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Vehicle Market Research, Inc. v. Mitchell International, Inc.

United States District Court, D. Kansas

June 25, 2015

VEHICLE MARKET RESEARCH, INC., Plaintiff,
v.
MITCHELL INTERNATIONAL, INC., Defendant.

MEMORANDUM AND ORDER

JULIE A. ROBINSON, District Judge.

This is a dispute between Plaintiff Vehicle Market Research, Inc. ("VMR") and Defendant Mitchell International, Inc. ("Mitchell") over whether Mitchell owes VMR royalties under a software development contract. VMR brings claims against Mitchell for breach of contract and breach of the covenant of good faith and fair dealing under California law; Defendant denies that it breached the contract and violated the implied covenant of good faith and fair dealing and seeks a declaratory judgment. The parties originally filed cross-motions for summary judgment in 2012.[1] In addition to arguing the merits of the contract claims, Mitchell argued that Plaintiff should be judicially estopped from recovering in this case because VMR's sole shareholder, John Tagliapietra, failed to disclose the potential value of his VMR stock during the course of his personal bankruptcy proceedings based on the unpaid royalties that form the basis of VMR's damages in this case. After conducting a hearing, the Court granted Mitchell's motion on the sole basis of judicial estoppel; it did not reach the merits of the contract claims. On appeal, the Tenth Circuit Court of Appeals reversed this Court's summary judgment ruling on judicial estoppel, and remanded the case for further proceedings in accordance with its opinion.

The parties participated in a pretrial conference with Magistrate Judge Rushfelt on February 2, 2015, and a Revised Pretrial Order was entered.[2] Soon after, the parties filed a Joint Motion to Renew Motions for Summary Judgment (Doc. 137). They ask that the Court consider the issues raised but not decided by their earlier-filed motions for summary judgment.[3] Rather than requiring them to file new briefs, the parties ask that the Court reconsider the previously-filed briefs, Docs 83-86, 92-93, and 97-98. The Court grants the motion to renew as to the previously-filed and fully briefed cross-motions for summary judgment (Docs. 83, 85) on the contract issues not previously addressed by this Court. As explained more fully below, the Court denies both motions for summary judgment, finding that the contract is reasonably susceptible to VMR's interpretation and finding further that a genuine issue of material fact exists about whether Mitchell used VMR's Pre-Existing Materials in developing the TLSS Product.

I. Summary Judgment Standard

Summary judgment is appropriate if the moving party demonstrates that there is no genuine dispute as to any material fact and that it is entitled to judgment as a matter of law.[4] In applying this standard, the court views the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party.[5] "There is no genuine issue of material fact unless the evidence, construed in the light most favorable to the nonmoving party, is such that a reasonable jury could return a verdict for the nonmoving party."[6] A fact is "material" if, under the applicable substantive law, it is "essential to the proper disposition of the claim."[7] An issue of fact is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the non-moving party."[8]

The moving party initially must show the absence of a genuine issue of material fact and entitlement to judgment as a matter of law.[9] In attempting to meet this standard, a movant that does not bear the ultimate burden of persuasion at trial need not negate the other party's claim; rather, the movant need simply point out to the court a lack of evidence for the other party on an essential element of that party's claim.[10]

Once the movant has met this initial burden, the burden shifts to the nonmoving party to "set forth specific facts showing that there is a genuine issue for trial."[11] The nonmoving party may not simply rest upon its pleadings to satisfy its burden.[12] Rather, the nonmoving party must "set forth specific facts that would be admissible in evidence in the event of trial from which a rational trier of fact could find for the nonmovant."[13] When the moving party also bears the burden of proof at trial,

a more stringent summary judgment standard applies. Thus, if the moving party bears the burden of proof, to obtain summary judgment, it cannot force the nonmoving party to come forward with "specific facts showing there [is] a genuine issue for trial" merely by pointing to parts of the record that it believes illustrate the absence of a genuine issue of material fact. Instead, the moving party must establish, as a matter of law, all essential elements of the issue before the nonmoving party can be obligated to bring forward any specific facts alleged to rebut the movant's case.[14]

The facts "must be identified by reference to an affidavit, a deposition transcript, or a specific exhibit incorporated therein."[15] Rule 56(c)(4) provides that opposing affidavits must be made on personal knowledge and shall set forth such facts as would be admissible in evidence.[16] The non-moving party cannot avoid summary judgment by repeating conclusory opinions, allegations unsupported by specific facts, or speculation.[17]

"Where, as here, the parties file cross motions for summary judgment, [the Court is] entitled to assume that no evidence needs to be considered other than that filed by the parties, but summary judgment is nevertheless inappropriate if disputes remain as to material facts."[18] Cross motions should be considered separately.[19] Just because the Court denies one does not require that it grant the other.[20]

Finally, summary judgment is not a "disfavored procedural shortcut;" on the contrary, it is an important procedure "designed to secure the just, speedy and inexpensive determination of every action."[21] In responding to a motion for summary judgment, "a party cannot rest on ignorance of facts, on speculation, or on suspicion and may not escape summary judgment in the mere hope that something will turn up at trial."[22] II. Uncontroverted Facts

The following facts are either uncontroverted or stipulated to in the Revised Pretrial Order.

