Western Pacific Railroad Corp. v. Western Pacific Railroad Company/Dissent Jackson

Mr. Justice JACKSON, dissenting.

I would not prolong this already aged litigation by remanding it for the Court of Appeals to reconsider whether it will hold a rehearing en banc. The decision that an individual litigant has a right to have his petition for rehearing en banc considered by at least three judges of the Court of Appeals stems not from statute, but from this Court's exercise of its vague supervisory powers over federal courts.

If I felt it incumbent upon me to help settle for Courts of Appeals whether they will sanction a practice of petitioning by litigants for en banc rehearings, I would decide in the negative. In cases of intracircuit conflict or other exceptional situations which actually demand the attention of the full court, the judges of a court should be trusted to convene on their own initiative. A successful party has good cause for complaint if he is put through the added expenditure of this dilatory step except where public interest in the administration of justice requires it. Rehearings en banc are not appropriate where the effect is simply to interpose another review by an enlarged Court of Appeals between decision by a conventional three-judge court and petition to this Court. Delay, cost, and uncertainty, which take their toll of both the successful and the unsuccessful, the just and the unjust litigant, are each increased by an additional appeal to a hybrid intermediate court. Moreover, the fact that the court leaves the precise nature of the right which it confers on the losing litigant so unsettled and equivocal would lead me to conclude that the en banc question is one which the litgant should not be given standing to raise.

If I were to predict, I would guess that today's decision will either be ignored or it will be regretted. Perhaps its requirements may be met if the panel which heard the case will append to its denial of rehearing the further statement 'and rehearing en banc denied.' This would be its most innocuous possible effect. Unfortunately, however, more significant results may follow. It is likely to open new complexities in federal practice and generate a new body of procedural law to vex courts and impoverish litigants. The litigant's petition for rehearing en banc is not a motion; it is a 'suggestion.' He is urged to point out to the judges the 'circumstances in a particular case which might warrant rehearing en banc.' There may yet be chapters in future manuals of federal practice exploring the differences between a motion and a 'suggestion,' and cases in the courts deciding just what more the suggesting litigant is entitled to than the right to have the words 'petition denied' instead of 'petition stricken.' This increase in the ponderousness of the federal court system may be a minor rather than a major evil, but it is counterbalanced, at most, only by a negligible good.

But just as surely as I am persuaded that en banc hearings should be discouraged in most cases and left to be initiated by the judges sua sponte, I am convinced that the whole practice on the subject is best left to each Court of Appeals. A diversity of practices has grown up in the various courts, presumably in response to their different conditions or prevailing desires. If Congress had required that litigants' petitions for rehearing en banc receive the consideration of the Courts of Appeals, the policy would be ours to enforce without questioning its desirability. But it is conceded that Congress has not done this. It is we ourselves who are making the policy, and so it is especially desirable to vindicate our new rule with reasons and bounds. Yet, all that we are vouchsafed in the Court's opinion is that the power to sit en banc is a 'necessary and useful power,' with a citation to our holding that a Court of Appeals has power to sit en banc. Textile Mills Securities Corp. v. Commissioner, 314 U.S. 326, 62 S.Ct. 272, 86 L.Ed. 249. When it is remembered that the question to be answered here is not whether Courts of Appeals have power to sit en banc, about which there is no dispute, but rather whether a litigant may compel the judges to hear and decide his petition for rehearing en banc, the feebleness of this reed is clear. I think both wisdom and humility would be well served by leaving this problem to the solutions from time to time suggested to each circuit by its own experience.

The case before us presents interesting questions on which there appears no conflict between panels; in fact, it is so unique that it is without precedent and is likely to be without progeny. A rehearing before the entire circuit en banc would simply be an appeal from the three-judge court to a swollen circuit court. Since I would not reverse on the procedural point, I reach the merits of the controversy.

The complaint alleges diversity of citizenship, presence of the requisite amount in controversy, and states that 'this is a civil action in equity between citizens of different states.' Because federal jurisdiction was grounded in diversity of citizenship, California law is the law of the forum and may govern the case. However, foreign corporations, acts committed in other states, federal bankruptcy proceedings and federal tax rulings are scrambled in the legal situation and law of other states may be involved. California certainly recognizes a cause of action based on unjust enrichment, whether it be treated as a common count, Minor v. Baldridge, 123 Cal. 187, 190, 55 P. 783, 785, or as a waiver of a tort and suit in assumpsit, Bank of America National Trust & Savings Ass'n v. Hill, 9 Cal.2d 495, 71 P.2d 258. Whether we resort to California law, other state law or federal law, none rejects the general doctrine of unjust enrichment and fiduciary duty of corporate managements, although it would be surprising if there were an exact precedent anywhere for this unique situation. Thus, the courts below would have to analyze the facts in the light of general principles of unjust enrichment, with such aid as they may obtain on the specific issues from analogy.

We have two affiliated corporations subject to considerable, if not complete, common control, but with different minority interests. One has realized a huge loss; the other has enjoyed large net income. If these two can be brought together, a tax saving amounting in this case to some seventeen million dollars can be made for the profitable company. Congress has authorized, but has not required, that these two be merged by means of a consolidated tax return. Each has the right, but no legal duty, under federal law to join in consolidated returns.

It may seem anomalous at first glance that a sustained loss can be realized upon as an asset. But it is not the loss; it is the right to use the loss as an offset that is valuable. The market for it is restricted, of course, but this detracts nothing from its value to one in a position to utilize it.

Each of these corporations had something to contribute to a tax-saving plan. Either one alone was helpless. But I know of no moral or legal obligation to give away any legal opportunity or advantage just because its owner cannot utilize it himself.

There would have been nothing remotely illegal or improper if the management of the plaintiff corporation had demanded some compensation for its loss privileges. Indeed, it is probable that the intention of the statute permitting the consolidation of the two positions was to provide salvage for the loser, not profit for one which sustained no loss.

Each corporation then had a bargaining position. The stakes were high. Neither could win them alone, although each had an indispensable something that the other was without. It was as if a treasure of seventeen million dollars were offered by the Government to whoever might have two keys that would unlock it. Each of these parties had but one key, and how can it be said that the holder of the other key had nothing worth bargaining for? DP The management, probably without improper intent, failed to claim for the plaintiff the advantages of its position, turning them over without compensation for the advantage and profit of another affiliated corporation. On the face of it, the conclusion would seem warranted that the plaintiff is entitled to what fair arm's-length bargaining would probably have yielded. To ask this can hardly be stigmatized as capitalizing mere nuisance value. This is not the blackmailing transaction which offers to forego doing another injury if bought off. This merely seeks a share in the benefit which it transferred.

I would reverse and remand to the District Court for findings in accordance with this sketchily stated doctrine of unjust enrichment.