Noble v. Joseph Burnett Company

Supreme Judicial Court of Massachusetts · 1911 · Corporations

208 Mass. 75 (1911)

Updated August 22, 2026

Corporationsequity jurisdictionaccountingtrade secretsbreach of trustnotice to corporationknowledge of officersfair and equitable share of net profits

Facts

Under a contract with Joseph Burnett and Company, Markoe agreed to devote his time and skill to producing formulas for the mutual benefit of himself and the firm and to permit the firm to use them in manufacturing. The firm agreed to market profitable compounds made from the formulas and to pay Markoe a fair and equitable share of the net profits. The bill alleged that Markoe's work was performed, that large profits had accrued, and that an accounting at common law would be complicated and inadequate. It further alleged that the defendant corporation, organized by members of the firm who knew Markoe's rights, took and used the formulas and had profits in its hands.

Issue

Whether the bill in equity could proceed against the surviving partners and the corporation despite objections that the profit-sharing term was too indefinite, that the corporation had no direct contract with Markoe, and that the bill was multifarious. Also, whether equity could require an accounting of profits derived from the formulas.

Rule

Equity has jurisdiction to compel an accounting where the plaintiff claims a share of net profits and a common-law remedy would be inadequate because the accounting is complex. A contractual promise to pay a fair and equitable share of net profits is enforceable when the work has been performed and the court is asked only to apply that standard to profits already realized. A corporation that receives trade-secret formulas with notice that their transfer from the original holder is a breach of trust takes them subject to the same trust, and the knowledge of its officers and organizers is imputed to the corporation.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Portland, Maine, chemist Elena Ruiz agreed that she would spend six months developing specialty fragrance formulas for Harbor Birch Laboratory, a partnership. The partnership could manufacture any profitable products from the formulas and promised Elena a fair and equitable share of the net profits; after several product lines succeeded, Elena alleged that calculating her share would require tracing expenses and revenues across dozens of batches and distributors.

If Elena sues the surviving partners seeking payment of her share, which is the best argument that equity has jurisdiction?

Explanation. The majority held that when the plaintiff claims a portion of net profits and alleges that an accounting would be extremely complicated and common-law relief inadequate, equity may compel an accounting. This is so irrespective of whether the agreement made the parties partners.