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Mapinfo Corp. v. Spatial Re-Engineering Consultants

September 28, 2006

MAPINFO CORPORATION, PLAINTIFF AND COUNTER-DEFENDANT,
v.
SPATIAL RE-ENGINEERING CONSULTANTS, DEFENDANT, COUNTER-CLAIMANT, AND THIRD-PARTY PLAINTIFF,
v.
USADATA, INC., THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: David R. Homer U.S. Magistrate Judge

MEMORANDUM-DECISION AND ORDER

Plaintiff MapInfo Corp. ("MapInfo") brought this action against its former partner, Spatial Re-Engineering Consultants ("SRC"), alleging six separate causes of action. Am. Compl. (Docket No. 59). SRC answered, asserting fourteen separate counter-claims (Docket No. 93) and commencing a third-party action against USADATA, Inc. ("USADATA") (Docket No. 52).*fn1 Presently pending is SRC's motion to preclude MapInfo's expert witness (Docket No. 126), MapInfo's motion to preclude SRC's expert witnesses (Docket Nos. 128, 129), and the motions of SRC and MapInfo for summary judgment pursuant to Fed. R. Civ. P. 56(b) (Docket Nos. 127, 130). SRC moves for summary judgment as to five of the six causes of action asserted by MapInfo in its amended complaint, eight of its fourteen counter-claims, and all third-party causes of action against USADATA. Docket No. 127. MapInfo moves for partial summary judgment as to the first cause of action in its amended complaint, all remaining counter-claims asserted by SRC against MapInfo, and all remaining third-party causes of action against USADATA. Docket No. 130.

For the reasons which follow, MapInfo's motions to preclude SRC's expert witnesses are granted in part and denied in part, SRC's motion to preclude MapInfo's rebuttal expert is granted, MapInfo's motion for summary judgment is granted in part and denied in part, and SRC's motion for summary judgment is denied.

I. Background

MapInfo is a Delaware corporation with a principal place of business in Troy, New York. SRC is a California limited liability corporation with a principal place of business in Orange, California. Both companies create, manufacture, and market computer software.

On October 1, 1998, MapInfo and SRC entered into a partnership agreement which authorized SRC to distribute MapInfo products to end-users. Gillis Decl. (Docket No. 130) at Ex. 2, Ex. A; Dax. Aff. (Docket No. 127) at Ex. 6 ("Partnership Agreement"). The parties also entered into a development and distribution agreement which provided that SRC would develop its proprietary software ("Allocate" and "Solocast") and integrate it with MapInfo's proprietary data to create a joint product that would be marketed under MapInfo's trademark, TargetPro. Dax Aff. at Ex. 58, Ex. A ("1998 Distribution Agreement"). The 1998 Distribution Agreement also granted MapInfo certain rights to distribute SRC's software. Id.

On December 22, 2000, MapInfo and SRC entered into another development and distribution agreement that superceded the 1998 Distribution Agreement. Dax Aff. at Ex. 8; Gillis Decl. at Ex. 2, Ex. C ("2000 Distribution Agreement"). The 2000 Distribution Agreement granted the parties the rights to develop and distribute certain products, including TargetPro. Id. However, the partnership deteriorated and both SRC and MapInfo sought termination of the Partnership Agreement and the 2000 Distribution Agreement. Def. Statement of Material Facts (Docket No. 127) at ¶ 19; Pl. Reply Statement of Material Facts (Docket No. 140) at ¶ 19. On February 15, 2002, the parties entered into an agreement to terminate the partnership on July 1, 2002. Dax Aff. at Ex. 9; Gillis Decl. at Ex. 2, Ex. B ("Termination Agreement").

On August 8, 2002, MapInfo commenced this action by alleging a single cause of action for breach of the Termination Agreement. Docket No. 1. SRC answered, asserting various counter-claims, and commenced a third-party action against USADATA. Docket Nos. 3,4. MapInfo moved to dismiss various SRC counter-claims and, along with USADATA, moved for summary judgment on SRC's counter-claims and third-party complaint for all claims relating to: 1) breach of contract and copyright infringement; and 2) violations of the Lanham Act, 15 U.S.C. § 1114, and New York General Business Law § 349. Docket Nos. 25, 29. SRC cross-moved for a declaratory judgment that it was entitled to audit MapInfo's books and to amend its answer and counter-claims. Docket No. 34. By Order dated April 2, 2003, SRC's motion to amend its answer and third-party complaint was granted as was MapInfo's motion to dismiss SRC's counter-claim for prima facie tort, and any claim that USADATA did not have the right to use TargetPro 3.7 after July 2002. Docket Nos. 49, 57. All other motions were denied. Id.

