The opinion of the court was delivered by: WERKER
This action alleging violations of the antitrust laws was commenced by plaintiff Richard Barr, the president of The League of New York Theatres and Producers, Inc. (The League), against the Dramatist Guild, Inc. and three of its officers. The League is a trade association and multi-employer bargaining unit "whose members include producers of legitimate theatrical attractions and owners and operators of theatres in New York City" (Complaint P5). The Dramatists Guild is a not-for-profit corporation whose members include professional playwrights, composers and lyricists.
The case is presently before the court on the motion by the third party defendants and plaintiff Barr to dismiss or stay defendants' contingent counterclaim and third party complaint (collectively the counterclaim).
The complaint alleges that the defendants, The Dramatists Guild and three individual playwrights -- Peter Stone, Sheldon Harnick and Ruth Goetz -- who are all among its officers, have violated Section 1 of the Sherman Act by conspiring "to restrain trade and commerce in the sale of authors' works for legitimate theatrical attractions" (Complaint P6). The complaint alleges, inter alia, that the defendants have conspired to fix the minimumprices and other terms on which they will deal with producers and have agreed among themselves that they will not license a play to producers except upon the minimum terns incorporated in a standard form contract -- the Minimum Basic Production Contract (MBPC) -- promulgated by the Guild (Complaint PP17(a) 19(b)).Plaintiff Barr seeks a declaration that the alleged conspiracy is violative of Section 1 of the Sherman Act, 15 U.S.C. § 1, and an injunction against the "use of contracts containing minimum terms and conditions for the production of any author's work as a legitimate theatrical attraction" (Compalint, p. 10). The complaint also seeks to enjoin the defendants from "involving themselves in any way, either directly or indirectly, in the negotiations between an author and a producer concerning the terms and conditions under which the right to produce any author's work will be licensed or offered for licensing for presentation as a legitimate theatrical attraction or in media other than legitimate theatrical attractions" (Complaint, p. 11). No damages are sought by Barr.
Defendants filed an answer on September 16, 1982 which denied the material allegations of the complaint. The answer asserted eight affirmative defenses. On April 28, 1983, defendants, with leave of the court, filed an amended answer containing an additional affirmative defense premised on the doctrine of in pari delicto (Amended Answer, Ninth Affirmative Defense) and a contingent counterclaim and third-party complaint against Barr, The League, and The Shubert and Nederlander interests.
The counterclaim alleges that the counterclaim defendnats have violated Section 1 of the Sherman Act by conspiring to "fix, stabilize and/or maintain at artifically low and non-competitive levels the compensation received by playwrights" (Amended Answer P45(a)), and "to enforce unfavorable terms and conditions in the contracts that are offered to playwrights" by producers (Amended Answer P45(b)). The counterclaim is denominated contingent and is asserted by defendant only if and to the extent that any alleged conduct of defendants is found to violate the antitrust laws (Amended Answer P48).
Defendants argue that "if it is held that playwrights may not lawfully combine to negotiate with producers regarding the terms and conditions of their employment, it would surely follow that producers (who do not claim to be a labor organization) would not be entitled to combine to agree on the terms and conditions on which they would deal with those same playwrights." Defendants' Memorandum of Law at 9.
The counterclaim alleges that the Shubert and Nederlander interests are producers of plays (Amended Answer PP25, 28). It alleges that they control about 70% of the first class theaters. The Shubert and Nederlander interests are alleged to have monopoly power in the market for ownership of first class theaters in New York City (Amended Answer P37).The counterclaim plaintiffs allege that the Shubert and Nederlander interests, by reason of their monopoly power in the market for theater ownership, dominate The League and dictate the terms on which they will produce playwrights' works (Amended Answer PP30, 39).
The defendants and counterclaim plaintiffs contend that the minimum royalty terms of the MBPC have become maximum terms, and that this is the result of concerted action by the counterclaim defendants. They argue that the purpose and effect of the producers' negotiating the MBPC has been to impose a ceiling on the amounts producers pay playwrights.
The counterclaim alleges that the conspiracy complained of is "continuing and [is] causing and will cause irreparable injury to counterclaim plaintiffs and their business and property" (Amended Answer P47). The defendants seek injunctive relief and treble such damages as will be shown to have resulted from the conduct on which the contingent counterclaim is premised -- but only in the event that the defendants' conduct is held to violate the antitrust laws.
The counterclaim defendants contend, among other things, that it is "factually untenable and legally impermissible for defendants simultaneously to (a) defend the past and continued use of their Minimum Basic Production Contract, the "MBPC", as lawful, reasonable and necessary, and (b) argue that the same MBPC was coercively imposed on dramatists to their detriment and monetary injury." Counterclaim Defendants' Reply Memorandum of Law at 2. They state that in the even thte court decides that dismissal of the counterclaim is inappropriate then the contingent counterclaim should be stayed and severed from the Barr suit.
The contingent counterclaim states a claim. It alleges a conspiracy by producers to fix the price of the services they purchase "at artificially low and noncompetitive levels" (Amended Answer P45-46). The counterclaim further alleges that the producers conspired through The League to establish and fix the economic terms on which they will purchase playwrights' services (Amended Answer P43), and that the purpose of the conspiracy was to reduce the compensation paid to playwrights and to remove competition among producers for the services of playwrights (Amended Answer P46). Conspiracies among buyers to suppress prices are unlawful under the antitrust laws.Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 334 U.S. 219, 68 S. Ct. 996, 92 L. Ed. 1328 (1948); Mackey v. National Football League, 543 F.2d 606 (8th Cir.1976), cert. dismissed, 434 U.S. 801, 98 S. Ct. 28, 54 L. Ed. 2d 59 (1977).
On a motion to dismiss, the well-pleaded allegations of the complaint must be taken as true and the complaint must be construed in the light most favorable to the plaintiff. In George C. Frey Ready-Mixed Concrete, Inc. v. Pine Hill Concrete Mix ...