Reddi-Wip, Inc. v. Lemay Valve Co.

• Decision Date: 20 February 1962
• Docket Number: REDDI-WI,INC,30637,Nos. 30562,30563,s. 30562
• Citation: 354 S.W.2d 913
• Parties: , a Corporation, and Development Research, Inc., a Corporation, Plaintiffs-Respondents, v. LEMAY VALVE COMPANY, Inc., a Corporation, Lemay Machine Company, a Corporation, and Fred Suellentrop, Sr., Defendants-Appellants, and Fred Suellentrop, Jr., Nuera Plastics, Inc., Western Rubber Company, and Pres-Pak Valve Corporation, Additional Defendants-Appellants.
• Court: Missouri Court of Appeals

Page 913

354 S.W.2d 913

REDDI-WIP, INC., a Corporation, and Development Research Inc., a Corporation, Plaintiffs-Respondents, v. LEMAY VALVE COMPANY, Inc., a Corporation, Lemay Machine Company, a Corporation, and Fred Suellentrop, Sr. Defendants-Appellants, and Fred Suellentrop, Jr., Nuera Plastics, Inc., Western Rubber Company, and Pres-Pak Valve Corporation, Additional Defendants-Appellants.

Nos. 30562, 30563, 30637.

St. Louis Court of Appeals, Missouri.

Feb. 20, 1962.

Motion for Rehearing or for Transfer to Supreme Court Denied

and Opinion Modified April 2, 1962.

Lusser, Morris & Burns, Rene J. Lusser, St. Louis, George J. Mager, Clayton, for defendants-appellants.

Hocker, Goodwin & MacGreevy, Lon Hocker, St. Louis, Jerome A. Gross, St. Louis, for respondents.

DOERNER, Commissioner.

Plaintiffs brought this action in equity seeking an injunction to restrain the defendants from making, using or selling certain dispensing valves, for an accounting, and for other relief. On April 30, 1958, the court entered an interlocutory decree by which the defendants were enjoined, an accounting was ordered, and a Special Master appointed to take the same. On November 12, 1959, plaintiffs waived the accounting, and the interlocutory decree became a final judgment from which the defendants appealed. While the interlocutory decree was still in effect plaintiffs, on September 25, 1959, filed a motion alleging that the defendants and the additional defendants had violated it by manufacturing and selling such valves, and asking that they be cited for contempt. A hearing was held on November 12, 1959, and on February 24, 1960, the court entered its order finding the defendants and the additional defendants guilty of contempt, and assessing fines against them in varying amounts. After unavailing after-trial motions, the defendants and additional defendants duly appealed. By agreement of all parties the appeals were consolidated for briefing and argument.

The valves which are the subject of this litigation are those frequently found in pressurized containers of fluffed products, such as whipped cream and shaving cream, the contents being dispensed when the tube or stem is tilted sideways. The idea for such a valve originated with Aaron S. Lapin as early as 1942. In 1947, Lapin, assisted first by an engineer named Tomasek, and subsequently by defendant Fred Suellentrop, Sr., the president and owner of defendant Lemay Machine Co., began the development of what will be referred to as the Tomasek valve, the first of which was satisfactorily assembled about February 1948. The component parts of the Tomasek valve consisted of a container top or mounting cap; a tubular, tiltable stem, having a valve head at the lower end; a rubber grommet or seal; and a metal spring designed to restore the stem to an upright position when the sideways pressure applied to tilt it was removed. An application for a patent was applied for in Tomasek's name on September 27, 1948, all interest in the invention was assigned to plaintiff Reddi-Wip, Inc., a corporation formed by Lapin and his associates, and that company became and is the owner of the patent on the Tomasek valve, No. 2,615,597, which was issued on October 28, 1952.

Following the successful development of the Tomasek valve, Lemay Machine, and subsequently a new corporation formed by Suellentrop for the purpose, St. Louis Valve Company, Inc., received orders for such valves from Reddi-Wip, purchased the component parts from suppliers, assembled the valves, and sold them to Reddi-Wip. This relationship continued until Reddi-Wip decided to set up its own assembly plant, and to employ St. Louis Valve to supervise and manage the same, subject to its direction and control. To that end a written contract was entered into between the parties on July 11, 1949, the pertinent terms of which will be later discussed.

