Nika Corp. v. City of Kansas City, Mo., 80-0609-CV-W-0.

Decision Date24 February 1984
Docket NumberNo. 80-0609-CV-W-0.,80-0609-CV-W-0.
PartiesThe NIKA CORPORATION, Plaintiff, v. CITY OF KANSAS CITY, MISSOURI, a municipal corporation, James Threatt and James Bowers, Defendants.
CourtU.S. District Court — Western District of Missouri

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Brian Butler and Gary M. Young, Stafford, Rosenbaum, Rieser & Hansen, Madison, Wis., for plaintiff.

Dorothy Campbell, Galen Beaufort, Asst. City Attys., Kansas City, Mo., for defendants.

MEMORANDUM OPINION AND JUDGMENT

ROSS T. ROBERTS, District Judge.

This is a diversity action in which The NIKA Corporation ("NIKA"), a Wisconsin citizen, seeks damages from the City of Kansas City, Missouri (the "City"), and two employees of the City, in connection with an alleged appropriation of certain documents and materials which NIKA claims are its exclusive property. The defendants contend that by virtue of a contract entered into between NIKA and the City on April 19, 1976, the City has had and still has a continuing right to retain and use those documents and materials.

Under its third amended complaint, NIKA advanced five separate theories of recovery: a violation of 42 U.S.C. § 1983; a "taking" of NIKA's property without just compensation in violation of the Fifth and Fourteenth Amendments; common law conversion; a willful damage or destruction of property in violation of § 537.330, R.S.Mo.1969 (as amended); and breach of contract. The first, second and fourth of those claims were dismissed upon defendants' motion under Rule 12(b)(6).1 The remaining two claims have now been tried to the Court, sitting without a jury.

From the parties' pretrial stipulations (Pretrial Order No. 2), it is clear that diversity jurisdiction exists, as well as personal jurisdiction over each of the parties. That being so, I turn forthwith to my findings of fact, conclusions of law and judgment in the matter, pursuant to Rules 52 and 58, Fed.R.Civ.P.

I. BACKGROUND FACTS

My findings as to the facts which form the general background of this controversy follow below, set forth in narrative form. Other facts, relating particularly to matters affecting interpretation of the contract in question, are set forth in Section II. Facts related to damages are recited in Section IV.

NIKA is a service business, engaged in estimating costs and preparing specifications for repair or rehabilitation of housing, particularly with regard to public housing programs, although it also performs those services for insurance companies, lending institutions, contractors, developers and the like. At the time of trial it employed a staff of twelve persons, composed of specialists in fields related to building and rehabilitation such as architects and construction experts, as well as systems specialists and computer specialists.

Central to NIKA's work in the above respects is a system developed by NIKA, known as the Naces III ("Nika Accelerated Cost Estimating System No. 3"). The Naces III system is, in brief, an integrated system consisting of three basic component parts: (a) the "work systems," comprised of various manuals describing the overall system and how to use it and its various parts, as well as a variety of forms and reports which have been specially developed for use with the system; (b) the "information" or data files, which contain a listing of all items which might be used in rehabilitating a home, the various actions which might be taken with regard to an item, the possible locations in the home where the action might be performed, the specifications for performing the work, and the costs for each such item and action; and (c), computer programs, which instruct a computer how to utilize a report on a home, how to access the data files, and how to produce a printout of specifications, including cost estimates, for rehabilitation of that home. Such a system is said to provide three advantages over "manual" cost estimating and specification systems: it is faster, provides uniform results, and prevents fraud or abuse. NIKA ordinarily contracts to provide the services of the Naces III system; it does not and never has "sold" the system to customers.2

Sometime prior to December, 1975, City officials began investigating a rehabilitation loan and grant program designed to benefit low to moderate income persons whose homes were located in certain deteriorating neighborhoods in Kansas City. In essence, the program was to involve low interest loans and grants, made from a fund administered by the City, the proceeds of which would be used to rehabilitate single family, owner occupied homes in designated rehabilitation districts. Ultimately, the program was approved by a resolution of the City Council adopted December 25, 1975. Defendant James Threatt, an Assistant City Manager responsible for community development, was in charge of the program (or at least the portion thereof in which NIKA was to become involved).

