Sinclair Refining Co v. Jenkins Petroleum Process Co

• Decision Date: 29 May 1933
• Docket Number: No. 752,752
• Citation: 77 L.Ed. 1449,289 U.S. 689,88 A.L.R. 496,53 S.Ct. 736,17 USPQ 522
• Parties: SINCLAIR REFINING CO. v. JENKINS PETROLEUM PROCESS CO
• Court: U.S. Supreme Court

289 U.S. 689

53 S.Ct. 736

77 L.Ed. 1449

SINCLAIR REFINING CO.

v JENKINS PETROLEUM PROCESS CO.

No. 752.

Argued May 11, 12, 1933.

Decided May 29, 1933.

Messrs. Dean S. Edmonds and Frank E. Barrows, both of New York City, for petitioner.

Mr. C. Stanley Thompson, of Washington, D.C., for respondent.

Mr. Justice CARDOZO delivered the opinion of the Court.

A bill of discovery in aid of an action at law was dismissed by the District Court (56 F.(2d) 272), but upheld upon appeal by the Circuit Court of Appeals (62 F.(2d) 663, 665). The question is whether the bill is good upon its face.

The respondent, Jenkins Petroleum Process Company, loaned to the petitioner, Sinclair Refining Company, then known as the Cudahy Refining Company, an experimental still for cracking petroleum oils to produce gasoline. By written agreement, any improvements developed as the result of the work of the petitioner's engineers and experts in making themselves familiar with the Jenkins apparatus or process were to belong to the respondent. The petitioner, or its predecessor, undertook, so far as it was able, to cause its employees to execute applications for patents in the United States and elsewhere in order to protect such improvements, and to assign the applications to the petitioner together with the improvements affected thereby.

In January, 1921, the respondent filed a bill in equity for specific performance. Isom, an employee of the peti- tioner, applied for a patent on September 10, 1917, and when the patent was issued on November 19, 1918, assigned it to his employer. The respondent made claim to the patent on the ground that it was an improvement of the Jenkins invention. After a trial upon the merits, the bill for specific performance was dismissed, the court holding that there was doubt whether Isom's invention was the outcome of his use of the Jenkins apparatus, or of independent thought and knowledge. (D.C.) 32 F.(2d) 247. There was an appeal from the decree to the Circuit Court of Appeals for the First Circuit. That court invoked the principle that to uphold a decree for specific performance there must be clear and convincing evidence, and not merely such evidence as would sustain a recovery at law. In that view the decree was affirmed in so far as it dismissed the prayer for equitable relief, but the dismissal was coupled with a direction that the cause be transferred to the law side of the court, the plaintiff to have leave to amend by turning his ause of action into one for the recovery of damages. 32 F.(2d) 252.

The action at law is now at issue, and the plaintiff prays for a discovery. It alleges in its bill that the evidence of the facts to be discovered is contained in voluminous books and documents which could not be inspected or proved upon a trial at law for damages without confusion and delay. Discovery is demanded as to the number of cracking stills constructed by the defendant under the Isom patent; as to the extent and time of operation; and as to the amount of gasoline and other petroleum products yielded thereby, with an inspection of the relevant designs and drawings. The District Court granted a motion to dismiss the bill placing its decision upon two grounds, (1) that a bill of discovery will not lie when the facts to be discovered relate to damages only, and (2) that the value of the patents has no relation to the sales of the patented device, and that evidence of such sales would be inadmissible if offered. The Court of Appeals reversed, one judge dissenting. In the view of the majority of the court, the damages to be recovered in an action at law may be proved by resort to a discovery in equity, if the ancillary remedy is reasonably necessary to advance the ends of justice. Munger v. Firestone Tire & Rubber Co. (C.C.A.) 261 F. 921, and Loose v. Bellows Falls Pulp Plaster Co. (C.C.A.) 266 F. 81, were disapproved to the extent that they involve a ruling to the contrary. As to the measure of damages, and the evidence pertinent thereto, the court held that the plaintiff was not concerned with the defendant's profits, since it was suing for breach of contract, and not as equitable owner. Even so, in ascertaining the value of the patent at the time of the breach, the triers of the facts would be at liberty to consider the commercial use that had been made of the patented device. The court went on to indicate restrictions as to the order of proof which were thought to be appropriate. At first and as part of the case in chief, the plaintiff was to be confined within rather narrow limits. It might show 'the general facts about the Isom invention, not specific instances of profitable use by this person or that.' The need for greater detail, however, might develop with the trial. 'If * * * the defendant should deny the utility and commercial success of the invention, evidence of the defendant's use of it might be highly significant; and under those circumstances the plaintiff would be entitled to discovery of them.' The information to be exacted of the defendant was thus, in the view of the court, to be adjusted to the need. To permit that adjustment the bill was to be retained until the trial, and prompt discovery would then be ordered if the situation thus developed should call for that relief. A writ of certiorari prayed for by the defendant has brought the case here. 289 U.S. 717, 53 S.Ct. 595, 77 L.Ed. —-.

