Joseph H. LYONS and Jessie H. Lyons, individually and as
co-partners doing business under the name and
style of Lyons Electrical Distributing
Company, Plaintiffs-Appellants,
v.
WESTINGHOUSE ELECTRIC CORPORATION and General Electric
Company, Defendants- Appellees.
Joseph H. LYONS and Jessie H. Lyons, individually and as
co-partners doing business under the name and
style of Lyons Electrical Distributing
Company, Petitioners,
v.
The Honorable Lawrence E. WALSH, United States District
Judge, Respondent.
Docket 23312, 23325.
United States Court of Appeals Second Circuit.
Argued Jan. 3, 1955.
Decided March 29, 1955.
Rehearing Denied in No. 23325 April 25, 1955.
Jоhn D. Calhoun and Albert R. Connolly, New York City, for the motion, and in opposition to the petition.
Copal Mintz, New York City, opposed to the motion, and on behalf of the petition.
Before L. HAND and MEDINA, Circuit Judges, DIMOCK, District Judge.
L. HAND, Circuit Judge.
The defendant, Westinghouse Corporation, with the support of an affidavit of the General Electric Company, moves to dismiss an appeal taken by the plaintiff from an order,
The Westinghouse Corporation argues that the order on appeal was no more than 'a mere stay of proceedings which a court of law, as well as a court of equity, may grant in a cause pending before it by virtue of its inherent power to control the progress of the cause so as to maintain the orderly processes of justice';1 and that, therefore, even though the federal action is at law, we should not treat the order as a substitute for a decree in equity enjoining its further prosecution. Judge Medina and Judge Dimock agree with this position and the motion to dismiss the appeal will therefore be granted. Although I should bе personally disposed to hold that the order falls within the doctrine of Enelow v. New York Life Insurance Co., supra,
The first defence which the plaintiffs at bar pleaded to the action in the state court was in seven separately numbered paragraphs, the first of which alleged that the Westinghouse Corporation, the General Electric Companies 'and others' were 'engaged in a mutual conspiracy together to monopolizе the manufacture, distribution and sale of electric lamps in the United States.' The second paragraph alleged that, in pursuance of that conspiracy, the conspirators agreed not to 'sell electric lamps in the usual course of trade, but only through alleged 'agents' under their direction, control and surveillance;' and that the conspirators compelled the 'alleged 'agents' to observe uniform price schedules,' and prevented 'said alleged 'agents' from competing among each other.' The fourth paragraph alleged that the conspirators were successful in their purpose of establishing a monopoly; and the fifth, that 'by reason of the premises the defendants * * * were unable to purchase electric lamps in the ordinary and usual course of trade, and, in order to engage in their aforesaid business, were compelled to, and did, execute whatevеr agreements and papers the plaintiff, from time to time, prescribed or demanded, and they were compelled to, and did, comply with all other requirements specified by the plaintiff.' The sixth paragraph alleged that these 'agreements and transactions * * * were exacted by the plaintiff in furtherance and in execution of the aforesaid conspiracy and as an integral part of the carrying out thereof'; and the seventh, that 'by reason of the premises, the agreements and transactions alleged in the complaint were unlawful.' The complaint at bar alleged the existence of a conspiracy in so nearly identical terms that we need not repeat them; and its twelfth paragraph alleged that 'by reason thereof, it was impossible for plaintiffs profitably to engage in the business of selling electric lamps without having for sale and delivery electric lamps manufacturеd by the defendants * * * and to carry on such business most successfully and profitably, it was necessary to handle the lamps of both defendants.' The thirteenth paragraph then alleged that because of this situation 'the plaintiffs were compelled to enter into written contracts * * * as 'agents' at prices and upon terms fixed * * * pursuant to the conspiracy and * * * were limited to * * * selling * * * to persons designated or authorized * * * all * * * in pursuance of the conspiracy.' Further, that the contract, on which the Westinghouse Corporation sued in the state court, appointed the plaintiffs its 'agents' to sell lamps, consigned to it at prescribed prices and on prescribed terms (though they were to acquire no title to them), to account to the Corporation for the prices received, less commissions, to keep books of account and render periodical reports 'on forms provided by Westinghouse' and to remit the net proceeds of sales each month.
