United States Court of Appeals,
Fifth Circuit.
No. 93-7661.
Phillip COCKERHAM, John A. Cockerham, Jr. and John Cockerham,
Sr., Plaintiffs-Appellants,
v.
KERR-McGEE CHEMICAL CORPORATION, Defendant-Appellee.
June 16, 1994.
Appeal from the United States District Court for the Northern
District of Mississippi.
Before WISDOM, DAVIS, and DUHÉ, Circuit Judges.
DUHÉ, Circuit Judge:
Appellants, Phillip Cockerham, John A. Cockerham, Jr. and John
Cockerham, Sr., appeal from the district court's grant of summary
judgment for Appellee, Kerr-McGee Chemical Corporation. Appellants
sued Kerr-McGee for fraudulent and negligent misrepresentation;
tortious interference with a prospective contract; quantum meruit
and unjust enrichment. The district court held that Appellants had
failed to establish a genuine issue of material fact on any of the
claims and dismissed all claims with prejudice. We affirm.
BACKGROUND
The following facts are undisputed. Kerr-McGee Chemical
Corporation wanted to raise a levee on a sedimentation pond at its
manufacturing plant in Hamilton, Mississippi. The Cockerhams1
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Phillip and John Cockerham are partners in Hamilton Gravel
Company. Phillip and John's father, John Cockerham, Sr., was to
supply financial assistance to his sons. The district court
concluded that a joint venture existed and ordered that John Sr.
be made a party.
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contacted James Hargis ("Hargis"), Kerr-McGee's manager of
operations and planning, to determine if Kerr-McGee required fill
dirt. Hargis told the Cockerhams that they could attend the
pre-bid meeting as a potential supplier of fill dirt. The proposed
prime contract distributed during the pre-bid meeting provided that
the prime contractor would purchase and supply the fill dirt. The
proposed contract also specified the type of dirt, but did not note
the source or location of the dirt to be used.
The Cockerhams found approximately 170 acres of land north of
and adjacent to Kerr-McGee's plant site known as the Keaton Estate.
According to Phillip Cockerham, he had a verbal agreement to
purchase the Keaton Estate and had made financing arrangements for
that purchase. Hauling dirt from this site rather than other sites
south of the plant was preferable.
On June 3, 1990, Kerr-McGee received bids from potential prime
contractors. Yates Construction Company (Yates) and Phillips
Contracting Company (Phillips) were the lowest bidders, but Kerr-
McGee rejected both bids.
Thereafter, the Cockerhams reported to Hargis that they had
located a potential fill dirt site on the Keaton Estate. Hargis
disclosed this information to Yates and Phillips. The Cockerhams,
Hargis, Henry Seawell, Kerr-McGee's consulting engineer, and
representatives from Yates and Phillips met at the Keaton Estate to
examine the fill dirt. Upon Hargis's request, the Cockerhams dug
a test hole on the Keaton Estate, approximately a hundred feet from
Kerr-McGee's property.
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Yates and Phillips resubmitted their bids using the fill dirt
from the Keaton Estate, but their second bids were also rejected.
After digging test holes on its own property, Kerr-McGee decided to
use fill dirt from its property and requested that Yates resubmit
its bid using Kerr-McGee's fill dirt. Yates's bid was accepted
resulting in a substantial savings to Kerr-McGee. Kerr-McGee had
used its own fill dirt for other projects in the past.
DISCUSSION
I. Standard of Review
Summary judgment is appropriate if the record discloses "that
there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law."
Fed.R.Civ.P. 56(c). In reviewing the summary judgment, we apply
the same standard of review as did the district court. Waltman v.
International Paper Co., 875 F.2d 468, 474 (5th Cir.1989). The
pleadings, depositions, admissions, and answers to interrogatories,
together with affidavits, must demonstrate that no genuine issue of
material fact remains. Celotex Corp. v. Catrett, 477 U.S. 317, 106
S.Ct. 2548, 91 L.Ed.2d 265 (1986). To that end we must "review the
facts drawing all inferences most favorable to the party opposing
the motion." Reid v. State Farm Mut. Auto. Ins. Co., 784 F.2d 577,
578 (5th Cir.1986). If the record taken as a whole could not lead
a rational trier of fact to find for the nonmoving party, there is
no genuine issue for trial. Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d
538 (1986).
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II. Misrepresentation
The Cockerhams allege that Hargis induced Phillip Cockerham
into revealing the location of the Cockerhams' intended supply of
dirt by promising them that he would keep this information
confidential. The Cockerhams allege both fraudulent and negligent
misrepresentation. The Cockerhams have failed, however, to
establish a genuine issue of material fact as to either claim.
The first element of the tort of negligent misrepresentation
is "a misrepresentation or omission of a fact." Bank of Shaw v.
Posey, 573 So.2d 1355, 1360 (Miss.1990). The representation must
be based on past or presently existing facts rather than merely
consisting of a promise. Id. Because the Cockerhams only allege
representations of a future promise, they cannot succeed in
bringing a claim of negligent misrepresentation.
