Electric Boat Co. v. Lake Torpedo Boat Co.

• Decision Date: 07 July 1914
• Docket Number: 412,426,450,433,451.
• Citation: 215 F. 377
• Parties: ELECTRIC BOAT CO. v. LAKE TORPEDO BOAT CO. (five cases).
• Court: U.S. District Court — District of New Jersey

215 F. 377

ELECTRIC BOAT CO. v. LAKE TORPEDO BOAT CO. (five cases).

Nos. 412, 426, 433, 450, 451.

United States District Court, D. New Jersey.

July 7, 1914

Pennie Davis & Goldsborough, of New York City, for plaintiff.

Gifford & Bull, of New York City, for defendant.

RELLSTAB District Judge.

The parties are citizens of the same state, engaged in a competitive business of manufacturing and selling submarine boats. The bill in each of the five cases alleges infringement of certain letters patent, relating to submarine boats. The answers to said bills, in addition to the usual defenses set up as counterclaims alleged infringements of other letters patent, relating to submarine boats, malicious prosecution, and unfair competition, and are substantially alike. In connection with such counterclaims the defendant prays, inter alia, that the plaintiff be enjoined from infringing said letters patent; from unfairly competing with it in its business; for an accounting of the profits acquired by plaintiff; and the damages suffered by defendant from the acts set out therein.

The plaintiff moves to strike out the counterclaims and the prayers based thereon on the following grounds: First, that the subject-matters of such counterclaims are not within equity rule 30 (198 F. xxvi, 115 C.C.A. xxvi); second, that as to some of such patents, defendant is not the sole owner third, that the subject-matter of the alleged malicious prosecution and unfair business dealings, if a cause of action, is one between citizens of the same state, and not one arising under the Constitution or laws of the United States; and, fourth, that such counterclaims are calculated to embarrass the trial of the action.

As to the first ground: In Motion Picture Patents Co. v. Eclair Film Co. (D.C.) 208 F. 416, 418, this court noted the difference in the judicial interpretation given to equity rule 30, but, as the conclusion there reached was based on other considerations, no opinion was expressed as to what counterclaims could be set up under such rule. The pertinent part of the rule is as follows:

'The answer must state in short and simple form any counterclaim arising out of the transaction which is the subject-matter of the suit, and may, without cross-bill, set out any set-off or counterclaim against the plaintiff which might be the subject of an independent suit in equity against him, and such set-off or counterclaim, so set up, shall have the same effect as a cross-suit, so as to enable the court to pronounce a final judgment in the same suit both on the original and cross-claims.'

The diverse interpretations referred to appear in the following cases: Terry Steam Turbine Co. v. B. F. Sturtevant Co. (D.C.) 204 F. 103; Adamson v. Shaler (D.C.) 208 F. 566; Klauder-Weldon Dyeing Machine Co v. Giles (D.C.) 212 F. 452; Williams Patent Crusher Co. v. Kinsey Mfg. Co. (D.C.) 205 F. 375; Marconi Wireless Telegraph Co. v. National Electric Signaling Co. (D.C.) 206 F. 295; Salt's Textile Mfg. Co. v. Tingue Mfg. Co. (D.C.) 208 F. 156; and Vacuum Cleaner Co. v. American Rotary Valve Co. (D.C.) 208 F. 419. These were all suits in which the plaintiff sought to enjoin alleged infringements of patents and to obtain an accounting, etc. In the first three cases the courts struck out counterclaims seeking to enjoin alleged infringements of other patents, etc. In the fourth case the court struck out a counterclaim alleging unfair competition in trade, consisting of misrepresentation by complainant of its patent rights and the scope thereof. In the other three cases the courts refused to strike out counterclaims setting up alleged infringement of patents, etc., and unfair business methods. The cases which denied the setting up of the counterclaims proceeded on the idea that only such matters as before the adoption of such rule could be set up by a cross-bill could be made the subject of a counterclaim.

