305 N.Y. 479 (1953)

General Aniline & Film Corporation, Respondent, v. Bayer Company, Inc., et al., Appellants.

Court of Appeals of the State of New York.

Decided July 14, 1953

Attorney(s) appearing for the Case

Paul W. Williams, George S. Hills and Robert G. Zeller for appellants.

Herbert L. Abrons, Donald O. Lincoln, Eugene L. Stewart and Kathryn V. Crean for respondent.

Edward P. Hodges, Acting Assistant Attorney General, Ralph S. Spritzer, Special Assistant to the Attorney General, and Wilbur L. Fugate and Daniel H. Margolis, Attorneys, Department of Justice, for United States of America, amicus curiæ.

LEWIS, Ch. J., CONWAY, DESMOND, DYE and FROESSEL, JJ., concur; VAN VOORHIS, J., taking no part.


In this action, for breach of contract and for money had and received, a certified question calls upon us to consider the legal sufficiency of two separate and affirmative defenses.

According to the complaint, defendant Bayer1 in 1923 entered into a written agreement — termed an "international cartel arrangement" (per HECHT, J., 188 Misc. 929, 930) — with a German corporation, Farbenfabriken Vorm. Friedr. Bayer & Company of Leverkusen.2 The parties agreed to divide the markets throughout the world, specifying the countries in which each was to have the exclusive right to sell its respective products and to use the "Bayer" trade-marks. Defendant Bayer, in addition, covenanted to pay the German company, for upwards of fifty years, a sum equal to one half of the net profits derived from all its business in Cuba. Some time later, the complaint continues, the profits due the German corporation under the agreement were assigned to General Aniline Works, Inc. — which in 1939 was merged into plaintiff. The complaint then goes on to recite that each German company duly performed all the conditions imposed upon it; that for the ten-year period from 1930 to 1940, defendant Bayer paid profits of over $600,000 as provided for in the agreement; that defendants Bayer and Sterling earned "large" profits during the years 1941 to 1944, which have not been paid; and that plaintiff has suffered damages of $1,000,000, the amount for which judgment is sought.

In their answer, defendants set forth two separate defenses; they have been stricken by the courts below, and, as indicated, it is with them that the appeal is concerned.

One of the defenses challenges the assignment of the contract to plaintiff, and, as to that defense, we need but say that it was properly stricken upon the ground that it speaks in legal conclusions and is framed in contingent and hypothetical terms. (See Stroock Plush Co. v. Talcott, 129 App. Div. 14, 17-18; Family Finance Corp. v. National Sur. Corp., 180 Misc. 496.)

The other defense, founded on impossibility of performance, sets forth that in 1941 the government instituted a proceeding against Bayer and Sterling in the United States District Court for the Southern District of New York, charging them with a violation of the federal antitrust laws. Defendants, the answer further alleges, consented to the entry of a decree, which declared and adjudged the agreement, upon which Aniline now sues, "unlawful" under the antitrust laws and enjoined Bayer and Sterling from "carrying out or enforcing" said agreement or "from paying" Farben or its assigns "any royalties or share of profits" pursuant to its terms. Neither Aniline nor its assignor was a party to that antitrust action or in any way privy to the decree.

Were the defense of impossibility held sufficient, Aniline would, in effect, be bound, in contravention of established principles of Anglo-American jurisprudence, by a judgment in personam in an action to which it was not a party and in which it had no opportunity to be heard. (See Matter of New York State Labor Relations Bd. v. Holland Laundry, 294 N.Y. 480, 493-494; Wilkinson v. First Nat. Fire Ins. Co., 72 N.Y. 499; Hansberry v. Lee, 311 U.S. 32, 40-41; see, also, Restatement, Judgments [1942], pp. 5-9; §§ 2, 5, 6.) Whatever the rule might be if the plea were based upon a decree rendered in a contested action, the defense lacks validity where, as here, the judgment was entered upon defendants' consent. (See, e.g., Oseas, Antitrust Prosecutions of International Business, 30 Corn. L. Q. 42, 58-59.)

Moreover, although a consent decree is decisive as between the parties to the antitrust proceeding itself (see Swift & Co. v. United States, 276 U.S. 311; Nashville, C. & St. L. Ry. Co. v. United States, 113 U.S. 261), in a suit brought by some third party, it is not only not conclusive, but not even usable or admissible against the consenting defendants. (38 U. S. Stat. 731, U. S. Code, tit. 15, § 16; see Bausch Mach. Tool Co. v. Aluminum Co. of America, 79 F.2d 217, 226; Twin Ports Oil Co. v. Pure Oil Co., 26 F.Supp. 366, 371-372; Diamond v. Davis, 263 App. Div. 68, 69.) Since, then, in such a situation, the decree could not be relied upon against the very parties who agreed to its entry, it would be almost unthinkable to allow them to invoke its provisions against a stranger.

