Commercial Data Servers v. International Business

262 F.Supp.2d 50

COMMERCIAL DATA SERVERS, INC., d/b/a Xbridge Systems, Inc. Plaintiff, v. INTERNATIONAL BUSINESS MACHINES CORPORATION Defendant.

No. 00CIV.5008CMLMS.

United States District Court, S.D. New York.

April 4, 2003.

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Bernard Persky, Barbara Jane Hart, Goodkind, Labaton, Rudoff & Sucharow, L.L.P., New York City, Bruce L. Simon, Steven N. Williams, Cotchett, Pitre & Simon, Robert T. Scott, Cotchett, Pitre & Simon, Bruce L. Simon, Cotchett, Pitre & Simon, Burlingame, CA, for Commercial Data Servers, Inc. dba Xbridge Systems, Inc., plaintiff.

Evan R. Chesler, Cravath, Swaine & Moore, L.L.P., Evan R. Chesler, Cravath, Swaine & Moore, L.L.P., New York City, for International Business Machines Corporation, defendant.

MEMORANDUM DECISION AND ORDER DENYING DEFENDANT'S MOTION TO STRIKE THE DECLARATIONS OF RONALD S. ALEPIN AND BRETT L. REED, OVERRULING PLAINTIFF'S OBJECTIONS TO DEFENDANT'S EVIDENCE, AND GRANTING IN PART DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGEMENT

MCMAHON, District Judge.

Plaintiff, Commercial Data Servers, Inc. ("CDS") alleges that Defendant International Business Machines Corporation ("IBM") committed federal and state antitrust violations under the Sherman Act §§ 1, 2 (15 U.S.C.A. §§ 1, 2), the Clayton Act § 3 (15 U.S.C.A. § 14), and the Donnelly Act (N.Y. Gen. Bus. Law § 340). Plaintiff also brings claims for tortious interference with its relations with two vendors. Defendant denies these allegations, and counterclaims for breach of two contracts and copyright infringement.

Defendant has moved for summary judgment under Fed.R.Civ.P. 56, on all of the plaintiffs claims except one claim of tortious interference. Defendant also moves for summary judgment on one of its breach of contract counterclaims.

Both the plaintiff and the defendant have also made separate motions regarding the admissibility of evidence submitted by the other. Plaintiff objects to the exhibits submitted by defendant with its Motion for Summary Judgment, on the grounds that the exhibits were not properly authenticated. Defendant moves to strike two expert affidavits submitted by plaintiff with its Motion in Opposition to Summary Judgment, on the grounds that the affidavits are unsubstantiated and speculative, and untimely under Fed. R.Civ.P. 26.

The motions are disposed of as follows: (1) I overrule plaintiffs objections to defendant's exhibits; (2) I deny defendant's motion to strike plaintiffs expert affidavits; (3) I grant defendant's motion for summary judgment on Counts II through VI of CDS's Second Amended Complaint, and deny summary judgement as to Count VII; and (4) I grant defendant's request for summary judgment on its breach of contract counterclaim.

FACTUAL BACKGROUND

IBM is a New York corporation that maintains its principal executive offices in Armonk, New York. (Plaintiffs Second Amended Complaint, ("Plaintiffs Sec. Amd. Cmplt."), ¶ 8.) IBM describes itself as a company that "uses advanced information technology to provide customer solutions through, inter alia, the sale of a variety of computer hardware and software products." (Defendant's Amended Answer and Counterclaims, p. 11.) CDS (which is currently doing business under the name "Xbridge Systems, Inc.") is a California corporation that maintains its principal executive offices in California. (Plaintiffs Sec. Amd. Cmplt, ¶¶7, 10.) CDS was formed in 1996 by three former IBM executives. Id. at ¶ 22. According to CDS's pleadings, CDS provided its founders with an "opportunity to compete with IBM."¹ Id. at ¶ 24.

Over a number of years, IBM developed the S/390 computing platform, "a component-based computer system consisting of hardware and software products that are compatible and interoperable with the platform's architecture." (Plaintiffs Second Amd. Cmplt., ¶ 13.) The primary hardware component of the S/390 system is a central processing unit ("CPU") board, referred to as the "P/390 Card." Id. at ¶¶ 13, 26. The P/390 card enables the computer to run OS/390 operating system software, and other predecessor IBM operating system software.² Other operating system software, such as software based on the UNIX or Windows NT operating systems, generally cannot run on S/390 platform computers. Likewise, S/390 operating system software and applications generally cannot be used on alternative platform computers.

IBM builds and markets its own S/390 computer systems and products. However, it also has agreements with other companies under which they incorporate IBM technology into their products. Plaintiff CDS was one of these companies.

