# Appendix — Singer Co. v. Perma Research & Development Co.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1976
- **Citation:** 429 U.S. 987

## Text

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509:

76° ~ Qt 12 Ws
CLERK

wicHaR RODAK, R.. —_

Supreme Court of the United States
OCTOBER TERM, 1976
No.

Tae Sovazr Company,
Petitioner,
against
Perma Reszaron & Devetopment Company,
Respondent.
APPENDIX TO

PETITION.FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

Merrett E. Crark, Jr.
Wourrsnop, Stimson, Putnam & Roserts
40 Wall Street
New York, New York 10005

Attorney for Petitioner

- me ee

INDEX

APPENDICES PAGE

A.

B.

Opinion of Bryan, J., dated March 29,
1968 la

Order and Judgment of Bryan, J., dated
August 11, 1968 15a

Opinion, dated April 25, 1969, of .the
United States Court of Appeals for the
Second Cireuit (410 F.2d 572 (2d Cir.
1969) ) - 18a

Order, dated April 25, 1969, of the United
States Court of Appeals for the Second
Circuit 32a

Opinion and Order of MacMahon, J., dated
January 27, 1970 (308 F. Supp. 743
(S.D.N.Y. 1970) ) 34a

Opinion and Order of Metzner, J., dated
May 14, 1970 dia

Opinion of Duffy, J., with Appendices
“A” and “B”, dated April 11, 1975 (402
F. Supp. 881 (S.D.N.Y. 1975)) cesses... 5la

Judgment after Trial, dated May 29, 1975
and Entered on June 3, 1975 ................ 126a

Amended Judgment after Trial, dated
June 13, 1975 and Entered on June 16,
1975 128a

Opinion, dated July 1, 1976, of the United
States Court of Appeals for the Second
GIT. eepcenciemnernintcentedetnbisetmastinednatisees 130a

Denial of Petition for Rehearing or Re-
hearing In Banc, dated September 2,
1976 166a

la

APPENDIX A
Opinion
United States Bistrict Court

SovutTHern Districr or New York

66 Civ. 665
Perma Research & DeveLopMeNT CoMPANY,
Plaintiff,
against
Tue Srncer Company,
Defendant.
66 Civ. 666
Perma Researcn & DeveLopMENT CoMPANY,
Plaintiff,
against
THe Srncer Company,
Defendant.

OPINION

Bryan, District Judge:

These are companion actions, the first (66 Civil 665,
referred to as Action No. 1), seeking damages for alleged
breach of contract, and the second (66 Civil 666, referred
to as Action No. 2) seeking injunctive relief.

2a
Appendia A

The complaint in Action No. 1 is in two counts.

The first alleges breach of a contract dated June 18, 1964,
between plaintiff, Perma Research & Development Com-
pany (Perma), and defendant, The Singer Company
(Singer), whereby Singer agreed to manufacture and
deliver to Perma’s customers an apparatus known as
“Perma Anti-skid Control,” on which Perma held patents,
for installation on automobiles. It is alleged that units of
this device manufactured under the contract were defective
due to Singer’s failure to exercise adequate quality controls
in the assembly and testing of the product as required by
the contract and that some 500 of these defective units were
delivered to Perma’s distributors over its objection. Perma
alleges that as a result of this breach it was unable to fulfill
its contractual obligations with its distributors and suffered
substantial damages.

The second count in Action No. 1 seeks to set aside a
second agreement between the parties dated December 21,
1964, which, among other things, terminated and cancelled
the earlier June 18, 1964, agreement. The second count
alleges that the December agreement was procured by
fraud and misrepresentation, that it was entered into
without consideration, and that it was illusory and there-
fore void. Judgment is sought (1) declaring that the
December agreement is null and void; (2) for specific
performance of the June agreement; and (3) for damages
of $41,000,000.

The final paragraph of the complaint seeks additional
relief by stating cryptically, “And in the alternative, if it
be determined that the contract of December 21, 1964 be
valid, Plaintiff demands judgment upon this contract for
breach and non-performance thereunder in the amount of
41 million dollars.”

3a
Appendix A

- The answer of Singer generally denies the allegations of
the complaint and interposes a counterclaim for alleged
false and fraudulent representations by Perma which
induced it to spend time and money on the skid control
device to its damage in the sum of $4,000,000.

The complaint in Action No, 2 seeks an injunction against
the further shipping and delivery of units of the Perma
Anti-Skid Control apparatus by Singer. The relief sought
is predicated on the June 18, 1964 agreement under which
Singer manufactured these units and ignores the December
21, 1964 agreement. The answer generally denies the
allegations of the complaint.

Defendant, Singer, has moved pursuant to Rule 56,
F.R.C.P. for summary judgment dismissing the complaints
in both actions and for summary judgment on its counter-
claim in Action No. 1. Plaintiff, Perma, cross-moved for
summary judgment on the second count in Action No. 1.
Perma also has moved for leave to file an amended reply
to the counterclaim in Action No. 1.

The factual background may be briefly summarized as
follows:

The Perma Anti-Skid Control device, designed to prevent
an automobile from skidding, was invented by Perrino,
President of Perma. Perma had been working for some
years and had spent substantial sums to perfect and
market it. The device is a complicated mechanism with
over 100 separate parts.

In June 1964, after Perma had sold a number of the
devices which it had assembled, it entered into a contract
with Singer under which Singer undertook to assemble the
product from an inventory of component parts purchased
from Perma’s former suppliers. Singer agreed to exercise
diligent quality control to determine that the components
complied with specifications.

4a
Appendix A

During six months of operation under this contract a
number of defects in both quality and design were discov-
ered. Various changes in design were made after consulta-
tion between Perma and Singer. During this period some
500 units were shipped by Singer to Perma’s distributor in
Ohio. A number of these units were defective in various
respects. Perma now claims that these defects were due
to Singer’s failure to exercise adequate quality control over
the component parts. Singer, on the other hand, maintains
that its controls were efficient and adequate and that the
defects were due to faults of design in the component parts
which Singer or Perma had discovered and which had to be
replaced or corrected.

In any event, in December 1964 a new contract was
entered into by the parties which cancelled the June con-
tract. Under the December contract the patents for the
device were assigned to Singer by Perma and Singer under-
took to manufacture and market the product, paying
royalties to Perma.

After substantial expenditures under this agreement and
a number of tests and experiments, Singer claims that it
concluded that the device was not fail-safe—that is to say,
was without a feature which would restore the standard
braking system of the automobile in the event of a mechani-
eal failure of the device—and that the device was therefore
unmarketable. A retrieval program was then instituted to
get back all devices delivered to distributors or sold to the
public by Singer and Singer advised Perma it would
deliver no more devices and component parts until the
device was made fail-safe.

After controversy had developed between the parties
over the decision reached by Singer, Perma commenced
the two actions at bar.

5a
Appendiz A

Singer’s motion for summary judgment addressed to the
complaint in Action No, 1 is predicated on two principal
grounds.

The first is that there was in fact no breach of the June
18, 1964 agreement as alleged. The second is that the June
18, 1964 agreement and all obligations thereunder were
fully and finally terminated by the agreement of December
21, 1964, and that there is no basis in fact or law for setting
aside the latter agreement which effectively bars suit upon
the first. However, Singer does not address itself to Per-
ma’s claim of breach of the December agreement set forth
in the final paragraph of the complaint.

Without suggesting that Singer’s first ground is without
merit, it is unnecessary to discuss that ground, since the
second, insofar as it goes to the validity of the December
1964 agreement is dispositive of the motions for summary
judgment addressed to Action No. 2 and to Counts 1 and 2
of Action No. 1.

By the December 21, 1964 agreement all patent rights to
the Perma anti-skid control device were transferred to
Singer and Singer agreed to manufacture and market the
device and to pay royalties to Perma. There is no doubt
that the December agreement effectively terminated the
June agreement. It expressly provided that the June
agreement “should be deemed null and void and of no force
or effect,” and that “all rights and obligations of the parties
thereunder were terminated” with the exception of specified
accrued items not relevant here.

Thus, any rights which Perma might have had to sue on
the June agreement are effectively barred by the December
agreement as long as it remains in force and effect.’ It is

1. See 5A Corbin, Contracts § 1236 (1964).

Ga
Appendix A

plainly for this reason that Perma in the second count of
its complaint seeks a declaratory judgment setting aside
the December agreement and declaring it null and void.
Unless Perma can succeed in setting aside the December
agreement it has no claim for relief on the first count for
breach of the June agreement.

In the second count Perma alleges three grounds for
setting aside the December agreement: (1) that there was
no consideration for the agreement on Singer’s part; (2)
that the agreement was illusory and therefore void; and (3)
that Perma was induced to enter into the agreement by
fraud and misrepresentation on the part of Singer.

1. Atiecep Lack or ConsmpERATION

The December agreement expressly provides that it is
to be governed by New York Law. It was an agreement in
writing to discharge the June agreement signed by Perma,
the party against whom the discharge is sought to be en-
forced. Under New York G.O.L. Section 5-1103, such a
contract “shall not be invalid for lack of consideration.”
Thus, the June agreement was effectively terminated
whether or not there was consideration for the December
agreement.

But quite apart from this there was ample consideration
for the December agreement.

Singer assumed loans and obligations of Perma in the
amount of $209,000 in return for which Perma gave Singer
a five year non-interest bearing promissory note. A cReck
for $24,000 was delivered to Perma at the closing. Singer
assumed Perma’s current liabilities to third parties in the
amount of $85,000 and also Perma’s four principal distribu-
torship contracts. Finally, Singer was required to pay

7a
Appendiz A

Perma royalties. All this is clear from the face of the con-
tract and was admitted by Perrino, Perma’s President, on
deposition. Indeed, it could not well have been denied.
There is no factual or legal basis for the contention
that the December 1964 contract lacked consideration.

2. A.iecep ILLUsorY NATURE OF
THE DecemBeR CONTRACT.

Perma’s theory, as stated in the complaint, is that the
agreement is illusory because “Singer was not bound to per-
form any covenants or agreements and retained complete
discretion as to manufacturing and marketing.” However,
on his deposition Perrino admitted that Singer had per-
formed a number of the covenants and agreements con-
tained in the December contract.

In any event, regardless of specific promises in the agree-
ment, there can be no doubt that there was an obligation
on Singer’s part under the agreement, to use its best
efforts to manufacture and market the product. Sea Wood
v. Lucy, Lady Duff Gordon, 222 N.Y. 88 (1917). See also
Bruce & Co., Ine. v. Simpson & Co., Inc., 40 Mise. 2d 501,
504 (S. Ct. 1963); Franklin Research & Development Corp.
v. Swift Electrical supply Co., 340 F.2d 439, 443, n. 3 (2d
Cir. 1964). Moreover, it appears from the papers before
me that Singer did in fact spend substantial time and money
in manufacturing, testing, research and marketing of the
device.

Finally, Paragraph 10 of the contract provides for a
“reversion right” to Perma under which Perma could
recover the rights to the device if Singer did not spend
more than $100,000 per year in marketing it. Perrino

8a
Appendia A

claimed that this reversion right was still in existence at
the time when his deposition was taken. There is no legal
or factual basis for Perma’s second contention either.

3. Fravup in THE INDUCEMENT.

The only other ground on which Perma relies is that the
December contract was induced by fraud and misrepresen-
tation. This is categorically denied by Singer.

Perma has not only failed to show that there was any
fraud or misrepresentation but in effect admits that there
was none.

Perma alleges in the second count in Action No. 1 that
the December agreement “was procured by fraud and mis-
representation on the part of” Singer “as to its intentions
and ability to market the product.” Perrino, the President
of Perma, on his deposition taken by Singer, was unable to
point to any evidence to support that charge.

When asked what the basis was for the charge Perrino
replied that he had been told that more time and money
would be spent on engineering and marketing, that there
was “less time and money spent after the signing of the
December agreement than there was previously,” that he
did not know how much time and money had been spent
under either agreement, but that “everything else pointed
to the fact that they did not intend to do what they said
they were going to do.”*

Further, Perrino said that “although they (Singer) said
they wuld market the product, they did not. They, in fact,
turned this over to an independent organization which was

2. Deposition of Perrino, p. 420.
3. Deposition of Perrino, p. 420.

9a
Appendiz A

previous [sic] our own distributor, where he stated himself
that he did not have the assets to market the product nation-
ally."* Apart from the hearsay in this statement it may
be noted that under the December agreement Singer had
the right to determine the method of manufacturing, ex-
ploiting and marketing the product “in its absolute discre-
tion.”

Even if Perrino’s claims were taken as true this would
not constitute fraud in the inducement under New York law.
Were there an intention not to perform terms of the Decem-
ber agreement on Singer’s part, followed by non-perform-
ance, this would not give rise to an action for fraud but to
an action for damages for breach of the agreement. As
was said in Briefstein v. Rotondo Co., 8 A.D.2d 349 at 351,
187 N.Y.S.2d 866, at 868 (1st Dept., 1959) :

“To say that a contracting party intends when he
enters into an agreement not to be bound by it is
not to state ‘fraud’ in an actionable area, but to state
a willingness to risk paying damages for breach of
contract.

