Source: http://masscases.com/cases/app/28/28massappct489.html
Timestamp: 2019-04-19 04:17:33+00:00

Document:
QUEST SYSTEMS, INC. vs. CHARLES M. ZEPP.
Present: WARNER, C.J., ARMSTRONG, & KAPLAN, JJ.
CIVIL ACTION commenced in the Superior Court Department on April 3, 1987.
Nancy E. Watters for the plaintiff.
John F. Batter, III, for the defendant.
the consideration on ordinary principles of his application for counsel fees.
Pleadings. We sketch the story as disclosed, first, in the pleadings. According to the complaint (filed on April 3, 1987), Zepp and Dr. Irena Bronstein, who had worked together on certain biotechnological studies and research, founded in April, 1986, The Charles Institute, Inc. (Charles Institute), to develop commercial uses for this research. Quest has succeeded to Charles Institute by merger.
Even before the founding of Charles Institute, Zepp and Bronstein had consulted with Professor A. Paul Schaap of Wayne State University (Wayne State) about Schaap's research; Zepp and Bronstein had, indeed, entered with Schaap into mutual nondisclosure agreements.
In June, 1986, Zepp resigned from Charles Institute and in that connection he executed, on June 13, 1986, an assignment to Charles Institute of his rights to inventions conceived or developed while he was with Charles Institute or was working earlier with Bronstein. Zepp agreed in the same document not to disclose any of the inventions to third parties, nor to compete with Charles Institute.
Meanwhile, in June, 1986, Charles Institute, through Bronstein, and Wayne State, by Schaap, were negotiating a licensing agreement under which, in consideration of payments to Wayne State and Schaap, Wayne State would grant to Charles Institute the exclusive commercial use of Schaap's research achievements in the field of chemical compounds called dioxetanes. The negotiations failed.
named coinventors. Accordingly it solicited and secured from Zepp on November 17, 1986, an assignment of his rights in the inventions Bronstein had listed in the patent application and any patent that might be issued. This second assignment is alleged to contradict and to be in breach of Zepp's assignment of June 13, 1986, to Charles Institute (Wayne State and Schaap had prior knowledge of that assignment). Although the Patent Office rejected Wayne State's initial petition to inspect the patent application because the petition was not executed by Zepp, it was understood that the office would allow access to Zepp upon proper request.
The plaintiff feared that, to its irreparable harm, Zepp would, under color of his assignment to Wayne State, and in breach of his assignment to Charles Institute, disclose to Wayne State the substance of the patent application.
The plaintiff Quest in count I charged Zepp with breach of contract (the June 13, 1986, assignment) and violation of other duties owed to it; and, in count II, with unfair and deceptive practices in violation of G. L. c. 93A, Sections 2 and 11. In addition to monetary damages, Quest in its count III and "claims for relief" sought specific performance by Zepp of his assignment of June 13, 1986, and relief against his disclosing confidential information belonging to Quest; against his seeking to obtain access to patent applications for inventions of Bronstein and Zepp; against his transferring his rights or interest in any inventions created or developed in collaboration with Charles Institute or Bronstein; and against his disclosing information previously assigned to Charles Institute.
By his answer, Zepp, after sundry denials, set up as defenses (inter alia) that the assignment of June 13, 1986, was obtained by fraud and misrepresentation, or arose from mutual mistake, or (on a possible reading) lacked consideration; also that any claim being asserted by Quest was preempted by Federal law, and that G. L. c. 93A was inapplicable.
Bronstein's affidavit in support of the application stated that she and Zepp investigated a series of chemical compounds known as dioxetanes or 1, 2 dioxetanes which emit light under certain conditions as protein labels or enzymatic substrates; and they invented a means of triggering light from 1, 2 dioxetanes by means of enzymes. Zepp's assignment of June 13, 1986, extended to the invention, especially so, since in a "Schedule A" appended to the instrument of assignment, listing the subject matter assigned by Zepp to Charles Institute, the following items appeared: "Dioxetanes as labels for proteins and haptens" and "Dioxetanes as enzymatic substrates." And the patent application naming Zepp as a coinventor with Bronstein was entitled "Method of Detecting a Substance Using Enzymatically-Induced Decomposition of Dioxetanes." Zepp, however, wrongfully refused to sponsor the patent application, and wrongfully executed the November 17, 1986, assignment purporting to assign his rights in favor of Wayne State, including those entering into the patent application, which he had previously assigned to Charles Institute. Bronstein asserted that Zepp's actions, which questioned ownership by Quest, had created problems for Quest with potential investors.
