Hughes Tool Co. v. Fawcett Publications, Inc.

• Decision Date: 26 October 1972
• Citation: 297 A.2d 428
• Parties: HUGHES TOOL COMPANY, a Delaware corporation, Plaintiff, v. FAWCETT PUBLICATIONS, INC., a Delaware corporation, and Noah Dietrich, Defendants. ROSEMONT ENTERPRISES, INC., a Nevada corporation, Plaintiff, v. FAWCETT PUBLICATIONS, INC., a Delaware corporation, and Noah Dietrich, Defendants.
• Court: Court of Chancery of Delaware

Page 428

297 A.2d 428

HUGHES TOOL COMPANY, a Delaware corporation, Plaintiff, v. FAWCETT PUBLICATIONS, INC., a Delaware corporation, and Noah

Dietrich, Defendants.

ROSEMONT ENTERPRISES, INC., a Nevada corporation, Plaintiff, v. FAWCETT PUBLICATIONS, INC., a Delaware corporation, and Noah

Dietrich, Defendants.

Court of Chancery of Delaware, New Castle County.

Oct. 26, 1972.

S. Samuel Arsht, David A. Drexler, Lewis S. Black, Jr., and Lawrence C. Ashby, of Morris, Nichols, Arsht & Tunnell, Wilmington, and Davis & Cox, New York City, for plaintiffs.

E. D. Griffenberg, Jr., and Peter M. Sieglaff, of Potter Anderson & Corroon, Wilmington, for defendant Fawcett Publications, Inc.

Charles F. Richards, Jr., and R. Franklin Balotti, of Richards, Layton & Finger, Wilmington, and Steptoe & Johnson, Washington, D.C., for defendant Noah Dietrich.

MARVEL, Vice Chancellor:

For a period of approximately thirty-two years prior to 1957 the defendant Noah Dietrich was first an employee and later a director and the executive vice-president of Hughes Tool Company, one of the plaintiffs in the above consolidated action. In such latter positions of trust and confidence Mr. Dietrich became a close personal associate of and a financial adviser to Howard R. Hughes, the sole stockholder of Hughes Tool Company, who apparently came to lean heavily on Mr. Dietrich for aid and counsel in the handling of his personal and business problems. Eventually, there was a falling out between the two men, and in 1957 Dietrich left the employ of Hughes Tool Company, thereafter suing both Hughes and Hughes Tool Company. However, in 1959, Dietrich and the defendants in such action agreed to settle, and as a result Mr. Dietrich entered into two contracts, both dated August 1, 1959, ¹ one with Mr. Hughes, under the terms of which Hughes agreed to assist Mr. Dietrich in obtaining an unsecured loan, Dietrich for his part agreeing not to disclose any confidential information about Hughes and his corporations, and the other with Hughes Tool Company in which Dietrich promised to make himself available to such company as a consultant for a period of seven years in return for a payment to him of a fixed sum. In the agreement with Hughes Dietrich acknowledged that a disclosure by him of confidential information about Hughes and his corporation would result in irreparable harm to Hughes and Hughes Tool Company and that the latter, in addition to any other remedies they might elect to assert, should have the right to seek the enjoining of further breaches.

In other words the agreement with Howard R. Hughes contained a covenant which specifically provided that Dietrich was not to disclose any information of any nature about the life and affairs of Hughes, the Hughes Tool Company, or of any of its affiliates, Mr. Dietrich having covenanted not to use for his own benefit or to permit the disclosure to others of any information of any nature, acquired or seemingly acquired as a result of his employment by or confidential relationship with Mr. Hughes, Hughes Tool Company, or any corporate affiliate, of any biographical or historical book, article, or other type of writing with respect to the life or affairs of Howard Hughes, or the history and affairs of Hughes Tool Company. Mr. Dietrich further agreed to surrender to Hughes, his attorneys or agents, any manuscripts or other ocumentation of any or all of the material above alluded to.

The Hughes Tool Company agreement, on the other hand, merely provided, as noted above, that Dietrich should make himself available to such corporation as a consultant for a period of seven years, in return for which he was to be paid the total sum of $694,000 by Hughes Tool Company in periodic installments.

Notwithstanding the restrictive covenant in the Hughes agreement, Dietrich has written and caused to be published an account of his personal and business association with Hughes, which book, a copy of which has been placed in the record, relates intimate and at times derogatory details of Hughes' private and business life to which Dietrich was allegedly privy. Such book has been published by Fawcett Publications, Inc., the defendant in the second complaint in the above consolidated action, under the title 'Howard, The Amazing Mr. Hughes'.

Following such publication, the plaintiffs Hughes Tool Company and Rosemont Enterprises, Inc. (the latter having been made the assignee in 1965 of exclusive rights to exploit Hughes' name, likeness or any account of his life or personality) brought these actions, claiming that their rights under the agreements referred to above had been infringed by actions of the defendants Dietrich and Fawcett Publications, Inc. Defendants have moved to dismiss such complaints and this is the Court's opinion such motions.

In pressing their motions to dismiss the complaints herein, defendants point out first of all that the restrictive covenant alluded to above which purportedly binds Mr. Dietrich not to disclose information concerning Mr. Hughes' personal and business affairs is contained solely in the Hughes agreement with Dietrich. They accordingly argue that Hughes is an indispensable party to this consolidated action and must be joined before these actions may proceed further. They further contend that Hughes Tool Company is neither a party to nor a third party beneficiary of the...