Partmar Corp. v. Paramount Pictures Theatres Corp.

*104Mr. Chief Justice Warren,

whom Mr. Justice Black joins, dissenting.

I cannot join in the Court’s decision. Relying on the doctrine of collateral estoppel, it affirms the trial judge’s dismissal of petitioner’s treble-damage counterclaims without a trial. The doctrine, I believe, is inapplicable to the facts of this case.

The Court correctly states the well-settled rule that a prior judgment on a different cause of action is not conclusive as to questions which might have been but were not actually litigated in the original action.1 The inquiry, therefore, must be whether the conspiracy issue was actually litigated in the eviction suit; if it was not so litigated, the District Court’s finding as to the absence of evidence of conspiracy cannot preclude petitioner on its counterclaims. The Court rests its decision on the assumptions (1) that the conspiracy issue was litigated in the eviction suit and (2) that in any event petitioner had a full opportunity to litigate the issue. Neither assumption, it seems to me, is warranted by the facts. To those facts I now turn.

The respondent, Paramount, sought to take advantage of its own violation of the federal antitrust laws by bringing an eviction suit to cancel a valuable lease held by its tenant, the petitioner, on a Los Angeles theatre. The lease provided that it was terminable if, “for any reason whatsoever,” petitioner’s franchise for the showing of Paramount’s pictures should be “cancelled or terminated.” *105Paramount, in its complaint charging unlawful detainer, did not allege in any respect that the franchise was invalid because part of a conspiracy; rather, the crux of the complaint was that the franchise had been terminated by the District Court decree in the Government antitrust action against Paramount and others. United States v. Paramount Pictures, Inc., 66 F. Supp. 323, 70 F. Supp. 53. After the eviction complaint had been filed, the decree in the Government action was reviewed here; the Court sustained the decree as to the existence of a nationwide conspiracy among the defendants, but reversed that portion of the decree which held that franchises were illegal per se. 334 U. S. 131, 155-156. Petitioner moved to dismiss, contending that the basis of the eviction complaint had been swept away by this Court’s decision. In opposing the motion to dismiss, Paramount made an about-face and urged the illegality of the franchise on other grounds: its minimum price requirements, block booking, and restrictions on runs and clearances. Paramount alleged that these provisions of the franchise agreement, apart from any conspiracy and independent of the decree in the Government action, rendered the agreement an illegal “contract ... in restraint of trade” under the Sherman Act. This new theory of the case was accepted by the trial court without any change in the pleadings, and the motion was denied.

In its answer, petitioner set up as a defense that Paramount was seeking to evict petitioner in pursuance of the conspiracy enjoined in United States v. Paramount Pictures, Inc., supra, and that the effect of an eviction would be to drive petitioner out of business and thus enable Paramount to extend an unlawful monopoly over motion picture theatres. On Paramount’s motion, the defense was stricken as an improper collateral attack on the right of the lessor to recover possession of the theatre.

*106The answer also contained petitioner’s counterclaims, alleging that Paramount and others named as cross-defendants had engaged in the conspiracy enjoined in United States v. Paramount Pictures, Inc., supra, and that by reason of this market control Paramount had been able to exact from petitioner monopoly profits in the form of overcharges for theatre and film rentals. Treble damages and injunctive relief were sought. On Paramount’s motion to dismiss the counterclaims, they were sustained as valid actions under the antitrust laws.2

Both actions — the eviction suit and the counterclaims— were then ready for trial. Paramount moved that the two actions be tried separately. Petitioner consented and the court so ordered, the eviction suit to be tried first.

Throughout the lengthy trial of the eviction suit, the trial judge repeatedly complained of the total absence of any evidence showing that the franchise was part of a conspiracy. His complaint went unheeded. Paramount, which had the burden of proof in the eviction suit, not only failed to introduce such evidence but never even alleged such a conspiracy. Petitioner, on the other hand, never denied the existence of the conspiracy, but argued that the franchise in itself was not invalid.3 And both *107times that petitioner sought to inject the conspiracy issue into the case, it was prevented from doing so. As I have already noted, petitioner’s answer alleged that the eviction suit was brought in pursuance of the conspiracy; on Paramount’s motion, the defense was stricken. Later when Paramount offered into evidence the decree in the Government action for the limited purpose of showing Paramount as being subject to the injunctive features of the decree, petitioner objected on the ground that the decree “should go in as a document in toto — no part of it but the whole thing.” In support of the objection, petitioner argued that § 5 of the Clayton Act4 made the decree prima facie evidence of the conspiracy established in the Government action. Again petitioner was overruled.

At the conclusion of the eviction trial, the court gave judgment for petitioner because of Paramount’s failure to show the illegality of the franchise by evidence of conspiracy. As to the counterclaims, the court stated: 5

“At the time of trial it was agreed that action on the counter-claims should be postponed until after the trial of the main issue involved, and no evidence was offered by either plaintiff or defendant on the counter-claims.”

