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COMPUTER AID, INC. v. HEWLETT-PACKARD CO.

June 15, 1999

COMPUTER AID, INC., AND COMPUTER AID, INC., TRADING AND D/B/A NEW CENTURY COMMUNICATIONS, PLAINTIFFS,
v.
HEWLETT-PACKARD COMPANY, SYDNEY FLUCK, AND AM COMMUNICATIONS, INC., DEFENDANTS. HEWLETT-PACKARD COMPANY, PLAINTIFFS, V. COMPUTER AID, INC., AND COMPUTER AID, INC., TRADING AND D/B/A NEW CENTURY COMMUNICATIONS, AND ANDERSON KILL & OLICK, P.C., DEFENDANTS.



The opinion of the court was delivered by: Van Antwerpen, District Judge.

    MEMORANDUM AND ORDER

I. INTRODUCTION

This case is before us on Motions for Summary Judgment. Case No. 96-CV-4150 was filed in this court by Plaintiffs Computer Aid, Inc. and Computer Aid, Inc., Trading and d/b/a New Century Communications (hereafter, "Computer Aid") on June 5, 1996. Computer Aid brought multiple causes of action against Defendants Hewlett-Packard Company (hereafter, "Hewlett-Packard") and one Sydney Fluck, an employee of Hewlett-Packard. Two months later, on August 26, 1996, Hewlett-Packard filed a separate suit in the Northern District of California seeking a declaratory judgment that a number of the claims brought by Computer Aid in the Pennsylvania suit (96-CV-4150) were invalid. This suit also brought claims that Computer Aid and its attorneys, Anderson Kill & Olick, P.C. (hereafter, "Anderson Kill"), had committed defamation and related torts by issuing a Press Release which accompanied the initial suit in Pennsylvania (hereafter, "Press Release"). This California action was transferred to our court on December 3, 1996, pursuant to the first to file doctrine. In accordance with the procedures of our court, this case was given file No. 97-CV-0284 and was assigned to the same judge who was handling the original case No. 96-CV-4150. Both cases were consolidated by Order of this court on March 14, 1997.

The thrust of Computer Aid and Anderson Kill's arguments against the Counterclaims of defamation and injurious falsehood is that their conduct is protected under the Fair Report Privilege. Computer Aid and Anderson Kill also argue that Hewlett-Packard and Sydney Fluck have failed to show that Computer Aid and Anderson Kill acted with the "actual malice" necessary if Hewlett-Packard and Sydney Fluck are either public figures or limited purpose public figures. Computer Aid argues also that Hewlett-Packard and Sydney Fluck have failed to make the requisite showing of special damages to succeed on their respective injurious falsehood claims. Additionally, Computer Aid argues that Hewlett-Packard's Counts VI and VII, common law and statutory unfair competition, must fail because they are unsubstantiated and seek improper damages. Finally, the parties all agree that Hewlett-Packard has conceded it has no valid interference with contract claim against Computer Aid as set forth in Counterclaim Count IX.

We believe both Computer Aid and Anderson Kill should prevail on summary judgment on Hewlett-Packard and Sydney Fluck's counterclaims for injurious falsehood. Computer Aid is also entitled to partial summary judgment on Hewlett-Packard's counterclaim for common law and statutory unfair competition. However, as we must consider the facts in the light most favorable to the non-moving party in summary judgment, we believe neither Computer Aid nor Anderson Kill is entitled to summary judgment on Hewlett-Packard and Sydney Fluck's defamation Counterclaims.

II. FACTS

The underlying complaint centers on a failed relationship between Computer Aid and Hewlett-Packard. On November 10, 1993 Computer Aid and CaLan, a cable television testing and monitoring equipment manufacturer, entered into an agreement to develop a product known as Galaxy (hereafter, "Agreement"). Sydney Fluck was the president and chief executive officer in addition to being the chairman of the board of directors of CaLan at that time. CaLan merged with Hewlett-Packard on July 8, 1994. As a result, Hewlett-Packard became legal successor to CaLan's rights and obligations under the Agreement and Sydney Fluck became a manager at Hewlett-Packard. Subsequently, Hewlett-Packard and Computer Aid have been unable to agree on the scope of their respective rights and obligations.

Between July 1994 and January 1995 the relationship between Computer Aid and Hewlett-Packard deteriorated, with claims of non-cooperation and non-performance under the Agreement from both sides in January, 1995, Hewlett-Packard purported to terminate the agreement with Computer Aid. Hewlett-Packard now takes the position that the Agreement created a work-for-hire relationship with Computer Aid and that the Galaxy software is the exclusive property of Hewlett-Packard, CaLan's successor in interest. Computer Aid alleges that the Agreement created a joint venture and that it owns those parts of Galaxy which it developed. Computer Aid further alleges Hewlett-Packard gained confidential information about Computer Aid, refused to work with Computer Aid in developing and marketing Galaxy, and attempted to defraud Computer Aid of the Galaxy technology.

