The Services Agreement contains a Termination Clause, which provides that

1

"EDS may terminate this Agreement and/or any Purchase Order issued hereunder for any

reason without penalty upon thirty (30) days prior written notice to the Supplier." Id. at § 6.1.

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

STRATEGIC MANAGEMENT GROUP,

INC.

v.

ELECTRONIC DATA SYSTEMS

CORPORATION

: CIVIL ACTION 

:

: NO. 04-CV-4715

:

:

:

:

MEMORANDUM AND ORDER

Kauffman, J. March 31, 2006

Plaintiff Strategic Management Group, Inc. (“SMG”) brings this breach of contract

action against Defendant Electronic Data Systems Corporation (“EDS”). Now before the

Court are the parties’ cross-motions for summary judgment. For the reasons that follow, the

Court will grant EDS’s motion and deny SMG’s.

I. BACKGROUND

The contract at issue consists of two separate written agreements. The first (hereafter

the "Services Agreement"), which the parties executed in 1993 and then amended in 1996, is

essentially a consulting agreement. See Services Agreement (attached as Exh. 1 to EDS’s

Motion for Summary Judgment) ("EDS’s Motion"). It provides that SMG will furnish EDS

with certain "personal development services" and that the nature of those services is to be set

out in "Purchase Orders." Id. at § 1.1. In September 2002, the parties executed a Purchase 1

Order for a workshop program SMG was to design for EDS to help "assess and further

develop" EDS’s managers. See Purchase Order at 3. The workshop was to be a “week-long

residential program where first-line managers [from EDS] would be brought together from all

different parts of the country and the world to participate together in a learning experience.” 

Deposition of Mitchell Young, June 9, 2005 at 30 (attached as Exh. 5 to EDS’s Motion) at

Case 2:04-cv-04715-BWK Document 30 Filed 03/31/06 Page 1 of 7
2

150. SMG’s development of the workshop was to proceed in five distinct phases: (1) the

"High Level Design Phase"; (2) the "Development Phase"; (3) the "Pilot Test and Final

Production Phase"; (4) the "Train-the Trainer/Assessor Phase"; and (5) the "Evaluation and

Closeout Phase." Id. at 5. Additionally, the Purchase Order contemplates that the workshop

will incorporate SMG’s proprietary simulation software, "Essentials of Business Leadership,"

and EDS committed to purchase 1,000 licenses for the software. Id. 

The final section of the Purchase Order provides a payment schedule. The price for

SMG’s development of the project was approximately $300,000, to be remitted in three

payments. Id. The first $100,000 payment was due when the project began; the second at the

completion of the "Development Phase," and the final installment was to be paid when the

project was completed. Id.

A separate provision in the “Payment Schedule” covers EDS’s purchase of the

"Essentials of Business Leadership" software licenses. It provides that "EDS will purchase

1,000 non-refundable simulation licenses at $375 per license." Id. The schedule for those

purchases is set out in the following chart:

Payment Balance Licenses Purchased

Dec-02 $105,000 $270,000 280

Mar-03 $67,500 $202,500 180

Jun-03 $67,500 $135,000 180

Sep-03 $67,500 $67,500 180

Dec-03 $67,500 $0 180

Total $375,000 1,000

On November 22, 2002, when the project was in its “Development Phase,” and before

any of the software licenses were scheduled to be purchased, EDS notified SMG to stop all

work. EDS was experiencing financial difficulties and was performing a budget review of all

Case 2:04-cv-04715-BWK Document 30 Filed 03/31/06 Page 2 of 7
3

training projects. See SMG’s Brief in Opposition to EDS’s Motion for Summary Judgment

(“SMG’s Opposition Brief”) at 8; Deposition of Elizabeth Townson, June 23, 2005 (attached

as Exh. 4 to EDS’s Motion) at 49:18-50:18. At no time subsequent to the November 22,

2002 stoppage did EDS authorize any additional work and none was in fact performed. 

EDS’s Memorandum at 4. On November 25, 2002, SMG submitted to EDS a document

entitled “Work Stoppage and Accrued Costs to Date,” which showed a “Balance Due” of

$95,504 on the project. See Exh. 7 to EDS’s Motion. EDS paid that balance in full, bringing

the total EDS had paid for the project to the sum of $295,504. Id. 

On April 24, 2003, SMG, for the first time, sent invoices seeking payment for 460 of

the software licenses. See EDS’s Memo; Young Dep. 173-80; invoices (attached as Exh. 13

to EDS’s Motion). By letter dated May 23, 2003, EDS disputed the invoices on the grounds

that the Purchase Order had been terminated in November 2002. See Meng Letter (attached

as Exh. 13 to EDS’s Motion).

On October 7, 2004, SMG filed this action for breach of contract. The Complaint

contains two counts: the first seeks payment for the work SMG performed prior to the EDS

notice on November 22, 2002 to stop all work on the project; the second seeks $375,000 for

the software licenses. SMG has since acknowledged that the $95,504 payment EDS had

remitted in response to the “Work Stoppage and Accrued Costs to Date” report satisfied

EDS’s obligations with regard to the development work, and voluntarily dismissed count one,

leaving EDS’s alleged obligation to pay for the licenses as the sole issue between the parties. 

Both EDS and SMG have filed motions for summary judgment.

II. LEGAL STANDARD

In deciding a motion for summary judgment pursuant to Fed. R. Civ. P. 56, the test is

“whether there is a genuine issue of material fact and, if not, whether the moving party is

entitled to judgment as a matter of law.” Med. Protective Co. v. Watkins, 198 F.3d 100, 103

(3d Cir. 1999) (quoting Armbruster v. Unisys Corp., 32 F.3d 768, 777 (3d Cir. 1994)). 

