Ritchie Enterprises v. Honeywell Bull, Inc.

Decision Date17 January 1990
Docket NumberNo. 86-1394-C.,86-1394-C.
Citation730 F. Supp. 1041
PartiesRITCHIE ENTERPRISES, a Kansas partnership, Plaintiff, v. HONEYWELL BULL, INC., Defendant.
CourtU.S. District Court — District of Kansas

Robert L. Howard, Foulston & Siefkin, Wichita, Kan., for plaintiff.

Joseph W. Kennedy, Morris, Laing, Evans, Brock & Kennedy, Wichita, Kan., for defendant.

MEMORANDUM AND ORDER

CROW, District Judge.

The case comes before the court on the motion of defendant, Honeywell Bull, Inc. (Honeywell), for partial summary judgment. Alleging the defendant made material misrepresentations and omissions of fact which induced it to purchase a Honeywell DPS6/40 mainframe computer, plaintiff, Ritchie Enterprises (Ritchie), brings this action to recover for damages sustained from the failure of the computer to perform consistent with defendant's representations or to meet the plaintiff's needs and specifications. Besides its fraud claims, plaintiff seeks relief upon the following theories: negligent misrepresentation, breach of both express and implied warranties, breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duty. Conceding issues of material fact exist as to plaintiff's fraud claim, defendant moves for summary judgment on all other claims of the plaintiff. Plaintiff's request for oral argument is denied, as it would not materially assist the court in deciding the motion.

In ruling on a motion for summary judgment, the trial court conducts a threshold inquiry of the need for a trial. Without weighing the evidence or determining credibility, the court grants summary judgment when no genuine issue of material fact exists and the movant is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 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." Anderson, 477 U.S. at 251-252, 106 S.Ct. at 2512.

An issue of fact is "genuine" if the evidence is significantly probative or more than merely colorable such that a jury could reasonably return a verdict for the nonmoving party. Id. at 248, 106 S.Ct. at 2510. An issue of fact is "material" if proof thereof might affect the outcome of the lawsuit as assessed from the controlling substantive law. 477 U.S. at 249, 106 S.Ct. at 2510. Where reasonable minds would not differ over the import of the evidence and could only reach one conclusion as to the evidence, summary judgment is appropriate. 477 U.S. at 250, 106 S.Ct. at 2511.

The movant's initial burden under Fed.R. Civ.P. 56 is to show the absence of evidence to support the nonmoving party's case. Windon Third Oil and Gas v. Federal Deposit Ins., 805 F.2d 342, 345 (10th Cir. 1986), cert. denied 480 U.S. 947, 107 S.Ct. 1605, 94 L.Ed.2d 791 (1987). The movant must specify those portions of "`the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits if any,'" which demonstrate the absence of a genuine issue of fact. Windon, 805 F.2d at 345 (quoting Fed.R.Civ.P. 56(c)). "Conclusory assertions to aver the absence of evidence remain insufficient to meet this burden." Windon, 805 F.2d at 345 n. 7. The movant, however, does not have the burden to prove a negative, that is, to disprove the nonmoving party's evidence. Id. at 346. It may be sufficient for the movant to establish that the alleged factual issues are without legal significance. Dayton Hudson Corp. v. Macerich Real Estate Co., 812 F.2d 1319, 1323 (10th Cir.1987).

The opposing party may not rest upon mere allegations or denials in the pleadings but must set forth specific facts supported by the kinds of evidentiary materials listed in Rule 56(c). Anderson, 477 U.S. at 250, 106 S.Ct. at 2511. The nonmoving party's evidence is deemed true and all reasonable inferences are drawn in his favor. Windon, 805 F.2d at 346. More than a "disfavored procedural shortcut," summary judgment is an important procedure "designed `to secure the just, speedy and inexpensive determination of every action.' Fed.R. Civ.P. 1." Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986).

Before identifying the uncontroverted facts, the court must resolve a procedural issue concerning what evidence may be considered on summary judgment. Plaintiff's statement of uncontroverted facts is for the most part based upon a written chronology and description of events prepared by one of plaintiff's employees, Jay West, at the request of plaintiff's attorneys. This document is comprised of approximately 47 pages of typewritten material. Jay West avers that this chronology was prepared from his review of information and documents found in his own files and his staff's files, as well as, his recollection of the events. This chronology was used extensively in the taking of Jay West's deposition. Defendant objects to plaintiff's use of this document in opposing summary judgment, as it is an unsworn statement containing inadmissible hearsay.

