Von Brimer v. Whirlpool Corp.

Decision Date24 May 1976
Docket NumberNo. 74-1807,74-1807
Citation536 F.2d 838
PartiesMichael J. VON BRIMER et al., Co-executors of the Estate of Joseph W. Von Brimer, Deceased, Plaintiffs-Appellants, v. WHIRLPOOL CORPORATION, Defendants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit
OPINION

Before KOELSCH and TRASK, Circuit Judges, and PALMIERI, * District Judge.

TRASK, Circuit Judge:

On May 13, 1969, the original plaintiff, Joseph W. Von Brimer, now deceased, filed a three count complaint against the Whirlpool Corporation, alleging (1) fraudulent appropriation; (2) malicious prosecution; and (3) intentional interference with contractual relations and prospective business advantage. He sought $150 million actual damages and $150 million punitive and exemplary damages. This action is now pursued by plaintiff Von Brimer's estate.

All the claims in the complaint were related to a linear induction motor developed by Von Brimer. Counts 2 and 3 were dismissed for failure to state a claim upon which relief could be granted. Subsequently, Count 1 was dismissed upon Whirlpool's Motion for Summary Judgment, one ground being that the claim was barred by the statute of limitations.

The case owes its origins to a series of meetings in 1962 between Von Brimer, a well-known inventor, and representatives of appellee, Whirlpool Corporation, a nationally-known manufacturer of washing machines. At these meetings, Von Brimer demonstrated his electrical linear induction motor which could be attached to washing machines and thereby utilize electricity more efficiently. Von Brimer and Whirlpool were hoping to execute a formal royalty agreement concerning use of this motor, but were unable to reach an agreement.

In November 1962, Von Brimer filed an application for a patent of his motor with the United States Patent Office. This patent was granted on July 13, 1965. In July 1963, one Lake, a representative of Whirlpool, filed an application for a patent on an invention very similar to that of Von Brimer's. The conflicting claims lead to an interference action between the two applications. Von Brimer became aware of the interference action sometime in 1966, the exact time being here in dispute, and the action was successfully terminated in Von Brimer's favor in January 1969.

Because this appeal centers in large part around the question of whether Von Brimer had title to the patented invention at pertinent points in time, several transactions with respect to the patent's title should also be outlined here. In late 1962, Von Brimer assigned and transferred to one Bollinger an undivided one-half interest in the invention. This undivided half-interest is hereinafter referred to as "Chain A" in the patented invention's title. On November 27, 1967, Bollinger conveyed his interest in the patent to one Quirk.

The parties to this appeal are in dispute as to the effect of this transfer. Whirlpool claims that this agreement provided for automatic reversion from Quirk to Bollinger after one year if Quirk had neither secured a license for the patent nor paid $10,000 to Bollinger. Both sides agree that Quirk did not meet either of these conditions. Appellants claim that this agreement was modified to provide an optional power of termination in Bollinger after two years, upon notice to Quirk.

In either case, Quirk conveyed whatever interest he had in the invention to Von Brimer on February 13, 1969. The trial court held that this transaction was a nullity since, it found, interest in the patent reverted automatically to Bollinger in 1968 and therefore, Quirk had no interest to convey to Von Brimer in 1969.

Some interest in the other one-half of the patent's title was conveyed from Von Brimer to the V. B. Research and Development Corporation on November 30, 1963. This half-interest is referred to as "Chain B" in the patent's title. The extent of the interest conveyed in this transaction is in dispute and at issue on appeal. Appellants maintain that Von Brimer conveyed only a license to the corporation, while appellee maintains that Von Brimer assigned away all of his interest.

Whether Von Brimer ever reacquired the interest he conveyed to the V. B. Research and Development Corporation is also in dispute. A photocopy of an agreement dated November 15, 1967, between Von Brimer and the corporation, Plaintiff's Exhibit 6, purporting to reinvest all rights in the patented item in Von Brimer, was originally admitted into evidence, subject to a motion to strike. Upon a motion for reconsideration, however, the exhibit was excluded because it was not produced in a timely manner pursuant to pre-trial discovery orders and because it could not qualify under the best evidence rule. On appeal, appellants object to the exclusion of this agreement.

