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CAUSE NO. 2023-77937
STEWART TITLE COMPANY, IN THE DISTRICT COURT OF
Plaintiff,
vs. § HARRIS COUNTY, TEXAS
QUALIA LABS, INC. d/b/a QUALIA, §
SOFTWARE, INC.
Defendant § 11 JUDICIAL DISTRICT
PLAINTIFF STEWART TITLECOMPANY REPLY IN SUPPORT OF ITS CROSS
MOTION TO STAYAND ENJOINARBITRATION
Plaintiff Stewart Title Company (“Plaintiff” or “STC”) files this Reply in Support of its
Cross Motion to Stay and Enjoin Arbitration (“Cross-Motion”) and respectfully would show the
Court as follows:
INTRODUCTION
On January 22, 2024, Defendant Qualia Labs, Inc. d/b/a Qualia Software, Inc.
(“Qualia”) filed a Motion to Abate Lawsuit, to which STC responded on January 24, 2024 and
filed its Cross-Motion.
On February 8, 2024, Qualia filed a Response to STC’s Cross-Motion
(“Response”).
In this Reply, STC stands by the arguments of its Cross Motion and asserts that
Qualia has failed to rebut them by its Response. However, a few points merit additional discussion
as set forth below.
ACTIVE 693467070v6
RGUMENT AND AUTHORITIES
Staying or Enjoining the Arbitration is in Harmony with the Express Text of the
License Agreement and Texas Jurisprudence.
Qualia argues in its Response that “Stewart ignores the Texas Supreme Court’s in-
depth analysis in TotalEnergies” and cites the Supreme Court’s consideration of Ally Align Health
as an example. Response at 8-9.
First of all, far from ignoring the import of TotalEnergies, STC devoted multiple
pages of its Cross Motion to consideration of the case, explaining in detail how it is distinguishable
from the case at bar. Crucially, Qualia fails to address the fact that the License Agreement’s
multiple instances of carving out injunctive relief from arbitration, both in Section 13.3 governing
remedies and Section 13.1.3 concerning arbitrability indicates a clear intent by the parties to assign
the question of arbitrability of injunctive relief to a “court of competent jurisdiction”—this Court.
Second, with regard the Texas Supreme Court’s analysis of Ally Align Health in
TotalEnergies, this case is distinguishable from the case at bar because it involved claims for both
monetary and equitable relief. See Response at 8 9 (quoting TotalEnergies E&P USA, 667 S.W.3d
at 714 15). By contrast, the case at bar is primarily injunctive in nature (as explained in STC’s
Cross Motion at ¶ 33-34) and thus its claims present no conflicting jurisdictional issues as they
fall squarely within Section 13.1.3’s carve out indicating that this Court decides the question of
arbitrability.
STC’s Claims Fall Within Section 13.3’s Remedies Carve Out for Injunctive Relief
Because Termination of the License Agreement Threatens STC’s Ability to
EffectivelyOperate its Business.
Qualia’s Response also asserts that Section 13.3’s carve out of injunctive relief
from arbitration in favor of a court of competent jurisdiction does not apply here because Qualia
is not threatening to take action that threatens STC’s ability to effectively operate its business”—
ACTIVE 693467070v6
the enumerated carve out invoked by STC in its Cross-Motion. Response at 13 14. Incredibly,
Qualia argues that it “has not threatened to terminate the Agreement at will” and so the carve out
does not apply because there is no threat to STC’s business operations. Response at 14.
This bizarre claim does not fit the facts. As noted in STC’s Cross Motion, Qualia
informed STC by letter on January 24, 2023, that it desired to “modernize” Adeptive’s agreements
and was therefore giving notice of termination and nonrenewal of the current License Agreement
effective one year later on January 24, 2024, which was later moved by Qualia to July 24, 2024.
