Twentieth Century-Fox F. Corp. v. Winchester Drive-In Th., 19400

• Decision Date: 22 October 1965
• Docket Number: No. 19400,19402.,19400
• Citation: 351 F.2d 925
• Parties: TWENTIETH CENTURY-FOX FILM CORPORATION, Buena Vista Distribution Co., Inc., Metro-Goldwyn-Mayer, Inc., and Paramount Film Distributing Corporation, Appellants, v. WINCHESTER DRIVE-IN THEATRE, INC., Syufy Enterprises, Inc., Rancho Drive-In Theatre, Inc., and Bell Drive-In Theatre, Inc., Appellees. BLUMENFELD ENTERPRISES, INC., Appellant, v. WINCHESTER DRIVE-IN THEATRE, INC., Syufy Enterprises, Inc., Rancho Drive-In Theatre, Inc., and Bell Drive-In Theatre, Inc., Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

351 F.2d 925 (1965)

TWENTIETH CENTURY-FOX FILM CORPORATION, Buena Vista Distribution Co., Inc., Metro-Goldwyn-Mayer, Inc., and Paramount Film Distributing Corporation, Appellants, v. WINCHESTER DRIVE-IN THEATRE, INC., Syufy Enterprises, Inc., Rancho Drive-In Theatre, Inc., and Bell Drive-In Theatre, Inc., Appellees.

BLUMENFELD ENTERPRISES, INC., Appellant, v. WINCHESTER DRIVE-IN THEATRE, INC., Syufy Enterprises, Inc., Rancho Drive-In Theatre, Inc., and Bell Drive-In Theatre, Inc., Appellees.

Nos. 19400, 19402.

United States Court of Appeals Ninth Circuit.

October 22, 1965.

Noble K. Gregory, Allan N. Littman, William I. Edlund, Pillsbury, Madison & Sutro, San Francisco, Cal., for appellants 20th Century Fox Film Corp., and others.

Robert D. Raven, Douglas C. White, Morrison, Foerster, Holloway, Clinton & Clark, San Francisco, Cal., for appellant Blumenfeld Enterprises, Inc.

Joseph L. Alioto, G. Joseph Bertain, Jr., San Francisco, Cal., for appellees.

Before BARNES, BASTIAN and MERRILL, Circuit Judges.

BARNES, Circuit Judge:

This appeal comes before us under cirtification of the district court that a controlling question of law is involved as to which there is a substantial ground for difference of opinion. As required by statute (28 U.S.C. § 1292(b)), we granted permission to appeal on the question contained in the certificate issued by the district court. That single controlling question, as framed by the district court, is "what rule the federal courts should apply to govern the effect of a general release in a federal antitrust case." He concluded there was no clear answer, and we agree.

We note at the outset that our attention is addressed to the single issue certified by the district court and to no other. We are required to construe the extraordinary relief provided by 28 U.S.C. § 1292(b) in its narrowest sense if we are not to thwart the judicial policy against interlocutory appeals and their resultant dilatory consequences. Thus, only two questions are presented on this appeal for our determination:

1. Does federal or state law govern the effect of releases in federal antitrust actions?

2. If federal law governs, does a general release of one joint tort-feasor release all joint tort-feasors?

As noted by the certificate issued by the district court, the controversy giving rise to this appeal involves an alleged violation of the antitrust laws. On November 4, 1958, prior to the date the present action was filed, the Rancho Drive-In Theatre Corporation, a motion picture exhibitor in Richmond, California, filed an antitrust action against Fox West Coast Theatre Corporation and United Artists Theatre Circuit, Incorporated (hereinafter sometimes referred to as the Rancho case). On May 11, 1959, plaintiff in the Rancho case entered into an "Agreement for Dismissal of Action and General Release" with Fox West Coast Theatres Corporation. The signatories to the release provided that all those parties whom the signatories were authorized by law to represent were also to be bound by the terms of the release.¹ The instrument also expressly reserved to the releasors any claims which they might have against the other defendant in the Rancho action, United Artists Theatre Circuit, Incorporated.² Pursuant to stipulation, the action was dismissed as to the defendant Fox West Coast only on June 8, 1959.

Thereafter, on August 13, 1959, another general release was executed by and on behalf of the same persons. This "General Release," is reproduced in part in the margin.³ It made no mention of the pending action against United Artists. That action, however, was subsequently dismissed on February 26, 1963.

On December 28, 1960, the present action was filed by certain parties whose interests had been represented by the releasors in the Rancho action, as well as by two corporations, Winchester Drive-In Theatre, Inc. and Syufy Enterprises, Inc., neither of which had an interest in the Rancho case prior to August 13, 1959.

