Kemart Corporation v. Printing Arts Research Lab.

• Decision Date: 25 May 1956
• Docket Number: No. 14299.,14299.
• Citation: 57 ALR 2d 1234,232 F.2d 897
• Parties: KEMART CORPORATION, a corporation, Appellant, v. PRINTING ARTS RESEARCH LABORATORIES, Inc., a corporation, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

57 ALR 2d 1234, 232 F.2d 897 (1956)

KEMART CORPORATION, a corporation, Appellant, v. PRINTING ARTS RESEARCH LABORATORIES, Inc., a corporation, Appellee.

No. 14299.

United States Court of Appeals Ninth Circuit.

April 18, 1956.

Rehearing Denied May 25, 1956.

Henry Gifford Hardy, Carl Hoppe, San Francisco, Cal., for appellant.

Lyon & Lyon, Leonard S. Lyon, Richard F. Lyon, Frederick Lyon, Los Angeles, Cal., Julian F. Goux, Santa Barbara, Cal., for appellee.

Before STEPHENS, HEALY, and CHAMBERS, Circuit Judges.

STEPHENS, Circuit Judge.

The decision on the merits of the declaratory relief injunction case in suit as to infringement of patents was formalized in the district court's judgment which followed our mandate in accordance with our opinion and decision. Kemart Corp. v. Printing Arts Research Lab., Inc., 9 Cir., 1953, 201 F.2d 624. These two appeals are from the district court's judgment referred to and concern the proper assessment of costs, attorney fees claimed allowable to the plaintiff, and an issue of damages claimed by the plaintiff for libel or slander as to plaintiff's patents. In the opinion and the judgment which has become final, costs were allowed but notwithstanding attorney fees and damages were claimed by plaintiff, we made no mention of either in our opinion, decision, or mandate.

In the trial of the case, it was held by the district court that Kemart Corporation, the plaintiff, had infringed some of Printing Arts patents. Upon that conclusion it followed logically that neither costs, attorney fees nor damages could properly be allowed Kemart, the losing party, and of course were not allowed. The situation was changed radically when we reversed on the infringing issue, leaving the issues of attorney fees and damages untouched. We are of the opinion now that upon remand of the case specifically covering only the issue of infringement it was implicit that the other issues would have to have additional consideration by the district court, since its ruling on the patents controlled its decision as to the other issues.

We hold that the district court should now proceed to reconsider the other issues.

We do not rule that attorney fees and/or damages should or should not be allowed. Those questions and the proper allowance are questions for the trial court to answer.

The clerk assessed the costs and filed a written memorandum setting out his reasons for allowing or rejecting claimed items. The trial court made no comment as to the clerk's reasoning. Ordinarily, there is no appeal from a mere judgment of costs, but there is an exception where the power or right of the court to assess certain items of costs is in dispute, or there is a claim as to abuse of discretion. Newton v. Consolidated Gas Co., 1924, 265 U.S. 78, 44 S.Ct. 481, 68 L.Ed. 909; Williams v. Sawyer Bros., 2 Cir., 1931, 51 F.2d 1004, 81 A.L. R. 1527; Walker v. Lee, 9 Cir., 1934, 71 F.2d 622; United States v. Arizona Canning Co., 10 Cir., 1954, 212 F.2d 532; Lyman v. Remington Rand, Inc., 2 Cir., 1951, 188 F.2d 306.

The allowance or disallowance of items of costs is determined by statute, rule, order, usage, and practice of the instant court. McWilliams Dredging Co. v. Department of Highways of Louisiana, 5 Cir., 1951, 187 F.2d 61; Williams v. Sawyer Bros., 2 Cir., 1931, 51 F.2d 1004, 81 A.L.R. 1527.

The first item for consideration relates to premiums or expenses paid to an individual for guaranty of supersedeas bond. In the trial of the main action, appellant here (plaintiff, Kemart Corporation, below) was held an infringer of a patent process and was ordered to desist from further licensing of the patent in dispute. Because the appellant's business was the licensing of such patents, the appellant filed a motion for supersedeas and stay of execution pending appeal. A hearing was held on the motion at which time appellee asked the court to require a $100,000 supersedeas bond and appellant Kemart asked that the bond be set at the lower figure of $5,000. The trial judge set the bond at $20,000, and a surety company bond could not be obtained unless appellant deposited $10,000 cash together with a personal note of its president for $10,000.

