Petition — Illinois Tool Works, Inc. v. Grip-Pak, Inc.

Office-Supreme Court, U.S.

8 9 1 6 65 ee

APR 11 1983

ALEXANDER L STEVAS,

CLERK

No.

iN THE

Supreme Court of the Cnited States

Octroser Term, 1982

ILLINOIS TOOL WORKS, INC.,

Petitioner,

Vv.

GRIP-PAK, INC.,

Respondent.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Baru E. Potiock

8000 Sears Tower

Chicago, Hlinois 60606

(312) 876-8000

Counsel of Record

for Petitioner

SONNENSCHEIN CARLIN

Nata & RosentTHAL

8000 Sears Tower

Chicago, Illinois 60606

Of Counsel

i

QUESTIONS PRESENTED FOR REVIEW

In an earlier action in the Illinois courts, petitioner

Illinois Tool Works Ine. (“ITW”) sued _ respondent

Grip-Pak, Inc. (“Grip-Pak”) to bar misappropriation of

ITW’s trade secrets. The state trial court denied relief but

also rejected Grip-Pak’s claim that ITW’s action had been

brought maliciously. The court expressly found that ITW’s

“bringing and prosecuting this case was not malicious”.

Respondent did not appeal that non-malice finding, but

instead instituted this federal antitrust action claiming that

petitioner’s state-court action violated the Sherman Act and

caused it injury.

The questions presented are:

1. Whether under the Noerr-Pennington doctrine a

state-court action, brought with probable cause and not

maliciously, can be deprived of its First Amendment

protection solely on the basis of the state-court plain-

tiff’s alleged anti-competitive intent.

2. Whether the state court’s non-malice finding can

be denied full faith and credit under 28 U.S.C. § 1738

and this Court’s decision in Kremer v. Chemical Con-

struction Corp., 102 S.Ct. 1883 (1982).

TABLE OF CONTENTS

PAGE

Questions Presented For Review ........... 0.000005 i

Eg ci casccncccussccccscvecessces iv

cannes se esss soe e ss cncnvevtyose 1

ES 2

Constitutional and Statutory Provisions Involved ... 2

DMN case cs cccccccccevccceecvesse 2

NY dn ade 5 04.56.6506 000040 seveceeess 2

B. The Prior State Court Litigation .............. 3

C. The Proceedings Below .............0sceeeees 4

Reasons for Granting the Writ ......... 0.0.00 0 cues 6

I. The Interpretation Below Of The First Amend-

ment And The Noerr-Pennington Doctrine Is In

Direct Conflict With The Decisions Of This Court

And Other Courts Of Appeals .................

A.

The Ruling Below That A Lawsuit Brought

With Probable Cause May Be Actionable,

Based Solely On Subjective Anti-Competitive

Purpose, Conflicts With This Court’s De-

cision In California Motor Transport .......

. The Decision Below Is In Direct Conflict With

Recent Decisions Of Other Courts of Appeals

. The Test Adopted Below Is Unworkable And

Undermines First Amendment Rights To

Petition and Free Speech ............600065

. Contrary To The Premise Of The Decision

Below, An Improper Subjective Purpose For

Bringing Litigation Is Wholly Insufficient To

Establish The Tort Of Abuse Of Process ....

6

14

iii

PAGE

Il. The Decision Below Denying Full Faith And

Credit To The State Court’s Judgment Is In Con-

flict With Decisions Of This Court ............ 15

I co's 0s54040csceneteaee¥arataeattaneusun 17

Appendices :

A—Opinion of the United States Court of Appeals

SOP CS OVEN COM ig vsidiscccesvcverseans A-l

B—Order of the United States Court of Appeals for

WO TIOVOUE CRPOUEE ovccccccccccbeasecccudsns A-19

(—Opinion of the United States District Court for

the Northern District of Illinois ............... A-20

iv

TABLE OF AUTHORITIES

Cases

Alexander v. National Farmers Organization, 687 F.2d

1173 (8th Cir. 1982), pet. for cert. pending (Dkt.

DEE Coe Gevechientasacesdhaeteebpenteseecea

Associated Radio Service Co. v. Page Airways, Inc.,

624 F.2d 1342 (5th Cir. 1980), cert. denied, 450 U.S.

EE ced eyeavie ea akuchwiskiosieiscvesss

California Motor Transport Co. v. Trucking Unlimited,

ee EEE, cases Nae dukes van uRe ey sehen

Clipper Exxpress v. Rocky Mountain Motor Traffic

Bureau, 690 F.2d 1240 (9th Cir. 1982), cert. denied,

51 U.S.L.W. 3607 (U.S. Feb. 22, 1983) ............

Dairy Foods Inc. v. Dairy Maid Products Cooperative,

Be Ween See (70e Cle, BOGE). vcdccsccnecscccccenes

Eastern Railroad Presidents Conference v. Noerr

Motor Freight, Inc., 365 U.S. 127 (1961) ..........

Energy Conservation, Inc. v. Heliodyne, Inc., 1982-83

Trade Cases {[ 65,179 (9th Cir. 1983) ..............

Franchise Realty Interstate Corp. v. San Francisco

Local Joint Executive Board of Culinary Workers,

542 F.2d 1076 (9th Cir. 1976), cert. denied, 430 U.S.

EE ria tudadasoWankhesukeue’ sense eetonce

Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986 (9th Cir.

1979), cert. denied, 444 U.S. 1025 (1980) ..........

Holiday Magic, Inc. v. Seott, 4 Ill. App. 3d 962, 282

EE CREED 0 koe eden inenteccedscvesouresee

Hydro-Tech Corp. v. Sundstrand Corp., 673 F.2d 1171

EE Civ den Gesdanneatvaccnes canines

PAGE

1

6,7, 10, 11

15

Vv

PAGE

Illinois Tool Works, Ine. v. Kovae, 43 Ill. App. 3d 789,

Se CMD cc cence tcccrcnccescccecccce

International Telephone & Telegraph Corp. v. United

Telephone Company of Florida, 550 F.2d 287 (5th

Guage c Cee ncecdwnseeseenvescases

Kobe, Ine. v. Dempsey Pump Co., 198 F.2d 416 (10th

Cir.), cert. denied, 344 U.S. 837 (1952) ............

Kremer v. Chemical Construction Corp., 102 S.Ct. 1883

Eales So cmnb ee bases ve bee bb eceeeenns

Litton Industries v. AT&T Co., 1982-83 Trade Cases

GE Cae CE, BOTIED coc ccccccccccccccccscccess

MCI Communications Corp. v. AT&T Co., 1982-83

Trade Cases { 65,137 (7th Cir. 1983) ..........008.

Rex Chainbelt Inc. v. Harco Products, Inc., 512 F.2d

993 (9th Cir.), cert. denied, 423 U.S. 831 (1975) ...

Taylor Drug Stores, Ine. v. Associated Dry Goods

Corp., 560 F.2d 211 (6th Cir. 1977) 2.0... eee.

Underwriters National Assurance Co. v. North Caro-

lina Life and Accident and Health Insurance Guar-

anty Assn., 455 U.S. 691 (1982) ............eeeees

United Mine Workers of America v. Pennington, 381

ES cuicessey ens eae sses0006s seanenans

Statutes and Constitutional Provisions

EEE sc chsh es heekeecenssesceeanedeace

ee ee eer rer

Ill. Rev. Stat. ch. 110, § 41 (1973) 2.0.0... 00.

Sherman Act § 2, 15 U.S.C. §2 0.0... 0. ccc cece cee eee

ee I, CE icesc es ekectnnedecebevveenense

U.S. Supreme Court Rule 28.1 ..............ceeeees

12

10

i, 16,17

11

14

10

11

17

6, 10,11

vi

PAGE

Other Authorities

P. Areeda, Antitrust Law { 203.la (Supp. 1982) .... 8

Balmer, Sham Litigation and the Antitrust Laws, 29

EE a 7, 8,15

Bork, The Antitrust Paradox (1978) .............4.. 7,8

Fischel, Antitrust Liability for Attempts to Influence

Government Action: The Basis and Limits of the

Noerr-Pennington Doctrine, 45 U. Chi. L. Rev. 80

each Gana Shaun b kena F404 Cave edéeseee 7, 8, 10

Note, Limiting The Antitrust Immunity For Concerted

Attempts To Influence Courts And Adjudicatory

Agencies: Analogies To Malicious Prosecution And

Abuse Of Process, 86 Harv. L. Rev. 715 (1973) .... 15

R. Posner, Antitrust Law: An Economic Perspective

(1976) oo cceccscrccccescvccsccvescssssscccscege 1d-E

IN THE

Hupreme Court of the United States

Octoser Tero, 1982

ILLINOIS TOOL WORKS, INC.,

Petitioner,

v.

GRIP-PAK, INC.,

Respondent.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Petitioner prays that a writ of certiorari issue to review

the judgment and opinion of the United States Court of

Appeals for the Seventh Circuit entered in this action on

November 24, 1982, reversing an order of the District Court

granting summary judgment in favor of petitioner.

OPINIONS BELOW

The opinion of the Court of Appeals is reported at 694

F.2d 466 (7th Cir. 1982) and is reproduced in Appendix A.

The order of the Court of Appeals denying rehearing and

amending its opinion is reproduced in Appendix B. The

memorandum opinion and order of the District Court is

unofficially reported at 1982-1 Trade Cases {| 64,451 (N.D.

Ill. 1981) and is reproduced in Appendix C. (The Appen-

dices are referred to herein as, e.g., “App. A, p. __”.)

2

JURISDICTION

The final judgment of the Court of Appeals was entered

on November 24, 1982. The Court of Appeals denied peti-

tioner’s petition for rehearing on January 12, 1983. The

jurisdiction of this Court is invoked under 28 U.S.C.

§ 1254(1).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The First Amendment to the United States Constitution

provides:

Congress shall make no law respecting an establishment

of religion, or prohibiting the free exercise thereof;

or abridging the freedom of speech, or of the press; or

the right of the people peaceably to assemble, and to

petition the Government for a redress of grievances.

