Paramount leased a theater and granted a franchise to Partmar to
exhibit first-run films of Paramount pictures, both for terms of
ten years. The lease provided that it was terminable at Paramount's
option if the franchise agreement "be cancelled or terminated for
any reason whatever." In an antitrust suit by the Government
against Paramount and others, a Federal District Court held that
such franchise agreements were the product of an illegal conspiracy
and enjoined their enforcement. Paramount then notified Partmar
that it was terminating the franchise agreement because of the
injunction and that it was terminating the lease because of
termination of the franchise agreement. Partmar refused to vacate
the theater, and Paramount sued in a Federal District Court to
obtain possession and for a declaratory judgment that the lease had
been properly terminated. Partmar answered, setting up various
defenses, and filed counterclaims seeking treble damages resulting
from a conspiracy respecting the franchise agreement in violation
of the Sherman Act. Paramount's suit and the counterclaims were
separated for trial. After this Court had overruled the District
Court's finding that such franchise agreements violated the Sherman
Act, the eviction suit was tried and the District Court found no
substantial evidence of a conspiracy respecting the franchise
agreement, and entered judgment for Partmar, but it also dismissed
Partmar's treble-damage counterclaims, with prejudice and without
trial. Partmar took no appeal from the District ,Court's judgment
in the eviction suit, but it appealed from the judgment dismissing
the treble-damage counterclaims.
collateral estoppel bars further litigation by
the parties of the issue of conspiracy in violation of the Sherman
Act, and the judgment dismissing the counterclaims with prejudice
is sustained. Pp. 347 U. S.
(a) A prior judgment between parties operates as an estoppel in
a suit on a cause of action different from that forming the basis
for the original suit only as to those matters in issue or
Page 347 U. S. 90
controverted, upon the determination of which the finding or
verdict was rendered. P. 347 U. S.
(b) The District Court did not err in dismissing Partmar's
counterclaims with prejudice and without a separate trial as to
their merits, and such dismissal did not deprive Partmar of due
process of law. Pp. 347 U. S.
(c) The power remained in the trial court until entry of its
final judgment to set aside, for appropriate reasons, the former
order for the separate trial of the counterclaims. P. 347 U. S.
(d) A separate trial on the counterclaims would have been an
improper procedure, as the judgment entered in Paramount's suit was
a final disposition of the determinative issue on the counterclaim
-- whether or not the terms of the lease were the product of an
illegal conspiracy. Pp. 347 U. S.
(e) Partmar was not prejudiced by the failure of the District
Court to consider either the judgment or the decree in the
Government's antitrust suit as evidence of the conspiracy alleged
in the counterclaims. Pp. 347 U. S.
200 F.2d 561 affirmed.
In a suit by respondents to declare a lease properly terminated
and to regain possession of a theater, the District Court decided
that issue in favor of petitioners, but dismissed petitioners'
counterclaims for treble damages under the antitrust laws.
97 F. Supp.
. The Court of Appeals affirmed. 200 F.2d 561. This Court
granted certiorari. 345 U.S. 963. Affirmed,
347 U. S.
MR. JUSTICE REED delivered the opinion of the Court.
This case presents a matter of federal practice involving
inconsistent positions by litigants in court proceedings. We have
often held that, under the doctrine of res judicata,
judgment entered in an action conclusively
Page 347 U. S. 91
settles that action as to all matters that were or might have
been litigated or adjudged therein. [Footnote 1
] But a prior judgment between the parties has
been held to operate as an estoppel in a suit on a cause of action
different from that forming the basis for the original suit "only
as to those matters in issue or points controverted, upon the
determination of which the finding or verdict was rendered."
] This latter aspect
of res judicata
is the doctrine of collateral estoppel by
judgment, established as a procedure for carrying out the public
policy of avoiding repetitious litigation.