Mitchell provides information, workflow, and performance management solutions to improve business processes for insurance companies and collision repair facilities. At one time, it claimed to serve over 30, 000 collision repair facilities, independent adjusters, and other repair chain participants and 250 insurance companies, including many of the nation's top carriers.

A total loss product is a product that assists automobile insurers in providing a fair market value for a vehicle that has been declared a total loss, i.e. a vehicle that will cost more to repair than its value at the time of the accident. In 1996, while an employee at Mitchell, John "Pete" Tagliapietra proposed a total loss system for the company that would be based on Auto Trader publications. Mitchell declined to use Tagliapietra's total loss concept, but informed him that he was free to "pursue an Internet solution utilizing Auto Trader information on a regional basis so long as it does not interfere with your operational duties at Mitchell."[23] Mitchell explicitly permitted Tagliapietra to be a passive owner or director of an organization that may be formed to pursue that opportunity, with certain restrictions. Tagliapietra agreed in principle to providing Mitchell with the right of first refusal to sell the total loss concept directly to insurance companies under license or as an independent sales representative.

VMR, a Kansas corporation incorporated by Tagliapietra in 1997, developed its Total Loss Settlement System ("TLSS") prototype and presented it to Mitchell. Mitchell hired Robert Douglas, a former Mitchell employee, to conduct market research analysis. He was tasked with developing "a corporate strategy (both short and long term) for the Total Loss (real steel') market."[24] As part of the consulting project, Douglas accompanied Tagliapietra and Dayle Phillips, who worked for DAIS, on visits with representatives of various insurance companies. During these visits, Tagliapietra and Phillips showed insurers the VMR prototype "as something that was going to be offered by Mitchell, " and gathered information about the insurers' needs for a total loss product. During this process, Tagliapietra participated as a Mitchell employee. Douglas recommended that Mitchell proceed with VMR in developing TLSS and drafted a Business Plan for Mitchell for this approach. The Business Plan was a collaborative effort between Mitchell, VMR, and DAIS, an independent contractor.

On March 20, 1998, VMR and Mitchell executed a Computer Programming and System Integration Services Agreement (the "Agreement"). The Agreement was signed by Paul Rose, Executive Vice President and CFO of Mitchell, James Lindner, President and CEO of Mitchell, and David T. Duensing, M.D., President of VMR. Linder testified in his deposition that he does not recall who at Mitchell helped negotiate and draft the Agreement, but believes one of the corporate attorneys would have drafted it. Dean Ricciarduli, who was in senior project management at Mitchell at the time, testified that he was responsible for crafting the Agreement; Linder does not believe that Ricciarduli was a "creator" of the document.

The following are key provisions of the Agreement.[25]

Paragraph 1 of the Agreement provides for the scope of work to be performed:

VMR agrees to perform for, and to provide to MITCHELL, and MITCHELL agrees to purchase from VMR and pay VMR for, Professional Services as described in Schedule A... required by MITCHELL in the design, development, production, installation, services, maintenance, and agreed upon enhancements of the MITCHELL Total Loss Settlement System (TLSS).

The Schedule A Overview provides: "VMR in conjunction with DAIS Incorporated ("Dais") acting as a MITCHELL approved independent contractor agrees to design, develop, maintain and support the Total Loss Settlement System (TLSS Product) based upon the VMR prototype system and MITCHELL/VMR product specifications."

Paragraphs 6.0, 6.1, 8.0 and 8.1 deal with ownership and use restrictions:

6.0 Proprietary Interest in MITCHELL Products. It is the intent of the parties that MITCHELL shall own all work product, including without limitation, software, computer programs (in Object and Source code formats) techniques, systems, methodologies, reports and records and other materials prepared for MITCHELL by VMR (Work Product) arising from the performance of the Professional Services. The Work Product shall be deemed to have become the property of MITCHELL immediately upon its creation or invention, regardless of the form of embodiment, stage of completion, format, platform or language. The parties intend that (I) VMR shall perform all Professional Services hereunder as an independent contractor.... VMR agrees that MITCHELL shall own all copyright, trademark, trade secret, patent and other intellectual property rights associated with or appurtenant to any Work Product discovered, created, invented or developed under this Agreement without regard to the origin of the Work Product.
6.1 VMR covenants and agrees with MITCHELL that VMR shall neither make claim, nor have any claim, of any design, invention, patent, copyright, trade secret or other right(s), or any proprietary interest in any MITCHELL product on which, or for which, it may perform Professional Services hereunder unless expressly agreed upon by both parties in writing. Nothing in this Agreement shall be construed as giving VMR or any Personnel, or resulting ...

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