or early 2013.[120] After TA began the RFID installation in April 2012, [121] however, it encountered three major challenges that ultimately led to a significant delay of the RFID launch: (1) problems with locating the RFID antennas in the canopies over the fueling stations, (2) instability in TA's POS system, and (3) water damage to the boxes that housed the RFID readers.

         1. The Short Canopy Issue

         In April 2012, TA discovered the so-called "short canopy" issue.[122] QuikQ initially had suggested that the ideal position to locate the RFID antenna for reading a windshield-mounted RFID tag was seventeen feet from the fuel hose.[123] But QuikQ's system specifications were "based on just a couple site reviews. . . . They did not factor in the many different canopy sizes in the market." [124] Actual measurements at TA locations revealed that many of TA's travel centers could not meet the seventeen-foot requirement.[125]

         By September 6, 2012, QuikQ had determined that "changing the location specification to 'as close to' 17 feet but not less than 15 feet was acceptable, " and was "providing modified antenna angle calculations to accommodate this change."[126] This change "increased the number of TA sites available for installation from 68 to 108."[127]

         By September 10, 2012, QuikQ and Comdata had come up with what Rowe called a "breakthrough solution for sites with narrow canopies." [128] This "breakthrough solution" required modifications to both the QuikQ software and TA's TravStar1 POS system.[129] TA agreed to this solution on September 10, 2012.[130]

         On October 4, 2012, Rowe emailed Morgan and Ken Patton, a Vice President at Comdata, stating that: "Based on where things stand today, the SmartQ system will not be up and running at the majority of TA and Petro locations until sometime in Q2 2013." [131] According to a Comdata "Technology Weekly Report, " by November 26, 2012, TA had finished installation of RFID hardware at seventy-eight locations, substantially completing Phase 1 of the rollout.[132]

         On January 2, 2013, Rowe provided members of the RFID project team with the following update for TA's rollout of QuikQ:

Fiscal delivered the code with QuikQ and QuikQ short canopy support last week as promised. However, the code has not yet been tested in our lab. . . . Based on the schedule as it now stands, we should be ready for regional beta testing and the network-wide rollout of the QuikQ code sometime in March or April.. . . the phase 2 rollout will encompass the remaining 115 company sites . . . Phase 3, the last phase of the deployment, will cover the 37 TA and Petro Franchise locations. This phase is tentatively scheduled for Q2.[133]

         2. The POS System Issue

         In December 2010, TA announced that it would begin installing "convenient island pumps for dispensing diesel exhaust fluid (DEF), "[134] a fuel additive that "reduces truck emissions and allows the fleets to tune their truck to maximize mileage."[135] TA contemplated integrating "the DEF dispenser with [its] point of sale and other systems so that drivers can purchase fuel and diesel exhaust fluid in a single transaction."[136]

         In January 2013, when TA implemented a new version of its TravStar1 POS system to permit the simultaneous purchase of DEF and fuel, the POS system became seriously destabilized.[137] The problem came to a peak at the end of the first quarter of 2013.[138] As Rowe testified:

We had situations where they saw that we were pumping fuel, drivers were filling their tanks, but we were not being paid for those transactions. And then we had transactions where fleets were reporting they had been charged for fuel and the driver had not actually pumped that fuel, or they were being charged a second time for fuel that was paid for previously. In addition, we were getting reports from the cashiers at the sites that the point of sale was experiencing slowdowns. . . . And then there were situations where the register was freezing entirely.[139]

         TA regarded this as "a business critical issue" that "placed a $5 billion commercial fuel operation at risk."[140] As a result, TA put its "other current projects, " including the RFID project, on hold so that its technology personnel could focus on stabilizing TravStar1.[141]

         In mid-2013, TA decided that "the TravStar1 source code is too unstable to support the business and TravStar1 should be replaced with Retalix, which has been used for years by Pilot Flying J and Love's."[142] TA initially expected the switch of its POS system to take approximately two years, but it ultimately took three years and four months-until the end of 2016-for the Retalix system to be fully deployed at all TA locations.[143]

