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Gordon v. Loew's Inc.

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT.


July 31, 1957

FRANK I. GORDON AND MARION V. GORDON
v.
LOEW'S, INC., PARAMOUNT FILM DISTRIBUTING CORPORATION, RKO RADIO PICTURES, INC., TWENTIETH CENTURY-FOX FILM CORPORATION, WARNER BROS. PICTURES DISTRIBUTING CORPORATION, COLUMBIA PICTURES CORPORATION, UNIVERSAL FILM EXCHANGES, INC., AND UNITED ARTISTS CORPORATION. JOHN C. GORDON, HELEN GORDON AND JOSEPH GORDON V. LOEW'S, INCORPORATED, PARAMOUNT FILM DISTRIBUTING CORPORATION, RKO RADIO PICTURES, INC., TWENTIETH CENTURY-FOX FILM CORPORATION, WARNER BROS. PICTURES DISTRIBUTING CORPORATION, COLUMBIA PICTURES CORPORATION, UNIVERSAL FILM EXCHANGES, INC., AND UNITED ARTISTS CORPORATION.

Author: Maris

Before MARIS, STALEY and HASTIE, Circuit Judges.

Opinion of the Court

By MARIS, Circuit Judge:

These appeals from summary judgments entered by the District Court for the District of New Jersey in favor of the defendants raise the question whether the plaintiffs' actions for treble damages under section 4 of the Clayton Act*fn1 are barred by an applicable statute of limitations.

The complaints, one by Frank I. Gordon and Marion V. Gordon and the other by John C. Gordon, Helen Gordon and Joseph Gordon, were each filed in the district court on March 3, 1955 against the same defendants, Loew's Incorporated, a Delaware corporation, Paramount Film Distributing Corporation, a Delaware corporation, Paramount Pictures, Inc., a New York corporation, RKO Radio Pictures, Inc., a Delaware corporation, Twentieth Century-Fox Film Corporation, a New York corporation, Twentieth Century-Fox Film Corporation, a Delaware corporation, Warner Bros. Pictures Distributing Corporation, a New York corporation, Columbia Pictures Corporation, a New York corporation, Universal Film Exchanges, Inc., a Delaware corporation, and United Artists Corporation, a Delaware corporation, all of which were motion picture producers or distributors.

Plaintiffs Frank and Marion Gordon asserted in their complaint that they were the sole stockholders of Northwest Theatre Company, an Illinois corporation which had been dissolved on February 16, 1950 and which had leased and operated the Wicker Park Theatre in Chicago from April 15, 1929 to May 14, 1949. Plaintiffs John, Helen and Joseph Gordon asserted in their complaint that they were the sole stockholders of Gordon Brothers Theatre Company, an Illinois corporation which had been dissolved on January 25, 1949 and which had operated the Chopin Theatre in Chicago from September 1, 1922 to January 1, 1947.

Each complaint asserted that the defendants had uniformly followed a system which violated the antitrust laws of releasing feature motion pictures for exhibition in Chicago to the injury of the theatre operated by the corporation of which the plaintiffs were surviving stockholders. Each complaint sought to recover treble damages for the alleged injury to the business and property of the corporation. All the plaintiffs claim the right to bring these suits as surviving stockholders of their respective corporations and, in addition, all of them except Joseph Gordon claim the right to bring the suits as assignees from their respective corporations of the causes of action sued on.

By an earlier order with which we are not here concerned the district court dismissed the complaints as against defendants Paramount Pictures, Inc., and Twentieth Century-Fox Film Corporation, New York corporations, for improper venue. Thereafter, the remaining defendants filed motions for summary judgment, asserting that the causes of action had abated at the expiration of two years after the dissolution of the respective corporations by virtue of the provisions of section 94 of the Illinois Business Corporation Act or, in the alternative, that the actions were barred by the New Jersey statute of limitations. The district court decided that the causes of action had abated under the Illinois Business Corporation Act and accordingly entered judgment in each case dismissing the complaint. 147 F.Supp. 398. These appeals followed. Since substantially the same questions are involved in each case the appeals were consolidated and considered together in this court.

At the time these suits were instituted there was no federal statute of limitations applicable to suits under the federal antitrust laws,*fn2 it being then settled that the statutes of limitations of the state in which the district court was sitting were to be applied by that court to federal antitrust litigation.*fn3 Accordingly, since these cases were brought in the District Court in New Jersey we must determine whether the statutes of that state operate to bar their prosecution.