MapInfo filed an amended complaint adding five causes of action against SRC for conduct allegedly occurring after July 1, 2002. See Am. Compl. SRC then moved to dismiss or for partial summary judgment as to five of the six causes of action asserted by MapInfo in its amended complaint and MapInfo cross-moved for partial summary judgment as to three of its causes of action. Docket Nos. 73, 77. On January 5, 2004, this Court granted MapInfo's cross-motion as to its third cause of action for an audit of SRC's records but denied all other motions. Docket No. 92. On January 15, 2004, SRC answered MapInfo's amended complaint, again asserting certain counter-claims. Docket No. 93.

II. Motions to Preclude

A. SRC Expert G.T. Reilly & Co.

MapInfo moves to preclude the report and testimony of SRC's expert witness, G.T. Reilly & Co. ("G.T. Reilly"), on the ground that the report does not satisfy the requirements for relevance or reliability established by Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993), and its progeny. Docket No. 129. MapInfo contends that James T. McNamara, the individual at G.T. Reilly responsible for the review of MapInfo's records, testified that neither he nor anyone else at G.T. Reilly had an opinion to a reasonable degree of accounting certainty as to the accuracy of MapInfo's royalty reports, the accuracy of MapInfo's overall royalty payments to SRC, or whether the payments complied with the royalty requirements specified in the parties' contract.

Under Fed. R. Evid. 702, an expert witness' testimony is admissible "if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case." A district court is charged with the "task of ensuring that an expert's testimony both rests on a reliable foundation and is relevant to the task at hand." Daubert, 509 U.S. at 597; see also Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141 (1999); Wills v. Amerada Hess Corp., 379 F.3d 32, 48 (2d Cir. 2004).

SRC retained G.T. Reilly "solely to assist [SRC] in determining the accuracy of the royalties paid by MapInfo to SRC, and MapInfo's compliance with the related royalty agreement between SRC and MapInfo." G.T. Reilly Report (Docket No.129, Gillis Decl., Ex. B) at 1. G.T. Reilly's procedures were divided into four separate groups of sales:

(1) MapInfo's entire sales population for the period January 1998 through December 2001; (2) TargetPro-related sales; (3) sales transactions with MapInfo's largest customers for the period January 1, 1998 through December 31, 2001; and (4) TargetPro-related products from the period July 1, 2002 through June, 2003. Id. The report concluded, inter alia, that based upon a sample of $2.3 million in MapInfo sales, the projected additional royalties due SRC were $262,964. Id. at 6.*fn2

MapInfo moves to preclude G.T. Reilly's report, relying heavily on James T. McNamara's deposition testimony that neither he nor anyone else at G.T. Reilly had an opinion "to a reasonable degree of accounting certainty" as to the accuracy of MapInfo's royalty reports or the accuracy of MapInfo's royalty payments to SRC. McNamara Dep. (Docket No.129, Gillis Decl., Ex. A) at 19-25. MapInfo contends that this failure renders the report irrelevant and inadmissible. However, there is no threshold requirement that an expert's opinion "must be expressed in terms of a reasonable scientific certainty in order to be admissible." United States v. Cyphers, 553 F.2d 1064, 1072 (7th Cir. 1977) (citations omitted); see also Schulz v. Celotex Corp., 942 F.2d 204, 208 (3d Cir. 1991) ("Care must be taken . . . to see that the incantation [to a reasonable degree of medical certainty] does not become a semantic trap and the failure to voice it is not used as a basis for exclusion without analysis of the testimony itself."). Although it is well-established that "expert testimony should be excluded if it is speculative or conjectural, or if it is based on assumptions that are 'so unrealistic and contradictory as to suggest bad faith,'" Boucher v. U.S. Suzuki Motor Corp., 73 F.3d 18, 21 (2d Cir. 1996) (internal citations omitted), nothing in the language of Rule 702 requires an expert to certify that their opinion is to a reasonable degree of scientific certainty. See United States v. Mornan, 413 F.3d 372, 381 (3d Cir. 2005).

MapInfo cites a single New York district court case in support of its contention that an expert's opinion must be excluded when the expert fails to offer opinion testimony to a reasonable degree of professional certainty. See Prohaska v. Sofamor, S.N.C., 138 F. Supp. 2d 422, 440 (W.D.N.Y. 2001). However, Prohaska dealt with the strict standards imposed on a medical expert when performing a differential diagnosis. Id. at 438-39. Nowhere in the opinion does the district court hold that all expert testimony must be stated to a reasonable degree of certainty. Thus, Prohaska is distinguishable from the facts of this case.

