Maytag Co. v. Meadows Mfg. Co.

• Decision Date: 08 January 1931
• Docket Number: No. 4392.,4392.
• Parties: MAYTAG CO. v. MEADOWS MFG. CO.
• Court: U.S. Court of Appeals — Seventh Circuit

45 F.2d 299 (1930)

MAYTAG CO. v. MEADOWS MFG. CO.

No. 4392.

Circuit Court of Appeals, Seventh Circuit.

December 4, 1930.

Rehearing Denied January 8, 1931.

Wallace R. Lane and Edward S. Rogers, both of Chicago, Ill., William L. Patton, of Springfield, Ill., and Ralph M. Snyder, of Chicago, Ill., for appellant.

Hal M. Stone and Chalmer C. Taylor, both of Bloomington, Ill., for appellee.

Before EVANS and PAGE, Circuit Judges, and LINDLEY, District Judge.

LINDLEY, District Judge.

In Maytag Co. v. Meadows Mfg. Co., 35 F.(2d) 403, we affirmed an interlocutory decree of the District court, denying plaintiff's prayer for relief and finding that defendant had sustained the allegations in its answer, praying, as affirmative relief, an injunction enjoining plaintiff from circulating throughout the country false defamatory propaganda concerning defendant, its business and its product; that defendant was entitled to recover from plaintiff because of latter's said wrongful action; and that the cause should be referred to a master to determine such damage. Following that decision, upon reference, the master heard the evidence and made a finding awarding to defendant as damages $500,000. The District court in its final decree approved the report and awarded damages in accordance therewith. The present appeal followed.

Appellant insists that a court of equity is without jurisdiction to grant the relief awarded by the District court, that there is no evidence to sustain an allowance of damages, and that the award, if proper, is grossly excessive.

In the former appeal we found that appellant maintained a sales organization of some eight thousand persons linked together, wherein salesmen, subject to the control and policy of the various managers under whom they worked, devoted their time exclusively to the promotion of sales of appellant's product, calling upon thousands of dealers and prospective customers each day. We further found that appellant, through such organization, caused to be circulated generally many false statements concerning appellee and its product and business. Sales representatives, district and divisional managers, and other representatives of appellant, in meetings, house organs, and letters, made statements that appellant was about to sue appellee for patent infringement though appellant's product was unpatented; that appellee would not be in business long; that appellee was going to be in trouble; that its customers would be unable to get repair parts; that appellee was paying a royalty to appellant; that there was an injunction against appellee; that buyers would have orphan machines on their hands; that appellee's financial backing was weak; that its salesmen were here to-day and gone to-morrow; that appellee had a small factory, was inexperienced, and could not meet its notes, was in the hands of a receiver and had no credit rating; and that its factory had been closed. These statements quite readily found their way to the ears of dealers and prospective customers all over the country with damaging results, as reference to the opinion in the former case will disclose.

Before the master, appellee contented itself with the offer of evidence previously taken, resulting in the original interlocutory decree and the findings aforesaid, and a rather full disclosure by appellee's representatives and dealers of their efforts to counteract the propaganda complained of and a narrative of the time and effort spent in that respect. Appellant offered no evidence.

Ignoring hearsay evidence as entirely incompetent to prove the original wrong complained of, remembering the competent evidence offered originally to prove the allegations of appellant and the findings referred to, and limiting the new evidence to such part thereof as is competent upon the question of the time and effort spent by appellee in protecting itself from the damaging propaganda and counteracting the same, we are of the opinion that the evidence amply justifies the conclusion that appellee's allegations have been proved and that it has suffered substantial damage.

There remains to be considered appellant's contention, first, that the court, sitting in equity, had no jurisdiction to award damages for libel and slander of appellee and its business, and, second, that if the court had such jurisdiction, the award is grossly excessive.

The original bill sought to enjoin appellee from alleged unfair competition. Appellee's prayer for affirmative relief relied upon unfair competition upon the part of appellant in the way of the damaging propaganda aforesaid and sought an injunction against the same and damages. The original decree found that appellee had sustained the allegations of its answer, awarded an injunction as prayed, and ordered that appellee recover of the appellant "all damages which defendant has sustained since May, 1926, to its business and reputation by reason of circulation of reports or propaganda, the circulation of which is here enjoined." To the contention made upon the former appeal, that the injury complained of was cognizable only at law, we replied in the negative and observed that the objection, first made upon appeal, came too late and was not properly assigned as error.

Following the rule that a court of equity, having taken jurisdiction, will do complete justice and retain the case for all purposes, even though such action requires the determination of purely legal rights, it follows that if the particular part of the prayer for relief complained of, even though legal in character, is germane to the issues in the original cause in equity, the court will retain jurisdiction thereof. Thus, in Kinney-Coastal Oil Co. v. Kieffer, 277 U. S. 488, 48 S. Ct. 580, 584, 72 L. Ed. 961, the original bill sought to restrain one of the parties from certain entries and operations under a lease. The court held that the District court had jurisdiction also to determine the damages which plaintiff's entries and operations under the lease caused to the crop of the owner, saying: "It is a general rule that a court of equity, in a suit of which it has and takes cognizance, may administer complete relief between the parties, even though this involves the determination of legal rights which otherwise would not be within the range of its authority." See also Camp v. Boyd, 229 U. S. 530, 33 S. Ct. 785, 57 L. Ed. 1317; Zenith Carburetor Co. v. Stromberg Motor Devices Co. (C. C. A.) 270 F. 424.

In the instant case the original complaint by appellee, in its answer, was based upon allegations of unfair competition upon the part of appellant, viz., the unfair and wrongful propaganda circulated by appellant. That the acts constituting unfair competition amounted to the commission of a tort, the recovery for which was...