We think that the state court had undoubted jurisdiction, notwithstanding § 15 of Title 15, U.S.C.A., to decide the merits of the first defence, although it involved exactly the same claim as that pleaded in the first count of the action at bar. The extent to which conspiracies under the Anti-Trust Act invalidated transactions of the conspirators with third persons apparently arose for the first time in Connolly v. Union Sewer Pipe Co.,
The upshot of these decisions, if we apprehend them right, is that, if the conspiracy inheres in the contract in suit by a conspirator against a non-conspirator, the conspiracy is a defence, but not otherwise. It is impossible to import any exact boundaries into that word; and we shall not attempt to do so; but, whatever may be its limits, it appears to us that, when a conspirator seeks to enforce a contract between himself and one of his 'agents,' whom he has employed to carry out the purposes of the illegal enterprise, the conspiracy must 'inhere' in the contract. The 'аgent' is a cooperator with him in his illegal venture, unlike the buyer of the goods monopolized, who has not joined in the undertaking and is therefore not an abettor. The fact that the agent's cooperation is unwilling is irrelevant; although a victim of the wrong, he becomes an active promotor of it. Therefore, we think that the state court had jurisdiction to pass upon whether the defence, as alleged, was proved.
It does not, however, follow that final judgment in the state action when entered will be an estoppel in the case at bar. That would be true, we agree, except for § 15 of Title 15, U.S.C.A., because, although the finding that there was no conspiracy involved questions of law as well as questions of fact, it was nevertheless of a kind that courts treat as estoppels.2 Thus the inquiry comes down to whether, when Congress gave exclusive jurisdiction to the district court over wrongs committed under the Anti-Trust Acts, it only meаnt that the 'person who shall be injured' must sue in the district court to recover damages; or whether it also meant that the district court must have unfettered power to decide the claim, regardless of the findings of any other courts, even when these were essential to the decision of actions over which their jurisdiction was unquestioned. A priori either reading seems permissible, and the decisions give an uncertain answer. The only case that we have discovered in the Supreme Court is Becher v. Contoure Laboratories, Inc.,
It is possible that decisions like Loomis v. Loomis, supra,
In the case at bar it appears to us that the grant to the district courts of exclusive jurisdiction over the action for treble damages should be taken to imply an immunity of their decisions from any prejudgment elsewhere; at least on occasions, like those at bar, where the putative estoppel includes the whole nexus of facts that makes up the wrong. The remedy provided is not solely civil; two thirds of the recovery is not remedial and inevitably presupposes a punitive purpose. It is like a qui tam action, except that the plaintiff keeps all the penalty, instead of sharing it with the sovereign. There are sound reasons for assuming that such recovery should not be subject to the determinations of state courts. It was part of the effort to prevent monopoly and restraints of commerce; and it was natural to wish it to be uniformly administered, being national in scope. Relief by certiorari wоuld still exist, it is true; but that is a remedy burdensome to litigants and to the Supreme Court, already charged with enough. Obviously, an administration of the Acts, at once effective and uniform, would best be accomplished by an untrammeled jurisdiction of the federal courts.
Nor is there anything inconsistent with this in allowing violations of the Acts to be raised as valid defences to actions brought in state courts upon a claim against third persons, if it involves a partial enforcement of an undertaking itself forbidden. It is appropriate to the underlying purpose of the Acts that such claims shall not succeed, by compelling individuals on whom the wrong impinges to pay what is not due, even though they may later recover the amount three times over. For these reasons we think that the situation is one where the delay and expense of a double trial of the same issue, do not balance the importance of an uncommitted enforcement of the remedy provided in § 15.
As we have concluded that the district court has refused to proceed pending a final judgment of the state court that can have no effect upon the decision of the action at bar, we hold that its refusal was not authorized by law and that it is our duty, as it is within our power, to direct a writ of mandamus to go, ordering it to vacate the stay and to proceed in due course with the trial herein.
Appeal dismissed. Writ of mandamus to go thirty days after the filing of this opinion, directing the district court to vacate the stay in question, unless it has been vacated theretofore.
MEDINA, Circuit Judge (dissenting in part).
This opinion represents the views of a majority of the court as to the appealability of Judge Walsh's interlocutory order, and my own by way of dissent to what must be deemed the equivalent of the granting of petitioners' application for mandamus.
