Winkler-Koch Engineer Co. v. Universal Products Co.

• Decision Date: 07 November 1947
• Citation: 79 F. Supp. 1013
• Parties: WINKLER-KOCH ENGINEER CO. v. UNIVERSAL PRODUCTS CO. (DELAWARE) et al.
• Court: U.S. District Court — Southern District of New York

79 F. Supp. 1013

WINKLER-KOCH ENGINEER CO. v. UNIVERSAL PRODUCTS CO. (DELAWARE) et al.

United States District Court S. D. New York.

November 7, 1947.

Paul Kolisch, of New York City (Thiess, Olson & Mecklenburger, J. Bernhard Thiess, Thorley von Holst, Sidney Neuman, and Robert W. Poore, all of Chicago, Ill. of counsel), for plaintiff.

Chadbourne, Wallace, Parke & Whiteside, of New York City, for defendant Atlantic Refining Co.

Cravath, Swaine & Moore, of New York City, for defendant Shell Union Oil Corporation.

Buell F. Jones, Pike H. Sullivan, Weymouth Kirkland, and A. L. Hodson, all of Chicago, Ill., and Townley, Updike & Carter, of New York City for defendant Standard Oil Co. (Indiana).

Dwight, Harris, Koegel & Caskey, of New York City, for defendant Universal Oil Products Co. (Delaware).

Davis, Polk, Wardwell, Sunderland & Kiendl, of New York City, for defendant Standard Oil Co. (New Jersey).

George W. Ray, Jr., of New York City, for defendants Texas Co. and Gasoline Products Co., Inc. E. F. Liebrecht, of New York City, for defendant M. W. Kellogg Co.

M. S. Gibson, of New York City, for defendant Gulf Oil Corporation.

CONGER, District Judge.

The defendants move to strike certain portions of the complaint herein pursuant to Rule 12(f), Federal Rules of Civil Procedure, 28 U.S.C.A. on the ground that they are redundant, immaterial, impertinent or scandalous, and also for a bill of particulars with respect to various facts.

The complaint demands treble damages for injuries allegedly sustained as a result of a conspiracy among the defendants to monopolize and restrain trade in connection with patented oil cracking processes and apparatus in violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C.A. §§ 1, 2.

The complaint alleges that plaintiff, a Kansas corporation, had been engaged in designing and supervising the installation of refining equipment, particularly distillation equipment, and that it had developed and perfected, prior to 1928, plans for an oil cracking device to make gasoline, subsequently known as the Winkler-Koch still, utilizing a process which became known as the Winkler-Koch oil cracking process. The still and process were unpatented. Plaintiff offered to engineer, construct and install said still for refiners in consideration of payment for plaintiff's engineering services and without the requirement of continuing royalty payments. Between April, 1928, and the end of 1929, plaintiff entered into 16 contracts for the construction and installation in the United States of Winkler-Koch cracking stills for various independent refiners with substantial profits resulting, in competition with various of the defendants herein, some of which were engaged in seeking to grant licenses for the use of their respective cracking processes and to design and construct either themselves or through another defendant, the cracking equipment necessary thereto.

It is further alleged that the defendants, beginning in 1928 and continuing during all the times hereinafter referred to, have combined and conspired to monopolize and restrain, and have in fact monopolized and restrained, trade in the licensing of patented cracking processes and apparatus, and in the business of engineering, designing and supervising the purchase, sale and installation of cracking processes and equipment by various means including the creation of a patent pool, cross-licensing, elimination of competition previously existing among themselves, and the use of the economic force acquired through the patent pool.

Paragraph 64 of the complaint sets forth the objects of the conspiracy as follows:

"(a) To prevent any manufacturer from selling, and any engineering company from contracting for and installing, any cracking equipment to or for any refiner in the United States not licensed by one of the defendants under the aforesaid patent pool.

"(b) To impose on every independent refiner in the United States the necessity of entering into a license agreement under the aforesaid patent pool in order to acquire cracking apparatus and a cracking process, if he previously had none or in order to continue to operate a previously acquired cracking process without danger of bankruptcy.

"(c) To impose on every independent refiner who acquired a license under the aforesaid pool of patents an unfair and onerous royalty which created a destructive competitive differential in costs between such licensees and those of the defendants who were and are engaged in the production of gasoline without any royalty obligation and who directly or indirectly share in the royalties paid by such licensees whereby said operating defendants are enabled to control and maintain the price of gasoline at a higher price than would have been possible if a cracking process were available royalty free to all independent refiners.

