DW Data, Inc. v. C. Coakley Relocation Sys., Inc.

Decision Date25 June 2013
Docket NumberNo. 10 C 01666.,10 C 01666.
Citation951 F.Supp.2d 1037
PartiesDW DATA, INC., a Delaware Corporation, d/b/a Digital Work, Plaintiff, v. C. COAKLEY RELOCATION SYSTEMS, INC., a Wisconsin Corporation, Defendant.
CourtU.S. District Court — Northern District of Illinois


Paige C. Donaldson, Yifan Xu Sanchez, Sanchez Daniels & Hoffman, Chicago, IL, for Plaintiff.

Craig Arthur Tomassi, Barrett William Whalen, Law Offices of Craig A. Tomassi, Chicago, IL, for Defendant.


JEFFREY COLE, United States Magistrate Judge.


DW Data, Inc. (DW Data) is a Delaware Corporation that hosts and constructs small business websites, provides search engine submission service through a partnership with Earth Link and entertainment event ticketing services for performing arts venues on the web, and offers a free website community called Zoomshare, a social network. Its annual revenues have been between $600,000 and $1 million. ( Ex. 1, Morganstern Dep. at 10–11). C. Coakley Relocation Systems, Inc. (Coakley), a Wisconsin corporation, is a full service moving and storage business.

DW Data claims that Coakley lost two Sun Microsystem computer servers loaded with Oracle 8i software that were stored with Coakley pursuant to a bailment agreement, causing damages of $224,726.00. While disputing liability—Coakley claims never to have had the servers in its possession—Coakley contends that if it is liable, the damages do not exceed $38,000, which, it insists, is the “replacement cost” for the missing servers, software, and installation. ( See Ex. 2 Expert Report of Lisa Wright at 3; Ex. 4, Expert Report of Lisa Wright LLC, “Determining the Replacement Cost of an Oracle System” at 5).1

The plaintiff agrees that the fair market value of the lost servers is less than $10,000. The problem is with the Oracle Database software, version 8i (“Oracle 8i”), including an Enterprise Edition license, which DW Data purchased from Oracle in 2000 for a million dollars. Since it is undisputed that Oracle no longer sells or supports the 8i software, the plaintiff contends there is no legitimate market for the software, and that purchase of the Oracle software that replaced the 8i version is the only way it can be placed in a position comparable to that it enjoyed before Coakley lost the servers and software. That will cost about $220,000 for the software and accompanying license.

It is the defendant's contention that the plaintiff's license for the Oracle 8i software it purchased in 2000 for $1 million is perpetual and allows it to use any 8i software even if purchased from a private source not affiliated in any way with Oracle. The defendant insists such software is available in the market from private sources and has a fair market value of $90—the price the defendant's expert, Lisa Wright, paid an acquaintance for 8i software disks he happened to have.

The parties have tacitly assumed Illinois law governs and therefore will be deemed to have stipulated to its application. National Ass'n of Sporting Goods Wholesalers, Inc. v. F.T.L. Marketing Corp., 779 F.2d 1281, 1285 (7th Cir.1985).


On May 21, 2010, the parties exercised joint consent to jurisdiction here. [Dkt. # 17]. On May 7, 2012, following the close of discovery and unsuccessful attempts to settle the case, Coakley withdrew its jury demand. [Dkt. # 43]. The parties' attorneys informed me that in an effort to rein in litigation costs, they would not be calling their respective expert witnesses at trial. Rather, they would rely on the experts' reports and their depositions. Additionally, they would rely exclusively on the depositions of a number of other witnesses, as well as introducing the depositions of the few witnesses the parties planned to call at trial.2 Two witnesses were called at trial: Michael Morganstern, the current CEO of DW Data, and Christopher Coakley, the President of C. Coakley Relocation Systems. The second day of trial consisted of closing arguments and discussions regarding the evidence and counsels' respective positions. The parties thereafter submitted Proposed Findings of Fact and Conclusions of Law. [Dkt. # # 49, 59].


It is undisputed that on about January 31, 2000, DW Data purchased one Sun Microsystems E6501 server and one Sun Microsystems E4500 server from PDC Solutions, Inc., a computer technology dealer. The actual price of the servers plus hardware upgrades was $562,082.38. ( Vol. 1, Ex. 1, 2). Additionally, DW Data purchased 36 months of maintenance for each server for a total cost of $122,356.59. Id. The servers were sent directly to Exodus Communications, an internet hosting service. Id. The Sun 6500 server was the size of a small or medium refrigerator. ( See, e.g., Ward Dep. at 10–11; Reinke Dep. at 23; Vol. 1, Ex. 9, at 3).

