Opinion ID: 1475522
Heading Depth: 1
Heading Rank: 7

Heading: Liability of La Mode Garment Company.

Text: The decrees in each of the two infringement actions were directed not only against the defendant therein but also against the La Mode Garment Company, which was not a nominal party in either action. It was made subject to the injunction and to the accounting for profits and for damages. Appellant La Mode Garment Company contends that, not being a party to either of those actions, no decree could be entered against it therein. This contention is sound. The relation of the La Mode to each of those actions was, at most, that of an indemnifying manufacturer which assumed the defense for its customer defendant. La Mode contends that it did not have such control over this defense as to bring it within the rule which makes an adjudication binding upon one, not a party, assuming a defense. [2] Expressly, we do not examine nor determine whether appellant, La Mode, is so bound. In order to test the broad issue here, we will assume that the conduct of appellant was such as to make any determination against the defendant in each of these two actions binding upon it. Even so, the force thereof does not go beyond creating an estoppel in subsequent litigation between it and plaintiff concerning the same matters. This is merely to say that in some subsequent action the prior adjudication may be set up in estoppel as res judicata. It does not make it a party to the prior suit. This is directly ruled by Merriam Co. v. Saalfield, 241 U.S. 22, 29, 31, 33, 36 S.Ct. 477, 60 L.Ed. 868. Also, see, Souffront v. La Compagnie des Sucreries, 217 U.S. 475, 486, 30 S.Ct. 608, 54 L.Ed. 846; Louisville & N. R. Co. v. Schmidt, 177 U.S. 230, 20 S.Ct. 620, 44 L.Ed. 747; Gulf Smokeless Coal Co. v. Sutton, Steele & Steele, 4 Cir., 35 F.2d 433, 438, certiorari denied 280 U.S. 609, 50 S.Ct. 158, 74 L.Ed. 652; Gibson v. Eastern Rim & Wheel Co., 3 Cir., 32 F.2d 774, 775; Freeman-Sweet Co. v. Luminous Unit Co., 7 Cir., 264 F. 107, 109, certiorari denied 253 U.S. 486, 40 S.Ct. 482, 64 L.Ed. 1025. There are some District Court and State decisions to the contrary. Hoskins v. Hotel Randolph Co., 203 Iowa 1152, 211 N.W. 423, 65 A.L.R. 1125, and note p. 1134. Appellees contend (1) that La Mode was made a party defendant because (they say) the court entered its order consolidating the La Mode suit with the Kresge and Penney suits upon an express understanding that the La Mode Company was brought into the litigation as a party defendant to those suits to be bound by any decrees entered in them; and (2) that, in the discussion out of which the consolidation order came, counsel for La Mode in effect admitted that La Mode Company was before the court in a position to be adjudged an infringer of the patents in suit. As to the first of these contentions. The action of La Mode (appeal No. 10,820) against appellees to enjoin prosecution of the two infringement actions (appeals No. 10,818 and 10,819) was filed two days before those two suits were set for trial. When those two infringement cases were called for trial, La Mode insisted upon a ruling on its application for an order (in its action) temporarily enjoining the prosecution of the infringement suits. Thereupon, counsel for appellees stated he had prepared an answer to the petition of La Mode and proposed to file it and go to trial on all three suits together. He stated this would be done but I make one condition, and that is that these gentlemen agree that any decrees that are entered in this case [the two infringement cases] shall actually be binding upon the La Mode Garment Company. He then asked and repeatedly asked counsel for La Mode to assent thereto. No assent was given but La Mode continued to insist upon a ruling on its application for temporary injunction and to oppose taking up of the infringement suits. The court then stated: The Court: Well, as the court understands the issues they are the same in the two cases that were set for trial, and substantially the same in the case that recently has been filed asking for a temporary injunction. The issues being substantially the same, the same parties in effect concerned, the court sees no reason why they should not be consolidated, the testimony may then be taken, and one trial will dispose of the three cases. An exception may be entered to the ruling of the court. We find no basis in the record for the statement that the cases were consolidated with any understanding that La Mode would be subject to decrees entered in the infringement suits. There is an utter absence of consent thereto by La Mode. There is no appearance, as a party, therein. While the court in its findings, in the action brought by La Mode, finds that the answer therein was filed and the suits consolidated for trial upon condition that La Mode be held as a party to said suits against said S. S. Kresge Company and J. C. Penney, Incorporated, and be bound by the decrees therein, there is no basis for such finding in the record. As to the second contention that counsel for La Mode made statements amounting to an admission that La Mode was subject to decrees in the two infringement cases. The language relied on is the italicized portion of the following statement: We have filed a bill in equity in this Court, and if Mr. Whiteley feels that he wants a judgment against the La Mode Company, Equity Rule 30 [28 U.S.C.A. following section 723] I believe, covering the subject of counter claims, gives him all the right in the world to bring his counter-claim against whom he claims is the nominal defendant in this case and the real defendant. Far from amounting to the admission claimed, this statement is a clear indication  if not invitation  that if counsel for plaintiffs (appellees) in the infringement suits want to bind La Mode, the proper way is to file a counter claim in the action brought by La Mode. Another contention of appellees is as follows. The testimony terminated November 26, 1935, at which time, the parties were given thirty, sixty and thirty days, respectively, after delivery of transcript of the evidence to file briefs. In the La Mode brief, counsel for appellees claims to have been first apprised that La Mode contended it would not be bound by decrees entered in the infringement suits. On April 14, 1936, counsel for appellees filed a Motion to amend Answer Nunc Pro Tunc in the suit brought by La Mode. [3] The court took no action upon this motion and later (July 20, 1936) filed its findings and conclusions and entered decrees in the three cases. In this situation, appellees contend that, although the court did not act upon the motion, The trial proceeded as if the amendment had been made, and the court considered the La Mode Company as a party defendant in the Kresge and Penney suits and held them as bound by the decrees. The difficulty in acceding to this contention is that the trial court affirmatively demonstrates that it did not regard this amendment as made. The court ignored the motion to amend; made no findings, stated no conclusions and entered no decree according recovery in the La Mode suit; dismissed the action by La Mode; and held it liable in the decrees in the two infringement cases. The clearly stated and sole basis for including the La Mode in those two decrees was that it was subject thereto because counsel for plaintiffs therein had stated that he would file an answer in the La Mode suit and try the three cases together on condition that La Mode would consent to be subject to such decrees and that the answer was filed, the cases consolidated and the trials had under that condition. The fatal defect is that La Mode never consented to such condition and consistently opposed consolidation on any terms. The situation is that counsel for La Mode pointed out, before the trial began, that appellees might make it liable by filing a counter claim, which appellees failed to do  going to trial on a bare answer to La Mode's petition; that La Mode did not accede to the request that it be subject to decrees in the infringement suits; that appellees and the court proceeded on the theory that La Mode would be so subject; that after the conclusion of the evidence, when appellees discovered La Mode contended otherwise, they sought to file the counter claim they had refused or failed to file in time; that such counter claim was never permitted made nor regarded as made by the court; that the court made no findings nor stated any conclusions in the La Mode case which would justify recovery against it therein; that it dismissed that action; that appellees have taken no appeal therefrom. In this situation, we think this contention must be denied. The parties have argued many other matters. We need notice only one because none of the others affect the results as above stated. The one exception is the contention of appellants that appellees are barred by laches and equitable estoppel from bringing either of the infringement suits. The record here holds no basis for this contention and it is denied.