“[S]ummary judgment will not lie if the dispute about a material fact is ‘genuine,’ that is, if

Case 2:04-cv-04715-BWK Document 30 Filed 03/31/06 Page 3 of 7
In effect, EDS is arguing that SMG’s completing development of the workshop 2

was a condition precedent to its obligation to purchase the software licences. See T.F.W.

Mgmt., Inc. v. Westwood Shores Property Owners Ass’n, 162 S.W.3d 564, 570 (Tex. App.

2005) (“A condition precedent to an obligation to perform is an act or event, which occurs

subsequently to the making of a contract, that must occur before there is a right to immediate

performance and before there is a breach of contractual duty.”).

The Services Agreement provides that the contract “shall be governed by and 3

construed in accordance with the laws, other than choice of law rules, of the State of Texas.” See

Services Agreement at 13.

4

the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” 

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The Court must examine the

evidence in the light most favorable to the non-moving party and resolve all reasonable

inferences in that party’s favor. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.

574, 587 (1986). However, “there can be ‘no genuine issue as to any material fact’ . . .

[where the non-moving party's] complete failure of proof concerning an essential element of

[its] case necessarily renders all other facts immaterial.” Celotex Corp. v. Catrett, 477 U.S.

317, 322-23 (1986).

III. ANALYSIS

EDS argues that its obligation to purchase the software licenses is contingent on

SMG’s completing development of the workshop. Because that phase indisputably was 2

never reached, EDS argues that SMG is not entitled to payment. SMG, in turn, argues that

EDS’s obligation to purchase the licenses was independent of completion of the workshop

and that EDS’s work stoppage order on November 22, 2002 did not affect its promise to

purchase the software licenses.

Under Texas law, the “primary concern when interpreting a contract is to enforce the 3

parties’ intent as contractually expressed, and an unambiguous contract will be enforced as

written.” Interstate Contracting, 407 F.3d at 712. “Whether a contract is ambiguous is a

question of law that must be decided by examining the contract as a whole in light of the

Case 2:04-cv-04715-BWK Document 30 Filed 03/31/06 Page 4 of 7
It is undisputed that EDS has not used the software in any manner whatsoever. 4

5

circumstances present when the contract was entered. Columbia Gas Transmission Corp. v.

New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996). “Lack of clarity does not create an

ambiguity and ‘not every difference in the interpretation of the contract ... amounts to an

ambiguity.’” Universal Health Services 121 S.W.3d at 746 (quoting Forbau v. Aetna Life Ins.

Co., 876 S.W.2d 132, 134 (Tex. 1994)). Rather, a contract should be deemed ambiguous

only when it is “susceptible to more than one reasonable meaning after application of

established rules of construction.” Id. 

When the contract here is read as a whole, it is clear that EDS’s obligation to purchase

the licenses is contingent on SMG’s completing development of the workshop. See J.M.

Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003) (“No single provision taken

alone will be given controlling effect; rather, all the provisions must be considered with

reference to the whole instrument.”). EDS agreed to purchase the licenses expressly for the

purpose of using them in the workshop SMG was to develop. See EDS’s Motion at 5; see

also Purchase Order at 19 (providing that EDS will purchase 1000 licenses of SMG’s

Essentials of Business Leadership simulation to be used in the 1st Line Leader Captsone

Workshop.” (emphasis added). The software licenses were thus only one component of the

overall management training product SMG had contracted to provide EDS. Their utility to

EDS depended directly on whether the company would be able to use them in the workshop.4

See Frost Nat’l Bank v. L&F Distrib., 165 S.W.3d 310, 312 (Tex. 2005) (“We construe

contracts ‘from a utilitarian standpoint bearing in mind the particular business activity sought

to be served’ and ‘will avoid when possible and proper a construction which is unreasonable,

inequitable, and oppressive.”) (quoting Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527, 530

(Tex. 1987). Since development of the workshop was never completed, EDS was not in

Case 2:04-cv-04715-BWK Document 30 Filed 03/31/06 Page 5 of 7
EDS’s notice to stop all work on November 22, 2002 indisputably was not a 5

breach of the contract.

6

breach of the contract when it refused to pay for the useless licenses. Accordingly, the Court 5

will enter summary judgment in EDS’s favor.

Case 2:04-cv-04715-BWK Document 30 Filed 03/31/06 Page 6 of 7
7

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

STRATEGIC MANAGEMENT GROUP,

INC.

v.

ELECTRONIC DATA SYSTEMS

CORPORATION

: CIVIL ACTION 

:

: NO. 04-CV-4715

:

:

:

:

ORDER

AND NOW, this 31 day of March, 2006, upon consideration of Defendant’s st

Motion for Summary Judgment (docket no. 15) and the responses thereto, and Plaintiff’s

Motion for Summary Judgment and Award of Attorney’s Fees (docket no. 18) and the

response thereto, and for the reasons stated in the accompanying Memorandum, it is

ORDERED that 

(1) Defendant’s Motion for Summary Judgment is GRANTED;

(2) Plaintiff’s Motion for Summary Judgment is DENIED;

(3) the Clerk shall ENTER Judgment for Defendant and mark this case CLOSED.

BY THE COURT:

/s/ Bruce W. Kauffman 

BRUCE W. KAUFFMAN, J.

Case 2:04-cv-04715-BWK Document 30 Filed 03/31/06 Page 7 of 7