Edward J. Moriarty & Co. v. General Tire & Rubber Co.

• Decision Date: 08 December 1967
• Docket Number: No. 6378.,6378.
• Citation: 289 F. Supp. 381
• Court: U.S. District Court — Southern District of Ohio
• Parties: EDWARD J. MORIARTY & CO. and Vinyloy, Inc., Plaintiffs, v. The GENERAL TIRE & RUBBER CO. and Aristovoulos G. Petzetakis, S. A., Hellenic Plastics & Rubber Industry, Defendants.

289 F. Supp. 381

EDWARD J. MORIARTY & CO. and Vinyloy, Inc., Plaintiffs, v. The GENERAL TIRE & RUBBER CO. and Aristovoulos G. Petzetakis, S. A., Hellenic Plastics & Rubber Industry, Defendants.

No. 6378.

United States District Court S. D. Ohio, W. D.

December 8, 1967.

COPYRIGHT MATERIAL OMITTED

Taft, Stettinius & Hollister, Cincinnati, Ohio, for both plaintiffs.

Dinsmore, Shohl, Coates & Deupree, Cincinnati, Ohio, for defendant General Tire & Rubber Co.

Paxton & Seasongood, Cincinnati, Ohio, for defendants Petzetakis & Hellenic.

MEMORANDUM OF DECISION

PORTER, District Judge:

This case is before the Court on three motions, all filed by parties defendant. The first is a motion to dismiss Count II of plaintiffs' complaint for lack of jurisdiction over the subject matter and is asserted by defendant General Tire. The second and third motions are based upon the alleged lack of jurisdiction and venue over defendant Petzetakis, S.A. One is a motion to dismiss on behalf of Petzetakis, S.A., and the other objects to certain of plaintiffs' interrogatories on the ground that this Court lacks jurisdiction over the person of Petzetakis, S. A.

Plaintiffs are Ohio firms, one a proprietorship, and one a corporation, which, in part, were engaged in purchasing plastic hose products from defendant Petzetakis, S.A., which is a Greek corporation. Plaintiffs sold the hose in various parts of the United States.

Plaintiffs' first cause of action is under the Sherman Act (15 U.S.C. § 15) and is based upon assertions of a conspiracy between Petzetakis, S.A., and General Tire in restraint of plaintiffs' trade. In support of this cause of action, plaintiffs assert that Petzetakis, S.A., appointed plaintiffs as its distributor for the hosing products mentioned above and represented that plaintiffs would continue to be its distributor even if manufacturing or sales rights for the hosing in the United States were granted to others. It is also alleged that Petzetakis, S.A., represented that plaintiffs would always be able to purchase the hosing from them directly.

Plaintiffs aver that, in reliance upon these representations, they spent much time and money in advertising and merchandising the hosing under a trade name, thereby developing a valuable reputation as distributor of said hosing.

It is alleged that, beginning in February, 1966, General Tire and Petzetakis, S.A., together with persons unknown, have engaged in a conspiracy to prevent anyone other than General Tire from importing the hosing into the United States or from purchasing the hosing from either Petzetakis, S.A., or General Tire, or from distributing such hosing in the United States, and that, pursuant to this conspiracy, Petzetakis, S.A., and General Tire have refused to deal with and have boycotted plaintiffs.

The alleged effect of this conspiracy is that plaintiffs can no longer obtain the hosing and have lost their distribution business, along with related business. This is said to be due in part to representations by General Tire that it is the sole distributor of such hosing.

The second cause of action incorporates all the allegations of the first cause of action and further alleges that General Tire had been negotiating with plaintiffs for the purchase of plaintiffs' business, and, at the request of General Tire, plaintiffs submitted for confidential inspection certain customer and inventory distributor information for the sole purpose of indicating the potential value of plaintiffs' business. It is alleged that General Tire expressly agreed to keep this information confidential, and that plaintiffs were assured that the information would not be used for a purpose other than that for which it was submitted.

Plaintiffs assert that, contrary to this agreement, General Tire used the information to establish its chain of distribution for the hosing it received from Petzetakis, S.A., and that it has solicited former distributors and customers of plaintiffs. These acts are said to establish plaintiffs' claim of unfair competition under state law. Plaintiffs seek restitution for the profits made by General Tire in sales of hosing to plaintiffs' former customers and damages based upon the above acts of General Tire.