At the outset we note that New Jersey has not enacted a so-called "borrowing statute," i.e. a law directing that the statute of limitations of the state in which a cause of action arose shall be applied to bar a suit on such cause of action if brought in New Jersey. New Jersey has thus not departed from the settled common law rule of conflict of laws that the forum applies only its own procedural statute of limitations and does not give effect to a statute of another state in which the cause of action arose unless that statute has been held by the state which enacted it to be substantive in nature, operating as a condition terminating the existence of the right instead of merely barring the remedy.*fn4 For this reason we do not need to take account of the limitation imposed by section 94 of the Illinois Business Corporation Act*fn5 to the extent that it is procedural in nature. And in view of our conclusion as to the applicability of the New Jersey statute we are not called upon to determine the question whether the Illinois statute can have the substantive effect of terminating at the expiration of two years after the dissolution of their respective corporations the causes of action which these plaintiffs as surviving stockholders assert have been given them by the federal antitrust laws.*fn6

The sections of the New Jersey Revised Statutes having possible applicability here as statutes of limitations are as follows:

"2A:14-1. 6 years.

"Every action at law for trespass to real property, for any tortious injury to real or personal property, for taking, detaining, or converting personal property, for replevin of goods or chattels, for any tortious injury to the rights of another not stated in sections 2A:14-2 and 2A:14-3 of this title, or for recovery upon a contractual claim or liability, express or implied, not under seal or upon an account other than one which concerns the trade or merchandise between merchant and merchant, their factors, agents and servants, shall be commenced within 6 years next after the cause of any such action shall have accrued."

"2A:14-10. 2 years ...; actions on penal statutes

"All actions at law brought for any forfeiture upon any penal statute made or to be made, shall be commenced within the periods of time herein prescribed:

...

"b. Within 2 years next after the offense committed or to be committed against the statute, or cause of action accrued, when the benefit of the forfeiture and the action therefor is or shall be limited or given to the party aggrieved;

...

"Where, however, by any statute made or to be made it is provided that any such action is to be brought within a shorter time than that prescribed by this section, such action shall be commenced within the time so provided by that statute." N.J.S.A. 2A:14-1, 10.

Upon examining these statutes we observe that the period of limitation applicable to the actions here in question is six years, as provided by section 2A:14-1 unless the plaintiffs' actions for treble damages under section 4 of the Clayton Act are to be regarded as actions brought for a forfeiture upon a penal statute within the meaning of section 2A:14-10, in which case the limitation of two years provided by that section is applicable.

In the action brought by John, helen and Joseph Gordon it appears from the face of their complaint that the cause of action sued upon arose more than six years before the complaint was filed. For in that case it is alleged that their corporation ceased operating the theatre in question on January 1, 1947 and was dissolved on January 25, 1949, both dates being more than six years before the suit was instituted. It is therefore, perfectly clear that their suit is barred by section 2A:14-1*fn7 if not by section 2A:14-10. The district court accordingly did not err in dismissing it.

In the suit brought by Frank and Marion Gordon, however, it appears from their complaint that their corporation operated the theatre in question up to May 14, 1949 and was not dissolved until February 16, 1950, both dates being less than six years but more than two years prior to the date the suit was instituted. Their suit was, therefore, not barred by section 2A:14-1 but would be barred by section 2A:14-10 if it is applicable.

This brings us to the question whether section 2A:14-10 of the Revised Statutes of New Jersey was applicable to bar Frank and Marion Gordon's suit for treble damages under section 4 of the Clayton Act. In determining that question we must, we believe, take that statute to have the meaning and scope which the New Jersey courts have given it in relation to state suits analogous to federal antitrust actions.*fn8 A recent decision of the Supreme Court of New Jersey, Addiss v. Logan Corp., 1957, 23 N.J. 142, 128 A.2d 426, sheds much light upon this question which was not available to the district court in this and prior cases.*fn9 The Addiss case involved the question whether section 2A:14-10 applied a bar to an action for treble damages brought by a tenant against his landlord under the state Rent Control Act. The Supreme Court of New Jersey held that section 2A:14-10 was applicable to such an action. Justice Burling who delivered the opinion of the court stated (pp. 148-149):

"Plaintiffs urge upon their cross-appeal that the trial court erroneously limited their recovery of treble damages to rental overcharges occurring within a two-year period prior to commencement of the action. The holding in this regard was based upon N.J.S. 2A :14-10 which provides, inter alia :

"'All actions at law brought for any forfeiture upon any penal statute made or to be made, shall be commenced within the periods of time herein prescribed:

"'b. Within 2 years next after the offense committed or to be committed against the statute, or cause of action accrued, when the benefit of the forfeiture and the action therefor is or shall be limited or given to the party aggrieved; * * *' The argument is that the State Rent Control Act is not a penal statute, hence the limitation does not apply.

