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Gallup, Inc. v. Kenexa Corp.

May 14, 2009

GALLUP, INC. D/B/A THE GALLUP ORGANIZATION PLAINTIFF,
v.
KENEXA CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Stengel, J.

MEMORANDUM

I. INTRODUCTION

Gallup and Kenexa settled this copyright case in 2006 with a settlement agreement and a consent order. Kenexa acknowledges a breach of the agreement during the compliance monitoring period, and Gallup is seeking sanctions. For the reasons set forth below, I will deny Gallup's requested sanctions.

II. DISCUSSION

A. Facts*fn1

This copyright infringement action was brought by Gallup, Inc. against a competitor, Kenexa Corporation in the year 2000. Gallup alleged that Kenexa had unlawfully used its employee engagement survey instrument - the "Q12."*fn2 Three years ago, on January 30, 2006, the parties entered into a settlement agreement over which this court retained jurisdiction. Gallup contends Kenexa breached the settlement agreement and filed a motion for sanctions. Both parties agree that Kenexa failed to stop using prohibited items on some surveys (violating paragraph 5 of the agreement*fn3 and failed to inform some clients that they were discontinuing those items (violating paragraph 10*fn4 ). While Kenexa's brief contains a counter-statement of the facts, it differs from Gallup's primarily in that it provides explanations for the breaches, points out that Kenexa has been steadily improving, and provides evidence that the breaches were not intentional, but rather the failure of its initially inadequate (yet good faith) efforts to comply. See Kenexa's Memorandum, pages 4-12. There appears to be no pattern in Kenexa's use of restricted items to suggest that "the residual use" was anything other than "the result of human error, and not some scheme to satisfy client demands at the expense of Kenexa's contractual obligations." Resp. at 5.

A misunderstanding or miscommunication regarding the data analysis between Kenexa's counsel and the auditor caused delay in producing a complete report during the first audit period. Gallup Mem. at 5-7. It was the first time the audit had been conducted, the problem has not recurred and the only damage was a delay.

During the second audit period some technical difficulties with Kenexa's screening software resulted in the use of restricted items. During the third audit period, however, Kenexa used only one restricted item out of more than thirteen thousand items administered. Resp. at 11.

B. Retaining Jurisdiction

Paragraph 4 of the January 30, 2006 Consent Order (Document #192) states "The Court will retain jurisdiction of the matter for purposes of enforcing the terms of this Consent Order and of the Settlement Agreement." This provision permits this court to enter an order that expressly enforces the settlement agreement. Specifically, this court has authority to enter an order that requires client notification and payment of the auditor's costs and fees.

A court retaining jurisdiction may "extend" a settlement agreement provision. Holland v. New Jersey Dep't of Corr., 246 F.3d 267, 283 (3d Cir. 2001). However, these extensions are permitted "only if such compliance enforcement is essential to remedy the violation and thus provide the parties with the relief originally bargained for in the consent order." Id.

Here, Kenexa has consented to three extensions of the original agreement while not conceding that those extensions are "essential" under Holland. Resp. at 13. In light of Kenexa's agreement, a consideration of whether the extension is "essential" is unnecessary. Kenexa will prepare and circulate to current and new employees a written policy setting forth the procedures to be used for compliance with the Settlement Agreement in the future, designate an employee who will be responsible for overseeing Kenexa's future compliance, and pay the costs and fees of an independent auditor for an additional one year auditing period. Gallup's proposals - to take control of the notification, to require Kenexa's compliance person to be an officer and to extend the compliance monitoring period for two years - are more far-reaching than necessary at this time.

C. Contempt

A retaining jurisdiction provision in an order differs from an order that expressly incorporates the substance of an agreement. The former cannot support a finding of contempt because the party has not been ordered by the court to perform the specific action. Rather, the court merely retains jurisdiction over the agreement and adjudicates any breaches as it would a new contract case added to the court's docket. When an order re-states the language from the agreement, the court has adopted and ordered the specific conduct to which the parties agreed. A breach of this agreement may also constitute contempt. ...


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