Mach-Tronics, Incorporated v. Zirpoli

• Decision Date: 01 April 1963
• Docket Number: No. 18349.,18349.
• Citation: 316 F.2d 820
• Parties: MACH-TRONICS, INCORPORATED, a California corporation, Petitioner, v. The Honorable Alfonso J. ZIRPOLI, Judge of the United States District Court of the Northern District of California, Southern Division, Respondent.
• Court: U.S. Court of Appeals — Ninth Circuit

316 F.2d 820 (1963)

MACH-TRONICS, INCORPORATED, a California corporation, Petitioner, v. The Honorable Alfonso J. ZIRPOLI, Judge of the United States District Court of the Northern District of California, Southern Division, Respondent.

No. 18349.

United States Court of Appeals Ninth Circuit.

April 1, 1963.

Howard, Prim & Smith, Denis T. Rice, and Joseph L. Alioto, San Francisco, Cal., Wagstaffe, Daba & Hulse, Redwood City, Cal., for petitioner.

Pillsbury, Madison & Sutro, James Michael, Noel J. Dyer, Noble K. Gregory, William C. Miller and James F. Kirkham, San Francisco, Cal., for respondent and Ampex Corp., real party in interest.

Before POPE, BROWNING and DUNIWAY, Circuit Judges.

POPE, Circuit Judge.

This is a petition for a writ of mandamus commanding the respondent Judge to vacate and set aside an order of October 16, 1962, which directed that all further proceedings in an action brought by the present petitioner against Ampex Corporation be stayed "until completion of all proceedings in the trial court" in an action pending in the Superior Court of the State of California, wherein Ampex Corporation is plaintiff and Mach-Tronics, Inc., the present petitioner, and others, are defendants.

The action in which further proceedings were thus stayed was commenced by the present petitioner on August 6, 1962, by the filing of a complaint against Ampex Corporation in the United States District Court for the Northern District of California, Southern Division. The complaint alleged that defendant Ampex and Radio Corporation of America had engaged and were engaged in a conspiracy to restrain and to monopolize interstate and foreign commerce in videotape recorders; that defendant had in fact achieved monopoly in violation of §§ 1 and 2 of the Sherman Act; that the said conspirators agreed to certain acts in pursuance of the conspiracy involving the elimination of competition, the suppression of research and technological improvement, the cross-licensing of patents, the suppression of potential manufacturers of competitive equipment through threats of litigation and customer harassment, price fixing, division of markets, cartel agreements with foreign manufacturers, and otherwise; that the conspiracy and attempted monopolization was successful and resulted in monopolizing the video-tape recorder industry, raising prices, suppressing research and technical advances, discouraging new competition and impeding certain advances in television and other uses of video-tape recordings; and, in addition, that it injured the plaintiff in its business and its property. It alleged that the plaintiff, about May 1, 1962, successfully manufactured a low cost closed circuit video-tape recorder which threatened the monopoly position of the defendant and Radio Corporation of America; that the said conspirators combined to destroy the plaintiff by instituting litigation against plaintiff "falsely alleging that plaintiff had appropriated defendant's research and ideas"; that defendant had contacted plaintiff's potential customers and suppliers, falsely representing that the litigation referred to had been concluded in favor of the defendant, threatening them with economic reprisals if they dealt with the plaintiff, and that all of this was done by the conspirators to preserve their monopoly position pursuant to the aforesaid conspiracy.

The complaint alleged that by reason of the aforesaid acts the value of plaintiff's business had been diminished and its operation impeded and its good will threatened, all to the plaintiff's damage in the sum of $1,125,000. The prayer was for recovery of threefold the amount of these damages.

Approximately two months prior to the institution of petitioner's treble damage suit the defendant in that suit, here called Ampex, on June 8, 1962, filed an action in the Superior Court of the State of California in and for the County of San Mateo, against Mach-Tronics, petitioner here, and some eight individuals, alleged to be officers and employees of Mach-Tronics and former employees of Ampex.