In connection with that rehabilitation loan program, City officials decided to seek proposals for a computerized housing rehabilitation specification system. To that end, on December 4, 1975, Threatt initiated a "Request for Proposal" letter, inviting proposals for such a system from outside companies and concerns. Among other things, the letter suggested that the anticipated workload was expected to be 500 dwelling units during the first year, "with up to 2,200 over three years." The letter also indicated that the City was interested "in a lease arrangement for the system with an option to purchase."

On December 18, 1975, NIKA's Board Chairman, Edward Gray, sent to the City NIKA's proposal for the work outlined in Threatt's December 4th Request For Proposals. Thereafter, in a letter dated February 3, 1976, Threatt advised Gray that NIKA had been selected to provide the City with a computer specification program, contingent upon the negotiation of a contract in connection therewith. Gray responded, on February 25, by sending Threatt a draft of a proposed contract. This contract was delivered to defendant James Bowers, an Assistant City Attorney, for his review as to form. Bowers recast the same in a format more commonly used by the City, but made no substantive changes of any relevance here except to add "Part II," mentioned in more detail hereafter.

Between the end of February, 1976 and mid-April, 1976, Gray and various City officials discussed a number of items connected with the proposed contract. In particular, during March, Gray met in Kansas City with several City officials, including Threatt and Bowers, to work out contract language. The Bowers' contract revision provided the starting point for that meeting. Ultimately an accommodation was reached between the parties and a formal written contract was executed on April 19, 1976, providing that NIKA was to furnish its Naces III system, together with certain services, to the City over a one-year period. That contract contained the following section, upon which much of the dispute in this case centers:

"V. It is agreed that the various work systems, computer programs and information necessary for the operation of the system and programs are the exclusive property of the NIKA Corporation, except that the City rewrite of the Naces III Program shall, upon completion satisfactory to the parties, become the joint property of the parties. However, the City may not sell, give, license or distribute the program to any other governmental agency, corporation, firm or person. Further, if the City desires to use the program for any activity other than the project described herein, the City will notify NIKA of said use in writing."

Performance under the contract was commenced immediately and work proceeded apace, with only normal difficulties being encountered. The contract expired by its own terms on August 31, 1977, with NIKA having performed all of its obligations satisfactorily and the City having made all its required payments in timely fashion.

Upon completion of the contract, however, the City did not return to NIKA the work systems documentation and information files which had been involved in its use of the Naces III system. On September 26, 1977, after conversations on that subject with other City employees, Gray sent a letter to Threatt, making reference therein to Section V of the contract and requesting that the City either compensate NIKA for its continued use of those items or return the items to NIKA and cease any further use. Threatt referred the letter to Bowers for advice. Bowers assured Threatt that the City had, under the contract, purchased the entire system, and that there was no responsibility to return anything to NIKA. Armed with that opinion, Threatt decided simply not to respond to the letter.

Having received no reply to his letter of September 26, Gray corresponded again with Threatt on October 30, 1977, renewing his demand on behalf of NIKA. At Threatt's direction, Bowers responded to the letter, refusing the demand with the statement that Section V of the contract did not require that the City return anything to NIKA.

The final two meetings between Gray and the City took place in January, 1978. At the first of those meetings, Gray and his attorney met with various City officials and once again requested return of the work systems and information files. That conference was unproductive. At a meeting with Threatt a few days later, Gray again requested return of the items in question. Threatt replied, in substance, that the City had the items and if Gray wanted them he could sue.

Following August 31, 1977, the City continued to use and revise the work systems materials and informational files originally supplied and revised by NIKA. At some undefined point after August 31, 1977, the City also permitted the Rehabilitation Loan Corporation (a not-for-profit corporation organized after August 31,...

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