Finch v. Hughes Aircraft Co.

Decision Date11 January 1984
Docket NumberNo. 393,393
Citation469 A.2d 867,57 Md.App. 190
PartiesWalter G. FINCH et al. v. HUGHES AIRCRAFT COMPANY. Sept. Term 1983.
CourtCourt of Special Appeals of Maryland
Edward F. Sullivan, III, Charlottesville, Va., with whom was Walter G. Finch, Baltimore, on brief, for appellants

Alan N. Halkett, Los Angeles, Cal., with whom were Peter L. Winik, Washington, D.C., Latham & Watkins, Los Angeles, Cal., Wilbur D. Preston, Jr., James R. Chason and Whiteford, Taylor, Preston, Trimble & Johnston, Baltimore, on brief, for appellee.

Argued before MOYLAN, LOWE and GARRITY, JJ.

LOWE, Judge.

This appeal is the result of two cases and counterclaims which had been consolidated from the old Circuit Court and the Superior Court of Baltimore City. To understand better the unnecessarily complicated scenario we should point out that most of the controversy arose as a result of the fertile inventive mind of the now deceased Doctor William B. McLean, whose interests here are being represented by a trust which we will collectively refer to as "McLean". Walter Finch, the other appellant, is an attorney who, as some compensation for representing McLean, obtained an one-half interest in the patent which is at the heart of the controversy.

Dr. McLean had patented a space satellite--oriented invention to which the United States had a nonexclusive royalty-free license by reason of McLean's employment. Both he and Finch thought that such relationship had relinquished to the government complete use and control of the patent in the United States. When Hughes Aircraft Company became interested in the patent in 1967, it informed McLean and Finch of their retained rights, and negotiated a The corporate assets of Hughes apparently were needed to explore the potential of the invention, but as Poor Richard commented in his Almanac, "[n]ecessity never made a good bargain." Three years later, having received minimal returns from this license, Finch approached Hughes to discuss a sale of the reissue rights of the patent and negotiated a price of $25,000 over Hughes' $100,000 offer by amending the License Agreement in August of 1970.

license agreement for the patent for $10,000; however, McLean and Finch would not only be entitled to certain royalties therefrom but Hughes was to obtain a costly reissuance of the patent and pay the costs of any infringement actions.

Dr. McLean died six years later, after which Mr. Finch and the McLean trustees contemplated the bargain which had been consummated of necessity in 1967, giving birth to the sale in 1970, and decided that "they" had been fraudulently seduced.

As a result they sued Hughes in equity seeking a rescission of the two contracts on the ground of fraudulent inducement and at law for damages on the same ground plus an allegation of breach of those "fraudulently induced" contracts. Finch, however, had also represented Hughes during part of that time in the reissuance of the patent and in patenting the invention in West Germany. He admittedly had overcharged Hughes for those services. This overcharge was the subject of the counterclaim, a judgment to which Finch consented except for the punitive damages added by the court.

The cases were consolidated and specially assigned to Judge Joseph H.H. Kaplan who found for Hughes on all counts including compensatory and punitive damages against Finch. The appeal therefrom raises a multitude of issues, but none of which the judge had failed to address in a meticulously crafted "Memorandum Opinion". In reviewing those issues we have carefully considered the arguments and patiently perused the 20 volumes of record extracts. We

                concur in every aspect of Judge Kaplan's opinion.   While we may have shortened it and even rephrased it to avoid too obvious an appearance of judicial plagiarism, we could not have improved it by denying Judge Kaplan the credit he deserves for such careful deliberation and such an articulate explanation of his conclusions.   We will therefore adopt them as our own, and having edited his opinion only in minimal detail append it herewith.   For the reasons he explains we will affirm his judgment




Plaintiffs filed a Bill of Complaint in the Circuit Court of Baltimore City on April 27, 1978, against Hughes Aircraft Company seeking rescission of a License Agreement dated March 1, 1967 and an Amendment to that Agreement dated August 1, 1967 1 and an accounting. Plaintiffs allege that Defendant procured these contracts by making fraudulent misrepresentations and by purposefully concealing material facts with the intent to deceive and mislead Plaintiffs and to induce them to enter into these contracts.

