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Electro-Miniatures Corp. v. Wendon Co.

argued: September 27, 1989.

ELECTRO-MINIATURES CORP., APPELLANT
v.
WENDON COMPANY, INC. AND WESTINGHOUSE ELECTRIC CORPORATION, INC. WESTINGHOUSE ELECTRIC CORP., INC.



On Appeal from the United States District Court for the District of New Jersey (Newark), D.C. Civil Action No. 86-154.

Higginbotham, Stapleton and Scirica, Circuit Judges.

Author: Higginbotham

Opinion OF THE COURT

A. LEON HIGGINBOTHAM, JR., Circuit Judge

Electro-Miniatures Corporation ("EMC") appeals from a January 4, 1989 order of the United States District Court for the District of New Jersey granting summary judgment in favor of appellee Wendon Company, Inc. ("Wendon"). Because we conclude that the district court erred in applying New Jersey's "entire controversy" doctrine, we will reverse and remand for further proceedings.

I.

EMC is a Delaware corporation with its principal place of business in New Jersey. Wendon is a Connecticut corporation and competitor of EMC. The parties are engaged in the business of manufacturing and selling printed slip ring assemblies.*fn1 For over a decade, EMC and Wendon have been intermittently involved in litigation concerning this product.

A. Initial Action

In April 1978, EMC filed a diversity suit in the United States District Court for the District of Connecticut ("initial action") against Wendon and Fred Eccles (a former EMC employee who had been hired by Wendon) alleging that the defendants had misappropriated EMC's proprietary information relating to slip ring assemblies. After a jury trial, the court entered judgment for EMC upon a finding that Wendon had wrongfully acquired EMC's trade secrets. EMC was awarded $375,000 in damages.

After the trial, EMC filed a motion to alter or amend the judgment to provide for a permanent injunction barring Wendon from manufacturing or selling the slip ring assemblies. The court appointed a special master to determine the existence, scope, and duration of EMC's trade secret. However, following negotiations between the parties, and before the special master had issued its opinion, counsel for EMC wrote a letter to the court requesting that its motion be withdrawn "with prejudice." On January 23, 1985, the court endorsed the letter as follows: "Construing this letter as a stipulation, stipulation APPROVED and SO ORDERED." Appendix ("App.") at 79.

On Wendon's appeal of the initial action, the district court's judgment was affirmed by the United States Court of Appeals for the Second Circuit. Electro-Miniatures Corp. v. Wendon Co. Inc., 771 F.2d 23 (2d Cir. 1985).

B. Present Action

EMC asserts that after paying damages pursuant to the judgment in the Connecticut action, Wendon has continued to manufacture and sell slip ring assemblies in competition with EMC. EMC commenced this action ("New Jersey action" or "present action") against Wendon and Westinghouse Electric Corporation*fn2 in New Jersey Superior Court on December 5, 1985. The action was subsequently removed to the United States District Court for the District of New Jersey. In its Amended Complaint, EMC asserts that Wendon continued to misappropriate its trade secrets after the judgment in the initial action. It seeks damages, an accounting, and an injunction restraining Wendon from "designing, ...


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