RING
v.
SPINA et al.
Circuit Court of Appeals, Second Circuit.
*648 Carl E. Ring, of New York City (Ring & Murray, of New York City, on the brief), for plaintiff-appellant.
Philip Wittenberg, of New York City (Wittenberg, Carrington & Farnsworth, of New York City, on the brief), for defendants-appellees Spina, Heyman, Hannan, and Pauker.
Jonas J. Shapiro, of New York City (Greenbaum, Wolff & Ernst, Sidney R. Fleisher, and Monroe R. Lazere, all of New York City, on the brief), for defendant-appellee The Authors' League of America, Inc., sued herein as The Dramatists' *649 Guild of the Authors' League of America, Inc.
Before EVANS and CLARK, Circuit Judges.
CLARK, Circuit Judge.
This is an appeal from an order of the District Court vacating a temporary injunction and denying a motion for such injunction pending trial in an action for treble damages under the Sherman Act, as amended, 15 U.S.C.A. § 15, and for other relief. Defendants Spina, Heyman, and Hannan are authors of a theatrical production called "Stovepipe Hat." The other defendants are Pauker, agent of these authors, and The Dramatists' Guild of the Authors' League of America, Inc., an association said to include substantially all the playwrights in the country. Restraint of trade is alleged to be accomplished by means of the Guild's Minimum Basic Agreement, which a producer or "manager" must sign before any Guild members, such as the authors herein, may license or sell to him their works. The Basic Agreement, among other things, fixes the minimum terms under which the Guild permits any of its members to lease or license a play, including the minimum advance payments and the minimum royalties to be paid by a manager. It limits contracts by both managers and authors to those made under its own terms, and between managers and members, both of whom are "in good standing" with the Guild.[1] It also provides that any dispute shall be finally adjudicated by arbitration.
It appears from the moving papers that plaintiff signed this Minimum Basic Agreement after he had invested $50,000 in the play. He came into the venture first by association with, later by taking over the rights of, one Gaumont, who had entered into a "Production Contract" with the three authors on February 7, 1944, whereby Gaumont was to produce the play upon stated royalties and other payments all subject to the provisions of the Basic Agreement. Then plaintiff on May 4, 1944, to safeguard his investment, and upon his agreement to advance the balance necessary for the show to open in New Haven, May 18, 1944, attempted to enter into an agreement with the authors on the basis of Gaumont's contract with them; but they signed only on condition that their lawyer would later approve. Their lawyer held, however, that this contract could not be made with plaintiff, a non-Guild member; and it was destroyed. Thereupon plaintiff, as he says, "against his will and under the coercive pressure of the monopolistic practice and rules and regulations" of the Guild, signed its Basic Agreement, in order that he might protect his part in the venture. The play did open in New Haven, and then went on to Boston, preparatory to going to Philadelphia and then to New York City; and plaintiff put up an additional $75,000, as he alleges. A dispute having arisen as to changes which plaintiff thought should be made in the play, the authors then took the position that plaintiff had breached the Basic Agreement by making changes without consent of the authors, contrary to its provisions, and hence that the production contract was terminated. The play was then forced to close and the authors requested arbitration of the dispute pursuant to the arbitration clauses of the Basic Agreement. Thereupon plaintiff commenced this action and asked for a temporary injunction, which was first granted pending a further hearing, but later denied after the hearing had been held.
The motion for a temporary injunction pending trial asked that defendants be enjoined from proceeding with arbitration or otherwise enforcing the Basic Agreement and from interfering with plaintiff's production of the show, and that royalties be withheld pending assessment of damages in this action. In denying the motion the District Court stated that not enough facts had been furnished to indicate that the *650 Basic Agreement was void under the Sherman Act, that the transactions here involved were not in interstate commerce, and that relief should be denied, since the parties were in pari delicto and since plaintiff was seeking at the same time to be awarded rescission and enforcement of a contract.
The granting or denial of an interlocutory injunction is usually relegated to the discretion of the District Court, which an appellate tribunal is reluctant to disturb. State of Alabama v. United States,
Plaintiff attacks the Basic Agreement for its provisions for compulsory arbitration, for price fixing, and for dealing with only Guild members. It is now well settled that a contract covering a large part of an industry will be void and illegal under the Sherman Act for such restrictive agreements and that these constitute adequate proof of a combination in restraint of trade. United States v. Trenton Potteries Co.,
The District Court, however, stressed the point that there can be no recovery under the Sherman Act where the restraint fails to involve transactions in interstate commerce. But we disagree with the conclusion below that the restraint in question was not of commerce among the several states. The District Court relied particularly upon the cases of Hart v. B. F. Keith Vaudeville Exchange, 2 Cir.,
Even if we thought that this present case concerned only a musical play being prepared in the provinces for Broadway, we should doubt the presently controlling force of these precedents. Employment contracts for separate exhibitions seem to us quite different from the substantial business of readying a musical comedy through tryouts on the road for New York production. There must be the securing of services of countless actors, actresses, members of choruses, and others, of scenery, music, and appropriate lighting, then the strenuous activities required to weld all these parts into a delectable whole, the judicious advertising, and all the other details to such a production, so extensive in fact that it seems not unusual for a single play to be *651 separately incorporated as a business corporation. And the road tryouts here, from New Haven to Boston to Philadelphia are an essential part of the fashioning of a perfect product for the Broadway trade. Moreover, there is no doubt of the steadily expanding content of the phrase "interstate commerce" in recent years; and hence there is no longer occasion for applying these earlier cases beyond their exact facts.[2] The Supreme Court has not hesitated to regard the distribution of motion picture films as interstate commerce, Interstate Circuit, Inc. v. United States,
But much more is here involved than merely an agreement for the production of a single play; under attack is a broad plan for controlling the dramatic productions of the country. It is clear that the plaintiff in an anti-trust suit need not himself be in interstate commerce. It is sufficient that the combination which is the cause of his injury seeks to restrain such commerce. Chattanooga Foundry & Pipe Works v. City of Atlanta,
The Guild contends, however, that it is a labor union, and thus attempts to bring itself within the exception of § 17 of the Sherman Act, as amended, 15 U.S.C.A. § 17. It is true that this exception has recently received a broad interpretation in the light of its original purpose. United States v. Hutcheson,
Plaintiff also calls attention to the fact that the parties herein are citizens of different states, and hence he claims also the right to recover under state laws prohibiting combinations in restraint of trade, such as N. Y. General Business Law, Consol. Laws N.Y., c. 29, § 340. In view of the conclusion we have reached as to the applicability of federal law, we find it unnecessary to consider this further claim at this time.
