V. T. A., Inc. v. Airco, Inc.

• Court: U.S. Court of Appeals — Tenth Circuit
• Writing for the Court: Before SETH, Chief Judge, and BARRETT and McKAY; McKAY
• Citation: V. T. A., Inc. v. Airco, Inc., 597 F.2d 220 (10th Cir. 1979)
• Decision Date: 19 April 1979
• Docket Number: 78-1553,Nos. 77-1341,s. 77-1341
• Parties: V. T. A., INC., Plaintiff, v. AIRCO, INC., Defendant-Appellee, v. DONNELLY MIRRORS, INC., a corporation, John S. Chapin, Third Party Defendants, Ted Van Vorous and Vac-Tec Systems, Inc., a corporation, Third Party Defendants-Appellants. V. T. A., INC., Plaintiff-Counter-Defendant, v. AIRCO, INC., Defendant-Counter-Plaintiff, Appellant, v. DONNELLY MIRRORS, INC., a corporation, Ted Van Vorous, and John S. Chapin, Third Party Defendants-Appellees.

Page 220

597 F.2d 220

202 U.S.P.Q. 650

V. T. A., INC., Plaintiff, v. AIRCO, INC., Defendant-Appellee, v. DONNELLY MIRRORS, INC., a corporation, John S. Chapin, Third

Party Defendants,

Ted Van Vorous and Vac-Tec Systems, Inc., a corporation,

Third Party Defendants-Appellants.

V. T. A., INC., Plaintiff-Counter-Defendant, v. AIRCO, INC., Defendant-Counter-Plaintiff, Appellant, v. DONNELLY MIRRORS, INC., a corporation, Ted Van Vorous, and John S. Chapin, Third Party Defendants-Appellees.

Nos. 77-1341, 78-1553.

United States Court of Appeals, Tenth Circuit.

Argued and Submitted Nov. 14, 1978.

Decided April 19, 1979.

John E. Reilly, Denver, Colo. (with James R. Young, Denver, Colo., on brief), for third party defendants-appellants and third party defendants-appellees Ted Van Vorous and Vac-Tec Systems, Inc.

Carl Hoppe, San Francisco, Cal. (Ernest M. Anderson, San Francisco, Cal., on brief), of Eckhoff, Hoppe, Slick, Mitchell & Anderson, San Francisco, Cal. (Robert H. Harry and Donald E. Phillipson of Davis, Graham & Stubbs, Denver, Colo., on brief), for defendant-appellee and defendant-counter-plaintiff-appellant Airco, Inc.

Before SETH, Chief Judge, and BARRETT and McKAY, Circuit Judges.

McKAY, Circuit Judge.

This is a consolidated appeal. Airco, Inc. (Airco) appeals from the denial of a motion for civil contempt for a claimed violation by Ted Van Vorous and Vac-Tec Systems, Inc. (Vac-Tec) of the terms of an injunction. Van Vorous and Vac-Tec appeal from the denial of a Rule 60(b) motion seeking relief from the court order issuing the injunction.

The genesis of the dispute concerns a 1972 contract between Airco and Vacuum Technology Associates, Inc. (VTA). VTA agreed to develop a high speed sputtering system for use in industrial coating. ¹ VTA further guaranteed to Airco all rights to the device. At the time of the agreement Van Vorous was the sole stockholder and operating officer of VTA. John S. Chapin was a VTA employee who, in the course of his employment, developed the contemplated device. Following development of the device, Airco unilaterally filed a patent application in Chapin's name. VTA sued to adjudicate ownership of the invention. Airco counterclaimed against VTA, asserting its contract rights under the terms of the 1972 agreement. The dispute was settled prior to trial, and a consent decree was entered. Under the terms of the consent decree, Airco obtained exclusive rights to the Chapin invention. The order of the court enjoined Van Vorous, Chapin, and Donnelly Mirrors, Inc. (which had become an 80% Stockholder in VTA), from "using, offering for sale and manufacturing" the device. ²

VTA was declared bankrupt less than two months after the entry of the district court's Order and Decree. Van Vorous subsequently formed Vac-Tec, which manufactures and sells sputtering devices similar to those formerly manufactured and sold by VTA. Airco promptly filed a motion for civil contempt against Van Vorous and Vac-Tec for alleged violations of the terms of the injunction. After a full evidentiary hearing on the civil contempt motion the district court concluded, among other things, ³ that the sum of the similarities between the Vac-Tec and Airco products was not sufficient to warrant a finding that the scope of the injunction had been violated.

Concurrently with Airco's motion for civil contempt, Van Vorous filed a 60(b) motion seeking to void the decree and injunction. Among the contentions raised were arguments that the district court lacked jurisdiction to order an injunction, that the injunction constituted an illegal restraint of trade, ⁴ and that changed circumstances made the injunction inequitable. Without allowing discovery, the district court denied the 60(b) motion, ruling that "the subject pleading raises no basis for relief under that rule" ⁵ and that the motion, filed sixteen months after entry of the consent decree, was not filed within a "reasonable" time. Airco appeals the denial of the civil contempt motion. Van Vorous and Vac-Tec appeal the denial of the 60(b) motion.

