Magna Pictures Corp. v. Paramount Pictures Corp.

• Decision Date: 28 February 1967
• Docket Number: Civ. No. 66-796.
• Court: U.S. District Court — Central District of California
• Parties: MAGNA PICTURES CORPORATION, a corporation, and Magna Pictures Distribution Corporation, a corporation, Plaintiffs, v. PARAMOUNT PICTURES CORPORATION, a corporation, and Embassy Pictures Corporation, a corporation, Defendants.

265 F. Supp. 144

MAGNA PICTURES CORPORATION, a corporation, and Magna Pictures Distribution Corporation, a corporation, Plaintiffs, v. PARAMOUNT PICTURES CORPORATION, a corporation, and Embassy Pictures Corporation, a corporation, Defendants.

Civ. No. 66-796.

United States District Court C. D. California.

February 28, 1967.

COPYRIGHT MATERIAL OMITTED

Broad, Busterud & Khourie, Michael N. Khourie, San Francisco, Cal., for plaintiffs.

O'Melveny & Myers, Everett B. Clary, Richard E. Sherwood, Richard C. Warmer, Los Angeles, Cal., for defendants.

MEMORANDUM AND ORDER

REAL, District Judge.

Plaintiffs MAGNA PICTURES CORPORATION, a corporation and MAGNA PICTURES DISTRIBUTION, a corporation move: (1) to strike the third defense from the answer of defendants PARAMOUNT PICTURES CORPORATION, a corporation, and EMBASSY PICTURES CORPORATION, a corporation pursuant to Rule 12(f)¹ of the Federal Rules of Civil Procedure, on the ground that such defenses are insufficient; (2) to dismiss the counterclaim alleged by each defendant pursuant to Rule 12(b) (1)² of the Federal Rules of Civil Procedure, on the ground the court lacks jurisdiction over the subject matter; (3) to order separate trial of the counterclaim alleged by each defendant pursuant to Rule 42(b)³ of the Federal Rules of Civil Procedure, on the ground that failure to do so will cause grave inconvenience and prejudice; and (4) for an enlargement of time in which to move or plead to the counterclaim alleged by each defendant to and including thirty (30) days after determination by the court of the motions (1) and (2) pursuant to Rule 6(b)⁴ of the Federal Rules of Civil Procedure.

Defendants PARAMOUNT PICTURES CORPORATION and EMBASSY PICTURES CORPORATION have each filed separate answers and counterclaims. But, since the third defense and counterclaim of each of the defendants are essentially identical they will be treated herein as though they were presented jointly in one pleading.

BACKGROUND

Plaintiffs instituted their action by a complaint for injunction and damages resulting from the alleged conspiracy of the defendants in violation of Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act.

The alleged unlawful acts of the defendants arise out of the production and marketing of two motion pictures bearing the title "HARLOW." Plaintiffs allege that the defendants and others conspired to and engaged in a national campaign of boycott effectively foreclosing the free marketing of plaintiffs' motion picture "HARLOW."

Defendants filed their answer contending that: (1) plaintiffs' complaint fails to state a claim upon which relief can be granted; (2) defendants did not conspire to, nor violate the antitrust laws, and (3) plaintiffs themselves are guilty of unfair competition and are barred for assertion of their claims as the result of their illegal conduct and unclean hands. Defendants also filed a counterclaim alleging unfair competition on the part of the plaintiffs and asking affirmative relief by way of damages. In their counterclaim defendants seek to name a new party ELECTRONOVISION PRODUCTIONS, INC. as part of the conspiracy therein alleged.

It is the third defense and counterclaim of defendants that primarily bring the parties before the court at this time.

MOTION TO DISMISS THIRD DEFENSE⁵

It would appear from the arguments of counsel and the memoranda filed both in support and in opposition to the motion here under discussion that the Supreme Court has clearly stated the law on the defense of unclean hands in antitrust litigation in the case of Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, (1951) 340 U.S. 211, at page 214, 71 S.Ct. 259, 261, 95 L.Ed. 219 when it says:

"But the Sherman Act makes it an offense for respondents to agree among themselves to stop selling to particular customers. If petitioner and others were guilty of infractions of the antitrust laws, they could be held responsible in appropriate proceedings brought against them by the Government or by injured private persons. The alleged illegal conduct of petitioner, however, could not legalize the unlawful combination by respondents nor immunize them against liability to those they injured. Cf. Fashion Originators' Guild v. Trade Comm., 312 U.S. 457, 668, 61 S.Ct. 703, 85 L.Ed. 949; Mandeville Island Farms v. American Crystal Sugar Co., 334 U.S. 219, 242-243, 68 S.Ct. 996, 1009, 92 L.Ed. 1328." (emphasis added)

As obvious as the rule of the Kiefer-Stewart case (supra) may appear to be, it is not so simply dispositive of the consideration of the case before the court. This is particularly true in light of the interpretation given defendants third defense in defendants' memorandum. Nor can the matter be resolved by oversimplification with labels such as "boycott" and "unclean hands."

