Kisco Co., Inc. v. Verson Allsteel Press Co., 82-446C(B).
| Decision Date | 26 April 1983 |
| Docket Number | No. 82-446C(B).,82-446C(B). |
| Citation | 564 F. Supp. 154 |
| Parties | KISCO COMPANY, INC., Plaintiff, v. VERSON ALLSTEEL PRESS CO., Defendant. |
| Court | U.S. District Court — Eastern District of Missouri |
Daniel R. O'Neill, Bryan, Cave, McPheeters & McRoberts, St. Louis, Mo., for plaintiff.
William A. Richter, Peper, Martin, Jensen, Maichel & Hetlage, St. Louis, Mo., for defendant.
In its three-count complaint, Kisco Company, Inc. (Kisco) seeks to recover the sum of $240,000, together with interest, the balance allegedly due Kisco for services and information furnished by it to Verson Allsteel Press Company (Verson) at the latter's request.1 In essence, Kisco asserts the making of an express contract obligating Verson to pay said sum, and alternatively, a quasi-contractual liability on the latter's part based on its alleged unjust enrichment by obtaining and using the services and information.
This litigation had its genesis in Verson's desire to obtain information which would be helpful in preparing a bid to Mason-Chamberlain Company, a government contractor, in response to Request for Proposal (RFP)-0054 for an integrated system to manufacture M42/46 grenade bodies. Verson had had many years of experience in the design and manufacture of metal forming presses generally, but no recent experience in designing presses for the type of system called for in RFP-0054. In addition, it had no operating cost data nor much of the other factual information it was required to furnish in conjunction with a bid. The period of time within which to obtain this information was extremely short.
In this situation, Verson sought the assistance of existing producers of M42/46 grenade bodies whose cost data and other relevant information would be helpful and whose tooling system could be copied in the event Verson was unwilling or unable to design its own system in the time available.
After failing to "team" with two other manufacturers of grenade bodies, Verson contacted Kisco which has produced grenade bodies since 1976. A plant tour of Kisco's facilities was arranged for October 6, 1980. At that time, a group of Verson employees headed by Ken Otsuka visited the Kisco plant and obtained a great deal of information (without charge) respecting Kisco's facilities and procedures from Robert H. Hoffman, its vice-president of engineering. It was not unusual for Kisco to permit other companies to tour its plant in this manner.
Several days thereafter, when apprised by Hoffman of Verson's desire for assistance, Jerome T. Holden, Chairman of the Kisco Board, requested its attorneys to prepare a draft of a memorandum of agreement on the basis authorized by him, and such a draft was prepared as of October 9, 1980, reciting, inter alia, that Kisco and Verson "have agreed" to the provisions therein. As of that time, however, there had not been any discussion with Verson about the terms of a possible agreement.
On October 10, 1980, Otsuka again visited Kisco and with Donald Smith, Verson's Vice-President of Marketing, was given another informative tour of the plant. In the course of this visit, there was little more than general conversation concerning the ability and willingness of Kisco to provide assistance to Verson, but no specific figures as to the price of such assistance were discussed.
In the next several days, Otsuka and Holden were in telephone communication and came to an understanding that whatever assistance Kisco was to provide would be in two phases. The first or pre-bid phase related to furnishing general conceptual (non-proprietary) information, visual and oral, pertaining to Kisco's presses and which could be utilized by Verson in the preparation of its bid. The second or manufacturing phase related to furnishing all drawings, specifications, product and maintenance records and other specialized proprietary information to enable Verson to copy Kisco's tooling in the event Verson was the successful bidder. It was agreed that the cost to Verson for the total package of assistance would be $250,000, provided Verson was awarded the Mason-Chamberlain contract, but that if it was the unsuccessful bidder, it would, in any event, pay Kisco $10,000 plus a fee of $50 an hour for the time of Kisco personnel.
