Grip-Pak, Inc. v. Illinois Tool Works, Inc.

• Decision Date: 12 January 1983
• Docket Number: INC,GRIP-PA,No. 82-1119,82-1119
• Citation: 694 F.2d 466
• Parties: , 1982-83 Trade Cases 65,058 , Plaintiff-Appellant, v. ILLINOIS TOOL WORKS, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 466

694 F.2d 466

217 U.S.P.Q. 1287, 1982-83 Trade Cases 65,058

GRIP-PAK, INC., Plaintiff-Appellant, v. ILLINOIS TOOL WORKS, INC., Defendant-Appellee.

No. 82-1119.

United States Court of Appeals, Seventh Circuit.

Argued Sept. 15, 1982.

Decided Nov. 24, 1982.

As Amended on Denial of Rehearing and Rehearing

En Banc Jan. 12, 1983.

Joel R. Bennett, Kendrick, Netter & Bennett, Los Angeles, Cal., for plaintiff-appellant.

Earl E. Pollock, Sonnenschein, Carlin, Nath & Rosenthal, Chicago, Ill., for defendant-appellee.

Before CUDAHY, Circuit Judge, WEICK, ^* Senior Circuit Judge, and POSNER, Circuit Judge.

POSNER, Circuit Judge.

The plaintiff, Grip-Pak, Inc., is a company engaged in--or at least aspiring to engage in--the business of producing plastic holders for "six-packs" of beer and other beverages. The defendant, Illinois Tool Works, Inc., is alleged to be the dominant manufacturer of such holders, and in particular to manufacture 90 percent of all plastic holders for six-packs of canned beverages. The complaint, filed in 1977, charges Illinois Tool Works with a variety of practices allegedly forbidden by sections 1 and 2 of the Sherman Act and sections 3 and 7 of the Clayton Act, 15 U.S.C. Secs. 1-2, 14, 18, including acquiring every patent there is on plastic beverage holders; threatening groundless patent-infringement suits to deter would-be competitors; prosecuting three "baseless and groundless lawsuits in bad faith, not for the legitimate purpose of adjudicating a legal controversy, but, rather, for an ulterior motive, i.e., to eliminate competition," one of these suits being against Grip-Pak and its principals (former employees of Illinois Tool Works) for theft of trade secrets; acquiring a competitor; dividing markets; and filing a fraudulent patent application. Treble damages and an injunction are sought.

The case comes up to us on Grip-Pak's appeal from summary judgment dismissing the complaint. The basis of dismissal was that Grip-Pak would not be able to prove at trial an essential element of its case, namely that it has been "injured in its business or property by reason of anything forbidden in the antitrust laws," as required by section 4 of the Clayton Act, 15 U.S.C. Sec. 15. The complaint alleges injury of two sorts. The first consists of the expenses that Grip-Pak incurred in defending the suit brought by Illinois Tool Works against Grip-Pak and its principals; the other is a general loss of business profits from the totality of the alleged monopolistic scheme. The district court threw out the first element of injury on the following reasoning. Although the state court in which Illinois Tool Works had prosecuted its suit against Grip-Pak and Grip-Pak's principals had dismissed the suit on the merits, the court had entered a finding that the suit was "not malicious"; this finding is entitled to collateral estoppel effect in the present litigation; a nonmalicious lawsuit is not actionable under the antitrust laws; therefore the state court suit could not be a source of antitrust injury to Grip-Pak within the meaning of section 4 of the Clayton Act. With regard to the second and more general element of injury, the district court held that Grip-Pak was not in the business of manufacturing plastic holders for six-packs and did not have a sufficiently definite expectation of entering it to be injured in its business within the meaning of section 4. We have to decide whether these rulings are correct.

Late in the state court trial Grip-Pak's counsel tried to present evidence that Illinois Tool Works' case was malicious. The trial court was surprised. Illinois Tool Works' counsel protested vigorously his lack of opportunity to develop evidence on the issue of malice. Grip-Pak's counsel pointed to the prayer for relief in the counterclaim, where a finding of malice, and an award of attorney's fees based on that finding, had been requested; but the judge ruled that the issue of malice, to be preserved, should have been alleged in the part of the counterclaim that contained Grip-Pak's theory of liability. Grip-Pak's counsel then changed his tune slightly, saying: "We feel the proof is already in relative to the factual evidence, the evidentiary evidence which will support our claim of malice." But the judge replied, "No, the court is not going to permit it." The antecedent of "it" is a bit vague, but the rest of the reply makes clear that the judge's intention was to forbid Grip-Pak "to assert a charge of this nature at this time." And the matter was dropped.

