Court Opinion

ID: 1017563
Source: CourtListenerOpinion
Date Created: 2013-07-04 22:06:41.546104+00
Date Added: 2024-06-11T09:51:21.702257
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                            No. 04-2166

NETWORK COMPUTING SERVICES CORPORATION,

                                            Plaintiff - Appellant,

          versus

CISCO SYSTEMS, INCORPORATED,

                                             Defendant - Appellee,

          and

MARK ANTHONY MARTIN, III; CAROL JAWORSKI;
WOODY SESSUMS; JOHN DISPENETTE; SCOTT SAWYER,

                                                        Defendants,

WILLIAM P. CHARPING; JOHN DOE 1-25,

                                                 Counter-Defendants.

-----------------------------------

IMPACT   INTERNATIONAL   FOUNDATION;   PRINTER
PROJECTS CORPORATION; PC GENIUS INCORPORATED;
SOVEREIGN GROUP, INCORPORATED; SOVEREIGN GROUP
MARKETING LTD; WORLD MISSION CENTRE,

                                                            Movants.
                               No. 04-2213

NETWORK COMPUTING SERVICES CORPORATION,

                                                  Plaintiff - Appellee,

           versus

CISCO SYSTEMS, INCORPORATED,

                                                 Defendant - Appellant,

           and

MARK ANTHONY MARTIN, III; CAROL JAWORSKI;
WOODY SESSUMS; JOHN DISPENETTE; SCOTT SAWYER,

                                                             Defendants,

WILLIAM P. CHARPING; JOHN DOE 1-25,

                                                    Counter-Defendants.

-----------------------------------

IMPACT   INTERNATIONAL   FOUNDATION;   PRINTER
PROJECTS CORPORATION; PC GENIUS INCORPORATED;
SOVEREIGN GROUP, INCORPORATED; SOVEREIGN GROUP
MARKETING LTD; WORLD MISSION CENTRE,

                                                                Movants.

Appeals from the United States District Court for the District of
South Carolina, at Columbia.     Joseph F. Anderson, Jr., Chief
District Judge. (CA-01-281-3)

Argued:   September 21, 2005                 Decided:   November 1, 2005

                                    2
Before WIDENER, NIEMEYER, and MICHAEL, Circuit Judges.

Affirmed by unpublished per curiam opinion.

ARGUED: Stephen G. Morrison, NELSON, MULLINS, RILEY & SCARBOROUGH,
L.L.P., Columbia, South Carolina, for Appellant/Cross-Appellee.
Henry L. Parr, Jr., Wallace K. Lightsey, WYCHE, BURGESS, FREEMAN &
PARHAM, P.A., Greenville, South Carolina, for Appellee/Cross-
Appellant. ON BRIEF: Robert H. Brunson, NELSON, MULLINS, RILEY &
SCARBOROUGH,    L.L.P.,    Charleston,    South   Carolina,    for
Appellant/Cross-Appellee.    William M. Wilson, WYCHE, BURGESS,
FREEMAN & PARHAM, P.A., Greenville, South Carolina, for
Appellee/Cross-Appellant.

Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).

                                3
PER CURIAM:

            Network    Computing      Services      Corp.    (NCS)    appeals      the

district    court’s    grant   of    summary      judgment     in    favor   of    the

defendants, Cisco Systems, Inc. (Cisco) and others, on NCS’s claims

for violation of the South Carolina unfair trade practices statute

and for common law fraud.           NCS also appeals the district court’s

order sanctioning NCS for discovery violations, and Cisco cross-

appeals on this issue.         We affirm the district court’s grant of

summary judgment and decline to reach the sanctions issue.

                                       I.

                                       A.

            Cisco makes networking equipment, which it sells to

customers     either    directly      or       through    distributors,       called

resellers.     NCS distributes networking equipment and provides

consulting    services   for    installation        and     maintenance      of   that

equipment.    Prior to 1998 NCS primarily sold products made by 3Com

Corp., a Cisco competitor.          In May 1998 NCS and Cisco executed a

written, one-year contract under which NCS agreed to become one of

Cisco’s many South Carolina resellers.                   NCS agreed to purchase

computer products from Cisco at a discount rate tied to the volume

of Cisco products that the parties projected NCS would sell. Under

the contract NCS’s projected sales volume for the contract year was

                                           4
$5 million.      Either party could terminate the contract on 30 days

written notice.

