Claiming that petitioner had breached its contract to pay
$150,000 for the exclusive use of the trademark "DAIRY QUEEN" in
certain portions of Pennsylvania, the owners of the trademark sued
in a Federal District Court for (1) temporary and permanent
injunctions to restrain petitioner from any future use of or
dealing in the franchise and trademark, (2) an accounting to
determine the exact amount of money owing by petitioner and a
judgment for that amount, and (3) an injunction pending accounting
to prevent petitioner from collecting any money from "Dairy Queen"
stores in the territory. Petitioner filed an answer raising a
number of defenses and made a timely demand for a trial by jury.
The District Court struck petitioner's demand for a trial by jury,
on the alternative grounds that either the action was "purely
equitable" or that whatever legal issues were raised were
"incidental" to equitable issues. The Court of Appeals denied
petitioner's application for a writ of mandamus to compel the
District Judge to vacate his order.
Held: the District Judge erred in refusing petitioner's
demand for a trial by jury of the factual issues related to the
question whether there had been a breach of contract or a trademark
infringement, and the Court of Appeals should have corrected that
error by granting the petition for mandamus. Pp.
369 U. S.
470-480.
(a) Where both legal and equitable issues are presented in a
single case, any legal issues for which a trial by jury is timely
and properly demanded must be submitted to a jury.
Beacon
Theatres, Inc. v. Westover, 359 U. S. 500. Pp.
369 U. S.
470-473
(b) Insofar as the complaint in this case requests a money
judgment, it presents a claim which is unquestionably legal. Pp.
369 U. S.
473-477.
(c) A different conclusion is not required by the fact that the
complaint is cast in terms of an "accounting," rather than in terms
of an action for "debt" or "damages." Pp.
369 U. S.
477-479.
Page 369 U. S. 470
(d) The legal claim here involved was not rendered "purely
equitable" by the nature of the defenses interposed by petitioner.
P.
369 U. S.
479.
Judgment reversed, and cause remanded for further
proceedings.
MR. JUSTICE BLACK delivered the opinion of the Court.
The United States District Court for the Eastern District of
Pennsylvania granted a motion to strike petitioner's demand for a
trial by jury in an action now pending before it on the alternative
grounds that either the action was "purely equitable" or, if not
purely equitable, whatever legal issues that were raised were
"incidental" to equitable issues, and, in either case, no right to
trial by jury existed. [
Footnote
1] The petitioner then sought mandamus in the Court of Appeals
for the Third Circuit to compel the district judge to vacate this
order. When that court denied this request without opinion, we
granted certiorari because the action of the Court of Appeals
seemed inconsistent with protections already clearly recognized for
the important constitutional right to trial by jury in our previous
decisions. [
Footnote 2]
At the outset, we may dispose of one of the grounds upon which
the trial court acted in striking the demand for trial by jury --
that based upon the view that the right to trial by jury may be
lost as to legal issues where those issues are characterized as
"incidental" to equitable issues -- for our previous decisions make
it plain that no such rule may be applied in the federal courts. In
Scott
Page 369 U. S. 471
v. Neely, decided in 1891, this Court held that a court
of equity could not even take jurisdiction of a suit "in which a
claim properly cognizable only at law is united in the same
pleadings with a claim for equitable relief." [
Footnote 3] That holding, which was based upon
both the historical separation between law and equity and the duty
of the Court to insure "that the right to a trial by a jury in the
legal action may be preserved intact," [
Footnote 4] created considerable inconvenience in that it
necessitated two separate trials in the same case whenever that
case contained both legal and equitable claims. Consequently, when
the procedure in the federal courts was modernized by the adoption
of the Federal Rules of Civil Procedure in 1938, it was deemed
advisable to abandon that part of the holding of
Scott v.
Neely which rested upon the separation of law and equity, and
to permit the joinder of legal and equitable claims in a single
action. Thus, Rule 18(a) provides that a plaintiff
"may join either as independent or as alternate claims as many
claims either legal or equitable or both as he may have against an
opposing party."
And Rule 18(b) provides:
"Whenever a claim is one heretofore cognizable only after
another claim has been prosecuted to a conclusion, the two claims
may be joined in a single action; but the court shall grant relief
in that action only in accordance with the relative substantive
rights of the parties. In particular, a plaintiff may state a claim
for money and a claim to have set aside a conveyance fraudulent as
to him without first having obtained a judgment establishing the
claim for money."
