Sarver v. Detroit Edison Co.

571 N.W.2d 759, 225 Mich. App. 580

• Court: Michigan Court of Appeals
• Decided: December 23, 1997
• Docket: Docket 181801
• Status: Published

Opinions

Holbrook, Jr., P.J.

Defendant appeals as of right from a circuit court judgment entered on a jury verdict that found that defendant had wilfully converted plaintiff’s idea that she had submitted under defendant’s employee suggestion plan. The jury awarded plaintiff $3,384,427 in damages. We reverse and remand for a new trial.

Before retiring from The Detroit Edison Company in 1994, plaintiff worked as a processor in the customer accounting department. Plaintiffs official job title was “Secondary Account Analyst,” and her duties included addressing customer complaints, solving problems with customer billing, and training other employees in the company. While working at Edison, plaintiff developed skill in operating the company’s computerized “Customer Information System” (CIS). However, plaintiff did not officially work as a computer programmer.

About 1976, when the company started placing tum-on/disconnect orders on the CIS, plaintiff began thinking about an idea to make the company’s tum-on/disconnect process run more efficiently. Edison’s traditional system for tum-on/disconnect orders worked as follows: When a dwelling was vacated, Edison would send a field service person to the unit. The field person would read the meter on the day the unit was vacated and bill the prior occupant. Subsequently, when a new occupant moved into that unit, another field representative went to the unit, read the meter, and billed the new occupant. Additionally, a scheduled monthly meter reader was sent to the premises as well. Over the years, plaintiff realized that three people were being sent to perform the same job. Plaintiff believed that Edison should only perform one field call, as opposed to three, and that the new and old occupants’ accounts should be prorated for the days that they did not occupy the unit. Additionally, plaintiff devised a system that would involve the computer automation of this process.

In November or December of 1990, plaintiff outlined her idea to her supervisors, all of whom appeared to plaintiff to be “enthused and excited about the idea.” Plaintiff was told by her supervisors to submit a written proposal of her idea. She then proceeded to research the company policy on improvements and began to compile information regarding her idea, writing her proposal on weekends, at home in the evenings, and occasionally on breaks during the day. On January 16, 1991, plaintiff submitted her proposal to Edison’s idea improvement committee. Soon after, the proposal coordinator called plaintiff and asked her which divisions the proposal affected, to which plaintiff replied, “all six divisions.”

At the time plaintiff submitted her proposal, she was aware that Edison had a policy entitled “General Order 207” dealing with employee suggestions. According to General Order 207, which was part of plaintiff’s employee manual, she could only receive a maximum of $5,000 for the submission of a proposal that rendered tangible savings for the company. However, plaintiff could receive an award for intangible benefits, as well as an additional award from the company if the savings it realized were substantially more than originally anticipated. At some point after the submission of her idea, plaintiff was told by the company to remove General Order 207 from her employee manual and replace it with “Policy EM-10.”

In June 1991, after receiving no response from defendant regarding her proposal, plaintiff discovered that Edison was using her idea. At that time, plaintiff was about to process a tum-on of an apartment on the CIS when she discovered, to her surprise, that the order was automatically completed. Being upset, plaintiff expressed concern with her immediate and general supervisor about the fact that her proposal had been implemented without her knowledge. Subsequently, plaintiff continued to have discussions with her supervisor regarding the status of her proposal. Eventually, on November 1, 1991, plaintiff’s supervisor informed her that her proposal had been rejected because it addressed ideas already under consideration by the company, and therefore, according to company policy, plaintiff was not entitled to compensation.

Plaintiff discussed the rejection documents with her supervisor, as well as her concerns regarding the delay in evaluating her proposal. In response to a memorandum to the company’s proposal plan coordinator from plaintiff’s supervisor, plaintiff was informed that her proposal would be reconsidered. Subsequently, Edison again rejected her proposal.

Plaintiff brought this lawsuit in September 1992, alleging that Edison had breached its contractual obligation to her. She subsequently filed an amended complaint, alleging several additional counts besides breach of contract, including rescission or other equitable relief, fraud, conversion, and intentional infliction of emotional distress. On Edison’s motion for summary disposition, the trial court dismissed all of plaintiff’s claims except the claims for conversion and breach of contract. Edison then moved for a rehearing, arguing that plaintiff’s contract damages should be limited to $5,000. The trial court denied Edison’s motion for a rehearing, reasoning that a question of fact existed regarding the amount of contract damages, if any, that plaintiff could be awarded.

