Court Opinion

ID: 8835521
Source: CourtListenerOpinion
Date Created: 2022-11-26 16:20:01.643301+00
Date Added: 2024-06-11T17:05:03.228390
License: Public Domain

MANTON, Circuit Judge
(dissenting in part). I am in accord with much of the prevailing opinion. I dissent from the disállowance of damages sustained by the plaintiff below for counsel fees paid for defending the alleged patent infringement suit. There the bill was held to have no merit, and, on the contrary, it was, in substance, held to be a disguised attempt to control the prices of its machines after they were sold and paid for. Straus v. Victor, 243 U. S. 490, 37, Sup. Ct. 412, 61 L. Ed. 866, L. R. A. 1917E, 1196, Ann. Cas. 1918A, 955. It brought forth the following statement in the opinion: 1
“That the plaintiff comes into court with a bill to enjoin the defendants from reselling machines secretly sold to them in large numbers by* the plaintiff’s agents indicates very clearly that, at least until the exigency out of which this case grew arose, the scheme was regarded by the plaintiff itself and by its agents simply as one for maintaining prices by holding a patent infringement suit in terrorem over the ignorant and the timid.”
Thus the purpose was plain to the Supreme Court on the plaintiffs’ own bill. Moreover, complete evidence presented to the jury below resulted in a finding by it that this so-called patent infringement suit was not brought in good faith or candor, and was a step in an unlawful conspiracy, the purpose of which was to maintain an illegal system for maintaining prices. Upon evidence fully warranting this finding, the learned trial judge instructed the jury:
“Another element of damages is the foes and expenses which it has been testified have been incurred in the defense of the infringement suit. Now, there are several questions that you must determine before you can allow that amount or any part of it. Let me again try to clear the atmosphere as to the legal question involved here. The Victor Company- had a perfect legal right to bring a suit for infringement of its patent rights; and if this suit was a suit purely and simply to enforce its patent rights, there could be no recovery. It would not make any difference whether it was right or wrong about that; they had the right to go ahead and do it. On the other hand, if this suit was not purely and simply to enforce its patent rights, but if it was a step taken in pursuance of the combination that then existed, for the purpose of making that combination stronger, or to scare people, or anything of that kind, if it was a step in .the combination, and not the independent act of the Victor people in pursuance of their patent rights, then they would be liable for the damages suffered, and it would not make any difference whether or not they believed that their combination was legal, or whether they thought it was illegal. It would not make any difference what any lawyers had told them as to whether their combination was legal or illegal, just as it makes no- difference in the whole case as to whether or not they believed, in August, 1913, or thereafter, or whether they still believe, that the Supreme Court is wrong, and that the combination was. perfectly legal. , 1
“If, as the Supreme Court has held, and therefore as it is settled for us, the combination was an illegal one, and these agreements were illegal, and if the patent suit was brought simply as a step in the carrying out of that combination, then they are liable, and the other defendants, who were a part of that combination, are liable, for the damages caused in that step in carrying out the combination. Now, as bearing on that, you have the right to consider, first, that the Victor people had valid patents, and that they had a right to enforce those valid patents. You are to consider, on the question of whether they were acting merely in the enforcement of the patents, or as a step in the combination, the letters that were written to them about what they were going to do about Macy’s, and as to whether those indicate or do not indicate to your mind that the thing that was being urged was some such step as this, and that the step was taken as part of the *809combination; and you are to consider, of course, in that connection, anything else in the evidence that you deem relevant to the determination of the question.
“Now, again, the plaintiffs have got the burden of satisfying you by the weight of the evidence that this was a step in the combination, in the furtherance of the combination, and not merely an independent patent suit. If they fail to satisfy you as to that in that way, then they cannot get any damages because of that; if they do satisfy you in that way, then they are entitled to the reasonable payments that they were put to because of that. It has been testified, also, that the actual payments were §15,804. Testimony has been offered that that was reasonable, and no testimony has been offered against that. It does not follow, because no testimony has been offered against it, that you are bound to accept that as a reasonable charge; it does not follow that, because Macy paid that amount, therefore they must have suffered that damage. It follows only that, if they are entitled to damages, they are entitled to it, if they paid it, as has been testified to, and if what they paid was reasonable.”
