PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 425 Park Avenue New York, New York 10022
C&H Matter No. 1025-00008
MEMORANDUM
TO: Carolyn Whitford, General Counsel & Executive Vice President, Quorum Insurance Holdings Corp. Gregory Stahl, Vice President, Legal Affairs, Quorum Insurance Holdings Corp.
FROM: Wendy Schultz, Associate, intellectual Property, Calderwood & Harkness LLP
CC: Leonard Cross, Responsible Partner, Calderwood & Harkness LLP Patricia Heng, Senior Counsel, Technology Transactions, Calderwood & Harkness LLP Omar Siddiqui, Associate, intellectual Property, Calderwood & Harkness LLP
DATE: March 13, 2023
RE: Post-Session Debrief — Second Negotiation Session, March 9, 2023 (Atlanta, GA) — Master Data License Agreement Between Quorum Insurance Holdings Corp. and Meridian Credit intelligence, Inc.
I. Executive Summary
The second in-person negotiation session between Quorum Insurance Holdings Corp. ("Quorum") and Meridian Credit intelligence, Inc. ("Meridian" or "MCI") was held on Thursday, March 9, 2023, at Meridian's corporate headquarters located at 3300 Peachtree Road NE, Suite 2100, Atlanta, Georgia 30326. The session ran from approximately 9:00 AM ET to 5:30 PM ET, with a working lunch.
Quorum Attendees: Wendy Schultz (Calderwood & Harkness LLP), Omar Siddiqui (Calderwood & Harkness LLP), Patricia Heng (Calderwood & Harkness LLP), Gregory Stahl (Quorum VP, Legal Affairs), Rajesh Anand (Quorum Chief Data Officer), and Thomas Ng (Quorum VP, Enterprise Procurement).
Meridian Attendees: Graham Whitley (Kessler Pruitt & Ashe LLP), Nina Chastain (Kessler Pruitt & Ashe LLP), Derek Fontaine (Kessler Pruitt & Ashe LLP), Keith Marlow (Meridian SVP, Data Licensing & Partnerships), Ben Overstreet (Meridian VP, Legal Affairs), and Lena Vasquez (Meridian Chief Privacy Officer).
Overall Assessment: The session yielded incremental progress on several secondary commercial and technical terms, including meaningful advances on service level agreement specifications, data-delivery windows, data security provisions, and certain payment-related mechanics. However, the two principal open issues — (1) Quorum's demand for a most favored nation ("MFN") pricing clause and (2) the allocation of ownership and commercialization rights with respect to derived data — remain unresolved. This outcome is consistent with the impasse flagged at the conclusion of the first negotiation session held on January 18, 2023, in New York.
Meridian's outside counsel at Kessler Pruitt & Ashe LLP ("KP&A") and Meridian's business team made clear throughout the session that their positions on MFN pricing and derived-data rights are informed by, and materially constrained by, directives from Breckenridge Capital Partners Fund IV, L.P. ("Breckenridge"), Meridian's majority equity owner holding approximately 62.5% of Meridian's outstanding equity, as well as input from Whitmore Zanthor & Co. ("Whitmore Zanthor"), the investment bank retained by Meridian to advise on a planned initial public offering targeted for the 2025–2026 time frame. The involvement of these third-party stakeholders represents a significant structural constraint on Meridian's negotiating flexibility and is likely to shape the trajectory of the remaining negotiations.
This memorandum summarizes the substantive discussion on each agenda item addressed during the March 9 session, reports on Meridian's stated positions and the rationale articulated in support thereof, identifies areas of meaningful movement and remaining disagreement, and recommends next steps for Quorum's consideration.
II. Background and Context
By way of brief procedural recap, the negotiation history of the proposed Master Data License Agreement ("MDLA") between Quorum and Meridian is as follows:
Meridian's form MDLA was delivered by KP&A to Calderwood & Harkness on November 4, 2022. Calderwood & Harkness prepared and delivered a comprehensive redline of the MDLA to KP&A on December 2, 2022. The redline addressed all material provisions but flagged several issues that Calderwood & Harkness anticipated would require in-person negotiation, including MFN pricing protections, derived-data ownership and commercialization rights, dispute resolution, post-termination data treatment, and certain service level commitments.
The first in-person negotiation session was held on January 18, 2023, at Calderwood & Harkness's offices in New York. That session covered substantially all provisions of the MDLA at a high level and resulted in the identification of the two principal impasses noted above — MFN pricing and derived-data rights — as well as narrowing of the issues on a number of secondary terms. A debrief memorandum covering the January 18 session was circulated to the Quorum team on January 23, 2023.
In the period between the January 18 session and the March 9 session, the parties' working teams exchanged comments on the Data Security Addendum ("DSA"), the Service Level Agreement ("SLA"), and Technical Schedule A (data delivery specifications). These exchanges were conducted primarily through redline exchanges between C&H (principally Patricia Heng and Omar Siddiqui) and KP&A (principally Derek Fontaine), with input from the respective business and technical teams.
Additionally, Pinnacle Ridge Advisory LLC ("Pinnacle Ridge") delivered its final pricing benchmark study to Quorum on February 14, 2023. The study was commissioned by Quorum and prepared by Franklin Osei, Managing Director of Pinnacle Ridge, who has extensive experience in credit-data licensing transactions in the insurance sector. The study's key finding — that Quorum's proposed per-record pricing under the MDLA is generally within market range for comparable credit-data licenses to insurance-industry participants, and in fact resides in the upper quartile of comparable arrangements — provides meaningful support for Quorum's MFN negotiating position. The implications of the Pinnacle Ridge study for the MFN discussion are addressed in greater detail in Section VII of this memorandum.
The March 9 session was convened principally to attempt resolution of the two principal impasses, with secondary items — including SLA specifications, data security and privacy provisions, payment mechanics, dispute resolution, and post-termination data treatment — also on the agenda. The parties agreed in advance on a structured agenda, which was circulated by KP&A on March 3, 2023.
III. Detailed Discussion by Agenda Topic
A. Most Favored Nation Pricing Clause
The MFN pricing issue consumed approximately three hours of the session and remains the single most contentious commercial term in the MDLA negotiation.