MapInfo also contends that G.T. Reilly ignored overpayments brought to its attention because SRC instructed them to do so, double-counted underpayments, and applied other procedures to overstate underpayments. However, disputes as to the methodology used by G.T. Reilly goes to the weight, not the admissibility, of the report. See McCullock v. H.B. Fuller Co., 61 F.3d 1038, 1044 (2d Cir. 1995). The procedures used by G.T. Reilly were performed in accordance with the attestation standards established by the American Institute of Certified Public Accounts, and, thus, are adequate.

Therefore, MapInfo's motion to preclude G.T. Reilly's report is denied.

B. SRC Expert Keegan

MapInfo moves to preclude the reports and testimony of SRC expert Dr. Warren J. Keegan ("Dr. Keegan") concerning SRC's damages from MapInfo's alleged disparagement on the ground that the reports do not satisfy the requirements for reliance or reliability established by Daubert and Fed. R. Evid. 401 and 702. Docket No. 128. MapInfo contends that Dr. Keegan's reports failed to use proper methodology and assumed the effect of a "campaign of disparagement" that was not supported by the evidence.

1. Dr. Keegan's Proposed Testimony

Dr. Keegan is the Distinguished Professor of Marketing and International Business and Director of the Center for Global Business Strategy at the Lubin School of Business at Pace University. Dr. Keegan's reports contain his opinions regarding SRC's lost sales as a result of MapInfo's alleged disparagement. To calculate these lost sales, Dr. Keegan "constructed a financial model to estimate what portion of MapInfo's predictive analytics income would have shifted to SRC had MapInfo not disparaged the products and reputation of SRC." Keegan Report I (Docket No. 126, Ex. A) at 5. Dr. Keegan concluded "that had MapInfo not disparaged SRC, SRC would have earned an additional $7,516,911 (present value) in marginal profit, net of all expenses from partner sales and $7,908,611 (present value) in gross profit from sales directly to customers" for a total loss of marginal profit to SRC of $15,425,572. Id. at 10. After performing an updated damages model calculation, this total was increased to $15,494,614. Keegan Report II (Docket No. 126, Ex. B) at 17. Dr. Keegan assumed that MapInfo engaged in a campaign of disparagement against SRC and that this campaign was effective in preventing SRC from acquiring business they would have obtained absent the disparagement. See Keegan Dep. I (Docket No. 126, Ex. E) at 46-47.

2. Discussion

SRC contends that on six separate occasions, MapInfo personnel made false, disparaging statements to resellers and customers in an attempt to harm SRC: a June 25, 2002 MapInfo WebEx, an Internet-based videoconference; a MapInfo TargetPro 4.0 Sales Kit, which included an SRC competitive document know as a "kill sheet"; a July 11, 2002 MapInfo conference call; a July 22, 2002 e-mail from MapInfo to USADATA;*fn3 an August 22, 2002 MapInfo WebEx; and an August 23, 2002 e-mail from Fred Cassin, a MapInfo employee, to Sean Robbins, a prospective customer. See Pl. Statement of Material Facts (Docket No. 130) at ¶¶ 33, 75, 77-78; Def. Mem. of Law (Docket No. 127) at 8-16. MapInfo contends that these alleged statements had no effect on either resellers or customers. In support of its contention, MapInfo offers declarations from thirty-two separate partners or resellers and five customers that either they never heard the alleged statements or, if they did, the statements had no effect on their view of SRC. Pl. Statement of Material Facts at ¶¶ 39, 41, 45, 50, 56-58, 76, 78, 86, 88, 98, 100, 102 (and citations cited therein). To the extent that SRC disputes any of these witnesses' statements, it does not offer any evidence to demonstrate that this testimony is false or unreliable. Instead, SRC argues that the testimony of the resellers and customers is nothing more "than a collection of assertions . . .

that they were not influenced."*fn4 Def. Reply to Motion to Preclude (Docket No. 138) at 3. "However, mere conclusory allegations, speculation or conjecture will not avail a party resisting summary judgment." Cifarelli v. Vill. of Babylon, 93 F.3d 47, 51 (2d Cir. 1996).

