Exhibitors Poster Exch., Inc. v. National Screen Serv. Corp.

• Decision Date: 26 January 1970
• Docket Number: No. 26643.,26643.
• Citation: 421 F.2d 1313
• Parties: EXHIBITORS POSTER EXCHANGE, INC., Plaintiff-Appellant, v. NATIONAL SCREEN SERVICE CORPORATION et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

421 F.2d 1313 (1970)

EXHIBITORS POSTER EXCHANGE, INC., Plaintiff-Appellant, v. NATIONAL SCREEN SERVICE CORPORATION et al., Defendants-Appellees.

No. 26643.

United States Court of Appeals, Fifth Circuit.

January 26, 1970.

C. Ellis Henican, Jr., New Orleans, La., Glenn B. Hester, Carl E. Sanders, Augusta, Ga., Francis T. Anderson, Yeadon, Pa., Sanders, Hester, Holley, Ashmore & Boozer, Augusta, Ga., Henican, James & Cleveland, New Orleans, La., for appellant, Exhibitors Poster Exchange, Inc.

James G. Burke, Jr., Gibbons Burke, New Orleans, La., Phillip A. Wittmann, William D. Treeby, New Orleans, La., Walter S. Beck, New York City, Chaffe, McCall, Phillips, Burke, Toler & Hopkins, New Orleans, La., Phillips, Nizer, Benjamin, Krim & Ballon, New York City, for appellee National Screen Service Corp.

Stone, Pigman, Walther, Wittmann & Hutchinson, Phillip A. Wittmann, William D. Treeby, New Orleans, La., for appellees Columbia Pictures Corporation, Metro-Goldwyn-Mayer, Inc., Paramount Film Distributing Corporation, Twentieth Century-Fox Film Corporation, United Artists Corporation, Universal Film Exchanges, Inc. and Warner Bros. Pictures Distributing Corporation.

Before JOHN R. BROWN, Chief Judge, GODBOLD, Circuit Judge, and CABOT, District Judge.

JOHN R. BROWN, Chief Judge:

Here Exhibitors¹ is seeking reversal of the District Court's summary judgment in favor of the defendants. The District Court granted the summary judgment on the basis of the doctrines of res judicata and collateral estoppel, which doctrines are the natural points of dispute of such long continuing private anti-trust cases as this.

Exhibitors is a jobber or rental distributor of advertising posters for movies. There are two defendants. As a group the first — Producers — comprises the major movie companies,² which through their copyright rights have the sole right to produce or license the production of the advertising material for their movies. The second, and perhaps most direct, is National Screen.³ Its economic role is a dual one (i) as the only major holder of a license to produce this material and (ii) a distributor of the material to motion picture exhibitors.

The history of the movie poster industry has been a history of almost continuous antitrust litigation since⁴ the early 1940s when the movie companies quit producing their own posters and started giving this right to National Screen. This litigation was produced when National Screen took steps toward vertically integrating its operation by supplying movie exhibitors directly thus eliminating the jobbers such as Exhibitors. National Screen at first did not persist in these efforts. When antitrust claims were brought it would enter into consent judgments under which it agreed to supply the jobbers with the posters it produced under the license from Producers. See Lawlor v. National Screen Service, 3 Cir., 1959, 270 F.2d 146; National Screen Service Corp. v. Poster Exchange, Inc., 5 Cir., 1962, 305 F.2d 647.

In spite of the consent judgments, several jobbers in the Philadelphia area brought another antitrust case alleging conspiracy and monopolistic practices. See Lawlor v. National Screen Service Corp., 1955, 349 U.S. 322, 75 S.Ct. 865, 99 L.Ed. 1122. Despite a momentary victory in the Supreme Court, which eliminated obstacles to a further factual inquiry, the tactic proved to be a mistake when, after the case was finally decided on the merits, the Third Circuit held that neither the licensing agreements nor the practices of National Screen were illegal. Lawlor v. National Screen Service Corp., 3 Cir., 1959, 270 F.2d 146, cert. denied, 1960, 362 U.S. 922, 80 S.Ct. 676, 4 L.Ed.2d 742.

Armed now with stare decisis, National Screen in 1961 executed its plan to put the vertical integration into effect. That included the February notice to jobbers all over the country that it would no longer operate through middle men.

Undaunted by the Third Circuit's opinion, jobbers again brought suit. Exhibitors was no exception. On May 17, 1961, one day after the date on which National Screen was to cease supplying posters, Exhibitors brought suit in the United States District Court for the Eastern District of Louisiana against National Screen and eight Producers.⁵ This became Suit No. 1.

