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FREMONT v. E.I. DUPONT DENEMOURS & CO.

December 31, 1997

J. MELVIN FREMONT, Plaintiff,
v.
E.I. DUPONT DENEMOURS & CO., Defendant,



The opinion of the court was delivered by: POLLAK

 Pollak, J.

 December 31, 1997

 This is an action for breach of contract, originally filed in the Court of Common Pleas of Delaware County, Pennsylvania. Defendant DuPont DeNemours & Co. ("DuPont") removed on March 11, 1997, basing jurisdiction on diversity of citizenship. Before the court is DuPont's motion for dismissal or, in the alternative, for summary judgment. Since the parties have made reference to materials outside the pleadings, and those materials will be considered in resolving this motion, the motion will be considered below solely as one for summary judgment.

 As to the following facts, there is no disagreement between the parties. Plaintiff J. Melvin Fremont worked as a chemist for DuPont from 1953 to 1990. Fremont specialized in the use of catalysts in the manufacture of chemical compounds, including a compound called butanediol. Since 1971, DuPont has owned a patent for a manufacturing process for butanediol that used a catalyst to produce the chemical compound under safer conditions than otherwise obtained in the manufacture of the compound. In 1984, Fremont learned that a competitor, GAF Chemical Corp. ("GAF"), also held a patent for a catalyst-based manufacturing process for butanediol. Fremont informed DuPont of this possible patent infringement and suggested that DuPont bring a patent infringement suit against GAF. In 1988, after further investigation, DuPont filed a patent infringement action against GAF in the United States District Court for the District of Delaware.

 In the course of litigation, DuPont realized that it required the services of a consultant to examine GAF documents and conduct related investigations. GAF, however, would not permit any current DuPont employee to review its documents. Fremont consequently agreed to retire from DuPont in order to work as the company's consultant in the patent litigation. DuPont agreed to pay Fremont, on a per diem basis, for his work as a consultant on the case. DuPont also agreed that if the litigation should conclude favorably for DuPont, Fremont would be eligible for a bonus equaling 1% of the award. In 1991, on the advice of in-house counsel, DuPont settled the lawsuit with GAF. The settlement involved no cash, but an agreement between the companies to exchange quantities of a chemical product, an agreement that promised to save DuPont on shipping charges over time. DuPont decided to pay no bonus to Fremont or any other DuPont employee involved in the litigation. The portion of the agreement concerning Fremont's eligibility for a bonus in the event that the litigation concluded favorably forms the subject of the instant dispute.

 Discussion

 A. Governing Law

 Preliminarily, the court must determine the law to be applied in this diversity action. A federal court deciding a case for which state law provides the rule of decision applies the conflicts rules of the state in which it sits. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). Under Pennsylvania choice-of-law rules, the substantive law to be applied is that of the state which has the most significant interest in having its law applied, a determination informed by examination of significant contacts. Bankers Trust Co. v. Bethlehem Steel Corp., 752 F.2d 874, 882 (3d Cir. 1985).

 Before engaging in this interests-contacts analysis, however, the court must first determine whether a "true conflict" or a "false conflict" exists. LeJeune v. Bliss-Salem, Inc., 85 F.3d 1069, 1071 (3d Cir. 1996); Cipolla v. Shaposka, 439 Pa. 563, 267 A.2d 854 (Pa. 1970). A true conflict exists if the competing jurisdictions each have interests that would be impaired by the application of another jurisdiction's law. A false conflict exists if only one jurisdiction has interests that would be impaired or if there is no material difference in the law of the jurisdictions implicated. In re Complaint of Bankers Trust Co., 752 F.2d 874, 882 (3d Cir. 1984). If only a "false conflict" exists, the conflicts analysis is moot. Lucker Manufacturing v. Home Insurance Co., 23 F.3d 808, 812 (3d Cir. 1994).

 As a threshold matter, at least a preliminary examination of the relevant contacts is necessary to determine which jurisdictions are implicated. In its motion for summary judgment, defendant states that there are contacts pointing toward both Delaware and Pennsylvania (without specifying what those contacts are) and states that the outcome is the same under either state's law. Plaintiff, without explanation, cites to both Pennsylvania and Delaware cases. Although the precise alignment of all the various contacts is not readily apparent from the record, this much is clear: Pennsylvania and Delaware are the only jurisdictions whose contract law is implicated here. Plaintiff is a resident of Pennsylvania and defendant is a Delaware corporation that does business in Pennsylvania. Much, if not all, of the contract's performance appears to have been in Delaware. Although the location of the negotiations and the agreement is uncertain, it appears that these activities were carried out in Pennsylvania, Delaware, or both.