After arriving at the foregoing understanding, Holden and Otsuka agreed that a written contract covering all the terms deemed necessary would be prepared by Holden and submitted to Verson for approval. It was further agreed that because of the time restraints creating an urgency as to phase one, Verson's personnel could continue their visits to the Kisco plant and obtain further background information while the parties were engaged in hammering out a definitive written agreement. Such a visit took place on October 15. It is obvious that as of that time and for several weeks thereafter neither party doubted that a written agreement would be arrived at and executed on mutually satisfactory terms.
On October 15, Holden transmitted to Verson his draft of an agreement. As Kisco should have anticipated in light of its own experience, Verson questioned the adequacy (more accurately, the omission) of any protective provision in the phase two portion of Kisco's draft. After a number of inter-company discussions relating to the Kisco draft (as well as prodding from Kisco, which was becoming restive by reason of the absence of an agreement), Verson signed and sent Kisco under date of October 27 its revised version of an agreement. Had Kisco accepted and signed the October 27 Verson "agreement", the present controversy could well have been obviated.
The Verson draft added a Paragraph 7 containing two warranties, one, that Kisco owned and had the right to furnish to Verson the know-how and technical information it was to provide, and two, that "to Kisco's knowledge" such know-how and technical information did not infringe any United States patents. The latter provision was of importance to Verson in view of the stipulation in RFP-0054 that the successful bidder indemnify Mason-Chamberlain (and ultimately the United States government) against liability for patent infringement.
As important, if not more so, in light of Verson's intention to copy Kisco's system, was Verson's requested warranty as to Kisco's right to furnish (i.e., sell) to Verson its proprietary technical information and know-how (which would, of course, include the detailed drawings and blue prints of its machinery and tooling). This equipment, which had been manufactured by Waterbury Farrell (a competitor of Verson) on order from Kisco, had been developed jointly by them, utilizing both Kisco's and Waterbury Farrell's proprietary information.
A disagreement as to their respective rights in the process was resolved by an ambiguous document, wherein it was agreed that the items Kisco had purchased from Waterbury Farrell are the "property" of Kisco which it could "use" as it saw fit and that Waterbury Farrell has the right to sell Waterbury Farrell equipment which utilized a combination of Waterbury Farrell and Kisco proprietary fabrication information. However, the language employed did not clearly, if at all, cover Kisco's right to sell the proprietary information owned and utilized by Waterbury Farrell in the manufacture of the process.
Upon receipt of the Verson draft, Kisco consulted its patent attorney who drafted a revised Paragraph 7. Kisco also added a new Paragraph 8.
In its revised version of Paragraph 7, Kisco drastically narrowed the proposed warranty of non-infringement to provide in lieu thereof that in Kisco's "opinion" the tooling and know-how does not infringe Waterbury Farrell's Patent 4,147,049, adding that Kisco "makes no warranty as to whether the tooling and know-how infringe any patent", thus creating the impression that it has knowledge of other patent infringement.
Kisco's revision of Verson's proposed simple and unambiguous warranty of ownership and right to sell is equally suspect. We can conceive of no good faith reason for the proposed new language absent an intent to evade compliance with Verson's request. That Kisco was concerned about its rights is manifested by Holden's October 22, 1982 memorandum to himself to "Determine Kisco's right to sell know-how", as well as by the language employed in its revised version.
What Verson had proposed was that "(a)s a material consideration for this agreement, Kisco warrants to Verson that it owns and has the right to furnish the know-how and technical information to be provided under this agreement." Not only did Kisco eliminate the "material consideration" aspect, but the substituted language merely tracked a portion of its agreement with Waterbury Farrell, namely, that the tooling, tooling drawings, presses and other items (collectively, tooling and know-how) "are the property of Kisco and that Kisco is free to make use of the tooling and know-how as Kisco sees fit." This revised warranty begged the question as to whether the authority to "use" the tooling and know-how included the right to market the know-how and tooling.
Kisco's newly revised draft was...
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