574 F.3d 129 (2nd Cir. 2009), 08-2762-bk, In re Dana Corp.

Docket Nº:08-2762-bk.
Citation:574 F.3d 129
Opinion Judge:KEARSE, Circuit Judge:
Party Name:In re DANA CORPORATION, Debtor. v. Dana Corporation, Appellee. Jasco Tools, Inc., Appellant,
Attorney:Alexander Geiger, Rochester, New York (Geiger & Rothenberg, Rochester, NY, on the brief), for Appellant. William G. Gandy, McLean, VA (Wilson, Elser, Moskowitz, Edelman & Dicker, McLean, VA, on the brief), for Appellee.
Judge Panel:Before KEARSE, HALL, and LIVINGSTON, Circuit Judges.
Case Date:July 31, 2009
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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574 F.3d 129 (2nd Cir. 2009)

In re DANA CORPORATION, Debtor.

Jasco Tools, Inc., Appellant,

v.

Dana Corporation, Appellee.

No. 08-2762-bk.

United States Court of Appeals, Second Circuit

July 31, 2009

Argued: Jan. 15, 2009.

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Alexander Geiger, Rochester, New York (Geiger & Rothenberg, Rochester, NY, on the brief), for Appellant.

William G. Gandy, McLean, VA (Wilson, Elser, Moskowitz, Edelman & Dicker, McLean, VA, on the brief), for Appellee.

Before KEARSE, HALL, and LIVINGSTON, Circuit Judges.

KEARSE, Circuit Judge:

Jasco Tools, Inc. ("Jasco"), appeals from a judgment of the United States District Court for the Southern District of New York, Richard M. Berman, Judge, affirming a decision of the United States Bankruptcy Court for the Southern District of New York, Burton R. Lifland, Judge, which granted summary judgment in favor of debtor-appellee Dana Corporation ("Dana") and disallowed Jasco's claim in the bankruptcy proceeding, see In re Dana Corp., No. 06-10354, 2007 WL 3376882 (Bankr.S.D.N.Y. Nov.6, 2007) ("Bankruptcy Court Decision" or " Decision"). On this appeal, Jasco contends principally (1) that

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several of the bankruptcy court's procedures leading to summary judgment were inappropriate, (2) that the court should have granted Jasco's request for additional discovery before resolving the summary judgment motion, and (3) that the existence of genuine issues of material fact should have prevented the granting of summary judgment in Dana's favor. Finding merit principally in Jasco's second and third contentions, we vacate the judgment and remand for further proceedings.

I. BACKGROUND

Dana is a purveyor of modules, systems, and components for original equipment manufacturers in the automotive industry; Jasco is a precision machining company. Until December 31, 2000, Jasco and Dana or Dana's predecessor-in-interest were parties to an agreement pursuant to which Jasco agreed to manufacture, and Dana agreed to purchase, precision-machined parts for Dana's heavy axle and brake business (the " Purchase Agreement" or " Agreement"). According to Eugene W. Baldino, who was Jasco's chief executive officer after May 31, 1999, " [t]he annual volume of business between Jasco and [Dana], pursuant to the Purchase Agreement, was approximately $24 million." (Declaration of Eugene W. Baldino dated September 19, 2007 ("Baldino Decl." or " Declaration"), ¶ 4.) According to Adam Haybach, Dana's purchasing manager for the parts in question during the relevant period, this " was one of the largest contracts Dana had with any of its suppliers." (Affidavit of Adam Haybach dated January 4, 2002 ("Haybach Aff."), ¶ 3.)

The Agreement provided that the parties would, in the second quarter of 1999, seek to negotiate an extension of the Agreement's term beyond 2000. Jasco's claim against Dana's bankruptcy estate arises out of the manner in which the Purchase Agreement ended, focusing in particular on events in the summer of 1999 that culminated in Dana's contracting with a Jasco competitor, Nationwide Precision Products Corporation ("Nationwide"), to supply the parts previously supplied by Jasco. The following description of the events is drawn principally from documents submitted to the bankruptcy court, including Baldino's Declaration and the exhibits attached to it, consisting chiefly of records, affidavits, and deposition excerpts obtained in a state-court action brought by Jasco against Dana, Nationwide, and three former Jasco employees for, inter alia, breach of contract, unjust enrichment, tortious interference with contract, and misappropriation of Jasco trade secrets. We describe the record in the light most favorable to Jasco, the party against which the bankruptcy court granted summary judgment.

A. The Events of 1999

Until the summer of 1999, three Jasco employees were responsible for all aspects of Jasco's performance of its contract with Dana: Jasco president Gary Rogers, Charles " Chuck" Zicari, a regional sales manager, and Sean Convertino, an engineering and quality assurance manager. Rogers was " Dana's primary contact person at Jasco." (Haybach Aff. ¶ 4.) Rogers retired from Jasco effective May 31, 1999, at the age of 50. The timing of his retirement was not of his own choosing. (See Deposition of Gary Rogers at 47-48.) According to Jasco, " Rogers took numerous confidential documents when he left Jasco." (Baldino Decl. ¶ 11.)

