Devex Corp. v. General Motors Corp., Civ. A. No. 3058.

• Decision Date: 22 August 1983
• Docket Number: Civ. A. No. 3058.
• Parties: DEVEX CORPORATION, et al., Plaintiffs, v. GENERAL MOTORS CORPORATION, Defendant.
• Court: U.S. District Court — District of Delaware

569 F. Supp. 1354

DEVEX CORPORATION, et al., Plaintiffs, v. GENERAL MOTORS CORPORATION, Defendant.

Civ. A. No. 3058.

United States District Court, D. of Delaware.

August 8, 1983.

On Postjudgment Interest August 22, 1983.

As Amended August 22, 1983.

William H. Sudell, Jr., and Denison H. Hatch, Jr., of Morris, Nichols, Arsht & Tunnell, Wilmington, Del., for the TeGrotenhuis and Ziesenheim plaintiffs.

Robert K. Payson, and W. Laird Stabler, III, of Potter, Anderson & Corroon, Wilmington, Del., for all other plaintiffs; Sidney Bender, and Aaron Lewittes, of Leventritt, Lewittes & Bender, Garden City, N.Y., of counsel.

Arthur G. Connolly, and Arthur G. Connolly, Jr., of Connolly, Bove, Lodge & Hutz, Wilmington, Del., for defendant; George E. Frost, of Barnes, Kisselle, Raisch, Choate, Whittemore & Hulbert, Birmingham, Mich., of counsel.

OPINION

CALEB M. WRIGHT, Senior District Judge.

This patent litigation, which began nearly twenty-seven years ago, is now reaching a conclusion. On May 24, 1983, the United States Supreme Court affirmed this Court's award of $11,022,854.97 prejudgment interest to the plaintiffs in this case. See General Motors Corp. v. Devex Corp., ___ U.S. ___, 103 S.Ct. 2058, 76 L.Ed.2d 211 (1983), aff'g., 667 F.2d 347 (3d Cir.1981), aff'g., 494 F.Supp. 1369 (D.Del.1980). On June 6, 1983, General Motors deposited the $11,022,854.97 in prejudgment interest with the Court. Subsequently, this Court directed the Clerk of the Court to deposit the $11,022,854.97 in an interest bearing account with the Delaware Trust Company. Currently before the Court are the cross-motions of the various plaintiffs concerning the distribution of this money.

There are several plaintiffs in this case, and it is necessary to provide some background information concerning each plaintiff's role in this litigation to explicate properly the issues presently before the Court. The patent involved in this case is Reissue Patent No. 24,017 (hereinafter "Henricks Patent") issued to John A. Henricks, President of Devex Corporation, on June 7, 1955, on Original Patent No. 2,588,234, dated March 4, 1952.¹ Subsequently, the Henricks Patent was assigned by Devex Corporation (hereinafter "Devex"), and Henricks to William M. McCoy, Theodore A. TeGrotenhuis, and Frederick B. Ziesenheim.² These three individuals were attorneys, each involved in prosecuting infringement claims concerning the Henricks Patent.

In 1964, McCoy, TeGrotenhuis, and Ziesenheim (hereinafter referred to as "Licensors"), entered into an exclusive License Agreement with Technograph, Inc. (hereinafter "Technograph"), a North Carolina corporation, concerning the Henricks Patent.³ The License Agreement vested Technograph with all significant rights in the Henricks Patent, with the Licensors retaining only bare legal title.⁴ The 1964 License Agreement provided, inter alia, that Technograph would pay the Licensors $6,000,000 from monies received through sublicense agreements and infringement suit judgments or settlements relating to the Henricks Patent.⁵

As a result of the final judgment entered by United States Court of Appeals for the Third Circuit on certain portions of this case,⁶ this Court, in July, 1982, distributed $8,813,945.50⁷ to the Technograph/GM Fund (hereinafter referred to as the "Fund").⁸ Out of the Fund, Technograph paid priority claims in accordance with the Modification and Restatement of Agreement of Exclusive License to Technograph, Inc., dated January 31, 1977 (hereinafter "1977 Agreement") (Dkt. Item 691, Exhibit A).⁹See Letter of Sidney Bender, Esq. to Licensors (July 30, 1982) (Dkt. Item 691, Exhibit C). After these priority claims were satisfied, Technograph distributed $3,801,794.27 out of the Fund to the Licensors, and the remainder was paid out to Technograph.¹⁰ These distributions were also made in accordance with the 1977 Agreement. See Letter of Sidney Bender, Esq. to Licensors at 2 (July 30, 1982) (Dkt. Item 691, Exhibit C). After these distributions, the Licensors collectively were entitled to an additional $2,001,245.73 under the terms of the 1977 Agreement. Consequently, McCoy,¹¹ TeGrotenhuis,¹² and Ziesenheim¹³ were each entitled to an additional $667,081.91 each, if and when additional money was received as a result of this litigation.

On January 31, 1983, the McCoy Group entered into an agreement with Technograph in which they assigned all their interests in the Henricks Patent to Technograph in exchange for Technograph promissory notes totaling $667,081.91.¹⁴ At approximately the same time, Technograph also made efforts to acquire the TeGrotenhuis Group's interest in the Henricks Patent, and a portion of the Ziesenheim Group's interest.