28 U.S.C. § 1738 provides in pertinent part:

The records and judicial proceedings of any Court of

any such State, Territory or Possession . . . shall have

the same full faith and credit in every court within the

United States and its Territories and Possessions as

they have by law or usage in the courts of such State,

Territory or Possession from which they are taken.

STATEMENT OF THE CASE

A. The Parties

Since 1960 petitioner ITW' has manufactured and

marketed a plastic multi-pack carrier known as the “Hi-

1 Pursuant to Rule 28.1 of the Rules of the Supreme Court, as

amended, petitioner provides the following information about its

subsidiaries (except wholly-owned subsidiaries) and affiliates: Pack-

aging Leasing Systems Inc.; Arrendadora Tlalnepantla, S.A. de

C.V.; Envases Multipac, S.A. de C.V.; INCAP-Industria de Carre-

gadores Plasticos S.A.; Inmobiliaria Cit., 8.A. de C.V.; ITW Mapri

Industria e Comercio Ltda.; Multipak de Venezuela C.A.; Nifco

Inc.; Nihon Deveon Kabushiki Kaisha; and Ricks Exploration Com-

pany.

3

Cone” carrier. Plastic multi-pack carriers are devices used

for holding together clusters of containers (primarily the

familiar plastic holder of “six-packs” of canned beer and

other beverages).

The two principals of respondent Grip-Pak, Michael

Kovac and Ernest Cunningham, were formerly employed

by ITW. They formed Grip-Pak in March 1972.

B. The Prior State Court Litigation

In May 1973 ITW brought suit for injunctive relief in

the Circuit Court of Lake County, Illinois, seeking to

enjoin Grip-Pak, Kovac, and Cunningham from wrongfully

appropriating ITW proprietary rights based on secrets

and confidences which were obtained by Kovac and Cun-

ningham in the course of their employment by ITW.

In its answer Grip-Pak sought a declaration that ITW

had brought the suit maliciously. During the course of the

trial, the state judge denied leave to Grip-Pak to amend

its counterclaim to seek damages for such alleged malicious

prosecution, but Grip-Pak’s malice allegation was not

stricken and Grip-Pak’s attorney represented to Judge

Van Deusen “that the proof is already in relative to the

factual evidence, the evidentiary evidence which will sup-

port our claim of malice”. Grip-Pak’s attorney also argued

the malice issue in his closing statement and, at the con-

clusion of the trial, Grip-Pak asked the court to find that

“the allegations of [ITW’s] complaint were made without

reasonable cause and not in good faith and were untrue and

{ITW’s] prosecution of this action was malicious” (Grip-

Pak’s Proposed Judgment). Similarly, in Grip-Pak’s Pro-

posed Findings of Fact ({] 1.1), Grip-Pak stated that it was

seeking “a determination that this action was maliciously

filed and prosecuted by plaintiff.” In Grip-Pak’s Proposed

Conclusions of Law (13), Grip-Pak also asked the court

4

to conclude that “[p]laintiff’s bringing and prosecuting this

lawsuit was malicious.”

The state judge declined to sustain IT W’s charges against

Grip-Pak, but expressly rejected Grip-Pak’s malice claim.

Instead, in 9 of his judgment order, the state judge ruled

that “[t)he plaintiff’s bringing and prosecuting this case

was not malicious.” (Italics added.) Grip-Pak did not ap-

peal this ruling.

In addition, in a post-trial motion, Grip-Pak sought the

Illinois statutory remedy for the costs of defending against

allegations made “without reasonable cause and not in good

faith, and found to be untrue.” Ill. Rev. Stat. ch. 110, § 41

(1973). The trial judge denied Grip-Pak’s motion, and on

appeal the Illinois Appellate Court affirmed. The Appellate

Court held that (with one exception relating to failure to

proceed with a noticed deposition) “we are unable to say

that [the trial judge] abused his discretion in denying that

motion.” Illinois Tool Works, Inc. v. Kovac, 43 Il. App. 3d

789, 799, 357 N.E.2d 639, 646 (1976). Grip-Pak’s petition

for review of that ruling was denied by the Illinois Supreme

Court.

C. The Proceedings Below

Approximately two weeks after the Lllinois Supreme

Court’s denial of Grip-Pak’s petition, and relying primarily

on ITW’s unsuccessful state court action and in particular

on the state court’s findings that it had not wrongfully

appropriated ITW’s secrets and confidences (Complaint,

1 17(d)(1)), Grip-Pak brought this private antitrust suit.

The complaint charges inter alia that ITW had brought the

state-court suit to monopolize and attempt to monopolize

the “plastic multi-pack carrier market” in violation of Sece-

tion 2 of the Sherman Act (915). On that basis Grip-Pak

reiterates its claim (rejected by the state court) that it is

5

entitled to reimbursement for its costs of defending the

state suit and also seeks other damages based on the state

suit.

On ITW’s motion for summary judgment, with respect

to Grip-Pak’s claim of injury based on the state court suit,

the District Court held that such a recovery was barred by

the First Amendment under the Noerr-Pennington doctrine

since the state court in that very proceeding had expressly

found that ITW’s “bringing and prosecuting this case was

not malicious” and had specifically rejected Grip-Pak’s

claim of bad faith. The Court found “. . . that the issue of

whether ITW’s bringing the state court suit was a sham

and constituted baseless litigation, was indeed decided in

that same state court suit” and held “That plaintiffs are

in fact and at law estopped from pursuing here the ques-

tion of ‘sham litigation’ in the state case” and “... that the

state court suit did not constitute sham litigation”. (App.

C, pp. 21, 23.)

On appeal, without even any mention of the “sham liti-

gation” exception, the Court of Appeals reversed. In addi-

tion to disagreeing with the application of collateral

estoppel (App. A, pp. 4-6), the panel concluded that—even

if the state court judgment was entitled to collateral es-

toppel effect, and even if ITW had probable cause for

bringing the state suit—the state suit was not thereby

protected by the First Amendment under the Noerr-

Pennington doctrine. The controlling test, the Court held,

was the plaintiff’s subjective purpose for bringing the

challenged litigation, regardless of whether it had probable

cause for doing so. (App. A, pp. 10-11.)

6

REASONS FOR GRANTING THE WRIT

I

The Interpretation Below Of The First Amendment And

The Noerr-Pennington Doctrine Is In Direct Conflict

With The Decisions Of This Court And Other Courts Of

Appeals.

The decision below sets forth a wholly novel test denying

First Amendment protection under the Noerr-Pennington

doctrine’ to litigation brought with probable cause and is

in conflict with this Court’s decision in California Motor

Transport Co. v. Trucking Unlimited, 404 U.S. 508 (1972).

The decision below is also in direct conflict with the deci-

sions of other Circuits, including the recent decisions of the

Eighth Circuit in Alexander v. National Farmers Organi-

zation, 687 F.2d 1173 (8th Cir. 1982), pet. for cert. pending

(Dkt. 82-1324), and the Tenth Cireuit in Hydro-Tech Corp.

v. Sundstrand Corp., 673 F.2d 1171 (10th Cir. 1982). In

addition, the opinion adopts an unworkable test which

would not only chill but would effectively abrogate First

Amendment rights to seek redress in the courts.

A. The Ruling Below That A Lawsuit Brought With Prob-

able Cause May Be Actionable, Based Solely On Sub-

jective Anti-Competitive Purpose, Conflicts With This

Court’s Decision In California Motor Transport.

Until the decision below, and ever since this Court’s de-

cision in California Motor Transport, it has been axiomatic

(i) that litigation is protected by the First Amendment un-

der the Noerr-Pennington doctrine unless the litigation falls

within the “sham exception” and (ii) that otherwise pro-

tected activity does not fall within the “sham exception”

2 Eastern Railroad Presidents Conference v. Noerr Motor Freight,

Inc., 365 U.S. 127 (1961); United Mine Workers of America v.

Pennington, 381 U.S. 657 (1965).

7

because of an anti-competitive purpose.’ In utter disregard

of these established principles (and without even a single

mention of the “sham exception”), the decision below pro-

ceeds de novo to hold that litigation—even though brought

with probable cause—is unprotected by Noerr-Pennington

depending solely on inquiry into the plaintiff’s subjective

purpose.

In California Motor Transport this Court extended the

Noerr-Pennington doctrine to the adjudicatory setting and

placed this protection—contrary to intimations in the opin-

ion below (see App. A, p. 8)—on solid First Amendment

footing. It held that the “right of access to the .. . courts

is part of the right to petition protected by the First

Amendment.” (404 U.S. at 513; see also pp. 510-11.)

In Noerr and again in California Motor Transport, this

Court recognized a narrow exception to such First Amend-

ment protection—i.e., attempts to influence governmental

action may be actionable under the antitrust laws where

they are a “mere sham”. In California Motor Transport,

this Court found that an alleged conspiratorial “pattern

of baseless, repetitive claims”-—brought with complete in-

difference as to whether there was probable cause for doing

so, “and regardless of the merits of the cases’, to harass

and deter competitors from having access to agencies and

courts—could constitute a “mere sham”. (404 U.S. at 512,

513, italics added.) The Court also cited other examples of

“illegal and reprehensible practices which may corrupt

the administrative or judicial processes” and which also

may fall within the “sham exception”. (404 U.S. at 513,

italics added. )

3 See, e.g., Fischel, Antitrust Liability for Attempts to Influence

Government Action: The Basis and Limits of the N.rr-Pennington

Doctrine, 45 U. Chi. L. Rev. 80, 104-113 (1977); Balmer, Sham

Litigation and the Antitrust Laws, 29 Buffalo L. Rev. 39, 41-46

(1980); Bork, The Antitrust Paradox (1978), pp. 349-357.

8

As stated by Judge (then Professor) Robert Bork in

summarizing California Motor Transport:

“Regardless of intent, parties can be held liable only

if they employ means of influencing governmental ac-

tien that are in themselves illegal or reprehensible. . . .

