Fox Chemical Co. v. Amsoil, Inc.

• Decision Date: 01 March 1978
• Docket Number: Civ. No. 3-77-481.
• Citation: 445 F. Supp. 1355
• Parties: FOX CHEMICAL CO., a Minnesota Corporation, Plaintiff, v. AMSOIL, INC., a Minnesota Corporation, and Albert Amatuzio, Defendants.
• Court: U.S. District Court — District of Minnesota

445 F. Supp. 1355

FOX CHEMICAL CO., a Minnesota Corporation, Plaintiff, v. AMSOIL, INC., a Minnesota Corporation, and Albert Amatuzio, Defendants.

Civ. No. 3-77-481.

United States District Court, D. Minnesota, Third Division.

March 1, 1978.

COPYRIGHT MATERIAL OMITTED

Gerald A. Kennedy, Patrick J. Neaton, Minneapolis, Minn., for plaintiff.

Stuart W. Rider, Jr., Minneapolis, Minn., for defendants.

MEMORANDUM AND ORDER

DEVITT, Chief Judge.

The parties make various motions in this action charging violations of federal and state antitrust laws and the Lanham Act, 15 U.S.C. § 1125(a). Plaintiff Fox Chemical Co. (Fox) was a manufacturer and distributor of synthetic oil, as Amsoil now is, until November 1974 when it ceased operations allegedly due to defendant Amsoil's attempts to illegally drive Fox out of business primarily through the use of misrepresentations concerning Amsoil's own products.

The motions to be resolved are as follows:

(1) Amsoil's motion to amend its answer to include the defense of the statute of limitations to Fox's Lanham Act claim (Claim III of plaintiff's complaint);

(2) Amsoil's motion for summary judgment based on that defense to plaintiff's Lanham Act claim;

(3) Amsoil's motion to dismiss for failure to state a claim as to plaintiff's claims under 15 U.S.C. § 1 (restraint of trade), § 2 (monopolization), and § 1125(a) (false advertising in violation of the Lanham Act);

(4) Fox's motion to dismiss Amsoil's counterclaim for libel as not being within the court's subject matter jurisdiction and as being barred by the statute of limitations. The motions will be considered in the above order.

AMSOIL'S MOTION TO AMEND ANSWER

Amsoil seeks to amend its answer to include the defense of the statute of limitations to plaintiff's Lanham Act claim. Fox does not oppose the motion and because Fed.R.Civ.P. 15(a) states that ". . . leave to amend shall be freely given when justice so requires," the motion is granted.

AMSOIL'S MOTION FOR SUMMARY JUDGMENT AS TO PLAINTIFF'S LANHAM ACT CLAIM

Defendant moves, pursuant to Fed.R. Civ.P. 56(b), for summary judgment on plaintiff's Lanham Act claim on the ground that it is barred by the statute of limitations. Amsoil argues that a two year period is allowed for such a claim; Fox counters that a six year period applies.

The Lanham Act does not have its own statute of limitations and so a federal court must look to state law for the period which best effectuates the federal policy at issue. Vanderboom v. Sexton, 422 F.2d 1233 (8th Cir. 1970). In doing so, the court may look to the local statute which bears the closest resemblance to the federal statute involved and then apply the limitation period applicable to it. Bailey v. Piper, Jaffray & Hopwood, Inc., 414 F.Supp. 475 (D.Minn.1976); Buchholtz v. Swift & Company, 62 F.R.D. 581 (D.Minn.1973).

Fox alleges that the Lanham Act gives rise to a private cause of action for anyone injured when a manufacturer makes misrepresentations about his own product. Amsoil denies this construction of the Act (see its motion to dismiss below) but for now we assume this is correct. The state analogue to this interpretation of the Act is Minn.Stat. 325.907 Subd. 3a (1976) which allows any party injured by a violation of Minn.Stat. 325.905 (1976) (prohibition of false advertising) to recover damages in a civil action for such injury. Unfortunately, this state statute does not contain a statute of limitations thus requiring a decision as to which of Minnesota's two general statutes of limitation would apply to this statutory cause of action.

Amsoil urges that Minn.Stat. 541.07(5) (1976) is applicable. It allows a two year period:

For the recovery of wages or overtime or damages, fees or penalties accruing under any federal or state law respecting the payment of wages or overtime or damages, fees or penalties. (The term "wages" as used herein shall mean all remuneration for services or employment, including commissions and bonuses and the cash value of all remuneration in any medium other than cash, where the relationship of master and servant exists and the term "damages," as used herein, shall mean single, double, or treble damages, accorded by any statutory cause of action whatsoever and whether or not the relationship of master and servant exists). (Underlined portions were added in 1953).

Fox argues that Minn.Stat. 541.05(2) (1976) applies. It sets a six year period:

Upon a liability created by statute, other than those arising upon a penalty or forfeiture or where a shorter period is provided by section 541.07. (Underlined portion added in 1966).

