International Telemeter Corp. v. Teleprompter Corp.

• Decision Date: 15 January 1979
• Docket Number: D,No. 52,52
• Citation: 592 F.2d 49
• Parties: INTERNATIONAL TELEMETER CORPORATION, Plaintiff-Appellee, v. TELEPROMPTER CORPORATION, Defendant-Appellant. ocket 78-7111.
• Court: U.S. Court of Appeals — Second Circuit

Page 49

592 F.2d 49

201 U.S.P.Q. 337

INTERNATIONAL TELEMETER CORPORATION, Plaintiff-Appellee, v. TELEPROMPTER CORPORATION, Defendant-Appellant.

No. 52, Docket 78-7111.

United States Court of Appeals, Second Circuit.

Argued Nov. 16, 1978.

Decided Jan. 15, 1979.

Laurence Greenwald, New York City (Stroock & Stroock & Lavan, Eva L. Coben, Curtis C. Mechling, New York City, on brief), for plaintiff-appellee.

Michael Lesch, New York City (Shea, Gould, Climenko & Casey, Arthur D. Felsenfeld, New York City, on brief), for defendant-appellant.

Before LUMBARD, FRIENDLY and OAKES, Circuit Judges.

LUMBARD, Circuit Judge:

In this case, originally brought as a suit for patent infringement, defendant Teleprompter Corporation appeals from a judgment of the district court, Motley, J., filed on February 21, 1978 after a bench trial and amended March 7, 1978, insofar as it (1) directs Teleprompter to pay plaintiff International Telemeter Corporation (ITC) $245,000 plus interest and costs for Teleprompter's breach of an agreement settling patent litigation, and (2) dismisses without prejudice Telepromter's counterclaim for a declaration of the patent's invalidity. ¹

The parties agree that New York law governs the enforceability of the settlement agreement, which was negotiated, consummated, and to be performed in New York, and which was explicitly made subject to New York law. The issues are (1) whether there was a binding settlement agreement enforceable against Teleprompter, and (2) whether enforcement of the settlement agreement violates the public policy enunciated in Lear v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610 (1969). As Teleprompter has not persuaded us that the district court erred in finding that the parties had consummated a binding settlement agreement or that this agreement violates the policy of Lear, supra, we affirm.

I

The relevant facts are undisputed. The present action arises from a suit for patent infringement commenced by ITC on March 15, 1968 against several defendants in the District Court for the Western District of Washington. On September 1, 1970, Teleprompter intervened as a defendant and counterclaimant in the action, seeking, Inter alia, declarations of patent invalidity and noninfringement. Following the dismissal of several claims and counterclaims, by 1973 the only parties remaining in the litigation were ITC, Teleprompter, and Philip D. Hamlin and Hamlin International Corporation (collectively, the "Hamlin defendants").

In February, 1973, William Bresnan, then President of Teleprompter, wrote to Arthur Groman, a Los Angeles attorney, asking if ITC wished to "discuss . . . a (negotiated) resolution of the patent litigation." On February 9, 1973, Groman responded by sending to Bresnan a draft license agreement proposed by ITC as a basis for settling the litigation. The draft agreement provided for minimum royalties of $75,000 for the first three years and damages for past infringement totalling $240,000. Bresnan turned down the proposed agreement but suggested that a meeting be arranged to discuss possible settlement.

The requested settlement meeting took place in New York City in April, 1973. Present on behalf of Teleprompter were William K. Kerr, Jules P. Kirsch, and Bresnan himself. Present on behalf of ITC were Morton Amster, Thomas Harrison, and Kenneth Merklen. All but Bresnan were acting as lawyers. The first meeting proved inconclusive.

In early July, 1973, after a further settlement proposal of Bresnan made on May 30 was found unacceptable by ITC, the parties met a second time. According to Amster, at this meeting the parties "negotiated the terms of the settlement." The parties assigned to Amster the task of preparing the initial drafts of the agreement, which included the following terms: an aggregate payment by Teleprompter of $245,000 in settlement of all claims against Teleprompter and the Hamlin defendants, the licensing of Teleprompter and the Hamlin defendants under the disputed patent, the dismissal of the pending litigation, and the issuance of a press release. These basic terms were never altered during the subsequent negotiations.

On July 26, 1973, Amster sent Kerr a copy of the draft agreements together with a proposed schedule for payments totalling $245,000.