Thus the theory of liability for counsel fees is based on the nature of this conspiracy action under the Sherman Law. In the cases referred to in the prevailing opinion (Oelrichs v. Spain, 15 Wall. 211, 21 L. Ed. 43; Flanders v. Tweed, 15 Wall. 450, 21 L. Ed. 203; Tullock v. Mulvane, 184 U. S. 497, 22 Sup. Ct. 372, 46 L. Ed. 657; Mo., Kan., etc., Ry. v. Elliott, 184 U. S. 530, 22 Sup. Ct. 446, 46 L. Ed. 673) there is no finding of fact, as here, that the bringing and prosecution of the suits were part of the unlawful scheme and design to make effective the chief object of the unlawful conspiracy. The general principle of the cases cited has long been recognized, and seems to be by the plaintiffs below. They adhere to the rule that the mere bringing and prosecution of a suit is not a wrongful act, without regard to its merits or its outcome. Resort to the courts is an individual’s legal right, and counsel fees are denied as damages, not because they are incapable of being an element of damages, and directly resulting from violation of right, but because in such cases the bringing of suit was not a wrongful or illegal act, and no legal right was therefore violated. But this suit was wrongful, and found to be an illegal act. It was begun to accomplish an illegal end (so the jury found), and the authorities based on the proper exercise of a legal right, have no application. This is an action in tort, and the damages recoverable depend upon whether the act complained of is unlawful. Whether damages are recoverable under the Sherman Law depends upon whether the act or acts complained of are within the prohibition of the statute. If they are, and therefore illegal, and are the direct cause of injury, then under section 7 such damages are recoverable.
' As the jury has said, the so-called patent suit was designed primarily to further the objects of the unlawful conspiracy, and such a step was illegal. The character and the effect of a conspiracy must be looked at as a whole. United States v. Patten, 226 U. S. 525, 33 Sup. Ct. 141, 57 L. Ed. 333, 44 L. R. A. (N. S.) 325; Swift & Co. v. United States, 196 U. S. 375, 25 Sup. Ct. 276, 49 L. Ed. 518. Even acts absolutely lawful may be steps in a criminal plot. Aikens v. Wisconsin, 195 U. S. 206, 25 Sup. Ct. 3, 49 L. Ed. 154. For a series of such acts, if the result of a concerted plan or plot between the defendants to thereby se*810cure the control of the sale of commodities in the markets and suppress competition in prices, would come plainly within the terms of the statute and as part of the scheme or plot would be unlawful. United States v. Reading Co., 226 U. S. 324, 33 Sup. Ct. 90, 57 L. Ed. 243. There is a finding here that the motives and inducements of a suit decided adversely to the defendants below .affectéd the combination and constituted a wrong. The Sherman Law is a limitation of rights which may be pushed to evil consequences, and therefore restrain, even though the offender depends upon patent rights or a license thereunder. Standard Sanitary Mfg. Co. v. United States, 226 U. S. 20, 33 Sup. Ct. 9, 57 L. Ed. 107. No rule of public policy giving free access to the courts is available to the defendants below, who, after a trial, have been found to have used the court as an instrument to accomplish unlawful acts and as a means to profit by an illegal conspiracy. United States v. Trans-Missouri Freight Ass’n, 166 U. S. 290, 17 Sup. Ct. 540, 41 L. Ed. 1007. Statutory costs were never intended as compensation for an action wrongfully maintained.
