Freedman v. Beneficial Corp., Civ. A. No. 4541.

• Decision Date: 24 December 1975
• Docket Number: Civ. A. No. 4541.
• Citation: 406 F. Supp. 917
• Parties: Irving FREEDMAN, Plaintiff, v. BENEFICIAL CORPORATION, a Delaware corporation, and Beneficial Management Corporation, a Delaware Corporation, Defendants.
• Court: U.S. District Court — District of Delaware

406 F. Supp. 917

Irving FREEDMAN, Plaintiff, v. BENEFICIAL CORPORATION, a Delaware corporation, and Beneficial Management Corporation, a Delaware Corporation, Defendants.

Civ. A. No. 4541.

United States District Court, D. Delaware.

December 24, 1975.

COPYRIGHT MATERIAL OMITTED

Steven D. Goldberg, of Theisen, Lank & Mulford, Wilmington, Del., and Richard S. Masington and Stuart Z. Grossman, of Spence, Payne & Masington, P. A., Miami, Fla., for plaintiff.

E. Norman Veasey and R. Franklin Balotti, of Richards, Layton & Finger, Wilmington, Del., for defendants.

MEMORANDUM OPINION

LATCHUM, Chief Judge.

Plaintiff Irving Freedman has brought this diversity action against defendants Beneficial Corporation and Beneficial Management Corporation seeking compensatory and punitive damages for the alleged use and publication of a plan, submitted to defendants in confidence and in expectation of remuneration and designed to enhance the profitability of defendants' business activities. Defendants have moved for summary judgment pursuant to Rule 56(b), F.R.Civ.P., and in their briefs and at argument the parties have contested two issues. The defendants assert, first, that essential elements of each of plaintiff's several theories for relief are lacking and, second, that plaintiff's claim is barred by the statute of limitations.

Beneficial Corporation, through its operating subsidiaries, engages in the small loan business throughout the United States. On May 12, 1967, plaintiff, by his attorney Muchnick, notified defendants that he had developed a business idea that would "substantially increase small loan volume accounts" and offered "a profitable by-product service."¹ On May 18, 1967, defendants acknowledged receipt of Muchnick's letter and stated that it had been referred to Barylick who was in charge of business development. Communication by telephone between Muchnick and Barylick on March 27, 1968 resulted in the forwarding to the defendants on April 3, 1968 of a fairly detailed summary of plaintiff's proposal. His anticipated compensation for use of his idea was also set forth. Plaintiff proposed that defendants make loans based on borrowers' expected federal income tax refunds — "immediate tax refunds"; the tax refund checks, which would be assigned to defendants, would be a form of collateral security. Furthermore, defendants were advised to enter the tax return preparation business. By letter of May 6, 1968, Muchnick confirmed a May 3, 1968 conversation with Barylick who reported that the plan was under consideration. However, on May 23, 1968, Barylick notified Muchnick that the defendants could not "participate in the arrangement."

Plaintiff in January, 1971, learned for the first time that defendants had implemented a program that provided for "instant tax refunds" and a tax preparation service at their loan offices. The defendants had considered developing such a program during 1968 and a formal proposal on tax preparation activities was submitted to the management committee on April 21, 1969.² By November 3, 1969, the concept of the "instant tax refund" had been formulated.³ The plan was advertised initially in The Atlanta Constitution on November 13, 1969,⁴ and it apparently went into operation in the "tax season" of 1970.

Plaintiff filed suit in this court on December 19, 1972. His causes of action were delineated in five counts: wrongful appropriation of property; contract implied in fact; contract implied in law (quasi contract); conversion; and conspiracy.⁵

Summary judgment "is never warranted except on a clear showing that no genuine issue as to any material fact remains for trial," Tomalewski v. State Farm Life Ins. Co., 494 F.2d 882, 884 (C.A.3, 1974), quoting Mintz v. Mathers Fund, Inc., 463 F.2d 495, 498 (C.A.7, 1972), and, moreover, the evidence "must be viewed in the light most favorable to the opposing party." Adickes v. S. H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); Brandywine One Hundred Corp. v. Hartford Fire Ins. Co., 405 F.Supp. 147 (D.Del. 1975). With these principles in mind, the Court now turns to the contentions of the parties.

Defendants' first argument in support of their motion for summary judgment is based on their claim that plaintiff cannot prevail on any of his causes of action. The Court has reviewed the affidavits, depositions, and answers to interrogatories but, while it has doubts about the viability of some of plaintiff's theories for recovery,⁶ is unable to conclude "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Rule 56(c), F.R.Civ.P. Also, in light of the complexity of this case and plaintiff's necessary reliance on circumstantial evidence, the Court, in the exercise of its discretion, finds that summary judgment on this ground would be inappropriate. John Blair & Co. v. Walton, 47 F.R.D. 196, 197 (D.Del.1969).