But when the judge came to prepare his findings of fact and conclusions of law he included a finding on malice. Despite the elimination of the issue from the trial both parties had submitted proposed findings on it, and the judge adopted the one submitted by Illinois Tool Works. But it seems that he did so in order to lay a foundation for declining to award attorney's fees as requested by Grip-Pak rather than to resolve a genuine factual issue at the trial, for he had not allowed the issue to be litigated. This interpretation is supported by an order the judge later issued denying a petition by Grip-Pak to vacate the finding on malice on the ground that he had lacked jurisdiction to make such a finding. The order states that at the trial the judge had "in substance held that under the pleadings a malice finding was not an issue," that he had "refused to permit evidence to be introduced on said issue," that "such a ruling may well make the later finding of the Court erroneous," and that he was not saying whether in these circumstances the finding would have collateral estoppel effect in any other proceeding, but was only holding that he had jurisdiction to make the finding, erroneous though it might be. The order has a tone of blaming the parties for having submitted proposed findings on malice when the judge had ruled the issue out of the trial; and the underlying fault is Grip-Pak's for having failed to raise the issue of malice in timely fashion and then having confused the judge by nevertheless submitting a proposed finding on malice at the close of the trial.

The doctrine of collateral estoppel prevents the relitigation of any legal or factual issue that has been "actually litigated and determined by a valid and final judgment." 1 Restatement of Judgments (Second) Sec. 27 (1982). Usually an express finding in a valid final judgment is good enough, and we have that here. And it makes no difference whether such a finding was based on a complete failure of proof rather than on a weighing of competing proofs. See, e.g., Continental Can Co., U.S.A. v. Marshall, 603 F.2d 590, 595-96 (7th Cir.1979). On the other hand, a default judgment is not a proper basis for collateral estoppel. 1 Restatement, supra, Sec. 27e at p. 257. And collateral estoppel is not properly invoked to punish a lawyer. Id., Sec. 27e at p. 256. We have to locate the present case in this web of principles.

It will help in doing so to note the difference between collateral estoppel and its sister doctrine, res judicata. Res judicata bars the relitigation of claims that could have been advanced in an earlier proceeding, whether they were or not, because they arise out of the same facts. The purpose is to reduce the costs of litigation, to the parties and to the courts, by forcing closely related claims to be combined in a single lawsuit. There is no suggestion that res judicata applies to this case--that Grip-Pak was required to bring its antitrust action as a counterclaim to Illinois Tool Works' state court suit. The doctrine of collateral estoppel is based on a different concept of economy of litigation: if an issue happens to have been litigated and determined in a previous suit between the parties, there is no reason to litigate it again. But the object is not to force the issue to be litigated in the earlier suit. The propriety of having two suits is accepted, presumably because they are not that closely related; and if the issue in question is first litigated in the second suit, that is fine; the only desideratum is that it not be litigated twice.

This distinction suggests that collateral estoppel should not be applied just because Grip-Pak's counsel in the state court action stumbled in trying to litigate the issue of malice. If the only consequence of his stumble was to postpone litigating that issue to this case, there was no waste of resources. It would be different if Grip-Pak had presented evidence so lacking in probative force that the trial judge had concluded that there was an utter failure of proof on the issue of malice. Then resources would have been expended on the determination of the issue in the first case and relitigation would be barred. But that is not what happened. Grip-Pak's counsel contended in desperation that the requisite evidence had gotten into the trial somehow, but the trial judge disagreed. He thought he was preventing the issue from being litigated rather than resolving the issue on the basis of evidence already in the record.

All this assumes, though, that we are allowed to go behind the express finding in the state court's judgment and examine not only the pages of the transcript where the judge is seen blocking Grip-Pak's counsel from going forward with the issue but also the post-trial order in which the judge refused to vacate the finding but indicated that it was not intended to be an evidentiary finding. A court will not take evidence from the judge in an earlier suit to find out what his findings really meant. Eaton v. Weaver Mfg. Co., 582 F.2d 1250 (10th Cir.1978); the parties ought to be able to rely on what the judgment says in guiding their behavior. But that is not a factor here. It is not that the judge had secret reservations about his judgment that did not emerge till long after it became final. Illinois Tool Works was privy to the circumstances that lay behind the finding, and the post-trial order was entered...