Leonia Amusement Corp. v. Loew's Inc.

• Decision Date: 29 December 1953
• Citation: 117 F. Supp. 747
• Parties: LEONIA AMUSEMENT CORP. et al. v. LOEW'S Inc., et al.
• Court: U.S. District Court — Southern District of New York

117 F. Supp. 747

LEONIA AMUSEMENT CORP. et al. v. LOEW'S Inc., et al.

United States District Court S. D. New York.

October 20, 1953.

Amended Opinion December 29, 1953.

COPYRIGHT MATERIAL OMITTED

Sperry, Weinberg & Ruskay, New York City, Joseph A. Ruskay and Joseph H. Muller, New York City, of counsel, for plaintiffs.

Dwight, Royall, Harris, Koegel & Caskey, O'Brien, Driscoll & Raftery, Phillips, Nizer, Benjamin & Krim, Schwartz & Frohlich, Austin C. Keough, Herbert B. Lazarus, R. W. Perkins, J. Robert Rubin, Adolph Schimel and J. Miller Walker, New York City, John F. Caskey, Saul Friedberg, Louis D. Frohlich, Edward C. Raftery, and E. Compton Timberlake, New York City, of counsel, for defendants.

RYAN, District Judge.

This suit came on to be heard on an order of Chief Judge Knox, entered with the consent of all, directing that a separate trial be had of "the defense under the statute of limitations."

Suit was filed on April 1, 1952 to recover threefold the damages alleged to have been sustained by plaintiffs by reason of unlawful acts of the defendants and the costs of suit, including a reasonable attorney's fee.¹

Plaintiff, Leonia Amusement Corporation, a dissolved New York corporation was the lessee and operator of the Leonia Theatre, located in Leonia, New Jersey. The individual plaintiffs are the trustees in dissolution of this corporation.²

The complaint alleges that defendants engaged in a combination and conspiracy in violation of the antitrust laws to injure plaintiffs in their operation of the Leonia Theatre and that, pursuant to this conspiracy, defendants refused to license motion pictures distributed by them to Leonia Theatre on the run and with the clearance desired. As a result of these alleged unlawful acts, plaintiffs claim they were put out of business and forced to sell their lease of the Leonia Theatre on September 1, 1935. Plaintiffs allege no interest in the theatre since that date.

All the defendants have filed answers pleading the three-year statute of limitations of New York,³ some of the defendants⁴ have in addition pleaded the six-year statute of limitations of New York,⁵ and the six-year statute of limitations of New Jersey⁶ pursuant to the provisions of Section 13, New York Civil Practice Act.⁷

It is not disputed that plaintiffs' claims, wholly and finally, accrued on September 1, 1935, and defendants have conceded that the statute of limitations was suspended while the suit of United States v. Paramount Pictures⁸ was pending against them.

Plaintiffs contend that the Paramount suit was pending from July 20, 1938 until at least October 16, 1950; that the six-year statute of New York is applicable, and that this statute was suspended during all the time the Paramount suit was pending.⁹

All of the defendants urge that the suit is to recover a penalty within the meaning of Section 49(3) of the New York Civil Practice Act. In the event that the suit be held to be one brought to recover upon a liability created by statute, within the meaning of Section 48(2) of the New York Civil Practice Act, and not one to recover a penalty or forfeiture, the consenting defendants alternatively urge that the Paramount suit was not pending against them within the meaning of Section 5 of the Clayton Act, Section 16, Title 15 U.S.C.A., during the period from the entry of the decree of November 20, 1940 to August 7, 1944, when the United States filed an application for modification of that decree.

This separate trial presents no factual issues¹⁰ and but two major questions of law. I consider now the first of these:

What statute of limitations is applicable to the claims pleaded in the complaint?

It is settled that there is no federal statute of limitations governing actions under the antitrust laws for three-fold the damages sustained¹¹ and that the statutes of limitations of the state in which the action is commenced are applicable.¹² The Rules of Decision Act¹³ has been steadfastly applied in actions at law to statutes of limitations of the state in those cases where the federal act contains no limitation period.¹⁴

Plaintiffs seek to enforce a right created by federal statute; jurisdiction does not depend upon diversity of citizenship and Erie v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, is not applicable. Determination of the nature of the claims pleaded is a federal matter and is to be reached by application of federal law.¹⁵ Having so decided the nature of the claim, we are required to ascertain by local law the particular state statute of limitations which affects the enforcement of the claim. When doing this we are bound by the decisions of the state courts on the construction and interpretation to be given these state statutes.¹⁶

