Con Way Transp Ser v. Regscan Inc , 242 F. App'x 823 ( 2007 )

Opinions of the United
2007 Decisions States Court of Appeals
for the Third Circuit
7-6-2007
Con Way Transp Ser v. Regscan Inc
Precedential or Non-Precedential: Non-Precedential
Docket No. 06-2262
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
________
Case Nos. 06-2262 and 06-2384
_________
CON-WAY TRANSPORTATION SERVICES, INC.,
Appellant No. 06-2262
v.
REGSCAN, INC.
_________
CON-WAY TRANSPORTATION SERVICES, INC.
v.
REGSCAN, INC.,
Appellant No. 06-2384
_________
On Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. Civil No. 03-cv-00374)
District Judge: Honorable John E. Jones, III
__________
Argued May 7, 2007
Before: RENDELL, JORDAN, HARDIMAN, Circuit Judges
(Filed July 6, 2007 )
J. David Smith [ARGUED]
McCormick Law Firm
835 West Fourth Street
Williamsport, PA 17701
Counsel for Appellant/Cross-Appellee
Con-Way Transportation Services, Inc.
Daniel F. Schranghamer [ARGUED]
Allen E. Ertel & Associates
800 West Fourth Street
Williamsport, PA 17701
Counsel for Appellee/Cross-Appellant
RegScan, Inc.
_________
OPINION OF THE COURT
__________
RENDELL, Circuit Judge.
This case presents an attack on a jury verdict in a breach of contract case. The jury
was presented with breach of contract claims relating to three computer products and
found in favor of Plaintiff Con-Way Transportation Services, Inc. (“Con-Way”) on one of
them, “HazMat Manager/Loader.” Con-Way now appeals the jury determination with
regard to a second program, “HazMat Trucking Enforcer,” arguing that it was logically
inconsistent for the jury to find for it on HazMat Manager/Loader but not HazMat
Trucking Enforcer. Con-Way also argues that the jury was improperly directed by the
District Court to decide a question of law. For the reasons described below, on this issue
and on all other issues raised on appeal we will affirm the Order of the District Court.
2
FACTUAL AND PROCEDURAL HISTORY
Con-Way is a trucking company that moves hazardous materials. A Con-Way
employee designed a computer program called “HazCalc” which was intended to
organize internally Con-Way’s movement of hazardous materials. In 1999, Con-Way
representatives met with representatives of RegScan, Inc. (“RegScan”) to discuss the
possibility of developing HazCalc into a commercial product. RegScan has experience in
the production of regulatory software, as well as its marketing and sales. In a written
agreement dated May 3, 2000, Con-Way and RegScan agreed on a licensing arrangement
(“the Agreement” or “the Licensing Agreement.”). The Agreement sought to use
HazCalc as a springboard to develop a “Product” (as it was described in the agreement)
marketable for use in the trucking industry. RegScan would develop HazCalc into a
marketable product or products and Con-Way would receive 32% of the gross sales of
any “commercial implementation” of HazCalc. App. 51a.
RegScan viewed HazCalc before the agreement was signed. There was conflicting
testimony about how useful HazCalc was to the RegScan software developers who
worked with it with the aim of developing commercially available products, but the
parties agree that three items were subsequently developed by RegScan and the
connection between those three items and HazCalc was the basis for the claim of breach
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of contract brought by Con-Way. The three items were HazMat Manager/ Loader,1
HazMat Enforcer, and HazMat Green Screen. HazMat Green Screen was a mainframe
system and not a software program like HazMat Enforcer and HazMat Manager.2
(Con-Way has not appealed the jury’s verdict that HazMat Green Screen is not covered
by the agreement.)
In 2001, RegScan began selling HazMat Manager/Loader. RegScan made two
royalty payments to Con-Way in the total amount of $3,420.00 before RegScan
discontinued, alleging that the Agreement was no longer binding. Con-Way brought suit
in federal court, alleging breach of contract.3 The jury trial lasted from December 6-7,
2005. RegScan argued that none of the programs was derived from HazCalc.
1
HazMat Manager/Loader was referred to at some points as HazMat Manager and
HazMat Loader. As the District Court charged the jury, “You will recall that during the
testimony, HazMat Loader and HazMat Manager were referred to interchangeably. So
although there are still three, you will consider that HazMat Loader and HazMat Manager
really refer to one of the three, and then there is HazMat Trucking Enforcer and HazMat
Green Screen. So just by way of clarification there are three, HazMat Loader and
HazMat Manager used interchangeably, that’s one; HazMat Trucking Enforcer and
HazMat Green Screen.” App. 141a.
