Heden v. Hill

• Decision Date: 13 August 1996
• Docket Number: Civil Action No. H-94-4095.
• Citation: 937 F. Supp. 1230
• Parties: Donald G. HEDEN, Plaintiff, v. Dale HILL, et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

937 F. Supp. 1230

Donald G. HEDEN, Plaintiff, v. Dale HILL, et al., Defendants.

Civil Action No. H-94-4095.

United States District Court, S.D. Texas.

August 13, 1996.

COPYRIGHT MATERIAL OMITTED

Randall O. Sorrels, Abraham, Watkins, Nichols, Ballard & Friend, Houston, TX, for Plaintiff.

Paul J. McConnell, III, DeLange & Hudspeth, L.L.P., Houston, TX, for defendants Adam, Nowickzewski, and Ultra Lite Manufacturing, Inc. Glenn Donald Phillips, Hearne & Phillips, L.L.P., Kilgore, TX, for defendants Hill, GHB Patent, Inc., Everlite, Inc., and Alumatech Corp.

D. Arlon Groves, D. Arlon Groves, P.C., Houston, TX, pro se.

ORDER OF ADOPTION

HITTNER, District Judge.

This court has reviewed the Memorandum and Recommendation of the United States Magistrate Judge signed July 19, 1996. The court finds the Memorandum and Recommendation should be, and the same is hereby, adopted as the court's Memorandum and Order. Accordingly, it is

ORDERED that the Motion for Summary Judgment is GRANTED with respect to Heden's claims of slander and violation of the Racketeer Influenced and Corrupt Organizations Act and DENIED with regard to Heden's claims for declaratory judgment as to the ownership of the patent, constructive fraud, common law fraud and coercion, tortious interference with business relations, civil conspiracy, and libel and defamation.

MEMORANDUM AND RECOMMENDATION

CRONE, United States Magistrate Judge.

I. Introduction

Pending before the Court is Defendant D. Arlon Groves ("Groves") Motion for Summary Judgment (# 103).

Defendant Groves seeks summary judgment on Donald G. Heden's ("Heden") claims for declaratory judgment regarding the ownership of the invention/patent, constructive fraud, common law fraud and coercion, interference with business relations, civil conspiracy, libel, slander and defamation, and violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO").

Having reviewed the pending motion, the submissions of the parties, the pleadings, and the applicable law, this court recommends that Groves's Motion for Summary Judgment be GRANTED IN PART and DENIED IN PART.

II. Background

According to the Third Amended Complaint, at some time prior to 1988, Plaintiff Donald G. Heden ("Heden") created a new design for a round-bottom, dump truck body/trailer made of aluminum. In confidence, Heden disclosed to Hill, who was in the trailer manufacturing business, his trailer design. In 1988, Heden and Hill agreed to develop, as equal partners, a venture to manufacture Heden's design. Hill was to be responsible for obtaining and/or providing sufficient capital for the formation of a new company to manufacture, market, and sell commercial units of the invention. In late 1988 and early 1989, Hill requested that Joseph Nowiczewski ("Nowiczewski") and Robert J. Adam ("Adam") be included as equal owners to finance the venture.

In 1989, Heden, Hill, Nowiczewski, and Adam agreed to incorporate the venture under the name Ultra Lite Manufacturing, Inc. ("Ultra Lite"). Articles of Incorporation were filed on April 5, 1989, with the Texas Secretary of State, creating four classes of stock, with each owner to receive a different class: 10,000 class A shares to Hill; 10,000 class B shares to Nowiczewski; 10,000 class C shares to Heden; and 10,000 class D shares to Adam. Nowiczewski was President of Ultra Lite. Adam was ultimately named Chairman of the Board, and Hill was the Chief Executive Officer. At some point in 1989, Heden retained Neal J. Mosely ("Mosely"), a patent attorney, to pursue an application for a patent on his trailer design.

According to Heden, a significant amount of money was spent improving the fabrication plant on Sellers Road between May and September 1989. The plant was owned by Nowiczewski and leased to Ultra Lite. Numerous dump truck bodies and trailers, using Heden's design, were fabricated and sold from March 1989 to June 1990. In the Summer of 1990, Ultra Lite began to suffer financial problems, which, according to Heden, resulted from wasteful spending of corporate assets by Nowiczewski and Hill. Heden further claims that Adam failed to fulfill his investment commitment of $100,000.00 in the corporation. Ultimately, the fabrication plant was shut down and the business was closed due to a lack of funds.

