Court Opinion

ID: 9466579
Source: CourtListenerOpinion
Date Created: 2023-08-05 01:20:07.559975+00
Date Added: 2024-06-11T17:39:48.853273
License: Public Domain

*466SWYGERT, Circuit Judge,
dissenting.
In Roberts v. Sears, Roebuck & Co., 573 F.2d 976, 985 (7th Cir. 1978), this court held that the district court had “correctly decided not to disturb the jury’s monetary award.” We characterized that award as the “measure of past profits earned by Sears up to the time of trial.” Id. (emphasis in original). That holding is the law of the case.
We also held in our earlier opinion that the jury’s award of past profits was “not inconsistent with return of the patent so that plaintiff [could] receive the future benefits of the patent that Sears fraudulently acquired.” Id. (emphasis in original). The combination of a damage remedy for past profits and an equitable remedy as to future benefits was permissible, we reasoned, because there would be neither a double recovery nor a factual inconsistency. Therefore, we remanded the case so that the trial judge could decide “whether rescission is appropriate under the facts of this case.” 573 F.2d at 986.
The trial judge took us at our word and proceeded to conduct a trial in equity to determine the question of whether the plaintiff was entitled to the rescission of his contract with Sears. He found that
Sears committed fraud on Roberts in the way it acquired all of his rights to the quick release device he invented; that Sears breached the confidential relation that existed between Roberts and the company, one that arose out of a pre-ex-isting relationship of employee and employer; and that Sears, in its negotiation for the quick release device committed negligent misrepresentations concerning the company’s knowledge of the invention’s value, its saleability, and its public acceptance.
Roberts v. Sears, Roebuck and Co., 471 F.Supp. 372, 378 (N.D.Ill.1979). The judge then reviewed the law of Illinois and determined that
the elements of fraud which would justify rescission of a contract by a suit in equity are the same as those which would sustain an award of damages in an action at law. . . . [W]here the subject matter of a contract is acquired through fraud, . . . through the breach of a confidential relation, ... or through misrepresentation, . . .rescission, as a remedy, is available through an action in equity. When this remedy is sought, it is to declare an agreement void from its inception.
Id. at 378-79 (citations omitted). Following this recitation of the law of Illinois, the trial judge concluded:
The mandate of the court of appeals directed this court to consider whether here, on the facts shown in the record, rescission is appropriate. After reviewing the pleadings, the evidence, the prior rulings, and applying the controlling principles of equity, it is this court’s judgment that Roberts is entitled to a decree rescinding his June 15,1965 contract with Sears. Therefore, a decree of rescission will be entered.
Id. at 379-80. Finally, the trial judge determined that under Illinois law, “Rescission is the termination of a contract with restitution,” and “When it is sought and granted for fraud, an Illinois court of equity usually grants the defrauded party the full remedy to which, under the circumstances, he may be entitled.” Id. at 380.
Although I agree with the majority that an accounting for the period from the date of the contract to the date of the judgment is prohibited by our earlier decision, I do not agree that the accounting ordered for the period from January 1, 1977 to the date of the accounting was erroneous. In my opinion, Judge Leighton was eminently correct in ordering an accounting for the latter period. Not only was he following the law of the case as pronounced by this court in our first opinion and the mandate that issued, but he came to a result which the facts, the law of Illinois, and the principles of equity required.
We held that the jury award for past profits did not bar an equitable remedy for future benefits. Roberts v. Sears, Roebuck & Co., supra. The majority concedes that the damages remedy continued only up to *467the date of the judgment, after which time the equitable remedy of rescission attached. By denying the plaintiff an accounting for the period after which his damages were assessed but before he was in a position to benefit from the return of his patents, the majority has, with no justification, left a substantial gap in the plaintiff’s rightful recovery.
According to the majority, the contract was rescinded or cancelled as of January 1, 1977. It is not disputed that the remedy of rescission generally carries with it an accounting for profits unjustly earned. Yet, the majority holds that in order for the plaintiff to recover the defendant’s profits, he must start a new action at law for patent infringement. Apparently the majority is concerned lest the plaintiff have a second chance to recover in equity what he has already received at law. But the jury award for damages continued only up to the date of the judgment. Here we are concerned exclusively with profits made after that date. Because we have held that the contract was void after January 1, 1977, profits earned by the defendant after that date must be disgorged to prevent unjust enrichment. Because the jury was never asked to award damages for this period, there is no possible double recovery or factual inconsistency in this result. I would give the plaintiff the full equitable relief to which he is entitled upon the finding that rescission is appropriate.
Although we have held that it was permissible for the plaintiff to seek remedies at law for past damages and in equity for future damages, we stated that it was incorrect for the judge to permit past damages to be assessed both at law and in equity for the same time frame. Yet the majority today would require that future benefits be decided partly in equity — the rescission of the contract — and partly at law — a patent infringement action to recover profits. My understanding is that an equitable accounting is designed to prevent this peculiar split of actions while accomplishing the same result.
Finally, I am impelled to record my distress of the majority’s assertion that this court did not actually mean “rescission” in its traditional sense when it told the district court to consider whether “rescission is appropriate under the facts of this case.” That assertion is unsettling to say the least and unfair to the district judge. But it has greater implications because of the unfairness to the plaintiff.
“Big” business ethics have of late come under heightened scrutiny and criticism. That scrutiny and criticism may appear to be justified if Sears’ monumental fraud visited on the plaintiff is any measurement. Evidence before the jury indicated that Sears’ incremental profits on the patented wrench had been $44,032,082 from the date it fraudulently acquired the patents up to December 31, 1976. The jury awarded the plaintiff one million dollars damages for that period. Beyond December 31, 1976, according to the directions of the court in the present appeal, the plaintiff will have back his patents with the opportunity to sue Sears for infringement, subject, however, to Sears’ defense of invalidity.* For me this result not only condones the proven unethical conduct of Sears but it is manifestly unjust to the plaintiff.
I would reverse in part and affirm in part.