Koehler v. Cummings

• Citation: 380 F. Supp. 1294
• Decision Date: 22 July 1974
• Docket Number: Civ. A. No. 4525.
• Parties: Robert P. KOEHLER et al. v. Thomas L. CUMMINGS, Jr., et al.
• Court: U.S. District Court — Middle District of Tennessee

380 F. Supp. 1294

Robert P. KOEHLER et al. v. Thomas L. CUMMINGS, Jr., et al.

Civ. A. No. 4525.

United States District Court, M. D. Tennessee, Nashville Division.

June 11, 1971.

As Amended July 22, 1974.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Herbert R. Rich, Philip M. Carden, Nashville, Tenn., for plaintiffs.

William R. Willis Jr., Nashville, Tenn., Charles S. Edwards, Syracuse, N.Y., for defendants.

Herbert Jamul, pro se.

MEMORANDUM

MORTON, District Judge.

This is an action in two counts: one alleging conspiracy to deprive the plaintiffs of their property and property rights, and the second alleging the inducement of a key employee to breach his employment contract with plaintiff S.O.S. International. Plaintiff Robert P. Koehler is now president and majority shareholder of S.O.S. International. The suit was authorized on behalf of plaintiff S.O.S. International, Inc. by its Board of Directors. Suit is also brought by Sentry Products Corporation.

This is a suit based on diversity jurisdiction. Plaintiff Robert P. Koehler is a citizen of Florida. Plaintiffs S.O.S. International, Inc. (hereinafter referred to as S.O.S.) and Sentry Products Corporation (hereinafter referred to as Sentry), are corporations incorporated under the laws of Florida with their principal places of business in Florida. Defendants Thomas L. Cummings, Jr., Newburn K. Hayes, and George T. Roberts are citizens of Tennessee. Defendants George Thomas and E. L. Schneider are citizens of New York. Defendant Herbert Jamul was a citizen of Tennessee at the time the suit was filed, and now is a citizen of Connecticut. Defendants Cummings & Co., Inc. and Jamul Safety Products, Inc. are corporations incorporated under the laws of Tennessee with their principal places of business in Tennessee.

Plaintiff Robert P. Koehler and defendant George Thomas first met Herbert Jamul, the employee whose services are the subject matter of this suit, in late July, 1963. Jamul approached them to obtain capital in the amount of $2,000 to develop safety garments and products made from a combination of reflective, phosphorescent and fluorescent materials. The individual materials were not new, but the idea of applying the reflective to the fluorescent materials (producing high visibility day or night) was novel. About August, 1963, plaintiff Koehler and defendants Thomas and Jamul, along with others not parties to this lawsuit, made plans to form a corporation, S.O.S. The purpose of the corporation was to develop and exploit the ideas and abilities of the defendant, Herbert Jamul. On August 20, 1963, the corporation papers, including a shareholders' agreement and an employment agreement with Jamul, were drawn up by Richard Hunt, a Miami attorney. A loan of $5,000, secured by shares of S.O.S. stock pledged by Jamul, was made by Koehler, Thomas, and Streeter, shareholders of S.O.S. The employment agreement between S.O.S. and Jamul, effective August 30, 1963, was to expire August 30, 1965. One of its covenants is germane:

"7. For a period of two (2) years after the EMPLOYEE ceases to be employed by the EMPLOYER, the EMPLOYEE will not enter the employ of, or become an associate, partner, advisor or other agent, or shareholder, of any firm, association, corporation, or any other organization which manufactures or sells, as agent or principal, within any of the states listed below, the same fabricated reflective safety items (including but not limited to vests, gloves, and other garments, as well as flags, banners, and advertising displays) produced or sold by the EMPLOYER: A list of 31 states, including the District of Columbia and Tennessee, follows." Employment Agreement, Plaintiffs' Exhibit 2, pp. 2-3.