Had [the California Motor Transport defendants] em-

ployed other means (e.g., individually opposing appli-

cants only where the defendants in opposition had

reasonable cause for his position), there could have

been no Sherman Act liability.”

Bork, The Antitrust Paradox (1978), p. 359 (italics added).

See also Balmer, Sham Litigation and the Antitrust Laws,

29 Buffalo L. Rev. 39, 41, 66 (1980); Fischel, Antitrust

Liability for Attempts to Influence Government Action:

The Basis and Limits of the Noerr-Pennington Doctrine,

45 U. Chi. L. Rev. 80, 104-113 (1977); P. Areeda, Antitrust

Law {| 203.la (Supp. 1982).

According to the decision below, however, the existence

of “reasonable cause” and the avoidance of “illegal or rep-

rehensible” means will not give Noerr-Pennington protec-

tion to the prior suit. Such a view ignores, and fundamen-

tally conflicts with, California Motor Transport.

Indeed, the decision below does not interpret California

Motor; it virtually flouts it. The opinion characterizes the

principle protecting litigation under the First Amendment

as merely what “[s]ome decisions state”—citing this Court’s

decision in California Motor. (App. A, p. 7; App. B.) And,

as noted, the opinion below does not even ‘mention the

“sham exception”, the applicability of which was the

Noerr-Pennington issue decided by the District Court and

briefed and argued below. Such silence is perhaps net too

surprising, since it is difficult to conceive how a non-mali-

cious suit brought with probable cause could possibly be

characterized as a “mere sham”.

9

B. The Decision Below Is In Direct Conflict With Recent

Decisions Of Other Courts Of Appeals.

As the opinion itself acknowledges (App. A, p. 11), the

decision conflicts with the Eighth Circuit’s recent decision in

Alexander v. National Farmers Organization, 687 F.2d 1173

(8th Cir. 1982), pet. for cert. pending (Dkt. 82-1324). In

Alexander, the Eighth Circuit found that lawsuits brought

by milk cooperatives against NFO, not for their own sake,

but instead to pursue other 4 als (precisely of the type

mentioned in the opinion below—App. A, pp. 9-10), were

nonetheless protected by Noerr-Pennington. The Court

stated (687 F.2d at 1200) :

“We recognize that the litigation directly against

NFO was intended in part to hamper NFO’s ability to

compete. The burdensome cost of the litigation was

one factor. Notes from internal AMPI meetings and

corroborating testimony show, for example, that senior

AMPI officials considered sponsorship of additional

third-party litigation against NFO in the hope that the

added cost of such litigation would ‘break NFO’s back.’

Such third-party litigation was filed and was conducted

by the same attorneys who represented AMPI, al-

though the record does not clearly establish that it was

brought in bad faith. Other evidence as to the goal of

the litigation is that when Mid-Am commenced its ac-

tion, it intended to have its membership certified as a

class so as to restrict communication by NFO with

Mid-Am’s members during the pendency of the litiga-

tion. Mid-Am’s action was also selectively directed at

NFO: Mid-Am did not bring actions against other

co-ops that the court found had solicited Mid-Am mem-

bers to breach their Mid-Am marketing contracts. .. .

“Notwithstanding the foregoing evidence of intent,

we cannot say that the legal claims against NFO were

so groundless as to come within the ‘sham litigation’

exception to the Noerr-Pennington doctrine. There

were genuine disputes regarding NFO’s solicitation

methods. Thus, in our view, the direct litigation against

10

NFO is not actionable as an antitrust violation.” (Foot-

note and citation omitted. )*

The decision below also conflicts with the Tenth Circuit's

recent decision in Hydro-Tech Corp. v. Sundstrand Corp.,

673 F.2d 1171 (10th Cir. 1982), dealing with an almost pre-

cisely parallel factual situation—-a prior suit brought by

the antitrust defendant against an ex-employee’s company

for misappropriation of proprietary rights. The Tenth Cir-

cuit (affirming the grant of a pre-trial motion to dismiss)

held “that the prosecution of a lawsuit, albeit without prob-

able cause and for an anticompetitive purpose, is actively

protected by the first amendment and therefore immune

from attack under the antitrust laws” (p. 1172, italics

added).

According to the Tenth Circuit, after reviewing this

Court’s decisions, “It cannot be said, therefore, that the

filing of a lawsuit is transformed into a ‘sham’ merely

because the primary intent of the lawsuit’s instigator is to

do harm to the business of a competitor” (p. 1175), and

“[T )he filing of a lawsuit, albeit without probable cause and

with an anticompetitive intent” simply does not rise “to

the category of an abuse of the judicial process” (p. 1176

* Although acknowledging that the Eighth Circuit decision in

Alezander, supra, “appears to be to the contrary” (App. A, p. 11),

the Court below relied on the 30-year-old opinion in Kobe, Inc. v.

Dempsey Pump Co., 198 F.2d 416 (10th Cir.), cert. denied, 344

U.S. 837 (1952). Kobe does not remotely support a proposition that

litigation is actionable solely on the basis of the plaintiff's subjective

purpose. In any event, Kobe was decided long before both Noerr

and California Motor Transport (and before the same Circuit's

recent decision in Hydro-Tech, supra). See Fischel, supra, note 3,

p. 113, pointing out that “. .. the Kobe doctrine . . . is presently of

doubtful validity”.

The other cases cited below on this issue (App. A, p. 11) are

wholly inapposite. Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986

(9th Cir. 1979), cert. denied, 444 U.S. 1025 (1980), involved a prior

suit brought without probable cause. Rez Chainbelt Inc. v. Harco

Products, Inc., 512 F.2d 993 (9th Cir.), cert. denied, 423 U.S. 831

(1975), does not even mention Noerr, Pennington, or California

11

n.6; italics added). Moreover, “the term ‘sham’ is some-

thing more than a mere ‘absence of probable cause’”; it

“means misuse or corruption of the judicial process”. (673

F.2d at 1176-77.)°

The Ninth Cireuit adopted a similar rationale in its

recent decision in Clipper Exaxpress v. Rocky Mountain

Motor Traffic Bureau, 690 F.2d 1240, 1254 (9th Cir. 1982),

cert. denied, 51 U.S.L.W. 3607 (U.S. Feb. 22, 1983). Al-

though denying Noerr-Pennington protection there because

the defendants’ “[b]aseless protests [had heen] instituted

without regard to merit” (italics added), the Court spe-

cifically recognized that “The fact that their intent [for

filing the protests] was to prevent price competition by

Clipper is not determinative.”

Accord, e.g., Litton Industries v. AT&T Co., 1982-83

Trade Cases {| 65,194 at p. 71,779 (2d Cir. 1983) (test is

whether plaintiff had a “reasonable expectation of obtain-

ing the favorable ruling”); Taylor Drug Stores, Inc. v.

Associated Dry Goods Corp., 560 F.2d 211, 213-14 (6th Cir.

Motor Transport. Similarly, Dairy Foods Inc. vy. Dairy Maid

Products Cooperative, 297 F.2d 805 (7th Cir. 1961), was decided

four years before Pennington and eleven years before California

Motor Transport and does not even refer to Noerr or a Noerr issue.

5 The Tenth Circuit also made plain that the requisite “abuse”

consists of more than an improper motive or intent (673 F.2d at

1176 n.6) :

“In California Motor Transport, the Court outlined types of

abuses of the judicial process which would give rise to a cause

of action under the antitrust laws. The Court mentioned per-

jury, use of a patent obtained by fraud to exclude a com-

petitor from the market, bribery, conspiracy with a licensing

official, and ‘a pattern of baseless, repetitive claims’ as examples

of such abuses, 404 U.S. at 512-13, 92 S.Ct. 612-13. We believe

that while these activities are only examples of the types of

activities not protected by the first amendment, and, therefore,

do not comprise an exclusive list, the listing thereof evidences

the Court’s intent to require some abuse of the judicial process

as a prerequisite to prosecution under the antitrust laws.”’

12

1977) ; International Telephone & Telegraph Corp. v. United

Telephone Company of Florida, 550 F.2d 287, 289 (5th Cir.

1977).

Yet, in the instant case, the Court below has ruled—in

direct conflict with decisions of other Circuits—that a

lawsuit brought with probable cause and wnaccompanied

by any “illegal or reprehensible” conduct is nevertheless

subject to antitrust attack despite its First Amendment

protection solely on the basis of a claim of an improper

anti-competitive intent.

C. The Test Adopted Below Is Unworkable And Under-

mines First Amendment Rights To Petition And Free

Speech.

The Court below recognized that its examples of “anti-

competitive litigation” may be regarded by some as “fanci-

ful” and that in all of them “the evidentiary problems of

disentangling real from professed motives would be acute”.

(App. A, p. 10.) Nonetheless, it sets forth a standard

which turns only on the “purpose” and which does not

require proof of abusive collateral conduct directed at

achieving the improper “purpose”—even where a case is

brought with probable cause.

A test is therefore adopted which is admittedly difficult

to apply and promises little benefit, but in its application

would exact high costs from both litigants and the judicial

system. Because the test is subjective, antitrust claims based

on “anti-competitive litigation” will be easy to allege and

may be hard to dismiss. Where a non-baseless suit is brought

with probable cause and without abusive conduct, how is

the subjective “purpose” to be ascertained? How can that

inquiry be made without itself punishing the prior resort

to the courts and necessarily chilling the exercise of First

Amendment rights? To say that access to courts is a right

13

which is protected by the First Amendment, but can be

vindicated only under a subjective test possibly requiring

five to ten years of additional litigation, is to sap the right of

any substance altogether.

Indeed, notwithstanding current bulging dockets, the

panel’s test virtually invites the filing of a federal antitrust

action after (and possibly during) any business litigation

between competitors. And, in these circumstances, firms

knowing that prosecution of a lawsuit against a competitor

may well result in expensive antitrust litigation could “feel

pressured to forego the exercise of [their] first amendment

right to petition courts.” Hydro-Tech Cerp. v. Sundstrand

Corp., supra, 673 F.2d at 1177 n.8. See also Franchise Realty

Interstate Corp. v. San Francisco Local Joint Executive

Board of Culinary Workers, 542 F.2d 1076, 1082 (9th Cir.

