Opposition Brief — Alumax Inc. v. U. S. Aluminum Corp./Texas

;

et Buprene Court, US,

No. 87-1976 JUN 30 1988

aia ure. ros ame SPANIOL, JR.

on ese i CLERK

Supreme Court of the United ‘States

OcTOBER TERM, 1987

ALUMAX, INC.,

Petitioner,

vs.

U.S. ALUMINUM CORPORATION/TEXAS,

Respondent.

ON PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

RESPONDENT’S BRIEF IN

OPPOSITION TO PETITION FOR

WRIT OF CERTIORARI

JOHN J. McCAULEY y

Counsel of Record

DANIEL L. RASMUSSEN

Of Counsel

PAUL, HASTINGS, JANOFSKY & WALKER

Seventeenth Floor

695 Town Center Drive

Costa Mesa, California 92626

(714) 641-1100

Attorneys for Respondent

U.S. ALUMINUM CORPORATION/TEXAS

Lawyers Brief Service / Legal Publishers / (213) 383-4457 / (714) 720-1510

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QUESTIONS PRESENTED

1. Is It Improper For A Circuit Court To make Use Of

The Law — Rather Than The Parties’ Mistaken

Understanding Of The Law — As Its Basis For

Determining The Proper Outcome Of A Legal Issue

Submitted To It?

2. Does 35 U.S.C. §285 — Which Gives Discretion To

District Court Judges To Award Attorneys’ Fees To

Victims Of Bad Faith Patent Infringement Actions —

Constitute A Repeal Of The Traditional Common

Law Remedy Of Malicious Prosecution Otherwise

Available To Those Victims?

RULE 28.1 LIST

International Aluminum Corporation is the parent

corporation of respondent U.S. Aluminum Corporation/

Texas. International Aluminum Corporation is also the

parent of Calvex; Eland-Brandt; B.V. General Window

Corp.; International California Glass Corp.; International

Carolina Glass Corp.; International Extrusion Corp.;

International Extrusion Corporation/Texas; International

Window/Arizona, Inc.; International Window Corp.;

International Window/Northern California; Ultra Indus-

tries, Inc.; U.S. Aluminum Corporation/Carolina; U/S.

Aluminum Corp.; U.S. Aluminum Corporation/ Illinois;

U.S. Aluminum Corporation/California; Ragland Manu-,

facturing Company, Inc.; and Ramaco, Inc.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED

RULE 28.1 LIST

re Me OD OE eo ccccusansacvaveveecsaccescecvoeesesnnics ill

I YR Dn. ca sacovnesssncsonavdsconsnecucseocucesaess l

: ae WMCET IVINS PRCCRE ACHION «.......0055....6scccccccccescecas z

Z The District Court Decision in this Malicious

aie pslead seu ubicciicee’ 3

a The Ninth Circuit Decision in this Malicious

ee Te ous iguunav sted bcovenunade 5

REASONS FOR DENYING THE WRIT .............0.0000000... 7

# ALUMAX HAS NO BASIS FOR SEEKING

CERTIORARI ON THE ISSUE OF THE

NINTH CIRCUIT’S DECISION TO BASE

ITS DECISION ON THE LAW, RATHER

THAN THE PARTIES’ MISTAKEN UN-

DERSLANUING OF THE LAW. ........................... 7

A. Under Supreme Court Precedent,

Uniformly Adhered To By AI! Circuit

Courts, An Erroneous Stipulation of Law

ae ras caliialcsusvacasarsouaticesnskshevasiecexsiicsns 7

pane es

Page

B. An Appellate Court’s Fundamental Duty

to Correct Errors of Law Supercedes the

Doctrine of Invited Error. .............ccccccccccseccccesees 10

C. By Correcting an Erroneous Stipulation of

Law, a Circuit Court Protects the Integrity

of the Law, Promotes Efficient Judicial

Administration and Safeguards the Adver-

OR I sacinche aa rcadics iar eacdesnapsnasccisd soaaaasincasconnes 14

Il. ALUMAX HAS NO BASIS FOR SEEKING

CERTIORARI ON THE ISSUE OF THE

NINTH CIRCUIT’S DECISION NOT TO

ELEVATE THE STANDARD OF PROOF

OF BAD FAITH FOR THIS MALICIOUS

Feet OPE BWM BOING soscisicensessisvcsenehgernvesdaxcnes 16

Pe POO. dutncscsienacntoaercisoess ixOcee cuncasaneng vsatcnusvaadecdessisness 20

— ili—

TABLE OF AUTHORITIES

Page

Cases

Air-Exec, Inc. v. Two Jacks, Inc.

$84 F.2d 942 (10th Cir. 1976) ......s.ccccccsccs 11

American Chemical Paint Co. v. Dow Chemical Co.

164 F.2d 206. CO Car .. TSE sncctcnennc.. 8, 14

Aronson v. Quick Point Pencil Co.

440 U.S. 257, 99 S.Ct. 1096,

$9 L.Bd.2d 296 CIGTS) ccuiiccstintincincuinancan 17

Avila v. I.N.S.

731 F.2d 616 (9th Cir. 1984) .......0... sachecuveniiend 13

Bradford y. U.S. ex rel. Department of Interior

651 F.2d 700 (10th Cir. PORE D | cickatartheeceubecantanens 10

Carlile v. South Routt School District RE-3J

739 F.2d 1496 (10th Cir. F966) .:.........ccc en, 13

Consolidated Water P & P Co. v.

Spartan Aircraft Co.

105 Fi DAT Cae Cae. FGA) ccccerisscsciccccce 9, 12

Consumers Power Co. v. Curtiss-Wright Corp.

