Caterpillar Tractor Co. v. International Harvester Co.

• Court: U.S. District Court — District of New Jersey
• Writing for the Court: CLARK
• Citation: Caterpillar Tractor Co. v. International Harvester Co., 32 F.Supp. 304 (D. N.J. 1940)
• Decision Date: 09 March 1940
• Parties: CATERPILLAR TRACTOR CO. v. INTERNATIONAL HARVESTER CO.

32 F. Supp. 304

CATERPILLAR TRACTOR CO. v. INTERNATIONAL HARVESTER CO.

District Court, D. New Jersey.

March 9, 1940.

McCarter & English, Conover English, and William H. Campbell, Jr. (substituted atty.), all of Newark, N. J. (Charles M. Fryer and A. C. Aurich, both of San Francisco, Cal., of counsel), for plaintiff.

Lindabury, Depue & Faulks, and Josiah Stryker, all of Newark, N. J. (George L. Wilkinson and William S. Elliott, both of Chicago, Ill., of counsel), for defendant.

CLARK, District Judge.

There is an air of disturbing unreality about the case at bar. Plaintiff and defendant are rival tractor manufacturers. They have since January, 1931, disagreed over the infringement of certain of plaintiff's patents by certain of defendant's constructions. The dispute was and is genuine, but the same cannot be said for the manner of its litigation.

Fortuitously and in the spring of 1931, Reinharts, Inc., a small Nevada dealer, sold two tractors of defendant's manufacture. It had never done so before, though such tractors (conveniently representative we may add — one being track type, the other wheel type) had long been on the market. Plaintiff did not allow the grass to grow under this act of infringement. It brought prompt suit against Reinharts, Inc., in the District of Nevada, and despite a very thorough defense, obtained a decree in its favor from the District Court which was sustained on appeal. See Reinharts, Inc., v. Caterpillar Tractor Co., 9 Cir., 85 F.2d 628, certiorari denied, 302 U.S. 694, 58 S.Ct. 13, 82 L.Ed. 536. The proofs leave little or no room for doubt that the defense of that suit was conducted and controlled by the present defendant through the firm of attorneys now representing it at bar, but then retained by it to represent Reinharts, Inc. The present defendant was, to be sure, originally made a party defendant in the same suit, but chose to have plaintiff's bill dismissed as to it for improper venue — the District of Nevada being, as it chanced, one of the two where it could not be brought into the federal courts against its will. From then on illusion was matched against illusion. Plaintiff, insisting on an adjudication in Nevada rather than immediate and forthright relief against defendant, stressed its somewhat inconsequential grievance against Reinharts, Inc.; defendant, in an effort to escape such an adjudication, feigned complete ignorance of its participation in the dealer's defense.

This artificial posture of litigation introduces the question at bar. Plaintiff, having disposed of Reinharts, Inc., and its two tractors, now turns to defendant and its thousands, invoking by appropriate motion the doctrine of res judicata. In opposition, defendant does not deny the adequacy of its interest in the Nevada litigation, nor does it seriously contest the fact (above postulated) of its complete control of the defense therein. It points rather to its strategem of pretended ignorance. Technically it relies upon the proposition that to render one not a party of record subject to the outcome of a suit, not only must he be a de facto party in the sense of having an interest in and control over the proceedings, but his participation in them must also be "open and avowed to the knowledge of the opposing party." Thus (the argument runs) a manufacturer able and willing to appear in the United States Courts disguised as one of its customers becomes, by that rather devious token, entitled to utilize the services of United States judges in answering, but not determining, arduous questions of its vulnerability to claims of patent infringement. In our estimation, however, that need not be the case, and never can be in the circumstance at bar.

