Electric Furnace Corp. v. Deering Milliken Research Corp., 17100

• Decision Date: 04 October 1967
• Docket Number: 17101.,No. 17100,17100
• Citation: 383 F.2d 352
• Parties: ELECTRIC FURNACE CORPORATION, Plaintiff-Appellee and Plaintiff, Cross-Appellant, v. DEERING MILLIKEN RESEARCH CORPORATION, Defendant-Appellant and Defendant, Cross-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

383 F.2d 352 (1967)

ELECTRIC FURNACE CORPORATION, Plaintiff-Appellee and Plaintiff, Cross-Appellant, v. DEERING MILLIKEN RESEARCH CORPORATION, Defendant-Appellant and Defendant, Cross-Appellee.

Nos. 17100, 17101.

United States Court of Appeals Sixth Circuit.

October 4, 1967.

Ray H. Moseley, Chattanooga, Tenn., for Deering Milliken Research, B. P. Gambrell, Atlanta, Ga., on brief.

Sizer Chambliss, Jac Chambliss, Chattanooga, Tenn., for Electric Furnace, Chambliss, Chambliss & Hodge, Chattanooga, Tenn., of counsel.

Before O'SULLIVAN, CELEBREZZE and PECK, Circuit Judges.

O'SULLIVAN, Circuit Judge.

We consider here the appeal of Deering Milliken Research Corporation (Deering) defendant in a libel action, from a judgment for plaintiff, Electric Furnace Corporation (Electric), awarding plaintiff-appellee $834.36 compensatory and $50,000 punitive damages. Judgment was entered after the District Court reduced, as excessive, a jury's verdict, returned July 30, 1965, for $2,000 compensatory and $60,000 punitive damages.

This judgment was the product of the third trial of this lawsuit. The outcome of the first trial in which a jury awarded $6,420 compensatory and $12,500 punitive damages to Electric, was reversed by this Court in Electric Furnace Corp. v. Deering Milliken Research Corp., 325 F.2d 761 (CA 6, 1963). We there remanded the case for a new trial, and following a second trial a jury again found in favor of the plaintiff, awarding it $20,000 compensatory and $50,000 punitive damages. Upon Deering's motion, the District Judge thereupon ordered a new trial, unless plaintiff would accept a reduction of the compensatory damages to $839.36 and the punitive damages to $25,000. Plaintiff elected not to accept the ordered remittitur, and the third trial ensued.

Defendant-appellant's motions for a directed verdict at the close of plaintiff's case in this last trial and at the close of proofs, and its motion for judgment n. o. v., were overruled. But upon its motion for new trial the District Judge ordered the above mentioned reduction of the jury's awards of compensatory and punitive damages, and this time the plaintiff accepted the suggested remittitur; judgment was entered on December 27, 1965. It is this final judgment which is now before us on appeal.

In our earlier opinion, 325 F.2d 761-766, we held that a letter written on September 6, 1955, by Deering Milliken to a list of Electric Furnace's customers was not libelous per se, but could be found to be libelous per quod; but we observed that "libel per quod standing alone without proof of actual damages proximately caused by the libel, will not support a verdict for the plaintiff." 325 F.2d at 765. Judge Cecil, author of our opinion, went on to review plaintiff's evidence on damages, and concluded,

"We conclude that there is a failure to offer any evidence to prove that Electric Furnace suffered any damages as a proximate result of the alleged libelous letter. Since punitive damages, even though actual malice may exist, cannot be allowed in an action for libel per quod, unless there is proof of actual damages, there is no support for the verdict of the jury." 325 F.2d at 766.

Notwithstanding plaintiff's failure then to sustain its burden of proof of actual damages, we elected, pursuant to 28 U.S.C. § 2106, not to direct entry of a judgment for defendant, but remanded the case for a new trial. Plaintiff, was, therefore, given opportunity at a new trial to offer such proof. Our review of the third trial persuades us that plaintiff did not offer such proof. We now reverse and remand for entry of judgment for defendant.

