PUREX CORPORATION, LTD. v. General Foods Corporation, Civ. No. 69-965-WPG.

• Decision Date: 27 October 1970
• Docket Number: Civ. No. 69-965-WPG.
• Citation: 318 F. Supp. 322
• Court: U.S. District Court — Central District of California
• Parties: PUREX CORPORATION, LTD., a corporation, Plaintiff, v. GENERAL FOODS CORPORATION, a corporation, and the S.O.S. Company, Inc., a corporation, Defendants.

318 F. Supp. 322

PUREX CORPORATION, LTD., a corporation, Plaintiff, v. GENERAL FOODS CORPORATION, a corporation, and the S.O.S. Company, Inc., a corporation, Defendants.

Civ. No. 69-965-WPG.

United States District Court, C. D. California.

October 27, 1970.

Gibson, Dunn & Crutcher, by Paul G. Bower, Los Angeles, Cal., for plaintiff.

O'Melveny & Myers, by Warren Christopher, Los Angeles, Cal., for defendants.

MEMORANDUM OF DECISION AND ORDER

WILLIAM P. GRAY, District Judge.

In this private antitrust action, brought under section 4 of the Clayton Act, 15 U.S.C. § 15, Purex Corporation, Ltd., seeks to recover for damages allegedly resulting from the 1957 acquisition of The S.O.S. Company, Inc., by defendant General Foods Corporation. That acquisition was held to violate section 7 of the Clayton Act, 15 U.S.C. § 18, in proceedings conducted by the Federal Trade Commission (Trade Regulation Reporter (CCH), March 28, 1966, ¶ 17,465). Pursuant to the Commission's order, after affirmance by the United States Court of Appeals, 386 F.2d 936 (3d Cir. 1967), cert. denied, 391 U.S. 919, 88 S.Ct. 1805, 20 L.Ed.2d 657 (1968), General Foods divested its holdings of S.O.S. in 1968.

All of the assets of Brillo Corporation, the major competitor of S.O.S. in the field of household steel wool products, were acquired by Purex in 1963. One of the assets allegedly received by Purex in that transaction was the right to sue for injuries resulting to Brillo from the acquisition of S.O.S. by General Foods, and it is upon the strength of the ownership of such right that the present suit is brought.

The defendants, in the fourth and fifth affirmative defenses urged in their answer to the complaint, contend that Purex's acquisition of Brillo was in violation of the antitrust laws, and that the present suit may not be maintained, because Purex should not be permitted to take advantage of its own illegal conduct. More specifically, these defenses allege that the Purex-Brillo acquisition violated section 7 of the Clayton Act, 15 U.S.C. § 18, and sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2. The concluding assertion of the fourth affirmative defense is that the plaintiff is barred from seeking to profit from its own illegal conduct, and the fifth affirmative defense contends that Purex lacks standing to bring this action.

The plaintiff has brought a motion to strike these two defenses, claiming that they are "insufficient" as a matter of law under Rule 12(f), Fed.R. Civ.P. The question thus presented is whether it is a defense to a private treble damage action that the plaintiff acquired the cause of action through an illegal acquisition of the corporation that suffered the alleged injury.

This court is mindful that it should be slow to grant motions to dismiss affirmative defenses. A defendant should be given the opportunity to prove his allegations if there is any possibility that the defense might succeed after full hearing on the merits. See Carter-Wallace, Inc. v. Riverton Laboratories, Inc., 47 F.R.D. 366, 368 (S.D.N.Y.1969). On the other hand, if the defense here asserted is invalid as a matter of law, such determination should be made now, in order to avoid the needless expenditures of time and money in litigating in this action the legality of two separate and distinct corporate acquisitions, rather than one.

After having considered the memoranda submitted by both parties and after having heard oral argument, this court has concluded that the appropriateness of the plaintiff's acquisition of Brillo may not properly be raised in this action, and that the plaintiff's motion must therefore be granted.

Kiefer-Stewart v. Seagram, 340 U.S. 211, 71 S.Ct. 259, 95 L.Ed. 219 (1951), appears to control the resolution of the issue here presented. The opinion in that case abolished the defense of "unclean hands" in private antitrust suits. It held that proof of independent price fixing violations by the plaintiff could not establish a defense to a finding that the defendants' own price fixing activities had violated the antitrust laws. As described in Perma Life Mufflers v. International Parts Corp., 392 U.S. 134, 139, 88 S.Ct. 1981, 1985, 20 L.Ed.2d 982 (1968), Kiefer-Stewart was

"* * * premised on a recognition that the purposes of the antitrust laws are best served by insuring that the private action will be an ever-present threat to deter anyone contemplating business behavior in violation of the antitrust laws. The plaintiff who reaps the reward of treble damages may be no less morally reprehensible than the defendant, but the law encourages his suit to further the overriding public policy in favor of competition. A more fastidious regard for the relative moral worth of the parties would only result in seriously undermining the usefulness of the private action as a bulwark of antitrust enforcement."

The Kiefer-Stewart rationale does not appear to be rendered inapplicable merely because the plaintiff acquired the very cause of action sued upon in an allegedly illegal transaction. While allowing Purex to recover in these circumstances may, in a sense, reward it for unlawful activity, Kiefer-Stewart makes it clear that such a seemingly anomalous situation must be tolerated in order to promote the general public interest.

A significant impediment to the policy of encouraging private antitrust actions would be...