Scully Signal Co. v. Joyal

• Decision Date: 16 March 1995
• Docket Number: Civ. A. No. 94-0144P.
• Citation: Scully Signal Co. v. Joyal, 881 F.Supp. 727 (D. R.I. 1995)
• Parties: SCULLY SIGNAL COMPANY v. Arthur JOYAL, Robert J. Dislets, Universal Control Systems, Ltd., Joseph L. Munoz, Laurence L. Lampert, and William R. Backman, Jr.
• Court: U.S. District Court — District of Rhode Island

881 F. Supp. 727

SCULLY SIGNAL COMPANY v. Arthur JOYAL, Robert J. Dislets, Universal Control Systems, Ltd., Joseph L. Munoz, Laurence L. Lampert, and William R. Backman, Jr.

Civ. A. No. 94-0144P.

United States District Court, D. Rhode Island.

March 16, 1995.

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Ieuan G. Mahony, Sherburne, Powers & Needham, P.C., Barry J. Kusinitz, Corrente, Brill & Kusinitz, Ltd., Providence, RI, for plaintiff.

M. Kathryn Mainelli, McGovern, Noel & Benik, Providence, RI, for defendants.

ORDER

PETTINE, Senior District Judge.

The Report and Recommendation of United States Magistrate Judge Robert W. Lovegreen filed on February 6, 1995 in the abovecaptioned matter is hereby accepted pursuant to 28 U.S.C. § 636(b)(1).

The Magistrate Judge's recommendation that the defendants' Joseph L. Munoz, Laurence L. Lampert and William R. Backman, Jr.'s motion to dismiss be denied; defendants' motion for partial summary judgment be granted as to Count VII, and granted as to Counts V and VI without prejudice to plaintiff bringing common law claims as set forth in the Magistrate Judge's Report and Recommendation, part II.D; and defendants' motion as to Counts IV and VII of the Second Amended Complaint be denied is hereby approved.

In light of the foregoing Order, I need not reach the issue of whether defendants' notice of appeal was untimely.

SO ORDERED:

REPORT AND RECOMMENDATION

LOVEGREEN, United States Magistrate Judge.

Before me are two motions. The first is defendants', Joseph L. Munoz ("Munoz"), Laurence L. Lampert ("Lampert") and William R. Backman, Jr.'s ("Backman"), motion to dismiss for lack of in personam jurisdiction and failure to state a claim upon which relief can be granted pursuant to Fed. R.Civ.P. 12(b)(2) and (6) respectively. The second is defendants', Arthur Joyal ("Joyal"), Robert J. Desilets ("Desilets") and Universal Control Systems, Ltd.'s ("Universal"), motion for partial summary judgment on Counts IV through VIII of the Second Amended Complaint pursuant to Fed.R.Civ.P. 56(c).¹ Munoz, Lampert and Backman indicated that they join in the motion for partial summary judgment if they are not successful on their motion to dismiss. The plaintiff brought this action, alleging claims for, inter alia, misappropriation of trade secrets, breach of contract, intentional interference with contract, unfair competition and deceptive trade practices and unjust enrichment.

These matters have been referred to me for preliminary review, findings and recommended disposition. 28 U.S.C. § 636(b)(1)(B) and Local Rule of Court 32(c). For the following reasons, I recommend that Munoz, Lampert and Backman's motion to dismiss be denied and defendants' motion for partial summary judgment be granted as to Count VII, granted as to Counts V and VI without prejudice to plaintiff bringing common law claims as described infra part II.D. and denied as to Counts IV and VIII of the Second Amended Complaint.

Facts

Neither party submitted a statement of facts that was temporally explicative of this matter. The following rendition of the facts relevant to the present motions has been culled from the various pleadings, memoranda and exhibits that both parties have submitted. The first section contains facts alleged in the Second Amended Complaint that I relied upon in deciding the motion to dismiss. The second section sets forth facts submitted to the Court in the form of various exhibits as relevant to the motion for partial summary judgment. When a fact is in dispute it is so noted.

Facts Relevant to the Motion to Dismiss

Munoz and Lampert served as incorporators of Universal and now serve as Secretary and Treasurer, and President, respectively. (Second Amended Complaint ¶¶ 38 and 41.) Upon incorporation they issued to themselves an undetermined number of shares of common stock without any initial capital investment by either in Universal. Id. ¶ 40. Further, Universal did not receive any capital contributions from any source upon incorporating. Id. ¶ 43. Pursuant to an agreement with Munoz, Backman possesses an undetermined equity ownership interest in Universal as compensation for his service as Marketing Manager of the Fueltrack Project. Id. ¶ 42. Universal has not held Board of Directors or shareholders meetings. Id. ¶ 44. Official minutes are not kept in connection with any corporate meetings that are held by Universal's officers. Id. ¶ 45. Munoz has regularly paid disbursements and expenses incurred on behalf of Universal out of accounts held in the name of other corporate entities in which he possesses an interest, such as Caribbean Motors. Id. ¶ 46. Universal was incorporated for the purpose of promoting fraud by infringing the proprietary technology and trade secrets embodied in plaintiff's Prodigy system, a computerized fuel management system, for use in Universal's Fueltrack fuel management system. Id. ¶ 48.

