Duplan Corp. v. Deering Milliken, Inc.

• Decision Date: 13 July 1976
• Docket Number: No. 75-2049,75-2049
• Citation: 540 F.2d 1215
• Parties: , 1976-2 Trade Cases 60,998 The DUPLAN CORPORATION et al., Appellants, v. DEERING MILLIKEN, INC., et al., Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1215

540 F.2d 1215

191 U.S.P.Q. 417, 1976-2 Trade Cases 60,998

The DUPLAN CORPORATION et al., Appellants, v. DEERING MILLIKEN, INC., et al., Appellees.

No. 75-2049.

United States Court of Appeals Fourth Circuit.

Argued April 5, 1976.

Decided July 13, 1976.

McNeill Smith, Greensboro, N. C., (Smith, Moore, Smith, Schell & Hunter, Greensboro, N. C., Haynsworth, Perry, Bryant, Marion & Johnstone, Leatherwood, Walker, Todd & Mann, Greenville, S. C., Perrin, Perrin & Mann, Spartanburg, S. C., David Rabin, Greensboro, N. C., Cushman, Darby & Cushman, Washington, D. C., Willkie, Farr & Gallagher, New York City, Parrott, Bell, Seltzer, Park & Gibson, Charlotte, N. C., on brief, for appellants.

Jay Greenfield, New York City (Burns, McDonald, Bradford, Erwin & Few, Greenwood, S. C., Paul, Weiss, Rifkind, Wharton & Garrison, New York City, Butler Means, Evins & Browne, Spartanburg, S. C., Morgan, Finnegan, Pine, Foley & Lee, New York City, for Chavanoz and DMRC; Brumbaugh, Graves, Donohue & Raymond, New York City, Ward, Howell, Barnes & Long, Spartanburg, S. C., for ARCT on brief), for appellees.

Before BOREMAN, Senior Circuit Judge, WIDENER, Circuit Judge, and HADEN, District Judge. ^*

WIDENER, Circuit Judge:

This is an interlocutory appeal, certified under 28 U.S.C. § 1292(b), from an order of the district court denying pre-trial discovery of certain documents containing the mental impressions, conclusions, opinions and legal theories of the appellees' representatives and attorneys regarding certain prior litigation. This appeal marks the third time in the course of this litigation ¹ that we have been presented with questions concerning the applicability of the work product doctrine of Hickman v. Taylor, 329 U.S. 495, 67 S.Ct. 385, 91 L.Ed. 451 (1947), and the scope of Rule 26(b)(3) of the Federal Rules of Civil Procedure. ²

In our most recent Duplan opinion dealing with this subject, 509 F.2d 730, we concluded that opinion work product material, as distinguished from material not containing mental impressions, conclusions, opinions or legal theories, is immune from discovery under Rule 26(b)(3) where the litigation to which that material relates has since terminated. Accordingly, on remand, discovery was limited to factual materials in the possession of the appellees for which the appellants could establish substantial need. Appellants (the throwsters) now seek access to those documents previously denied them as well as certain additional documents, all of which contain opinion work product of the appellees' attorneys and other representatives.

It is the appellants' position that certain of the documents now sought are not trial preparation material and therefore not protected by the work product doctrine. In addition, they argue that all of the documents involved here, regardless of whether or not they are work product, are discoverable under either a purported "crime, fraud, or tort" exception, or, alternatively, a "subject matter waiver" exception to Rule 26(b)(3). The district court, relying upon our decision in Duplan v. Moulinage et Retorderie de Chavanoz, 509 F.2d 730 (4th Cir. 1974), disagreed, being of opinion that all of the documents sought here were covered by the work product doctrine and that neither of the exceptions contended for were applicable to Rule 26. Since some of the questions presented had not previously been raised during the course of this litigation, but largely because of the sheer immensity of the litigation, we granted this appeal.

We are now of opinion the district court was correct in concluding that the documents to which the appellants now seek access are subject to Rule 26(b) (3). While we do not find it necessary to reach the question of whether there exists a crime, fraud, or tort, exception to work product doctrine, we do find that a subject matter waiver exception under Rule 26(b)(3) is not applicable to this case. Accordingly, the district court's order denying discovery is affirmed.

