As I write for the parties who are familiar with the background of this case, I will limit

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my recitation of the facts to those most pertinent to the motion for sanctions.

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

GALLUP, INC. d/b/a : CIVIL ACTION

THE GALLUP ORGANIZATION :

Plaintiff, :

:

v. : NO. 00-5523

:

KENEXA CORPORATION, :

Defendant. :

M E M O R A N D U M

STENGEL, J. May 14, 2009

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. Facts1

This copyright infringement action was brought by Gallup, Inc. against a

competitor, Kenexa Corporation in the year 2000. Gallup alleged that Kenexa had

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The Q is a survey given to a company’s employees to measure their satisfaction with 2 12

the workplace. The survey seeks an employee’s reaction to specific issues relating to the

employee’s perception of his workplace, as well as an “overall employee satisfaction question.” 

Paragraph 5 prohibits Kenexa from using sixty-six (66) items, but provided for a 30-day 3

grace period as well as a 60-day grace period for surveys under contract when the agreement was

executed.

Paragraph 10 required Kenexa to "inform all of its clients, current or former, since 4

January 1, 2003, whose surveys contain or contained any of the Items, that Kenexa has agreed to

discontinue the use of the particular Items contained in the surveys used with that client" and to

"provide Gallup with an affidavit, under penalty of perjury, that Kenexa [had] complied with the

terms of this paragraph."

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unlawfully used its employee engagement survey instrument - the “Q Three years 12.” 2

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 ) and failed to 3

inform some clients that they were discontinuing those items (violating paragraph 10 ). 4

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. 

Case 2:00-cv-05523-LS Document 212 Filed 05/15/09 Page 2 of 10
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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.

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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. A contempt proceeding is only appropriate for the violation of a court order,

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On April 5, 2006, Kenexa gave Gallup an affidavit sworn by then-Chief Operating 5

Officer, Elliot Clark who certified that Kenexa had complied with the customer notice

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not for a violation of an agreement over which a court retains jurisdiction.

This case involves a retention of jurisdiction provision in a settlement order. The

order contains four simple provisions, two of which are stipulations by Kenexa. First, the

order states that Kenexa stipulates that Gallup owns a valid copyright in the Gallup Q ,

12.

that the Q is comprised of thirteen individual items, and that the copyright is validly 12.

registered. Consent Order (Document #192). Second, the order states that Kenexa

stipulates that Gallup is the original author of the Q and each of the thirteen items 12.

comprising it. Id. Third, the order states that the parties are executing a Settlement

Agreement. Id. Finally, the order states that this court will retain jurisdiction of the case

“for purposes of enforcing the terms of this Consent Order and of the Settlement

Agreement.” Id.

The nine-page Settlement Agreement consists of twenty-four numbered

paragraphs. In paragraph 5 of that agreement, Kenexa agreed to stop using sixty-six

items that were the subject of the lawsuit, subject to a thirty-day grace period to begin

using surveys that did not contain those items and a sixty-day grandfather period to

complete the administration of those surveys. In paragraph 10 of the agreement, Kenexa

agreed to inform all of its clients since January 1, 2003 whose surveys contain(ed) any

prohibited items that Kenexa agreed to discontinue those items. Kenexa also agreed to

provide an affidavit certifying that it had notified those clients. Paragraph 9 of the 5

Case 2:00-cv-05523-LS Document 212 Filed 05/15/09 Page 5 of 10
requirement of the Settlement Agreement. Gallup Mem. at 4 (Document #207).

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agreement set forth a compliance monitoring procedure that required Kenexa to submit

information to an independent auditor for three years. The agreement stated that the

auditor would report his results to this court for review; this court would then authorize

disclosure of the results to the parties.

Kenexa has breached paragraphs 5 and 10 of the Settlement Agreement. Those

paragraphs were drafted by and agreed to by the parties. The requirements and language

in those paragraphs were created and negotiated by the parties, not this court. Those

paragraphs are not contained in any order of this court. Kenexa has not violated a court

order, therefore Kenexa cannot be held in contempt for violating the parties’ Settlement

Agreement. See Silva v. Mamula, No. 93-5618, 1995 U.S. Dist. LEXIS 7189 at 2-3 (E.D.

Pa. 1995) (holding that where the terms of the agreement had not be incorporated into a

court order - the order only recognized the agreement as valid - the court could only

remedy, not sanction).

Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375 (1994) involved an

order that a suit be dismissed. There was no language in the order at issue in that case

which retained jurisdiction or incorporated the settlement agreement terms into the order. 

Id. at 381. Nevertheless, Gallup cites Kokkonen to support its argument that Kenexa

should be held in contempt for violating the settlement agreement because this court

retained jurisdiction over its terms. In Konnonen the Court stated that a breach of a

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settlement agreement “would be a violation of the order, and ancillary jurisdiction to

enforce the agreement would therefore exist.” Id. at 381. The Tenth Circuit has similarly

held that a consent order that includes a retention of jurisdiction provision, even where

some of the agreement terms are incorporated into the order, does not give a court power

to enforce an unmentioned term through contempt. Here, all the terms are “unmentioned”

because they are not expressly incorporated into any of this court’s prior orders.

