Graphic Technologies, Inc. v. Pitney Bowes Inc.
| Decision Date | 12 March 1998 |
| Docket Number | Civil Action No. 97-2040-GTV. |
| Citation | 998 F.Supp. 1174 |
| Parties | GRAPHIC TECHNOLOGIES, INC., Plaintiff, v. PITNEY BOWES INC. and Monarch Marking Systems, Inc., Defendants. |
| Court | U.S. District Court — District of Kansas |
Douglas M. Weems, Angela D. Gupta, Teresa A. Woody, Spencer, Fane, Britt & Browne, Kansas City, MO, for Graphic Technology Inc.
Mark Moedritzer, Joseph G. Matye, Shook, Hardy & Bacon L.L.P., Kansas City, MO, for Pitney Bowes, Inc.
Irvin V. Belzer, Robert J. Hoffman, R. Jeffrey Harris, Bryan Cave L.L.P., Kansas City, MO, for Monarch Marking Systems, Inc.
Plaintiff Graphic Technologies, Inc. (Graphic) brings this action claiming that defendants Pitney Bowes Inc. (Pitney Bowes) and Monarch Marking Systems, Inc. (Monarch), formerly a wholly owned subsidiary of Pitney Bowes, fraudulently or negligently misrepresented facts in a stock purchase agreement. The agreement covered the sale of all stock in Data Documents Systems, Inc. (Data Systems), a wholly owned subsidiary of Monarch and Pitney Bowes. Plaintiff asserts claims of fraudulent misrepresentation, negligent misrepresentation, and misrepresentation in a sales transaction. Plaintiff also asserts claims for declaratory judgment, rescission, and reformation.1 The case is before the court on the following motions:
(1) Defendants' motions (Doc. 76, 81) for summary judgment;
(2) Plaintiff's motion (Doc. 79) for partial summary judgment; and
(3) Plaintiff's motion (Doc. 117) for leave to amend the complaint.
Because both defendants seek summary judgment on all claims and advance essentially the same arguments in support of their motions, the court will address the motions collectively. For the reasons set forth below, defendants' motions are granted with respect to the claim of misrepresentation in a sales transaction, denied as moot with respect to the claim for declaratory judgment, and denied with respect to the remaining claims. Plaintiff's motion for partial summary judgment is denied as moot and plaintiff's motion for leave to amend the complaint is denied.
The following facts are either uncontroverted or are based on evidence submitted with summary judgment papers viewed in a light most favorable to the nonmoving party. Immaterial facts and facts not properly supported by the record are omitted.
In January 1990, plaintiff entered into a stock purchase transaction with defendants to acquire all of the outstanding stock in Data Documents Systems, Inc. (Data Systems). The parties closed on the stock purchase transaction on March 9, 1990. Prior to the closing date, defendants had made no representations regarding the status of Data Systems' contracts with third parties. Section 4.20 of the stock purchase agreement contained defendants' representations that Data Systems was not in default on any contracts set forth in Schedule 4.20. Schedule 4.20 listed the two license agreements discussed herein. In Section 8.1 of the agreement, the parties agreed that all representations contained in the agreement were true and correct as of the closing date of the stock purchase transaction. The agreement also included the following provision:
12.6 Entire Agreement; Amendments and Waivers. This Agreement, together with all exhibits and the Schedules hereto, and the Confidentiality Agreement, constitute the entire agreement among the parties pertaining to the subject matter hereof and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties.
At the closing, Carole St. Mark, chairperson of Monarch and Data Systems and a representative of Pitney Bowes, signed a certification that all representations and warranties contained in the agreement were true and correct as of the March 9, 1990 closing date.
Included among the contracts that defendants represented were not in default were license agreements Data Systems had negotiated with Image Data Systems, Ltd. (IDS) and Davis & Henderson, Ltd. (D & H). Data Systems previously had granted a software license to IDS and D & H for exclusive use of certain software in the United Kingdom and Canada, respectively, in exchange for royalties. Neither license agreement specifically described the software licensed.