780 F.2d 1093 (3rd Cir. 1986) .............ccceeeeeeees 12

Dimidowich v. Bell & Howell

803 F.2d 1473 (9h Cir. 1986), modified,

$10 F.2d S17 Cot Cae. TSB) ccisccccs. o. i2. 33

Estate of Sanford v. Commissioner

of Internal Revenue

308 U.S. 39, 60 S.Ct. 51,

Pe he Ae A API Y hecintntiibndsiaMedinidie sia

Exxon Corporation v. Governor of Maryland

437 US. 117, 98 S.Ct. 2207,

57 L.Ed.2d 91 (1978) .....

Ezell v. Hayes Oilfield Construction Co.

693 F.2d 489 (Sth Cir. 1982),

cert. denied, 464 U.S. 818,

104 S.Ct. 79, 78 L.Ed.2d 90 (1983)

Fisher v. First Stamford Bank and Trust Co

751 F.2d 519 (2nd Cir. 1984)

Gilchrist v. Jim Slemons Imports, Inc

803 F.2d 1488 (9th Cir. 1986)

Gundy v. United States

728 F.2d 484 (10th Cir. 1984)

Handgards, Inc. v. Ethican, Inc

601 F.2d 986 (9th Cir. 1979), cert

denied, 444 US. 1025 (1980)

H avee V. Belk

775 F.2d 1209 (4th Cir. 1985

Helvering v. Wood

309 U.S. 344, 60 S.Ct. 551,

84 L.Ed. 796 (1940)

Page

19

8, 12

8, 14

13

12

18, 19

Page

In Re Lawson Square

816 F.2d 1236 (8th Cir. 1987) 9

International Travelers Cheque Company v

Bankamerica Corporation

660 F.2d 215 (7th Cir. 1981) 11

Kewanee Oil Company v. Bicron Corporation

416 US. 470, 94 S.Ct. 1879,

40 L.Ed.2d 315 (1974) 17

Kincaid v. Sears, Roebuck & Co

259 Cal.App.2d 733,

66 Cal.Rptr. 915 (1968) 6

King v. United States

641 F.2d 253 (Sth Cir. 1981) .

Loctite Corp. vy. Ultraseal Lid

781 F.2d 861 (Fed. Cir. 1985) 18

VU arshall v. Nugent

222 F.2d 604 (Ist Cir. 1955) 12

McPhail v. Municipality of Culebra

$98 F.2d 603 (Ist Cir. 1979) 11

VUorseburg v. Baylon

621 F.2d 972 (9th Cir. 1980),

ceri denied, 449 U S 983 ( L980) 20

Votive Parts Warehouse v. Facet Enterprises

774 F.2d 380 (10th Cir. 1985) 12

Vi

Page

Murphy v. City of Flagler Beach

761 F.2d 622 (llth Cir. 1985) .... Air . 12

Noel Shows v. United States

721 F.2d 327 (11th Cir. 1983) ....... ;, OFT,

One Lot Emerald Cut Stones v. United States

409 US. 232, 93 S.Ct. 489,

34 L.Ed.2d 438 (1972) 6

Partenweederei v Weigel

313 F.2d 423 (9th Cir. 1962).

cert.-denied, 373 U.S. 904 (1963) 13

Peterson v. Clark Leasing Corp.

451 F.2d 1291 (9th Cir. 1971) .... 6

Reactive Metals & Alloys Corp. v. ESM, Inc

769 F.2d 1578 (Fed. Cir. 1985) 6

Saviano v.C.I.R

765 F.2d 643 (7th Cir. 1985) 9, 14

Schiavone v. Fortune

750 F.2d 15 (3rd Cir. 1984),

aff'd, 477 U.S. 21 (1986) 9)

Sebold v. Sebold

444 F.2d 864 (D.C. Cir. 1971) 8

S.E.C. v. Albert & Maguire Securities Co

S60 F.2d 569 (3rd Cir. 1977) ......... a

vu

Page

Swift and Co. v. Hocking Valley Railway Co.

243 US. 281, 37 S.Ct. 287,

61 L.Ed. 722 (1917) .......... ee Cae. eo ee

Terkildsen v. Waters

481 F.2d 201 (2nd Cir. 1973) eer)

Iwohy v. First Nat. Bank of Chicago

758 F.2d 1185 (7th Cir. 1985) a

United States v. New York Telephone Co

434 US. 159, 98 S.Ct. 364,

$4 L.Ed.2d 376 (1977) ... ua 3

United States v. One 1978 Bell

Jet Ranger Helicopter

707 F.2d 461 (11th Cir. 1983) .. ae mee 14

Ute Indian Tribe v. State Tax Commission

$74 F.2d 1007 (10th Cir. 1978), cert

denied, 439 U.S. 965, 99 S.Ct. 452,

S58 L.Ed.2d 423 (1978) 9

Van Nijenhoff v. Bantry Transp. Co

791 F.2d 26 (2nd Cir. 1986) 1]

999 y. CI.T. Corp.

776 F.2d 866 (9th Cir. 1985) ray eR

Constitution

United States Constitution

Article I. Section 8, Clause 8&8 eT) |

|

— Vili—

Page

Rule

Federal Rules of Civil Procedure Rule 51 ................... 12

Statute

FR ay OE I eae rere ee cats ita BN NS ye ae i

Text

Wright & Miller, Federal Practice and Procedure:

chs icky RNA UNS Ee PETE oT Nt eh a 12

Miscellaneous

36 C.J.S. Federal Courts § 297(18) et i eee exdueei; Oe

No. 87-1976

IN THE

Supreme Court of the United States

October Term, 1987

ALUMAX, INC,,

Petitioner,

VS.

U.S. ALUMINUM CORPORATION/TEXAS,

Respondent.

