Perceptron Inc. v. Sensor Adaptive Machines

• Decision Date: 20 June 2000
• Docket Number: Nos. 99-1456,99-1498,s. 99-1456
• Citation: 221 F.3d 913
• Parties: (6th Cir. 2000) Perceptron, Incorporated, a Michigan Corporation, Plaintiff-Appellee/ Cross-Appellant, v. Sensor Adaptive Machines, Incorporated (SAMI), a Canadian Corporation, Defendant-Appellant/Cross-Appellee. Argued:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 913

221 F.3d 913 (6th Cir. 2000)

Perceptron, Incorporated, a Michigan Corporation, Plaintiff-Appellee/ Cross-Appellant, v. Sensor Adaptive Machines, Incorporated (SAMI), a Canadian Corporation,

Defendant-Appellant/Cross-Appellee.

Nos. 99-1456, 99-1498

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Argued: June 20, 2000

Decided and Filed: July 24, 2000

Appeal from the United States District Court for the Eastern District of Michigan at Detroit. No. 96-73620--Anna Diggs Taylor, District Judge. [Copyrighted Material Omitted] Robert J. Lenihan II, HARNESS, DICKEY & PIERCE PLC, Troy, Michigan, for Appellee/Cross-Appellant.

Roger H. Cummings, DICKINSON, WRIGHT, PLLC, Clay A. Guise, S. Thomas Wienner, FEENEY, KELLETT, WIENNER & BUSH, Bloomfield Hills, Michigan, Bloomfield Hills, Michigan, for Appellant.

Before: MERRITT, GUY, and COLE, Circuit Judges.

OPINION

RALPH B. GUY, JR., Circuit Judge.

Plaintiff, Perceptron, Inc., and defendant, Sensor Adaptive Machines, Inc. (SAMI), appeal from the judgment entered following a jury trial on their respective claims and the district court's disposition of several post-trial motions. The jury found in favor of Perceptron on its breach of contract claim, alleging that SAMI breached a non-compete agreement, and the jury awarded Perceptron $732,223.19 in damages. The jury found against SAMI on its counterclaims, which alleged that the non-compete agreement violated antitrust laws and that Perceptron's response to the perceived breach of the agreement constituted tortious interference with business relationships.

SAMI appeals from the district court's denial of its motion for judgment as a matter of law, or for new trial, on Perceptron's breach of contract claim and SAMI's counterclaims. Perceptron appeals from the district court's post-trial denial of Perceptron's request for an equitable extension of the non-compete agreement as a further remedy for its breach. Perceptron also appeals from the district court's calculation of prejudgment interest. After careful review of the record and the arguments presented on appeal, we affirm except as to the calculation of prejudgment interest.

I.

The heart of this matter is the non-compete agreement Perceptron secured from SAMI in July 1990, as part of a transaction to purchase certain intangible assets from Diffracto Ltd. Diffracto was founded in 1973 by Tim Pryor and others to develop laser beam technology for use in measuring and checking machined parts. Perceptron was founded in 1981 by Dwight Carlson and began developing laser beam sensors for use in sheet metal applications. In 1985, Diffracto received an infusion of capital from General Motors Corporation to develop competing electro-optical measuring devices for sheet metal applications. Diffracto developed its "Z-sensor," which was used in systems supplied to automobile companies in competition with Perceptron's products. At that time, both Perceptron and Diffracto used the technology in large end-of-line systems. The competition caused both of them to experience financial difficulty. A merger was discussed in early 1988, but the talks failed to result in an agreement.

Pryor formed SAMI in mid-1988 and described it as a "spin off" or "sister" company of Diffracto. Although Pryor left Diffracto, he had been its most prolific inventor and continued to be its largest single shareholder. In return for a capital investment, Diffracto received a 40-percent ownership interest in SAMI. Pryor owned the remaining 60 percent. SAMI had a license with an option to purchase certain Diffracto technology, which was part of the later purchase by Perceptron.

When Diffracto began looking for a buyer in 1989, negotiations resumed with Perceptron. Perceptron and Diffracto entered into a Sales Agreement in May 1990, which closed in escrow pending completion of other matters including the non-compete agreement with SAMI and Pryor. The Sales Agreement provided:

WHEREAS, the Seller [Diffracto] desires to sell to the Buyer [Perceptron] certain assets described in this Agreement which are used in the Fit Division of [Diffracto's] business to design, develop, manufacture, sell and service electro-optical measuring products used to determine the dimensional characteristics of, or the location of, formed (not machined) parts or assemblies (the "Fit Products") upon the terms and conditions contained in this Agreement;

. . . .