1. The remedy of discovery is as appropriate for proof of a plaintiff's damages as it is for proof of other facts essential to his case.

Help for the solution of problems of this order is not to be looked for in restrictive formulas. Procedure must have the capacity of flexible adjustment to changing groups of facts. The law of discovery has been invested at times with unnecessary mystery. There are few fields where considerations of practical convenience should play a larger role. The rationale of the remedy, when used as an auxiliary process in aid of trials at law, is simplicity itself. At times, cases will not be proved, or will be proved clumsily or wastefully, if the litigant is not permitted to gather his evidence in advance. When this necessity is made out with reasonable certainty, a bill in equity is maintainable to give him what he needs. Equity Rule 58 (28 USCA § 723). There were other reasons in times past, when parties were not permitted to be witnesses, and when there was no compulsory process for the production of books or documents. Carpenter v. Winn, 221 U.S. 533, 31 S.Ct 683, 55 L.Ed. 842; Pressed Steel Car Co. v. Union Pacific Co. (D.C.) 240 F. 135, 137. Today the remedy survives, chiefly, if not wholly, to give facility to proof. In the practice of many states there is a summary substitute by an order for examination before trial or for the inspection of books and papers. The substitute has never found its way into the procedure of the federal courts. Ex parte Fisk, 113 U.S. 713, 5 S.Ct. 724, 28 L.Ed. 1117. The remedy in those courts is still by bill in equity as in days before the codes. Colgate v. Compagnie Francaise, etc. (C.C.) 23 F. 82; Pressed Steel Car Co. v. Union Pacific Co., supra.

To state the function of the remedy is to give the password to its use. There are times when a suit is triable in separate parts, one affecting the right or liability, and the other affecting the measure of recovery. In suits of that order a discovery as to damages will commonly be postponed till the right or liability has been established or declared. Schrieber v. Heyman, 63 L.J.Rep. 749 (1894); Elkin v. Clarke, 21 W.R. 447 (1873); Parker v. Wells, L.R. 18 Ch.Div. 477; Fennessy v. Clark, L.R. 37 Ch.Div. 184; De la Rue v. Dickinson, 3 K. & L. 388; Peile, The Law and Practice of Discovery, pp. 26—29; Bray, Principles and Practice of Discovery, pp. 14, 15; Wigram, Points in the Law of Discovery, § 45. As a general thing it will be useless to decree it any earlier, and may even be oppressive. 'The principle of judicial parsimony' (L. Hand, J., in Pressed Steel Car Co. v. Union Pacific Railroad Co., supra), if nothing more, condemns a useless remedy. This division of the trial into stages or installments will happen oftenest in suits in equity, though it is not unknown in actions at law where a jury has been waived. In equity it is common practice. Thus, a suit to establish a partnership or to restrain the infringement of a patent culminates, if successful, in an interlocutory decree, which will be followed by an accounting and a discovery of documents. In these and like cases, the accounts will not be probed until the right has been adjudged.

A different situation is presented where the action is at law and is triable by judge and jury. There interlocutory judgments are unknown, at all events where the defendant has answered generally and not by special plea, and the verdict establishing the right establishes at the same time the amount to be recovered. The answer being general, the case according to common-law practice must be tried as a unit and not broken into parts. In such circumstances damages may be proved with the aid of a discovery, if the complication of accounts or other practical impediments make it necessary that the evidence be sifted in advance. Pape v. Lister, L.R. 6 Q.B. 242; Saunders v. Jones, L.R. 7 Ch.Div. 435, 452; Elkin v Clarke, supra; Sherwood Bros., Inc., v. Yellow Cab Co., 283 Pa. 488, 491, 492, 129 A. 563; Wells v. Holman, 115 S.C. 443, 106 S.E. 224; McKinnon Young Co. v. Stockton, 55 Fla. 708, 46 So. 87; Burns v. Lipson, 204 App.Div. 643, 198 N.Y.S. 810; Webb v. Homer W. Hedge Co., 133 App.Div. 420, 117 N.Y.S. 643; Iroquois Hotel & Apartment Co. v. Iroquois Realty Co., 126 App.Div. 814, 111 N.Y.S. 172; Harbaugh v. Middlesex Securities Co., 110 App.Div. 633, 97 N.Y.S. 350; Peile, supra, p. 112; Bray, supra, p. 21. 'I have consulted my learned Brothers,' said Lush, J., in Pape v. Lister, supra, 'and the conclusion at which we have arrived is that this rule...