In the spring of 1996, Anderson Kill prepared a complaint on behalf of Computer Aid against Hewlett-Packard, Sydney Fluck and a third party, AM Communications ("AM"), which was subsequently dropped from the Complaint. The complaint was filed with this court on June 5, 1996. About the time the Complaint was filed, Anderson Kill issued a five-page Press Release on its firm's letterhead discussing Computer Aid's claims against Hewlett-Packard, Sydney Fluck and AM. A few copies of the Press Release were sent out to members of the press the night before the Complaint was filed. This Press Release is now at the heart of Hewlett-Packard and Sydney Fluck' claims in the case before us.

As previously discussed, Hewlett-Packard responded to the Complaint and filed the separate action in the Northern District of California which was transferred to this Court and consolidated with the underlying action. On January 27, 1997, Sydney Fluck also filed an Answer to the Complaint and asserted its counterclaims, similar to those of Hewlett-Packard against Computer Aid and Anderson Kill. Subsequent amendments to the parties' filings address the underlying action and do not affect the Counterclaims which are presently before us.

III. DISCUSSION

A. Summary Judgment Standard

The court shall render summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). An issue is "genuine" only if there is sufficient evidentiary basis on which a reasonable jury could find for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A factual dispute is "material" only if it might affect the outcome of the suit under governing law. Id. at 248, 106 S.Ct. 2505. All inferences must be drawn and all doubts resolved in favor of the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962); Gans v. Mundy, 762 F.2d 338, 341 (3d Cir. 1985), cert. denied, 474 U.S. 1010, 106 S.Ct. 537, 88 L.Ed.2d 467 (1985).

On motion for summary judgment, the moving party bears the initial burden of identifying those portions of the record that it believes demonstrate the absence of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). To defeat summary judgment, the non-moving party must respond with facts of record that contradict the facts identified by the movant and may not rest on mere denials. Id. at 321 n. 3, 106 S.Ct. 2548 (quoting Fed.R.Civ.P. 56 (e)); see also First Nat'l Bank of Pennsylvania v. Lincoln Nat'l Life Ins. Co., 824 F.2d 277, 282 (3d Cir. 1987). The non-moving party must demonstrate the existence of evidence that would support a jury finding in its favor. See Anderson, 477 U.S. at 248-49, 106 S.Ct. 2505.

Computer Aid and Anderson Kill also argue that the facts in this case are vulnerable to the chilling of discussion of litigation of public interest, therefore summary judgment is particularly appropriate. see St. Sorb v. Virgin Islands Daily News. Inc., 21 F.3d 1309, 1318 (3d Cir. 1994). While summary judgment may indeed be appropriate, the St. Surin case does not provide a basis for raising the standard Hewlett-Packard and Sydney Fluck must overcome to defeat Computer Aid and Anderson Kill's Motions for Summary Judgment.

Computer Aid and Anderson Kill further argue that the facts in this case point to the chilling of lawyers' vigorous representation of their clients for fear of being sued, citing United States v. Hurt. 543 F.2d 162 (D.C.Cir. 1976). In the Hurt case. the D.C. Circuit acknowledged that when an attorney is ordered to continue to represent a client on whose behalf he has made statements and is then sued for defamation with respect to such statements. a conflict of interest exists which violates the client's sixth amendment right to effective counsel. We note that Hurt was a criminal case in which the defendant was appointed counsel. In the case before us, we have not ordered Anderson Kill to continue to represent Computer Aid in its civil matter.

We acknowledge that, in theory, some danger of chilling public discussion and lawyer's vigorous representation of their client exists. However, we do not believe that the facts of this case warrant deviating from the general summary judgment standard.

B. Choice of Law

Federal district courts generally apply the choice of law rules of the state in which they are situated. Carrick v. Zurich-American Ins. Group, 14 F.3d 907 (3d Cir. 1994). However, when a case has been transferred from a federal court for reasons other than lack of jurisdiction or venue, the transferee court generally applies the choice-of-law rules for the state in which the transferring court sits. McFadden v. Burton, 645 F. Supp. 457, 460 (E.D.Pa. 1986) (citing Van Dusen v. Barrack, 376 U.S. 612, 638-39, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964)). As noted, Hewlett-Packard originated its present counterclaims as the California Action, which was transferred to this court.

Computer Aid and Anderson Kill argue and Hewlett-Packard and Sydney Fluck do not challenge that upon transfer the court should apply the choice-of-law rules of the transferring state. see Tucker Anthony, Inc. v. Bankers Trust Co., 1994 WL 9683 *1, *10 (S.D.N.Y. 1994). We have doubts about this because Case No. 96-CV-4150 was filed in our court. Nevertheless in an abundance of caution, we will apply California's choice-of-law ...


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