Opinion
Civil Action No. 00-2381.
July 29, 2004
MEMORANDUM
Before the court are defendant Getronics Inc.'s ("Getronics") renewed motion for summary judgment, plaintiff Commonwealth Capital's ("Commonwealth") opposition thereto and defendant's motion to strike the proposed report, on plaintiff's behalf, of Rory Alan Roth.
I. Facts
This breach of contract action, sounding in diversity, stems from a dispute between Commonwealth, a Pennsylvania corporation, and Getronics, a Delaware corporation with its principal place of business in Massachusetts, over the return of computer equipment and manuals in accordance with the terms of a lease entered into between Wang Laboratories — the former name of Getronics — and Commonwealth's predecessor in interest, Varilease Corporation. The agreement, dated September 8, 1995, provided for the lease to Getronics of computers and computer equipment for a base monthly rental of $33,277.00. The leased items of greatest value, and with respect to which the parties are in principal disagreement, are two Siemens Nixdorf brand "RM400-730" computers systems identified by physical serial numbers SSY6104573 and SSY6104574. Upon termination of the lease, Getronics was obligated to "return the Equipment to Lessor . . . in the same operating order, repair, condition and appearance." On December 5, 1995, shortly after the agreement was entered into between Varilease and Getronics, Varilease assigned its rights under the lease to Commonwealth pursuant to an Agreement of Sale and Assignment.
Following the termination of the lease on March 31, 1999, Getronics shipped the leased equipment to Commonwealth's agent, Vital Technical Services. The RM400 systems returned by Getronics bore physical serial numbers that matched those of the equipment leased to Getronics. Despite the apparent match in physical serial numbers, Commonwealth asserts that Getronics failed to return the correct equipment. According to Commonwealth, a discrepancy between, on the one hand, the RM400's physical serial numbers and, on the other hand, the electronic serial numbers, which appear on an LED display when the equipment is powered on, indicates that the computers returned by Getronics were not the leased computers.
II. Procedural History
Getronics originally filed a motion for summary judgment in February 2001. This court, in an order dated September 29, 2001, denied Getronics' motion, finding that, although the parties agreed that the physical serial numbers on the computers shipped by Getronics to Vital Technical Services matched the numbers in the lease, the discrepancies between the electronic and physical serial numbers raised a disputed issue of material fact that precluded the entry of summary judgment.
Trial was scheduled for September 2003. In August 2003, Getronics provided notice of its intent to offer the business records of Siemens Business Services and the declaration of Scott Reynolds, a Siemens systems engineer. Mr. Reynolds' declaration and the proposed business records offered by Getronics indicated that the motherboards on both RM400 systems at issue were replaced by Siemens as part of two service repair calls made on April 15 and October 31, 1996, during the term of the lease and well after the computers were leased to the defendant.
According to Mr. Reynolds, in a subsequent affidavit submitted in support of summary judgment, in an RM400 computer system the electronic serial number is stored in the motherboard, a computer component which does the computer's data processing. Aff. of Scott Reynolds in Materials in Supp. of Def's Renewed Mot. for Summ. J. at ¶ 7. Replacing the motherboard of an RM400 unit would therefore change the electronic serial number generated by the unit. Id. at ¶ 10 Commonwealth filed a motion in limine to exclude Reynolds' declaration, or in the alternative a continuance to conduct further discovery. The court granted Commonwealth's request for a continuance, and Getronics has filed the renewed motion for summary judgment currently before the court. Commonwealth has opposed Getronics' motion, including in its submission the report of Rory Alan Roth. Getronics has filed a motion to strike Mr. Roth's report. Oral argument was held to address Getronics' motion for summary judgment and motion to strike on June 9, 2004.
