In re Rainard

191 F. Supp. 867, 4 Fed. R. Serv. 2d 491, 129 U.S.P.Q. (BNA) 6, 1961 U.S. Dist. LEXIS 6008

• Court: District Court, D. Delaware
• Decided: March 13, 1961
• Docket: Misc. No. 10
• Status: Published

Opinion

LEAHY, Senior District Judge.

1. Rainard, Bancroft’s employee, was questioned on deposition on the degree of control Bancroft had over the North Carolina litigation. Spunize’s counsel, at oral argument, stated, if answered, Rainard’s testimony could be used in the North Carolina suit as admissions against Duplan. But only, I think, is this so if it has first been established that Bancroft is in control of the North Carolina litigation.

The nature or degree of Bancroft’s control of the North Carolina litigation can be properly elicited from Duplan. If such information established privity between Bancroft and Duplan then Bancroft’s activities could be admitted as admissions against Duplan. The fact that information concerning Bancroft’s control of the litigation is requested initially from Bancroft rather than from Duplan does change the relevancy of the information. Judge Swann ⁵ wrote (268 F.2d at page 524): “Bancroft itself does not make and sell yarns, nor it is in privity with its licensees in the same sense as is a manufacturer with its customers.” True, the Second Circuit’s determination of this matter has no binding effect on the North Carolina Court because, for one reason it may be suggested, its opinion was based only upon an examination of the license agreement, not upon any consideration of actual control exercised by Bancroft over the North Carolina suit. But, Bancroft has up to now decided it will not enter the North Carolina litigation. Judge Clark’s opinion in the Connecticut litigation is, as a procedural matter, correct. If Bancroft stays out of the North Carolina suit it would not be bound by that Court’s judgment. The fact Bancroft has elected to submit its rights to the Connecticut Court may not be weighed lightly in recognizing latitude to Spu-nize to utilize discovery techniques in its North Carolina suit of Spunize v. Duplan.

2. Examination by Spunize of a Bancroft employee and the discovery of documents is, argues Bancroft, an attempt to embroil it against its will in the North Carolina litigation — Spunize vis-a-vis Duplan; or, Spunize desires to “learn the facts” by discovery within the frame of the North Carolina litigation while Bancroft suggests the facts may be learned in the Connecticut action;⁶ e. g., the fact that Bancroft is the real party controlling and directing the defense of the North Carolina action. In short, it is Bancroft’s position that Spunize is attempting to circumvent Judge Clark's decision and the ruling of the Court of Appeals that both the Connecticut and North Carolina litigations should proceed independently of one another, and that, as to any res judicata lurking in the North Carolina litigation resting on an estoppel by Bancroft’s alleged actual control of the litigation there, it will take a separate law suit (query: the Connecticut litigation itself) to ascertain Bancroft’s status as to any North Carolina judgment to be entered in that forum. The reference for support is early (1916) Merriam v. Saalfield, 241 U.S. 22, 28-29, 36 S.Ct. 477 and recently reaffirmed as “familiar law” in Schnell v. Eckrich & Sons, Inc., 81 S.Ct. 557.

It is this law Judge Clark took when he decided the motions, supra, Bancroft V. Spunize, for he wrote:

“So, notwithstanding defendant’s contention to the contrary, it seems probable that plaintiff can escape the effect of any judgment rendered in North Carolina as to its licensee, Duplan. In any event, it is clear that it will take another and a separate lawsuit to ascertain its status as to the judgment. Minneapolis-Honeywell Regulator Co. v. Thermoco, Inc., 2 Cir., 116 F.2d 835; Marshall Metal Products Inc. v. Aghnides, D.C.S.D.N.Y., 126 F.Supp. 850; G. & C. Merriam Co. v. Saalfield, 241 U.S. 22, 27-33 [36 S.Ct. 477].

3. Bancroft is not present in the North Carolina case. It cannot examine or cross-examine witnesses upon the issue of its alleged participation and control, or any other issue for any purpose, unless it submits itself to the jurisdiction of the North Carolina Court. At another time and place there should be a full-dress trial of the issue of Bancroft’s control of the North Carolina litigation if there ever arises an attempt to encompass Bancroft in an ultimate North Carolina decree and an effort is made to enforce such a decree and judgment against Bancroft on a basis of res judicata or estoppel, etc.

I cannot conclude Spunize should be permitted to use the subpoena process of this Court to make Bancroft submit to the North Carolina litigation, i. e., in effect, submit to the jurisdiction of the North Carolina Court by the subpoena process to establish the fact it controls the North Carolina litigation. This would clearly circumvent the “familiar law” of the Merriam and Schnell cases, and escape the law of the case in the Connecticut suit, between Bancroft and Spunize, as fixed by Judge Clark and Judge Swann.

Order to quash the subpoena of the present Court will be entered.

5 . See note 2, supra.

6 . Bancroft counsel by letter (2/21/61) to Spunize counsel:

“Moreover, if tbe question is to be raised, — and you have indicated that you have every intention of raising it, — we suggest that it be done only in the proper forum, that is, in the Connecticut case, to which we are both parties and in which you are entitled to make complete discovery from us to the extent permitted under the Rules. That you have not raised the question in Connecticut, but instead have attempted to obtain from our personnel, under the guise of depositions in the Duplan case, the information which you seek, we can only regard as an unwarranted attempt to embroil Bancroft, against its will, in the North Carolina action against Duplan.

“Bancroft is neither present nor represented in the North Carolina action. It cannot cross-examine your witnesses, and cannot call or cross-examine witnesses in its own behalf, in the North Carolina Court, without running the risk of subjecting itself to the jurisdiction of that Court, which it has no intention of doing. Nor do we see how we could submit Bancroft to the jurisdiction of the North Carolina court for the limited purpose of trying out and determining the question which you have raised, — whether or not Bancroft should be bound by the judgment in the North Carolina case, — without running the risk of submitting Bancroft to the jurisdiction of that Court on the merits, which we have no intention of doing. We feel very strongly that the only proper forum for litigating the issue as to the effect of the North Carolina judgment is the Connecticut Court.

“If we wish to pursue the matter further, we suggest as a possible means of expediting a trial of the question, at least insofar as it can be tried at this stage, that you promptly take discovery from Bancroft in the Connecticut case, where we are both parties and both subject to the jurisdiction of the Court. In fact, we invite you now immediately to proceed in the Connecticut Court, which we renard as the only proper forum for trying and adjudicating this issue. Moreover, since a great deal of the information which you apparently seek is privileged, in our vieio, we repeat our offer to sit down xoith you and malee a sincere attempt to stipulate so much of the relevant facts, —as seem to he unobjectionable, — of course without waiving any privilege which we claim." (Emphasis supplied.)

And, response of Spunize counsel to Bancroft counsel (2/27/61):

“ * * * we think we are entitled to learn the facts and let the [North Carolina?] Court decide whether Bancroft’s actions have or have not resulted in binding Bancroft under the decision in the North Carolina case.”