1976), cert. denied, 430 U.S. 940 (1977); Handgards, Inc.

v. Ethicon, Inc., 601 F.2d 986, 996 (9th Cir. 1979), cert.

denied, 444 U.S. 1025 (1980).

Even in a non-constitutional context, the author of the

opinion below has previously pointed out the illusory and

hazardous nature of such a test:

“Moreover, the dependence of this approach on evidence

of intent is a considerable limitation on its utility. It is

extraordinarily difficult to ascertain the intent of a

large corporation by the methods of litigation. What

juries (and many judges) do not understand is that the

availability of evidence of improper intent is often a

function of luck and of the defendant’s legal sophisti-

cation, not of the underlying reality. A firm with execu-

tives sensitized to antitrust problems will not leave any

documentary trail of improper intent; one whose execu-

tives lack this sensitivity will often create rich evidence

of such intent simply by the clumsy choice of words to

describe innocent behavior. ... Any doctrine that relies

upon proof of intent is going to be applied erratically at

best.”

14

R. Posner, Antitrust Law: An Economic Perspective 189-90

(1976).°

Surely, if a test based solely on intent is unworkable in

a non-constitutional context, it can only be regarded as

calamitous when First Amendment rights are at stake.

D. Contrary To The Premise Of The Decision Below, An

Improper Subjective Purpose For Bringing Litigation

Is Wholly Insufficient To Establish The Tort Of Abuse

Of Process.

The effort of the Court below to justify its novel test in

terms of the state-law tort of abuse of process (App. A,

pp. 7-10) is based on a misconception of the elements of that

tort. Contrary to the Court’s analysis, in order to establish

such an abuse of process, an improper subjective purpose

is clearly insufficient.

The very treatise relied on by the Court (App. A, p. 7),

Prosser’s Handbook on the Laws of Torts (1971), declares

that “... there is no liability where the defendant has done

nothing more than carry out the process to its authorized

conclusion, even though with bad intentions” (p. 857, italics

added). Prosser also points out that “... it is what is done

in the course of negotiation, rather than the issuance or any

formal use of the process itself, which constitutes the tort”

(p. 857) and that “... the improper act may not be inferred

from the motive” (p. 858).

The Prosser treatise accurately summarizes the case-

law. Thus, in the case cited by the panel (App. A, p. 7),

Holiday Magic, Inc. v. Scott, 4 Ill. App. 3d 962, 967, 282

N.E.2d 452, 456 (1972), the Court stated that “[s]ome act

* See also the Seventh Circuit’s recent opinion (per Cudahy, J.,

who joined in the decision below) in MCI Communications Corp.

v. AT&T Co., 1982-83 Trade Cases {| 65,137 (7th Cir. 1983) at p.

71,374, similarly recognizing that “. . . a test based wholly on intent

is unworkable”.

15

must be alleged whereby there has been a misuse or per-

version of the process of the court” and “mere institution of

a suit or proceeding, even with a malicious intent or motive,

does not itself constitute an abuse of process.” (Italics

added. )

See also Associated Radio Service Co. y. Page Airways,

Inc., 624 F.2d 1342, 1358 (5th Cir. 1980), cert. denied,

450 U.S. 1030 (1981); Energy Conservation, Inc. v. Helio-

dyne, Inc., 1982-83 Trade Cases { 65,179 (9th Cir. 1983) at

p. 71,698; Balmer, swpra note 2 at 66-67; Note, Limiting

The Antitrust Immunity For Concerted Attempts To Influ-

ence Courts And Adjudicatory Agencies: Analogies To

Malicious Prosecution And Abuse Of Process, 86 Harv. L.

Rev. 715, 732 (1973).

II

The Decision Below Denying Full Faith And Credit To The

= Court’s Judgment Is In Conflict With Decisions Of

Court.

As noted, Grip-Pak took no appeal from {9 of the 1974

state court judgment, which provided that ITW’s “bringing

and prosecuting this case was not malicious”. However,

more than four years later—and shortly after the filing of

ITW’s summary judgment motion in this case—Grip-Pak

petitioned the state court to vacate 9 of the judgment.

Although the petition was denied, and although the Court

below acknowledged that “. . . the parties ought to be

able to rely on what the judgment says in guiding their

behavior” (App. A, p. 5),’ the Court below refused to give

7 This principle, this Court stated, “is not a factor here” because

“the post-trial order was entered shortly after the judgment became

final” (App. A, pp. 5-6; App. B) (italics added). Apparently the

Court’s reference is to the completion of all appellate proceedings

in the state case; the relevance of that date is puzzling for this

purpose, particularly since {| 9 was not appealed by Grip-Pak and

became “final” more than four years earlier in 1974.

16

full faith and credit to the 1974 judgment. According to

the Court, “. . . collateral estoppel should not be applied

just because Grip-Pak’s counsel in the state court action

stumbled in trying to litigate the issue of malice” (App.

A, p. 5).

However, contrary to the premise of the decision below,

to give or withhold full faith and credit to express findings

of a state court is not a mere matter of judicial discretion

or ad hoc evaluation of appropriate resource allocation (see

App. A, pp. 4-5). Instead, as this Court recently held in

Kremer vy. Chemical Construction Corp., 102 S.Ct. 1883

(1982), the Congressional mandate of 28 U.S.C, § 1738

(supra, p. 2) requires that full faith and credit be given to

such determinations. Nevertheless, although the Aremer

decision and 28 U.S.C. § 1738 were specifically called to the

attention of the Court below, both (like the Noerr-Penning-

ton “sham exception”) were wholly ignored in its opinion.

Kremer held that a state agency’s finding sustained on

judicial review is binding in a subsequent federal action

and entitled to full faith and credit if the litigant has had

a full and fair opportunity to present its evidence and

arguments before an adjudicatory body which meets the

standards of due process. There can be no doubt that Grip-

Pak had such an opportunity—not merely in an adminis-

trative agency but in the Illinois courts. Grip-Pak pleaded

malice, assured the court that “the proof already is in”,

argued it in its final argument, submitted it to the state

court for determination, and obtained a ruling on it (but

chose not to contest the ruling in Grip-Pak’s appeal to the

Illinois Appellate Court).

Grip-Pak, not ITW, must bear the consequences of Grip-

Pak’s litigation strategy and its failure to appeal the finding

of {| 9. Contrary to the opinion below (App. A, p. 5), the fact

17

that “. . . Grip-Pak’s counsel in the state court action

stumbled in trying to litigate the issue of malice” affords no

basis for denying collateral estoppel effect and full faith and

credit to the court’s finding. As this Court held in Aremer

(102 S.Ct. at 1899): “The fact that [a plaintiff] failed to

avail himself of the full procedures provided by state law

does not constitute a sign of their inadequacy.” Further-

more, “A party cannot escape the requirements of full faith

and credit and res judicata by asserting its own failure to

raise matters clearly within the scope of a prior proceeding.”

Underwriters National Assurance Co. v. North Carolina

Life and Accident and Health Insurance Guaranty Assn.,

455 U.S. 691, 710 (1982).

CONCLUSION

For the foregoing reasons, the petition should be granted.

Respectfully submitted,

Faru E. Po.ttock

8000 Sears Tower

Chicago, [llinois 60606

(312) 876-8000

Coumsel of Record

for Petitioner

SONNENSCHEIN CARLIN

Natu & RosenrTHa.

8000 Sears Tower

Chicago, Illinois 60606

Of Counsel

Dated : April 11, 1983

A-1l

APPENDIX A

Opinion of the United States Court

of Appeals for the Seventh Circuit

3n the

Gnited States Court of Appeals

For the Seventh Circuit

No, 82-1119

Grip-Pak, INc.,

Plaintiff-Appellant,

Inurvors Toot Works, Inc.,

Defendant-Appellee.

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division,

No. 77 C 2688—James Parsons, Judge.

Arcuep Sepremser 15, 1982—Derctpep NovemsBer 24, 1982

Before Cupany, Circuit Judge, Wriox, Senior Circuit

Judge,* and Posner, Circuit Judge.

Posner, Circuit Judge. The plaintiff, Grip-Pak, Inc.,

is a company engaged in—or at least aspiring to engage

in—the business of producing plastic holders for “six-

packs” of beer and other beverages. The defendant, I-

linois Tool Works, Inc., is alleged to be the dominant

manufacturer of such holders, an? in particular to

* Of the Sixth Circuit.

A-2 No. 82-1119

manufacture 90 percent of all plastic holders for six-

packs of canned beverages. The complaint, filed in 1977,

charges [llinois Tool Works with a variety of practices

allegedly forbidden by sections 1 and 2 of the Sherman

Act and sections 3 and 7 of the Clayton Act, 15 U.S.C.

§§ 1-2, 14, 18, including acquiring every patent there is on

plastic beverage holders; threatening groundless patent-

infringement suits to deter would-be competitors ; prosecut-

ing three “baseless and groundless lawsuits in bad faith,

not for the legitimate purpose of adjudicating a legal

controversy, but, rather, for an ulterior motive, i.e., to

eliminate competition,” one of these suits being against

Grip-Pak and its principals (former employees of Illinois

Tool Works) for theft of trade secrets; acquiring a com-

petitor; dividing markets; and filing a fraudulent patent

application. Treble damages and an injunction are sought.