            NCS alleges that, despite Cisco's contractual obligation

to NCS, Cisco took advantage of sales leads that NCS supplied and

then told several potential customers to do business with other,

favored Cisco distributors instead of NCS. NCS suffered when these

customers went elsewhere.            In addition, NCS contends that Cisco

repeatedly broke its oral “promise[] to make [NCS] the ‘go to’

reseller” in the state.             Appellant’s Br. at 35.     For example,

during    1998   the   State   of    South   Carolina   solicited   bids   from

manufacturers, or their authorized distributors, for the sale of

computer network equipment to state agencies. Cisco authorized NCS

to be one of its distributors so that NCS could be listed on this

contract.    In violation of an alleged oral promise to make NCS the

only officially listed distributor, Cisco authorized several other

companies to serve as distributors.           As a condition of listing NCS

with the State, Cisco also required NCS to agree not to be listed

as an official distributor of any of Cisco’s competitors.

            Cisco denies that these conditions were unfair in any

way. More generally, Cisco denies responsibility for NCS’s loss of

customers and contends that NCS’s problems were of NCS’s own

making.    Cisco also points out that NCS never stopped selling 3Com

products after commencing the Cisco distributorship and that Cisco

never required NCS to do so under the contract.

                                        5
          NCS served as a Cisco reseller for 18 months until Cisco

terminated the contract.        In that time NCS ordered and received

approximately $225,000 worth of Cisco products.              NCS paid Cisco

approximately $26,000, but did not pay the balance.

                                     B.

          NCS   sued    Cisco   in   the   U.S.   District   Court   for   the

District of South Carolina, complaining that Cisco lured NCS into

the distributorship through deliberate misrepresentation of the

profits to be earned and that Cisco undermined NCS’s ability to

perform its contractual duties.            The case was referred to a

magistrate judge, and Cisco moved for summary judgment.                    NCS

voluntarily dropped its federal claim under the Sherman Antitrust

Act, 15 U.S.C. §§ 1-2, as well as its state law claims for civil

conspiracy, tortious interference with contract, and trade secrets

misappropriation.      The magistrate judge concluded that there were

triable issues on whether Cisco’s conduct breached an implied

contractual duty of good faith and fair dealing,               but rejected

NCS’s theory that there was an oral contract between the parties

going beyond their written agreement.             Further, the magistrate

judge found triable issues regarding NCS’s claims for common law

fraud, fraud in the inducement, and violation of the South Carolina

Unfair Trade Practices Act (SCUTPA), S.C. Code § 39-5-20.

                                      6
            Cisco objected to these recommendations of the magistrate

judge, leading the district court to determine the pertinent issues

de novo.     The district court held that the written breach of

contract    claim   raised       a    triable   issue     “as   to    whether   Cisco

deliberately discouraged companies from doing business with NCS (or

gave information that NCS provided to other resellers to steer

business away from NCS).”              J.A. 718.       However, after concluding

that there were no triable issues on NCS’s theories of breach of

oral contract, SCUTPA, or fraud, the district court granted summary

judgment to Cisco (and the other defendants) on these claims.                     The

parties thereafter agreed to a partial settlement in which NCS

dismissed with prejudice all of its claims except for (1) violation

of SCUTPA and (2) common law fraud and fraud in the inducement.

NCS now appeals the district court’s rulings on these surviving

claims.

            As the case proceeded, a bitter discovery dispute arose.

The magistrate judge ordered NCS and its chief executive, William

Charping,   to   produce     a       customer   list    or   submit    an   affidavit

attesting that NCS could not compile such a list.                      By affidavit

Charping denied the existence of certain documents and asserted

that NCS previously produced its customer list as part of a

production in September 2001.             The magistrate judge then ordered

NCS to produce the materials at issue or specify where they were

located in documents already produced.                       NCS finally produced

                                           7
several documents, including a customer list, that Cisco asserted

had never previously been produced and whose existence Charping and

NCS   had   previously   denied.         Alleging   that   NCS’s   response   to

numerous    discovery    orders    was    unsatisfactory,    Cisco   moved    to

dismiss as a sanction for the discovery violations.                This motion

was first considered by the magistrate judge, who recommended that

a monetary sanction be imposed against NCS.                The district court

decided that a monetary sanction would be an insufficient deterrent

against NCS’s misconduct under the circumstances.             Accordingly, in

an opinion published at 223 F.R.D. 392 (D.S.C. 2004), the district

court determined that the jury would be instructed about NCS’s

misconduct if the case went to trial.               The specific instruction

that would be used was included in the opinion.               NCS appeals the

sanction, and Cisco contends in a cross-appeal that the district

court should have considered whether the proper sanction was

dismissal.