The complaint in that action alleged that at the time the individual defendants were employed by Ampex, the latter was in the process of carrying on research and developing designs, confidential information and data for the purpose of producing portable video recorders; that it produced several prototypes of such recorders and planned others; that in connection with that research, the individual defendants had learned of these designs, confidential information and data, and that their intimate knowledge thereof had been acquired under circumstances imposing upon them a duty not to disclose the same; that notwithstanding this, the individual defendants in that action had left their employment with Ampex, organized Mach-Tronics, a California corporation, and in breach of trust disclosed to Mach-Tronics the confidential information possessed by them concerning the engineering, development and research of Ampex designed to provide a portable video-tape recorder. In short, the action by Ampex against Mach-Tronics and others in the state court was one for alleged unfair competition, breach of confidential relationship and wrongful appropriation of trade secrets.

In their answer to the amended Ampex complaint defendants denied the allegations of the complaint and particularly denied that the technical information utilized by Mach-Tronics in the development of a successful portable video-tape recorder had come from or originated with Ampex.¹ As a "separate and affirmative defense" it was alleged that Ampex was guilty of bad faith and unconscionable conduct by falsely stating to prospective purchasers from Mach-Tronics that Ampex had won this suit, by attempting to dissuade purchasers from dealing with Mach-Tronics, by disparaging the products and business of Mach-Tronics, and that Ampex "conspired and combined with other manufacturers and distributors unlawfully to restrain trade in videotape recorders and related components, patented and unpatented, by such means as: division of markets; fixing and stabilizing of prices; cross-licensing of patents; and the institution of baseless litigation against defendants."

After petitioner's treble damage suit had been filed and it had initiated proceedings for the taking of depositions therein, Ampex, on September 17, 1962, moved to stay all further proceedings in that action pending final determination of the state court action mentioned. It was upon this motion that the respondent Judge acted in issuing the order of October 16, 1962, previously mentioned, and against which this petition for mandamus is directed.²

We note at the outset that the stayed proceedings were brought pursuant to the provisions of the Clayton Act § 4, 38 Stat. 731, 15 U.S.C.A. § 15, which permits such a treble damage action to be brought "in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy."³

It must be noted that in filing its complaint petitioner was presenting to the district court an action which that court was authorized to entertain, and one which was within the jurisdiction of that court. Initially the question is whether the respondent Judge, by granting the stay, could properly abstain from proceeding with the action or could properly prohibit the plaintiff in the action from proceeding with its prosecution.

The stay granted here goes far beyond the attempt of the court to fix or adjust its own calendar, or to postpone consideration of the case because of prior commitment of the court to cases having an earlier place upon its calender. By the order here in question the court withholds the further exercise of its authority until the state court might render a judgment. The court abandoned its control over and conduct of the case, including any placing of the case upon its calendar for trial. "It, therefore, appeared upon the record presented to the Circuit Court of Appeals that the Circuit Court had practically abandoned its jurisdiction over a case of which it had cognizance, and turned the matter over for adjudication to the state court. This, it has been steadily held, a Federal court may not do. * * * It cannot be denied that a Circuit Court of the United States, like other courts, had power to postpone the trial of cases for good reasons, but by the orders made in this case the Federal court withheld the further exercise of its authority until the state court, by its action in a case involving all the parties, might render a judgment which would be res judicata, and thus prevent further proceedings in the Federal court." McClellan v. Carland, 217 U.S. 268, 281-282, 30 S.Ct. 501, 504, 54 L.Ed. 762. The court was undertaking to make use of and apply the so-called doctrine of abstention.

It has long been recognized that when a federal court is properly appealed to in a case over which it has by law jurisdiction, it is its duty to take such jurisdiction. Willcox v. Consolidated Gas Co., 212 U.S. 19, 40, 29 S.Ct. 192, 53 L.Ed. 382; Meredith v. City of Winter Haven, 320 U.S. 228, 234, 64 S.Ct. 7, 88 L.Ed. 9; Propper v. Clark, 337 U.S. 472, 69 S.Ct. 1333, 93 L.Ed. 1480; Allegheny County v. Frank Mashuda, 360 U.S. 185, 188-189, 79 S.Ct. 1060, 3 L.Ed. 2d 1163. It has also been considered to be the rule that when a federal court is presented with a case of which it has cognizance it may not turn the matter over for adjudication to the state court, and that the pendency of an action in the state court is no bar to the proceedings concerning the same matter in the federal court. McClellan v. Carland, supra, 217 U.S. pp. 281-282, 30 S.Ct. 501.

It has from the first been deemed to be the duty of the federal courts, if their jurisdiction is properly invoked, to decide even questions of state law when necessary to the rendition of a judgment. Meredith v. City of Winter Haven, supra. A...