Court Opinion

ID: 9445870
Source: CourtListenerOpinion
Date Created: 2023-08-03 21:39:38.271682+00
Date Added: 2024-06-11T17:30:25.839862
License: Public Domain

HAND, Circuit Judge
(dissenting).
If these plaintiffs had sued the defendant within the period from July 20, 1935 and July 20, 1938, and the defendant had moved to dismiss the actions, as it did move on several other occasions, although the judge who heard the motion might have himself decided all issues of fact, he would have been free in his discretion to refer them to a jury, either upon a trial *837of that issue alone, or of the whole case. Rule 12(b) of the Federal Rules of Civil Procedure provides that among the defenses that a defendant may raise by motion is “improper venue,” and Rule 43(e) provides that on any motion the court may hear the matter on affidavits, or “may direct that the matter be heard wholly or partly on oral testimony or depositions” ; and there can be no doubt that this provision is constitutional. In a case depending upon the party’s residence, the Supreme Court said: “ * * while the court might have submitted the question to the jury, it was not bound to do so; the parties having adduced their testimony, pro and con, it was the privilege of the court, if it saw fit, to dispose of the issue upon the testimony which was fully heard upon that subject.” Gilbert v. David, 235 U.S. 561, 568, 35 S.Ct. 164, 166, 59 L.Ed. 360. Earlier in Wetmore v. Rymer, 169 U.S. 115, 121, 18 S.Ct. 293, 296, 42 L.Ed. 682, where jurisdiction depended upon the amount in controversy, it said: “ * * it would appear to have been the intention of Congress to leave the mode of raising and trying such issues to the discretion of the trial judge.” See also Lehigh Valley Coal Co. v. Washko, 2 Cir., 231 F. 42, 46. However, although the judge in an action during the critical period would have been free to dispense with a jury, I do not see how we can say that he would have done so, and, since the defendant has the burden of proof on the issue of the statute of limitations, it failed to prove that the issue whether the defendant was “transacting business” in California would have been tried to a judge. I agree, therefore, with my brothers that Judge Rayfiel’s order was wrong. Hence it follows that, if on the evidence before Judge Galston, a jury in an action brought in California might have found that the defendant had not “transacted business” in that state, the plaintiffs at bar were entitled to a verdict.
However, it seems to me that as on the evidence here at bar Judge Galston would have been bound to direct a verdict for the defendant if the case had been tried to a jury, Judge Rayfiel’s error is immaterial. In short, I think that the defendant proved beyond dispute that it had been “transacting business” in California throughout the critical period. It will be necessary as a preliminary to deal with the plaintiffs’ agreement that, regardless of whether the defendant had in fact been “transacting business,” its denials that it had been in at least ten actions brought against it in both state and federal courts constituted a “judicial estoppel” against its present contradictory position. It is of course true that upon the trial in the actions at bar any statements made by the defendant in its pleadings and affidavits in other actions were competent evidence in favor of the plaintiffs; but I can find no warrant for the theory that they created a “judicial estoppel,” except suggestions in one or two law reviews. Moreover, since such a doctrine is plainly contrary to the underlying basis of the whole doctrine of estoppel by judgment it is plainly without foundation. Judgment by estoppel is not designed as a moral sanction against inconsistency: it does not visit penalties upon those who take one position today and deny it tomorrow; it is designed only to prevent a party who has, or has not, prevailed upon an issue in an earlier action to vex the same antagonist with the same dispute in a later one. The plaintiffs cite Houghton v. Thomas, 220 App.Div. 415, 221 N.Y.S. 630, to the contrary, but Mack, the party against whom the estoppel there prevailed, although not a party to the earlier action, had been the attorney of one of the parties, which the court held to be the equivalent — itself a very doubtful extension of the doctrine.
The only issue therefore is whether the evidence before Judge Galston was in enough conflict to entitle the plaintiffs, to a trial by jury. That makes it necessary to decide what § 12 of the AntiTrust Act means by “transacting business.” Section 7, 15 U.S.C.A. 15 note had allowed an action to be brought in any district in which the “defendant *838resides or is found” and' in the case of corporations this became “often an insuperable obstacle” to any remedy. Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 374, 47 S.Ct. 400, 403, 71 L.Ed. 684. The Supreme Court there held that in § 12 Congress added the clause, “transacts business,” in order to assist the enforcement of the act by ridding actions of the web of refined decisions that had been woven' about the word “found.” It made no attempt, however, to state in general terms what constituted “transacting business” beyond saying (273 U.S. at page 373, 47 S.Ct. at page 403), that a corporation did so in any district “if in fact, in the ordinary and usual sense, it ‘transacts business’ therein of any substantial character.” However, the Court discussed the issue at length in United States v. Scophony Corporation, 333 U.S. 795, 807, 808, 68 S.Ct. 855, 862, 92 L.Ed. 1091. In that case the defendant, a foreign corporation, had, as here, “transacted business” by means of a subsidiary corporation whose conduct it reserved the right to supervise and regulate. It is true that the issue was whether that made the defendant “found” within the district where it was sued, but since the Court held that it did, a fortiori, it was a ruling that the defendant had been “transacting business” there. Therefore, it seems to me that we can, and indeed must, take what was said as an authoritative gloss upon § 12. The Court declared that the statute meant the “practical, everyday business or commercial concept of doing or carrying on business ‘of any substantial character’ ”; and that the amendment had substituted “practical, business conceptions” in place of “the previous hair-splitting legal technicalities encrusted upon the ‘found’ — ‘present’ — ‘carrying-on-business’ sequence.”