“If a man makes a contract intending to breach it
he would expect to pay the price which such a course
incurs by the usual rules of law under which con-
tracts are afforded judicial enforcement. An inten-
tion not to perform does not bring on heavier
damages than actual non-performance. The policy
which runs through ‘he fabric of the law of contracts
is to bind a party by what he agrees to do whether or
not he intends to do what he agrees.

4. Id. at 420-21.

10a
Appendix A

“Implicit in the policy sanctioning the formaliza-
tion of contracteal undertakings is precaution
against an existing intention not to be bound by the
agreement as well as a future change of mind about
being bound by it. Actionable relief hangs on
breach; and under the facts here pleaded, relief does
not lie for fraud resting on an intention not to per-
form.”

See also Leventhal v. Martin, 25 A.D.2d 508, 266 N.Y.S.2d
774 (1st Dept. 1966).

The facts in Briefstein were quite different from those in
such cases as Sabo v. Delman, 3 N.Y.2d 155, 164 N.Y.S.2d
714 (1957), where it was said that a promise “actually made
with a preconceived and undisc!osed intention of not per-
forming it * * * constitutes a misrepresentation of a material
existing fact upon which an action for rescission may be
predicated.” Id. at 160, 165 N.Y.S.2d at 716. Sabo v.
Delman was concerned with fraudulent promises as to col-
lateral matters not included within and outside the terms
of the contract which were given to induce the party seek-
ing rescission to enter into the contract. In Briefstein, on
the other hand, plaintiff, as the plaintiff here, simply
claimed that defendant never intended to carry out the
promises which he had made under the actual terms of the
contract itself.’

Moreover, Perrino’s testimony on deposition demon-
strates there is no evidence of an intention by Singer not
to perform the contract. When Perrino was asked how he

5. dt may be noted that Briefstein does not conform to either the
Restatement of Contracts or the Restatement of Torts. See Restate-
ment, Torts, § 530 Comment b; Restatement, Contracts, § 473.

lla
Appendia A

knew “that Singer had no intention to market the product”
at the time it negotiated and signed the contract, he replied
“There is no way of me knowing exactly what their inten-
tion was at the time they said it, except that they promised
certain things when everything else points to the fact that
they did not intend to do what they said they were going
to do.”* Perrino was then asked “What points to that fact
that you allege?’” His response resolved itself into noth-
ing more than claims of non-performance by Singer.*

A mere showing of non-performance of a promise without
more is insufficient to support a claim of fraud in the
inducement. See Restatement, Torts, §530 Comment c;
Restatement, Contracts § 473 Comment c; Adams v. Clark,
239 N.Y. 403 at 410 (1925). See also Prosser, Torts, § 90 at
p. 565 (2d ed. 1955). Nothing more than that was shown
here.

The only affidavit in opposition to Singer’s motion for
summary judgment is that of Perrino in support of Perma’s
cross-motion for the same relief on Count 2. It wholly fails
to present any evidence of fraud in the inducement of the
December contract. The conversations which Perrino
claims to have had with various persons connected with
Singer do not support the claim that there was no intention
on Singer’s part to perform when it entered into the
December contract, much less establish any fraudulent
misrepresentations. Perrino’s affidavit is insufficient to
raise any material issues of fact. Nor does it cast any
doubt on his admission at his deposition that Singer and

6. Deposition of Perrino, p. 420.
7. Thid.
8. Id. at 420-22.

l2a
Appendiz A

Perma were engaged in joiut efforts looking toward the
perfection and marketing of the device for some six months
after the December agreement was entered into, and up to
the time that Singer lost confidence in the device.

In any event, it appears that there was a substantial
measure of performance of the December agreement by
Singer. ‘The real issue between the parties is over the
adequacy of such performance under the terms of the
contract. It is plain that this controversy is not as to fraud
in the inducement, but as to whether or not the December
contract was breached.

There are no material issues of fact to be tried with
respect to the claim in the second count in Action No. 1 for
rescission of the December agreement and Singer is entitled
to summary judgment on that claim. Perma’s cross-motion
for summary judgment in the second count in Action No. 1
is wholly without merit and must be denied.

The first count based on alleged breach of the June, 1964
contract therefore automatically falls since any such claim
is barred by the subsisting December 1964 agreement and
Singer is entitled to summary judgment on the first count
of Action No. 1 also. The same result follows with respect
to Action No. 2 for injunctive relief based solely upon the
June agreement. Singer’s motion for summary judgment
dismissing the complaint in Action No. 2 will be granted.

There remains the claim asserted in Count 2 of Action
No. 1 for breach of the December 1964 contract as distin-
guished from the claim for rescission. It will be recalled
that this claim is alleged in the following language:

“And in the alternative, if it be determined that
the contract of December 21, 1964 be valid, plaintiff

13a
Appendiz A

demands judgment upon this contract for breach of
non-performance thereunder in the amount of 41
million dollars.”

This can scarcely be said to be an artistic way to allege a
substantial claim for breach of contract. However, if the
quoted paragraph be read in conjunction with other allega-
tions of Count 2, it is barely sufficient to withstand a motion
to dismiss and must be held to state a viable claim for relief
for breach of contract. As Professor Moore has stated:

“* * * The courts have ruled again and again that
a motion to dismiss for failure to state a claim should
not be granted unless it appears to a certainty that
plaintiff would be entitled to no relief under any
state of facts which may be proved in support of his
claim.” 2A, Moore’s Federal Practice, ¢ 8.13 at page
1705-07.

See also DioGuardi v. Durning, 139 F.2d 774 (2d Cir. 1944).
Singer has not addressed itself directly to the claim for
breach of the December agreement nor has Perma. In the
present posture of this action and on the papers before me
Singer has not demonstrated that there are no material
issues of fact as to this claim which require trial and
summary judgment on the claim must therefore be denied.
Finally, there are Singer’s motion for summary judgment
on its counterclaim in Action No. 1, and Perma’s motion for
leave to serve an amended reply to that counterclaim.
Singer’s counterclaim alleges a series of fraudulent acts
and representations on the part of Perma which induced
Singer “to spend time and money on the manufacture, dis-

Eo OOeeeeRe—e——eeScaa_

l4a
Appendiz A

tribution and sale, testing, recalling and retrieving” of the
anti-skid device to its damage in the sum of $4,000,000. The
original reply to the counterclaim was. inartistically drawn,
to say the least, and it can be argued with some persuasive-
ness that it is not an effective denial sufficient to place in
issue the material allegations of the counterclaim. How-
ever, Perma has moved for leave to serve an amended reply
which places in issue such material allegations.

Singer urges that service of the proposed amended reply
should not be permitted, net only because it is untimely
but because a number of its allegations are inconsistent with
the record thus far made on the depositions taken by the
parties. However, in view of the liberal policy favoring
amendments, I do not think that Perma should be foreclosed
from filing its amended reply and leave is granted to do so.

In the light of the issues raised by the amended reply
it cannot be said on the record before me that there are
no material issues of fact to be tried with respect either to
Perma’s liability on the counterclaim or to the important
question of Singer’s damages. Singer’s motion for summary
judgment on its counterclaim will therefore be denied.

Settle order on notice embodying the decisions reached in
this opinion.

Dated: New York, N. Y.
March 9, 1968

s/ Freperick V. P. Bryan
United States District Judge

15a
APPENDIX B

Order and Entry of Judgment
UNITED STATES DISTRICT COURT

SourHerN District or New York

66 Civ. 665
Perma Researcu & DeveLopmMent Company,
Plaintiff,
against
Tue Srncer Company,
Defendant.

The following motions having been made,

1. By the defendant, The Singer Company (hereinafter
“Singer”) for summary judgment, pursuant to Rule 56 of
the Federal Rules of Civil Procedure, dismissing the Com-
plaint of plaintiff, Perma Research & Development Com-
pany (hereinafter “Perma”),

2. By Singer for summary judgment on its Counter-
claim against Perma, pursuant to Rule 56 of the Federal
Rules of Civil Procedure,

3. By Perma for summary judgment on the Second
Count of the Complaint, pursuant to Rule 56 of the Federal
Rules of Civil Procedure,

16a
Appendiac B

4. By Perma for leave to file an amended reply to
Singer’s Counterclaim, pursuant to Rule 15 of the Federal
Rules of Civil Procedure, and

The Court having granted Perma’s motion for leave to
file an amended reply to Singer’s counterclaim, and

The Court having considered the pleadings in this action,
the affidavits, memoranda and exhibits in support of and in
opposition to said motions, and having heard counsel for
the respective parties and having had due deliberation, and
having rendered its decision on March 28 and filed its opin-
ion on April 1, 1968, and

Mortons for reargument having been made,
1. By Singer on April 11, 1968, and
2. By Perma on April 23, 1968, and

The Court having granted both of said motions for
reargument and on reargument having adhered to its deci-
sion dated March 28 and filed April 1, 1968, by memoran-
dum of the Court filed on July 15, 1968, it is

Orpvergp that Singer’s motion for summary judgment on
the First Count of the Complaint be and the same hereby is
granted; and it is further

OrpeEreED that Singer’s motion for summary judgment on
the Second Count of the Complaint be and the same hereby
is granted insofar as said Court seeks rescission of the
December 21, 1964 agreement between Perma and Singer;
and it is further

17a
Appendia B

OrperepD that Singer’s motion for summary judgment on
the Second Count of the Complaint be and the same hereby
is denied insofar as said Count seeks damages for the
alleged breach of the December 21, 1964 agreement between
Perma and Singer; and it is further

OrperEeD that Perma’s motion for summary judgment on
the Second Count of the Complaint be and the same hereby
is denied ; and it is further

OrperED that Singer’s motion for summary judgment on
its Counterclaim against Perma be and the same hereby is
denied; and it is further

OrpereD that the Court, expressly determining under
Rule 54(b) of the Federal Rules of Civil Procedure that
there is no just reason for delay, hereby expressly directs
that a final judgment be entered: (1) dismissing with preju-
dice the First Count of the Complaint, and (2) dismissing
with prejudice the Second Count of the Complaint insofar
as said Count seeks rescission of the December 21, 1964
agreement between Perma and Singer; and said judgment
is hereby entered.

Dated: New York, New York
August 11, 1968

s/ Freperick V. P. Bryan
United States District Judge

JUDGMENT ENTERED:
Dated: New York, New York
August 13, 1968

s/ Joun J. Oxear, Jr.
Clerk

18a,
APPENDIX C

Perma ResearcH AND DEVELOPMENT Company, Appellant,
v.

Tue Srncer Company, Appellee.

Nos. 407 and 408, Dockets 32716 and 32754.
UNITED STATES COURT OF APPEALS

Second Circuit.

Argued Jan. 22, 1969.
Decided April 25, 1969.

Before Smit and Hays, Circuit Judges, and Henperson,
District Judge.* ~

J. Josepu Smita, Circuit Judge:

The plaintiff Perma Research & Development Company
(“Perma”), brought this action for breach of contract in
the United States District Court for the Southern District
of New York, alleging that substantial numbers of an auto-
mobile anti-skid braking device assembled by the defendant,
The Singer Company (“Singer”), were “defective due to
inadequate quality control.” Judge Bryan granted partial
summary judgment in favor of Singer in the action for
breach of contract, and dismissed an injunction action
brought the same day to enjoin Singer from shipping any
of the units thus assembled.' For the reasons stated below,
we agree with the disposition of these cases, and affirm.

* Chief Judge of the Western District of New York, sitting by
designation.

1. The complaints in both actions alleged that Singer had shipped
500 defective units to an Ohio distributor over the express objections
of Perma.

19a
Appendia C
L

In June, 1964, Perma and Singer entered into a contract
(the “June contract”) for the manufacture of the “Perma
Anti-Skid Device.” Invented by Frank A. Perrino, the
president of Perma, the product was said to have “a “fail-
safe [sic] feature which will automatically revert to the
standard braking system in case of failure.” By the terms
of the June contract, the parties agreed that Singer would
assemble the product in accordance with specifications and
blueprints provided by Perma, and that Singer would use
“diligent quality control in the production, assembly, test-
ing and packaging” of the product.

As a condition precedent to the June contract, Singer
purchased an inventory of specified component parts at a
cost of $1,000,000.2 During the first few months of at-
tempted production, Singer complained that a large num-
ber of component parts were defective in various ways, and
depending on the parts involved, Perma either arranged
for their correction, waived the deviations, or ordered re-
placements. Singer also suggested modifications in the
basic design of the product, and Perma responded by mak-
ing some twelve design changes.*

In December, 1964, the parties entered into a second
contract (the “December contract”) which terminated the

2. The quoted words are from the sound track of a promotional
film made by Perma somctime prior to the June contract.

3. The component parts were purchased from two companies
which had previously manufactured these same parts for Perma.

4. Under paragraph 9 of the June contract, Singer was forbidden
to make any changes in the basic design of the invention without
the written approval of at least two officers of Perma.

20a
Appendix C

June contract‘ and assigned all patent rights on the product
to Singer. In return Singer agreed to manufacture and
market the product and pay royalties to Perma.’ In addi-
tion Singer paid $24,000 in cash, gave Perma an interest-
free loan of $209,000,’ and assumed contractual obligations
of Perma in the amount of $85,000. Singer also promised
to pay $9,800 a month under a six-month technical services
contract with Perma.

