Cole v. Control Data Corp., 90-2685

Decision Date04 December 1991
Docket NumberNo. 90-2685,90-2685
Citation947 F.2d 313
PartiesErvin COLE, Jr., Appellee, v. CONTROL DATA CORPORATION, Appellant.
CourtU.S. Court of Appeals — Eighth Circuit

Daniel T. Rabbitt, St. Louis, Mo., argued (Steven H. Schwartz, on the brief), for appellant.

Susan Nell Rowe, St. Louis, Mo., argued (Michael A. Fisher, on the brief), for appellee.

Before JOHN R. GIBSON, Circuit Judge, ROSS and HENLEY, Senior Circuit Judges.

JOHN R. GIBSON, Circuit Judge.

Control Data Corporation appeals from a judgment entered on a jury verdict in favor of Ervin J. Cole, Jr., on Cole's claims for breach of contract and conversion arising out of a software program that he developed while employed by Control Data. Control Data argues that the district court erred in denying judgment notwithstanding the verdict because the software program was its property, Cole had no right to possess it, Cole destroyed the software himself, and there was no evidence that Control Data intended to deprive him of access to it. Control Data also contends that any partnership between Cole and the company was terminable at will, there was insufficient evidence of damages, and the punitive damage award violates its constitutional rights. Control Data further argues error in the giving of instructions and admission of damages testimony. We affirm the district court's judgment with respect to actual damages, but remand for review of the punitive damage award under Pacific Mutual Life Insurance Co. v. Haslip, --- U.S. ----, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991).

Action Data Services Group, a division of Control Data, employed Cole as a software programmer. While so employed, Cole developed a software program. About these facts there is little dispute, but from that point on the evidence the parties presented converges only with respect to a few details. Cole testified that he developed, on his own time, a software program that would allow a personal computer to communicate with Action Data's mainframe computer through Control Data's network. Control Data's evidence was that Cole developed the program on Control Data's time using Control Data's materials. Cole's evidence is that an Action Data manager made an oral agreement with him in which Action Data would market the software and share the profits with Cole. Cole states that in late 1986 another Action Data manager ordered him to destroy the software program on the company's premises or be fired, and that Cole did so.

Cole brought this diversity action, and following an eight-day trial, submitted his case on two counts: breach of contract and conversion. The jury returned a verdict against Control Data on the breach of contract claim for $150,000 in actual damages, and on the conversion claim for $2,000,000 in actual damages and $500,000 in punitive damages. Cole v. Control Data Corp., No. 87-1952C(5), slip op. at 1 (E.D.Mo. Apr. 27, 1990).

We will supplement the facts as necessary to decide the issues raised in this appeal.

I.

Control Data argues that it was entitled to judgment notwithstanding the verdict on both the breach of contract and conversion claims. The Supreme Court instructs us to review issues of state law de novo, giving no deference to the district court's ruling. Salve Regina College v. Russell, --- U.S. ----, 111 S.Ct. 1217, 1221, 113 L.Ed.2d 190 (1991). In reviewing Control Data's arguments, we must consider the evidence in the light most favorable to Cole, give him the benefit of all reasonable inferences, and resolve factual conflicts in his favor. Craft v. Metromedia, Inc., 766 F.2d 1205, 1218 (8th Cir.1985), cert. denied, 475 U.S. 1058, 106 S.Ct. 1285, 89 L.Ed.2d 592 (1986). Control Data cannot prevail if the evidence so viewed would allow reasonable jurors to differ as to the conclusion that could be drawn. Id.

We observe that Control Data, while seemingly recognizing these standards of review, makes primarily factual arguments, presenting the evidence in the light most favorable to its position. Such arguments are of little help in determining whether Cole made a submissible case.

A.