The Stay
Thus the first question to be decided here is whether Judge Walsh's order is in substance the granting of an injunction, as it is beyond cavil interlocutory, and 28 U.S.C. §§ 1291 and 1292 give us jurisdiction only of appeals from 'final decisions' of the United States District Courts, and also of appeals from interlocutory orders 'granting, continuing, modifying, refusing or dissolving injunctions,' and others not pertinent to the matter before us.
It would be difficult to find a phase of the development of Anglo-American jurisprudence which has done so much to bedevil the whole machinery of justice as the distinction between law and equity, following in the wake of the establishment of the Court of Chancery in England. Despite unceasing efforts to abolish the distinction between the two, the old technicalities persist. Our decision here is controlled by a series of Supreme Court cases,1 beginning with Enelow in 1935 and concluding with Baltimore Contractors in January, 1955. Judge Dimock and I construe those cases as a series of perfectly consistent efforts to inquire into the historical background and determine in еach case whether or not the District Court, in granting or denying a 'stay' or striking a demand for a jury trial, was exercising a power such as the chancellor was, under the old or ancient practice, accustomed to call into play in a separate proceeding in equity. In other words, is the 'stay' a 'modern procedural substitute for a decree in chancery.' Wherever this was found to be the case, despite the merger of law and equity and the advent of the new Federal Rules of Civil Procedure, 28 U.S.C., the order was held to be injunctive in character and hence appealable under the statute, otherwise not. As the Supreme Court was construing statutory language long in effect, this historical approach seems to have been more or less inevitable, unless the Court, in search of a formula too simple to be misunderstood, had been willing to throw principle to the winds.
The first significant pronouncеment upon the subject appeared in Enelow v. New York Life Ins. Co., 1935,
On the same day, the Supreme Court decided Shanferoke Coal & Supply Corporation v. Westchester Service Corporation, 1935,
Next we come to Ettelson v. Metropolitan Ins. Co., 1942,
Thus, in each of these three cases, appealability was limited to situations where the District Court exercised or refused to exercise its equity power to stay an original action at law in order first to determine the issues of a subsequently raised equitable defense or counterclaim.
The limited scope of appealability was further emphasized in City of Morgantown v. Royal Ins. Co., 1949,
The last link in this chain is of very recent vintage. In Baltimore Contractors, Inc., v. Bodinger,
Thus, we are constrained to conclude from the foregoing that appealability exists in these cases only when there has been 'a stay through equitable principles of a common law action.'
In the case before us, Judge Walsh was not asked to exercise what was formerly an equity power to stay an action at law. True it is that this case is an original action at law, unlike both Morgantown and Baltimore Contractors, but the power exercised by Judge Walsh was simply the power to stay proceedings which 'a court of law, as well as a court of equity, may grant in a cause pending before it by virtue of its inherent power to control the progress of the cause * * *.' The exercise of an equity power which, under the Supreme Court rule, is an essential prerequisite to appealability is wholly absent.
Mandamus
The factual background must first be explored before the principles, governing the question of whether or not we should entertain this petition for mandamus, can be applied. Dates and the sequence of events, together with the attendant circumstances disclosed by the record before us, led Judge Walsh to conclude that the stay should be issued in the interests of justice, not because he thought the District Court lacked jurisdiction to proceed.
On February 8, 1952, Westinghouse sued its former agents, partners doing business as Lyons Electrical Distributing Company, for an accounting in the New York Supreme Court, charging widespread fraudulent practices to conceal large sums of money due to Westinghouse. An answer was filed in due course; and, on June 20, 1952, an amended answer was served which asserted as a First Affirmative Defense that the agency contracts upon which Westinghouse sued were illegal under the Anti-trust Acts, by reason of a conspiracy charged against Westinghouse and General Electric. Shortly thereafter and on July 8, 1952, the present action was commenced in the United States District Court for the Southern District of New York. Judge Walsh quite correctly observes that this was 'an apparent retaliation'; and it is not disputed that the allegations of the defense in the state action and those of the complaint in this action are substantially identical.
The next move in the process of 'retaliation' appears to have been a motion in this action, based upon the identity of the anti-trust issues in the two actions, for an injunction restraining the prosecution of the action for the accounting, followed by the usual notices to take the depositions of a number of Westinghouse employees and subpoenas duces tecum requiring the production of vast quantities of documents, all in support of the anti-trust charge.