On March 3, 1963, the distributor defendants as well as the exhibitor defendant other than Fox West Coast and United Artists filed their answers raising a defense based upon the release of August 13, 1959. A motion for partial summary judgment on the basis of the general release defense was denied without prejudice on the ground that an issue of fact existed as to whether the August 13, 1959 release encompassed the claims in the instant action. Subsequent thereto, attorneys for plaintiffs and Fox West Coast stipulated in writing "that plaintiffs are seeking no damages from defendant FOX WEST COAST THEATRES CORPORATION for the period prior to August 13, 1959 * * *." Thereafter, a second "Motion for Partial Summary Judgment" was denied by the district court. 232 F. Supp. 556. (N.D.Cal.1964). The court concluded that federal rather than state law governed the effect of a general release in an antitrust action. The court then adopted as the federal rule that a general release does not discharge the other joint tort-feasors unless it expressly provides for their discharge. The propriety of that ruling is the issue that the district court has certified as a controlling question of law for our consideration.

I. State versus federal law.

Attorneys of all parties concede, as found by the district court, that a conflict exists as to whether state or federal law governs the effect of a release in a federal antitrust case. The uncertainty of the current state of the law on this question was noted by the third circuit in Dura Electric Lamp Co. v. Westinghouse Electric Corp., 249 F.2d 5 (3rd Cir. 1957). Some federal trial courts have held that state law applies. See, e. g., Solar Electric Corp. v. General Electric Co., 156 F.Supp. 51 (W.D.Pa. 1957). Others have unequivocally stated that federal law applies. Taxin v. Food Fair Stores, Inc., 197 F.Supp. 827 (E.D.Pa. 1961); Dale Hilton, Inc. v. Triangle Publications, Inc., 198 F.Supp. 638 (S.D. N.Y. 1961). No abstract notions arising from a so-called substance-procedure dichotomy can be relied upon to resolve this conflict in result. Cf. Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Whether state or federal law should govern the question posed by this appeal must be made dependent upon considerations of public policy which transcend any static theories of law.

In the present matter we are concerned with rights created under federal law. We are concerned with a federal statute which seeks to regulate business conduct that affects commerce crossing state lines. Allegations of proscribed conduct under the antitrust laws most frequently involve charges of illegal activities transcending state, regional, and even national boundary lines.

Although the Supreme Court has not treated the problem of the effect of a release in a federal antitrust case, we find its position in Dice v. Akron, C. & Y. R. Co., 342 U.S. 359, 72 S.Ct. 312, 96 L.Ed. 398 (1952) clearly in support of the proposition that the construction of a release in a situation of federally-created rights is to be governed by federal law. In that case, the question of the validity of a release granted to a carrier by an injured employee in an action under the Federal Employers' Liability Act was held a matter of federal rather than state law. The Court stated:

"Manifestly the federal rights affording relief to injured railroad employees under a federally declared standard could be defeated if states were permitted to have the final say as to what defenses could and could not be properly interposed to suits under the Act. Moreover, only if federal law controls can the federal Act be given that uniform application throughout the country essential to effectuate its purposes." (342 U.S. at 361, 72 S.Ct. at 314.)

We find the Supreme Court's position in Dice compelling reason to treat the question of the effect of a general release under the antitrust laws as a matter of federal concern. State law cannot be permitted to impede the effectuation of the national objectives expressed in the statutory scheme of the antitrust laws. We affirm the lower court's determination that a federal rule should apply.⁴

II. Effect of general releases under federal law.

The determination that federal law governs the effect of a general release in an antitrust case does not, unfortunately, result in a speedy resolution of the controlling legal question which confronts us on this appeal. We must face the task of deciding what that federal law is.

From our reading of the briefs before us as well as the case law that has either directly or tangentially treated the issue presently at bar, we find three possible rules of law which might conceivably be applied to the question of what effect should be given to a general release of one of several joint tort-feasors. These three positions can be stated as follows:

(1) A release given one joint tort-feasor necessarily releases all others even though it expressly reserves rights against them. This is generally referred to as the common law rule.

(2) A release of one tort-feasor does not release other joint tort-feasors unless the release expressly so provides.⁵

(3) A release of one tort-feasor releases all others jointly liable unless the release expressly reserves rights against joint tort-feasors.

The district court, in making its choice of which rule of law to follow, determined that the federal courts which had adhered either to rule "1" or rule "3" had done so adhering to the status of the law as expressed in the Restatement of Torts. Rule "1" embodies the provision of the old common law rule, and Rule "3" voices the position of section 885(1) of the Restatement. The district court concluded that neither of these rules was suitable in the setting of a private treble-damage action under the anti-trust laws. For this reason, the district court took it upon itself to fashion its own body of appropriate federal law. It adopted and applied the position...