Zenith Radio Corp. v. Hazeltine Research, Inc.Annotate this Case
401 U.S. 321 (1971)
U.S. Supreme Court
Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321 (1971)
Zenith Radio Corp. v. Hazeltine Research, Inc.
Argued November 10, 1970
Decided February 24, 1971
401 U.S. 321
CERTIORARI TO THE UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
Respondent (HRI) brought a patent infringement suit against petitioner (Zenith) in 1959, and, in 1963, Zenith counterclaimed for damages alleging violations of the Sherman and Clayton Acts by HRI's participation in patent pools in Canada, Great Britain, and Australia, restricting Zenith's operations in those countries. A year after evidence was closed, the trial judge entered preliminary findings of fact and conclusions of law favoring Zenith. HRI then moved to amend its reply to the counterclaim and to reopen the record for taking additional evidence. HRI sought to assert defenses of the statute of limitations and release, claiming that part of the damages awarded Zenith for 1959-1963 were caused by pre-1959 conduct, and thus barred by the statute of limitations, or were barred by a 1957 release given by Zenith to certain American companies in settlement of a civil treble damage action. The trial judge permitted the defenses to be filed, but refused to reopen the record or modify his findings and conclusions concerning the Canadian market. The Court of Appeals reversed on the ground that Zenith had failed to prove injury to its business. This Court reversed with respect to Canada, holding that there was ample evidence of damage in the Canadian market and noting that the trial judge had either rejected the limitations and release defenses on the merits or deemed them waived, 395 U. S. 395 U.S. 100. On remand, the Court of Appeals held that the trial judge erroneously rejected the defenses on their merits. That court, while doubting that Zenith's claim that the statute of limitations was tolled (by reason of a Government antitrust suit pending from 1958 to 1963 against various companies participating along with HRI in the Canadian patent pool), was properly before it, since no formal plea had been entered, rejected the tolling argument, concluding that tolling takes place only with respect to parties to a Government suit, and HRI was not such a party. The court further ordered evidence to determine the extent of reduction of damages by virtue of the defenses it sustained.
1. Under the circumstances of this case, the trial judge did not abuse his discretion if his rejection of the limitations and release
defenses was based on HRI's waiver due to untimeliness of their presentation. Pp. 401 U. S. 328-333.
2. The Court of Appeals erroneously rejected Zenith's claim that the statute of limitations was tolled during the pendency of the Government's antitrust suit against the other participants in the patent pool. Pp. 401 U. S. 333-338.
(a) Where, as here, a plaintiff has no reason to anticipate that a claim of limitations will be raised against him, he need not set forth his claim of tolling until the limitations claim is raised. P. 401 U. S. 334.
(b) Under 28 U.S.C. § 16(b) the statute of limitations is tolled against all participants in a conspiracy that is the object of a Government suit, whether or not they are named as defendants or conspirators therein. Pp. 401 U. S. 335-338.
3. A plaintiff in an antitrust action may recover damages occurring within the statutory limitation period that are the result of conduct occurring prior to that period if, at the time of the conduct, those damages were speculative, uncertain, or otherwise incapable of proof. Pp. 401 U. S. 338-342.
4. The effect of a release upon coconspirators is to be determined in accordance with the intention of the parties, and here, HRI, which was neither a party to the 1957 release nor a parent or subsidiary of a party, is not entitled to the benefit of the release, as the agreement to exchange releases provided expressly that they were "to bind or benefit" the party and "the parent and subsidiaries of the party giving or receiving such release." Pp. 401 U. S. 342-348.
418 F.2d 21, reversed and remanded. WHITE, J., delivered the opinion of the Court, in which BURGER, C.J., and BLACK, DOUGLAS, BRENNAN, MARSHALL, and BLACKMUN, JJ., joined. HARLAN, J., filed an opinion concurring in the result, in which STEWART, J., joined, post, p. 401 U. S. 349.
MR. JUSTICE WHITE delivered the opinion of the Court.
This is the second time this marathon litigation has been before us. It began in 1959 as a suit for patent infringement brought by Hazeltine Research, Inc. (hereafter HRI), against Zenith. In 1963, Zenith filed a counterclaim against HRI alleging violations of the Sherman and Clayton Acts, as amended, 26 Stat. 209, 38 Stat. 731, 737, 15 U.S.C. §§ 1, 2, 15, 26, by reason of HRI's participation in patent pools in Canada, Great Britain, and Australia. These pools, it was claimed, operated to exclude Zenith from those foreign markets by refusing to grant patent licenses to American manufacturers seeking to export American-made radio and television sets. Trial was had without a jury. Zenith submitted telling evidence as to the existence and operation of the conspiracy and HRI's participation in each of the markets. Zenith demonstrated the fact and extent of its business injury by estimating the percentage of the foreign market it would have enjoyed absent the conspiracy during the four years prior to 1963 and showing the portion it actually enjoyed during those years. The difference between the profits it actually made and the profits it would have made in a free market during the four years was the measure of the damages demanded.
