Imaging Business Machines, LLC. v. Banctec, Inc.

• Decision Date: 10 August 2006
• Docket Number: No. 05-10835.,05-10835.
• Citation: 459 F.3d 1186
• Parties: IMAGING BUSINESS MACHINES, LLC., Plaintiff-Appellant, v. BANCTEC, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

459 F.3d 1186

IMAGING BUSINESS MACHINES, LLC., Plaintiff-Appellant, v. BANCTEC, INC., Defendant-Appellee.

No. 05-10835.

United States Court of Appeals, Eleventh Circuit.

August 10, 2006.

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Joseph W. Letzer, Howard P. Walthall, Jr., Burr & Forman, LLP, Birmingham, AL, for Plaintiff-Appellant.

Daniel J. Burnick, Sandra L. Vinik, Sirote & Permutt, P.C., Birmingham, AL, for Defendant-Appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Before TJOFLAT and PRYOR, Circuit Judges, and GEORGE^*, District Judge.

GEORGE, District Judge:

Imaging Business Machines, LLC, produces high-speed document scanners. It alleges that Banctec, Inc. developed a competitive high-speed document scanner by copying trade secrets and confidential features of an Imaging Business Machines' scanner.

The district court orally denied Imaging Business Machine's motion for a preliminary injunction, finding a lack of evidence of damages. In so finding, the district court expressly discounted evidence that two customers purchased the infringing BancTec scanner rather than a newer model of Imaging Business Machines' scanner. In a written amendment, the district court further reasoned that Imaging Business Machines failed to show BancTec copied features that were trade secrets. Subsequently, the district court specifically limited discovery of damages to the scanner model that BancTec copied. The district court then granted BancTec's motion for summary judgment for essentially the same reasons that it denied the preliminary injunction. Imaging Business Machines appeals the grant of summary judgment.¹ We have jurisdiction pursuant to 28 U.S.C. § 1291 and reverse the grant of summary judgment.

I

In 1994, Imaging Business Machines began marketing the ImageTrac I, a high-speed, high-volume color document scanner.² Several years later, the company introduced the ImageTrac II to market, which model was both quicker and had a better camera. During this time, BancTec began marketing its own high-speed scanners, the S-Series. In general, however, the two product lines did not compete with each other. Indeed, BancTec's foreign subsidiaries purchased ImageTrac scanners for resale, which Imaging Business Machines re-labeled as BancTec scanners for the foreign subsidiaries.

On March 15, 2000, Imaging Business Machines and BancTec entered into a two-year Reseller Agreement. The agreement required BancTec to refrain from copying or reverse engineering Imaging Business Machines' products. The reseller relationship between the two companies continued after March 2002. During 2002 and 2003, BancTec began development of a scanner that would directly compete with the ImageTrac scanners. BancTec developed its scanner by copying mechanical features of the ImageTrac II.

When Imaging Business Machines asked BancTec whether it was developing a scanner to compete with the ImageTrac scanners, BancTec falsely stated that it was not developing such a scanner. BancTec introduced its scanner to the market as the DocuScan 9000 in March 2004.

During the same time that BancTec developed the DocuScan 9000, Imaging Business Machines developed and introduced two updated versions of its ImageTrac scanners: the ImageTrac III and IV. The primary difference between the ImageTrac II and IV is that the latter has a higher speed camera that allows the scanner to run faster. Otherwise, the ImageTrac IV generally uses the same mechanical components of the ImageTrac II that BancTec copied and used to develop the DocuScan 9000.

BancTec has sold at least eleven DocuScan 9000s since its introduction. As to at least two of those sales, the customer purchased the DocuScan 9000 rather than an ImageTrac IV. Imaging Business Machines, however, did not offer evidence that the DocuScan 9000 specifically competed against an ImageTrac II for any particular sale, or that any customer purchased a DocuScan 9000 rather than an ImageTrac II.

II

"We review the district court's grant of summary judgment de novo, applying the same legal standards that bound the district court, and viewing all facts and reasonable inferences in the light most favorable to the nonmoving party." Cruz v. Publix Super Mkts., Inc., 428 F.3d 1379, 1382 (11th Cir.2005) (internal quotes and emphasis omitted). A grant of summary judgment is appropriate where "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).