In August, 1965, Singer concluded that the product could
not be made “fail-safe,” and commenced a retrieval pro-
gram to get back those units already on the market. At
the same time Singer advised Perma that it was abandon-
ing the project until the “fail-safe” problem could be
resolved.

Perma then commenced this action for breach of the June
contract. While admitting that the December contract pur-
ported to terminate the June contract, Perma alleged that
Singer entered into the December contract with an intention
not to perform, and asked the court to set aside the De-
cember contract on account of fraud. In the alternative,
Perma asked for damages for breach of the December
contract. Singer, in turn, counterclaimed for $4,000,000 on
the theory that Perma had fraudulently misrepresented the
“fail-safe” features of the product.

5. Paragraph 7 of the December contract provided that the June
contract “shall be deemed null and void and of no force and effect,”
and further provided that “all rights and obligations of the parties
thereunder” shall be terminated with the exception of certain accrued
items not relevant here.

6. In the event Singer did not spend at least $100,000 annually
on “marketing, promoting and advertising” the product, the De-

cember contract gave Perma a “reversion right” on the ent of
$50,000. wit

7. This was done under an arrangement whereby Singer assumed
$209,000 in claims against Perma in return for which Perma gave
Singer a promissory note in that amount.

21a
Appendia C

[1-3] On Singer’s motion for summary judgment, Judge
Bryan dismissed the action to set aside the December con-
tract on account of fraud.* He held that Perma failed to
produce any evidence showing a fraudulent intent on the
part of Singer, and further held that a fraudulent intent,
even if proved, would not give rise to an action for rescis-
sion under New York law.? Having concluded that there
was no actionable fraud, Judge Bryan dismissed the claim
for breach of the June contract on the ground that any
such claim was barred by the valid December contract.
This left the claim for breach of the December contract,
as well as the counterclaim by Singer, and as to these claims

8. Perma also alleged that the December contract was void on
account of lack of consideration and illusoriness. In light of the
statements made in the Perrino deposition, the mind boggles at the
suggestion that the December contract was not supported by ade-
quate consideration. Perrino admitted, for example, that in con-
sideration for the December contract Singer paid $24,000 in cash,
assumed an obligation of a distributor for $40,000, and paid certain
of Perma’s debts or asssumed its liabilities to the sum of $209,967.
He also admitted that Singer and Perma had continued to work to-
gether for at least six months under the technical services contract,
and that Perma was paid at the monthly rate of $9,800. Equally
frivolous is the argument based on illusoriness, since Singer was
obligated to use its best efforts to manufacture and market the
product even if the agreement did not expressly say so. “A promise
may be lacking, and yet the whole writing may be ‘instinct with an
obligation’ imperfectly expressed.” Wood v. Lucy, Lady Duff-
Gordon, 222 N.Y. 88, 91, 118 N.E. 214 (1917) (Cardoza, J.). More-
over, it appears from the depositions that Singer did in fact spend
substantial time and money trying to perfect and market the product.

9. The December contract expressly provided it should be con-
strued in accordance with New York law.

22a
Appendix C

Judge Bryan denied summary judgment. He then certified
that there was “no just reason for delay,” and entered final
judgment on the dismissed claims.'®

On appeal Perma insists that a contractual promise made
without any intention of performing it is fraudulent, and
that Judge Bryan erred in holding that a contract induced

10. Since the injunction action raises the question of whether the
December contract was fraudulently induced, and since dismissal of
that action is unquestionably a “final decision” within the meaning of
28 U.S.C. § 1291, we need not decide whether the dismissed claims
in the breach of contract action are propetly appealable under Rule
54(b), Fed.R.Civ.P. The basic issue in both actions is whether the
June contract was effectively terminated by the December contract,
and under the circumstances, we think that a decision adjudicating
the fraud issue in the injunction action would be res judicata in the
breach of contract action. See generally 1B Moore, Federal Practice
0.405 [1] (2d ed. 1965).

By its very words Rule 54(b) is applicable only “[w]hen more
than one claim for relief is presented,” and thus the partial adjudica-
tion of a single claim is not appealable, regardless of whether there
is a Rule 54(b) certificate. McNellis v. Merchants National Bank
& Trust Company of Syracuse, 385 F.2d 916 (2d Cir. 1967). The
alternative claims for breach of contract do not present multiple
claims within the meaning of Rule 54(b), since Perma would be
limited at best to a single recovery. See Campbell v. Westmoreland
Farm, Inc., 403 F.2d 939, 941 (2d Cir. 1968). “The word ‘claim’
in Rule 54(b) refers to a set of facts giving rise to legal rights in
the claimant, not to legal theories of recovery based upon those
facts.” CMAX, Inc. v. Drewry Photocolor Corp., 295 F.2d 695,
697 (9th Cir. 1961). As to whether the claim-counterclaim situation
presents multiple claims, compare Omark Industries, Inc. v. Lubanko
Tool Co., Inc., 266 F.2d 540 (2d Cir. 1959) (“multiple claims” pre-
sented when the plaintiff sued for goods sold and delivered and
defendant counterclaimed for breach of franchise agreement), with
Seaboard Machinery Corp. of Delaware v. Seaboard Machinery Corp.
of New Jersey, 267 F.2d 178 (2d Cir. 1959) (“single claim” pre-
sented where all counts of complaint and counterclaim arose out of
a single contract). Compare also Bendix Aviation Corp. v. Glass,
195 k. 2d 267, 38 A.L. R.2d 356 (3d Cir. 1952) (en banc) (“multiple
claims” presented where claims for specific performance and counter-
claim for damages arose out of same transaction), with Carter v.
Croswell, 323 F.2d 696 (Sth Cir. 1963) (“single claim” presented
where claim and counterclaim arose out of same automobile accident).

———

23a
Appendiz C

by fraudulent promises could not be rescinded under New
York law. In addition, Perma urges that there was a tri-
able issue of fact on the fraud claim, and that summary
judgment was improperly granted. We need not reach the
summary judgment question, of course, if Judge Bryan
was correct in holding that proof of an intention not to
perform would not give rise to an action for rescission
under New York law.

II.

[4] Since the New York Court of Appeals has specifically
held that “a contractual promise made with the undisclosed
intention not to perform it constitutes fraud,” Sabo v. Del-
man, 3 N.Y.2d 155, 162, 164 N.Y.S.2d 714, 718, 143 N.E.2d
906, 909 (1957), we think that Judge Bryan erred in dis-
missing the fraud claim on the theory that it would not
support an action for rescission. “[I]f a promise was
actually made with a preconceived and undisclosed inten-
tion of not performing it, it constitutes a misrepresentation
of ‘a material existing fact’ upon which an action for rescis-
sion may be predicated.” Id. at 160, 164 N.Y.S.2d at 716,
143 N.E.2d at 908.

In dismissing the fraud claim, Judge Bryan quoted
approvingly from Briefstein v. P. J. Rotondo Co., 8 A.D.2d
349, 351, 187 N.Y.S.2d 866, 868 (1st Dept. 1959), where it
was said: “To say that a contracting party intends when he
enters into an agreement not to be bound by it is not to
state ‘fraud’ in an actionable area, but to state a willing-
ness to risk paying damages for breach of contract.”
Judge Bryan distinguished Sabo on the ground that the
fraud there resulted from misrepresentations as to “col-
lateral matters” which had not been reduced to writing.

24a
Appendiz C

Since Singer did not make any promises “outside the terms
of the contract,” Judge Bryan concluded that Briefstein,
and not Sabo, was controlling. We disagree.

While the contract in Sabo may have been fraudulently
induced by “collateral” promises not reduced to writing,
there is nothing in the Sabo opinion which suggests that
the result would have been any different if the fraudulent
promises had been included within the actual terms of the
contract itself. As a matter of plain logic, we fail to see
why there is any less fraud in the inducement if the false
promises are made a part of the contract itself, and indeed,
Sabo speaks of contractual rather than collateral promises.
Since Briefstein was not decided by the highest appellate
court in New York, and since there is good reason to think
that the New York Court of Appeals would not follow the
somewhat aberrational holding of that case,'! we think that
Sabo is controlling in this diversity action, see Commis-
sioner of Internal Revenue v. Bosch’s Estate, 387 U.S. 456,
87 8.Ct. 1776, 18 L.Ed.2d 886 (1967), and hold that Judge

Bryan erred in dismissing the fraud claim on the basis of
Briefstein.

Ii.

Having concluded that the fraud alleged here, if true,
would support an action for rescission, we must decide
whether Judge Bryan was correct in holding that there

11. The Briefstein rationale is not supported, for example, by
either the Restatement of Contracts or the Restatement of Torts.
See Restatement, Contracts § 473: “A contractual promise made
with the undisclosed intention of not performing it is fraud.” See
also Restatement, Torts § 530, comment c, which provides in perti-
nent part: “One who fraudulently misrepresents himself as intend-
ing to perform an agreement which he makes with the recipient of
the misrepresentation, is subject to liability * * * whether the agree-
ment is enforceable or unenforceable as a contract.”

25a
Appendiz C

were no triable issues of fact on the fraud claim. We
agree that the fraud claim is without any substance, and
affirm on this ground.

[5,6] The only allegation of fraud in the entire Perma
complaint is the statement that the December contract “was
procured by fraud and misrepresentations on the part of
[Singer] and its agents as to its intentions and ability to
market said product.” By itself this allegation is plainly
insufficient to state a claim for fraud under Rule 9(b), Fed.
R.Civ.P.'2 Nor does the deposition of Perrino, the presi-
dent of Perma, provide any factual basis for the fraud
alleged in the complaint. Except for repeated references
to Singer’s unsatisfactory performance under the Decem-
ber contract, Perrino was unable to point to any evidence
of an intention not to perform, and as Judge Bryan prop-
erly observed, actionable fraud depends on more than a
showing of non-performance. See Restatement, Torts
§ 530, comment c; Restatement, Contracts § 470, comment
e; Adams v. Clark, 239 N.Y. 403, 410, 146 N.E. 642 (1925).
Moreover, it appears from the deposition that there was
substantial performance under the December contract, at
least until Singer concluded that the product was not “fail-
safe” and hence unmarketable. Indeed, Perrino admitted
in his deposition that the parties were engaged in joint
efforts to solve the “fail-safe” problem as late as six
months after the December contract was negotiated.

12. Rule 9(b) provides that the circumstances constituting the
alleged fraud must be stated with particularity. Failure to comply
with Rule 9(b) will render the pleadings vulnerable to a motion te
dismiss for failure to state a claim, see, for example, Robison v.
Caster, 356 F.2d 924 (7th Cir. 1966), or a motion for a more definite
statement. See:-for example, Trussell v. United Underwriters, Ltd.,
228 F.Supp. 757, 774 (D.Col.1964); Lynn v. Valentine, 19 F.R.D.
250 (S.D.N.Y., 1956).

26a
Appendiz C

The only difficult question is whether any of the state-
ments made by Perrino in an affidavit opposing summary
judgment are sufficient to raise material issues of fact. In
that affidavit Perrino said:

At the time I entered into the contract of Decem-
ber 21, 1964 on behalf of Perma with Singer, Perma
was in desperate financial straits because of the
delays in deliveries of the product under the June
contract. Mr. Kloby of Singer told me that Singer
was waiting for Perma to become insolvent so that
they could take over the rights to manufacture and
market the product under the most satisfactory con-
ditions or get out of their obligations to Perma
entirely. Mr. Peacock, of counsel for Singer, told
me, at the time of the negotiations for the December
contract, in the presence of Mr. Kloby, that Singer
had every intention to manufacture and market the
product and pay royalties to Perma. The Singer
name was of great importance to Perma, but I have
since learned that the same Mr. Peacock had already
drawn a draft agreement to sell the marketing rights
to Monitor Enterprises of Long Island, New York,
under an agreement whereby Perma would receive
no royalties. Also, subsequent to the signing of the
December contract J had a conversation with Mr.
Person of Singer at the Biltmore Hotel in Provi-
dence, Rhode Island, at which time Mr. Person told
me that Singer never had any intention of perform-
ing the December contract, that Singer’s New York
management was now afraid of product liability
and Singer did not want to be in the brake business,
and would allow the contract to expire on the rever-
sion date. [Italics added. ]

27a
Appendiz C

Since Perma has fully performed all of its obligations
under the December contract, Singer would be obligated to
make royalty payments even if Perma became insolvent,
and thus we fail to see how the statement attributed to
Kloby raises any triable issue of fraud. We also note that
Kloby was deposed for over 300 pages by plaintiff’s coun-
sel and was never asked about the statement which Perrino
now attributes to him.

Similarly, there is no substance to the suggestion that
Perma would be cheated out of royalties due under
the December contract if Singer sold its marketing rights
to Monitor Enterprises, Inc. The December contract
expressly provides that Singer shall have “absolute discre-
tion” in determining “the method of manufacturing,
exploiting and marketing the product,” and thus it would
seem that Singer is obligated to pay royalties regardless
of how it markets the product. Assuming that Singer did
in fact arrange to sell the marketing rights to Monitor, we
simply cannot say that raises any triable issue of fraud.

