Van Brode Milling Co. v. Kellogg Co.

• Decision Date: 23 April 1953
• Docket Number: Civ. A. No. 1321.
• Citation: 113 F. Supp. 845
• Parties: VAN BRODE MILLING CO., Inc. v. KELLOGG CO. et al.
• Court: U.S. District Court — District of Delaware

113 F. Supp. 845

VAN BRODE MILLING CO., Inc. v. KELLOGG CO. et al.

Civ. A. No. 1321.

United States District Court D. Delaware.

April 23, 1953.

Herbert L. Cobin, of Wilmington, Del., and Abraham I. Wolf, of New York City, for plaintiff.

E. Ennalls Berl (Berl Potter & Anderson), of Wilmington, Del., Matthias Concannon and Herbert Morton, of Chicago, Ill., and Edwin L. Harding, of Battle Creek, Mich., for defendants.

RODNEY, District Judge.

Upon a former occasion in this case certain views were expressed in an opinion upon which no order was entered. Since then a reargument has been requested and granted and other questions have arisen. The former opinion is now abrogated and, while certain portions are here inserted, the former opinion is superseded herewith.

The complaint in this case was filed on June 26, 1950, alleging that the defendant had violated the Sherman and Clayton Acts.¹

Van Brode, the plaintiff, and the Kellogg Co. are both engaged in the business of manufacturing ready-to-eat cereals. Kellogg Sales is a wholly-owned subsidiary of the Kellogg Co. engaged exclusively in selling the Kellogg products.

The principal act complained of is that the defendants in their sales to institutional purchasers as a result of bids have reduced their selling price to below the actual cost of production with the alleged purpose of driving the plaintiff out of business. The complaint further states that 75% of the plaintiff's business is comprised of institutional sales on the bid basis while approximately only 2 to 3% of the defendants' business is carried on through institutional bidding. The plaintiff contends that the defendants thereby may underbid the plaintiff to a point where the bids yield no return and therefore suffer very little financial loss in respect to their whole volume of cereal business while the plaintiff is slowly forced out of business.

To this complaint the defendants answered generally denying the allegations of the complaint and setting up several defenses, including res judicata, laches, and statute of limitations.

By opinion of this court of April 25, 1951, on objections to interrogatories propounded by the plaintiff, this court, recognizing that any one of the defenses might be dispositive of the entire case, suspended action on the objections to interrogatories and gave the defendants an opportunity to move for a separate trial or other motions which would place the defenses in a position for independent determination.

A motion for separate trial on the defenses of statute of limitations and res judicata was granted on January 15, 1952. Following this motion both parties moved for summary judgment on both issues set down for separate trial.

1. Since counsel for the plaintiff have agreed that any acts committed by the defendants more than three years prior to the commencement of this action are not compensable by way of damages to the plaintiff, there is no need to further consider the defense of statute of limitations.

2. The facts surrounding the defense of res judicata are clear and undisputed.

In the latter part of 1946 in the U. S. District Court of Massachusetts, the Kellogg Company and the General Foods Corporation instituted an action for patent and trade-mark infringement against Van Brode Milling Co. and certain other individual defendants. Van Brode, et al., filed an answer and counterclaim. A consent decree was entered on December 1, 1948, disposing of the patent and trade-mark issues and severing Van Brode's counterclaim from the case, subject to a trial at a later date. On October 17, 1949, the Massachusetts District Court entered an order dismissing Van Brode's counterclaim for failure to prosecute. Since it does not appear on the face of the order that this dismissal is without prejudice, it must, under Rule 41(b), 28 U.S.C.A., be considered as an adjudication on the merits. It is this counterclaim that the present defendants assert as being res judicata to the present action.

The two main issues to be considered are identity of parties and identity of issues.

Identity of Parties

In the Massachusetts suit General Foods Corporation and the Kellogg Company (one of the present defendants) were plaintiffs while Van Brode Milling Co., Inc. (the present plaintiff), David Brody, Goldie Brody, and Frederic W. Swartz were the defendants. In the present action Van Brode Milling Co., Inc. is plaintiff with the Kellogg Company and Kellogg Sales Co. as defendants.

It is not necessary that there be complete identity of parties and their privies in order to sustain the applicability of the defense of res judicata. But the persons between whom the prior judgment is to operate as res judicata must be the same. Fulsom v. Quaker Oil & Gas Co., 8 Cir., 35 F.2d 84; Henderson v. United States Radiator Corp., 10 Cir., 78 F.2d 674; 30 Am.Jur., Judgments, Sec. 223. See also Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 60 S.Ct. 907, 84 L.Ed. 1263.

