Rolls-Royce Limited, Derby, England v. United States

• Decision Date: 15 July 1966
• Docket Number: No. 74-63.,74-63.
• Citation: 176 Ct. Cl. 694,364 F.2d 415
• Parties: ROLLS-ROYCE LIMITED, DERBY, ENGLAND, a British Company v. The UNITED STATES and United Aircraft Corporation, Defendant-Intervenor.
• Court: U.S. Claims Court

176 Ct. Cl. 694, 364 F.2d 415 (1966)

ROLLS-ROYCE LIMITED, DERBY, ENGLAND, a British Company v. The UNITED STATES and United Aircraft Corporation, Defendant-Intervenor.

No. 74-63.

United States Court of Claims.

July 15, 1966.

W. Houston Kenyon, Jr., New York City, for plaintiff; William T. Boland, Jr., Donald J. Lisa, and Kenyon & Kenyon, New York City, of counsel.

William W. Fleming, Washington, D. C., with whom was Asst. Atty. Gen. John W. Douglas, for defendant.

C. Blake Townsend, New York City, for defendant-intervenor; Carroll G. Harper, Byerly, Townsend, Watson & Churchill, New York City, and Russell M. Lipes, Jr., East Hartford, Conn., of counsel.

Before COWEN, Chief Judge, and LARAMORE, DURFEE, DAVIS and COLLINS, Judges.

COWEN, Chief Judge:

Plaintiff, a British corporation engaged in the manufacture of aircraft engines, has brought this action for patent infringement against the United States under 28 U.S.C. § 1498. Plaintiff is the owner of a United States patent which describes and claims a metal alloy used in the making of turbine blades of jet engines. The particular utility of the invention is said to lie in the fact that the alloy resists softening and deformation at extremely high temperatures. Plaintiff claims that the Department of Defense, without license or consent of plaintiff and without any other lawful right, procured certain internal combustion turbine engines from four domestic aircraft corporations which contained blades fabricated from alloys that are alleged to be described in and protected by its patent. Before defendant filed its answer, one of the four supplying manufacturers, United Aircraft Corporation, was granted permission to intervene as a third-party defendant in the action under Rule 28 of the court, on the grounds that: (1) it has a pecuniary interest in the subject matter of the litigation, in that it might, by reason of an indemnity agreement, be ultimately liable to defendant for a judgment rendered against the United States, and (2) that the representation of its interests by defendant alone might prove to be inadequate.

To this point, the case does not raise any problems of third-party practice novel to this court. United, as defendant-intervenor, however, has not limited itself to the mere presentation of its defenses to plaintiff's principal claim. It has proceeded further and asserted a counterclaim against plaintiff to recover damages for breach of contract in the sum of $500,000. Plaintiff has moved to dismiss the counterclaim as beyond this court's jurisdiction, because in the counterclaim affirmative relief by one private party against another is sought and because the contract in issue was not asserted, referred to, or relied upon by plaintiff in its petition. At the present juncture, we are concerned only with the resolution of this jurisdictional question.¹

In their respective answers, the Government and United each set up the defenses of invalidity, non-infringement, and an alleged license from plaintiff to United. This last defense is based upon a manufacturing agreement entered into by plaintiff and United on December 30, 1947, which purports to grant to United, under stated conditions, rights and licenses to sell and grant sub-licenses to other persons, corporations, and Government agencies.² Defendant was not a party to the agreement, but avers in its answer that as a result of its arrangements with United it was licensed to manufacture, use, and sell the accused engines and turbine blades to the same extent as United. The Government's pleading did not contain any counterclaim or prayer for cross-relief.

To support its contention that this court has jurisdiction to entertain the counterclaim, United urges that since plaintiff's petition averred nonexistence of a license and United specifically denied the same in its answer (and indeed affirmatively averred the existence of a license as a result of the manufacturing agreement), a direct controversy has been raised. It is argued that the license so put in controversy arises out of and is an integral and indispensable part of the transactions or occurrences that constitute the subject matter of the petition. In short, United asserts that since the effect or non-effect of the manufacturing agreement is an essential determination to be made in regard to the principal claim, the court has broad ancillary power, under Rule 21 and under Section 14 (b) of the Contract Settlement Act of 1944 (41 U.S.C. § 114(b) (1964 ed.)), to dispose of all questions arising out of the agreement and to adjudicate the rights and legal relations of all parties properly before it — even to the extent of granting judgment on a counterclaim by an intervenor to recover damages against plaintiff for breach of contract.

