Azalea Drive-In Theatre, Incorporated v. Sargoy

394 F. Supp. 568, 1975 U.S. Dist. LEXIS 13665
CourtDistrict Court, E.D. Virginia
DecidedFebruary 25, 1975
DocketCiv. A. 73-347-N
StatusPublished
Cited by10 cases

This text of 394 F. Supp. 568 (Azalea Drive-In Theatre, Incorporated v. Sargoy) is published on Counsel Stack Legal Research, covering District Court, E.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Azalea Drive-In Theatre, Incorporated v. Sargoy, 394 F. Supp. 568, 1975 U.S. Dist. LEXIS 13665 (E.D. Va. 1975).

Opinion

MEMORANDUM DECISION

KELLAM, Chief Judge.

Plaintiff corporations, which own and operate outdoor motion picture theatres in the Tidewater area of Virginia, instituted this action pursuant to Section 4 of the Clayton Act, 15 U.S.C. § 15, and 28 U.S.C. §§ 1331(a), 1332 and 1337, 1 alleging that the defendants, motion picture distributing corporations and their agents, had violated the federal antitrust laws by combining or conspiring to restrain interstate trade or commerce, 2 by monopolizing or attempting to monopolize such trade or commerce, 3 and by fixing prices. 4

The case was tried to the jury on September 23, 24 and 25, 1974. Prior to the presentation of any evidence, this Court, finding that plaintiffs had failed *571 to include price fixing in the final pretrial order as one of the triable issues, ruled that evidence of price fixing would be inadmissible (Transcript p. 19). After the presentation of all the evidence, plaintiffs’ attorneys withdrew all proposed instructions concerning the issue of monopolization and the case was submitted to the jury solely on the issue of whether the defendants had combined or conspired in restraint of interstate trade or commerce. The jury returned a $100,000.00 verdict in favor of plaintiffs.

At the conclusion of plaintiff’s case and again after all evidence had been presented, defendants moved for a directed verdict pursuant to Rule 50(a) of the Federal Rules of Civil Procedure. The Court withheld ruling on said motions and the jury returned the aforesaid verdict adverse to defendants. They now move, pursuant to Rule 50(b), for judgment notwithstanding the verdict or, in the alternative, for a new trial.

The issues to be decided are: *(1) whether the doctrine of collateral estoppel bars recovery in this action, and (2) assuming that doctrine to be inapplicable, whether the evidence is insufficient to support the verdict of the jury. 5 For the reasons set out below, we hold that the doctrine of collateral estoppel does not bar recovery and that the evidence is sufficient to support the jury verdict.

I

FACTUAL BACKGROUND

Plaintiff corporations exhibit motion pictures to the public. To obtain some of the films so exhibited, they entered into formal agreements with the nine defendant distribution corporations whereby the distributors agreed to lease film to the exhibitors in return for the exhibitors’ promise to pay as rent a percentage .of the gross admission receipts on each film exhibited. Pursuant to the leasing agreement, exhibitors authorized the distributors to audit their books to insure that the proper rent was being paid. For more'than 25 years, the distributors have utilized the New York based law firm of Sargoy, Stein and Hanft for this purpose. If an audit discloses underreporting of admissions, the law firm is authorized to collect whatever rent is owed either through settlement or litigation.

In November, 1970, the law firm notified plaintiffs that their books would be audited. On December 14, Philip Kornfeld, an accountant employed by the law firm, travelled to Norfolk and commenced the audit. The audit lasted one week whereupon Kornfeld returned to his New York office to analyze the data collected.

Kornfeld subsequently returned to Norfolk on January 15, 1971, to discuss with plaintiffs the results of his investigation. He advised them that he had uncovered underreporting of admissions in excess of $240,000.00 for the five-year audit period. Plaintiffs denied any underreporting and Kornfeld returned to New York.

On February 12, 1971, Kornfeld returned to Norfolk to elicit an offer of settlement from plaintiffs. After extensive negotiations, plaintiffs executed a $70,000.00 promissory note in favor of the law firm, in full settlement of the claim for past due rent. Plaintiffs, however, defaulted when the first installment came due and the noteholder brought suit in the Court of Law and Chancery of the City of Norfolk (now Circuit Court of the City of Norfolk) to recover on the instrument.

*572 In defending the state action, the exhibitors argued that the note was invalid (1) for lack of consideration, (2) because it was executed under duress, and (3) because it was obtained in violation of the federal antitrust laws. The exhibitors also raised the alleged antitrust violation to support a $210,000.00 counterclaim.

The noteholder filed a plea in abatement to the counterclaim and a motion to strike the antitrust defense. Judge Ryan, the presiding judge in the state court action, accepting the contention that the antitrust issues are exclusively within the province of the federal courts, sustained both motions by order dated August 7, 1972. Preserved were the defenses of duress and failure of consideration.

While the state action was pending, the exhibitors filed their antitrust complaint in this Court and moved for a stay of the state proceedings pending resolution of the antitrust action. This motion was denied and on January 4, 1974, the state court judge ruled that the promissory note was enforceable. Shortly thereafter judgment was entered in favor of the noteholder.

In his opinion, Judge Ryan posed the legal issues before him, asking, inter alia, “Was there sufficient and convincing evidence of duress on the part of the plaintiffs [noteholders] to the detriment of the defendants [exhibitors] ?” (Emphasis added).

In resolving this question, Judge Ryan stated:

Counsel have cited to the Court an abundance of case law and other authorities. The Court concludes that the authorities cited by the plaintiff [noteholder] are more persuasive, considering the peculiar facts and circumstances of the case. In addition, it seems that to a broad degree the issues of law outlined above turn on issues of fact. As the trier of the facts, the Court decides same in favor of the plaintiffs.

In the case at bar, the defendant motion picture distributors argue that the finding of no duress in the prior state action bars relitigation of that issue in this Court under the doctrine of collateral estoppel.

II

COLLATERAL ESTOPPEL

Under the doctrine of res judicata, a final judgment on the merits in one suit bars a subsequent suit involving the same parties or their privies based on the same cause of action. Collateral estoppel, on the other hand, is more narrow. Generally speaking, collateral estoppel bars the same parties or their privies

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