The fact that General Foods Corp., as plaintiff, and a number of individual defendants were parties to the Massachusetts action and are not parties to this suit would not bar the plea of res judicata as between the present parties.

Kellogg Sales Company, admittedly a wholly-owned subsidiary and exclusive sales agent of the Kellogg Company, is sufficiently identified in interest with the parent that it represents the same legal rights. The judgment in the Massachusetts action is as binding on Kellogg Sales as it is on the Kellogg Company. Hart Steel Company v. Railroad Supply Co., 244 U.S. 294, 37 S.Ct. 506, 61 L.Ed. 1148.

Even outside the requirement of privity when one not a party to a former suit sets up the defense of res judicata against one who was a party, some courts have granted the plea on the requirements of public policy to end litigation. Coca Cola Co. v. Pepsi Cola Co., 6 W.W.Harr. 124, 36 Del. 124, 172 A. 260; Taylor v. Sartorious, 130 Mo. App. 23, 108 S.W. 1089. See also Bruszewski v. United States, 3 Cir., 181 F.2d 419.

I therefore conclude that there is sufficient identity of parties for a valid defense.

Identity of Issues

This action is based on the Clayton and Sherman Acts in that the defendants, through concerted effort, fixed their prices in the institutional bid line of the ready-to-eat cereal business to the extent below a return of profit whereby the plaintiff is either forced to sell at a loss to meet the defendants' prices or lose its customers.

The substance of the Massachusetts counterclaim, as indicated in the footnote,² is an allegation of an unlawful conspiracy between Kellogg Co. and General Foods comprising a number of acts, namely, an unwarranted and vicious suit with detrimental publicity, monopolistic price combination in rice cereals to force the counterclaimants to discontinue their business, and harassment by the circulation of false rumors.

It is apparent from the reading of the present complaint and the Massachusetts counterclaim that both are concerned to some extent with the activities of Kellogg Co. in connection with monopolistic price combinations with the alleged purpose of destroying Van Brode's business. It is the extent of such alleged activities that remains in doubt after examination of the present complaint and the former counterclaim or more especially the judgment dismissing the former counterclaim. The present defendants urge the court that extrinsic evidence should be examined for the solution of this uncertainty or ambiguity and that such extrinsic evidence consists of excerpts from the trial brief submitted in the Massachusetts case by the present plaintiff, defendant in the Massachusetts proceeding, stenographic notes of the Massachusetts patent trial, extracts from the Van Brode brief in the Massachusetts trial, and extracts from the deposition of Richard A. McNichol. That extrinsic evidence may be used has long been the rule. In Burthe v. Denis, 133 U.S. 514, at pages 522, 523, 10 S.Ct. 335, at page 338, 33 L.Ed. 768, it is said:

"As a general rule, the judgment of a court or commission is to be interpreted by its own langauge, and the pleadings or proceedings upon which it is founded. Extrinsic evidence to aid in its interpretation is inadmissible unless after reference to the pleadings and proceedings there remains some ambiguity or uncertainty in it. In such cases, resort may be had to other evidence, as where, from the generality of the language in the pleadings or proceedings, as well as in the decision, it becomes necessary to ascertain and limit the extent of the judgment intended. Thus, where a former judgment is pleaded in bar of a second action upon the same demand, it is competent to show by extrinsic evidence the identity of the demands in the two cases, if this does not appear on the face of the pleadings. Washington, Alexandria & Georgetown Steam Packet Co. v. Sickles, 24 How. 333 16 L.Ed. 650; Miles v. Caldwell, 2 Wall. 35 17 L.Ed. 755; Cromwell v. County of Sac, 94 U.S. 351, 355 24 L.Ed. 195." See also 50 C.J.S., Judgments, § 841.

Examining therefore the complaint and counterclaim in the Massachusetts case as well as the extrinsic evidence in that case on the one hand and the complaint in the present case we find the following facts.

The complaint in the Massachusetts case was essentially one of patent infringement. It is true that charges of unfair competition were also involved but these charges are not material here. The patents allegedly infringed in the Massachusetts case concerned solely the manufacture and production of ready-to-eat oven-puffed rice cereals.

The counterclaim in the Massachusetts case alleged an unlawful conspiracy between Kellogg Co. and General Foods culminating and exemplified in the bringing of the Massachusetts action in order to force the counterclaimants to discontinue their business. The counterclaim consists of Sections 21 to 24 of the Answer to the Massachusetts action. A critical examination of each...