Cross Motion at ¶¶ 7-10. In fact, Qualia’s CEO, Nate Baker, made clear that “We have terminated
the pre-existing agreement between Stewart and Adeptive . . .” SeeExhibit A at 1
It was only after STC protested that the License Agreement’s plain text stated that
it was “perpetual and irrevocable” that Qualia decided to pursue arbitration. Indeed, there would
be no arbitrable case or controversy had Qualia not threatened to terminate the License Agreement.
It is a strange argument indeed to assert that one has not threatened to terminate the License
Agreement and then state that one has a legal right to terminate the License Agreement and are
currently engaged in arbitration with the goal of getting official relief to terminate the License
Agreement. As noted at length in STC’s Cross Motion, STC reasonably interprets these actions to
be a threat to terminate the License Agreement which would be devastating to STC’s business
operations. See Original Petition at ¶¶ 36
Qualia also argues that STC “drafted and signed” the License Agreement.
Response at 10. Certainly, the License Agreement was signed by the parties, but it was not drafted
by STC. The supporting declaration for Qualia’s argument is incomplete on the drafting of the
License Agreement. In reality, the License Agreement was drafted by Adeptive and its consultant
after the parties worked through some key provisions. The key provisions were negotiated at
ACTIVE 693467070v6
length in response to a RFP STC sent to title production system producers. Adeptive ended up as
the chosen provider based on meeting STC’s criteria and agreement regarding the key provisions.
The License Agreement was drafted by Adeptive and then negotiated at length by the parties. The
parties had equal bargaining power and the permanent license was a feature STC required for the
very reason that is occurring now with Qualia’s attempt to cancel the licenses.
Qualia Misreads Section 13.1.3 Which Clearly Provides that “Notwithstanding”
Anything to the Contrary in the License Agreement that “Either Party May Seek
Appropriate Injunctive Relief or Other Equitable Relief, At Any Time in a Court of
Competent Jurisdiction”
Qualia acknowledges as it must that the License Agreement includes the following
language:
Notwithstanding anything to the contrary in this Agreement, either party may
seek appropriate injunctive or other equitable relief, at any time, in a court of
competent jurisdiction in the event of a breach of Section 10, any infringement or
misappropriation of a party’s intellectual property rights or when injunctive relief
is the only appropriate relief.
License Agreement at § 13.1.3 (emphasis added). Qualia does not dispute the case law cited in
STC’s Cross Motion that the word “notwithstanding” has been interpreted by the Texas Supreme
Court to mean that the provision applies regardless of “anything else in the contract.” El Paso
Field Servs., L.P. v. MasTec N. Am., Inc., 389 S.W.3d 802, 807-808 (Tex. 2012). Qualia may not
ignore this langu r attempt to re write the License Agreement, as it has done. Klaassens v.
Bishop, No. 01-19-00873-CV, 2020 Tex. App. LEXIS 9543, at *19 (Tex. App.Houston [1st
Dist.] Dec. 8, 2020, no pet.) (“We may not construe a contract in a way that reduces a contract
provision to a meaningless addition”); R. H. Sanders Corp. v. Haves, 541 S.W.2d 262, 264 (Tex.
Civ. App. 1976) (“Furthermore, all language used is presumed to have some meaning and is not
mere surplusage”
ACTIVE 693467070v6
Qualia then argues that arbitration is “appropr iate relief” and thus “Section 13.1.3
is not applicable to the parties’ disputes.” Reply at 16. Qualia is wrong. Arbitration is not “relief.”
As stated by Section 13.1.3, the relief in question is “injunctive or other equitable relief.” Section
. As previously briefed, STC’s request for injunctive relief is the primary relief requested.
See STC’s Cross Motion at 13 Courts uniformly hold that when an injunction and declaratory
relief are seeking essentially the same thing, the relief is “primarily injunctive.” . (cases and
discussion).
STC Does Not Dispute The Terminability Of The Maintenance Agreement Nor
Qualia’s Reading Of The License Agreement’s Disengagement Services, Which
Therefore Present No Arbitrable Issues.
