Perma Research and Development v. Singer Co.
| Decision Date | 01 July 1976 |
| Docket Number | Nos. 715,D,1126,s. 715 |
| Citation | 542 F.2d 111 |
| Parties | PERMA RESEARCH & DEVELOPMENT, Plaintiff-Appellee, Appellant, v. The SINGER COMPANY, Defendant-Appellant, Appellee. ockets 75-7362, 75-7405. |
| Court | U.S. Court of Appeals — Second Circuit |
Paul R. Grand, Poletti Freidin Prashker Feldman & Gartner, New York City (Barbara A. Lee, Linda S. Miller, George J. Solomon and Justin N. Feldman, New York City, of counsel), for plaintiff-appellee.
Merrell E. Clark, Jr., Winthrop, Stimson, Putnam & Roberts, New York City, for defendant-appellant.
Richard Sexton, New York City, on the brief filed on behalf of amicus curiae SCM Corp.
Before CLARK, Associate Justice *, TIMBERS and VAN GRAAFEILAND, Circuit Judges.
In a diversity action for breach of contract which commenced on March 9, 1966, the Singer Company (Singer) appeals from the judgment recovered by Perma Research and Development Company (Perma). The District Court, sitting without a jury, found that Singer had breached a contractual obligation to use its best efforts to perfect, manufacture, and market an automotive anti-skid device covered by a patent that Perma assigned to Singer on December 21, 1964. The court awarded damages to Perma in the amount of $5,333,423.94, with interest and costs amounting to more than $1.5 million.
Singer raises three points: (1) The District Court erred in holding that a contract between the parties imposed upon Singer an implied obligation to use its best efforts to perfect the anti-skid device and make it fail-safe; (2) The Perma anti-skid device was not perfectible and marketable; (3) The proof of damages was speculative and based on postulated sales that could never actually take place. We find no merit in any of the contentions and affirm the judgment.
The controversy grew out of two contracts between the parties, the first dated June 18, 1964, and the second, December 21, 1964. The first provided Singer with an exclusive license to manufacture the automotive anti-skid device involved here. The second contract superseded the first and provided for the assignment of Perma's patents on the anti-skid device to Singer and the payment of a royalty thereon. The contract also provided for the furnishing of technical assistance by Perma at the request of Singer "in the continuing design and engineering and improvement of the Product and of the equipment for manufacturing the same" for a 6-month period at a cost to Singer of $9800 per month. Upon Singer's abandonment of the contract, Perma brought this suit to set aside the December 21, 1964 contract and to enforce the earlier one. On motion for summary judgment, the complaint was dismissed save as to the "Wherefore" clause, which alleged that Singer did not use its "best efforts to market and manufacture the invention." On appeal, this judgment was affirmed, 410 F.2d 572 (2d Cir. 1969). On remand the case came before Judge MacMahon, and a second Singer motion for summary judgment was denied. The court found that, under the December 18, 1964 contract, Singer was required to "continue collaborating with Perma for a reasonable length of time in a good faith effort to resolve the problems then preventing the marketing of the product." D.C., 308 F.Supp. 743, 748. The principal issue, the court found, was "Did Singer use its best efforts for a reasonable time in collaboration with Perma to perfect the product" in order to prepare it for market. Id. at 749.
Singer then sought dismissal on the ground that it had been induced to enter the December 1964 contract on the misrepresentation by Perma that the anti-skid device was fail-safe. This third motion for summary judgment came before Judge Metzner who denied it, holding that "it is perfectly obvious from the record and the prior opinions that defendant Singer could not have been under any delusions that the product was fail-safe." Thereafter the case came before Judge McLean who agreed His 59-page opinion reveals the meticulous care and erudition that he gave to the trial and the "extraordinary latitude" he permitted Singer "to prove all that it could and to make any argument it wished" in the hope "that this trial would mark an end to this litigation." The ten-year, tortuous course of this litigation has involved five different trial judges and is here now for the second time, and still Singer insists that the December 18, 1964 contract does not impose upon it the obligation to perfect the anti-skid device it obtained from Perma, or if it does, that the abandonment of the contract was justifiable on the ground that the anti-skid device was not sufficiently perfectible to satisfy Singer's standard of "absolute fail-safety". The district court found that this was not only "an impossible standard" but was beyond the agreement of the parties. Finally, Singer claims that "any damage award would nevertheless be speculative", as being based on phantom "sales of a non-skid device which subsequent history has shown could not have been successfully sold."
