Motorola, Inc. v. Fairchild Camera and Instrument Corp.

• Decision Date: 13 March 1973
• Docket Number: Civ. No. 6808 Phx. WPC.
• Parties: MOTOROLA, INC., a corporation, Plaintiff, v. FAIRCHILD CAMERA AND INSTRUMENT CORPORATION et al., Defendants.
• Court: U.S. District Court — District of Arizona

366 F. Supp. 1173

MOTOROLA, INC., a corporation, Plaintiff, v. FAIRCHILD CAMERA AND INSTRUMENT CORPORATION et al., Defendants.

Civ. No. 6808 Phx. WPC.

United States District Court, D. Arizona.

March 13, 1973.

COPYRIGHT MATERIAL OMITTED

Snell & Wilmer by Mark Wilmer, Evans, Kitchel & Jenckes by Earl H. Carroll, Phoenix, Ariz., Mueller, Aichele & Rauner by Foorman L. Mueller, Chicago, Ill., Townsend & Townsend, San Francisco, Cal., Lesher & Scruggs, Tucson, Ariz., Kirkland & Ellis by Karl F. Nygren, E. Houston Harsha, Frank Cicero, Jr., Leslie Hodson, Lewis D. Spencer, Ronald L. Engel and Daniel W. Vittum, Jr., Chicago, Ill., for plaintiff.

Brown, Vlassis & Bain, Phoenix, Ariz., John W. Barnum, Washington, D. C., Roger S. Borovoy and Nelson Stone, Mountain View, Cal., for Audrey Hogan and C. Lester Hogan.

OPINION^* AND ORDER

COPPLE, District Judge.

This case proceeded to trial on plaintiff's fifty-five page (plus attachments) Amended Complaint filed May 29, 1969. The original complaint was filed August 27, 1968. In the caption the Amended Complaint was entitled:

"Complaint for:

Unfair Competition;

Interference with Advantageous Personnel Relationships;

Antitrust Violation;

Unjust Enrichment;

Constructive Trust upon Benefits Wrongfully Obtained;

Damages—Punitive and Compensatory;

Breach of Fiduciary Duty by Officer and Director."

During the eight weeks consumed by plaintiff in presenting its case-in-chief some 75 witnesses were called either in person or by deposition, and approximately 560 exhibits were introduced into evidence by plaintiff. Prior to commencement of trial, by stipulation, defendants marked directly into evidence over 850 exhibits, many of which were used in cross-examination of plaintiff's witnesses and in the examination of defendants themselves when called by plaintiff for cross-examination. At the conclusion of plaintiff's case all defendants moved to dismiss pursuant to Rule 41(b), Federal Rules of Civil Procedure, on the grounds that "upon the facts and the law the plaintiff has shown no right to relief." The test, simply stated, is that if, from the record as it stands at the end of plaintiff's case, the Court is convinced that the evidence preponderates against plaintiff, the Court is empowered to grant the motion. Ellis v. Carter, 328 F.2d 573 (9th Cir. 1964). This Court is so convinced.

The basic dispute arises from the fact that in early August of 1968 eight executives of Motorola's Semiconductor Division at Phoenix, Arizona, resigned to accept employment with one of Motorola's important competitors, Fairchild Camera and Instrument Corporation, at Mountain View, California. While some of these individuals were employed in a similar capacity at Fairchild Camera's Semiconductor Division, others were employed in different and more responsible positions and some with corporation-wide responsibilities. Not all of them have remained with Fairchild Camera.

Jurisdiction is based upon 28 U.S.C. § 1332 (diversity), and 15 U.S.C. § 1 et seq. (Sherman Antitrust Act and Clayton Act).

The various parties are described briefly as follows:

Plaintiff

Motorola, Inc., is a multi-division corporation with facilities worldwide. The Semiconductor Division is headquartered at Phoenix, Arizona, and in August 1968 had approximately 16,000 employees engaged in manufacture and sales of various semiconductor and related products.

Defendants

Fairchild Camera is also a multi-division worldwide operation which manufactures and sells, among many other products, semiconductor and related devices.

The late Sherman Fairchild was a major stockholder and director of Fairchild Camera.

Walter Burke was financial advisor to Sherman Fairchild and was and is an executive officer of Fairchild Camera.

Motorola Employee-Defendants (referred to hereinafter collectively as employee-defendants):

C. Lester Hogan was a director and officer of Motorola, Inc., and General Manager of its Semiconductor Division.

Leo E. Dwork was an officer of Motorola, Inc., and Director of Product and Operation groups within the Semiconductor Division.

Wilfred J. Corrigan was a Director of Product groups in the Semiconductor Division.

Eugene A. Blanchette was Director of Integrated Circuit operations in the Semiconductor Division.

