308 F.Supp. 679 (S.D.N.Y. 1969), 61 Civ. 2324, Trans World Airlines, Inc. v. Hughes
| Citation | 308 F.Supp. 679 |
| Party Name | TRANS WORLD AIRLINES, INC., Plaintiff, v. Howard R. HUGHES, Hughes Tool Company and Raymond M. Holliday, Defendants. |
| Case Date | December 23, 1969 |
| Court | United States District Courts, 2nd Circuit, U.S. District Court — Southern District of New York |
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Cahill, Gordon, Sonnett, Reindel & Ohl, New York City, for plaintiff; John F. Sonnett, Paul W. Williams, Dudley B. Tenney, Immanuel Kohn, Marshall H. Cox, Jr., Abraham P. Ordover and Fred E. Scharf, New York City, of counsel.
Donovan, Leisure, Newton & Irvine, and Chester C. Davis, New York City, for defendants Hughes Tool Company and Raymond M. Holliday; Ralstone R. Irvine, James V. Hayes, George S. Leisure, Jr., Mahlon F. Perkins, Jr., Chester C. Davis, Maxwell E. Cox, Ronald J. Cayo, John H. Wilkinson and Paul E. Goodspeed, New York City, of counsel.
METZNER, District Judge.
The special master, Herbert Brownell, Esq., has submitted his report awarding plaintiff $137,611,435.95 as damages after trebling as provided in § 4 of the Clayton Act, 15 U.S.C. § 15. The matter had been referred to him for assessment of damages following the entry of a default judgment imposed as a sanction for failure of Howard R. Hughes to appear for deposition. Trans World Airlines, Inc. v. Hughes, 32 F.R.D. 604 (S.D.N.Y.1963). In the ensuing discussion, plaintiff will be referred to as TWA and defendants Howard R. Hughes and Hughes Tool Company as Hughes and Toolco, respectively.
Both parties have filed objections to the report. The defendants move to confirm those portions of the report which are favorable to them and move to reject those portions which are adverse to their position. If their contentions are correct, TWA is not entitled to any damages. TWA objects to the report on the ground that the amount awarded is inadequate. The maximum figure for which it contends is $510 million plus prejudgment or moratory interest of over $175 million. The respective contentions of the parties will be discussed below.
The history of this litigation, in which TWA sought damages for claimed antitrust violations, shows that it has been long and complex. It was originally instituted on June 30, 1961. On August 31, 1961, the case was assigned to me for
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all purposes pursuant to Rule 2 of the General Rules of this court. Since then it has been the subject of many pretrial rulings, opinions and appeals. The sufficiency of the complaint was upheld in an opinion reported in 214 F.Supp. 106 (S.D.N.Y.1963). In that opinion this court also ruled adversely to defendants' contention that the acts complained of were exempt from the antitrust laws by virtue of certain orders of the Civil Aeronautics Board. After the court was informed that Hughes would refuse to appear for examination, it granted TWA's application for a default judgment. 32 F.R.D., supra. The Court of Appeals affirmed the rulings found in 214 F.Supp., supra, but refused to pass upon the propriety of the entry of the default judgment. 332 F.2d 602 (2d Cir. 1964). On March 8, 1965, the Supreme Court dismissed writs of certiorari as improvidently granted. 380 U.S. 248, 249, 85 S.Ct. 934, 13 L.Ed.2d 817, 818. The special master and the court then made preliminary rulings as to the effect of the default judgment on the damage hearings. 38 F.R.D. 499 (S.D.N.Y.1965). 1
The hearings before the special master commenced on May 2, 1966. Some 11,000 pages of testimony were taken from expert witnesses in the fields of economics, engineering, finance and accounting. Over 800 exhibits containing 60,000 pages were admitted in evidence. The special master thereafter rendered a 323-page report. A hearing was held on the objections of the parties to the report. They submitted over 1,300 pages of briefs and memoranda, including a 62-page listing by defendants of 216 specific objections to the report.
At page 12 of his report, the special master states, 'Despite prior rulings in the case, this (effect of the default) has been the subject of continuing disagreement between the parties in the damage hearings.' I thought that this issue had been clearly disposed of in the preliminary report of the original special master, dated July 30, 1965, and in this court's opinion in 38 F.R.D. 499.
As stated in that opinion at page 501:
'Liability is not an issue for the Special Master except in a very limited sense. The sufficiency of the complaint has already been established by the denial of defendant's motion to dismiss. 214 F.Supp. 106 (S.D.N.Y.1963), aff'd, 332 F.2d 602 (2d Cir. 1964), writ of cert. dismissed, 380 U.S. 248, 85 S.Ct. 934, 13 L.Ed.2d 817 (1965). By virtue of the default the defendant has admitted the truth of the well-pleaded allegations of the complaint. Thomson v. Wooster, 114 U.S. 104, 5 S.Ct. 788, 29 L.Ed. 105 (1885).'
