Bernstein v. Universal Pictures, Inc.

• Decision Date: 27 May 1975
• Docket Number: No. 535,D,535
• Citation: 517 F.2d 976
• Parties: 89 L.R.R.M. (BNA) 2471, 77 Lab.Cas. P 10,899, 1975-1 Trade Cases 60,338 Elmer BERNSTEIN et al., Plaintiffs-Appellants, v. UNIVERSAL PICTURES, INC., et al., Defendants-Appellees. ocket 74-2169.
• Court: U.S. Court of Appeals — Second Circuit

Page 976

517 F.2d 976

89 L.R.R.M. (BNA) 2471, 77 Lab.Cas. P 10,899,

1975-1 Trade Cases 60,338

Elmer BERNSTEIN et al., Plaintiffs-Appellants, v. UNIVERSAL PICTURES, INC., et al., Defendants-Appellees.

No. 535, Docket 74-2169.

United States Court of Appeals, Second Circuit.

Argued May 12, 1975.

Decided May 27, 1975.

Theodore W. Kheel, New York City (Battle, Fowler, Lidstone, Jaffin, Pierce & Kheel, New York City, on the brief), for plaintiffs-appellants.

Simon Rose, New York City (Robert R. Salman, Janet P. Kane, and Martin Stein, New York City, of counsel; Phillips, Nizer, Benjamin, Krim & Ballon, Cahill, Gordon & Reindel, Donovan, Leisure, Newton & Irvine, Hawkins, Delafield & Wood, Shea, Gould, Climenko & Kramer, and Simpson, Thacher & Bartlett, New York City, on the brief), for defendants-appellees.

Ronald S. Rolfe, New York City (Cravath, Swaine & Moore, New York City, on the brief), for defendant-appellee Columbia Broadcasting System, Inc.

Before KAUFMAN, Chief Judge, FEINBERG, Circuit Judge, and JAMESON, District Judge. ^*

IRVING R. KAUFMAN, Chief Judge:

This elaborate class action was conceived by 71 talented creators, all composers and lyricists, members of the Composers and Lyricists Guild of America (CLGA), and brought against 15 producers of motion pictures and television shows. Judge Brieant abruptly brought down the curtain on plaintiffs' production, however, when, sua sponte, he dismissed the complaint on the ground that the matter was within the exclusive jurisdiction of the NLRB. We find that the dismissal was premature since issues of fact remain to be resolved, and consequently that, in the tradition of the entertainment industry, the curtain must rise again.

I

The composers' ¹ complaint alleges that the producers, acting appropriately enough in concert, refused to contract for their services except on certain standard terms, which reserved to the producers the copyright and other ownership rights in the words and music composed on their behalf. This was asserted to constitute a conspiracy in restraint of trade, as well as an attempt to monopolize the sheet music publishing industry.

The standard terms were contained in three contracts, entitled "Minimum Basic Agreements," negotiated and signed in 1960, 1965, and 1967 by CLGA and the trade association of the motion picture producers, the Association of Motion Picture and Television Producers (AMPTP). The three television networks, also defendants herein, were not members of AMPTP nor participants in the negotiations, but allegedly contracted with composers on terms similar to those contained in the agreements. Although each of the successive contracts, which represented the minimum terms under which composer's services could be obtained, provided increased wages and shares of the copyright royalties, the producers steadfastly refused to accede to CLGA's demand for copyright ownership by the individual composers.

This issue came to a head in November of 1971, when negotiations between CLGA and AMPTP reached an impasse over copyright ownership. On November 30, the composers launched what proved to be an unsuccessful strike, and simultaneously filed a charge with the National Labor Relations Board alleging that AMPTP's refusal to bargain over copyright ownership violated § 8(a)(3) of the Act. On January 31, 1972, a general membership meeting of CLGA approved the commencement of an antitrust suit against the producers, and the complaint was filed seven days later. On March 7, CLGA withdrew its unfair labor practice charge ² because the composers now assert they realized that the Board would have no jurisdiction, since they were independent contractors rather than employees.

The producers answered the antitrust charges with the usual denials; in addition they raised the affirmative defenses that their conduct was protected by the labor exemption to the antitrust laws, and that the subject matter of the controversy was within the primary and exclusive jurisdiction of the NLRB. ³ In July of 1973, the composers moved pursuant to Fed.R.Civ.P. 12(f) and 56 to strike these affirmative defenses. Judge Brieant found Rule 56 an inappropriate vehicle for dismissal of affirmative defenses, and ruled the motion under Rule 12(f) untimely. He dismissed the complaint on his own initiative under Rule 12(h)(3), however, concluding that the refusal to bargain with respect to copyright ownership was a labor dispute over which the NLRB had exclusive jurisdiction. The composers appeal.

