Majestic Theatre Co. v. United Artists Corporation, 3259.

• Decision Date: 09 October 1930
• Docket Number: No. 3259.,3259.
• Court: U.S. District Court — District of Connecticut
• Parties: MAJESTIC THEATRE CO., Inc., v. UNITED ARTISTS CORPORATION et al.

43 F.2d 991 (1930)

MAJESTIC THEATRE CO., Inc., v. UNITED ARTISTS CORPORATION et al.

No. 3259.

District Court, D. Connecticut.

October 9, 1930.

Robert P. Butler and Robinson, Robinson & Cole, all of Hartford, Conn. (Francis W. Cole and Thomas Hewes, both of Hartford, Conn., of counsel), for plaintiff.

Cadwalader, Wickersham & Taft, of New York City (F. Sims McGrath, Arthur L. Fisk, Jr., and Catherine Noyes Lee, all of New York City, of counsel), for defendants United Artists Corporation, Fox Film Corporation, and New Haven Film Board of Trade.

Solomon Elsner, of Hartford, Conn. (Harry L. Nair, of Hartford, Conn., of counsel), for Vitagraph, Inc.

BURROWS, District Judge.

This is an action at law, alleging a conspiracy in violation of the anti-trust laws resulting in injury to the plaintiff. The defendants, in addition to filing answers admitting or denying particular allegations of the complaint, pleaded a special defense, identical in form as to each of the defendants, by way of confession and avoidance. To this defense plaintiff demurred, and the matter is before the court on this demurrer.

One of the principal claims made by the defendants, both in argument and brief, is that the complaint does not set out a good cause of action, claiming, among other things, that the defendants were not engaged in interstate commerce; that it did not appear that the combination controlled the film business; and that the contracts under which the defendant distributors acted were voluntarily entered into by the plaintiff, and therefore the conduct complained of was damnum absque injuria. The defendants contend that they may attack the complaint through the plaintiff's demurrer to their special defense on the authority of Bishop v. Quintard, 18 Conn. 395, which held as an established rule of pleading that a demurrer searched the entire record. But it is very doubtful if that rule is now sanctioned in Connecticut, since the statutory requirement is that a demurrer must be special, and specifically set forth reasons why the pleading in question is insufficient. Schroeder v. Tomlinson, 70 Conn. 348, 351, 39 A. 484. The rules under the Practice Act of Connecticut provide that the demurrer is the only remedy before trial by which to test the sufficiency of a cause of action. Connecticut Practice Book 1922, p. 287, § 196. If a defendant deems a complaint to be insufficient, the proper procedure provided by the rules is to demur. It is the present practice in this state. Also, if the complaint is not specific in its allegations, the remedy is by motion. Connecticut Practice Book 1922, p. 295, § 223. Rules of pleading in this court conform to rules of pleading under the Connecticut Practice Act. See District Court Rule 8. Inasmuch, however, as the parties have, both orally and in brief, argued the demurrer to the special defense with the allegations of the complaint as a basis, I will assume for the moment that it is proper to examine the complaint to determine whether or not there is alleged a cause of action under the anti-trust laws.

An examination of the complaint reveals that in February, 1926, the leading distributors of moving pictures in the United States, including the defendants, adopted and agreed to use a so-called "Standard Exhibition Contract," and from then until May, 1928, i. e., the date of the writ, were unwilling to contract with exhibitors for licensing pictures except in this form. Paragraph 20, the only relevant section of this contract, relates to arbitration, and this is set out in full in a note below.¹

It expressly provides that this paragraph shall be construed according to the laws of New York. The substance of this paragraph is that each party agrees to submit any controversy under said contract to the board of arbitration located in the city where the Distributors' Exchange is maintained. They agree to abide by the award and accept as final any finding of facts. If an exhibitor refuses to submit to arbitration or abide by an award under the contract with the particular distributor or under a contract with any other distributor, or if the board finds a breach of contract which in its opinion justifies the demand of security by the particular distributor, or any other distributor, in dealing with the exhibitor, then the distributor may require the payment of an additional sum, not to exceed $500 under each existing contract, to be retained by the distributor until all contracts are completed. At this point, it is to be observed that each contract between an exhibitor and a distributor gathers within its effect not only the immediate distributor, but all other distributors having similar contracts and apparently distributors having no contracts; that is, all distributors who are parties to the combination and with whom it may be necessary for a particular exhibitor to deal.

