Price Bros. Co. v. Philadelphia Gear Corp.

• Decision Date: 18 June 1981
• Docket Number: 78-3089,Nos. 78-3088,s. 78-3088
• Citation: 649 F.2d 416,31 U.C.C.Rep.Serv. 469
• Parties: 31 UCC Rep.Serv. 469 PRICE BROTHERS COMPANY, Plaintiff-Appellee Cross-Appellant, v. PHILADELPHIA GEAR CORPORATION, Defendant-Appellant Cross-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 416

649 F.2d 416

31 UCC Rep.Serv. 469

PRICE BROTHERS COMPANY, Plaintiff-Appellee Cross-Appellant, v. PHILADELPHIA GEAR CORPORATION, Defendant-Appellant Cross-Appellee.

Nos. 78-3088, 78-3089.

United States Court of Appeals, Sixth Circuit.

Argued April 1, 1980.

Decided May 15, 1981.

Rehearing Denied June 18, 1981.

Robert P. Bartlett, Jr., Robert E. Portune, Estabrook, Finn & McKee, Dayton, Ohio, for defendant-appellant cross-appellee.

Neil F. Freund, Young & Alexander, Dayton, Ohio, for plaintiff-appellee cross-appellant.

Before KEITH and MERRITT, Circuit Judges, and PECK, Senior Circuit Judge.

JOHN W. PECK, Senior Circuit Judge.

This is an appeal from a judgment entered in a diversity action for breach of contract and breach of warranties. Plaintiff, Price Brothers Company, a manufacturer of reinforced concrete pipe, brought an action against Philadelphia Gear Corporation, claiming that machine components produced by the defendant and used in Price Brothers' pipe wrapping machine had failed to perform as represented. At the conclusion of a trial to the bench, the district court entered judgment for the plaintiff and awarded $125,864.15 in damages. The defendant appealed both the conclusion as to liability and the award of damages, and the plaintiff cross-appealed, asserting that the damage award was inadequate.

I.

Among the issues raised by Philadelphia Gear's appeal is an assertion that the trial court relied on information outside the record in reaching its decision. As one basis of this contention, Philadelphia Gear alleged that prior to the trial the trial judge's law clerk had traveled from Dayton, Ohio, to Beacon, New York, and had observed the operation of the pipe wrapping machine that is at the center of this controversy. Philadelphia Gear argued that the law clerk's observations were presumably reported to the trial judge, and speculated that this report may have been relied on by the judge in making his findings. Philadelphia Gear asserted that it had no knowledge of the clerk's trip prior to its occurrence, that it therefore had no opportunity to be present when the clerk observed the machine, and that it had no opportunity to review or rebut any report made by the clerk to the judge. Philadelphia Gear argues that the fact finding potentially based on the nonevidentiary observation by the law clerk is clearly erroneous as a matter of law.

Philadelphia Gear first raised the issue of the law clerk's off-the-record involvement by a motion made after entry of judgment, pursuant to Fed.R.Civ.Pro. 59(c), asking the court to amend its findings to reflect the fact of the law clerk's visit. The district judge denied that motion without comment on the law clerk's involvement. With the record in the state just described, serious questions regarding the impartiality of the fact finding were necessarily noted by this Court on appeal. Price Bros. Co. v. Philadelphia Gear Corp., 629 F.2d 444 (6th Cir. 1980).

It is imperative that a finder of fact avoid off-the-record contacts that might bias its judgment or otherwise impair its ability to fairly and objectively weigh the evidence properly submitted at trial. A judge presiding at a bench trial may not directly or indirectly, through his law clerk or by any other means, conduct an investigation outside the record and use the results of that investigation in determining the facts of a case. It need hardly be mentioned that what a judge cannot do in person he may not do by proxy. The fact that the clerk rather than the judge made the trip and observed the machine in no way alters the problem. The fair and impartial administration of justice demands that facts be determined only upon the evidence properly presented on the record. Furthermore, it is incumbent on the finder of fact to protect the appearance, as well as the fact, or its impartiality. It is fundamental that no judgment can be maintained under circumstances that suggest that the fact finder may have relied on covert, personal knowledge rather than on the evidence produced in open court and subject to review by the parties, the public, and the appellate court.