In the present report, the special master has referred to another case, Harshman v. Knox County, 122 U.S. 306, 7 S.Ct. 1171, 30 L.Ed. 1152 (1887), which on its
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facts is even stronger than Thomson v. Wooster, supra. Without going into the details of that case, it is sufficient to quote the Court's language at page 317, 7 S.Ct. at pages 1175-1176:
'In the absence of a denial, the fact as stated in the petition of the plaintiff is confessed by the default, and stands as an admission on the record, of its truth by the defendant.'
In the hearings before the special master, TWA did not have to present any evidence to support the well-pleaded allegations of the complaint, and defendants may not offer evidence to controvert such allegations. To the extent that they did, it will be disregarded. That opportunity was forfeited by defendants as a result of the default.
Defendants may show, however, that an allegation is not well pleaded, but only in very narrow, exceptional circumstances. The Thomson and Harshman cases clearly support this rule. For example, an allegation made indefinite or erroneous by other allegations in the same complaint is not a well-pleaded allegation. Other examples, as detailed in 38 F.R.D. at 501, are allegations which are contrary to facts of which the court will take judicial notice, or which are not susceptible of proof by legitimate evidence, or which are contrary to uncontroverted material in the file of the case. That opinion went on to say:
'However, it may be shown by plaintiff, in the context of this case, that some matters of which the court may take judicial notice should not be so noticed. See McCormick, Evidence 330 (1954). Where file material is involved, if the plaintiff did not have full opportunity to meet or controvert such material, then it should not be used to nullify the allegation. If evidence merely tends to show that an allegation is not true, the allegation must be taken as true in this default. Finally, the plaintiff is entitled to the benefit of all reasonable inferences from the evidence tendered.
'Attempts by defendant to escape the effects of its default should be strictly circumscribed. It should not be afforded an opportunity to litigate what has already been deemed admitted in law. In the absence of an exceedingly strong showing that an allegation is untrue under the rules set forth above, the allegation stands as admitted.' 38 F.R.D. at 501.
This quoted language had in mind the impact of the failure of Hughes to appear for deposition. His default stymied TWA in the acquisition and presentation of evidence in support of its claim. As the Court of Appeals said (332 F.2d at 614):
'We think it clear beyond any question, in light of all the circumstances here presented, that the deposition of Hughes was necessary to all aspects of this litigation * * *.'
And again at page 615:
'Hughes' deposition was absolutely essential to the proper conduct of the litigation.'
Defendants claim that there are allegations in the complaint which are contrary to facts of which the court will take judicial notice. They particularly refer to that portion of the third paragraph of the complaint which alleges that Toolco was engaged
'since in or about 1939 in the development, manufacture and acquisition of aircraft and related equipment from the manufacturers thereof in various states and in the sale and lease of such aircraft to air carriers in various other states for use in interstate and foreign commerce.'
They request that judicial notice be taken of the fact that Toolco never 'manufactured' or engaged 'in the sale and lease' of aircraft. I cannot take judicial notice of these matters because they are not indisputably true.
The question whether judicial notice can be taken of facts which are not
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indisputable has been the subject of disagreement among scholars. Wigmore thought that notice should not be limited to indisputable facts. He took the position that the taking of judicial notice of a fact merely relieved the offeror of more formal proof. However, this did not prevent his opponent from disputing the fact by offering contrary evidence. 9 Wigmore, Evidence § 2567 (3d ed. 1940). See also Thayer, Preliminary Treatise on Evidence 308-309 (1898); Ohio Bell Telephone Co. v. Public Utilities Comm'n of Ohio, 301 U.S. 292, 301-302, 57 S.Ct. 724, 81 L.Ed. 1093 (1937); United States v. Aluminum Co. of America, 148 F.2d 416, 445-446 (2d Cir. 1945). The more recent thinking is that only indisputable facts such as matters of common knowledge and matters capable of certain verification will be judicially noticed. When noticed such facts are binding on the trier of the facts. Morgan, The Law of Evidence, 1941-1945, 59 Harv.L.Rev. 481, 482-87 (1946); McCormick, Evidence 330 (1954); McNaughton, Judicial Notice, 14 Vand.L.Rev. 779 (1961); Alvary v. United States, 302 F.2d 790, 794 (2d Cir. 1962).
I do not have to resolve the debate among scholars concerning the taking of judicial notice during trial. It is clear to me that after a default only indisputable facts...
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