Industrial Bldg. Materials, Inc. v. Interchemical Corp.

• Decision Date: 26 February 1971
• Docket Number: No. 22847.,22847.
• Citation: 437 F.2d 1336
• Parties: INDUSTRIAL BUILDING MATERIALS, INC., Appellant, v. INTERCHEMICAL CORPORATION, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

437 F.2d 1336 (1970)

INDUSTRIAL BUILDING MATERIALS, INC., Appellant, v. INTERCHEMICAL CORPORATION, Appellee.

No. 22847.

United States Court of Appeals, Ninth Circuit.

November 23, 1970.

As Amended on Denial of Rehearing February 26, 1971.

Lyle L. Jones, San Diego, Cal. (argued), John A. Mitchell, San Diego, Cal., for appellant.

G. Richard Doty, Los Angeles, Cal. (argued), H. Peter Stoterau, of McCutchen, Black, Verleger & Shea, Los Angeles, Cal., for appellee.

Before BROWNING, ELY, and WRIGHT, Circuit Judges.

ELY, Circuit Judge:

The appellant, Industrial, filed an action for damages under the Sherman Act (15 U.S.C. §§ 1 & 2) and the Clayton Act, as amended by the Robinson-Patman Act (15 U.S.C. § 13(a)). After extensive discovery and pre-trial efforts at defining issues, the District Court dismissed the action for failure of plaintiff's counsel to comply with a court order and also granted summary judgment for defendants. Industrial appeals from both the summary judgment and the judgment of dismissal.

Defendants below were Martin-Marietta Company and Interchemical Corporation, now Inmont Corporation, successive owners of Martin-Marietta's Presstite Division. The dispute involves Presstite's decision that it would no longer avail itself of Industrial's services as a distributor. In 1961 Industrial purchased the business of Hubbard Company, who had almost exclusive rights to distribute Presstite products in California, Nevada, and Arizona. Industrial claims that, at the time of the purchase, Presstite's officers gave oral assurance that the exclusive distributorship arrangement would continue so long as Industrial "did a good job." Presstite was then owned by Martin-Marietta, but it was purchased by Interchemical in 1963.

Presstite produces sealing products, primarily for use in manufacturing various end products, such as trailers and airplanes. Presstite has far more shapes, sizes, and styles of sealants than any other manufacturer, and the combined products of thirty to forty of its competitors would be required substantially to duplicate its product line. This broad product line, argues Industrial, places Presstite in a somewhat unique position in the industry, inasmuch as customers ordinarily prefer to deal with one supplier who is able to fulfill all their needs rather than several different suppliers. Industrial alleges that Presstite holds monopoly power in the field of sealants, but the District Court held that its affidavits would not support an ultimate conclusion to that effect.

As of about the same time that Industrial purchased the Hubbard distributorship, Presstite was encountering difficulties in its western plant in El Segundo, California. Part of the solution later adopted by Presstite to counter these difficulties was the by-passing of Industrial and the distribution of its own products directly to Industrial's customers. Presstite contacted several of these customers, offering some of them discounts that resulted in the customers buying for lower prices than Industrial was given on its Presstite purchases. Presstite lured other customers away from Industrial by selling to them at the same price as Industrial was required to pay. One competitor of Industrial, distributing to certain elements of Industrial's trade, was given lower prices by Presstite than it gave to Industrial. Finally, Presstite hired Industrial's "top salesman," one Kite, who took with him most of Industrial's remaining important customers. This pattern plus a recommendation from Presstite's sales manager that Presstite sell directly to Industrial's customers, was the basis for the allegations of violations of sections 1 & 2 of the Sherman Act and of section 2 of the Clayton Act, as amended by the Robinson-Patman Act.

Industrial's action was dismissed by the District Court under Rule 41(b), Fed.R.Civ.P. The dismissal culminated a long and confusing pre-trial process which failed clearly to define issues and specify Industrial's factual support to the court's satisfaction. After Industrial filed its complaint, defendants served a set of interrogatories that were not specifically answered in large part, because of lack of information. The court ordered that the interrogatories be answered specifically, but Industrial continued to claim a lack of sufficient information. After extensive discovery, Industrial filed a "Statement of Contentions" in an effort to define issues for trial. Interchemical then served another set of interrogatories. After several extensions of time, Industrial filed, instead of a seriatim response to each interrogatory, a two-volume "Narrative" and a ten-volume "Appendix" in which it purported to set out "the full mosaic of the case." Since this response did not conform literally to the Rules, Interchemical moved for specific answers. The then judge, to whom the case had been transferred, took the view that Industrial's response would be as satisfactory as specific answers for the purpose of delineating issues for trial. The judge suggested that Interchemical make a motion for summary judgment, but Industrial suggested that Interchemical should file a motion to eliminate issues, specifying all the issues and requesting Industrial either to admit that there was no case for certain issues or to set out all its evidence in support of those issues. This proposal was agreed to by all parties, and Interchemical filed a motion listing thirty possible issues.