Heden contends that despite the fact he was named director, several meetings were held by Hill, Adam, and Nowiczewski, without Heden being notified or invited. According to Heden, the meetings were held to discuss a plot to close the company, drive it into bankruptcy, and sell the assets of Ultra Lite, including any patent rights, to Hill. Heden alleges that one such meeting was held on August 20, 1990. Heden claims that, shortly after the meeting, Hill sought the assistance of an attorney, Groves.

On October 30, 1990, Groves contacted Mosely by letter requesting files relating to the dump trailer/dump body invention, including the patent application. Groves represented in the letter that his office had been engaged by Ultra Lite for the purpose of obtaining the files. Groves stated in the letter that this was necessitated by Mosely's failure to deliver the files when requested by Nowiczewski, the President of Ultra Lite. Mosely responded by letter on November 1, 1990, stating that he considered Heden to be his client, not Ultra Lite. Mosely declined to release the files unless jointly instructed by Heden and Ultra Lite as to their disposition. Mosely also stated in the letter that if he did not have a joint resolution of the matter or a withdrawal of Groves's claim to the files by November 9, 1990, he would turn the files over to the court and file an action for interpleader and declaratory judgment. On November 6, Heden authorized Mosely by facsimile to release the files to Ultra Lite. Heden specifically stated in his authorization that he did not give Ultra Lite or any of its stockholders any right of ownership to any of his intellectual property or any of his interest or claims to the ownership of the dump truck design or any other designs. After Mosely released the files to Groves, Heden alleges that Groves changed the application from a sole inventorship application in Heden's name to a joint inventorship application naming Hill first and Heden second, without consulting Heden or investigating the true inventorship of the design. Subsequently, on January 18, 1991, Groves mailed the application to the Patent and Trademark Office ("PTO").

Heden alleges that Hill sought the assistance of Groves to exploit Heden's invention. On January 14, 1991, Groves incorporated Alumatech, Inc. ("Alumatech"). According to Heden, Hill was the sole owner of Alumatech at the time of incorporation. Groves was listed as the initial and sole director of Alumatech. One of Alumatech's purposes, listed in its Articles of Incorporation, was "to manufacture, have manufactured, market, sell, advertise and otherwise promote lightweight, high strength, container/transporter systems such as trailers...."

In November 1990, Ultra Lite filed for bankruptcy protection. Heden contends that in January or February 1991, Hill made a proposal to Nowiczewski and Adam to buy all of the assets of Ultra Lite. According to Heden, this proposal included a plan for the sale of the corporation's ownership interests in all assignments of patent rights it might have. Heden further claims that the plan called for the payment of a sum certain to each of the directors on each unit sold by Hill, his successors, or assigns up to one-half the amount of each of Adam's and Nowiczewski's initial investment in Ultra Lite, as well as royalties. Heden contends that when he learned of the proposal, he informed Hill, Nowiczewski, and Adam that he was opposed to it. Heden also claims that Hill did not fully disclose his personal interest in the proposal, specifically, that he had incorporated a new company, Alumatech, to engage in the same type of business as Ultra Lite.

Heden alleges that Nowiczewski and Adam agreed to Hill's proposal without an investigation and without knowledge of the actual worth of the corporation and its assets. In addition, Heden claims that Nowiczewski accepted Hill's representation of the value of Heden's invention without seeking further information and without ordering an appraisal. Heden refused to sign the agreement memorializing Hill's proposal. Heden alleges that as a result of his refusal, Hill, Nowiczewski, and Adam conspired to create the documents necessary to record the transfer of Heden's rights to his invention. Heden claims that a document entitled "Action of the Board of Directors of Ultra Lite Manufacturing, Inc. Without First Meeting" was created, and the signature of Heden was forged or in some other manner added to the signature line of the document by other than Heden's hand and without his consent. Additionally, Heden contends that in 1990 up through the date of the sale of the assets of Ultra Lite, Hill agreed with Heden to refinance the company so that he and Hill could proceed with the development of the invention as equal owners. Heden maintains that Hill breached this agreement.

Heden further alleges that without his consent, Hill, Nowiczewski, and Adam signed an agreement on February 9, 1991, to transfer Ultra Lite's patent rights to Hill in exchange for royalty payments of $100 per dump trailer to Adam, Nowiczewski, and Heden. Heden alleges that he did not sign this agreement. Heden also contends that Hill agreed his payments would be put into an escrow account. Heden asserts that although Alumatech grossed over $9.6 million in sales in its first year of operation, 1993 to 1994, and Adam and Hill have received thousands of dollars in royalties, no payments have been made to him or to an escrow account for his benefit.

On January 22, 1993, the PTO notified Heden that a patent application was filed on January 18, 1991, in the name of "Hill and Heden." Heden requested a copy of...