Columbia Pictures Industries, Inc. v. Schneider

• Decision Date: 26 July 1977
• Docket Number: No. 76 Civ. 4463.,76 Civ. 4463.
• Citation: 435 F. Supp. 742
• Parties: COLUMBIA PICTURES INDUSTRIES, INC., Plaintiff, v. Berton J. SCHNEIDER, Robert J. Rafelson and J. Stephen Blauner, Defendants.
• Court: U.S. District Court — Southern District of New York

435 F. Supp. 742

COLUMBIA PICTURES INDUSTRIES, INC., Plaintiff, v. Berton J. SCHNEIDER, Robert J. Rafelson and J. Stephen Blauner, Defendants.

No. 76 Civ. 4463.

United States District Court, S. D. New York.

July 26, 1977.

COPYRIGHT MATERIAL OMITTED

Weil, Gotshal & Manges, New York City, for plaintiff.

Hofheimer, Gartlir, Gottlieb & Gross, New York City, for defendants.

LASKER, District Judge.

Columbia Pictures Industries, Inc., a Delaware corporation with its principal place of business in New York, sues Berton Schneider, Robert Rafelson and Stephen Blauner, all residents of California, for a declaratory judgment that Columbia has not, alone or in concert with A.B.C. Television, violated the anti-trust laws or breached its contract with the defendants or otherwise violated their rights in connection with its marketing for national network broadcast the motion picture film, "The Last Picture Show." Columbia also seeks a preliminary injunction restraining the defendants from prosecuting an action which the defendants filed in the Central District of California which sought damages and injunctive relief against Columbia and ABC for anti-trust violations, breach of contract, violation of fiduciary duty, and conspiracy to defraud. In essence, Columbia argues that since its action in the Southern District of New York was filed six days before the defendants' action in California, the California proceedings should be enjoined. Defendants argue that California is the more appropriate forum for litigation of the issues between the parties, and move to dismiss the complaint for lack of personal jurisdiction and failure of service.

I.

Prior to December 31, 1971 defendants were the sole stockholders of an independent motion picture production company called BBS Productions, Inc. ("BBS"), a California corporation. In 1970 BBS acquired the motion picture rights to the novel, "The Last Picture Show," and commenced production. In order to secure financing for the picture, BBS assigned to Columbia Pictures distribution rights and a share in the profits of the film; BBS retained a 30% interest in the net proceeds of "The Last Picture Show."

On December 30, 1971, Schneider, Rafelson and Blauner sold to Columbia Pictures all of the issued and outstanding shares of BBS stock pursuant to an Agreement of Sale ("the contract"). BBS' 30% interest in the net proceeds of "The Last Picture Show" was one of many assets acquired by Columbia through its purchase of the BBS stock. The purchase price set by the contract for the BBS stock was to be no less than $350,000. and no more than $10,000,000. altogether. Defendants were entitled to semi-annual payments of 85% of the total amounts realized by Columbia from the assets of BBS — which included other motion pictures in addition to "The Last Picture Show" — between December 30, 1971 and December 30, 1978.

In March, 1974 Columbia entered into a television licensing agreement with A.B.C. Television for its national broadcast of "The Last Picture Show" and nine other movies owned by Columbia. In the summer of 1976 Schneider, Rafelson and Blauner retained the Los Angeles law firm of Simon & Sheridan to investigate the facts underlying the Columbia-ABC transactions and Schneider's contention that such transactions "constituted an illegal tie-in and block-booking" and that in addition "there was a secret side deal entered into whereby ABC agreed that Columbia would produce certain television pilot films for ABC." (Defendant's Opposition Memorandum, p. 11) Simon & Sheridan drafted a complaint alleging that the ABC-Columbia transaction amounted to a violation of the federal anti-trust laws, a breach of the 1971 contract, and a conspiracy to defraud Schneider et al.

Instead of filing the finalized draft of this complaint, however, on August 13, 1976 Schneider sent a copy of the proposed complaint to Leo Jaffe, Chairman of the Board of Columbia, at his New York Office. The personal covering letter reads as follows:

"Dear Leo,

I have enclosed a set of papers which need very little explanation. I am completely convinced as to their accuracy. In light of our long-standing friendly relationship, I believe that the acts we allege were done without your knowledge. Therefore, as a courtesy to you, I have postponed filing these papers for ten days so you can have a chance to investigate the matter.

If after checking all this out, you feel we have something to discuss, please let me know before the end of the month.

I am sorry to see us once again in conflict, but I am sure that once having looked into the matter you will understand our position.

Sincerely,"

Three days later, on August 16, Sheridan & Smith sent copies of the complaint to counsel for Columbia Pictures and ABC (which was named as a defendant) along with a cover letter inviting negotiations towards settlement in lieu of filing the complaint.