1. Quorum's Position Restated. Quorum reiterated its demand — first articulated at the January 18 session and set forth in detail in Section 4.07 of C&H's December 2, 2022 redline — for a most favored nation pricing clause covering all U.S.-domiciled insurance carriers, managing general agents ("MGAs"), and insurtech firms with annual premiums written of $500 million or more ("Comparable Licensees"). Under Quorum's proposed formulation, Meridian would be required to ensure that the effective per-record pricing charged to Quorum under the MDLA does not exceed the lowest effective per-record rate charged by Meridian to any Comparable Licensee for substantially similar data products and delivery services during the same contract period.
Gregory Stahl referenced the Pinnacle Ridge benchmark study and its finding that Quorum's proposed pricing — Year 1 annual license fee of $10,800,000; Years 2 through 5 annual license fee of $12,300,000 per year; total consideration of $60,000,000 over the five-year term — is at or above market rates for comparable arrangements. Mr. Stahl argued that Quorum's proposed MFN clause would merely function as a baseline protection to ensure that Quorum is not commercially disadvantaged relative to its competitors in the insurance market who are also licensing Meridian's data products, and that Quorum's willingness to commit to a $60,000,000, five-year license warrants this level of commercial assurance.
Mr. Stahl further emphasized that Quorum's Board of Directors and Chief Executive Officer Meg Tierney view MFN protection as a strategic imperative given the magnitude of the license commitment. He noted that the Quorum board's authorization to proceed with the Meridian license was granted with the expectation that pricing protections, including an MFN or a commercially equivalent mechanism, would be secured in the final agreement.
2. Meridian's Response. Graham Whitley, lead outside counsel for Meridian at KP&A, stated in clear terms that Meridian's position on MFN has not changed since the January 18 session: Meridian categorically refuses to include any MFN pricing clause in the MDLA, in any formulation.
Keith Marlow, Meridian's SVP of Data Licensing & Partnerships, articulated four specific reasons underpinning this refusal:
(a) Confidentiality Obligations to Existing Licensees. Mr. Marlow stated that Meridian's existing data license agreements with other insurance-industry participants contain strict confidentiality provisions that preclude Meridian from disclosing, directly or indirectly, the pricing terms of those agreements to Quorum, to any auditor acting on Quorum's behalf, or to any third party. Mr. Marlow asserted that compliance with an MFN clause — which would necessarily require some mechanism for comparing Quorum's pricing against the pricing extended to other licensees — would place Meridian in breach of its existing contractual obligations.
(b) Impracticability of Cross-Licensee Price Comparisons. Mr. Marlow explained that each of Meridian's enterprise data licenses involves a bespoke combination of Meridian data products — including the MCI Consumer Credit File, MCI CommercialView, MCI AltSignal, and various custom analytics and scoring packages — tailored to the specific use case and data requirements of the licensee. Given the bespoke nature of these arrangements, Mr. Marlow argued that meaningful apples-to-apples price comparisons across licensees are infeasible. A per-record rate comparison would not account for differences in data product scope, refresh frequency, delivery method, support services, volume commitments, or the inclusion of custom analytics components, all of which materially affect the effective price of the license.
(c) Breckenridge and Whitmore Zanthor Constraints. Mr. Marlow stated — and Graham Whitley confirmed — that Breckenridge Capital Partners Fund IV, L.P., Meridian's majority equity owner, has explicitly instructed Meridian management that an MFN pricing clause in the Quorum MDLA, or in any material enterprise data license, would be viewed as a margin-compression risk that could negatively impact Meridian's valuation narrative in the context of the planned 2025–2026 IPO. Mr. Marlow identified Elaine Drummond, Managing Partner of Breckenridge, and Caleb Rourke, the Breckenridge partner overseeing the Meridian portfolio investment, as the individuals responsible for this directive. Mr. Marlow further stated that Rachel Ng-Castillo, Managing Director at Whitmore Zanthor & Co. (Meridian's retained investment bank), has advised Meridian that data exclusivity and pricing power are central pillars of Meridian's equity story and that the inclusion of MFN clauses in material enterprise licenses would undermine investor confidence in Meridian's ability to maintain and grow margins. This input from Whitmore Zanthor reinforces the Breckenridge directive and further constrains Meridian's negotiating flexibility on this issue.
(d) Antitrust Sensitivities. Meridian's counsel raised the concern that MFN clauses in concentrated data-supply markets — and the consumer credit data market is undeniably concentrated — could invite regulatory scrutiny from the U.S. Department of Justice Antitrust Division or the Federal Trade Commission. Graham Whitley noted recent enforcement interest in MFN clauses in platform and data markets and suggested that Meridian's counsel has advised against MFN provisions on antitrust-risk grounds as well as commercial grounds. While Mr. Whitley did not cite any specific enforcement action or pending investigation, he characterized this concern as a meaningful additional basis for Meridian's refusal.
Graham Whitley concluded by confirming that Meridian's refusal of any MFN pricing clause reflects a formal directive from Meridian's board of directors, not merely a negotiating stance of the working-level team. This statement is significant because it signals that no amount of working-level negotiation is likely to change Meridian's position absent intervention at the board or principal-investor level.
3. Quorum's Fallback — Pricing Audit Right. In anticipation of Meridian's continued refusal of a full MFN clause, Wendy Schultz previewed — without formal written proposal at this stage — Quorum's potential fallback concept: a limited annual pricing audit right. Under this concept, Quorum would have the right, exercisable once per contract year, to engage an independent third-party auditor (to be mutually approved by both parties) to verify that Quorum's effective per-record rate under the MDLA does not exceed 110% of the lowest effective per-record rate charged by Meridian to any Comparable Licensee (as defined above) for substantially similar data products and delivery services during the same measurement period. The auditor would report only a pass/fail determination — whether the 110% ceiling was met or exceeded — without disclosing any specific pricing information about other licensees. If the audit determined that the ceiling was exceeded, Meridian would be obligated to reduce Quorum's pricing prospectively to bring it into compliance with the 110% threshold, and Quorum would receive a retroactive credit for any overpayment during the applicable measurement period.