Petitioners entered counterclaims in a suit against them by
respondent. These counterclaims were dismissed by the trial court
upon determination of the original suit for petitioners and against
respondents. The cause of action stated in petitioners'
counterclaims is based upon a controverted personal right that had
not been adjudged, and therefore res judicata
is no bar to
the claimed right of recovery. Respondent, however, in its original
suit, had raised an issue, determinative of its cause of action,
which had been therein successfully controverted by petitioners to
final judgment on the merits. Collateral estoppel stands as a bar
to further litigation by the parties of this issue, and this issue
was held by the trial court to be determinative of petitioners'
counterclaims. Petitioners' argument that the dismissal denied a
hearing of issues that might have been, but were not, determined by
the judgment on the merits of the original action
Page 347 U. S. 92
moved us to grant certiorari, limited to the issue of the
counterclaims. 345 U.S. 963.
Although federal jurisdiction was sought only on the ground of
diversity, the complaint relied upon a breach of the Sherman Act,
and the counterclaims were similarly bottomed on that federal law.
Therefore, our conclusion is reached on a consideration of federal
law and procedure. It will depend upon whether or not any issue of
fact or law remained for decision after the primary action was
decided. [Footnote 3
] The issue
reaches us under the following circumstances.
Paramount Pictures Theaters Corp., a subsidiary of Paramount
Productions, Inc., and successor to Paramount Pictures, Inc., is a
New York corporation engaged in the business of operating motion
picture theaters throughout the United States. These three
corporations will hereinafter be referred to jointly as
"Paramount." On August 31, 1939, Paramount leased the Paramount
Downtown Theater in Los Angeles, California, for ten years to
Partmar Corp., a California corporation, petitioner here, wholly
owned by Fanchon & Marco, Inc. This lease was subsequently
amended in 1942 and extended to March 18, 1952. A "film franchise
agreement" was executed in conjunction with, and for the same
period as, the lease. It licensed Partmar to exhibit Paramount
pictures at the theater as first "runs" of the films, required
Partmar to exhibit such pictures not less than forty-six weeks each
year, and set a scale of license fees. The lease expressly provided
that it was terminable at the option of Paramount if the franchise
agreement "be cancelled or terminated for any reason whatsoever."
Other provisions of the lease and agreement are not germane to the
issue before this Court.
Page 347 U. S. 93
On December 31, 1946, a decree was entered in the District Court
for the Southern District of New York in an equity action brought
by the United States against Paramount and other major companies of
the motion picture industry alleging a conspiracy to violate the
Sherman Act, 26 Stat. 209, 15 U.S.C. §§ 1-2. United States v.
Paramount Pictures, Inc., 70 F. Supp.
. One provision of that decree defined a "franchise" to be a
"in effect for more than one motion picture season and covering
the exhibition of pictures released by one distributor during the
entire period of agreement,"
and enjoined each of the defendants in that action "from further
performing any existing franchise to which it is a party and from
making any franchises in the future." 70 F. Supp. at 73, Decree, §
On March 26, 1947, Paramount notified Partmar that it was
cancelling and terminating the franchise agreement because of the
injunction, and on April 2, 1947, notified Partmar that it was
terminating the lease by reason of the termination of the franchise
agreement. Partmar refused to vacate the theater upon demand, and
Paramount instituted this action on May 1, 1947, in the District
Court for the Southern District of California, alleging diversity
and unlawful detainer of the theater. The complaint sought, so far
as is material here, restitution of possession based on illegality
of the franchise under the Sherman Act as construed in the decree
in the Southern District of New York, supra,
declaratory judgment that the lease had been properly
Partmar and Fanchon & Marco, Inc., answered setting up
various defenses, and filed three counterclaims seeking treble
damages under 38 Stat. 731, 15 U.S.C. § 15, resulting from a
conspiracy between Paramount and other motion picture companies in
violation of the Sherman Act. The conspiracy was alleged to have
resulted in the
Page 347 U. S. 94
imposition of excessive terms and conditions on Partmar by the
lease and franchise agreement. [Footnote 4
By order dated April 26, 1948, the District Court, upon
Paramount's motion, ordered Paramount's causes of action
Page 347 U. S. 95
for unlawful detainer and declaratory judgment tried separately
from Partmar's counterclaims. Prior to trial on May 3, 1948, we
handed down our decision on Paramount's and the other defendants'
appeals from the decree of the Southern District of New York.
United States v. Paramount Pictures, Inc., 334 U.
. We held, inter alia,
that "we cannot
say on this record that franchises are illegal per se
extended to any theater or circuit, no matter how small," and set
aside the District Court's findings relative to such franchises.