As a result of these communications, various meetings and telephone conversations were had from August 25, 1976 to September 30, 1976 between the parties and their counsel concerning possible settlement. Although offers were apparently made on both sides, the two positions were quite far apart. (Kaufman Reply Affidavit, ¶ 9; Stulberg Deposition at 28, 37, 39-40) On October 3, 1976, following a phone conversation on September 30, 1976 with Leo Jaffe in which no agreement was reached, Schneider advised Simon & Sheridan to file their complaint in the United States District Court for the Central District of California.

On October 8, 1976 Columbia filed its complaint in the Southern District of New York. Schneider's complaint was filed in California six days later on October 14th. Columbia moved immediately for a temporary restraining order and preliminary injunction prohibiting Schneider, et al. from proceeding with the California litigation; on October 18, 1976, a temporary restraining order was granted. By stipulation the parties have agreed not to proceed with either suit pending decision on Columbia's motion for a preliminary injunction.

II.

"Where an action is brought in one federal district court and a later action embracing the same issue is brought in another federal court, the first court has jurisdiction to enjoin the prosecution of the second action." Meeropol v. Nizer, 505 F.2d 232, 235 (2d Cir. 1974). It is this power which Columbia seeks to have the court exercise in favor of its action: "first-filed" by six days. There is no dispute that both law suits "embrace" the same issues, or that ABC, joined as a party in the California litigation but not presently named in the New York complaint, could be made a party to the New York lawsuit. See Meeropol v. Nizer, supra. At first blush, therefore, Columbia appears to be entitled to the benefit of this circuit's "first-filed" rule:

"as a principle of sound judicial administration, the first suit should have priority, `absent the showing of balance of convenience in favor of the second action,' Remington Products Corp. v. American Aerovap, Inc., 192 F.2d 872, 873 (2d Cir. 1951); Mattel, Inc. v. Louis Marx & Co., 353 F.2d 421, 423 (2d Cir. 1965), petition for cert. dismissed, 384 U.S. 948, 86 S.Ct. 1475, 16 L.Ed.2d 546 (1966), or unless there are special circumstances which justify giving priority to the second. Joseph Bancroft & Sons Co. v. Spunize Co. of America, 268 F.2d 522 (2d Cir. 1959).

William Gluckin & Co. v. International Playtex Corp., 407 F.2d 177, 178 (2d Cir. 1969).

Schneider does not seriously contend that the balance of convenience favors California strongly over New York; rather, he and his codefendants argue that "there are special circumstances which justify giving priority" to their second-filed suit. The case-law has thus far recognized only two such "special circumstances:" the first, clearly not applicable here, applies when the first-filed suit is against a customer of an alleged patent infringer while the second suit involves the infringer himself, William Gluckin & Co. v. International Playtex Corp., supra, 407 F.2d 177; the other when forum-shopping alone motivated the choice of situs for the first suit. Rayco Mfg. Co. v. Chicopee Mfg. Co., 148 F.Supp. 588 (S.D.N.Y. 1957); Mattel, Inc. v. Louis Marx & Co., supra, 353 F.2d at 424, n. 4.

Schneider argues that Columbia's New York suit should be stayed and his California suit allowed to proceed because Columbia chose New York as a forum solely for reasons of forum-shopping. This argument is based on the undisputed proposition that the Second Circuit's rule on standing in anti-trust actions would preclude Schneider's assertion of a claim for treble damages against Columbia in this district. Fields Productions, Inc. v. United Artists Corp., 432 F.2d 1010 (2d Cir. 1970), aff'g., 318 F.Supp. 87 (S.D.N.Y.1969), cert. denied, 401 U.S. 949, 91 S.Ct. 932, 28 L.Ed.2d 232 (1971), whereas the Ninth Circuit has upheld the standing of similarly situated plaintiffs (as Schneider et al. would be there) to sue for treble damages. Mulvey v. Samuel Goldwyn Productions, 433 F.2d 1073 (9th Cir. 1970).

However, a litigant is "open to the charge of forum shopping only when he chooses a forum with slight connection to the factual circumstances surrounding his suit," Rayco Mfg. Co. v. Chicopee Mfg. Co., supra, 148 F.Supp. at 593 (emphasis added), or where "forum shopping alone" motivated the choice of situs. Mattel Inc. v. Louis Marx & Co., supra, 353 F.2d at 424, n. 4 (emphasis added). It cannot be said that New York has only a "slight connection" to the subject matter of this litigation. Columbia's principal place of business is in New York. The events which Schneider et al., claim violated the anti-trust laws and breached their contract consist largely of deals negotiated between Columbia and ABC in New York. The monies for which Schneider seeks an accounting and imposition of a trust are received by Columbia from ABC in New York. Thus, there is a logic to Columbia's choice of the...