         In an email dated August 28, 2013, a Shell employee who was working with TA informed FleetCor about TA's plan to switch its POS system from TravStar1 to Retalix for all of TA's sites over the next two years:

Also, important to communicate that as part of TA general strategy . . . they plan to move all site sales to new Retalix POS from existing Fiscal TravStar1 over next 2 years. The first phase for Retalix will be to bring it up for LNG only sales at TA sites with TravStar1 continuing in near term to service all other fuel sales (i.e. eventually TravStar1 phased out, and only Retalix for all sales at TA sites).[144]

         The email was forwarded to Ken Kaley, a Vice President of Operations at Comdata, who in turn forwarded it the same day to Morgan and Patton, writing: "Crap! Looks like TA is moving to Retalix. I suspect . . . this could also impact what they are doing with SmartQ roll out."[145]

         Rowe also informed Comdata of TA's switch from TravStar1 to Retalix at one of the weekly RFID status meetings in August 2013.[146] Stevenson, who learned about TA's POS system issue through conversations with O'Brien, [147] recalled that, by December 2013, TA was

still struggling with having to get the core system up and going in their - in their merchant locations there with - as soon as that was done, the - implementing the cardless solution would be kind of the next thing to do once we got our core new processing system in place, point of sale system operating.[148]

         Sometime around August 2013, the weekly RFID project meetings were discontinued, apparently because Comdata's Director of Implementation Project Management did not "see why a standing weekly call is needed and more importantly I need our focus to be on new customers coming on board to get them ramped as quickly as possible to make our 2013 numbers."[149] The Comdata director asked Patton to check if TA was "ok with cancelling the calls and just maintaining the program through email and one off calls."[150]

         Over the next three years, TA and Comdata engaged in occasional discussions about RFID.[151] Comdata also learned about TA's RFID progress through some third parties.[152] Despite its clear awareness of TA's transition from TravStar1 to Retalix by no later than August 2013 and the resulting significant delay it would cause to implementing QuikQ, Comdata never objected to this transition, never suggested that TA launch the RFID system on a location-by-location basis as it rolled out Retalix, and never claimed that TA was not reasonably cooperating toward RFID implementation, until this litigation.[153]

         3. The Water Damage Issue

         TA completed the initial RFID hardware installation at all locations by December 2013.[154] In the summer of 2014, TA discovered that RFID readers at approximately half of its locations were "dropping off the network."[155] TA notified Comdata and QuikQ of the issue in an effort to secure repair parts.[156]

         By working with QuikQ and a third-party contractor called Tolt Solutions, Inc., TA determined that the problem mainly was caused by rain water intruding into boxes approved by the National Electrical Manufacturer's Association ("NEMA") that housed the RFID readers.[157] According to the "SmartQ RFID Equipment Installation Guide, " the NEMA boxes were to be positioned beneath the canopy over the fuel lanes of each truck stop.[158] Rowe testified, however, that "partway through the rollout, " TA's installer Velociti "recommended that instead of putting the NEMA boxes on the underside of the canopy, that they be mounted on the support poles for the canopy to make them more accessible for repairs and to facilitate the project. This decision was discussed with QuikQ, and they approved that change."[159] Tolt's inspection reports to TA showed that most of the NEMA boxes that were infiltrated by water were mounted on the column, [160] although some boxes that were mounted under the canopy also suffered water damage.[161]

         In response to the water damage issue, QuikQ designed a new water-resistant NEMA box.[162] TA replaced all of the old NEMA boxes at all of its locations-not just the damaged ones-with the newly designed boxes, at its own expense.[163] TA completed the replacement at approximately 201 locations by August 2016, and was waiting for equipment for the remaining twenty-two sites at that time.[164]