 With the alternatives of Pennsylvania and Delaware in mind, I now turn to an examination of whether there is a true conflict in this case. Since there is no material difference in the parties' rendering of the express terms of the contract, the only significant legal issue raised is the operation vel non of the duty of good faith and fair dealing. Under Delaware law, as interpreted by Delaware Supreme Court, the duty of good faith and fair dealing clearly attaches to all contracts. See Pierce v. International Ins. Co. of Illinois, 671 A.2d 1361, 1366 (De. 1996)("So that the reasonable expectations of parties to a contract will not be defeated, we have held that a duty of good faith and fair dealing attaches to every contract, and this duty cannot be disclaimed.")(footnote omitted).

 The precise extent to which Pennsylvania law extends the duty of good faith and fair dealing, however, is the subject of a degree of uncertainty. In support of the proposition that the duty applies in this case, plaintiff argues that the duty inheres in every contract, citing a diversity case from this district with language to that effect, Kedra v. Nazareth Hospital, 868 F. Supp. 733, 737 (E.D. Pa. 1994)(Dalzell, J.). As the Pennsylvania Supreme Court has not spoken on the issue, this court's predictive inquiry must be informed by an examination of the relevant intermediate appellate decisions. Rolick v. Collins Pine Co., 925 F.2d 661, 664 (3d Cir. 1991). It is true that the Pennsylvania Superior Court has on several occasions stated that the duty of good faith and fair dealing inheres in every contract. See, e.g., Somers v. Somers, 418 Pa. Super. 131, 613 A.2d 1211, 1213 (Pa. Super. Ct. 1992); Liazis v. Kosta, Inc., 421 Pa. Super. 502, 618 A.2d 450, 454 (Pa. Super. Ct. 1992), allocatur denied sub nom. Tantaros v. Liazis, 536 Pa. 630, 637 A.2d 290 (Pa. 1993); Germantown Mfg. Co. v. Rawlinson, 341 Pa. Super. 42, 491 A.2d 138 (Pa. Super. Ct. 1985). The Superior Court, however, has not been entirely univocal on this issue. In Creeger Brick & Bldg. Supply Co. v. Mid-State Bank & Trust Co., 385 Pa. Super. 30, 560 A.2d 151, 153 (Pa. Super. Ct. 1989), the court, in holding that the duty of good faith could not defeat express contractual rights, stated that "the duty of good faith has been recognized in limited situations."

 Although the Creeger court's statement might well be considered, in the parlance of the statistician, an "outlier," *fn1" it may not be wholly disregarded. The Third Circuit, in Parkway Garage, Inc. v. City of Philadelphia, 5 F.3d 685, 701 (3d Cir. 1993), read Creeger for the proposition that "under Pennsylvania law, every contract does not imply a duty of good faith" and held that there is no implied duty of good faith where a plaintiff has recourse to an independent cause of action to vindicate the same rights with respect to which the plaintiff invokes the duty of good faith. *fn2" See also Tycoon Corp. v. Quaker State Corp., 1995 U.S. Dist. LEXIS 18265, Civil Action No. 95-2318 (E.D. Pa. 1995) (Dalzell, J.)(nothing tension between Parkway Garage and the general drift of Pennsylvania Superior Court decisions).

 Thus according to the Third Circuit, whose predictions of state law this court is bound to follow, there are some contracts to which the duty does not attach. It is, however, readily apparent that the agreement at issue in this case is the type of contract to which, under the pertinent Superior Court decisions, the duty would attach. Unlike the situation before the court in Parkway Garage, this is not a case in which the plaintiff has an independent cause of action that he can invoke to vindicate the interests he asserts here. Furthermore, the plaintiff in this case is not, as was the plaintiff in Creeger, seeking to defeat express terms of a contract by means of the duty of good faith. Thus under both Delaware and Pennsylvania law, the duty of good faith applies to this contract, requiring reasonableness in DuPont's exercise of discretion to conduct the litigation and determine whether Fremont would receive a bonus. *fn3"

 Accordingly, I conclude that there is no true conflict between Delaware and Pennsylvania law with respect to the duty of good faith and fair dealing. *fn4" Nor is there any other material issue of contract law that might necessitate conflicts analysis, as there is no actual dispute with respect to the terms of the agreement. *fn5" ...


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