The facts of this case have been discussed at some length in our prior decisions on this subject. Briefly stated, this litigation consists of 37 separate patent and antitrust actions which have been consolidated for purposes of trial. The first of these was commenced in 1968 by Moulinage et Retorderie de Chavanoz (Chavanoz), the holder of certain patents on false twist machinery, and Deering Milliken Research Corporation (DMRC), Chavanoz's exclusive use-licensee in the United States, against one of DMRC's sublicensees alleging breach of the patent sublicense and patent infringement. The remaining actions against the appellant-sublicensees were instituted in late 1969 or early 1970 and also asserted breach of the sublicensing agreement and patent infringement.

The sublicensees, all of whom are engaged in texturing, or throwing, synthetic yarns, countered with claims against Chavanoz and DMRC, as well as Ateliers Roannais de Constructions Textiles (ARCT), the manufacturer of the texturing machines embodying, to varying degrees, Chavanoz's patents. The sublicensees (throwsters) asserted that Chavanoz's patents were invalid, unenforceable and not infringed. They also contended that the appellees, along with others, violated the antitrust laws as a result of a settlement agreement entered into in 1964 ending certain patent litigation. Specifically as to this latter allegation, the throwsters asserted that the execution of certain written agreements between the Leesona Corporation, an American manufacturer of false twist machinery, and Chavanoz, DMRC, ARCT and others, was part of a conspiracy to unreasonably restrain trade in violation of the antitrust laws.

Because this purported conspiracy to violate the antitrust laws bears upon the present appeal, it is necessary to briefly expand upon the facts surrounding the settlement agreement. In the late 1950's, Chavanoz and Leesona each owned a number of patents in both North America and Europe. These patents covered inventions relating to the process of false twist texturing. According to appellees, each company believed that one or more of its patents was or might be infringed by the machines of the other. This resulted in patent litigation instituted in both Europe and North America.

This litigation stretched from 1957 until settlement was reached in April of 1964. During this period, preliminary and intermediate decisions relating to issues of patent validity and infringement varied between forums, countries, and years. In 1963, for example, Burlington Industries, Inc., the world's largest throwster and an appellant here, and its subsidiary, Madison Throwing Co., both of whom were engaged in the process of texturing yarn, settled litigation with Leesona, and Madison specifically acknowledged the validity of one of Leesona's patents after the Canadian counterparts to the Leesona patents were held valid. Chavanoz, ARCT, and DMRC understandably maintain that the pendency of this litigation with Leesona had a negative effect on their efforts to break into the American textile market. This was so, they say, because of the insistence of American machinery users that they be protected from suit by Leesona for patent infringement before they would purchase ARCT's machines.

This, according to the appellees, was the atmosphere in which the 1964 settlement was achieved. That settlement agreement provided for a compromise of each side's patent claims against the other in the form of undertakings not to sue one another or one another's licensees for patent infringement under one or more of the false twist patents. It was also agreed that the then pending litigation would be discontinued. In essence, according to the appellees, the settlement provided for peace between Leesona and Chavanoz and was fostered by a desire on both sides to avoid long and costly litigation.

The throwsters on the other hand impute quite different motives to the appellees' actions in settling this litigation. They contend that the parties involved recognized the weakness of Leesona's patents and the possibility that Chavanoz's patents might not extend to all machines then licensed by Leesona. Thus, they say that continued litigation resulting in Leesona's patents being held invalid would not have been to Chavanoz's benefit since manufacturers would have then been free to market non-infringing, unpatented false twist machines. This, in turn, would have resulted in the discontinuance of use royalties on the ARCT machines for no American manufacturer would have been willing to pay such a royalty when acceptable alternatives would have been available on a royalty-free basis. Therefore, according to the throwsters, Chavanoz and Leesona agreed to settle their disputes in order to preserve their limited monopolies and foreclose competition from other manufacturers.

The resolution of these conflicting views as to the 1964 settlement agreement is, of course, a matter for the district court to resolve upon the trial of this case. We merely set forth a brief abstract of the various contentions of the parties as background to this appeal and do not intimate any opinion as to the merits of either position. With these facts in mind, we turn to appellants' argument.

I

The throwsters first contend that the district court erred in holding that certain documents now sought were work product and, as such, protected by Rule 26(b)(3). These documents, all of which relate to the Leesona litigation and the 1964 settlement agreement, were, with the exception of one, prepared by Leo Soep, a French conseil en brevets, ³ who served as Chavanoz's patent agent up to and during the time of settlement with Leesona. The remaining document was prepared by one Norman C. Armitage, former general house counsel and vice president of DMRC. ⁴ The thrust of the throwsters' argument as to these documents is that they were not generated by trial counsel, were not generated for or at his request, and were...