[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________ FILED
U.S. COURT OF APPEALS
No. 05-10835 ELEVENTH CIRCUIT
AUGUST 10, 2006
________________________
THOMAS K. KAHN
CLERK
D. C. Docket No. 04-01104-CV-J-S
IMAGING BUSINESS MACHINES, LLC.,
Plaintiff-Appellant,
versus
BANCTEC, INC.,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Alabama
_________________________
(August 10, 2006)
Before TJOFLAT and PRYOR, Circuit Judges, and GEORGE*, District Judge.
GEORGE, District Judge:
Imaging Business Machines, LLC, produces high-speed document scanners.
It alleges that Banctec, Inc. developed a competitive high-speed document scanner
*
Honorable Lloyd D. George, United States District Judge for the District of Nevada,
sitting by designation.
by copying trade secrets and confidential features of an Imaging Business
Machines’ scanner.
The district court orally denied Imaging Business Machine’s motion for a
preliminary injunction, finding a lack of evidence of damages. In so finding, the
district court expressly discounted evidence that two customers purchased the
infringing BancTec scanner rather than a newer model of Imaging Business
Machines’ scanner. In a written amendment, the district court further reasoned
that Imaging Business Machines failed to show BancTec copied features that were
trade secrets. Subsequently, the district court specifically limited discovery of
damages to the scanner model that BancTec copied. The district court then
granted BancTec’s motion for summary judgment for essentially the same reasons
that it denied the preliminary injunction. Imaging Business Machines appeals the
grant of summary judgment.1 We have jurisdiction pursuant to 28 U.S.C. §1291
and reverse the grant of summary judgment.
1
Imaging Business Machines also appeals the denial of its motion for a preliminary
injunction and the district court’s order limiting discovery. Though the issue is close, we
summarily find that the district court did not abuse its discretion in denying the preliminary
injunction. By contrast, the district court plainly abused its discretion in limiting discovery.
2
I
In 1994, Imaging Business Machines began marketing the ImageTrac I, a
high-speed, high-volume color document scanner.2 Several years later, the
company introduced the ImageTrac II to market, which model was both quicker
and had a better camera. During this time, BancTec began marketing its own
high-speed scanners, the S-Series. In general, however, the two product lines did
not compete with each other. Indeed, BancTec’s foreign subsidiaries purchased
ImageTrac scanners for resale, which Imaging Business Machines re-labeled as
BancTec scanners for the foreign subsidiaries.
On March 15, 2000, Imaging Business Machines and BancTec entered into
a two-year Reseller Agreement. The agreement required BancTec to refrain from
copying or reverse engineering Imaging Business Machines’ products. The
reseller relationship between the two companies continued after March 2002.
During 2002 and 2003, BancTec began development of a scanner that would
directly compete with the ImageTrac scanners. BancTec developed its scanner by
copying mechanical features of the ImageTrac II.
2
Given the posture in which this matter comes before this panel, the facts we set
forth are those most favorable to Imaging Business Machines.
3
When Imaging Business Machines asked BancTec whether it was
developing a scanner to compete with the ImageTrac scanners, BancTec falsely
stated that it was not developing such a scanner. BancTec introduced its scanner
to the market as the DocuScan 9000 in March 2004.
During the same time that BancTec developed the DocuScan 9000, Imaging
Business Machines developed and introduced two updated versions of its
ImageTrac scanners: the ImageTrac III and IV. The primary difference between
the ImageTrac II and IV is that the latter has a higher speed camera that allows the
scanner to run faster. Otherwise, the ImageTrac IV generally uses the same
mechanical components of the ImageTrac II that BancTec copied and used to
develop the DocuScan 9000.
BancTec has sold at least eleven DocuScan 9000s since its introduction. As
to at least two of those sales, the customer purchased the DocuScan 9000 rather
than an ImageTrac IV. Imaging Business Machines, however, did not offer
evidence that the DocuScan 9000 specifically competed against an ImageTrac II
for any particular sale, or that any customer purchased a DocuScan 9000 rather
than an ImageTrac II.