Seller shall . . . (a) sell, transfer and deliver to the Buyer . . . all the Seller's right, title and interest in the tangible assets described or listed in Schedule 6.4 hereof and in its then existing tangible and intangible assets necessary for Buyer [Perceptron] to conduct . . . the business of designing, manufacturing, selling and servicing Fit Products . . . .

(Emphasis added). The assets Perceptron purchased included: ownership of one patent and a fully paid perpetual license to use 54 other patents; operation and maintenance manuals; documentation for Diffracto system controllers, image processors, and sensors for in-line inspection systems; and information concerning Diffracto's customers and installed sheet metal systems, including customer contacts and the project managers' working files. Diffracto received over $2.5 million in notes and about 17 percent of Perceptron's outstanding stock. Separate non-competition agreements were executed by key Diffracto officers.¹

As part of the deal, Perceptron insisted upon and negotiated a non-compete agreement with SAMI and Pryor. In exchange, SAMI received a $180,000 reduction in the option purchase price for the Diffracto technology it had licensed, as well as the right to buy back SAMI shares owned by Diffracto. The relevant portion of the Pryor/SAMI non-compete agreement, dated July 13, 1990, provided that:

Without the prior written consent of Perceptron, neither Pryor nor SAMI shall, directly or indirectly, for a period of sixty (60) months from the date hereof and anywhere in the world, compete with Perceptron in the business of designing, developing, manufacturing, selling and servicing electro-optical measuring products used: (i) to gage car bodies, truck bodies, white goods, furniture or major subassemblies of any of the foregoing; or (ii) in the product applications known as "wheel alignment" or "bin picking". Without the prior written consent of Perceptron, neither Pryor nor SAMI shall, directly or indirectly, for a period of thirty-six (36) months from the date hereof and anywhere in the world, compete with Perceptron in the business of manufacturing, selling and servicing electro-optical measuring products used to locate car bodies, truck bodies, white goods, furniture or major subassemblies of any of the foregoing.

(Emphasis added). The agreement explicitly stated that the parties considered the restrictions to be fair and reasonable. Considerable testimony was adduced at trial concerning the scope of this non-compete agreement and whether it was a reasonable restraint on competition as a legitimate part of the purchase of the Diffracto assets.

Until 1993, SAMI focused its efforts on small sensors for machined parts, robot guidance concepts, and new machine tools. By late 1992, however, SAMI was in serious financial trouble and shifted its focus. By April 1993, SAMI began developing its SmartProx sensors and components for use in gaging sheet metal parts and assemblies. SAMI publicly introduced the SmartProx system in September 1993, and began marketing it through brochures, demonstrations, and test installations. The SmartProx system was designed to be installed "upstream" in the assembly process and was marketed as an alternative to end-line sensor systems like those sold by Perceptron. Perceptron objected and expressed its belief that SAMI and Pryor had violated the non-compete agreement by using SmartProx sensors in systems for gaging automobile assemblies.²

Perceptron wrote a letter to Chrysler Corporation and communicated to other customers concerning its purchase of Diffracto's business and the non-compete agreements with Diffracto, SAMI, and Pryor. SAMI believed that Perceptron misrepresented the non-compete agreement and sent Chrysler an extensive response stating its position. SAMI claimed that the misrepresentations and threats of litigation caused delays in SmartProx orders. This was the basis of SAMI's tortious interference claim.

Perceptron filed suit in June 1996, almost a year after the non-compete agreement had expired in July 1995. Perceptron sued Diffracto, SAMI, and Pryor, but later voluntarily dismissed Diffracto and any claim that the non-compete clause was breached through the use of the Z-sensor technology. SAMI raised several defenses and asserted counterclaims against Perceptron alleging that the non-compete agreement violated antitrust law and that Perceptron had tortiously interfered with its business relationships or expectancies concerning the SmartProx system. Trial began October 20, 1998, and continued through December 10, 1998. The jury returned a special verdict addressing the claims and counterclaims, beginning with the following questions and answers:

1. Did Perceptron establish by a preponderance of the evidence that the Agreement Not to Compete among Perceptron, SAMI and Dr. Pryor ("Agreement Not to Compete") was reasonable, enforceable (including permitted under the antitrust laws.)?

Answer: YES (yes or no)

If your answer is "no", go to Question 8; otherwise go to Question 2.

2. If your answer to Question 1 is "yes", did Perceptron establish by a preponderance of the evidence that SAMI breached the Agreement Not to Compete?

Answer: YES (yes or no)

The jury further found that Perceptron suffered damages as a proximate and foreseeable result of SAMI's breach, and not as a result of Perceptron's own failure to mitigate its damages. The jury then awarded Perceptron a lump sum of $732,223.19 on its claim against SAMI. The jury also found no separate...