Bowser, Inc. v. Filters, Inc.

• Citation: 398 F.2d 7
• Decision Date: 25 June 1968
• Docket Number: No. 21701.,21701.
• Parties: BOWSER, INC., an Indiana Corporation and Briggs Filtration Company, a Delaware corporation, Appellants, v. FILTERS, INC., a California corporation, Engineered Fabrications, Inc., a California corporation doing business under the style of Enfab, Inc., and Lucian W. Taylor, Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

398 F.2d 7 (1968)

BOWSER, INC., an Indiana Corporation and Briggs Filtration Company, a Delaware corporation, Appellants, v. FILTERS, INC., a California corporation, Engineered Fabrications, Inc., a California corporation doing business under the style of Enfab, Inc., and Lucian W. Taylor, Appellees.

No. 21701.

United States Court of Appeals Ninth Circuit.

June 25, 1968.

Bernard Hoban (argued), Clarence E. Threedy, Edward C. Threedy of Threedy & Threedy, Chicago, Ill., Albert L. Jeffers, Fort Wayne, Ind., Lawrence Livingston, of Livingston, Borregard & Grant, San Francisco, Cal., for appellants.

Stewart L. Johnson (argued), L. N. Duryea, of Duryea, Carpenter & Barnes, Santa Ana, Cal., Harlow P. Rothert, of Cushing, Cullinan, Hancock & Rothert, San Francisco, Cal., Fraser, Wilson & Fraser, Toledo, Ohio, for appellees.

Before DUNIWAY and ELY, Circuit Judges, and THOMPSON,^* District Judge.

THOMPSON, District Judge:

This is an action for unfair competition brought by Bowser, Inc., an Indiana corporation, and its subsidiary, Briggs Filtration Company, a Delaware corporation, against Lucian W. Taylor, a California citizen, and his two California corporations, Engineered Fabrications, Inc., doing business as Enfab, Inc., and Filters, Inc., which manufacture fiber glass filters and components thereof. This diversity action is governed by California law which is the law of the forum as well as the place where the acts comprising the alleged unfair competition occurred. Smith v. Dravo Corp., 7th Cir. 1953, 203 F.2d 369, 373.

In a companion action for patent infringement, we have sustained the findings by the trial court of non-infringement. Bowser, Inc. v. Filters, Inc. et al., 1968, 396 F.2d 296, decided May 20, 1968, and we refer to that opinion for a more detailed explanation of the difference between the product produced by plaintiffs and defendants' competing filter.

Defendant Taylor, after his graduation from Ohio State University in industrial engineering, spent his lifetime working with, manufacturing and developing fiber glass products, particularly in the field of filtration, first with Owens Corning, next with Vibradamp Corporation, and, since 1953, as President and principal stockholder of defendant Enfab, Inc., which he organized to manufacture fiber glass doughnuts for a Government rocket program. In 1956, Enfab became a supplier to Bowser, Inc. of B fiber, fiber glass doughnuts, and in 1958, a supplier to Briggs of 8 pound density, two-inch fiber glass doughnuts, with specified dimensions and grooved interior for use in manufacture by plaintiff of its water separator cartridge under the Marvel patent.

Beginning in late 1954 Enfab worked with Oliver United Filters (later Dorr Oliver) in the design and production of fiber glass wrapped tubes for use in filtration, some of multilayer construction, and early in 1958, worked with Permanent Filter Corporation in the design and production of a filter-separator cartridge of multifiber wrapped tube design.

In August, 1957, Enfab, under Taylor's management, in an effort to expand Enfab sales to filtration companies, sent out mailings to various companies suggesting the possibilities of a tube with dual diameter fiber glass wraps, and in September, 1957, Taylor visited Briggs Filtration with rough samples of what he had in mind. At that time, Briggs ordered samples for testing of a convolute type tube, specifying coarse fiber on the inside layer and finer fiber on the outside. These sample tubes were delivered by Enfab in December, and in February, 1958, Briggs reported that the tests showed good results for commercial applications but not quite good enough for military specifications. Taylor's contacts with Briggs and Bowser continued through 1958 and 1959 in connection with orders for components of plaintiffs' filters.

In July, 1958, Taylor decided on a crash program in an effort to produce a wrapped tube filter separator which would pass military requirements, hired Mr. James Osterman, an industrial engineer experienced in the field, to conduct experiments and tests, obtained good preliminary results, and in August, 1958, organized Filters, Inc., with Osterman as President and sole stockholder, although Taylor was the beneficial owner of all the stock. Taylor purposely and intentionally concealed his ownership of Filters, Inc., through which the successful Taylor filter was manufactured and marketed and accepted for military use. The first military order was obtained in April, 1959.

Taylor's reasons, as stated by him, for concealment of his competitive position were to maintain Enfab as a supplier to Bowser and Briggs and to avoid litigation. The deliberate concealment continued through January, 1963. For example, in June, 1959, Taylor told Bowser representatives that he and Enfab were connected with Filters, Inc. only as a supplier, and in a deposition in May, 1961, he averred that he first became "associated with or affiliated with" Filters, Inc. at the end of 1960. The true situation was finally disclosed in Taylor's deposition taken in this action on February 4, 1963, after a long series of evasive answers. The trial court made no findings on the issue of expressly concealed competition, deeming the issue irrelevant, but there is no dispute in the evidence regarding it.

We have summarized the evidence of Taylor's duplicity because it is the springboard and sub-foundation of plaintiffs' whole case on appeal. Despite the trial court's findings against plaintiffs on other material issues in the case, plaintiffs contend that a reversal of the judgment...