655 F.2d 938 (9th Cir. 1981), 79-3014, Societe De Conditionnement En Aluminium v. Hunter Engineering Co., Inc.

Docket Nº:79-3014.
Citation:655 F.2d 938
Party Name:210 U.S.P.Q. 344 SOCIETE de CONDITIONNEMENT en ALUMINIUM, Plaintiff-Appellant, v. HUNTER ENGINEERING CO., INC., Defendant-Appellee.
Case Date:April 09, 1981
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

Page 938

655 F.2d 938 (9th Cir. 1981)

210 U.S.P.Q. 344



HUNTER ENGINEERING CO., INC., Defendant-Appellee.

No. 79-3014.

United States Court of Appeals, Ninth Circuit

April 9, 1981

Argued and Submitted Nov. 6, 1980.

As Amended on Denial of Rehearing Aug. 19, 1981.

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[Copyrighted Material Omitted]

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James P. Ryther, Chicago, Ill., argued, for plaintiff-appellant; Peter C. Smoot, Kaplan, Livingston, Goodwin, Berkowitz & Selvin, Beverly Hills, Cal., Duglad S. McDougall, McDougall, Hersh & Scott, Chicago, Ill., on brief.

Robert T. Tobin, New York City, argued, for defendant-appellee; Kenyon, Reilly & Carr, New York City, Oliver F. Green, Paul, Hastings, Janofsky & Walker, Los Angeles, Cal., on brief.

Appeal from the United States District Court for the Central District of California.

Before CHOY and WALLACE, Circuit Judges, and HANSON, [*] District Judge.

WALLACE, Circuit Judge:

Societe de Conditionnement en Aluminium (SCAL) brought this action against Hunter Engineering Co., Inc. (Hunter) seeking a declaratory judgment that a patent owned by Hunter is invalid. Hunter moved to dismiss the action for lack of subject matter jurisdiction, pursuant to Rule 12(b)(1), Fed.R.Civ.P. The district judge granted Hunter's motion, holding that the court lacked subject matter jurisdiction because there was no case or controversy. SCAL appeals from this judgment and from the district judge's failure to admit certain deposition testimony into evidence. We reverse and remand.


Because the district judge made no findings of fact, we have taken our statement of facts from the record. Most of the facts are undisputed. We shall point out the areas of dispute.

SCAL, a subsidiary of Pechiney Ugine Kuhlmann of France, manufactures and sells aluminum products and metal working machinery. Hunter also manufactures and sells metal working machinery. Reynolds Metals Company (Reynolds) sells aluminum products and uses the metal working machinery sold by SCAL and Hunter. In 1976, Reynolds expressed interest in purchasing continuous roll casters, 1 and both Hunter and SCAL submitted proposals to Reynolds. Reynolds negotiated with both Hunter and SCAL through September 1977. SCAL's initial proposals did not include a "hold harmless" or patent indemnification clause, but did include an agreement to assist in case of patent litigation. This was SCAL's standard proposal. Reynolds responded according to its standard practice by requesting a hold harmless provision. Negotiations continued throughout the summer of 1977, but neither SCAL nor Reynolds would alter its position on the hold harmless provision.

In September 1977, Jim Hickam of Hunter made a phone call to W. J. Vogel of Reynolds that is the crux of this case. Vogel was responsible for procuring the continuous casting contract. Hickam was Technical Director of Hunter. Although Hickam was never an officer at Hunter, he had been identified to Reynolds as Vice President of Engineering and Production in a letter sent by George R. Vassily, Hunter's National Sales Manager and the person responsible for the continuous caster negotiations with Reynolds. Vogel understood

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Hickam's capacity to be Technical Director. He testified, however, that "Hickam was the authority as to what they could guarantee and what they couldn't," while Vassily's job was sales. Vogel said that Vassily had to rely on Hickam when the conversation went beyond the standard, written guarantees.

Vogel's recollection of Hickam's phone call of September 12 is as follows:

Mr. Hickam called me on the phone in an emotional state .... He was very concerned that we were about to order casters from SCAL. And he stated that they had been informed that the Patent Department was going to issue them a patent and that it would be printed on October 18. And he felt that the SCAL equipment would infringe on this patent. And he went on to say that he didn't care whether Reynolds bought the equipment or not if they wanted to give him a retirement annuity. He said he would take this patent to court and take every legal action available to them against Reynolds.

Vogel apparently took this conversation seriously. He advised Reynolds' legal department of the call. He indicated that "we were very concerned about this indicated threat from Hunter."

Vogel stated that after this phone call he again requested a hold harmless provision from SCAL. SCAL indicated that it did not think its competitors would hold Reynolds harmless. Vogel called Vassily, who told him that Hunter would agree to a hold harmless provision in the contract. Vogel stated that the hold harmless agreement "(a)t that point, ... was a very serious question with us," and that "if SCAL did not agree to hold us harmless, they weren't going to get the order either."

Shortly after the Hickam phone call, Kurt T. Braun, a Hunter Vice President, called Vogel to apologize for the "exchange of harsh words" between Vogel and Hickam. There was no mention made of a patent litigation threat.

No one at Hunter had ever explicitly authorized Hickam to speak for the company concerning patent litigation. Hunter had a policy not to sue its customers, and a decision to sue would have been made by the Board of Directors. Hunter claims that no one at Hunter knew of Hickam's "threat" until SCAL filed its complaint in this case, and that immediately upon learning of the threat Hunter repudiated it. SCAL points out that Hunter has refused to forbear from any future threats or litigation concerning these patents.

In September 1977, a few days after Hickam's phone call, SCAL and Reynolds entered into a contract for the sale of continuous roll casters. The agreement contained a hold harmless provision. The parties are in dispute over what caused SCAL to agree to include a hold harmless provision in the agreement. Hunter claims that SCAL agreed only when it learned that Hunter had agreed to hold Reynolds harmless. SCAL argues that it agreed to the hold harmless provision only after Reynolds' position had hardened subsequent to the Hickam phone call. The parties have pointed to nothing in the record that indicates causation. Rather, the record merely reflects the chronological...

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