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MONTH-IN-BRIEF (May 2020)

Data Privacy

Court Enforces Arbitration Clause Against Contractor of Customer

By John Ottaviani, Partridge Snow & Hahn LLP

A Pennsylvania federal court recently enforced the arbitration clause in an online license agreement where each log-on displayed a link to the terms and stated that use of the system constituted acceptance of the terms. Healthplan CRM, LLC d/b/a Cavulus v. Avmed, Inc., No. 2:19-cv-1357NR (W.D. Pa. April 28, 2020).

Avmed subscribed to Cavulus’s cloud-based customer relationship management (CRM) software for insurance companies managing Medicare Advantage plans, pursuant to a license agreement that contained an arbitration clause.  Avmed decided to replace Cavulus with another CRM platform.  Instead of asking Cavulus to provide Avmed’s customer information in a suitable electronic format, Avmed decided to engage NTT to transition its historical customer data to the new CRM platform, granted NTT a sublicense to access the Cavulus platform to do so, and notified Cavulus of the arrangement.  When Cavulus suspected that NTT was going beyond mere copying of data and was copying Cavulus’s “customized and proprietary workflows and recreating them” in the new CRM platform, Cavulus filed a demand for arbitration against Avmed and NTT for breach of contract, theft of trade secrets, and violations of the Pennsylvania Uniform Trade Secrets Act.  After NTT refused to participate in arbitration, and Avmed objected to arbitrability of the claims, NTT sued to enforce arbitration.  The court agreed with Cavulus and ordered the parties to arbitration.

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