Writers Guild of America, West, Inc. v. Screen Gems, Inc.

• Citation: 274 Cal.App.2d 367,79 Cal.Rptr. 208
• Court: California Court of Appeals
• Decision Date: 26 June 1969
• Parties: WRITERS GUILD OF AMERICA, WEST, INC., a California Corporation, Plaintiff and Appellant, v. SCREEN GEMS, INC., a Delaware Corporation, et al., Defendants and Respondents. Civ. 32888. . Division 2

Page 208

79 Cal.Rptr. 208

274 Cal.App.2d 367

WRITERS GUILD OF AMERICA, WEST, INC., a California Corporation, Plaintiff and Appellant, v. SCREEN GEMS, INC., a Delaware Corporation, et al., Defendants and Respondents.

Civ. 32888.

Court of Appeal, Second District, California.

Division 2.

June 26, 1969.

Rehearing Denied July 23, 1969.

Hearing Denied Aug. 20, 1969.

Paul P. Selvin and Selvin & Cohen, Los Angeles, for appellant.

Mitchell, Silberberg & Knupp, Arthur Groman, Charles A. Collier, Jr., Los Angeles, for respondents.

FLEMING, Associate Justice.

Appeal by Writers Guild of America, West, Inc. (Guild) from the denial of its petition to compel arbitration. Guild sought an order for arbitration after its application in the superior court for a preliminary injunction had been denied.

Guild's demand for arbitration arose from the following circumstances.

Guild, a labor union, negotiated a collective bargaining agreement (Basic Agreement) on behalf of its writer members with the producers of television programs. Disputes between Guild and the producers over the meaning of the terms in the Basic Agreement were made arbitrable. One of the terms of the Basic Agreement reserved to the writers the merchandising and publication rights to materials first described by the writers.

Mazursky and Tucker, writers, worked under contract for Screen Gems and Raybert, producers of the television series, 'The Monkees.' On 9 September 1966, the two writers, in a contract negotiated on their behalf by Guild, granted Screen Gems and Raybert for a specified consideration the series' merchandising and publication rights 'reserved by the writer(s) under the terms and conditions * * * of the * * * Basic Agreement.'

A dispute arose among the parties over the correct interpretation of this contract (the Raybert Contract), and on 19 January 1967, Guild, Mazursky, and Tucker jointly filed this suit in the superior court against Screen Gems and Raybert to rescind the Raybert Contract on the ground that at the time of its making the parties had no common understanding of the rights it granted. In their complaint Guild and the writers set forth at length their interpretation of the terms, merchandising and publication rights, used in the Basic Agreement and incorporated in the Raybert Contract. Guild and the writers also asked that 'a preliminary and permanent injunction issue enjoining and restraining the defendants * * * from exercising any of the reserved rights of the writers in the television series, 'The Monkees' and * * * from exercising * * * merchandising rights and publication rights as defined above in this Complaint.' Defendants answered the complaint and cross-complained against the writers for a declaration of the meaning of the terms, merchandising and publication rights, in the Raybert Contract.

On 14 February Guild and the writers brought their application for a preliminary injunction before the superior court, and after a hearing their application was denied.

Guild then demanded that Screen Gems and Raybert submit the dispute to arbitration, and on the latter's refusal Guild petitioned the superior court to order arbitration. Thereafter, defendants amended their cross-complaint for declaratory relief to add Guild as a cross-defendant. On 17 April the petition for arbitration came before the Superior court, and the court, finding that Guild had waived its right to compel arbitration, denied the petition.

Essentially, the questions before the court are whether Guild's suit sought a court interpretation of the meaning of the terms merchandising and publication rights in the Basic Agreement. If it did, could Guild later withdraw its request for a court interpretation and compel arbitration? If it could, how soon would Guild have to act in order not to lose its right to arbitration?