The Federal Rules did not, however, purport to change the basic
holding of
Scott v. Neely that the right to trial
Page 369 U. S. 472
by jury of legal claims must be preserved. [
Footnote 5] Quite the contrary, Rule 38(a)
expressly reaffirms that constitutional principle, declaring:
"The right of trial by jury as declared by the Seventh Amendment
to the Constitution or as given by a statute of the United States
shall be preserved to the parties inviolate."
Nonetheless, after the adoption of the Federal Rules, attempts
were made indirectly to undercut that right by having federal
courts in which cases involving both legal and equitable claims
were filed decide the equitable claim first. The result of this
procedure in those cases in which it was followed was that any
issue common to both the legal and equitable claims was finally
determined by the court, and the party seeking trial by jury on the
legal claim was deprived of that right as to these common issues.
This procedure finally came before us in
Beacon Theatres, Inc.
v. Westover, [
Footnote 6]
a case which, like this one, arose from the denial of a petition
for mandamus to compel a district judge to vacate his order
striking a demand for trial by jury.
Our decision reversing that case not only emphasizes the
responsibility of the Federal Courts of Appeals to grant mandamus
where necessary to protect the constitutional right to trial by
jury, but also limits the issues open for determination here by
defining the protection to which that right is entitled in cases
involving both legal and equitable claims. The holding in
Beacon Theatres was that, where both legal and equitable
issues are presented in a single case,
"only under the most imperative circumstances, circumstances
which in
Page 369 U. S. 473
view of the flexible procedures of the Federal Rules we cannot
now anticipate, can the right to a jury trial of legal issues be
lost through prior determination of equitable claims. [
Footnote 7]"
That holding, of course, applies whether the trial judge chooses
to characterize the legal issues presented as "incidental" to
equitable issues or not. [
Footnote
8] Consequently, in a case such as this, where there cannot
even be a contention of such "imperative circumstances,"
Beacon
Theatres requires that any legal issues for which a trial by
jury is timely and properly demanded be submitted to a jury. There
being no question of the timeliness or correctness of the demand
involved here, the sole question which we must decide is whether
the action now pending before the District Court contains legal
issues.
The District Court proceeding arises out of a controversy
between petitioner and the respondent owners of the trademark
"DAIRY QUEEN" with regard to a written licensing contract made by
them in December, 1949, under which petitioner agreed to pay some
$150,000 for the exclusive right to use that trademark in certain
portions of Pennsylvania. [
Footnote
9] The terms of the contract provided
Page 369 U. S. 474
for a small initial payment with the remaining payments to be
made at the rate of 50% of all amounts received by petitioner on
sales and franchises to deal with the trademark and, in order to
make certain that the $150,000 payment would be completed within a
specified period of time, further provided for minimum annual
payments regardless of petitioner's receipts. In August, 1960, the
respondents wrote petitioner a letter in which they claimed that
petitioner had committed "a material breach of that contract" by
defaulting on the contract's payment provisions, and notified
petitioner of the termination of the contract and the cancellation
of petitioner's right to use the trademark unless this claimed
default was remedied immediately. [
Footnote 10] When petitioner continued to deal with the
trademark despite the notice of termination, the respondents
brought an action based upon their view that a material breach of
contract had occurred.
Page 369 U. S. 475
The complaint filed in the District Court alleged, among other
things, that petitioner had "ceased paying . . . as required in the
contract;" that the default "under the said contract . . . [was] in
excess of $60,000.00;" that this default constituted a "material
breach" of that contract; that petitioner had been notified by
letter that its failure to pay as alleged made it guilty of a
material breach of contract which, if not "cured," would result in
an immediate cancellation of the contract; that the breach had not
been cured, but that petitioner was contesting the cancellation and
continuing to conduct business as an authorized dealer; that to
continue such business after the cancellation of the contract
constituted an infringement of the respondents' trademark; that
petitioner's financial condition was unstable; and that, because of
the foregoing allegations, respondents were threatened with
irreparable injury for which they had no adequate remedy at law.
The complaint then prayed for both temporary and permanent relief,
including: (1) temporary and permanent injunctions to restrain
petitioner from any future use of or dealing in the franchise and
the trademark; (2) an accounting to determine the exact amount of
money owing by petitioner and a judgment for that amount; and (3)
an injunction pending accounting to prevent petitioner from
collecting any money from "Dairy Queen" stores in the
territory.