The case comes up to us on Grip-Pak’s appeal from

summary judgment dismissing the complaint. The basis

of dismissal was that Grip-Pak would not be able to prove

at trial an essential element of its case, namely that it has

been “injured in its business or property by reason of

anything forbidden in the antitrust laws,” as required by

section 4 of the Clayton Act, 15 U.S.C. 415. The com-

plaint alleges injury of two sorts. The first consists of the

expenses that Grip-Pak incurred in defending the suit

brought by Illinois Tool Works against Grip-Pak and its

principals; the other is a general loss of business profits

from the totality of the alleged monopolistic scheme. The

district court threw out the first element of injury on the

following reasoning. Although the state court in which

Illinois Tool Works had prosecuted its suit against Grip-

Pak and Grip-Pak’s principals had dismissed the suit on

the merits, the court had entered a finding that the suit

was “not malicious”; this finding is entitled to collateral

estoppel effect in the present litigation; a nonmalicious

lawsuit is not actionable under the antitrust laws; there-

fore the state court suit could not be a source of antitrust

injury to Grip-Pak within the meaning of section 4 of the

Clayton Act. With regard to the second and more general

element of injury, the district court held that Grip-Pak

No. 82-1119 A-3

was not in the business of manufacturing plastic holders

for six-packs and did not have a sufficiently definite ex-

pectation of entering it to be injured in its business within

the meaning of section 4. We have to decide whether these

rulings are correct.

Late in the state court trial Grip-Pak’s counsel tried

to present evidence that Illinois Tool Works’ case was

malicious. The trial court was surprised. Illinois Tool

Works’ counsel protested vigorously his lack of opportunity

to develop evidence on the issue of malice. Grip-Pak’s

counsel pointed to the prayer for relief in the counterclaim,

where a finding of malice, and an award of attorney’s fees

based on that finding, had been requested; but the judge

ruled that the issue of malice, to be preserved, should have

been alleged in the part of the counterclaim that contained

Grip-Pak’s theory of liability. Grip-Pak’s counsel then

changed his tune slightly, saying: “We feel the proof is

already in relative to the factual evidence, the evidentiary

evidence which will support our claim of malice.” But the

judge replied, “No, the court is not going to permit it.”

The antecedent of “it” is a bit vague, but the rest of the

reply makes clear that the judge’s intention was to forbid

Grip-Pak “to assert a charge of this nature at this time.”

And the matter was dropped.

But when the judge came to prepare his findings of

fact and conclusions of law he included a finding on

malice. Despite the elimination of the issue from the trial

both parties had submitted proposed findings on it, and

the judge adopted the one submitted by Lllinois Tool

Works. But it seems that he did so in order to lay a foun-

dation for declining to award attorney’s fees as requested

by Grip-Pak rather than to resolve a genuine factual

issue at the trial, for he had not allowed the issue to be

litigated. This interpretation is supported by an order the

judge later issued denying a petition by Grip-Pak to vacate

the finding on malice on the ground that he had lacked

jurisdiction to make such a finding. The order states that

at the trial the judge had “in substance held that under

the pleadings a malice finding was not an issue,” that

he had “refused to permit evidence to be introduced on

A-4 No. 82-1119

said issue,” that “such a ruling may well make the later

finding of the Court erroneous,” and that he was not say-

ing whether in these circumstances the finding would

have collateral estoppel effect in any other proceeding,

but was only holding that he had jurisdiction to make the

finding, erroneous though it might be. The order has a

tone of blaming the parties for having submitted proposed

findings on malice when the judge had ruled the issue out

of the trial; and the underlying fault is Grip-Pak’s for

having failed to raise the issue of malice in timely fashion

and then having confused the judge by nevertheless sub-

mitting a proposed finding on malice at the close of the

trial.

The doctrine of collateral estoppel prevents the reliti-

gation of any legal or factual issue that has been “ac-

tually litigated and determined by a valid and final judg-

ment.” 1 Restatement of Judgments (Second) § 27 (1982).

Usually an express finding in a valid final judgment is

good enough, and we have that here. And it makes no

difference whether such a finding was based on a com-

plete failure of proof rather than on a weighing of com-

peting proofs. See, e.g., Continental Can Co., U.S.A. v.

Marshall, 603 F.2d 590, 595-96 (7th Cir. 1979). On the

other hand, a default judgment is not a proper basis for

collateral estoppel. 1 Restatement, supra, § 27e at p. 257.

And collatera] estoppel is not properly invoked to punish

a lawyer. Id., § 27e at p. 256. We have to locate the present

case in this web of principles.

It will help in doing so to note the difference between

collateral estoppel and its sister doctrine, res judicata.

Res judicata bars the relitigation of claims that could

have been advanced in an earlier proceeding, whether

they were or not, because they arise out of the same facts.

The purpose is to reduce the costs of litigation, to the

parties and to the courts, by forcing closely related

claims to be combined in a single lawsuit. There is no

suggestion that res judicata applies to this case—that

Grip-Pak was required to bring its antitrust action as a

counterclaim to Illinois Tool Works’ state court suit. The

No. 82-1119 A-5

doctrine of collateral estoppel is based on a different

concept of economy of litigation: if an issue happens to

have been litigated and determined in a previous suit

between the parties, there is no reason to litigate it again.

But the object is not to force the issue to be litigated in

the earlier suit. The propriety of having two suits is ac-

cepted, presumably because they are not that closely

related; and if the issue in question is first litigated in

the second suit, that is fine; the only desideratum is that

it not be litigated twice.

This distinction suggests that collateral estoppel should

not be applied just because Grip-Pak’s counsel in the

state court action stumbled in trying to litigate the issue

of malice. If the only consequence of his stumble was

to postpone litigating that issue to this case, there was

no waste of resources. It would be different if Grip-Pak

had presented evidence so lacking in probative force that

the trial judge had concluded that there was an utter

failure of proof on the issue of malice. Then resources

would have been expended on the determination of the

issue in the first case and relitigation would be barred.

But that is not what happened. Grip-Pak’s counsel con-

tended in desperation that the requisite evidence had

gotten into the trial somehow, but the trial judge dis-

agreed. He thought he was preventing the issue from

being litigated rather than resolving the issue on the

basis of evidence already in the record.

All this assumes, though, that we are allowed to go

behind the express finding in the state court’s judgment

and examine not only the pages of the transcript where

the judge is seen blocking Grip-Pak’s counsel from going

forward with the issue but also the post-trial order in

which the judge refused to vacate the finding but in-

dicated that it was not intended to be an evidentiary find-

ing. A court will not take evidence from the judge in an

earlier suit to find out what his findings really meant,

Eaton v. Weaver Mfg. Co., 582 F.2d 1250 (10th Cir. 1978) ;

the parties ought to be able to rely on what the judg-

ment says in guiding their behavior. But that is not

a factor here. It is not that the judge had secret reser-

A-6 No. 82-1119

vations about his judgment that did not emerge till long

after it became final. Illinois Tool Works was privy to the

circumstances that day behind the finding, and the post-

trial order was entered before the judgment became final.

Although we believe that the issue of malice was never

litigated and determined in the sense relevant to col-

lateral estoppel, we are reluctant to stop there without

considering whether, if collateral estoppel were applied,

the finding that the Illinois suit was not malicious would

bar Grip-Pak from seeking to recover in this antitrust

suit the expenses it incurred in defending the Illinois

suit. Grip-Pak points out that the finding, unelaborated

as it is, implies only that the Illinois suit could not be

the basis of an action for malicious prosecution under

Illinois tort law; and it argues that a lawsuit does not

have to violate some state’s law of malicious prosecution

to be actionable under the Sherman Act. We think we

should address this argument now for the guidance of the

parties and the district court on remand. If the argument

is correct there will be no need for the parties to introduce

evidence on whether the state court action was malicious;

if it is incorrect, that issue may be dispositive.

The tort of malicious prosecution in Illinois has two

elements that might be relevant to this case: improper

purpose, and lack of probable cause to believe that the

lawsuit may have merit. Holiday Magic, Inc. v. Scott, 4 Il.

App. 3d 962, 966, 282 N.E.2d 452, 455 (1972). One cannot

tell from the state court’s finding which element it thought

was missing here—assuming, contrary to what we said

earlier, that its finding was intended to determine an

actually litigated issue. If the missing element was im-

proper purpose, Grip-Pak’s effort to characterize the state

court action as anticompetitive would be devastated. A

lawsuit could not be thought anticompetitive if it was no

part of the plaintiff’s purpose to suppress competition.

But the judge may instead have thought that although the

state court action was ultimately determined not to have

merit, it had had enough apparent merit when brought

to satisfy probable cause, which is just “a state of facts

[that] would lead a man of ordinary caution and prudence

No, 82-1119 A7

to believe that he has a justiciable claim to prosecute

against a defendant.” [ulcher v. Archer Daniels Midland

Co., 88 Ill. App. 3d 1, 4, 409 N.E.2d 412, 415 (1980). We

must consider therefore whether a lack of probable cause

is essential to make a lawsuit actionable under the Sherman

Act.

There are two grounds on which it might be thought

essential. The first is that the First Amendment confers

antitrust immunity on any lawsuit that is not so totally

baseless as is implied by a finding that there was no

probable cause to bring it. Some courts have said that the

right to bring lawsuits, even of a purely commercial char-

acter, is within the scope of the First Amendment, as a

form either of petition for redress of grievances, California

Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508,

510 (1972), or of speech, id. at 510-11; Hydro-Tech Corp.

v. Sundstrand Corp., 673 F.2d 1171, 1177 n. 8 (10th Cir.

1982). But we do not believe that the extent of protection

is invariant to the nature of the lawsuit—that the efforts

of the National Association for the Advancement of Colored

People to use constitutional litigation to break down official

segregation, NAACP v. Button, 371 U.S. 415 (1963), are

entitled to no more protection than the efforts of Illinois

Tool Works to collect damages for an alleged theft of

trade secrets—or, if Grip-Pak is right, to drive a com-

petitor out of business,

If all nonmalicious litigation were immunized from

government regulation by the First Amendment, the tort

of abuse of process would be unconstitutional—something

that, so far as we know, no one believes. The difference

between abuse of process and malicious prosecution is

that the former does not require proving that the law-

suit was brought without probable cause. Holiday Magic,

Inc. v. Scott, supra, 4 Ul. App. 3d at 966, 282 N.E.2d at 455;

Prosser, Handbook of the Law of Torts 856 (4th ed. 1971).

If abuse of process is not constitutionally protected, no

more should litigation that has an improper anticompeti-

tive purpose be protected, even though the plaintiff has a

colorable claim.

