Murphy v. International Robotic Systems, Inc.

• Court: United States State Supreme Court of Florida
• Citation: 766 So.2d 1010
• Docket Number: No. SC92837.,SC92837.
• Parties: Robert MURPHY and Technology Innovations International, Inc., Petitioners, v. INTERNATIONAL ROBOTIC SYSTEMS, INC., and Howard Hornsby, Respondents.
• Decision Date: 17 August 2000

766 So.2d 1010

Robert MURPHY and Technology Innovations International, Inc., Petitioners,
v.
INTERNATIONAL ROBOTIC SYSTEMS, INC., and Howard Hornsby, Respondents

No. SC92837.

Supreme Court of Florida.

August 17, 2000.

766 So.2d 1012

R. Stuart Huff and Mark L. Mallios, Coral Gables, Florida, for Petitioners

David A. Jaynes, West Palm Beach, Florida, for Respondents.

LEWIS, J.

We have for review Murphy v. International Robotics Systems, Inc., 710 So.2d 587 (Fla. 4th DCA 1998), which expressly and directly conflicts with decisions from the First and Third District Courts of Appeal¹ regarding when relief may be granted in a civil case based upon improper, but unobjected-to, closing argument. We have jurisdiction. See Art. V, § 3(b)(3), Fla. Const. As explained more fully below, we hold that relief may not be granted in a civil case² based on improper,

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but unobjected-to, closing argument unless such argument is first challenged and judicially evaluated in the trial court

I. GENERAL FACTUAL BACKGROUND IN THE PRESENT CASE

During the mid-1980s, Robert Murphy (Murphy) and Howard Hornsby (Hornsby) developed a low-profile, remote-controlled, unmanned marine vehicle known as the OWL. Generally described, the OWL consists of a fiberglass hull, motor, and various electronic components, all formed around the base of a jet ski type personal watercraft. In 1988, Murphy and Hornsby, along with several other individuals, formed International Robotic Systems, Inc. (Robotic Systems I), a Florida corporation, in large part to conduct business relating to the development and marketing of the OWL. Murphy and Hornsby each owned forty percent of the stock in Robotic Systems I; Murphy became the president of the company and Hornsby its vice-president. By 1990, two patents had been issued to Murphy and Hornsby as co-inventors of the OWL, and they assigned those patents to Robotic Systems I.

During the late 1980s and early 1990s, Murphy and Hornsby attempted to attract business interest in the OWL, with a primary potential customer being the U.S. Navy. In addition to the U.S. Navy, private companies such as Boston Whaler and Israeli Aircraft Industries expressed varying interest in the product. Also during this time period, several business interests loaned funds to Robotic Systems I, including a New York financier who loaned $100,000 to the company, and International Commercial Development Company (ICDC), which loaned the company $125,000. To secure the $125,000 loan from ICDC, Robotic Systems I assigned the two patents on the OWL to ICDC as collateral. Robotic Systems I also obtained several other smaller loans during this time period.

By the end of 1991, the U.S. Navy had expressed an interest in purchasing a prototype OWL, but there were no guarantees of when, if ever, the Navy would actually make the purchase. During February 1992, Murphy and Hornsby were introduced to John Terry Carroll (Carroll), an employee and representative of United Technologies Optical Systems (UTOS), a subsidiary of United Technologies Corporation (UTC). UTOS was not UTC's only subsidiary, as UTC was also the parent company of entities such as Pratt-Whitney; generally speaking, UTC was a large corporate entity with significant ties to the defense industry. Upon meeting with Murphy and Hornsby and viewing the OWL, Carroll expressed interest in the OWL's potential uses.

In April 1992, Carroll introduced Murphy and Hornsby to Peter Just (Just) and John Wood (Wood), officers of Laser Holdings, Ltd. (Laser), an Australian company with which UTC had a pre-existing business relationship. On April 12, 1992, Murphy, Hornsby, Just, and Wood met to discuss the sale of Robotic Systems I's assets to Laser. Carroll attended this meeting as well, acting in large part as moderator. At the end of the meeting, Murphy and Hornsby on behalf of Robotic Systems I, and Just and Wood on behalf of Laser, executed a "Memorandum of Understanding" (MOU). According to the terms of the MOU, Robotic Systems I agreed to sell its assets to Laser for $200,000, of which $25,000 would be payable on April 15, 1992, with the remaining $175,000 payable at closing. The assets to be transferred included, among other things, the two OWL patents, any future contract with the U.S. Navy, a prototype OWL, and the goodwill of Robotic Systems I, including its corporate name. The memorandum also specified that any sale was contingent upon (1) Robotic Systems I successfully procuring a contract from the U.S. Navy for the purchase of an OWL; and (2) Hornsby becoming an employee of the purchasing company.