Finally, Perrino states that he was told by Person of
Singer that “Singer never had any intention of performing
the December contract.”’ This statement is alleged to have
been made sometime after the parties entered into the
December contract. While it would appear to raise a
triable issue as to fraudulent intent, we think that Judge
Bryan could properly conclude that the statement made in
the affidavit was less reliable than the contradictory state-
ments in the deposition, see 6 Moore, Federal Practice
7 56.22[1] at 2814 (2d ed. 1965), and that it did not raise a
triable issue of fraud.

28a
Appendiz C

At the time of his deposition Perrino was able to point
only to Singer’s alleged failure to perform as evidence of
its supposed intention not to perform. At one point in the
deposition he said: “There is no way of me knowing
exactly what their intention was at the time they said it,
except that they promised certain things when everything
else points to the fact that they did not intend to do what
they said they were going to do.” Moreover, Perrino
admitted in his deposition that there had been substantial
performance under the December contract, and this is not
contradicted by the affidavit. If there is any dispute as to
the material facts, it is only because of inconsistent state-
ments made by Perrino the deponent and Perrino the
affiant. “The deposition of a witness will usually be more
reliable than his affidavit, since the deponent was either
cross-examined by opposing counsel, or at least available
to opposing counsel for cross-examination. Nevertheless,
if a witness has made an affidavit and his deposition has
also been taken, and the two in some way conflict, the court
may not exclude the affidavit from consideration in the
determination of the question whether there is any genuine
issue as to any material fact.” 6 Moore, Federal Practice
7 56.22[1] at 2814 (2d ed. 1965).

[7] During four days of deposition-taking Perrino was
repeatedly asked to specify the basis of the fraud he
alleged, and we think it is significant that he made no refer-
ence to the alleged conversation with Person when Singer
might have had an opportunity to cross-examine him about
it. We think it is also significant that Perma’s lawyers
failed to question Person about the alleged conversation
when they examined him on deposition. Since Perrino was

29a
Appendiz C

admittedly a party to that conversation, this is plainly not
a case where the party opposing summary judgment can
complain of non-access to material facts. See Rule 56(f),
Fed.R.Civ.P. Nor is this a case where the contradicting
affidavit can fairly be said to contain evidence “newly dis-
covered.” If a party who has been examined at length on
deposition could raise an issue of fact simply by submitting
an affidavit contradicting his own prior testimony, this
would greatly diminish the utility of summary judgment
as a procedure for screening out sham issues of fact. Cf.
Dressler v. MV Sandpiper, 331 F.2d 130 (2d Cir. 1964).
Compare Engl. v. Aetna Life Insurance Co., 139 F.2d 469
(2d Cir. 1943), where Judge Clark observed that a party
who resists summary judgment cannot hold back his evi-
dence until the time of trial.

[8] The object of summary judgment is “to discover
whether one side has no real support for its version of the
facts,” Community of Roquefort v. William Faehndrich,
Inc., 303 F.2d 494, 498 (2d Cir. 1962), and thereby to avoid
unnecessary trials. We recognize that summary judgment
was never intended to be a substitute for trial by jury
where the parties “really have issues to try.” Sartor v.
Arkansas Natural Gas Corp., 321 U.S. 620, 621, 627, 64
S.Ct. 724, 88 L.Ed. 967 (1944). We recognize also that
there may be some instances where summary judgment is
too blunt a procedural device for deciding difficult cases.
See, for example, Miller v. General Outdoor Advertising
Co., 337 F.2d 944 (2d Cir. 1964). Nonetheless, summary
judgment canrut be defeated by the vague hope that some-
thing may tun up at trial. Radio City Music Hall Corp.
v. United States, 135 F.2d 715 (2d Cir. 1943). Since
neither the Perrino deposition nor the Perrino affidavit

30a
Appendix C

raises any issue which we can call genuine, and since the
allegations of fraud amount to little more than allegations
on non-performance, we hold that Judge Bryan properly
granted summary judgment dismissing the fraud claims.

IV.

As a separate ground for reversal Perma urges that
Judge Bryan erred in admitting the affidavit of Singer’s
counsel in support of its motion for summary judgment.
The affidavit was made by William C. Chanler, and it was
basically an attempt to summarize over 1,000 pages of
depositions, as well as numerous documentary exhibits.
Perma now insists that the affidavit contains “a substantial
number of important misstatements and misconstructions,”
that it was based on hearsay as to which Chanler was not
competent to testify, and that it was not made on personal
knowledge as required under Rule 56(e), Fed.R.Civ.P.

[9] While it is true that there are certain statements
which do not appear to be made on personal knowledge and
which are hence inadmissible,’ see Union Insurance Soci-
ety of Canton, Ltd. v. William Gluckin & Co., 353 F.2d 946,
952 (2d Cir. 1965), we think that Judge Bryan could have
properly disregarded these statements, especially since
none is relevant to the question of whether the December
contract was obtained by fraud. “Even if an affidavit does
contain some inadmissible matter, the whole affidavit need

13. ‘At one point, for example, Chanler stated in his affidavit that
there was O-ring leakage in a pressure switch component and that
this resulted from “a basic design defect in the angle of the cylinder
entrance through which the ee were inserted.” From the
depositions it is somewhat unclear whether this malfunction could
properly be called “a basic design defect.”

3la
Appendiz C

not be stricken or disregarded; the court may disregard the
inadmissible parts and consider the rest of the affidavit.”
6 Moore, Federal Practice J 56.22 [1] at 2817 (2d ed. 1965).

[10] We also note that the motion to strike was much
too general in that it did not specify which parts of the
Chanler affidavit should be stricken and why. Many of the
statements made in the Chanler affidavit were amply sup-~
ported by the record, and we think that the plaintiff was
required to do more than swing its bludgeon wildly. As
Prof. Moore has said, the motion to strike must be precise.
“TTjt should state specifically the portions of the affidavit
to which objection is being made, and the grounds there-
for.” 6 Moore, Federal Practice { 56.22[1] at 2818 (2d ed.
1965).

The judgments are affirmed.

32a
APPENDIX D

UNITED STATES COURT OF APPEALS
For THe Seconp Circuit

At a Stated Term of the United States Court of Appeals,
in and for the Second Circuit, held at the United States
Courthouse in the City of New York, on the twenty-fifth
day of April, one thousand nine hundred and sixty-nine.
Present: Hon. J. JosepH SmirtH,

Hon. Paut R. Hays,
Circuit Judges.

Hon. Joun O. HENDERSON,
District Judge.

PerMA RESEARCH AND DEVELOPMENT COMPANY,

Plaintiff-Appellant,
v.

Tue Srncer Company,
Defendant-A ppellee.

Appeal from the United States District Court for the
Southern District of New York.

33a
Appendiz D

This cause came on to be heard on the transcript of
record from the United States District Court for the South-
ern District of New York, and was argued by counsel.

On ConsmDERATION WHEREOF, it is now hereby ordered,
adjudged, and decreed that the orders of said District Court
be and they hereby are affirmed with costs to be taxed
against the appellant.

A. Dante, Fvsaro,

Clerk.
Judgment entered a true copy.
A. Dante, Fusaro Joun LivinesTon
Clerk Clerk
No Bill or Statement Attached.

Sha
APPENDIX E

Perma Researcu & DEVELOPMENT
Company, Plaintiff,

v.
THe Srycer Company, Defendant.
No. 66 Civ. 665.

UNITED STATES DISTRICT COURT
S. D. New York.

Jan. 27, 1970.

OPINION

MacManoy, District Judge.

This is a motion by defendant, The Singer Company
(“Singer”), for summary judgment dismissing the com-
plaint, pursuant to Rule 56, Fed.R.Civ.P. Plaintiff, Perma
Research & Development Company (“Perma”), contends
that the motion should be denied both because of the doc-
trine of “law of the case” and because there are many issues
of material fact in dispute.

The complaint, far from a model of clarity, asserts three
claims. The first seeks damages of $41,000,000 for breach
of a June 1964 contract between the parties, alleging that
substantial numbers of an automobile anti-skid braking
device invented by Frank A. Perrino, the president of
Perma, and assembled by Singer under the contract were
“defective as a result of inadequate quality control.” The

35a
Appendiz E

second seeks to set aside a superseding contract made in
December 1964 and to recover damages of $41,000,000 for
fraud in the inducement. Both of these counts were dis-
missed by this court (Bryan, J.) and summary judgment
granted in favor of Singer. The Court of Appeals affirmed.
410 F.2d 572 (2d Cir. 1969). '

We are concerned here with the third claim, which is
buried in the “Wuererore” clause of the complaint under
the prayer for other relief. It alleges in the alternative
that “if it be determined that the contract of December 21,
1964 be valid, Plaintiff demands judgment upon this con-
tract for breach and non-performance thereunder in the
amount of 41 million dollars.”

There was extensive discovery, but neither party sought
evidence concerning this alternative claim. Rather, it was
either overlooked or intentionally ignored. Not surpris-
ingly, therefore, on the earlier motion for summary judg-
ment, Singer did not address itself directly to the alterna-
tive claim, nor did Perma. Despite this, it did not escape
the notice of Judge Bryan, who, after noting the neglect of
the parties, held that “in the present posture of this action
and on the papers before me Singer has not demonstrated
that there are no material issues of fact as to this claim
which require trial and summary judgment on the claim
must therefore be denied.”

Had the matter stopped there, we would not feel con-
strained to follow Judge Bryan, for it is plain that because
of the parties’ neglect the court lacked sufficient informa-
tion in proper form to consider the merits of the alterna-
tive claim and in such circumstances the doctrine of law
of the case is not a strait jacket.! However, the matter did

1. Johnson v. Cadillac Motor Car Co., 261 F. 878, 882-883, 8
A.L.R. 1023 (2d Cir. 1919); Zdanok v. Glidden Co., Durkee Famous
Foods Div., 327 F.2d 944, 952-953 (2d Cir.), cert. denied, 377 U.S.
934, 84 S.Ct. 1338, 12 L.Ed. 2d 298 (1964).

36a
Appendix E

not stop there. Instead, Singer moved successfully for
reargument asserting that “this claim of breach must be
dismissed because as a matter of law the contract provided
the exclusive remedy of termination for any alleged inade-
quacy of performance (Point I), or, alternatively, because
on the basis of undisputed facts now before the Court, there
has been no breach (Point II).”

Singer then made the precise argument, cited the same
authorities and presented the identical facts now urged on
this second attempt for summary judgment in its favor.
There is no suggestion that there are any newly discovered
facts or that there has been a change in the applicable law.
In short, the very points now made were all made and
rejected by this court when Judge Bryan granted reargu-
ment and adhered to his original decision. This squarely
raises the question of whether this motion is barred by the
doctrine of law of the case.

[1, 2] As Judge Learned Hand said, “the ‘law of the
case’ does not readily bind a court to its former decisions,
but is only addressed to its good sense.’? Since the doc-
trine is addressed to the court’s “good sense,” it ought not
be imposed on a mechanical basis.’ Rather, its applica-
bility turns upon a number of considerations.‘ One is judi-
cial economy and another is the unseemliness of a court’s
altering a legal ruling as to the same litigants. A decision

2. Higgins v. California Prune & Apricot Grower, Inc., 3 F.2d
896, 898 (2d Cir. 1924).

, one United States v. Russell Mfg. Co., 349 F.2d 13, 19 (2d Cir.
).

4. Zdanok v. Glidden Co., Durkee Famous Foods Div., supra,
327 F.2d at 953.

37a
Appendiz E

in a given case is, therefore, said to be the law of the case,
and no question previously decided will be decided again
unless there is some compelling reason.°

[3] The balance of considerations here argues strongly
against overruling Judge Bryan, for, although we are not
compelled to follow his decision, in all “good sense” we are
unable to find any convincing reason for refusing to do so.°
We rest on his opinion both because it is the law of the case
and because we are satisfied with it.’

Singer contends that the alternative claim for breach of
the December agreement must be dismissed because as a
matter of law Singer was not required under the contract
to do anything until January 1966 and because the contract
provides the exclusive remedy of termination for any
alleged inadequacy of performance. Singer’s contentions
are based on paragraph 10 of the contract, which, in per-
tinent part, provides:

“Reversion Right. In the event * * * [Singer]
does not incur direct and indirect costs of at least
$100,000 for marketing, promoting and advertising
the Product * * * in any calendar year between Janu-
ary 1, 1966 and the December 31st preceding the
time of expiration of * * * [Singer’s] duty to pay
royalties hereunder * * * [Perma] upon written
notice * * * may notify * * * [Singer] of its exercise
of its rights * * * [to reversion of its patents, tools,
ete.].”

5. Wharton v. Hirsch, 348 F.2d 906, 907 (2d Cir. 1965).

6. Banco Nacional de Cuba v. Farr, 383 F.2d 166, 183 (2d Cir.
1967).

7. See, United States v. Certain Property, etc., 344 F.2d 142,
144 (2d Cir. 1965).

38a
Appendix E

It was further provided that upon receipt of such notice,
Singer “shall assign and convey to * * * [Perma] the pa-
tents and patent application assigned and conveyed here-
under” in consideration of Perma’s payment to Singer of
all its debts, plus $50,000 in cash, whereupon the December
agreement would terminate.