A-8 No, 82-1119

The argument that such litigation is constitutionally

immune is based on two Supreme Court decisions, Eastern

Railroad Presidents Conf. v. Noerr Motor Freight, Inc.,

365 U.S. 127 (1961), and California Motor Transport

Co. v. Trucking Unlimited, supra. Noerr held that con-

spiracies to influence a legislature to pass anticompeti-

tive legislation are not actionable under the Sherman Act.

The holding was presented as an interpretation of the

Sherman Act rather than of the First Amendment, but

one strongly influenced by the First Amendment. See 365

U.S. at 138. The Court viewed collective efforts to in-

fluence legislation, regardless of their purpose, as a form

of petitioning for redress of grievances. California Motor

Transport considered the application of Noerr to adjudi-

cation. The complaint alleged a conspiracy by a group of

trucking companies “to institute state and federal proceed-

ings to resist and defeat applications by respondents [com-

peting trucking companies] to acquire operating rights or

to transfer or register those rights.” 404 U.S. at 509. The

Court held that the complaint stated a valid cause of ac-

tion under the Sherman Act. Although it said that “the

right of access to the courts is indeed but one aspect of

the right of petition,” id. at 510, this statement was used

as the fulcrum to lever the petitioners out of range of the

First Amendment hy characterizing the alleged con-

spiracy as one to prevent the respondents from exer-

cising their legal rights to obtain and transfer operating

rights. The Court quoted the allegation in the complaint

that petitioners instituted proceedings “‘with or with-

out probable cause,’” id. at 512, and also stated that “a

pattern of baseless, repetitive claims may emerge which

leads the factfinder to conclude that the administrative

and judicial processes have been abused,” id. at 513, but

it did not say this was the only type of case in which

litigation could be attacked under the antitrust laws.

It takes a rather free-wheeling imagination to ex-

trapolate from the California Motor Transport opinion a

principle that if applied across the board would, as we

have suggested, make the tort of abuse of process invalid

under the First Amendment; and we decline to do so—

No. 82-1119 A-9

noting, also, that the Court used the language of abuse of

process to describe the kind of litigation activity that the

First Amendment does not protect, see id. at 513. Cf. Metro

Cable Co. v. CATV of Rockford, Inc., 516 F.2d 220, 228

(7th Cir. 1975). But it is a separate question whether, as a

matter of antitrust principle, the Sherman Act should be

interpreted to forbid using litigation to suppress competi-

tion. The Act could not reasonably be interpreted to make

companies, even ones with monopoly power, outlaws, for-

bidden to enforce their legal rights. And the line between

effective and abusive resort to legal remedies is in-

distinct, especially since so many of the legal rights valid-

ly asserted in commercial settings are rights against

what the law deems excessive or unfair competition.

When Illinois Tool Works sued Grip-Pak and its prin-

cipals for theft of trade secrets, it was asserting just such

a right. Distinguishing a lawful from an unlawful anti-

competitive purpose is harder than distinguishing law-

ful from unlawful purpose in abuse of process cases,

though even there subtle distinctions abound—for exam-

ple, the distinction between suing to get damages and su-

ing to induce the defendant to discontinue the activity

challenged in the suit by putting him to the expense of

litigation. See Alexander v. Unification Church of America,

634 F.2d 673, 677-78 (2d Cir. 1980).

But we are not prepared to rule that the difficulty of

distinguishing lawful from unlawful purpose in litigation

between competitors is so acute that such litigation can

never be considered an actionable restraint of trade,

provided it has some, though perhaps only threadbare,

basis in law. Many claims not wholly groundless would

never be sued on for their own sake; the staxes, dis-

counted by the probability of winning, would be too low

to repay the investment in litigation. Suppose a monopo-

list brought a tort action against its single, tiny com-

petitor; the action had a colorable basis in law; but in

fact the monopolist would never have brought the suit—

its chances of winning, or the damages it could hope to

get if it did win, were too small compared to what it would

have to spend on the litigation—except that it wanted to

A-10 No, 82-1119

use pretrial discovery to discover its competitor’s trade

secrets; or hoped that the competitor would be required

to make public disclosure of its potential liability in the

suit and that this disclosure would increase the interest

rate that the competitor had to pay for bank financing;

or just wanted to impose heavy legal costs on the com-

petitor in the hope of deterring entry by other firms. In

these examples the plaintiff wants to hurt a competitor

not by getting a judgment against him, which would

be a proper objective, but just by the maintenance of the

suit, regardless of its outcome. See City of Gainesville v.

Florida Power & Light Co., 488 F. Supp. 1258, 1265-66

(S.D. Fla. 1980).

Some students of antitrust law would regard all of our

examples of anticompetitive litigation as fanciful, and in

all the evidentiary problems of disentangling real from

professed motives would be acute. Concern with the evi-

dentiary problems may explain why some courts hold that

a single lawsuit cannot provide a basis for an antitrust

claim (see Fischel, Antitrust Liability for Attempts to In-

fluence Government Action: The Basis and Limits of the

Noerr-Pennington Doctrine, 45 U. Chi. L. Rev. 80, 109-10

(1977) )—an issue we need not face here since three im-

proper lawsuits are alleged, and it can make no difference

that they were not all against Grip-Pak. Still, we think it

is premature to hold that litigation, unless malicious in the

tort sense, can never be actionable under the antitrust laws.

The existence of a tort of abuse of process shows that it has

long been thought that litigation could be used for improper

purposes even when there is probable cause for the litiga-

tion; and if the improper purpose is to use litigation as a

tool for suppressing competition in its antitrust sense, see,

e.g., Products Liability Ins. Agency, Inc. v. Crum & Forster

Ins. Cos., 682 F.2d 660, 663-64 (7th Cir. 1982), it becomes

a matter of antitrust concern. This is not to say that litiga-

tion is actionable under the antitrust laws merely because

the plaintiff is trying to get a monopoly. He is entitled

to pursue such a goal through lawful means, including

litigation against competitors. The line is crossed when

his purpose is not to win a favorable judgment against a

No. 82-1119 A-ll

competitor but to harass him, and deter others, by the

process itself—regardless of outcome—of litigating. The

difficulty of determining the true purpose is great but no

more so than in many other areas of antitrust law.

In rejecting the proposition that a nonmalicious law-

suit can never violate antitrust law, we are supported by

most of the cases, which are not numerous, on the question,

see, e.g., Kobe, Inc. v. Dempsey Pump Co., 198 F.2d 416,

424-25 (10th Cir. 1952); Rea Chainbelt, Inc. v. Harco

Prods., Inc., 512 F.2d 993, 1004-07 (9th Cir. 1975), though

Alexander v. National Farmers Organization, 687 F.2d

1173, 1200 (8th Cir. 1982), appears to be to the contrary.

It is true that this circuit’s decision in Kobe, which contains

the clearest statement of the proposition that litigation

having a colorable basis can still violate the antitrust

laws, was decided before Noerr or California Motor Trans-

port; but it continues to be cited with approval, see Rex

Chainbelt, supra, 512 F.2d at 1004-05; Handgards, Inc. v.

Ethicon, Inc., 601 F.2d 986, 994 (9th Cir. 1979).

We conclude that the state court’s enigmatic finding on

malice, even if it were entitled to collateral estoppel effect

in this litigation, would not be a bar to finding that Illinois

Tool Works’ lawsuit against Grip-Pak was an unlawful act

under federal antitrust law. If Grip-Pak proves it was, it

can recover damages measured by its expenses in defending

that suit. See Dairy Foods Inc. v. Dairy Maid Prods. Coop.,

297 F.2d 805, 809 (2d Cir. 1961).

The other damages sought by Grip-Pak are the profits

that it says it would have made from developing and

marketing a plastic liolder that would compete with holders

made by Illinois Tool Works. Grip-Pak has designed, and

obtained patents on, several models of plastic six-pack

holders; has entered into several joint ventures looking to

eventual production of Grip-Pak holders; has promoted

the sale of the holders (and some have in fact been sold) ;

but, contrary to the allegations of its complaint, has neve?

manufactured the holders itself. When Illinois Tool Works

first moved for summary judgment the district judge denied

the motion because he read an affidavit submitted by Grip-

A-12 No, 82-1119

Pak to say that Grip-Pak had at last begun manufacturing

holders through one of the joint ventures and had begun

selling the holders in quantity; when he discovered this was

not the case he granted the motion.

But it is not important whether Grip-Pak is or ever

will be a manufacturer and seller of the products em-

bodying its inventions. Manufacturers are not the only

businessmen who can get damages under section 4 of the

Clayton Act for competitive injury. A firm that develops

and promotes new products does not forfeit the protection

of section 4 by contracting out the manufacture and sale

of the products to firms that specialize in manufacturing

and selling rather than in development and promotion.

And it is of no moment that the complaint mistakenly

alleged that Grip-Pak is engaged in manufacturing its

plastic holders; in modern procedure, the pleadings are

required to conform to the proofs rather than the proofs

to the pleadings.

Now it is true that if a manufacturer is the target

of anticompetitive conduct, not every firm linked to

him by the forces of demand and supply is entitled

to sue for damages caused, indirectly, by that conduct. Jn

re Industrial Gas Litigation, 681 F.2d 514, 519-20 (7th

Cir. 1982). For example, a patent licensor who licenses

the manufacture of the patented product and whose

royalties are keyed to his licensee’s sales or profits cannot

obtain damages caused by an anticompetitive scheme

that is directed at the licensee, injures the licensee’s

business, and by so doing reduces the licensor’s royalties.

See Productive Inventions, Inc. v. Trico Prods. Corp., 224

F.2d 678 (2d Cir. 1955); SCM Corp. v. Radio Corp. of

America, 407 F.2d 166 (2d Cir. 1969); 2 Areeda &

Turner, Antitrust Law § 341 (1978).