We turn first to the breach of contract claim. The district court instructed the jury that it must find for Cole if it believed that: Cole developed the program on his own time, using his own equipment and resources; that the parties entered into an agreement under which Cole agreed to provide the program to Control Data and to assist it in finalizing the formatted screens for the program, and Control Data agreed to pay for the costs of producing and marketing the program, and to share any profits from the sale of the program equally with Cole. The court further instructed that to return a verdict for Cole, the jury had to find that Cole performed the agreement, Control Data failed to perform the agreement, and Cole was damaged. These findings were but underscored in an instruction requiring a finding for Control Data unless the jury found that Cole developed the program on his own time using his own equipment and resources, and there was an agreement between Cole and Control Data.

We have little question that the evidence fully supported submission of the breach of contract claim, and that the district court did not err in denying the motion for judgment notwithstanding the verdict. Action Data Services employed Cole in 1979. He purchased his personal computer in October 1981, and over the next two and one-half years purchased approximately $12,000 worth of hardware and software with his own funds to write the software program. Both Cole and his supervisor, Dave Clark, testified that Cole worked on the program at his home on his own personal time using his personal computer. Cole completed the bulk of his program by April 1984. Control Data did not obtain a personal computer for Cole's department until November 1984. Cole estimated that before he entered into the agreement with Control Data he spent approximately 2,100 to 2,200 hours developing this program. Cole had his personal computer on Control Data premises only when he demonstrated his program, and on one other occasion when he demonstrated an unrelated software program.

Cole mentioned the program to Clark after developing two portions of it, and Clark stated that Cole's division was not involved in this kind of business and could not expend manpower on it. After two demonstrations for Clark, Clark said he thought the program might be worthwhile, but still could not expend funding or personnel for such a project. Nonetheless, Clark said that he would present it to the management of Cole's division. After a third demonstration for Clark, however, which occurred in August or September 1984, Clark had two employees of the division expand the data base. Clark then provided Cole with log-on identification numbers and 800 telephone numbers, and Cole obtained terminal identification codes, so that Cole could gain access to the on-line system of Control Data's computers. Cole testified that he used these items only for on-line testing, a process which he explained was separate from developing of the program.

In November 1985, Cole completed a submission form in compliance with company policy for submitting employee-developed software, and placed it in the company mail on December 3, 1985. Cole testified that on the next day, Thomas Fitzgibbons, the manager for his division, approached him and told him that the division had reconsidered his project and wished to join Cole in finalizing and marketing the product to customers. Fitzgibbons stated that the division would back Cole financially and purchase any hardware and software necessary to present the program as a final product to its customers, assist Cole in developing the screens for the program, and that Control Data would take responsibility for marketing the program to its customers. Fitzgibbons also said that Cole would be responsible for any program changes, and that the profits from the endeavor would be split with Cole as in any partnership. He also advised Cole that the company offer was conditioned upon Cole's retrieving his submission form from the company mail. Cole agreed, and Fitzgibbons assisted Cole in retrieving the form.

Cole's evidence was that he had completed the bulk of his program by April 1984, about a year and a half before the date of the contract. After making the contract with Fitzgibbons, Cole brought a copy of the program to Action Data and placed it in the company computer. After several months, Cole deleted the copy of the program he kept at home on his personal computer because he kept all backup copies of the program at Action Data. Pursuant to Fitzgibbons' instructions, Cole began to purchase software for use with the program and was reimbursed by Control Data through employee expense reports. There was evidence that Control Data, without Cole's knowledge, showed the program to Manufacturer's Hanover, one of its major customers, to try to sell the program.

The program was ready for marketing by the fall of 1986. Later that same year, however, Leslie Getz, Cole's manager at the time, ordered Cole to delete his program from the company's computer along with all files Action Data had not purchased. He informed Cole that "no unauthorized software should be on any company ... computer." Getz refused Cole's request to copy the program or transmit it over telephone lines to his personal computer at home, and Getz told Cole he would be fired if he attempted to do so.

Control Data argues that Cole had no cause of action for breach of contract because when Cole began working for the company in 1979, he signed an Employee Disclosure and Assignment Agreement stating that any software employees developed, either on their own time or company time, belonged to the company. Control Data later instituted a policy which stated:

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