RESPONDENT’S BRIEF IN

OPPOSITION TO PETITION FOR

WRIT OF CERTIORARI

The respondent, U.S. Aluminum Corporation/Texas

(“U.S. Aluminum”) respectfully requests that this Court

deny the Petition for Writ of Certiorari, seeking review of

the Ninth Circuit’s opinion in this case. That opinion ts

reported at 831 F.2d 878.

STATEMENT OF FACTS

Petitioner, Alumax, Inc. (‘‘Alumax”’) seeks this Court’s

review of an opinion of the Ninth Circuit Court of Appeals

reversing an order of summary judgment granted in the

United States District Court for the Northern District of

California. The District Court’s grant of summary

judgment dismissed a malicious prosecution action resulting

from an earlier patent infringement lawsuit which Alumax'!

| The underlying action, Howmet Aluminum Corporation v. U.S.

Aluminum Corporation /Texas (Civ. Action No. 3-82-426-6) N.D.

Texas, was actually prosecuted by Howmet Aluminum Corporation,

(Footnote continued.)

MB ii £2092. 0h Na aa a i aa

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had lost against U.S. Aluminum in the United States

District Court for the Northern District of Texas, and

which U.S. Aluminum contends had been filed in bad faith.

The sole basis for the District Court’s entry of summary

judgment was its determination that U.S. Aluminum is

collaterally estopped from filing the malicious prosecution

action. Moreover, its only reason for concluding that

coliateral estoppel was applicable was the following fact: in

the underlying patent action itself, U.S. Aluminum had

been awarded attorney’s fees by the trial court under 35

U.S.C. Section 285 at the close of trial, but had then failed

to sustain that award on appeal.

1. The Underlying Patent Action

U.S. Aluminum has substantial basis for bringing its

malicious prosecution action. The evidence that Alumax

had filed and maintained the Patent Action in bad faith was

plain enough that, even without the benefit of specific

discovery on the issue of Alumax’s motives, the District

Court in the Patent Action concluded from its own

observations in the trial that:

“Plaintiff [Alumax] persisted and continued to

prosecute this action in bad faith in frivolous

disregard of the facts, and in a manner to unfairly

conceal or obscure or distort the facts.” (E.R. 92,

173.)

Based on this finding, the trial judge granted the

attorneys’ fees U.S. Aluminum had requested in the prayer

section of its answer, relying upon the special section in the

Patent Code (35 U.S.C. §285) permitting the award of such

Alumax’s subsidiary and predecessor in interest. Excerpts from the

Record on Appeal (““E.R."’) 2, 39, 129.

a

fees upon clear and convincing evidence of “exceptional”

circumstances. (E.R. 144, 171-173.)

Alumax was able to escape the attorneys’ fees order in the

Patent Action by appealing to the United States Court of

Appeals for the Federal Circuit. That Court upheld the

defense judgment in favor of U.S. Aluminum on the patent

infringement claim, but reversed the award of attorneys’

fees, finding that the evidence before the trial judge was not

sufficient to satisfy ‘“‘the heavy burden necessary to

establish an exceptional case under 35 U.S.C. §285.” (E.R.

115, 116, 195, 196.)

Accordingly, U.S. Aluminum ffiled its action for

malicious prosecution in the United States District Court

for the Northern District of California, invoking the

diversity jurisdiction of that Court.

2. The District Court Decision in this Malicious

Prosecution Action

After U.S. Aluminum filed this case for malicious

prosecution, Alumax successfully moved for summary

judgment, contending that U.S. Aluminum was collaterally

estopped from litigating the issue of Alumax’s bad faith in

bringing the patent infringement lawsuit. It argued, as it

does here:

(a) That because the Ninth Circuit had elevated the

standard of proof from the “preponderance of

evidence” standard to the more demanding “clear

and convincing evidence” standard in the case of

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

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

antitrust case which was based upon an underlying

patent action), the District Court should require US.

Aluminum to show “clear and convincing” evidence

a

of Alumax’s bad faith in this malicious prosecution

action; and

(b) That the Federal Circuit Court which had reviewed

the decision in the Patent Action had found that U:S.

Aluminum had failed to meet that higher standard.

(E.R. 42-49.)

In granting summary judgment, the District Court did

not decide the issue of what is the appropriate standard of

proof in this action, but was instead “relieved” of the

obligation to do so by what it took to be a stipulation from

U.S. Aluminum’s former counsel that the higher standard

of proof was applicable. For this reason, the portion of the

District Court’s written decision addressing the question of

the appropriate standard of proof cites to no authority

whatsoever, not even to the Handgards case cited by

Alumax, but only to the “stipulation.” (Petitioner’s

Appendix, A-7 and A-8.)”

2 To further its argument in this Petition, Alumax describes U.S.

Aluminum’s former counsel’s “‘stipulation” as “strategic,” and attempts

to support this description by characterizing the words he used in the

heat of the summary judgment argument as ‘“‘a knowing and thoughtful

decision made by experienced trial counsel to help his client overcome

the exigency that he perceived at the time.” (Alumax Petition, pp. 6-7,

fn. 7.) The record of the summary judgment hearing, however, reveals

that there was no “exigency” of a sort that could even potentially be

mitigated or overcome by the “‘stipulation.”’ (See Petitioner’s Appendix,

pp. A-23 to A-30.) This is not a case, for example, in which USS.

Aluminum was put to an election among various ways to attack the

collateral estoppel argument. Moreover, there was absolutely no

“strategic need,” at a summary judgment hearing, for U.S. Aluminum’s

counsel to make use of this key dispositive legal concession in order to

display confidence in the factual merits of his case, as Alumax argues

(see Alumax Petition at p. 11, fn. 12).

