Perfect Solutions, Inc. v. Jereod, Inc., Civ.A. No. 95-11870-MAP.

974 F.Supp. 77

PERFECT SOLUTIONS, INC., Plaintiff, v. JEREOD, INC., et al., Defendants.

Civ.A. No. 95-11870-MAP.

United States District Court, D. Massachusetts.

July 29, 1997.

Geoffrey A. Wilson, Trudel, Bartlett, Barry, Wilson, MacNicol, Greenfield, MA, for Plaintiff.

Michael A. Fitzhugh, Fitzhugh & Assoc., Boston, MA, for Defendants.

PONSOR, District Judge.

Upon de novo review, the Report and Recommendation is hereby adopted and defendants motion (Dkt. No. 62) is DENIED. Plaintiff has made a sufficient showing to avoid summary judgment. The issue of damages may be re-visited at trial. The clerk will set this case for a conference before me.

So ordered.

REPORT AND RECOMMENDATION WITH REGARD TO DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

April 18, 1997.

NEIMAN, United States Magistrate Judge.

Plaintiff Perfect Solutions, Inc. ("PS"), a Massachusetts software company, seeks recovery in contract against seventeen Florida video stores, doing business as the American Video Network ("AVN"), and their president Robert Zlatkiss ("Zlatkiss").¹ Defendants' motion for summary judgment has been referred to this Court for a report and recommendation. See 28 U.S.C. § 636(b)(1)(B). For the reasons set forth below, the Court recommends that Defendants' motion be DENIED.

I. SUMMARY JUDGMENT STANDARD

The role of summary judgment in civil litigation is to pierce the boilerplate of the pleadings and assay the parties' proof in an effort to determine whether trial is actually required. McIntosh v. Antonino, 71 F.3d 29, 33 (1st Cir.1995) (citing Wynne v. Tufts Univ. Sch. of Med., 976 F.2d 791, 794 (1st Cir.1992)). The Court must view the evidence as a whole, rather than in isolation. Mesnick v. General Elec. Co., 950 F.2d 816, 822 (1st Cir.1991). The facts, and all reasonable inferences that may be drawn from them, must be viewed in a light most favorable to the non-moving party, see Guzman-Rivera v. Rivera-Cruz, 29 F.3d 3, 4 (1st Cir.1994), who bears the burden of placing at least one material fact into dispute after the moving party shows the absence of any disputed material fact, Mendes v. Medtronic, Inc., 18 F.3d 13, 15 (1st Cir.1994) (discussing Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2553-54, 91 L.Ed.2d 265 (1986)). Summary judgment is appropriate where the record reveals 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).

II. FACTUAL BACKGROUND

The facts of this case, stated in a light most favorable to PS, follow. The Court has omitted certain "factual" statements, (e.g., Defs.' Statement of Material Facts ("Defs.' Facts") ¶¶ 13, 19, 20 and 23), that have no apparent support in the record. See Fed. R.Civ.P. 56(c); L.R. 56.1.

PS is in the business of developing, licensing and servicing computer software. (Compl.¶ 25.) It commenced operations in February of 1989. (Defs.' Facts ¶ 1.) Mark Durbin ("Durbin") owned fifty percent of PS until early 1991. (Id. ¶ 3.) Durbin was also involved in an entity known as Oshci Enterprises ("Oshci") and had, through Oshci, developed a software program entitled "Encore!." (Defts' Ex. 3.) One of Encore!'s uses was in video store computers. (Compl. ¶ 25.) At some point prior to March 1, 1993, Oshci transferred the rights to Encore! to PS, which in its best year made about $61,000 from the software. (See Defs.' Ex. 3; Defs.' Ex. 1 at 85-88.) What happened prior to that time is the subject of some dispute.

Durbin claims that, prior to the Oshci-PS transaction, Oshci, through one of its employees, Ralph Adams ("Adams"), had "sold" copies of Encore! "outright" to AVN, which at that time was comprised of eight stores. (Defs.' Ex. 3; see also Defs.' Ex. 4 at 16-17, 91.) PS's president, James Neilson ("Neilson"), on the other hand, asserts that Durbin's statement that Encore! was "sold" to AVN is "gross[ly] inaccura[te]" and that he had "no reason to believe that [the statement was] true." (Pl.'s Ex. C at 24-25.) Adams, PS asserts, merely sold AVN "computers" on which he "installed" Encore!. (Defs.' Ex. 4 at 16-17.) In any event, there is apparently no dispute that, at some point prior to March 1, 1993, AVN gained access to Encore! and modified the software for its own internal use.