Of course, the varying state statutes will result in lack of uniformity of the limitation period; that this is so, absent an applicable federal statute of limitations, has long been recognized and accepted.¹⁷ But uniform interpretation of a federal statute is a matter of federal concern; it can only be achieved by reserving that power of interpretation to the federal courts; it was not surrendered by the Rules of Decision Act.¹⁸

The problem, therefore, is two-fold: (a) what in federal law is the essential nature of a claim arising under Section 4 of the Clayton Act as amended;¹⁹ and (b) what New York statute of limitations would the New York courts hold applicable to this type or class of claim. (In fact, this precise question could not come before the New York courts for decision, for a suit to recover threefold damages sustained by reason of a violation of the federal antitrust laws cannot be brought in a state court.)

In many private antitrust suits filed in district courts, within New York it has been held that the six-year statute of limitations²⁰ was applicable.²¹ It is true that in two of these suits²² the defendants did not question the applicability of the six-year statute as sufficient to bar the claims pleaded, but a reading of these decisions is indicative of a general acceptance by the court and bar that the six-year statute applied. Likewise, district courts in other states have held that the statute of limitations of the particular state covering penalties does not apply to an action under the antitrust laws.²³

But defendants urge that to the extent that these decisions cite and rely upon the Chattanooga case,²⁴ such reliance is misplaced; and to the extent that they refer to private suits to recover three-fold damages for antitrust violations as not being for a "penalty" under federal law, they are in conflict with conclusions reached by other federal courts,²⁵ and contrary to the legislative history of the antitrust laws.

I accept the defendants' historical recitals of the Chattanooga decisions.²⁶ I read Chattanooga as saying that a suit for treble damages under the antitrust laws is not one to recover a statutory penalty or forfeiture within the meaning of Section 1047 of the Federal Revised Statutes²⁷ and appreciate that this ruling must be weighed with the holding that this statute applies only to actions brought by the Government. But it also was necessary for the Court to classify the suit as to its nature and type in order that decision might be made as to the particular Tennessee statute of limitations applicable. This was especially so since one of the statutes, Section 4469, Code of Tennessee, considered as possibly applicable, prescribed a limitation of one year for statutory penalties and injuries to the person; and another, Section 4470, Code of Tennessee, a three-year limitation "for injuries to personal or real property."

The Court of Appeals for the Sixth Circuit in Chattanooga, when considering the nature of the claims pleaded, wrote, 127 F. at page 28, 64 L.R.A. 721:

"We find ourselves in agreement with the court below in holding that an action under the seventh section of the act of July 2, 1890, c. 647, 26 Stat. 210 (U.S.Comp.St.1901, p. 3202), is not a penal action. * * * The seventh section alone gives any remedy to one injured by such a forbidden combination or contract, and that measures the relief by the `damages by him sustained,' costs of suit, and his reasonable attorney's fees. The remedy is not given to the public, for no one may bring the action save the person `who shall be injured,' etc., and the recovery is for the sole benefit of the person so injured and suing. It is not reasonable to construe the remedy so conferred as a penal action, for that would be to add to the punishment by fine or imprisonment imposed by the other sections of the act an additional punishment by way of pecuniary penalty. The plain intent is to compensate the person injured."

The ruling of the court which follows, 127 F. at page 29,

"True, the compensation is to be three times the damage sustained. But this enlargement of compensation is not enough to constitute the action a penal action, within the meaning of section 1047, Rev.St. (U.S.Comp.St.1901, p. 727)",

did not render the holding which preceded it mere dictum, for it was a holding as to the nature of the action and was necessary to the ultimate decision reached.

Judge Cardozo so read Chattanooga and wrote in Cox v. Lykes Brothers, 237 N.Y. 376, at pages 379-380, 143 N.E. 226, at page 227:

"In harmony with this ruling are decisions of the Supreme Court of the United States, excluding from the class of penalties an action against the infringer of the copyright of a dramatic composition, who must pay not less than $100 for the first and $50 for every subsequent performance (Brady v. Daly, 175 U.S. 148, 20 S.Ct. 62, 44 L.Ed. 109), and an action under the anti-trust law for the recovery of treble damages. (Chattanooga Foundry & Pipe Works v. City of Atlanta, 203 U.S. 390, 27 S.Ct. 65, 51 L.Ed. 241, affirming 127 F. 23, 64 L.R.A. 721)."

In Sullivan v. Associated Billposters and Distributors, 2 Cir., 1925, 6 F.2d 1000, 42 A.L.R. 503, where the question...