Novak v. General Electric Corporation

• Citation: 282 F. Supp. 1010
• Decision Date: 29 September 1967
• Docket Number: Civ. A. No. 38936.
• Parties: Stanley NOVAK d/b/a Supreme Tire Service v. GENERAL ELECTRIC CORPORATION and Union Carbide Corporation.
• Court: U.S. District Court — Eastern District of Pennsylvania

282 F. Supp. 1010

Stanley NOVAK d/b/a Supreme Tire Service v. GENERAL ELECTRIC CORPORATION and Union Carbide Corporation.

Civ. A. No. 38936.

United States District Court E. D. Pennsylvania.

September 29, 1967.

Blank, Rudenko, Klaus & Rome, Philadelphia, Pa., by Edwin P. Rome, Phillip C. Patterson, Charles H. Baron, for plaintiff.

Ballard, Spahr, Andrews & Ingersoll, Philadelphia, Pa., by Charles I. Thompson, and Sullivan & Cromwell, New York, New York by William Piel, Jr., J. Marshall Welborn, Jr., for defendant, General Electric Co.

Drinker, Biddle & Reath, Philadelphia, Pa., by Lewis H. Van Dusen, Jr., Robert S. Ryan, for defendant, Union Carbide Corp.

HIGGINBOTHAM, District Judge.

OPINION

On June 30, 1967, I issued an order denying the motions of defendants for partial summary judgment based on the release of January 14, 1962 and the cross motion of plaintiff for summary judgment as to the scope of that release. The order was issued prior to the time this opinion was prepared in its now final form in order to expedite the continuation of discovery and other pretrial preparations.

Nevertheless, I believe that the questions presented by the motions, particularly insofar as their disposition will affect the conduct of this litigation, warrant full discussion and explication. This opinion is intended to provide the explanation of the reasons for and the effect of the above mentioned order.

I. STATEMENT OF THE CASE

This case is before me on the motions of both defendants, General Electric Corporation (hereafter referred to as "G.E."), and Union Carbide Corporation (hereafter referred to as "Carbide"), for partial summary judgment based on the asserted applicability of a release executed by plaintiff, Novak, for the benefit of Carbide in 1964. Jurisdiction is conferred on this Court by 28 U.S.C.A. § 1331,¹ because the claims asserted by the plaintiff arise under the federal antitrust laws — 15 U.S.C.A. §§ 13(a), (b), (c), (e), (f), 15, 22, 26² and 45.³

II. FACTUAL BACKGROUND

In June 1962, Stanley Novak and his then partner, Walter Svihla, by their attorney, David Novack of Camden, New Jersey, commenced an action against Carbide in the United States District Court for the District of New Jersey,⁴ alleging that Carbide had violated the Robinson-Patman Act by selling "Prestone" brand anti-freeze at different prices to certain competitors from that at which it would sell to plaintiffs.⁵ Carbide defended by asserting cost justification for any such differences. The case was called for trial on November 12, 1963. That afternoon, the parties engaged in further settlement negotiations which resulted in a tentative agreement that Carbide would pay plaintiffs $5,000 in return for which plaintiffs would agree to a dismissal of their suit with prejudice and would execute a release for the benefit of Carbide. On November 14, 1963, Carbide's local counsel, Joseph Kenney, Esquire, sent to plaintiffs' attorney a draft of a release for his approval and the signature of plaintiffs. A copy was forwarded to plaintiff, Novak, late in November. At the insistence of plaintiffs' counsel, the draft was changed so that the $5,000 would not appear to be paid as "counsel fees", and on December 19, 1966 was returned to plaintiffs' attorney. He forwarded it to plaintiff Novak shortly thereafter. It was signed and verified on January 13, 1964.⁶ Payment was made shortly thereafter, and a judgment was entered dismissing the action "with prejudice".

Thereafter, on September 24, 1965, Stanley Novak filed a complaint in this Court commencing this action alleging price discrimination by both G.E. and Carbide in the sale of miniature and sealed beam lamps in the automotive after-market in violation of the Clayton Robinson-Patman and Federal Trade Commission Acts.

Both G. E. and Carbide have moved for summary judgment, asserting that the release precluded this suit. In support of this motion, Carbide has submitted several affidavits and the deposition of plaintiff. G. E., while not a party to the earlier suit, nor mentioned in the release, claims that since its relation to Carbide, under plaintiff's theory of the wrong, would be that of either principal to agent or joint tortfeasor, it, too, is protected by the release. Both petitioners also assert that since they are, in fact, in the relationship of principal and agent, insofar as the marketing of automotive lamps is concerned, G. E. is not required by the Act to offer those lamps to others at the same prices paid by Carbide.