Relying on the above provision and its tender of the
patents and waiver of the $50,000 cash payment, Singer
argues that paragraph 10 defines not only the sole measure
of the performance required of Singer, but also specifies
Perma’s exclusive remedy for breach. We think, however,
that paragraph 10 simply gives Perma an option to recover
its patents and terminate the contract upon specified con-
ditions. The option rests not with Singer but with Perma.

[4, 5] An option to terminate is not an exclusive
remedy, and a party is not obligated to exercise such an
option but may stand on his rights. There is, thus, no
basis in the agreement for Singer’s contention that “under
any conceivable version of the facts, as a matter of law
Perma’s sole remedy would be to reacquire its patents.”
Nor do we find support in the cases urged by Singer® for
all of them, as Singer concedes, are predicated on the fact
that patents were assigned without an express agreement
by the assignee to pay any specified amount or to perform

8. Patents, 43 N.Y. Jurisprudence § 47; Bernard v. Golden Gate
Mfg. Co., 187 App.Div. 542, 175 N.Y.S. 741, 744 (1st Dep’t 1919),
aff'd, 231 N.Y. 591, 132 N.E. 900 (1921).

9. Corbet v. Manhattan Brass Co., 93 App. Div. 217, 87 N.Y.S.
577 (1st Dep’t 1904), modified, 183 N.Y. 548, 70 N.E. 1092 (1905);
Ebert v. Loewenstein, 42 App.Div. 109, 58 N.Y.S. 889 (1st Dep't
1899), aff'd, 167 N.Y. 577, 60 N.E. 1110 (1901); Born v. Schren-
keisen, 110 N.Y. 55, 17 N.E. 339 (1888); Wing v. Ansonia Clock
Co., 102 N.Y. 531, 7 N.E. 621 (1886); Rose v. Imbrey, 37 N.Y.S.2d
793 (Sup.Ct., Bronx Co. 1942).

39a
Appendiz E

any particular act. That premise is absent here. It is not
supplied by reiteration of the complaint’s erroneous con-
clusion that the contract is illusory because Singer “was
not bound to perform any covenants or agreements.”
That construction of the agreement is frivolous, and it was
expressly and correctly rejected by both Judge Bryan and
the Court of Appeals

[6] Nor is the premise found in paragraph 13 of the
contract, which, under the heading “Marketing,” states that
the “Buyer in its absolute discretion shall determine the
method of manufacturing, exploiting and marketing the
Product.” We think it perfectly plain that paragraph 13
merely specifies that control of the means and methods of
performance rests in Singer’s discretion. The clause cannot
be stretched to give Singer an absolute right unilaterally to
abandon the contract or to terminate it at will.

Nor do we find merit in Singer’s contention that as a
matter of law Perma is limited to a claim for rescission.
The Neenan, Crowe and Matzka cases’® each involved suits
by a licensor seeking not damages but rescission. None
holds that the plaintiff may not recover damages but simply
ground equity jurisdiction on the proposition that the legal
remedy was inadequate because damages were of a specu-
lative nature. Indeed, the Crowe case specifically recog-
nized the right of the plaintiff “first to hold the contract
rescinded or second to sue on the breach for damages.” Our
rejection of these authorities should not be understood as a
holding either that the fact of, or the amount of, plaintiff’s
damages, if any, is certain. It may well be that there are

10. Neenan v. Otis Elevator Co., 194 F. 414 (2d Cir. 1912);
Crowe v. Oscar Barnett Foundry Co., 213 F. 864 Brg yl?
Matzka Corp. v. Kelley Dry-Pure Juice Corp., 19 Del.Ch. 359, 168
A. 70 (1933).

40a
Appendix E

no damages or that, if there are, they are of a speculative
nature."’ We simply hold that that question cannot be
determined on the record before us but must await develop-
ments at the trial.

[7,8] Equally without merit is Perma’s contention that
Singer breached the December agreement by not shipping
the product at once and throughout 1965. Perma claims
support for this contention in the fact that Singer assumed
five contracts previously made by Perma with various dis-
tributors which called for delivery of the product either in
1964 or in 1965. It is apparent, however, that the product
never was perfected during 1965. Concededly, the parties
were engaged in joint efforts to correct the defects at least
until the end of July, and the product is still not fail-safe.
Perrino admitted on his deposition that a malfunction will
lead to a complete loss of braking power even today. Yet,
in promotional material shown to Singer before the June
agreement, Perma represented that the device had a “fail-
safe feature which will automatically revert to the standard
braking system in case of failure.” Thus, the device was
not fail-safe as that term is defined in impartial diction-
aries” and by Perma before there was any motive to create

11. See Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251,
264, 66 S.Ct. 574, 90 L.Ed. 652 (1946); Story Parchment Co. v.
Paterson Parchment Paper Co., 282 U.S. 555, 562, 51 S.Ct. 248, 75
L.Ed. 544 (1931); Eastman Kodak Co. of New York v. Southern
Penns Materials Co., 273 U.S. 359, 378, 47 S.Ct. 400, 71 L.Ed. 684
(1927).

12. Perma’s pre-litigation definition conforms to the one given
in the dictionary: “fail-safe (fal’saf’), adj. 1. Electronics. pertain-
ing to or noting a mechanism built into a system, as in an early
warning system or a nuclear reactor, for insuring safety sliould the
system fail to operate properly. 2. equipped with a secondary sys-
tem that insures continued operation even if the primary system
fails. * * * [adj., n. use of v. phrase fail safe].” Random House
Dictionary of the English Language (Unabridged Ed. 1969).

4la
Appendix E

an issue of fact. We think that in view of these immutable
admissions by plaintiff there can be no genuine issue that
the device was not fail-safe when Singer decided to aban-
don the contract.

It is nothing short of preposterous, in view of the mod-
ern doctrine of strict liability,‘ to suggest that Singer was
under a duty to ship a product concededly defective.
Indeed, Perrino, as a deponent, admitted as much,’ and
as a litigant based his rejected claim for breach of the June
contract on Singer’s alleged shipment of defective product.

[9] More significantly, we find no merit in the forego-
ing contentions of either party because the contract, as
construed correctly by Judge Bryan and the Court of
Appeals, neither permits Singer to sit idly until 1966 nor
requires it to start manufacturing or shipping at once.

13. Perrino the affiant asserts that whether the device was fail-
safe when Singer decided not to market it is the core of the present
dispute between Perma and Singer. The assertion, of course, is an
argumentative conclusion and we reject it. Perrino attempts, in his
affidavit, to extricate himself from his admissions in his deposition
by tailoring the definition of “fail-safe” and coloring his testimony
with the lame explanation that when he said a malfunction can lead
to a loss of brakes he merely meant that a mechanical product not
correctly built may not function and that the loss of brakes does not
demonstrate an ce of a fail-safe feature. Material issues of
fact, however, cannot be created simply by contradictory or “incon-
sistent statements made by Perrino the deponent and Perrino the
affiant.” 410 F.2d at 578.

14. Gold v. Kollsman Instrument Corp., 12 N.Y.2d 432, 240
N.Y.S.2d 592 (1963).

15. 2 That’s because you wouldn’t ship 500 replacement units
or wouldn’t permit the shipment of 500 replacement units if you
believed them to be defective, is that right?

“A That's right. But that doesn’t mean that these 500 units may
not be part of the units which were shipped over my objection to
Mr. Romel that defective units should not be shipped.” Deposition
of Perrino, p. 190.

42a
Appendia E

Rather, it obligates Singer to use its best efforts to manu-
facture and market the product.'®

“Best efforts,” like “reasonable care,” is a term which
necessarily takes its meaning from the circumstances. Set
against the background of defects in both the quality and
design of the product, which the parties had experienced
over a six-month period while operating under the June
1964 contract, we think that “best efforts” here means that
Singer was required to continue collaborating with Perma
for a reasonable length of time in a good faith effort to
solve the problems then preventing marketing of the
product. Clearly, that is what the parties intended, for
that is what they started doing immediately. Singer spent
substantial time and money and the parties engaged in
joint efforts for over six months to solve the problems.
Their intention to keep trying is also revealed in the fact
that simultaneously with the December contract, they
entered into an agreement whereby Perma undertook to
furnish know-how and technical assistance to Singer for

16. The complaint alleges in Count II that the December agree-
ment was illusory because Singer was not bound to perform any
covenants or agreements and retained complete discretion as to
manufacturing and marketing. Urged by Singer, Judge Bryan
rejected the contention by reading the Duff-Gordon rule into the
agreement and thus found an obligation on defendant’s part to use
its best efforts to manufacture and market the product.

‘The Duff-Gordon rule is that “a promise may be lacking, and yet
the whole writing may be ‘instinct with an obligation’ imperfectl
expressed.” Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88, 91,
118 N.E. 214 (1917). Under the rule, the implication to use “best
efforts” is clearly predicated on the lack of an express promise.

While it is true that the December agreement did contain an
express promise of the performance required by Singer after Janu-
ary 1, 1966, it was silent as to what Singer was supposed to do from
December 1964 until then. We, therefore, think that Judge Bryan
was correct in filling the void with an implied promise.

43a
Appendiz E

the next six months in consideration of Singer’s payment
of $9,800 per month. The intention is further manifested
in the main agreement’s postponement of Singer’s obliga-
tion to spend money on marketing and promotion until
January 1, 1966. That, we think, shows an understanding
that further experimental work would be necessary to per-
fect the product before Singer could be expected to put it
on the market. |

Singer’s obligation to continue making the collaborative
effort to correct the defects arose immediately upon enter-
ing into the December agreement. The obligation, how-
ever, was not perpetual. Rather, we think, since no time
was stated for performance, Singer was obliged to keep
trying for a reasonable length of time.’”

Our construction of the contract is consistent with Judge
Bryan’s and compels us to reject Singer’s contentions that
its only duty was to market and promote the product after
January 1, 1966, as specified in paragraph 10 of the con-
tract, and that Perma’s sole remedy for an inadequate per-
formance both under the contract and as a matter of law
was to terminate the agreement and recover its patents.

We conclude, therefore, that Judge Bryan was correct
in rejecting Singer’s contention that on any conceivable
state of facts Singer is entitled to judgment dismissing the
alternative claim as a matter of law.

[10} We turn, then, to whether there are any genuine
issues of fact requiring trial. The factual issue, if any,
posed by the contract as construed by the court, is whether
Singer did use its best efforts for a reasonable length of
time in collaboration with Perma to perfect the product in
order to be in a position to market it.

17. 1 Williston, Contracts § 38, pp. 112-113 (3d ed. 1957).

da
Appendix E

There is no question that Singer did spend considerable
time and money in an effort to perfect the product. Indeed,
the Court of Appeals noted “there was substantial perform-
ance under the December contract, at least until Singer
concluded that the product was not ‘fail-safe’ and hence
unmarketable. * * * Perrino admitted in his deposition
that the parties were engaged in joint efforts to solve the
‘fail-safe’ problem as late as six months after the December
contract was negotiated.” 410 F.2d at 576-577.

The issue, however, is not whether there was substantial
performance, as Singer contends, or whether the product
was “fail-safe,” as Perma contends, but whether, as Judge
Bryan stated, Singer’s performance was adequate. For
example: (1) Did Singer use its best efforts for a reason-
able time in collaboration with Perma to perfect the
product under all of the circumstances? (2) In view of the
fact that the device was not “fail-safe,” was Singer justified
in abandoning the contract either because it was impossible
to make the device “fail-safe” or because it could not be
made “fail-safe” without unreasonable, unwarranted or
impractical efforts and expenditures of time and money
out of all proportion to engineering and economic realities?

Such questions could not be answered definitively on the
basis of the record before Judge Bryan, nor can we answer
them on the refurbished record before us. -

In the first place, the voluminous depositions were di-
rected not to breach or performance of the December agree-
ment but to breach or performance of the June contract, to
fraud or the lack of it as to the December agreement, and to
Singer’s counterclaim for fraud. This is understandable
because no one paid any attention to the alternative claim
for breach of the December agreement and, even if the claim
had been noticed, there was no suggestion at that time of

45a
Appendiz E

an implicit promise by Singer to use its best efforts. That
promise did not come into the case until Judge Bryan’s
decision long after the depositions were closed. As a result,
only a few of the thousands of questions asked have any
relevance whatever to the issues now before the court.

In the second place, Singer’s papers on this motion are
directed not to a demonstration of the absence of a genuine
factual issue respecting its use of its best efforts but to the
rejected proposition that the claim is moot as a matter of
law because Singer had a right to terminate the contract
upon tendering the patents to Perma. Likewise, Perma’s
papers are not addressed to the issue. Rather, they contain
a mass of irrelevancies, arguments, opinions and conclu-
sions. The burden, however, of demonstrating the absence
of any genuine issue of fact is upon Singer, and it has failed
to do so.