This is the application of the age-old tort principle

of remoteness of damage to the novel statutory tort

created by the federal antitrust laws. The tort principle

serves practical goals of preventing duplicate recovery of

damages and proliferation of lawsuits. Its operation is il-

lustrated by Rickards v. Sun Ow Co., 23 N.J. Mise. 89, 41

No, 82-1119 A-13

A.2d 267 (1945). Sun Oil Company negligently destroyed

the only bridge linking an island to the mainland.

Merchants located on the island, including Rickards, lost

business, and five of them sued Sun Oil. The court held

that their loss was too remote. The owner of the bridge

could of course sue for his loss. But if the island merchants

had also been allowed to sue, Sun Oil might have ended

up being liable for more than the total damages it had

caused, since those merchants’ losses may well have

been gains to mainland merchants to whom consumers

switched when they no longer could reach the island. And

even if the island merchants sustained losses not made up

elsewhere in the economic system, those losses were no

different from the losses suffered by many others who

depended on the bridge. Therefore, if the five island

merchants could sue, it would mean that the destruction

of the bridge could give rise to an indefinite number of

lawsuits, of marginal significance in terms of the deter-

rent and compensatory objectives of tort law compared to

the suit by the bridge’s owner, but potentially of great

cumulative cost to Sun Oil and the judicial system.

The patent license case is an even stronger illustration

of the reasons behind the doctrine of remoteness of

damage. The patent licensor may have suffered no net

diminution in his royalties at all. The contraction in the

business of the licensee who was the target of an anti-

competitive scheme may have led to an expansion in the

business of other licensees and hence to an increase in the

royalties paid by them to the licensor that offset the

decrease in the royalties paid by the first licensee. And if

the licensor were allowed to sue, why not everyone else

whose fortunes are linked to the victimized licensee—or,

if not everyone, at least the licensee’s employees, his

(other) suppliers, and the merchants who sell to his

employees? None of these is more remote from the anti-

trust violation than the licensor.

But it does not follow from all this that a patent licen-

sor may never get antitrust damages. It is not his status

as a licensor but his relationship to the violation that

determines his right to sue. If he is the defendant’s

A-14 No, 82-1119

target, he stands in the same relation to the defendant as

the owner of the bridge did to the defendant in Rickards,

and the tort principle of remoteness, absorbed by im-

plication into section 4, would not prevent him from

suing. Though we acknowledge the contrary intimations

in Shapiro v. General Motors Corp., 472 F. Supp. 636,

656 (D. Md. 1979), and Pastor v. American Tel. & Tel.

Co., 76 F. Supp. 781, 784 (S.D.N.Y. 1940), the facts of

those cases are far different from those of this one.

If the allegations of the complaint are true, which for

present purposes we must assume they are, Lllinois Tool

Works is determined to prevent anyone else from com-

peting with it in the plastic six-pack holder business and,

having identified Grip-Pak and its principals as significant

potential competitors, is trying to keep it and them out of

the business. On this theory it is a matter of indifference

to Illinois Tool Works whether Grip-Pak manufactures

holders or licenses others to do so. The important thing is

Grip-Pak’s invention. That is what Illinois Tool Works

allegedly is trying to destroy. If the inventor, when he is

the target of the anticompetitive scheme and not just an

innocent bystander, may not sue for damages, anticompeti-

tive behavior may go undeterred by threat of private

damage action. For unless the manufacturers of the product

under license have resources specialized to the manufacture

of that product, they may not suffer any damages at all

from the withdrawal of the product from the market; they

may be able to switch without cost to making something else.

All this is not to say that Grip-Pak has in fact sustained

any damages as an inventor or developer or marketer from

the alleged anticompetitive scheme. That depends among

other things on the terms of the contracts between Grip-Pak

and its licensees. We hold only that Grip-Pak is not barred

from recovering damages merely because it is not a manu-

facturer. We go further: Grip-Pak may be able to recover

lost profits as a manufacturer even though it has not yet

started manufacturing, if it had reasonable prospects of

doing so which Illinois Tool Works snuffed out. Section 4

of the Clayton Act is not a bar. It does limit the damages

No, 82-1119 A-15

recoverable in an antitrust case to those resulting from in-

jury to the plaintiff’s “business or property,” which has

been understood to limit damage liability to the plaintiff's

direct pecuniary losses. If predatory pricing caused the

president of the firm that was the predator’s victim to

commit suicide, his widow would not have a cause of action

against the predator under section 4 for loss of consortium.

This principle is again linked to traditional tort notions of

remoteness of damage, as illustated by such cases as

Kelley v. Kokua Sales & Supply, Ltd., 56 Haw. 204, 532

P.2d 673 (1975). A man died of a heart attack after being

told in a long-distance telephone conversation that his

daughter and one of his granddaughters had been killed in

an accident, and the court held that his estate could not get

damages against those tortiously responsible for the acci-

dent. Such cases do not bear on a case where an antitrust

violation snuffs out a potential competitor before he gains

a foothold, though he may have invested much money in

preparing to enter the violator’s market and may have given

up lucrative opportunities in other fields. There would be

a big gap in the damage remedies of the antitrust laws if

the reference to “its business” in section + were read to

prevent the recovery of damages by all would-be entrants.

But there is also a big problem of quantifying lost hopes.

While damages for loss of future earnings and profits are

familiar items in tort and contract cases, the problem of

measurement is greater when the loss occurs in a market

that the plaintiff is not yet in. Yet tort analogies are again

helpful. We had occasion to observe recently that “if a man

who had never worked in his life graduated from law school,

began working at a law firm at an annual salary of $35,000,

and was killed the second day on the job, his lack of a past

wage history would be irrelevant to computing his lost

future wages.” O’Shea v. Riverway Towing Co., 677 F.2d

1194, 1198 (7th Cir. 1982).

In an attempt to balance the interest in deterrence

against the concern with measurement, most courts (ours

has not spoken to the issue before) have required a com-

pany that has not actually entered the market to show that

A-16 No, 82-1119

it intended to enter and was prepared to do so within a

reasonable time, if it wants to collect damages under sec-

tion 4 for being excluded. See, e.g., Martin v. Phillips

Petroleum Co., 365 F.2d 629 (5th Cir. 1966); Huron Valley

Hospital, Inc. v. City of Pontiac, 666 F.2d 1029, 1033 (6th

Cir. 1981); Fleer Corp. v. Topps Chewing Gum, Ine., 415

F. Supp. 176, 179-81 (E.D. Pa. 1976); 2 Areeda & Turner,

supra, § 335¢ at 174-75. This seems a sensible requirement

which we adopt for this circuit without having to explore

its precise dimensions in this case. In his first opinion the

district judge found sufficient evidence of Grip-Pak’s serious

and imminent interest in manufacturing its plastic holders

—a natural evolution from its joint ventures—to create a

genuine issue of material fact, which barred summary

judgment. On reconsideration he decided there was no such

issue, because contrary to his original impression Grip-Pak

had not yet begun to manufacture its plastic holders. But

this in itself would not be determinative; the whole pur-

pose of the “intention and preparedness” test is to allow

recovery of damages in cases where the plaintiff has not

entered the business in which he is seeking lost profits.

Griv-Pak’s evidence of intention and preparedness is quite

thin; and the district judge may have been correct in con-

cluding on reconsideration that it did not create a triable

issue. But he did not apply the correct standard on recon-

sideration, and he must therefore reconsider once again

in light of this opinion.

Illinois Tool Works argues that there is an alternative

ground for the district judge’s dismissal of the complaint:

misrepresentations by Grip-Pak. We said earlier that Grip-

Pak had presented in opposition to the initial motion for

summary judgment an affidavit which the judge interpreted

as stating that Grip-Pak had at last begun to manufacture

plastic holders. When Illinois Tool Works moved for re-

consideration of the judge’s denial of its motion for sum-

mary judgment, on the basis that the affidavit was mislead-

ing, it also asked for sanctions for the alleged misrepre-

sentation, including dismissal of the complaint. The opinion

granting summary judgment on reconsideration states:

No. 82-1119 A-17

“Defendant’s motion to reconsider [the denial of summary

judgment] is granted and defendant’s motion for contempt

and sanctions for plaintiff’s misrepresentation to the court

is granted to the extent that the case will be dismissed.”

Illinois Tool Works asks us to punctuate this sentence by

placing a comma after the first “granted.” But a more

plausible reading is that the judge granted just the motion

for summary judgment, in light of his revised understand-

ing of the affidavit; for he does not discuss the question

whether an appropriate punishment for Grip-Pak’s wrong-

doing would be to dismiss the complaint, assuming sum-

mary judgment were improper. Moreover, while he de-

scribes the reference to manufacturing in the affidavit as

an “affirmative misstatement,” the judge also states that

“it would be extremely reactive” to describe his misunder-

standing as the result of “purposeful deception” and he

therefore “decline[s] to assert the severe sanctions sug-

gested by the defendant.” To dismiss a possibly meritorious

complaint with prejudice (the dismissal in the summary

judgment is described as being “with prejudice”) would

be a severe sanction.

So we do not think we can uphold dismissal of the com-

plaint as a sanction imposed by the district judge for the

misleading affidavit. On remand Illinois Tool Works can

if it wants renew its motion for sanctions. We express no

view on the merits of the motion and of course none on

the underlying merits of the lawsuit. We hold only that

the complaint should not have been dismissed on the

grounds advanced in the motion for summary judgment.

We repeat that the district judge is free to reconsider the

part of his order granting summary judgment that bars

Grip-Pak from obtaining damages for lost manufacturing

profits.

REVERSED AND REMANDED.

A true Copy:

Teste:

A-18 No, 82-1119

Clerk of the United States Court of

Appeals for the Seventh Circuit

A-19

APPENDIX B

Order of the United States

Court of Appeals for the Seventh Circuit

United States Court of Appeals

For the Seventh Circuit

Chicago, Llinois 60604

January 12, 1983

Before

Hon. RICHARD D. CUDAHY, Circuit Judge

Hon. PAUL C. WEICK, Senior Judge*

Hon. RICHARD A. POSNER, Circuit Judge

GRIP-PAK, INC., Appeal from the

s

Plaintiff-A llant, United Stat

wntty'-Appe District Court

Vs. for the

Nore aaa

No, 82-1119 Bebere Division.