Two out of the three issues which Qualia seeks declaratory relief in the Arbitration
are uncontested between the parties. See Response at 11. STC has never disputed Qualia’s right to
terminate the Maintenance Agreement nor does STC contest Qualia’s reading of the License
Agreement’s “Disengagement Services.”Thus, these issues are not justiciable and present no case
or controversy
"A declaratory judgment is available only when there is a justiciable controversy
between the parties." Hous. Chronicle Publ'g Co. v. Thomas, 196 S.W.3d 396, 401 (Tex. App.
Houston [1st Dist.] 2006, no pet.) (citing Brooks v. Northglen Ass'n, 141 S.W.3d 158, 163 64 (Tex.
2004)). "Justiciability is a matter of concern in every civil case." Heckman v. Williamson Cty
S.W.3d 137, 147 (Tex. 2012). For an issue to be justiciable, "there must be a real controversy
between the parties that will be actually resolved by the judicial relief sought." State Bar of Tex.
v. Gomez, 891 S.W.2d 243, 245 (Tex. 1994).
First, the terminability of the Maintenance Agreement is uncontested by STC and
therefore provide no arbitrable case or controversy. In fact, Qualia has already terminated the
aintenance Agreement, and given notice of the same. See Exhibit B (Qualia “Notice of Non
ACTIVE 693467070v6
Renewal and Termination of Maintenance and Support”). See also Exhibit A. The addition of
maintenance agreement declaratory relief in the arbitration is an artifice to make it appear that the
maintenance agreement is in dispute. It is not in dispute. STC does not disagree with Qualia’ right
to terminate the maintenance agreement as it has done.
Second, the disengagement services issue is not ripe for any type of adjudication
because STC has not terminated the License Agreement and has not requested the disengagement
services following such a termination. See License Agreement at § 9.8.1. Even if STC had
terminated the License Agreement and then requested disengagement services, and it has not done
so, Qualia has already confirmed it would honor the obligations of the disengagement services.
See Exhibit C at 2 (“Stewart Title, of course, retains the option to terminate the License Agreement
and avail itself of Disengagement Services for as much as two years, an obligation Qualia intends
to honor.”). Thus, there is no dispute between the parties as to any particulars of that clause.
Qualia’s clusion of these claims for declaratory relief in an arbitration is puzzling
and begs the question of whether Qualia added them in good faith or instead tacked on these issues
in an effort to avoid the jurisdiction of this Court for the sole remaining and actual controversy
between the parties regarding the will terminability of the License Agreementa claim which
is primarily injunctive in nature as detailed at length above and thus properly brought by STC
before this Court. See also STC’s Motion for Summary Judgment, and Reply in Support of its
Motion for Summary Judgment, for a detailed discussed of the at will terminability of the License
Agreement.
CONCLUSION
light of the foregoing and STC’s Cross-Motion, the Court should deny Qualia’s
Motion and grant STC’s Cross Motion granting temporaryand permanent injunctive relief and/or
ACTIVE 693467070v6
permanently stay Qualia from continuing with the Arbitration and award STC such other and
further relief, at law or in equity, to which it may be entitled.
Dated: February 12, 2024 Respectfully submitted,
REENBERG RAURIG
By: /s/ Roland Garcia
Roland Garcia
State Bar No. 07645250
garciar@gtlaw.com
Angeles Cassin
State Bar No. 24087561
Angeles.Cassin@gtlaw.com
Kristin Agnew
State Bar No. 24083144
Kristin.Agnew@gtlaw.com
Steven Higginbotham
SBN 24125274
higginbothams@gtlaw.com
1000 Louisiana Street, Suite 6700
Houston, Texas 77002
Telephone: (713) 374-3500
Facsimile: (713) 374-3505
Attorneys for Plaintiff Stewart Title
Company
ACTIVE 693467070v6
CERTIFICATE OF SERVICE
The undersigned certifies that a true and correct copy of the foregoing was served by e file
on all counsel of record on February 12, 2024.
