Stentor Electric Mfg. Co. v. Klaxon Co.

• Citation: 30 F. Supp. 425
• Decision Date: 28 November 1939
• Docket Number: No. 4.,4.
• Parties: STENTOR ELECTRIC MFG. CO., Inc., v. KLAXON CO.
• Court: U.S. District Court — District of Delaware

30 F. Supp. 425

STENTOR ELECTRIC MFG. CO., Inc., v. KLAXON CO.

No. 4.

District Court, D. Delaware.

November 28, 1939.

COPYRIGHT MATERIAL OMITTED

Murray C. Bernays and Abraham Friedman (of Ernst, Gale, Bernays & Falk), both of New York City, and Paul Leahy (of Ward & Gray), of Wilmington, Del., for plaintiff.

Hugh M. Morris and Edwin D. Steel, Jr., both of Wilmington, Del., for defendant.

NIELDS, District Judge.

A verdict for $100,000 was rendered in favor of the plaintiff and judgment entered thereon.

Defendant moves: (1) To have the verdict and judgment set aside; (2) to have judgment entered for defendant; or (3) a new trial granted.

Plaintiff moves that the judgment be corrected to include interest on the amount of the verdict at the rate of 6% per annum, from the date of the institution of suit to the date of the entry of judgment, in the sum of $60,821.92.

The grounds of defendant's motions are:

1. That the complaint sets forth no cause of action, in that, article 13 is too vague and indefinite to be enforceable. The article provides that the defendant "will use its best efforts to further the manufacture and sale of the articles covered by this agreement, and to that end it will maintain an efficient organization for the manufacture and sale of said articles".

2. That upon the breach of such a license agreement as the one in suit, it must be ruled as a matter of law either that no money damages at all are recoverable or that the recovery must be limited to the nominal sum of six cents.

3. That the proof of commercial utility of the articles covered by the agreement does not support a verdict in favor of the plaintiff.

4. That the court erred in refusing to instruct the jury as prayed by the defendant in its 27th prayer as follows: "27. The Spence receiver patent conferred no authority upon the defendant to manufacture the cone or dynamic type of radio receiver. This is true, even though it be assumed that the words of the claims of the Spence receiver patent read upon the diaphragm and mounting of the cone or dynamic type receiver".

5. That the court erred in charging the jury as follows: "It is for the jury to determine whether or no the patents were limited to the devices specified therein and whether the patents so limited were of any commercial value".

6. That it was error for the court to grant plaintiff inspection of Prickett Exhibits Nos. 300 to 1087.

7. That the testimony of Hollister upon a subject defendant opened over plaintiff's objections should not have been received.

8. That the verdict was excessive.

The scope of a motion to set aside a verdict or for a new trial has been repeatedly dealt with. This court held: "It is not, however, a sufficient ground for a new trial that the verdict is merely against a preponderance of the testimony, or that the court might have arrived at a different result, but the verdict must be manifestly and palpably against the evidence in the case." Weed v. Lyons Petroleum Co., D.C., 294 F. 725, 733, affirmed 3 Cir., 300 F. 1005.

Such a motion based upon the alleged excessive amount of the verdict has been frequently considered: "Conceding that the amount of the verdict is larger than the court would have given if the cause had been tried by it without a jury, this fact alone ought not to induce the court to grant a new trial. The matter of assessing the damages is, in cases of this character, exclusively within the province of the jury to determine, and the court should never interfere with the verdict, unless the amount is so excessive as to indicate passion and prejudice on the part of the jury, and cannot be accounted for in any other manner". Occidental Consolidated Min. Co. v. Comstock Tunnel Co., C.C., 125 F. 244, 245.

The court in charging the jury in this case adopted language usually employed in this district: "You will understand that you are not bound by anything that the court has said regarding the facts. The jury is bound in the performance of its duty to follow the law laid down by the court. As to the facts, you are entirely free to find, as you see fit, in accordance with the principles of law given you by the court. In mentioning facts the sole purpose of the court is to assist the jury but not to usurp or attempt to usurp the power belonging to them".

Defendant's grounds for setting aside the verdict will be considered seriatim.

The court reaffirms its charge to the jury that the complaint clearly states a cause of action.

