Cold Metal Process Company v. United Engineering Foundry Company
| Decision Date | 11 June 1956 |
| Docket Number | No. 76,76 |
| Citation | 76 S.Ct. 904,100 L.Ed. 1311,351 U.S. 445 |
| Parties | The COLD METAL PROCESS COMPANY and The Union National Bank of Youngstown, Ohio, Trustee, Petitioners, v. UNITED ENGINEERING & FOUNDRY COMPANY |
| Court | U.S. Supreme Court |
Mr.
William H. Webb, for petitioner.
Mr. Jo. Baily Brown, Pittsburg, Pa., for respondent.
This is a multiple claims action in which the District Court entered a judgment disposing of but one claim. Pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, as amended in 1946, 28 U.S.C.A.,1 that court expressly determined that there was no just reason for delay and expressly directed the entry of judgment. Thereupon, an appeal was taken to the Court of Appeals, and the issue before us is whether the latter court has jurisdiction to entertain that appeal under 28 U.S.C. § 1291, 28 U.S.C.A. § 1291,2 although an unadjudicated counterclaim awaits disposition in the District Court. The issue is comparable to that decided in Sears, Roebuck & Co. v. Mackey, 351 U.S. 427, 76 S.Ct. 895, except that here the unadjudicated claim is a counterclaim arising in part out of the same transactions and occurrences as the adjudicated claim. By applying the reasoning used in the Sears case, we reach a like conclusion here and uphold the jurisdiction of the Court of Appeals.
While the counterclaim arises in part out of the same transactions as does the adjudicated claim, it was filed long after the principal proceeding was begun, and is in the nature of an action ancillary to the principal proceeding and bears a separate case number. Upon request of both parties, the District Court has removed the counterclaim from the trial calendar, without prejudice to either party, leaving it subject to reinstatement for trial at any time by order of the court upon its own initiative, or upon request of either party after reasonable notice. A brief review of the entire proceedings and a disclosure of its subject matter throws light on the relationship between the adjudicated claim and the counterclaim.
In 1927, petitioner, The Cold Metal Process Company, an Ohio corporation, and United Engineering & Foundry Company, a Pennsylvania corporation, entered into a contract for the purpose of securing a patent in the name of Cold Metal relating to a certain type of steel rolling mill and of granting to United an exclusive license to make, use and sell mills under such patent. To that end, the parties contributed claims under their respective patent applications and it was agreed that the license should be granted when the patent was issued. The parties also agreed to try, by negotiation, to determine the amount of the payment by United for the license. If the parties could not agree on that point, the subject was to be submitted to arbitration in a manner specified in the contract.3
In 1930, the patent was issued but Cold Metal refused to treat the 1927 contract as conferring an exclusive license on United. Cold Metal maintained that United was not a licensee until the amount due Cold Metal had been determined and paid. United, on the other hand, treated the contract as an enforceable exclusive license under which the license fee was to be determined later.
After litigation not now material,4 Cold Metal, in 1934, instituted the present proceeding, Equity No. 2991, against United in the United States District Court for the Western District of Pennsylvania. Cold Metal seked (1) for an injunction restraining United from prosecuting certain suits, pending in Ohio and elsewhere, founded upon United's claim of exclusive rights under the patent, and (2) for determination of the amount to be paid by United under the 1927 contract. The court declined to issue a preliminary injunction, D.C., 9 F.Supp. 994, but Cold Metal appealed from such denial and, in 1935, obtained a reversal directing the injunction to be issued, 3 Cir., 79 F.2d 666.
In 1939, Cold Metal, in line with the foregoing results, filed a supplemental complaint asking that the 1927 contract be 'cancelled, revoked and annulled' and that United be enjoined from further operations under the patent. However, in 1938, the District Court, after trial, held the contract valid and enforceable, and directed an accounting before a master. 83 F.Supp. 914.
Cold Metal appealed but, in 1939, the Court of Appeals reversed its 1935 decision and largely sustained United's position. It ordered that the injunction against United's infringement suits be dissolved and held that the 1927 contract created a valid and enforceable exclusive license in favor of United. It also stated that the master could determine, from an 'understanding' between the parties as shown by the record, the amount due from United under the 1927 contract. 3 Cir., 107 F.2d 27.
