Universal Atl. Sys., Inc. v. Honeywell Int'l, Inc.

388 F.Supp.3d 417

UNIVERSAL ATLANTIC SYSTEMS, INC., Plaintiff,

v.HONEYWELL INTERNATIONAL, INC., Defendant.

CIVIL ACTION NO. 17-4660

United States District Court, E.D. Pennsylvania.

Signed May 14, 2019

Mark L. Rhoades, Rhoades LLC, Joseph M. Profy, Jacobs Law Group PC, Philadelphia, PA, Neill Wilson Clark, Faruqi & Faruqi LLP, Jenkintown, PA, for Plaintiff.

Anna M. Tobin, Holley C. Horrell, Mark L. Johnson, Sybil L. Dunlop, Greene Espel PLLP, Minneapolis, MN, Kevin Errol Hexstall, Marshall Dennehey Warner Coleman & Goggin, PC, Philadelphia, PA, for Defendant.

OPINION

WENDY BEETLESTONE, District Judge

This case presents a straightforward legal question, one with which any first-year law student would be intimately familiar: Did the parties form a binding contract? As many a first-year law student can attest, however, answering that question—applying the law to actual facts—can be anything but straightforward, as this case illustrates. Plaintiff, Universal Atlantic Systems, Inc. ("Universal"), claims that it formed an implied-in-fact contract with Defendant, Honeywell International, Inc. ("Honeywell"), based on a series of meetings and communications between the parties in early 2014, and that Honeywell breached the terms of that agreement. Honeywell disputes those claims, arguing it did not breach any implied-in-fact contract because no such contract was formed.

Honeywell also asserts a crossclaim, arguing Universal breached a separate agreement between the parties in 2016. Honeywell now moves for summary judgment on Universal's implied-in-fact contract claim as well as on its crossclaim. For the reasons that follow, Honeywell's motion will be granted on both claims.

I. Facts¹

A. The Parties & Their Business Relationship

At all times relevant here, both Universal and Honeywell were in the video-surveillance business. Honeywell developed and sold video-surveillance equipment, including both hardware in the form of video recorders—i.e. , security cameras—and software that ran on those video recorders. Universal purchased video-surveillance equipment from Honeywell, amongst other vendors, and then sold or leased that equipment to large, multi-location companies such as McDonald's and Panera Bread.

Although Universal was one of the largest purchasers of Honeywell's security equipment in the country, prior to 2013, Universal purchased hardware from Honeywell at prices agreed upon through informal discussions between Scott Elkins, Universal's President, and Scott Harkins, the Honeywell executive that managed the Universal relationship for several years. In November 2013, however, the parties executed a written agreement that set a fixed price for Universal's purchase of Honeywell's video recorders.²

B. Move from Analog to Digital

A catalyst of this dispute was the video-surveillance industry's transition from analog to digital technology over the last decade. Up until the mid-2000's, the dominant video-surveillance technology was digital video recorders ("DVRs"). Despite the name, DVRs were analog technologies, not designed to be connected to the internet.

In the 1990s, Honeywell developed and began selling its Rapid Eye line of DVRs as well as a suite of software services related to the hardware. Those services included Rapid Eye Report ("RER"), which collected data from Rapid Eye DVRs and created customizable reports for end users, and "Admin/View," which allowed end users to remotely administer and view Rapid Eye DVRs.

Universal purchased thousands of Rapid Eye systems, and then sold or leased those systems to its customers. Honeywell also "private-labeled" Rapid Eye DVRs and related software under Universal's Raven branding. The private-label arrangement was not exclusive; Honeywell private-labeled Rapid Eye DVRs for other purchasers, and Universal purchased Raven-branded video recorders from other producers, albeit of a different quality than Honeywell's Rapid Eye.

By the late 2000s, however, the proliferation of internet technology caused a shift in video-surveillance technology. Analog DVRs were replaced with network video recorders ("NVRs"), which had the capability of connecting to computer networks or the Internet. In 2010, Honeywell developed and began selling an internet-based surveillance system under its "MaxPro" brand, which included MaxPro NVRs and MaxPro-branded software such as the MaxPro Video Management System ("MPVMS").

Honeywell's transition from analog Rapid Eye DVRs to MaxPro NVRs created several, interrelated problems for Universal. First, because the Rapid Eye DVRs operated on different end-user software than did the Max Pro NVRs, if customers transitioned to the new video-recorder technology, they would also need to transition to new end-user software or else maintain separate software platforms. Second, and relatedly, the new MPVMS end-user software differed in critical respects from Rapid Eye's Admin/View software, making a transition potentially disruptive for Universal's customers. Finally, as Honeywell ramped up production of MaxPro NVRS, it wound down production of Rapid Eye DVRs, leaving Universal without an adequate supply of equipment and parts for customers still employing the legacy technology.