Nor is the circumstance that it is the government that brought the antitrust suit sufficient to change settled principles. The government does, it is true, possess the power to strike down "systems deemed violative of the anti-trust laws even though such systems included leases, licenses, and other forms of agreements, and the lessees, licensees, and other parties to the agreements [are] not before the court." (United States v. National Lead Co., 63 F.Supp. 513, 525, n. 8, affd. 332 U.S. 319; see, also, Hartford-Empire Co. v. United States, 324 U.S. 570, 572-574.) However, as the Supreme Court has noted in a somewhat analogous situation, such an order "is ineffective to determine [the] private rights" of those not joined as parties, and strangers to the proceeding are "free to assert such legal rights as they may have acquired under their contracts, in any appropriate tribunal". (National Licorice Co. v. Labor Bd., 309 U.S. 350, 366.) And so in the case before us. Aniline has a right to be heard on its claim that the agreement between its assignor and defendants is lawful, and it may not be foreclosed from litigating that claim because defendants saw fit to consent to a judgment declaring the agreement unlawful. However willing defendants may have been to relinquish their own rights under that contract, however ready to absolve themselves from liability, they certainly had no authority or power to extinguish Aniline's claim.

Defendants may, of course, still defend upon the ground that the contract sued upon runs afoul of the antitrust laws and is, therefore, illegal. (See Metropolitan Opera Co. v. Hammerstein, 221 N.Y. 507, affg. 162 App. Div. 691; Ainsworth v. Cooper Underwear Co., 227 App. Div. 837; Brett v. Ebel, 29 App. Div. 256.) Striking the defense of impossibility, which in a sense presupposes illegality, bars defendants only from obtaining an adjudication of invalidity without tendering the issue for decision. They may not interpose a defense that would deprive Aniline of a day in court and defeat its claim even before it is heard. Indeed, the federal court that made the decree has rejected a like effort on the government's part to have the 1941 determination of illegality adjudged conclusive against Aniline in a pending federal suit (see United States v. Bayer Co., 105 F.Supp. 955, per SUGARMAN, J.; United States v. Bayer Co., U. S. Dist. Ct., S. D. N. Y., Oct. 16, 1952, per CLANCY, J.), and no reason exists why we should accord greater efficacy to the judgment than did the very court that issued it. The defense of impossibility of performance was, therefore, properly stricken.

That disposes of the appeal, and there we would conclude, but for the fact that, in the years that have passed since the decision at Special Term, the situation has changed. Aniline has been added as a party defendant in the federal antitrust suit. In January, 1952, the government filed a supplemental complaint in the United States District Court, charging Aniline, as assignee of Farben, with participation in the conspiracy originally charged against Bayer and Sterling and seeking a judgment declaring the agreement unlawful and enjoining Aniline from enforcing its provisions. Aniline is thereby assured an opportunity of having the agreement's legality tried out, with all interested parties represented, by the same court that rendered the consent decree.

A question that naturally presents itself is where the issues involved should first be tried. Its answer depends, of course, upon considerations of comity and orderly procedure. Accordingly, should a stay of the present action be sought, it will be pertinent to consider, among other matters, whether it is in the state or in the federal forum that a more complete disposition of the issues may be obtained and whether it is the federal or the state court that possesses a greater familiarity and expertise with the trial of such issues. (Cf., e.g., Royal China v. Regal China Corp., 304 N.Y. 309; Langfelder v. Universal Laboratories, 293 N.Y. 200, 206; Dederick v. North Amer. Co., 48 F.Supp. 410, 412; also, Consent Decrees and Absent Cartel Participants, 56 Yale L. J. 396, 401.) Since such considerations are, in the first instance, for the court at Special Term, we express no opinion thereon.

The order appealed from should be affirmed, with costs, and the question certified answered in the affirmative, without prejudice, however, to an application by defendants at Special Term for a stay pending determination of the proceedings in the federal court, initiated by the government's supplemental complaint joining Aniline as a party defendant.

Order affirmed, etc.


1. Bayer was dissolved in 1942, since which time all of its business has been conducted and carried on by defendant Sterling, its sole stockholder.
2. In 1926, a second agreement was executed, under which I. G. Farbenindustrie Aktiengesellschaft was substituted for Bayer of Leverkusen.


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