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December 13, 1979

DANIEL L. RODE, Plaintiff, against ROSS M. BRANCA and LASERTRONIX, INC., Defendants.

The opinion of the court was delivered by: PLATT


Plaintiff, a holder of a Ph.D. in Applied Physics from Case Western Reserve, sues in a six count complaint for rescission of an Agreement dated January 15, 1977, on the grounds of fraud in the inducement, unconscionability, breach of contract and mistake, for a declaration that the defendants have no interest in his alleged invention and for punitive damages for unethical conduct.

 Defendant Ross M. Branca ("Branca"), a New York attorney who also holds a degree in business administration, denies all of the material allegations in the complaint, sets forth four affirmative defenses and four counterclaims in which he seeks specific performance and accounting and, in the event the Court orders rescission, an award for his legal fees.

 At the request of the plaintiff, the Court is presiding over a bifurcated trial, holding in abeyance Branca's counterclaims for legal fees.


 The facts are as follows:

 Following his acquisition of his Ph.D., plaintiff went to work for Bell Telephone Laboratories ("Bell") and prior to his termination in January of 1979 he had risen to Technical Group Supervisor in the field of semiconductor technology. During his employment with Bell, plaintiff claims to have invented a "Product" which converts electricity into light and which he claims is novel and has foreseeable profitable applications in several electronic communications, military, process control, optical, computer and other systems.

 In or about 1973, plaintiff met Branca socially. They became friends through their fiances who were neighbors in New Jersey. In 1976 they first discussed the Product. Their discussions eventually led to an understanding that Branca would attempt to find financial backing for the Product and in this connection Branca, in November 1976, undertook to form the defendant Lasertronix, Inc. ("Lasertronix") as a Delaware corporation. Thereafter, the plaintiff and Branca entered into negotiations in order "to fix their rights and responsibilities as between themselves" (Exhibit 1). Several draft agreements were prepared, discussed and edited into a penultimate draft (Exhibit 2), and a final draft (Exhibit 1) which the parties signed and acknowledged before a New Jersey lawyer on January 15, 1977.

 Plaintiff testified that Branca was acting as attorney for plaintiff, the corporate defendant, and himself, and that prior to the execution of the agreement Branca had assured him that the agreement "does not mean anything unless I get the money and you join it" (i. e., presumably the corporation). Plaintiff's wife testified that she overheard this representation.

 Branca testified (and it does not appear to be disputed) that he spent substantial time and effort in attempting to obtain funding for the defendant corporation and the Product. Among others, he talked to representatives of IBM, General Telephone and Electronics, International Telephone and Telegraph Company, Newport Securities, Harris Semiconductor and Valtec. More significantly, Branca produced in 1978 and both he and the plaintiff talked to Richard Endres, a consultant for Amp Corporation and representatives of Data Service Ventures ("DSV"). But all of these prospective investors in 1978 rejected the business plans which plaintiff and Branca had prepared and presented to them primarily because of the estimated cost of the project.

 When plaintiff lost his position in January 1979 with Bell after Bell learned of his association with Lasertronix, Inc., he undertook, at the suggestion of Branca, to communicate and meet again with Richard Endres in an attempt to interest him in working further on the project. He was successful, and in the winter and early spring of 1979 plaintiff and Endres rewrote a business plan for the Product which, among other things, described the Product as that of Lasertronix. They also submitted this business plan to Branca who made certain suggestions with respect thereto. The principal difference between the new business plan and the one formulated by plaintiff and Branca lay in the amount of funds that would be required to develop the Product. Thereafter, Endres took plaintiff to EMW Ventures ("EMW") and back to DSV. Both firms became interested and loaned the project $ 125,000.00 and indicated that they would make a further investment in the event a new company (Liteson Corp.) were formed and Endres was named the president thereof.

 Mr. Endres then took plaintiff to a Philadelphia attorney who drafted an agreement (Exhibit A) to be presented to Branca pursuant to which the agreement of January 15, 1977, would be rescinded, a new corporation (Liteson) would be formed, and Branca would be given 4% Of the common stock of Liteson if he put up $ 30,000.00 of new money. Branca, however, refused to accept this proposal and plaintiff commenced this lawsuit.


 Plaintiff claims that it was Branca's duty under their arrangement to find and furnish the requisite funding for a product, and not having done so Branca is not entitled to the benefits of the agreement dated January 15, 1977. The difficulty with this position, of course, is that the written agreement (Exhibit 1) between the parties does not so provide. Plaintiff says, however, that the oral agreement between them was that the written agreement (Exhibit 1) between them would be, in effect, meaningless unless Branca obtained the requisite funds. Assuming arguendo that the terms of the written agreement dated January 15, 1977 can be altered in such fashion, the fact remains that while Branca was not Solely responsible for the production of the $ 125,000.00 loan from DSV ...

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