The District Court was also of the view that plaintiff's participation in any possible combination, as evidenced by his signing of the Basic Agreement, was sufficient to require denial of relief. As appears above, plaintiff, having invested $50,000 with Gaumont, took over the latter's production contract with the authors and, before he invested more, endeavored to enter into a direct contract with them. But he found this impossible until he in turn became a member of the Guild in good standing by signing the Basic Agreement. The rules of the Guild permitted no other course. Thus, he had to sign to save his $50,000 investment and to safeguard his further attempts to bring the venture to fruition. This seems to us a prima facie showing of economic coercion. We do not think it an answer to say that he knew of this Basic Agreement at the time he dealt with Gaumont. It seems a fair conclusion that the real compulsion for his quite personal commitment came when he found himself actively engaged in plans to take over the venture personally.
It is well settled that where one party to an illegal contract acts under the duress of another the parties are not in pari delicto. 6 Williston on Contracts, Rev. Ed.1938, § 1789, and cases cited 5 Williston on Contracts, § 1614, nn. 4-7; 2 Pomeroy, Equity Jurisprudence, 4th Ed., §§ 941, 942. And in actions for triple damages under the Sherman Act a showing of economic duress similar to that asserted here has been held sufficient proof that the plaintiff is not a party to the monopoly. Eastman Kodak Co. of New York v. Southern Photo Materials Co.,
Where the parties stand actually and truly in pari delicto, the law should leave them where it finds them. Northwestern Oil Co. v. Socony-Vacuum Oil Co., 7 Cir.,
Finally, we disagree with the District Court's comment that plaintiff's action fails because he seeks at the same time rescission and enforcement of a contract. This comment is in point only as to a very small part of plaintiff's extensive prayers for relief, which were based upon an extremely detailed, if not verbose, complaint.[3] But plaintiff is entitled to state his claims in detail if he chooses, and rely upon the court to award him such judgment as his case deserves; and at trial he will not be bound by his prayers. F.R.C.P. 54(c), 28 U.S.C.A. following section 723c; Truth Seeker Co. v. Durning, 2 Cir.,
So far, therefore, as the underlying principles of law are concerned, we think plaintiff showed prima facie grounds of potential recovery. The District Court did not, however, pass upon the facts in controversy.[4] It is true that much of the story herein is shown by documentary evidence, though the amount actually invested by plaintiff and the proximate cause for the failure of the production seem in serious dispute. Nothing we have said should be considered to foreclose adjudication of these issues, although the parties and the court may be disposed in the interest of expeditious dispatch of this litigation to agree to try the case upon the merits at the same time further hearing is held upon the proceedings for a temporary injunction. Meanwhile we think the ends of justice will be served by continuing the present restraining order granted by this court to the same effect as the original preliminary injunction below until hearing and decision upon the facts are had by the District Court. The order as entered was much less broad than that moved for by plaintiff; its main effect is to suspend arbitration proceedings pending adjudication of the validity of the contracts. No good purpose will be served by forcing the parties to the time and expense of arbitration while this question remains unsettled; and serious legal problems may develop if an arbitration is had, and thereafter the contracts are held invalid. Cf. Mohawk Mfg. Co. v. Cavicchi,
Judgment reversed and cause remanded for proceedings consistent with this opinion.
PER CURIAM.
Petitions for rehearing denied. These petitions are framed on the theory that the court was making binding adjudications of fact and law, whereas the opinion stated that the court was making merely preliminary rulings to dispose of the particular appeal and pointed out that final rulings both of fact and law must await a definitive hearing in the District Court.
NOTES
Notes
[1] Thus Art. I, Sec. 2, "Member's Right to Contract," provides: "None of the members of the Guild shall, without its consent, make any contract granting rights to produce and present a play upon the speaking stage in the United States except under the terms of this Basic Agreement and only with a Manager who is in good standing with the Guild. The names of Managers in good standing shall be filed with the Secretary of the Guild, and any Manager or Member of the Guild shall be entitled, upon written demand, to be informed of the names of Managers in good standing. The Guild shall have the right to notify its Members and Managers as and when any Manager has ceased to be in good standing." Like restrictions govern the "Manager's Right to Contract" under Art. I, Sec. 1.
[2] This appears to be conceded by a vigorous critic of the more recent developments. Powell, Insurance as Commerce in Constitution and Statute, 57 Harv.L. Rev. 937, 961.
[3] Defendants assert that the complaint is insufficient in law. Technically that point is not directly before us; for immediate purposes we say that we think enough is alleged to support the present proceedings. Package Closure Corp. v. Sealright Co., 2 Cir.,
[4] The District Court suggested that because of the "square dispute" between the parties as to the relevant facts, it could not make the findings required by F.R. 65(b). That rule refers, however, only to a "temporary restraining order," not to a preliminary injunction, F.R. 65(a).
