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HIRSHHORN v. MINE SAFETY APPLIANCES CO.

March 13, 1944

HIRSHHORN
v.
MINE SAFETY APPLIANCES CO. et al.



The opinion of the court was delivered by: SCHOONMAKER

Plaintiff, on his own behalf and on behalf of all other stockholders of Carbon Monoxide Eliminator Corporation (Carbon Monoxide), brings this suit against Mine Safety Appliances Company (Mine Safety), Carbon Monoxide, Catalyst Research Corporation (Catalyst Research), and certain officers and directors of these corporations.

He seeks an accounting for profits from the use of patents owned by defendant Carbon Monoxide and its subsidiary, Catalyst Research.

 The complaint contains the following allegations: Plaintiff is a resident and citizen of New York; Mine Safety, organized under the laws of Pennsylvania, has its principal place of business at Pittsburgh, Allegheny County, Pennsylvania; Carbon Monoxide, a Delaware corporation, does business in Allegheny County, Pennsylvania; Catalyst Research, incorporated in Maryland, transacts business in Allegheny County, Pennsylvania; all the individual defendants are citizens and residents of Allegheny County, Pennsylvania. Mine Safety which is engaged in the manufacture of industrial safety devices, and the several officers and directors of Mine Safety named as defendants herein, own a large majority of the capital stock of Carbon Monoxide. Carbon Monoxide, a research organization, owns 60% of the capital stock of Catalyst Research, a similar research organization.

 The gravamen of plaintiff's complaint alleges: Mine Safety and the individual defendants who were officers thereof, pursuant to a plan and conspiracy, acquired control of Carbon Monoxide and Catalyst Research by electing officers and directors of said corporations almost exclusively from officers and directors of Mine Safety, operated Carbon Monoxide and Catalyst Research as instrumentalities of Mine Safety, in order to obtain exclusive rights in any patents resulting from research by Carbon Monoxide and Catalyst Research; Mine Safety and individual defendants caused Carbon Monoxide to grant to Mine Safety exclusive right to use Carbon Monoxide's patents without adequate consideration, which license agreement is grossly unfair and unjust to Carbon Monoxide, and which constitutes a breach of trust in reckless disregard of fiduciary duties placed on Mine Safety and individual defendants; Mine Safety and individual defendants appropriated to the use of Mine Safety the profits from the use of Catalyst 111, perfected by Carbon Monoxide, and converted to the use of Mine Safety profits from the use of a helium leakdetector owned by Catalyst Research; said defendants wrongfully induced the assignment to Mines Safety of a breathing device invented by one Dr. Jackson while in the employ of Carbon Monoxide; said defendants refused to exploit valuable patents owned by Carbon Monoxide and Catalyst Research, except those which Mine Safety coverted to its own use, so that the asserts of the subsidiaries are being wasted, to the detriment of Carbon Monoxide and Catalyst Research, and stockholders therein; and because of the interlocking affiliations between the corporations, it would be futile to request the directors or stockholders to bring this action.

 Plaintiff prays for an accounting, rescission of the license agreement, and general equitable relief.

 Defendants have filed a motion to stay, and a motion to dismiss. The motion to stay is based on the contention that many of the patents involved in the litigation are directly concerned with military production, and that their disclosure would be violations of our security laws *fn1" and Mine Safety's Government military contracts. *fn2"

 But the relief sought in this suit does not concern the structure or details of any patent or contract, but asks only an accounting as to the profits from the use of patents owned by Carbon Monoxide and its subsidiary. Prima facie, these profits may be determined without resort to any secret military information. If at any time during the trial, it appears that further prosecution would be inimical to the interests of the United States, this motion should be reconsidered.

 Defendant further contends in support of the motion to stay that the delay will not affect plaintiff's rights. This is not certain. Aside from considerations of defendants' financial responsibility, delay would be prejudicial to the plaintiff, jeopardizing the plaintiff's evidence by the passage of time. In a similar stockholders' suit, the Third Circuit Court had to decide the fairness of the consideration paid by a parent corporation to its subsidiary in a transaction consummated many years previous. The court said, *fn3"

 "The testimony of adequacy and inadequacy of prices paid years ago for properties then open to limited uses and since subjected to many changes, is of little assistance in doing exact justice between the parties in this case. It is quite impossible at this late date to determine, as a matter of fact, precisely what the several properties were worth when purchased."

 That is the exact situation a court will have to face if this suit is delayed. Therefore, it cannot be said with certainty that the delay will not affect plaintiff's rights.

 The motion to stay is denied.

 In support of the motion to dismiss, defendants assert ...


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