Roberts v. Sears, Roebuck and Co.

• Decision Date: 31 May 1979
• Docket Number: No. 69 C 2573.,69 C 2573.
• Parties: Peter M. ROBERTS, Plaintiff, v. SEARS, ROEBUCK AND CO., a corporation, Defendant.
• Court: U.S. District Court — Northern District of Illinois

471 F. Supp. 372

Peter M. ROBERTS, Plaintiff, v. SEARS, ROEBUCK AND CO., a corporation, Defendant.

No. 69 C 2573.

United States District Court, N. D. Illinois, E. D.

May 31, 1979.

COPYRIGHT MATERIAL OMITTED

Louis G. Davidson, Chicago, Ill., for plaintiff.

Peter D. Kasdin, Arnstein, Gluck, Weitzenfeld & Minow, Chicago, Ill., for defendant.

MEMORANDUM

LEIGHTON, District Judge.

This suit alleging fraud, breach of confidential relation, negligent misrepresentation, and unjust enrichment, is by Peter M. Roberts, a former employee, against the Sears, Roebuck Company, his former employer, for damages and rescission of a contract by which he assigned all his rights, including patents, to a quick release device for socket wrenches. A second amended complaint invoked the jurisdiction of this court on the ground that the parties are of diverse citizenship, and that the requisite jurisdictional amount is involved. Plaintiff prayed for rescission of the contract, return to him of certain issued patents, and for disgorgement of the unjust enrichment which allegedly had accrued to the defendant. The case was tried before a jury that returned three verdicts in plaintiff's favor, each for damages in the sum of $1,000,000 on his claims of wrongdoing by defendant.

Judgment was entered for plaintiff in the amount of $1,000,000, it being conceded that the verdicts were non-cumulative. Then, in a post-trial motion based on the jury's verdicts, plaintiff asked this court to grant him the equitable relief for which he had prayed, and payment to him of $44,000,000 by which, according to the evidence, defendant had been unjustly enriched through the use of plaintiff's property rights in the device he had invented. The motion was denied, this court concluding that having submitted his claim for damages to a jury, the doctrine of election of remedies barred plaintiff from obtaining restitutionary relief. Both parties appealed.

The court of appeals approved the jury's findings, concluded that the three verdicts were proper, and affirmed the judgment in plaintiff's favor. It held, however, that it was error, in this instance, to apply the Illinois doctrine of election of remedies; and that while this court had "correctly decided not to disturb the jury's monetary award, . . . it had erred in not considering whether rescission of the contract and return of plaintiff's patents were appropriate." Roberts v. Sears, Roebuck & Co., 573 F.2d 976, 985 (7th Cir.), cert. denied, 439 U.S. 860, 99 S.Ct. 179, 58 L.Ed.2d 168 (1978). Accordingly, that part of the court's judgment which denied equitable relief was reversed and remanded for a determination whether rescission is proper under the facts of this case.

The cause has been redocketed; the parties have stated their respective positions. They agree that no further evidence is to be heard; and that the mandate of the court of appeals can be complied with on a record which now consists of the pleadings, the evidence presented to the jury, the decision of the reviewing court, and the briefs of the parties stating their contentions. Therefore, the court will proceed to consider and decide whether under the facts of this case plaintiff is entitled to rescission of the contract by which he assigned to defendant all his rights to the quick release device for socket wrenches, including patents. A necessary starting point is a statement of the facts which must have persuaded the jury to return its verdicts.

I.

Peter M. Roberts was born on January 18, 1945. When he was a 17 year old high school student, he worked part-time for the Sears, Roebuck Company in Gardner, Massachusetts. After finishing high school, he became a full-time sales clerk for the company. His education extended only to a high school diploma; and he did not have any business experience.

In 1963, while a minor 18 years of age, he worked on his own time and developed a quick release device that enabled the user of a wrench, with one hand, to change a socket of one size to one of another. He designed, tooled, and made a prototype of his invention. Then he had a Worcester, Massachusetts lawyer file an application on his behalf for a United States patent. Roberts knew that Sears, his employer, sold more than 1,000,000 wrenches each year. Therefore, he decided to show his invention, and the only prototype of it then in existence to the manager of the store in which he worked. Roberts was persuaded to submit his invention, along with the prototype, as a Sears employee suggestion to the company. Consequently, on May 7, 1964, the suggestion form which showed that a patent for the device was pending, and the prototype, were sent to the Sears main office in Chicago, Illinois. A short time later, Sears closed its Gardner, Massachusetts store; Roberts moved to Tennessee with his parents.

