Triangle Sheet Metal Works, Inc. v. Silver

• Citation: 222 A.2d 220,154 Conn. 116
• Court: Supreme Court of Connecticut
• Decision Date: 26 July 1966
• Parties: TRIANGLE SHEET METAL WORKS, INC., et al. v. Jacob M. SILVER et al.

Page 220

222 A.2d 220

154 Conn. 116

TRIANGLE SHEET METAL WORKS, INC., et al. v. Jacob M. SILVER et al.

Supreme Court of Connecticut.

July 26, 1966.

Milton Sorokin, Hartford, with whom were Joseph D. Hurwitz, Hartford, and, on the brief, Ethel S. Sorokin, Hartford, for appellants (defendants).

Irving S. Ribicoff, Hartford, with whom was Louise H. Hunt, Hartford, for appellees (plaintiffs).

Before KING, C.J., and MURPHY, ALCORN, HOUSE and THIM, JJ.

ALCORN, Associate Justice.

The named plaintiff, which we shall call Triangle, is a corporation which has been engaged in sheet metal work since 1917. Sometime prior to 1960, it began to make and install metal structures to be used to enclose heating and/or air-conditioning units around the perimeter of buildings. The structures are commonly called enclosures.

The other plaintiff, Modulaire Components Corporation, hereinafter called Modulaire, is a corporation which was organized by Triangle in February, 1962, to handle the sale and installation of Triangle's enclosures.

The defendant Leonard R. Phillips is an engineer of wide experience in sheet metal work who was employed by Triangle from July 15, 1960, to June 19, 1963, as a heating, air-conditioning and ventilating engineer, and, when Modulaire was organized, he served as its vice-president from February, 1962, to June, 1963.

The defendant Renzel L. Byus was employed as a salesman by Triangle from January to December, 1962, and as a salesman for Modulaire from December, 1962, to March, 1963, when he became sales manager of Modulaire and continued in that capacity until October, 1963.

The other individual defendants are persons who joined with Phillips, after he left Triangle and Modulaire, to form the defendant corporation, Phillips Air Devices, Inc., in August, 1963, hereinafter called Air Devices.

Triangle and Modulaire brought this action, claiming that Phillips, in violation of his express agreement with the plaintiffs and in violation of his confidential and fiduciary relation with them, disclosed to Air Devices and the deendants who joined him in forming that corporation secret and confidential information concerning the plaintiffs' business which those defendants proposed to use to the plaintiffs' disadvantage; that Phillips and those defendants conspired to appropriate, unlawfully, the plaintiffs' secret and confidential improvements and advances on their enclosures; Byus to leave the plaintiffs and join Air Byus to leave the plaintiffs and join Air Devices and that he, in concert with the others, is using confidential information which he obtained while he was in the plaintiffs' employ to their damage; and that, in soliciting competing business, the defendants have wilfully and fraudulently misrepresented Air Devices' product and operations in an improper attempt to interfere with the plaintiffs' business.

The plaintiffs sought injunctive relief to restrain the actions complained of, as well as damages, reasonable attorneys' fees, and any other appropriate equitable relief. The trial court found in the defendants' favor on the conspiracy issue but rendered judgment for the plaintiffs on the other three counts. It enjoined Phillips, Byus, Air Devices and their officers, servants, agents and employees from certain specified activities until August 29, 1965, and awarded the plaintiffs exemplary damages in the form of $12,500 attorneys' fees.

At the start of the trial, the plaintiffs filed, over the defendants' objection, a substituted complaint which included a claim for reasonable attorneys' fees which had not been included in the original complaint. There is no dispute that, by it, the plaintiffs sought to recover exemplary damages. A motion to expunge the claim on the ground that the parties had agreed that no new issue was to be injected by the substituted complaint was denied by the court, and that denial is made one ground of appeal. The award of exemplary damages is a major issue on the appeal, however, and we shall deal with it on a substantive basis as the parties have done rather than from the procedural aspect of the ruling on the motion.

The defendants have made a massive attack on the finding, much of which has been abandoned, but an examination of the still substantial portions which are pursued discloses that no corrections which would be of advantage to the defendants can be made.