The real reason behind the unfortunate concession is simpler than

Alumax’s “thoughtful strategy” explanation: U.S. Aluminum’s former

counsel — and, apparently, the District Court judge himself — had the

(Footnote continued.)

3. The Ninth Circuit Decision in this Malicious

Prosecution Action

Thereafter, U.S. Aluminum filed an appeal with the

United States Court of Appeals for the Ninth Circuit,

arguing that the District Court’s decision was wrong

because Alumax’s summary judgment motion had failed to

meet three of the necessary prerequisites for collateral

estoppel. Without reaching the issues with respect to two of

these prerequisites (and expressly reserving judgment on

those issues)°, the Ninth Circuit reversed. It ruled that

collateral estoppel was not a bar to U.S. Aluminum’s

malicious prosecution action, because the standard of proof

it faced in that action was not the same as the standard

which the Federal Circuit had ruled it had failed to meet in

the patent action. To reach this result, the Ninth Circuit

found that the apparent stipulation on this issue, which USS.

Aluminum’s former counsel had made during oral

misapprehension that the key case relating to the motion, Handgards,

Inc. v. Ethicon, Inc. was a malicious prosecution case which had

already resolved the ‘“‘standard of proof” issue in favor of Alumax. (See

Petitioner’s Appendix, A-28, in which U.S. Aluminum’s trial counsel was

silent in the face of the District Court’s erroneous description of the

holding of Handgards.) In short, it is ordinary human error, not

misdirected strategy, that accounts for the approach he took at the

hearing.

3 (See Text of Ninth Circuit opinion, at p. A-5 of Petitioner's

Appendix.) For this reason, two of the issues which also support the

reversal of the summary judgment motion here are not now before this

Court. This alone suffices to make inappropriate Alumax’s request for

summary reversal. (See Alumax Petition, p. 14, fn. 21.). U.S. v. New

York Telephone Co., 434 U.S. 159, 98 S.Ct. 364, 54 L.Ed.2d 376 (1977)

(prevailing party may defend favorable ruling on any ground which the

law and the record permit).

a

argument, was an error of law and, therefore, not binding.

Specifically, the Ninth Circuit recognized that:

(a)

(b)

(c)

(d)

(e)

The right to attorney’s fees under §285 must be

established by “clear and convincing” evidence.

Reactive Metals & Alloys Corp. v. ESM, Inc., 769

F.2d 1578, 1582 (Fed. Cir. 1985).

By contrast, the right to damages for malicious

prosecution need only be _ established by a

“preponderance of the evidence.” Kincaid v. Sears,

Roebuck & Co, 259 Cal.App.2d 733, 739, 66

Cal.Rptr. 915, 919 (1968).

Since the malicious prosecution action involves a

lower standard of proof, there can be no collateral

estoppel. One Lot Emerald Cut Stones v. United

States, 409 U.S. 232, 93 S.Ct. 489, 34 L.Ed. 2d 438

(1972); Peterson v. Clark Leasing Corp. 451 F.2d

1291 (9th Cir. 1971) (per curiam).

Neither Handgards nor the objectives of the federal

patent law supported Alumax’s contention that the

standard of proof applicable to U.S. Aluminum’s

malicious prosecution lawsuit should be raised.

(Petitioner’s Appendix, A-3, A-4 and A-S5.)

An erroneous stipulation of law is not binding upon

the reviewing Court. (Petitioner’s Appendix, A-3.)

a,

REASONS FOR DENYING THE WRIT

I. ALUMAX HAS NO BASIS FOR SEEK-

ING CERTIORARI ON THE ISSUE OF

THE NINTH CIRCUIT’S DECISION TO

BASE ITS DECISION ON THE LAW,

RATHER THAN THE PARTIES’ MIS-

TAKEN UNDERSTANDING OF THE

LAW.

Alumax’s Petition for Certiorari charges the Ninth

Circuit with this supposed error: that in reaching its

decision it adhered to the law as it is, rather than adopting

the erroneous version of the law which had_ been

improvidently presented by the parties to the District Court.

The Petition to review the Ninth Circuit’s decision should

not be granted on this issue. Under established Supreme

Court precedent, an erroneous stipulation of law has no

legal effect. An appellate court’s fundamental duty is to

correct errors of law, whatever their source. This duty,

which supercedes any equitable principle of estoppel,

protects the integrity of the law, promotes efficient judicial

administration and safeguards the adversary system.

A. Under Supreme Court’ Precedent,

Uniformly Adhered To By All Circuit

Courts, An Erroneous Stipulation of

Law Is Not Binding.

Whether an erroneous stipulation of law is binding on

courts is not an open and controverted question, as Alumax

would have it. To the contrary, the question has long since

been resolved by this Court. In Swift and Co. v. Hocking

Valley Railway Co., 243 U.S. 281, 289, 37 S.Ct. 287, 289, 61

L.Ed. 722 (1917), this Court unequivocally asserted that an

a

= ae

erroneous stipulation of law is not binding. In striking down

a stipulation concerning the construction and legal effect of

a written license, it stated: “If the stipulation is to be treated

aS an agreement concerning the legal effect of admitted

facts, it is obviously inoperative; since the Court cannot be

conirolled by agreement of counsel on a subsidiary question

of law.” Id. at 289. See also, Estate of Sanford v.

Commissioner of Internal Revenue, 308 U.S. 39, 50, 60 S.Ct.

S51, 59, 84 L.Ed. 20 (1939) (stipulated definition of

administrative practice does not bind the Court as it

involves conclusions of law). Unaccountably, Alumax

makes no reference to Swift, or Sanford, or their progeny,

in its Petition.