Meridian's team acknowledged the concept but expressed skepticism, citing the same confidentiality and comparability concerns articulated in connection with the full MFN clause. Graham Whitley stated that the concept, while somewhat more palatable than a full MFN, still requires disclosure of pricing information (albeit to an auditor rather than to Quorum directly) and still presupposes that meaningful cross-licensee comparisons are feasible, which Meridian disputes. Mr. Whitley indicated that he would need to take the pricing audit concept back to Arthur Pennington, Meridian's General Counsel, and to Breckenridge for evaluation, but could not make any commitment regarding Meridian's receptivity. Mr. Whitley's tone was neither encouraging nor dismissive — the concept was received without affirmative engagement but also without categorical rejection.
Assessment: The pricing audit right fallback may have some traction with Meridian if it is positioned carefully — in particular, if the auditor's role is narrowly scoped to minimize the confidentiality exposure that Meridian and its existing licensees face, and if the comparability methodology is defined with sufficient rigor to address Meridian's bespoke-package objection. However, achieving Meridian's acceptance will likely require further development of the proposal, including specificity regarding auditor qualifications, the scope and methodology of the comparison, remedies for non-compliance, and the frequency and cost allocation of the audit process. Even with these refinements, resistance from Breckenridge remains likely. We recommend formalizing the pricing audit right proposal in a detailed written submission for transmittal to KP&A after internal refinement with the Quorum team.
4. Meridian's Counter-Concept. Near the conclusion of the MFN discussion, Graham Whitley floated — on an informal, non-committal basis — a counter-concept under which Meridian might be willing to offer a "most favored terms" commitment (as distinct from a most favored pricing commitment) limited in scope to data-delivery SLAs, uptime commitments, and technical service levels. Under this concept, Meridian would commit that the service levels extended to Quorum would be no less favorable than those extended to any Comparable Licensee. The commitment would explicitly exclude pricing, fee structure, and all economic terms.
This concept is commercially insufficient for Quorum's purposes, as Quorum's MFN concern is fundamentally a pricing concern. However, the SLA parity concept may have value as an additional layer of protection for Quorum, even if the pricing issue is resolved through a separate mechanism. We recommend capturing this concept and seeking to include it in the MDLA as a supplementary provision, while making clear that it does not satisfy Quorum's requirement for a pricing-related MFN or audit mechanism.
B. Derived-Data Rights — IP Ownership and Commercialization
The derived-data issue consumed the remainder of the morning session and a substantial portion of the afternoon session, totaling approximately four hours of discussion. This issue remains the most legally complex item in the negotiation and has the most significant long-term strategic implications for Quorum.
1. Quorum's Position Restated. Omar Siddiqui presented Quorum's position on derived-data rights, which is set forth in detail in C&H's proposed Article VII of the December 2, 2022 redline. Quorum's position is as follows: Quorum should own all intellectual property rights in any data, models, scores, indices, analytical outputs, or other work product created by or on behalf of Quorum using licensed Meridian data as an input, whether in whole or in part (collectively, "Derived Data"). Quorum should have unrestricted rights to use, modify, create further derivative works from, sublicense, distribute, and commercialize such Derived Data without payment of additional fees or royalties to Meridian and without obtaining Meridian's prior consent or approval.
Rajesh Anand, Quorum's Chief Data Officer, explained the commercial importance of this position in concrete terms. Quorum's proprietary QuorumScore™ predictive underwriting model — for which a U.S. Patent and Trademark Office application is currently pending (Serial No. 97/482,116) — is a machine-learning-based scoring system that blends Meridian credit data with Quorum's own first-party claims experience data, policy performance data, and telematics data to generate predictive risk scores used in underwriting decisions. QuorumScore is central to Quorum's competitive advantage in underwriting and is the foundation of a planned business-to-business ("B2B") licensing revenue line that Quorum's management projects will generate between $40 million and $50 million in annual revenue by 2027. Any restrictions on Quorum's ability to use, license, or commercialize QuorumScore outputs — including restrictions arising from the Meridian MDLA — would materially impair Quorum's execution of this strategic initiative.
Quorum's team further emphasized the fundamental distinction between raw Meridian data (the MCI Consumer Credit File records, CommercialView records, and AltSignal records received under the license) and the transformed analytical outputs generated by Quorum's proprietary models. Mr. Siddiqui argued that machine-learning model outputs — specifically, the predictions, scores, and classifications generated by QuorumScore when applied to new, non-Meridian input data at inference time — should not be classified as "Derived Data" at all. These outputs are the product of Quorum's proprietary model architecture, training methodology, and independent data assets; the fact that Meridian data was one of several inputs used during the model training phase does not, in Quorum's view, give Meridian any cognizable intellectual property interest in the model's inference-time outputs.
2. Meridian's Response. Graham Whitley and Ben Overstreet reiterated Meridian's position on derived-data rights with considerable specificity. Meridian's position comprises four principal elements:
(a) Derivative Work Classification. Meridian views any Derived Data that incorporates, is based on, or is traceable to Meridian's raw data as a "derivative work" under Section 101 of the Copyright Act (17 U.S.C. § 101), and maintains that such Derived Data therefore remains subject to Meridian's underlying intellectual property rights in the raw data. Meridian's position is that the creation of derivative works from Meridian data requires Meridian's authorization under the copyright grant in the MDLA, and that Meridian is entitled to impose conditions on such authorization, including the conditions described below.
(b) License-Back on Derived Data. Meridian demands a perpetual, irrevocable, royalty-free, non-exclusive license-back on all Derived Data for Meridian's own internal business purposes, including use of Derived Data for product development, model improvement, benchmarking, and analytics. Mr. Whitley characterized this as a reasonable and standard provision in Meridian's enterprise data licenses, noting that Meridian's existing form MDLA includes a substantially similar license-back in every executed agreement.
(c) Commercialization Restrictions — "Sufficient Transformation" Standard. Meridian insists on a prohibition on Quorum selling, sublicensing, distributing, or otherwise making Derived Data available to any third party unless the Derived Data has been "sufficiently transformed" such that no Meridian raw data can be reverse-engineered, reconstructed, or otherwise extracted from it. Critically, Meridian's proposed formulation provides that Meridian shall have sole discretion to determine whether any particular Derived Data item or output has been "sufficiently transformed" to satisfy this standard. Ben Overstreet emphasized that this sole-discretion formulation is non-negotiable from Meridian's perspective, as Meridian must retain the ability to protect the confidentiality and integrity of its raw data and to prevent indirect redistribution of its data assets through licensee-created derivatives.