At trial, following the close of plaintiff’s proofs, defendant moved for a directed verdict with regard to the contract and conversion claims. The trial court denied the motions. The jury ultimately found that defendant had intentionally and wilfully taken or used plaintiff’s personal property, and awarded her $3,384,427 for the enhanced value of that property. Defendant’s postjudgment motions for judgment notwithstanding the verdict or remittitur were denied by the trial court. Defendant now brings this appeal, and we reverse.

On appeal, defendant argues that plaintiffs submission of an idea pursuant to the employee suggestion plan did not give rise to a property interest that was subject to a conversion cause of an action. We agree. In Michigan, conversion is defined generally as “any distinct act of domain wrongfully exerted over another’s personal property in denial of or inconsistent with the rights therein.” Foremost Ins Co v Allstate Ins Co, 439 Mich 378, 391; 486 NW2d 600 (1992). See also Trail Clinic, PC v Bloch, 114 Mich App 700, 705; 319 NW2d 638 (1982). “The gist of conversion is the interference with control of the property.” Prosser & Keeton, Torts (5th ed), § 15, p 102.

What property may be the subject of an action for conversion was at first determined on the basis of the fiction of losing and finding. Any tangible chattel could be lost and found, and so could be converted. . . .

Intangible rights of all kinds could not be lost or found, and the original rule was that there could be no conversion of such property. But this hoary limitation has been discarded to some extent by all of the courts. The first relaxation of the rule was with respect to the conversion of a document in which intangible rights which were merged, so that the one became the symbol of the other — as in the case of a promissory note, a check, a bond, a bill of lading, or a stock certifícate. This was then extended to include intangible rights to which a tangible object, converted by the defendant, was highly important — as in the case of a savings bank book, an insurance policy, a tax receipt, account books, or a receipted account. In all of these cases, the conversion of the tangible thing was held to include conversion of the intangible rights and to carry damages for it. The final step was to find conversion of the rights themselves where there was no accompanying conversion of anything tangible — as, for example, where a corporation refuses to register a transfer of the rights of a shareholder on its books. [Id. at 90-91 (citations omitted).]

The doctrine of conversion has not extended beyond the kind of intangible rights that are customarily merged in, or identified with, some document or other tangible property. Id. at 92. Prosser and Keeton acknowledge, however, that “[t]here is perhaps no very valid and essential reason why there might not be conversion of ... an idea, or ‘any species of personal property which is the subject of private ownership.’ ” Id., quoting Vaughn v Wright, 139 Ga 736; 78 SE 123 (1913). Thus, plaintiff’s idea could be subject to conversion if she could establish an exclusive right of owmership in the idea.

Michigan appellate courts have held that certain intangible property can be the subject of a conversion action. See, e.g., Warren Tool Co v Stephenson, 11 Mich App 274, 276; 161 NW2d 133 (1968) (negotiable instrument); Tuuk v Andersen, 21 Mich App 1, 13; 175 NW2d 322 (1969) (right to lease a machine); Miracle Boot Puller Co, Ltd v Plastray Corp, 57 Mich App 443, 451; 225 NW2d 800 (1975) (patent right). Notably, in each of these cases, the plaintiff’s ownership interest in intangible property was represented by or connected with something tangible. Here, although plaintiff expressed her idea for an automated tum-on/disconnect process in written form, she did not thereby transform the idea into intangible property that was subject to private ownership.

An idea is usually not regarded as property because our concept of property implies something that can be owned and possessed to the exclusion of others. To protect an idea under a property theory requires that the idea possess property-like traits. Courts consider the elements of novelty or originality necessary for a claim of “ownership” in an idea or concept. These elements distinguish protectable ideas from ordinary ideas that are freely available for others to use. It is the element of originality or novelty that lends value to the idea itself. [Reeves v Alyeska Pipeline Service Co, 926 P2d 1130, 1143 (Alas, 1996) (citation omitted).]

