International Tel. & Tel. Corp. v. General Tel. & Elec. Corp.

• Decision Date: 16 January 1969
• Docket Number: Civ. No. 2754.
• Citation: 296 F. Supp. 920
• Court: U.S. District Court — District of Hawaii
• Parties: INTERNATIONAL TELEPHONE & TELEGRAPH CORPORATION, Plaintiff, v. GENERAL TELEPHONE & ELECTRONICS CORPORATION and Hawaiian Telephone Company, Defendants.

296 F. Supp. 920

INTERNATIONAL TELEPHONE & TELEGRAPH CORPORATION, Plaintiff, v. GENERAL TELEPHONE & ELECTRONICS CORPORATION and Hawaiian Telephone Company, Defendants.

Civ. No. 2754.

United States District Court District of Hawaii.

January 16, 1969.

Joseph L. Alioto, Maxwell M. Blecher, Harold R. Collins, Jr., San Francisco, Cal., Damon, Shigekane & Char, Vernon F. L. Char, Honolulu, Hawaii, Howard J. Aibel, Edwin A. Kilburn, Herbert A. Steinke, Jr., Scott E. Bohon, New York City, for plaintiff.

Jenks, Kidwell, Goodsill & Anderson, Marshall M. Goodsill, Jr., Martin Anderson, Honolulu, Hawaii, Hopkins, Sutter, Owen, Mulroy, Wentz & Davis, Thomas R. Mulroy, Chicago, Ill., Theodore F. Brophy, New York City, for defendant General Telephone & Electronics Corporation.

Jenks, Kidwell, Goodsill & Anderson, Marshall M. Goodsill, Jr., Martin Anderson, Honolulu, Hawaii, for defendant Hawaiian Telephone Company.

MEMORANDUM DECISION ON PLAINTIFF'S MOTION TO STRIKE THE SECOND, THIRD AND FOURTH AFFIRMATIVE DEFENSES OF DEFENDANT GENERAL TELEPHONE & ELECTRONICS CORPORATION

PENCE, Chief Judge.

Plaintiff is suing under Section 16 of the Clayton Act (Title 15 U.S.C. § 26) and Section 11 of Act 190 of the Hawaii Laws of 1961 for injunctive relief from defendants' alleged violations of the federal and state antitrust laws. Defendant General Telephone & Electronics (GT&E) has asserted the doctrines of laches and/or statute of limitations,¹ estoppel,² and unclean hands³ as affirmative defenses to some or all of plaintiff's charges. Plaintiff has moved to strike these defenses as insufficient and immaterial as a matter of law. Plaintiff's motion was granted orally on August 2, 1968, and this is but the formal written decision thereon.

I. Second Affirmative Defense: Laches and/or Statute of Limitations

Paragraph 1 of plaintiff's prayer for relief requests that the following acquisitions of GT&E be adjudged violations of Sections 1 and 2 of the Sherman Act (Title 15 U.S.C. §§ 1, 2) and Section 7 of the Clayton Act, as amended (Title 15 U.S.C. § 18):

1. 1950—GT&E acquired the capital stock of Leich Electric Co.;

2. 1954—GT&E acquired the stock or assets of Automatic Electric Company;

3. 1959—GT&E acquired the stock or assets of Lenkurt Electric Co., Inc.; and

4. 1964—GT&E acquired the stock of California Water & Telephone Company, West Coast Telephone Company, The Southwestern States Telephone Company, and Western Utilities Corporation (all referred to as the Western Utilities groups).

Defendant contends "such relief is barred by reason of laches and the statute of limitations (Section 4B of the Clayton Act * * *)." (Emphasis added.)⁴ Defendant has abandoned this defense insofar as it relates to the 1964 acquisition of the Western Utilities group, which occurred within four (4) years of the filing of this lawsuit (October 18, 1967).⁵

Clayton § 4B⁶ provides that any "action under Clayton sections 4 or 4A shall be forever barred unless commenced within four years after the cause of action accrued." Since plaintiff initiated this lawsuit solely under Clayton § 16 for injunctive relief, the § 4B statute of limitations applying to Clayton Act actions for money damages is, by its very language, not, per se, applicable to this proceeding. Defendant's second affirmative defense is therefore limited to the equitable doctrine of laches, which, for the purposes of this action, defendant equates to the statute of limitations.

Defendant stated its position in the context of and relies primarily⁷ on Farbenfabriken Bayer, A. G. v. Sterling Drug, 197 F.Supp. 627 (D.N.J.1961): (Id. note 5 supra.)

"When I say laches here, I am talking about laches in the sense of an equitable remedy being linked to a legal right, the equitable remedy being Section 16 linked to a legal right, which is Section 7 of the Clayton Act, and Sections 1 and 2 of the Sherman Act.