In 1995, CDS entered into an Original Equipment Manufacturer ("OEM") Agreement with IBM, under which CDS was able to purchase the P/390 card and S/390 operating software. Id. at ¶ 26. CDS purchased the software at the entry system level ("ESL"), which was IBM's most favorable software pricing level. Id. ¶¶ 4, 20. The OEM Agreement allowed CDS to incorporate the P/390 Card into its own product, and licensed CDS to "preload" S/390 operating system software onto these CDS systems. Pursuant to this agreement, in 1997 CDS introduced the CDS 104 system (later renamed CDS 2000). Id. at ¶ 26.

In 1997, CDS entered into another agreement with IBM, an Original Provider Agreement ("OPA"), pursuant to which CDS invested in IBM's efforts to create an improved P/390 card—the "P/390e" card. Id. at ¶ 29. In 1998, the OEM Agreement was amended to allow CDS to purchase the P/390e card. ("OEM" Agreement and amendments, Ex. 23 to Burke Dec.) CDS then developed a product incorporating the P/390e card and the OS/390 operating system, which it marketed as the "CDS 2000e." (Plaintiffs Sec. Amd. Cmplt. at ¶ 29.)

In May 1998, IBM "pre-announced" a new product, the S/390 Integrated Server (also referred to as the "Planter"), scheduled for release in November 1998. Id. at ¶¶ 16, 69. At the same time, IBM also preannounced an additional S/390 product, with higher processing power (estimated to be two times as fast). Id. Both products was based on the P/390E, and were designed to compete with CDS's computers. Id. at ¶ 51, 52. IBM released the integrated server in November 1998, as scheduled. In September 1999, IBM released the "Multiprise 3000" servers, which provided processing power approximately six times greater than CDS's product. IBM stopped offering the S/390 Integrated Server in February 2000. Id. at ¶ 71. The Multiprise products are still on the market.

CDS alleges that IBM viewed CDS as a competitive threat and sought to "eliminate" them. Id. at ¶ 6. CDS alleges that the introduction of the S/390 Integrated Server, and subsequent decision to "drop[ ]" the server from the market, was intended to destroy the CDS market opportunity. Id. CDS also alleges that IBM refused to provide CDS with ESL pricing qualification except under anti-competitive terms and conditions which limited the marketing claims that CDS could make regarding its product. Id. at ¶¶ 44-45. IBM also allegedly "threatened" and/or "coerced" two value added resellers ("VARs"), Information Technology Co. ("ITC") and Intelliware, in an effort to "prevent CDS from distributing the CDS 2000" through certain distribution channels. Id. at ¶¶ 756-66.

PROCEDURAL HISTORY

Plaintiffs original complaint in this action was filed on July 7, 2000. Counts I through VI of the original complaint alleged various antitrust violations, Count VII alleged tortious interference with prospective business relations, Counts VIII and IX alleged misappropriation of plaintiffs technology, and Count X alleged breech of the OPA Agreement. Defendant moved to dismiss Counts VIII through X and the Hon. Louis Stanton granted defendant's motion, albeit with leave to replead. Commercial Data Servers, Inc. v. International Business Machines Corp., 2001 WL 277303 (S.D.N.Y. March 21, 2001)("CZ)S /"). Pursuant to the Court's Rules for the Division of Business, the case was sent to White Plains and reassigned to me.

On May 8, 2001, plaintiff filed its first amended complaint, which repeated the original Counts I through VII and repleaded Counts VIII and IX, the misappropriation claims dismissed by Judge Stanton. Defendant moved to dismiss the complaint in its entirety. This Court granted defendant's motion on October 9, 2001. Commercial Data Servers, Inc. v. International Business Machines Corp., 166 F.Supp.2d 891 (S.D.N.Y.2001)("CDS IF). The misappropriation claims previously dismissed by Judge Stanton, Counts VIII and IX, were dismissed with prejudice. The antitrust claims, Counts I through VI, were dismissed without prejudice, due to plaintiffs failure to properly allege a relevant market. Id. at 896. The tortious interference claim, Count VII, was dismissed without prejudice, due to plaintiff failure to identify any particular "VARs" that plaintiff had a relationship with who were intimidated by defendant. Id. at 898.

On November 13, 2001, plaintiff filed a second amended complaint, realleging with greater specificity the claims that were dismissed without prejudice. Defendant moved a third time under Fed.R.Civ.P. 12(b)(6), this time seeking to dismiss the antitrust claims, Counts I through VI. On March 15, 2002, this Court dismissed Count I for failure to state a claim for per se violation of Section 1 of the Sherman Act. Commercial Data Servers, Inc. v. International Business Machines Corp., 2002 WL 1205740 (S.D.N.Y. March 15, 2002)("CDS III"). I denied the motion as to the other claims. Thereafter, defendant answered the second amended complaint and asserted three counterclaims: (1) breach of the OPA; (2) breach of the OEM Agreement; and (3) copyright infringement.

Discovery in this matter began in the summer of 2001, while the motion to dismiss the first amended complaint was pending. After accommodating the parties by twice extending the close of discovery, I finally ordered that all discovery must be completed on or before February 28, 2002....