process was known to and used by the plaintiffs before any request from Anderson or Miner for assistance. A broad interpretation such as is suggested by the defendants would equate to a sale of a substantial portion of Rodgard's operations; such was clearly not contemplated by the parties. If Miner wanted to purchase all of the rights to the processes involving Hytrel to the exclusion of Rodgard, it knew how to express such specifically in the terms of a contract.
Alternatively, the defendants argue that the plaintiffs' acts should estop them from bringing claims for fraud and for breach of contract. Estoppel is an equitable remedy which requires that the party invoking such must do so with clean hands;
the defendants do not come to this Court with clean hands and therefore cannot assert estoppel.
The amount recoverable as damages for the breach of a contract is that that is reasonably foreseeable and within the contemplation of the parties.
It is this element that the plaintiffs failed to meet and satisfy at trial. In fact the defendants elicited an admission from Winfield that, indeed, the plaintiffs had not suffered any economic harm.
This lack of any provable economic harm prevents recovery by the plaintiffs of compensatory damages on the contract claims. Although the plaintiffs have proven that the defendants breached the promise of domestic confidentiality as expressed in the 1977 agreement and repeated in the 1981 agreement (although promising confidentiality only until 1986 in the latter), the defendants' proof that the plaintiffs had no evidence of any economic harm directly and proximately caused by the defendants' breachful conduct in the form of the improvident disclosure is equally fatal to both the plaintiffs' fraud claims and their breach of contract claims.
As remaining matters, the plaintiffs allege that the defendants were unjustly enriched as a result of their improper conduct and seek recovery of the same via a constructive trust or comparable arrangement. While a constructive trust may be imposed in certain instances to redress unjust enrichment resulting from fraudulent conduct, there was in this case no proof as to how the defendants were unjustly enriched. Prior to the 1981 agreement, the defendants had purchased Hytrel parts produced by Rodgard and, during the course of their relationship and up to 1983, Miner paid approximately three million dollars to Rodgard.
By the terms of the 1981 agreement, the defendants purchased the right to use the trade secret and disclose it abroad, and any gains derived therefrom cannot be said to have been improperly achieved. If there were a claim to compel the defendants to disgorge any unjust enrichment, such would of necessity be limited to such profits derived from and because of the improper domestic disclosure, but not from The Patent itself or its claims. This Court does not find any proof establishing that the defendants were unjustly enriched by or because of their conduct of having improperly disclosed the plaintiffs' manufacturing processes and techniques of eliminating voids such that a constructive trust should be imposed on such improper gains. While it may be true that the defendants did not purchase the right to disclose the information contained in The Patent, the plaintiffs have failed to prove any damages or improper gains proximately resulting from such disclosure.
The plaintiffs allege that the defendants breached the covenant of good faith which, along with fair dealing, is implied in every contract in both Illinois and New York.
However, such does not provide a cause of action independent of those matters already discussed.
Good faith vel non has been implicitly considered as part of this Court's evaluation of the fraud and breach-of-contract claims and needs no further elaboration.
The plaintiffs' claim for damages arising from any or all disclosures by Miner outside of this country has no basis. The 1976, 1977 and 1981 agreements all contained provisions whereby Miner could disclose information abroad and outside the domestic marketplace, notwithstanding any potential detriment to Rodgard. Even if this Court had jurisdiction to entertain the claims related to Miner's foreign patents and the disclosures therein of the plaintiffs' processes, all the written agreements between the parties contained provisions expressly granting to Miner the right to disclose abroad any information obtained from the relationship.
Although the plaintiffs failed to prove actual damages so as to sustain any recovery on their claims, there remains no doubt that the defendants' conduct was not forthright. Nevertheless, such conduct does not present such egregiousness to warrant imposing punitive damages. There must be aggravating circumstances or outrage, or some evidence of ill will, evil motive, spite or malice to justify an award of punitive damages.
In cases alleging fraud closely related to claims for breach of contract, there must be morally culpable behavior amounting to fraud upon the public.
Punitive damages are not justified in this case.
The plaintiffs have also sought attorney's fees. This Court finds that the parties advocated their positions vigorously, legitimately and reasonably and does not find this to be an "exceptional case" that warrants an award of attorney's fees under 35 U.S.C. § 285 or otherwise in light of the fact that the plaintiffs did not prevail on any of their patent claims.