In its answer to this complaint, petitioner raised a number of
defenses, including: (1) a denial that there had been any breach of
contract, apparently based chiefly upon its allegation that, in
January, 1955, the parties had entered into an oral agreement
modifying the original written contract by removing the provision
requiring minimum annual payments regardless of petitioner's
receipts, thus leaving petitioner's only obligation that of turning
over 50% of all its receipts; (2) laches and estoppel
Page 369 U. S. 476
arising from respondents' failure to assert their claim
promptly, thus permitting petitioner to expend large amounts of
money in the development of its right to use the trademark; and (3)
alleged violations of the antitrust laws by respondents in
connection with their dealings with the trademark. Petitioner
indorsed upon this answer a demand for trial by jury in accordance
with Rule 38(b) of the Federal Rules of Civil Procedure. [
Footnote 11]
Petitioner's contention, as set forth in its petition for
mandamus to the Court of Appeals and reiterated in its briefs
before this Court, is that, insofar as the complaint requests a
money judgment it presents a claim which is unquestionably legal.
We agree with that contention. The most natural construction of the
respondents' claim for a money judgment would seem to be that it is
a claim that they are entitled to recover whatever was owed them
under the contract as of the date of its purported termination,
plus damages for infringement of their trademark since that date.
Alternatively, the complaint could be construed to set forth a full
claim based upon both of these theories -- that is, a claim that
the respondents were entitled to recover both the debt due under
the contract and damages for trademark infringement for the entire
period of the alleged breach, including that before the termination
of the contract. [
Footnote
12] Or it might possibly be construed to set forth a claim for
recovery based completely on either one of these two theories --
that is, a claim
Page 369 U. S. 477
based solely upon the contract for the entire period both before
and after the attempted termination on the theory that the
termination, having been ignored, was of no consequence, or a claim
based solely upon the charge of infringement on the theory that the
contract, having been breached, could not be used as a defense to
an infringement action even for the period prior to its
termination. [
Footnote 13]
We find it unnecessary to resolve this ambiguity in the
respondents' complaint because we think it plain that their claim
for a money judgment is a claim wholly legal in its nature, however
the complaint is construed. As an action on a debt allegedly due
under a contract, it would be difficult to conceive of an action of
a more traditionally legal character. [
Footnote 14] And as an action for damages based upon a
charge of trademark infringement, it would be no less subject to
cognizance by a court of law. [
Footnote 15]
The respondents' contention that this money claim is "purely
equitable" is based primarily upon the fact that their complaint is
cast in terms of an "accounting," rather than in terms of an action
for "debt" or "damages." But the constitutional right to trial by
jury cannot be made
Page 369 U. S. 478
to depend upon the choice of words used in the pleadings. The
necessary prerequisite to the right to maintain a suit for an
equitable accounting, like all other equitable remedies, is, as we
pointed out in
Beacon Theatres, the absence of an adequate
remedy at law. [
Footnote 16]
Consequently, in order to maintain such a suit on a cause of action
cognizable at law, as this one is, the plaintiff must be able to
show that the "accounts between the parties" are of such a
"complicated nature" that only a court of equity can satisfactorily
unravel them. [
Footnote 17]
In view of the powers given to District Courts by Federal Rule of
Civil Procedure 53(b) to appoint masters to assist the jury in
those exceptional cases where the legal issues are too complicated
for the jury adequately to handle alone, [
Footnote 18] the burden of such a showing is
considerably increased, and it will indeed be a rare case in which
it can be met. [
Footnote 19]
But be that as it may, this is certainly
Page 369 U. S. 479
not such a case. A jury, under proper instructions from the
court, could readily determine the recovery, if any, to be had
here, whether the theory finally settled upon is that of breach of
contract, that of trademark infringement, or any combination of the
two. The legal remedy cannot be characterized as inadequate merely
because the measure of damages may necessitate a look into
petitioner's business records.
Nor is the legal claim here rendered "purely equitable" by the
nature of the defenses interposed by petitioner. Petitioner's
primary defense to the charge of breach of contract -- that is,
that the contract was modified by a subsequent oral agreement --
presents a purely legal question having nothing whatever to do
either with novation, as the district judge suggested, or
reformation, as suggested by the respondents here. Such a defense
goes to the question of just what, under the law, the contract
between the respondents and petitioner is and, in an action to
collect a debt for breach of a contract between these parties,
petitioner has a right to have the jury determine not only whether
the contract has been breached and the extent of the damages, if
any, but also just what the contract is.