Thomas D. Hinkelman was Director of Planning and Production Control in the Semiconductor Division.

George M. Scalise was General Manager of European Operations for the Semiconductor Division.

Andrew A. Proscassini was Director of Reliability Assurance and Quality Control, Semiconductor Division.

William L. Lehner was Manager of Equipment and Plant Operations, Semiconductor Division.

While not a named party, it is also well to mention here that Mr. Robert Galvin is the major stockholder of Motorola, Inc., which was founded by his father. Galvin is chief executive officer of Motorola, runs it with a strong and skillful hand and, as he freely testified, not even a division manager can implement any decision or plan with which Galvin disagrees.

Also at Motorola there is a corporate-level Financial Review Committee, sometimes in the testimony referred to as Profit Review Committee, headed by Galvin, which regularly meets with division managers to review and approve or disapprove proposed budgets and operating plans for each division and to determine funding for new projects, termination of unprofitable or unpromising projects, etc. Their decisions in these regards are final.

Motorola Semiconductor Division is characterized by the evidence as a low-cost mass producer rather than an innovator. Fairchild Camera apparently is known more for research and development and less as a low-cost mass producer.

The semiconductor industry is a relatively new but rapidly growing field. Many new companies have been formed as a result of a spin-off of groups of executive and scientific employees from other established companies. The industry is led by bright, relatively young and highly ambitious scientists. One of its characteristics is the high mobility of top-flight employees. There is keen competition in the industry for the best men, with resulting substantially higher-than-average salaries, bonuses, stock options and other fringe benefits. All members of the industry regularly engage in advertising and recruiting in their competitors' areas of operation to attract new employees. There is a greater sensitivity among employees in this industry to higher offers and better opportunities elsewhere, with less loyalty to a particular employer, than obtains in other industries.

In mid-1968 Fairchild Camera was searching for a new corporate chief executive. A number of experienced executives were considered, some interviewed. Ultimately the attention of Sherman Fairchild was called to Hogan. When first contacted, Hogan expressed no interest in the job. Finally in late July, after the offer was made more attractive financially, Hogan agreed that if the details could be satisfactorily reduced to a written contract approved by his attorney and tax consultant he would accept. On August 7, 1968, Hogan was advised by his counsel that the contract had been agreed upon as to form and content and awaited only his signature. Dr. Hogan, that day, submitted his resignation to his immediate superior, Dr. Noble, who was Vice Chairman of the Board and Chief Technical Officer and Group Executive, Motorola, Inc. Dr. Noble suggested that the resignation should be submitted to Mr. Galvin. On August 8, 1968, Hogan met with Galvin in Chicago. While Mr. Galvin tried with various carefully researched and prepared arguments to dissuade Dr. Hogan from resigning, he was unsuccessful and accepted Dr. Hogan's resignation at that time. At no time did Galvin advise Hogan that he had an employment contract with Motorola and, in fact, told him that he was, of course, free to resign. The following day Dr. Hogan was appointed Chief Executive Officer of the Fairchild Corporation with corporate-wide responsibilities and, in addition, as temporary General Manager of its Semiconductor Division.

During the period following Fairchild's initial offer and preceding his acceptance thereof on August 7, 1968, Dr. Hogan had discussed the offer with various persons at Motorola's Semiconductor Division, including some of the other employee-defendants, seeking their advice. Some indicated that if Dr. Hogan went to Fairchild they would be interested in going too. Dr. Hogan refused to discuss employment with any of them but did give them, at their request, the telephone number of Walter Burke at Fairchild.

Dr. Hogan, late in his negotiations with Fairchild, had told Mr. Burke that if he came to Fairchild there might be others at Motorola who would apply for jobs, and he gave Burke the names of five of the employee-defendants who might call and the general salary and option ranges they could command in the industry. Early in their negotiations Sherman Fairchild and Burke had inquired specifically of Dr. Hogan if he had an employment contract preventing him from leaving Motorola. Dr. Hogan correctly assured them that neither he nor any other employee of the Semiconductor Division had such a contract and all were free to resign at any time.

Each of the employee-defendants, except Hinkelman and Corrigan, independently and without knowledge of the actions of the others, contacted Burke, applied for employment and negotiated their own deal for compensation. Hinkelman and Corrigan learned of Dr. Hogan's resignation on August 8 or 9 and, after Hogan's employment with Fairchild, applied for jobs with Fairchild and were hired by Dr. Hogan.

There was no evidence of any "conspiracy" by defendants Fairchild Camera, Sherman Fairchild and Walter Burke to injure Motorola. They were, for good business reasons, seeking a new chief executive. While the salary and bonus arrangements were substantial, so also are such arrangements for other chief executives of large corporations.

The evidence...