To establish fraudulent misrepresentation, the Cockerhams
must prove, by clear and convincing evidence, the following
elements: (1) a representation; (2) its falsity; (3) its
materiality; (2) the speaker's knowledge of its falsity, or
ignorance of the truth; (4) the speaker's intent that it should be
acted on by the hearer and in a manner reasonably contemplated;
(5) the hearer's ignorance of its falsity; (6) the hearer's
reliance on its truth and his right to rely thereon; and (7) the
hearer's consequent and proximate injury. Spragins v. Sunburst
Bank, 605 So.2d 777, 780 (Miss.1992). In cases where fraud is
alleged, a representation based on a promise is actionable if it is
a contractual promise made with the present intent of not
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performing it. Bank of Shaw, 573 So.2d at 1360.
The Cockerhams complain that Hargis misrepresented to them
that he would keep the location of the dirt supply confidential
from other Kerr-McGee officials. There is no dispute that Hargis
was Kerr-McGee's agent when he was dealing with the Cockerhams.
Under Mississippi general agency law, " "knowledge acquired by an
agent when transacting his principal's business will be imputed to
his principal although not communicated to him.' " Pittman v. Home
Indemnity Co., 411 So.2d 87, 89 (Miss.1982) (quoting Home Ins. Co.
v. Thornhill, 165 Miss. 787, 144 So. 861, 863 (1932)). Thus,
Hargis could not promise to the Cockerhams to keep information
confidential from other Kerr-McGee officials because as a matter of
law they were deemed to know it the moment it was told to Hargis.
As for disclosure to third parties, Kerr-McGee informed only
Yates and Phillips of the potential dirt supply. The Cockerhams
neither allege nor offer summary judgment evidence of any injury
suffered from the disclosure of the fill dirt location to these
third parties.
Alternatively, the Cockerhams argue that when Hargis told
them he would keep the information "in confidence," he was
promising that Kerr-McGee would not misappropriate the information
about the location of the dirt supply. Misappropriation of a trade
secret is an actionable wrong.
A trade secret is defined as a " "formula, pattern, device or
compilation of information which is used in one's business and
which gives him an opportunity to obtain an advantage over
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competitors who do not know or use it.' " ACI Chems., Inc. v.
Metaplex, Inc., 615 So.2d 1192, 1195 (Miss.1993) (quoting Cataphote
Corp. v. Hudson, 422 F.2d 1290, 1293 (5th Cir.1970)). "Where a
process or idea is so common, well known or readily ascertainable
that it lacks all novelty, uniqueness and originality, it
necessarily lacks the element of privacy necessary to make it
legally cognizable as a trade secret." Cataphote Corp. v. Hudson,
444 F.2d 1313, 1315 (5th Cir.1971).
Assuming that the location of the dirt supply on Keaton
Estate was a trade secret to the Cockerhams, Kerr-McGee neither
used the dirt from that property nor gave the information to a
competitor of the Cockerhams. Therefore, the Cockerhams have
failed to demonstrate that Kerr-McGee misappropriated the
Cockerhams' knowledge in this respect.
As for the argument that Kerr-McGee misappropriated the idea
of using dirt north of the plant, we conclude that this was not a
trade secret as a matter of law for the Cockerhams. The Cockerhams
do not dispute that Kerr-McGee had used dirt from its own land in
other projects. In fact, Phillip Cockerham testified that prior to
beginning his search, he voluntarily asked Hargis why Kerr-McGee
did not use the dirt on their land and informed Hargis that Kerr-
McGee probably had suitable dirt. Kerr-McGee found the suitable
dirt on its land through independent testing performed by its
employees. The Cockerhams cannot now argue that the location of
the fill dirt site was its trade secret when they had previously
volunteered the information and Kerr-McGee could readily ascertain
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whether suitable dirt existed.
III. Interference with a Prospective Contract
The Cockerhams argue that Kerr-McGee tortiously interfered
with its potential contract with the prime contractor, Yates.2 To
prevail on a claim for tortious interference with a prospective
contract, the Cockerhams must establish that (1) there was a
reasonable probability that they would have entered into a
contractual relationship; (2) Kerr-McGee acted maliciously by
intentionally preventing the relationship from occurring for the
purpose of harming the Cockerhams; (3) the acts were done without
right or justifiable cause; and (4) harm or damage occurred as a
result of Kerr-McGee's conduct. Hubbard Chevrolet Co. v. General
Motors Corp., 682 F.Supp. 873, 877 (S.D.Miss.1987), aff'd, 873 F.2d
873 (5th Cir.), cert. denied, 493 U.S. 978, 110 S.Ct. 506, 107
L.Ed.2d 508 (1989).
The parties' disagreement focuses on the malice element and
whether Kerr-McGee acted without right or justifiable cause.
Malice is the " "intentional doing of a wrongful act without legal
or social justification.' " Cranford v. Shelton, 378 So.2d 652,
655 (Miss.1980) (quoting Ramondo v. Pure Oil Co., 156 Pa.Super.