Manifestly, the question of license is relevant to the defense of United and the Government to plaintiff's principal claim. The fact that the asserted counterclaim may have questions of fact in common with a defense to the main action, however, does not compel the conclusion that this court has jurisdiction to grant complete relief on all ancillary or related claims by the intervenor against the plaintiff. The powers of the court are to be ascertained from the acts of Congress creating and defining its jurisdiction, and we have been referred to no statute which confers jurisdiction on this court to enter judgment for United on the counterclaim it has filed.

The Contract Settlement Act of 1944 does not evince a congressional intent to confer such sweeping authority upon the court. The purpose of the statute was to enlarge the jurisdiction of the Court of Claims so as to cover certain aspects of modern third-party practice. Maryland Casualty Co. v. United States, 141 F.Supp. 900, 135 Ct.Cl. 428 (1956); Seaboard Surety Co. v. United States, 144 Ct.Cl. 686 (1959), cert. denied, Haltom City State Bank of Fort Worth v. Seaboard Surety Co., 359 U.S. 1001, 79 S.Ct. 1140, 3 L.Ed.2d 1031. However, we have held that the act is limited to situations in which the third-party defendants have an interest in a plaintiff's claim against the Government, which interest the third-party defendants might assert against the United States, or as a defense to the plaintiff's claim, or in connection with which the United States might assert a claim against the third party. Oliver-Finnie Co. v. United States, 137 F.Supp. 719, 133 Ct.Cl. 555 (1956); Weiss v. United States, 130 Ct. Cl. 815 (1955). It does not embrace actions by plaintiff against third parties, or by third parties against plaintiff to recover damages on causes of action not cognizable by this court. See 41 U.S.C. § 114(c).³ Berkeley v. United States, 276 F.2d 9, 149 Ct.Cl. 549 (1960).

In Richfield Oil Corp. v. United States, 151 F.Supp. 333, 138 Ct.Cl. 520 (1957), this court held that the act did not cover a cross-claim asserted by an indemnifying third-party defendant against another third-party defendant alleged to have indemnified the cross-claimant. In that case, Richfield sued for the value of certain property taken by the Government in connection with the construction of a flood control project. The United States impleaded the Los Angeles County Flood Control District on the ground that the district had agreed to hold it harmless in such an event. The district summoned two officials of the State of California as additional third parties, alleging that the State had in turn agreed to indemnify the district. The court granted the motion of the State officials to dismiss the district's cross-claim, on the grounds that the Contract Settlement Act and the rules of the court did not "authorize the impleading of the contingent debtor's contingent debtor". The objectives of the statute and its application to the situation before it were summarized in the following language:

The principal purpose of the statute was not, we think, to provide for the adjudication of all possible rights and obligations which might stem, however remotely, from the transaction involved in the principal suit. It was to permit the parties to bring in other persons who might, if not foreclosed, later show that they owned or had an interest in the claim sued on, or whose possible right might, if not foreclosed, be used as a defense by the United States to defeat the principal claimant. It was also intended to permit the United States to bring in parties who were under a duty to save it harmless from judgments such as the one sought by the plaintiff, and to recover money from parties to which it had paid the money which it might be adjudged to have to pay to the plaintiff.

The alleged contingent liability of the State of California to the District, which would arise only if the contingent liability of the District to the United States were to become actual, does not fall within the purposes which we have suggested.

* * * * * *

In the circumstances, we are not inclined to stretch the third party statute to the utmost possible limits, since it would seem that nothing useful would be gained by doing so. * * * (151 F.Supp. at p. 335, 138 Ct.Cl. at pp. 522-523)

To allow United to assert its counterclaim in the present case would stretch the third-party statute beyond the limits urged by the third-party defendant and rejected by the court in Richfield Oil. In that case the third-party defendant wished to adjudicate the legal liability of its contingent debtor — a party whose ultimate liability was derived from the very claim asserted by the plaintiff against the United States. In the situation at hand, the third-party defendant is seeking to enforce a claim which is in fact no part of plaintiff's original action against the United States. It is not necessary to award damages to United for plaintiff's...