COA reversal splits panel in email subscriber data dispute

An appellate panel split Monday in reversing on whether an online travel media company substantially performed its obligations under its settlement agreement with a marketing technology company regarding the use of subscriber data.

ShermansTravel Media, LLC v. Gen3Ventures, LLC, 19A-PL-3024, concerns a dispute between travel media company Shermans and Gen3, a marketing tech company that provided Shermans with subscriber email addresses. The two companies had entered into an email delivery agreement together where the parties would share revenue generated from email advertisements sent to subscribers collected and identified by Gen3 and its affiliates. Meanwhile, Shermans would send emails both to its subscribers and to Gen3’s subscribers.

At some point, Gen3 filed a complaint for breach of contract against Shermans, and the parties eventually entered into a settlement agreement. Shermans agreed to make periodic payments to Gen3 and to delete Gen3’s subscriber data, and each party would dismiss its claims. However, Gen3 refused to dismiss its claims against Shermans after asserting that Shermans had not completely performed its obligation to delete Gen3’s subscriber data.

A trial court ultimately entered summary judgment for Gen3, finding Sherman’s had breached the settlement agreement. But an appellate majority consisting of Judge James Kirsch and Judge Elaine Brown sided with Shermans, reversing after finding that summary judgment should not have been granted to Gen3.

Although it agreed with Gen3 that the settlement agreement required Shermans to satisfy specified conditions before Gen3 was required to dismiss the complaint, the appellate majority disagreed with Gen3 that substantial performance does not apply to the conditions.

It therefore concluded that substantial performance is applicable to the parties’ obligations under the settlement agreement, further concluding that the trial court failed to recognize that material, factual disputes existed with respect to whether Shermans materially breached the settlement agreement.

First, the appellate majority noted that during the 13-day period relevant to April 5 and April 18 files that Shermans sent Gen3 data concerning all Gen3 Subscribers, Shermans sent “over 22 million emails” to its subscribers and that the 68,521 emails sent to Gen3 subscribers “made up less than a third of one percent, 0.3%, of the volume of emails sent by Shermans during that time.”

It further found that there is a dispute regarding the status of the subscribers in the June 13 files, whether the subscribers are independently acquired Shermans subscribers who overlap with Gen3 subscribers or whether they are Gen3 subscribers.

Lastly, the majority noted that there is a disputed factual question as to whether Shermans’ efforts to delete the data was substantial performance of that obligation. It therefore concluded that the designated evidence leads to the conclusion that there was a factual dispute as to whether Shermans substantially performed under the settlement agreement.

Concluding that there were genuine issues of material fact precluding summary judgment, the majority reversed the award of summary judgment to Gen3 and remanded for further proceedings. Judge Brown, concurring in a separate opinion, agreed that the summary judgment award to Gen3 was improper.

But Judge Terry Crone, writing in dissent, argued that Shermans failed to substantially perform under the agreement as a matter of law and “overpromised regarding its ability to delete and cease utilizing Gen3’s subscriber data, and it woefully underdelivered.”

“The concurring opinion posits that ‘[u]tilize’ connotes a benefit[,]’ but the only thing that one ‘utilizes’ an email address for is to send an email. To say that Shermans did not ‘utilize’ Gen3’s subscriber data by sending emails is like saying that I did not ‘utilize’ my phone by making a phone call with it. The lead opinion adopts Shermans’ sleight-of-hand focus on percentages, noting that the 68,521 emails sent to Gen3 subscribers in April 2017 ‘made up less than a third of one percent, 0.3%, of the volume of emails sent by Shermans during that time,’” the dissenting judge wrote.

“The total number of emails that Shermans sent to its subscribers is irrelevant; the critical fact is that Shermans breached its Settlement Agreement with Gen3 68,521 times. In no rational universe would this constitute substantial performance,” Crone concluded.

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