Nor is the meaning of these Supreme Court precedents

controverted. In applying these precedents, the circuit

courts have uniformly refused to give effect to erroneous

legal stipulations. For example, in King v. United States,

641 F.2d 253, 258 (Sth Cir. 1981), the Court found it was

not bound by the parties’ stipulation as to the burden of

proof. Similarly, in S.E.C. v. Albert & Maguire Securities

Co., 560 F.2d 569, 571, (3rd Cir. 1977), the parties’

Stipulation as to the interpretation of federal regulations

was rejected in favor of the court’s own determination.

There are abundant other examples. See, e.g., Sebold v.

Sebold, 444 F.2d 864, 870 fn. 8 (D.C. Cir. 1971) (agreement

of counsel regarding proper disposition of property title not

binding); Fisher v. First Stamford Bank and Trust Co., 751

F.2d 519, 523 (2nd Cir. 1984) (stipulations of law generally

not binding (dictum)); Ezell v. Hayes Oilfield Construction

Co., 693 F.2d 489, 492 fn. 2 (Sth Cir 1982), cert. denied, 464

U.S. 818, 104 S.Ct. 79, 78 L.Ed.2d 90 (1983) (parties’

stipulation as to choice of law not binding); American

Chemical Paint Co. v. Dow Chemical Co., 164 F.2d 208, 209

(6th Cir. 1947) (concession that action was controlled by

particular precedent not binding); Saviano v. CJ.R. 765

Ss

F.2d 643, 645 (7th Cir. 1985) (stipulation that parties

executed a “Loan Agreement” not binding as to legal

question of appropriate characterization of the transaction);

In Re Lawson Square, 816 F.2d 1236, 1240 (8th Cir. 1987)

(stipulation by parties as to proper interpretation of federal

statute not binding); Ute Indian Tribe v. State Tax

Commission, 574 F.2d 1007, 1009, (10th Cir. 1978) cert.

denied 439 US. 965, 995, 99 S.Ct. 452, 58 L.Ed.2d 423

(1978) (stipulation regarding boundaries of reservation does

not bind appellate court); Noel Shows v. United States, 721

F.2d 327, 330 (1lth Cir. 1983) (stipulation as to

admissibility of evidence does not bind trial court). But see

Schiavone v. Fortune, 750 F.2d 15, 18 (3d Cir. 1984) aff'd,

477 US. 21 (1986) (appellate review precluded by party's

concession that state relation back rule was procedural for

purposes of application of the Erie doctrine).*

The Ninth Circuit’s decision to rule on the basis of the

law in this case is consistent with — and mandated by —

Swift and its progeny. In granting summary judgment to

Alumax, the District Court below had plainly relied upon

the “‘stipulation” that the applicable standard of proof was

the “clear and convincing evidence” standard. (Petitioner's

Appendix at p. A-8.) The Ninth Circuit reversed, holding

that the proper standard of proof was “preponderance of

4 Schiavone, cited prominently by Alumax at p.14 of its Petition, is an

aberrational case which reached its outcome without analysis and

without citation to any authority. Apart from Schiavone, the Third

Circuit, like the other circuits, has uniformly adhered to the orthodox

rule that it is the courts, not the parties, which decide issues of

substantive law. See, e.g. S.E.C. v. Albert & Maguire Securities Co., 560

F.2d 569, 571 (3rd Cir. 1977) (the Third Circuit declined to rely on a

stipulation insofar as it purported to decide a legal issue); Consolidated

Water P & P Co. v. Spartan Aircraft Co., 185 F.2d 947, 949 (3rd Cir.

1950) (the Third Circuit expressly disregarded a stipulation as to choice

of law).

SS... ckxg—_—_~

10

the evidence,” and that it did not matter whether the parties

had stipulated otherwise. “Appellate courts,” it stated, “are

not bound . . . by stipulations as to the substance of law

regardless of what the parties say the law might be.” (/d. at

A-3.)

In refusing to be controlled by counsels’ agreement on

this question of law, the Ninth Circuit specifically and

properly relied on the authority of its own prior reported

decisions securely grounded in the Swift opinion. See

Dimidowich vy. Bell & Howell, 803 F.2d 1473, 1477 n.1, (9th

Cir. 1986) modified 810 F.2d 1517 (9th Cir. 1987) (cited in

the opinion below at p. A-3 of Petitioner’s Appendix)

B. An Appellate Court’s Fundamental

Duty to Correct Errors of Law Super-

cedes the Doctrine of Invited Error.

Alumax argues that the Ninth Circuit's decision to rule

on the basis of the law somehow contravenes the doctrine of

“invited error.”° (Alumax Petition, p.8.) This argument

simply ignores the well established boundaries of the invited

error doctrine. The courts of appeal apply that doctrine to

promote judicial efficiency. Nevertheless, they recognize

that they have a fundamental duty to correct errors of law

In the instances when these two principles conflict, the

latter universally prevails

Che invited error doctrine is a common law principle of

estoppel As Alumax correctly isserts, if applies to

erroneous stipulations on questions of fact® or on “mixed

errors for which he is responsible. See generally 36 C.J.S. Federal

Courts §297 (18) et seg

= {a

questions of law and fact,”’ and to untimely submission of

legal issues® at least within certain bounds.’ The doctrine

also applies to mistakes in the framing of pleadings, '° in

submitting or objecting to evidence,'' and in deciding

? See, e.g., International Travelers Cheque Company v. Bankamerica

Corporation, 660 F.2d 215, 223 (7th Cir. 1981) (party is bound by his

stipulation that another party was indispensable to action); Air-Exec,

Inc. v. Two Jacks, Inc., 584 F.2d 942, 944 (10th Cir. 1978) (party 1s

bound by his admission that another party was not indispensable to the

action).

