Fox Film Corporation v. Muller

• Citation: 192 Minn. 212,255 N.W. 845
• Decision Date: 29 June 1934
• Docket Number: No. 29872.,29872.
• Parties: FOX FILM CORPORATION v. MULLER.
• Court: Supreme Court of Minnesota (US)

255 N.W. 845

192 Minn. 212

FOX FILM CORPORATION v. MULLER.

No. 29872.

Supreme Court of Minnesota.

June 29, 1934.

Appeal from District Court, Hennepin County; P. W. Guilford, Judge.

Action by the Fox Film Corporation against A. B. Muller. From an order denying plaintiff's motion for a new trial, plaintiff appeals.

Affirmed.

Shearer, Byard & Trogner, of Minneapolis, for appellant.

Samuel P. Halpern, of Minneapolis, for respondent.

LORING, Justice.

Appeal from an order denying plaintiff's motion for a new trial.

This action was brought to recover damages for breach of two contracts entered into between plaintiff and defendant whereby plaintiff leased numerous moving picture films to defendant, the total agreed rental for which was $1,345 plus $460 for the synchronized scores. On the first nine pictures contracted for plaintiff was to have 50 per cent. of the gross admission receipts in excess of $200, which it alleges would have aggregated $225 under the liquidated damage provision of the contract. It asserts damage in the total contract price of the rental of the films and scores plus the $225 item. The defendant relies upon the total illegality of the leasing contracts as in restraint of trade and in violation of the Sherman Anti-Trust Act as determined in United States v. Paramount (D. C.) 34 F.(2d) 984, affirmed in 282 U. S. 30, 51 S. Ct. 42, 75 L. Ed. 145. It is the custom in the moving picture trade for the distributors of the films to enter into contracts with exhibitors prior to the making of the pictures and on dates specified in the contract the pictures are sent to the exhibitor. It is essential that the prints of the film be kept constantly moving from one exhibitor to another, since the life of the public demand for a picture is short and any delay is costly to the producer and distributor. The contracts here in question were formulated and imposed by the producers and distributors upon the exhibitors in the same manner as those involved in the cases cited above.

Pursuant to the contracts here in question, plaintiff sent four films to the defendant at his request, who refused to accept, exhibit, or pay for them. As a consequence, the pictures were not exhibited during the time they were in transit to and from the defendant.

It appears that substantially all of the moving picture producers and distributors have organized for the distribution of moving picture films, and for the purpose of such distribution have set up in certain districts throughout the United States many unincorporated associations known as Film Boards of Trade. The history of these organizations and their coercive methods of imposing their standard contract upon exhibitors is all fully set out in the opinions above referred to. It would serve no useful purpose to reiterate it here. It is sufficient to say that the producers and distributors have formulated and agreed to adopt a standard exhibition contract for the use of the trade; that no exhibitor could, at the time these contracts were made, obtain pictures unless he agreed to the standard contract; that the contract then contained an arbitration clause which the Supreme Court has held to unreasonably restrain competition and to be in violation of the Anti-Trust Act.

The arbitration clause provided that, before any action should be brought on the contract, any claims arising thereunder should be submitted to an arbitration board; that the parties would be bound by the decision of the arbitration board; that, in the event the exhibitor should fail or refuse to submit any claim under the contract to the arbitration board, the distributor might require a bond in a sum not exceeding $500, to be posted by the exhibitor for faithful performance of that contract, or at his option the distributor might terminate the contract or any existing contract between the distributor and the exhibitor. Like bonds to, or termination by, all other distributors followed a claimed breach with any one distributor. The contract expressly provided that, unless the exhibitor observed the illegal arbitration clause, the distributor should not be bound by any of it and might terminate it.

The question presented on this appeal is whether the arbitration clause is severable from the contract, leaving the remainder of the contract enforceable or not severable, permeating and tainting the whole contract with illegality and making it void.

1. Many cases involving the standard exhibition contract have been before the courts in which the same question has been presented. A careful examination of these cases finds the courts about equally divided upon the question of severability or nonseverability of the arbitration clause. Although not all the cases were actions for breach of the contract, the rule has been laid down in the following cases that only the arbitration clause is illegal and that it is severable from the balance of the contract and that the valid remainder of the contract is enforceable: Columbia Pictures Corporation v. Bi-Metallic Co. (D. C.) 42 F.(2d) 873; Paramount, etc., Corporation v. National Theatre (C. C. A.) 49 F.(2d) 64; Metro-Goldwyn Corporation v. Bijou Theatre (D. C.) 50 F.(2d) 908; Fox Film Corporation v. Buchanan, 17 La. App. 285, 136 So. 197; Metro-Goldwyn Corporation v. Cocke (Tex. Civ. App.) 56 S.W.(2d) 489; Fox Film Corporation v. Ogden Theatre (Utah) 17 P.(2d) 294, 90 A. L. R. 1299. The case of Metro-Goldwyn Corporation v. Bijou Theatre, although criticizing the rule laid down in Paramount, etc., Corporation v. National Theatre, followed the holding there handed down. On the other hand, the following cases have held that the illegal arbitration clause taints the whole contract with illegality: Vitagraph Co. v. Theater Realty Co. (D. C.) 50 F.(2d) 907; Fox Film Corporation v. Amusement Co. (D. C.) 58 F.(2d) 337; Universal Film Exchanges v. West, 163 Miss. 272, 141 So. 293; Majestic Theatre v. United Artists (D. C.) 43 F.(2d) 991; United Artists v. Odeon Building, Inc., 212 Wis. 150, 248 N. W. 784; Fox Film Corporation v. Tri-State Theatres, 51 Idaho, 439, 6 P.(2d) 135.

Most of this confusion has been occasioned by the different interpretations placed upon Judge Thacher's opinion and decree in the case of United States v. Paramount (D. C.) 34 F.(2d) 984, 989, and the affirming opinion in 282 U. S. 30, 51 S. Ct. 42, 75 L. Ed. 145. The language of the decree most often quoted in support of the first proposition follows: "Nothing contained in this decree shall be construed as prohibiting any defendant or any member of any defendant Film Board of Trade from performing and/or continuing to perform, or enforcing and/or continuing to enforce, by any lawful means any contractual obligation the performance or enforcement of which is consistent with the provisions of this decree."

The action in that case was brought by the United States for the purpose of restraining the defendants from further engaging in a conspiracy in...