Significantly, both sections were amended in 1966 (see below).

Prior to its 1953 amendment 541.07(5) (two year period) was held applicable to wage actions only in all cases where the question arose.¹ All cases but two which have dealt with the statute since its 1953 amendment (see underlined portions, supra) have also regarded it as applying only to wage actions.² One exception is Bailey v. Piper, Jaffray & Hopwood, supra, where the court in dictum characterized 541.07(5) as a "general catch-all limitations provision." The other is General Corporation v. General Motors Corporation, 140 F.Supp. 219 (D.Minn.1956) where the court without reasoning held the statute set a two year limitation for a Sherman Antitrust violation. It is upon this case alone that defendant relies. No other cases, state or federal, have been found which are on point and we are not persuaded, without more, that General Corporation, supra, accurately states the law. Thus, the principal issue is whether the state legislature meant a state action analogous to plaintiff's Lanham Act claim to be barred by the two year statute of limitations, 541.07(5).

At first reading the statute seems to deal primarily with actions for wages as Judge Neville said in Klapmeier v. Peat, Marwick, Mitchell & Co., 363 F.Supp. 1212 (D.Minn. 1973). But upon a closer reading, the meaning becomes less clear thanks to the enigmatic "or's" added by the legislature in 1953. As the Minnesota Supreme Court said, "what the legislature intended by omitting the commas and adding the words or, we are at a loss to understand." Kohout v. Shakopee Foundry Co., 281 Minn. 401, 403, 162 N.W.2d 237, 239 (1968). It was on the basis of this case that Judge Neville in Klapmeier, supra, held that the statute dealt primarily with wages. Nevertheless, if read literally the statute would provide a two year period of limitations "for the recovery of . . . damages . . . accruing under any federal or state law respecting the payment of . . . damages . . . or penalties."³

As noted above, both statutes were amended in 1966. The result was that a six year limitation applied to liabilities "created by statute, other than those arising upon a penalty or forfeiture or where a shorter period is provided by section 541.07." Minn. Stat. 541.05(2) (1976). A two year period was still imposed "upon a statute for a penalty or forfeiture," Minn.Stat. 541.07(2) (1976), and for the recovery of wages, etc., Minn.Stat. 541.07(5) (1976) (the section at issue). If one reads 541.07(5) as applying only to wage actions then, a scheme emerges whereby liabilities created by statute are barred after six years unless the liability arises upon a penalty or forfeiture or arises from a wage context and then the period is two years.

But if we were to adopt defendant's view of 541.07(5), then all liabilities created by statute would be covered by a two year period because 541.07(5) literally reads "for the recovery of damages . . . accruing under any federal or state law respecting the payment of . . . damages . . .." In effect, such a construction of 541.07(5) would render superfluous Minn.Stat. 541.05(2) (1976) which prescribes a six year period "upon a liability created by statute . . .." It would also render superfluous part or all of Minn. Stat. 541.07(2) (1976) setting a two year period "upon a statute for a penalty or forfeiture," for 541.07(5), by its terms, also covers penalties.

"A statute is to be construed so as to give it full effect, when reasonably possible. In other words, a construction which will nullify a statute, in whole or in part, is to be avoided if reasonably possible." 17B M. Dunnell, Dunnell Minnesota Digest, § 8950, p. 374 (3rd ed. 1970); Minn.Stat. 645.16 et seq. (1976). We are not persuaded that it was the legislature's intent to nullify in whole or in part 541.05(2) and 541.07(2) when it amended 541.07(5) in 1953 and both limitations statutes in 1966 leaving intact 541.05(2) and 541.07(2). We agree with Judge Neville that 541.07(5) as amended in 1953 was still meant to deal with wage actions and not actions such as the one now before us.

Finally, if we accept plaintiff's construction of the Lanham Act as covering false advertising by a manufacturer, our conclusion is strengthened that the legislature meant a six year period to apply. Such a construction essentially states a cause of action most closely related to fraud and such actions in Minnesota are only barred after six years. Minn.Stat. 541.05(6) (1976). We see no reason why common law and statutory fraud would be treated differently by the legislature. We therefore deny defendant's motion for summary judgment and hold that plaintiff's Lanham Act claim is governed by Minn.Stat. 541.05(2) (1976).

AMSOIL'S MOTIONS TO DISMISS FOR FAILURE TO STATE A CLAIM

These motions go to plaintiff's three federal claims: 15 U.S.C. § 1 (restraint of trade), § 2 (monopolization), and § 1125(a) (Lanham Act).

Defendant argues that plaintiff has alleged only a conspiracy to restrain trade between Amsoil and its president Albert Amatuzio and that such a conspiracy is not outlawed by 15 U.S.C. § 1. That section applies only to conspiracies between a corporation and others not associated directly with the corporation, according to defendant.

In essence, this is a pleading problem with Amsoil claiming Fox has...