A few days before closing the deal with Graphic, Pitney Bowes sought Graphic's approval, as a prospective purchaser, for Data Systems to grant Pitney Bowes a nonexclusive worldwide license to certain software that it had previously been using without a license at plants in Hong Kong and Dayton, Ohio. Graphic did not know that such software was the same software exclusively licensed to IDS and D & H, and defendants did not disclose that information. Defendants deny that they knew that the same software was exclusively licensed to IDS and D & H. Graphic alleges that it consented to the grant of the license to Pitney Bowes without knowledge or notice that Data Systems had exclusively licensed the software to IDS and D & H, relying on defendants' representations in the stock purchase agreement. On March 9, 1990, shortly before closing the Graphic transaction, Data Systems executed a license agreement granting Pitney Bowes the nonexclusive, worldwide right to use the software, including the right to grant a sublicense to its subsidiaries and affiliates. The same day, Pitney Bowes granted a sublicense to Monarch, which was its subsidiary at the time. Graphic contends that the act of granting the license and sublicense to defendants caused the IDS and D & H license agreements to become in default and, thus, certain stock purchase agreement provisions were misrepresentations.
Additional facts will be provided as necessary.
Summary judgment is appropriate "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." Fed.R.Civ.P. 56(c). The requirement of a "genuine" issue of fact means that 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). Essentially, the inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. 477 U.S. at 251-52.
The party moving for summary judgment bears the initial burden of demonstrating the absence of a genuine issue of material fact. This burden may be met by showing that there is an absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has properly supported its motion for summary judgment, the burden shifts to the nonmoving party to show that there is a genuine issue of material fact left for trial. Anderson, 477 U.S. at 256. "A party opposing a properly supported motion for summary judgment may not rest on mere allegations or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial." Id. Thus, the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment. Id. The court must consider the record in the light most favorable to the party opposing the motion. Bee v. Greaves, 744 F.2d 1387, 1396 (10th Cir.1984).
A fundamental prerequisite to any misrepresentation claim is an untrue statement of material fact. Eckholt v. American Bus. Info., Inc., 873 F.Supp. 510, 517-18 (D.Kan. 1994). Plaintiff offers evidence that defendants represented in the stock purchase agreement that Data Systems was not in default on any contracts when, in fact, Data Systems was in default under the license agreements. Defendants assert that plaintiff cannot prove that defendants made an untrue statement.
Plaintiff's second amended complaint alleges that:
At all times during the negotiations of the Stock Purchase Agreement, and at the closing of the [Data Systems] stock purchase transaction, Pitney Bowes and Monarch specifically represented to [Graphic] that there was no default by [Data Systems] on any of its current license agreements, including the Original IDS License Agreement and the D & H License Agreement.
The complaint incorporated Section 4.20 of the stock purchase agreement, which contained the following representations:
Each of the contracts, agreements and leases set forth ... is a valid and binding obligation of [Data Systems] ... and is a valid and binding obligation of the other party thereto, and ... is enforceable in all respects in accordance with its terms.... Neither [Data Systems] nor ... any other party thereto, is in default with respect to any contract, agreement or lease set forth and no event has occurred which, through the passage of time or giving of notice, or both, would constitute a default thereunder or would cause the acceleration of any obligation of any party thereto.
Defendants allege that none of Data Systems' agreements were in default at the time of closing because each agreement stated it was not in default until an arbitrator or judicial authority determined that the contract was in default. Defendants argue that because the complaint pleads only a representation of "no default," plaintiff is precluded from arguing that the "valid and binding obligation," "enforceable in all respects," and "no event has occurred" clauses are false representations. Such an interpretation flies in the face of the liberal pleading principles of Fed.R.Civ.P. 8.
Rule 8 requires only a "short and plain statement of the claim showing that the pleader is entitled to relief."...
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