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Roseneau v. Empire Circuit Co.

Supreme Court of New York, Appellate Division

March 3, 1909

ROSENEAU
v.
EMPIRE CIRCUIT CO. ET AL.

Appeal from Trial Term, Erie County.

Action by Edward J. Roseneau, as receiver of the Court Street Theater, against the Empire Circuit Company and others. From a judgment for plaintiff, and from an order denying a new trial, defendants appeal. Reversed.

Daniel J. Kenefick (Rankin D. Jones, of counsel), for appellants.

Simon Fleischmann (Frank F. Williams, of counsel), for respondent.

Argued before McLENNAN, P. J., and SPRING, WILLIAMS,: KRUSE, and ROBSON, JJ.

McLENNAN, P. J.

The Court Street Theater Company, of which the plaintiff is receiver, is a domestic corporation. From the time of its incorporation in the year 1895 until the 17th day of March, 1902, when the plaintiff was appointed receiver of said company, it, as lessee, was engaged in the city of Buffalo, N. Y., in conducting the Court Street Theater, so called. Said company played and conducted [115 N.Y.S. 513] at said theater burlesque performances only, and during the time mentioned had practically no competitor in such city. Its business was run at a large profit, and it had established the valuable reputation of being the leading and only burlesque theater in the city of Buffalo. The defendant the Empire Circuit Company is a foreign corporation, organized about the year 1900 under the laws of the state of Ohio, having its principal office and place of business in Cincinnati. At all the times in question its business was conducted by a board of nine directors, among whom were the defendants Kernan and Rife. Each of the directors of said defendant company was the owner, lessee, or controlled one or more burlesque theaters, so called, and which were devoted exclusively to the accommodation of burlesque shows or attractions. The stock of such company was owned by the directors in proportion to the number of theaters which they respectively owned, leased, or controlled, and the business of such company was to contract with the persons, firms, or corporations owning or controlling burlesque shows or attractions to play in its theaters, to the end that all of such theaters might be continuously occupied, or as nearly so as possible, during any theatrical season. The theaters owned, leased, or controlled by the several directors of the defendant company were located in the cities of St. Louis, Kansas City, Indianapolis, Louisville, Pittsburgh, Cleveland, Cincinnati, Washington, Baltimore, and the city of Buffalo; only one of such theaters being located in each of said cities. As stated in respondent's brief:

" The theaters managed by the Empire Company were the principal burlesque theaters in the cities in which they were located."

There were practically only 41 burlesque shows or attractions in the middle and eastern parts of the United States which were suitable to be given or played in the defendant company's theaters or in the Court Street Theater. It appears that said 41 burlesque shows or attractions were not more than was reasonably necessary to supply the defendant company's theaters with suitable attractions. That being the situation, the defendant company resolved that it would not book any burlesque show or attraction to play in its theaters except upon condition that the owners of such burlesque shows or attractions would agree not to play in any theaters other than those owned, leased, or controlled by it, and, pursuant to such resolution, each of the owners of or persons controlling such burlesque shows or attractions were notified, in effect, that, if they gave their shows or played in any theater not owned or controlled by the defendant company, they would not be permitted to give their shows in the theaters owned by it. As a result of such resolution and notice, the owners of practically all of such burlesque shows or attractions voluntarily decided to show or play only in the theaters of the defendant company, and it appears that 19 or 20 of such owners had contracted with the Court Street Theater Company to play in its theater, but because of the action taken by the defendant company and the defendants Kerman and Rife each and all of such contracts were canceled, with the result that the Court Street Theater Company, of which the plaintiff is receiver, [115 N.Y.S. 514] could not obtain any suitable attractions to play in its theaters, and therefore financial loss resulted to it.

We may assume, at least there is evidence to support the conclusion, that the defendants knew or had reason to believe that, if the plan adopted by them was carried out and acceded to by a considerable number of the owners of the burlesque shows, financial loss would result to the plaintiff, and that it would be difficult, if not impossible, for it to secure suitable attractions to play in the Court Street Theater. All other burlesque theaters which were not included in the defendants' lists would experience a like difficulty. It is practically conceded that the method of doing business adopted by the defendants was of very great advantage to them, and also to the owners of the burlesque shows or attractions. The burlesque shows or attractions were thus enabled to be booked in advance, and to follow the circuit, so called, of theaters owned or controlled by the defendants, which, as we have seen, comprised the principal burlesque theaters in the middle and eastern parts of the United States. Any one of such shows or attractions could be given in Washington or Baltimore, and then in all the theaters owned by the defendant company, in regular order, thereby avoiding unnecessary travel and the expense incident thereto, and the theaters owned by the defendants were thereby assured of having their theaters continuously filled during any theatrical season. Before such plan was devised, it was common for a burlesque show to be booked in a western city for one week, then in an eastern city for another week, then be obliged to return to a western city, and so the company was compelled to travel long distances, thereby incurring large expense, in order to keep their engagements. It was also true that such theaters as afterwards were included in the defendant company were often closed because burlesque attractions could not be secured on account of the lack of method which prevailed. To meet that difficulty, the defendant company was formed, its prime purpose and intent being to provide its theaters constantly with shows and at the same time to enable the owners of the burlesque shows or attractions to keep their companies constantly employed after they had started upon the road, and so without incurring the expense of traveling a long distance to meet and keep their respective engagements.

