Nikish Software Corp. v. Manatron, Inc.

• Decision Date: 08 July 2011
• Docket Number: Case No. 1:07–cv–0358–TWP–MJD.
• Citation: 801 F.Supp.2d 791
• Parties: NIKISH SOFTWARE CORPORATION and Kishin Bharwani, Plaintiffs/Counterdefendants, v. MANATRON, INC., Defendant/Counterclaimant.
• Court: U.S. District Court — Southern District of Indiana

801 F.Supp.2d 791

NIKISH SOFTWARE CORPORATION and Kishin Bharwani, Plaintiffs/Counterdefendants,

v.MANATRON, INC., Defendant/Counterclaimant.

Case No. 1:07–cv–0358–TWP–MJD.

United States District Court,S.D. Indiana,Indianapolis Division.

July 8, 2011.

Brady J. Rife, Lee J. McNeely, McNeely Stephenson Thopy & Harrold, Shelbyville, IN, Christopher G. Bernard, Susan M. Kornfield, Bodman LLP, Ann Arbor, MI, for Plaintiffs/Counterdefendants.

James Dimos, Joel E. Tragesser, Richelle Marie Harris, Frost Brown Todd LLC, Indianapolis, IN, for Defendant/Counterclaimant.

ENTRY ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

TANYA WALTON PRATT, District Judge.

This matter is before the Court on Defendant Manatron, Inc.'s (“Manatron”) Motion for Summary Judgment. On December 1, 2006, Manatron sent a letter to a majority of the county auditors in Indiana, claiming that it had “credible evidence” that Nikish Software Corporation's (“Nikish”) tax software was a “misappropriated derivative copy” of Manatron's own tax software, meaning “Manatron would own [the software] and any offer or sale of [the software] by Nikish would be illegal.” In response, Nikish and its President and CEO, Kishin Bharwani (“Bharwani”), filed suit against Manatron for defamation, tortious interference with a business relationship, tortious interference with a contractual relationship, and breach of contract. For the reasons set forth below, Manatron's Motion for Summary Judgment (Dkt. 150) is GRANTED in part and DENIED in part.

I. BACKGROUND

A. Nikish and Manatron work together—and then sever ties

This dispute arises out of a competitive business relationship between two tax software developers—Nikish and Manatron. Manatron provides property tax software, appraisal, and other services to state and local governments. Moreover, Manatron has a significant footprint in the Indiana market, providing some form of software and services to more than 80 Indiana counties. Nikish develops software in the field of real estate, including tax software for use by local governments. Before becoming adversaries in the market for tax software, Manatron and Nikish worked together on numerous ventures.

The parties' relationship formally began in 2001, when Nikish and Manatron entered into a contract relating to the development of software for a property appraisal and tax system in Dauphin County, Pennsylvania. The parties apparently completed their duties under this agreement without incident. In 2003, the parties entered a similar agreement for a property appraisal and tax system in Baltimore, Maryland. This agreement did not go as smoothly, and the parties' relationship soon began to fray. Accordingly, on October 14, 2005, the parties entered into a “Settlement, Release, and Business Service Agreement” to discharge all duties and obligations owed under the Baltimore contract (“Settlement Agreement”).

Significantly, the Settlement Agreement terminated all non-compete and non-solicitation obligations between Nikish and Manatron. To that end, the Settlement Agreement expressly gave Nikish and Bharwani the freedom to do business with “any person or entity,” regardless of any prior or potential relationship the third party may have had with Manatron. That said, Nikish was still bound by a duty not to disclose or reproduce Manatron's confidential and proprietary information, including its MVP tax software (“MVP”).

Soon after the Baltimore contract was terminated, Nikish began developing its own tax software called RMS 2.0 (“RMS”) to compete with MVP. In early 2006, Nikish began shopping RMS to various Indiana counties. On July 19, 2006, Nikish demonstrated RMS to employees of Bartholomew County using various screen shots. At this time, however, RMS was still in a developmental stage, and was therefore demonstrated as a “work in progress.”

In August 2006, Nikish responded to a Request for Proposal (“RFP”) for Vigo County, Indiana by offering its RMS product. At the time of Nikish's response, Vigo County was one of Manatron's Indiana clients. Manatron ultimately learned that Nikish was marketing RMS after reviewing the Vigo County RFP response. According to Manatron, the response raised significant red flags and, for a variety of reasons, Manatron believed that Nikish's nascent RMS product was nothing more than a derivative work of its own MVP product. According to Manatron, five factors led to this conclusion: (1) “the quick delivery turnaround time provided in the response to RFP”; (2) “Manatron's knowledge of Nikish's operating structure and performance ability”; (3) “the use of Manatron naming conventions”; (4) “the use of former Manatron personnel intimately familiar with the MVP code”; and (5) “Nikish's possession of the MVP code through its business dealings with Manatron.” (Dkt. 151 at 8).