In 1941, United asked leave to file an amended answer and counterclaim, complaining that Cold Metal's recent acts were inconsistent with the 1939 judgment of the Court of Appeals. In 1942, the District Court denied that motion on the ground that it could carry out only the existing mandate of the Court of Appeals. 43 F.Supp. 375. It suggested, however, that the injunction sought by United in its counterclaim should be the subject matter of another action, and that United could assert, before the master, Cold Metal's breaches of the 1927 contract. In 1943, the District Court modified its 1938 decree to make it conform to the Court of Appeals' order of 1939. It also appointed a master to determine not only the amount due Cold Metal from United for its past operations, but the payments to be made on licensed mills in the future.
In 1949, United refiled its claims as an 'Ancillary Cross Complaint' in Civil Action No. 7744. United sought inter alia, (1) to enjoin the prosecution of infringement suits by Cold Metal against parties using mills under licenses granted by United, (2) to require Cold Metal to account for any funds it had collected for the use of such mills within the field of United's exclusive license, and (3) to set off those funds from any payment or royalty that might be due from United to Cold Metal under the 1927 contract. In 1950, the District Court dismissed the cross complaint on the ground that it was not ancillary to Equity No. 2991. 92 F.Supp. 596. However, in 1951, the Court of Appeals reversed the District Court. It held that United's cross complaint was, in reality, a counterclaim, ancillary to Equity No. 2991, and, therefore, within the jurisdiction of the District Court. 3 Cir., 190 F.2d 217. The Court of Appeals reviewed the previous course of the proceedings and pointed out that the claims now made by United in this counterclaim are entirely dependent upon the 1939 decision of that court, 107 F.2d 27, which upheld the validity of United's exclusive license.
Into this situation, in 1954, came the master's report on the accounting in Equity No. 2991. It listed the licensed mills, fixed the compensation payable under the 1927 contract, and found that United's license had existed from 1930 to 1947 and that United's customers were duly licensed to use the patented mills. It also held that certain United mills were exempt from royalty, that Cold Metal had failed to respect the license or to perform all of its obligations under the 1927 contract, but that United owed Cold Metal a substantial sum under it.
In 1955, the District Court approved the master's report in all respects and entered judgment against United for $387,650, with interest at 6% from the date of filing of the report. Both parties appealed. Cold Metal at once moved to dismiss United's appeal on the ground that the District Court had not made the certification required by Rule 54(b). With permission of the Court of Ap- peals, the District Court then amended its judgment to add such certification.5
Again both parties appealed. Again Cold Metal moved to dismiss United's appeal from the amended judgment because the Court of Appeals lacked jurisdiction to entertain it. This time the motion was denied with a per curiam opinion in which the Court of Appeals said 3 Cir., 221 F.2d 115.
Accordingly, on October 3, 1955, in the Court of Appeals, the parties argued their respective appeals on their merits in Equity No. 2991. However, before any decision was rendered on the merits, we granted certiorari upon Cold Metal's petition questioning the jurisdiction of the Court of Appeals to entertain the appeal. 350 U.S. 819, 76 S.Ct. 48. We agree with the Court of Appeals that this is the very kind of case for which amended Rule 54(b) was designed. The appealability of the adjudicated claim is upheld so that the merits of the existing judgment may be determined at this stage of the proceedings.
Prior to the promulgation of the Federal Rules of Civil Procedure in 1939, it may well have been true that the Court of Appeals would not, at this stage, have had jurisdiction over United's appeal. Under the single judicial unit theory of finality which was then recognized, the Court of Appeals would have been without jurisdiction until United's counterclaim also had been decided by the District Court. That would have been so even if the counterclaim did not arise out of the same transaction and occurrence as Cold Metal's claim.6 However, as stated in Sears, Roebuck & Co. v. Mackey, 351 U.S. 427, 76 S.Ct. 895, Rule 54(b), in its original form, modified the...
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