Coffman v. Federal Laboratories, 9545.

• Decision Date: 09 November 1948
• Docket Number: No. 9545.,9545.
• Citation: 171 F.2d 94
• Parties: COFFMAN v. FEDERAL LABORATORIES, Inc., et al. (UNITED STATES, Intervenor).
• Court: U.S. Court of Appeals — Third Circuit

171 F.2d 94 (1948)

COFFMAN v. FEDERAL LABORATORIES, Inc., et al. (UNITED STATES, Intervenor).

No. 9545.

United States Court of Appeals Third Circuit.

Argued April 23, 1948.

Decided November 9, 1948.

Writ of Certiorari Denied February 14, 1949.

James D. Carpenter, Jr., of Jersey City, N. J., and John G. Buchanan, of Pittsburgh, Pa. (Smith, Buchanan & Ingersoll, of Pittsburgh, Pa., Carpenter, Gilmour & Dwyer, of Jersey City, N. J., William H. Eckert, of Pittsburgh, Pa., Samuel M. Coombs, Jr., of Jersey City, N. J., and John G. Buchanan, Jr., of Pittsburgh, Pa., on the brief), for appellant.

Thomas McNulty, of Jersey City, N. J. (Seif, Evashwick & Best, of Pittsburgh, Pa., and Milton, McNulty & Augelli, of Jersey City, N. J., on the brief), for appellee.

Melvin Richter, of Washington, D. C. (H. G. Morison, Asst. Atty. Gen., Owen M. Burns, U. S. Atty., of Pittsburgh, Pa., and Roy C. Hackley, Jr., and Paul A. Sweeney, Attorneys, Department of Justice, both of Washington, D. C., on the brief), for intervenor.

Before GOODRICH and KALODNER, Circuit Judges and FEE, District Judge.

Writ of Certiorari Denied February 14, 1949. See 69 S.Ct. 603.

GOODRICH, Circuit Judge.

The instant case presents to this Court, for the second time, the constitutionality of the wartime Royalty Adjustment Act.¹ The question first came to us in Timken-Detroit Axle Company v. Alma Motor Company² and we upheld the validity of the legislation. Our judgment was vacated by the Supreme Court and the case remanded to us with directions to determine first the non-constitutional issues of the litigation between the parties.³ This we did and the decision was rendered on patent law points involving no constitutional questions. 3 Cir., 1947, 163 F.2d 190.

This case cannot thus be disposed of. The plaintiff, Coffman, sues for royalties alleged due him under a licensing agreement made with the defendant in 1932.⁴ The defendant defends under the terms of the Royalty Adjustment Act and, more specifically, Royalty Adjustment orders W-9 and N-7 issued respectively by the War Department and Navy Department pursuant to the statute.⁵

The defendant disputed part of the amount due on other grounds not involving the statute or the validity of the plaintiff's patents. But these defenses went to a portion of the claim only; as to the remainder the sole defense is the Royalty Adjustment Act. If it and the orders made pursuant to it are valid, the defendant is not liable to the plaintiff and the District Court so held. D.C.W.D.Pa.1947, 73 F.Supp. 409. Consideration of the statute seems inescapable and upon this point the litigants are in agreement.⁶

In addition to urging the non-constitutionality of the statute, the plaintiff claims that in any event the Act, or alternatively, the particular orders in question, should not be applied to royalties due before January 1, 1943, the date mentioned in the orders. This argument is made, first, as a matter of what the plaintiff regards as the proper interpretation of the statute, and, second, an application of the doctrine of res judicata. This phase of the case we turn to first.

Res Judicata and the Interpretation of the Orders Issued Pursuant to the Act.

The plaintiff presses his res judicata point in conjunction with his contention that the orders issued under the Act were by their terms prospective only, and that their intent was not to affect royalties which accrued before January 1, 1943. To understand Coffman's point it will be necessary to relate in greater detail the progress of this lawsuit as it worked its way to final disposition in the District Court. Among the items which made up the claim for royalties due under the terms of the license agreement was 6% of "the licensee's net selling price" on the cartridges manufactured to fill a certain Navy contract. There had been an agreement which reduced the royalties on the manufactured articles to fulfill that particular contract but plaintiff claimed that a failure to observe its conditions made the full 6% payable. When the defendant answered this part of the complaint it admitted that royalties of 3% were due on the cartridges manufactured under the particular Navy contract. As previously stated, however, it also set up the defense of the Royalty Adjustment orders. The plaintiff moved for a summary judgment on part of the claim on the ground that the orders did not prohibit its payment. The motion was granted. The order and the pleadings, which are all we have in the way of a record on that aspect of the case, do not indicate the basis of the District Court's action. Federal Laboratories argues that its original answer was drawn in such a manner that it did not raise the Royalty Adjustment orders as a defense to that part of the claim. Coffman says it did, pointing out that the briefs and oral argument on the motion were concerned mainly with just that point. We do not need to resolve this controversy. Either way that proceeding did not preclude the District Court when the matter came to trial from holding that the orders applied to royalties due before they were issued. Our conclusion turns on subsections (a) and (d) of Rule 56 and subsections (a) and (b) of Rule 54, Federal Rules of Civil Procedure, 28 U.S.C.A., all of which are set out in the margin.⁷