         F. FleetCor Acquires Comdata

         In March 2014, FleetCor started performing due diligence on Comdata for purposes of a potential acquisition.[165] It reviewed Comdata's contracts, including its merchant agreements with Pilot, Love's, and TA, as part of the due diligence process.[166] In an April 2014 presentation prepared by FleetCor, it identified a "Big 3 revenue opportunity, " which included a substantial increase in TA's transaction fees.[167] Right below the section of the presentation identifying "Big 3 revenue opportunity" was a section entitled "Complications."[168] The first complication listed was that "TA contract doesn't renew until 2022."[169]

         In August 2014, FleetCor announced its agreement to acquire Comdata for $3.45 billion.[170] Comdata represented in Section 3.13(b) of the merger agreement, which is dated as of August 12, 2014, that:

All of the Material Contracts are valid and binding and in full force and effect (except those that terminate or are terminated after the date of this Agreement in accordance with their respective terms). To the Knowledge of the Company, no Person is challenging the validity or enforceability of any Material Contract. Neither the Company nor any of its Subsidiaries, nor to the Knowledge of the Company, any of the other parties thereto, has violated any provision of, or committed or failed to perform any act which (with or without notice, lapse of time or both) would constitute a material default under any provision of, and neither the Company nor any of its Subsidiaries has received written notice that it has violated or defaulted under, any Material Contract. Company has delivered to Parent a complete copy of each Material Contract.[171]

         The Merchant Agreement between Comdata and TA was listed in the disclosure schedule to the merger agreement as a "Material Contract." The disclosure schedule did not separately list the RFID Agreement. "Knowledge" is defined in the merger agreement to mean, with respect to Comdata, the actual knowledge of certain people, including Lisa Peerman and Randy Morgan, "and the knowledge that such persons would reasonably be expected to have after due inquiry of their direct reports."[172]After signing the merger agreement in August 2014, but before the transaction closed in November 2014, FleetCor's CEO Ronald Clarke called O'Brien to confirm that TA's Merchant Agreement was still valid.[173]

         G. Comdata and FleetCor Seek to Renegotiate the "Big Three" Merchant Agreements

         In July 2015, Greg Secord became President of Comdata.[174] He was given a target annual growth rate of ten percent, and started looking for opportunities "to increase the rates that Comdata charged the Big 3."[175] In September 2015, he handwrote the following "thoughts around the marketplace:"

Big 3 . . .
1) We have a bad deal, want better, new ask
2) How we can help you
3) How we can hurt you . . .
a) terminate agreement - nuke war - bad for both[176]

         When Secord wrote these notes, Comdata's contract with Pilot already had expired and its contract with Love's was expiring shortly.[177] Thus, Secord logically must have been referring to the Merchant Agreement with TA when he wrote down "terminate agreement - nuke war."[178]

         Secord began negotiating new contracts with Pilot and Love's in 2015, [179] and Comdata entered into new service center agreements with Pilot and Love's in April and October 2016, respectively.[180] Both of these agreements include higher transaction fees payable to Comdata than the previous agreements.[181]

         On May 16, 2016, Secord, Morgan, and Paul Baran, a Comdata Vice President, attended a meeting with FleetCor's CEO Clarke.[182] After the meeting, they prepared a slide deck that summarized the discussions at the meeting and the follow-up items.[183] The first page of the slide indicates that FleetCor was interested in acquiring QuikQ to obtain its RFID technology:

Meeting Takeaways:
• . . .
• RFID-make a market . . . interested in potentially buying QuikQ
Follow-up Items:
• Schedule meeting with Ernie at QuikQ to discuss strategic options . . . path forward to include potential acquisition of company.
- Greg/Randy meeting with Ernie on June 2nd.
• . . .
Expected Results:
• Go-forward strategy for Merchant Business
- Potential Acquisition of QuikQ…if acquired how can we leverage Big 3 RFID to make RFID market standard[184]

         The last page of the slide deck posed questions about the potential consequences if Comdata were to breach its contract with TA:

Meeting Takeaways:
• TA:
- What are penalties for breaking TA contract? Other risks?
- Any "outs" of contract? TA breaches? Investigate the commitment to buy and INSTALL RFID equipment
• . . .
Follow-up Items:
• Schedule meeting with outside/internal counsel on TA contract . . . what are potential penalties for breach? What's the likelihood of being sued? Maximum risk?
• Meeting with TA
• . . .
Questions to Answer:
What are outs of TA Contract
• What are financial/legal risks of terminating TA contract?
• Other leverage we may have with TA?
• What do we want from TA (install RFID, higher rate, marketing program, etc.)
• . . .[185]

         On July 7, 2016, Secord presented a Comdata three-year strategic plan to Clarke and some other officials of Comdata and FleetCor.[186] The slides for the presentation were finalized on July 5.[187] Page 3 of the slide deck stated:

Merchant:
• . . .
• RFID is a "kludgy" solution -> Not long term.
Big 3:
. . .
• TA/Petro - Meeting scheduled -> but locked in long term.[188]

         Later in the presentation, Secord noted that QuikQ had no interest in a potential transaction with FleetCor and questioned the wisdom of betting on RFID technology:

What we have done:
• . . .
• Made "deal" proposal to Quick Q, no interest.
• Site visit at Quick Q 6/17
• Discussed RFID with Pilot - "no way."
Considerations:
• . . .
• Betting on RFID is a "iffy" bet -> technology is changing and not user friendly[189]

         Secord testified that by saying "RFID is a 'kludgy' solution" and an "'iffy' bet, " he meant:

So frankly, it's an inelegant solution. You had a cone, or a reader that's on top of the thing and projects a cone, and a vehicle needs to be [in] it. It was great technology at the time. Like many first-time innovations, the first cardless-payment solution in the diesel, it was great technology. But, you know, it's just not elegant. . . . It wasn't quite the same opportunity anymore. The window had closed. So in my mind, I'm rolling around, what do we do next? There's going to be a different payment technology.[190]

         The presentation made no suggestion that TA might be in breach of the Merchant Agreement or the RFID Agreement.

         On July 8, 2016, Secord met in person with O'Brien and Mike Lombardi, a Senior Vice President at TA.[191] During the meeting, Secord proposed to collaborate with TA on a new small-fleet program.[192] Secord also asked O'Brien why RFID had not been installed.[193] In response, O'Brien discussed the challenges that TA and Comdata had faced in installing the RFID system, [194] and stated that TA would resume installation as soon as it completed the POS system switch, which probably would be in the first quarter of 2017.[195] Secord did not tell O'Brien that he thought TA was in breach of any contract-either the Merchant Agreement or the RFID Agreement.[196] He did not tell O'Brien that he thought TA had not moved as quickly as it was obligated to under the RFID Agreement, or ask TA to activate the RFID system location-by-location.[197] Indeed, Secord did not ask TA to do anything differently with respect to the RFID rollout than what TA was doing.[198]

         On August 15, 2016, Secord sent out an email entitled "Priorities" to certain Comdata employees.[199] The attachment to the email, entitled "Secord Personal Prioritiesv2, " contained the following entry:

TA Petro
• Bring TA to table (July meeting)
• Propose new agreement for SME…fuel & service (9/16/16 in Cleveland)
• Drive toward reward vs. consequence conversation[200]

         The second bullet-"Propose new agreement for SME…fuel & service (9/16/16 in Cleveland)"-refers to a meeting with TA that Secord had scheduled to take place in mid-September.[201] Secord's priority list does not refer to RFID or to TA being in breach of any contract.[202]

         H. Comdata Purports to Terminate the Merchant Agreement

         During the summer and early fall of 2016, TA was still working on the RFID installation.[203] On September 6, 2016, Rowe of TA emailed Morgan of Comdata projecting that SmartQ would be operational by early 2017:

We are preparing to implement Comdata SmartQ in production at the end of the year or early in Q1 2017. Since the original installation of the SmartQ hardware at our sites, we have acquired new truck stops. We are preparing a purchase order for the equipment and software licenses needed for these acquisition locations. Since there have been a number of organizational and personnel changes since our last SmartQ order, please let me know where to send the PO.[204]

         Morgan forwarded Rowe's email to Secord, who testified that he did not "think that much of" it and that it was "[s]tandard course."[205] The contemporaneous record shows, however, that Secord immediately forwarded Rowe's purchase order to FleetCor's Clarke, Comdata's in-house counsel Peerman, and FleetCor's in-house counsel Sean Bowen, [206] and that within hours of receiving Rowe's inquiry, Peerman had drafted a "TA default notice 9.6.16" and sent it to Secord, Clarke, and Bowen.[207]

         On September 7, 2016, Comdata mailed TA a notice of default, in which Comdata asserted for the first time that TA was in breach of the RFID Agreement, and that Comdata intended to terminate the Merchant Agreement, as amended:

Pursuant to paragraph 8 of the above referenced Agreement, this letter is to provide written notice of default to TA for failing to install the Radio Frequency Identification (RFID) technology at all locations. The consideration for Comdata's willingness to enter into the December 2011 amendment to the Agreement, which served to extend the Agreement term and reduce transaction fees, was TA's agreement to purchase and install the RFID technology. Comdata will exercise its rights under the Agreement if TA does not cure the breach in thirty (30) days from TA's receipt of this notice.[208]

         Rowe testified that when TA received the default notice, they "had a plan in place . . . to go live with SmartQ RFID after Retalix was deployed to all locations" in December 2016, but they "accelerate[d] that timeline" and "compress[ed] it into one month's work" in response to Comdata's default notice.[209]

         In an internal email dated September 10, 2016 to O'Brien, Young, and Rebholz, Rowe summarized the "current status of the SmartQ RFID implementation" and "Next Steps."[210] As Rowe explained in the email, as of September 10:

The RFID hardware is installed at 202 truck stops and production ready at 170 or 84% of these sites. The remediation vendor has been tasked to repair the RFID hardware at the 32 sites where it is still not production ready. In addition, the RFID hardware was never installed at 22 sites. The SmartQ software license and hardware for these 22 locations should be purchased from Comdata according to our agreement.[211]

         On September 16, 2016, TA sent a letter to Comdata, confirming that TA received Comdata's notice of default on September 12, 2016, but disputing that Comdata had a right to terminate the Merchant Agreement based on an alleged default under the RFID Agreement, or that TA had defaulted under the RFID Agreement.[212] Comdata replied to this letter on September 21, maintaining its position that "The 2011 Amendment clearly states that the purchase and installation of RFID at all of [TA's] locations nationwide was the consideration for Comdata's agreement to reduce the merchant transaction fees and extend the term of the Agreement" and notifying TA that the "thirty day cure period ends October 13."[213]

         On September 22, Rowe wrote to Secord and Morgan, urging Comdata to process the purchase order "for the SmartQ (FIM) System for 156 diesel lanes at 21 sites" because Rowe had "not heard back from Comdata with a contact name for [the] order."[214] By this point, however, Comdata no longer had a contract with QuikQ.[215] Although Comdata still worked with QuikQ to secure the equipment TA ordered, the order did not arrive at TA locations until after the cure period ended.[216]

         On September 29, a Comdata employee emailed Morgan, Secord, and several other Comdata personnel inquiring whether Comdata had been formally notified that TA had implemented RFID "this past Monday."[217] Morgan replied: "Should we not do a press release or something around the activation? Pretty big news to fleets and could influence other merchants for Matt and team."[218] Another Comdata employee on the email chain agreed that it "[s]ounds like good news."[219] But Secord quickly wrote back: "No press release. Please."[220]

         On October 13, 2016, the last day of the cure period, TA sent a letter to Comdata, by email and Federal Express, stating that it had "substantially" completed the RFID installation:

I am writing to update you on the status of the installation of the FIM Solution system (the "System") at our 224 company operated travel center locations. We are substantially complete in that we are currently accepting RFID transactions at 201 travel centers. As to the remaining 23 sites, we are repairing damaged equipment at 1 site and we will install the System at 22 sites as soon as we receive the equipment and software licenses which are waiting on from Comdata.
We trust that the above resolves this matter.[221]

         Because TA expected to complete its Retalix rollout by the end of 2016, the 201 locations that allegedly were active as of October 13 included a few sites that were still running the TravStar1 POS system. TA determined that, although TravStar1 had demonstrated serious issues with stability, it was an acceptable risk to turn on RFID in sites running TravStar1 in October 2016 given the small number of sites (under thirty) and short period of time (four to eight weeks) involved.[222]

         After receiving TA's October 13 letter, Comdata decided to visit a sample of TA locations to verify TA's assertion that the installation was substantially complete.[223] Despite the requirement in Section 4(f) of the RFID Agreement that Comdata may audit TA for compliance with the RFID Agreement "upon reasonable prior notice, " Comdata did not inform TA of its intention to conduct the site visits.[224]Instead, Comdata instructed its employees conducting these visits to tell inquiring TA employees that they were simply conducting "normal Comdata testing."[225]Secord testified that when he ordered these site visits, he was not trying to solve the problem, but was trying to gather evidence.[226]

         On November 1, 2016, Pat O'Donnell, an independent contractor at Comdata at the time, [227] emailed Secord updated results of the RFID tests from the Comdata employees' visits to TA locations.[228] According to the report, as of October 31, Comdata had RFID communications with 154 TA locations and the "[communication report shows 67 locations have sent no RFID communications."[229] The report further stated that:

• Visits to locations on the NEW install list produced 4 locations with no equipment installed and 1 with equipment but tests failed
• Visits to existing locations have produced 6 successful tests and 8 failed tests.
• Currently have 3 visits that we are waiting status on.[230]

         On November 2, 2016, Comdata sent a letter to TA via Federal Express, asserting that "TA did not cure its default under the Agreement within the 30 day cure period."[231] The term "Agreement" is defined in the letter to mean the Merchant Agreement, as amended.[232] The November 2 letter further stated that:

Comdata has visited a number of TA and Petro travel centers since October 13 and has confirmed that, not only do some travel centers still lack any RFID hardware, but also a number of TA and Petro travel centers with RFID hardware do not process RFID transactions. . . . Accordingly, the Agreement is terminated immediately.
. . . Please let us know your interest and availability to meet over the coming weeks.
We are agreeable to continue operating on the same terms for up to 90 days as we work through the issues above.[233]

         At no time did Comdata assert that it was terminating the RFID Agreement. Instead, even after notifying TA on September 7 that it believed TA was in default of the Merchant Agreement for failure to install the RFID system, Comdata continued to accept payments from TA for equipment purchased under the RFID Agreement[234]and to process RFID transactions at TA locations.[235] Through December 2016, TA spent over $7.3 million on RFID installations, well over its original $4 million budget.[236] Approximately $4.6 million was spent before August 2013, and $560, 000 was spent after September 2016.[237]

         On November 15, 2016, O'Brien, Young, Clarke, Secord, FleetCor's General Counsel Brad Slutsky, and certain other senior officers from TA and FleetCor met at FleetCor's office near Atlanta, Georgia.[238] Contemporaneous documents written by Young and O'Brien to memorialize discussions at the meeting show that before the meeting started, Young and Slutsky reached an agreement to treat the discussions at the meeting as settlement negotiations.[239] On November 18, 2016, Secord emailed O'Brien a "TA-Comdata Settlement Proposal, " copying the other attendees at the November 15 meeting.[240] The document was marked as a "Non-Binding Settlement Proposal Subject to Rule 408."[241]