Von Brimer instituted his suit on May 13, 1969. In response to the complaint, Whirlpool raised two affirmative defenses: (1) that Von Brimer had failed to state a claim upon which relief can be granted; and (2) that Von Brimer's action was barred by the statute of limitations. The parties agreed to a trifurcated trial in which the question of whether the complaint had stated a claim upon which relief can be granted would be determined by the court without a jury, and a jury trial on issues of liability and damages would follow if necessary. On December 20, 1972, the court decided that the complaint had successfully stated a claim for relief.

Whirlpool then filed a motion for reconsideration on January 18, 1973, arguing that this question had been decided upon the basis of Plaintiff's Exhibit 6, discussed supra. This exhibit was produced just prior to trial and counsel for Whirlpool argued that they did not have the opportunity to respond adequately. On March 21, 1973, the court granted Whirlpool's motion and excluded Exhibit 6. After a hearing on April 26, 1973, the court then decided the question of standing 1 adversely to appellants, thereby vacating its decision of December 20, 1972, and dismissing Counts 2 and 3 of the complaint. The district court's opinion is printed at 362 F.Supp. 1182.

On September 18, 1973, Whirlpool filed a motion for summary judgment on Count 1 of the complaint, alleging that there was no genuine issue of material fact relating to the necessary element of economic detriment and that the claim was barred by the statute of limitations. After a hearing, the court granted Whirlpool's motion. Appellants' motion for a rehearing was denied on January 30, 1974, and they filed notice of appeal on February 11, 1974.

Counts 2 and 3 of the complaint were dismissed because the trial court found that Von Brimer lacked a proprietary interest in the patented item at the time he instituted suit that would support those alleged causes of action. This appeal is based upon objection to the exclusion of certain evidence which would, appellants maintain, establish the proprietary interest in the patented item. Appellants also argue, however, that a proprietary interest in the patented item is not necessary to pursue Counts 2 and 3. With respect to the granting of summary judgment on Count 1 of his complaint, they argue that triable issues remain as to whether Whirlpool was unjustly enriched by the wrongful appropriation of the patented item and as to whether certain notification constituted "discovery" of the fraud so as to commence the statute of limitations.

We hold that a proprietary interest in the patented item was necessary to pursue Von Brimer's third cause of action for interference with contractual relations and prospective business advantage and that the trial court's conclusion that Von Brimer failed to establish that proprietary interest was correct. We hold that a proprietary interest was not necessary to pursue Von Brimer's second cause of action for malicious prosecution. Finally, we hold that the first cause of action for fraudulent appropriation was barred as a matter of law by the statute of limitations and that summary judgment was therefore properly granted.

Jurisdiction in this case, in which common law causes of action are asserted, is based upon diversity of citizenship, 28 U.S.C. § 1332. Von Brimer was a California resident and Whirlpool is a Delaware corporation whose principal place of business is in Michigan. The amount of damages sought is considerably in excess of the statutory minimum. Both parties agree that on the basis of Erie R. R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), Guaranty Trust Co. v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945), and Klaxon Co. v. Stentor Electric Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941), the applicable substantive law is that of the state of California.

Counts 2 and 3
A. Whether Von Brimer held a proprietary interest in the patented item at the time the suit was instituted.

Appellants argue that several items of evidence which would have indicated a proprietary interest in the patented item were wrongfully excluded at trial. They also argue that the trial court erred in determining that an agreement executed on November 30, 1963, between Von Brimer and the V. B. Research and Development Corporation, in which he conveyed to the corporation certain interests in the patented item, was an assignment and not a license. Several exhibits, 6, 14, 15, and 17, were excluded because not produced in a timely manner in compliance with pre-trial discovery orders. Exhibits 15 and 17 were also excluded on the basis of the parol evidence rule and Exhibit 6 was also excluded on the basis of the best evidence rule.

Exhibits 15 and 17 related to Chain A in Von Brimer's title. They were memoranda changing the terms of the contract offered as Exhibit 5. All three exhibits dealt with the...

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