Nor is this an action for malicious piosecution. It is for unlawful conspiracy, followed by wrongful acts, among which is the institution and maintenance of this so-called patent suit. Probable cause for the suit is important in the defense of a malicious prosecution action, but the plain issue here was whether or not the so-called patent suit was oppressively maintained and used as an instrument for the unlawful combination to suppress and destroy competition. Here there was first established the combination, and thereafter the evidence surrounding the patent litigation was received. It was shown to be directly in line with the objects of the conspiracy. In resisting that suit, the plaintiffs below incurred the counsel fees which they now seek in reimbursement as an element of damage resulting from the wrongs committed against them by this unlawful combination in restraint of trade. This defense v was imperative, in order that the plaintiffs below might protect their rights as against the tortious conduct of the defendants below. They were obliged to do this to meet the wrongdoing of the defendants below, and the counsel fees incurred were an immediate and direct result. It is now settled that the consequences of violation of the Sherman Law cannot be avoided by the testimony of witnesses that the violators have acted upon advice of able and eminent counsel. Indeed, such evidence has been held to be immaterial and irrelevant. Harriman v. Northern Securities Co., 197 U. S. 298, 25 Sup. Ct. 493, 49 L. Ed. 739; Standard Sanitary Mfg. Co. v. United States, 226 U. S. 50, 33 Sup. Ct 9, 57 L. Ed. 107; United States v. Patten, 226 U. S. 543, 33 Sup. Ct. 141, 57 L. Ed. 333, 44 L. R. A. (N. S.) 325; Thomsen v. Cayser, 243 U. S. 66, 37 Sup. Ct. 353, 61 L. Ed. 597, Ann. Cas. 1917D, 322.
A suit of the nature prosecuted by the defendants below is peculiarly a strong instrument in the hands of an unlawful combination to suppress and destroy competition. The sinister intent and illegal object of the basic conspiracy in which the suit is but a step, and yet an integral part, and constitutes, a wrongful act, is the material object. The Supreme Court said in Straus v. Victor Co., 243 U. S. 490, 37 Sup. Ct. 412, 61 L. Ed. 866, L. R. A. 1917E, 1196, Ann. Cas. 1918A, 955:
*811“Convinced * * * that the purpose and effect of this ‘lácense Notice’ of plaintiff, considered as a part of its scheme for marketing its product, is not to secure to the plaintiff any use of its machines, and as is contemplated by the patent statutes, but that its real and poorly concealed purpose is to restrict the price of them, after the plaintiff had been paid for them and after they have passed into the possession of dealers and of the public, we conclude that it falls within the principles of Adams v. Burke, 17 Wall. 453, 456, 21 L. Ed. 700, 703, and of Bauer v. O’Donnell, 229 U. S. 1, 57, * * * that it is therefore invalid, and that the District Court properly held that the bill must fail for want of equity.”
Pursuant to Sherman Act, § 7, when a wrong has been done and the law gives a remedy, the compensation shall be equal to the injury; the latter is the standard by which the former is to be measured. The injured party is to be placed, as near as may be; 'in the situation he would have occupied if the wrong had not been committed. Wicker v. Hoppock, 6 Wall. 94, 18 L. Ed. 752. Whatever is done by those engaged in the scheme or plot, with the motive or intent to carry out the unlawful purpose itself, it becomes tainted with the illegality of the scheme, however innocent it might otherwise have been, and the separate acts become thereby so interwoven with the unlawful scheme as to cause injury by reason of the combination and fall within the language of section 7. Monarch Tobacco Works v. American Tobacco Co. (C. C.) 165 Fed. 774.