(d) Revenue Sharing. If Quorum commercializes Derived Data that has been approved by Meridian as sufficiently transformed, Meridian proposes that it receive a royalty of 15% of Quorum's net revenues attributable to such Derived Data. Mr. Whitley characterized this revenue share as reflecting the inherent value of Meridian's data contribution to the creation of the Derived Data and as a standard arrangement in data licensing transactions.
Lena Vasquez, Meridian's Chief Privacy Officer, added a privacy and regulatory dimension to Meridian's position. Ms. Vasquez noted that Meridian, as a furnisher and reseller of consumer credit information, has obligations under the Fair Credit Reporting Act ("FCRA") and various state privacy laws regarding the downstream use and distribution of consumer credit information and data derived therefrom. Ms. Vasquez argued that these obligations support — and in some cases may require — Meridian's demand for control over the commercialization of derived data, particularly in circumstances where Derived Data may contain or be traceable to individual consumer credit information. Ms. Vasquez stated that Meridian's legal and compliance team has concluded that allowing unrestricted downstream use and sublicensing of Derived Data by Quorum could expose Meridian to FCRA enforcement risk if Quorum's downstream sublicensees do not have permissible purposes for accessing consumer credit information, even in derived or transformed form.
3. Technical Dispute — Model Weights vs. Inference Outputs. A significant and technically nuanced discussion took place regarding whether the outputs of Quorum's machine-learning models — which are trained on, among other data sources, Meridian data — constitute "derived data" within the meaning of the MDLA.
Quorum's Position: Rajesh Anand, with legal framing provided by Omar Siddiqui, articulated the following technical and legal argument. Machine-learning model training involves the use of large volumes of training data — from multiple sources, including Meridian data and Quorum's own proprietary data — to optimize the statistical parameters (weights and biases) of a neural network or other ML architecture. Once training is complete, the resulting trained model is a mathematical function defined by those optimized parameters. At inference time, the trained model processes new input data — which may be entirely non-Meridian data — and generates predictions, scores, or classifications based on the learned statistical relationships encoded in the model parameters. Quorum's position is that only the trained model weights and parameters are potentially derivative of Meridian's data, to the extent they encode statistical patterns learned from Meridian data. The live predictions and scores generated at inference time, however — when the model is applied to new input data that does not include Meridian data — are independent outputs of Quorum's proprietary model and should not be classified as "Derived Data" or subjected to any Meridian restrictions. Mr. Anand analogized the trained model to a recipe: the recipe was developed through experimentation with particular ingredients (including Meridian data), but the dishes subsequently prepared using the recipe and different ingredients are not derivative of the original ingredients.
Meridian's Position: Graham Whitley articulated the contrary position. Mr. Whitley argued that any model trained on Meridian data has Meridian's data "embedded" in its parameters — that the statistical patterns encoded in the model weights are, in essence, a compressed representation of the training data, including Meridian's data. Therefore, all outputs of such a model, regardless of what input data is processed at inference time, are traceable to Meridian's data and should be classified as Derived Data subject to Meridian's restrictions. Mr. Whitley characterized Quorum's distinction between the training phase and the inference phase as "legally and technically unpersuasive" and suggested that the analogy to recipes fails because, unlike a recipe, a trained ML model's parameters contain extractable information about the training data (a reference to the growing body of literature on model inversion and membership inference attacks in machine learning). Mr. Whitley did not cite any specific case law in support of this position but stated that Meridian's counsel believes the weight of emerging legal commentary favors treating ML model outputs as derivative of their training data.
This remains a fundamental conceptual disagreement between the parties. The memorandum on ownership of ML model outputs prepared by Wendy Schultz and Omar Siddiqui in January 2023 — which analyzes the question under copyright law, trade secret law, and emerging academic and judicial commentary — supports Quorum's position that inference-time outputs of a model trained on Meridian data are not derivative works of that data. However, as noted in that memorandum, case law in this area remains largely undeveloped, and no court has squarely addressed the question of whether ML model outputs constitute derivative works of the model's training data. This uncertainty is a risk factor that Quorum should be aware of and that may weigh in favor of a negotiated compromise framework rather than reliance on a pure legal-rights position.
4. Areas of Potential Compromise Explored. Despite the fundamental disagreement on the underlying legal and technical characterization of ML model outputs, the parties explored several potential avenues for compromise during the session:
Objective Transformation Standard. Wendy Schultz proposed, on a conceptual basis, that the "sufficient transformation" standard in Meridian's draft — which currently vests sole discretion in Meridian — be replaced with an objective, jointly developed standard based on measurable technical criteria. Ms. Schultz suggested that such criteria might include: (i) the demonstrable inability to reconstruct or reverse-engineer individual Meridian records from the Derived Data, as verified through specified technical testing methodologies; (ii) a minimum number of independent, non-Meridian data sources combined in the creation of the Derived Data; or (iii) statistical irreversibility testing demonstrating that the Derived Data does not contain sufficient information to permit identification or re-identification of Meridian's raw data records. Meridian's team indicated some willingness to discuss objective criteria as an alternative to sole discretion, which represents a meaningful concession relative to their stated position. However, Meridian's team expressed concern about the administrability of such a standard, the difficulty of defining technically workable criteria, and the risk that any objective standard could be gamed by a sophisticated licensee to circumvent the protections Meridian seeks. This area warrants further exploration and may represent the most productive path toward compromise on the derived-data issue.
Narrow Feedback License. With respect to the license-back demand, Quorum indicated that it might consider granting Meridian a narrow feedback license limited to aggregated, anonymized performance metrics — for example, aggregate model accuracy statistics, aggregate loss-ratio correlations, or similar high-level performance data — rather than a license to the Derived Data itself. This feedback license would allow Meridian to understand how its data is performing in Quorum's models but would not give Meridian access to Quorum's proprietary Derived Data, model weights, or individual-level outputs. Meridian's team appeared to want broader access than what Quorum's feedback license concept would provide, and this gap will need to be addressed in subsequent discussions.