Roberts did not hear from Sears concerning his employee suggestion or about the evaluation of his invention. On one occasion he called Sears Chicago office long distance and spoke to a woman who seemed to be familiar with the subject; he wrote a letter on January 5, 1965 seeking information about the status of his suggestion, but he received no response. Then, sometime around the end of January 1965, while at his place of employment in Newport, Tennessee, he received a telephone call from Leonard Schram, a Sears attorney, who asked for the name of the lawyer who was processing the patent application for Roberts. After answering Schram's question, Roberts asked him, "what was happening with my device and he said that they were looking into it with some interest and they might be interested in it on some parts of their lines. . . ." Roberts then asked Schram what Sears had concluded about the invention's value; but, "he wouldn't give me an answer. He just said, `Well, sometimes inventors get more for their ideas than they are really worth, or try to get more for their ideas than they are really worth,' and that if he was interested, he would let me know." Schram, although he knew what Sears had done with the prototype of Roberts' invention since it was received in May 1964, did not tell Roberts the facts, nor the real reason for the telephone call.

In April 1965, through the Massachusetts lawyer, Sears wrote to Roberts and began negotiations for a license to use the quick release device. In letters written by Schram, the company stated that, in its judgment, the invention was not new; that any claim granted on the patent application would be "quite limited"; that the cost of adding the quick release feature to its wrenches would be 40¢ to 50¢ for each unit, and that in its appraisal, Roberts' invention as a feature on a Sears wrench would sell only to the extent that it was promoted. Therefore, a license for its use was worth $10,000. Sears' agents knew that Roberts trusted the company for which he had worked; and they expected him to accept as true the representations they were making in the effort to purchase a license for his quick release feature. Roberts, relying on what was transmitted to him from Sears by the Massachusetts lawyer, accepted as true the representations which had been made. On June 15, 1965, as far as he was concerned, the negotiations with Sears were concluded when he signed a memorandum agreement, the contract at issue in this case.

This agreement was prepared by Sears' lawyers; it was signed by Roberts when he was still a minor.¹ Its contents and their legal meaning were never explained to him; he did not employ an attorney in Tennessee where he was then living. He relied on what the Massachusetts lawyer told him; but unknown to Roberts, Sears had employed that lawyer, while he was purportedly acting for Roberts, to protect the company's interests with regard to certain patents Sears anticipated would be issued for the quick release device. The agreement, as it was worded, was not one for a license, as had been first proposed by Sears; it provided for an assignment to Sears of all of Roberts' rights in his invention, including worldwide patent protection. It contained language suggesting that Sears did not expect to sell more than 50,000 wrenches with the feature in any year; it provided against the contingency that a patent would not issue on the Roberts' application. The total amount Roberts was to receive for his invention was $10,000, payable in a 2¢ royalty per unit.

Roberts entered into the memorandum agreement totally ignorant of what Sears had done in determining the value of his invention. He was not informed of relevant and important facts which were known only to Sears and its agents. Contrary to the impression Schram created when he told Roberts that the company was "looking into it the device with some interest and . . . might be interested in it on some parts of its lines . . .", the company had thoroughly explored and investigated the value of the quick release feature. Virtually on receiving the prototype of the invention in May 1964, Sears had it examined, and through experts at its disposal became convinced it was a highly marketable and valuable item. Copies of the prototype were immediately made. One of the questions raised by those responsible to Sears for the marketing of wrenches was whether Roberts' insertion of the release feature weakened a wrench to the extent that it could not stand use by a mechanic. Therefore, Sears' custom manufacturer of wrenches was requested to subject a copy of the prototype to physical tests. And in order to determine market acceptance of the new invention, a number of garage mechanics were asked to use one. These steps were taken in the summer and late fall of 1964. The physical tests proved that Roberts' modification of the ratchet wrench with his feature was usable; the market test established that mechanics would be enthusiastic in welcoming what was a unique solution to a problem that had long burdened users of socket wrenches. Sears, through experts in the several...