William Whitman Co. v. Universal Oil Prod. Co.

• Citation: 92 F. Supp. 885
• Decision Date: 12 July 1950
• Docket Number: Civ. A. No. 987.
• Parties: WILLIAM WHITMAN CO., Inc. v. UNIVERSAL OIL PRODUCTS CO.
• Court: U.S. District Court — District of Delaware

92 F. Supp. 885

WILLIAM WHITMAN CO., Inc. v. UNIVERSAL OIL PRODUCTS CO.

Civ. A. No. 987.

United States District Court D. Delaware.

July 12, 1950.

Caleb S. Layton (Richards, Layton & Finger) of Wilmington, Del.; Leslie Nichols, William B. Cockley, Allen C. Holmes and Walter J. Milde (Jones, Day, Cockley & Reavis) all of Cleveland, Ohio, of counsel, for plaintiff.

Clarence A. Southerland (Southerland, Berl & Potter) of Wilmington, Del.; Ralph S. Harris, Frederick W. P. Lorenzen and John R. McCullough (Dwight, Harris, Koegel & Caskey) of New York City, and Adam M. Byrd, of Chicago, Ill., of counsel, for defendant.

RODNEY, District Judge.

In this action the plaintiff seeks rescission of an agreement between it and the defendant which was entered into on April 1, 1937. The suit is founded on the charge that plaintiff was induced to enter into this contract by defendant's representation that it had in 1935 obtained a judgment in the Circuit Court of Appeals for the Third Circuit, Root Refining Co. v. Universal Oil Products, 78 F.2d 991, upholding the validity of two patents belonging to it, as a result of which plaintiff took a license from the defendant under the agreement of April 1, 1937. The allegation is made that the 1935 judgment was vacated by the Court of Appeals for the Third Circuit in 1948, 169 F.2d 514, by reason of defendant's fraud in its procurement.

At a pretrial conference in this case, it was determined that a hearing should be had to decide the question whether the 1948 judgment or order of the Court of Appeals, vacating the 1935 judgment by reason of the fraud practised on that court, constitutes such an adjudication upon that issue as to preclude its relitigation in the present action.

The factual background of this case may be summarized as follows. In 1929 and 1931 defendant's predecessor, a South Dakota corporation of the same name as defendant, commenced two suits in this court against Root Refining Company, charging it with the infringement of two of its patents, the Egloff and Dubbs patents. These suits were consolidated for trial, and an opinion was filed on April 27, 1934, sustaining the validity of the patents and holding that they were infringed by the process practised by Root.¹ Root appealed to the Circuit Court of Appeals for this Circuit, and that court unanimously affirmed the decree of the district court, the opinion being written by Judge J. Warren Davis. Rehearing of the case was subsequently denied by the Circuit Court of Appeals² and the Supreme Court denied Root's petition for certiorari.³ The present defendant was substituted for the North Dakota corporation in the Root case by an order of this court entered pursuant to an opinion dated October 9, 1936, 16 F.Supp. 846.

In the meantime Universal Oil Products had brought patent infringement suits against other oil companies, including plaintiff in the present action, charging them also with infringing the Egloff and Dubbs patents. The suit between Universal and the present plaintiff was settled by the agreement of April 1, 1937, to which reference has already been made. It seems unnecessary to recite the details of the transactions and negotiations leading up to that settlement, other than to state that it is alleged by the plaintiff that it was induced to become a party to such settlement by reason of its reliance upon the defendant's representation that it had obtained a valid judgment in its favor in the Root case.

In 1941 proceedings were instituted in the United States Circuit Court of Appeals for the Third Circuit, as it was then designated, upon the initiative of certain lawyers, who had originally represented Root Refining Company in the Root case but who were now acting in a somewhat personal capacity, to have the court inquire into the integrity of its own judgment in the Root case. The suggestion was made that Judge Davis had been bribed by Universal to render a decision in Universal's favor when the Root case went up to the Circuit Court on appeal. A master was appointed and seems to have made extensive investigation of the facts. Universal took part in these proceedings, but Root Refining Company did not do so, its former attorneys acting in the proceedings simply as amici curiae. The master rendered a report in 1944, in which he concluded that there was such fraud in connection with the appellate proceedings in the Root case as tainted and invalidated the judgments rendered by the Circuit Court of Appeals on June 26, 1935.

