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Samuel Goldwyn Inc. v. United Artists Corporation.

June 29, 1940

SAMUEL GOLDWYN, INC., ET AL.
v.
UNITED ARTISTS CORPORATION.



Appeal from the District Court of the United States for the District of Delaware.

Author: Biggs

Before BIGGS, MARIS, and CLARK, Circuit Judges.

BIGGS, Circuit Judge.

The appellee, United Artists Corporation, on September 2, 1935, entered into a distribution contract with London Film Productions, Limited, an English producing corporation, and with Alexander Korda, a motion picture director and a resident of London, England. The contents of this contract need not be detailed here. It is sufficient to state that it provided for the purchase of a unit of common stock of United by Korda and London Film, and required London Film to deliver and United to accept from London Film for distribution and to distribute a certain number of films produced, directed or supervised by Korda for a period of ten years commencing upon the date of the contract.

On July 22, 1936, the appellant, Samuel Goldwyn, Inc., entered into a distribution contract with United, the performance of which by Goldwyn, Inc., was guaranteed by the appellant, Samuel Goldwyn, by a guarantee contract. Under the terms of this contract Goldwyn, Inc., was required to deliver and United was required to accept for distribution and to distribute a certain number of films, produced, directed and supervised by Glodwyn. It should be noted that the period of time covered by this contract was made coextensive with the distribution contract between United, London Film and Korda, to which we have just referred, the contract between Goldwyn, Inc., Goldwyn and United requiring the delivery of films and their acceptance for distribution for a period of ten years commencing as of September 12, 1935. The thirteenth paragraph of this contract provided that if United granted any other producer more favorable terms for the distribution of pictures than were granted to Goldwyn, Inc., by the contract, then the distribution contract between United and Goldwyn, Inc., should be deemed to be amended to the extent necessary to give Goldwyn, Inc., terms as favorable as those included in any other contract. However, before Goldwyn, Inc., and Goldwyn could be induced to enter with United into the contracts of distribution and guarantee another contract, known as the inducing contract, was required by Goldwyn, Inc., and Goldwyn to be executed by United. This inducing contract recites specifically that Goldwyn, Inc., is unwilling to enter into the distribution contract and Goldwyn individually is unwilling to enter into the guarantee contract unless the inducing contract be executed. It goes on to provide that United must enter into substantially identical distribution contracts with Pickford Corporation, The Elton Corporation, and with Charles Chaplin, these distribution contracts, other than the Chaplin contract (Chaplin acting as an individual and without the agency of a corporation) to be guaranteed as Goldwyn guaranteed the performance of Goldwyn, Inc., respectively by Mary Pickford and Douglas Fairbanks.

The inducing contract specifically provided that United agreed that no amendment should be made or permitted in any of the provisions of the contracts of distribution except as provided in paragraph 13 of each or in the contracts of guarantee as entered into by United with Pickford Corporation, The Elton Corporation, London Film, Charles Chaplin, with Korda, Mary Pickford or Douglas Fairbanks, and that United would not waive the strict performance and observance of any of the provisions of the distribution and guarantee contracts referred to without in each instance obtaining first the express written consent of Pickford Corporation, The Elton Corporation, Charles Chaplin, Goldwyn, Inc., Mary Pickford, Douglas Fairbanks, and Samuel Goldwyn. The contemplated contracts of distribution and guarantee were actually entered into by United with the other corporations and individuals named in this paragraph, upon July 22, 1936, and Pickford Corporation, Samuel Goldwyn, Korda and London Film, The Elton Corporation and Charles Chaplin on July 22nd became and have remained the owners of all of the outstanding capital stock of United.Inducing contracts substantially similar to that between Goldwyn, Inc., and United were entered into between United, Pickford Corporation, Mary Pickford, The Elton Corporation, Douglas Fairbanks, and Charles Chaplin, and at a later date United entered into an inducing contract also with London Film and Korda.

All of the foregoing appears from the amended complaint filed in this cause. Glodwyn, Inc., and Goldwyn have sued United under the Declaratory Judgment Act, Section 274d of the Judicial Code, 28 U.S.C.A. § 400, and seek to have the court below declare that United has breached the terms and provisions of the inducing contract entered into by it with Goldwyn and Goldwyn, Inc. They seek also to have their contracts of distribution and guarantee declared to be terminated by reason of alleged breaches by United of the inducing contract. These breaches fall into two categories: first, modifications by United without the consent of Goldwyn, Inc., of certain provisions of the distribution contracts which United had with London Film and with The Elton Corporation; second, the waiver by United of the strict performance and observance by London Film and Korda of provisions of the contract of September 2, 1935, between United and London Film and Korda.

United filed a motion to dismiss the complaint because of the failure of the appellants to join Korda, London Film, Douglas Fairbanks and The Elton Corporation. The court below found that Korda and London Film were indispensable parties and necessary parties, that the Declaratory Judgment Act was designed to put an end to controversies but to allow the appellants to proceed with the suit at bar without joinder of the parties named would breed new litigation. The amended complaint was dismissed and the appeal at bar followed.

It will be observed that the corporations and individuals which we have referred to above have bound themselves by contracts with United in such a way that they have effected a community of interest in the distribution of moving pictures. It is apparent that a failure upon the part of United to insist upon strict adherence to the provisions of the distribution or guarantee contracts by any party might affect the distribution of the motion pictures produced by the other parties to the other contracts with United. It is obvious that the decree which the appellants seek cannot be granted unless the court examines the distribution contracts of London Film and The Elton Corporation in the light of the circumstances and reaches the conclusion that these contracts have been modified or breached by what United did or permitted London Film or The Elton Corporation to do. Such a conclusion however would not constitute an adjudication of the rights of United, London Film and The Elton Corporation under their respective distribution contracts. An adjudication is a judgment, the entry of a decree by a court in respect to the parties in a case, and London Film, The Elton Corporation, Korda and Fairbanks are not parties to the suit at bar. Even if they could be made such there is no relief which Goldwyn, Inc., or Goldwyn might have as to them or any of them so far as any breach or modification of their respective contracts of distribution or guarantee with United are concerned. Goldwyn, Inc., and Goldwyn must look solely to United. Any relief to which the appellants are entitled must come from United.