But Judge Bondy denied the motion for an injunction, and his order was unanimously affirmed by this court, 2 Cir., 1953,
Lyons was defeated on the merits, however, in the state court action; the proofs were found to have revealed shocking frauds, including the keeping of secret books, and the rendition of false monthly reports. The anti-trust charge, which had been the subject of much evidence pro and con at the trial, was also determined against Lyons on the merits.2
True to form, Lyons, after appealing to the Appellate Division of the New York Supreme Court from the interlocutory order directing the accounting, started in again with another round of deposition taking, with the usual subpoenas duces tecum requiring the production of documents. This led to the motion for a stay, which Judge Walsh granted in the exercise of his discretion, finding, under the peculiar circumstances which the affidavits portrayed, that there was a reasonable likelihood that the final determination of the accounting action would make unnecessary the expense and hardship of the discovery procedure which Lyons was bent on pursuing. It was not claimed that the interlocutory judgment in the state court had any binding effect; but Judge Walsh doubtless thought the 'retaliation' had gone far enough. And the congested condition of the court calendars in the Southern District of New York, and the added burden on the judges of supervising elaborate discovery proceedings in another anti-trust case, may well have been in his mind, even though the subject is not mentioned in his opinion. What is plain beyond argument is that the considerations which led him to grant the stay were such as are inherent in the making of interlocutory orders governing the administration of the dockets and the progress of cases prior to trial. There is nothing in the record before us to suggest that Judge Walsh lacked, or thought he lacked, power to decide the motion either way; nor does he purport to determine the question of whether the final judgment in the accounting action will have binding effect.
There is much talk nowadays on the subject of the law's delays, which are attributed to litigation arising out of the use of automobiles, the increase in the population, the complexity of modern life in an industrial age and the slowmoving processes by which improvements in the administration of justice are effected. But little is said about what is probably one of the principal causes of congestion of court calendars and delays which all too often result in the denial of justice. Our imposition of trivial costs on the defeated party, which makes our courts open to all, whether rich or poor, and our elaborate and justly praised discovery procedures, make our courts a happy hunting ground, where irresponsible people may make irresponsible and wholly unfounded offensive and defensive claims with impunity, in the hope that payments will be made for what is euphemistically phemistically called 'nuisance value,' or that the day of reckoning may be postponed and exhausted and impoverished suitors be induced to abandon just causes from lack of the wherewithal to continue to prosecute them. The existence of separate state and federal court systems multiplies the opportunities for artful maneuvers and procedural sallies which serve little purpose other than to throw sand in the judicial machinery. And it is difficult for me to avoid the conclusion that the ruling about to be made here will aid those who may wish to subvert justice by ingenious devices, by taking away from the District Judges what is one of their most useful incidental powers, that of regulating their calendars and the progress of causes before trial, in the interest of substantial justice.
My brethren say that 'a final judgment of the state court * * * can have no effect upon the decision of the action at bar'. I do not see how that can be so.3 But even if a final judgment in the state court, on these very issues of law and fact, were not binding, I still say there is no basis on this record for holding that Judge Walsh abused his discretion in granting the stay. Mere abstractions and hypotheses should not be permitted to render our District Judges powerless to deal with practical every day problems, such as the one with which Judge Walsh was called upon to deal. If permitted to run the gamut of discovery procedure against both Westinghouse and General Electric, while the Appellate Division is disposing of the appeal from the interlocutory judgment and, in case of affirmance, pending the settlement of the account and an appeal to the Court of Appeals, these two companies will doubtless be able to endure the expense and the disruption of their administrative and executive staffs, while the various officers and employees are running around answering questions and producing documents. Perhaps they will sеttle or withdraw the state action; but either eventuality seems remote. In the end, if the New York Court of Appeals affirms a final judgment against Lyons, rejecting on the merits the claims of Lyons on the anti-trust issues as well as the others, the trial of this action some years from now may proceed nevertheless when it is reached in due course; but I doubt it. In any event, other litigants under similar pressures in other cases may not be able to afford the expense of defending themselves against such procedural warfare indefinitely, and the rule of this case will, at least in this Circuit, leave District Judges no alternative other than to withhold the only remedy which will meet the necessities and practicalities of the case.