On June 15, 1944, the Circuit Court of Appeals entered an order that the judgments be vacated and the cases reargued. Thereafter the amici curiae applied to the Circuit Court for an order directing that their expenses and compensation and those of the master be taxed against Universal. The Circuit Court granted this application on December 29, 1944. Universal petitioned the Supreme Court for a writ of certiorari with respect to the order of December 29, 1944. The Supreme Court reversed the judgment of the Circuit Court, as far as the compensation and expenses of the amici curiae were concerned.⁴

Thereafter the Circuit Court of Appeals decided to vacate its orders of June 15, 1944, and on June 20, 1947, it entered an order to that effect. The order also directed Universal to show cause why the judgment of affirmance in the Root case should not be set aside and vacated by reason of the alleged fraud and corruption practised upon the Circuit Court by Universal or those acting for it; it permitted the intervention of Skelly Oil Company and authorized the Attorney General or some member of his staff to appear as amicus curiae.

The Chief Justice of the United States designated three judges from other circuits to sit as the Circuit Court of Appeals for the Third Circuit in further proceedings in this matter. In the meantime Whitman filed a motion in the Circuit Court for leave to intervene. The intervention was permitted by an order of that court on April 6, 1948, over the opposition of Universal. In the same order the court formulated the charges to be tried, which were, in essence, whether the action of Judge Davis in the case had been influenced by an expectation of gain under an agreement with one Kaufman, and whether Kaufman had been employed by Universal to exercise improper influence upon Judge Davis. Hearings were held and extensive testimony was taken by the Court of Appeals. It found that the judgments in the Root case were tainted with fraud and ordered the judgments to be vacated.⁵ Finally, after Universal had unsuccessfully petitioned the Supreme Court for writs of certiorari and for rehearings upon the Supreme Court's denial of certiorari, the Court of Appeals issued its mandate directing the District Court to vacate its decrees in the Root case and to dismiss the bills of complaint therein, by reason of the fraud practised upon the Court of Appeals by Universal.

It is the plaintiff's contention that the defendant is estopped to relitigate the issue of the fraudulent procurement by Universal of the judgment of affirmance in the Root case. Reliance is placed upon the doctrine of collateral estoppel. That doctrine was somewhat considered by this court in Buromin v. National Aluminate Corporation, 70 F.Supp. 214, but that case involved the binding effect of matters which might have been but were not litigated in the former proceeding, while here is involved the effect of matters formerly litigated upon a subsequent proceeding upon a somewhat different cause of action.

Section 68 of Restatement of Law of Judgments provides, "Where a question of fact essential to a judgment is litigated and determined by a valid and final judgment, the determination is conclusive between the parties in a subsequent action on a different cause of action except as stated in Sections 69.71 and 72." No material exception in those sections is found by me.

Clearly the issue of fraudulent procurement of judgment of affirmance was essential in the former proceedings in the Court of Appeals and was there litigated and determined. Such issue is material here in a suit involving the same parties but brought upon a different cause of action.

In considering the applicability of the doctrine of collateral estoppel, the broad purposes of that doctrine and the public policy underlying it must be kept in sight. The public policy is, of course, that there must be an end to litigation. Once parties have had a full and fair opportunity to litigate an issue before a competent tribunal, they should not be permitted to relitigate that issue. This policy is primarily for the benefit of the public and not merely for the benefit of the litigants themselves.⁶

The unusual character of the proceeding in the Court of Appeals seems to create certain difficulties which are more apparent than real. An examination of the main aspects of the proceeding reveals a general pattern which brings it into closer relationship with the more usual types of litigation.

The question of the power or jurisdiction of the Court of Appeals to conduct the proceedings with respect to the alleged fraudulent procurement of the judgments of affirmance is fundamental. But that question seems to have been definitely settled by the statement of the Supreme Court in Universal Oil Co. v. Root Refining Co., 328 U.S. 575, 580, 66 S.Ct. 1176, 1179, 90 L.Ed. 1447, in which it said: "The inherent power of a federal court to investigate whether a judgment was obtained by fraud, is beyond question." Likewise there can be no question that the issue of the fraudulent procurement of the judgments of affirmance in the Root case was squarely before the Court of Appeals, and that that issue was considered and determined by the court after a full and extensive hearing. It is clear also that the parties to this suit were present in the proceedings in the Court of Appeals. Universal was, so to speak, an original party, and Whitman came in by way of...