that the issue involved was as had been stated by Judge MacMahon. Unfortunately Judge McLean died, and subsequently the case was assigned to Judge Duffy, who entered the judgment here under review on April 11, 1975. 402 F.Supp. 881.
We too have examined the record and find that substantial evidence supports the findings of the trial judge and that they are not clearly erroneous.
We need not belabor the point that Singer was obligated under the December 1964 contract to use its best efforts to perfect the anti-skid device covered by the Perma patents that were assigned to it. As the trial court found: "Both parties recognized the need for engineering on the device." In fact before the contract was signed, Singer employed William E. Hill and Company, Inc. to do a market survey on the anti-skid device, and the results thereof were reported to Singer prior to its purchase of the patents. The report's principal findings and conclusions included an evaluation of the anti-skid device:
The Perma anti-skid control falls short of meeting requirements of automotive engineers and does not provide the improvement possible in theory. The consensus of many engineering tests that had been run on the unit indicates that the Perma control as compared to a panic or locked wheel stop, gives improved steering control but requires a greater stop distance to come to a complete stop.
The General Motors Research Center, the Ford Advance Design Corporation and the Chrysler Brake Laboratory are against use of the control.
Based on evaluation by major automobile manufacturers, the Perma anti-skid control did not meet established requirements. In the contract of December 1964, Singer specifically recognized its obligation for the effectiveness of the anti-skid device by providing therein that Perma, in consideration of the payment of $9800 monthly, would furnish assistance to Singer in the "continuing design and engineering and improvement of the Product and of the equipment for manufacturing the same."
It is significant also that two days after Singer signed the contract, it ordered a long list of engineering services from Perma, advising "we must find a design which will yield consistent and higher results." Singer was aware of the firms with which it was doing business and who had found defects in the anti-skid device. Singer knew that some problems had arisen regarding the finishing of the product. Nevertheless it said: Letter to C. G. Morehouse, Portland, Oregon, July 7, 1965.
Despite this representation, as early as July 22, 1965, Singer had decided to restrict extensive experimentation to short range projects. An internal managerial task force on August 10, 1965 recommended to Singer that marketing of the anti-skid device be suspended. The explanation was
that the device's future was uncertain as a product item for Singer because it would place "us in the automotive parts industry dominated by the purchasing power and engineering skills of the Big 3". Suspension was recommended although Denville Special Report No. 62, which was charged with the technical evaluation of the anti-skid device, reported on August 10, 1965 that the device was not fail-safe, but estimated that the problem could be overcome at a cost to Singer of around $30,000. Rather than proceed further to improve the anti-skid device as it had agreed to do, Singer decided to abandon the project. On December 22, 1965, Singer advised Mr. Frank Perrino, the top official of Perma, "Very bluntly, Frank, we do not want to be in the brake business our people at Elizabeth should not have gotten into the brake business." At the same time, Singer rejected Perrino's suggestion of improvements that might make the anti-skid device fail-safe. On January 26, 1966, Singer finally abandoned all efforts to perfect the anti-skid device.
When Alfred DiScipio became Vice President of Singer in charge of consumer products, he visited the Elizabeth plant. While there, tests of the anti-skid device were made, and every one proved to be disastrous. Mr. DiScipio characterized the device as being not "fail-safe" and asserted that Singer would not market a product which "could leave the purchaser . . . less safe than if he hadn't elected to purchase it . . ." While Perma had represented that its anti-skid device had "fail-safe features", we find no representations that it ever claimed that the device was "absolutely fail- safe." In fact, Singer's own brake expert testified that he knew of no anti-skid device marketed in the United States that was completely fail-safe and that such perfection was not obtainable. In any event, Singer has no ground for...
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