Our former opinion, 325 F.2d 761, sets out at adequate length the background of this litigation, the evidence then offered by plaintiff on its attempt to prevail, and the law which governs. We repeat here only to the extent necessary to expose our current view. The litigation began as a suit by Deering in 1955, charging Electric with patent infringement. While the case was pending, Deering obtained, by its production at the taking of a deposition of Electric's president, Stanley Livingstone, a list of concerns for whom Electric was doing work — employing a chemical process — which allegedly infringed Deering's patent. Thereafter, in late August of 1956, Livingstone and the president of Deering, Dr. Armitage, met to discuss the pending patent case. At this meeting Dr. Armitage showed Mr. Livingstone a copy of a letter which Deering proposed to mail to Electric's customers. The general purport of the letter was to notify these customers that Electric was infringing Deering's patent in the process it was using in serving them. The first paragraph of the letter said:

"We have learned from Mr. Stanley Livingstone, President of Electric Furnace Corporation, Chattanooga, Tennessee, that you have used the services of Electric Furnace Corporation in obtaining filling grates coated with TEFLON for use in your mill, and Mr. Livingstone knows that we are writing directly to you."

Livingstone objected to Armitage's plan to send this letter, calling attention to a letter which had been written by Livingstone some two years earlier, on July 31, 1954, wherein Electric advised its customers, anent Deering's claims concerning the alleged infringement of its patent, that Electric would defend at its cost any suit for infringement or royalties brought against its customers; the letter further stated that "we do not disclose the identity of our customers." Livingstone said that the above language was tantamount to a promise by his company not to give out the names of its customers; and that Armitage's proposed letter could be construed as telling Electric's customers that it had voluntarily given their names to Deering in breach of its 1954 promise. There is no evidence that Armitage agreed or led Livingstone to believe that the letter would not be sent, and such a letter was sent on or about September 6, 1956, to each of Electric's customers.

This present litigation then began by Electric's filing of a cross-complaint in the patent case, charging that Deering had libelled it by sending out the September 6, 1956, letter. Electric's charge of libel resides in its claim that the accused letter implied that Electric had broken a promise with its customers and thus defamed and degraded it in their eyes, and in the industry where it was known.

In our former opinion, we went along to the extent of holding that a jury could find that the letter was libelous per quod, but that "libel per quod standing alone without proof of actual damages, proximately caused by the libel, will not support a verdict for the plaintiff." We recited the authorities which supported our view of the law and we need not here restate Judge Cecil's lucid exposition of the law and his extensive citation of the authorities supporting our conclusion. What he there said is now the law of this case, but independently of such rule, we are satisfied that a fresh examination of applicable authorities would not lead us now to any different conclusions. The evidence offered and admitted at the third trial gave no more support to plaintiff's case than that which made up the record at the first trial. Plaintiff-appellee's current address to us does not contend otherwise.

The fatal deficiency in plaintiff's case resides in its failure to show that any recipient of the accused letter gave it the meaning which Electric asserts is fairly inferable from a reading of it. There was no evidence from any of such recipients which indicated that Electric was in fact defamed or degraded by the letter, and especially, there was no evidence that Electric suffered any actual or special damages by way of loss of business which could be attributed to the allegedly libelous letter. In our first opinion we said,

"While Mr. Livingstone had some responses from customers concerning his letter of July 31, 1954, not one customer said that it had discontinued business with the plaintiff because of any breach of promise by Mr. Livingstone or any misrepresentation made by him on behalf of the Electric Furnace Corporation.

* * * * * *

"The evidence fails to show that any business was lost due to any libelous phase of the letter of September 1956. The customers themselves could have cleared up this missing link in the proof." (Emphasis supplied.) 325 F. 2d at 766.

Our suggestion of a method of providing the "missing link" in the proofs was not followed: no relevant testimony by any customer was provided at the third trial. Throughout the trial plaintiff's counsel, by various observations, hinted that his inability to prove actual and special damages was a reluctance of Electric's customers to come forth with the necessary testimony, a reluctance produced by their...