The defendants have counterclaimed for breach of the May 1981 agreement, contending that Winfield and Rodgard accepted employment detrimental to the interest of Miner in contravention of the 1981 agreement. The specific language prohibited Winfield or Rodgard from accepting any "employment or assignments detrimental to the interests of Miner with regard to the above-mentioned compression springs during the existence of this agreement." The referenced springs are those related to "spring products such as the RF-11, which *** is used in [Miner's] RF-444 Draft Gear." A reasonable interpretation of the consulting agreement, taking into account all the relevant language in the contract as well as the relationship between the parties and business realities is that Winfield and Rodgard were to help install compression-spring manufacturing capabilities at Miner similar to Rodgard's and to refrain from competing with Miner's draft-gear spring products. In the light of this interpretation, the defendants' proof at trial that the plaintiffs pursued ventures with another manufacturer in relation to a "truck" or "railway car" "side bearing" does not show conduct rising to a breach. Such products were not draft gears; in fact, one was so different as to merit an independent patent.
The defendants hinted that such product was substantially similar to the spring products Rodgard had made for Miner, but such intimation was not at all substantiated. To interpret the agreement as drafted by Miner to prohibit any activity by Rodgard or Winfield in the field of Hytrel products that are not similar to RF-11 as produced for and by Miner would be overreaching and unreasonable. The plaintiffs understood that Winfield was to provide assistance in installing a production facility and that they then were not to engage in any activity that competed with the production of the draft-gear products from such facility,
and such interpretation is entirely reasonable. Therefore, the defendants did not sustain their burden of proving that the plaintiffs breached the 1981 contract.
Even if the defendants had proved their counterclaim for breach of contract, the defendants failed to prove any damages resulting from the plaintiffs' conduct. The defendants did put forth a request for restitution of the payments made to the plaintiffs under the 1981 consulting contract; however, in making this request, the defendants failed to account for the fact that, by their own admission, the plaintiffs did substantially, if not fully, perform the requirements of the contract. Assuming that a breach occurred which this Court has not found, restitution under these circumstances would be inappropriate and excessive.
The defendants also request an award of attorney's fees. Although a court has the power to award attorney's fees where an opposing party has conducted litigation in bad faith or for improper reasons, such an award is not justified here.
This Court finds that the plaintiffs and their attorneys conducted this litigation vigorously and properly and in total good faith, and certainly based upon reasonable inquiries. Simply because a party is successful in the end does not imply that the opposing party's conduct was not in good faith.
The defendants filed a motion to strike Winfield's testimony claiming that they had been denied the opportunity to cross-examine him in relation to the additional claims made in the Complaint. It has long been regarded that the opportunity to cross-examine is an essential safeguard of the credibility, accuracy and completeness of testimony. However, except in criminal cases, in the event of death of a person who has previously testified there seems no adequate reason for excluding the prior testimony.
Where the inability to cross-examine is not attributable to any fault of the opposing party, but solely due to the death of the witness, striking out all prior testimony would be unwarranted.
Any preclusion would have to be limited to subject matter not covered by the cross-examination performed.
This Court finds that the defendants made substantial use of their opportunity to cross-examine Winfield prior to his death and have failed to satisfy this Court that any prejudice will be suffered if Winfield's testimony is not stricken. The motion to strike will be denied on the merits.
The remaining counterclaims by the defendants for a declaratory judgment regarding the validity of The Patent and inventorship of the same are rendered moot by the findings and conclusions in this case.
After reviewing all the evidence presented and considering the arguments put forth, it is hereby ORDERED that the defendants' motion to strike Winfield's testimony is denied and further it is hereby FOUND AND CONCLUDED that Winfield was not a joint inventor, that the defendants did not violate the best mode requirement, that the defendants did not misappropriate a trade secret from the plaintiffs, that the plaintiffs' fraud claim based on the 1977 contract is time barred, that the plaintiffs failed to prove fraud otherwise, that the plaintiffs did prove that the defendants had breached the terms of the 1977 contract but did not prove any damages resultant therefrom, that the defendants were not unjustly enriched, that the defendants failed to prove their counterclaims and that neither party is awarded attorney's fees and ORDERED that the defendants may have a Judgment of dismissal and for their costs pursuant to FRCvP 54(d)(1), if any.
DATED: Buffalo, N.Y.
December 29, 1995
John T. Elfvin