"(d) To eliminate the plaintiff from the business of designing and installing unpatented, royalty free cracking equipment and processes in the United States."

And it is further alleged that these objects have been substantially accomplished by numerous acts, arrangements and contracts including the obtaining by Universal Oil Products Company Delaware of a corrupt affirmance of a judgment in the Third Circuit Court of Appeals through bribery of a judge, and certain settlements and dismissals of litigation as a result of the proceedings in the Third Circuit.

The motion to strike is directed toward certain allegations of the complaint, as to which, these defendants assert, proof would not be admissible and which on their face are immaterial and irrelevant. In addition, the defendants object to the headings which precede certain paragraphs in the pleading.

I shall first take up the objections to Paragraph 137 of the complaint, which reads as follows:

"In 1941 as a result of information brought to its attention, the Court of Appeals for the Third Circuit authorized an investigation into the question of possible fraud and corruption of the Court of Appeals in the Root case. Pursuant to proceedings had in this investigation, in which Universal participated and was fully heard, the Court on June 15, 1944, entered its order (reported in 62 U.S.P.Q. 114) adopting the findings and conclusions of a Special Master appointed by it and adjudged the Root judgments to be so tainted with fraud as to be wholly invalid and void. The Root judgments were vacated and the mandates to the lower court were recalled."

The defendants object to this paragraph on the grounds (1) that the order of the Third Circuit Court of Appeals, dated June 15, 1944, referred to therein, has no legal effect as an adjudication of the invalidity of the Root judgments; and (2) that, assuming its validity, it is still not admissible in the trial of this action.

The defendants' first objection is based upon an opinion of the Supreme Court in Universal Oil Products v. Root Refining Co., 328 U.S. 575, 66 S.Ct. 1176, 90 L.Ed. 1447, in which the Court, in reversing an order of the Third Circuit Court of Appeals allowing counsel fees to the amici curiae assisting in the Root investigation, indicated quite strongly that the order of June 15, 1944, although not directly in issue, was of no effect as an adjudication of the rights of the parties because of the informality of the proceeding, the Court stating among other things, that "a court cannot deprive a successful party of his judgment without a proper hearing." 328 U.S. at page 580, 66 S.Ct. at page 1179, 90 L.Ed. 1447.

However, without deciding the effect and status of the proceedings in the Third Circuit, I pass to the second objection which is decisive.

The allegations contained in paragraph 137 would be admissible upon the trial as evidence only upon the theory of res judicata. But it is a general rule that a judgment is evidence in a subsequent suit solely between the parties to the preceding suit, or their privies. Rudd v. Cornell, 171 N.Y. 114, 63 N.E. 823; St. John v. Fowler, 229 N.Y. 270, 128 N.E. 199, reargument denied 229 N.Y. 608, 129 N.E. 927; United States v. Pink, 315 U.S. 203, 62 S.Ct. 552, 86 L.Ed. 796; Restatement of the Law of Judgments, Section 93. The plaintiff was neither party nor privy to the Root case, nor were the defendants, other than Universal.

Paragraph 137, and the parts of paragraphs 138, which allude to the matter contained therein should be stricken, as well as the expression "as later held by the Supreme Court of the United States" in paragraph 108.

Beginning with paragraph 132, the complaint sets forth allegations concerning the purported bribery of Judge Davis. I quote the pertinent paragraphs of the complaint:

"132. With the object of assuring a successful outcome of the Root appeals, Universal, at some time pending the appeal or prior thereto, employed one Morgan S. Kaufman, an obscure referee in bankruptcy residing at Scranton, Pennsylvania, who was personally intimate with said Judge J. Warren Davis. The said Kaufman had a general understanding with Davis whereby Davis was to render Kaufman judicial favors in return for monetary rewards in cases in which Kaufman was interested. Following the argument of the Root appeal, Davis and Kaufman vacationed together at Miami Springs, Florida, and after Davis's return and on June 26, 1935, the purported opinion of the Circuit Court of Appeals was filed in favor of Universal in the Root case. Davis wrote the decision for the court. Subsequently Davis denied Root's petition for rehearing, and the Supreme Court of the United States denied Root's petition for certiorari.

"133. The order denying certiorari was entered on October 21, 1935. On October 22, 1935, Universal, through its president Hiram J. Halle, paid Morgan Kaufman the sum of $25,000.00 and entered into an agreement with Kaufman for the payment to him of an additional $25,000.00 to be paid to him during the following year. Morgan S. Kaufman rendered no legal services for Universal...