C. Discussing Solutions

The parties were aware of the challenges the transition from analog to digital equipment posed to Universal and the Universal-Honeywell relationship. In February 2011, in an email from Yves Van der Elst—a Honeywell engineer on the Universal project—to Harkins, Elkins, and Brian Walker—Universal's Director of Raven technology—Van der Elst explained that Honeywell had "no plan to obsolete [the Rapid eye] Admin/View [platform] before our customers are ready to transition to the MPVMS based solution." Van der Elst continued: "I have no idea how we will transition from Admin/View to MPVMS based solution. We may want to deploy both solution in parallel.... The bottom line is this is not a Honeywell decision but a UAS one! We will present you with options and we will work together on the implementation."

In October 2012, the issue of separate software platforms remained outstanding. In an email from Universal's Walker to Harkins, Walker observed that one of the "open issues" in the Universal-Honeywell relationship was the "[m]ultiple distributed database architecture" caused by the new MaxPro NVRs. Walker requested Honeywell "[p]rovide an integrated solution between Admin/View, RER, Dashboard, MVMSs and MaxPro to support the require[d] infrastructure ... ASAP."

The parties engaged in discussions about a solution into 2013. In an email dated February 6, 2013 from Walker to Van der Elst, Walker emphasized the "need to focus on [a] Single Sign on, centralized user management/control—MaxPro and Raven Devices." Walker further noted the need "to accelerate these issues so we [Universal] are not left behind or forced to find other solutions to meet our customers' demands (i.e. Oz, other IP solutions)." On April 23, 2013, Harkins sent an email to Elkins explaining: "We [Honeywell] have been working on a comprehensive plan to outline in writing a complete [Universal] plan that would include" a "[l]ong term roadmap for Raven transition to next generation of product."

D. 2014 Roadmap & Communications

The parties' plans to develop a solution for Universal accelerated in early 2014. On February 27, 2014, Van der Elst shared a PowerPoint presentation with Universal entitled "UAS MaxPro VMS Clip & Email Get Well Plan" (the "Get Well Plan"), which laid out a "Roadmap" for the future of the Universal-Honeywell relationship. The opening slide of the Get Well Plan defined the problem faced by Universal as follows: Universal wanted to add "about 1200 sites in MAXPRO," and faced issues rolling out that quantity of equipment. To solve that problem, the Get Well Plan proposed "deploy[ing] a new version of [Honeywell's] MAXPROVMS" for Universal.

The next slide provided a "[s]ummary" of Honeywell's "[d]eliverables" for Universal broken out into three phases and accompanied by a timeline. Phase One identified several completed projects relating to Universal's existing analog system. According to the slide, Honeywell had completed all Phase One projects as of January 2014. Phase Two identified Honeywell projects "[i]n [p]rogress" or "[i]n [d]esign," and summarized potential upgrades to Universal's existing analog system software. The slide indicated that "[i]n [p]rogress" projects were to be delivered by March 14, 2014, and "[i]n [d]esign" projects were to be delivered by May 14, 2014. Finally, Phase Three identified Honeywell projects "[i]n [d]efinition". Amongst the projects included as part of Phase Three was the creation of an "[i]ntegrated [m]anagement" system for "VMS, RER, [and] Admin/View"—that is, Honeywell's various software platforms. The timeline for Phase Three projects was "Q3 14," understood to mean the third quarter of 2014.

On March 19, 2014, Honeywell's Harkins sent Elkins a follow-up email, with the subject line "Roadmap." Harkins stated that he had "received a complete and very detailed review from our technical staff on the transition path from [Universal's] current RAVEN solution to a next generation solution that does not leave your existing customers stranded." Harkins explained that the update "was very engineering focused" and that it was "being updated in a way that will be more externally presentable." Harkins then asked to set up a meeting to "review" the update "in detail." Harkins and Elkins set up a meeting for April 14.

Although not entirely clear,³ at the April 14 meeting Honeywell appears to have shared two PowerPoint presentations with Universal's leadership—one entitled "[Universal] Transition to MAXPRO" and the other entitled "[Universal] Raven Transition Plan Proposal." Both presentations concerned Universal's transition to a new surveillance system based on Honeywell's MAXPRO software, and both included a slide entitled "MAXPRO Cloud Architecture" that mapped out Honeywell's...