PARTMAR CORPORATION ET AL. v. PARAMOUNT PICTURES THEATRES CORP. ET AL.
No. 17
Supreme Court of the United States
Argued October 13, 1953. Decided February 8, 1954.
347 U. S. 89
MR. JUSTICE REED delivered the opinion of the Court.
This case presents a matter of federal practice involving inconsistent positions by litigants in court proceedings. We have often held that under the doctrine of res judicata a judgment entered in an action conclusively
Petitioners entered counterclaims in a suit against them by respondent. These counterclaims were dismissed by the trial court upon determination of the original suit for petitioners and against respondents. The cause of action stated in petitioners’ counterclaims is based upon a controverted personal right that had not been adjudged and therefore res judicata is no bar to the claimed right of recovery. Respondent, however, in its original suit had raised an issue, determinative of its cause of action, which had been therein successfully controverted by petitioners to final judgment on the merits. Collateral estoppel stands as a bar to further litigation by the parties of this issue, and this issue was held by the trial court to be determinative of petitioners’ counterclaims. Petitioners’ argument that the dismissal denied a hearing of issues that might have been but were not determined by the judgment on the merits of the original action
Although federal jurisdiction was sought only on the ground of diversity, the complaint relied upon a breach of the Sherman Act, and the counterclaims were similarly bottomed on that federal law. Therefore our conclusion is reached on a consideration of federal law and procedure. It will depend upon whether or not any issue of fact or law remained for decision after the primary action was decided.3 The issue reaches us under the following circumstances.
Paramount Pictures Theatres Corp., a subsidiary of Paramount Productions, Inc., and successor to Paramount Pictures, Inc., is a New York corporation engaged in the business of operating motion picture theatres throughout the United States. These three corporations will hereinafter be referred to jointly as “Paramount.” On August 31, 1939, Paramount leased the Paramount Downtown Theatre in Los Angeles, California, for ten years to Partmar Corp., a California corporation, petitioner here, wholly owned by Fanchon & Marco, Inc. This lease was subsequently amended in 1942 and extended to March 18, 1952. A “film franchise agreement” was executed in conjunction with, and for the same period as, the lease. It licensed Partmar to exhibit Paramount pictures at the theatre as first “runs” of the films, required Partmar to exhibit such pictures not less than forty-six weeks each year, and set a scale of license fees. The lease expressly provided that it was terminable at the option of Paramount if the franchise agreement “be cancelled or terminated for any reason whatsoever.” Other provisions of the lease and agreement are not germane to the issue before this Court.
On March 26, 1947, Paramount notified Partmar that it was cancelling and terminating the franchise agreement because of the injunction, and on April 2, 1947, notified Partmar that it was terminating the lease by reason of the termination of the franchise agreement. Partmar refused to vacate the theatre upon demand, and Paramount instituted this action on May 1, 1947, in the District Court for the Southern District of California, alleging diversity and unlawful detainer of the theatre. The complaint sought, so far as is material here, restitution of possession based on illegality of the franchise under the Sherman Act as construed in the decree in the Southern District of New York, supra, and a declaratory judgment that the lease had been properly terminated.