Defendant does not claim as a matter of law that damages for loss of profits are never recoverable. In its brief defendant states: "* * * since Hadley v. Baxendale 1854, 9 Ex. 341, or even earlier in Masterton v. Mayor etc., of City of Brooklyn, 1845, 7 Hill N.Y. 61 42 Am. Dec. 38, loss of profits which were the direct and immediate fruits of the contract have been allowed." In this connection defendant states: "One is struck upon reading the cases by the unanimity of decision since 1845 to the effect that anticipated profits may be a proper element of damages, but that in certain cases susceptible of definite classification, anticipated profits are so inherently uncertain that their recovery will be denied."

Defendant contends that this case is controlled by the rule that anticipated profits of a new and untried business may not be recovered as damages for breach of contract. Cramer v. Grand Rapids Showcase Co., 223 N.Y. 63, 119 N.E. 227, 1 A. L.R. 154. The business of plaintiff was not "a new and untried business". Plaintiff was organized in 1913. During the early and experimental years it made no profits. In 1917 after charging off taxes, salaries and depreciation it showed a net profit. When the license agreement was made, plaintiff delivered to defendant contracts aggregating $240,000 upon which defendant realized a net profit. In subsequent years profits were realized from a business of nearly $1,000,000 without any promotion or exploitation into new fields. Here, a going business was turned over to defendant upon a profit-sharing basis and upon defendant's undertaking to use its best efforts "to further the manufacture and sale of the articles covered by this agreement".

Defendant further contends that license agreements with respect to patent devices are sui generis. This argument is based upon the language of the District Court in Crowe v. Oscar Barnett Foundry Co., 213 F. 864. But the Court of Appeals, 3 Cir., 219 F. 450, in that case clearly recognized that there is nothing sui generis in a license agreement for a patented device prohibiting the recovery of damages for breach thereof.

Defendant contends that damages were not proved by sufficient and competent evidence. There was evidence of the profits earned by plaintiff in 1917 from which damages could be computed. This profit was $13,210.13. Upon that basis the net profit payable to plaintiff for the fourteen years of the license agreement would be $184,800. Defendant received from Klaxon during that period $70,000. The difference is $114,800 or $14,800 more than the verdict.

Hollister, plaintiff's witness, computed damages for the years 1928 to 1930, inclusive, in the sum of $23,424.84 on the basis of the loss suffered by plaintiff because of defendant's policy of favoring Fisher Body and Fleetwood, affiliates of General Motors. Adding this damage to the first amount, you have damages of $138,200 or $38,200 more than the verdict.

Profits for the seven and one-half months from May 20, 1918, to December 31, 1918, were $61,000. One half of this amount or $30,500 was paid to plaintiff. At that rate for the thirteen remaining years of the license agreement profits would have been paid to plaintiff of $396,000. Klaxon actually received only $40,000 leaving a difference of $356,000. Moreover, plaintiff's witness Hollister testified that plaintiff would have received a very substantial sum as its share of profits if defendant had not ignored the radio market during the years 1922 to 1927.

There was also evidence before the jury that the Spence receivers cost from $.95 to $1.10 and that defendant received on the outside as high as $3.70 per receiver and from Fisher Body and Fleetwood $2.25 to $2.50. A profit to plaintiff of $1 per receiver could be readily calculated.

In 1918 Alfred P. Sloan, Jr. was president of United Motors Corporation and in 1929 was Chairman of the board of directors of General Motors Corporation. His deposition read in evidence by defendant contains the following passages:

"Q. Without regard to the details you ultimately did recommend the making of this agreement meaning the license agreement in suit? A. Yes.

"Q. And the fact is that you recommended it because at that time you thought the making of this agreement would be a desirable piece of business for the United Motors, or such affiliate or subsidiary which made the agreement? A. Absolutely, or I would not have recommended it.

* * *

"Q. The agreement itself as you have pointed out is an agreement in effect for the sharing of profits? A. Yes.

"Q. Consequently I assume that the record of profits, if any, of the Stentor Company up to that time, and the possibility of profits in that operation after that time, were matters of prime interest to you? A. I must have gone into it at the time, otherwise I would not have been justified in making the recommendation. The question now is, do I recall; and the answer is, no.

"Q. But you feel certain you must have gone into it? A. Yes, it was part of my responsibility.

"Q. And you satisfied yourself both with respect to profits up to that time, and the possibility of profits which could have been foreseen in the future? A. Otherwise I would not have recommended it."

Mathematical exactness is not required in computing damages: "As to this question the Court of Appeals — after stating that in its opinion the plaintiff's evidence would have supported a much larger verdict than that returned by the jury — said: `The pl...