III. DISCUSSION

A. Applicable Rule for Decision

At the threshold we are met with a difficult problem. "Federal law is generally interstitial in its nature. It rarely occupies a legal field completely, totally excluding all participation by the legal systems of the states. * * * Federal legislation on the whole, has been conceived and drafted on an ad hoc basis to accomplish limited objectives. It builds upon legal relationships established by the states, altering or supplanting them only so far as necessary for the special purpose. * * *"⁷

The antitrust statutes themselves provide no rule for interpreting releases of antitrust claims as to either what claims or what parties are released. Yet, as petitioners urge, since the issue involves the alleged release of a federally created right, it is a "federal question" and one which the federal courts must be competent to answer without regard to state law.⁸ Thus, Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L. Ed. 1188 (1938), Klaxon v. Stentnor, 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941), and the cases which followed them, holding that a federal district court in a suit based on diversity of citizenship jurisdiction must apply the same rules for decision as would a state court in that state, are inapplicable.

On the other hand, federal courts are not bound to create a new rule for decision of every aspect of every "federal question". To the contrary, they should consider the problem, as Congress must have done when it enacted the relevant legislation, in the light of the existing body of state law. Indeed they may even choose to apply the state rule directly. Reconstruction Finance Corporation v. Beaver County, 328 U.S. 204, 66 S.Ct. 992, 90 L.Ed. 1172 (1946), cf. United States v. Yazell, 382 U.S. 341, 86 S.Ct. 500, 15 L.Ed.2d 404 (1966). The factors to be considered in making this choice are similar to those which determine knotty issues of statutory construction when legislative history is unhelpful:

1. The requirement — if any — of the federal program for a single rule for decision to be applied uniformly throughout the country.

2. The relationship of the transaction in question to the normal course of activities regularly decided under state law.

3. The relationship of the state rule to the federal policy and to related aspects of the federal program of which the statute in question is a part.⁹

"* * * The problem involves more than merely arriving at one or another substantive rule for decision, but deciding whether to formulate * * * a rule at all or to refer the determination to state law. * * * In the present context, this would involve consideration not only of the best substantive result on the particular issue, but also balancing against the possible gain from prescribing such a rule, the potential losses from non-integration of the national program with normal state activities."¹⁰

B. Relevance of State Law

In addition to the general counselling of clients and the normal state court activities of attorneys, a substantial portion of cases instituted in federal courts involve the application of state law.¹¹ Most cases are settled by agreement of the parties before judgment.¹² In addition, many matters are settled by the parties even before a suit is filed. Generally, settlements involve the execution of releases. Thus, the preparation of releases and the local law governing them are necessarily part of the stock-in-trade of every lawyer — something he deals in almost daily. I can perceive great difficulty for counsel and the possibility of substantial injustice to litigants should I decide that for all questions related to claims — or defenses — under the antitrust laws a separate and distinct set of "federal" rules for determining the scope and effect of the language used in releases had to be utilized.

The instant case provides a prime example of the relevance of state law. In the prior Camden action, Carbide was represented by both their present Philadelphia counsel and by Joseph Kenney, Esquire, of Camden, a member of the New Jersey Bar. Mr. Kenney conducted the negotiations leading to the settlement and the execution of the releases here in issue. Carbide, in fact, leans heavily on the correspondence between Mr. Kenney and Mr. David Novack, Esquire, then counsel for the plaintiffs, to establish that plaintiff knew or had ample reason to know that he was signing a "general release". Indeed, one of the documents submitted to support this motion for summary judgment is an affidavit of Mr. Kenney detailing the course of negotiations. The affidavit states:

"3. At the request of Union Carbide's Philadelphia Counsel, I drafted a general release * * * following the normal New Jersey form of general release. * * *"¹³

Other correspondence submitted by Carbide indicates that Philadelphia counsel had greater experience in antitrust matters than did Mr. Kenney. Yet they asked him to draw the release in that case. Evidently, Mr. Kenney's familiarity with local law and practice were thought to be relevant to the preparation of a release albeit a release of claims under the federal antitrust laws.

C. Authority

Petitioners have cited several cases to support their contention that since federal antitrust claims were involved in the prior case and are here involved, the effect of the 1964 release is to be determined by the application of a federal rule. I find the authority to be to...