Partmar and Fanchon & Marco, Inc., answered setting up various defenses and filed three counterclaims seeking treble damages under
By order dated April 26, 1948, the District Court, upon Paramount‘s motion, ordered Paramount‘s causes of action for unlawful detainer and declaratory judgment tried separately from Partmar‘s counterclaims. Prior to trial on May 3, 1948, we handed down our decision on Paramount‘s and the other defendants’ appeals from the decree of the Southern District of New York. United States v. Paramount Pictures, Inc., 334 U. S. 131. We held inter alia that “we cannot say on this record that franchises are illegal per se when extended to any theatre or circuit no matter how small” and set aside the District Court‘s findings relative to such franchises. Id., at 156. Relying on that decision Partmar and Fanchon & Marco, Inc., moved in the Southern District of California for dismissal of Paramount‘s action against them. Their motion was denied and the case went to trial without amendment of the pleadings in November 1950, on two issues: whether Paramount was justified in terminating the franchise agreement because of the decree in the New York Paramount case, supra; whether the lease and contract were illegal contracts under the federal antitrust statutes justifying repossession of the theatre by Paramount under California law. See, e. g., Glos v. McBride, 47 Cal. App. 688, 191 P. 67. Thus issue was joined as to the legality of the actions of Paramount and its alleged co-conspirators relative to the lease and franchise agreement, wholly apart from the New York injunction, and Paramount was in the anomalous position of attempting to prove that its agreements with Partmar violated the antitrust laws. Paramount did not limit its contention of illegality of the agreement to nonconspiratorial aspects of the antitrust laws, but argued that if the agreements were illegal in any way it had the right to possession. That Partmar recognized this position is clearly shown by its statement in its brief to the trial court that “after the reversal of that judgment [in the New York case], the plaintiff [Paramount] took the position that the question presented was whether the franchise was violative of the
“There was no allegation or proof of conspiracy. There being no showing of interstate commerce, it is immaterial whether there was conspiracy, unreasonable clearance, fixed admission prices, block booking, or unreasonable restraint. In the absence of interstate commerce, all else was entirely beyond the purview of the Sherman Act. But, assuming that there had been no failure to prove interstate commerce, the absence of conspiracy is equally fatal. Probably the only evidence relative to conspiracy was the statement of Y. Frank Freeman, a witness for Paramount, that there were no conspiratorial arrangements between Paramount and Fox West Coast. . . . Even in a setting of conspiracy, it is doubtful that the franchise would be unlawful. . . . On the evidence in this case the Partmar franchise is neither one of a system, or made by one holding a dominant position, or pursuant to a conspiracy. . . .”
It thus insisted that the remunerative lease and franchise agreements were still valid and subsisting, and that Paramount had no right to possession.
After eighteen days of trial the District Judge on May 2, 1951, filed a memorandum opinion, 97 F. Supp. 552, in which he concluded that the termination “for any reason” clause in the lease meant for any “legal or substantial reason,” and that the 1946 decree of the Southern District of New York “was not a legal cause or reason for terminat-
“Paramount, not in conjunction with any other major studio, entered into the franchise agreement which gave to Partmar the right to exhibit the first-run feature pictures of Paramount in the City of Los Angeles. Neither said franchise agreement, nor said lease, nor any amendment to either of them constituted any part of, nor were they or any of them entered into as a result of any agreement, combina-
tion or conspiracy of any kind whatsoever between Paramount and any other person or persons, nor between Partmar and any other person or persons.”
And conclusion No. 11 which provides:
“Inasmuch as the said lease and said franchise agreement and all amendments to each of them were in all respects lawful and were not entered into nor performed as a result of any combination or conspiracy of any kind whatsoever on the part of either plaintiffs, defendants, third party plaintiff or third party defendants, with any person or persons; inasmuch as said lease, said agreement and amendments thereto have neither the purpose or effect of restraining or monopolizing trade or commerce among the several states in the production, distribution, transportation, sale or exhibition of motion pictures; and inasmuch as each was an agreement solely between plaintiff and defendants, or defendants and third party plaintiffs and third party defendants dealing solely with the Paramount Theatre Los Angeles alone and the exhibition of pictures thereat; third party plaintiffs, and each of them, cannot recover upon the first, second and fourth counterclaim, or any of them.”5
The court simultaneously entered an order giving judgment for Partmar on Paramount‘s two counts of unlawful detainer, declaring the rights and duties of the parties under the franchise and the lease, and dismissing with prejudice Partmar‘s three treble-damage counterclaims.