Zicari resigned from Jasco on July 9; Convertino resigned from Jasco on July 16. During the week after Zicari left Jasco, while Convertino was still there, Convertino told Zicari he had computer files containing Jasco information as to the processes,

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costs, and budgets for the parts made for Dana. (See Deposition of Sean Convertino ("Convertino Dep.") at 84-87.) Zicari told Convertino that " it would be helpful for competitive reasons to have that information available after [Convertino's] departure." (Id. at 87-88.) Thus, " [w]hen Mr. Convertino left Jasco, he retained information from Jasco on his personal computer such as machining cycle times, pricing information, and a list of machines required for performance under the Agreement," Bankruptcy Court Decision, 2007 WL 3376882, at *1.

The files taken by Convertino contained information that had, " over a number of years," been " developed by [Convertino] as well as other employees at Jasco." (Convertino Dep. at 89; see id. ("I didn't develop it singularly").) The information was nonpublic (see id.) and was " proprietary to Jasco" (id. at 290). Convertino testified, " I felt it was unethical I had left with Jasco's information." (Id. at 1740.) One reason Convertino took the files was that he had " some animosity" toward Jasco. (Id. at 44.)

Convertino's other reason was that the files " contained all of the financials and manufacturing process outlines" (id. at 89), including " speed and feed calculations for moving materials" (id. at 44), making it " very helpful in estimating manufacturing processes" and " [p]roduc[ing] cost estimates" (id. at 44-45; see also Baldino Decl. ¶ 20 (the computer disk that Convertino took with him " contained some 4000 pages of technical details about Jasco's manufacturing processes with respect to the Dana parts")). Convertino had in mind that the data " would be a benefit to Chuck and myself if we started up a business" (Convertino Dep. at 1740), or " useful to someone else trying to compete with Jasco" (id. at 44-45). He took all the Jasco data he thought would be of use (see id. at 1738-40) if they wanted to " go after the Dana business" " [w]ith some other company" (id. at 1739).

On August 9, 1999, Convertino became an employee of Nationwide; on August 16, 1999, Zicari became an employee of Nationwide. " In his new position at Nationwide, Mr. Zicari played a role in soliciting the Dana business[,] and Mr. Convertino helped prepare Nationwide's proposal to Dana." Bankruptcy Court Decision, 2007 WL 3376882, at *1. Dana soon agreed to replace Jasco with Nationwide as its post-2000 supplier, sending Nationwide a December 20, 1999 letter of intent stating the expectation that the contract with Nationwide would be finalized by the end of January 2000. (See Baldino Decl. Exhibit J.) In February 2000, Convertino received from Nationwide a raise in salary, the promise of another 9% raise at the beginning of 2001, a bonus of $20,000, and the promise of an additional $22,000 bonus to be paid in 2001, for " his involvement in securing the Dana Contract." (Baldino Decl. Exhibit K (February 29, 2000 memorandum from Ron Ricotta, Nationwide's president and chief executive officer, to " The Personnel File of Sean Convertino").)

The Dana management team responsible for purchasing the items covered by the Purchase Agreement with Jasco consisted of purchasing manager Haybach, his boss Paul E. Blanchard, who was the general purchasing manager for Dana's heavy truck group, and Robert A. Buss, a purchasing product analyst who reported to Haybach. (See Deposition of Adam Haybach ("Haybach Dep.") at 74, 110.) With respect to the contention that Dana knew of and encouraged the misappropriation of Jasco's confidential and proprietary information, Jasco " obtained telephone records showing dozens of phone calls between and among Rogers, Zicari, Haybach, and Buss

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throughout June, July, and August of 1999." (Baldino Decl. ¶ 13 n.2.)

Buss, in his state-court deposition, testified that he had no reason to have contact with Rogers after Rogers retired (see Deposition of Robert A. Buss ("Buss Dep.") at 92) and that in fact he did not have any conversations with Rogers after May 31 (see id. at 88, 91). The telephone company records, however, indicate that Rogers called Buss several times in the days and weeks following his May 31 retirement from Jasco, and that calls on June 7 and August 12 lasted 30 minutes and 25 minutes, respectively. (See Baldino Decl. ¶ 32.) When confronted with the records, Buss acknowledged that the telephone number called was his number at Dana but testified that he had no recollection of the calls. (See Buss Dep. at 88-89, 91.)

The telephone calls principally relied on by Jasco, including those from Rogers to Buss, as well as several from Zicari to Buss or Haybach, occurred on the following dates:

June 4 Rogers called Buss
June 7 Rogers called Buss; they spoke for 30 minutes
June 29 Zicari called Haybach
July 1 Zicari called Haybach
July 6 Zicari called Buss
July 6 Zicari called Haybach
July 13 Zicari called Haybach
July 13 Zicari called Buss
July 16 Zicari called Buss
August 12 Rogers called Buss; they spoke for 25 minutes
August 12 Rogers then immediately called Zicari; they spoke for 13 1/2
...

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