United States District Court, M.D. Pennsylvania
October 6, 2005.
CON-WAY TRANSPORTATION, SERVICES, INC., Plaintiff,
REGSCAN, INC., Defendant.
The opinion of the court was delivered by: JOHN JONES, District Judge
MEMORANDUM AND ORDER
THE BACKGROUND OF THIS ORDER IS AS FOLLOWS:
Currently pending before the Court is Defendant RegScan, Inc.'s
("RegScan" or "Defendant") Motion for Summary Judgment. (Rec.
Doc. 81) ("the Motion").
This Court has diversity jurisdiction over the instant action
pursuant to 28 U.S.C. § 1332 (2005).
For the following reasons, we will deny the Motion in part and
grant the Motion in part.
PROCEDURAL HISTORY AND STATEMENT OF RELEVANT FACTS:
This action is between Plaintiff Con-Way Transportation
Services, Inc. ("Plaintiff" or "Conway"), a Michigan-based
subsidiary of CNF, Inc., a California corporation and Defendant RegScan, Inc., a Pennsylvania
corporation. In May of 2000, the parties entered into a Licensing
Agreement (the "Agreement") pursuant to which Defendant was to
modify a computer software program ("the software") created by
Plaintiff. The essence of the software was to facilitate
regulatory compliance of trucking companies dealing in hazardous
In March 3, 2003, Plaintiff filed a complaint (doc. 1) against
Defendant with this Court, alleging breach of contract (Counts I
and II), Misuse of Proprietary Information (Count III) and Unjust
Enrichment (Count V). Plaintiff also demanded an Accounting from
Defendant to determine its damages (Count IV). (Rec. Doc. 1). In
a companion state court action, Defendant sought declaratory
relief as to the invalidity of the Agreement, alleging that
Plaintiff failed to provide and/or misrepresented the software
Defendant was to modify. On January 1, 2004, this Court entered
an Order (doc. 46) staying the instant action until resolution of
the companion state action. On August 6, 2004, Judge Anderson of
the Lycoming County Court of Common Pleas found against Defendant
on all claims of misrepresentation and contract invalidity. (Rec.
At the heart of this action is Defendant's allegation that
Plaintiff's software was "useless," forcing Defendant to develop
a different computer software program from "scratch." (Rec. Doc.
82 at 1-2). Defendant seeks to avoid performance under the Agreement on the grounds of non-occurrence
of a condition precedent to Defendant's performance. Defendant
alleges that the existence of viable, modifiable software was a
condition precedent to its performance of software development
and payment of licensing fees to Plaintiff. It is Defendant's
contention that since the software was "useless" and
unmodifiable, it was impossible for Defendant to perform under
the Agreement. Further, Defendant alleges that it became aware of
the software's defects only after signing the Agreement with
In strong contrast, Plaintiff alleges that Defendant possessed
the software prior to signing agreement and is therefore charged
with the knowledge of the software's components. Although
Plaintiff admits that the software was not ready for "field use"
when provided to Defendant, Plaintiff denies Defendant's
allegations that the software did not perform as represented or
required. Moreover, Plaintiff alleges that the parties performed
under the Agreement for a year and a half before Defendant
stopped paying licensing fees to Plaintiff in February of 2002.
Both Defendant and Plaintiff have fully briefed the Motion and
it is therefore ripe for our review.
STANDARD OF REVIEW:
Summary judgment is appropriate if "there is no genuine issue
as to any material fact and . . . the moving party is entitled to judgment
as a matter of law." FED .R. CIV. .P. 56(c); see also Turner
v. Schering-Plough Corp., 901 F.2d 335, 340 (3d Cir. 1990). The
party moving for summary judgment bears the burden of showing
"there is no genuine issue for trial." Young v. Quinlan,
960 F.2d 351, 357 (3d Cir. 1992). Summary judgment should not be
granted when there is a disagreement about the facts or the
proper inferences which a fact finder could draw from them. See
Peterson v. Lehigh Valley Dist. Council, 676 F.2d 81, 84 (3d
Initially, the moving party has a burden of demonstrating the
absence of a genuine issue of material fact. Celotex Corporation
v. Catrett, 477 U.S. 317, 323 (1986). This may be met by the
moving party pointing out to the court that there is an absence
of evidence to support an essential element as to which the
non-moving party will bear the burden of proof at trial. Id. at
Federal Rule of Civil Procedure 56 provides that, where such a
motion is made and properly supported, the non-moving party must
then show by affidavits, pleadings, depositions, answers to
interrogatories, and admissions on file, that there is a genuine
issue for trial. Fed.R.Civ.P. 56(e). The United States Supreme
Court has commented that this requirement is tantamount to the
non-moving party making a sufficient showing as to the essential
elements of their case that a reasonable jury could find in its favor. Celotex Corp., 477 U.S. at 322-23.
It is important to note that "the non-moving party cannot rely
upon conclusory allegations in its pleadings or in memoranda and
briefs to establish a genuine issue of material fact." Pastore
v. Bell Tel. Co. of Pa., 24 F.3d 508, 511 (3d Cir. 1994)
(citation omitted). However, all inferences "should be drawn in
the light most favorable to the non-moving party, and where the
non-moving party's evidence contradicts the movant's, then the
non-movant's must be taken as true." Big Apple BMW, Inc. v. BMW
of N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir. 1992), cert.
denied, 507 U.S. 912 (1993) (citations omitted).
