National Souvenir Center, Inc. v. Historic Figures, Inc.

• Decision Date: 10 February 1984
• Docket Number: 82-2330 and 82-2337,Nos. 82-2329,s. 82-2329
• Parties: , 1984-1 Trade Cases 65,850 NATIONAL SOUVENIR CENTER, INC., et al., Appellants, v. HISTORIC FIGURES, INC., et al. WILLIAMSBURG WAX MUSEUM, INC., Appellant, v. HISTORIC FIGURES, INC., et al. NATIONAL CIVIL WAR WAX MUSEUM, Appellant, v. HISTORIC FIGURES, INC., et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 503

728 F.2d 503

234 U.S.App.D.C. 222, 1984-1 Trade Cases 65,850

NATIONAL SOUVENIR CENTER, INC., et al., Appellants, v. HISTORIC FIGURES, INC., et al.

WILLIAMSBURG WAX MUSEUM, INC., Appellant, v. HISTORIC FIGURES, INC., et al.

NATIONAL CIVIL WAR WAX MUSEUM, Appellant, v. HISTORIC FIGURES, INC., et al.

Nos. 82-2329, 82-2330 and 82-2337.

United States Court of Appeals District of Columbia Circuit.

Argued Dec. 14, 1983.

Decided Feb. 10, 1984.

As Amended Feb. 10, 1984.

Appeals from the United States District Court for the District of Columbia (Civil Action Nos. 77-01243, 77-00093 & 77-00131).

Jerome S. Wagshal, Washington, D.C., with whom Nelson Deckelbaum, Washington, D.C., was on brief, for appellants.

David J. Cynamon, Washington, D.C., with whom James C. McKay, Washington, D.C., was on brief, for appellees.

Before TAMM and WALD, Circuit Judges, and HENLEY, ^* Senior Circuit

Judge, United States Court of Appeals for the Eighth Circuit.

Opinion for the Court filed by Circuit Judge WALD.

WALD, Circuit Judge:

These appeals spring from a series of pre-trial rulings by the district court in three consolidated antitrust cases involving wax museums; the effect of these rulings is to deny all relief on the claims filed. Plaintiff-appellants are commonly owned corporations which operate wax museums in Williamsburg, Virginia, Gatlinburg, Tennessee, and Gettysburg, Pennsylvania. Between 1962 and 1967, all three appellants entered into agreements to purchase or lease display figures for their museums from appellees and to become appellees' "franchisees". In 1977, the appellants filed antitrust claims alleging that the appellees illegally tied the franchise arrangements to the initial sale or lease of the wax figures. Appellants National Souvenir Center, Inc. and Historic Reviews, Inc., which jointly run the Gatlinburg museum, also claimed that appellees unlawfully exercised their monopoly power in the wax figure market to require leasing rather than selling the figures. Upon filing suit, all appellants stopped paying the franchise fees and rents required by the allegedly illegal agreements. Appellees then counterclaimed for recovery of overdue payments and interest.

The district court made several rulings relevant to the issues involved in this appeal. It first denied appellants' motion that appellees' attorneys be disqualified because they had previously represented one plaintiff in matters allegedly related to negotiation of one of the agreements at issue here. It then denied appellees' motion for summary judgment based on their claim that the antitrust charges were patently insubstantial, but granted them summary judgment on their contract counterclaims, awarding them the overdue franchise and lease fees, prejudgment interest on those fees, and ordering the appellants to pay all future franchise fees as they become due. Finally, the court granted summary judgment for the appellees on the ground that the antitrust claims were barred by the statute of limitations. The appellants appeal all adverse rulings including the remedial order requiring them to pay overdue franchise fees with interest and all future fees as they become due.

We affirm the dismissal of the appellants' tying claims on statute of limitations grounds. We find, however, that the statute of limitations is not a proper ground for dismissing the Gatlinburg appellants' monopoly leasing claim. Although we do not wholly agree with the district court's analysis of the applicability of the appellants' antitrust defenses to appellees' counterclaims for overdue franchise fees and lease payments, we agree with the court that those defenses may not be raised, given the facts of these cases. Therefore, we affirm the award of past due franchise and lease payments. We do not find, however, that the district court sufficiently justified its order requiring appellants to pay future franchise fees as they become due. The result is a remand for further proceedings on the Gatlinburg monopoly leasing claim and of the order to make future payments.