Defendants also argue that the applicable statute of limitations bars plaintiff's suit in this court. In order to resolve this issue, it is necessary to apply the appropriate statute of limitations to each of plaintiff's causes of action.

A federal district court in a diversity action applies the statute of limitations that the forum state would apply. Wells v. Simonds Abrasive Co., 345 U.S. 514, 73 S.Ct. 856, 97 L.Ed. 1211 (1953); Guaranty Trust Co. v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945). Delaware has a "borrowing statute," 10 Del.C. § 8121, which provides in pertinent part:

"Where a cause of action arises outside of this State, an action cannot be brought in a court of this State to enforce such cause of action after the expiration of whichever is shorter, the time limited by the law of this State, or the time limited by the law of the state or country where the cause of action arose, for bringing an action upon such cause of action."

Thus, each cause of action set forth in plaintiff's complaint must be tested against both the appropriate Delaware statute of limitations and the appropriate statute of limitations for the state in which the cause of action arose.⁷ However, opposing counsel have agreed that there is no period of limitations shorter than the three year period specified in Delaware's applicable statute of limitations. 10 Del.C. § 8106.⁸ The five causes of action will be considered separately.

1. Wrongful Appropriation of Property.

Under this heading, plaintiff essentially alleges that the defendants took his idea and without permission employed it for their own benefit. The three year statute of limitations is applicable to this claim because it is an "action to recover damages caused by an injury unaccompanied with force." 10 Del.C. § 8106. Causes of action sounding in tort, such as this one, accrue at the time of injury, Howmet Corp. v. City of Wilmington, Del.Super., 285 A.2d 423, 425 (1971); Nardo v. Guido DeAscanis & Sons, Inc., Del.Super., 254 A.2d 254, 256 (1969); Leibowitz v. Hicks, Del.Ch., 42 Del.Ch. 209, 207 A.2d 371, 372 (1965), and the statute of limitations starts to run at that time. Hood v. McConemy, 53 F.R.D. 435, 445 (D.Del.1971); Bradford, Inc. v. Travelers Indemnity Co., Del.Super, 301 A.2d 519, 524 (1972).⁹ Plaintiff's injury occurred, and therefore his right to sue accrued, when defendants used his idea in a manner inconsistent with his ownership rights. The plan allegedly implementing plaintiff's idea was announced to the public in November, 1969, and it is uncontroverted that several months had been required to prepare the plan for implementation. The defendants' actions were thus inconsistent with plaintiff's rights when they began adapting and formulating the idea to the needs of their own enterprise. The plaintiff was damaged at that time rather than the date of the first market use. Thus, because the injury arose before November 13, 1969, more than three years before the filing of this suit in this court, this cause of action is time barred by 10 Del.C. § 8106 unless the statute of limitations was tolled.

2. Contract Implied in Fact.

Plaintiff argues that defendants' conduct indicating that he would be compensated for the use of his idea and his submission of the idea to defendants with the expectation of compensation if it were used justify finding the requisite contractual consent. Thus, plaintiff argues that defendants' use of his idea would be a breach of a contract implied in fact. The three year statute of limitations also applies to this cause of action because it is either an "action based on a promise" (promise implied) or an "action to recover damages caused by an injury unaccompanied with force." 10 Del.C. § 8106. The statute of limitations begins to run when the contract is breached, Lembert v. Gilmore, Del.Super., 312 A.2d 335, 337 n.3 (1973), and the breach of the implied in fact contract occurred when the defendants began to use plaintiff's idea for their own benefit. Thus, plaintiff's cause of action for breach of an implied contract accrued when his idea was appropriated by defendants, and, as with the appropriation count, this happened outside the three year period prior to the commencement of this litigation. Therefore, unless the statute of limitations was tolled, the cause of action based on an implied contract is also time barred.

3. Contract Implied in Law (Quasi Contract).¹⁰

Plaintiff contends that he is entitled to remuneration for the use of his idea because the defendants voluntarily accepted and used something of value which he had sent to them with a reasonable expectation of compensation. Initially, the Court must determine if 10 Del.C. § 8106 is applicable to an action in the nature of quasi contract. See Restatement, Restitution § 148(2). Apparently, § 8106 was designed to encompass all contractual claims except for those specifically considered elsewhere. Furthermore, this cause of action, essentially one of unjust enrichment, would seem...