8 See, e.g. Helvering v. Wood, 39 US. 344, 348, 60 S.Ct. 551, 553, &

L.Ed. 796 (1940) (party is bound by his waiver of reliance on statutory

section): McPhail v. Municipality of Culebra, 598 F.2d 603, 607 (Ist

Cir. 1979) (party may not advance strict liability theory for the first time

on appeal); Terkildsen v. Waters, 481 F.2d 201, 204 (2nd Cir. 1973)

(party may not challenge the aw ard of pre-judgment interest for the first

time on appeal)

® Courts are naturally not expected, in the normal course, to reach

beyond the issues presented by counsel. In this sense, they are “passive ‘3

The fact that courts typically address only the issues raised, however

does not mean that they passively adopt lawyers’ errors as to those issues

that have been raised. Ours is not a case of an unsubmitted issue.”” The

issue before the District Court whether collateral cstoppel ts

applicable was specifically submitted in the form of an Alumax

affirmative defense, and specifically litigated in the context of the

summary judgment motion based on that issue. Alumax observes tha

even in cases of unsubmitted issues, where “passivity” is the norm,

Courts sometimes become active Thus, it notes that issues such as

jurisdiction and standing will be raised by Courts sua sponte, regardless

of the lawyers’ decision to submit those issues. But Alumax's observation

is not at all contrary to this Court’s decision tn Swift directing federal

courts actively to determine the proper legal outcome as to issucs which

are submitted to it, regardless of what the parties say the law ts

See, e.x. Van Nijenhoff v. Bantry Transp Co., 791 F.2d 26, 28

(2nd Cir. 1986) (a party is bound by his pleadings when he combines

}

claims in such a way as to invoke application of comparative negligence

doctrine)

See. e.g.. Motive Parts Warehouse v. Facet Enterprises, 774 F.2d

(Footnote continued.)

= >

whether to accept, without contest. the results of motions or

judgments. !?

Occasionally, the doctrine applies to choice of law!3 and

by statute, applies to erroneous Stipulations as to jury

instructions. '4

380, 391 (10th Cir. 1985) (a party is bound by his acquiescence to

admission of documentary evidence); Gundy v. U.S., 728 F.2d 484, 488

(10th Cir. 1984) (a party is bound by his incorrect use of an expert

testimony standard).

2 See, e.g. Consumers Power Co. vy. Curtiss Wright Corp. 780 F.2d

1093, 1099 (3rd Cir. 1986) (a party ts bound by his consent to a

remittitur)

‘5 See Dimidowich vy. Bell & Howell, 803 F.2d 1473, 1477 n.1, (9th

Cir. 1986) modified, 810 F.2d 1517 (9h Cir. 1987) (parties may, in the

absence of strong public policy, stipulate as to choice of law: they may

not stipulate as to the content of the law); Twohy v. First Nat. Bank of

Chicago, 758 F.2d 1185, 1191 (7th Cir. 1985) (same conclusion):

Murphy v. City of Flagler Beach. 761 F.2d 622, 630-31 (11th Cir

1985) (parties’ agreement to apply disputed law of state appellate court

was “In a sense, a choice of law” and binding on the parties). But see

Ezell v. Hayes Oilfield Construction Co., 693 F.2d 489, 492 n. 2 (Sth

Cir. 1982) cert. denied, 464 US. 818 (1983) (parties’ stipulation as to

choice of law is not binding); Consolidated Water P & P Co. y Spartan

Aircraft Co., 185 F.2d 947, 949 ¢ 3d Cir. 1950) (same conclusion.)

'* See Fed. R. Civ. P. 51 (a party who fails to object to a proposed jury

instruction ts bound by it.) See also, e.g. Havee y. Belk, 775 F.2d 1209,

1220 (4th Cir. 1985) (party submitting erroneous jury instructions is

bound by them)

In fact, the special statutory treatment of jury instructions is the

“exception which proves the rule.” Jury instructions are, without

question, stipulations as to the substance of the law. Nonetheless, the

doctrine of invited error applies to jury instructions because Congress

altered the common law result which would otherwise ensue Congress

sought to “lessen the potential burden of appellate courts by diminishing

the number of rulings at the trial which they may be called upon to

review.” Wright & Miller, Federal Practice and Procedure: Civil §2551

(quoting Marshall v. Nugent, 222 F.2d 604. 615 (Ist Cir. 1955)). This

Congressional alteration applies only to jury instructions, and, plainly, no

jury instruction issue is raised in this case

|

The doctrine does not, however, extend to erroneous

stipulations as to the content of the law, as Alumax

contends. As to legal issues “already properly before it, such

as the legal issue of collateral estoppel submitted by

Alumax in this case, a court’s duty is to determine the

correct legal outcome. This duty supersedes the doctrine of

invited error. As was stated by the Tenth Circuit in Carlile

vy. South Routt School District RE-3J, 739 F.2d 1496, 1500

(10th Cir. 1984):

“Parties to a dispute cannot stipulate to the law

and assume the Court will follow blindly an

incorrect interpretation of the law, especially in an

unsettled and ever changing area.”

For this reason, and contrary to Alumax’s assertion, the

Ninth Circuit’s decision to adhere to the authority of Swi/t

in this case does not, by any means, “effectively extinguish”

the doctrine of invited error. The Ninth Circuit, like all the

circuits, has reconciled the doctrine of invited error with the

doctrine that courts will not be bound by erroneous

Stipulations of law.'5 The two doctrines are entirely

compatible, and “peacefully coexist” within their own

realms.

5 Compare Gilchrist v. Jim Slemons Imports, Inc., 803 F.2d 1488,

1493 (%h Cir. 1986) (party submitting erroneous jury instructions 15

bound by them); 999 v. C.l.T. Corp., 776 F.2d 866, 873 (9th Cir. 1985)

(party consenting to remittitur 1s bound by it); Partenweederei ¥.

