J. T. Healy & Son, Inc. v. James A. Murphy & Son, Inc.

• Citation: 357 Mass. 728,260 N.E.2d 723
• Parties: , 166 U.S.P.Q. 443 J. T. HEALY & SON, INC. v. JAMES A. MURPHY & SON, INC. et al. (and two companion cases 1 ).
• Decision Date: 19 June 1970
• Court: United States State Supreme Judicial Court of Massachusetts

Page 723

260 N.E.2d 723

357 Mass. 728, 166 U.S.P.Q. 443

J. T. HEALY & SON, INC. v. JAMES A. MURPHY & SON, INC. et al. (and two companion cases¹).

Supreme Judicial Court of Massachusetts, Bristol.

Argued April 8, 1970.

Decided June 19, 1970.

David E. Crosby, Brockton, for plaintiff.

James K. Edwards, Providence, R. I. (John J. Curtin, Jr., Boston, with him), for defendants.

Before WILKINS, C.J., and SPALDING, CUTTER, REARDON and QUIRICO.

WILKINS, Chief Justice.

These three cases were consolidated and tried before a master, who was also an auditor, with findings of fact to be final. A judge of the Superior Court denied the defendants' motion to recommit the master's report, confirmed it, and reported the cases on the pleadings, the master's report, and the judge's rulings of law, such decree to be entered as justice and equity may require.

I. The first case is a suit in equity in the Superior Court, Bristol County, by J. T. Healy & Son, Inc. (Healy), against James A. Murphy & Son, Inc. (Murphy Co.); James A. Murphy, individually (Murphy); James A. Murphy, as executor under the will of his late wife, Virginia; John Soper, John Whalen, ² Vivian Carvalho, Carolyn Tousignant, and Dorothy Carey, former employees of Healy.

The bill sought (1) an injunction against the defendants disclosing or utilizing information about Healy and its processes, acquired by them as officers, directors or employees of Healy; (2) an accounting from the individual defendants of sums received from Healy as compensation while planning to compete; (3) an accounting of 'damage' to Healy by the defendants; (4) that all capital stock in Healy held by Virginia Murphy be reached and applied in satisfaction of the amount due Healy from her, and a constructive trust for the benefit of Healy to be imposed on capital stock held by Murphy as her executor; and (5) a constructive trust for the benefit of Healty to be imposed on all Murphy Co. stock held by Murphy either individually or as executor of the estate of Virginia.

In general, this litigation concerns allegations that the defendants, former officers, directors or employees of Healy, acted wrongfully and in violation of their trust in taking records, dies, and secret information to set up a rival business.

The other two cases are actions at law.

II. By J. T. Healy & Son, Inc. against James A. Murphy, executor under the will of Virginia, an action of contract or tort for $49,000 wages and bonus received by Virginia Murphy in 1961, 1962, and 1963.

III. By J. T. Healy & Son, Inc. against James A. Murphy & Son, Inc., an action of replevin of certain dies and other items taken from the defendant.

Healy is a Massachusetts corporation, having a principal place of business in Attleboro, and was incorporated in 1948 with 3,000 shares of preferred and 1,000 shares of common stock. Mrs. Catherine L. Healy became the sole stockholder, transferring all the assets of the former J. T. Healy & Son, a sole proprietorship, of which she was owner. Like its predecessor, Healy engaged in the jewelry findings business. She had four living adult children, Marjorie (Wright), Elton, Virginia (Murphy), and Eugene, all of whom at one time or another took part in the Healy business.

When her husband died in 1935, Mrs. Healy was a housewife, but the course of events required her to take over the business, and she had to rely upon others to manage it, particularly upon her children. From 1948 to September 21, 1963, she was president, treasurer, and a director, and attended the meetings. Taking periodic trips to Florida, she remained the sole stockholder until about 1962. Then she gave 125 shares of common stock and 150 shares of preferred stock to each of three children, Elton, Marjorie, and Virginia, but none to Eugene. About 1958 Mrs. Healy bought a new home in Attleboro which was shared by Virginia and her husband. In 1962 she sold them the house, but remained a member of the household. She continued to do so after Virginia died on June 28, 1963. Over the years there had been many factions in the family and causes of dissension, much of which related to the business of Healy.

James A. Murphy, as far back as 1936, had worked part time for Healy on the machines. He left about 1940--1941. In 1953 he returned to do sales work. He was employed full time and eventually took charge of that work. In 1957 he took over cost work. In November, 1958, he was elected a director, secretary, and vice-president of Healy.