Revenue Share. On the 15% revenue share proposed by Meridian, Quorum stated unequivocally that this proposal is a non-starter. Mr. Stahl characterized the revenue share as fundamentally incompatible with Quorum's B2B licensing strategy for QuorumScore and noted that no reasonable commercial actor would accept a 15% perpetual revenue share in favor of a data supplier on a product that Quorum has independently developed using its own proprietary technology, data assets, and substantial R&D investment. Quorum did not offer a counter-percentage, and the position was characterized as one of principle, not degree — Quorum objects to any revenue-sharing obligation, not merely to the proposed 15% rate.
QuorumScore Carve-Out. Explicit protection of QuorumScore was flagged as a red line for Quorum. The Quorum team stated in the strongest terms that any compromise framework must include a clear and unambiguous carve-out ensuring that QuorumScore outputs — including all predictions, scores, classifications, and risk assessments generated by the QuorumScore model — are not subject to license-back rights, revenue sharing, Meridian approval or consent requirements, or any other Meridian restriction, regardless of the fact that Meridian data was used as one of several inputs in the training of the QuorumScore model. This carve-out is essential to Quorum's strategic position and must be secured in any acceptable formulation of the derived-data provisions.
C. Service Level Agreement and Technical Schedules
The parties made moderate but meaningful progress on service level agreement terms and the technical specifications set forth in Schedule A to the MDLA. The tone of the discussion on these items was notably more collaborative than the discussions on MFN pricing and derived-data rights, and both parties' technical teams demonstrated a genuine willingness to work toward workable formulations.
Tentatively Agreed SLA Terms. The following SLA terms were agreed on a tentative basis, subject to final documentation:
• Monthly Uptime Commitment: 99.9% uptime for API access to all Meridian data products, measured on a calendar-month basis.
• Data-Delivery Windows for Batch Feeds: Daily batch files for the MCI Consumer Credit File and MCI AltSignal data products shall be delivered by 6:00 AM Eastern Time each business day. Weekly batch files for the MCI CommercialView data product shall be delivered by 8:00 AM Eastern Time each Saturday.
• Refresh Frequencies: Daily batch delivery plus real-time API access for the MCI Consumer Credit File; weekly batch delivery for MCI CommercialView; daily batch delivery for MCI AltSignal.
• Delivery Methods: Secure File Transfer Protocol ("SFTP") for batch file deliveries and RESTful API for real-time access.
Open SLA Items. Several SLA items remain unresolved:
• Service Credit Caps. Quorum is seeking uncapped service credits for SLA failures, meaning that the aggregate credits payable by Meridian in any measurement period should have no artificial ceiling. Meridian is proposing that service credits be capped at 10% of quarterly fees as the maximum credit exposure in any quarter. This gap is significant: under Meridian's proposal, the maximum quarterly credit would be $307,500 (10% of the $3,075,000 quarterly installment for Years 2–5), which Quorum views as an inadequate remedy for sustained service failures.
• Uptime Measurement Methodology. Meridian is seeking exclusions from the uptime measurement for scheduled maintenance windows, which Meridian proposes to define broadly to include up to eight hours per month of planned downtime during off-peak hours (weeknights and weekends). Quorum is resisting any exclusion from the 99.9% measurement that is not narrowly defined and subject to advance notice requirements.
• API Response Time and Degradation Events. The parties have not yet agreed on specific response time commitments for API queries or on the remediation and escalation procedures applicable to API degradation events (i.e., situations where the API remains technically available but response times exceed acceptable thresholds).
Technical Schedule A. Derek Fontaine (KP&A) and Omar Siddiqui (C&H) made substantial progress on the technical specifications set forth in Schedule A, including record schemas, data formats (agreed to use standardized delimited flat-file format for batch and JSON for API), and data-quality acceptance criteria (including minimum completeness thresholds, field-level validation rules, and timeliness requirements). The base-tier record cap was confirmed at 500 million records per month, with an overage rate of $0.003 per record above that threshold. Quorum's estimated monthly volume of approximately 437 million records — representing approximately 87.4% of the base-tier cap — was confirmed as within the base tier and not expected to trigger overage charges under normal operating conditions.
Patricia Heng noted that she is preparing a separate SLA memorandum analyzing the adequacy of Meridian's proposed uptime and latency commitments benchmarked against industry standards for enterprise credit-data providers. This analysis will inform C&H's counter-markup of the SLA provisions and will be circulated to the Quorum team upon completion.
D. Data Security and Privacy
The data security and privacy discussion was led by Lena Vasquez on behalf of Meridian and by Patricia Heng and Gregory Stahl on behalf of Quorum.
Security Certifications. Lena Vasquez presented an overview of Meridian's information security framework, noting that Meridian holds a current SOC 2 Type II certification (audit report issued by Galloway Nash LLP, covering the twelve-month period ending March 31, 2023) and ISO 27001 certification for its data-processing and storage environments. These certifications provide a baseline level of assurance regarding Meridian's security controls, though as is customary, the specific scope and findings of the SOC 2 report will need to be reviewed by Quorum's information security team. Quorum confirmed its own SOC 2 Type II certification, with an audit report issued by Felton Thorpe & Co. LLP covering the twelve-month period ending December 31, 2023.
Data-Breach Notification. Both parties tentatively agreed that the Data Security Addendum will include a 48-hour breach notification requirement running from the notifying party's discovery of a breach or reasonably suspected breach of the security of the other party's data. The notification will be required to include a description of the nature of the breach, the categories and approximate number of records affected, the likely consequences of the breach, and the measures taken or proposed to address the breach. Further specifics regarding the content, format, and delivery mechanics of breach notifications remain to be finalized.
FCRA Compliance. The parties discussed the structure and content of the FCRA Permissible Purpose Certification that Quorum will be required to execute as a condition to receiving access to consumer credit information through the MCI Consumer Credit File. Lisa Johannsen (referenced but not present at the session) is preparing a draft certification schedule setting forth Quorum's permissible purposes under Section 604 of the FCRA (15 U.S.C. § 1681b). Quorum's permissible purposes include insurance underwriting (Section 604(a)(3)(C)) and review of existing accounts (Section 604(a)(3)(F)(ii)). The certification will also address Quorum's obligations regarding adverse action notices, accuracy disputes, and other FCRA-mandated consumer protections.
