Automatic Drilling Machines, Inc. v. Miller

• Decision Date: 24 July 1974
• Docket Number: No. B--4595,B--4595
• Citation: 515 S.W.2d 256
• Parties: AUTOMATIC DRILLING MACHINES, INC., et al., Relators, v. Honorable George E. MILLER, District Judge, et al., Respondents.
• Court: Texas Supreme Court

Page 256

515 S.W.2d 256

AUTOMATIC DRILLING MACHINES, INC., et al., Relators, v. Honorable George E. MILLER, District Judge, et al., Respondents.

No. B--4595.

Supreme Court of Texas.

July 24, 1974.

Lykos, Bergner, McMurrey & Goodrich, Richard F. Bergner, Anderson, Brown, Orn & Jones, Earl A. Brown, Jr., Barrow, Bland & Rehmet, David Bland, Houston, for relators.

Vinson, Elkins, Searls, Connally & Smith, B. Jeff Crane, Jr. and Clark Martin, Houston, for respondents.

WALKER, Justice.

This is an original mandamus proceeding. Automatic Drilling Machines, Inc., et al, relators, seek the writ to require the Honorable George E. Miller, Judge of the 113th Judicial District Court of Harris County, to: (1) vacate an order requiring delivery of certain papers and documents to counsel for Drilling Systems International, Inc., and The Offshore Company; and (2) grant relators' motion for a protective order pursuant to Rule 186b, Texas Rules of Civil Procedure. The petition for writ of mandamus is granted conditionally.

Automatic Drilling Machines, Inc. will be referred to as relator. Drilling Systems International, Inc., and The Offshore Company will be referred to as respondents or as DSI and Offshore, respectively. Judge Miller will be referred to by name. The controversy here arises out of a suit instituted by relator to recover damages and for other relief against respondents, certain of their officers and employees, and Leyman Corporation. In due time respondents filed a counterclaim against relator and a third party action against four of relator's directors. The suit and the counterclaim involve an agreement made by relator and Offshore on December 4, 1971, a series of transactions leading up to the contract and events occurring subsequent to its execution. All of these transactions and events took place during the latter part of 1971 and on through June of 1972.

The second amended original petition, which is relator's live pleading at this time, contains 15 counts. Relator there alleges that as a result of fraudulent and overreaching conduct on the part of respondents, their duress, breach of contract, interference with contractual relationships between relator and others, respondents have been placed in position to and are wrongfully claiming to be the owners of or entitled to enjoy all patents, licenses, trade secrets, and design methods that were formerly utilized solely by relator. The prayer is for actual and exemplary damages, that Offshore, its officers and directors be permanently enjoined from using certain confidential information, and that the following be declared null and void: a nonexclusive license executed by relator to DSI on January 26, 1972; a license from Leyman Corporation to DSI; and an assignment to Offshore or DSI of manufacturing rights acquired by Apollo Electric, Inc. under its contract with relator dated November 3, 1971. There is also an alternative prayer under one count for reinstatement of a license from Leyman Corporation to relator.

The counterclaim of respondents is based on allegations of fraud on the part of relator, its officers and directors, in connection with the agreement of December 4, 1971, and the nonexclusive license granted January 26, 1972. Respondents nevertheless affirm the contract and license and pray for recovery of actual and exemplary damages. They also seek rescission of the purchase of a drilling rig from relator or, in the alternative, damages for fraud in connection with that transaction.

Relator's claims for damages are based, in part, on allegations that the conduct of respondents, their officers and employees, has caused relator 'to lose business ventures and financing proposals' that otherwise would have been available to it. In one count it is alleged that as a result of the poor performance of a drilling rig, caused by respondents' breach of contract, 'plaintiff has suffered and will continue to suffer loss of business opportunities.' Relator also seeks to recover funds expended in strengthening patents formerly covered by a license from Leyman Corporation and in training employees who terminated their employment at the wrongful instance of respondents. There are other counts that contain even more general allegations of damages.

The parties tell us that discovery by deposition and otherwise has been fairly extensive. On March 22, 1974, notice to take the deposition of Mr. George Homanick in Bloomfield Hills, Michigan, was served on relator's attorneys. The notice stated that a subpoena duces tecum would be served to require the witness to produce various documents for examination or copying when the deposition was taken. Homanick is not a party to the litigation in district court and is not regularly employed by any party. He is one of the pioneers in the field of automatic drilling rigs, was a co-inventor on the patents that originally set forth that concept, has served as a consulting engineer since 1965, and has done design and development work for relator from time to time.

At the suggestion of relator's attorneys, arrangements were made to take the deposition in Houston. The witness arrived there during the night of April 8, 1974, bringing with him a file of written documents in response to the subpoena duces tecum. Early the following morning, relator's attorney went through the file and withdrew material believed to relate solely to the preparation and evaluation of new systems and procedures for automatic drilling which were designed subsequently to the filing of the suit in district court. These new systems and procedures are represented to be highly confidential in nature, and will probably be the subject of applications for letters patent.

The oral deposition was commenced, but only a few pages of testimony had been taken when relator's attorney instructed the witness not to answer questions relating to confidential matters on which he was then working for relator. At the same time relator's attorney stated that he had removed from the file material of a current nature relating to new items and systems concerning which the witness was consulting with relator and that could reasonably lead to patent applications. The witness was then asked what material had been removed from the files, and he answered that it was reference material and design sketches relevant to a unit on which he was working for relator. Counsel for respondents thereupon decided not to proceed with the deposition until the matter could be taken up with the trial court.

Shortly after the deposition was adjourned, counsel for respondents telephoned Judge...