Ross v. Twentieth Century-Fox Film Corporation, 14999.

• Decision Date: 23 August 1956
• Docket Number: No. 14999.,14999.
• Citation: 236 F.2d 632
• Parties: Frank ROSS, Appellant, v. TWENTIETH CENTURY-FOX FILM CORPORATION, a corporation, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

236 F.2d 632 (1956)

Frank ROSS, Appellant, v. TWENTIETH CENTURY-FOX FILM CORPORATION, a corporation, Appellee.

No. 14999.

United States Court of Appeals Ninth Circuit.

August 23, 1956.

Pacht, Ross, Warne & Bernhard, Stuart L. Kadison, Isaac Pacht, Los Angeles, Cal., for appellant.

Musick, Peeler & Garrett, Harold F. Collins, Theodore A. McCabe, Jr., Los Angeles, Cal., for appellee.

Before DENMAN, Chief Judge, and HASTIE and CHAMBERS, Circuit Judges.

HASTIE, Circuit Judge.

This is an appeal from an order, entered in an action for breach of contract, requiring that all proceedings in the case be stayed to permit the submission of disputed issues to arbitration. The order is interlocutory. However, such a staying of a common law type action for breach of contract is now authoritatively held to be appealable under Section 1292(1) of Title 28 of the United States Code. Baltimore Contractors, Inc., v. Bodinger, 1955, 348 U.S. 176, 75 S.Ct. 249, 99 L.Ed. 233.

The district court had before it the complaint and answer and the text of the contract in suit. The contract is one under which Twentieth Century-Fox Film Corporation, hereinafter called Fox, purchased from appellant's assignor motion picture and other rights in a novel entitled "The Robe". The agreed purchase price was a percentage of the net profits to be realized from the distribution of a motion picture photoplay to be based upon the novel. The contract expressly obligated the purchaser to produce and distribute such a motion picture. Included in the contract were various provisions concerning "distribution in the United States and Alaska", "distribution in Canada and all other foreign territories" and indeed concerning distribution "throughout the world". It is clear and not disputed that the purchase price was to be based upon the production of a motion picture and the interstate and foreign distribution and sale of that product.

The complaint here is that in its computation of the net profits of this venture Fox has improperly treated certain expenses of its business as costs of producing this film, thus materially diminishing the base upon which the sum payable to appellant is calculated under the contract. More particularly, appellant says that Fox's calculation of the "negative costs" of the motion picture has improperly included certain of the company's general capital expenditures not reasonably allocable to this production. It is also contended that Fox in computing net profits has violated a provision of the contract limiting its overhead charges to 25 percent of the direct cost of the photoplay. It is said further that Fox has listed items as expenses of the distribution of this film which were general promotional expenses in advertising and exploiting a new process called "Cinemascope". In addition it is claimed that Fox has based its own percentage fee for distribution — an allowable expense under the contract — upon an improperly inflated base. These principal items indicate the essential character of the complaint. The answer denied the several claims of improper charges and deductions in the computation of net profits.

The contract also provided that certain disputes be referred to an acceptable "national firm of certified public accountants" for arbitration. One matter expressly made referable to arbitration was any dispute as to Fox's itemized computation of "negative cost", with each party to follow certain procedures in connection with the creation of such an issue. In more general terms the contract also provided that any controversy as to any accounting with respect to net profits should be submitted to certified public accountants for arbitration. The district court thought that these circumstances made appropriate the exercise of the power Section 3 of Title 9 of the United States Code confers upon a district court to stay a proceeding pending before it to permit arbitration.

One of appellant's principal contentions is that Section 3 of Title 9 of the United States Code is inapplicable to this case because stay orders are authorized only when the subject matter in litigation is, as stated in Section 2 of that Title, "a contract evidencing a transaction involving commerce". True, it is now settled that beyond maritime matters, Section 3 of Title 9 is concerned only with procedure for the arbitration of contracts "evidencing a transaction involving commerce". Bernhardt v. Polygraphic Co. of America, 1956, 350 U.S. 198, 76 S.Ct. 273. But we are satisfied that such a contract is in suit here. This contract specifically calls for the production of a motion picture for national and even world-wide sale and distribution. That provision is no minor or incidental aspect of the bargain. The essential consideration which the seller sought and obtained was the promise of the buyer to produce and widely distribute a motion picture photoplay and to pay the seller a percentage of the substantial sum it was hoped this venture in commerce would net. It is to be emphasized that this was not...