Partmar, apparently not wishing to jeopardize its valuable lease and franchise, took no appeal from parts of
Partmar contends that the District Court erred in dismissing its counterclaims with prejudice without a separate trial as to their merits, which the trial court had previously ordered, and that such dismissal deprived it of due process of law. In particular, it argues that it was denied the valuable property right of having admitted in evidence during a trial the judgment in the case of United States v. Paramount Pictures, Inc., 334 U. S. 131, which, it argues, would provide, under § 5 of the Clayton Act,
Each of Partmar‘s counterclaims for treble damages was predicated upon allegations that Paramount and its alleged co-conspirators engaged in a conspiracy in restraint of trade and commerce, and that the allegedly “excessive terms, conditions and charges for the photoplays made and released by them” and the exaction of fifty percent of the net receipts, imposed by the lease and franchise agreement, were part of such conspiracy. The District Court found in the principal action, which decision was not appealed and is not before us, that neither the lease nor the franchise was the result “of any agreement, combination or conspiracy of any kind whatsoever.” Of course, if this finding were not material to the principal action, the doctrine of collateral estoppel would not apply. But this finding was ob-
The allegations of the counterclaims charge that as a result of “the same conspiracy stated in the complaint” in United States v. Paramount Pictures, Inc., 334 U. S. 131, Partmar was damaged in the terms of its lease from Paramount. Yet this very lease was sustained by the judgment in this case on the ground that it was not violative of the Sherman Act. Partmar moved to dismiss the complaint in this case after this Court‘s decision in the Paramount Pictures case on the ground that it “had become moot by the demonstrated nonexistence of the basic fact,” i. e., the illegality of the lease. In its brief in the trial court, petitioner stated its position clearly:
“The effect of the opinion seems to be that franchises are not unlawful per se, that is, apart from con-
spiracy, and that on the record in that case they were not shown to have been parts of the conspiracy.” “The Supreme Court seems at least to have clearly indicated that a franchise with one exhibitor for one theatre, like that with Partmar, was not involved in the case. It said in effect that only franchises with defendants and franchises for theatres in a circuit were involved.”
Nor would unlimited admission in evidence of the final decree in United States v. Paramount Pictures, Inc., supra, have aided Partmar. We had reversed the only finding in that case pertaining to the illegality under the Sherman Act of franchise agreements between exhibitors and producers, and the final consent decree as to Paramount entered on March 4, 1949, contains no findings on such subject. Cf. United States v. Paramount Pictures, Inc., 85 F. Supp. 881, 897. Since final judgments or decrees in Government antitrust actions are admissible under § 5 of the Clayton Act as prima facie evidence only of issues actually determined in the prior adjudication,8 the Government judgments provide no proof of the indispensable element to Partmar‘s counterclaims, that the lease and
Affirmed.
MR. JUSTICE JACKSON and MR. JUSTICE CLARK took no part in the consideration or decision of this case.
[For dissenting opinion of MR. CHIEF JUSTICE WARREN, joined by MR. JUSTICE BLACK, see p. 104.]
I cannot join in the Court‘s decision. Relying on the doctrine of collateral estoppel, it affirms the trial judge‘s dismissal of petitioner‘s treble-damage counterclaims without a trial. The doctrine, I believe, is inapplicable to the facts of this case.
The Court correctly states the well-settled rule that a prior judgment on a different cause of action is not conclusive as to questions which might have been but were not actually litigated in the original action.1 The inquiry, therefore, must be whether the conspiracy issue was actually litigated in the eviction suit; if it was not so litigated, the District Court‘s finding as to the absence of evidence of conspiracy cannot preclude petitioner on its counterclaims. The Court rests its decision on the assumptions (1) that the conspiracy issue was litigated in the eviction suit and (2) that in any event petitioner had a full opportunity to litigate the issue. Neither assumption, it seems to me, is warranted by the facts. To those facts I now turn.
The respondent, Paramount, sought to take advantage of its own violation of the federal antitrust laws by bringing an eviction suit to cancel a valuable lease held by its tenant, the petitioner, on a Los Angeles theatre. The lease provided that it was terminable if, “for any reason whatsoever,” petitioner‘s franchise for the showing of Paramount‘s pictures should be “cancelled or terminated.”