Prior to the execution of that contract Lapin had been working on the development of a springless valve in which the rubber grommet was designed to serve both as a seal and as the spring to restore the stem to an upright position. An application for this valve, hereafter called the Lapin valve, was filed by Lapin on May 2, 1949, assigned to Reddi-Wip, and ultimately resulted in the issuance to it on March 15, 1955, of Patent No. 2,704,172. During the same period in which Lapin was developing the Lapin valve, Suellentrop, unknown to Lapin, was also developing a springless valve, which will be referred to as the Suellentrop valve, for which he applied for a patent on June 30, 1949. In the course of the negotiations for the employment contract of July 11, 1949, Lapin learned from Suellentrop that the latter had applied for a patent on his valve, and there was incorporated in that agreement a provision requiring Suellentrop to assign his invention to Reddi-Wip. Suellentrop did so, by an assignment dated July 27, 1949. Sullentrop's application was not pressed, and no patent was ever issued thereon.

In accordance with the contract of July 11, 1949, St. Louis Valve supervised and managed the assembling of Tomasek valves for Reddi-Wip and its licensee, plaintiff Development Research, Inc., until June 28, 1951. On that date the parties executed a written agreement modifying the contract, by which Reddi-Wip dispensed with the supervisory and management services of St. Louis Valve, but agreed to pay the latter the original minimum compensation of $2,000 per month until July 11, 1954, the expiration date of the original contract. The evidence is clear that after June 28, 1951, none of the defendants herein, or St. Louis Valve, acted in a supervisory or managerial capacity for plaintiffs. In fact, the only relationship shown was that until December 1956, Lemay Machine on occasions made repairs to machinery and equipment used by Development Research in the assembling of Tomasek valves, and sold the latter various supplies.

On July 2, 1956, Suellentrop filed an application for a patent on a springless type valve. On December 12, 1956, the filed another application on the same type, both of which applications were pending at the time the trial was held. Sullentrop then formed the defendant corporation Lemay Valve Company, Inc., of which he owns all of the shares, and in May 1957 began in a small way to manufacture and sell the so-called Lemay valve, which was covered by his application of December 12, 1956. Plaintiffs instituted this action on June 28, 1957. Between May 1957 and the date of trial, February 27, 1958, Lemay Valve Co. assembled approximately a half million of the Lemay valve. Jack W. Soffer, president of Development Research, testified that his company continued to assemble and sell an improved spring-type or Tomasek valve until the trial, at the rate of several million a month, that it was not yet in commercialized production of the springless or Lapin valve, and that up to the week preceding the trial the entire production of the Lapin valve only amounted to about 200,000 valves.

Plaintiffs' petition was in two counts, on both of which the court found in favor of plaintiffs. The essential allegations of the cause of action pleaded in Count I was that a confidential relationship had existed between the plaintiffs and defendants, in the course of which defendants had acquired knowledge of plaintiffs' trade secrets relating to its dispensing valves; and that in violation of the obligations imposed on them by virtue of such confidential relationship, defendants were unfairly competing with plaintiffs by utilizing plaintiffs' trade secrets in the manufacture and sale of defendants' valves. In the prayer plaintiffs asked that defendants be enjoined '* * * from making, using or selling the particular valves now being manufactured, used and sold, or any other valve embodying any of the details of construction or any of the trade secrets utilized in Plaintiffs' valves,' for an accounting of profits and award of damages, and other relief. Defendants denied generally the material allegations in Count I of plaintiffs' petition.

The court found that a confidential relationship had existed between plaintiffs and defendant Suellentrop, and declared the law to be that: '* * * By the confidential relationship existing between plaintiffs and defendant Suellentrop and Lemay Valve Company, Inc., during 1948 and 1949, defendants are precluded from utilizing, for their own benefit and in competition with the plaintiffs, any of the information disclosed to them pursuant to said confidential relationship, particularly the principles underlying the valve structure of the valve disclosed to and manufactured by Lemay Machine Co. for Reddi-Wip in 1948 and 1949, and including the springless modification thereto developed in the spring of 1949.' (While of no great consequence, it is apparent that in speaking of the confidential relationship which existed between plaintiffs and defendant Lemay Valve Co. during 1948 and 1949 the court undoubtedly intended to refer to either the Lemay Machine Company or the St. Louis Valve Company rather than to the Lemay Valve Company, for the evidence is undisputed that the latter company was not incorporated until February 20, 1957). By the interlocutory decree the defendants were enjoined permanently from directly or indirectly manufacturing, selling or using a valve for pressure containers 'Embodying, in whole or in part, the same or substantially the same, device or combination of devices, or any of them, as those disclosed * * *' in the Tomasek valve, the Lapin valve, and the Suellentrop valve, an accounting was ordered, and a Special Master appointed to take the same.

The basis of the cause of action pleaded in Count I is the rule that one who uses another's trade secret, without a privilege to do so, is liable to the other if his use constitutes a breach of confidence reposed in him by the other in disclosing the secret to him. Restatement, Torts, Sec. 757; ...