"The statutory penalty of N.J.S. 2A :42-38 is both remedial and penal, a factor inferentially recognized in Friedman v. Podell, supra. Cf. Ryan v. Motor Credit Co., Inc., 130 N.J.Eq. 531 (Ch. 1941) affirmed 132 N.J.Eq. 398 (E. & A. 1942). The tenant recovers the measure of unlawful rental extracted and by statutory direction is the recipient of the punitive award. The total recovery is arbitrarily computed; it takes cognizance of the actual loss only as a base. According to the statutory direction the landlord 'forfeits' an amount three times that base. This operates as a sanction. True, it is largely a wrong to the individual but excessive rental charges also impugn the statutory purpose of stabilizing rentals in emergency areas and thus incidentally wrong the public. Compare Cruickshanks v. Eak, 33 N.J. Super. 285 (Law Div. 1954). A further point why the court below was correct in applying the limitation is the desire to prevent actions such as this, having penal characteristics, from being unlimited. See Boswell v. Robinson, 33 N.J.L. 273 (Sup. Ct. 1869); Borough of Fair Lawn v. Fairlawn Transportation, Inc., 25 N.J.Misc. 331 (Sup. Ct. 1947). But cf. Shelton Electric Co. v. Victor Talking Mach. Co., 277 F. 433 (D.C.N.J. 1922). We concur in the conclusion that the two-year limitation of N.J.S. 2A:14-10(b) was applicable to the plaintiffs' causes of action."

The action for treble damages given by section 4 of the Clayton Act is essentially similar in its pertinent characteristics to the action for treble damages which the New Jersey State Rent Control Act gave to a tenant. To paraphrase what Justice Burling said in the Addiss case with regard to the State Rent Control Act, the person injured by reason of action forbidden by the antitrust laws recovers the measure of the injury to his business or property and by statutory direction is the recipient of the punitive award. The total recovery is arbitrarily computed; it takes cognizance of the actual loss only as a base. According to the statutory direction the defendant must pay an amount three times that base. This operates as a sanction. True it is largely a wrong to the individual but violations of the antitrust laws also impugn the Congressional purpose of freeing interstate commerce from restraints and monopolies and thus incidentally wrong the public. Indeed the violation of those laws is not only subject to this sanction but is also made a misdemeanor, punishable by fine and imprisonment.*fn10 We think it is clear, in the light of the Addiss opinion, that for the purpose of the application of section 2A:14-10 of the New Jersey Revised Statutes, section 4 of the Clayton Act must be regarded as a penal statute within the purview of that section.

It is suggested that section 4 of the Clayton Act cannot thus be held to be a penal statute because the Supreme Court of the United States held in Chattanooga Foundry v. Atlanta, 1906, 203 U.S. 390, that the five years limitation upon suits "for the enforcement of any civil fine, penalty or forfeiture, pecuniary or otherwise" imposed by the predecessor of section 2462 of title 28, United States Code, was not applicable to such a suit. It must, of course, be conceded that such a suit is not for a penalty within the meaning of the federal statute of limitations now incorporated in section 2462. But it does not follow that the law which authorizes such a suit to be brought may not be a penal statute within the meaning of section 2A:14-10 of the New Jersey Revised Statutes. For "penal" and "penalty" are not words of art. On the contrary, as is the case with many other terms used in the law, their meaning varies with the circumstances in which they are used and takes on the meaning in each instant which the user intends. See Huntington v. Attrill, 1892, 146 U.S. 657.As an illustration we may point out that actions under the antitrust laws at other times and in other settings have been described by the federal courts as authorizing the recovery of a penalty. *fn11 And indeed the fact that the antitrust laws had been held to be penal in respect to the application of the statutes of limitations of some states but not of others was one of the reasons why Congress in 1955 enacted the uniform statute of limitations applicable to these cases.*fn12

All we are called upon to decide and all we do decide is that section 4 of the Clayton Act is a penal statute within the meaning of that phrase as used in section 2A:14-10 of the Revised Statutes of New Jersey, and that, therefore, the suit brought by Frank and Marion Gordon is barred by the limitation imposed by that section.

It is persuasive, although of course not controlling, that in similar cases in the federal district court in Illinois involving the application of the Illinois statute of limitations to suits for treble damages under the Clayton Act the Court of Appeals for the Seventh Circuit reached a conclusion similar to that to which we have come in this case.*fn13

The judgments of the district court will be affirmed.


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