/s/ Roland Garcia
Roland Garcia
ACTIVE 693467070v6
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CAUSE NO. 2023-77937 STEWART TITLE COMPANY, IN THE DISTRICT COURT OF Plaintiff, vs. § HARRIS COUNTY, TEXAS QUALIA LABS, INC. d/b/a QUALIA, § SOFTWARE, INC. Defendant § 11 JUDICIAL DISTRICT PLAINTIFF STEWART TITLECOMPANY REPLY IN SUPPORT OF ITS CROSS MOTION TO STAYAND ENJOINARBITRATION Plaintiff Stewart Title Company (“Plaintiff” or “STC”) files this Reply in Support of its Cross Motion to Stay and Enjoin Arbitration (“Cross-Motion”) and respectfully would show the Court as follows: INTRODUCTION On January 22, 2024, Defendant Qualia Labs, Inc. d/b/a Qualia Software, Inc. (“Qualia”) filed a Motion to Abate Lawsuit, to which STC responded on January 24, 2024 and filed its Cross-Motion. On February 8, 2024, Qualia filed a Response to STC’s Cross-Motion (“Response”). In this Reply, STC stands by the arguments of its Cross Motion and asserts that Qualia has failed to rebut them by its Response. However, a few points merit additional discussion as set forth below. ACTIVE 693467070v6 RGUMENT AND AUTHORITIES Staying or Enjoining the Arbitration is in Harmony with the Express Text of the License Agreement and Texas Jurisprudence. Qualia argues in its Response that “Stewart ignores the Texas Supreme Court’s in- depth analysis in TotalEnergies” and cites the Supreme Court’s consideration of Ally Align Health as an example. Response at 8-9. First of all, far from ignoring the import of TotalEnergies, STC devoted multiple pages of its Cross Motion to consideration of the case, explaining in detail how it is distinguishable from the case at bar. Crucially, Qualia fails to address the fact that the License Agreement’s multiple instances of carving out injunctive relief from arbitration, both in Section 13.3 governing remedies and Section 13.1.3 concerning arbitrability indicates a clear intent by the parties to assign the question of arbitrability of injunctive relief to a “court of competent jurisdiction”—this Court. Second, with regard the Texas Supreme Court’s analysis of Ally Align Health in TotalEnergies, this case is distinguishable from the case at bar because it involved claims for both monetary and equitable relief. See Response at 8 9 (quoting TotalEnergies E&P USA, 667 S.W.3d at 714 15). By contrast, the case at bar is primarily injunctive in nature (as explained in STC’s Cross Motion at ¶ 33-34) and thus its claims present no conflicting jurisdictional issues as they fall squarely within Section 13.1.3’s carve out indicating that this Court decides the question of arbitrability. STC’s Claims Fall Within Section 13.3’s Remedies Carve Out for Injunctive Relief Because Termination of the License Agreement Threatens STC’s Ability to EffectivelyOperate its Business. Qualia’s Response also asserts that Section 13.3’s carve out of injunctive relief from arbitration in favor of a court of competent jurisdiction does not apply here because Qualia is not threatening to take action that threatens STC’s ability to effectively operate its business”— ACTIVE 693467070v6 the enumerated carve out invoked by STC in its Cross-Motion. Response at 13 14. Incredibly, Qualia argues that it “has not threatened to terminate the Agreement at will” and so the carve out does not apply because there is no threat to STC’s business operations. Response at 14. This bizarre claim does not fit the facts. As noted in STC’s Cross Motion, Qualia informed STC by letter on January 24, 2023, that it desired to “modernize” Adeptive’s agreements and was therefore giving notice of termination and nonrenewal of the current License Agreement effective one year later on January 24, 2024, which was later moved by Qualia to July 24, 2024. Cross Motion at ¶¶ 7-10. In fact, Qualia’s CEO, Nate Baker, made clear that “We have terminated the pre-existing agreement between Stewart and Adeptive . . .” SeeExhibit A at 1 It was only after STC protested that the License Agreement’s plain text stated that it was “perpetual and