Maloney v. EI Du Pont de Nemours & Co., 18454

• Decision Date: 10 June 1965
• Docket Number: No. 18454,18874.,18454
• Citation: 352 F.2d 936
• Parties: Norvin G. MALONEY, Jr., Appellant, v. E. I. DU PONT de NEMOURS & CO., Inc., Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

352 F.2d 936 (1965)

Norvin G. MALONEY, Jr., Appellant, v. E. I. DU PONT de NEMOURS & CO., Inc., Appellee.

Nos. 18454, 18874.

United States Court of Appeals District of Columbia Circuit.

Argued March 15, 1965.

Decided June 10, 1965.

Motion for Rehearing Denied October 5, 1965.

Petition for Rehearing Denied October 5, 1965.

Mr. Henry Lincoln Johnson, Jr., Washington, D. C., for appellant.

Mr. James C. McKay, Washington, D. C., with whom Mr. Edward J. Grenier, Jr., Washington, D. C., was on the brief, for appellee.

Before BAZELON, Chief Judge, and WASHINGTON and WRIGHT, Circuit Judges.

Appellant's Motion for Rehearing Denied October 5, 1965.

Appellee's Petition for Rehearing En Banc and/or for Rehearing by the Division in 18454 Denied October 5, 1965.

WASHINGTON, Circuit Judge.

Appellant, a development engineer, was employed by appellee E. I. Du Pont de Nemours & Co., in 1945. Then, and again in 1952, he executed a form contract assigning all discoveries he might make during the term of his employment to Du Pont, and promising never to reveal without permission any secret or confidential information he might learn during the course of his employment. The only term in the contract form which dealt with other conditions of employment stated that he would be employed "at a wage or salary and for such length of time as shall be mutually agreeable." Appellant was dismissed from the employment of Du Pont in January 1961, by a letter which informed him only that the Company no longer had need for his services, and that he would be given one month's pay in lieu of notice.

Appellant brought two actions against Du Pont in the United States District Court for the District of Columbia challenging this dismissal, one grounded in contract and the other in fraud. He claims, in the first, that he was entitled to "permanent" employment, terminable only by mutual consent, retirement, or for cause, and that none of these conditions for termination was satisfied. In the second, he argued that he was fraudulently induced to leave former employment and accept employment with Du Pont by the promise that his employment would be permanent. In both actions, the trial court found for appellee Du Pont on its motions for summary judgment. These appeals followed.

The action for fraud (our No. 18,874) was brought January 13, 1964. This was exactly three years after appellant had received formal notice that Du Pont no longer wished his services. However, it is uncontroverted that appellant was given oral notice of Du Pont's belief that it had the right to fire him under the contract, and intended to exercise that right, in November and December 1960. Since a three-year statute of limitations applies, and appellant must have discovered the putative fraud in 1960 at the very latest, it appears that the suit was barred. Wiren v. Paramount Pictures, Inc., 92 U.S.App.D.C. 347, 206 F.2d 465 (1953), cert. denied, 346 U.S. 938, 74 S.Ct. 378, 98 L.Ed. 426 (1954). We thus affirm the judgment below in No. 18,874.

In the contract action (our No. 18454), the trial judge rested his grant of summary judgment upon interpretation of the contract form. He found that it embodied appellant's contract of employment, and that its terms unambiguously created a relationship terminable at the will of either party.¹ If his findings were correct, termination by Du Pont could not have given rise to any cause of action. Their correctness, however, must be decided by reference to Delaware contract law, for all parties are domiciled there and it was there that the contract form was signed and all work performed. So viewing the findings, we find them erroneous, because there remain unresolved issues of material fact, requiring trial and foreclosing summary judgment.²

The question first arises whether the form constituted a contract at all. Wages and duration of employment, it provides in essence, are to be mutually agreed upon. In Hammond & Taylor, Inc., v. Duffy Tingue Co., 39 Del.Ch. 174, 161 A.2d 238 (1960), the Delaware Chancery Court characterized a contract providing for employment "on terms to be mutually agreed on" as "almost the classic example of a legally unenforceable * * * agreement to agree." It stated that evidence of oral agreements could be consulted to see if a definite and enforceable compact existed, and, on the facts, found no such agreement to exist. Although the contract in Hammond & Taylor was executory, and the parties here had been "performing" for upwards of fifteen years, we think no different conclusion would be reached.³ In the absence of an oral agreement, there would appear to be no valid contract.⁴

As we read appellant's complaint and affidavit upon appellee's motion for summary judgment, however, a substantial question of fact is presented whether a supplementary oral agreement was made. He claims that oral representations were made to him that Du Pont would continue his employment, so long as he satisfactorily performed the work assigned to him, if economic conditions permitted. Thus, he could not be discharged except for cause, in cases of economic necessity, or at retirement.

