Beall v. KEARNEY & TRECKER CORPORATION

• Decision Date: 27 September 1972
• Docket Number: Civ. No. 70-1303.
• Citation: 350 F. Supp. 978
• Parties: Thomas Emmert BEALL, a/k/a T. Emmert Beall and Emmert T. Beall v. KEARNEY & TRECKER CORPORATION.
• Court: U.S. District Court — District of Maryland

350 F. Supp. 978

Thomas Emmert BEALL, a/k/a T. Emmert Beall and Emmert T. Beall v. KEARNEY & TRECKER CORPORATION.

Civ. No. 70-1303.

United States District Court, D. Maryland.

September 27, 1972.

Bernard M. Goldstein, Baltimore, Md., for plaintiff.

Joseph S. McCarthy, Rockville, Md., for defendant.

BLAIR, District Judge.

This action for breach of contract, arising under this court's diversity jurisdiction, is a sequel to a complex patent infringement suit which was recently decided by the Court of Appeals for the Seventh Circuit. Kearney & Trecker Corp. v. Giddings & Lewis, Inc., 306 F.Supp. 189 (E.D.Wis.1969), rev'd, 452 F.2d 579 (7th Cir. 1971), cert. denied, 405 U.S. 1066, 92 S.Ct. 1500, 31 L.Ed.2d 796 (1972). By election of the parties, the instant case was tried to the court without a jury.

The plaintiff, Thomas Emmert Beall, had been employed by the United States Patent Office from 1921 until his retirement on June 22, 1962. Upon retirement, he was approached by the defendant's president, Francis J. Trecker, and offered a position as a patent consultant. The conditions of employment were agreed upon and a contract was executed on August 1, 1962. By its terms, the employment contract was to continue in force for 5 years unless terminated by either party by July 31 of any year. During this 5-year period, Mr. Beall received many assignments from Elroy Wutschel, the defendant's chief patent attorney. Beall performed his duties satisfactorily and with his assistance, the defendant was able to secure the reissue of the Brainard patent for a mechanical tool changer on June 29, 1965. Thereafter, the plaintiff continued in the employ of Kearney & Trecker until the expiration of his contract on July 31, 1967. At that time, Trecker advised Beall in writing that Kearney & Trecker was "very pleased" with his services and it would like to renew the existing contract for an additional 2-year period. Mr. Beall accepted this offer.

Kearney & Trecker, in the meantime, had commenced an action against a competing tool manufacturer alleging that the company was infringing the patent which had been acquired with the assistance of Beall. During pre-trial discovery in that case, it was revealed that Beall had worked on the patent in question as both an examiner for the patent office and a consultant for the corporation. In an effort to preserve the validity of its patent, Kearney & Trecker relinquished all patent claims obtained with the assistance of Beall's services and, in addition, terminated Beall's contract of employment on August 15, 1968. His contract would not have expired until August 1, 1969.

In the patent infringement suit, the district court sustained the validity of Kearney & Trecker's patent on the theory that the company, by taking the aforementioned action, had relinquished any benefit resulting from the patent which was acquired with the assistance of Beall. The Seventh Circuit, in reversing, held that Beall's conduct was not only contrary to the official policy expressed in Patent Office Rule 341(g) but also violated the conflict of interest statute, 18 U.S.C.A. § 207. It further held that Beall's conduct in connection with the reissue rendered the entire Brainard patent invalid. As a direct consequence of this decision, Kearney & Trecker have incurred damages in excess of four million dollars.

Mr. Beall has continually asserted that he was not guilty of any impropriety and that Kearney & Trecker wrongfully terminated his contract. Thus, this action was commenced by Beall to recover the remainder of the compensation due under his employment contract as well as certain attorneys' fees and expenses which he claims were incurred as a result of the aforementioned patent litigation.

The defendant maintains that it was justified in discharging Beall from its employ prior to the expiration of his contract because of the impropriety of his actions in connection with the Brainard patent reissue. Although the contracts did not by their terms forbid conduct by Beall of the type alleged to justify termination, the court considers that the proscription of conduct inimical to Kearney & Trecker's interest was a term supplied by implication. The plaintiff, however, argues that the initial 5-year contract and the subsequent 2-year extension are legally independent entities. Thus, it is asserted that any misconduct which would justify termination of the extension agreement must have occurred after August 1, 1967, the date of that contract's extension. Since Beall's work on the Brainard patent occurred prior to that date, any misconduct during the first contract could not justify termination of the second contract, so the plaintiff reasons. The plaintiff has been unable to cite any authority to support this proposition and this court, after extensive research, concludes that this argument is illfounded. Cf. Brown v. Dupuy, 4 F.2d 367 (7th Cir. 1924).