Schaap's affidavit opposing the preliminary injunction stressed his career-long research in dioxetanes. In discussions with Zepp and Bronstein prior to the founding of Charles Institute, he had described his recent success in stabilizing dioxetanes and triggering chemiluminescent decomposition. Zepp at that time suggested that Schaap consider enzyme-induced dioxetane decomposition. Bronstein offered no opinion and made no comment on Zepp's suggestion. Thereafter Schaap did extensive research in using certain enzymes to decompose dioxetanes, without contribution by Zepp or Bronstein, and (thinking himself secure under the nondisclosure agreement) kept Zepp and Bronstein informed. There were negotiations for licensing Charles Institute to utilize commercially the Schaap advances in dioxetane research. This, Schaap believed, was the research at issue in the present lawsuit.
As noted, the judge denied the application for a preliminary injunction (April 22, 1987), stating that "[p]laintiff has not shown a substantial likelihood of success on the merits." He did not offer further explanation.
European patent application had now been published [Note 4] disclosing the same information that was contained in the United States application for patent. Thus, protection against the disclosure was moot. Cooperation on the defendant's part in securing a United States patent was no longer needed because of the defendant's denial that he was an inventor. Litigation had been commenced -- an action by Wayne State and Schaap against Quest and Bronstein in Michigan State court, and an action by Quest against Wayne State and Schaap in Massachusetts [Note 5] -- which might eliminate any need to enforce rights against Zepp. Quest asserted that Zepp would not be damaged by a dismissal without prejudice, whereas a dismissal with prejudice might involve a determination of the merits of Quest's suit against Zepp; in particular, a determination that Zepp's June 13, 1986, assignment to Charles Institute was invalid.
here, Zepp asserted, the action was vexatious. Zepp indicated that, by agreement, Wayne State had paid his counsel fees.
Decisions. As noted, the judge ordered dismissal of the action with prejudice but denied attorney's fees. Judgment was entered on April 4, 1988, and (with an immaterial change) was reentered April 11, 1988.
Discussion. (1) The grounds stated by the judge for his decision of the rule 41(a)(2) motion were mistaken.
(a) The judge said the action had been pending for nearly a year without any serious pursuit of it by the plaintiff; under the new time standards being implemented, cases will have to be disposed of within two years; he regretted that Quest had to feel the brunt of these new rules, but that was the way things were.
(b) The judge indicated that the defendant Zepp could not be awarded his attorney's fees because in fact Wayne State had paid them. We do not see this as a bar to an award of fees to the defendant, if it was otherwise justified.
(2) Although the judge did not say so, he may have dismissed with prejudice because he thought the action was meritless and vexatious, as Zepp asserted. The prior refusal (by another judge) to grant a preliminary injunction on the laconic ground that the plaintiff Quest had not shown a substantial likelihood of success can hardly be taken to prove that the action was a sham. Nor does the record supply such proof. For aught that appears, there was "a real controversy as to essential facts arising from conflicting or doubtful evidence," Wilkinson v. Guarino, 19 Mass. App. Ct. 1021 , 1023-1024 (1985). After all, Zepp did not move to dismiss on the pleadings, or for summary judgment. See Flynn v. Church of Scientology, Inc., 19 Mass. App. Ct. 59 , 65 n.7 (1984); cf. note 7, supra.
On the whole, we think the action taken by the judge exceeds any discretion he may have had.
"promptly" if he declines the court's conditions and decides to go forward on the merits. See Flynn, 19 Mass. App. Ct. at 67. Here the plaintiff made its request in its rule 59(e) motion for reconsideration filed on April 15, 1988, four days after entry of the amended judgment dismissing with prejudice, which was but eleven days after the hearing on the motion to dismiss. We see no particular reason for holding that the request was delayed unduly. [Note 13] Cf. Gravatt v. Columbia Univ., 845 F.2d 54, 55-57 (2d Cir. 1988); Lau v. Glendora Unified Sch. Dist., 792 F.2d, 929, 931 (9th Cir. 1986); Smith & Zobel, Rules Practice Section 41.11, at 61 (1977).