A view by the fact finder of places or objects related to a lawsuit does not per se destroy the fact finder's impartiality. Where the purpose of a view is to assist the fact finder to better understand evidence properly introduced, and the view itself is not considered as evidence, then the potential for prejudice to a party not present at the view is minimized. In contrast, where the fact finder's observations upon a view are used as evidence to determine the facts, then the procedural safeguards of a trial, including the rules of evidence and the participation of the parties must apply.

Unfortunately, from the record originally presented to this Court it could not be determined if the trial judge's law clerk had observed the pipe wrapping machine, and if such an observation did occur, how it was used by the trial judge. Accordingly, we remanded for an evidentiary hearing on the questions of whether the law clerk had viewed the machine, what the law clerk reported to the trial judge, when the defendant learned of the view by the clerk, whether the defendant consented to the view, and, most importantly, what use the trial judge made in deciding the case of whatever the law clerk had observed.

On remand, a district judge not previously involved in this case conducted a hearing directed at the questions recited above. Testimony was elicited from the trial judge's law clerk and secretary, attorneys for both parties, and other witnesses. In addition, the trial judge submitted a statement concerning the matters that necessitated the remand.

The undisputed testimony from the hearing answers several of the questions presented. The law clerk did, at the direction of the trial judge, travel to New York and observed the operation of the pipe wrapping machine at the premises of the plaintiff. Counsel for neither party were present. The clerk's conversations with plaintiff's employees were limited to identifying the machine that the clerk had come to see and identifying a part of the machine in response to a question from the clerk.

It is unfortunate that our remand "for an evidentiary hearing and report" (629 F.2d at 447) was interpreted by the district judge conducting the hearing to mean that no findings of fact were required of him. We are unable, on the basis of the cold record of the hearing, to resolve conflicting testimony as to when the defendant first learned of the law clerk's view of the machine and whether defendant consented to it. Fortunately, however, the questions answered by the undisputed testimony produced at the hearing and by the trial judge's statement do permit us to resolve the issue of whether the trial judge's fact finding was critically impaired by his law clerk's off-the-record observations and report. Thus, whether the defendant consented to the view by the clerk and is thus estopped from asserting prejudice based on that view become irrelevant.

The view involved in this case was more than a simple observation of the place where a specified event was alleged to have occurred. The subject viewed here, the machine, was under the control of the plaintiff. The plaintiff had the opportunity to manipulate what the law clerk saw in order to present an image most favorable to the plaintiff. The defendant was not present to learn what the law clerk observed, what conversations the law clerk had with plaintiff's employees, or what impressions the law clerk conveyed to the trial judge. Obviously, the defendant could not rebut any of the off-the-record information that the trial judge received from this source. These factors created a presumption of prejudice to the defendant in the trial judge's determination of facts that must be rebutted before his decision can stand.

Based on the undisputed testimony produced at the hearing on remand, we conclude that the presumption of prejudice arising from the law clerk's report of off-the-record observations has been overcome. The law clerk's testimony and the statement of the trial judge establish that the sole purpose of the clerk's trip was to observe the operation of the pipe wrapping machine and describe it to the judge so that he might be better able to understand the evidence to be produced at trial. There is no indication that the trial judge considered the law clerk's report as evidence or that the judge was improperly influenced in his fact finding by the clerk's report. Since the trial judge's fact finding was not based on the off-the-record contact of the clerk's view, any error that may have occurred in not obtaining the parties' consent to that view did not result in prejudice and was harmless. We therefore conclude that the specter of prejudice created by the judge's off-the-record contact with material evidence has been removed, and that the trial judge's findings were not biased by his law clerk's view of the wrapping machine.

II.

Philadelphia Gear has appealed both the trial court's conclusion that Philadelphia Gear breached express and implied warranties of merchantability and fitness and the court's determination of damages. Price Brothers has also appealed the trial court's damages determination. Because we conclude that the trial court erred in finding that implied and express warranties were breached by Philadelphia Gear, we do not reach the question of damages.

Price Brothers had for many years prior to the events of this controversy wrapped concrete pipe with wire by means of complex machinery of Price Brothers' own design. Price Brothers decided to expand its operations to the east coast by constructing a new manufacturing plant at Beacon, New York. During the planning stages for the new plant, a Price Brothers engineer read a journal article describing a new design in disc clutch and drive units manufactured by Philadelphia Gear for commercial...