Facts Relevant to the Motion for Partial Summary Judgment

Defendant Joyal was employed by the Raytheon Company ("Raytheon") as an engineer from 1958 through 1992. Defendant Desilets has been employed by Raytheon as an engineer since 1984. Outside of their work for Raytheon, both men had worked with Integrated Fuel Technology ("IFT") to develop a computerized fuel management system that would be called Prodigy. Apparently, IFT was unable to amass the capital needed to complete Prodigy, and thus, the project stalled. In approximately September of 1990, Joyal placed a call to Munoz, described the Prodigy project to him briefly and asked if he might be interested "in supporting the project." (Joyal Depo., Pl.'s Ex. 10 at 96, 99.) Munoz was not then interested. Id. Thereafter, plaintiff Scully acquired all of the assets and proprietary technology of IFT, and on September 7, 1991, Scully entered into a Design and Development Agreement (the "D and D Agreement") with Joyal and Desilets to continue working on Prodigy as independent contractors (Defs.' Ex. F).

Under the D and D Agreement, Joyal and Desilets agreed to complete their work on Prodigy "in a professional fashion in accordance with the best engineering standards," id. at 500527, and to "use their best efforts" to complete the Prodigy system through the stage of engineering prototype, id. at 500528. The D and D agreement also states that

Joyal and Desilets agree to assign all ... right, title and interest in all inventions, discoveries, products, processes and computer programs which have been conceived or developed in connection with the Work ... to Scully....

* * * * * *

Joyal and Desilets agree that, upon completion of the Work, they will promptly deliver to Scully any papers, drawings, blueprints, manuals, letters, notes, notebooks, reports, diskettes or other machine-readable media or other material relating to the Prodigy Project which are or in the future will be in their possession or under their control.

Neither of the Engineers shall, either during or after completion of the Work divulge to anyone or use for his own or another's benefit, any information (including designs, specifications, and software programs) embodied in the Prodigy system unless duly authorized in writing by an officer of Scully.

Id. at XXXXXX-XX. The agreement further provided that Joyal and Desilets would furnish Scully with a list of all modifications that needed to be made to Prodigy and provide on the job training to Scully's engineers relating to the technology, manufacturing, assembly and testing of Prodigy. Id. at 500542. The D and D Agreement also states: "This Agreement shall be governed by the laws of the Commonwealth of Massachusetts without giving effect to the principles of conflicts of law." Id. at 500534.

Joyal and Desilets contend that all the work under the D and D Agreement was completed in January of 1992 and that a prototype was successfully demonstrated to Scully as per the D and D Agreement in February, 1992. (Joyal Depo., Pl.'s Ex. 10 at 141; Joyal Aff., Defs.' Ex. A ¶¶ 6-7; Desilets Aff., Defs.' Ex. C ¶¶ 6-7.) Joyal testified at his deposition that in January of 1992, when he and Desilets turned over Prodigy to Scully, the system was functioning and that he never formed a belief that a complete redesign of Prodigy would have been in order. (Joyal Depo., Defs.' Ex. B at 159.) Nevertheless, Joyal testified previously in the same deposition that as of February, 1992, he felt that a complete redesign of Prodigy was in order to prevent the system from being outdated. (Joyal Depo., Pl.'s Ex. 10 at 153-54.) Further, Joyal did not discuss any of the perceived disadvantages of the Prodigy system with Scully engineers. (Joyal Depo., Pl.'s Ex. 16 at 23.)

Plaintiff disputes that Joyal and Desilets completed their work for Scully in February of 1992 in accord with the D and D Agreement. Scully submits a letter from Desilets to a Scully employee dated September 13, 1992 which references computer disks with design information that Desilets was returning to Scully with the letter and states: "This should bring to a close this one remaining issue left open under the Design and Development Agreement." (Pl.'s Ex. 9.) Robert Scully, President of plaintiff Scully, testified by affidavit that the February 22, 1992 testing of Prodigy was not wholly successful and that the system did not appear to function until Joyal and Desilets succeeded in "jury-rigging" it to perform. (Scully Aff., Pl.'s Ex. 1 ¶ 7.) Further, Scully engineers contacted Joyal and Desilets by mail and phone through October, 1992 to get Joyal and Desilets to provide the training and instruction on Prodigy, to disclose confidential information, including source codes, and to provide the necessary documentation and models, all of which was agreed upon in the D and D Agreement. Id. ¶ 9. In fact, Robert Scully states that Desilets visited Scully's testing site for Prodigy as late as January, 1993 to consult with Scully engineers pursuant to the D...