Contrary to plaintiff's position, evidence must be admissible at trial before it can be considered on a motion for summary judgment, unless its admissibility is unchallenged. Colan v. Cutler-Hammer, Inc., 812 F.2d 357, 365 n. 14 (7th Cir.), cert. denied, 484 U.S. 820, 108 S.Ct. 79, 98 L.Ed.2d 42 (1987). Courts have excluded from their consideration in summary judgment proceedings such evidence as unsworn documents, Martin v. John W. Stone Oil Distributor, Inc., 819 F.2d 547, 549 (5th Cir.1987); hearsay statements in notes, Colan, 812 F.2d at 365 n. 14; and hearsay evidence in depositions or affidavits, Gamboa v. Washington, 716 F.Supp. 353, 362 (N.D.Ill.1989). The Supreme Court did state in Celotex that the nonmoving party need not produce evidence in a form which would be admissible at trial. However, the context for this broad statement is delineated by the Court's subsequent sentences which state that a nonmoving party is not required to depose his own witnesses and that he may rely on the evidentiary materials listed in Rule 56(e), including affidavits. 477 U.S. at 324, 106 S.Ct. at 2553. Fed.R.Civ.P. 56(e) provides in pertinent part: "Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence...." A chronology of events prepared sometime after their occurrence, at the request of counsel and in apparent anticipation of litigation, does not fall within any of the hearsay exceptions argued by plaintiff. The court will apply these same principles in determining the uncontroverted facts in this summary judgment motion.

For purposes of this motion, the following facts are uncontroverted.

1. Plaintiff Ritchie is a Kansas general partnership with its principal place of business in Kansas. Plaintiff conducts its business through solely owned subdivisions, including Ritchie Oil Co., Ritchie Energy, Ritchie Associates, Inc., and Ritchie Corporation. Ritchie Corporation in turn owns several subsidiaries, including Ritchie Paving, Inc., Ritchie Sand Co., and Allen's Concrete, Inc., which are in the business of asphalt paving, sand, and concrete readimix.

2. Defendant Honeywell is a Delaware corporation with its principal place of business in Massachusetts.

3. Plaintiff had purchased several computers from defendant before it purchased the DPS 6/40 which is the subject matter of this lawsuit. Ritchie's third purchase from defendant was a Honeywell DPS-330. This purchase contract was signed by David Buchholz, Ritchie's chief financial officer, in November of 1980 and took effect on December 19, 1980. This contract became the parties' "Basic Agreement" as all subsequent purchases were made subject to this contract and were simply added as amendments to the Basic Agreement. Before delivery of the DPS-330, defendant announced a new model, DPS/7, which had the same capabilities of the DPS-330 but with more growth capacity. Defendant offered to let plaintiff switch to the DPS/7 and informed it that the peripheral equipment such as printers could be moved to the DPS/7. Plaintiff later learned that a $17,000 printer it had ordered for the DPS-330 could not be used with the DPS/7. Upset over this discovery, Mr. Buchholz met with defendant's regional marketing manager, Ed Evans, and tape-recorded their meeting. This problem was eventually resolved with Honeywell providing plaintiff a $17,000 service credit. The Basic Agreement was then amended to apply to the DPS/7.

4. During the purchasing negotiations for the DPS/7 in 1981, Jay West, Ritchie's data processing manager, began maintaining a chronological list of purchases and communications with defendant. West explained that he considered the list necessary because of his experience with Honeywell where problems were unsatisfactorily resolved when it was only our word against their word.

5. Sometime after September of 1980, plaintiff decided to automate its order entry system which was then handled manually. Mr. Buchholz informed defendant of Ritchie's goal to have the automation complete by late summer of 1982. Ritchie also planned ultimately to market its automated order entry system to similar companies in the asphalt paving and readi-mix cement business.

6. In September of 1982, the plaintiff's data processing steering committee decided after numerous meetings with Honeywell personnel that the order entry system should be used on a distributed processing, or decentralized computer, rather than the DPS/7 which was a centralized computer. At this point, Honeywell considered the Honeywell DPS/6 line of mini-computers and also looked into a Digital Equipment Company (DEC) computer sold by a company in Oklahoma City. During this time, Jay West often obtained the advice of Brian Loether, defendant's technical representative in the Wichita area. Jay...

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