I. BACKGROUND

A. The Franchise Relationship

This lawsuit was spawned in January, 1957, when Frank Dennis incorporated appellee Historic Figures, Inc. (Historic) to operate a wax museum in Washington, D.C. The display figures in the museum were provided by appellee Lynch Display Corporation (Lynch), a company formed by appellee Earl Dorfman in March, 1957, to manufacture such figures. The figures were made of a vinyl plastic material rather than the traditional beeswax and, according to the appellants, "were considered a substantial improvement over the true wax figures." Brief for Appellants at 15. Lynch agreed to provide the figures for the Washington museum and to assist in installing them in appropriate historical settings. In return, Historic agreed to purchase figures exclusively from Lynch and, for a five year Historic soon expanded its business to "franchising" museums in different parts of the United States. The first franchise was granted by Historic's subsidiary National Historical Museums, Inc. (NHM), in 1960, to appellant-National Civil War Wax Museum (Gettysburg), which was owned primarily by Chaim Uberman. According to Dennis's affidavit accompanying appellees' first motion for summary judgment, the agreement between NHM and Gettysburg obligated NHM to provide Lynch figures at cost, and to "furnish, at Gettysburg's request, services 'in connection with the establishment of a museum by franchisee' including historical research for the figures and display scenes, advice on the cast of characters, and story line, assistance in planning floor layouts and advice on promotional material and operating procedures." Brief for Appellees at 9. The appellants contend, however, that NHM also was obligated to "provide continuing franchisor services to its franchisees in the form of assistance in the efficient operations of the museum" throughout the twenty year franchise relationship. Brief for Appellant at 21. In return, Gettysburg agreed to pay NHM 5% of its annual gross receipts for twenty years, beginning in April, 1962, when the museum opened.

period, to act as Lynch's sales agent to other wax museums. ¹

In May, 1962, NHM entered a similar agreement with appellant Historic Reviews, Inc. (Gatlinburg). NHM agreed to provide essentially the same service as it provided Gettysburg in return for 5% of Gatlinburg's gross receipts for the nineteen year four month term of the agreement. Unlike Gettysburg, Gatlinburg did not purchase the display figures from Historic, but rather leased them directly from Lynch for the term of the agreement for an annual minimum rent plus 15% of gross annual receipts over $100,000. NHM also agreed not to grant another wax museum franchise within 200 miles of Gatlinburg during the term of the agreement. ²

Uberman established a third franchised wax museum in Williamsburg, Virginia. NHM and appellant Williamsburg Wax Museum, Inc. (Williamsburg) entered a franchise agreement on September 22, 1967. NHM obligated itself to provide the same services as for Gettysburg and Gatlinburg, and not to franchise another wax museum within 100 miles of Williamsburg. In return, Williamsburg agreed to pay NHM 5% of its gross receipts for twenty years, and 2 1/2% of gross receipts thereafter.

The agreements are not typical franchises. See Brief for Appellants at 20; Brief for Appellees at 12-13. As the district court recognized:

[T]he characteristics that generally typify a franchise are not present here: there is no operation under a common name or designation, no cooperative advertising, no periodic inspections, and no establishment of common standards or business practice.

Williamsburg Wax Museum, Inc. v. Historic Figures, Inc., Civ. No. 77-0093, slip op. at 3 n. 5 (May 19, 1981) (Memorandum Order granting defendants' motion for summary judgment on their counterclaims, but denying summary judgment for defendants on plaintiffs' antitrust claims). Indeed, precisely what NHM provided in return for the "franchise fee" is a critical issue in the case. Appellees characterize the franchise agreements as

intended to get the museums off the ground by providing experienced assistance "in connection with the establishment of a wax museum" and by offering Dorfman's consultant services to the franchisees for this purpose only for the period prior to and during the opening of each museum.... Thereafter, ... NHM and Dorfman were obligated during the terms of the agreements "to stand by" to provide additional services Brief for Appellees at 13. The appellants' interpretation of the agreements, on the other hand, is quite different. They claim that "actual services, not merely a standby commitment, were due from the defendants for the franchise fee payments, but that the defendants generally failed to honor this obligation." Brief for Appellants at 20. The record, however, shows no particular instance where NHM provided additional services, beyond start-up services, except for an additional charge.

as requested and paid for by the franchisees (and with respect to Gatlinburg and Williamsburg, also were under a continuing obligation not to establish competing wax museums in specified geographical areas) but the franchisees were under no obligation either to request or pay for such additional services.

B. The District Court Rulings

The district court first considered appellants' motion to disqualify defendants' counsel, Covington & Burling (C & B), on the ground that it had previously counselled one appellee, Gettysburg, regarding the franchise agreement involved in this suit. Williamsburg, 501 F.Supp. 326, at 328 (Nov. 26, 1980) (Memorandum). The district court's inquiry focused on whether "there is a substantial relationship between the present litigation [involving the franchise agreements] and the matters on which C & B previously provided advice to Gettysburg." Id. at 328. After examining the record...