American Machine & Metals v. De Bothezat Impeller Co.

• Decision Date: 10 March 1948
• Docket Number: No. 129,Docket 20816.,129
• Citation: 166 F.2d 535
• Parties: AMERICAN MACHINE & METALS, Inc. v. DE BOTHEZAT IMPELLER CO., Inc.
• Court: U.S. Court of Appeals — Second Circuit

166 F.2d 535 (1948)

AMERICAN MACHINE & METALS, Inc. v. DE BOTHEZAT IMPELLER CO., Inc.

No. 129, Docket 20816.

Circuit Court of Appeals, Second Circuit.

March 10, 1948.

Alphonse Kenison, of New York City (Leonard P. Moore and Charles Pickett, both of New York City, of counsel), for appellant.

Royal E. Mygatt, of New York City (Watson Washburn, of New York City, of counsel), for appellee.

Before SWAN, CHASE and FRANK, Circuit Judges.

SWAN, Circuit Judge.

This appeal presents a question under the Declaratory Judgment Act, 28 U.S.C.A. § 400, which authorizes the courts of the United States "in cases of actual controversy" to declare "rights and other legal relations of any interested party petitioning for such declaration," without regard to whether further relief is or could be sought. Before answering the complaint, the defendant moved, pursuant to Rule 12(b) of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723, for dismissal of the action on the ground that (a) the complaint fails to state a claim upon which relief can be granted, and (b) the court lacks jurisdiction because there is no matter in controversy between the parties. This motion was granted for the reason, as we read the district court's opinion, that the facts alleged in the complaint did not show the existence of an "actual controversy." From the judgment of dismissal the plaintiff has appealed.

In summary the allegations of the complaint are the following:

In 1934 the parties entered into a contract under which the defendant conveyed to the plaintiff certain patents and certain physical equipment for the making of fans and other products and the plaintiff agreed to pay the defendant license fees (not less than $5,000 annually) based on the "net sales" of its products. So long as the contract continued the fees were to be paid on "net sales" regardless of whether the plaintiff's products were covered by the patents or whether the patents had expired. The contract contained no expiration date but could be terminated at any time by the plaintiff on six months' notice. In the event of such termination the plaintiff was to transfer the patents back to the defendant and to cease using the name "De Bothezat," which it agreed to use in its literature and sales promotion while the contract continued. Since February 19, 1946 the plaintiff has neither manufactured nor sold any product for which possession of the patents is essential. The plaintiff "desires and intends" to exercise its right of termination under the contract and "desires and intends" to continue in the business of selling fans and ventilating equipment. The defendant at various times has made claims and assertions to the plaintiff and other persons to the effect that upon termination of the contract the plaintiff will no longer have the right to continue the manufacture of fans and ventilating equipment, and "has led plaintiff to believe" that upon termination of the contract defendant will sue plaintiff if it does not cease the manufacture and sale of fans and ventilating equipment. Said claims and assertions by defendant "are without basis and an actual controversy exists between the parties," and plaintiff seeks a declaration of the rights of the parties in order to avoid the possible accrual of avoidable damages. The prayer requests a declaration "particularly with respect to the proper interpretation and effect of the agreement" and that the court declare the right of plaintiff to continue to manufacture and sell fans and other noninfringing products after termination of the agreement and without the payment of further sums to defendant.

In concluding that no controversy exists the district judge noted that the plaintiff has not yet given notice of termination of the contract and may never do so; the opinion states 75 F.Supp. 421, 424:

"In this case, if the court should decide that plaintiff might terminate and continue its manufacture and sale of products other than those covered by patents, plaintiff might and probably would terminate. If the court should decide otherwise, plaintiff would probably continue under the agreement until its termination and no controversy such as now claimed to exist might ever be present. In other words, plaintiff has not elected what it wishes to do and its action might and could render academic the very declaration which it seeks.

"The complaint is, therefore, dismissed because no justiciable controversy exists which would justify the maintenance of an action under the Declaratory Judgment Statute. The relief prayed for should not be granted at this time either as a matter of discretion or otherwise."

We think the judge construed the statute too narrowly. As the Supreme Court said in Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826, the difference between an abstract question and a ...