Some recent contract-related court cases

Ambiguity: Pay $680K each of 16 months, or in total?

In a First Circuit case, an employee’s severance agreement with his company called for the company to pay the employee “monthly severance payments … in the amount of $680,000 for sixteen (16) [sic] months ….”

After much litigation, culminating in an 11-day (!) bench trial, a federal trial court in Massachusetts held that this called for each monthly payment to be $680,000; rejecting the company’s request to reform the contract on grounds of mutual mistake, the court entered judgment for the employee in the amount of $10,200,000, plus prejudgment interest.

The First Circuit, though, concluded that the severance provision was ambiguous; the court remanded the case to the trial court to resolve the ambiguity on the basis of extrinsic evidence.

See Dahua Tech. USA, Inc. v. Zhang, No. 24-1350, slip op. at 7, 24-31 (1st Cir. May 12, 2025).

Federal Acquisition Regulations getting an overhaul

See Anam Abid, Cherylyn Harley LeBon, James Sabia, and Stephen Tobin, The Revolutionary FAR Overhaul: What Federal Contractors Need to Know.

IBM UK wins against a company
that reverse-engineered IBM software

In an English case, IBM UK won a case against a group of related companies for reverse engineering of IBM software in violation of a prohibition in the license agreement; the court postponed ruling on the amount of damages to be awarded, but did award IBM its costs, with an initial payment of £20 million pending further proceedings. See IBM UK Ltd. v. LzLabs GmbH, [2025] EWHC 532 (TCC), summarized in Sophie Burgess, Edouard Fortunet, Jakob Guhn, and Rebecca Swindells, UK Court Rules on Reverse Engineering of Mainframe Software.

Failure to square away software license prior to
corporate spin-off leads to $80MM copyright lawsuit

Earlier this year, Allstate spun off a line of business (for $2 billion). The spun-out business continued to use software that Allstate had previously licensed from a vendor. The vendor promptly sued Allstate and others for $80 million, alleging direct and indirect copyright infringement. See Stephen Gillespie, Use of Software by Divested Business After Spinout Brings $80,000,000 Lawsuit.