In addition, about a month later, on March 9, 2000, DW Data purchased Oracle Database software, version 8i (“Oracle 8i”), including an Enterprise Edition license, for $1,049,538.35. ( Vol. 1, Ex. 3). The software was considered to be the best commercial database on the market. The software license gave DW Data the right to run the Oracle 8i software indefinitely. ( Vol. 1, Ex. 21, 22). The license was not assignable, and the software could not be given to a third party without Oracle's permission. More on this later. See infra at 37. Part of the purchase included one year of Oracle support, which gave the purchaser the ability to upgrade to new releases of Oracle software and to access Oracle's technical support services via the phone and web. ( Morganstern Dep. at 63–64; Vol. 2, Ex. 4, “ Wright Reportat 2–3).

In order to extend Oracle support, annual service and support fees had to be paid, which typically would amount to 22% of the original software purchase price. ( Id.; Morganstern Dep. at 63–64). Because of financial difficulties, DW Data chose to allow its annual support renewal to lapse, thereby eliminating the ability to upgrade its software to a newer version, download patches or bug fixes, or obtain the software via download or physical media. ( Wright Report at 2–3).

DW Data had purchased the Sun servers and Oracle software in anticipation of an initial public offering. ( Morganstern Dep. at 16–17). DW Data was unable to raise the capital required to take the company public, and when the dot.com bubble burst, it effectively ended DW Data's attempt to go public. ( Morganstern Dep. at 21–22). On December 19, 2002, as part of downsizing, DW Data moved its office. ( Morganstern Dep. at 27–29) and contracted with OFIS, Inc. / National Van Lines (“OFIS”) to perform the move and rented approximately 200 square feet of commercial storage space at OFIS's facility in Gurnee, Illinois. Various items, including the two Sun servers and two Canon copiers went into storage. ( Id.; Vol. 1, Ex. 4, 5, 7, 8, H, J). Plaintiff's Exhibit J is a detailed OFIS inventory of the property placed in storage and lists, inter alia, the Sun 6500 and Sun 4500 servers, and two copiers. DW Data kept its account with OFIS in good standing by paying the monthly storage fees, and the servers remained in the possession of OFIS until about March 22, 2007. ( Vol. 1, Ex. 20; Mesterhazy Dep. at 22).

On March 22, 2007, Coakley and OFIS entered into an Asset Purchase Agreement (“APA”). ( Vol. 1, Ex. A; Coakley Dep. at 8). The APA refers to an “Exhibit A” which, Mr. Coakley described as “a summary list of what was being purchased.” ( Coakley Dep. at 10; see also Vol. 1, Ex. A, at 1). “Exhibit A” was described in the Asset Purchase Agreement as a “table of contents” of what was being purchased.

Coakley admits it purchased the majority of OFIS's storage lots, including the lot belonging to DW Data ( Coakley Dep. at 12; Vol. 1, Ex. B), and that it “received enclosed containers from [OFIS] with inventories created by [OFIS, i.e., Ex. J].” ( Vol. 1, Ex. E, Defendant's Answers to Interrogatories, ¶ 7). Although Exhibit A was requested in discovery, it was never produced. ( Coakley Dep. at 15; Mesterhazy Dep. at 5–6). Mr. Coakley claimed that it was never prepared and must have “fallen between the cracks.” See infra at 21.

Over the course of a week or two in multiple deliveries, the storage lots were transferred by Coakley from OFIS to Coakley's facility in Milwaukee, Wisconsin. Tim Reinke, Coakley's project manager, oversaw the move. ( Coakley Dep. at 14). Mr. Reinke said he created a hand-drawn post-delivery floor plan documenting nothing more than the physical location of customers' items in Coakley's facility. ( Vol. 1, Ex B; Reinke Dep. at 18–19).4 Open storage or “loose” items—that is to say items not contained within a storage crate, or “speed pak”—were not individually documented on this diagram. ( Mesterhazy Dep. at 7–14).5 Thus, the servers could well have been received from OFIS without being shown on the diagram. And Reinke claimed no crates of corporate customers were opened and inventoried ( Reinke Dep. at 14–16), despite Coakley's general practice of “creat[ing] an inventory at the time of loading and cross-check[ing] the inventory upon placement in its storage facility.” ( Vol. 1, Ex. E, Defendant's Answers to Interrogatories, at ¶ 7). Mr. Coakley claimed that he just “assumed” that his company got all that it purchased and thus accepted the contents of OFIS's storage lots without verifying what was actually being received. See discussion at 16, 21.

In early 2008, the new CEO of DW Data, Michael Morganstern, learned of the storage arrangement with Coakley. ( Morganstern Dep. at 29). He sent an employee, Kelley Fogg, to Coakley to determine what was in storage. ( Morganstern Dep. at 29–30). Ms. Fogg reported that the items in storage were large and would be difficult to move. ( Morganstern Dep. at 34). Shortly thereafter, DW Data contacted Rhonda Mesterhazy, Coakley's Vice President of Operations, who was involved in coordinating the move of the OFIS...

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