2
According to Thomas Balaban, RegScan Vice President, Green Screen was designed
to run “on a large mainframe computer as opposed to a PC. It was something that we
were not aware of when we started the application, was that all the major trucking
companies had not gone the PC route. That was a surprise to us. They were in – all using
mainframes, if you remember the old days if you’ve ever seen some of the computers of
20 years ago that had green lettering on a black screen, no graphics, just strictly – that’s
the green screen, that’s where the term comes from.” App. 112a.
3
A state court proceeding was brought by RegScan regarding the validity of the
contract but it is of limited relevance to the instant appeal.
4
RegScan argued at trial that when it received HazCalc it found it to be, in the
words of one witness (Wilcox) “a rather incompetent program,” that was
“incomprehensible and totally useless for developing new software.” App. 95a. He said
that the hope was that it could be used to create new software but “it never happened. It
just – we could not figure that thing out.” 95a. Asked if his team started from scratch
when it began the HazMat Loader project, Wilcox answered: “Basically.” App. 96a.
Asked if they used anything from HazCalc in designing HazMat Loader, Wilcox
answered: “No, no.” App. 96a.
RegScan also contended that HazMat Trucking Enforcer was not a “Product”
covered by the Licensing Agreement because it was not a commercial implementation of
HazCalc. It pointed to the unique needs of law enforcement (who had to be aware of
more labels on trucks than any single truck company); the fact that the program included
roughly three times the functionality of HazMat Manager in light of additional features
and information included; the fact that it could link violations to specific regulations; and
the fact that it could upload violations into a government database.4
4
Specific testimony was put forward to this effect, from a variety of witnesses.
See, e.g., App. 118-19a (Lang Direct) (testifying that Trucking Enforcer has three times
the functionality of Manager/Loader and does not contain anything from HazCalc); App.
116a (Shanahan Direct) (testifying that Trucking Enforcer does not use anything from
HazCalc); App. 110a (Balaban Direct) (testifying that Trucking Enforcer was not
developed from HazCalc); App. 101-102a (Ertel Direct) (testifying that Trucking
Enforcer’s purposes are distinct from those of Manager/Loader).
5
At the charging conference, the issue was raised about how to separate out the
different programs for the jury. The following conversation occurred:
[Counsel for RegScan]: . . . . [T]here are three distinct products that are at
issue here, HazMat Loader/Manager, HazMat Trucking Enforcer, and
HazMat Manager Green Screen. And I think there’s been a fair amount of
testimony about the differences between those. And I think the jury can
find or could find that HazMat Loader was a product, but Trucking
Enforcer and Green Screen were not.
The Court: No question they could, and I don’t disagree with that.
[Counsel for Con-Way]: And it’s covered in the charge, Your Honor.
App. 122a.
The District Court’s jury charge included the following:
To review then, you may find that none of the software are products under
the Licensing Agreement, or you may find that one of the three, two of the
three, or that all of the three of the software are subject to the Licensing
Agreement.
App. 136a.
The jury rendered its verdict on December 8, 2005. The verdict sheet showed that
the jury found for Con-Way only with regard to royalties on HazMat Manager/Loader.
The jury found no breach of contract with regard to HazMat Trucking Enforcer or
HazMat Green Screen. The Court entered a judgment on the jury verdict in the amount of
$36,100.64. This amounted to 32% of the gross sales of HazMat Manager/Loader, minus
the amount already paid to Con-Way by RegScan.5
5
The District Court subsequently entered an amended judgment in the amount of
$43,685.64 to account for omitted HazMat Manager/Loader sales and prejudgment
interest.
6
Prior to the verdict being rendered, Con-Way orally moved for judgment as a
matter of law pursuant to Rule 50(a) of the Federal Rules of Civil Procedure. The Court
denied the oral motion, and after the verdict the motion was renewed pursuant to
Rule 50(b) and was briefed by the parties, along with a motion by Con-Way for a new
trial on the issue of damages pursuant to Rule 59 of the Federal Rules of Civil Procedure.
The District Court held that “a reasonable jury could easily have concluded that
HazMat Trucking Enforcer was not a ‘Product’ pursuant to the Agreement.” App. 10a.
The Court examined Con-Way’s arguments and found that they essentially amounted to
disputes as to what the evidence showed, but that the jury had credited RegScan’s version
of the facts. It held that the jury had “more than the ‘minimum quantum’ of evidence
upon which it could render the judgment that it did. To rule otherwise would clearly be
an impermissible substitution of [my] judgment in place of that of the jury.” App. 11a
(quoting Keith v. Truck Stops Corp., 909 F.2d 743, 745 (3d Cir. 1990)).6
6
The District Court denied the request for a new trial on damages based on similar
reasons. Con-Way also put forward an argument that the District Court erred by
submitting a legal question to the jury for determination. The Court wrote in denying this
argument:
[Con-Way] submits that reading the Agreement together with the ‘scope of
work’ documents unequivocally proves that HazMat Manager/Loader was a
‘Product’ under the Agreement, and therefore as a logical conclusion
HazMat Trucking Enforcer was also a ‘Product’ subject to the Agreement.