We conclude therefore that the district judge erred in refusing
to grant petitioner's demand for a trial by jury on the factual
issues related to the question of whether there has been a breach
of contract. Since these issues are common with those upon which
respondents' claim to equitable relief is based, the legal claims
involved in the action must be determined prior to any final court
determination of respondents' equitable claims. [
Footnote 20] The Court
Page 369 U. S. 480
of Appeals should have corrected the error of the district judge
by granting the petition for mandamus. The judgment is therefore
reversed, and the cause remanded for further proceedings consistent
with this opinion.
Reversed and remanded.
MR. JUSTICE STEWART concurs in the result.
MR. JUSTICE FRANKFURTER took no part in the decision of this
case.
MR. JUSTICE WHITE took no part in the consideration or decision
of this case.
[
Footnote 1]
McCullough v. Dairy Queen, Inc., 194 F.
Supp. 686.
[
Footnote 2]
368 U.S. 874.
[
Footnote 3]
140 U. S. 140 U.S.
106,
140 U. S. 117.
See also Cates v. Allen, 149 U. S. 451, in
which the principles expressed and applied in
Scott v.
Neely were explicitly reaffirmed.
[
Footnote 4]
Id., at
140 U. S.
110.
[
Footnote 5]
"Subdivision (b) (of Rule 18) does not disturb the doctrine of
those cases [
Scott v. Neely and
Cates v. Allen],
but is expressly bottomed upon their principles. This is true
because the Federal Rules abolish the distinction between law and
equity, permit the joinder of legal and equitable claims, and
safeguard the right to jury trial of legal issues."
3 Moore, Federal Practice, 1831-1832.
[
Footnote 6]
359 U. S. 359 U.S.
500.
[
Footnote 7]
Id. at
359 U. S.
510-511.
[
Footnote 8]
"It is therefore immaterial that the case at bar contains a
stronger basis for equitable relief than was present in
Beacon
Theatres. It would make no difference if the equitable cause
clearly outweighed the legal cause, so that the basic issue of the
case, taken as a whole, is equitable. As long as any legal cause is
involved, the jury rights it creates control. This is the teaching
of
Beacon Theatres, as we construe it."
Thermo-Stitch, Inc. v. Chemi-Cord Processing Corp., 294
F.2d 486, 491.
[
Footnote 9]
There are two groups of respondents in this case. in addition to
the district judge. who is formally a respondent by reason of the
procedural posture of the case. H. A. McCullough and H. F.
McCullough, a partnership doing business as McCulough's Dairy
Queen, are the owners of the trademark and are entitled under the
contract to payment for its use. B. F. Myers, R. J. Rydeen, M. E.
Montgomery, and H. S. Dale are the original licensees under the
contract, through whom petitioner obtained its rights by
assignment. This latter group of respondents joined in the action
against petitioner on the grounds (1) that they would be
responsible to the trademark owners if petitioner defaulted on its
obligations under the contract, and (2) that they are themselves
entitled to certain royalties under the assignment arrangement.
Since the portion of the complaint involving this latter group
raises no issues relevant to the question to be determined here
which differ from those raised in that part of the complaint
involving the trademark owners, the discussion can be restricted to
the issues raised by the trademark owners, and "respondents," as
used in this opinion, will refer only to that group.
[
Footnote 10]
The full text of the letter sent to petitioner is as
follows:
"This letter is to advise you that your failure to pay the
amounts required in your contract with McCullough's Dairy Queen for
the 'Dairy Queen' franchise for the State of Pennsylvania, as
called for in your contract with your assignors, constitutes in our
opinion a material breach of that contract."
"This will advise you that unless this material breach is
completely satisfied for the amount due and owing, your franchise
for 'Dairy Queen' in Pennsylvania is hereby cancelled."
"Copies of this letter are being sent to your assignors."
[
Footnote 11]
"Any party may demand a trial by jury of any issue triable of
right by a jury by serving upon the other parties a demand therefor
in writing at any time after the commencement of the action and not
later than 10 days after the service of the last pleading directed
to such issue. Such demand may be indorsed upon a pleading of the
party."
[
Footnote 12]
This seems to be the construction given the complaint by the
district judge in passing on the motion to strike petitioner's jury
demand.
See 194 F. Supp. at 687-688.