The "open and avowed" rule is announced by the highest authority, Souffront v. La Compagnie Des Sucreries, 217 U.S. 475, 30 S.Ct. 608, 54 L.Ed. 846, and thoroughly entrenched in the texts. See 1 Freeman, Law of Judgments, §§ 432, 433; 2 Black on Judgments, § 540; Van Fleet, Res Judicata, §§ 523, 525; Bigelow on Estoppel, p. 115; Herman on Estoppel, p. 157; and, also, 1 George Washington Law Review 415 (note); but cf. Bower, Res Judicata, §§ 197-208. Upon analysis, however, the decisions which enforce the rule fall into two distinct categories. In the first (which comprises most of the cases) res judicata is pleaded by one who has been a successful undisclosed but de facto party to the former litigation. See Westinghouse Electric & Mfg. Co. v. Jefferson Electric, etc., Co., C.C., 128 F. 751; Jefferson Electric, etc., Co. v. Westinghouse Electric & Mfg. Co., 3 Cir., 134 F. 392; Id., 3 Cir., 139 F. 385; Cramer v. Singer Mfg. Co., 9 Cir., 93 F. 636. There are cogent grounds for preventing him from capitalizing upon the former judgment in his dummy's favor. One is the desirability of removing any advantage from secret defenses. For if the secret is kept, the deceived adversary, later proceeding against the deceiver, has no choice but to retry identical issues against a forewarned opponent. Another is well expressed by a writer in the Columbia Law Review:

"* * * The reason advanced for the `open and avowed' qualification in the case where a secret defendant in a previous suit seeks to invoke the doctrine of res judicata in a later action, is that to allow him to do so would be to force a plaintiff to prosecute to the utmost suits which, for personal or pecuniary reasons, he wishes to let slide. Should plaintiff institute a suit and after that suit is commenced discover that his opponent is judgment-proof, it is hard to require him to throw good money and time after bad by continuing his prosecution on the mere chance that a responsible party, whom he might attempt to sue in another action on the same issues, is a secret defendant in this suit. This reason has not gone unchallenged, but its practical fairness as far as plaintiffs are concerned, coupled with arguments of public policy, seem to ensure its validity. * * *

"It seems to be against public policy to clutter up the calendar with mere token suits, suits whose further prosecution represents economic waste not only to the plaintiff, but also to the state." 39 Columbia Law Review 1251, 1252.

See, also, Von Moschizisker, Res Judicata, 38 Yale Law Journal 299, 302. So the interest of the state in seeing an end to litigation is enhanced by abolishing the greater evil (fruitless suits) at the expense of permitting the lesser (relitigation of secretly contested issues). In the second category of cases — where, as here, res judicata is pleaded against an unsuccessful secret party — there is no rational explanation for the rule. The pleader, by hypothesis, has not been deceived by the secrecy. Nor, by hypothesis, can there be any risk of encouraging the needlessly extensive prosecution or defense of lawsuits. Public policy, on the other hand, commands that the unsuccessful party, open and avowed or otherwise, who has had his day in court shall not vex his adversary twice with the same cause, and burden the courts with the relitigation of adjudicated issues. See 2 Freeman, Law of Judgments, above cited, § 626.

The application of the open and avowed rule to the first, but not the second, category does, of course, conflict with the orthodox concept of mutuality of estoppel by judgment. That concept, however, is not absolute. It has yielded to numerous exceptions in other fields of the law, such as specific performance, Walsh, Equity, pp. 341-356, and see Ames, Mutuality in Specific Performance, 3 Columbia Law Review 1, and consideration, 1 Williston on Contracts, pp. 504, 505. The same is true of the field of the case at bar. See Cox, Res Judicata; Privity and Mutuality in the Doctrine of Res Judicata, 35 Yale Law Journal 607 (comment); The Requirement of Mutuality in Estoppel By Judgment, 29 Illinois Law Review 93 (comment); 82 University of Pennsylvania Law Review 871 (note). Those exceptions are dictated by policy, and so it must be conceded that mutuality is the servant, not the master, of the maxim "interest rei publicae ut sit finis litium." Any other view would sacrifice accuracy in substance for mere symmetry in form. As Jeremy Bentham has warned: "If the rule itself is a curious one, the reason given for it is still more so: — `Nobody can take benefit by a verdict, who had not been prejudiced by it, had it gone contrary': a maxim which one would suppose to have found its way from the gaming-table to the bench. If a party be benefited by one throw of the dice he will, if the rules of fair play are observed, be prejudiced by another: but that the consequence should hold when applied to justice is not equally clear." 7 Bentham's Works (Bowring's Ed. 1843) 171.

We think, therefore, that policy must prevail over mutuality in our circumstance, and that the open and avowed rule does not apply. This is no great departure from precedent. Of the cases in the second category cited by counsel, only one holds that lack of avowal and/or knowledge alone affords a basis for disregarding the doctrine of res judicata, Rowe v. Kidd, 6 Cir., 259 F. 127, and that case did not involve the somewhat...