                                     II.

            Summary judgment is appropriate when “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).     We review

a district court’s grant of summary judgment de novo.                  Sunrise

                                         8
Corp. of Myrtle Beach v. City of Myrtle Beach, 420 F.3d 322, 327

(4th Cir. 2005).    Although all justifiable inferences are drawn in

favor of the party opposing summary judgment, “[c]onclusory or

speculative allegations do not suffice”     to create a genuine issue

of material fact.    Thompson v. Potomac Elec. Power Co., 312 F.3d

645, 649 (4th Cir. 2002) (punctuation omitted).

                                  A.

          To prevail on a SCUTPA claim, the plaintiff must show by

a preponderance of the evidence “(1) that the defendant engaged in

an unlawful trade practice, (2) that the plaintiff suffered actual,

ascertainable damages as a result of the defendant’s use of the

unlawful trade practice, and (3) that the unlawful trade practice

engaged in by the defendant had an adverse impact on the public

interest.”   Havird Oil Co. v. Marathon Oil Co., 149 F.3d 283, 291

(4th Cir. 1998).    The third element may be satisfied by proof of

“facts   demonstrating    the   potential   for   repetition   of   the

defendant's actions.” Daisy Outdoor Advertising Co. v. Abbott, 322

S.C. 489, 493, 473 S.E.2d 47, 49 (1996).           “Plaintiffs . . .

generally have shown potential for repetition in two ways:      (1) by

showing the same kind of actions occurred in the past, thus making

it likely they will continue to occur absent deterrence . . . or

(2) by showing the company's procedures create a potential for

repetition of the unfair and deceptive acts.”        Id. at 496, 473

                                   9
S.E.2d at 51 (citations omitted).     In focusing on the defendant’s

past actions, South Carolina courts have looked at the harm to the

people of South Carolina caused by the challenged practice.     “The

legislature intended in enacting the UTPA to control and eliminate

the large scale use of unfair and deceptive trade practices within

the state of South Carolina.”     Noack Enters., Inc., v. Country

Corner Interiors, 290 S.C. 475, 477, 351 S.E.2d 347, 349 (S.C. Ct.

App. 1986) (punctuation omitted).     Public harm “must be proved by

specific facts.”   Jefferies v. Phillips, 316 S.C. 523, 527, 451

S.E.2d 21, 23 (S.C. Ct. App. 1994).

          With respect to the third SCUTPA element, NCS failed to

adduce evidence sufficient to create a genuine issue of material

fact regarding whether Cisco’s conduct caused harm to any member of

the South Carolina public.       NCS offered three documents from

executives at companies who alleged that Cisco mistreated them in

various business transactions, but none of these documents can bear

the weight NCS places on them.   One document is from the president

of a Florida corporation; another document is from the president of

an Arizona corporation.   Neither document describes acts by Cisco

either in South Carolina or affecting South Carolina residents.

The third document is a letter from a lawyer for NCS recounting a

conversation he had with the president of a company in Gainesville,

Florida, that dealt with Cisco.       According to the letter, Cisco

attempted to restrict the parameters of any bid this company might

                                 10
make on a potential contract with the College of Charleston in

South    Carolina.    This     letter      does        not   satisfy   the    statutory

requirement that the witness certify that an unsworn statement is

true by stating that it is “under penalty of perjury” or using

other language “substantially . . . [similar in] form.”                       28 U.S.C.