The distributors in the United States carrying on business in Connecticut maintain, through their branch offices or exchanges, the New Haven Film Board of Trade, one of the defendants herein, which covers in its operations the entire state. An exhibitor in Connecticut is unable to secure sufficient films without dealing with one or more members of this board, that is, the plaintiff or any other exhibitor in Connecticut cannot go into an open film market, but must deal, if at all, with the distributors of films according to the organization created by them acting in combination. This organization apparently contemplates national distribution through state-wide exchanges. If films are wanted for showing in Connecticut, they must be procured in Connecticut from members of the defendant Film Board of Trade. The defendant Film Board of Trade in 1926 duly created a board of arbitration under the standard exhibition contract, which proceeded to hear disputes, make awards, and fix the sum which might be demanded by a distributor in dealing with an exhibitor. Its decisions were duly transmitted to the secretary of the Film Board, and he in turn would notify each member thereof, including the defendants. It is apparent, therefore, that substantially all the distributors doing business in Connecticut, and with whom an exhibitor must deal, were members of the combination, who were willing to contract in the standard form, or not at all, with its provisions for arbitration, and who, in pursuance of contracts with a particular exhibitor, might demand security, or apparently might demand security even though they had no contract, if notified of the appropriateness of so doing by the board of arbitration. In fact, it is alleged in the complaint (paragraph 30) that all of the members of the Film Board — that is, substantially all distributors of films in Connecticut — were parties to the combination to insist upon such contract with its arbitration features and this is also the only permissible inference. Eastern States Retail Lumber Dealers' Ass'n v. U. S., 234 U. S. 600, 612, 34 S. Ct. 951, 58 L. Ed. 1490, L. R. A. 1915A, 788.

Prior to April 18, 1927, one A. C. Morrison owned and operated the Majestic Theatre in Hartford. Mr. Morrison had a contract with Tiffany Productions, Inc., to exhibit certain of its pictures at said theatre. Tiffany was a member of the defendant Film Board of Trade, and by necessary inference of the alleged combination. On or about April 18, 1927, Morrison leased said theatre to the plaintiff corporation, which continued to operate it until October, 1927, when the theatre closed and did not reopen. Shortly before June 5, 1927, Morrison had a dispute with Tiffany, and Tiffany refused to forward any more pictures for exhibition at the theatre. The plaintiff corporation then made contracts in the standard form for future showing of films with the defendant distributors beginning in September, 1927. These contracts provided for a sufficient number of films to keep the theatre in operation throughout the following year. The defendant distributors were all corporations of states other than Connecticut, engaged in the business of producing and distributing pictures throughout the United States, and duly admitted to Connecticut and maintaining branch offices in New Haven. Plaintiff, however, was compelled to close its theatre during the summer of 1927 because it was unable to get any pictures at all from any distributor in Connecticut because of the dispute between Morrison, the individual, and Tiffany; that is, no member of the combination would deal at all with the plaintiff. Tiffany later referred the dispute to the board of arbitration at New Haven, and the board in September or October of that year notified the secretary of the Film Board of its award against Morrison, the individual, and in turn the secretary notified the defendant distributors, and presumably all other members in accordance with the practice hereinbefore described. The defendant distributors then notified the plaintiff that unless $500 was deposited under each contract with them, service would be suspended. Plaintiff corporation declined to make any deposit, and service was terminated. Said Morrison, president of the plaintiff corporation, then offered to defendant distributors payment in advance in cash for the films booked for immediate showing. This was refused. Although the plaintiff's financial standing was not in question, defendant distributors declined to furnish pictures under their contracts unless the $500 deposit was made, because of the claimed default of Morrison personally with Tiffany; plaintiff was also unable to secure pictures from any other distributor member of said Film Board, except upon making a $500 deposit, on the ground that the plaintiff was in default. It is further alleged that this course of conduct was engaged in by the defendants and all other distributors in the United States doing business in Connecticut, for the purpose of forcing plaintiff and any other exhibitor in Connecticut to agree to arbitration in...