Computers Unlimited, Inc. v. Midwest Data Systems, Inc.

Citations: 657 N.E.2d 165; 1995 Ind. App. LEXIS 1405; 1995 WL 653039Docket: 49A02-9501-CV-3

Court: Indiana Court of Appeals; November 8, 1995; Indiana; State Appellate Court

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Computers Unlimited, Inc. appealed the summary judgment favoring Midwest Data Systems, Inc. and GVS Enterprises Limited. The appeal raised three issues: (I) whether the court erred in striking Computers Unlimited's response to the defendants' summary judgment motions; (II) whether the court erred in granting GVS Enterprises' motion for summary judgment; and (III) whether the court erred in granting Midwest Data Systems' motion for summary judgment. The court determined that resolution of the first issue was unnecessary for the appeal's outcome and focused on the propriety of the summary judgment.

The court affirmed in part and reversed in part, stating that summary judgment is appropriate only when there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law. The movant must demonstrate that undisputed facts negate at least one element of the claim. In this case, Liebhardt Mills hired Computers Unlimited to provide a computer system and programming services, but encountered problems, leading them to seek alternatives. Liebhardt Mills consulted Midwest Data and GVS Enterprises, who recommended new hardware and services. After Midwest Data installed a new system, Liebhardt Mills terminated its relationship with Computers Unlimited on March 9, 1992, citing insufficient maintenance and support.

Computers Unlimited claimed in Count V that GVS Enterprises tortiously interfered with its business relationship with Liebhardt Mills by providing a negative evaluation of Computers Unlimited's services, which led to Liebhardt Mills terminating their relationship. GVS Enterprises supported its motion for summary judgment with evidence, including a report submitted to Liebhardt Mills on March 19, 1992, and interrogatory responses indicating that the relationship had ended on March 9, 1992, prior to the report's issuance. For a tortious interference claim, the existence of a valid contract or business relationship is required. The facts show no valid relationship existed after March 9, 1992, and Computers Unlimited failed to provide evidence to the contrary. Although there were prior disagreements over payments, these did not indicate an ongoing business relationship. GVS Enterprises successfully established that there was no genuine issue of material fact regarding the claims of tortious interference post-March 9, 1992. Computers Unlimited argued that the report was only one of several reasons for the termination and acknowledged that a valid contract existed until that date. GVS Enterprises contended it acted with justification in a competitive spirit, citing case law that allows competition as a defense in tortious interference cases. The Restatement of Torts outlines factors for determining justification, particularly in competitive contexts, emphasizing that interference is not improper if it pertains to competition, does not involve wrongful means, does not restrain trade unlawfully, and has a competitive purpose.

Competitors can induce third parties to breach contracts with each other without facing liability for improper interference, provided the contract is not terminable at will. The privilege to compete includes the right to attract business away from competitors directly or indirectly. Limitations to this privilege are specified in certain clauses. The principle is based on the belief that competition enhances free enterprise, with efficiency and service being the measures of superiority in competition.

In the case involving Liebhardt Mills, Computers Unlimited, and GVS Enterprises, evidence shows that Liebhardt Mills was dissatisfied with Computers Unlimited and sought alternative suppliers. GVS Enterprises, aware of this, approached Liebhardt Mills and presented its services, ultimately leading to Liebhardt Mills hiring GVS Enterprises. This sequence of events does not imply that GVS Enterprises used wrongful means to divert business, as Computers Unlimited failed to demonstrate that GVS Enterprises exerted undue influence unrelated to competition. Additionally, any claim by Computers Unlimited regarding the conversion of a security chip does not constitute a significant issue of material fact. As per the Restatement, if an actor causes a party to not continue a terminable at will contract without employing wrongful means, then the interference is not considered improper.

Wrongful means must align with causation. In this case, the alleged conversion coincided with the construction of a new system by Midwest Data. By that time, GVS Enterprises had already influenced Liebhardt Mills to terminate its existing contract, despite not having notified Computers Unlimited. The alleged conversion of a security chip was not a factor in the termination and did not qualify as wrongful means. No material factual disputes exist regarding GVS Enterprises' justification for its actions, as it merely competed for Liebhardt Mills' business. Consequently, the trial court correctly granted summary judgment to GVS Enterprises regarding the tortious interference claim.

Additionally, Computers Unlimited accused Midwest Data of criminal and tortious conversion concerning ownership of software and a security chip. Liebhardt Mills had permitted Midwest Data to install the software and chip on its new system. Computers Unlimited alleged that Midwest Data knowingly assisted in the conversion of its property. Criminal conversion occurs when a person knowingly exerts unauthorized control over another's property, as defined by Ind. Code 35-43-4-3. Midwest Data presented evidence that Liebhardt Mills claimed ownership of the software to be installed, while the chip's ownership followed the software's ownership.

In response, Computers Unlimited argued that evidence suggested Midwest Data should have known it was not Liebhardt Mills that owned the chip. They referenced information indicating Liebhardt Mills leased its system from Computers Unlimited and that the software was licensed to the computer. However, the identified software was the operating system licensed to hardware, not the chip. Even if Midwest Data knew of the lease, this did not negate the fact that Liebhardt Mills asserted ownership of the software and, by industry standards, the chip was included. Computers Unlimited failed to provide evidence confirming its ownership of the software and chip rather than the leased hardware. Therefore, even if it was found that Computers Unlimited owned the chip, there was no evidence proving that Midwest Data acted with the requisite knowledge of unauthorized control. Thus, the trial court correctly granted summary judgment to Midwest Data on the criminal conversion claim, which requires knowing or intentional unauthorized control.

Mens rea is not a requirement for proving tortious conversion, and good faith serves as no defense against such claims. Conversion is defined as the appropriation, destruction, or dominion over another's personal property in a manner that disregards the rights of the owner. Evidence suggests that Midwest Data assisted Liebhardt Mills in appropriating a chip owned by Computers Unlimited for their own benefit, violating Computers Unlimited's rights. Additionally, Liebhardt Mills may have exceeded its authority regarding the chip's possession, implicating Midwest Data in tortious conversion. Midwest Data's assertions that it briefly controlled the chip and did not prevent Computers Unlimited from accessing it are seen as mitigating arguments to be evaluated by the trier of fact. A genuine issue of material fact regarding tortious conversion exists, leading to the conclusion that the trial court erred in granting summary judgment in favor of Midwest Data. The summary judgment for GVS Enterprises is upheld, while the judgment for Midwest Data regarding criminal conversion is affirmed, and the judgment concerning tortious conversion is reversed and remanded for further proceedings.