Dowless v. Warren-Rupp Houdailles, Inc.
| Decision Date | 05 October 1988 |
| Docket Number | Nos. 87-3199,WARREN-RUPP,s. 87-3199 |
| Citation | 866 F.2d 1415 |
| Parties | Unpublished Disposition NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit. Harry DOWLESS, Plaintiff-Appellee, v.HOUDAILLES, INC., Defendant-Appellant, and Houdailles Industries, Inc., Defendant. Harry DOWLESS, Plaintiff-Appellant, v.HOUDAILLES, INC.; Houdailles Industries, Inc., Defendants- Appellees. (L), 87-3200. . Argued: |
| Court | U.S. Court of Appeals — Fourth Circuit |
Robert Worthington Spearman (Renee J. Montgomery, Gary S. Maines, Pope McCorkle, Adams, McCullough & Beard, on brief), for appellant.
Larry Love Coats (David E. Bennett, Rhodes, Coats & Bennett, on brief), for appellee.
Before HARRISON L. WINTER, Chief Judge, and SPROUSE and ERVIN, Circuit Judges.
Invoking diversity jurisdiction, Harry Dowless sued Warren-Rupp Houdailles, Inc. (Warren-Rupp), a manufacturer of hydraulic industrial pumps. Dowless alleged breach of contract for Warren-Rupp's failure to pay him for an improvement that he devised for its pumps, common law unfair competition, and violation of North Carolina's unfair competition statute, N.C.G.S. Sec. 75-1.1.
The district court granted Warren-Rupp's motion for summary judgment on both unfair competition claims. The breach of contract claim was tried to a jury and resulted in a verdict of $1,000,000 for Dowless. The district court denied Warren-Rupp's post-verdict motion for judgment n.o.v., and, in the alternative, for a new trial.
Both parties appeal. 1 Dowless asserts that the district court erred in granting summary judgment for Warren-Rupp on his unfair competition claims. Warren-Rupp contends that the district court erred in admitting Dowless' evidence of damages. It goes further and argues that Dowless submitted no legally competent evidence of damages and that therefore it is entitled to judgment n.o.v. on the contract claim, or at least a new trial as to damages.
We affirm the judgment for Warren-Rupp on Dowless' unfair competition claims. We agree with Warren-Rupp that the district court improperly admitted evidence of Dowless' damages and failed properly to instruct the jury how to assess them. We think, however, that Warren-Rupp is entitled, not to a judgment n.o.v., but to a new trial only as to damages. We therefore affirm in part, reverse in part and remand for further proceedings.
In May, 1977, Dowless was employed by Kelly Springfield Tire Manufacturing Company (Kelly Springfield), which used Warren-Rupp pumps in its operations. Dowless wrote a letter to Warren-Rupp indicating that he had conceived of a design that would improve the operation of one of Warren-Rupp's pumps and asking Warren-Rupp to contact him if it was interested. Warren-Rupp, by its president, responded to Dowless as follows:
If you would let us know what your improvement consists of, we will evaluate it and if we choose to use it, we would reimburse you with some kind of flat fee.
Dowless then wrote to Warren-Rupp, describing an oil accumulation problem in the SA2-A model pump that caused the pump to fail. Dowless suggested that this problem could be solved by installing a drain plug in the inner side of the pump's diaphragm chamber. 2 Warren-Rupp responded in writing shortly thereafter, asserting that the drain plug proposed by Dowless was unnecessary. "[T]his is the first time that your suggestion has come to us," its president wrote. "If this was an inherent fault with the pump we would have discovered it years ago but in our experience this is not the case." Sometime thereafter, Dowless was transferred to another department where he did not have contact with Warren-Rupp pumps.
About three years after Dowless' correspondence with Warren-Rupp, Dowless suggested the drain plug device to his successor at Kelly Springfield. Kelly Springfield installed the device in some of its Warren-Rupp pumps. Evidence at trial indicated that the drain plug device increased the service life and decreased the maintenance cost of the pumps.
In late 1981, Warren-Rupp decided to install drain plugs on the SA2-A and other model pumps. There was evidence at trial that a Warren-Rupp representative had been shown a pump fitted with Dowless' drain plug device on a visit to Kelly Springfield some months earlier. 3 Shortly after discovering in 1984 that new model Warren-Rupp pumps contained drain plugs, Dowless brought this action against Warren-Rupp, alleging, among other things, breach of contract, unfair competition under North Carolina common law, and violation of North Carolina's unfair competition statute, N.C.G.S. 75-1.1.