Further, [Con-Way] argues that no reasonable juror could have determined
that HazMat Trucking Enforcer was not derived from HazMat Manager/
Loader.
First, [I] note that a plain reading of the Agreement clearly indicates
7
Con-Way timely appealed both the Rule 50(b) denial and the Rule 59 denial.
DISCUSSION
We have jurisdiction pursuant to 28 U.S.C. § 1291 and the District Court had
jurisdiction pursuant to 28 U.S.C. § 1332.7 “Our review of the district court’s denial of a
Rule 50(b) motion is plenary.” Trabal v. Wells Fargo Armored Serv. Corp., 269 F.3d
243, 249 (3d Cir. 2001). Judgment notwithstanding the verdict “may be granted under
Fed. R. Civ. P. 50(b) ‘only if, as a matter of law, the record is critically deficient of that
minimum quantity of evidence from which a jury might reasonably afford relief.’” Id.that its terms are vague as they relate to the matters in dispute, at best. To
be sure, [I] do not believe it was the intent of either party to create a
contractual document that contained ambiguous terms. Despite the efforts
and negotiations of the parties, however, the resulting Agreement was not
unambiguous. In the face of this unclarity, factual questions arose that were
properly submitted to the jury for resolution.
App. 9a.
7
Defendant RegScan puts forward a cross-appeal in which it contends that the District
Court decision lacked subject matter jurisdiction because this diversity case lacked the
requisite amount in controversy under 28 U.S.C. § 1332. It is clear that the complaint met
the requirements of § 1332. The parties agree that the entire amount that could come due
to Con-Way exceeded $75,000. As the District Court held when this challenge was raised
before it, RegScan initially disclaimed the validity of the contract in its answer (as it had
in a previous state-court action against Con-Way), and thus the entire value of the
payments was the correct amount with which to calculate the amount in controversy. See
Dardovitch v. Haltzman, 190 F.3d 125, 135 (3d Cir. 1999) (“Where a plaintiff brings a
suit for payment of money as part of an ongoing and continually accruing obligation, such
as an installment contract, the amount in controversy is generally limited to the amount
then due and owing, even if a judgment would have collateral estoppel effects on liability
for future payments. Where, by contrast, a suit is brought to establish directly the right to
receive any payments because the putative defendant has repudiated that right entirely,
and not just with respect to current payments, the amount in controversy is the entire
amount that may ever come due.”) (citation omitted).
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(quoting Powell v. J.T. Posey Co., 766 F.2d 131, 133-34 (3d Cir. 1985)). With regard to
the request for a new trial on damages, we review the denial of a new trial motion for
abuse of discretion. Waldorf v. Shuta, 142 F.3d 601, 621 (3d Cir. 1998). We give
RegScan the “benefit of all logical inferences that could be drawn from the evidence
presented, resolv[ing] all conflicts in the evidence in [its] favor and, in general, view[ing]
the record in the light most favorable to [it].” Williamson v. Conrail, 926 F.2d 1344, 1348
(3d Cir. 1991).
Con-Way’s sufficiency of the evidence argument boils down to whether one
should view HazMat Trucking Enforcer as part of an inviolable chain (HazCalc – HazMat
Manager/Loader – HazMat Trucking Enforcer) as Con-Way asserts, or as a distinct
application that came to exist after RegScan found HazCalc to be of very little use, and
after it sought to create a new application with different uses and purposes for a different
customer. As the District Court wrote, the jury heard two days of testimony as to the
unique purpose and function of HazMat Trucking Enforcer. At least four different
witnesses, see n.4 supra, testified that HazMat Trucking Enforcer was not a commercial
implementation of HazCalc–the two had different purposes, functions, coding, scope, and
customers. The jury simply credited RegScan’s witnesses with respect to HazMat
Trucking Enforcer but not with respect to HazMat Manager/Loader. This is a legally
available disposition of the case. There was no objection at the time of the jury charge to
the notion that the jury could find for Con-Way on one product and not the other, and the
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judge’s charge was patterned on what Con-Way submitted. It is clear that the verdict
with respect to HazMat Trucking Enforcer was one at which a reasonable jury could
arrive.
As to the question of whether the District Court improperly gave the jury the task
of determining a legal issue, Con-Way faces the same problem. The alleged defects in the
jury charge were not objected to at the time of the charge, and we agree with the District
Court that the jury was not asked to decide a question of law here but, rather, to apply the
contract as written to the facts as they found them.
CONCLUSION
For the reasons set forth above, we will AFFIRM the decision of the District Court
denying Con-Way’s motions for relief pursuant to Rules 50 and 59, and we will DENY
RegScan’s cross-appeal.
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