Free Response to Motion - District Court of Delaware - Delaware

Case 1:06-cv-00055-GMS

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE TESLA INDUSTRIES, INC., Plaintiff, v. DAVID C. WALDMANN, LYNDOL W. HOLLINGSWORTH, CHARLES MINNICK a/k/a CHUCK MINNICK, and NEW MILLENNIUM TOOLS, INC., Defendants. ) ) ) ) C.A. No. 06-055-(GMS) ) ) ) ) ) ) ) )

PLAINTIFF TESLA INDUSTRIES, INC.'S RESPONSE IN OPPOSITION TO DEFENDANTS WALDMANN, HOLLINGSWORTH, MINNICK, AND NEW MILLENNIUM TOOLS, INC. MOTION FOR PARTIAL JUDGMENT ON THE PLEADINGS OR, IN THE ALTERNATIVE, PARTIAL SUMMARY JUDGMENT Now comes Plaintiff Tesla Industries, Inc., and hereby responds in opposition to Defendants Hollingsworth, Minnick, and New Millennium Tools, Inc.'s Motion for Partial Judgment on the Pleadings or, in the Alternative, Partial Summary Judgment (D.I. 106) (hereinafter "Motion for Partial Judgment"). For the reasons grounded in both fact and law set forth below, Tesla Industries, Inc. urges this Court to deny Defendants' Hollingsworth, Minnick, And New Millennium Tools, Inc.'s Motion for Partial Judgment in toto. INTRODUCTION Plaintiff Tesla Industries, Inc. ("Tesla Industries") requests that the Court deny the Motion for Partial Judgment filed by the Defendants Lyndol W. Hollingsworth, Charles Minnick, and New Millennium Tools, Inc. ("NMT Defendants") on December 1, 2006 (D.I. 106). The Motion for Partial Judgment was filed in order to seek judgment on five inadvertent admissions Tesla Industries made in its Answer to the Counterclaims of Defendants Lyndol W.

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Hollingsworth, Charles Minnick, and New Millennium Tools, Inc. (D.I. 32) ("Original Answer"). Tesla Industries has contemporaneously filed a Motion for Leave File Amended Answer to the Answer and Counterclaims of Defendants Lyndol W. Hollingsworth, Charles Minnick a/k/a Chuck Minnick and New Millennium Tools, Inc. and Demand for Jury Trial ("Motion to Amend Answer") (copy attached as Exhibit "A"). Tesla Industries asks that, because the admissions were typographical errors that Tesla Industries intended to deny and is seeking to remedy, the Court deny the Motion for Partial Judgment filed by the Defendants Lyndol W. Hollingsworth, Charles Minnick, and New Millennium Tools, Inc. NATURE AND STAGE OF PROCEEDINGS On January 27, 2006 Plaintiff, Tesla Industries Inc., filed a Complaint in this Court against Defendants David C. Waldmann, Lyndol W. Hollingsworth, Charles Minnick, and New Millennium Tools, Inc. alleging, inter alia, misappropriation of Plaintiff's trade secrets, breach of contract, conversion and allied counts (D.I. 1). After entry of a Stipulation extending Defendants time to answer (D.I. 24) the Defendants filed separate Answers and Counterclaims to this Complaint on March 27, 2006 (D.I. 26, 27). Defendant Waldmann filed a one-hundred thirteen (113) paragraph counterclaim (D.I. 26) and the other Defendants filed a sixty-three (63) paragraph counterclaim (D.I. 27). Plaintiff's Answers to the Counterclaims in these voluminous (200 paragraph) pleadings were filed on April 17, 2006. (D.I. 32, 33). In the process of preparing these Answers, Plaintiffs responses to four (4) out of the two hundred ­plus paragraphs in the Defendants' Counterclaims were incorrectly, and inadvertently, lodged as admissions instead of denials. The error in