CCPA/CPRA Compliance. The parties discussed the California Consumer Privacy Act ("CCPA") and California Privacy Rights Act ("CPRA") implications of the MDLA in the context of the Data Processing Agreement ("DPA") that will be appended to the MDLA. Lisa Johannsen's draft DPA is in progress. Key open issues include consumer opt-out facilitation (i.e., the mechanics by which Meridian will communicate consumer opt-out requests to Quorum and the timeframes for Quorum's compliance), de-identification standards applicable to Derived Data, and the allocation of responsibility for responding to consumer access and deletion requests. Notably, the de-identification standards for Derived Data under the CCPA/CPRA tie directly back to the derived-data commercialization dispute, as Meridian's position that it must retain control over the "sufficient transformation" standard is partly grounded in its view that the CCPA's de-identification requirements impose constraints on downstream use of data derived from consumer information.
NY DFS Cybersecurity Regulation. David Cartwright (not present at the Atlanta session but reviewing remotely) has flagged several requirements under the New York Department of Financial Services Cybersecurity Regulation (23 NYCRR 500) that must be reflected in the Data Security Addendum. These include third-party service provider oversight obligations (Section 500.11), encryption standards for data in transit and at rest (Section 500.15), incident response plan requirements (Section 500.16), and annual certification obligations (Section 500.17). Mr. Cartwright has prepared a summary of the applicable requirements, which C&H will incorporate into its redline of the DSA. Meridian's team appeared receptive to these provisions, with Ms. Vasquez noting that Meridian already maintains controls consistent with most 23 NYCRR 500 requirements and would not object to contractual commitments reflecting those controls.
Insurance Minimums. The parties reached tentative agreement on the following insurance requirements to be set forth in the MDLA:
• Meridian: Commercial General Liability ("CGL") insurance with limits of not less than $5,000,000 per occurrence; Cyber Liability and Technology Errors & Omissions ("E&O") insurance with limits of not less than $25,000,000 in the aggregate.
• Quorum: CGL insurance with limits of not less than $5,000,000 per occurrence; Cyber Liability insurance with limits of not less than $50,000,000 in the aggregate.
The difference in cyber liability limits reflects Quorum's higher exposure profile as the entity that will be processing and deriving new analytical outputs from Meridian's consumer credit data.
E. Payment Terms and Deal Economics
No substantive changes were made to the fee structure during the March 9 session. The following terms were confirmed:
• Year 1 Annual Fee: $10,800,000, reflecting the six-month implementation and ramp-up period built into Year 1 (effective monthly rate of $900,000).
• Years 2–5 Annual Fee: $12,300,000 per year (effective monthly rate of $1,025,000).
• Total License Value: $60,000,000 over the five-year initial term ($10,800,000 + $12,300,000 × 4 = $60,000,000).
• Payment Schedule: Quarterly in advance. Year 1 quarterly installments of $2,700,000; Years 2–5 quarterly installments of $3,075,000.
• Implementation/Integration Fee: $1,500,000 (one-time, non-recurring), billed separately and outside the $60,000,000 license value. This fee covers Meridian's costs for technical integration, API configuration, data-mapping assistance, and dedicated onboarding support during the implementation period. The terms for invoicing this fee — specifically, whether it is payable upon execution of the MDLA or upon completion of the integration milestone — remain open.
• Late Payment Interest: 1.5% per month (equivalent to 18% per annum) on overdue amounts — agreed in principle.
• Data-Volume Overage Pricing: $0.003 per record above the 500 million records/month base-tier cap — confirmed and agreed.
F. Dispute Resolution
The dispute resolution provisions remain unresolved. The discussion on this topic was brief, as both parties acknowledged that it would be premature to expend significant negotiating capital on dispute resolution while the principal commercial impasses — MFN pricing and derived-data rights — remain unresolved.
Quorum's Position: Exclusive jurisdiction in the United States District Court for the Southern District of New York or, where federal subject-matter jurisdiction is unavailable, the Commercial Division of the Supreme Court of the State of New York, New York County. Quorum prefers court jurisdiction for several reasons, including the availability of injunctive relief (important given the IP-intensive nature of the MDLA), the precedential value of judicial decisions, and the broader discovery rights available in litigation compared to arbitration.
Meridian's Position: Binding arbitration under the American Arbitration Association ("AAA") Commercial Arbitration Rules, with the arbitration seated in New York, New York, and conducted before a panel of three arbitrators. Meridian's preference for arbitration is likely motivated by the confidentiality of arbitral proceedings (important given the sensitivity of Meridian's pricing information and data practices), the finality of arbitral awards, and the limited grounds for judicial review.
Neither side showed movement on this issue during the March 9 session. The parties agreed to defer further negotiation of the dispute resolution provisions pending resolution of the principal commercial terms. Governing law is settled: both parties agree that the MDLA will be governed by the laws of the State of New York, without regard to principles of conflicts of law.
G. Post-Termination Treatment of Data
Raw Meridian Data. The parties agreed in principle that upon termination or expiration of the MDLA, Quorum must return or certifiably destroy all raw Meridian data (i.e., all MCI Consumer Credit File, MCI CommercialView, and MCI AltSignal records received under the license) within ninety (90) days of the effective date of termination or expiration. Quorum will be required to provide a written certification of destruction executed by an authorized officer. This provision is largely settled.
Derived Data Post-Termination. The treatment of Derived Data upon termination or expiration remains disputed and is inextricably linked to the derived-data ownership discussion addressed in Section III.B above. Meridian's position is that all Derived Data must be destroyed or returned to Meridian upon termination, on the theory that Derived Data is a derivative work of Meridian's raw data and that Quorum's right to possess and use Derived Data is coextensive with the term of the license. Quorum's position is that Quorum must retain perpetual rights to use, retain, and commercialize all Derived Data and trained models following termination, on the theory that Derived Data is Quorum's proprietary intellectual property created through Quorum's independent investment of resources, expertise, and proprietary data.
No progress was made on this item during the March 9 session. Both parties acknowledged that resolution of the post-termination Derived Data provisions will follow from, and must be consistent with, the resolution of the Article VII derived-data ownership and commercialization provisions.