Weigel, 313 F.2d 423, 425 (Mh Cir. 1962) cert. denied 373 U.S. 904

(1963) (party may not advance a claim for indemnity for the first time

on appeal) with Avila y. I.N.S.. 731 F.2d 616, 620 (9h Cir. 1984)

(appellate court will review a claim not raised when it was abandoned

due to an erroncous interpretation of law); Dimidowich vy. Bell &

Howell. 8303 F.2d 1473. 1477 (%h Cir. 1986), modified 810 F.2d, 1517

(9th Cir. 1987) (appellate court rejects parties’ erroneous stipulation that

state antitrust laws are construed in accordance with federal precedent)

a, * aes

C. By Correcting an Erroneous Stipulation

of Law, a Circuit Court Protects the

Integrity of the Law, Promotes

Efficient Judicial Administration and

Safeguards the Adversary System.

Finally, Alumax contends that holding parties to

erroneous stipulations of law is essential for the promotion

of efficient judicial administration. Courts will become

better able to manage their dockets, Alumax argues, if they

are free to adopt, as their rules of decisions, the errors

provided by such stipulations. In support of this argument,

Alumax asserts, “there is no basis for appellate courts to

review concessions of law differently from concessions of

fact.” (Alumax Petition, p. 12.)

This, of course, is a radical proposition. It is precisely the

concessions of law” and “concessions

é

distinction between

of fact” that courts use as their basis to determine whether

the doctrine of invited error is applicable at ali. See Fisher v.

First Stamford Bank and Trust Company, 751 F.2d 519,

523 (2nd Cir. 1984) (stipulation of fact is generally binding;

stipulation of law is not); Accord, Saviano v. C.I.R., 765 F.2d

643, 645 (7th Cir. 1985); American Chemical Paint

Company v. Dow Chemical Co., 164 F.2d 208, 209 (6th Cir.

1947); U.S. v. One 1978 Bell Jet Ranger Helicopter, 707

F.2d 461, 462 (11th Cir. 1983).

The reason for this distinction is plain. Erroneous

concessions of fact affect only the case. But erroneous

concessions of law — if adopted by courts of record —

affect the development of the law itself. Alumax

acknowledges this to be a problem. (Alumax Petition, p.12.)

Its proposed “solutions,” however, are ones which, if

adopted, would only create serious new problems. Alumax

proposes:

iia iii ail

a, | ae

(1) That legal decisions be written to articulate two

layers of law — (i) the erroneous stipulated law (to

serve as the basis of a decision), and (11) the judicially

corrected ‘“‘actual” law (to be overlaid in the form of

a dictum). (Alumax Petition, p.14, fn.19.)

(2) Alternatively, that the standards currently governing

publication of cases (e.g. 9th Cir. R. 36-2 and 36-3) be

altered so that cases (such as ours) whose subject

matter is not sui generis and may indeed raise issues

of general public significance shall nonetheless be

withheld from publication whenever there has been

an erroneous stipulation in the factual history of the

case. (/d.)

Alumax’s unwieldy and needless “‘solutions’” have no

place in any rational system of law. They run directly afoul

of Alumax’s own announced concern for efficient and

effective administration of justice. And they serve no

conceivable public policy.

Under current law, articulated in Swift, and implemented

by the Ninth Circuit below, the courts maintain efficient

judicial management and the integrity of the law. Errors of

counsel do not linger, in any form, to affect either the

writing of decisions or the determination of their

publication, but are instead corrected, cleanly and simply.

There is no demonstrated need to change this procedure

here.

pan

II. ALUMAX HAS NO BASIS FOR SEEK-

ING CERTIORARI ON THE ISSUE OF

THE NINTH CIRCUIT’S DECISION

NOT TO ELEVATE THE STANDARD OF

PROOF OF BAD FAITH FOR THIS

MALICIOUS PROSECTION ACTION,

Alumax’s second, and final, basis for seeking certiorari is

to claim that the Ninth Circuit erred when it rejected

Alumax’s argument concerning the proper standard of

proof in malicious prosecution actions of the sort brought

by U.S. Aluminum. Specifically, Alumax argues that

whenever a successful defendant in a patent infringement

action brings a subsequent lawsuit for malicious

prosecution, it should be required to prove malice by “clear

and convincing” evidence, not by “preponderance of

evidence,” which is the standard otherwise universally

applicable to such actions.

Alumax does not dispute that (1) the malice element of

common law tort of malicious prosecution ordinarily must

be proved only by a preponderance of the evidence, and that

(2) there is no case from any circuit which has ever applied

the higher standard of proof Alumax proposes. It contends,

instead, that state law governing this tort is preempted when

the lawsuit which was maliciously prosecuted by the alleged

wrongdoer was a patent infringement action. According to

Alumax, it is the “purpose and objective” of federal patent

law to enhance the right of patent claimants to assert their

patent claims through infringement suits. Permitting states

to maintain the traditional ‘preponderance of evidence”

standard in connection with malicious prosecution actions

for bad faith patent suits, Alumax contends, would interfere

with that supposed policy.

Alumax’s “evidence” of this “federal policy” is not the

Patent Clause of the Constitution (Article I, Section 8,

aon |

Clause 8). The express policy set forth in that Clause is,

instead, ‘‘To Promote the Progress of Science and useful

Arts....” That policy is fostered not by an unmitigated

deference to those asserting patent rights, but by a balanced

approach which supports both the right of patent claimants

to assert their claims and the right of the public to make

unhindered use of ideas which are not legitimately subject

to a patent. As the Ninth Circuit stated below:

“Patents do not create an exception from state

malicious prosecution laws. Indeed, the balance

we reached in Handgards between the right of

suing patentees and their defendants presupposed

the continued existence of state law remedies for

bad faith suits. . . .” Petitioner’s Appendix, pp. A-4

and A-5).