III. Discussion
Getronics' Motion to Strike
The first matter to be addressed is Getronics' motion to strike the proposed report of Rory Alan Roth. Commonwealth submitted Mr. Roth's report as part of its opposition to Getronics' motion for summary judgment. Pl.'s Opp. at Exh. C. Roth is an employee of Maxxum Asset Xperts, a company contracted by Commonwealth to perform an audit in August 2003 on the Siemens Nixdorf equipment Getronics returned. Id. According to Roth's audit report:
During the manufacturing process, the electronic serial numbers are "burned" or "loaded" onto the systems main board to correspond with the physical serial number on the exterior of the unit. These electronic serial numbers are very important on "midrange" or "main frame" equipment such as the Siemens Nixdorf equipment in question. These electronic serial numbers are used as the system identification numbers for the manufacturers service contracts. Most service organizations that are contracted or certified by manufacturers must track any changes with the systems and the system identification numbers so that fraud will not take place.
Computer and Information Technology (IT) can easily be altered, reconfigured, or replaced with substandard components. In this particular case there is no way to identify the serial number on the main boards replaced by the technicians. No record was kept by Mr. Reynolds on the replacement board and there is no way to know if the board replaced was new, reconditioned, or used pull from another machine. When an audit is performed, the first action is to match the unit serial number with the electronic serial number. This will identify immediately if there have been any alterations to the system. On lease returns, all Lessors we work with want to know the exact situation behind the discrepancies. This many times results in a discovery of undisclosed damage, loss, or an attempt to defraud the Lessor. With this in mind, there is no way to track exactly what occurred with the leased equipment that [Getronics] returned.Id.
Getronics raises several objections to the Roth report. First, Getronics contends that the report is unreliable, because the audit was performed four years after the equipment was returned in 1999. Getronics also argues that the report does not comply with the requirements of Fed.R.Civ.P. 56(e), which provides, in pertinent part, that
Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein. Sworn or certified copies of all papers or parts thereof referred to in an affidavit shall be attached thereto or served therewith.
Fed.R.Civ.P. 56(e). Commonwealth has attempted to cure these defects by explaining that Roth was hired as an expert witness and attaching a certification in which Roth explains that the statements in his report "were based on my personal information, knowledge, expertise, and/or inspection of the equipment." Pl.'s Certification of Rory Alan Roth.
Getronics maintains that Commonwealth's curative efforts have not satisfied the concerns of Rule 56(e). Moreover, Getronics contends that the Roth report fails to satisfy Fed.R.Civ.P. 26(a)(2)(B), which requires a party planning to present expert testimony to disclose in a signed report
a complete statement of all opinions to be expressed and the basis and reasons therefor; the data or other information considered by the witness in forming the opinions; any exhibits to be used as a summary of or support for the opinions; the qualifications of the witness, including a list of all publications authored by the witness within the preceding ten years; the compensation to be paid for the study and testimony; and a listing of any other cases in which the witness has testified as an expert at trial or by deposition within the preceding four years.
At the outset, while there may be some dispute over whether Commonwealth has cured the defects arising from its failure to comply with Rule 56(e), it is clear that Commonwealth has failed to satisfy any of the requirements set forth in Rule 26(a)(2)(B). Furthermore, even if Commonwealth were able to satisfy the requirements of Rule 26, Roth is not qualified to supply relevant expert testimony about the electronic serial numbers.
Federal Rule of Evidence 702 governs the admissibility of expert testimony and provides: If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, 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.
Fed.R.Evid. 702. Pursuant to Rule 702, there are "three distinct substantive restrictions on the admission of expert testimony: qualifications, reliability, and fit." Elcock v. Kmart Corp., 233 F.3d 734, 741 (3d Cir. 2000). "For a court to qualify a witness to testify as an expert, Rule 702 requires the witness to have `specialized knowledge' regarding the area of testimony." Waldorf v. Shuta, 142 F.3d 601, 625 (3d Cir. 1998). Though this specialized knowledge may arise from "practical experience as well as academic training and credentials" it is clear that the proffered witness "must possess skill or knowledge greater than the average layman." Id. (citations omitted). Despite the generally liberal standard for qualifying an expert witness, the Third Circuit has "not pursued a policy of qualifying [every] proffered witness as an expert." Id.
Reliability requires that the expert's opinion be "ground[ed] in the methods and procedures of science" and not "subjective belief or unsupported speculation." Daubert v. Merrell Dow Pharms., 509 U.S. 579, 590 (1993).
