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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1988
- **Citation:** 488 U.S. 822

## Text

;
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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ie iy

; Bt pa 28
o

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

=,

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).

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385019_1823%3A2. Public record. Not legal advice.