I 60(b) MOTION

When reviewing the denial of a 60(b) motion, ⁶ we are generally limited to determining whether the denial amounts to an abuse of discretion. ⁷ Unless the trial court was powerless to render the judgment in the first instance, ⁸ an appeal from the denial of a 60(b) motion raises for review only the order itself and not the underlying judgment. Browder v. Director, Department of Corrections, 434 U.S. 257, 263 n.7, 98 S.Ct. 556, 54 L.Ed.2d 521 (1978); Hayward v. Britt, 572 F.2d 1324, 1325 (9th Cir. 1978) (per curiam); Pagan v. American Airlines, Inc., 534 F.2d 990, 992-93 (1st Cir. 1976). We note that the underlying judgment was by consent and has the same force and effect for 60(b) purposes as a judgment rendered on the merits following trial. United States v. Kellum, 523 F.2d 1284, 1287 (5th Cir. 1975); Siebring v. Hansen, 346 F.2d 474, 477 (8th Cir.), Cert. denied, 382 U.S. 943, 86 S.Ct. 400, 15 L.Ed.2d 352 (1965); Securities & Exchange Commission v. Thermodynamics, Inc., 319 F.Supp. 1380, 1382 (D.Colo.1970), Aff'd, 464 F.2d 457 (10th Cir. 1972), Cert. denied,410 U.S. 927, 93 S.Ct. 1358, 35 L.Ed.2d 588 (1973).

Although Van Vorous' motion did not specify which subdivision of 60(b) he relied on, apparently his arguments appealed to 60(b)(4), (5) and (6). Rule 60(b)(5) allows relief from the operation of judgment when "it is no longer equitable" to give the judgment prospective application. Rule 60(b)(6) provides a remedy for "any other reason justifying relief." Van Vorous contends on appeal that the unforeseen bankruptcy of VTA (which was allowed to compete with Airco under license provisions in the settlement agreement) makes it inequitable to enforce the injunction. He further argues apparently under 60(b)(6) that the injunction ordered by the district court amounts to an unlawful enlargement of patent monopoly, a violation of public policy and an illegal restraint of trade. We need not reach the merits of these arguments relative to 60(b)(5) and 60(b)(6) since both subdivisions of the motion have a "reasonable" time requirement. We cannot say, as a matter of law, that the district court erred in concluding that the motion, filed sixteen months after judgment, was not filed within a reasonable time.

Van Vorous' arguments based on Rule 60(b)(4) present a more troublesome issue because 60(b)(4) is not subject to any time limitation. ⁹ This subdivision provides relief from final judgment if the judgment is void. We must therefore determine whether there is any basis for relief under that rule.

A judgment is not void merely because it is or may be erroneous. Marshall v. Board of Education, 575 F.2d 417, 422 (3d Cir. 1978); Lubben v. Selective Service System Local Board No. 27, 453 F.2d 645, 649 (1st Cir. 1972); See Chicot County Drainage District v. Baxter State Bank, 308 U.S. 371, 374-78, 60 S.Ct. 317, 84 L.Ed. 329 (1940). For a judgment to be void under Rule 60(b)(4), it must be determined that the rendering court was powerless to enter it. If found at all, voidness usually arises for lack of subject matter jurisdiction or jurisdiction over the parties. It may also arise if the court's action involves a plain usurpation of power ¹⁰ or if the court has acted in a manner inconsistent with due process of law. ¹¹ In the interest of finality, the concept of setting aside a judgment on voidness grounds is narrowly restricted. ¹²

Van Vorous raises several arguments of potential applicability to a 60(b)(4) motion. He first contends that enforcement of the injunction by summary contempt proceedings operates to deny him due process of law. The apparent thrust of this argument is that enforcement of the injunction in a contempt proceeding denies him the opportunity to challenge the validity of the Airco claims submitted for patent protection. While we agree with Van Vorous' contention that a district court cannot determine the validity of a claim whose patent is pending, it does not follow that the district court was powerless to enforce alleged violations of a consent decree restraining activities relating to such claims. Moreover, we are not persuaded that Van Vorous has been denied an opportunity to dispute the validity of the Airco claims. There is no question about Van Vorous having had notice and an opportunity to be heard in connection with the proceeding that culminated in the consent decree. He was not denied opportunities to reject the proposed stipulated settlement or to challenge the validity of the development agreement out of which the Airco claims arose. While a judgment may be void for 60(b)(4) purposes if its entry has occurred in such an arbitrary or improper manner that due process has been violated, such a showing has not been made in this case. The court had jurisdiction over the parties and over the subject matter in the consent decree proceeding. The proceeding was not conducted in a manner that deprived Van Vorous of notice, hearing, or other fundamental constitutional rights. We therefore reject Van Vorous' 60(b)(4) due process contentions.

Van Vorous makes a second 60(b)(4) contention, claiming that the consent decree's injunction is void as an unlawful restraint of trade due to its potentially unlimited time and geographic coverage. While it is conceivable that the injunction secures for Airco rights greater than those contemplated by state and federal law, ¹³ we cannot say that any error in this respect rises to the level of constitutional infirmity subject to collateral attack under 60(b)(4). We do not discern in this context a "plain usurpation" of power by the district court. Assuming that the judgment was erroneous in the first instance, the proper procedure for review would have been by direct appeal, not collateral attack. Lubben v. Selective Service System Local Board No. 27, 453 F.2d at 649. ¹⁴

Van Vorous' final argument is that the judgment is void because the...