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paragraphs 36-40 of Plaintiff's Answer is readily apparent1. More specifically paragraphs 36-40 of the Answer and Counterclaims of Defendants Lyndol W. Hollingsworth, Charles Minnick a/k/a Chuck Minnick and New Millennium Tools, Inc. and Demand for Jury Trial ("Defendants' Counterclaims") (Exhibit "B" to the Motion to Amend Answer) here at issue accuse Plaintiff of "anticompetitive practices", attempting intentionally to monopolize the relevant product and geographical markets (¶ 36); attempts "to monopolize the market by improper and unlawful actions"(¶ 37); "violation of the Sherman Act" (¶ 38) and conclusory statements that Defendants were damaged by Plaintiff's acts (¶ 39-40). Clearly anyone except Defendants would see Plaintiff's admissions to such serious and patently false allegations as an obvious error. Indeed, Plaintiff's Answers to Paragraphs 36-40 of Defendants' Counterclaims were a simple typographical error as explained in the Affidavit of Plaintiff's trial counsel, Brian A. Sullivan (Exhibit "A" to the Motion to Amend Answer). Mr. Sullivan's Affidavit explains that an initial draft of Plaintiff's Answer to paragraphs 36-40 contained denials as one would expect (Sullivan Aff., ¶ 6). He was out of the office on the response deadline (Easter Monday) for filing this Answer and somehow the draft denials were inadvertently word-processed as admissions (Sullivan Aff., ¶ 7-10). ARGUMENT I. Standard of Review

A court shall grant summary judgment only if "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). The moving party bears the burden of proving that no genuine

They were not recognized however, until Defendants filed their Motion for Partial Judgment on the Pleadings on December 1, 2006 seeking to turn these inadvertent admissions into a judgment on the pleadings.

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issue of material fact exists. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 n. 10 (1986). Once the moving overcomes this threshold, the nonmoving party must show that a genuine issue of fact exists by presenting evidence indicating that facts are in contention, making it necessary that the case go to trial for a fact-finder to resolve the issue. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). The court will "view the underlying facts and all reasonable inferences therefrom in the light most favorable to the party opposing the motion." Pa. Coal Ass'n v. Babbitt, 63 F.3d 231, 236 (3d Cir. 1995). II. Tesla Should Not Be Bound by Its Inadvertent Admissions

In Defendants' Motion for Partial Judgment, Defendants allege that because Tesla Industries "admitted" sections 36-40 of the Defendants' Counterclaims, they should be bound by their admissions. They cite the case of Missouri Hous. Dev. Comm'n v. Brice for the proposition that admissions in pleadings are binding on all parties and may support summary judgment even if post-pleadings evidence conflicts with evidence in the pleadings. 919 F.2d 1306, 1315 (8th Cir. 1990). For this proposition, the Court in Missouri Hous. Dev. Comm'n was discussing Davis v. A.G. Edwards & Sons, Inc., 823 F.2d 105 (5th Cir. 1987) aff'g in relevant part 635 F. Supp. 707 (W.D. La. 1986), which dealt with a factual statement by the parties made in their complaint (that they were aware of defendants' misconduct) that was inconsistent with a later statement in an Affidavit (that they were not). Plaintiffs' awareness made summary judgment for statute of limitations appropriate. Missouri Hous. Dev. Comm'n, 919 F.2d at 1315. Tesla Industries' case is distinguishable because Tesla was not stating a fact, but only responding generally to the allegations contained in sections 36 through 40 of Defendants' Counterclaims. Tesla Industries' "admissions" were mere typographical errors, the misplacing of an admission where a denial was intended. See Sullivan Aff. ¶ 9. Therefore, Tesla Industries' mistake should

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not be considered a true admission of fact but merely a typographical error. Tesla Industries should not be bound by a typographical error but allowed to amend its pleading as requested in Tesla Industries' Motion to Amend Answer. Further, Defendants argue that a statement in an answer is a judicial admission. They use as authority for this proposition the case of Adams v. Teck Cominco Alaska, Inc. 2006 U.S. Dist. LEXIS 15372, 15416 (D. Alaska 2006). The Court stated that Defendants' statements in their answers in the prior suit constituted admissions by a party opponent under Federal Rule of Evidence 801(d)(2). However, the Defendants in Adams did not dispute that they had made admissions in their prior answers. Id. at 45. Unlike those Defendants, Tesla Industries vigorously denies that their "admissions" were actual admissions, but instead stresses the fact that the word "admitted" was intended to be "denied" in paragraphs 36 through 40 of the Original Answer. III. Tesla Industries' Admission of Liabilility as to Counterclaim III was in Error

