United States v. Krasnov

• Decision Date: 22 December 1952
• Docket Number: Civ. A. No. 11024.
• Citation: 109 F. Supp. 143
• Parties: UNITED STATES v. KRASNOV et al. KRASNOV et al. v. COMFY MFG. CO. et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

109 F. Supp. 143

UNITED STATES v. KRASNOV et al.

KRASNOV et al. v. COMFY MFG. CO. et al.

Civ. A. No. 11024.

United States District Court E. D. Pennsylvania.

December 22, 1952.

William L. Maher, George W. Jansen, Joseph F. Tubridy, Sp. Assts. to the Atty. Gen., for plaintiff.

Daniel Lowenthal, Philadelphia, Pa., and Wendell Berge, Washington, D. C., for defendants Comfy Mfg. Co. and Fred E. Katzner.

Fred A. Klein, New York City, for defendant, Arthur Oppenheimer, Jr.

C. Brewster Rhoads, Philadelphia, Pa., for cross-claimants Joseph A. Krasnov, Samuel Krasnov and Seymour Krasnov. Leonard L. Kalish, Joseph W. Swain, Jr., Montgomery, McCracken, Walker & Rhoads, Philadelphia, Pa., of counsel.

CLARY, District Judge.

This is an action under the Sherman Anti-Trust Act, 15 U.S.C.A. § 4, wherein the United States seeks an adjudication that the defendants have been engaged in monopolistic practices and seeks an injunction restraining them from a continuance or revival of illegal practices and activities in violation of Sections 1 and 2 of the Sherman Anti-Trust Act, 15 U.S.C.A. §§ 1 and 2. The defendants have also been indicted in this district under Criminal Action No. 15754, returned June 2, 1950, charging the same violations as alleged in the complaint in this action.

For many months attempts were made to reach an agreement between the Government and all of the defendants whereby a consent decree would be entered terminating the above action. Pending those discussions, defendants Krasnov's motion for a more definite statement filed on December 27, 1950 was continued on the Argument List from time to time. When it appeared that no consent decree could be agreed upon, the above motion for a more definite statement was withdrawn under a distinct agreement that on or before June 28, 1952 the defendants Krasnov would file an answer to the merits. The other three defendants, the Comfy Manufacturing Company, Fred E. Katzner and Arthur Oppenheimer, Jr., nonresidents of this district, filed their answers respectively on December 28 and 29 of 1950.

On June 25, 1952, defendants Krasnov moved the Court for an order extending the time to serve their answer until July 21, 1952, which answer, they stated, would contain a cross-claim against the defendants, the Comfy Manufacturing Company, Fred E. Katzner and Arthur Oppenheimer, Jr. This motion was refused as requested, but the time for answering and making a cross-claim was extended to July 14, 1952. On July 14, 1952, defendants Krasnov served their answer and obtained a further order of court extending the time to serve a cross-claim to August 14, 1952. The order entered by the Court on June 25, 1952 expressly stated that the trial of the Government's case was not to be delayed, and it was also understood that the United States reserved the right to move to strike or to object to any cross-claim being interjected into an anti-trust suit. After the defendants Krasnov filed the cross-claim above referred to on August 14, 1952 against the Comfy Manufacturing Company, Fred E. Katzner and Arthur Oppenheimer, Jr., both the United States and defendants Comfy, Katzner and Oppenheimer moved to strike the cross-claim.

Defendants Krasnov are all three residents of the Eastern District of Pennsylvania. Comfy is a resident of the State of Maryland, the Comfy Manufacturing Company being located at Baltimore, Maryland. Katzner is a resident of New York, and Oppenheimer is a resident of Boise, Idaho. Jurisdiction over Comfy, Katzner and Oppenheimer was obtained by court order of June 7, 1950, pursuant to the provisions of Section 5 of the Sherman Anti-Trust Act, 15 U.S.C.A. § 5. The motions to strike on the part of the Government and on the part of defendants Comfy, Katzner and Oppenheimer raise questions both as to jurisdiction and to venue.