217, 48 A.2d 156 (1946)). Kerr-McGee argues that it had the right
to change the specifications in its prime contract before a bid was
awarded and a legitimate business interest in reducing its costs by
2
The Cockerhams do not argue on appeal that Kerr-McGee
interfered with an existing contract and, thus, have abandoned
this claim. See Marple v. Kurzweg, 902 F.2d 397, 399 n. 2 (5th
Cir.1990).
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using its own fill dirt. The Cockerhams respond that financial
self-interest should not be an absolute defense because most
interference claims relate somehow to a company's profit motive.
Kerr-McGee's interest extended, however, beyond mere
financial interest; it had a potential contractual relationship
with the prime contractor. In Martin v. Texaco, Inc., 304 F.Supp.
498, 502 (S.D.Miss.1969), the plaintiff had a verbal agreement with
a third party to sell its service stations and its consignment
business with the defendant, a petroleum supplier. The consignment
agreement required the defendant's approval of the plaintiff's
successor. Id. at 499. When defendant advised the potential
successor that it would exercise its contractual right to sell in
the consignee's area if it were profitable to do so, the plaintiff
sued for tortious interference. Id. at 500. The court found that
the defendant's actions constituted a "privileged interference":
The alleged offer and agreement on which plaintiff's suit is
based was strictly conditional upon the future occurrence of
certain events as to which the defendant not only had a
financial or business interest, but also the undisputed and
admitted right of determination and control....
Id. at 502; see also Davenport v. St. Paul Fire & Marine Ins. Co.,
978 F.2d 927, 933 (5th Cir.1992) (" "Absolute rights, including ...
the right to enter or refuse to enter into contractual relations,
may be exercised without liability for interference without
reference to one's motive as to any injury directly resulting
therefrom.' ") (quoting 45 Am.Jur.2d Interference § 23).
The parties do not dispute that the Cockerhams' agreement with
Yates was conditional on Yates's being awarded the prime contract.
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Kerr-McGee's bid proposal allowed it to reject the original bid
terms and amend the contract terms. Kerr-McGee exercised that
right and its actions were within the scope of its legitimate
interest.
IV. Quantum meruit
If their actions at law fail, the Cockerhams assert that they
are entitled to recover under the doctrine of quantum meruit. They
assert that a genuine issue of material fact exists as to whether
Kerr-McGee knew that acceptable fill dirt was located on its
property.
A person may recover for services rendered on a quantum
meruit basis if the "circumstances are such as to warrant an
inference of an understanding by the person performing the work,
that the person receiving the services, intends to pay for it."
Kalavros v. Deposit Guaranty Bank & Trust Co., 158 So.2d 740, 744
(Miss.1963). Recovery in quantum meruit is measured by the
reasonable value of materials or services rendered. Estate of
Johnson v. Adkins, 513 So.2d 922, 926 (Miss.1987).
Even assuming a genuine issue remains as to whether Kerr-
McGee knew that suitable dirt existed on its property, the
Cockerhams have failed to demonstrate that their services were
rendered under the reasonable expectation that Kerr-McGee knew
about and would pay for the services being performed. The
Cockerhams initially contacted Kerr-McGee, inquiring whether the
levee project would need fill dirt. Phillip Cockerham testified
that he begun an investigation of possible sites even before the
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pre-bid meeting. The Cockerhams knew that the prime contractor,
not Kerr-McGee, would supply and pay for the fill dirt. The
Cockerhams have adduced no summary judgment evidence that would
lead a rational trier of fact to find that it had a reasonable
expectation of being compensated by Kerr-McGee for their search of
the fill dirt prior to a final contract with the prime contractor.
V. Unjust Enrichment
The Cockerhams also seek to recover the extent to which Kerr-
McGee was unjustly enriched by its savings in using its own dirt.
"[A]n action for "unjust enrichment' lies in a promise, which is
implied in law, that one will pay to the person entitled thereto
which in equity and good conscience is his." Magnolia Federal
Savings & Loan Ass'n v. Randal Craft Realty Co., 342 So.2d 1308,
1311 (Miss.1977). A person is enriched when he receives a benefit
whether it is a profit or a loss avoided. Omnibank of Mantee v.
United S. Bank, 607 So.2d 76, 92 (Miss.1992). "What is important
... to remember is our law accepts no value condemning pursuit of
wealth, so long as it be done within legal parameters. There is
nothing inherently unjust about enrichment." Id.
Whether Kerr-McGee benefitted from the Cockerhams discovery
of the adjacent dirt site is not a material fact; the issue is
whether that benefit was unjust. We find that it was not. Kerr-
McGee had the legal right to use its own dirt. It was not
obligated either to purchase dirt from the Cockerhams or require
the prime contractor to purchase dirt from them. In sum, the
Cockerhams have no entitlement to the savings of Kerr-McGee.
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CONCLUSION
For the foregoing reasons, the district court's grant of
summary judgment for Kerr-McGee is AFFIRMED.
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