An office and small plant was established at Hialeah, Florida; products and market interest developed. In October, 1963, there was good response to a booth at the Chicago Safety Show. More capital was needed so Koehler "decided to go all out" and deposited enough securities at the First National Bank of Hialeah, Florida, to make about $100,000 of credit available. From September, 1963, to April, 1964, the new corporation had the normal problems of a new business. Its volume of sales, although mostly samples, was only about $4,000, but its prospects appeared bright. An order for safety vests for the Miami Herald in the amount of $250 had been completed by December, 1963. In February, 1964, S. O.S. received its largest purchase order, from Tri-tix, Inc., for $50,000. Unfortunately, one of the conditions of the order was that the fluorescent material be guaranteed to last for a period of two years. A laboratory report from Chicago was not completed until early April and the order was cancelled in the meantime. Another of S.O.S.'s purchase orders was for $8,000 from L. P. Harless. This order was subsequently cancelled before the factory was able to produce, allegedly because the order had been held by Richard Hunt, the corporation's attorney. Koehler testified that about the first of April, 1964, the prospects for S.O.S. still appeared good and he consequently made another loan of $5,000 at this time. Koehler maintains he made a minimum amount of loans of $30,000 to S.O.S. A letter from Jamul to Angus Stevens, his attorney, states Koehler's loans to be about $35,000. Because of the lapse of time, and either failure to keep good records or loss thereof, this Court can find documentary evidence only for $22,946.19, exclusive of interest thereon, in loans contributed by Koehler and Sentry Products, a corporation owned by Koehler and his wife. Statement Supplementing Testimony of Robert P. Koehler, Record, at 4. Koehler testified, and his testimony was corroborated, that his bank, the First National Bank of Hialeah, had advised him not to make more loans. Nor would the bank make further personal loans to Koehler for the company, regardless of the amount of collateral, until the company was reorganized and Jamul, who was then president, was placed in charge of research only. Meanwhile, when Koehler was seeking additional investors and a reorganization of S.O.S., the defendants Thomas L. Cummings, Jr. and Newburn Hayes were introduced to S.O. S. by Richard Hunt, whom they consulted on their own legal matters. Negotiations began for an interest in S.O.S., culminating at the "marathon meeting" on April 14, 1964, in an option agreement between Thomas, Koehler, Streeter, and Jamul, shareholders of S.O.S., and Cummings & Co. or its nominees. At this point Jamul had already resigned as president of S.O.S., and pursuant to a shareholders' meeting shortly before, had been made a vice-president in charge of research and development. Koehler was having difficulty controlling Jamul at this time. Jamul was aptly described as a "mad scientist," full of ideas, but flighty and strong-headed. Jamul and Hunt had met with the Cummings group prior to this marathon meeting. Jamul was highly desirous of having these parties in the corporation. The major asset of S.O.S., all parties agree, was the man Jamul and his ideas. This essentially constituted the basis for investment by all the parties. The Cummings group at the close of the marathon meeting was given an option to purchase S.O.S., and $1,650 was placed in escrow in case the option was exercised. On April 21, 1964, Koehler and Streeter sent a telegram cancelling the option. Exhibit 11. This was done following a telephone call from Richard Hunt informing Koehler that the terms of the agreement were going to have to be changed. Short of negotiations being resumed, further discussions ensued. Jamul, on learning of Koehler's cancellation of the option agreement, was extremely upset. There was an unsuccessful attempt on April 30, 1964, to see if any of the difficulties between Jamul and Koehler could be resolved. Finally, on May 4 and 5, 1964, there was a safety show at the Everglades Hotel in Miami, where Jamul at his own expense exhibited S.O.S. products. Jamul and Ruby Maxey, now Ruby Judkins, an employee of S.O.S. in charge of the sewing operations, met Hayes at this meeting. Hayes stated he dropped by the Everglades show on behalf of Koehler, who had asked Hayes to see if he might get the two men back together again. Koehler's testimony corroborates this. Mrs. Judkins stated it was at this time that Hayes gave Jamul some help in composing a letter to Jamul's attorney, Angus Stevens, concerning anticipated litigation seeking to avoid his employment contract with S.O.S. Hayes meanwhile wrote to Koehler that Jamul had something going on but that Jamul would not tell Hayes. Hayes states in his letter to Koehler, dated May 6, 1964:

"Sorry I didn't have time to get back with you yesterday but as you requested, I went by to chat with Herb Jamul at the Safety Engineers Show. You realize of course that I could not lead Mr. Jamul into expanding his inter-thoughts sic but could only be a `good listener.' Mr. Jamul was non-communicative and frankly I strongly suspect some deep seeded discension sic. He apparently has something in mind which he wouldn't elaborate on to me. Maybe you know what it is.

"In view of this I would like to emphasize again that we would not be interested in renegotiating in any way. I think you will agree that we cannot afford to get in the middle on this situation." Exhibit 17, Letter from Newburn K. Hayes, Controller-Treasurer of Cummings & Co. to Robert P. Koehler, dated May 6, 1964.

Hayes failed to reveal his helping Jamul draft his letter regarding litigation. Hayes professed to be finding out how the strain between Koehler and Jamul might be relieved, and instead was furthering only the interests of the defendants in obvious conflict with Koehler's interests.

Finally, at the end of April, Jamul was no longer regularly working at the S.O. S. plant. Koehler discovered samples, dies, equipment, and rolls of material missing, although there was no evidence of break-in. An independent inventory was...