Brown v. Burr-Brown Research Corporation

• Decision Date: 16 August 1967
• Docket Number: No. 22800.,22800.
• Citation: 378 F.2d 822
• Parties: Norman S. BROWN and IBL Engineering & Sales Inc., Appellants, v. BURR-BROWN RESEARCH CORPORATION, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

378 F.2d 822 (1967)

Norman S. BROWN and IBL Engineering & Sales Inc., Appellants, v. BURR-BROWN RESEARCH CORPORATION, Appellee.

No. 22800.

United States Court of Appeals Fifth Circuit.

June 9, 1967.

Rehearing Denied August 16, 1967.

Max R. Rosenfield, Elihu E. Berwald, Rosenfield, Berwald & Mittenthal, Dallas, Tex., for appellants.

Harold Hoffman, Wynne, Jaffe & Tinsley, Dallas, Tex., for appellee.

Before RIVES, THORNBERRY and AINSWORTH, Circuit Judges.

RIVES, Circuit Judge:

Tom R. Brown, Jr., is a graduate engineer of the Massachusetts Institute of Technology who specializes in electronics. In 1956 he organized the Burr-Brown Research Corporation (hereafter Burr-Brown) of which he became President and a major stockholder. Burr-Brown manufactured and sold electronic devices, mostly operational amplifiers used in the field of instrumentation and control of flight equipment. On or about February 27, 1961, Burr-Brown and Norman S. Brown, doing business as Norman S. Brown Associates (hereafter Norman Brown), entered into a letter agreement by which Norman Brown agreed to act as manufacturer's representative for the sale of Burr-Brown's products in Texas, Oklahoma, Kansas and Missouri. The area was later extended to include Arkansas and Louisiana. In March 1962 Norman Brown advised Burr-Brown that IBL Engineering & Sales, Inc. (hereafter IBL), a corporation in which Norman Brown owned the controlling interest, had been formed as a result of a merger to which Norman Brown was a party. IBL and Norman Brown continued to act as manufacturer's representative for the sale of Burr-Brown products until January 4, 1964, when Burr-Brown terminated the relationship.

On February 13, 1964 Burr-Brown filed its complaint against Norman Brown and IBL charging several breaches of duty, viz.: (1) breach of the express provision of their contract to "make every reasonable sales effort to promote the sale of our (Burr-Brown's) products in your area"; (2) breach of the implied covenant not to sell competitive products without first making full disclosure to and obtaining the consent of the principal (Burr-Brown); (3) clandestinely promoting the sales of a competitor of Burr-Brown. Norman Brown and IBL denied that they breached the express provisions of the contract or any implied covenant not to sell competitive products. They admitted that they had entered into a written agreement to represent Nexus Research Laboratories, Inc. (hereafter Nexus), and, upon Burr-Brown's inquiry, had falsely denied representing Nexus but claimed that the products of Burr-Brown and Nexus accomplished different purposes and were not competitive, and that their motive in denying that they represented Nexus was that there was a personal grudge between Burr-Brown and Nexus and they did not want to lose the fruits of their labors because of such personal differences.

Burr-Brown's complaint sought the recovery of several different kinds of damages: (1) for failure of the defendants to return certain described demonstrators or sample units of values totaling $2,523.00; (2) for commissions paid to defendants to which they were not lawfully entitled totaling $4,626.00; (3) for lost profits on sales which would have been made by Burr-Brown if the defendants had not breached their duties of representation, estimated to be "in excess of $14,000.00"; (4) an additional damage from the loss of future sales "by virtue of the customers who were sold Nexus products in the past having become `locked in' with Nexus products as to their future needs," the loss of future profits being estimated to be at least $21,000.00; (5) exemplary damages in the sum of $42,000.00 The complaint also prayed for "such other and further relief to which plaintiff may be entitled." It may be well to remark at this point that under Rule 54(c), Federal Rules of Civil Procedure,¹ in a litigated case the prayer does not limit the amount of recoverable damages.²

The district court held that the evidence did not justify an award of punitive or exemplary damages and declined to submit that issue to the jury. After trial the jury...