"The plaintiff isn't suing for damages. The one thing he is after is an equitable remedy of an injunction, divestiture, some equitable remedy. Now, it's linked to the legal rights given by statute, Clayton 7 and Sherman 1 and 2. Those legal rights in the antitrust laws, Sherman 1 and 2 and Clayton 7, are subject to Section 4, statute of limitations, Section 4B, four years.

* * * * * *

"* * * When I say laches now, I am talking about laches which is the four-year period, because it is the statute of limitations of the legal rights upon which they ask for the equitable remedy."

Plaintiff urges that an action for divestiture under the antitrust laws is timely if, at the time of filing, there appears a reasonable likelihood any acquisition will lessen competition, citing United States v. E. I. Du Pont De Nemours & Co., 353 U.S. 586, 77 S.Ct. 872, 1 L.Ed.2d 1057 (1957). Plaintiff maintains Du Pont permits suit whenever "the acquisition threatens to ripen into a prohibited effect."⁸ Defendant counters that Du Pont is distinguishable since it was a government suit and immune from any laches defense. Defendant construes plaintiff's position as conceding that an acquisition which constituted a violation at the time made is subject to attack for laches, arguing that, at most, Du Pont introduces a fact question (e. g., when the violation occurred) which precludes summary judgment as an alternative to a motion to strike.

Clayton 4B is limited to actions for money damages initiated under Clayton 4 or 4A by private parties or the federal government. Clayton 4B does not in any way specifically curtail or attach limitations to private suits under Clayton 16. If there is any such limitation on private equity proceedings, it can therefore only derive from case law.

Sterling Drug, supra, is the primary authority relied upon by defendant to support its position that the Clayton 4B four year statute of limitations for Clayton 4 actions is by case law transmuted into laches and made applicable to this equitable proceeding under Clayton 16. In that case plaintiff sued on September 28, 1955, for money and injunctive relief as a result of defendant's Sherman 1 violation. A companion opinion found that such violation (an unlawful combination and conspiracy in restraint of trade in pharmaceutical products) had terminated on September 5, 1941. Previously the court had dismissed plaintiff's treble damage claim, leaving only a Clayton 16 claim for injunctive relief. In granting defendant's motion for summary judgment, the court said:

"Section 4 of the Clayton Act * * * grants to `any person * * * injured in his business or property by reason of anything forbidden in the antitrust laws' a right to maintain an action for treble damages. Section 16 of the Act * * * grants an additional right to maintain an action for injunctive relief `against threatened loss or damage.' We are of the opinion that the equitable remedy available under Section 16 is predicated upon the legal cause of action created by Section 4. It is essentially an equitable remedy in aid of a legal right created by the statute. (Emphasis added.)

"The statute of limitations, by its express terms, applies only to actions at law and may not be invoked as a defense against a claim exclusively equitable. However, where the equity jurisdiction is invoked in aid of a legal right, or is predicated upon a legal cause of action, equity `will withhold its remedy if the legal right is barred by the * * * statute of limitations.'" 197 F.Supp. at 629.⁹

The history of sections 4, 16 and 4B does not permit this court to agree with the conclusion that a Clayton 16 claim "is predicated upon the legal cause of action created by Section 4." Private parties were originally granted the right to seek treble damages by the Sherman Act (passed July 2, 1890), which, however, did not establish the corollary right to injunctive relief. Congress reenacted the substance of the treble damage provision on October 15, 1914 as Section 4 of the Clayton Act. Significantly, Congress at that time made a concomitant expansion of the antitrust laws by giving private parties the right to sue for injunctive relief (Clayton § 16) separate and apart from any right to monetary recovery. It was not until July 7, 1955, that Clayton 4B, which pre-empted application of state statutes of limitation to the federal antitrust laws, was added.

While the right to such injunctive relief to redress antitrust grievances may be said to be "additional" to the right to damages in the sense that it may be conjoined therewith, it may also be an alternative. As the above history manifests, the equitable remedy of § 16 is in no way "predicated upon", incidental to or derived from the legal right of § 4. The two sections expressly create wholly independent remedies, in strikingly similar language. A litigant may pull either trigger of his shotgun independently, or, at his option, he may shoot both barrels together. This is abundantly clear from the instant complaint, in which plaintiff seeks only injunctive relief. No damage claim exists herein on which any equitable remedy could be predicated. Yet defendants have not challenged plaintiff's right to maintain this suit.

In Sterling Drug plaintiff originally sought both legal and equitable relief, and to support incorporation of the Clayton 4B four year limitations period into a laches defense applied to a Clayton 16 claim the court relied on the general principle that equity withholds its remedy when legal rights are barred. Moreover, the facts of Sterling Drug are markedly different from those alleged here. The violation in Sterling Drug consisted of a conspiracy among plaintiff's predecessors and the defendant and its predecessors, which included illegal contracts in 1920, 1923 and 1926, all of which terminated on September 5, 1941. The suit was filed in 1955. In contrast, the pleadings herein allege a cause of action growing out of successive and multiple acquisitions continuing to the year suit was brought. The prospective language of Clayton 7, in...