In its answer, petitioner set up as a defense that Paramount was seeking to evict petitioner in pursuance of the conspiracy enjoined in United States v. Paramount Pictures, Inc., supra, and that the effect of an eviction would be to drive petitioner out of business and thus enable Paramount to extend an unlawful monopoly over motion picture theatres. On Paramount‘s motion, the defense was stricken as an improper collateral attack on the right of the lessor to recover possession of the theatre.
Both actions—the eviction suit and the counterclaims—were then ready for trial. Paramount moved that the two actions be tried separately. Petitioner consented and the court so ordered, the eviction suit to be tried first.
Throughout the lengthy trial of the eviction suit, the trial judge repeatedly complained of the total absence of any evidence showing that the franchise was part of a conspiracy. His complaint went unheeded. Paramount, which had the burden of proof in the eviction suit, not only failed to introduce such evidence but never even alleged such a conspiracy. Petitioner, on the other hand, never denied the existence of the conspiracy, but argued that the franchise in itself was not invalid.3 And both
At the conclusion of the eviction trial, the court gave judgment for petitioner because of Paramount‘s failure to show the illegality of the franchise by evidence of conspiracy. As to the counterclaims, the court stated:5
“At the time of trial it was agreed that action on the counter-claims should be postponed until after the trial of the main issue involved, and no evidence was offered by either plaintiff or defendant on the counter-claims.”
Nevertheless, the court dismissed the counterclaims without trial on the ground that there was “. . . no substantial evidence of a conspiracy in this case on the part of Partmar or Paramount . . . .”6 The court thus disposed of both the eviction suit and the counterclaims on the same ground—the absence of any evidence of conspiracy.
Under these circumstances, should the doctrine of collateral estoppel be invoked against petitioner to bar a trial on its counterclaims? I believe not. The doctrine presupposes, and the Constitution requires, that the party who is estopped had his day in court in a prior action and that he then had a fair hearing in which to prove his point but failed. Surely the doctrine was never intended to estop a party who in the prior action was denied such a hearing.
That, as I see it, is precisely the situation here. The eviction suit and counterclaims had been severed for trial purposes. During the trial of the eviction suit, Paramount was the only party with any reason or justification for proving that the franchise was part of a conspiracy. Because of Paramount‘s failure to present such proof, the court held the lease to be valid, but at the same time gave judgment against petitioner on its counterclaims because of the same shortcoming of Paramount‘s proof. This Court now affirms. The anomalous result is to penalize petitioner for refusing to help Paramount win the eviction suit.
Notes
“27. Paramount Pictures Theatres Corporation, Paramount Pictures, Inc., Paramount Film Distributing Corporation, . . . and the defendants in United States of America v. Paramount Pictures, Inc., et al., Equity No. 87-273, in the United States District Court for the Southern District of New York, and other persons to the defendants unknown, were, at the time of the acts and transactions stated in the complaint herein, and they now are, engaged in a conspiracy in restraint of trade and commerce among the States, in the distribution and exhibition of motion pictures, in violation of the Act of July 2, 1890, that is to say, the same conspiracy stated in the complaint in that case.
“32. This action has been brought by the plaintiff in pursuance of the aforesaid conspiracy, arrangements and agreements, and to evade and defeat the purpose to end the aforesaid conspiracy and restraint of trade for which United States of America v. Paramount Pictures, Inc., et al., Equity No. 87-273, was instituted.
“33. As part of the aforesaid conspiracy, the plaintiff and the thirdparty defendants arranged and agreed among themselves, to require Partmar Corporation to license for exhibition at the Paramount Theatre for 46 weeks of each year, only photoplays made and released by Paramount Pictures, Inc., and, for any failure upon the part of Partmar Corporation to obey that requirement, to evict it from Paramount Theatre. The plaintiff, and the third-party defendants have been able to impose, and they have in fact imposed, upon Partmar Corporation, excessive terms, conditions and charges for the photoplays made and released by them and exhibited at the Paramount Theatre, from March 2, 1933, to the present time.”
