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PENTHOUSE INTL., LTD. v. KOCH

December 21, 1984

PENTHOUSE INTERNATIONAL, LTD., Plaintiff, against EDWARD KOCH, THE CITY OF NEW YORK, METROPOLITAN TRANSPORTATION AUTHORITY, NEW YORK CITY TRANSIT AUTHORITY and NEW YORK SUBWAYS ADVERTISING CO., INC., Defendants.


The opinion of the court was delivered by: HAIGHT

MEMORANDUM OPINION AND ORDER

HAIGHT, District Judge:

 This case is before the Court on cross-motions for summary judgment. Plaintiff, Penthouse International Ltd. ("Penthouse"), moves for partial summary judgment against three of the named defendants - New York City Subways Advertising Co., Inc. ("Subways"), New York City Transit Authority ("NYCTA") and Metropolitan Transit Authority ("MTA") - on the ground that defendants' removal of and refusal to display a Penthouse advertising poster in the New York City subway system violated its First and Fourteenth Amendment rights of free speech and equal protection. Penthouse further alleges that due to the tortious interference of MTA and NYCTA, Subways wrongfully breached its advertising contract with Penthouse. Plaintiff seeks a declaratory judgment and monetary damages for defendants' alleged wrongdoings.

 The three defendants cross-move for judgment in their own favor on all claims on the ground that they rightfully prohibited display of the poster, which they term "offensive."

 All parties agree that there are no disputed issues of material fact and that this action is ripe for disposition by partial summary judgment on the issue of liability.

 I. FACTS

 MTA is a public benefit corporation, created by the Metropolitan Transportation Authority Act, N.Y. Pub. Auth. Law § 1260 et. seq. (McKinney's 1982), which controls and regulates New York metropolitan area mass transportation systems. NYCTA, another public benefit corporation, N.Y. Pub. Auth. Law § 1200 et. seq. (McKinney's 1982), is responsible for operation of the New York City rapid transit or subway system. In 1959, the NYCTA was given statutory authority to place advertisements on subway system property, or to "rent, have or otherwise sell the right to do so to any person, private or public," N.Y. Pub. Auth. Law § 1204, subd. 13-a. Pursuant to that authority, NYCTA entered into a contract with Subways, a private New York corporation, by which Subways agreed to act as NYCTA's agent in leasing advertising space in the subway system. The agreement contains a provision *fn1" permitting NYCTA to prohibit acceptance or demand removal by Subways of any advertisement deemed by NYCTA to be "offensive to good taste" or "objectionable to the Authority."

 In exercise of the authority granted to it by that agreement, Subways entered into a contract dated November 21, 1983 with Tilley & Marlieb Advertising, Inc. on behalf of Penthouse, for the display of posters advertising Penthouse magazine in the New York City subway system. Subways agreed to install up to 500 "one sheet station posters" for Penthouse for purposes of subway and bus shelter advertisements. The contract ran for a term of twelve months beginning on January 12, 1984, at a cost of $8,917.00 per month. Consistent with its contractual obligation to NYCTA, Subways' standard form lease contract with its own customers, including Penthouse, provides at Section 2E:

 "All copy and design shall be subject to rejection or removal at any time if it is deemed offensive to good taste or is unsatisfactory to the New York City Transit Authority."

 Penthouse is a monthly publication whose advertising strategy reflects the cyclical and short-lived nature of the product. Its poster advertisements are usually created from the cover of the next monthly issue to go on sale and its advertising campaign is scheduled to coincide with the appearance of the issue on newstands. Numerous poster advertisements for Penthouse have been accepted and displayed by Subways, although some have been modified by Penthouse, at Subways' request, to "reduce nudity." *fn2"

 On April 12, 1984, Penthouse *fn3" submitted a proof to Subways Advertising of a poster advertising the magazine's June issue. The poster featured a caricature of Walter Mondale by political cartoonist Uri Hofmekler. The figure, wearing a medallion labeled "ERA Yes" around his neck, was portrayed as an almost nude male "stripper", with female hands reaching up toward his unclothed thighs.

 Because the poster had a sexual content, the proposed ad copy was reviewed by Marvin Schwartz, President of Subways. *fn4" Schwartz agreed to accept the proposed poster if a black banner or "snipe" were added covering the figure's midsection from abdomen to thigh.