Rule 54(b) provides for a final judgment upon one claim in a suit predicated upon two or more claims. It is clear, however, that there must be differing occurrences or transactions which form the bases of separate units of judicial action before such a judgment can be entered under that Rule.⁸ They are not found here. The plaintiff's claim is for royalties alleged to be due him up to the dates set forth in his bill of complaint. The fact that this claim was divided into several parts in the findings of fact,⁹ to determine the impact of the Act and orders thereunder on various segments of it, does not make what is essentially a single claim into several claims arising out of wholly separate and distinct transactions or engagements. The claim, moreover, of which enforcement was being sought, was one for 6% royalties on a particular contract and at most only half of that amount was undisputed. Since the part does not become a separate cause of action a judgment could not be entered under Rule 54(b).¹⁰

The other rule to be considered in this connection is Rule 56. That Rule covers summary judgment, that is, those situations in which a court can enter a judgment based on the pleadings and affidavits filed which indicate that a party is entitled to a judgment as a matter of law. We have examined subsection (a) of the Rule in the light of subsection (d) of the same Rule and agree with the Second and Seventh Circuits that the Rule "does not contemplate a summary judgment for a portion of a single claim in suit. Neither does any other rule of the Rules of Civil Procedure so contemplate, as far as we are aware. A partial summary judgment, as the instant one is termed, under the circumstances before us is a misnomer." Biggins v. Oltmer Iron Works, 7 Cir., 1946, 154 F.2d 214, 216; Audi Vision, Inc., v. RCA Mfg. Co., 2 Cir., 1943, 136 F.2d 621, 147 A.L.R. 574.

Subsection (d) simply provides for a method whereby the trial judge with the aid of counsel can point up the controverted issues. It is, moreover, similar to the pretrial procedure provided for in Rule 16¹¹ and the matters determined in the issues so framed are not foreclosed in the sense that the judge cannot alter his conclusions. The action of interpreting the orders, therefore, did not become final for the purposes of appeal¹² and it did not have the effect of a final judgment. The court retained full power "to make one complete adjudication on all aspects of the case when the proper time arrived."¹³ That time was when the judgment in the whole proceeding was entered. Therefore, even if we accept the plaintiff's contention as to what was determined by the motion, the court was still free to alter its view as to interpretation of the orders at a later stage of the proceedings. Res judicata was not and is not applicable.

Upon the question of the interpretation of the orders, we agree with the trial judge that a reading of them shows an intent to prohibit the payment of royalties in excess of the amounts fixed thereby, even though the royalties accrued before the orders were issued. Previous to the issue of Royalty Adjustment orders Nos. W-9 and N-7 the heads of the departments herein involved gave a notice, as directed by § 1 of the Act, to the effect that no royalties unpaid on that date should thereafter be paid until further notice. About ten months later the orders which are the subject-matter of the present controversy were issued. Paragraphs 1 of those orders set a ceiling price on starters and stated that no royalties were payable on the cartridges.

Plaintiff's main support for non-applicability to pre-1943 royalties is contained in the phrase "* * * but not to exceed the sum of Fifty Thousand ($50,000) Dollars to be paid to Licensor in each calendar year commencing January 1, 1943, in respect of starters sold to or for the War Department and Navy Department, added together." The date mentioned therein is the date on which the fifty thousand dollar limitation becomes effective. But it is not the date marking the beginning of regulation of the maximum amount the patent owner could receive as royalties. The intent to make the orders retroactive is evident from provisions contained in paragraphs 2 when the rates given in paragraphs 1 are permitted to be paid by the licensee "on account of any manufacture, use, etc. * * * heretofore occurred or hereafter occurring." Furthermore, in paragraphs 3 the licensee is directed to pay over to the War Department all royalties due but unpaid to the licensor on "the effective date of said notice, * * * on account of any manufacture, use * * * for the War Department or the Navy Department heretofore occurred...