II
4
“We review the district court's grant of summary judgment de novo,
applying the same legal standards that bound the district court, and viewing all
facts and reasonable inferences in the light most favorable to the nonmoving
party.” Cruz v. Publix Super Mkts., Inc., 428 F.3d 1379, 1382 (11th Cir.2005)
(internal quotes and emphasis omitted). A grant of summary judgment is
appropriate where “the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to
judgment as a matter of law.” Fed.R.Civ.P. 56(c).
III
We begin by examining whether summary judgment was appropriately
granted as to Imaging Business Machines’ claim for fraud because it failed to offer
evidence supporting the element of injury.3 In its motion for summary judgment,
3
The element of injury is also often referenced as the element of damage. The
district court, however, granted summary judgment based solely on its finding that Imaging
Business Machines’ failed to show damages rather than damage. As noted by the Alabama
Supreme Court: “damage” (in the singular) refers to the loss or injury sustained by a plaintiff
while “damages” (in the plural) refers to “‘a pecuniary compensation’ for an injury or loss.”
Boswell v. Liberty Nat. Life Ins. Co., 643 So.2d 580, 584 (Ala. 1994).
We recognize that the failure to offer evidence of damages may, in some circumstances,
amount to a failure to offer evidence of an injury. See, Mobile Building and Loan Ass’n v.
Odom, 232 Ala. 19, 166 So. 698 (Ala. 1936). This, however, is not necessarily always true. For
example, in Maring-Crawford Motor Co. v. Smith, 285 Ala. 477, 233 So.2d 484 (Ala. 1970), the
plaintiff sued the defendant for fraudulently selling her a used vehicle as if it was new. At trial,
the plaintiff failed to establish her damages because she did not offer evidence of the value of the
car if it had been new. Nevertheless, she had established that she suffered an injury since a jury
5
BancTec attacked Imaging Business Machines’ claim for fraud solely on the basis
that the plaintiff was not injured. We conclude that BancTec never met its initial
burden on summary judgment.
In Alabama, a party who commits a wrongful act is responsible for the
injuries that the wrongful act causes to another. “It is well established by many
decisions in [Alabama] that persons who perpetrate torts are, as a rule, responsible
for the consequences of the wrongs they commit. That is, unless the tort be the
proximate cause of the injury complained of, there is no legal accountability.”
Louisville & N.R. Co. v. Maddox, 236 Ala. 594, 183 So. 849, 852 (Ala. 1938).
Proximate cause is an act or omission that in a natural and continuous
sequence, unbroken by any new independent causes, produces the
injury and without which the injury would not have occurred. The
requirement of foreseeability is imposed to preclude a finding of
liability when the defendant's conduct was part of the causal chain of
events leading to the injury but the resulting injury could not have
been reasonably anticipated by the defendant. Foreseeability does not
require that the particular consequence should have been anticipated,
but rather that some general harm or consequence could have been
anticipated.
could reasonably infer that a used car is less valuable than a new car. Id., at 492. The plaintiff’s
failure to show damages (ie, the pecuniary difference in value between the new and used vehicle)
merely precluded an award of compensatory damages for her injury. Id. She could however,
recover nominal damages for that injury as Alabama permits an award of nominal damages for a
claim of fraud where the plaintiff has established a breach of legal duty but has either not
suffered damages or failed to prove damages. Id. Accordingly, a finding that a plaintiff failed to
offer evidence of damages does not, standing alone, permit the grant of summary judgment for
failure to offer evidence of an injury.
6
Thetford v. City of Clanton, 605 So.2d 835, 840 (Ala. 1992). In the context of a
motion for summary judgment arguing a lack of injury, the defendant’s initial
burden is to show that a plaintiff lacks evidence regarding each injury alleged to
be proximately caused by its wrong.
In this case, Imaging Business Machines alleged in its complaint that it
continued to sell scanners to BancTec in reliance on the fraudulent representation
that the latter was not developing a competing scanner. This allegation--that
Imaging Business Machines lost the economic opportunity of altering its
relationship with BancTec from reseller to future competitor--was plainly a
sufficient allegation of an injury. Although BancTec correctly recited this
allegation of injury in its motion, it nevertheless relied upon the district court’s
finding (first stated in the oral ruling denying the motion for a preliminary
injunction) that Imaging Business Machines failed to show a loss of customers.