A year after evidence was closed, the trial judge entered preliminary findings of fact and conclusions of law favoring Zenith. He concluded that Zenith had been damaged $6,297,371 in the Canadian market, $9,248,926 in the English, and $692,555 in the Australian, a total of $16,238,872 before trebling. HRI then moved to amend its reply to Zenith's counterclaim and to reopen the record for the taking of additional evidence. The motion sought leave to assert the defenses of limitations and release; the claim was that part or all of the damages
awarded to Zenith for the four years 1959-1963 were caused by pre-1959 conduct, and, to that extent, were barred by the statute of limitations, 15 U.S.C. § 15b, or by a release given by Zenith to certain American companies in 1957. HRI also sought leave to prove that, until specified dates, Zenith's exclusion from the English and Australian markets had been due not to the operation of the alleged patent pools, but to such matters as official embargoes, tariffs, and technical factors. The trial judge agreed to take additional evidence with respect to England and Australia, but refused to reopen the record for other purposes or to modify his findings and conclusions concerning the Canadian market. He did, however, permit the limitations and release defenses to be filed, and, after hearing evidence with respect to the English and Australian markets, reduced his award of damages with respect to them. 239 F.Supp. 51 (1965).
In the Court of Appeals, HRI asserted error on various grounds. Putting aside other issues, the Court of Appeals reversed on the ground that Zenith had failed to prove injury to its business in any of the three markets. 388 F.2d 25 (1967). We, in turn, affirmed the judgment denying recovery for the alleged injury in the English and Australian markets, but reversed with respect to Canada, holding that Zenith's evidence amply demonstrated the fact of damage in the Canadian market. 395 U. S. 100 (1969). We also noted that some portion of the damages proved and awarded resulted from conspiratorial conduct prior to 1959, and that the trial judge had either rejected on the merits the defenses of limitations and release or deemed them waived. Id. at 395 U. S. 117 n. 13. We went no further, however, with respect to the issues surrounding either defense.
The Court of Appeals, on remand, accepted as duly proved that, absent the conspiracy, Zenith would have
enjoyed a 16% share of the Canadian market, and that the difference between 16% and the share it actually had was the measure of the total damages inflicted by the. conspiracy during the four years 1959-1963. But recognizing that some portion of Zenith's business injury resulted from conspiratorial conduct prior to 1959, the court went on to hold that the trial judge had not rejected the defenses of limitations and release on waiver grounds, but had erroneously rejected them on their merits, and further that Zenith's claim that the statute had been tolled had been waived by Zenith and was, in any event, unsound. Finally, the court ordered further evidence to be taken in the trial court to determine the extent to which, if any, the damages awarded by the trial court should be reduced by virtue of the defenses sustained in the Court of Appeals. 418 F.2d 21 (1969).
We granted certiorari. 397 U.S. 979 (1970). Zenith's principal contentions here are that the trial judge properly deemed the limitations and release defenses to have been waived, that, if not waived, the defenses were without merit, and that, in any event, the statute of limitations was tolled by the pendency of a Government suit against HRI's coconspirators. We need not decide whether the trial judge held the defenses waived or rejected them on the merits, since, in our view, either course would have been legally sound. We therefore reverse the Court of Appeals.
We deal first with Zenith's claim that the defenses of limitations and release were properly held by the trial court to have been waived. To do so it is essential briefly to outline the course of the trial and evidence. Zenith's 1963 counterclaim alleged the existence of the conspiracy and the impact on its business and prayed for damages and injunctive relief, but made no allegations as to the time period as to which damages were sought.
These latter matters became clear during the pretrial proceedings and during the course of the trial itself. In its pretrial brief and opening statement, Zenith asserted that the illegal pools had existed for many years; that Zenith had conspiratorially been refused a license to import into Canada; and that litigation had been threatened and potential distributors discouraged. The conspiracy was said to have been not only a longstanding, but also a worldwide one, against certain members of which the United States Government had brought an antitrust action and Zenith itself had recovered $10,000,000 in 1957 in settlement of a civil treble damage action. But Zenith disclosed that, although the conspiracy had been worldwide and long-existing, it would seek to recover damages for restraint of its trade in the three foreign markets only during the "four-year statutory damage period."
At trial, Zenith introduced voluminous evidence with respect to the operations of the conspiracy and its impact on its business. The testimony with respect to Canada was that, in a free market, Zenith would have had the same share of the Canadian market as it enjoyed in the United States, and that the existence and operation of the conspiracy had restricted its Canadian business. Specifically, Zenith claimed that, in the four years after June 1, 1959, it had lost profits aggregating some $6,300,000 as the result of conspiratorial conduct by the Canadian patent pool during and prior to that period. Counsel made Zenith's position perfectly clear in his summation and post-trial brief: except for the Canadian pool, Zenith would have had a 16% share of the Canadian market, but, as a result of the pool, it had only a 3% share. Zenith thus argued that it was entitled to the full difference between 16% and 3% for the entire four-year period. It also made similar claims with respect to the English and Australian markets.