Against this background, we will first consider the motion to dismiss by General Tire. General Tire's position rests upon the assertion that plaintiffs' second cause of action sounds in breach of contract and fraud, requiring proof of facts "obviously different than those required to sustain the allegations of * * *" the first cause of action, i. e., the second cause of action is not sufficiently related to the first so as to sustain pendent jurisdiction over it.

We cannot agree with this position. While it is true that the facts alleged in the second cause of action show a breach of an express agreement by General Tire, that cause of action, as we read it, is based on the alleged illegal attempt of General Tire to obtain confidential information from plaintiffs, the alleged success of this attempt, and the alleged use of this information to capture plaintiffs' customers for itself, all of which was allegedly undertaken in an effort to accomplish the conspiracy alleged in the first cause of action. The fact that certain words were not used in the complaint does not prevent this Court from understanding the obvious import of the language used.

The controlling case on the issue of pendent jurisdiction is United Mine Workers of America v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966), which clarifies a patent ambiguity in the landmark case on pendent jurisdiction, Hurn v. Oursler, 289 U.S. 238, 53 S.Ct. 586, 77 L.Ed. 1148 (1933).¹ This ambiguity resulted from the vagueness of the use of the term "cause of action" by the Hurn Court.

The Court in Gibbs noted that the Hurn opinion distinguished "grounds for recovery" from "cause of action" at a time when no one agreed what the term "cause of action" meant. This distinction between undefined terms has caused considerable confusion in cases in which the issue of pendent jurisdiction arises.

Under the Gibbs rationale, the first requirement for pendent jurisdiction is that there be a federal claim, i. e., claim which confers subject matter jurisdiction upon the federal court. Secondly, that claim must be a "substantial" one. We interpret the term "substantial" to refer to a cause of action which would withstand a motion to dismiss for failure to state a claim.

Once there is a substantial federal claim, the appended claim, nonfederal in nature, must be related to the federal claim in sufficient degree to confer pendent jurisdiction over it. It is on this degree of relation that the parties in this case differ. (General Tire has not challenged the sufficiency of plaintiffs' first cause of action.)

In order to understand the degree of relation necessary between claims or grounds for recovery before pendent jurisdiction is taken, the purpose of the doctrine must be understood. Under the Federal Rules of Civil Procedure, the impulse is toward entertaining the broadest possible scope of action consistent with fairness to the parties. United Mine Workers of America v. Gibbs, supra. Joinder of claims, parties and remedies is strongly encouraged. Yet the federal court is limited to the extent that jurisdictional requirements must be met. However, it has always been the essential rule that once jurisdiction is laid in the federal court, that court must have the power to hear and dispose of the entire case. United Mine Workers of America v. Gibbs, supra.

Thus the basis of doctrine of pendent jurisdiction rests upon the absolute uselessness of piecemeal litigation, and its degrading effect upon the federal courts. Theories of judicial economy play no great part in this aspect of the discussion, and the fallacious consideration of these theories in relation to the reason for the doctrine can only result in a grave understatement of the purpose of pendent jurisdiction, and perhaps even a complete misunderstanding of the rule.

In our opinion, the doctrine goes to the heart of the power of the federal system. Were a federal court resigned to hearing only questions which satisfied the jurisdictional requirements, it would be possible, and more likely probable, that the federal courts would be relegated to an advisory position in respect to state courts. In more cases than not the federal courts would be unable to render a decision, because the full case would not be presented.

As an example, in a case based upon restraint of trade under the Sherman Act, and involving a breach of an exclusive dealing contract, if the federal court finds the contract valid under the Sherman Act, it is powerless to decide the question of breach, which is based upon state law, absent the doctrine of pendent jurisdiction. The case then goes into state court for final resolution.

Certainly it is essential that a court, if it is indeed to represent itself as a court of law, have the power to hear and decide the entire action which comprises but one "constitutional case." United Mine Workers of America v. Gibbs, supra. For this reason, the doctrine of pendent jurisdiction was established.

Once the grounds for pendent jurisdiction are met, the theories of judicial economy become meaningful. For, even though a federal court has the power to hear the entire case, it may nevertheless dismiss the action if, for example, the federal claim is dismissed before trial, even though not insubstantial in a jurisdictional sense, or if there is a likelihood of jury confusion resulting from multiple and complex legal issues. United Mine Workers of America v. Gibbs, supra.

In our opinion an understanding of the purpose of the doctrine sufficiently answers the question as to what degree of relation is necessary to sustain pendent jurisdiction. However, it may be helpful to add the rule set out in Gibbs. It is not necessary that the two...