Finally, Rule 702 demands that the proffered expert testimony fit, "in that it must assist the trier of fact." Oddi v. Ford Motor Co., 234 F.3d 136, 145 (3d Cir. 2000) (citing In re Paoli, 35 F.3d 717, 743 (1994)).
At oral argument, Commonwealth's counsel described Roth as an auditor who has developed a familiarity with electronic serial numbers and the identification of equipment through his employment with Maxxum Asset Xperts. Oral Argument Tr. at 4. Counsel made clear that Roth was neither an accountant nor an engineer, but would act as "a fact witness and would provide expert testimony as well. Either lay-opinion testimony or expert testimony . . . as to the importance of the electronic serial numbers and how they are used to verify the identity of computer equipment in the industry." Id. at 11.
Counsel's assertion that Roth will provide testimony on the importance of electronic serial numbers does not suggest that Roth is relying upon any particular area of expertise or specialized knowledge in the course of rendering his opinion.
The reliability and fit of Roth's report and proposed testimony are undermined by the fact that his audit was performed in August 2003, four years after the computer equipment in question was returned to Commonwealth in March 1999. After describing the audit process, Roth states in his report that "there is no way to track exactly what occurred with the lease equipment that [Getronics] returned." Pl.'s Opp. at Exh. C. Though he describes a discrepancy between the electronic and physical serial numbers, Roth provides no insight into the significance of the electronic serial numbers and the bearing these electronic serial numbers had on the contracting parties in this case. Roth's report and testimony would not be helpful to a trier of fact faced with the task of determining what equipment was returned to Commonwealth. In light of Roth's lack of any relevant expertise, Getronics' motion to strike Roth's report will be granted.
Getronics' Motion for Summary Judgment
Getronics raises a series of arguments in support of its renewed motion for summary judgment. Most significant among them is the assertion that Commonwealth cannot prove that Getronics failed to return the same computer equipment it leased. In particular, Getronics focuses on the discrepancy between the electronic and physical serial numbers which animate Commonwealth's case. Getronics points out that Commonwealth has no record of the electronic serial numbers at the time the computer equipment was leased. Moreover, Commonwealth does not contest the assertion that computer equipment bearing the same physical serial numbers was returned at the termination of the lease. Getronics therefore argues that Commonwealth simply cannot prove that any difference exists between the leased and returned computer equipment.
Getronics also cites the affidavit of Scott Reynolds, a Siemens engineer, who explained that the electronic serial numbers generated by a computer will change with the replacement of its motherboard. Aff. of Scott Reynolds in Materials in Supp. of Def's Renewed Mot. for Summ. J. at ¶ 10. According to the Siemens service logs of April 15 and October 31, 1996, the motherboards on each of the computer systems at issue were replaced. Materials in Supp. of Def's Renewed Mot. for Summ. J. at Exh. A and B. Significantly, Reynolds' testimony is uncontroverted, and Commonwealth does not dispute Getronics' explanation in its memorandum in opposition, nor did it take issue with this explanation at oral argument.
In response to Getronics' arguments, Commonwealth principally relies upon Roth's report regarding the significance of electronic serial numbers to argue that different computers were returned.
Commonwealth also argues that Getronics' replacement of the motherboards without first notifying them of the repairs was a breach of the lease. Commonwealth does not specify the particular lease provision upon which it bases this claim. However, the court assumes it is invoking ¶ 6(c), which provides that the "Lessee shall not without prior written consent of Lessor, affix or install any accessory, feature, equipment or device to the Equipment or make any improvement, upgrade, modification, alteration or addition to the Equipment. . . ." In addressing this question of law, the court is not persuaded that Getronics'replacement of the motherboards, a component essential to the operation of the equipment at issue, constitutes the type of "accessory, feature, equipment or device," or the type of "improvement, upgrade, modification, alteration or addition," contemplated by the lease. In fact, Getronics' replacement of the motherboards can best be described as obligatory maintenance, in accordance with ¶ 7 of the lease, entitled "Maintenance and Repairs." That provision requires that the lessee "keep the Equipment in good working order, repair, appearance and condition and make all necessary adjustments, repairs and replacements" to the equipment.
