Dueling LMS Lawsuits

A university and its learning management system provider sue each other for breach of contract.

October 16, 2014

A learning management system provider is suing one of its clients for breach of contract, alleging the university let more students use the system than previously agreed. The university, meanwhile, has responded with its own lawsuit, saying the company is charging “exorbitant fees” for a “malfunctioning product.”

The University of the Incarnate Word, a private Catholic institution in San Antonio, Tex., in December 2004 hired Learning Technology Partners to provide its learning management system, called Izio. The two parties agreed to a pay-per-student model, where the university paid a flat fee (in 2014, $24) for each student who accessed the system.

Their partnership expanded in 2009 and 2011. First, the university asked the company to let students in its adult degree completion program use the system to download ebooks. That agreement, priced at $2 per student, did not come with access to Izio. Then, the university introduced blended programs, and negotiated a price of $12 per student for five to eight weeks of access to the system.

Yet in 2011, the company began to experience “severe usage and capacity issues,” and asked its contacts at the university to figure out where the additional traffic was coming from. According to the complaint, which was filed in the San Francisco County Superior Court, the university “repeatedly denied” that students in the degree completion programs were the source of the traffic.

While the company spent the next three years diagnosing and upgrading its system, the university made plans to end the agreement. When the university announced its intentions in October 2013, “the relationship of the parties changed,” according to the counterclaim.

The company said it found the source of the congestion: Students who were only supposed to download their ebooks had access to Izio, and students in the blended programs were accessing Izio for twice as long a period as they had paid for. After an audit of the past three academic years, the company charged the university more than $1 million in fees for “unauthorized usage.”

In its counterclaim, however, the university says the company conducted a similar audit in 2013, and although it found irregularities, it “agreed as part of an accord that no retroactive fees be assessed.”

The company includes quotes from a handful of emails suggesting the university knew about the additional traffic. In an email to Reda Athanasios, president of Learning Technology Partners, Cyndi W. Porter, the university’s vice president for extended academic programs, acknowledged the “rogue courses,” saying the institution would pay for them.

The complaint also states the university experimented with other learning management systems, including Blackboard Learn, even though its agreement with Learning Technology Partners named the company the “sole and exclusive provider for all distance education” systems.

In the letter announcing that Incarnate Word would terminate the agreement, Douglas B. Endsley, vice president for business and finance, also said the institution would replace Izio with “other products that are paid for and currently in service in the greater part of the university.”

The university’s final one-year extension with the company, which came with higher fees to support the upgrades, was scheduled to end this December. Instead, the university ended the agreement before the fall semester, six months after it notified the company that Izio was “malfunctioning.” According to the contract, the university was free to do so if Izio was unavailable for more than 10 percent of any two weeks during a three-week period.

The university paid the company an early termination fee of $120,144, which it is now saying should be reimbursed.

In an email, Athanasios declined to elaborate on the complaint, saying, "We feel very strongly about our case, but because the lawsuit is pending, we don’t have any further comment at this time." The university did not respond to a request for comment.

The cases are awaiting action from the U.S. District Court for the Northern District of California.


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