In Enprotech Corp. v. Renda, 983 F.2d 17, 21 (3d Cir. 1993), a case in which the

parties never sought enforcement of the agreement for a breach, the Third Circuit held

that “reliance on the inherent contempt powers of the court [was] premature.” Contempt

proceedings would be premature in this case. The extraordinary circumstances in which

judicial process is abused and the court’s inherent sanctioning power is warranted are not

present here. In this case there is no bad faith and no "egregious" conduct. At the very

least, Kenexa has not acted willfully. Willfulness is the minimum level of culpability that

must be shown in order for a party to be held in contempt under this court's inherent

contempt power. Computer Power, Inc. v. Myers / Nuart Elec. Prods. Inc., No. 01-2451,

2002 U.S. Dist. LEXIS 2459 at 4 (D. N.J. 2002) (“Under their inherent power, federal

courts may levy sanctions . . . for ‘willful disobedience of a court order. . . or when the

losing party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons”)

(quoting Roadway Express, Inc. v. Piper, 447 U.S. 752, 766 (1980)).

In MGE v. Titan, 2006 WL 3524502, at 15 (M.D. Tenn. 2006), the district court

Case 2:00-cv-05523-LS Document 212 Filed 05/15/09 Page 7 of 10
If Kenexa continues to violate the attached order, sanctions might be warranted. 6

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imposed a monetary sanction of 30% of the defendant's gross revenues to "compel

compliance." The facts of MGE are distinguishable in significant ways from the Gallup /

Kenexa situation. In MGE, the court had issued a preliminary injunction ordering the

defendants to refrain from using the software they had stolen from MGE. The

preliminary injunction was a court order that specifically enumerated the prohibited

conduct. It enjoined the defendant from "using MGE's software and data disk for any

purpose," among other things. Id. at 1. In spite of the preliminary injunction that

specifically stated the conduct in which the defendants were not to engage, the defendants

in MGE continued to use MGE's software in violation of an express term of the court's

order. Id. at 7. As a result, the district court imposed the 30% of defendant's gross

revenue sanction, calculated from the first use of the restricted software. Id. at 15.

The preliminary injunction order in MGE was not - as in this case - an order

stating that a settlement agreement between the parties was valid. As Kenexa has pointed

out in its memorandum, this factual distinction between (1) an order validating an

agreement and retaining jurisdiction over it and (2) an order specifically enumerating

prohibited or required conduct is significant. The MGE case is in the latter category and

therefore sanctions were appropriate. As Gallup is in the former category, sanctions are

not (yet ) appropriate. 6

 In MGE, the court was explicit about what was required for it to find defendant in

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contempt. The MGE court's reasoning shows that sanctions are inappropriate under the

facts of this case: 

For a finding of contempt, 'the facts found must constitute a plain violation

of the decree so read.' Cohn v. Kramer, 136 F.2d 293, 295-96 (6th Cir.

1943) (quoting Terminal R.R. Ass'n v. US, 266 U.S. 17, 29 (1924)). The

offending party must have 'violate[d] a definite and specific order of the

court requiring him to perform or refrain from performing a particular act

or acts with knowledge of the court's order.' NLRB v. Cincinnati Bronze,

829 F.2d 585, 591 (6th Cir. 1987) (quoting SEC v. First Financial Group

of Texas, Inc., 659 F.2d 660, 669 (5th CIr. 1981). Violation of the Court's

Order must be premised on the language of the Order: 'Unbroken lines of

authority caution us to read court decrees to mean rather precisely what

they say.' and ambiguities must be resolved in favor of the persons charged

with contempt.' Grace v. Center for Auto Safety, 72 F.3d 1236, 1241 (6th

Cir. 1996) (quoting NBA Properties, Inc. v. Gold, 895 F.2d 30, 32 (1st

Cir. 1990). 

Id. at 12.

This court’s inherent sanctioning power would likely not include the type of

sanctions Gallup proposes even if Kenexa had violated an express order. The Supreme

Court’s admonition is to exercise inherent power “with restraint and discretion.” 

Chambers v. NASCO, Inc., 501 U.S. 32, 59 (1991). Gallup’s request for monetary

sanctions appears to exceed any damage caused by Kenexa’s breach. Synthes Spine Co.

v. Walden, No. 04-4140, 2006 WL 3053317, 11 (E.D. Pa. 2006) (“damages award must

not ‘exceed the actual damages caused the offended party by a violation of the court’s

order’”). Further, because this court has not found Kenexa to have acted in bad faith,

awarding attorneys’ fees and costs would be inappropriate. See, e.g., Moss v.

McDonald’s Corp., No. 03-5000, 2006 WL 680985 (following the American rule that

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It appears that if Kenexa continues to engage in its breaching conduct, Gallup will have 7

stronger footing to seek sanctions because Kenexa’s violation will then be a violation of the

express terms of this court’s order. See, e.g., MGE v. Titan, supra.

Kenexa represents that Wayne Robert Edwards has already been appointed to fill this 8

role and has been providing oversight since 2007. Resp. at 13.

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“court must determine whether the party being sanctioned acted in bad faith before using

its inherent power to impose sanctions”).

III. CONCLUSION & REMEDY

Kenexa will be ordered to fulfill the terms of the agreement. The order that

follows specifically provides that Kenexa must abide by the terms of the agreement with

respect to paragraphs 5 and 10. 

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Additionally, the compliance monitoring period provided for in the agreement will

be extended by one year from the date of the order that follows. The cost for this

additional monitoring shall be borne exclusively by Kenexa.

Kenexa also 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, as provided in the order that follows. Finally, Kenexa will

designate an employee who will be responsible for overseeing Kenexa’s future

compliance.

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An appropriate order follows.

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