Still, "the mere existence of some alleged factual dispute
between the parties will not defeat an otherwise properly
supported motion for summary judgment; the requirement is that
there be no genuine issue of material fact." Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in
original). "As to materiality, the substantive law will identify
which facts are material." Id. at 248. A dispute is considered
to be genuine only if "the evidence is such that a reasonable
jury could return a verdict for the nonmoving party." Id.
A. Counts I and II: Breach of Contract Defendant requests summary judgment on Counts I and II, arguing
that its performance under the Agreement was excused because of
non-occurrence of a condition precedent. Defendant argues that
Plaintiff did not satisfy the condition that formed the basis of
the Agreement, namely that Plaintiff did not supply Defendant
with software capable of modification. Defendant argues that
since the software supplied by Plaintiff was "useless" and
unmodifiable, a fundamental condition of the Agreement never
occurred and therefore its performance under the Agreement is
Plaintiff denies Defendant's allegations that the software did
not function as required under the Agreement. Plaintiff alleges
that Defendant knew the "design objectives [of the software] were
fairly loosely structured," (doc. 88 at 16), and that the
software, as supplied to Defendant, was not misrepresented in any
way prior to contract formation.
It is apparent to us that a number of genuine issues of
material fact exist, most notably, whether the software
"useless." It would be improper for us, at this juncture, to
ignore these issues of material fact, and therefore summary
judgment with respect to Counts I and II of the complaint is
We pause to note that we do not agree that Defendant is
collaterally estopped from litigating Counts I and II of the
complaint by virtue of the August 2004 decision of Judge Anderson in Pennsylvania state court. The
doctrine of collateral estoppel precludes relitigation of an
1) the issue decided in the prior adjudication was
identical with the one presented in the later action;
2) there was a final judgment on the merits;
3) the party against whom the plea [of collateral
estoppel] is asserted was a party or is in privity
with a party to the prior adjudication; and
4) the party against whom [collateral estoppel] is
asserted had a full and fair opportunity to litigate
the issue in question in a prior action.
Tucker v. Philadelphia Daily News, 577 Pa. 598
, 608 (Pa. 2004).
Collateral estoppel does not preclude Defendant from defending
against Plaintiff's claims on the theory of non-occurrence of a
condition. To be sure, Defendant is precluded from relitigating
the issue of whether the Agreement is a valid and binding
contract. However, Defendant presently argues that it is excused
from performance because of the non-occurrence of a condition.
The doctrine of collateral estoppel can only be applied when a
latter issue is identical to a litigated former issue. It is
clear to us that whether performance is excused by the
non-occurrence of a condition and whether a contract exists at
all are two completely different issues. Therefore, Plaintiff's
argument is not accepted by this Court. B. Count III: Misuse of Proprietary Information
In its complaint, Plaintiff alleges that Defendant made sales
of products in violation of the Agreement's trade secret and
proprietary information aspects. Defendant argues that we should
grant summary judgment on Count III because "what was licensed to
[Defendant] under the Agreement was not a trade secret, was not
confidential, and was not proprietary." (Rec. Doc. 82 at 12).
Defendant supports this contention by citing the deposition
transcript of Robert G. Petrancosta.
We do not read Mr. Petrancosta's testimony regarding the
proprietary status of the license subject matter as dispositive
of whether Defendant used trade secrets in violation of the
Agreement. Mr. Petrancosta's testimony seems hesitant at best
regarding the subject matter of the license and its status as a
Based on the foregoing, we believe that there remains a genuine
issue of material fact as to whether the software was a trade
secret, and therefore deny summary judgment on Count III of the
C. Count IV: Accounting
In the complaint, Plaintiff demands an accounting of
Defendant's sales and profits for the purposes of determining
Plaintiff's rights to commission under the Agreement. Because
this claim flows at least in part from the breach of contract claims, and since we have declined to dismiss those counts, we
will likewise not dismiss Plaintiff's demand for accounting at
this stage of the proceedings.
D. Count V: Unjust Enrichment
Unjust enrichment is defined in Black's Law Dictionary,
8th edition, as "the retention of a benefit conferred by
another, without offering compensation, in circumstances where
compensation is reasonably expected. In its complaint, Plaintiff
alleges that Defendant was unjustly enriched "to the extend that
the [D]efendant claims that no binding contract exists between it
and [Plaintiff]." (Rec. Doc. 1 at 6).
Count V of the complaint was conditional on a ruling that no
binding contract existed between the parties. As a result of
Judge Andereson's opinion in the companion state case, it is res
judicata that a binding contract existed between the parties.
Therefore, Count V of the complaint is hereby dismissed.
NOW, THEREFORE, IT IS HEREBY ORDERED:
1. With respect to Counts I, II, III and IV of the
complaint (doc. 1), the Motion (doc. 81) is DENIED. 2. With respect Count V of the complaint (doc. 1),
the Motion is GRANTED and the said Count is
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