irrevocable” that Qualia decided to pursue arbitration. Indeed, there would be no arbitrable case or controversy had Qualia not threatened to terminate the License Agreement. It is a strange argument indeed to assert that one has not threatened to terminate the License Agreement and then state that one has a legal right to terminate the License Agreement and are currently engaged in arbitration with the goal of getting official relief to terminate the License Agreement. As noted at length in STC’s Cross Motion, STC reasonably interprets these actions to be a threat to terminate the License Agreement which would be devastating to STC’s business operations. See Original Petition at ¶¶ 36 Qualia also argues that STC “drafted and signed” the License Agreement. Response at 10. Certainly, the License Agreement was signed by the parties, but it was not drafted by STC. The supporting declaration for Qualia’s argument is incomplete on the drafting of the License Agreement. In reality, the License Agreement was drafted by Adeptive and its consultant after the parties worked through some key provisions. The key provisions were negotiated at ACTIVE 693467070v6 length in response to a RFP STC sent to title production system producers. Adeptive ended up as the chosen provider based on meeting STC’s criteria and agreement regarding the key provisions. The License Agreement was drafted by Adeptive and then negotiated at length by the parties. The parties had equal bargaining power and the permanent license was a feature STC required for the very reason that is occurring now with Qualia’s attempt to cancel the licenses. Qualia Misreads Section 13.1.3 Which Clearly Provides that “Notwithstanding” Anything to the Contrary in the License Agreement that “Either Party May Seek Appropriate Injunctive Relief or Other Equitable Relief, At Any Time in a Court of Competent Jurisdiction” Qualia acknowledges as it must that the License Agreement includes the following language: Notwithstanding anything to the contrary in this Agreement, either party may seek appropriate injunctive or other equitable relief, at any time, in a court of competent jurisdiction in the event of a breach of Section 10, any infringement or misappropriation of a party’s intellectual property rights or when injunctive relief is the only appropriate relief. License Agreement at § 13.1.3 (emphasis added). Qualia does not dispute the case law cited in STC’s Cross Motion that the word “notwithstanding” has been interpreted by the Texas Supreme Court to mean that the provision applies regardless of “anything else in the contract.” El Paso Field Servs., L.P. v. MasTec N. Am., Inc., 389 S.W.3d 802, 807-808 (Tex. 2012). Qualia may not ignore this langu r attempt to re write the License Agreement, as it has done. Klaassens v. Bishop, No. 01-19-00873-CV, 2020 Tex. App. LEXIS 9543, at *19 (Tex. App.Houston [1st Dist.] Dec. 8, 2020, no pet.) (“We may not construe a contract in a way that reduces a contract provision to a meaningless addition”); R. H. Sanders Corp. v. Haves, 541 S.W.2d 262, 264 (Tex. Civ. App. 1976) (“Furthermore, all language used is presumed to have some meaning and is not mere surplusage” ACTIVE 693467070v6 Qualia then argues that arbitration is “appropr iate relief” and thus “Section 13.1.3 is not applicable to the parties’ disputes.” Reply at 16. Qualia is wrong. Arbitration is not “relief.” As stated by Section 13.1.3, the relief in question is “injunctive or other equitable relief.” Section . As previously briefed, STC’s request for injunctive relief is the primary relief requested. See STC’s Cross Motion at 13 Courts uniformly hold that when an injunction and declaratory relief are seeking essentially the same thing, the relief is “primarily injunctive.” . (cases and discussion). STC Does Not Dispute The Terminability Of The Maintenance Agreement Nor Qualia’s Reading Of The License Agreement’s Disengagement Services, Which Therefore Present No Arbitrable Issues. Two out of the three issues which Qualia seeks declaratory