To conclude, Quest is entitled to dismissal without prejudice which may, however, be conditioned upon payment of Zepp's counsel fees if the judge shall find this to be appropriate. This inquiry will follow conventional lines. See GAF Corp. v. Transamerica Ins. Co., 665 F.2d 364, 367-370 (D.C. Cir. 1981), on remand, GAF Corp. v. Insurance Co. of No. America, 96 F.R.D. 188 (D.C. Cir. 1982); compare Puerto Rico Maritime Shipping Authy. v. Leith, 668 F.2d 46, 51 (1st Cir. 1981).
The judgment is vacated and the case is remanded for entry of a judgment of dismissal without prejudice, conditioned upon the payment of the defendant's reasonable attorney's fees if the judge, after hearing, shall find such condition appropriate.
[Note 1] Zepp filed his answer on April 28, 1987, after denial of the plaintiff's motion for a preliminary injunction.
[Note 2] For lawsuits between Quest (and Bronstein) and Wayne State (and Schaap), see note 5, infra.
[Note 3] The rule provides: "(a) Voluntary Dismissal: Effect Thereof . . . . (2) By Order of Court. Except as provided in paragraph (1) of this subdivision (a) [allowing voluntary dismissal by the plaintiff before the defendant answers or moves for summary judgment or by stipulation of the parties], an action shall not be dismissed at the plaintiff's instance save upon order of the court and upon such terms and conditions as the court deems proper. . . . Unless otherwise specified in the order, a dismissal under this paragraph is without prejudice."
[Note 4] On January 28, 1988.
[Note 5] We gather that the issues in these lawsuits include whether Bronstein or Schaap violated the terms of their mutual nondisclosure agreements; whether Wayne State tortiously induced Zepp to violate his contract with Charles Institute; whether Schaap or Wayne State has defamed Bronstein; whether Schaap or Wayne State has engaged in unfair or deceptive business practices in violation of G. L. c. 93A; whether Bronstein or Quest has tortiously interfered with Wayne State's prospective economic advantages, attempted to convert or misappropriate Schaap's research, or fraudulently induced Schaap to reveal his research to Bronstein.
[Note 6] As the arguments on the motion for voluntary dismissal and on reconsideration were in chambers and not recorded, the parties prepared and the court approved a joint statement which reconstructed the interchanges.
[Note 7] On the motion to reconsider, Quest submitted correspondence and notes and affidavits of counsel showing that any protraction of the case was due to settlement negotiations or was otherwise by agreement.
[Note 8] Nor can the court's action have been predicated on Mass.R.Civ.P. 41(b)(1), 365 Mass. 804 (1974), which provides for involuntary dismissal by the court for lack of prosecution. The rule requires a three-year period of inactivity in the case and notice to the plaintiff's attorney not less than one year prior to dismissal. Moreover, the rule provides that such dismissals are without prejudice.
[Note 9] See Flynn, 19 Mass. App. Ct. at 65: the test of whether a dismissal with prejudice is called for is "whether to have done otherwise would have caused substantial prejudice to the defendants." See also Alamance Indus., Inc. v. Filene's, 291 F.2d 142, 146-147 (1st Cir.), cert. denied, 368 U.S. 831 (1961).
[Note 10] For example, there is no suggestion that defense witnesses will become unavailable or that the defendant was not notified of the claim with sufficient promptness to enable him to preserve necessary records. Contrast Brissette, 23 Mass. App. Ct. at 216-217; Boling v. United States, 231 F.2d 926, 927-928 (9th Cir. 1956).
[Note 11] Although the Quest-Wayne State actions are not duplicitous of the present Quest claim against Zepp, the chance of a later suit by Quest against Zepp is reduced by the possibility of outcomes by judgments or settlement in the former cases that would, as a practical matter, obviate the need for Quest's again claiming against Zepp.
[Note 12] Dismissal of an action with prejudice results in preclusion of the claim, not preclusion of issues where, as here, the issues have not been litigated and determined. See Restatement (Second) of Judgments Section 19, Section 20, comment d, Section 27, comments d and e, Section 29 (1982); 9 Wright & Miller Section 2373, at 231.
[Note 13] The judge in fact said during hearing on the motion to reconsider, "If you want a trial, I'll give you a trial . . . I can give you one in three months." The plaintiff said it "would proceed to trial rather than have a dismissal with prejudice, but asked that the court reconsider its dismissal with prejudice and dismiss without prejudice."

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