Warren-Rupp moved for summary judgment on Dowless' unfair competition claims. The district court granted this motion, and Dowless proceeded to trial on implied-in-fact contract and quasi-contract theories. At trial, Dowless offered evidence of Warren-Rupp's retail and wholesale sales of pumps containing drain plugs, roughly $25 million and $15 million respectively, and of its gross profits on those sales, roughly $5.4 million. Warren-Rupp objected to the admission of these figures on the ground that Dowless had offered no evidence of the proportion of Warren-Rupp sales that were attributable to the drain plugs. 4 The district court itself voiced the concern that the sales figures bore "absolutely no correlation" to any benefit conferred on Warren-Rupp and suggested other ways that Dowless could attempt to prove the drain plug's value. In the end, however, the court allowed the evidence to be introduced.
Dowless put forth no evidence at trial tending to show the value of the services he provided to Warren-Rupp or the contribution of the drain plug to Warren-Rupp sales. In his summation to the jury, Dowless' counsel stressed that five percent of Warren-Rupp's sales in the five years that its pumps had contained drain plugs would amount to $750,000, and asked the jury to return a verdict for twice that amount. The district court charged the jury that it could find the existence of either an implied-in-fact contract or quasi-contract. It instructed the jury specifically on the measure of damages for breach of an implied-in-fact contract. Its instruction on the measure of damages for breach of a quasi-contract was not as specific. The jury returned a verdict against Warren-Rupp for breach of an implied-in-fact contract and awarded Dowless $1,000,000. Warren-Rupp moved for a judgment n.o.v., or, in the alternative, for a new trial. The district court denied the motion, and this appeal and cross-appeal followed.
We address first Dowless' recovery for breach of contract.
The jury found that a contract existed between Dowless and Warren-Rupp, and we accept this finding. However, even if a contract existed, it is at once obvious that the contract did not fix the compensation Dowless was entitled to receive. Therefore, the question we must address is the proper measure of damages under North Carolina law when a contract is silent as to the compensation to be paid.
Warren-Rupp contends that Turner v. Marsh Furniture Co., 217 N.C. 695, 9 S.E.2d 379 (1940), is the controlling authority. 5 In Turner, plaintiff, while working as a carpenter in a furniture factory, conceived of a labor-saving device to be used in the manufacturing process. He disclosed his idea to the president of the furniture company, who told him to reduce it to drawings and the company would have the device constructed and " 'if it works satisfactorily, I will pay you for it, and pay you well'." 217 N.C. at ----, 9 S.E.2d at 379. Plaintiff did as he was told; the company constructed the device and it worked. The question raised in plaintiff's suit for compensation was the proper measure of plaintiff's recovery for nonpayment. The Supreme Court of North Carolina announced the general rule that
when there is no agreement as to the amount of compensation to be paid for services, the person performing them is entitled to recover what they are reasonably worth, based on the time and labor expended, skill, knowledge and experience involved, and other attendant circumstances, rather than on the use to be made of the result or the benefit to the persons for whom the services are rendered.
217 N.C. at ----, 9 S.E.2d at 380. Applying this rule, the court held that the trial court erroneously had instructed the jury that plaintiff was entitled to recover such sum of money as would represent the value of the invention to the defendant. The court held that the jury should have been instructed that plaintiff was entitled to recover only the " 'reasonable value of his services rendered, taking into consideration the amount of time, work and skill required, and also the benefits, if any, resulting to the defendant, and other facts and circumstances' ". 217 N.C. at ----, 9 S.E.2d at 380.
Dowless argues that Turner is distinguishable from his case because in Turner the plaintiff could be said to have given his idea to the defendant who then engaged him to reduce it to practical application, while in the instant case, Dowless could be said to have sold his idea itself. Subsequent North Carolina decisions persuade us, however, that the rule of Turner applies here. For example, in Hood v. Faulkner, 47 N.C.App. 611, 267 S.E.2d 704 (1980), the parties entered into a building contract that named the price for the basic work and provided that additional labor and materials supplied by plaintiff would be at extra cost to defendants. The contract, however, did not specify the cost of extra labor or materials or a formula for their determination. Plaintiff provided extra labor and materials and sued to recover their value from defendant, who had refused to pay. The Court of Appeals of...
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