III

We begin by examining whether summary judgment was appropriately granted as to Imaging Business Machines' claim for fraud because it failed to offer evidence supporting the element of injury.³ In its motion for summary judgment, BancTec attacked Imaging Business Machines' claim for fraud solely on the basis that the plaintiff was not injured. We conclude that BancTec never met its initial burden on summary judgment.

In Alabama, a party who commits a wrongful act is responsible for the injuries that the wrongful act causes to another. "It is well established by many decisions in [Alabama] that persons who perpetrate torts are, as a rule, responsible for the consequences of the wrongs they commit. That is, unless the tort be the proximate cause of the injury complained of, there is no legal accountability." Louisville & N.R. Co. v. Maddox, 236 Ala. 594, 183 So. 849, 852 (Ala.1938).

Proximate cause is an act or omission that in a natural and continuous sequence, unbroken by any new independent causes, produces the injury and without which the injury would not have occurred. The requirement of foreseeability is imposed to preclude a finding of liability when the defendant's conduct was part of the causal chain of events leading to the injury but the resulting injury could not have been reasonably anticipated by the defendant. Foreseeability does not require that the particular consequence should have been anticipated, but rather that some general harm or consequence could have been anticipated.

Thetford v. City of Clanton, 605 So.2d 835, 840 (Ala.1992). In the context of a motion for summary judgment arguing a lack of injury, the defendant's initial burden is to show that a plaintiff lacks evidence regarding each injury alleged to be proximately caused by its wrong.

In this case, Imaging Business Machines alleged in its complaint that it continued to sell scanners to BancTec in reliance on the fraudulent representation that the latter was not developing a competing scanner. This allegation—that Imaging Business Machines lost the economic opportunity of altering its relationship with BancTec from reseller to future competitor—was plainly a sufficient allegation of an injury. Although BancTec correctly recited this allegation of injury in its motion, it nevertheless relied upon the district court's finding (first stated in the oral ruling denying the motion for a preliminary injunction) that Imaging Business Machines failed to show a loss of customers. The district court's finding regarding lost customers, however, was irrelevant to whether Imaging Business Machines lost the economic opportunity of altering its business relationship with BancTec. Further, BancTec did not offer any other argument suggesting that Imaging Business Machines could not offer evidence of the injury alleged in the complaint. Accordingly, BancTec did not meet its initial burden on summary judgment and the burden never shifted to Imaging Business Machines to offer evidence of its injury resulting from the alleged fraud.

Although the burden never shifted to Imaging Business Machines to offer evidence that it suffered an injury, we note that it nevertheless offered sufficient evidence of several injuries proximately caused by the fraud to preclude a grant of summary judgment. First, Imaging Business Machines submitted the affidavit of its president, Gary Murphy, that the corporation would have ceased selling scanners to BancTec, thus limiting the latter's access to the market, if the latter had truthfully stated that it was developing a competing scanner. A fact-finder could readily infer that a manufacturer is injured when it loses an opportunity to timely react to a reseller's plans to become a competitor. Thus, Murphy's affidavit was sufficient evidence to create a triable issue of fact whether Imaging Business Machines' suffered the injury specifically alleged in the complaint.

Second, as recognized by the district court, Imaging Business Machines offered evidence that it lost two sales to BancTec's DocuScan 9000. Plainly the loss of a sale is an injury. The district court, however, summarily discounted this evidence (in its order denying the preliminary injunction) solely because the sales involved the ImageTrac IV rather than the ImageTrac II. The injured party, however, is not the ImageTrac II but is Imaging Business Machines. Thus, the relevant query is not limited to whether BancTec's conduct proximately caused injury to sales of the ImageTrac II, but whether that conduct proximately caused injury to Imaging Business Machines. In light of the record established below, whether BancTec's fraudulent representation proximately caused the loss of the two sales of the ImageTrac IV is an issue to be resolved by the fact-finder. Accordingly, the district court's grant of summary judgment as to Imaging Business Machines' claim for fraud was in error.

IV

In moving for summary judgment, BancTec attacked the element of injury only as to Imaging Business Machines' claim for fraud. Thus, the district court's grant of summary judgment for failure to show injury as to the remaining claims was sua sponte. In so granting summary judgment, however, the district court procedurally erred by failing to give proper notice to Imaging Business Machines. "[A] district court may...