Although Zenith's counterclaim, on its face, sought to recover all damages suffered in past years, without restriction, [Footnote 1] HRI pleaded neither limitations nor release in its reply to the counterclaim. Zenith instead revealed its own awareness of the statutory limitation period during the trial and expressly restricted its proof to damages suffered during the statutory four-year damage period. However, Zenith sought to recover all damages suffered during those years even though it was unmistakably clear that some of this damage had been caused by conspiratorial action prior to 1959. Yet at no time during the trial did HRI suggest that the statute barred Zenith's recovery of any part of its total damage suffered during that period. HRI did challenge Zenith's claim that it would have had a 16% share of the Canadian market on the ground that the evidence was speculative -- indeed, that it was so speculative that Zenith had failed entirely to sustain its burden of proving damage, but it interposed no objection to Zenith's demand for all damages sustained during the four-year period, no matter when the operative acts had occurred. Not until one year after trial, when it learned that the judge's findings and conclusions were unfavorable, did HRI assert that part of the post-1959 damage was the result of pre-1959 conduct and was barred either by the statute of limitations or by the
release given by Zenith in 1957 in settlement of its suit against other American companies. [Footnote 2]
Other than a general attack on the sufficiency of Zenith's proof of damages and a demand that the matter be relitigated, HRI's post-trial motion had three principal branches. First, it sought leave to file the defense of limitations. The motion in effect asserted that the conspiracy, even if it had continued during the damage period, had committed no damaging overt acts during that period, all of Zenith's damage being caused by pre-1959 operations of the pool. HRI asserted as a legal matter that the statute of limitations would therefore bar Zenith's entire claim on the record then before the Court. Second, HRI sought to interpose the defense of release. The argument was that some or all of Zenith's post-1959 damages were the consequence of pool activity occurring prior to the date of a 1957 release given to American companies which were coconspirators of HRI in the Canadian pool. That release, it was claimed, also released HRI. Third, HRI sought to reopen the record to show that, until well into the four-year damage period, Zenith's inability to enter the English and Australian markets was due to official embargoes, other governmental policies, and technical difficulties, rather than to the operations of the patent pools.
The motion was thoroughly and extensively argued. With respect to the defenses of limitations and release,
the trial court's ruling, after Zenith objected to them as being "too late," was expressed as follows: "Well, the record will show that leave is given to file them at this time, after proofs are closed and after findings have been made." [Footnote 3] This ruling was immediately followed by the court's refusal either to reopen the record for additional evidence with respect to Canada or to modify its judgment in any way as to that market. The record as to England and Australia, however, was reopened for further proof as to the operative forces other than the patent pools which, in fact, had prevented importation of Zenith's products into those markets.
Arguably, since the trial judge permitted the limitations and release defenses to be filed, but then rejected them by refusing to amend the judgment with respect to Canada, rejection was necessarily on the merits. But the record also yields to the construction that the two defenses were overruled because a just and sensible ruling on their merits would have required a reopening of the record for a virtual retrial of the issue of damages, an eventuality which the trial court deemed unwarranted in view of HRI's delinquency in raising the defenses. If this was the course the trial judge took, we would not disturb his judgment.
At the time of the trial, Rule 8(c) of the Federal Rules of Civil Procedure required that,
"[i]n pleading to a preceding pleading, a party shall set forth affirmatively . . . release . . . statute of limitations . . . and any other matter constituting an avoidance or affirmative defense."
Rule 12(h) at that time provided that "[a] party waives all defenses and objections which he does not present"
either by motion or in answer or reply. Based on these rules, Zenith claims that the trial court was required to, and did, hold the two defenses waived.
HRI contends that the District Court should have granted it leave to amend its answer under Rule 15(a), which provides that such "leave shall be freely given when justice so requires." HRI's position is that the evidence in the record at the time it offered its defenses showed that all of the acts causing damage during the 1959-1963 period had occurred prior to 1959; from this it follows that Zenith had failed, according to HRI, to offer any evidence upon which an award of damages could have been sustained. In the alternative, HRI argues that the record showed that it had been released from all liability for damages flowing from pre-1957 acts. [Footnote 4] In either case, HRI urges that the damage award be set aside.
It is settled that the grant of leave to amend the pleadings pursuant to Rule 15(a) is within the discretion of the trial court. Foman v. Davis,371 U. S. 178, 371 U. S. 182 (1962) (dictum). In a matter as substantial and complex as this one, where HRI claimed it had been misled or, at the very least, asked to be relieved of mistake or oversight, it might have been within the discretion of the trial judge to have permitted HRI to amend its pleadings to include therein the defenses of limitations and release. But, in deciding whether to permit such an amendment,
the trial court was required to take into account any prejudice that Zenith would have suffered as a result, see Kanelos v. Kettler, 132 U.S.App.D.C. 133, 136-137, n. 15, 406 F.2d 951, 954-955, n. 15 (1968); United States v. 7 Bottles, More or Less, 320 F.2d 564, 573-574 (CA3 1963); Caddy-Imler Creations v. Caddy, 299 F.2d 79, 84 (CA9 1962); 3 J. Moore, Federal Practice
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