In its Answer, Defendant denies Plaintiffs' allegations of fraud and raises the defenses of limitations and laches. Defendant also avers that one of the plaintiffs, Walter G. Finch, Esquire, is not entitled to relief in a court of equity because he comes to the court with unclean hands. Defendant alleges that Mr. Finch, an attorney, represented Defendant in the application for the reissue patent which is the subject of the License Agreement and Amendment and in efforts to obtain patent coverage in certain foreign countries. Defendant alleges that during the course of this representation, Mr. Finch submitted bills to Defendant for professional services rendered by Mr. Finch which were falsely inflated, in that they overstated the amount of time Allegations of fraud in connection with Mr. Finch's billing to Defendant for professional services are also the basis for Defendant's Counterclaim against Mr. Finch filed on May 31, 1978. Mr. Finch filed a Motion to Dismiss the Counterclaim, which he later withdrew. At trial, on January 28, 1982, Mr. Finch, by his attorney, consented on the record to the entry of judgment against him on this Counterclaim in the amount of $23,077.27. T. 2138.

                spent by Mr. Finch in rendering services to Defendant.   Defendant alleges that these bills were fraudulently prepared at the direction of Mr. Finch with the intent to deceive and mislead Defendant

Plaintiffs filed a Declaration in the Superior Court of Baltimore City on January 14, 1980, against Hughes Aircraft Company. In their first count, Plaintiffs claim one billion dollars in compensatory and punitive damages for Defendant's alleged fraud in connection with the procurement of the License Agreement and Amendment. In their second count, Plaintiffs claim two hundred million dollars for Defendant's alleged breach of the two contracts between the parties.

Defendant filed general issue pleas, a special plea of limitations and a Counterclaim containing the same allegations as the Counterclaim filed in the Circuit Court case. In its Counterclaim, Defendant claims compensatory damages of $50,000.00 and punitive damages of $200,000.00. Plaintiffs have responded to the Counterclaim by motion raising the defense of lack of legal capacity to sue on the part of the Counter-Plaintiff.

These cases were tried concurrently in January, 1982, and the parties submitted proposed findings of fact and conclusions of law in March, 1982. The Court heard argument of counsel on March 26, 1982.


Walter G. Finch, Esquire, one of the plaintiffs, has been engaged in the private practice of law in Baltimore City Before he entered private practice, Mr. Finch gained extensive experience in the field of patent law and practice. He joined Westinghouse Electric Company's patent department in 1950 and was employed as a patent drafter. While at Westinghouse, his duties included the making of infringement studies, royalty studies, state of the art studies and preliminary investigations in the United States Patent Office. Near the end of 1951, he took a position with a Washington, D.C. law firm which specialized in patent law. During this period he prosecuted patent applications and conducted various studies in the Patent Office. After approximately one year, Mr. Finch left the Washington, D.C. firm and joined the patent staff of the Applied Physics Laboratory of the Johns Hopkins University. His duties there included the preparation and prosecution of patent applications.

                since 1957.   Mr. Finch holds Bachelor's and Master's Degrees in engineering (Johns Hopkins University, 1940, 1950), Bachelor's and Master's Degrees in accounting (Temple University, 1949), a Juris Doctor Degree and Master's Degree in patent law (Temple University, 1948;  George Washington University, 1949) and a Master's Degree in business administration (Temple University, 1949).   He has been a certified public accountant since 1966

In 1957, Mr. Finch received several contracts to prepare patent applications on missiles for the United States Navy. At about the same time, the son of a deceased Baltimore patent lawyer asked Mr. Finch to take over his father's practice. These events enabled Mr. Finch to enter private practice as a sole practitioner in the area of patent law.

Edith L. McLean, Mark A. McLean and California First Bank, the remaining plaintiffs, are trustees of the McLean 1976 Family Trust under a Deed of Trust from William B. McLean and Edith L. McLean dated March 9, 1976. Included among the assets of this trust at the time it was established was all of Dr. William B. McLean's right, title and Defendant, Hughes Aircraft Company, is a Delaware corporation with principal corporate offices located in Culver City, California. Hughes began its communication satellite program in the Fall of 1959. In 1970, approximately five percent of Hughes' total business was in the field of communications satellites. Today, communications satellites comprise about ten percent of Hughes' total business.

                interest in U.S. Patent 3,216,674, one of the patents involved in the instant litigation.   Dr. McLean died in August, 1976

Dr. McLean was educated at California Institute of...

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