Western Geophysical Co. of America v. Bolt Assoc., Inc.

• Decision Date: 27 June 1969
• Docket Number: Civ. No. 11868.
• Court: U.S. District Court — District of Connecticut
• Parties: WESTERN GEOPHYSICAL COMPANY OF AMERICA, Inc., Plaintiff, v. BOLT ASSOCIATES, INC., Defendant and Third-Party Plaintiff, v. LITTON INDUSTRIES, INC., Third-Party Defendant.

305 F. Supp. 1248

WESTERN GEOPHYSICAL COMPANY OF AMERICA, Inc., Plaintiff, v. BOLT ASSOCIATES, INC., Defendant and Third-Party Plaintiff, v. LITTON INDUSTRIES, INC., Third-Party Defendant.

Civ. No. 11868.

United States District Court D. Connecticut.

June 27, 1969.

William J. Doyle, Wiggin & Dana, New Haven, Conn., for plaintiff and third-party defendant.

Roland T. Bryan, Robertson, Bryan, Parmelee & Johnson, Stamford, Conn., for defendant and third-party plaintiff.

BLUMENFELD, District Judge.

RULING ON PLAINTIFF AND THIRD-PARTY DEFENDANT'S MOTIONS FOR JUDGMENT ON THE PLEADINGS AND FOR SUMMARY JUDGMENT WITH RESPECT TO ANTITRUST DEFENSES

This is a civil action for breach of two agreements between plaintiff Western Geophysical Company, a Delaware corporation with its principal place of business in California, and defendant Bolt Associates, a Connecticut corporation with its principal place of business in this state. Defendant pleads several defenses and counterclaims against plaintiff and against Litton Industries, a Maryland corporation with its principal place of business in California. Western and Litton now move for summary judgment and judgment on the pleadings with respect to Bolt's antitrust defenses and antitrust counterclaims. At the hearing, it developed that additional affidavits were necessary in order for the sufficiency of the antitrust counterclaims to be decided, and additional time was granted the parties to obtain them. However, the parties agreed that the decision on the antitrust defenses need not be delayed. This memorandum deals only with the antitrust defenses.

The subject of the first cause of action is an agreement of September 14, 1962, under which plaintiff obtained the right to acquire an exclusive license to use a pneumatic acoustical repeater device (PAR), for use in exploration for natural resources under the sea bottom, having a pressure-chamber volume of 10 to 200 cubic inches, and the right to acquire an option for a second exclusive license to use a PAR with a volume in excess of 200 cubic inches should one be successfully developed. The subject of the second cause of action is an agreement of April 16, 1963, which is the "exclusive license agreement" for the 10-to-200 cubic inch PAR. That agreement contains provisions allowing plaintiff to sublicense the PAR and keep 50% of the royalties paid by the sublicensees to defendant through plaintiff. The license has a provision requiring plaintiff to use its best efforts to promote use of the PAR by government and nonprofit institutions for the first two years, and thereafter by all possible sublicensees.¹

Paragraphs 29 and 35 of defendant's answer assert antitrust defenses to the two causes of action. In almost identical wording, they allege that the PAR is a "unique and novel" device, that the relevant market is the field of "off-shore, sub-bottom exploration," that plaintiff at the time of the agreement occupied a "predominant" position in that market—greater than 50%, and that plaintiff continues to be at least a "large competitor." Therefore, enforcing the contracts so as to grant plaintiff an exclusive license would aid plaintiff in violating the antitrust laws in that plaintiff's obtaining the license was (i) part of an attempt to monopolize, (ii) part of an illegal combination or conspiracy to monopolize with third-party defendant and unknown others, and (iii) an illegal acquisition of an asset the effect of which would be to substantially lessen competition or tend to create a monopoly in the relevant market.

Plaintiff argues that these antitrust defenses are insufficient as a matter of law. It first asserts that the allegations are defective for failure to allege sufficient facts in support of the conclusions. However, antitrust pleadings need not be in a particular technical form as long as they present "a short and plain statement of the claim showing that the pleader is entitled to relief" as required by Fed.R.Civ.P. 8. This is particularly true in a case such as this where there have already been several pre-trial conferences and extensive discovery has been taken. See Nagler v. Admiral Corp., 248 F.2d 319 (2d Cir. 1957). It is true that there must be more than mere assertions that the antitrust laws have been violated, see Klebanow v. New York Produce Exch., 344 F.2d 294, 299 (2d Cir. 1965), and that paragraphs 29 and 35 taken in isolation seem a bit conclusory. However, the answer as a whole gives adequate notice of defendant's claims and conforms to the requirements of Rule 8. To make defendant go through the motions of amendment on the basis of nice technicalities at this late stage of the litigation would be a needless exercise.

The heart of the motions is the argument that the defenses are legally insufficient under the doctrine of Kelly v. Kosuga, 358 U.S. 516, 79 S.Ct. 429, 3 L.Ed.2d 475 (1959). In that case plaintiff sued defendant seeking to recover payment of the purchase price of a quantity of onions. The defendant alleged that the contract of sale was made pursuant to an agreement to restrain trade: plaintiff and others with substantial control over the onion market had threatened to deliver large quantities of onions on the futures exchange and, therefore, depress the price unless defendant and others purchased a large quantity of these onions. Both sides agreed not to deliver any of the onions on the futures market that season, the purpose of this agreement being to create a false market condition and thereby fix the price of onions. The defendant accepted some of the onions, but defaulted on the rest. The lower court entered judgment for the plaintiff and struck the antitrust defense.

The Supreme Court affirmed. It stated, "As a defense to an action based on contract, the plea of illegality based on violation of the Sherman Act has not met with much favor in this Court. This has been notably the case where the plea has been made by a purchaser in an action to recover from...