Industrial responded to this motion by admitting that five of the thirty issues could be eliminated, but did not set forth its evidence as to each of the other issues to the court's satisfaction. The court then ordered that Industrial should respond with its legal theories as to each issue, with a statement of its supporting evidence, and directed that failure to comply would force abandonment of the issue.¹ In response to this order Industrial submitted a 159-page document entitled "Oral Testimony and Documentary Evidence Supporting Plaintiff's Claim of Violations of the Antitrust Laws." This response did not conform exactly to the court's order, and the court dismissed the suit under Rule 41(b), granted defendants' motion to eliminate all issues, and entered summary judgment in favor of defendants. Thereafter, Martin-Marietta, by stipulation, and apparently as a result of a compromise agreement, was dismissed from the suit and is not a party appellee.

Dismissal Under Rule 41(b)

Rule 41(b) provides a rather drastic remedy by which a trial court can penalize a plaintiff for his counsel's failure to comply with an order of the court. Application of the remedy rests within the sound discretion of the court, but since it may severely punish a party not responsible for the alleged dereliction of his counsel, the rule should only be invoked in extreme circumstances. In reviewing the propriety of dismissal under Rule 41(b) we should, we think, look to see whether the court might have first adopted other, less drastic alternatives. Flaksa v. Little River Construction Co., Inc., 389 F.2d 885 (5th Cir. 1968); Gill v. Stolow, 240 F.2d 669 (2d Cir. 1957).

Here, Industrial argues that its trial counsel substantially complied with the court's order by submitting the "Narrative" and the "Statement of Oral Testimony and Documentary Evidence." Industrial's then attorney justified his approach by stating to the court that an issue-by-issue answer would have required substantial and unnecessary duplication of the same material for each of the thirty issues. The trial judge at first agreed with this position, but later reversed himself. Whether the documents submitted amounted to substantial compliance was, in the first instance, a question for the trial judge, who was in a position to assess the extent of compliance, the apparent good or bad faith of counsel, and the nature of the understanding as to that which was to be submitted as a response. Even as it related to those considerations, the court's exercise of its discretion is reviewable, but it would certainly not be so vulnerable to challenge were it not for the question of whether suitable alternatives to dismissal were available.

Unfortunately, in undertaking to ascertain whether the court considered other aids to the enforcement of its orders, we derive little guidance from the District Court opinion. It would appear from the opinion that no other sanctions were considered, but the opinion, reported at 278 F.Supp. 938, was written by attorneys for the defendants.

At a hearing on July 31, 1967, the trial judge orally expressed the view that a dismissal would not likely be sustained on appeal because there was "not really aggravation" in the failures of Industrial's counsel. Therefore, he requested counsel for defendant to prepare a proposed decision that would provide a "final buttressing for the mere failure to abide by the order." Defendants' counsel submitted a lengthy "Memorandum in Aid of Proposed Decision," which, except for a few inconsequential changes, was adopted word for word by the judge as his own opinion.

Rule 41(b) requires that the trial judge, when he dismisses on the merits, make findings of fact and conclusions of law in accordance with Rule 52(a), Fed.R.Civ.P., but under Rule 52(a), judges have sometimes merely adopted the findings and conclusions prepared by victorious counsel. This practice has been condemned because of the possibility that such findings and conclusions, prepared by the non-objective advocate, may not fully and accurately reflect the thoughts entertained by the impartial judge at the time of his initial decision. See United States v. El Paso Natural Gas Co., 376 U.S. 651, 656-657 n. 4, 84 S.Ct. 1044, 12 L.Ed.2d 12 (1964). For the nature and purpose of findings of fact and conclusions of law and the duty of the trial judge in their preparation, see United States v. Forness, 125 F.2d 928, 942-943 (2d Cir.), cert. denied, City of Salamanca v. United States, 316...