Del Mar Avionics v. Quinton Instruments Co.

• Decision Date: 22 May 1981
• Docket Number: No. 79-4407,79-4407
• Citation: 645 F.2d 832,213 USPQ 988
• Parties: DEL MAR AVIONICS, a California Corporation, Plaintiff-Appellee, v. QUINTON INSTRUMENTS COMPANY, a Washington Corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 832

645 F.2d 832

213 U.S.P.Q. 988

DEL MAR AVIONICS, a California Corporation, Plaintiff-Appellee, v. QUINTON INSTRUMENTS COMPANY, a Washington Corporation Defendant-Appellant.

No. 79-4407.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Oct. 8, 1980.

Decided May 22, 1981.

Richard W. Seed, Seed, Berry, Vernon & Baynham, Seattle, Wash., for defendant-appellant.

Mario A. Martella, Los Angeles, Cal., for plaintiff-appellee.

Appeal from the United States District Court for the Western District of Washington.

Before NELSON and BOOCHEVER, Circuit Judges, and WILLIAMS ^*, District Judge.

BOOCHEVER, Circuit Judge.

This case involves the applicability of the related doctrines of res judicata and collateral estoppel to a patent infringement suit brought against a manufacturer in the District Court for Seattle, based on a judgment of infringement against a distributor of the same product in the District Court for Los Angeles. Because defendant Quinton Instruments, Inc. ("Quinton") was bound by the Los Angeles court's determination that it controlled the Los Angeles litigation against its distributor Physio-Tronics, Inc. and was thus precluded from relitigating the Los Angeles court's substantive findings on patent validity and infringement, summary judgment in favor of Del Mar Avionics, Inc. ("Del Mar") in the instant action was proper. Furthermore, the trial judge did not abuse his discretion in denying Quinton's requested injunction against enforcement of the Los Angeles injunction.

Del Mar brought an infringement action against Physio-Tronics, a California distributor for Quinton, in the United States District Court for the Southern District of California on October 21, 1974 (the "Los Angeles suit"). Although Quinton was not a named party in this action, it contracted to indemnify Physio-Tronics for all costs and liability arising from the litigation. In addition, Quinton selected and paid for the services of an attorney for Physio-Tronics and corresponded with him throughout the trial, often to the exclusion of Physio-Tronics. Quinton also authorized and participated in settlement negotiations, and authorized an appeal from the judgment against Physio-Tronics.

The trial court in the Los Angeles suit determined that the patent was valid and had been infringed by Physio-Tronics and entered judgment in favor of Del Mar on July 7, 1978. The judgment was amended on September 11, 1978 to add an injunction against further infringement. On August 9, 1978, apparently because it believed venue could not be obtained against Quinton in California, ¹ Del Mar brought suit for an injunction and damages against Quinton in the United States District Court for the Western District of Washington (the "Seattle suit"), based on the same alleged infringement. In January 1979 the Los Angeles court held a hearing to determine the extent of Quinton's role in the litigation. Quinton participated in the hearing and was represented by counsel. On January 24, the court extended its injunction to include Quinton as well as Physio-Tronics, based on Quinton's "substantial involvement" in the Los Angeles litigation. ²

Del Mar filed a motion for partial summary judgment in the Seattle suit on the issue of liability, alleging that Quinton was bound by res judicata and collateral estoppel. After the Los Angeles injunction was extended to cover Quinton, Del Mar filed an additional memorandum notifying the Seattle court of this development. Quinton apparently believed that a grant of summary judgment was now inevitable, and submitted a proposed order that no longer contested Del Mar's motion. Quinton instead requested what it termed "safeguards," consisting of an injunction against further enforcement of the Los Angeles judgment.

The court below granted Del Mar's motion for partial summary judgment, reserving determination of damages and costs. The court denied Quinton's request for safeguards. In this appeal Quinton contends that its failure to oppose the motion for partial summary judgment was conditioned on the granting of its request for the injunction. ³ Although we find considerable merit to Del Mar's contention that opposition was waived and the issue was not preserved for appeal, the question is sufficiently close that we have elected to address the merits.

I. RES JUDICATA EFFECT OF THE LOS ANGELES JUDGMENT

The Supreme Court, in the case of Montana v. United States, 440 U.S. 147, 99 S.Ct. 970, 59 L.Ed.2d 210 (1979), recently reaffirmed the basic principles applicable to the situation at bar:

A fundamental precept of common-law adjudication, embodied in the related doctrines of collateral estoppel and res judicata, is that a "right, question or fact distinctly put in issue and directly determined by a court of competent jurisdiction ... cannot be disputed in a subsequent suit between the same parties or their privies ...." (citation omitted). Under res judicata, a final judgment on the merits bars further claims by parties or their privies based on the same cause of action. (citations omitted). Under collateral estoppel, once an issue is actually and necessarily determined by a court of competent jurisdiction, that determination is conclusive in subsequent suits based on a different cause of action involving a party to the prior litigation ....

These interests are similarly implicated when nonparties assume control over litigation in which they have a direct financial or proprietary interest and then seek to redetermine issues previously resolved.... Preclusion of such nonparties falls under the rubric of collateral estoppel rather than res judicata because the latter doctrine presupposes identity between causes of action. And the cause of action which a nonparty has vicariously asserted differs by definition from that which he subsequently seeks to litigate in his own right.

440 U.S. at 153-54, 99 S.Ct. at 973 (footnote omitted).

In Montana, the United States stipulated a number of facts indicating that it had controlled a lawsuit brought by a contractor to invalidate a state tax, so that the Court did not have to resolve any factual questions in finding the control necessary to trigger collateral estoppel. In the instant case, however, Quinton has not so stipulated, and has argued forcefully that its actions with respect to the Los Angeles litigation do not constitute control.

Whether a nonparty controlled the earlier litigation is a question of fact for the trial court. Ransburg Electro-Coating Corp. v. Lansdale Finishers, Inc., 484 F.2d 1037, 1038 (3d Cir. 1973). Factors important to a finding of control include selection and payment of counsel, payment of litigation expenses, a written indemnification agreement, participation in settlement negotiations, and control over the decision to appeal. TRW, Inc. v. Ellipse Corp., 495 F.2d 314, 318 (7th Cir. 1974); Troy Company v. Products Research Company, 339 F.2d 364, 367 (9th Cir. 1964). Quinton...