METRO-GOLDWYN-MAYER DIST. CORP. v. KIGGINS. 497
Nov. 1935 Opinion Per HOLCOMB, J.
[No. 25723. Department Two. November 22, 1935.]
METRO-GOLDWYN-MAYER DISTRIBUTING CORPORATION,
Appellant, v. JOHN P. KIGGINS, Respondent. �1�
[1] CONTRACTS (46, 51) - MONOPOLIES (4) - VALIDITY - PREVENTION
OF COMPETITION - PARTIAL INVALIDITY. The provision for
compulsory arbitration in the standard contract for motion
picture exhibitions is unlawful sad unenforcible under the
Sherman Anti-Trust Law; sad the illegal elements being
inseparable from and vitally connected with other portions of
the contract, the contracts are wholly illegal and void.
Appeal from a judgment of the superior court for
Clark county, Stone, J., entered January 28, 1935,
upon findings in favor of the defendant, in an action
on contract, tried to the court. Affirmed.
Hall & Schaefer, for appellant.
D. Elwood Caples, for respondent.
HOLCOMB, J. - Appellant is a producer and distributor
of motion picture films and prints, and respondent
was an exhibitor at Vancouver, Washington, at
the time the contracts in this action were signed.
These contracts were dated prior to October 15, 1929.
The complaint of appellant contains several causes
of action based on written contracts between it and
respondent, copies of the contracts being attached to
the complaint, wherein in each of them appellant
agreed to. license or rent to respondent, upon certain
terms and conditions therein set forth and upon certain
fixed rentals, a number of motion picture prints
to be exhibited by respondent at his theater in
Vancouver.
Respondent accepted, exhibited and paid for a
number of prints covered by these contracts, and
�1� Reported in 51 P.2d 690.
498 METRO-GOLDWYN-MAYER DIST. CORP. v. KIGGINS.
Opinion Per HOLCOMB, J. 184 Wash.
thereafter, having sold his theater, refused to accept
or pay for any more of the prints contracted for. He
paid for all the prints he exhibited.
A written stipulation was entered into between the
parties and filed in this cause, stipulating that the
total amount due appellant from respondent, if the
contracts were valid and enforcible at the time he
refused to further perform his part of the contract,
was $4,121, with interest at six per cent per annum
from October 1, 1930, which he stipulated and agreed
to be the correct amount due and owing. It was further
stipulated that the contracts sued upon as forming
the basis of the action herein are, in form and
effect, identical with the Standard Exhibition Contract
before the court in United States v. Paramount
Famous Lasky Corp. (D.C.), 34 F. (2d) 984, and
affirmed in Paramount Famous Lasky Corp. v. United
States, 282 U.S. 30, 51 S. Ct. 42, and that the printed
reports of those cases may be considered in evidence
by the court in lieu of authenticated or certified copies
thereof. That decree was filed October 15, 1929.
The trial judge, having tried the case without a
jury, held that appellant should not be permitted to
maintain an action permeated with the unconscionable
terms and elements contained in these contracts; that
he was content to rest his judgment on the authorities
of Fox Film. Corp. v. Tri-State Theatres, 51 Idaho
439, 6 P.2d 135, and Fox Film Corp. v. C. & M.
Amusement Co. (D.C.), 58 F. (2d) 337, as there
determined. He accordingly dismissed the action, with
costs to respondent.
[1] The contracts before us need not be set out at
length. They have been the subject of much contrariety
of opinion in both Federal and state courts. In
the parent suit, United States v. Paramount Famous
Lasky Corp., supra, which was a suit in equity in a
METRO-GOLDWYN-MAYER DIST. CORP. v. KIGGINS. 499
Nov. 1935 Opinion Per HOLCOMB, J.
Federal district court in New York to restrain appellant
in this case and others from engaging in a conspiracy
in restraint of interstate trade and commerce
and from violation of SS 4 of the Sherman Anti-Trust
Act (15 USCA SSSS 4 and 1), the trial judge in that
case, after an elaborate opinion, held that SS 18 of
the contracts in question, which was a provision for
compulsory arbitration, violated the Sherman Anti-
Trust laws and was void. That provision may be
read, if desired, in that case, as well as in 282 U.S.
30, where the decree was affirmed.
The decision in the last cited case was exceedingly
ambiguous, to say the least. The effect of it was that
the decree of the court below was not inconsistent
with the stipulated facts and "the challenged decree
must be affirmed." What the original decree meant
and what the United States supreme court meant in
its decision, has been a matter of a great divergence
of opinion between the courts, as heretofore stated.
In Metro-Goldwyn-Mayer Distributing Corp. v.
