Ring v. Spina, 230.

• Citation: 148 F.2d 647
• Decision Date: 19 April 1945
• Docket Number: No. 230.,230.
• Parties: RING v. SPINA et al.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

148 F.2d 647 (1945)

RING v. SPINA et al.

No. 230.

Circuit Court of Appeals, Second Circuit.

March 19, 1945.

Rehearing Denied April 19, 1945.

Carl E. Ring, of New York City (Ring & Murray, of New York City, on the brief), for plaintiff-appellant.

Philip Wittenberg, of New York City (Wittenberg, Carrington & Farnsworth, of New York City, on the brief), for defendants-appellees Spina, Heyman, Hannan, and Pauker.

Jonas J. Shapiro, of New York City (Greenbaum, Wolff & Ernst, Sidney R. Fleisher, and Monroe R. Lazere, all of New York City, on the brief), for defendant-appellee The Authors' League of America, Inc., sued herein as The Dramatists' Guild of the Authors' League of America, Inc.

Before EVANS and CLARK, Circuit Judges.

CLARK, Circuit Judge.

This is an appeal from an order of the District Court vacating a temporary injunction and denying a motion for such injunction pending trial in an action for treble damages under the Sherman Act, as amended, 15 U.S.C.A. § 15, and for other relief. Defendants Spina, Heyman, and Hannan are authors of a theatrical production called "Stovepipe Hat." The other defendants are Pauker, agent of these authors, and The Dramatists' Guild of the Authors' League of America, Inc., an association said to include substantially all the playwrights in the country. Restraint of trade is alleged to be accomplished by means of the Guild's Minimum Basic Agreement, which a producer or "manager" must sign before any Guild members, such as the authors herein, may license or sell to him their works. The Basic Agreement, among other things, fixes the minimum terms under which the Guild permits any of its members to lease or license a play, including the minimum advance payments and the minimum royalties to be paid by a manager. It limits contracts by both managers and authors to those made under its own terms, and between managers and members, both of whom are "in good standing" with the Guild.¹ It also provides that any dispute shall be finally adjudicated by arbitration.

It appears from the moving papers that plaintiff signed this Minimum Basic Agreement after he had invested $50,000 in the play. He came into the venture first by association with, later by taking over the rights of, one Gaumont, who had entered into a "Production Contract" with the three authors on February 7, 1944, whereby Gaumont was to produce the play upon stated royalties and other payments — all subject to the provisions of the Basic Agreement. Then plaintiff on May 4, 1944, to safeguard his investment, and upon his agreement to advance the balance necessary for the show to open in New Haven, May 18, 1944, attempted to enter into an agreement with the authors on the basis of Gaumont's contract with them; but they signed only on condition that their lawyer would later approve. Their lawyer held, however, that this contract could not be made with plaintiff, a non-Guild member; and it was destroyed. Thereupon plaintiff, as he says, "against his will and under the coercive pressure of the monopolistic practice and rules and regulations" of the Guild, signed its Basic Agreement, in order that he might protect his part in the venture. The play did open in New Haven, and then went on to Boston, preparatory to going to Philadelphia and then to New York City; and plaintiff put up an additional $75,000, as he alleges. A dispute having arisen as to changes which plaintiff thought should be made in the play, the authors then took the position that plaintiff had breached the Basic Agreement by making changes without consent of the authors, contrary to its provisions, and hence that the production contract was terminated. The play was then forced to close and the authors requested arbitration of the dispute pursuant to the arbitration clauses of the Basic Agreement. Thereupon plaintiff commenced this action and asked for a temporary injunction, which was first granted pending a further hearing, but later denied after the hearing had been held.

The motion for a temporary injunction pending trial asked that defendants be enjoined from proceeding with arbitration or otherwise enforcing the Basic Agreement and from interfering with plaintiff's production of the show, and that royalties be withheld pending assessment of damages in this action. In denying the motion the District Court stated that not enough facts had been furnished to indicate that the Basic Agreement was void under the Sherman Act, that the transactions here involved were not in interstate commerce, and that relief should be denied, since the parties were in pari delicto and since plaintiff was seeking at the same time to be awarded rescission and enforcement of a contract.

The granting or denial of an interlocutory injunction is usually relegated to the discretion of the District Court, which an appellate tribunal is reluctant to disturb. State of Alabama v. United States, 279 U.S. 229, 230, 231, 49 S.Ct. 266, 73 L. Ed. 675. But here the trial court's denial of the injunction was based in substantial measure upon conclusions of law which can and should be reviewed because of their basic nature in this litigation. Cf. Bowles v. Nu Way Laundry Co., 10 Cir., 144 F.2d 741; Bowles v. May Hardwood Co., 6 Cir., 140 F.2d 914; Coty, Inc. v. Leo Blume, Inc., 2 Cir., 24 F.2d 924; Schey v. Turi, 2 Cir., 294 F. 679. The case then should be remanded for action by the District Court in the light of the legal principles thus enunciated.

