Arvest Bank v. RSA Security, Inc.
1:15-cv-11798
D. Mass.Sep 27, 2017Background
- Arvest Bank licensed RSA software under a 2006 Software License and Support Service Agreement that included an intellectual property indemnity: RSA would "defend, indemnify and hold Licensee harmless" for third-party patent/copyright/trademark claims if notified and RSA given control and assistance.
- Agreement contained a two-year contractual limitation: no action arising out of the Agreement more than two years after accrual.
- Arvest notified RSA of the Secure Axcess patent suit on March 3, 2011; RSA declined to assume defense, stating it was not convinced the claim targeted RSA’s product but would fulfill obligations if that changed.
- Arvest settled the Secure Axcess litigation on May 10, 2013, and sought indemnification and reimbursement from RSA thereafter; RSA continued to deny indemnity.
- Arvest sued RSA on May 7, 2015, alleging breaches of the duty to defend, duty to indemnify, breach of the implied covenant of good faith, and unjust enrichment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When did breach of duty to defend accrue? | Arvest: accrual occurred when RSA equivocated and declined to defend (Mar/Apr 2011); claims timely within two years of accrual. | RSA: accrual was April 21, 2011 letter; two-year limitation bars suit. | Court: Duty to defend accrued at RSA's refusal in April 2011; claim for duty to defend is time-barred. |
| When did breach of duty to indemnify accrue? | Arvest: accrual occurred when RSA refused indemnity earlier; alternatively, accrual when Arvest settled and incurred losses (May/Aug 2013). | RSA: accrual occurred with April 21, 2011 letter; two-year limit bars indemnity claim. | Court: Indemnity accrues on actual losses/settlement; Arvest's indemnity claim (post-settlement 2013) is timely. |
| Can unjust enrichment proceed despite a governing contract? | Arvest: paid license fees and received no indemnity/defense; equitable restitution available. | RSA: valid contract governs and provides remedy at law; unjust enrichment barred. | Court: Unjust enrichment barred because the Agreement defines parties' rights and provides legal remedy. |
| Effect on implied covenant claim | Arvest: covenant breach tied to indemnity/defense failures. | RSA: limitations bar underlying claims. | Court: Because indemnity claim is timely, implied covenant claim survives; duty-to-defend claim is barred. |
Key Cases Cited
- Int’l Mobiles Corp. v. Corroon & Black/Fairfield & Ellis, Inc., 560 N.E.2d 122 (Mass. App. Ct. 1990) (contract cause of action accrues at breach)
- John Beaudette, Inc. v. Sentry Ins. A. Mut. Co., 94 F. Supp. 2d 77 (D. Mass. 1999) (distinguishes accrual rules for duty to defend v. duty to indemnify)
- Boston Symphony Orchestra, Inc. v. Commercial Union Ins. Co., 545 N.E.2d 1156 (Mass. 1989) (duty to defend broader and antecedent to duty to indemnify)
- OneBeacon Am. Ins. Co. v. Narragansett Elec. Co., 31 N.E.3d 1143 (Mass. App. Ct. 2015) (accrual of defense costs not postponed until full extent determinable)