Exhibitors alleged that the refusal to deal by National Screen and the refusal of Producers to license Exhibitors to produce posters on a local basis was a "group boycott". Thus it alleged that National Screen and Producers were violating Sections 1⁶ and 2⁷ of the Sherman Act in that they were engaged in a "contract or conspiracy in restraint of trade" and were conspiring to give National Screen a monopoly and that National Screen was monopolizing or attempting to monopolize the industry. Exhibitors sought triple damages under the private-attorney-general authority given by § 15 of the Clayton Act⁸ and sought to enjoin the defendant from engaging in the alleged illegal conduct in the future.

Exhibitors was granted a preliminary injunction against all parties. But, after the depositions of Exhibitors' President, and National Screen's local manager were taken and upon motion and affidavits of officials of Producers, the Court granted a summary judgment in favor of Producers and dissolved the injunction. National Screen was, however, retained as a party defendant.

In 1964, after a pre-trial conference and as the trial with only National Screen as a defendant neared, Exhibitors filed Suit No. 2 in the same court. In Suit No. 2 the Producers⁹ were again named defendants and Exhibitors again stated the same facts — the 1961 refusal to deal — but sought only to recover the damages suffered since the summary judgment in Suit No. 1. The trial on the remaining part of Suit No. 1 was postponed and the two suits were merged. All defendants — National Screen and Producers — moved for summary judgment and the Court granted all the motions. As in Suit No. 1 no appeal was taken.

Exhibitors was undaunted. Adverse judgments were the fuel on which it seemed to thrive. And in 1967 the present Suit, No. 3, was instituted against the same defendants in which Exhibitors asked for damages from the time of filing Suit No. 2. Again all defendants moved for summary judgment and the District Court by invoking the doctrines of res judicata and collateral estoppel undertook to lay the antitrust claims of this jobber to rest.¹⁰

The defendants pressed these doctrines on the District Court as though they were to be used as clubs to accomplish the policy embedded in them: the prevention of a repetitive litigation. The doctrines must be used, however, not as clubs but as fine instruments that protect the litigant's right to a hearing as well as his adversary and the courts from repetitive litigation. In addition, it must be remembered that the use of these doctrines can cloak a party in perpetual immunity and thus possibly protect conduct lasting long past the prior judgment — conduct that the law may grow to abhor.

Our attempt to carve our way through these doctrines and this litigation convinces us that the District Court erred. Although res judicata and collateral estoppel do slice away much, there are still controverted issues upon which Exhibitors may recover if it can meet its considerable burden of proof.

I.

Res judicata must first be dealt with. It is only where the prior judgment does not fit into that doctrine that there need be inquiry into the collateral estoppel effect of such judgment. Of course, the doctrine is that "a judgment `on the merits' in a prior suit involving the same parties or their privies bars a second suit based on the same cause of action." Lawlor v. National Screen Service Corp., 1955, 349 U.S. 322, 326, 75 S.Ct. 865, 867, 99 L.Ed. 1122, 1127.

Here there is no problem with the identity of the parties. The problem is whether the present action — Suit No. 3 — is "based on the same cause of action" as either Suits No. 1 or No. 2. The answer here depends on the nature of the right of action granted under the antitrust laws. It is Exhibitors' contention that the alleged wrongs — the § 1 conspiracy in restraint of trade, and the § 2 conspiracy to monopolize, and monopolization — are, if not a series of new torts successively perpetrated, at least in the nature of continuing torts. It argues that there is no res judicata effect to either judgment because each new accrual of damage gives rise to a new claim for which relief can be granted — that the damages occurring since Suit No. 2 have given rise to a new cause of action.

The defendants, on the other hand, argue that there is and has been only one cause of action — the alleged concerted refusal in 1961 of the National Screen and Producers to deal with Exhibitors. They contend that there has been prior adjudication that that conduct is not in violation of either § 1 or § 2 of the Sherman Act (see notes 6 and 7 supra).

Exhibitors relies upon the Supreme Court's 1955 decision in Lawlor v. National Screen Service Corp., supra, a case involving National Screen's earlier attempt to eliminate jobbers. There National Screen and the movie companies argued that a 1942 consent judgment under which National Screen agreed to supply advertising material to jobbers was res judicata. The jobbers, however, there alleged that since the entry of the prior judgment National Screen had engaged in new monopolistic practices — deliberately slow deliveries, tie-in sales, and others — and that five other producers had joined the conspiracy.

The Supreme Court held that the prior judgment was not a bar. The Court held that the additional claims coupled with the fact that in those circumstances the continuing conduct gave rise to more than one cause of action. The Court said:

"That both suits involved `essentially the same course of wrongful conduct\' is not decisive. Such a course of conduct — for example, an abatable nuisance — may frequently give rise to more than a single

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