In the Turbine Case, the first of the reported cases dealing with this subject, the learned judge said that the main purpose of the permissive part of the rule was, 'to dispense with cross-bills by requiring everything previously done by cross-bill to be thereafter done by answer only. ' This, in my judgment, is so only as to the mandatory part of the rule, and, as to the permissive or optional part, the main purpose is to enable the defendant by answer to do precisely that which the plaintiff, by rule 26 (198 F. xxv, 115 C.C.A. xxv), may do in one bill, viz., 'join * * * as many causes of action cognizable in equity as he may have against the (plaintiff) defendant. ' This difference as to the main purpose of this part of the rule leads to radically different results. In the former view the term 'cross-bill' (drawing to it its previously accepted meaning) is given a controlling effect upon what follows, whereas under the latter view the phrase 'without cross-bill' is but a parenthetical one, subordinate in its effect. Dominated by this former view, the learned judge, in the Turbine Case, was led to conclude that no other counterclaims than those covered by the mandatory provision could be set up under the permissive provision of the rule. To so confine the right to counterclaim, in my judgment, is to unduly limit the meaning of the term 'cross-bill' as used in such rule, disregard the manifest intent to distinguish between the kinds of counterclaims that must or may be set up in the answer, and to overlook entirely the plain purpose of the new rules to permit the parties to settle their differences in one suit, provided they can be conveniently disposed of together.

Under the old system of pleading, a cross-bill was necessary to obtain for the defendant affirmative relief touching the matter of the original bill. A cross-bill, however, was not permitted unless it was based on or grew out of the subject-matter of the original bill. It was treated as a mere auxiliary suit or as a dependency upon the original suit. Story's Eq. Pl. Secs. 389, 399; Shipman's Eq. Pl. Secs. 210, 211; Morgan Co. v. Texas Central Ry. Co., 137 U.S. 171, 200, 11 Sup.Ct. 61, 34 L.Ed. 625; Harrison v. Perea, 168 U.S. 311, 320, 18 Sup.Ct. 129, 42 L.Ed. 478; Stonemetz, etc., Co. v. Brown, etc., Co. (C.C.) 46 F. 851; New Departure Bell Co. v. Hardware Specialty Co. (C.C.) 62 F. 462; Weathersbee v. American, etc., Co. (C.C.) 77 F. 523; Springfield Milling Co. v. Barnard & Leas Mfg. Co., 81 F. 261, 26 C.C.A. 389; Hogg v. Hoag (C.C.) 107 F. 807; 16 Cyc. 331.

The 'counterclaim arising out of the transaction which is the subject-matter of the suit,' and which, under the rule, must be set up in the answer, covers broadly stated, all matters which heretofore could have been pleaded by cross-bill. Therefore to limit the option given to the defendant to 'set out any set-off or counterclaim against the plaintiff which might be the subject of an independent suit in equity against him' to such claims as must be set up is to make the option fruitless. Marconi Wireless Telegraph Co. v. National E.S. Co. (D.C.) supra, 206 Fed.at page 302.

The distinction made in the rule between a 'counterclaim arising out of the transaction' forming the basis of the original suit and one 'which might be the subject of an independent suit,' brought by the defendant against the plaintiff, is the primary and influential distinction between what could be set up by a cross-bill and what could not. The provision that the claims arising out of such transaction must be set up in the answer is intended to put an end in one suit to all the controversies that arise out of such subject-matter, legal (see rule 23 (198 F. xxiv, 115 C.C.A. xxiv), also new) or equitable; and the provision that the independent equitable causes of action may be so set up is intended to permit the defendant to litigate in the same suit all independent causes of action, of an equitable nature, to the same extent as the complaint might in the first instance under rule 26. In the presence of such manifest intent, to adhere to the technical meaning of the term 'cross-bill' is to attribute to the framers of the rule a meaning in irreconcilable conflict with the context. Such term is perhaps unfortunate, both as to words and position, but it is clear from the context that it is to be understood as a synonym of 'cross-suit' and 'cross-claim.' Therefore the limitation upon what counterclaim may be set up is not that it must have arisen out of the transaction which is the basis of the original bill, that character of counterclaim having been already completely covered by the preceding clause, but that the subject-matter thereof be such as 'might be the subject of an independent suit in equity' against the plaintiff.

Rule 26 (also a new rule) authorizes the plaintiff to 'join in one bill as many causes of action cognizable in equity as he may have against the defendant,' and a proper construction of rule 30 gives the defendant the same option; thus both parties are, in the matter of joining causes of action, placed on an equal footing. In the case of the plaintiff so joining, the court, by express authority contained in the concluding sentence of rule 26, is given discretion to order separate trials if it appears that such 'causes cannot be conveniently disposed of together. ' In case the joinder is the result of the defendant's action, the court has a like discretion. Rule 30 declares that such counterclaim 'shall have the same effect as a cross-suit,' and by analogy, if not by necessary implication, the defendant in such cross-suit is to be treated as a plaintiff, and the joinder of different causes of action by him in one suit is subject to the court's power of ordering separate trials if they 'cannot be conveniently disposed of together.'

In Adamson v. Shaler, supra, the...