Although such contracts ordinarily are not favored in the law,⁵ we conclude that Delaware courts would enforce such an agreement, were it shown, in view of the conditions of secrecy placed upon appellant. Delaware courts have frequently been solicitious of the employee who has agreed to provisions restricting his right to compete with a former employer, or to use knowledge and skills he may have acquired.⁶ This solicitude is, in effect, an acknowledgement that an employee thus assumes what may be a substantial burden of diminished employment mobility.⁷ Even where limited to "trade secrets," such provisions can have a chilling effect on negotiations with a prospective employer, who will wish to avoid even the threat of litigation.⁸ In Delaware, secrecy clauses are apparently enforceable by injunction, whether or not bad faith on the part of the employee is shown.⁹ It seems to follow that Delaware courts would consider such provisions special consideration for a "tenure" contract.¹⁰

We note, moreover, that, in view of the present record, appellant's claim to a "tenure" contract is not extravagant. Printed forms explaining employee benefits for Du Pont employees, in the record of No. 18,874, state that the continuity of an employee's service is broken by a variety of causes. Discharge for cause, layoffs of a certain length, and other forms of termination are specified; no mention is made that discharge may be at Du Pont's whim, or what the consequences of such a discharge might be. By various policies and acts, it appears that Du Pont encourages its employees to think in terms of a permanent place at Du Pont. Moreover, the contract contains no mention of a right of either party to terminate at will; nor does the contract provide for any notice of termination, separation pay, or other amenities which might be expected to follow employment subject to arbitrary termination. Other industry contracts imposing a duty of secrecy often specify periods of notice which must be given on termination, and explictly reserve the company's right to terminate unilaterally in accord with those provisions.¹¹ Since in Delaware, as elsewhere, the terms of a contract are to be construed against the party drawing it¹² — here Du Pont — there is some reason to believe a Delaware court would conclude that discharge without cause or other justification was wrongful.¹³

If it is concluded that a case for wrongful breach can be made out, the question of remedy arises.¹⁴ Appellant sued on three counts. Plainly, appellant would be entitled to show consequential damages, as he claims in the third count of his complaint. But in addition to damages, appellant sought to reclaim his patents and inventions, and to have an accounting of Du Pont's profits from their use. However, an assignment of an invention made during a period of actual employment for the express purpose of invention could be compelled, even in the absence of express contractual provision.¹⁵ Certainly, an assignment already made would not be undone. We hold, therefore, that summary judgment was properly granted as to counts one and two of the complaint.

In reversing, we hold only that summary judgment was erroneously granted on count three of the complaint, alleging wrongful breach by Du Pont of the employment relationship. We find the issue to be, under Delaware law,¹⁶ whether the contract provision is too indefinite to stand or, on the contrary, is defined by supplementary oral representations and agreements made at the time of contracting. If such supplementary agreements exist, the question arises whether they support Du Pont's view of the contract or appellant's. If they support appellant's view, the question will be whether the discharge was wrongful — i. e., not for cause or other justified reason; if wrongful, damages must still be shown. Of course, we intimate no view as to any of these questions.

No. 18874 is affirmed.

No. 18454 is affirmed in part and reversed and remanded in part.

1 In an earlier proceeding, on Du Pont's motion to dismiss the complaint for failure to state a cause of action, another district judge had indicated a contrary point of view. Appellant claims the present ruling was a violation of "law of the case" We need not reach this contention.

2 Since Delaware law was argued neither to the trial court nor to this court, we do not attempt precision in identifying these issues. It is sufficient to satisfy ourselves that a cause of action might exist...