Murphy Co. was organized on May 29, 1963, as a Massachusetts corporation having a principal place of business in Attleboro. The directors were the two Murphys and a Providence lawyer.

Soper worked for Healy from 1929 to 1946 and from 1956 to September 20, 1963. In 1946 he went into another business making jewelry findings. Soper's training had been that of tool and die maker, and after 1957 he had charge of the Healy tool and die room. This was a very important function in the jewelry findings business in which a large number of dies had to be made and maintained, or replaced when they broke. It was highly skilled work and years of training were required to achieve the degree of skill necessary.

Jewelry findings are sold to jewelry manufacturers, who assemble the finished pieces of jewelry. The words 'dies' and 'tools' were used during the hearings more or less interchangeably as meaning about the same thing. A die is a piece of hardened steel which is used to give the desired shape to another piece of steel. At the Healy plant the material was always metallic, usually brass, but occasionally silver or gold. The manufacturing action consisted of stamping out the tubing to create the products which were to become jewelry findings, such as beads. Healy had two principal methods. One was by Langelier machine, an automatic device about two feet square of which Healy had five or six. The other was by foot press. The Langelier dies were numbered from 1 to 500, the foot press dies from 500 up.

The business of Healy was conducted in a one story building owned by Mrs. Healy and leased by her to the company. There were 5,500 square feet of floor space. In the front part of this space was a small office flanked by the shipping room. The remaining space was devoted to production. There was no significant partitioning. The employees worked in sight of each other. The toolroom was almost directly behind the office and was not enclosed. Bins, containing stock, which was usually in the form of tubing, formed one perimeter of the tool area, and on another perimeter of the tool area were racks for tools and dies containing spaces numbered in sequence. In other areas were the Langelier machines, lathes for patterning, foot presses, and other equipment.

Many dies owned by Healy had been made by Eugene, especially between 1952 and 1957. He initialed most of his. Still others had been made by various independent tool and die makers who did work outside the plant on a contract basis. Eugene was not employed to invent, but was employed to be general manager and to devise profitable methods of manufacturing. He developed the processes of twisted-corrugated and the application of patterns on the Healy premises with its material on its time, but there was no express agreement between him and Healy to assign his rights, nor did he do so.

Healy maintained its own tool and die room with its toolmaker and assistants for most of the necessary work. Dies could be made by a skilled toolmaker from a description given by the customer or they could be made from a sample of a product already made from another die.

The master made the following general findings.

(1) Neither Carey (typist and billing clerk), nor Tousignant (bookkeeper), nor Carvalho (expediter), nor Whalen (brother of Mrs. Healy) planned or schemed with each other, or with any other defendant to use confidential information of Healy for the benefit of Murphy Co.; nor did any one of the aforesaid defendants commit any breach of duty while an employee of Healy; nor did any one of the aforesaid defendants commit any act which would entitle Healty to any form of relief against anyone of them.

(2) Soper planned or schemed with the Murphys to use confidential information as to the dies of Healy for the benefit of Murphy Co., and their action in so doing was wrongful.

(3) Soper and the Murphys acted wrongfully in setting up for the benefit of Murphy Co. the processes of twisted-corrugated and application of patterns on tubing which were trade secrets of Healy.

(4) The process of applying patterns on tubing was a trade secret of Healy properly guarded as such, which Healy was entitled to protect by appropriate procedures.

(5) The process of twisted-corrugated was a trade secret of Healy properly guarded as such, which Healy was entitled to protect by appropriate procedures.

(6) The ball-end-mill method of making dies was not in and of itself a trade secret, but the dies, once completed, were a trade secret, at least as to their specifications.

(7) The record cards of Healy were trade secrets or confidential information, but were not misappropriated, nor copied, nor used in any manner by any defendant in breach of duty, and all information acquired by any defendant was acquired in the course of regular employment without breach of any duty and was used later at Murphy Co. only as remembered information.

(8) The same finding as (7) as to labor cards of Healy.

(9) The same finding as (7) as to customers list of Healy.

(10) The same finding as (7) as to the price list of Healy.

(11) The Murphys did not induce any employee of Healy, except Soper, to terminate employment prior to September 23, 1963. The Murphys induced Soper on or about June 1, 1963, to agree to work for them when they should establish their own business, but neither Soper nor any other defendant had any contract of employment with Healy.

(12) No defendant physically moved any cards or dies...