Judge Galston made very detailed findings that are too long and too many, to quote, but I append numbers 10, 11 and 12, becjause these succinctly state the facts that appear to me to be controlling. The pldintiffs object that these improperly imputed to the defendant such or the described activities as took place after the organization of a corporation, which the findings speak of as “Agency”: —a wholly owned subsidiary whose officers were “in the main” the defendant’s officers. I rely upon the following language in United States v. Scophony Corporation, supra, 333 U.S. at pages 814, 815, 68 S.Ct. at page 865, which seems to me to make “Agency’s” business “business transacted” by the defendant: “The contracts created controls in Scophony, and in the American interests as well, which taken in conjunction with the stock controls called for continuing exercise of supervision over and intervention in American Scophony’s affairs. We need not decide whether, in view of the agreements’ continuing and persuasive effects, they could be considered as sufficing in themselves to make Scophony ‘found’ within the New York district. Whether so or not, they set the pattern for a regular and continuing program of patent exploitation requiring, as we have said, Scophony’s constant supervision and intervention.”
I cannot see why this language does not apply almost literally, mutwtis mutandis, to the contract of December 2, 1935, between the defendant and “Agency” along with which the defendant assigned to “Agency” the contract of Skouras Brothers of June 13. Of course it is true that a jury might not have believed the testimony offered by the defendant as to what was done under these contracts, although they did not put in any evidence to contradict it. Moreover, there might be a difficulty, if there had been no evidence that “Agency” had ever acted under the contract. However, that the plaintiffs may not assert, for it would cut the ground from under the complaints, which are based upon acts of the defendant after the contracts had been made. Hence, if the jury disbelieved the testimony of the defendant’s witnesses as to what they had done, they must assume that other persons committed the wrongs charged in the comolaints, and yet that they did not do so in performance of the contract with “Agen*839cy,” for that contract, if once in effect, set up a “program” of “constant supervision and intervention”; and made the defendant “transact business.” Surely we are not warranted in treating seriously such a web of dialectical fantasy.
The only evidence that the plaintiffs produced was the defendant’s repeated assertions that it did not do any business in California, and had no agents there. Although, as I have said, these were indeed admissible against it, they amounted to no more than statements of the legal result of whatever the defendant had done, and they raised no issue as to the authority vested in the Skouras Brothers by the contract of June 13, 1935, and in “Agency” thereafter. Any conduct in California in performance of those contracts ipso facto made the defendant “transact business” in that state, no matter how often the defendant chose to deny that that had been the legal effect of what was done. I need not therefore answer the argument that all parties to a conspiracy are not mutual agents in the sense that what any one of them does is a “transaction of business” of all the rest.
In conclusion it seems to me worth while to observe that, although the result of my brothers’ reasoning will indeed require the defendant to defend on the merits actions arising under the AntiTrust Acts, toward which the Supreme Court, especially of late, has shown particular favor, it does so at the expense of a precedent of the greatest value to large corporations doing a wide interstate business. I cannot see why, if what we are deciding is right, a corporation by doing its local business through subsidiary corporations over whom it retains supervisory control, will not compel those whom it may damage to sue in some district where it can be “found,” as distinct from any one in which it “transacts business.” If so, the whole purpose of the amendment to § 12 will be defeated.
APPENDIX
“10. National Agency Corporation, a wholly-owned subsidiary of National, is a Delaware corporation which was organized in 1935. The name of this company was changed to National Theatres Amusement Co., Inc., and it was referred to at the trial by both names. It is referred to in these findings as ‘Agency.’ Agency was organized to render certain services and perform certain activities for National, which prior to the organization of Agency had been rendered and performed by National. Agency qualified to do business in New York in February, 1936, and in California in August, 1942. The same individuals were, in the main, the officers of National and of Agency. The two companies occupied the same premises.
“11. Agency entered into a contract with National on December 2, 1935, under which Agency agreed to perform extensive services for National and its subsidaries. Under that contract Agency agreed to keep National fully informed of all matters relating to the affairs and business of National and its subsidiaries, including, with respect to the operating subsidiaries, the daily results of theatre operations, profits and losses, cash position, nature of the properties owned and changes therein and the general corporate set-up of all such subsidiaries. Agency agreed to maintain National’s books of account and furnish other accounting services such as preparation of statistical information, tax returns and similar matters. National agreed to pay Agency $3,000 per week for the services rendered to and for it. Throughout all of the period from the date of the contract in 1935 until the institution of these actions in 1951, Agency performed services for National and its subsidiaries as provided in that contract. Such services were performed in California and in New York and elsewhere.
“12. The contract of June 13, 1935, between the Skouras brothers and National was assigned to Agency on December 2, 1933. The assignment provided that National, however, rfetained all its rights under its contract with the Managers. The assignment cohtained the following provision:
*840“ Tt is understood that notwithstanding such assignment to you, we retain all our rights and privileges under said contract, including, without limitation, the right to terminate the same, and that by such assignment you receive only the rights to the services of the Managers above referred to and the right to enforce performance thereof in any way not inconsistent with our rights in such connection * *
“Under the employment contracts with the Skouras brothers, National paid their salaries until Agency was formed. After the organization of Agency, the fixed salaries were paid by that company pursuant to the assignment from National to Agency, but the portion of their compensation which was based upon the profits of National was paid by National. The payments made by Agency were made by it as the agent for National and for all purposes here were the same as though made directly by National.”