As previously stated, on June 6, 1983, General Motors deposited $11,022,854.97 with this Court to satisfy its prejudgment interest liability to the plaintiffs. On June 14, 1983, Technograph filed a motion seeking to transfer these monies to the Technograph/GM Fund. By the papers Technograph has filed in connection with that motion, and in statements made to the Court by its counsel, it is apparent that Technograph does not intend to distribute the full amount owed to the TeGrotenhuis and Ziesenheim Groups under the 1977 Agreement. Technograph, however, maintains that it already has paid the TeGrotenhuis Group the $667,081.91 due under the 1977 Agreement. As such, Technograph claims that the TeGrotenhuis Group is not entitled to any additional money. Technograph further maintains that it has paid the Ziesenheim Group $133,416.39 of the $667,081.91 that is due. Consequently, Technograph claims that it must pay out only an additional $533,665.52 to the Ziesenheim Group.

The TeGrotenhuis and Ziesenheim Groups have opposed Technograph's motion for the transfer of funds. These two groups contend that Technograph has not paid them any portion of the $667,081.91 due under the 1977 Agreement. As such, the two groups have filed their own motions for the transfer of funds. This motion seeks an order transferring the prejudgment interest account at the Delaware Trust Company to the Technograph/GM Fund, with specific instructions that Technograph thereafter distribute $667,081.91 to both groups as required under the 1977 Agreement. The issue for the Court to decide is the amount of money to be distributed to each plaintiff from the $11,022,854.57 that is in the Court's possession.

The facts surrounding the current controversy are not in dispute. The parties agree that after the various distributions were made in July, 1982, there remained a contingent obligation to pay the TeGrotenhuis and Ziesenheim Groups an additional $667,081.91 each, representing the balance of the purchase price due under the 1977 Agreement. As previously stated, this obligation was conditional upon additional amounts of money being received and deposited into the Technograph/GM Fund.¹⁵

In early 1983, Technograph became interested in acquiring the Licensors' rights in the Henricks Patent.¹⁶ To this end, Technograph contacted each of the three groups of Licensors in an effort to purchase their interests. As previously set forth, Technograph reached an agreement with the McCoy Group, and acquired that Group's interest on January 31, 1983.¹⁷

With respect to negotiations with the TeGrotenhuis Group, Technograph, by letter dated February 18, 1983, offered to pay the TeGrotenhuis Group $667,081.91 in return for their assignments and release of their interest in the Henricks Patent to Technograph. (Dkt. Item 695, Attachment). On February 21, 1983, Mr. TeGrotenhuis refused to execute such a document.¹⁸ Nevertheless, despite TeGrotenhuis' refusal, Technograph created two accounts at the Delaware Trust Company on behalf of Mr. and Mrs. TeGrotenhuis in the total amount of $667,081.92.¹⁹

Upon being advised of the creation of these two accounts, Mr. TeGrotenhuis wrote to Sidney Bender, Esq. of Technograph on February 28, 1983. The letter reads in relevant part:

My wife, Marjorie, and I both thank you very much for Technograph's deposit of $333,540.96 to each of our respective accounts in the Delaware Trust Company.

I have applied $41,000 of the deposit to my bill for services.

Both Marjorie and I shall expect the balance due us from Technograph soon after the Supreme Court renders its decision.

Letter of Theodore A. TeGrotenhuis to Sidney Bender, Esq. (February 28, 1983) (Dkt. Item 695, Attachment).

In a letter to Mr. TeGrotenhuis dated March 10, 1983, Bender advised TeGrotenhuis that Technograph did not recognize his claim for $41,000. (Dkt. Item 695, Attachment). In a letter of the same date to William H. Sudell, Jr., Esq., the TeGrotenhuis Group's attorney, Bender further claimed that through the creation of the two bank accounts, Technograph had acquired all the TeGrotenhuis Group's interest in the Henricks Patent. See Letter of Sidney Bender, Esq. to William H. Sudell, Jr., Esq., at 1 (March 10, 1983) (Dkt. Item 695, Attachment). The TeGrotenhuis Group, however, maintained that Technograph had not acquired their interest in the Henricks Patent. See Letter of William H. Sudell, Jr., Esq., to Sidney Bender, Esq. at 1 (March 30, 1983) (Dkt. Item 695, Attachment).

With respect to negotiations with the Ziesenheim Group, Technograph had on-going negotiations with Walter J. Blenko, Jr. in an effort to acquire that Group's interest in the Henricks Patent. On February 16, 1983, Technograph sent the Ziesenheim Group a letter, along with an agreement which for $667,081.91 would assign the Group's interest in the Henricks Patent over to Technograph. (Dkt. Item 695, Attachment). Technograph's offer, however, was not accepted.²⁰ Nevertheless, on February 28, 1983, Technograph tendered a check to Frederick B. Ziesenheim as Trustee for Martha O. Leonard,²¹ in order to obtain Leonard's interest in the Henricks Patent. See Letter of Sidney Bender, Esq. to William H. Sudell, Jr., Esq., at 2 (March 10, 1983) (Dkt. Item 695, Attachment). The...