[11] Finally, a motion for summary judgment is always
addressed to the discretion of the court."®

The device which is the subject matter of this litigation
has over 100 separate parts and is an extremely complicated
mechanism. Much of the voluminous deposition is involved
with engineering technicalities, and, as we have seen, there
is little in the depositions of relevance to the present issue.
The affidavits, exhibits and memoranda are extensive. The
sheer quantity of the material to be analyzed cautions
against the expenditure of judicial time in an effort to sift
out and piece together the undisputed facts essential to a
summary judgment. The issue are further obscured by
argumentative statements and counter-assertions, conclu-

18. Rockefeller Center Luncheon Club v. Johnson, 116 F.Supp.
437 (S.D.N.Y. 1953); 6 Moore, Federal Practice J 56.15 [6], at
2421 (2d ed. 1966).

46a
Appendix E

sions and conflicting inferences which the parties attempt
to draw from an incomplete record. Too much is left open.

Plainly, there is a genuine issue as to whether Singer, in
collaboration with Perma, did use its best efforts for a rea-
sonable length of time to correct the defects in order to
make the product marketable.'? When we add the fact that
summary judgment has already been once denied, it is read-
ily apparent that on the record here summary judgment
would rest on quicksand. The cumulative weight of the
obstacles is too heavy for so frail a vehicle as summary
judgment.”

We are convinced under the circumstances that sound
judicial administration dictates that the court withhold
judgment on the involved questions of law and fact pre-
sented here until the whole structure stands on a solid
foundation established on a trial where the evidence can be
directed to the relevant issue, the proof more deeply devel-
oped, the ultimate facts definitively found and the issues
put into clear focus. Summary procedures, however salu-
tary, where issues are clear-cut and simple present a treach-
erous record for deciding complex litigation. Good judicial
administration demands that judgment of the ultimate
questions involve in this case be withheld until there is a
solid basis for findings by a court or jury based on litiga-
tion or a comprehensive statement of agreed facts.”"

Accordingly, the motion for summary judgment is denied.
So ordered.

19. There may be other issues of fact, and we do not wish te
foreclose the parties or the pre-trial or trial judge in that regard.

20. Boston & M. R.R. v. Lehigh & N. E. R.R., 188 F.Supp. 486,
491 (S.D.N.Y. 1960), appeal dismissed per curiam, 287 F.2d 678
(2d Cir. 1961).

21. Kennedy v. Silas Mason Co., 334 U.S. 249, 256-257, 68 S.Ct.
1031, 92 L.Ed. 1347 (1948).

UNITED STATES DISTRICT COURT
SouTHERN District or New York

66 Civ. 665
Perma Researcu & DevELOPMENT CoMPANY,
Plaintiff,
against
Tue Sincer Company,
Defendant.
66 Civ. 666
Perma Reseancu & DeveLOPpMENT CoMPaNY,
Plaintiff,
against
Tue Stncer Company,
Defendant.

Metzner, D. J.:

Defendant moves for summary judgment dismissing the
complaint on the ground that the contract sued upon was
induced by material misrepresentations.

This is defendant’s third motion for summary judgment.
The first motion was disposed of by Judge Bryan. The
pertinent part of that opinion, which is applicable to the
present motion, held that the complaint alleged a substan-

48a
Appendia F

tial claim for breach of the December 21, 1964 contract.
Since neither of the parties had addressed themselves to
that claim, the defendant had not demonstrated that there
were no material issues of fact. Therefore, the motion for
summary judgment was denied. Judge Bryan’s order was
affirmed on appeal. 410 F.2d 572 (2d Cir. 1969).
Defendant then brought on a second motion for summary
judgment which was denied by Judge MacMahon on Jan-

uary 27, 1970. In the papers submitted on that motion,
defendant argued:

“That Singer was justified in abandoning the proj-
ect because of the fail-safe problem would seem clear
from the fact that Perrino admitted on his deposi-
tion, even as of today, any malfunction of the device
might result in a total loss of braking power.”

It further argued:

“Thus it is plain that the dispute between the parties
is not as to whether a failure in the Perma device
might produce a total loss of brakes, but whether
that conceded fact shows that the device is not fail-
safe... But in any event, we think it is plain that
Singer was amply justified in the exercise of its abso-
Jute discretion in taking the same view as Governor
Rockefeller and determining that under those cireum-
stances, the device was not fail-safe and, therefore,
in abandoning the project.

“We submit that this disposes of the entire litiga-
tion.”

In those papers defendant also referred to reports on
the operations of the product which it claims it received

49a
Appendiz F

for the first time in January 1965. It stated that it was
disturbed by these reports “since Singer had entered into
the agreement in June 1964 largely on the basis of a movie
shown them by Perma which stated categorically that the
device had a ‘fail-safe feature which will automatically
revert to the standard braking system in case of failure.’ ”

Judge MacMahon discussed defendant’s obligations under
the contract. He found that there was a genuine issue as
to whether the defendant, in collaborating with the plain-
tiff, used its best efforts for a reasonable length of time
to correct the defects in order to make the product market-
able. He said:

“For example: (1) Did Singer use its best efforts
for a reasonable time in collaboration with Perma to
perfect the product under all of the circumstances?
(2) In view of the fact that the device was not ‘fail-
safe,’ was Singer justified in abandoning the con-
tract either because it was impossible to make the
device ‘fail-safe’ or because it could not be made
‘fail-safe’ without unreasonable, unwarranted or
impractical efforts and expenditures of time and
money out of all proportion to engineering and eco-
nomic realities?”

On this third motion, defendant now argues that since
Judge MacMahon found as of fact that the product was
not fail-safe, it should succeed on this motion because of
its affirmative defense that it entered into the contract
because of the false representation that the product was
fail-safe. In essence this is a reiteration of defendant’s
position before Judge MacMahon, quoted above, buttressed
by Judge MacMahon’s finding that the product was not
fail-safe.

50a
Appendiz F

Whatever effect the representation in the film may have
had prior to June 1964, it is perfectly obvious from the
record and the prior opinions that defendant could not have
been under any delusion that the product was fail-safe
because of events and transactions between the parties sub-
sequent to the viewing of that film. The contract in
issue was entered into in December 1964.

Defendant argues that in view of Judge MacMahon’s
finding that the product was not fail-safe, there no longer
exists a controverted issue as to Singer’s affirmative defense
that the contract was entered into on reliance on a material
misrepresentation. This position overlooks the above-
quoted portion of Judge MacMahon’s opinion indicating
that issues for a trial do exist despite the fact that the
product was not fail-safe.

Motion is denied. So ordered.

Dated: New York, N. Y.
May 14, 1970

/s/ CuHartes M. Metzner
U.S. D. J.

Sla

APPENDIX G
Perma Researcu & DeveLopMeNtT CoMPANY,
Plaintiff ,
v.
Tue Srxcer Company,
Defendant.

No. 66 Crv. 665 KTD.

United States District Court,
S. D. New York.

April 11, 1975.

OPINION

KEVIN THOMAS DUFFY, District Judge.

This case has had a long and tortured history. It was
instituted on March 9, 1966, and the operative facts go back
several years prior to that time. The trial spanned eight
months and included many thousands of pages of exhibits.

Basically, it is a breach of contract action, plaintiff and
defendant having entered into two contracts, one on June
18, 1964, the other on December 21, 1964. By judicial
curtailment of the issues, only the breach of the December
21, 1964 contract was the subject of the trial but in order
to put into perspective all of the claims, counterclaims and
defenses of the parties it is necessary to review the nego-
tiations leading to the June 18, 1964 contract, the relation-
ship of the parties while operating thereunder, and partic-
ularly the knowledge gained by the defendant during the
period starting with the negotiations leading to the June
18, 1964 contract and ending with the December 21, 1964

52a
Appendix G

contract; and also the performance by the defendant under
the December 21, 1964 contract.

Both contracts' involve an anti-skid device for automo-
biles invented by the president of the plaintiff, Frank Per-
rino (hereinafter “Perrino”); patented by him and the
patents assigned first to the plaintiff corporation and
thereafter pursuant to the December 21, 1964 contract to
the defendant. It should be remembered that anti-skid
devices for automobiles were not generally marketed prior
to 1964, and that there is no attack whatsoever on the
patents which underlie this suit.

This action started as one to set aside the December
21, 1964 contract and to enforce certain provisions of the
June 18, 1964, contract. That complaint was dismissed by
Judge Frederick vanPelt Bryan of this Court except that
Judge Bryan found that cause of action lay in the “Where-
fore” clause of the complaint that the defendant may have
not used its “best efforts to market and manufacture” the
invention assigned to it under the December 21, 1964 con-
tract. Civil No. 66-665.(S.D.N.Y., filed March 29, 1968),
aff’d 410 F.2d 572 (2d Cir. 1969).

Thereafter, Judge MacMahon of this Court, in denying
another motion for summary judgment, further delineated
the issue of “best efforts” as follows:

“. . . we think that ‘best efforts’ here means that
Singer was required to continue collaborating with
Perma for a reasonable length of time in a good
faith effort to solve the problems then preventing
marketing of the product.”

1. A third contract was entered into by the parties which is
referred to herein as the “Technical Services Contract”. No breach
has ever been claimed of this contract although it will be referred
to from time to time throughout this opinion.

—— ee ae —

° 53a
Appendix G

“For example: (1) Did Singer use its best efforts
for a reasonable time . . . to perfect the product
under all the circumstances? (2) In view of the fact
that the device was not ‘fail-safe,’ was Singer justi-
fied in abandoning the contract either because it was
impossible to make the device ‘fail-safe’ or because
it could not be made ‘fail-safe’ without unreasonable,
unwarranted or impractical efforts and expenditures
of time and money out of all proportion to engi-
neering and economic realities?” 308 F.Supp. 743,
748-49 (S.D.N.Y. 1970)

While I defined the issues at the start of trial in a some-
what similar manner to that of Judge MacMahon, I per-
mitted extraordinary latitude to the defense to prove all
that it could and to make any arguments it wished as to
its defenses and its counterclaim. Since the case was tried
without a jury I permitted certain evidence to be received
which is of questionable probative value. All of this was
done with a view that this trial would mark an end to this
litigation.

In summary, I find for the plaintiff on the claim that was
tried. I also find that the counterclaim advanced by defend-
ant was totally sham as a matter of fact.

This opinion is to be considered findings and conclusions
as required by Rule 52 of the Federal Rules of Civil Pro-

cedure.
IL
BACKGROUND OF THE PARTIES

Frank Perrino, although a person without formal engi-
neering training, has been a “tinkerer” all his adult life.

54a
Appendix G

After being discharged from the Air Force, where he
received training as an airplane mechanic, he returned to
his native New England where he invented an accelerator
brake and filed for a patent in 1959. An anti-skid control
was part of this accelerator brake patent application. In
1962, a separate patent application was filed for the anti-
skid invention. Thereafter, the anti-skid was separated
into five patent applications representing different aspects
of the device. These applications matured into five sepa-
rate patents between 1966 and 1969 after the assignment
of them to the defendant.

Perrino founded the plaintiff corporation, Perma
Research & Development Company (hereinafter “Perma”)
under Delaware law and has been its president at all relevant
times. Perma has its principal place of business in North
Attleboro, Mass.

The Singer Company (hereinafter “Singer”) is a New
Jersey corporation with its headquarters in Rockefeller
Center, New York, N. Y. While originally started as a
manufacturer of sewing machines, it has become a widely
diversified manufacturing concern. The 1965 annual report
for the Singer Corporation shows sales of $980 million
from manufacturing and sale of heating and air condition-
ing equipment, technical products, business machines and
computers, and a variety of other devices, of course includ-
ing sewing machines. During 1965 alone, Singer spent $18
million on its various research and development activities.

Both parties acknowledge that this Court has jurisdic-
tion over this action based on diversity of citizenship. 28
U.S.C. § 1332.

55a
Appendiz G
I.

BACKGROUND TO THE
NEGOTIATIONS LEADING TO
THE JUNE 18, 1964 CONTRACT

After the invention of the accelerator brake and the
recognition that the anti-skid control could be separated
from it, Perrino tried to interest various people in the
automotive industry in the devices. Of particular note is
the fact that he took the anti-skid device to the Bendix
Corporation in 1960, where it was considered by Stanley I.
MacDuff, who tested it once by driving it home and who
recommended that Bendix decline any interest in the
device. (As we will see later, this was the same Stanley
I. MacDuff whom the defendant Singer employed as an
expert when it became apparent that this case would go to
trial and who was permitted to give “expert” testimony
at trial.) Perrino, on behalf of Perma, was apparently
unable to interest anyone in the anti-skid device but con-
tinued working on it at North Attleboro, Mass.

Perma also arranged to have tests made of its anti-skid
device by certain automotive companies and by the Motor
Vehicle Research of New Hampshire (hereinafter
“M.V.R.N.H.”), apparently a private organization owned
by one Andrew White. M.V.R.N.H. agreed to do the test-
ing for a portion of the capital stock of Perma and White
became a member of the Board of Directors of Perma.
M.V.R.N.H., thereafter, issued a glowing report on the
Perma anti-skid device. Much of the report, however,
only hints at conclusions and little firm test data is con-
tained therein. Armed with this report and a promotional
firm, Perrino, on behalf of Perma, set out again to sell

56a
Appendix G

some manufacturer on the anti-skid control device. Appar-
ently this effort was again unsuccessful although Perma
had put together a number of hand-tooled, hand-finished
prototypes.