In the second counterclaim, the third-party plaintiffs (petitioners) reiterated their allegations of conspiracy and based their claim for damages on an addition to the lease that required Partmar “to pay an additional sum; that is to say, fifty per cent of the net receipts of Partmar Corporation at the Paramount Theatre.”
The other counterclaim is not in the record but the briefs indicate that it contained substantially the same allegation as numbers one and two.
“The general principle announced in numerous cases is that a right, question or fact distinctly put in issue and directly determined by a court of competent jurisdiction, as a ground of recovery, cannot be disputed in a subsequent suit between the same parties or their privies; and even if the second suit is for a different cause of action, the right, question or fact once so determined must, as between the same parties or their privies, be taken as conclusively established, so long as the judgment in the first suit remains unmodified.”
See note 1, supra.“We think that Congress intended to confer, subject only to a defendant‘s enjoyment of its day in court against a new party, as large an advantage as the estoppel doctrine would afford had the Government brought suit.
. . . .
“The evidentiary use which may be made under § 5 of the prior conviction of respondents is thus to be determined by reference to the general doctrine of estoppel. Accordingly, we think plaintiffs are entitled to introduce the prior judgment to establish prima facie all matters of fact and law necessarily decided by the conviction and the verdict on which it was based.”
See Theatre Enterprises v. Paramount Corp., 346 U. S. 537; Monticello Tobacco Co., Inc. v. American Tobacco Co., 187 F. 2d 629.
There is yet an additional reason for not applying the doctrine of collateral estoppel here. Petitioner, as the successful party in the eviction suit, could not appeal the District Court‘s finding that there was no evidence of conspiracy. Lindheimer v. Illinois Bell Telephone Co., 292 U. S. 151, 176; New York Telephone Co. v. Maltbie, 291 U. S. 645. The adverse finding was not included in the Court‘s decree, as in Electrical Fittings Corp. v. Thomas & Betts Co., 307 U. S. 241. Because of this inability to appeal, the finding cannot bind petitioner in a subsequent action between the parties based upon a different cause of action. See Restatement, Judgments, § 69 (2); Scott, Collateral Estoppel by Judgment, 56 Harv. L. Rev. 1, 15-18.The Court‘s opinion (footnote 6) concedes that inability to appeal precludes a subsequent application of collateral estoppel, but contends that petitioner could have appealed here because the trial court‘s finding in the eviction suit (as to the absence of proof of conspiracy) was material to the decree in the eviction suit. The Court‘s opinion cites no case, in this Court or any other, holding that a successful party can appeal findings which are not inserted as part of the decree. Indeed, the opinion overlooks the very holdings of this Court on which it relies for support. In both Lindheimer v. Illinois Bell Telephone Co., supra, and New York Telephone Co. v. Maltbie, supra, the findings which the public utility sought to appeal related to the value of its property for rate-making purposes; in each case, the trial court had held that the rates fixed by a state commission were confiscatory on the basis of those findings. Yet this Court held that the public utility, as the successful party, could not appeal those findings. Surely in this case the trial judge‘s finding as to conspiracy was no more “material” than the findings which this Court refused to review in Lindheimer and Maltbie.
“The contention of the Government seems to be that the doctrine of res judicata does not apply to questions of law; and, in a sense, that is true. It does not apply to unmixed questions of law. Where, for example, a court in deciding a case has enunciated a rule of law, the parties in a subsequent action upon a different demand are not estopped from insisting that the law is otherwise, merely because the parties are the same in both cases. But a fact, question or right distinctly adjudged in the original action cannot be disputed in a subsequent action, even though the determination was reached upon an erroneous view or by an erroneous application of the law.”
Emich Motors Corp. v. General Motors Corp., 340 U. S. 558, 569; Cf. United States v. Stone & Downer Co., 274 U. S. 225, 230.