[
Footnote 13]
This last possible construction of the complaint, though
accepted as the correct one in the concurring opinion, actually
seems the least likely of all. For it seems plain that,
irrespective of whatever else the complaint sought, it did seek a
judgment for the some $60,000 allegedly owing under the contract.
Certainly the district judge had no doubt that this was the case:
"Incidental to this relief, the complaint also demands the $60,000
now allegedly due and owing plaintiffs under the aforesaid
contract." 194 F. Supp. at 687.
[
Footnote 14]
"In the case before us, the debt due the complainants was in no
respect different from any other debt upon contract. It was the
subject of a legal action only, in which the defendants were
entitled to a jury trial in the federal courts."
Scott v. Neely, 140 U. S. 106,
140 U. S. 110.
See also Thompson v. Railroad
Companies, 6 Wall. 134.
[
Footnote 15]
Cf., e.g., Arnstein v. Porter, 154 F.2d 464;
Bruckman v. Hollzer, 152 F.2d 730.
[
Footnote 16]
359 U.S. at
359 U. S.
506-510.
See also Thompson v. Railroad
Companies, 6 Wall, 134,
73 U. S. 137;
Scott v. Neely, 140 U. S. 106,
140 U. S.
110.
[
Footnote 17]
Kirby v. Lake Shore & Michigan Southern R. Co.,
120 U. S. 130,
120 U. S.
134.
[
Footnote 18]
Even this limited inroad upon the right to trial by jury "should
seldom be made, and if at all only when unusual circumstances
exist."
La Buy v. Howes Leather Co., 352 U.
S. 249,
352 U. S. 258.
See also In re Watkins, 271 F.2d 771.
[
Footnote 19]
It was settled in
Beacon Theatres that procedural
changes which remove the inadequacy of a remedy at law may sharply
diminish the scope of traditional equitable remedies by making them
unnecessary in many cases.
"Thus, the justification for equity's deciding legal issues once
it obtains jurisdiction, and refusing to dismiss a case, merely
because subsequently a legal remedy becomes available, must be
reevaluated in the light of the liberal joinder provisions of the
Federal Rules, which allow legal and equitable causes to be brought
and resolved in one civil action. Similarly, the need for, and
therefore, the availability of, such equitable remedies as Bills of
Peace,
Quia Timet, and Injunction must be reconsidered in
view of the existence of the Declaratory Judgment Act, as well as
the liberal joinder provision of the Rules."
359 U.S. at
359 U. S.
509.
[
Footnote 20]
This does not, of course, interfere with the District Court's
power to grant temporary relief pending a final adjudication on the
merits. Such temporary relief has already been granted in this case
(
see McCullough v. Dairy Queen, Inc., 290 F.2d 871), and
is no part of the issues before this Court.
MR. JUSTICE HARLAN, whom MR. JUSTICE DOUGLAS joins,
concurring.
I am disposed to accept the view, strongly pressed at the bar,
that this complaint seeks an accounting for alleged trademark
infringement, rather than contract damages. Even though this leaves
the complaint as formally asking only for equitable relief,
* this does not
end the inquiry. The fact that an "accounting" is sought is not, of
itself, dispositive of the jury trial issue. To render this aspect
of the complaint truly "equitable," it must appear that the
substantive claim is one cognizable only in equity, or that the
"accounts between the parties" are of such a "complicated nature"
that they can be satisfactorily unraveled only by a court of
equity.
Kirby v. Lake Shore & Michigan Southern R.
Co., 120 U. S. 130,
120 U. S. 134.
See 5 Moore, Federal Practice (1951) 198-202. It is
manifest from the face of the complaint that the "accounting"
sought in this instance is not of either variety. A jury, under
proper instructions from the court, could readily calculate the
damages flowing from this alleged
Page 369 U. S. 481
trademark infringement, just as courts of law often do in
copyright and patent cases.
Cf., e.g., Hartell v.
Tilghman, 99 U. S. 547,
99 U. S. 555;
Arnstein v. Porter, 154 F.2d 464;
Bruckman v.
Hollzer, 152 F.2d 730.
Consequently, what is involved in this case is nothing more than
a joinder in one complaint of prayers for both legal and equitable
relief. In such circumstances, under principles long since
established,
Scott v. Neely, 140 U.
S. 106,
140 U. S. 110,
the petitioner cannot be deprived of his constitutional right to a
jury trial on the "legal" claim contained in the complaint.
On this basis, I concur in the judgment of the Court.
* Except as to the damage claim, there is no dispute but that
the complaint seeks only equitable relief.