After executing the MOU, but prior to closing, the parties entered into several additional agreements. Specifically, on

766 So.2d 1014

May 27, 1992, Laser entered into a "Consultancy Agreement" and a "Loan Agreement" with Robotics Systems I, and Laser also entered into a "Commission Agreement" with Hornsby and Murphy, individually. Under the terms of the "Consultancy Agreement," Robotic Systems I agreed to be a consultant to Laser for a period of five years for development of the business purchased from Robotic Systems I, and Laser agreed to pay a total consultant's fee of not less than $300,000 but not more than $400,000 during that five-year period. According to the "Loan Agreement," Laser agreed to lend $300,000 to Robotic Systems I for a five-year period at an interest rate of six percent, to be paid back in amounts to be agreed upon by the parties "from time to time." Finally, under the terms of the "Commission Agreement," Laser agreed to pay Murphy and Hornsby a commission of $5000 each for every OWL produced in the first twelve months following the date of execution of the agreement, and $750 for every OWL produced in the four years following that first twelve-month period. The cap on commissions payable to Murphy and Hornsby over the five-year period was $1,000,000 each

The closing on the proposed transaction was held on July 24, 1992. Several weeks prior to that time, one of the conditions precedent to the proposed transaction had been fulfilled; namely, the U.S. Navy entered into a contract with Robotic Systems I for the purchase of a prototype OWL, with a sales price of approximately $449,000. Hornsby fulfilled the other condition precedent set forth in the MOU by agreeing at the closing to a five-year employment contract with the Australian interests, with a starting salary of $80,000 per year. In conjunction with the closing, Just and Wood formed a new Florida corporation, Justwood, Inc. (Justwood), to receive the assets of Robotic Systems I, including its corporate name. Additionally, all of Laser's rights under the previously executed agreements were transferred to Justwood, which adopted the name International Robotic Systems, Inc. (Robotic Systems II). At the same time, Robotic Systems I changed its name to Technology Innovations International, Inc. (Innovations), and Murphy remained with Innovations. Using the money obtained from the sale, Robotic Systems I satisfied all of its existing debts.

After the closing, Hornsby, as president of Robotic Systems II, began developing and building a new prototype OWL according to the specifications and requirements set forth in the contract with the U.S. Navy. Cost overruns occurred during this development and building process, and the OWL ultimately was delivered to the U.S. Navy behind schedule. During the same time period, Laser experienced financial difficulties and was placed into receivership in Australia. A $5000 commission check was sent to Murphy for the OWL produced for the U.S. Navy, and another $750 commission check was sent to him after another prototype demonstrator OWL was produced. The OWL built for the Navy and the demonstrator OWL were the only two OWLs fully produced in the three years following the closing of July 14, 1992.

II. PROCEEDINGS IN THE TRIAL COURT AND THE FOURTH DISTRICT

Murphy and Innovations (collectively "the Plaintiffs") filed suit against UTC/UTOS, Laser, Robotic Systems II, and Hornsby (collectively "the Defendants"). One of the Plaintiffs' primary allegations was that Carroll, the employee and representative of UTOS/UTC, had misrepresented the extent of involvement that UTC/UTOS would have in producing and marketing the OWL after the deal with Laser was completed. More specifically, the Plaintiffs asserted that Carroll represented that the Australian interests were merely a conduit for UTC/UTOS to become involved with the OWL. The Plaintiffs claimed that if the major corporate presence of UTC/UTOS had supported the OWL, the ultimate financial and production

766 So.2d 1015

problems associated with the product would not have occurred.

The case proceeded to trial and, at the conclusion of the four-week trial, the jury found in favor of the Defendants³ on all but one claim. Specifically, the jury returned a special interrogatory verdict form finding the following: (1) none of the Defendants either intentionally or negligently misrepresented material facts which the Plaintiffs reasonably relied upon and which caused monetary losses to the Plaintiffs; (2) none of the Defendants conspired with one another to intentionally misrepresent material facts which the Plaintiffs relied upon and which caused monetary losses to the Plaintiffs; (3) none of the Defendants breached the "Commission Agreement" with Murphy; (4) none of the Defendants breached the "Consultancy Agreement" with Innovations;⁴ (5) Hornsby, individually, breached a fiduciary duty owed to the Plaintiffs, from which the Plaintiffs suffered damages in the amount of $1; (6) Hornsby, individually, did not receive and conceal moneys for himself which were corporate opportunities of Innovations;⁵ (7) the assignment of the two OWL patents from Innovations to Robotic Systems II should not be held null and void due to the conduct of the Defendants; and (8) none of the Defendants were liable for punitive damages.

After the...