As Tesla Industries has stated before, Tesla Industries' admission of liability as to Counterclaim III of the Defendants' Counterclaims was an inadvertent mistake. See Affidavit of Brian A. Sullivan, ¶ 9. Tesla Industries has filed its Motion to Amend Answer in order to fully explain that the "admissions" were not intentional. Therefore, there was no intentional Stipulation as to liability, and Tesla did not admit liability as to Counterclaim III. IV. The NMT Defendants are Not Entitled to Judgment as a Matter of Law or, in the Alternative, Summary Judgment

The NMT Defendants are not entitled to Judgment as a Matter of Law or Summary Judgment. Even Defendants' authority agrees. They cite 5c Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1367 (3d ed. 2006) for the proposition that : "The motion

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for a judgment on the pleadings only has utility when all material allegations of fact are admitted or not controverted in the pleadings and only questions of law remain to be decided by the district court"( emphasis added) The essential facts underlying Defendants Motion are controverted. Tesla Industries intended to deny the allegations made by NMT in sections 36 through 40. Defendants nevertheless argue that Denealt v. Commissioner of Internal Revenue supports their Motion. In Denealt the Court granted the IRS' motion for judgment on the pleadings after the taxpayers failed to respond to the IRS' amended petition or Rule 37(c) Motion to deem admitted the unanswered allegations of the IRS' amended petition. Denealt v. Commissioner of Internal Revenue, T.C. Memo 1997-329, 343 (1997). This case is inapplicable because Tesla Industries is engaged and responsive in this litigation unlike the Respondents in Denealt. As Tesla Industries has stated, the word "admitted" was inadvertently typed instead of "denied" in its Response to the allegations of Counterclaim III of the Answer of NMT Parties. Because this was a mistake and not an admission, Tesla Industries has asked the Court for leave to file an Amended Answer. Tesla Industries asks that the Court deny Defendants' Motion for Partial Judgment and allow it to be heard on the Motion to Amend Answer. CONCLUSION Defendants' Motion for Partial Judgment ought to be denied it its entirety, as it lacks both the factual and legal support to prevail under Fed. R. Civ. P. 56. As a result of the foregoing, Defendants have failed to meet their burden on summary judgment. The pleadings and Affidavits on the record quite clearly show that there is a genuine issue of material fact to be determined. Tesla Industries maintains, through its Motion to Amend Answer and the Affidavit of Brian A.

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Sullivan, that the admissions were inadvertent errors on the part of Tesla Industries' attorneys. Therefore, there was no intentional stipulation as to liability, and Tesla did not admit liability as to Counterclaim III. Tesla, in it's response to the assertion of Counterclaim III against it, meant to deny the allegation as it is without merit, but accidentally and through the fault of the drafter admitted it instead.

Respectfully submitted,

Dated: December 15, 2006 ___ ___/s/ Brian A. Sullivan Brian A. Sullivan (DE No. 2098) Robert D. Wilcox (DE No. 4321) Amy D. Brown (DE No. 4077) 300 Delaware Avenue, 13th Floor P. O. Box 25046 Wilmington, DE 19899 Telephone: (302) 652-1100 Facsimile: (302) 652-1111 and Paul E. Crawford (I.D. # 493) CONNOLLY BOVE LODGE & HUTZ LLP 1107 N. Orange Street P.O. Box 2207 Wilmington, DE 19899-2207 302.658.9141 [email protected]

Attorneys for Tesla Industries, Inc.

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CERTIFICATE OF SERVICE

I hereby certify that on December 15, 2006, I caused one copy of the foregoing document to be served upon the persons listed below in the manner indicated:

VIA E-MAIL & FIRST CLASS MAIL John A. Adams, Esq. Susanin Widman & Brennan, P.C. 455 S. Gulph Road, Suite 240 King of Prussia, PA 19406 Louis S. Mastriani, Esq. Rodney R. Sweetland, III, Esq. David F. Nickel, Esq. Adduci,Mastriani & Schaumberg, LLP 1200 Seventeenth Street, N.W. Fifth Floor Washington, DC 20036-3006

VIA HAND DELIVERY John D. Demmy, Esq. Stevens & Lee, P.C. 1105 North Market Street, 7th Floor Wilmington, DE 19801 Steven J. Balick, Esq. John G. Day, Esq. Lauren E. Maguire, Esq. Ashby & Geddes 500 Delaware Avenue, 8th Floor Wilmington, DE 19801

/s/ Brian A. Sullivan Brian A. Sullivan (#2098)