In Joyce v General Motors Corp, 49 Ohio St 3d 93; 551 NE2d 172 (1990), the Supreme Court of Ohio examined a case factually similar to the one at bar. There, the plaintiff submitted an idea pursuant to the defendant’s employee suggestion plan. Under the plan, a suggestion committee decided whether the suggestions were eligible for awards and determined the amount of an award should one be given. Id. at 93. The plaintiff’s suggestion was ultimately rejected because a duplicate suggestion allegedly had been turned in on the same day. Id. The plaintiff subsequently sued the defendant on the grounds that his ideas had been wrongfully appropriated. Id. The Joyce Court rejected the concept that an “idea” can be considered property that is protected under the law:

In Gottschalk v Benson [409 US 63, 67-71; 93 S Ct 253; 34 L Ed 2d 273 (1972)], the United States Supreme Court stated that ideas themselves are not subject to individual ownership or control. They do not rise to the level of property and are not in themselves protected by law .... The law does not favor the protection of abstract ideas as property of the originator. “An idea should be free for all to use at least until someone is able to translate such idea into a sufficiently useful form that it may be patented (trademarked) or copyrighted.” ... In Puente v President & Fellows of Harvard College, [248 F2d 799, 802 (CA 1, 1957)], the court indicated that an idea which is not in a patented (trademarked) or copyrighted form is not protected “unless it is acquired and used under such circumstances that the law will imply a contractual or fiduciary relationship between the parties.” [Joyce, supra at 96.]

The Joyce court ultimately held that ideas are not the property of anyone unless expressed in a legally protected manner, and the plaintiff had not expressed her idea in such a manner.¹ Id. Moreover, the Joyce court found that the public disclosure of the plaintiffs ideas made them available to all and operated to deprive the plaintiff of any further rights in them. Id. at 96-97. See also Matzan v Eastman Kodak Co, 134 AD2d 863; 521 NYS2d 917 (1987); Bloom v Hennepin Co, 783 F Supp 418 (D Minn, 1992); HJ, Inc v Int’l Telephone & Telegraph Corp, 867 F2d 1531 (CA 8, 1989); GS Rasmussen & Associates v Kalitta Flying Service, Inc, 958 F2d 896, 902-903 (CA 9, 1992).

Here, plaintiff has not established any ownership interest in the idea of automated tum-on/disconnect policies. Although she may have expended significant effort in formulating and drafting her proposal, her own expert witness at trial testified on cross-examination that the idea was neither novel nor unique. Thus, we hold that plaintiffs idea did not constitute property subject to a conversion cause of action. However, to the extent that plaintiff seeks compensation for formulating, drafting, and submitting her idea pursuant to defendant’s employee suggestion program, rather than for the idea itself, she has stated a breach of contract claim. Although the jury found no breach of contract existed in this case, we believe that the jury might have found differently on this claim had the conversion claim not been erroneously presented. Accordingly, we reverse and remand for a new trial on plaintiffs breach of contract claim only.

In the event that the trier of fact determines on retrial that a breach of contract occurred, the question of the extent of plaintiffs damages must also be determined. Employee suggestion programs, such as the one in this case, have been viewed by courts as presenting continuing offers to employees to develop new and cost-saving ways for a company to perform. When an employee submits a suggestion, that employee is deemed to have accepted the employer’s offer and a valid and enforceable contract is created. Carlini v United States Rubber Co, 8 Mich App 501, 503; 154 NW2d 595 (1967). See also RaybestosManhattan, Inc v Rowland, 460 F2d 697, 700 (CA 4, 1972). In this case, a question of fact exists whether the compensation terms of the parties’ contract included those set forth in General Order 207, in effect at the time plaintiff originally submitted her proposal, or Policy EM-10, in effect at the time that Edison reevaluated plaintiff’s proposal following original rejection. Under ¶ 9 of General Order 207, plaintiff would be entitled to a maximum of $5,000 for tangible savings to Edison as well as an award for “significant” intangible benefits realized by defendant. Moreover, pursuant to ¶ 10 of General Order 207, an “additional award” would be available if savings after one year of implementation were “substantially more than originally estimated.” On the other hand, under Policy EM-10, plaintiff would be entitled to fifteen percent of Edison’s “net actual savings from the first 2 years of operation of the new idea.” In the event that it is determined that Edison breached its contract with plaintiff, the trier of fact must next determine which of the above policies governed the amount of compensation due plaintiff.

Reversed and remanded for a new trial.

A. T. Davis, J., concurred.

1 Plaintiff argues that the Joyce court suggests that if a plaintiff’s idea has been developed in a confidential relationship, it may be afforded legal protection by way of an “implied contract or implied fiduciary relationship.” Yet, in this case, because plaintiff submitted her idea pursuant to a contractual relationship with her employer, no contract need be implied pursuant to Joyce.