         II. PROCEDURAL POSTURE

         On November 30, 2016, TA filed a Verified Complaint (the "Complaint") against Comdata and FleetCor asserting four claims. Count I seeks a declaration that defendants may not terminate the Merchant Agreement based on TA's alleged default under the RFID Agreement. Count II asserts that defendants breached the Merchant Agreement and seeks specific performance. Count III asserts that defendants breached the implied duty of good faith and fair dealing under the Merchant Agreement. Count IV asserts that defendants violated the Tennessee Consumer Protection Act by engaging in unfair and deceptive business practices. TA simultaneously filed a motion for expedited proceedings and for preliminary injunctive relief.

         On December 9, 2016, Secord emailed O'Brien a letter representing that "Comdata will continue to allow acceptance of Comdata payment methods at TA locations until the final decision of the trial court, " but would impose new, higher fees on TA, which Comdata represented were those that "a merchant similar in size to TA would pay."[242] Comdata began charging TA those higher rates on February 1, 2017 (the "February Rates").[243]

         On December 14, 2016, the Court granted expedition but denied TA's request for a hearing on its motion for a preliminary injunction. With respect to the latter issue, the Court explained that Comdata's representation that it would continue to accept Comdata cards at TA locations until the final decision of this Court mooted the concern of irreparable harm.[244]

         On December 22, 2016, defendants filed a counterclaim, which was amended on February 23, 2017, asserting one claim for breach of contract and seeking damages and declaratory relief.

         On February 27, 2017, the Court denied TA's Motion for Partial Judgment on the Pleadings with respect to Count I of the Complaint.[245]

         On March 27, 2017, TA filed a Verified Supplement to the Complaint, setting forth additional allegations relating to the parties' disputes and seeking additional relief in the form of damages under Count II and Count IV.

         III. ANALYSIS

         A. The Parties' Contentions

         The heart of the parties' dispute concerns the validity of Comdata's purported termination of the Merchant Agreement, as amended, on November 2, 2016. The Amendment extended the expiration date of the Merchant Agreement from January 2, 2016 to January 2, 2022.[246] The Merchant Agreement itself permits early termination only if "either party defaults in the performance of any material obligations, covenants, or conditions contained in this Agreement."[247]

         Defendants do not argue that TA breached any of its obligations set forth in the Merchant Agreement. They assert instead that TA materially breached its obligations under the RFID Agreement, that the RFID Agreement was consideration for the Amendment, that the purported failure of consideration for the Amendment permits termination of the Amendment, [248] and that Comdata thus was free to charge TA higher transaction fees because the Merchant Agreement had expired under its original terms on January 2, 2016.[249]

         For its part, TA argues that the Merchant Agreement (as amended) and the RFID Agreement are two separate agreements, and that TA's performance under the RFID Agreement can in no way be a ground for termination of the Merchant Agreement. TA also argues that it did not materially breach the RFID Agreement and that it cured any purported breach within the thirty-day cure period in any event. According to TA, Comdata and FleetCor conjured up a dispute over the RFID Agreement as pretext to terminate the Merchant Agreement and negotiate a new contract with terms more favorable to Comdata. TA contends that this conduct constitutes a breach of the Merchant Agreement, violates the implied duty of good faith and fair dealing, and violates the Tennessee Consumer Protection Act.

         B. Tennessee Contract Law Principles

         The parties agree that Tennessee law governs the substantive aspects of the claims in this case. This follows from the fact that the Merchant Agreement and the RFID Agreement both provide that they "shall be construed in accordance with the laws of the State of Tennessee" without regard to its conflict of law rules.[250]

         In Planters Gin Co. v. Federal Compress & Warehouse Co., Inc., the Supreme Court of Tennessee held that:

The central tenet of contract construction is that the intent of the contracting parties at the time of executing the agreement should govern. The intent of the parties is presumed to be that specifically expressed in the body of the contract. . . . If clear and unambiguous, the literal meaning of the language controls the outcome of contract disputes.[251]