Appellant's bankers refused the loan of the required sum of $10,000 because appellant was without operating capital (the patents were the essence of appellant's business) and because the issue in the litigation had already been adversely decided against the appellant. Appellant was also unsuccessful in trying to borrow the money from others. Eventually a Mr. Charles Whitehead agreed to deposit the $10,000 with the surety company on the condition that appellant pay him $250 per month until the appeal was settled or the full sum had been repaid. If the appeal were adverse to appellant, Whitehead was to become a general creditor of appellant for the full $10,000, and payments were to stop. Some twenty-three months passed before the appeal was decided in appellant's favor, during which time Whitehead had received $5,750 from Kemart on the Whitehead contract. The district court, in accordance with the clerk's memorandum, and we think correctly, declined to allow this charge as costs and appellant now contends this sum should have been taxed as costs to appellee pursuant to Local Rule 15(b) for the Southern District of California. Local Rule 15(b) provides:

"The party entitled to recover costs shall ordinarily be allowed premiums paid on undertakings, bonds or security stipulations, where the same have been furnished by reason of express requirement of the law, or on order of the court or a judge thereof, or where the same is necessarily required to enable the party to secure some right accorded him in the action or proceeding."

Appellant argues that the amount paid to Whitehead was a "premium" under the ordinary definition of the word, as defined in Webster's New International Dictionary, to-wit:

"Something offered or given for the loan of money; bonus; something synonymous with interest, but generally signifying a sum, or bonus, in addition to capital."

He further argues that the contract with Whitehead is either an undertaking or a security stipulation, and thus the payment is within local Rule 15(b).

The general subject of entering as costs the sums paid for surety, over and above the usual fee therefor, was discussed in The Europe, 9 Cir., 1911, 190 F. 475. In the cited case it was held by this court that the expense of obtaining a bond, as well as the regular premium paid to the bonding company, could be taxed as costs. This court stated in part, 190 F. at page 481:

"It is a serious matter to detain a ship by judicial process in a cause not founded upon a just claim, although prosecuted in good faith and, therefore, lawful. The cost of the bond was high, but necessarily so. The Europe is a foreign ship, and the amount of the bond was necessarily large because the libelant sued for a large amount. Forty-one thousand dollars was the exact amount of the security required. By competent evidence it was proved that the claimant was diligent in endeavoring to obtain a bond promptly and at a minimum of expense, and that the amount allowed, $1,269, was actually expended. In that sum there is included the premium paid to a bonding company and the expenses incurred in arranging with bankers in France and in New York to furnish the indemnity which the bonding company exacted. To these additional expenses objections are specifically urged. It is said that such expenses are unusual and unnecessary, * * *. Formerly, when security or bail was exacted, the litigant was obliged to importune his friends to become sureties, but, since the coming of corporations organized and capitalized to furnish security for compensation, it has become unnecessary for individuals to assume obligations for the accommodation of friends, and the instances are rare in which an individual can be prevailed upon to jeopardize his fortune by becoming a surety for a large amount. Hence the necessity of paying cash to obtain a bond to release a ship from legal custody. And payment of the premium is not the only burden which necessity imposes. Bonding corporations are not like insurance companies. They sell their credit only; they do not assume obligations without being fully indemnified. In this case the expense of providing indemnity was as necessary as payment of the premium. * * *" 190 F. 475, 481.

There would then seem to be no question as to the trial court's power to assess as costs, money paid out for a bond over and above the bonding surety rate, but the allowance or rejection is subject to the court's sound discretion, and the trial court is not bound by the reasons given by the clerk for his ruling. An analysis of the Whitehead agreement¹ shows that the amounts to be paid Whitehead were not ordinary expenses of obtaining a bond but were sums to be paid on a speculative money-making private contract. We do not base our ruling on Local Rule 8(b)² which provides for the approval of the court and endorsement by the opposed counsel as to sureties. We think Local Rule 8 covers only the bond and not the detail in the securing of the bond.

Concerning the witness fees paid officers of appellant corporation, the clerk of the district court refused to tax as costs the items of witness fees and mileage to witnesses Burt L. Berry and Frank P. Adams because "they are officers of the plaintiff corporation and it is presumed that the parties will be present without payment of witness fees." The district court agreed with the clerk as to these items of costs.

Appellant relies on Perlman v. Feldmann, D.C.Conn.1953, 116 F.Supp. 102, 115, wherein such costs were allowed by the court, stating:

"No recovery in the action to which they were called as witnesses was sought from them individually; their interest was not shown to be other than the natural concern of an officer for the welfare of this corporation. The Clerk\'s ruling

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