Executone of Columbus, Inc. v. Inter-Tel, Inc.

• Citation: 665 F.Supp.2d 899
• Decision Date: 30 September 2009
• Docket Number: Case No.: 2:06-cv-126.
• Parties: EXECUTONE OF COLUMBUS, INC., et al., Plaintiffs, v. INTER-TEL, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

665 F.Supp.2d 899

EXECUTONE OF COLUMBUS, INC., et al., Plaintiffs, v. INTER-TEL, INC., et al., Defendants.

Case No.: 2:06-cv-126.

United States District Court, S.D. Ohio, Eastern Division.

September 30, 2009.

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Mark Kingsley Merkle, Jr., David S. Bloomfield, Jr., Columbus, OH, Carol H. Stewart, Dent M. Morton, Devin Clarke Dolive, Joseph W. Letzer, Richard J. Davis, Scott A. Boykin, Burr & Forman, LLP, Mitesh B. Shah, Maynard, Cooper & Gale, PC, Birmingham, AL, for Plaintiffs.

David Wayne Hardymon, Francis James Foley, Columbus, OH, Carl S. Burkhalter, Mitesh B. Shah, Maynard Cooper & Gale PC, Birmingham, AL, for Defendants.

OPINION AND ORDER

GEORGE C. SMITH, District Judge.

Plaintiffs Executone of Columbus, Inc. ("Executone"), Executone Communications Solutions, Inc., CT-Innovations, LLC, Ideacom of the Gulf Coast, Inc., Ideacom Technologies of Georgia, Inc., and Ideacom Technologies, Inc. (collectively "Plaintiffs"), bring this action for breach of contract and promissory estoppel against Defendants Inter-Tel, Inc. and Inter-Tel Business Information Systems, Inc. (collectively "Defendants" or "Inter-Tel"). Defendants counterclaim for breach of contract. This matter is before the Court on Defendants' Motion for Summary Judgment (Doc. 88) and Defendants' Supplemental Motion for Summary Judgment (Doc. 138), both which seek judgment on Plaintiffs' breach of contract and promissory estoppel claims (Doc. 88). For the reasons that follow, the Court GRANTS IN PART AND DENIES IN PART Defendants' Motion for Summary Judgment (Doc. 88) and DENIES Defendants' Supplemental Motion for Summary Judgment (Doc. 135).

I. BACKGROUND

Each of the Plaintiffs is a company that sells telephony products to consumers. Between October 1, 1996 and March 29, 1999, Plaintiffs entered into Distributor Agreements with Executone, a manufacturer of telephony products. The Distributor Agreements ran to the end of 2001 and were not renewed.

The purpose of each Distributor Agreement was to appoint each Plaintiff as an "Authorized Distributor of the products described in Exhibit B (the `Authorized Products'), including spare parts therefore, and as a licensee of any Software imbedded therein or otherwise an integral part thereof described in Exhibit B (the `Authorized Software')" so that Plaintiffs could "promote and service . . . the Authorized Products . . . and . . . sublicense the use of the Authorized Software in conjunction with the sale of the Authorized Products. Distrib. Agmt. at Recitals. Pursuant to the Distributor Agreements, each distributor was required to purchase a quota of products to "maintain a sufficient inventory of the Authorized Products," and to "make sales of the Authorized Products" to customers within a designated sales territory. Distrib. Agmt. § 4 and § 7(a)(ii). In addition, Plaintiffs were obligated to service customers in their area. Distrib. Agmt. § 5.

Plaintiffs contend that from the mid-1990s until 2000, Executone breached the Distributor Agreements by providing poor quality products and poor technical support, thereby causing damage to Plaintiffs' business and reputations.

On October 17, 1999, Executone and Inter-Tel entered into an Asset Purchase Agreement ("APA") whereby Inter-Tel was to purchase all of the assets used or necessary to the operation of the Computer Telephony Business, including the Distributor Agreements. The sale of assets by Executone to Inter-Tel was closed on January 1, 2000. Plaintiffs allege that six months prior to the sale, in July 1999, Inter-Tel had formulated a plan to discontinue the Executone product line and to convert Plaintiffs' customer base to Inter-Tel's product line. Specifically, Plaintiffs claim that "Inter-Tel did not inform the dealers of its true plan for the Executone acquisition. Instead, [Inter-Tel] made a series of misrepresentations to the dealers designed to keep them in the fold while [Inter-Tel] implemented its true plans." The alleged misrepresentations included:

• On October 19, 1999, sending a letter to Executone distributors, stating that Inter-Tel planned to continue Executone products and its dealer network indefinitely, contrary to Inter-Tel's "true plan." Cmplt. ¶¶ 32-33.