Apparently in late 1963 or early 1964, Perma had ar-
ranged for a distribution agreement of the anti-skid device
with a small number of automotive equipment distributors
and new car dealers and had entered into a contract for
the manufacture of the device by the Worcester Stamped
Metal Company of Worcester, Mass., which in turn had sub-
contracted with others for the manufacture and assembly
of some of the components of the device.

Perma, through Perrino, continued to try to interest
safety officials, highway patrols, insurance companies and
others in the device. Apparently some officials of the
Singer Company (Canada) Ltd. saw the promotional film,
the M.V.R.N.H. bulletin and advised the management of
the Elizabeth, N. J., Singer plant of the device.

During the period of the early 1960s, imports of cheaper
sewing machines (particularly Japanese made models) had
cut into Singer’s share of the sewing machine market.
Singer had already started to diversify its product line and
yet much of Singer’s Elizabeth plant, which had been en-
gaged principally in the manufacture of sewing machines,
stood idle.

Til.

THE NEGOTIATIONS FOR
THE JUNE 18, 1964
CONTRACT

In February 1964, representatives of Singer’s Elizabeth,
N. J., plant travelled to North Attleboro, Mass., to meet

57a
Appendix G

with Perrino and other representatives of Perma. Perrino
apparently told the Singer people at that time that the
Perma anti-skid device was “fail-safe” (or in plaintiff’s
version, “had fail-safe features”) and “that in case of a
failure, that the car would revert back to its normal brak-
ing”. The Singer representatives were also assured that in
the event of some internal failure “the unit in effect de-
activated and reverted back to the original brake system
on the car”. The Singer people were also shown the Perma
promotional film which stated “The Perma anti-skid
control . . . includes a fail-safe feature which will auto-
matically revert to the standard braking system in case of
failure.” These statements or ones similar to them alleg-
edly were reiterated by Perma officials in the months lead-
ing to the June contract.

Similarly, Singer was told that the device was “per-
fected” and that Perma had “had testing done by an in-
dependent laboratory.” In connection with this latter
assertion Perma supplied the Singer officials with copies of
the M.V. R.N.H. report.

It is on the basis of these asserted “false misrepresents.
tions” that the defendant asserts its counterclaim and its
affirmative defense since the device was neither perfected
nor fail-safe.

At the initial meeting in North Attleboro, the Singer
personnel present were Messrs. Kloby, Morris and
Sprague. Kloby was to be the man in charge of the Per-
ma anti-skid program for Singer. He admitted that he had
no background in engineering. Morris at the time was the
assistant general manager of the Elizabeth facility and
after June 1964, became the general manager of the facil-
ity. Sprague was the chief engineer of the Elizabeth plant.

58a
Appendix G

Each was a witness to a demonstration of the Perma
product at this February meeting. First a Perma employee
drove a car equipped with the anti-skid device on a test
tract behind the Perma offices. Then the representatives of
Singer were given a demonstration ride in a car equipped
with a Perma anti-skid device over country roads. A num-
ber of stops were made under panic conditions. Some of
these were made while the car was driven with two wheels
on dry road and the other two on the wet, snow-covered
shoulder.

Singer had immediately after the initial meeting in Feb-
ruary been given a set of plans and specifications, along
with three anti-skid controls and a cutaway of the device.
These were necessary for Singer to work out the cost to
build the anti-skid control. In return, the Singer officials
left with Perma a brochure which was boastful about the
engineering and quality control expertise of Singer.

While it is clear that Singer sought out Perma to beef up
production in its Elizabeth, N. J., plant, it is similarly clear
that Perma was anxious to have Singer take over the manu-
facturing of its anti-skid device since the Worcester
Stamped Metal plant was on strike and Perma was dis-
satisfied with the quality control of the units being deliv-
ered by Worcester.

Prior to signing the June 18, 1964 contract, Perrino and
his cohorts from Perma visited the Elizabeth plant and dis-
played to the top Singer officials the entire device with all
of its components spread out on conference tables. The
promotional film was shown and the M.V.R.N.H. report
was distributed. Among the many Singer representatives
present at the presentation were the top officials of the
Elizabeth plant along with the top engineers assigned to

59a
Appendiz G

that facility. This fact becomes important as we will see
because one of the “experts” who testified on behalf of the
defendant at trial indicated that any engineer worth his
salt would, on inspection, have rejected the Perma device
as totally unmarketable. I must assume that this was a
damning of the Singer engineering capabilities, which is a
strange defense and one which I will not rule on.

IV.

THE JUNE 18, 1964 CONTRACT AND THE EXPERI-
ENCE OF THE PARTIES THEREUNDER

On June 18, 1964, the parties entered into a Patent
Licensing Agreement by which Perma granted Singer the
exclusive right to manufacture the device in the United
States. In order to oust the Worcester Stamped Metal
Company, Singer agreed to buy the inventory then being
held by Worcester. This cost over a million dollars.

It is undisputed that, after the Elizabeth plant acquired
the inventory and started production, many defects were
found in the mass-produced device. During this period
from mid June to December 1964, officials from Perma
visited the Elizabeth plant quite often and the parties rede-
signed a number of the components of the device, including
many of the so-called “fail-safe features”.

Rather than attempt to describe the entire device, I am
appending hereto a copy of one of the patents which most
fully discloses its configuration and operation. (Appendix
A) From this the reader should note that anti-skid control
consists of a flexible cable attached to the speedometer
cable, which drives a set of weights in the sensor; the
weights spin in a centrifugal fashion which, when suddenly

60a
Appendix G

slowed or stopped, collapse in such a fashion or. one side to
force a cam gear to actuate a micro switch which permits
electricity to pull back a solenoid on the other side of the
sensor; which in turn permits a rotary valve to introduce
vacuum into the system. This vacuum draws back a dia-
phragm in the “Perma-Vac”, which in turn pulls back a
plunger which takes hydraulic fluid from the brake system
and thus relieves pressure on the brakes. A pressure switch
is included in the device at this point so that when pressure
is reduced the electricity flowing to the solenoid is cut off
and the vacuum stopped at the diaphragm, thus permitting
full brake pressure to be exerted. In this manner the
brakes are “pumped” in a “panic stop”, thus lessening the
chance for a locked wheel skid.

During the period of June through December 1964, the
pressure switch was redesigned with Singer’s chief engi-
neer on the project so deeply involved in the redesign that

he made some of the parts by himself in the tool room at >

the Elizabeth plant.

Similarly, it was discovered that the cam gear which
activated the micro switch was not operating properly.
Singer’s chief engineer on the project concluded that this
feature was “marginal” and suggested that it be rede-
signed. Instead, a temporary solution was worked out
whereby the cam gear was polished.

Other difficulties with the device were recognized by the
Singer staff. They noted that the sensing unit could become
packed with contaminants in ordinary usage; that the
rotary valve could and did “bind” on occasion; and that the
Perma-Vac spring should be strengthened.

On September 17, 1964, Singer’s chief project engineer
confided his fears about the reliability of the anti-skid con-
trol to management in a memorandum which reads in part:

6la
Appendix G

“I am deeply concerned about the reliability of this
device in general. My cause for alarm stems from
the fact that the performance testing does not detect
some defects which could cause malfunction of the
unit during operation on a car... I feel it would be
advisable to get a detailed specification from Perma
listing all the possible causes for failure so we may
incorporate tests to detect deficiencies before send-
ing units out of the plant. I strongly recommend
that the legal aspects of responsibilities be thor-
oughly investigated so that we may be fully covered
for what is sold before the confidence level is deter-
mined to be satisfactory.”

Whether, in fact, Singer asked Perma for such “detailed
specification” is unclear but it is clear that none was forth-
coming.

During the period from June through December 1964,
Singer conducted a number of tests on the anti-skid con-
trols that it was producing. These were done on test stands
acquired from Perma. A device was also installed on a
Singer vehicle. These tests, however, were not exhaustive,
but that was a choice by Singer management and in no way
now bolsters its counterclaim and affirmative defense.

Because of the problems recognized by Singer, few of
the anti-skid controls were marketed prior to the December
contract, thus leaving Perma financially distressed. Both
parties recognized the need for further engineering on the
device and this situation led to the negotiations for the
December 21, 1964 contract.

62a
Appendiz G

V.

NEGOTIATIONS FOR DECEMBER 21,
1964 CONTRACT BETWEEN
THE PARTIES

The exact genesis of the negotiations leading to the
December 21, 1964 contract between the parties is unclear
but it is clear that Perma entered the negotiations with a
negative balance sheet and the recognition that it could not
perfect the anti-skid device for market on its own. Singer
offered to Perma its engineering skills and purported
expertise.

But, before entering the December 21, 1964 contract,
Singer, although it had done its own marketing surveys
and had seen Perma’s estimates, commissioned William E.
Hill & Co., Inc. to do another market survey. The report
of the Hill organization delivered to Singer management
at least a week prior to the December 21, 1964 contract with
Perma totally demolishes the counterclaim and affirmative
defense advanced by Singer. It so dramatically proves
that the management of Singer could not have relied on
any alleged false representation by Perma that it is set
forth in full in Appendix B hereto.?

Among the “Principal findings and conclusions” of the
report are the following:

“The Perma anti-skid control falls short of meet-
ing requirements of automotive engineers and does
not provide the improvement possible in theory.
The consensus of many engineering tests that have

2. It is astounding to me that in the hundreds of pages of pre
posed findings and conclusions and briefs submitted by the
tatives of Singer there is not one mention of the Hill report, except
to serve as a crutch on the question of damages.

63a
Appendiz G

been run on the unit indicate that the Perma control,
as compared to a panic or locked wheel stop, gives
improved steering control but requires a greater
stopping distance to come to a complete stop. The
automotive brake and safety engineers who have
reviewed its performance do not agree on the value
of the Perma anti-skid control . . .”

“The General Motors Research Center, the Ford
Advanced Design Group and the Chrysler Brake
Laboratory are against the use of the control.”

“Based on evaluation by major automobile manu-
facturers the Perma anti-skid control does not meet
established requirements.”

In an appendix to the Hill report is a summary of the
results of tests which representatives of Singer, at trial,
claimed were concealed from Singer by Perma prior to ‘he
December 21, 1964 contract. Apparently this claim has
now been abandoned.

[1] Singer, however, still presses its claim that Perma
falsely misrepresented that the device was “fail-safe” and
that it was fully “perfected” and “tested” and that Singer
relied upon these representations in entering the December
21, 1964 contract. I hold as a matter of fact that there was
no such reliance. Without reliance any misrepresentation
is not cognizable at law either as a counterclaim or as an
affirmative defense. In the situation presented only an
ostrich could make the claim defendant does. It is clear to
me that both the counterclaim and the affirmative defense
raised by Singer are sham.

64a
Appendiz G
VL

THE DECEMBER 21, 1964 CONTRACT
BETWEEN THE PARTIES

On December 21, 1964, the parties entered into a contract
whereby Perma assigned its patent applications to Singer.
It is clear that the parties knew at that time that the anti-
skid device was not fully perfected and that Singer would
have to do work to make the device a marketable one. In
consideration for the assignment of these rights Singer
paid off all the outstanding debts of Perma and agreed to
pay royalties on each Perma anti-skid control marketed.
No minimum royalty was agreed to in the contract, a some-
what unusual arrangement.

It is true that both parties to the contract were looking
for the anti-skid control to be quickly marketed, for both
had expectations of deriving profits from it, but these
expectations do not give credence to Singer’s argument
that the contract did not call for any engineering work by
Singer on the device. That promised engineering work is
the total foundation upon which the December 21, 1964
contract is based. It is true that the expected engineering
work is not spelled out in the contract. And it is for that
reason that we must consider whether Singer made its best
efforts in collaboration with Perma for a reasonable length
of time in a good faith effort to solve the problems then
preventing the marketing of the product.

In this connection it must be noted that the December 21,
1964 assignment of Perma’s patent rights to Singer was
accompanied by a Technical Services Contract of the same
date. This Technical Services Contract required Perma to
collaborate with Singer in any engineering efforts which

65a
Appendiz G

Singer required the inventor to do to make the device
marketable. The very existence of the Technical Services
Contract gives the lie to Singer’s contention that no fur-
ther engineering work was contemplated by the parties as
of December 21, 1964, the date they entered the patent
assignment contract.

3 Vil.
SINGER’S PERFORMANCE UNDER THE CONTRACT

To properly evaluate Singer’s performance under the
patent assignment contract it is necessary to look first at
Singer’s capability. In 1965, Singer had 15 research and
development laboratories and employed more than 2,200
scientists, engineers and technicians. Singer’s net earn-
ings in 1965 were $44 million.