 Once Tilley & Marlieb had obtained the approval of Subways for the modified version of the poster, Penthouse ordered additional copies of the advertisement and delivered them to Subways for posting. On Thursday, May 10, 1984, employees of Subways began installing the posters, and continued installing them on Friday, May 11, 1984. By 6:30 p.m., approximately 20 to 30% of the posters had been mounted.

 At that point, Robert Kiley, Chairman of the MTA, learned that the poster was being installed and displayed in the subway system. After determining that the poster was "offensive to good taste" and "objectionable", he ordered the removal of all posters already installed and prohibited further installation of the poster, pursuant to the NYCTA-Subways agreement.

 Kiley's order was relayed to Schwartz that evening by Larry Levine, an MTA employee. By Monday, May 14, 1984, all of the Penthouse posters had been removed.

 The next day, Penthouse filed suit in New York state court against the same defendants as in this action, seeking damages and an injunction directing defendant to replace all of the posters that had been removed and enjoining defendants from removing them again. *fn5" Plaintiff's motion for a preliminary injunction was denied by Justice Maresca on May 21, 1984 and the denial was affirmed without opinion by the Appellate Division, First Department, on June 28, l984.

 On July 3, 1984, Penthouse filed this action in federal court and simultaneously sought to voluntarily discontinue the state court action by serving a notice of discontinuance on defendants. The discontinuance, however, was ineffective because it was served and filed more than twenty days after the service of Penthouse's complaint. New York C.P.L.R. 3217(a)(1). As a result, the state action is still pending.

 II. STAY OF PROCEEDINGS

 Defendants, MTA, NYCTA and Subways, have moved this Court for a stay of further proceedings in this action pending final resolution of the state court action. They argue that because the state action is a prior pending action on the same claims between the same parties, *fn6" this Court should exercise its discretion to stay all proceedings before it until the previous action is properly terminated. Defendants accuse plaintiff of forum shopping in hopes of finding a more sympathetic ear to its claims in federal court. They argue that such forum shopping should not be permitted unles the state court action is discontinued in accordance with the requirements of N.Y.C.P.L.R. 3217, which may require payment to defendants of their costs and expenses of defending the state court action. Mandelbaum v. L.N. Magazine Distrib., Inc., 28 A.D.2d 680, 280 N.Y.S. 2d 753 (2d Dep't 1967). Defendants candidly acknowledge that they have no real desire to stay in the New York state courts. They ask this Court to hold the case before it hostage in order to coerce plaintiff into properly discontinuing the state action and perhaps thereby to give defendants the financial satisfaction they seek. This I decline to do.

 Defendants' counsel conceded at oral argument that he could initiate a request on his own in state court, after passage of time, to have the action dismissed there for want of prosecution. However, he said he knew of no provision by which he could then apply for the expenses for which he seeks reimbursement. He suggested that his clients can get financial satisfaction only if this Court requires plaintiff to first discontinue this action in accordance with N.Y.C.P.L.R. 3217, as a condition of pursuing its claim here.

 It is not the province of this Court to manipulate its own exercise of jurisdiction in an attempt to set in motion the state court's procedural mechanisms for defendants' benefit. Surely defendants can directly initiate whatever application is appropriate in the state court in order to bring their grievance before that court.

 A stay by this Court, postponing resolution of the motions ripe for adjudication before it, would be improper in light of the central importance of plaintiff's constitutional claims in this litigation. Federal courts have the primary duty to decide federal constitutional issues, Zwickler v. Koota, 389 U.S. 241, 252, 19 L. Ed. 2d 444, 88 S. Ct. 391 (1967), and in the First Amendment area, the Supreme Court has severely limited the scope of the district court's discretion to abstain, New York Civil Liberties Union, Inc. v. Acito, 459 F. Supp. 75, 82 (S.D.N.Y. 1978). In Zwickler, a federal district court was held to be in error for abstaining from ruling on a request for a declaratory judgment that a state criminal statute contravened the First Amendment by its overbreath. The Court emphasized that "Congress imposed the duty upon all levels of the federal judiciary to give due respect to a suitor's choice of a federal forum for the hearing and decision of his federal constitutional claims." 389 U.S. at 248.

 Defendants' request for a stay is denied, and I proceed to consider the merits of the motions before me.

 III. BREACH OF CONTRACT

 Penthouse claims that the actions of the three defendants in removing and refusing to display plaintiff's posters constituted breach of contract. Penthouse further states that it has performed all of its own contractual obligations, except as prevented from doing so by defendants' acts. It claims that it is therefore entitled to recover monetary damages for loss of revenue from sales of the June 1984 issue, as well as for injury to ...


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