IV. Assessment of Meridian's Negotiating Dynamics
Based on the discussions at the March 9 session, we offer the following assessment of the negotiating dynamics on Meridian's side, which we believe has important implications for Quorum's negotiating strategy going forward.
Breckenridge Capital Partners' influence over Meridian's negotiating positions is significant and direct. Keith Marlow referenced Breckenridge's position multiple times during the session — not in passing, but as an affirmative justification for Meridian's refusal to move on MFN pricing and derived-data commercialization. Graham Whitley, Meridian's lead outside counsel, confirmed that Meridian's board-level guidance — which reflects Breckenridge's directives — constrains the negotiating team's flexibility on these two issues. The clear implication is that Meridian's working-level team does not have the authority to concede on MFN or derived-data rights, even if they were otherwise inclined to do so.
Breckenridge's concern, as articulated during the session, is specifically that broad MFN clauses and unfettered derived-data rights granted to material enterprise licensees would be viewed by prospective IPO investors as risks to Meridian's "data exclusivity moat" and pricing power. In Breckenridge's assessment, these provisions would compress prospective valuation multiples by undermining the narrative that Meridian enjoys significant leverage and pricing authority in the consumer credit data market. This is fundamentally a valuation narrative concern driven by Breckenridge's exit timeline and IPO economics, not a purely commercial or legal concern.
The role of Whitmore Zanthor & Co. reinforces this dynamic. Rachel Ng-Castillo, the Whitmore Zanthor Managing Director advising Meridian on the IPO, is reportedly advising that the Quorum license — as one of Meridian's largest enterprise contracts and one that will be scrutinized closely by prospective IPO investors during due diligence — must not contain provisions (such as MFN clauses or broad derived-data rights) that would set an unfavorable precedent for Meridian's other enterprise licensing relationships. The concern is that IPO investors would view licensee-favorable terms in a material contract as evidence that Meridian lacks the pricing discipline and contractual leverage necessary to sustain premium margins post-IPO.
Assessment: Meridian's business team — Keith Marlow in particular, and Sandra Ellison (referenced but not present) — appeared personally sympathetic to finding a commercially reasonable compromise on both MFN and derived-data rights. The signals from Meridian's business team during side conversations and in the tone of their engagement suggest that they understand the commercial importance of the Quorum relationship and would prefer to reach agreement. However, their negotiating authority is constrained by Breckenridge and Whitmore Zanthor in a manner that is unlikely to change through working-level discussions alone.
Any breakthrough on the principal impasses will likely require engagement at the principal or board level — specifically, engagement between Quorum's CEO, Meg Tierney, and Meridian's CEO, Vince Halstead, and potentially direct communication between Quorum's leadership and Caleb Rourke, the Breckenridge partner overseeing the Meridian investment. Mr. Rourke was not present at the March 9 session but was referenced as a key decision-maker whose endorsement would be necessary for any material concession on MFN or derived-data terms.
V. Standish National Bank Covenant — Status Update
We remind the Quorum team that the $60,000,000 total license value of the proposed MDLA exceeds the $25,000,000 threshold for intellectual property licenses and data license agreements set forth in Section 7.12(b) of Quorum's Amended and Restated Credit Agreement, dated as of June 15, 2021 (as amended), with Standish National Bank, N.A., as Administrative Agent (the "Credit Agreement"). The MDLA's total value exceeds the threshold by $35,000,000, representing 240% of the covenant limit. Accordingly, execution of the MDLA requires the prior written consent of Standish National Bank, N.A. (or, depending on the applicable majority lender provisions, the requisite lenders under the Credit Agreement).
Marcus Weill of C&H's Banking & Finance practice group submitted a draft lender consent request letter to Standish National Bank, N.A. (attention: Philip Yardley, Relationship Manager) in November 2022, contemporaneous with the commencement of MDLA negotiations. As of the March 9 session date, no formal written response has been received from Standish. This is not unusual in the context of a consent request submitted well in advance of the anticipated closing date, but the extended silence warrants follow-up.
A follow-up letter was prepared by Marcus Weill in February 2023. We need to coordinate with Gregory Stahl on whether Philip Yardley or any other Standish representative has provided any informal indication of Standish's position on the consent request — including any preliminary concerns about the license value, the term, the payment structure, or the nature of the data rights being acquired.
Obtaining lender consent remains a condition precedent to closing the MDLA. Given the current dormant state of the consent process and the unresolved status of the MDLA's principal commercial terms, we recommend that Quorum maintain regular contact with Standish to ensure the consent request remains active and to identify any potential concerns early, but that Quorum not push aggressively for execution of the consent letter until the principal commercial terms of the MDLA are closer to agreement. Premature execution of a lender consent based on terms that may subsequently change could necessitate a supplemental consent request, adding complexity and delay.
VI. Coordination with Caldwell & Strauss LLP
Angela Firth, Partner at Caldwell & Strauss LLP (100 Pearl Street, Hartford, Connecticut 06103), continues in her role as Quorum's longstanding outside intellectual property counsel, providing background guidance to Quorum's in-house legal and technology teams on the implications of the MDLA for Quorum's existing IP portfolio and on the derived-data ownership positions being advanced in the negotiation.
Caldwell & Strauss is not billing on the MDLA matter and is not serving as transactional counsel for the MDLA negotiation. However, Ms. Firth and her team have shared their view that Quorum's position on ownership of machine-learning model outputs and QuorumScore intellectual property is well-supported under existing IP law and is consistent with Quorum's broader IP strategy, including the pending USPTO application for QuorumScore (Serial No. 97/482,116) and Quorum's existing trade-secret protections for its proprietary data assets and model architectures.
We recommend continued coordination between Calderwood & Harkness and Caldwell & Strauss as the derived-data provisions develop, particularly as the parties move toward a potential compromise framework involving objective transformation standards, scope of permissible commercialization, and the QuorumScore carve-out. Ms. Firth's familiarity with Quorum's IP portfolio and prosecution strategy will be valuable in ensuring that the MDLA provisions do not inadvertently create conflicts with or undermine Quorum's existing IP protections.