The district court’s finding regarding lost customers, however, was irrelevant to
whether Imaging Business Machines lost the economic opportunity of altering its
business relationship with BancTec. Further, BancTec did not offer any other
argument suggesting that Imaging Business Machines could not offer evidence of
the injury alleged in the complaint. Accordingly, BancTec did not meet its initial
7
burden on summary judgment and the burden never shifted to Imaging Business
Machines to offer evidence of its injury resulting from the alleged fraud.
Although the burden never shifted to Imaging Business Machines to offer
evidence that it suffered an injury, we note that it nevertheless offered sufficient
evidence of several injuries proximately caused by the fraud to preclude a grant of
summary judgment. First, Imaging Business Machines submitted the affidavit of
its president, Gary Murphy, that the corporation would have ceased selling
scanners to BancTec, thus limiting the latter’s access to the market, if the latter
had truthfully stated that it was developing a competing scanner. A fact-finder
could readily infer that a manufacturer is injured when it loses an opportunity to
timely react to a reseller’s plans to become a competitor. Thus, Murphy’s affidavit
was sufficient evidence to create a triable issue of fact whether Imaging Business
Machines’ suffered the injury specifically alleged in the complaint.
Second, as recognized by the district court, Imaging Business Machines
offered evidence that it lost two sales to BancTec’s DocuScan 9000. Plainly the
loss of a sale is an injury. The district court, however, summarily discounted this
evidence (in its order denying the preliminary injunction) solely because the sales
involved the ImageTrac IV rather than the ImageTrac II. The injured party,
however, is not the ImageTrac II but is Imaging Business Machines. Thus, the
8
relevant query is not limited to whether BancTec’s conduct proximately caused
injury to sales of the ImageTrac II, but whether that conduct proximately caused
injury to Imaging Business Machines. In light of the record established below,
whether BancTec’s fraudulent representation proximately caused the loss of the
two sales of the ImageTrac IV is an issue to be resolved by the fact-finder.
Accordingly, the district court’s grant of summary judgment as to Imaging
Business Machines’ claim for fraud was in error.
IV
In moving for summary judgment, BancTec attacked the element of injury
only as to Imaging Business Machines’ claim for fraud. Thus, the district court’s
grant of summary judgment for failure to show injury as to the remaining claims
was sua sponte. In so granting summary judgment, however, the district court
procedurally erred by failing to give proper notice to Imaging Business Machines.
“[A] district court may enter summary judgment sua sponte if the parties are given
adequate notice that they must present all of their evidence.” Flood v. Young
Woman's Christian Ass'n of Brunswick, Georgia, Inc., 398 F.3d 1261, 1267 (11th
Cir. 2005) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 326, 106 S.Ct. 2548,
2554, 91 L.Ed.2d 265 (1986). “Consistent with the importance of the procedural
protection afforded by Rule 56(c), courts have strictly enforced the requirement
9
that a party threatened by summary judgment must receive notice and an
opportunity to respond.” Massey v. Congress Life Ins. Co. 116 F.3d 1414, 1417
(11th Cir. 1997). The mandatory character of this notice also applies to a district
court’s sua sponte consideration of summary judgment. Id.
BancTec’s motion for summary judgment only raised the issue of injury as
to Imaging Business Machine’s claim for fraud. Imaging Business Machines
responded on the issue of damage only as it pertained to its claim of fraud. Thus,
the district court’s consideration of the element of damage as to the remaining
claims was sua sponte. As the district court did not comply with Rule 56(c),
failing to notify Imaging Business Machines that it would be considering the issue
of injury as to each of the remaining claims, the grant of summary judgment on the
issue of injury as to these claims was procedurally improper and must be vacated.
V
Finally, we consider the district court’s grant of summary judgment as to
whether the information that BancTec appropriated from the ImageTrac II
constituted a trade secret or confidence. In granting summary judgment, the
district court ruled that it “has already found that the misappropriation of trade
secret claim must fail as a matter of law . . . .” The district court then referenced
10
its written amendment to the oral order denying Imaging Business Machines’
motion for a preliminary injunction.