Nevertheless, the court dismissed the counterclaims without trial on the ground that there was “. . . no substantial evidence of a conspiracy in this case on the part of Part-mar or Paramount . ...” 6 The court thus disposed of both the eviction suit and the counterclaims on the same ground — the absence of any evidence of conspiracy.

*108I submit that on these facts the Court’s two assumptions are unwarranted. The issue of conspiracy was not litigated; nor did petitioner have a fair opportunity to litigate the issue. Indeed, whether petitioner had an opportunity to do so is immaterial under the doctrine of collateral estoppel. If the counterclaims had been based on the same cause of action as the eviction suit, such an opportunity might have barred petitioner under the more sweeping doctrine of res judicata. But here, where the second suit is based on a different cause of action, a neglected opportunity in the first action to litigate an issue is without legal significance.7

Under these circumstances, should the doctrine of collateral estoppel be invoked against petitioner to bar a trial on its counterclaims? I believe not. The doctrine presupposes, and the Constitution requires, that the party who is estopped had his day in court in a prior action and that he then had a fair hearing in which to prove his point but failed. Surely the doctrine was never intended to estop a party who in the prior action was denied such a hearing.

That, as I see it, is precisely the situation here. The eviction suit and counterclaims had been severed for trial purposes. During the trial of the eviction suit, Paramount was the only party with any reason or justification for proving that the franchise was part of a conspiracy. Because of Paramount’s failure to present such proof, the court held the lease to be valid, but at the same time gave judgment against petitioner on its counterclaims because of the same shortcoming of Paramount’s proof. This Court now affirms. The anomalous result is to penalize petitioner for refusing to help Paramount win the eviction suit.

*109I believe that petitioner has been denied its day in court, and that the case should be reversed with instructions to the trial court to hear the counterclaims.8

Cromwell v. County of Sac, 94 U. S. 351, 353. See also Restatement, Judgments, § 68; Scott, Collateral Estoppel by Judgment, 56 Harv. L. Rev. 1, 2-3, 5-6; Note, Collateral Estoppel, 52 Col. L. Rev. 647, 652-657; Developments in the Law, Res Judicata, 65 Harv. L. Rev. 818, 840-841; Von Moschzisker, Res Judicata, 38 Yale L. J. 299, 311-312; Cleary, Res Judicata Reexamined, 57 Yale L. J. 339, 342-343; Freeman, Judgments (5th ed.), §§674-676.

38 Stat. 731, 15 U. S. C. § 15.

The Court’s opinion, apparently for the purpose of showing that the conspiracy issue was actually litigated, points to statements in petitioner’s trial brief to the effect that Paramount had failed to establish a conspiracy in restraint of interstate commerce. It is difficult to understand how petitioner’s argument at the trial that the conspiracy issue was not litigated can now be converted into proof that the issue was litigated. Petitioner’s statements in its brief amounted to nothing more than a wholly justifiable contention that Paramount had failed in its burden of proof in the eviction suit; the statements merely pointed out that the franchise was valid in the absence of evidence of conspiracy and that Paramount had not even alleged a conspiracy — by pleadings, evidence, or oral argument.

38 Stat. 731, 15 U. S. C. § 16.

97 F. Supp. 552, 561.

Ibid.

See note 1, supra.

There is yet an additional reason for not applying the doctrine of collateral estoppel here. Petitioner, as the successful party in the eviction suit, could not appeal the District Court’s finding that there was no evidence of conspiracy. Lindheimer v. Illinois Bell Telephone Co., 292 U. S. 151, 176; New York Telephone Co. v. Maltbie, 291 U. S. 645. The adverse finding was not included in the Court’s decree, as in Electrical Fittings Corp. v. Thomas & Betts Co., 307 U. S. 241. Because of this inability to appeal, the finding cannot bind petitioner in a subsequent action between the parties based upon a different cause of action. See Restatement, Judgments, § 69 (2); Scott, Collateral Estoppel by Judgment, 56 Harv. L. Rev. 1, 15-18.

The Court’s opinion (footnote 6) concedes that inability to appeal precludes a subsequent application of collateral estoppel, but contends that petitioner could have appealed here because the trial court’s finding in the eviction suit (as to the absence of proof of conspiracy) was material to the decree in the eviction suit. The Court’s opinion cites no case, in this Court or any other, holding that a successful party can appeal findings which are not inserted as part of the decree. Indeed, the opinion overlooks the very holdings of this Court on which it relies for support. In both Lindheimer v. Illinois Bell Telephone Co., supra, and New York Telephone Co. v. Maltbie, supra, the findings which the public utility sought to appeal related to the value of its property for rate-making purposes; in each case, the trial court had held that the rates fixed by a state commission were confiscatory on the basis of those findings. Yet this Court held that the public utility, as the successful party, could not appeal those findings. Surely in this case the trial judge’s finding as to conspiracy was no more “material” than the findings which this Court refused to review in Lindheimer and Maltbie.