Since Mr. Beall's conduct which occurred within the original term of his employment contract is relevant to the issue of whether his employment was justifiably terminated, evidence on this matter which was accepted subject to a later ruling of this court is hereby admitted.

Kearney & Trecker attempted to raise the defense of res judicata without expressly pleading it as required by Rule 8(c) of the Federal Rules of Civil Procedure. However, since it appeared that both parties were prepared to address themselves to this issue, the court will overlook the defect in pleading and consider the merits of the arguments.

The major thrust of the defendant's case rests upon the assertion that since the Seventh Circuit, in Kearney & Trecker Corp. v. Giddings & Lewis, Inc., 452 F.2d 579 (7th Cir. 1971), found that Beall had transgressed the bounds of propriety, he was collaterally estopped from denying his wrongful conduct in this proceeding. This argument does not find support in authority.

The doctrine of collateral estoppel is a relative of the doctrine of res judicata. Res judicata will bar the parties to a suit from relitigating issues that have been or could have been adjudicated in a prior proceeding between them or their privies. At the heart of the doctrine is the public policy that all litigation must at sometime end and that once tried, issues shall be forever settled as between the parties. Baldwin v. Iowa State Traveling Men's Ass'n, 283 U.S. 522, 51 S.Ct. 517, 75 L.Ed. 1244 (1931). Traditionally, this doctrine would bar litigation of issues only when there was mutuality of estoppel. That is, if the one taking advantage of the earlier decision would have been bound by it had it gone against him. Bernhard v. Bank of America, 19 Cal.2d 807, 122 P.2d 892 (1942). However through judicial extension of the underlying principals, this doctrine has been relaxed so that in a proper case one may be collaterally estopped in the absence of mutuality. Presently, many jurisdictions, including Maryland, hold the view that once an issue is litigated the parties may be bound by that litigation for all purposes. Thus, one who was not a party may assert the results of a prior adjudication against all those who are bound by that decision. See Pat Perusse Realty Co. v. Lingo, 249 Md. 33, 238 A.2d 100 (1968). See also Zdanok v. Glidden Co., 327 F.2d 944 (2d Cir. 1964), cert. denied, 377 U. S. 934, 84 S.Ct. 1338, 12 L.Ed.2d 298 (1964); Bernhard v. Bank of America, 19 Cal.2d 807, 122 P.2d 892 (1942), and cases cited therein at 892.

The defendant urges this court to extend the reasoning of these cases so as to allow Kearney & Trecker, a party to a prior litigation, to assert the results of that decision against Beall, who was not a party. Thus, according to the defendant's interpretation of the law, because the Seventh Circuit found that Beall's conduct was improper Beall is collaterally estopped from asserting the absence of wrong. Blonder-Tongue Labs., Inc. v. Univ. of Ill. Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971); Maryland v. Capital Airlines, 267 F.Supp. 298 (D.C., 1967); and Greenwell v. American Guarantee Corp., 262 Md. 102, 277 A.2d 70 (1970) are cited in support of this argument. This court, after a careful reading, finds all of the above cited authority clearly distinguishable from the instant case. In each of those cases, the party asserting the results of prior litigation was not a party to the former case but the party against whom the prior adjudication was asserted had been a party to or had asserted the results of that action. Here we have the opposite aspect of those factual situations. Beall was not a party to the patent litigation. The fact that the Seventh Circuit's findings concerning his conduct were a determinal issue in finding against his employer does not estop him collaterally from asserting his claim in this case.

This court has searched in vain for any decision which supports the defendant's assertion that the Seventh Circuit decision estops Beall from denying any wrongdoing. Furthermore, this court does not believe any such decision could be rendered without violating the due process clause of either the Fifth or Fourteenth Amendments to the Constitution. It is fundamental that, at a minimum, due process of law requires that a person not be deprived of life, liberty, or property unless he has been afforded an opportunity to defend and protect those rights. In re Oliver, 333 U.S. 257, 68 S.Ct. 499, 92 L.Ed. 682 (1948) and cases cited at 273 n.31, 68 S.Ct. 499; Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950); Armstrong v. Manzo, 380 U.S. 545, 85 S.Ct. 1187, 14 L.Ed.2d 62 (1965); Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970). Mr. Beall, in the Seventh Circuit litigation, had no control over any aspect of the trial or appeal; he could not call witnesses in his own behalf, nor could he object to the admission of any evidence that might prove harmful to his interests. To...