There are many instances recognized in the law which indicate that the expenses of litigation and counsel fees incurred by the wrongful acts are elements of damage. ' Counsel fees are recoverable as compensatory damage in cases of malicious prosecution. Blunk v. Atchison. T. & S. F. R. Co. (C. C.) 38 Fed. 311; Chambers v. Upton (C. C.) 34 Fed. 473; Tiblier v. Alford (C. C.) 12 Fed. 262; Farris v. Messimore, 219 Ill. App. 582; Ziegler v. Powell, 54 Ind. 173. The rule in Massachusetts allows recovery for counsel fees as a direct and necessary result of the defendant’s wrongful act in violation of the terms of a surety agreement. Wheeler v. Hanson, 161 Mass. 370, 37 N. E. 382, 42 Am. St. Rep. 408; Pond v. Harris, 113 Mass. 114; Faneuil Hall Ins. Co. v. Liverpool, L. & G. Ins. Co., 153 Mass. 63, 26 N. E. 244, 10 L. R. A. 423. Refusal to defend a suit by an assured against the insurer makes the insurer liable for counsel fees and other legal expenses as part of the general damages arising from breach of duty. N. Y., etc., Ins. Co. v. Protection Ins. Co., 1 Story, 458, Fed. Cas. No. 10,216; Jackson v. St. Paul Ins. Co., 99 N. Y. 124, 1 N. E. 539. Recoveries ; of counsel fee have been allowed for a defendant’s failure to perform 7 a primary duty, and where a plaintiff has been put to the expense of litigation, even in the absence of contract. Westfield v. Mayo, 122 Mass. 100, 23 Am. Rep. 292; Chesapeake & Ohio Co. v. Alleghany Co., 57 Md. 201, 40 Am. Rep. 430; Oceanic Steam Nav. Co. v. Compania T. E., 134 N. Y. 461, 31 N. E. 987, 30 Am. St. Rep. 685. It is the rule in England that, where the natural and proximate consequences of the defendant’s tortious act is to involve the plaintiff in litigation with others, he is entitled to reimbursement for counsel fees. Dixon v. Fawcus, 3 El. & El. 637. This rule has been followed in the courts of this country. Chambers v. Upton (C. C.) 34 Fed. 473; Philpot v. *812Taylor, 75 Ill. 309, 20 Am. Rep. 241; McGaw v. Acker, Merrall & Condit Co., 111 Md. 153, 73 Atl. 731, 134 Am. St. Rep. 592; Stiles v. Municipal Council of Lowell, 233 Mass. 174, 123 N. E. 615, 4 A. L. R. 1365. We are not referred to any authoritative decision of the Supreme Court to the contrary.
The allowance of counsel fee as an element of damage in the instant case must be considered with due regard for the intention of Congress in providing for compensatory damages for wrongs committed under the Sherman Act. Undoubtedly, the direct consequences of the wrongful act of the defendant below was the expense of the employment of counsel. Reasonable value of this service is fixed by the testimony. Evidence as to the reasonableness of the service and the value thereof is as common as fixing the value of labor in any other pursuit. Head v. Hargrave, 105 U. S. 49, 26 L. Ed. 1028. The practical effect of such a loss under such circumstances as this record discloses calls for that progress in the law as to meet the progress of the times. The fact that the statute trebles the damages does not affect the situation. The Sherman Act is to be liberally construed to repress the evil and advance the remedy. Chattanooga Foundry Co. v. Atlanta, 203 U. S. 390, 27 Sup. Ct. 65, 51 L. Ed. 241; Ware, etc., Tobacco Co. v. American Tobacco Co. (C. C.) 178 Fed. 117.
In Missouri Pacific v. Larabee, 234 U. S. 459, 34 Sup. Ct. 979, 58 L. Ed. 1398, a dispute arose for demurrage between the railroad company and the flour mills to enforce payments suspended for rendering switching service which the railroad company had theretofore regularly performed for the mills company. Mandamus proceedings to compel the continuance of the services were instituted. Under a state, statute it was held that the power to assess, as against one party to a suit, a sum for attorney’s fees for services rendered' in the court as against the other party to the suit, was not authorized by the laws of the United States or by the rules of the Supreme Court. In other words, the statute was held to be a burden to the right of access to the court. It is not in point here, for in the instant case invoking the aid of the court has been held to be a wrongful act and an instrument used in aid of the unlawful conspiracy. The counsel fee paid was properly considered as an element of damage.
Taking this view, I see no occasion to reduce the allowance of $35,-000 awarded by the court after the rendition of the verdict herein. The judgment below should be affirmed.