On or about March 1, 1993, PS, now the putative owner of Encore!, entered into two contracts with AVN regarding AVN's continued use of the software. The first contract, a copy of which appears at Defendants' Exhibit 8, is a "licensing" agreement. It gave PS the power to license, but not sell, Encore! to AVN. (Defs.' Ex. 8 ¶ 1.1.) In return, AVN promised to treat Encore! as proprietary, to use each licensed copy only in conjunction with a single computer for its own internal use and to pay PS "a one-time licensing fee in the amount of fifteen-hundred dollars ($1500)." (Id. ¶ 2(a)-(c).) In addition, AVN agreed to the following:

(d) upon the execution of this Agreement, [AVN shall] provide to PS a complete list of all of AVN's retail stores, such list to include the Software serial number. Any such location with duplicate serial numbers shall have a new serial number assigned by PS and AVN shall install such serialization software; and

(e) prior to AVN's use of the Software at additional locations, AVN shall register the full address and legal name of each such location with PS. Further, AVN shall obtain from PS serialization software specific to each location and such serialization software shall be installed by AVN. Such serialization software shall not be unreasonably witheld [sic] by PS. Any duplicate use of serialized copies of the Software by AVN shall be an unauthorized use of the Software under this Agreement.

(Pl.'s Ex. I ¶ 2(d) and (e).)² The agreement also included the following provision with respect to damages, which PS claims was fully discussed before the agreement was signed:

AVN agrees that the use of the Software in a manner unauthorized by and or inconsistent with this Agreement will cause PS irreparable damage, and that PS shall have specific rights including, but not limited to[:] equitable and injunctive relief to prevent the unauthorized use or disclosure; the greater of ten-thousand dollars ($10,000) for, or such damages as are occasioned by, each instance of such unauthorized use or disclosure; and attorney's fees.

(Id. ¶ 5.)

The second contract between PS and AVN, a copy of which appears at Defendants' Exhibit 10, is a confidential disclosure and non-competition agreement. It provided, inter alia, that PS would give AVN confidential and proprietary information that would enable AVN to enhance AVN's use of Encore! and release AVN from liability for its prior use of Encore!. (Id. ¶ 1.) In return, AVN agreed to treat any information provided by PS as proprietary and confidential. (See id. ¶¶ 2-6, 8 and 9.) Specifically, the parties agreed to the following provisions:

2. AVN-agrees (a) not to divulge or in any way make available such proprietary and or confidential information to any person or third party without the express written consent of PS; ...

3. AVN shall disclose or give access to such proprietary and or confidential information only to such employees having a need to know in connection with AVN's use herewith. AVN shall advise such employees of the proprietary and or confidential nature of the information, and AVN agrees to use reasonable care to safeguard said information and to prevent the unauthorized use or disclosure thereof.

4. No copies of any proprietary and or confidential information shall be made, except for archival purposes, without the express written consent of PS. AVN shall, upon request, appraise [sic] PS in writing of the number of copies in existence and in the possession and control of AVN. Any unauthorized copies or reproductions of software shall bear the copyright and or proprietary notices contained in the original.

(Id. ¶¶ 2(a), 3 and 4.) This second agreement also included a damages provision similar to that found in the licensing agreement.³

Both agreements, which were reviewed and approved by Defendants' counsel, provided that they would be governed under Massachusetts law. (Defs.' Exs. 8 ¶ 10 and 10 ¶ 16.) In addition, both stated that, although their duties were non-delegable and their rights non-assignable (see Defs.' Exs. 8 ¶ 6 and 10 ¶ 10), their provisions extended to any future corporation doing business under the AVN umbrella (see Defs.' Exs. 8 ¶ 11 and 10 ¶ 17). Finally, both agreements were signed by Neilson and personally guaranteed by Zlatkiss.

On April 5, 1993 Neilson sent a letter to Zlatkiss requesting that Zlatkiss forward documentation of, and changes in, Encore!'s access code pursuant to ¶ 2(d) of the licensing agreement. (Defs.' Ex. 12.) Between April 5, 1993 and January of 1994, Neilson made several telephone calls to Zlatkiss regarding Zlatkiss' alleged failure to perform pursuant to the March 1, 1993 agreements. (Defs.' Ex. 2 at 5.)

In a letter dated January 26, 1994, Ron Sparks ("Sparks"), vice president of AVN, provided Neilson with "documentation" of the Encore! serial numbers at "all [AVN] stores." (Defs.' Ex. 13.) Attached to the letter is a typewritten list of eleven AVN stores and the serial numbers of the Encore! software used therein. The names of six other stores are handwritten on the attachment, although it appears as if five of those stores were added on May 16, 1995. (See id.)

In February or March of 1994, Sparks told Neilson that AVN expected to be opening two to three more stores in conjunction with an outside investor. (Defs.' Ex. 2 at 5.) Immediately thereafter, Neilson called Zlatkiss with this information and Zlatkiss stated that "Sparks doesn't know anything" and that the deal with the investor had fallen through. (Id. at 5-6.) However, in a letter dated June 13, 1994, Sparks indicated to Neilson that AVN had twelve stores. (Defs.' Ex. 13.)

In the summer or fall of 1994, Neilson twice asked...