SRC has proffered further evidence to demonstrate the effect MapInfo's alleged disparagement had on SRC in the marketplace. In its answer, SRC alleges that MapInfo's disparagement of SRC and SRC's products resulted in the loss of customers and potential customers, damage to its reputation and the reputation of its products, and lost dealings. Answer (Docket No. 93) at ¶¶ 115, 141, 145, 149, 153. SRC included the following customers as evidence of lost customers and potential customers: USUnwired ($35,000); RackRoom Shoes ($45,000); Sav-a-Lot ($75,000); Schwans Sales Enterprises ($60,000); Mieneke Muffler ($50,000); Atlanta Journal-Constitution ($35,000); Martin Agency ($50,000); Northwestern Mutual Life ($70,000); Hannaford Brothers ($45,000); Albertson's Stores ($75,000); Physician Mutual Insurance ($45,000); and Sprint ($500,000). Answer at ¶¶ 141, 149, 153, 157. SRC also added ten more customers in its discovery responses that refused to do business, stopped doing business, or did less business with SRC after the alleged disparaging statements in the June 25, 2002 WebEx: Build A Bear, Club Corporation of America, Gannett, Post & Courier, Rainbow Advertising, U-Haul, Wendy's, Empower Geographics, TerraNOVA, and Galilee Enterprises. Gillis Decl., Ex. 31 at 6-7. However, SRC again fails to demonstrate that MapInfo's alleged disparagement had any effect on these resellers or customers.

During his deposition testimony, Dean Stoecker ("Stoecker"), SRC's President, admitted that the only proof he had that the twelve customers named in SRC's answer were affected by the alleged disparagement, and thus "lost or potentially lostcustomers," was that SRC was sometimes given the "cold shoulder" when they attempted to sell to these customers. Stoecker Dep. (Gillis Decl., Ex. 15) at 339-47; Def. Reply Statement of Material Facts at ¶ 84.*fn5 However, Stoecker's mere speculation as to why certain customers gave SRC the "cold shoulder," without any further proof, is insufficient to demonstrate that the named customers were affected by the alleged disparagement. Cifarelli, 93 F.3d at 51. For the remaining ten customers cited by SRC, MapInfo has provided declarations from four that the alleged disparagement had no effect on their dealings with SRC.*fn6 Also, it is undisputed that three of the customers cited have never done business with SRC.*fn7

Two of the customers purchased products from SRC after the alleged disparagement.*fn8 The only disputed customer is Rainbow Advertising ("Rainbow"). MapInfo contends that SRC's decrease in sales preceded the alleged disparagement and that SRC's sales to Rainbow stopped before the first incident of alleged disparagement. See Pl. Statement of Material Facts at ¶ 97. SRC contends that Rainbow failed to renew its contract with SRC in April 2003 and instead chose MapInfo's product. Def. Reply Statement of Material Facts at ¶ 97. However, SRC fails to offer any proof that Rainbow's failure to renew had anything to do with the alleged disparagement. Thus, SRC has failed to demonstrate that MapInfo's alleged disparagement had any effect on its customers.

MapInfo contends that Dr. Keegan's testimony should be precluded because it was based on an erroneous assumption that MapInfo's alleged disparagement had caused SRC to lose potential sales. Pl. Motion to Preclude (Docket No. 128) at 8-10. In support of this contention, MapInfo cites Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc., 75 F. Supp. 2d 235 (S.D.N.Y. 1999), aff'd, 314 F.3d 48, 59-61 (2d Cir. 2002). In Fashion Boutique, the district court precluded the plaintiff's expert on damages in a product disparagement case because the expert's testimony was based upon a causal assumption that plaintiff failed to prove. Fashion Boutique, 75 F. Supp. 2d at 238. SRC attempts to distinguish Fashion Boutique from the instant case, arguing that unlike Fashion Boutique, where plaintiff only proffered its expert as an expert in damages and not causation, Dr. Keegan's testimony is being offered to prove both causation and damages. Def. Reply to Motion to Preclude at 3-4. However, Dr. Keegan has repeatedly testified that he assumed that the alleged disparagement occurred and that it impacted the customers in the marketplace. See Keegan Dep. I at 31-34, 46-47, 96; Keegan Dep. II (Dax. Aff., Ex. F) at 108-109. Further, Dr. Keegan testified that he did not know when the first alleged act of disparagement took place or for how long the disparagement lasted. Keegan Dep. I at 44-45. For these reasons, Dr. Keegan's testimony will not be considered for causation. SRC's failure to prove in any other way a causal connection between MapInfo's alleged disparagement and any losses by SRC renders Dr. Keegan's testimony on damages irrelevant.

Therefore, MapInfo's motion to preclude Dr. Keegan's testimony is granted. Further, because the expert report of Dr. Roy J. Epstein, MapInfo's rebuttal expert, were proffered to respond to Dr. Keegan's reports, Dr. Epstein's reports are now irrelevant and SRC's motion to preclude his reports (Docket No. 126) is granted. See Epstein Report (Docket No. 126, Dax. Aff. at Ex. A) at 1 ("I [Dr. Epstein] have been asked by counsel for MapInfo . . . to respond to the expert report submitted on behalf of [SRC] by Warren J. Keegan.").