This ruling by the Ninth Circuit is perfectly consistent with

this Court’s articulation of federal policy underlying the

existence of a patent system.'®

Nor can Alumax look to the attorneys’ fee provisions of

the Patent Code — 35 U.S.C. Section 285 — to find support

for its supposed policy of favoritism to patent claimants.

That provision gives relief toa wrongfully sued defendant in

a patent action that is not normally available to defendants

in other actions: the right to recover for that wrong in the

action itself, without the burden or impediment of being

\6 By its nature, the federal patent system involves not an uncontrolled

grant of private monopoly, but a carefully considered balance of

competing objectives. In considering the federal patent law’s preemptive

effect on state law, this Court has declared that the purposes of the

federal patent system are (1) to foster and reward invention; (2) to

promote disclosure of inventions in order to stimulate further innovation;

and (3) to assure that ideas remain in the public domain. Aronson vy.

Quick Point Pencil Co. 440 US. 257, 262, 99 S.Ct. 1096, 1099, 59

L.Ed.2d 296 (1979); Kewanee Oil Company v. Bicron Corporation, 416

US. 470, 479, 94 §.Ct. 1879, 1885, 40 L.Ed.2d 315 (1974).

ae, | ae

required to commence a new action. This extraordinary

relief has a limitation: it may be awarded only if the

successful defendant has clear and convincing evidence of

bad faith. But it does not logically follow from this that the

patent defendant’s subsequent resort to the ordinary means

of vindicating this wrong — a malicious prosecution action

—— 1s subject to the same limitation.

Consequently, the only ‘‘authority” Alumax offers for its

novel proposal to raise the standard of proof in state law

malicious prosecution actions is the existence of two federal

antitrust cases in which the plaintiffs had claimed that the

defendants’ unsuccessful patent infringement action had

been brought in restraint of trade. There, the courts found

that the element of intent for the antitrust action must be

established by “clear and convincing evidence.” The first of

these two cases was the Handgards case referred to above.!7

In Handgards, the Ninth Circuit determined, as a matter of

interpretation of Congressional intent with respect to the

antitrust statutes, that proof of an antitrust violation

involving an underlying patent action is subject to the ‘‘clear

and convincing evidence” standard. Handgards, 601 F.2d

at 996.

However, Alumax errs in its claim that Handgards

compels the higher standard in state malicious prosecution

actions. In fact, Handgards not only fails to provide support

for raising the standard in such actions, it provides

authority, in dictum, directly prohibiting this step. The

Ninth Circuit was concerned that raising the standard of

proof in antitrust actions arising out of patent actions

would create an imbalance by vitiating the remedies

available to victims of bad faith patent actions. It answered

its Own concern by pointing to the continued viability of

'’ The second, Loctite Corp. v. Ultraseal Ltd., 781 F.2d 861, 876-77

(Fed.Cir. 1985) follows Handgards’ lead.

=" =

common law malicious prosecution actions to preserve the

balance:

[Substantial disincentives to instigating ill-

founded patent infringement suits that are not

actionable under the standard of antitrust liability

announced today already exist. For example, the

patent laws contain a_ specific remedy for

prosecution in bad faith. 35 U.S.C. Section 285...

and nothing appears to preclude a successful

defendant in an infringement action from

bringing a common law malicious prosecution

claim.” Id. 601 F.2d at 998 fn. 17 (emphasis

added).

In short, the “neutered” version of malicious prosecution

(which Alumax contends is mandated by the authority of

Handgards) is plainly not what the Ninth Circuit had in

mind when it decided Handgards.'® The reason is simple. If

the Ninth Circuit had raised the standard of proof to “clear

and convincing” evidence in the case at bar, as Alumax

proposes it should have done, that decision would have at

least seriously weakened — and_ perhaps effectively

repealed — the state law remedy of malicious prosecution

available for bad faith patent infringement lawsuits.

Accordingly, even if the case at bar presented a question

of federal preemption, the Ninth Circuit fulfilled the duty it

has when presented with such a question. That duty is to

strike harmony between the federal and state interests.!?

18 Indeed, it is notable that the author of the Handgards decision,

Justice Joseph T. Sneed, was on the panel of the Ninth Circuit that

unanimously ruled in favor of U.S. Aluminum in the case at bar.

'9 See, Exxon Corporation v. Governor of Maryland, 437 U.S. 117,

130, 98 S.Ct. 2207, 2216, 57 L.FEd.2d 91 (1978) (conflicts between

coincident federal and state regulation should not be sought out where

no conflict clearly exists); Morseburg v. Baylon, 621 F.2d 972, 978 (9th

(Footnote continued.)

i Fe

Rather than accept Alumax’s invitation to debilitate state

law malicious prosecution lawsuits, the Ninth Circuit has

harmonized the consistent objectives of federal and state

law, balancing the rights of patent claimants and the public,

in order ‘‘to Promote the Progress of Science and useful

Arts.” Accordingly, Alumax’s Petition for Certiorari should

be denied.

CONCLUSION

For these reasons stated above, a writ of certiorari should

not issue.

Respectfully submitted,

JOHN J. McCAULEY

Counsel of Record

DANIEL L. RASMUSSEN

Of Counsel

PAUL, HASTINGS, JANOFSKY

& WALKER

Attorneys for Respondent

US. ALUMINUM CORPORATION/

TEXAS

Cir. 1980) cert. denied, 449 U.S. 983 (1980) (crucial inquiry in a

preemption case is not whether state law reaches matters also subject to

federal regulation, but whether the two laws function harmoniously

rather than discordantly).