Singer chose to leave in charge of the Perma project
after December 21, 1964, those who had worked on produc-
tion under the prior June contract: Robert Kloby and
Albert Romel. Kloby was given the title Manager, Perma
Anti-Skid Program. His education and experience were
concentrated in marketing, market evaluations and sales
projections. He had no engineering background whatso-
ever. Albert Romel was an engineer graduated from the
Newark College of Engineering in June 1964, which he
attended while working for Singer at the Elizabeth plant.
Virtually for his entire adult life Romel had been employed
at the Elizabeth plant where he had been engaged in the
manufacture of sewing machines. Prior to working on the
Perma device, he had no employment experience in automo-
tive or brake industries. Until he started to work on the
Perma device he had never worked on brake systems.

66a
Appendix G

Both Kloby and Romel testified at trial. Romei, the
engineer in charge assigned to the project by Singer, took
22 minutes on the witness stand to compute the relative pro-
portion of one circle to another after being given pencil and
paper and the relevant equations which require merely
squaring one number. At the point this exercise was called
for, Romel had been on the stand for a number of days.
He did not appear nervous. Yet his computations were
totally wrong. The history of the project shows that
Romel was not an innovator but merely followed his in-
structions. He testified that although he had worked on the
Perma device starting in June 1964, and had been exposed
to it in February 1964, he had not analyzed the invention
prior to the contract of December 21, 1964.

Romel’s staff consisted of three graduate engineers, one
engineering student and various others who were given
grandiose titles which seem to have been invented solely for
this litigation. One engineer from Singer’s Denville re-
search laboratory was also assigned to the project for a
period of about one month.

Kloby and Romel were under orders to keep expenses
down. The manager of the Elizabeth plant received a
memorandum from corporate headquarters dated January
7, 1965, which stated in part:

“It is of the utmost importance that we spend no
additional moneys and generate cash flow as quickly
as possible .. .”

To this the following response was made:

“Every additional expenditure for the Perma pro-
duct line is being scrutinized thoroughly by this office.

67a
Appendiz G

No additional moneys are being spent unless abso-
lutely necessary in order to control our total invest-
ment.”

One Singer official estimated that during the year
1965, the project cost $190,000 including salaries of all
assigned to the project, allocation of normal expenses to
run the Elizabeth plant, ete. This figure appears inflated
although Singer at trial tried to prove an even more bloated
figure. In this attempt the witnesses for the defendant
contradicted themselves and each other in many respects.
For example, Kloby testified that in September 1965, he was
removed from the Perma project and returned to “Forward
Planning” at the Elizabeth plant; yet his salary for the
entire year is attributed to the Perma project.

In any event, it is clear that Singer gave inadequate fund-
ing to the entire program and staffed it with inept and
inexperienced people who were unable to even understand
the problems, much less cope with them. At one point
Singer advertised for an automotive engineer who special-
ized in brake systems. He was not hired.

Shortly after undertaking the December 21, 1964 contract,
Singer attempted to set up “liaison” with automotive and
brake manufacturers. This consisted of one trip for Kloby
and Romel to the Detroit area early in 1965, and conversa-
tions with various people there. It is astounding that
Kelsey-Hayes, a well-known brake manufacturer, at that
time offered to analyze and do tests on the device (appar-
ently without cost to Singer), but that the offer was rejected
out of hand, at least until Singer recognized that this litiga-

tion was impending.
In March 1965, Singer received from E. I. duPont de-

Nemours & Co. (hereinafter “duPont”) an analysis of a

68a
Appendix G

1963 vintage Perma device. This analysis set forth a num-
ber of potential failure modes in the device which could
cause an unsafe condition and loss of brakes. No indepen-
dent analysis of the device was made at this time by Singer.
Romel thereafter concentrated the efforts of his staff in
attempting to resolve the problems posed by the duPont
report and those obviously required by the changes made
in braking systems introduced by the automotive manu-
facturers.

Some of the 1965 model automobiles had for the first time
self-adjusting brakes and dise brakes. For the Perma
device to work with these new features required greater
fluid displacement and higher hydraulic pressure. Pur-
suant to the Technical Services Contract, Perma proposed
to change the device by changing the piston bore and the
spring in the Perma-Vac. This, however, would have ren-
dered worthless much of Singer’s inventory and in Febru-
ary 1965, Perrino, at Romel’s direction, designed a transfer
valve whereby vacuum would be introduced to the front of
the Perma-Vac diaphragm to assist in pumping the brakes.
The device thus became totally vacuum dependent with this
change and introduced more failure modes into its opera-
tion. If there was a loss of vacuum for any reason (e. g. an
engine stall), the brakes might not be fully reapplied.

In order to meet the demands of the new braking systems
Singer also experimented with a “restrictor valve” which
was devised by Romel and those working for him. The
“restrictor valve” is a simple device which permits hydrau-
lie fluid to run more freely in one direction than in the
other. It appears that there are serious questions as to the
efficacy of this addition and these questions are of real
substance.

69a
Appendix G

It is clear to me that Romel and his staff did not have
a full understanding of the dynamics of the device or of an
automobile to which it was to be attached.

Romel tested various models of the Perma anti-skid
throughout the period from June 1964 through December
1965, on test stands basically supplied by Perma at the
Elizabeth Singer plant. He also arranged for road tests
at the Linden, N. J., airport.

It is of some interest that the officials of Singer spurned
Perrino and the other officials of Perma during most of the
period after the December 21, 1964 contract. While the
Perma people were at the Elizabeth plant, conferring with
Singer at least two or three times a week under the June 18,
1964 contract, this liaison almost totally ceased after Singer
entered the December 21, 1964 contract even though under
the Technical Services Contract Perrino and Perma re-
mained obligated (at no extra cost) to confer with Singer
about the development of the anti-skid unit. When the
Technical Services contract expired it was not renewed but
thereafter Perrino continued to make technical suggestions
to Singer.

In June 1965, Singer through Romel and his staff were
conducting road tests on the Perma device. These tests
were conducted on a completed but unused section of Inter-
state Highway 295.

VIII.

SINGER’S DECISION TO ABANDON
THE CONTRACT
At about this time, corporate politics inside Singer
called fcr a shakeup in management. Apparently there had
also been some grumbling from corporate headquarters

70a
Appendix G

about the non-profitability of the Perma project. Finally,
Alfred DiScipio was named as corporate vice-president in
charge of Consumer Products. Among the many product
lines under Mr. DiScipio’s direction was the Perma Anti-
Skid Device program.

DiSeipio, with some of his staff, visited the Elizabeth
plant to review production of all product lines manufac-
tured there. In connection with the review the group from
corporate headquarters went to view the road tests of the
Perma device being conducted at the Interstate Highway.

A car was driven down the highway and subjected to a
“panic” stop, first with the Perma device inactivated and
then allegedly twice with the anti-skid control in operation.
On all three runs the car swerved and skidded danger-
ously out of control.

DiScipio and his group immediately got into their own
vehicles and drove away, surprisingly without even check-
ing to see if the anti-skid had been operative or ascertain-
ing what caused its failure.

At a meeting following the abortive demonstration,
DiScipio announced that the anti-skid control was not fail-
safe. He told the group that Singer would not market a
product which “could leave the purchaser . . . less safe
than if he hadn’t elected to purchase it...” It must have
been as clear to DiScipio’s subordinates as it was to me on
trial that DiScipio was enunciating an impossible standard
yet apparently none of his subordinates dared to question
their boss. It is my belief that DiScipio had determined
to get rid of the Project on the very day he first saw it
demonstrated and that he communicated this decision to his
subordinates although not in so many words.

In any event, a few days later DiScipio set up a “Task
Force” to study the Perma project which was chaired by

71a.
Appendix G

Burton Person, DiScipio’s assistant, and, significantly,
included an attorney from the staff of house counsel. Per-
son thereafter circulated a memorandum setting out the
guidelines for the work of the Task Force. The memoran-
dum questions whether manufacturing and marketing an
anti-skid device for automobiles was the type of business
which was appropriate for Singer and outlined certain
areas for study, including Singer’s legal exposure and pos-
sible costs if the project was terminated. Technical evalu-
ation of the device was first sought from Kloby and Romel.
Romel’s report dated July 22, 1965, declares “due to cost
and limited personnel available, it was decided to restrict
extensive experimentation to short range projects.” This
admission in and of itself gives a fair insight into the real
efforts used by Singer under the December contract with
Perma.

Within days after getting the Romel report, Person, on
August 10, 1965, circulated the first report of the Task
Force. Basically, it recommended the withdrawal of the
device from the market; the retrieval of units already sold
and in use; the termination of distributorship contracts;
and an approach to Perma to “provide flexibility for Singer
in regard to divestiture”. Significantly, the report also
directed that all letters and strategy were to be reviewed
by outside counsel to Singer. At the time of the prepara-
tion and circulation of this first report, no outside engi-
neering evaluation of the device was considered by the
Task Force although it is clear that the members of the
group had at the outset contemplated getting such an evalu-
ation from the Cornell Aeronautical Laboratories and at
least from Singer’s own Denville Research and Develop-
ment Laboratories.

‘

72a
Appendix G

The August 10, 1965 First Report of the Task Force
sounded the death knell of any real effort by Singer to
perfect and market the Perma anti-skid device. Much of
what occurred thereafter was merely a charade staged in
contemplation of the possibility of litigation.

On August 30, 1965, Person and Singer’s attorney Boriss
went to North Attleboro to meet with Perrino and other
representatives of Perma. Person announced that the
Perma program had been stopped since the device was not
“fail-safe”, which he defined as being so designed and made
“so that no matter what, it must revert to the conventional
braking system”. Person also stated Perma had to solve
the problems.

On September 9, 1965, Person wrote a letter to Perrino
asserting that Singer had legal claims against Perma.
This letter also stated that Singer proposed “to procure
the evaluation of a qualified, independent laboratory and
have in fact initiated discussion with the Cornell Aeronau-
tical Laboratory”. The letter failed to state that Singer
had decided against having Cornell do such an evaluation.

In fact, Person had, on September 3, 1965, requested
from Singer’s own Denville Research and Development
Laboratory a report on whether the anti-skid device was
fail-safe. The device as submitted to the Denville scien-
tists and engineers contained the transfer valve. The
Denville report as finally submitted is dated November 9,
1965. The contents of that report are extremely significant
but they will be outlined below.

Meanwhile, Romel and his staff at the Elizabeth Singer
plant kept searching for a quick solution to the problems of
the anti-skid device. I can characterize these efforts only
as being abysmally inept. The proposals generally ignored

73a
Appendix G

fundamental engineering concepts. For example, to mini-
mize hysteresis (sticking) in the rotary valve, Romel
experimented with a larger rotary valve, thus increasing
the area where friction would occur with concomitant
aggravation of the fundamental sticking problem.

At the same time, Perrino had also attacked the “fail-
safe” problem and by early November had come up with a
set of proposals including a bleeder hole to the back of the
Perma-Vac which would restore brakes if vacuum was
present longer than a pre-determined time; a variable dis-
placement piston to increase output pressure; and a
vacuum time delay device which would turn off the device
after a pre-determined time. Perrino called the last pro-
posal a fail-safe for the fail-safe.

On November 4, 1965, Perrino called Person and gave
him a brief description of his proposals and agreed to send
him a schematic of the devices. He also called Romel and
described the proposals to him and likewise agreed to send
Romel a schematic.

Without seeing the drawings, Romel, in a conversation
with Person, stated his opinion that the proposals
advanced by Perrino would not work.

Rome! did not get the drawings until November 10, 1965,
although Person, who could not judge the devices on his
own, did receive the schematics on November 9, 1965. On
November 9, 1965, Person also received the report of the
engineering analysis from Singer’s Denville Research and
Development Laboratory. This report described the work
by Singer at Elizabeth as “modest”, and concluded that the
device was not fail-safe because of its vacuum dependence
caused by the transfer valve (induced by Romel to save
inventory). The report further stated that a redesign pro-

74a
Appendix G

gram estimated to cost $30,000 could overcome this prob-
lem. The defendant did nothing to implement this pro-
posed redesign program.

On the same day as Person received the Denville report
and Perrino’s proposal, he submitted a Task Force report
to DiScipio which formally recommended the divestiture
of the Perma program. That night DiScipio and Person
met and DiScipio orally agreed to the divestiture. Two
days later, DiScipio gave formal approval to the Task
Force Report but noted that a reserve of $2,000,000 should

be set up instead of the $1,500,000 recommended in the

report.

Person then set up a meeting with Perrino on November
22, 1965, in Providence, R. I. There he handed Perrino a
letter dated the same day which basically rejected Perrino’s
ideas to make the anti-skid device more “fail-safe”. Person,
when questioned about Singer’s real purpose, told Perrino,
“Very bluntly, Frank, we do not want to be in the brake
business—our people at Elizabethport should not have
gotten into the brake business.” Person tried to get Per-
rino to change the December 21, 1964 contract »ut Perrino
refused and threatened to bring this lawsuit.

After the November 22, 1965 meeting, this litigation
loomed and nothing much of what was done by Singer is of
much import. Of course, Singer tried to cut its losses by
attempting to sell the device. For some reason, perhaps
as an attempt to cloak what Singer recognized was a breach
of its contractual obligations, Romel continued working on
the Perma project with his curtailed staff. He spent most
of his time until January 26, 1966, prototyping the device
for new model cars, i.e., measuring the lengths of vacuum
hose, speedometer cable, ete.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_0733%3A2. Public record. Not legal advice.