II

The composers contend that whether the NLRB had exclusive jurisdiction depends on a disputed issue of fact the status of composers as employees or independent contractors which could not be resolved on the papers before the district court. Section 8(a)(3), they correctly point out, refers to "labor organizations;" labor organizations are collections of "employees," § 2(5), a term whose definition excludes independent contractors, § 2(3). Thus, the composers maintain, the Board had no jurisdiction if the composers were not employees, and the complaint was improperly dismissed in advance of a determination of that factual question.

There can be little doubt that a district court should be alert to terminate an action under Rule 12(h)(3) when lack of subject matter jurisdiction becomes apparent. Judicial resources are precious, particularly in view of the courts' steadily burgeoning caseload, and they should not be dissipated in futile proceedings. Indeed, the lack of jurisdiction is so fundamental a defect that the rule permits a judge to recognize it sua sponte at any time.

But like summary judgment, a "procedural weapon to pierce sham claims and resolve actions where the facts are undisputed," American Manufacturers Mutual Ins. Co. v. American Broadcasting-Paramount Theatres, Inc., 388 F.2d 272, 278 (2d Cir. 1967), sua sponte dismissals of the kind before us are justified only where the underlying facts are not subject to fair dispute. Even where both parties may urge the absence of any material factual issues we have counselled district judges to be cautious, lest haste to avoid a trial lead to premature resolution of contested matters. Id. at 279-80. And particularly in complex antitrust litigation, although the benefits of avoiding a trial may be substantial, the courts have stressed the inappropriateness of deciding issues of fact before they have been fully developed. See, e. g., id., Poller v. Columbia Broadcasting System, Inc.,368 U.S. 464, 473, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962); Premier Electrical Construction Co. v. Miller-Davis Co., 422 F.2d 1132, 1138 (7th Cir. 1970).

In holding that the NLRB had exclusive jurisdiction, the district judge noted that CLGA had conducted itself as a labor union for two decades, that it had been certified by the Board on August 19, 1955 after a consent election as the exclusive bargaining representative for composer employees of a number of motion picture producers, and indeed that the instant dispute arose out of the breakdown in negotiation over a new collective bargaining agreement.

While these facts are surely probative, they do not resolve the issue. With respect to the certification, the composers forcefully maintain that it discloses little about their employee status, since the election was consented to by the producers, and that in any event, the unit certified specifically excluded all independent contractors. Nor can it be said that the activity of CLGA for the past two decades is dispositive, since antitrust jurisdiction cannot be declined simply because independent contractors masquerade as a union. See, e. g., Los Angeles Meat & Provision Drivers Union v. United States, 371 U.S. 94, 83 S.Ct. 162, 9 L.Ed.2d 150 (1962); American Medical Ass'n v. United States, 317 U.S. 519, 533-36, 63 S.Ct. 326, 87 L.Ed. 434 (1943); Columbia River Packers Ass'n, Inc. v. Hinton, 315 U.S. 143, 62 S.Ct. 520, 86 L.Ed. 750 (1942).

In addition, there is substantial evidence in the record tending to show that the composers are not in fact employees. On two occasions, the National Labor Relations Board has ruled that composers were independent contractors. American Broadcasting Co. 117 NLRB 13 (1957) (composers hired by American Broadcasting Co.); Alliance of Television and Film Producers, Inc. No. 21-RC-7995 (1963) (composers hired by, inter alia, defendant MCA, Inc.). Indeed, the record suggests that the composers contract for a specific output, work at their own pace at home, and are not subject to day-to-day supervision by the producers. It may be, consequently, that the producer has no right to control the manner in which work is performed, so that under the test of NLRB v. United Insurance Co., 390 U.S. 254, 88 S.Ct. 988, 19 L.Ed.2d 1083 (1968), and Herald Co. v. NLRB, 444 F.2d 430, 432-33 (2d Cir.), cert. denied, 404 U.S. 990, 92 S.Ct. 532, 30 L.Ed.2d 541 (1971) the composers are independent contractors. See also Lorenz Schneider & Co. v. NLRB, 517 F.2d 445 (2d Cir. 1975). It is plain, therefore, that the status of composers is at least a strongly contested factual issue, resolution of which was critical to a determination of the Board's exclusive jurisdiction.

III

The producers quite properly admit that the status of the composers is a contested factual issue. They contend, however, that dismissal was nonetheless proper, since the federal law of labor relations has preempted the field. Under the test established by San Diego Building Trades v. Garmon,359 U.S. 236, 245, 79 S.Ct. 773, 780, 3 L.Ed.2d 775 (1959):

When an activity is arguably subject to § 7 or § 8 of the (National Labor Relations) Act, the States as well as the federal courts must defer to the exclusive competence of the National Labor Relations Board if the danger of state interference with national policy is to be averted.

Thus, the producers maintain, since it is at least arguable that the composers are employees, federal antitrust jurisdiction would be...