The defendant company was an important corporation. When organized, it was authorized to issue capital stock to the amount of $50,000, which it did, and such stock was practically all taken at its par value by the owners of the theaters which it controlled. Its business from the outset was successful and profitable because, as we may assume, of the plan adopted by it which brought it and the owners of the theaters which it represented into harmonious relations with the owners of the principal burlesque shows or attractions, enabling them to give such shows at the minimum of expense. We conclude that the purpose and object of the defendants in the premises was legal, and that they had a perfect legal right to adopt and carry out the plan which they did in order to accomplish such purpose, notwithstanding it resulted in financial loss to the plaintiff's company, and prevented [115 N.Y.S. 515] it from procuring suitable attractions for the Court Street Theater. The evidence does not support the conclusion that the defendant corporation was organized and its method of doing business adopted because of malice which it entertained toward the plaintiff company or toward its principal owner, and there is no evidence from which it can be fairly concluded that the chief purpose which the defendants had in view was to ruin and destroy the business of the plaintiff's company. The evidence does tend to show that ill will existed between some of the defendants and the chief stockholder of the plaintiff company, and it is undoubtedly true that they desired to eliminate the competition which existed because of the ownership and operation of the Court Street Theater. Such ill will or feeling started because the owner of the Court Street Theater established competing burlesque theaters in the cities of Washington and Baltimore. It being the defendants' notion that there was only room for one such theater in either of those cities, and because of such action on the part of the owner of the Court Street Theater, the defendants Kernan and Rife opened a competing burlesque theater in the city of Buffalo, and adopted the plan to which attention has been called, which was acceded to by practically all the owners of burlesque attractions, with the result that the Court Street Theater practically ceased to be a competitor. Concededly the defendants or either of them had a right to open a theater which would be a competitor of the Court Street Theater in the city of Buffalo, the same as the plaintiff had a right to open and establish a competing theater in the city of Washington or Baltimore.

The contention of the plaintiff is that the defendants, in case they brought a burlesque attraction to the city of Buffalo and played it in their theater, the Lafayette, were compelled to permit the owner of a burlesque show so playing in it to play in the Court Street Theater, notwithstanding, perchance, the defendants had expended large sums of money in advertising and bring the burlesque show played in the Lafayette Theater to the attention of the people of the city of Buffalo. We consider that the defendants had the right to say to the owner of such burlesque show: " If we incur the expense of booking your attraction for the Lafayette Theater, you must agree not to play in the Court Street Theater" -and that the defendants had the right to say, " Your time must be at our disposal, and you shall not be permitted to make or enter into any agreement or contract which will deprive us of playing any of your attractions in any of the theaters which we own or control, and at such time as we may desire." May a corporation, not dealing in public necessities, utilities, or food products, determine that it will not employ any individual, firm, or corporation except upon condition that such individual, firm, or corporation will agree not to work for or to serve its competitors? The owners of the burlesque shows or attractions desired to secure employment; desired that they might be permitted to give such shows in the theaters owned or controlled by the defendant which comprise the principal theaters in the middle and eastern portions of the United States. The defendants were willing to give to the owner of such shows employment, but only upon condition that they would not serve the owners of theaters not owned or controlled by them. We think that the defendants [115 N.Y.S. 516] in insisting upon such condition were strictly within their legal rights, and so notwithstanding such condition imposed resulted in or induced 19 or 20 of the owners of burlesque shows or attractions to violate the contract entered into between them and the plaintiff company, and resulted in practically preventing the plaintiff company from obtaining suitable attractions to be played therein.

In the case of Ashley v. Dixon, 48 N.Y. 430, 8 Am. Rep. 559, it was held that no liability was incurred by C. because of the fact that he induced B. to break a contract entered into by him with A. for the purchase of A.'s real property. The court in that case said:

" But, even if defendant had induced Patrick not to perform his contract, that alone would not make him liable to the plaintiffs for damages. He could advise and persuade Patrick not to convey the land under his contract with McEachron, and could by offering more, induce him to convey to himself, without incurring liability to McEachron, so long as he was guilty of no fraud or misrepresentation affecting McEachron."

In the case at bar it is not pretended that the defendant company, or its directors, agents, or representatives, made any false statement respecting the Court Street Theater which induced the burlesque show companies not to play or give their attractions in it. What the defendants did was open and above board. They simply said to the owners of burlesque shows, " If you play or show in the Court Street Theater, you cannot play in the theaters owned, leased, or controlled by us" ; and, as before said, we conclude that in adopting that plan and rule and in enforcing it the defendants were acting within their legal rights. The purpose and object of the adoption and enforcement of such rule was to secure financial advantage and profit to the defendants. It was for the purpose of enabling it to make provision by which its theaters should at all times during the theatrical season be occupied with suitable burlesque shows, and, as before suggested, there is no basis for the conclusion or finding that this important corporation was actuated by malice as against the owner of the plaintiff's company in organizing the defendant company and in adopting the rule which it did. Its chief purpose and object was to conduct its business in such fashion so that it would be successful and yield a profit to its stockholders and a reasonable return for the money and property which they had invested therein. We, however, understand the law to be that, if the means employed to do a certain act are legal and lawful, it ...


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