VII. Pinnacle Ridge Pricing Benchmark Study — Key Observations
Franklin Osei, Managing Director of Pinnacle Ridge Advisory LLC, delivered the final pricing benchmark study to Quorum on February 14, 2023. The study was commissioned to provide an independent, market-based assessment of the pricing terms proposed in the Quorum-Meridian MDLA in comparison to comparable credit-data licensing arrangements in the insurance industry. The following findings are of particular relevance to the MFN discussion:
• Market Positioning of Quorum's Proposed Pricing. Quorum's proposed annual fees ($10,800,000 in Year 1; $12,300,000 in Years 2 through 5) are within the upper quartile of comparable enterprise credit-data licenses to insurance-industry participants, based on per-record pricing analysis. This finding indicates that Quorum's proposed pricing is not below-market or discounted; to the contrary, Quorum is proposing to pay rates at the high end of the market range for comparable arrangements.
• Comparable Arrangements. Pinnacle Ridge identified three comparable arrangements between Meridian (or, in one case, a competitor credit-data provider) and other major insurance carriers. The names of the comparable licensees were anonymized by Pinnacle Ridge in accordance with its standard methodology. In all three comparable arrangements, the effective per-record rates were 8% to 15% lower than Quorum's proposed effective per-record rate under the MDLA.
• Implications for MFN. This data provides strong support for Quorum's argument that an MFN pricing clause or a pricing audit mechanism is commercially justified. If Quorum is already paying rates at the upper end of the comparable range — and if three identifiable comparable licensees are paying 8% to 15% less for substantially similar data products — an MFN or audit right would merely ensure that Quorum is not disadvantaged relative to its competitors. The fact that Quorum's rates are above the comparable range also undercuts Meridian's implicit suggestion that an MFN would force Meridian to reduce its pricing to Quorum; an MFN would more likely have no immediate effect, serving instead as a prospective protection against future pricing disparities.
We recommend using the Pinnacle Ridge findings strategically in the next round of negotiations — for example, by referencing the existence and conclusions of the study (without disclosing the full report) to reinforce Quorum's argument that its pricing is at or above market and that an MFN or audit right would not impose an unreasonable burden on Meridian. However, we recommend against sharing the full study with Meridian absent a specific, deliberate tactical decision to do so, as the study contains methodology and comparable-transaction details that could be used by Meridian to identify the comparable arrangements and potentially to adjust its pricing with those licensees.
VIII. Recommended Next Steps
Based on the foregoing, we recommend the following next steps:
1. MFN — Formalize Pricing Audit Right Proposal. Calderwood & Harkness will prepare a formal written proposal for the pricing audit right fallback mechanism. The proposal will include detailed provisions addressing: the annual exercise right, the 110% ceiling on effective per-record rate relative to the lowest comparable insurance-industry licensee rate, the qualifications and selection process for the independent third-party auditor, mutual approval rights, the scope and methodology of the auditor's comparison, confidentiality protections for third-party licensee information, the auditor's reporting obligations (pass/fail only, with no disclosure of specific pricing data), remedies for non-compliance (prospective rate adjustment and retroactive credit), and cost allocation for the audit. The formal proposal will be transmitted to Kessler Pruitt & Ashe LLP with a target delivery date of early April 2023.
2. Derived Data — Develop Compromise Framework. Calderwood & Harkness will prepare a revised Article VII framework for internal review by the Quorum team, incorporating the following elements:
• Preservation of Quorum's ownership of all intellectual property rights in Derived Data, including all models, scores, indices, and analytical outputs.
• Elimination of the license-back on Derived Data in its current form, but with consideration of a narrow feedback license limited to aggregated, anonymized performance metrics (e.g., aggregate model accuracy statistics, aggregate loss-ratio correlations) provided to Meridian on a periodic basis.
• Replacement of Meridian's proposed "sole discretion" standard for sufficient transformation with objective, measurable criteria developed jointly by the parties' technical teams, potentially incorporating the irreversibility and minimum-source requirements discussed conceptually at the March 9 session.
• Elimination of the 15% revenue-sharing obligation in its entirety.
• Inclusion of an explicit carve-out for QuorumScore outputs, ensuring that all predictions, scores, classifications, and risk assessments generated by the QuorumScore model (and any successor or derivative models) are excluded from the definition of "Derived Data" and are not subject to license-back, revenue sharing, Meridian approval, or any other Meridian restriction.
The target delivery date for the revised Article VII framework is May–June 2023, in advance of a potential third negotiation session.
3. C-Suite Escalation. If the MFN pricing and derived-data rights impasses remain unresolved after the formal proposals described above are exchanged with KP&A, we recommend that Quorum's CEO, Meg Tierney, engage directly with Meridian's CEO, Vince Halstead, to attempt to break the impasse at the principal level. As discussed in Section IV above, Breckenridge Capital Partners' influence on Meridian's negotiating team suggests that only board-level or GP-level engagement — i.e., engagement that reaches Caleb Rourke or Elaine Drummond at Breckenridge — may change the constraints under which Meridian's negotiating team is operating. A CEO-to-CEO conversation, framed as a discussion about the strategic value of the Quorum-Meridian partnership and the mutual benefits of a commercially reasonable framework, may be the most effective path to unlocking flexibility on the Meridian side.
4. Dispute Resolution. Continue to defer negotiation of the dispute resolution provisions pending resolution of the principal commercial terms. In the interim, C&H will prepare for the eventual negotiation by maintaining Quorum's preference for exclusive court jurisdiction in the Southern District of New York or the Commercial Division of the New York Supreme Court, and by developing fallback positions (e.g., a hybrid clause providing for arbitration with carve-outs for injunctive relief and IP disputes) in the event that a compromise is necessary.
5. Standish Consent. Gregory Stahl should follow up with Philip Yardley at Standish National Bank, N.A., regarding the status of the lender consent request submitted in November 2022 and the follow-up letter transmitted in February 2023. The objective is to maintain an open and productive dialogue with Standish, identify any preliminary concerns, and ensure that the consent process does not become a critical-path obstacle to closing once the MDLA's principal commercial terms are resolved.
6. Data Security and Privacy. Calderwood & Harkness will finalize its redline of the Data Security Addendum, targeting delivery to KP&A by th