I think the writ should be withheld, even if we may be said to have the power to let it go in aid of our appellate jurisdiction, which I do not concede. See Radio Corporation of America v. Igoe, 7 Cir., 1954,
DIMOCK, District Judge, concurs in that part of Circuit Judge MEDINA'S opinion entitled 'The Stay'.
On Petition for Rehearing in No. 23325
We do not find it necessary to discuss this petition except as to three decisions that the defendants press upon us as contrary to what we held about the collateral estoppel of the state judgment if it becomes final. These decisions are Straus v. American Publishers' Association, 2 Cir., 1912,
In the first the plaintiffs had recovered a money judgment in a state court under a state statute against monopolies and restraint of trade. Later they sued the same defendants and others under the Sherman Act in a federal court for treble damages, and we affirmed a judgment of Lacombe, J., that dismissed the complaint because the 'plaintiffs, having the option to go into either court, chose the state court, and their claim, having been there adjudicated, cannot be presented the second time to any other court.' (
The second case concerned an action in a federal court by an employee against his employer to have the contract between them declared invalid on the ground that it had been part of the execution of a conspiracy in violation of the Anti-Trust Acts. The employer had sued the plaintiff in a stаte court upon the same contract, and the plaintiff had set up as a defence that the contract was in restraint of trade. The state appellate court gave judgment for the employer overruling the defence, and finding that the plaintiff had been guilty of many unconscionable violations of the contract. The Third Circuit held that the findings of the state court as to the plaintiff's misconduct were estoppels in the federal action, and that, as such, they disqualified him from filing a suit in equity in the federal court to have the contract declared invalid. It follows that the point decided had nothing to do with the effect of the judgment of a state court upon any claim or cause of action of the plaintiff to recover damages for violation of the Anti-Trust Acts.
In the third case the Paramount Corporation had sued the Partmar Corporation in ejectment in the District Court for the Southern District of Californiа, and the Partmar Corporation pleaded as counterclaims claims for damages for violations of the Anti-Trust Acts. The court separated the counterclaims for trial and treated them thereafter as though they were separate actions. The Paramount Corporation based the action of ejectment on the theory that the lease under which the Partmar Corporation held possession had been executed under a 'franchise' which the District Court for the Southern District of New York had then held to be violation of the Anti-Trust Trust Acts. However, the Supreme Court reversed this ruling of that court before the ejectment action came on for trial in California; and the trial court found that the Paramount Corporation had not entered into any conspiracy that included the execution of the lease, and dismissed the action of ejectment. It also dismissed the counterclaims relying upоn its findings in the ejectment action as estoppels. It is enough to distinguish the decision of the Supreme Court affirming this judgment that, even though the decision of the court in the ejectment action could be regarded as disposing of a liability under § 15, it was the judgment of a federal court that had jurisdiction over an action for damages under that section.
So it appears to both Judge Dimock and me that none of these decisions throws any doubt upon our opinion already filed. But I go further, though he does not, because I think it necessary to distinguish the situation from that in Becher v. Contoure Laboratories,
The petition is denied.
Notes
Enelow v. New York Life Insurance Co.,
United States v. Moser,
'Where a court has incidentally determined a matter which it would have had no jurisdiction to determine in an action brought directly to determine it, the judgment is not conclusive in a subsequent action brought to determine the matter directly.'
Clark v. Dew, 1 Russ. & Milne 103; Bogardus v. Clarke, 1 Edw.ch. 266, affirmed
Enelow v. New York Life Ins. Co., 1935,
Westinghouse Electric Corporation v. Lyons, Sup.Ct., N.Y.County, 1953,
'The general principle announced in numerous cases is that a right, question, or fact distinctly put in issue, and directly determined by a court of competent jurisdiction, as a ground of recovery, cannot be disputed in a subsequent suit between the same parties or their privies; and, even if the second suit is for a different cause of action, the right, question, or fact once so determined must, as between the same parties or their privies, be taken as conclusively established, so long as the judgment in the first suit remains unmodified.' Southern Pacific R. Co. v. United States, 1897,
Troxell v. Delaware, Lackawanna & Western R. Co.,