A grant of summary judgment is appropriate "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 a judgment as a matter of law." Fed.R.Civ.P. 56(c). "[A]t the summary judgment stage the judge's function is not . . . to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). The evidence is viewed in the light most favorable to the non-moving party, and all "justifiable inferences" from the evidence are drawn in the nonmovant's favor. Id. at 255. The moving party bears the burden of proving that there are no genuine issues of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). To avoid summary judgment, the nonmoving party must produce more than a mere scintilla of evidence in its favor. Anderson, 477 U.S. at 252. The absence of "sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party" would indicate that there is no genuine issue for trial. Id. at 249 "If the evidence is merely colorable . . . or is not significantly probative . . . summary judgment may be granted." Id. at 249-50 (citations omitted).
Commonwealth's claim that Getronics failed to return the same computer equipment it leased rests almost entirely on the difference between the electronic serial numbers and the physical serial numbers on the equipment at issue. However, Commonwealth cannot hinge its claim on any discrepancy between the physical and electronic serial numbers. Importantly, Commonwealth has failed to set forth any evidence of record detailing what the electronic serial numbers were at the time the two RM-400 units were leased to Getronics' predecessor. In the absence of such evidence — and in the face of Scott Reynolds' testimony as to Siemens' responsibility for embedding the electronic serial numbers in the two computers when the motherboards were replaced during the lease — Commonwealth cannot prove that the units returned by Getronics, which bore the same physical serial numbers as the leased units, were not the leased units.
Commonwealth also argues that the presence of plastic, rather than metal, "manufacturer's tags" affixed to the outside of the computer cabinets supports the inference that different equipment was returned at the termination of the lease. Commonwealth's president, George Springsteen, stated in his affidavit that "there are tags or labels applied at the factory to the outside of the equipment. Typically these are silver or aluminum colored tags that are permanently applied so that they cannot easily be tampered with or removed. They typically will include the manufacturer's name, the serial number in Arabic numbers and in a bar code, as well as various other information pertinent to the equipment to which they are attached." Springsteen Decl. at ¶ 10. Notwithstanding Mr. Springsteen's description of the tags, Commonwealth cannot point to any evidence regarding the type of tags affixed to the computers at the time they were leased to Getronics. Furthermore, in a second affidavit, Scott Reynolds explained that Siemens uses a thin plastic sticker to label its computer equipment, rather than the metal tags described by Mr. Springsteen, undermining the notion that the presence of plastic tags are indicative of a difference between the machines leased and returned. Second Aff. of Scott Reynolds at ¶ 4.
In short, Commonwealth's failure to offer any proof, beyond mere speculation, that the computer equipment returned was any different than the equipment which was leased, establishes that there is not a genuine issue for trial.
Briefly, in a footnote to its brief in opposition, Commonwealth contends that there are genuine issues of fact concerning "(a) when the equipment was, in fact returned, since several of the units were not in working order and were not restored to working order for months, (b) the condition of the equipment, since it was missing many individual items and was damaged, and (c) defendant's failure to return manuals needed for the operation of the equipment." Pl.'s Opp. at 2 fn. 1. In support of this assertion, Commonwealth has submitted the declaration of George Springsteen.
Springsteen's declaration detailing the alleged damage does not indicate when he inspected the returned computer equipment. Commonwealth also failed to provide a definitive record of the condition of the equipment when it was delivered to Commonwealth's agent, Vital Technical Services.
Further, the terms of the lease allowed the lessee to return the equipment with "reasonable wear and tear excepted." Even if, notwithstanding its imprecision, some weight were accorded the Springsteen declaration, there has not been any demonstration that the alleged damage to the computer equipment goes beyond the "reasonable wear and tear" anticipated by the lease.
Finally, the weakness of Commonwealth's claim that equipment was returned damaged is underscored by the fact that there is also no evidence to support Commonwealth's assertion that Getronics failed to return any particular set of manuals. The record before the court reveals that the manuals Commonwealth claims were not returned were not even among the items subject to the lease.