The enclosures produced by Triangle in 1960 were mainly assembled and welded at the factory. This procedure necessitated the transportation of heavy and bulky units to the jobsite and resulted in a lack of flexibility in installation and adjustment to job conditions. These enclosures had no secret features which were novel to the trade. Triangle's president wished, however, to develop methods of fabricating enclosures with standardized parts and contacted Phillips pursuant to that objective. Following the discussion, Phillips was engaged to develop such a line of products for Triangle under a written contract, which provided that all matters concerning the development, improvement, advancement and extension of methods, processes, designs, plans, ideas and inventions were to be deemed trade secrets and to be held confidential and secret by Phillips and not disclosed by him during or after his employment and that any disclosure by Phillips would entitle Triangle to injunctive relief. The pertinent provisions appear in the footnote. ¹ After extensive experimentation during the first quarter of 1961, Phillips designed what is called the Modulaire enclosure. This was a new type of enclosure, distinguished by a series of interchangeable parts, which could be sent unassembled to the field for easy installation on the job and for easy adjustment to irregularities of job conditions. The design was unique, not known or used by others, secret and entitled to protection. It permitted Triangle to develop and adopt techniques for mass production. On October 17, 1961, Phillips applied for a patent on the Modulaire enclosure and assigned the patent application ot Triangle. Triangle spent more than a year, and over a half million dollars, in solving problems of tooling and manufacturing, cost analysis, packaging, installation methods and price lists for the new enclosure, and production was commenced in March or April, 1962. Phillips was in general charge of the program and had full knowledge of all of Triangle's methods of design, as well as its practices concerning manufacturing, costs, pricing and bidding.

Byus, who, as already stated, was employed by both Triangle and Modulaire, had acquired full knowledge of the plaintiffs' costs, pricing, discounting and bidding procedures. As sales manager for Modulaire, he kept a record of Modulaire's standard pricing methods and another record of prospective jobs known to Modulaire. After he left Modulaire, the latter record could not be found.

On June 19, 1963, Phillips resigned from both Triangle and Modulaire, expressing dissatisfaction with his status in the two companies. On that date he agreed in writing that the improvements, advances and extensions on the enclosure designs on which he had been working belonged to Triangle; that he would sign, and assign to Triangle, all applications for patents on those items and cooperate in prosecuting them at Triangle's expense; and that, in consideration of a general release given by Triangle and Modulaire, he would not thereafter disclose any of their trade secrets.

When he left the plaintiffs, Phillips was negotiating with the defendants Jacob M. Silver, Emanuel M. Silver and Phillip Klein to start a manufacturing business, and, on or about August 7, 1963, they caused Air Devices to be incorporated. Soon thereafter, those defendants decided to produce enclosures without investigating whether, by that course, Phillips would violate his obligations to the plaintiffs or whether the enclosures they proposed to produce differed from the Modulaire enclosure. Phillips designed an enclosure for Air Devices which was an attempted modification of the Modulaire enclosure but contained features proprietary to, and not substantially different from, Modulaire. Knowledge of Triangle's production and design secrets were necessary in order to produce the essential features of this enclosure. The defendants actually produced no enclosures but were prepared to make them based on and using the Modulaire idea and the plaintiffs' secrets of design and production.

On October 12, 1963, Byus left his employment with Modulaire and on October 14, 1963, went to work for Air Devices. He immediately began to bid on projects for Air Devices which he had previously bid on for Modulaire, or with which he had become familiar while he was employed by Modulaire. On some of these projects, Phillips had been instrumental in having the architect incorporate specifications for Modulaire enclosures or features in the plans. At the time of the trial, however, Air Devices had succeeded in obtaining only two small contracts to supply enclosures.

The defendants produced and circulated a brochure to prospective purchasers which is substantially a copy of the plaintiffs' brochure and which bears a distorted copy of the plaintiffs' union label although the defendants had neither a union contract nor the right to use the plaintiffs' union label. They solicited work from contractors with whom Triangle had also bid, representing, in substance, that Phillips had left the plaintiffs and joined Air Devices, which was staffed by former key personnel of Modulaire and which had developed a new, different and improved enclosure design. They bid on ten construction projects, using secret and confidential bidding data developed by the plaintiffs, and, after September, 1963, Modulaire lost eight of its sales representatives, some of whom became selling agents for Air Devices.

The Modulaire enclosure was unique, and its methods of design, tooling, manufacture and...