relief in the Arbitration are uncontested between the parties. See Response at 11. STC has never disputed Qualia’s right to terminate the Maintenance Agreement nor does STC contest Qualia’s reading of the License Agreement’s “Disengagement Services.”Thus, these issues are not justiciable and present no case or controversy "A declaratory judgment is available only when there is a justiciable controversy between the parties." Hous. Chronicle Publ'g Co. v. Thomas, 196 S.W.3d 396, 401 (Tex. App. Houston [1st Dist.] 2006, no pet.) (citing Brooks v. Northglen Ass'n, 141 S.W.3d 158, 163 64 (Tex. 2004)). "Justiciability is a matter of concern in every civil case." Heckman v. Williamson Cty S.W.3d 137, 147 (Tex. 2012). For an issue to be justiciable, "there must be a real controversy between the parties that will be actually resolved by the judicial relief sought." State Bar of Tex. v. Gomez, 891 S.W.2d 243, 245 (Tex. 1994). First, the terminability of the Maintenance Agreement is uncontested by STC and therefore provide no arbitrable case or controversy. In fact, Qualia has already terminated the aintenance Agreement, and given notice of the same. See Exhibit B (Qualia “Notice of Non ACTIVE 693467070v6 Renewal and Termination of Maintenance and Support”). See also Exhibit A. The addition of maintenance agreement declaratory relief in the arbitration is an artifice to make it appear that the maintenance agreement is in dispute. It is not in dispute. STC does not disagree with Qualia’ right to terminate the maintenance agreement as it has done. Second, the disengagement services issue is not ripe for any type of adjudication because STC has not terminated the License Agreement and has not requested the disengagement services following such a termination. See License Agreement at § 9.8.1. Even if STC had terminated the License Agreement and then requested disengagement services, and it has not done so, Qualia has already confirmed it would honor the obligations of the disengagement services. See Exhibit C at 2 (“Stewart Title, of course, retains the option to terminate the License Agreement and avail itself of Disengagement Services for as much as two years, an obligation Qualia intends to honor.”). Thus, there is no dispute between the parties as to any particulars of that clause. Qualia’s clusion of these claims for declaratory relief in an arbitration is puzzling and begs the question of whether Qualia added them in good faith or instead tacked on these issues in an effort to avoid the jurisdiction of this Court for the sole remaining and actual controversy between the parties regarding the will terminability of the License Agreementa claim which is primarily injunctive in nature as detailed at length above and thus properly brought by STC before this Court. See also STC’s Motion for Summary Judgment, and Reply in Support of its Motion for Summary Judgment, for a detailed discussed of the at will terminability of the License Agreement. CONCLUSION light of the foregoing and STC’s Cross-Motion, the Court should deny Qualia’s Motion and grant STC’s Cross Motion granting temporaryand permanent injunctive relief and/or ACTIVE 693467070v6 permanently stay Qualia from continuing with the Arbitration and award STC such other and further relief, at law or in equity, to which it may be entitled. Dated: February 12, 2024 Respectfully submitted, REENBERG RAURIG By: /s/ Roland Garcia Roland Garcia State Bar No. 07645250 garciar@gtlaw.com Angeles Cassin State Bar No. 24087561 Angeles.Cassin@gtlaw.com Kristin Agnew State Bar No. 24083144 Kristin.Agnew@gtlaw.com Steven Higginbotham SBN 24125274 higginbothams@gtlaw.com 1000 Louisiana Street, Suite 6700 Houston, Texas 77002 Telephone: (713) 374-3500 Facsimile: (713) 374-3505 Attorneys for Plaintiff Stewart Title Company ACTIVE 693467070v6 CERTIFICATE OF SERVICE The undersigned certifies that a true and correct copy of the foregoing was served by e file on all counsel of record on February 12, 2024. /s/ Roland Garcia Roland Garcia ACTIVE 693467070v6