Plaintiff attacks the Basic Agreement for its provisions for compulsory arbitration, for price fixing, and for dealing with only Guild members. It is now well settled that a contract covering a large part of an industry will be void and illegal under the Sherman Act for such restrictive agreements and that these constitute adequate proof of a combination in restraint of trade. United States v. Trenton Potteries Co., 273 U.S. 392, 47 S.Ct. 377, 71 L.Ed. 700, 50 A.L.R. 989; Ethyl Gasoline Corp. v. United States. 309 U.S. 436, 458, 60 S.Ct. 618, 84 L.Ed. 852; United States v. Bausch & Lomb Optical Co., 321 U.S. 707, 720, 64 S.Ct. 805, 88 L.Ed. 1024; United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 218, 60 S.Ct. 811, 84 L.Ed. 1129; United States v. Univis Lens Co., 316 U.S. 241, 250, 251, 62 S.Ct. 1088, 86 L.Ed. 1408; United States v. Masonite Corp., 316 U.S. 265, 274, 62 S.Ct. 1070, 86 L.Ed. 1461; Paramount Famous Lasky Corp. v. United States, 282 U.S. 30, 51 S.Ct. 42, 75 L.Ed. 145; Fox Film Corp. v. Muller, 296 U.S. 207, 56 S.Ct. 183, 80 L.Ed. 158; Youngclaus v. Omaha Film Board of Trade, D.C. Neb., 60 F.2d 538, 540. The agreement also forbids outright sale of radio, television, and other subsidiary rights in the play prior to its stage presentation; and even thereafter such sales still require the Guild's written approval. These and similar provisions in the Basic Agreement indicate an attempt to control the industry; and the affidavit of Richard Rodgers, president of the Guild, tends to admit that such is the purpose of the organization. We think we must hold that there is a showing prima facie of an agreement in restraint of trade. We need not go further at this time before a trial has established the extent of the restraint, except perhaps to suggest that, in view of the repeated statement by the Supreme Court that a "price-fixing combination" is "illegal per se under the Sherman Act" (cf. 316 U.S. 274, 62 S.Ct. 1076, 86 L.Ed. 1461; United States v. Bausch & Lomb Optical Co., 321 U.S. 720, 64 S.Ct. 805, 88 L.Ed. 1024), it is difficult for us to see now how this Basic Agreement can be upheld, at least in its entirety.

The District Court, however, stressed the point that there can be no recovery under the Sherman Act where the restraint fails to involve transactions in interstate commerce. But we disagree with the conclusion below that the restraint in question was not of commerce among the several states. The District Court relied particularly upon the cases of Hart v. B. F. Keith Vaudeville Exchange, 2 Cir., 12 F.2d 341, certiorari denied 273 U.S. 703, 704, 47 S.Ct. 97, 71 L.Ed. 849, and Federal Base Ball Club of Baltimore v. National League, 259 U.S. 200, 42 S.Ct. 465, 66 L.Ed. 898, 26 A.L.R. 357. These cases held that contracts for the personal services for exhibition purposes of vaudeville and baseball artists were not in interstate trade or commerce, even though the actual exhibitions were to take place in different states.

Even if we thought that this present case concerned only a musical play being prepared in the provinces for Broadway, we should doubt the presently controlling force of these precedents. Employment contracts for separate exhibitions seem to us quite different from the substantial business of readying a musical comedy through tryouts on the road for New York production. There must be the securing of services of countless actors, actresses, members of choruses, and others, of scenery, music, and appropriate lighting, then the strenuous activities required to weld all these parts into a delectable whole, the judicious advertising, and all the other details to such a production, so extensive in fact that it seems not unusual for a single play to be separately incorporated as a business corporation. And the road tryouts — here, from New Haven to Boston to Philadelphia — are an essential part of the fashioning of a perfect product for the Broadway trade. Moreover, there is no doubt of the steadily expanding content of the phrase "interstate commerce" in recent years; and hence there is no longer occasion for applying these earlier cases beyond their exact facts.² The Supreme Court has not hesitated to regard the distribution of motion picture films as interstate commerce, Interstate Circuit, Inc. v. United States, 306 U.S. 208, 59 S.Ct. 467, 83 L.Ed. 610; Paramount Famous Lasky Corp. v. United States, 282 U.S. 30, 51 S.Ct. 42, 75 L.Ed. 145; United States v. First Nat. Pictures, 282 U.S. 44, 51 S.Ct. 42, 75 L.Ed....