Bijou Theatre Co., 59 F. (2d) 70, the Federal circuit
court of appeals for the first circuit, in an appeal from
a judgment by a district judge in Massachusetts, 50
F. (2d) 908, reversed that decree and, among other
things, held that the arbitration provision of the
contract in question was separable from lawful portions
of the contract; that, where mutual covenants go to
whole consideration on both sides, they are mutual
covenants, but where they go only to part, and recompense
may be had in damages, the contract is divisible;
and that agreements in restraint of trade, which are
unlawful only in part, are enforcible as to parts that
are not unlawful.
The only thing that has been definitely settled and
conceded is that paragraph 18 of the contracts before
us was void and unenforcible.
500 METRO-GOLDWYN-MAYER DIST. CORP. v. KIGGINS.
Opinion Per HOLCOMB, J. 184 Wash.
The following state and Federal courts have held
the contracts separable and that the remainder of the
contract can be enforced regardless of the compulsory
arbitration clause: Columbia Pictures Corp. v.
Bi-Metallic Inv. Co. (D.C.), 42 F. (2d) 873; Paramount
Famous Lasky Corp. v. National Theatre Corp.
(C.C.A.), 49 F. (2d) 64; Metro-Goldwyn-Mayer
Distributing Corp. v. Bijou Theatre Co. 50 F. (2d) 908;
Fox Film Corp. v. Buchanan, 17 La. App. 285, 136
So. 197; Metro-Goldwyn Distributing Corp. v. Cooke,
56 S.W. (2d) (Tex. Civ. App.) 489; Fox Film Corp.
v. Ogden Theatre Co., 82 Utah 279, 17 P.2d 294, 90
A.L.R. 1299.
On the contrary, the standard contract before us
has been held indivisible and illegal throughout, in
Vitagraph, Inc., v. Theatre Realty Co. (D.C.), 50 F.
(2d) 907; Fox Film Corp. v. C. & M. Amusement Co.
(D.C.), 58 F. (2d) 337; Fox Film Corp. v. Tri-State
Theatres, 51 Idaho 439, 6 P.2d 135; Universal Film
Exchanges v. West, 163 Miss. 272, 141 So. 293; United
Artists Corp. v. Piller, 62 N.D. 289, 244 N.W. 20;
Fox Film Corp. v. Muller, 192 Minn. 212, 255 N.W.
845, which also cites and approves United Artists v.
Odeon Building, 212 Wis. 150, 248 N.W. 784.
Thus, the Federal courts of first instance and of
intermediate appeal being in hopeless conflict as to
what their own decisions mean, we are compelled to
determine the matter, under what we consider the
best reasoning of the courts.
In Fox Film Corp. v. Ogden Theatre Co., supra,
the Utah supreme court took the ground that the
compulsory arbitration clause dealt wholly with the
method of procedure and was therefore separable
from the body of the contract and fixes the obligation
of the parties. We would be inclined to agree with
that reasoning were it not for the fact that the
METRO-GOLDWYN-MAYER DIST. CORP. v. KIGGINS. 501
Nov. 1935 Opinion Per HOLCOMB, J.
procedure agreed upon between the parties was rendered
wholly abortive and void by the decision in the parent
case and its affirmance by the United States supreme
court. That left nothing of the contracts that could
be enforced, except what was, in a way, as was said
by one of the Federal courts, nothing but "coercive
matter." See Fox Film Corp. v. C. & M. Amusement
Co., supra. In that case, the district court held that
the illegal elements were inseparable from standard
exhibition contracts precluding the film distributor's
recovery against the exhibitor for the mount of the
unperformed contract price.
In the case of Fox Film Corp. v. Tri-State Theatres,
supra, the Idaho supreme court also held that the
contracts in question, as signed by the parties, would
carry into effect the coercion by an unlawful combination
in restraint of trade, being not only an illegal
contract, but illegally executed and therefore
unenforcible. It further held that any contract which was
unlawful under the Sherman Anti-Trust Law was
unenforcible.
In Universal Film Exchanges v. West, supra, the
supreme court of Mississippi held that the invalid
arbitration section of the standard exhibition contracts
was so vitally connected with the remainder of
the contracts as to infect the entire contract with
illegality and therefore was not severable.
We are thoroughly impressed with the reasoning
of the courts which hold that the compulsory arbitration
provision in the contracts before us, being admittedly
illegal, is so vitally connected with the other
portions of the contracts as to render them wholly
illegal and unenforcible.
The judgment of the trial court is therefore affirmed.
BLAKE, MAIN, MITCHELL, and BEALS, JJ., concur.