B. Manatron's letter

On December 1, 2006, Manatron sent a letter (“Letter”) to 56 of its Indiana MVP customers—all Indiana county auditors or treasurers—as well as the Indiana Department of Local Government Finance (“DLGF”). In doing so, Manatron asserted the statement that is at the heart of the present dispute:

Rather this letter is being sent because Manatron also has credible evidence that the RMS ... system itself is nothing more than a misappropriated derivative copy of the Manatron MVP system in Indiana. As such Manatron would own it and any offer or sale of RMS ... by Nikish would be illegal.

Moreover, Manatron warned that any purchase of RMS “would likely result in legal and operational gridlock.” The Letter was drafted by Marty Ulanski (“Ulanski”), Manatron's executive vice president of operations, with the input of other members of Manatron's executive team. To this day, Manatron contends that the Letter was factually accurate, fair, and reasonable. In Nikish's mind, of course, the Letter was nothing more than a transparent gambit to fend off competition in the Indiana market.

Prior to mailing the Letter, Manatron held intra-company discussions and reviewed Nikish's Vigo County RFP response, but did not contact Nikish or any of its agents because it felt that “any discussions would prove fruitless.” When asked point-blank what investigation Manatron undertook prior to sending the Letter, Ulanski testified, “I got a copy of the RFP, we read the RFP, took it at face value and we deduced from our experience ... that ... there is no practical way that [Nikish] could enter the market in such a short period of time without having taken a derivative of our code.”

Nikish contends that the threatening nature of the Letter deterred many Indiana counties from using RMS. Notably, the Letter has not been altogether fatal to Nikish's Indiana business prospects. For instance, on February 26, 2007, Nikish signed its first contract involving RMS with Clinton County, Indiana.

C. Procedural history

In March 2007, Nikish brought the present action against Manatron based on the Letter. On September 15, 2008, roughly one and a half years later, Manatron filed a motion for leave to assert a counterclaim for, among other things, copyright infringement. In doing so, Manatron alleged that RMS was nothing more than a misappropriated derivative copy of MVP. The Court ultimately disagreed, granting Nikish's motion for summary judgment as to Manatron's copyright infringement claim and finding that “no genuine issues of material fact exist as to Nikish's alleged infringement.” (Dkt. 139 at 17). ¹ At all times, Nikish has maintained that RMS “is not derived in any way from” MVP or any other Manatron software. (Dkt. 156 at 4).

II. LEGAL STANDARD

Federal Rule of Civil Procedure 56 provides that 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 a judgment as a matter of law.” Hemsworth v. Quotesmith.Com, Inc., 476 F.3d 487, 489–90 (7th Cir.2007). In ruling on a motion for summary judgment, the court reviews “the record in the light most favorable to the nonmoving party and draw[s] all reasonable inferences in that party's favor.” Zerante v. DeLuca, 555 F.3d 582, 584 (7th Cir.2009) (citation omitted). However, “[a] party who bears the burden of proof on a particular issue may not rest on its pleadings, but must affirmatively demonstrate, by specific factual allegations, that there is a genuine issue of material fact that requires trial.” Hemsworth, 476 F.3d at 490 (citation omitted). “In much the same way that a court is not required to scour the record in search of evidence to defeat a motion for summary judgment, nor is it permitted to conduct a paper trial on the merits of a claim.” Ritchie v. Glidden Co., 242 F.3d 713, 723 (7th Cir.2001) (citation and internal quotations omitted). Finally, “neither the mere existence of some alleged factual dispute between the parties nor the existence of some metaphysical doubt as to the material facts is sufficient to defeat a motion for summary judgment.” Chiaramonte v. Fashion Bed Group, Inc., 129 F.3d 391, 395 (7th Cir.1997) (citations and internal quotations omitted).

III. DISCUSSION

As mentioned, Nikish and Bharwani have brought four claims against Manatron: (1) tortious interference with a contractual relationship; (2) tortious interference with a business relationship; (3) defamation; and (4) breach of contract, specifically the Settlement Agreement. Each claim is addressed in turn below.

A. Tortious interference with contract

The elements of an action for tortious interference with a contract are: (1) the existence of a valid and enforceable contract; (2) defendant's knowledge of the existence of the contract; (3) defendant's intentional inducement of breach of the contract; (4) the absence of justification; and (5) damages resulting from defendant's wrongful inducement of the breach. Melton v. Ousley, 925 N.E.2d 430, 440 (Ind.Ct.App.2010) (citing...