III. Motions for Summary Judgment

The amended complaint asserts the following causes of action:*fn9 Cause of Action No. Description 1 Breach of contract for failure to make payments required under the Termination Agreement 2 Breach of contract for the distribution of MapInfo products after July 1, 2002 4 Unfair trade practices -- false designation of origin 5 Unfair trade practices -- false advertising 6 Copyright infringement SRC asserts the following counter-claims:*fn10 Counter-Claim No. Description 2 Breach of contract -- disparagement 3 Failure to make royalty payments 4 Breach of contract for allowing USADATA to utilize SRC's software 5 Breach of contract for excluding SRC from MapInfo partner events 6 Unfair trade practices - disparagement 7 Defamation per se 8 Product disparagement 9 Injurious falsehood 11 Reverse passing off*fn11 12-14 Copyright infringement SRC asserts the following third-party causes of action against USADATA:*fn12

Cause of Action No. Description 1 Breach of Contract 2-3 Copyright Infringement

A. Standard

A motion for summary judgment may be granted if there is no genuine issue as to any material fact if supported by affidavits or other suitable evidence and the moving party is entitled to judgment as a matter of law. The moving party has the burden to show the absence of disputed material facts by informing the court of portions of pleadings, depositions, and affidavits which support the motion. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Facts are material if they may affect the outcome of the case as determined by substantive law. Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986). All ambiguities are resolved and all reasonable inferences are drawn in favor of the non-moving party. Skubel v. Fuoroli, 113 F.3d 330, 334 (2d Cir. 1997).

The party opposing the motion must set forth facts showing that there is a genuine issue for trial. The non-moving party must do more than merely show that there is some doubt or speculation as to the true nature of the facts. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). It must be apparent that no rational finder of fact could find in favor of the non-moving party for a court to grant a motion for summary judgment. Gallo v. Prudential Residential Servs. 22 F.3d 1219, 1223-24 (2d Cir. 1994); Graham v. Lewinski, 848 F.2d 342, 344 (2d Cir. 1988).

B. Breach of Contract, Copyright Infringement, and Third-Party Claims

MapInfo moves for summary judgment on SRC's fourth, thirteenth, and fourteenth counter-claims and for all third-party claims against USADATA on the grounds that the USADATA license was valid in all respects. SRC moves for summary judgment as to its fourth, thirteenth, and fourteenth counter-claims against MapInfo and its first and second third-party causes of action against USADATA on the grounds that the rights granted by MapInfo to USADATA were outside the scope of the agreement.

Here, the dispute centers on the parties' interpretation of § 2.1.3 of the 2000 Distribution Agreement. Section 2 of the Agreement, entitled "License Grants and License Restrictions," states, in relevant part:

2.1 Development/Production Licenses. Subject to the terms and conditions contained herein, Company [SRC] grants to MapInfo, and MapInfo accepts: . . .

2.1.3 The MapInfo User Interfaces may be made using any MapInfo or 3rd party technology . . ., but the Licensed Products may not [be] used by MapInfo for an Internet-based subscription or pay as you go access to MIDD; however, for the avoidance of doubt, MapInfo standard licensing provisions for the Licensed Products as licensed by End Users do permit use by End Users in and [sic] Application Service Provider internet environment.

2000 Distribution Agreement at 3.

The parties do not dispute that New York law applies to these claims. "'Under New York law, a written contract is to be interpreted so as to give effect to the intention of the parties as expressed in the unequivocal language they have employed.'" British Int'l Ins. Co. v. Seguros La Republica, S.A., 342 F.3d 78, 82 (2d Cir. 2003) (quoting Cruden v. Bank of N.Y., 957 F.2d 961, 976 (2d Cir. 1992)). "When the question is a contract's proper construction, summary judgment may be granted when its words convey a definite and precise meaning absent any ambiguity." Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir. 1992) (citations omitted). However, "[w]here the language used is susceptible to differing interpretations, each of which may be said to be as reasonable as another, and where there is relevant extrinsic evidence of the parties' actual intent, the meaning of the words become an issue of fact and summary judgment is inappropriate . . . ." Id. (citations omitted).

Here, the issue of whether the contract's language is ambiguous has already been decided. A February 10, 2003 decision held that

[b]ecause the Court cannot determine the meaning of service bureau agreements or the intent of the parties when entering into this contract, from the four corners of the document, the contract is ambiguous, and the issue becomes one of fact. Extrinsic evidence of the parties' intent will ...


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