ILLINOIS TOOL WORKS, INC., No. 77 C 2688

Jamea Parsons,

Defendant-A ppellee. J sae

ORDER

On December 15, 1982, defendant-appellee Illinois Tool

Works, Inc., filed a petition for rehearing with suggestion

for rehearing en banc. All of the judges of the original panel

have voted to deny the petition, and none of the active mem-

bers of the court has requested a vote on the suggestion for

rehearing en banc. The petition is therefore DENIED.

The opinion is AMENDED as follows:

Page 6, line 1. The word “before” should be changed to

read “shortly after.”

Page 7. The third sentence in the first full paragraph is

changed to read as follows: “Some decisions state that the

right to bring lawsuits, even of a purely commercial char-

acter, is protected by the First Amendment. . . .”

Page 11. In line 9 of the first full paragraph, the words

“this circuit’s decision in” should be deleted. And in the

second to last line of the next paragraph on this page, “2d”

should be changed to “7th.”

* Of the Sixth Circuit.

a es ee ema ea a a

A-20

APPENDIX C

Memorandum Opinion and Order

United States District Court

for the Northern District of Illinois

In the United States District Court

for the Northern District of Illinois

Eastern Division

~

Plaintiff,

™ j No. 77 C 2688

ILLINOIS TOOL WORKS, INC.,

Defendant.

GRIP-PAK, INC.,

J

MEMORANDUM OPINION AND ORDER

The court vacates its September 21, 1981 Memorandum

Opinion and Order denying defendant Illinois Tool Work’s

(“ITW”) motion for summary judgment against plaintiff

Grip-Pak, Ine. (“Grip-Pak”). Defendant’s motion to re-

consider is granted and defendant’s motion for contempt

and sanctions for plaintiff’s misrepresentation to the court

is granted to the extent that the case will be dismissed. The

reasons follow.

In its September 21, 1981 opinion, the court rested its de-

cision to deny summary judgment on the following grounds:

1) the Court found that there remained a material ques-

tion of fact whether ITW’s purpose in bringing the suit

against Grip-Pak was sham litigation; 2) the Court found

as a matter of law that Grip-Pak had demonstrated pre-

paredness to enter a market and was thus a protectable

business interest under Section 4 of the Clayton Act; 3)

the Court found that Grip-Pak had sustained injury from

an anti-competitive sham litigation resulting in the damage

of litigations costs, a matter which is cognizable under

Section 4 of the Clayton Act. The court did not reach the

issue of whether the state court suit, /7W v. Kovac, in the

Circuit Court of Lake County, Illinois, was res judicata

with respect to the present suit.

A-21

In reexamining the sham litigation issue, the Court now

finds that the doctrine of res judicata does serve to prevent

Grip-Pak from relitigating this issue. Under the doctrine

of res judicata when there is a valid, final judgment, “such

judgment constitutes an estoppel, between the same parties

or those in privity with them, as to matters that were neces-

sarily litigated and determined although the claim or de-

mand in the subsequent action is different.” 1B Moore’s

Federal Practice § 0.405 at 621 (2d ed. 1974).

The Court now finds that the issue of whether ITW’s

bringing the state court suit was a sham and constituted

baseless litigation, was indeed decided in that same state

court suit. In the state case, Grip-Pak sought in its answer

to ITW’s complaint and again in its proposed judgment a

finding that ITW had maliciously sued Grip-Pak and that

the complaint had been brought without reasonable cause,

good faith or truth. Grip-Pak counter-claimed for malicious

prosecution. The state court denied the counter-claim and

held that ITW had not brought the suit maliciously. Grip-

Pak did not appeal this determination, but did appeal from

the denial of a post-trial motion seeking costs for defending

against allegations of breach of confidentiality. The Appel-

late Court did not overturn the trial court’s determination.

This court, when considering the question of the state

litigation in arriving at its first decision unfortunately was

lured away from the issue of estoppel and the importance

of that issue, by the breadth of the discussions in the

briefs of the parties of the Noerr-Pennington “doctrine”.

This preoccupation with that legal theory absorbed the

bulk of ITW’s own attention also. In its brief filed May 19,

1978, it devoted 12 pages discussing the Noerr-Pennington

“doctrine”, and only approximately 312 pages on the issue

of estoppel. Indeed its approach to the question involved

was to demur from the issue which logically a demurrer

ought to have been taken.

It thus has been a total re-evaluation of the matter of

the prior litigation which has led this court to its present

conclusion: That plaintiffs are in fact and at law estopped

from pursuing here the question of “sham litigation” in

the state case.

A-22

In its original opinion the court’s finding of “prepared-

ness”, and hence the finding of a business interest protect-

able under Section 4 of the Clayton Act, was premised on

Grip-Pak’s representation through the affidavit of one of

its officers, Michael Kovac, that it was fully engaged in

the production and sale of Grip-Pak multi-packaging car-

rier devices, I now find that representation to be untrue,

The misrepresentation led the court to assume that the

joint venture agreement between the plaintiff, Grip-Pak,

Inc. and Atlas Plastics Corporation, to develop, manufac-

ture, sell and license multipackaging products, and to lease

assembly equipment and license patents and trademarks,

was still in effect at the time of the filing of the Kovac

affidavit—April 9, 1981—and that the three purchase orders

attached to the affidavit represented sales made by the

plaintiff Grip-Pak, Inc. This assumption was incorrect.

The misrepresentation is manifested on page 2 of Michael

Kovae’s affidavit when he stated :

However, all production problems have now been

solved, and GRIP-PAK, INC., through a manufactur-

ing and marketing arrangement with Atlas Plastics

Corporation and affiliates, has now begun production

and sale of Grip-Pak multi-packaging carrier devices.

Attached hereto are copies of actual purchase orders

for GRIP-PAK multi-packaging carrier devices re-

ceived from customers. ... These carriers have been

(Emphasis added.)

Upon review of the documents the court now finds that

it was noi Grip-Pak, Inc., the plaintiff in this case, that

obtained and filled the three purchase orders, but Grip-Pak

Products, Inc. a wholly owned subsidiary of Atlas Products.

This is clear from the November 12, 1981 deposition of

Morten Christensen, the president of Atlas Plastics Cor-

poration. The three purchase orders were addressed re-

spectively to Grip-Pak, Inc., Grip-Pak, and Grip-Pak Sys-

tems Inc. The invoices were on forms bearing the name

Grip-Pak Products, Inc. and two of the three invoices were

dated after the date of the Kovac affidavit. It was mislead-

A-23

ing for Mr. Kovac to state in Paragraph 3 of his affidavit

that Grip-Pak, Inc. (the plaintiff herein) had begun pro-

duction and sale of these carriers, to attach purchase orders

for these devices and refer to them in Paragraph 4 as

illustrative of the representation made in Paragraph 3,

when in fact the invoices evidencing sale and shipment of

the carriers were those of a wholly owned subsidiary of

Atlas Plastics Corporation, in which Grip-Pak had no

ownership interest and with whom an earlier joint venture

agreement had terminated in December of 1980. The affirma-

tive misstatement by Kovac that Grip-Pak, Inc. was manu-

facturing and selling the carrier devices in question plus

the purchase-order addressees misled the court into believ-

ing that plaintiff Grip-Pak, Inc. was itself still in a joint

venture with Atlas Plastics, Inc. and had made three sales.

In addition, at the time of the affidavit, only one sale had

actually been consummated which was to Coca Cola Bottling

of St. Louis—its purchase order was filled by the April 1,

1981 duplicate invoice of Grip-Pak Products, Inc. The

record is clear that the joint venture agreement between

Atlas Plastics, Inc. and Grip-Pak, Inc. referred to in both

briefs of the plaintiff and in the Kovac affidavit, had already

been terminated in December of 1980; yet the court was

thus invited to believe in its continued existence. The obvi-

ous result if not purpose of these misrepresentations was

to mislead the court into believing that Grip-Pak, Inc.,

which is the lone plaintiff in this case, itself had made three

actual sales of the carriers involved in the litigation.

Of course, the court’s final finding in its September 21,

1981 decision to the effect that Grip-Pak, Inc. had suffered

the injury of litigation costs with respect to Section 4 of

the Clayton Act has to be vacated because of the above

present finding that the state court suit did not constitute

sham litigation.

ITW has moved for the court to find Grip-Pak, Ine. in

contempt and to impose sanctions in view of the misrepre-

sentations made to the court. The possibility that the state-

ments in the Kovac affidavit and purchase orders would

mislead the court was high. The purpose of an affidavit is

A-24

to present evidence the court can rely upon. The use of the

words “subscribed and sworn to” is to impart the same

assurances to the trier of fact as does the oral oath which

promises “the truth, the whole truth, and nothing but the

truth”. Although in his affidavit Mr. Kovae was appearing

as a witness for himself as the principal of a party in in-

terest, and not as an attorney-at-law and member of the

bar of this court, though in fact he is, his representations

in his earlier affidavits of his position within the legal pro-

fession understandably would cause the trier of fact to

rely more comfortably upon his sworn statements than upon

those of an ordinary witness or the principal of a corporate

party to this litigation.

It would be excessively reactive on the part of the Court

for it to find from the materials before it that these two

areas in which it considers itself to have been misled were

products of purposeful deception, since sharper perceptive-

ness on the part of the court could have aided it in arriving

at a different decision than that of September 21, 1981

without the assistance given by defendant’s motions to re-

consider. For that reason the Court itself accepts blame

for the erroneous position taken by it in September, and

declines to assert the severe sanctions suggested by the

defendant. Under the circumstances its action taken herein

is sufficient. The order heretofore entered on its memoran-

dum of opinion is vacated. The court finds for the defendant

on its motion for Summary Judgment for the reasons set

out in said motion. Accordingly, the case is dismissed. The

dismissal is “with prejudice”.

ENTER:

/s/ James B. Parsons

JAMES B. PARSONS

United States District Court Judge

DATED: December 29, 1981