§ 1746.     In response to the lawyer’s request that the company

president “confirm by signing below that these statements convey an

accurate representation of some of the things that you advised us,”

J.A. 337, the president affixed his notarized signature under the

words “I CONFIRM.”     The notary’s certificate simply means that the

president’s signature is authentic.                    It is not a substitute for

language    indicating   that        the        witness      understood      he   risked

prosecution    for   perjury    if    he        gave    false   testimony.        Cisco

adequately objected to the letter’s admissibility in its challenge

to the magistrate court’s report. Thus, NCS cannot survive summary

judgment based on any of the three documents it presented.

            Nor did NCS present “specific facts” indicating that

Cisco’s business procedures risked repeating “unfair and deceptive

acts.”    There was no evidence, for example, that Cisco trained its

agents to make misleading representations to potential resellers or

that Cisco used a standard distribution contract that contained

falsehoods.    NCS did not show that there was any real danger that

Cisco routinely deceived, or could have deceived, its business

partners.     South Carolina courts have relied on such danger when

                                           11
they have found that a “company's procedures create a potential for

repetition of the unfair and deceptive acts.”                See Daisy Outdoor

Advertising, 322 S.C. at 493-95, 473 S.E.2d at 49-51 (describing

prior cases).

              Because NCS could not meet its burden on the public

interest element of its SCUTPA claim, summary judgment in Cisco’s

favor was proper.

                                         B.

              For   claims     of      “fraud    and     deceit,   based   upon

representation,” such as those NCS asserts against Cisco,

     [t]he following elements must be shown by clear, cogent
     and convincing evidence: (1) a representation; (2) its
     falsity; (3) its materiality; (4) either knowledge of its
     falsity or a reckless disregard of its truth or falsity;
     (5) intent that the representation be acted upon; (6) the
     hearer’s ignorance of its falsity; (7) the hearer’s
     reliance on its truth; (8) the hearer’s right to rely
     thereon; (9) the hearer’s consequent and proximate
     injury. Failure to prove any one of the foregoing
     elements is fatal to recovery.

O’Shields v. S. Fountain Mobile Homes, Inc., 262 S.C. 276, 281, 204

S.E.2d 50, 52 (1974).        “[F]raud may be based . . . on promises made

without an intention of performance.”                  Thomas & Howard Co. v.

Fowler, 225 S.C. 354, 358, 82 S.E.2d 454, 456 (1954).              Breach of a

contractual promise alone is not enough to prove such fraud,

however.      “Nonobservance of a promise may support an inference of

a lack   of    intent to     perform    only    when it is coupled with other

                                         12
evidence.”      Winburn v. Ins. Co. of N. Am., 287 S.C. 435, 441, 339

S.E.2d 142, 146 (S.C. Ct. App. 1985).

             NCS argues that it proffered sufficient evidence from

which a reasonable jury could conclude that Cisco never intended to

help   NCS     sell   the   $5   million    in   Cisco   products    that   the

distributorship contract indicated NCS would sell.              But NCS does

not    offer     “other     evidence”       that    goes    beyond     Cisco’s

“[n]onobservance of a promise.”            Id.   The district court did not

allow NCS to rest on the suggestion that, because Cisco did not do

all that it could have done to help NCS sell products after the

contract was executed, Cisco must have lacked intent to perform the

promise at the time the contract was executed.             In so holding, the

district court correctly applied South Carolina law.            See Winburn,

287 S.C. at 440, 339 S.E.2d at 146 (“The truth or falsity of a

representation must be determined as of the time it was made or

acted on and not at some later date.               Inferences of fact, like

fullbacks on football teams, do not ordinarily run backward.”)

(citations omitted). Even if the inference was permitted, it would

fall short of the “clear, cogent and convincing” evidence of fraud

that South Carolina law demands.           In sum, NCS could not meet its

burden on the fraud claims, and summary judgment in favor of Cisco

was proper.

                                      13
                                III.

          We turn briefly to the sanctions issue.        Because we

conclude that summary judgment was correctly granted to Cisco on

the only claims that NCS did not agree to settle, this case will

not proceed to a jury trial.   Thus, there is no possibility that a

jury will receive the instruction that the district court crafted

as a sanction for NCS’s discovery violations.   As a result, we need

not reach the question whether the district court abused its

discretion in choosing this sanction.

                                IV.

          For the foregoing reasons, the judgment of the district

court is affirmed.

                                                           AFFIRMED

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