We start with the unquestioned fact that Guild's complaint directly asked the court to interpret the terms of the Raybert Contract, whose terms were defined by reference to the Basic Agreement. An interpretation of the former necessarily required a prior interpretation of the latter. Under the pleadings we have little doubt that a judgment between Guild and defendants interpreting the terms in the Basic Agreement as used in the Raybert Contract would, on principles of collateral estoppel, bind the parties on the meaning of those terms in other litigation. For example, in Price v. Sixth Dist. Agricultural Ass'n., 201 Cal. 502, 509, 258 P. 387, a court interpretation of an earlier contract was held conclusive on the rights of the parties under a later contract with similar provisions. In Teitelbaum Furs Inc. v. Dominion Insurance Co., 58 Cal.2d 601, 25 Cal.Rptr. 559, 375 P.2d 439, a judgment of criminal conviction for conspiracy to defraud an insurer estopped Teitelbaum in a subsequent civil suit from recovering on the insurance policy. In Bernhard v. Bank of America, 19 Cal.2d 807, 122 P.2d 892, a ruling against a claimant in a probate proceeding was held binding in a subsequent suit by the same claimant on the same claim against a bank. In Partmar Corp. v. Paramount Pictures Theatres Corp., 347 U.S. 89, 91, 74 S.Ct. 414, 98 L.Ed. 532, Paramount contended that it could terminate its franchise agreement and theatre lease with Partmar because the franchise and lease violated the anti-trust laws. Partmar resisted termination, and the trial court, finding no anti-trust violation, gave judgment for Partmar. Thereafter, Partmar's counterclaim for treble damages under the anti-trust laws, which claim had been severed for trial, was dismissed by the trial court on the ground of collateral estoppel, because the earlier finding that the franchise and lease did not violate the anti-trust laws had been essential to the earlier judgment for Partmar. The Supreme Court affirmed. At bench, the court would have to construe the Basic Agreement to decide the lawsuit, and since its construction would bind the parties in any subsequent litigation over the meaning of the terms of the Basic Agreement, it seems inescapable that Guild solicited a judicial adjudication of the meaning of the terms in the Basic Agreement. In so doing, it placed in jeopardy its right to compel arbitration on the same issue.

Case v. Kadota Fig Ass'n., 35 Cal.2d 596, 220 P.2d 912, is directly in point, and for that reason we refer to it in some detail. Case-Swayne contracted to operate a cannery for Kadota, an association of fig growers. Under its contract Case-Swayne was allowed to pack other fruit and pay Kadota a percentage of the profits from such packing. Thereafter Case-Swayne contracted with Yosemite Growers to pack peaches. The Yosemite contract for peaches, but not the Kadota contract for figs, provided for arbitration of accounting disputes involving computation or allocation of costs. Differences arose between the parties, and Case-Swayne sued Kadota for breach of contract and Yosemite for inducing breach of Kadota's contract. Both growers' associations filed denials and counterclaims, Kadota pleading breach of contract by Case-Swayne and Yosemite seeking an accounting (a subject for arbitration under the Yosemite contract). The trial court gave judgment for Kadota and Yosemite on their counterclaims.

On appeal, Case-Swayne argued that the award to Yosemite should be vacated because Yosemite failed to submit the accounting to arbitration. In holding that Case-Swayne had waived arbitration the court said:

'Case-Swayne sued Yosemite alleging that it had wrongfully induced Kadota to breach its contract. One defense available to Yosemite under its general denial was that there had been no such breach. * * *

'* * * The issue presented by Case-Swayne in the action against Yosemite, therefore, inevitably included the question of performance by Kadota, and it could not be completely determined without ascertaining the amounts chargeable to Yosemite. The Kadota contract, by authorizing Case-Swayne to pack fruit other than figs, expressly contemplated contracts such as the Yosemite agreement, and the Yosemite agreement referred to the Kadota agreement by stating that Case-Swayne had the right to use the plant facilities. * * * Evidence tending to prove that it was Case-Swayne and not Kadota which had breached the contract, at least in part also fixed the rights of Case-Swayne and Yosemite as to certain costs. Otherwise stated, the cause of action pleaded by Yosemite against Case-Swayne was inextricably linked with, and an essential part of, its defense upon the charge of inducing a breach of contract.

'* * * For these reasons, by resorting to litigation, Case-Swayne waived any right it might have had to require the selection of an accountant to make a determination of any matter involving the 'computation of the costs' under its agreement with Yosemite. Jones v. Pollock, 34 Cal.2d 863 (867), 215 P.2d 733.' (35 Cal.2d at 605--606, 220 P.2d at 917--918; italics ours.)

Thus a suit brought by a party (Case-Swayne) to one contract (the Kadota agreement) constituted a waiver of...