“[A] district court may grant preliminary injunctive relief when the moving
party shows that: (1) it has a substantial likelihood of success on the merits of the
underlying case when the case is ultimately tried; (2) irreparable injury during the
pendency of the suit will be suffered unless the injunction issues immediately; (3)
the threatened injury to the movant outweighs whatever damage the proposed
injunction may cause the opposing party; and (4) if issued, the injunction would
not be adverse to the public interest.” Alabama v. U.S. Army Corps of Eng’rs, 424
F.3d 1117, 1128 (11th Cir. 2005). The district court applied the first of these
factors--that the moving party show a substantial likelihood of success on the
merits--to assess the evidence whether Imaging Business Machines had a trade
secret in the components of its ImageTrac II scanner.
In contrast to the four-factor test applied on a motion for preliminary
injunction, a motion for summary judgment requires the moving party to show the
absence of any genuine issues of fact. Fed. R. Civ. Pro. 56(c); Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986). Once the moving party meets its initial burden
on summary judgment, the non-moving party must submit facts showing a genuine
issue of material fact. Fed. R. Civ. Pro. 56(e). As summary judgment allows a
11
court "to isolate and dispose of factually unsupported claims or defenses," Celotex,
477 U.S. at 323-24, the court resolves any dispute in the evidence "in the light
most favorable to the opposing party." Adickes v. S. H. Kress & Co., 398 U.S.
144, 157 (1970).
Plainly, Imaging Business Machines bore a significantly different burden in
moving for preliminary injunction than it bore in opposing BancTec’s motion for
summary judgment. Further, and significantly, in resolving each of these motions,
the district court was required to apply a substantially different standard in
reviewing the evidence and resolving contested issues. In considering the motion
for preliminary injunction, the district court could assess the likelihood that
Imaging Business Machines’ evidence would be persuasive to a fact-finder in light
of BancTec’s evidence. In resolving whether Imaging Business Machines would
likely succeed on the merits, the district court could consider the credibility of
witnesses and was not limited to resolving any disputed issues of fact in the light
most favorable to Imaging Business Machines. The written amendment to the oral
order denying a preliminary injunction indicates that the district court resolved the
issue of whether Imaging Business Machines had a trade secret based on the
strength and persuasiveness of BancTec’s evidence, apparently discounting the
contrary evidence presented by Imaging Business Machines.
12
In considering the motion for summary judgment, however, the district court
had a duty to construe the evidence presented to it in the light most favorable to
Imaging Business Machines, resolving any contested issue of fact in favor of
Imaging Business Machines. The written amendment to the order denying the
preliminary injunction, however, lacks any language suggesting that the district
court applied this summary judgment standard to the evidence underlying
BancTec’s motion for summary judgment. Rather, the language of the written
amendment to the order denying the preliminary injunction establishes the
contrary; the district court discounted Imaging Business Machines’ evidence,
weighed it against evidence submitted by BancTec, and largely adopted BancTec’s
evidence in finding that Imaging Business was unlikely to succeed on the merits of
whether it had trade secrets. The district court’s order granting summary judgment
lacks any indication that the district court reconsidered the evidence pursuant to
the appropriate summary judgment standard. Rather, the record before this court
establishes that, in granting summary judgment, the district court relied solely
upon its prior finding that Imaging Business Machines lacked a trade secret, which
finding was not the result of resolving all disputes and drawing all inferences in
the light most favorable to Imaging Business Machines. Accordingly, the grant of
13
summary judgment must be reversed on the issue of whether the information
appropriated by BancTec was a trade secret or otherwise confidential.
We would also note that, in light of the record before us, application of the
appropriate summary judgment standard would require the denial of BancTec’s
motion for summary judgment on the issue of whether Imaging Business
Machines had a protectible trade secret or otherwise confidential information.
Construing disputed issues of fact in the light most favorable to Imaging Business
Machines, the record raises genuine issues of material fact whether the
information was generally known and whether the information was readily
ascertained from publicly available information. A particularly acute issue of fact
remains as to whether Imaging Business Machines’ integration of the various
individual mechanical elements into a single device constituted a trade secret. A
genuine issue of fact also remains as to whether Imaging Business Machines made
reasonable efforts to maintain the secrecy of its information.
VI
Accordingly, we conclude that the district court erred in granting the motion
for summary judgment.
REVERSED in part, AFFIRMED in part, and REMANDED.
14