McGraw-Edison Company v. Preformed Line Products Company

• Decision Date: 26 May 1966
• Docket Number: No. 20023.,20023.
• Citation: 362 F.2d 339
• Parties: McGRAW-EDISON COMPANY, a corporation, Appellant, v. PREFORMED LINE PRODUCTS COMPANY, a corporation, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

362 F.2d 339 (1966)

McGRAW-EDISON COMPANY, a corporation, Appellant, v. PREFORMED LINE PRODUCTS COMPANY, a corporation, Appellee.

No. 20023.

United States Court of Appeals Ninth Circuit.

May 26, 1966.

Herbert A. Huebner, Richard M. Worrel, Harlan P. Huebner, Albert L. Gabriel, Huebner & Worrel, Los Angeles, Cal., Charles A. Prudell, Milwaukee, Wis., for appellant.

Reginald E. Caughey, Lyon & Lyon, Los Angeles, Cal., Patrick H. Hume, Henry L. Brinks, Chicago, Ill., Richard F. Stevens, J. Richard Hamilton, Cleveland, Ohio, for appellee.

Before JERTBERG and ELY, Circuit Judges, and JAMESON, District Judge.

JAMESON, District Judge:

This is an appeal from an order dismissing without prejudice, a complaint for patent infringement and a counterclaim for declaratory judgment.

The appellee, Preformed Line Products Company, filed a complaint on May 1, 1958, against the City of Los Angeles and appellant, McGraw-Edison Company, charging infringement of United States Letters Patent No. 2,761,273, granted September 4, 1956, for "Dead-End For Cables".¹ Both defendants filed answers and counterclaim.

A stipulation was filed June 15, 1964, dismissing without prejudice the complaint as to the City of Los Angeles and the City's counterclaim for a declaratory judgment. On February 24, 1965, the district court, upon motion of Preformed, opposed by McGraw-Edison, dismissed without prejudice both the complaint and appellant's counterclaim.

Preformed, on October 29, 1956, had filed suit in the United States District Court for the Northern District of Ohio against The Fanner Manufacturing Company, alleging infringement of two patents and unfair competition. One of the patents charged to be infringed was No. 2,761,273 for "Dead-End For Cables". The instant action was brought by Preformed against the City of Los Angeles and McGraw-Edison alleging their use and sale, respectively, of dead ends made by The Fanner Manufacturing Company and charged to infringe Patent No. 2,761,273.

The Ohio case was tried in January-February, 1959. Although no decision in the Ohio action had been announced, the parties in this action stipulated on November 3, 1959, that the case should be removed from the trial calendar.²

By judgment dated May 17, 1962, the United States District Court for the Northern District of Ohio determined that the dead end patent was valid and infringed by Fanner and that Preformed was entitled to an injunction against further infringement and to damages for past infringement. Preformed Line Products Co. v. Fanner Mfg. Co., N.D. Ohio 1962, 225 F.Supp. 762. The judgment was affirmed by the Court of Appeals for the Sixth Circuit on February 19, 1964, (328 F.2d 265) and rehearing was denied May 17, 1964. Certiorari was denied by the Supreme Court on October 12, 1964. (379 U.S. 846, 85 S. Ct. 56, 13 L.Ed.2d 51.)

This case remained off the calendar for about three years. Pursuant to a local court rule, it was then placed on the calendar for consideration of dismissal for want of prosecution. A hearing was held October 15, 1962. Upon representation to the court that the case in the Northern District of Ohio had been tried but that the plaintiff, Preformed Line Products Company, was required to purge itself of "unclean hands", which subsequently was held to have been accomplished, and that the case was then on appeal, the district court ordered that the order of November 3, 1959, would be continued in effect.

On April 15, 1964, McGraw-Edison filed a notice restoring the action to the trial calendar. Thereafter McGraw-Edison filed a motion for leave to file an amended and supplemental answer and counterclaim. An order was entered June 25, 1964, granting McGraw-Edison's motion, subject to certain conditions and exceptions. On July 31, 1964, McGraw-Edison filed its first amended and supplemental answer and counterclaim.

Thereafter depositions were taken in Cleveland, Ohio. On September 16, 1964, McGraw-Edison filed a motion to compel answers to questions on oral depositions and a motion to set the case for trial. Preformed filed a motion to strike the fifth cause of defendant's counterclaim, which sought a declaratory judgment with respect to a modified device known as "Straight-Bight Fanngrip". On September 24, 1964, the court denied the motion to strike, granted defendant leave to file a second amended answer and counterclaim, and set the case for trial to commence February 6, 1965.

