Carolina Security v. Control Systems Intl ( 1998 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
CAROLINA SECURITY AND FIRE
INCORPORATED; CLIFTON REYNOLDS;
DOTTIE REYNOLDS; HVAC
CONSTRUCTION COMPANY,
INCORPORATED; FRED L. HATFIELD;
DOROTHY HATFIELD,
Plaintiffs-Appellants,
No. 97-1528
v.
CONTROL SYSTEMS INTERNATIONAL,
INCORPORATED, a Delaware
corporation,
Defendant-Appellee,
UNITED STATES OF AMERICA,
Movant.
Appeal from the United States District Court
for the District of South Carolina, at Columbia.
Patrick Michael Duffy, District Judge.
(CA-95-1577-3-23)
Argued: April 10, 1998
Decided: July 21, 1998
Before MOTZ, Circuit Judge,
STAMP, Chief United States District Judge for the
Northern District of West Virginia, sitting by designation,
and DOUMAR, Senior United States District Judge for the
Eastern District of Virginia, sitting by designation.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
COUNSEL
ARGUED: James Edward Bell, III, BELL & MOORE, P.A., Sumter,
South Carolina, for Appellants. David G. Surratt, CANTERBURY,
STUBER, ELDER, GOOCH, & SURRATT, P.C., Dallas, Texas, for
Appellee. ON BRIEF: Jeffrey A. Brannen, CANTERBURY, STU-
BER, ELDER, GOOCH & SURRATT, P.C., Dallas, Texas; Kimila
L. Wooten, OGLETREE, DEAKINS, NASH, SMOAK & STEW-
ART, L.L.P., Greenville, South Carolina, for Appellee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
Carolina Security and Fire, Inc. et al. ("plaintiffs") appeals an order
of the district court granting summary judgment to Control Systems
International, Inc. ("CSI") on plaintiffs' claims for breach of contract,
fraud, negligent misrepresentation, tortious interference with contract,
and federal and state antitrust violations. We affirm based on the rea-
soning of the district court.
I.
CSI is a small Texas based manufacturer of energy controls equip-
ment for heating and air conditioning units used in industrial build-
ings. CSI has a dual distribution system: 1) CSI will sell directly to
customers or 2) CSI will sell to "authorized" value added resellers
("VARs") who have been trained at CSI headquarters and have an
ongoing contract with CSI involving sales quotas and non-exclusive
territories. HVAC Construction Company, Inc. ("HVAC") and Caro-
lina Security and Fire, Inc. ("Carolina Security") are mechanical and
security contractors, respectively, based in South Carolina.
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On or about September 30, 1991, HVAC bid on two contracts to
update heating and air conditioning systems at four buildings at Fort
Jackson, South Carolina. The contracts with the U.S. government
specified that CSI equipment was to be used on the jobs and that the
contractor be an authorized CSI installer of the equipment. After sub-
mitting bids along with other contractors, HVAC was awarded the
two contracts for all four buildings.
HVAC did not use the authorized CSI subcontractor, Larry
Bironas, in its successful bid. Instead, HVAC used Larry Cantrell of
Electromatic, Inc. ("Electromatic"), who had installed similar systems
in the past at a lower price than Bironas, although it appears that none
of these systems were CSI systems. In order to use Cantrell on the
job, the government required CSI authorization of Cantrell.
On June 5, 1992, CSI account representative Kirk Northington sent
a letter to Cantrell to submit to Fort Jackson's contracting officer Glo-
ria Brown. The letter stated:
This letter is in confirmation of your Purchase Order . . .
for the HVAC project at Charleston Air Force Base, Build-
ing 215. As per our previous understanding, we will provide
the necessary CSI System 7000 components and some engi-
neering support where needed. We are in understanding that
Electromatic will perform all control system installation. In
our opinion Electromatic is qualified to perform CSI System
7000 installation.
This letter was then forwarded to Jan Whittemore, the Contracting
Administrator at Fort Jackson.
The plaintiffs contend that although the letter refers to the Charles-
ton Air Force Base, Northington knew that there was no such project
and that the equipment was to be used at Ft. Jackson pursuant to an
alleged oral contract between Cantrell and Northington.
According to CSI, Electromatic took possession of the system 7000
without paying for it, and then proceeded to divert delivery from
Charleston to Fort Jackson. The plaintiffs admit to this diversion, but
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state that Northington would only sell the system this way because he
wanted to protect his sales commission. CSI claims that even if there
was an oral contract between Cantrell and Northington, this agree-
ment constituted a scheme to ship the product to Fort Jackson by
invoice through Charleston so as to avoid CSI's policy of a branch
office not competing with VARs. Therefore, Northington was acting
outside the scope of his employment and the alleged oral contract was
not attributable to CSI.
When Hatfield was asked by Ft. Jackson officials about the refer-
ence to Charleston AFB, Hatfield replied that the letter applied to Ft.
Jackson, and this explanation was initially accepted. Subsequently,
CSI delivered the equipment to Cantrell who began the installation
process at Ft. Jackson.
After discovering that HVAC had obtained the CSI installation
contracts for Fort Jackson, Bironas asked Ft. Jackson personnel about
Electromatic's CSI authorization. Whittemore then contacted CSI to
determine if Electromatic was an authorized VAR.