There followed a series of minor revisions and exchanges of revised drafts. Amster, as attorney for ITC, and Kirsch, as attorney for Teleprompter, agreed to final changes at a meeting held on August 28 or September 7, 1973. Thereafter, on September 10, 1973, "clean drafts" were forwarded by Amster to Kirsch. On September 26, 1973, Amster sent to Kirsch copies of the Teleprompter and Hamlin license agreements and copies of the stipulation and order of dismissal to be filed in the patent lawsuit pending in the Western District of Washington. In his covering letter, Amster remarked, "Hopefully we have attended to all the minor changes and the documents are in condition for execution. . . . Perhaps upon a review of the papers, you would be willing to advise your local counsel (in the Washington litigation) that the case is settled so that he and (ITC's local counsel) can advise Judge Boldt that the case is settled and that a proposed stipulation and order will be filed shortly."

On October 3, 1973, Kirsch did so advise Teleprompter's Seattle counsel, Richard Williams. That same day, Williams wrote to Judge Boldt that "the final Settlement Agreement has been transmitted to all parties for the purpose of signature . . . we should be in a position to present a Stipulation and Order of Stipulation to the Court for its consideration and entry." Williams further advised the court that the pending trial date "may be vacated." A copy of this letter was sent to Amster. If Williams overstated the parties' proximity to settlement, as Kirsch later claimed at trial, Kirsch failed to correct the allegedly mistaken impression conveyed to the trial court.

Just as the parties were finishing their work on the settlement documents, a dispute arose between Teleprompter and the Hamlin defendants over the Hamlin defendants' obligation to pay amounts claimed by Teleprompter pursuant to its intervention agreement with the Hamlin defendants. Rather than allow the settlement agreement to founder on this last minute disagreement between the defendants, Kirsch acted to secure a separate peace between Teleprompter and ITC. On October 25 and October 26, 1973, he telephoned and wrote to Amster to advise him of the falling out between Teleprompter and the Hamlin defendants and attempted to secure a settlement as to ITC and Teleprompter on precisely the same terms as those already agreed upon. In his October 26 letter, Kirsch wrote as follows to Amster:

Dear Mort:

As I advised you in our telephone discussions on Thursday and Friday, October 25 and 26, 1973, Mr. Hamlin is unwilling to pay Teleprompter the amounts due Teleprompter pursuant to the August 3, 1970 Intervention Agreement. As a consequence, Teleprompter now wishes to settle the litigation only with respect to Teleprompter on the terms which had been agreed upon with respect to Teleprompter in the Settlement Agreement and the License Agreement which accompanied your September 26, 1973 letter, and I understand that this is agreeable with ITC. . . .

In our telephone conversation on October 26, 1973, you and I agreed that I would revise the Settlement Agreement to limit its terms to Teleprompter only, that Teleprompter will make the payments specified in Schedule 1 to the original Settlement Agreement, that Teleprompter will execute the original ITC-Teleprompter License Agreement, and that I would revise the Stipulation and Order of Dismissal to limit dismissal of the action to Teleprompter only. . . .

Sincerely,

Jules P. Kirsch

(Emphasis added.)

Thus Kirsch's letter committed Teleprompter to a settlement on the terms "which had been agreed upon" and which were already set forth in the draft settlement papers accompanying Amster's September 26, 1973 letter. At trial, Kirsch confirmed that he had Teleprompter's authorization to send this October 26, 1973 letter. In fact, Kirsch sent a copy of this letter to Teleprompter's general counsel, Barry Simon. If this letter inaccurately conveyed Teleprompter's intent to be bound, Simon made no effort to set the matter straight. All that remained to be done before a formal signed agreement could be executed was to eliminate mechanically all reference to the Hamlin defendants in the draft agreement.

Several important events occurred on October 29, 1973. Kirsch duly revised the settlement papers to delete all references to the Hamlin defendants and forwarded the revised documents to Amster on the morning of October 29. These were listed as follows:

1. A revised settlement agreement.

2. An unrevised Schedule 1 to the revised settlement agreement.

3. A revised stipulation and order of dismissal as to Teleprompter only.

4. An unrevised ITC-Teleprompter license agreement.

5. A revised joint announcement of settlement and dismissal of the litigation as to Teleprompter only.

Kirsch also sent a separate letter to Amster asking him to call as soon as he had finished reviewing the settlement papers "so that if there are any changes you wish to have made, we can discuss them. If necessary I can arrange for them to be made before I leave for Los Angeles this afternoon. In that way the final papers can be delivered promptly to Teleprompter for execution and returned to you." No changes were suggested by Amster. All that remained was to obtain the requisite signatures and make delivery. Consequently, that afternoon Kirsch wrote another letter to Amster, enclosing three copies of the stipulation and order of dismissal as to Teleprompter which Kirsch had signed and dated October 29, 1973. Amster also signed the stipulation and order of dismissal that afternoon, as requested by Kirsch. Kirsch also requested that Amster send a ribbon copy...