         But "where a contractual provision is ambiguous, i.e., susceptible to more than one reasonable interpretation, . . . courts must resort to other rules of construction, and only if ambiguity remains after application of the pertinent rules does the legal meaning of the contract become a question of fact."[252] Then, the court must examine other evidence to ascertain the parties' intention. "Such evidence might include the negotiations leading up to the contract, the course of conduct the parties followed as they performed the contract, and any utterances of the parties that might shed light upon their intentions."[253] Tennessee courts repeatedly have held that "a course of conduct pursued by the parties is the very strongest evidence of what the contracting individuals originally intended."[254]

         Under Tennessee law, partial failure of consideration could be a ground for rescission of a contract if the failure of consideration "is such as to affect the very object of the contract or concerns a matter of such prime importance that the contract would not have been made if the parties had expected or contemplated that particular default." [255] In Farrell v. Third Nat. Bank, the Tennessee Court of Appeals explained:

There is a vast difference between inadequacy of consideration and failure of consideration. "Inadequacy of consideration" is, as the term implies, a consideration not adequate or equal in value to the thing conveyed, and where the parties contract with a knowledge of what they are doing inadequacy of consideration is no ground for avoiding the contract. . . . Failure of consideration is in fact simply a want of consideration, and if a partial failure of consideration is such as to affect the whole contract and defeat the object of the contract, then it may be a ground for rescission.[256]

         Rescission based on a partial failure of consideration "should be exercised sparingly" and only "under the most demanding circumstances. . . . Even a proved partial failure of consideration is not a ground for rescission unless the failure defeats the purpose of the contract."[257] Thus, under Tennessee law, Comdata could rescind the Amendment and effectively terminate the Merchant Agreement if: (1) the RFID Agreement was at least partial consideration for the Amendment; and (2) TA breached the RFID Agreement in a way that affected "the very object" of the Amendment or concerned "a matter of such prime importance that the [Amendment] would not have been made if the parties had expected or contemplated that particular default."[258] For a breach of the RFID Agreement to meet this requirement, the breach logically must be material, as defendants recognize.[259]

         C. Burden of Proof

         The parties disagree as to which party bears the burden to prove whether TA materially breached the RFID Agreement and whether such breach, if proven, could excuse Comdata's performance under the Merchant Agreement.[260] Generally, to succeed at trial, "Plaintiffs, as well as Counterclaim-Plaintiffs, have the burden of proving each element, including damages, of each of their causes of action against each Defendant or Counterclaim-Defendant, as the case may be, by a preponderance of the evidence."[261] Similarly, defendants and counterclaim-defendants bear the burden to prove each element of each of their affirmative defenses by a preponderance of the evidence.[262] Specific performance, however, "is a matter of grace that rests in the sound discretion of the court, " and the "party seeking specific performance has the burden of proving entitlement by clear and convincing evidence."[263]

         The parties do not disagree with the foregoing general principles, but defendants argue that, as part of TA's burden to prove its entitlement to specific performance, TA also must show that it is not in default of the Merchant Agreement due to any material breach of the RFID Agreement. For support, defendants cite the rule in Peden v. Gray that "specific performance will not be granted to a party in breach of the agreement sought to be enforced."[264] In Peden, the Court denied a request to specifically enforce a land sales contract because the purported buyer was not "ready, willing, and able to perform his obligations under the contract."[265] Peden is readily distinguishable from this case, where defendants do not challenge TA's willingness or ability to perform under the Merchant Agreement, but seek to terminate the Merchant Agreement based on a theory of failure of consideration that is raised as an affirmative defense and in their counterclaim.[266]

         This case is more analogous to In re IBP, Inc. S'holders Litig., where IBP, Inc. sued Tyson Foods, Inc. to specifically enforce a merger agreement. Tyson argued that it was entitled to terminate the agreement because, among other things, IBP breached certain of its contractual representations.[267] Then-Vice Chancellor Strine held that IBP ...


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