• In early November 1999, conducting a meeting in Phoenix, Arizona, at which Inter-Tel repeated the statements of the October 19, 1999 letter and provided detailed plan to the dealers about the continuation of Executone products, contrary to Inter-Tel's "true plan." Cmplt. ¶¶ 32, 34.

• On January 11, 2000, sending a letter to Executone distributors, telling them that the Executone Distributor Agreements would be continued and that the Phoenix product line would be ready for production by July 1, 2000, contrary to Inter-Tel's "true plan." Cmplt. ¶¶ 32, 35.

• On January 28, 2000, sending a letter to dealers stating that Executone products would be ready on specific dates, while knowing that such dates were not feasible. Cmplt. ¶ 37.

• On February 3, 2000, repeating the allegations of the January 11, 2000 letter in a meeting of Executone dealers. Cmplt. ¶ 38.

• In February 2000, providing distributors with a "comfort letter" for their use with customers, assuring customers that Inter-Tel was committed to continuing the Executone product lines, contrary to Inter-Tel's "true plan." Cmplt. ¶ 32, 39.

• On June 29, 2000, sending a letter to The Distributors saying that it would continue development of the Phoenix product line contrary to Inter-Tel's "true plan." See Compl. at ¶¶ 32, 45.

On February 16, 2006, Plaintiffs filed this action against Defendants, asserting breach of contract and promissory estoppel claims. On October 20, 2006, Defendants filed their first amended counterclaim, asserting counterclaims for breach of contract and accounting. On November 3, 2006, Plaintiffs filed a motion to dismiss, seeking dismissal of Defendants' counterclaim for accounting. The Court, in its April 16, 2007 OPINION AND ORDER, 2007 WL 1144866, granted Plaintiffs motion, dismissing Defendants' counterclaim for accounting. On March 26, 2008, Defendants filed a motion for summary judgment, and on August 11, 2008, Defendants filed a supplemental motion for summary judgment. Defendants seek judgment as a matter of law on Plaintiffs' promissory estoppel and breach of contract claims. The motions for summary judgment have been fully briefed and are ripe for review.

II. SUMMARY JUDGMENT STANDARD

The standard governing summary judgment is set forth in Fed.R.Civ.P. 56(c), which provides:

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

Summary judgment will not lie if the dispute about a material fact is genuine; "that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Summary judgment is appropriate, however, if the opposing party fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); see also Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 588, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

When reviewing a summary judgment motion, the Court must draw all reasonable inferences in favor of the nonmoving party, and must refrain from making credibility determinations or weighing the evidence. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150-51, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000).¹ The Court disregards all evidence favorable to the moving party that the jury would not be not required to believe. Id. Stated otherwise, the Court must credit evidence favoring the nonmoving party as well as evidence favorable to the moving party that is uncontroverted or unimpeached, if it comes from disinterested witnesses. Id.

The Sixth Circuit Court of Appeals has recognized that Liberty Lobby, Celotex, and Matsushita have effected "a decided change in summary judgment practice," ushering in a "new era" in summary judgments. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1476 (6th Cir.1989). The court in Street identified a number of important principles applicable in new era summary judgment practice. For example, complex cases and cases involving state of mind issues are not necessarily inappropriate for summary judgment. Id. at 1479.

Additionally, in responding to a summary judgment motion, the nonmoving party "cannot rely on the hope that the trier of fact will disbelieve the movant's denial of a disputed fact, but must `present affirmative evidence in order to defeat a properly supported motion for summary judgment.'" Id. (quoting Liberty Lobby, 477 U.S. at 257, 106 S.Ct. 2505). The nonmoving party must adduce more than a scintilla of evidence to overcome the summary judgment motion. Id. It is not sufficient for the nonmoving party to merely "`show that there is some metaphysical doubt as to the material facts.'" Id. (quoting Matsushita, 475 U.S. at 586, 106 S.Ct. 1348).

Moreover, "[t]he trial court no longer has a duty to search the entire record to establish that it is bereft of a genuine issue of material fact." Id. at 1479-80. That is, the nonmoving party has an affirmative duty to direct the court's attention to those specific portions of the record upon which it seeks to rely to create a genuine issue of material fact. In re Morris, 260 F.3d 654, 665 (6th Cir.2001).

III. DISCUSSION

Plaintiffs allege claims for breach of contract and promissory estoppel arising out of their agreements with Inter-Tel to distribute telephony products....