Northington explained that Electromatic was not an authorized
VAR. An authorized VAR must have CSI approval to do the engi-
neering, start-up, and programming, as well as the installation itself
on any project in addition to signing a contract with CSI obligating
the VAR to send people to train in Dallas, Texas. Mike Busby, VAR
Operations Manager, was later contacted by Brown. He explained to
her that the letter CSI had sent to Electromatic only "qualified" Elec-
tromatic to install the system for one particular project with the assis-
tance of CSI and it did not make Electromatic an"authorized"
installer of the CSI system. Plaintiffs argue that this letter did not
accurately respond to Brown's inquiry as to whether they were autho-
rized to install CSI systems because the letter provided more informa-
tion than solicited.
Ultimately, HVAC was defaulted from the projects at Fort Jackson.
The basis for the default was failure to prosecute the work, failure to
pay contractors and suppliers, and failure to have an "authorized" CSI
subcontractor. Because HVAC could not bid on any further govern-
ment work due to lack of bonding capacity, CSI contends that HVAC
got Carolina Security to bid on an additional project at Fort Jackson.
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Carolina Security claims that it used HVAC and Cantrell as subcon-
tractors because it knew that Cantrell had been authorized to install
CSI systems. Carolina Security was apparently terminated when the
government realized that Hatfield was utilizing Carolina Security to
bid contracts at Ft. Jackson.*
The plaintiffs brought suit against CSI alleging breach of contract,
tortious interference with a contract, breach of contract accompanied
by a fraudulent act, civil conspiracy, and violations of the Unfair
Trade Practices Act ("UTPA") and the Sherman Antitrust Act under
15 U.S.C. § 1, together with various causes of action related to the
individual plaintiffs having to make payments under their indemnity
agreements.
Thereafter, CSI moved to dismiss pursuant to Fed. R. Civ. P. 12(b)
or, in the alternative, for summary judgment. The district court
granted summary judgment on all claims. The district court entered
a final order and the plaintiffs appealed therefrom.
II.
"Appellate review of a summary judgment requires an examination
of the record before the district court to determine de novo that there
is no genuine issue of material fact . . . ." Sempione v. Provident Bank
of Maryland, 75 F.3d 951, 954 (4th Cir. 1996)."The standard of
appellate review for the granting or denial of a summary judgment
motion is de novo. Thus, the court of appeals uses the same standard
as the district court." Shaw v. Stroud, 13 F.3d 791, 798 (4th Cir.
1994).
Rule 56(c) of the Federal Rules of Civil Procedure mandates the
granting of summary judgment when the evidence, viewed most
favorable to the nonmoving party, demonstrates that there is no genu-
ine issue of material fact and that the moving party is entitled to judg-
_________________________________________________________________
*Debarment proceedings were instituted against both HVAC and Car-
olina Security. Carolina Security contends that this was part of the
"scheme" to eliminate these companies from the Fort Jackson projects at
any cost. However, HVAC and Carolina Security did settle with the gov-
ernment and agree to a three-year debarment.
5
ment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S.
242 (1986). A party opposing a properly supported motion for sum-
mary judgment may not rest on the mere allegations or denials of his
pleadings, but must set forth, by affidavit or other proof, specific facts
showing that there is a genuine issue of material fact. Id. The exis-
tence of a mere scintilla of evidence in support of the nonmoving
party's position is not sufficient to overcome a motion for summary
judgment. A party's response to the motion must set forth specific
facts, admissible in evidence, showing that there is a genuine issue for
trial. If he does not so respond, summary judgment should be entered
against him. Id. The evidence and all reasonable inferences from the
evidence must be viewed in the light most favorable to the non-
moving party. Id. If a party fails to show an essential element of the
case for which that party has the burden of proof, summary judgment
is appropriate. Id.In a well-reasoned opinion, the district court concluded that even
if an oral agreement to sell equipment for use at Ft. Jackson existed
between the plaintiffs and Northington, Northington lacked the
authority to enter into the alleged contract on CSI's behalf. Further-
more, plaintiff had actual knowledge of Northington's lack of author-
ity and thus could not have relied on Northington's representations.
Without the right to rely, the district court held that the plaintiffs had
no claim for breach of contract, fraud, negligent misrepresentation,
and breach of contract accompanied by a fraudulent act. In addition,
the district court found that plaintiffs had no claim for tortious inter-
ference with contract because CSI was justified in voiding any unau-
thorized actions of its agents.
With regard to the UTPA claim, the district court concluded that
the plaintiffs failed to prove that CSI's allegedly unfair acts adversely
impacted the public interest because the plaintiffs did not show that
the acts were capable of repetition.
The district court held that the Sherman Antitrust claim failed
because the interactions between CSI and Bironas did not give rise to
a reasonable inference of conspiracy. The Court concluded that
although Bironas complained to CSI about the plaintiffs' contracts at
Ft. Jackson, a conspiracy will not be inferred when a manufacturer
responds to a dealer's complaints. With regard to the civil conspiracy
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claim, the district court concluded that the plaintiffs failed to allege
additional facts in furtherance of the conspiracy but instead realleged
those found in the UTPA claim and the Sherman Antitrust claim.
Finally, the district court dismissed the remaining causes of action
involving the indemnity agreements for failure to state a claim upon
which relief could be granted.
Having reviewed the record, briefs, and relevant statutes and case
law, and having had the benefit of oral argument on the matter, we
conclude that the district court's rulings were correct. Accordingly,
we affirm on the reasoning of the district court opinion. See Hatfield,
et al. v. Control Systems International, Civil Action No. 3:95-1577-23
(D.S.C. March 14, 1997).
AFFIRMED
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