Much has been written as to what are indispensable, necessary, proper or merely formal parties to a suit. We refer to the decision of the Circuit Court of Appeals for the Ninth Circuit in State of Washington v. United States, 87 F.2d 421, where the cases relating to this topic are collected and classfied. Rule 19 of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c throws some light on this question. Subsection (a) of Rule 19, relating to "Necessary Joinder", provides that persons possessed of a "joint interest" shall be made parties and joined on the same side as plaintiffs or defendants. Subsection (b), relating to "Effect of Failure to Join", provides taht when persons "who are not indispensable, but who ought to be parties if complete relief is to be accorded between those already parties, have not been made parties and are subject to the jurisdiction of the court as to both service of process and venue and can be made parties without depriving the court of jurisdiction of the parties before it, the court shall order them summoned to appear in the action. The court in its discretion may proceed in the action without making such persons parties, if its jurisdiction over them as to either service of process or venue can be acquired only by their consent or voluntary appearance or if, though they are subject to its jurisdiction, their joinder would deprive the court of jurisdiction of the parties before it; but the judgment rendered therein does not affect the rights or liabilities of absent persons."

We conclude that the "interest" referred to both in Rule 19 and the decided cases*fn1 is one which must be directly affected legally by the adjudication.Not only this, but we go further and state that the interest of the absent party must be cognizable,*fn2 that is to say within the jurisdiction of the court or the power given to the court by law to adjudicate the controversy. We are of the opinion that this is so if the absent party is to be deemed either indispensable or necessary, but if the absent party's interest be "joint" with that of either the plaintiff or defendant, the absent party is then an indispensable party and must be joined as either a party plaintiff or a party defendant in accordance with subsection (a). If the absent party's legal interest is cognizable in the suit but is not joint with that of the plaintiff or the defendant, and he should be joined in order to afford complete relief to those already prties, then he is a necessary party and must be joined if subject to the process and within the venue of the court. If he is not subject to the process and within the venue of the court, then under the conditions laid down in the last sentence of subsection (b) the court may or may not, within its discretion, proceed to judgment as to the parties before it.

Though the relief sought by the amended complaint is pursued under the Declaratory Judgment Act, none the less the provisions of Rule 19 apply to this kind of action as well as to any other civil proceeding. Subsection 1 of the Act, 28 U.S.C.A. § 400(1), specifically states that the courts of the United States shall have the power " * * * to declare rights and other legal relations of any interested party petitioning for such declaration * * * ". Legal rights may only be adjudicated under the Declaratory Judgment Act precisely as only legal rights may be adjudicated in any other form of civil action. That this is the case is made abundantly clear by the opinion of the Supreme Court in AEtna Life Insurance Company v. Haworth, 300 U.S. 227, 240, 57 S. Ct. 461, 464, 81 L. Ed. 617, 108 A.L.R. 1000, in which the Chief Justice stated, "A 'controversy' in this sense [in the sense of the Declaratory Judgment Act] must be one that is appropriate for judicial determination.* * * A justiciable controversy is thus distinguished from a difference or dispute of a hypothetical or abstract character; from one that is academic or moot. * * * The controversy must be definite and concrete, touching the legal relations of parties having adverse legal interests. * * * It must be a ral and substantial controversy admitting of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts. * * * Where there is such a concrete case admitting of an immediate and definitive determination of the legal rights of the parties in an adversary proceeding upon the facts alleged, the judicial function may be appropriately exercised although the adjudication of the rights of the litigants may not require the award of process or the payment of damages."

Applying these principles to the case at bar, we conclude that thought the suit at bar is one in which a declaratory judgment is sought, none the less London Film, The Elton Corporation, Korda and Fairbanks are neither indispensable or necessary parties for there is no justiciable controversy between them or any of them and the appellants, nor would the legal interests of the absent parties be affected by an adjudication in the case at bar. As a matter of law the interests of the appellants and those of the absent parties are neither adverse nor similar in the legal sense. They can be made neither parties plaintiff or defendant. Specifically the interests of the appellants are not joint with those of the absent parties. A community of interest has been created by agreement, but the rights and obligations of the respective parties to the contracts are severable and the interests of the parties outside of their several and respective contracts are not legal interests. Goldwyn, Inc., for example, cannot force United to bring a suit for breach of contract against London Film or Korda and thereby compel an adjudication of that issue. Such controversies are not justiciable or cognizable in any suit which might be brought by goldwyn, Inc., or Goldwyn against London Film or Korda.

It is apparent that if the appellee's views as to what constitute indispensable and necessary parties are to be accepted, not only must the parties named in the motion to dismiss be joined in the suit at bar but also all the persons or corporations heretofore named must be joined in any suit against United. Every person or corporation bound into the community of interest would be an indispensable or necessary party whether their legal rights would be legally affected by the adjudication or not. We consider this view unrealistic and one which would tend to limit the purposes and scope of the act in a way which Congress has not intended. Jurisdiction of parties to a controversy under the Declaratory Judgment Act differs not at all from jurisdiction of supplied by the Declaratory The remedy supplied by the Declaratory Judgment Act is merely a different remedy. In ...


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