Preformed filed its answer to the counterclaim of McGraw-Edison as amended and supplemented, and on January 8, 1965, McGraw-Edison filed a motion to strike the answer. Shortly thereafter Preformed sought to have McGraw-Edison charged in contempt in the Ohio case. On January 15, 1965, the district court in this action granted an order to show cause and temporary restraining order restraining Preformed from proceeding against McGraw-Edison in the Ohio case.

On January 19, 1965, Preformed filed a motion to dismiss this action "on the ground that all justiciable matters and issues raised herein are presented in, and fully determinable by" the Ohio case. On February 24, 1965, the court granted Preformed's motion to dismiss its complaint without prejudice and also ordered dismissal without prejudice of the McGraw-Edison counterclaim. This order was supplemented by a nunc pro tune order on May 10, 1965, dismissing the "action in its entirety".

The order of February 23, 1965, reads in pertinent part:

"Rule 41 (a) (2) of the Federal Rules of Civil Procedure permits dismissal even though a counterclaim has been filed where, as here, the counterclaim can remain pending for independent adjudication by the court. Here, defendant\'s counterclaim is for declaratory relief and could remain pending; however, in light of the dismissal of the complaint and the pending litigation in Cleveland, Ohio, the counterclaim should also be dismissed without prejudice.

"Plaintiff\'s motion to dismiss complaint and counterclaim is granted without prejudice and each party to bear its own costs."

Rule 41(a) (2) F.R.Civ.P. provides in pertinent part: "* * * If a counterclaim has been pleaded by a defendant prior to the service upon him of the plaintiff's motion to dismiss, the action shall not be dismissed against the defendant's objection unless the counterclaim can remain pending for independent adjudication by the court. * * *"

The parties agree that McGraw-Edison's counterclaim could have remained pending for independent adjudication notwithstanding dismissal of the complaint. The dismissal of the complaint without prejudice accordingly was proper under Rule 41 (a) (2). The question then arises as to whether the trial court could properly dismiss the counterclaim for declaratory relief. The answer to this question does not depend upon Rule 41(a) (2),³ but rather upon a construction of the Federal Declaratory Judgment Act.

The Declaratory Judgment Act (28 U.S.C. § 2201) provides that in "a case of actual controversy within its jurisdiction", a court may "declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought". Rule 57 of the Federal Rules of Civil Procedure provides, "The existence of another adequate remedy does not preclude a judgment for declaratory relief in cases where it is appropriate."⁴

Professor Borchard has well stated the applicable rules for determining when declaratory relief is appropriate:

"The two principal criteria guiding the policy in favor of rendering declaratory judgments are (1) when the judgment will serve a useful purpose in clarifying and settling the legal relations in issue, and (2) when it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding. It follows that when neither of these results can be accomplished, the court should decline to render the declaration prayed." Borchard, Declaratory Judgments 299 (2d ed. 1941).⁵

Ordinarily the question of whether a district court shall exercise jurisdiction in a declaratory judgment action rests in the sound discretion of that court. As this court said in Shell Oil Co. v. Frusetta, 9 Cir. 1961, 290 F.2d 689, 691-692:

"It is well established that even though jurisdiction may exist under the Declaratory Judgment Act the granting of declaratory judgments is at the discretion of the district court. (Citing cases.) Said discretion is to be exercised in accordance with sound judicial principles and the purposes of the Declaratory Judgment Act. * * * The purpose of the Declaratory Judgment Act is to afford an added remedy to one who is uncertain of his rights and who desires an early adjudication thereof without having to wait until his adversary should decide to bring suit, and to act at his peril in the interim."

The bases for refusing declaratory relief were well summarized in Yellow Cab Co. v. City of Chicago, 7 Cir. 1951, 186 F.2d 946, 950-951, as follows:

"The discretion of a court to entertain a suit for declaratory judgment is a `judicial discretion\' which must find its basis in sound reason * * * and jurisdiction is not to be declined merely because of the existence of another adequate legal remedy * * * or even because of the pendency of another suit, if the controversy between the parties is such that it will not necessarily be determined therein * * *. It is well settled, however, that a declaratory judgment may be refused where it would serve no useful purpose * * * or would not finally determine the rights of the parties * * or where it is being sought merely to determine issues which are involved in a case already pending and can be properly disposed of therein * * * especially if the issue is one involving a novel question of state law * * * or is, for any other reason, one that can better be adjudicated in another court * * *. Nor should declaratory relief be granted where it would result in piecemeal trials of the various

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