Defendants claim that the allegations of the third defense are necessary to allow proof of the reasonableness of their actions in light of the plaintiffs' conduct. Plaintiffs, without conceding the admissibility of evidence to support the allegations of the third defense, claim that all relevant evidence of the reasonableness of the conduct on the part of defendants would be admissible under defendants general denial. But the concession is not so unequivocal as to make further consideration of the matter unnecessary.

In Times-Picayune v. United States, 345 U.S. 594, 73 S.Ct. 872, 97 L.Ed. 1277 (1953) the Supreme Court describes the inquiry into reasonableness in this language at page 615, 73 S.Ct. at page 884:

"* * * For our inquiry to determine reasonableness under § 1 must focus on `the percentage of business controlled, the strength of the remaining competition and, whether the action springs from business requirements or purpose to monopolize'. * * *" (emphasis added)

and at page 623, 73 S.Ct. at page 888 the court gives further indication of this inquiry when it says:

"* * * To be sure, an unlawful trade practice may not be justified as an emulation of another's illegal plan. Cf. Federal Trade Commission v. A. E. Staley Mfg. Co., 1945, 324 U.S. 746, 753-754, 65 S.Ct. 971, 974-975, 89 L.Ed. 1338. But that factor is certainly relevant to illuminate ambiguous intent, particularly when planned injury to that other competitor is the crux of the charge."

Plaintiff herein, in addition to alleging the "boycott" it claims as per se violations of the antitrust laws alleges acts to which the allegations of defendants' third defense are peculiarly applicable. Plaintiff alleges: (1) that the defendants "conducted a deliberate, wilful and malicious campaign consisting of public statements, press releases, advertising, and private conversations, aimed directly at destroying and impairing the commercial value of Photoplay, and attacked the integrity of the management of plaintiffs"; (2) that defendants "threatened to destroy and discourage plaintiffs' future financing and distribution efforts by publicly stating that they would deliberately time the release of their future pictures to coincide with future releases of plaintiffs"; (3) that defendants "embarked upon a public relations and advertising campaign unprecedented in the history of the motion picture industry, timed to coincide with the national release of Photoplay, deliberately contrived to destroy and reduce the commercial and box office value of Photoplay." These are not allegations of boycott. The third defense may add evidence which might not be admissible under the general denial. United States ex rel. Rodriguez v. Weekly Publications, D.C. N.Y.1947, 74 F.Supp. 763.

There can be no doubt that claims of unfair competition or unclean hands do not constitute a defense to an antitrust action. Kiefer-Stewart Co. v. Joseph E. Seagram & Sons (supra); Moore v. Mead Service Co., 10 Cir., 1951, 190 F.2d 540, certiorari denied 1952, 342 U.S. 902, 72 S.Ct. 920, 96 L.Ed. 675; Trebuhs Realty Co. v. News Syndicate Co., D.C.S.D.N.Y.1952, 107 F.Supp. 595; Interborough News Co. v. Curtis Pub. Co., D.C.S.D.N.Y.1952, 108 F.Supp. 768. If the third defense of defendants is offered to justify illegal conduct on their part it cannot stand. Neither should the defendants, because of unfortunate labeling, be foreclosed from showing that the acts which may be proved by the plaintiffs at the trial are not a boycott or otherwise illegal restraint of trade but rather legal and necessary to maintain competition in the market place. The court is persuaded by the logic of Judge Walsh in Affiliated Music Enterprises, Inc. v. Sesac, Inc., et al., D.C.S.D.N.Y.1955) 17 F.R.D. 509 at page 512 when he says:

"* * * Where attempted proof of the subject matter alleged as a defense might be too remote for reception under a general denial, it is desirable that the defense be pleaded. The defendant protects itself from waiver. The plaintiff and the court gain by this greater specificity of defendant's pleading. Theirfeld v. Postman's Fifth Avenue Corp., D.C.S.D.N.Y.1941, 37 F.Supp. 958, 960; United States ex rel. Rodriguez v. Weekly Publications, Inc., D.C.S.D.N.Y.1947, 74 F.Supp. 763, 764. Cf. Chicago Great Western Ry. Co. v. Peeler, 8 Cir. 1944, 140 F.2d 865, 868."

In denying the motion to dismiss the third defense the court does however strike therein the word "unfair" at line 30, page 4 of the answer of defendant Paramount Pictures Corporation and at line 7, page 5 of the answer of Embassy Pictures Corporation. The court also strikes all of the language beginning at the last word "and" on line 22, page 6 and ending with the word "complaint" on line 25, page 6 of the answer of defendant Paramount Pictures Corporation. The same language being found in the answer of defendant Embassy Pictures Corporation beginning with the last word of line 30, page 6 and ending on line 3 page 7 it is likewise stricken.

Considering it in this manner we append to the third defense the appellation of the "defense of reasonableness."

MOTION TO STRIKE COUNTERCLAIM⁶

Having determined...