Considering first the motion of Comfy, Katzner and Oppenheimer, three grounds are set forth in their written motion to strike which are: (1) that the cross-claim is a sham and does not present any genuine claim or issue in the case; (2) that the cross-claim is barred by the Statute of Limitations; and (3) that the cross-claim is barred by the parol evidence rule and/or the Statute of Frauds. If the cross-claim is cognizable in this court, these are affirmative defenses which would have to be pleaded and, consequently, would afford no reason for the striking of the cross-claim. However, at the argument of the present motion, counsel for Comfy, Katzner and Oppenheimer adopted and asked the Court on their behalf to strike the cross-claims on two of the grounds advanced by the Government, to wit: That actions by the United States for the enforcement of the Anti-Trust Statute do not permit the interposition of monetary cross-claims between two sets of defendants; additionally, that when a defendant under the extraordinary jurisdictional features of Section 5 of the Sherman Anti-Trust Act is subjected to the jurisdiction of a district other than the one in which he resides, such jurisdiction does not subject such defendant to an in personam action in the nature of a cross action by a joint defendant.

The Government's motion to strike, while very shortly stated, raises not only the two questions above set forth which defendants Comfy, Katzner and Oppenheimer adopted at argument, but also avers that the cross-claim is improperly interposed and that it does not arise out of the transaction or occurrence that is the subject matter of the original action, a condition imposed by Rule 13(g) of the Federal Rules of Civil Procedure, 28 U.S.C.A. as a prerequisite for asserting a cross-claim.

The complaint avers that since 1937 defendants Krasnov and defendant Comfy Manufacturing Company, of which defendant Katzner is President, have been the two largest manufacturers of slip covers in the United States. In 1949 said defendants manufactured approximately 62 per cent of all slip covers manufactured in the United States with thirteen other manufacturers accounting for the remaining 38 per cent, of which the defendants' largest competitor accounted for only 9 per cent of the total slip covers manufactured. During 1949 more than twenty-three million dollars worth of ready-made furniture slip covers of all types were produced in the United States. Defendants Krasnov and Comfy manufactured slip covers in Baltimore, Maryland, and Bethlehem, Pennsylvania, which latter city is within the Eastern District of Pennsylvania, and both shipped and sold the same in interstate commerce to the various states in the United States.

The complaint further charges that in violation of Sections 1 and 2 of the Sherman Anti-Trust Act of July 2, 1890, c. 647, 26 Stat. 209, as amended, 15 U.S.C.A. §§ 1 and 2, the defendants were engaged in a combination and conspiracy in restraint of interstate trade and commerce in the manufacture and sale of ready-made furniture slip covers among the several states of the United States; that they combined and conspired to monopolize the aforesaid trade and commerce in ready-made furniture slip covers, and they attempted to monopolize the aforesaid trade and commerce in ready-made furniture slip covers. The complaint avers that defendants threatened to and will continue such offenses unless the relief prayed for in the complaint is granted. Defendant Oppenheimer is the patentee of U. S. Letters Patent No. 2,100,868, which pertains to the manufacture of ready-made furniture slip covers from knitted fabrics. In 1938 he transferred title of said patent to defendant Comfy, retaining a reversionary interest and rights to certain royalties on slip covers manufactured thereunder. Defendants Krasnov owned Patent No. 1,984,973 embodying certain inventions in the manufacture of slip covers. The complaint avers that by certain actions including cross licensing, defendants combined and conspired to monopolize the slip cover trade in the United States.

In their cross-claim interposed in this action, Krasnovs aver that any dealings had with defendants Comfy, Katzner and Oppenheimer were the result of an agreement entered into in 1938; that such agreement was induced by false and fraudulent misrepresentations; that these false and fraudulent misrepresentations were not discovered until 1949, when they cancelled the contract, and that they have paid to Comfy $160,000 in royalties which they seek to recover in this cross action.

As stated above, I am not concerned with the written reasons assigned by Comfy, Katzner and Oppenheimer in their motions to strike. Such defenses would go to the merits and would of necessity have to be determined at time of trial. The other problems raised, however, are more substantial. Admittedly any suit on a contract for false and fraudulent misrepresentation and to recover damages for such false and fraudulent misrepresentation could be brought by the Krasnovs against the other three defendants in this district only under the provisions of Section 1391 (a) of Title 28 U.S.C.A. relating to venue (the three Krasnovs being residents of this district). The effectiveness of the suit, however, would depend upon their ability to get service on the said three defendants, Comfy a resident of Baltimore, Katzner a resident of New York, and Oppenheimer a resident of Idaho. It is admitted that all three are not residents of or...