334 U.S. at 334 U. S. 156
Relying on that decision, Partmar and Fanchon & Marco, Inc.,
moved in the Southern District of California for dismissal of
Paramount's action against them. Their motion was denied, and the
case went to trial, without amendment of the pleadings, in
November, 1950, on two issues: whether Paramount was justified in
terminating the franchise agreement because of the decree in the
New York Paramount
whether the lease
and contract were illegal contracts under the federal antitrust
statutes justifying repossession of the theater by Paramount under
California law. See, e.g., Glos v. McBride,
47 Cal. App.
688, 191 P. 67. Thus, issue was joined as to the legality of the
actions of Paramount and its alleged co-conspirators relative to
the lease and franchise agreement, wholly apart from the New York
injunction, and Paramount was in the anomalous position of
attempting to prove that its agreements with Partmar violated the
antitrust laws. Paramount did not limit its contention of
illegality of the agreement to nonconspiratorial aspects of the
antitrust laws, but argued that, if the agreements were illegal in
any way, it had the right to possession. That Partmar recognized
this position is clearly shown by its statement in its brief to the
trial court that,
"after the reversal of that judgment [in the New York case], the
plaintiff [Paramount] took the position that the question presented
was whether the franchise was violative of the
Page 347 U. S. 96
Sherman Act, wholly apart from any judgment or the decisions of
the District or Supreme Courts."
Partmar vigorously contended in brief and in argument that the
lease of the theater and the franchise for "first-run" exhibitions
did not in any way violate the Sherman Act. It clearly recognized
that one way the franchise might be illegal would be if it were the
result of a conspiracy, for it argued in its brief that:
"There was no allegation or proof of conspiracy. There being no
showing of interstate commerce, it is immaterial whether there was
conspiracy, unreasonable clearance, fixed admission prices, block
booking, or unreasonable restraint. In the absence of interstate
commerce, all else was entirely beyond the purview of the Sherman
Act. But, assuming that there had been no failure to prove
interstate commerce, the absence of conspiracy is equally fatal.
Probably the only evidence relative to conspiracy was the statement
of Y. Frank Freeman, a witness for Paramount, that there were no
conspiratorial arrangements between Paramount and Fox West Coast. .
. . Even in a setting of conspiracy, it is doubtful that the
franchise would be unlawful. . . . On the evidence in this case the
Partmar franchise is neither one of a system, or made by one
holding a dominant position, or pursuant to a conspiracy. . .
It thus insisted that the remunerative lease and franchise
agreements were still valid and subsisting, and that Paramount had
no right to possession.
After eighteen days of trial, the District Judge, on May 2,
1951, filed a memorandum opinion, 97 F. Supp.
, 555, in which he concluded that the termination "for any
reason" clause in the lease meant for any "legal or substantial
reason," and that the 1946 decree of the Southern District of New
York "was not a legal cause or reason for terminating
Page 347 U. S. 97
the franchise agreement." He continued,
"there is no evidence to indicate that any third party conspired
with either Paramount or Partmar to bring into existence the
that "a single contract between one film company and one
exhibitor is not violative of the Sherman Act", and that, since the
franchise agreement was "not in itself an illegal agreement,"
Paramount "had no right to cancel or terminate it because of
illegality." The court went on to hold that,
"as we find no substantial evidence of a conspiracy in this case
on the part of Partmar or Paramount, we are of the opinion that the
counterclaimant cannot recover"
on the counts seeking treble damages on the basis of an alleged
conspiracy. The opinion directed Partmar to submit proposed
findings of fact, both parties submitted such findings and proposed
conclusions, and a hearing, upon notice, was held on June 18, 1951.
Paramount thereupon submitted Finding No. 20 and conclusion No. 11,
thus formalizing its contention that the judgment
denying plaintiff's petition estopped defendant from recovering on
its counterclaims for violation of the Sherman Act. At this
hearing, Partmar appeared and expressly objected to the adoption of
the proposed finding and conclusion which required the dismissal of
its treble damage counterclaims. Argument was heard on Partmar's
objection, but the court adhered to its position and adopted among
its findings No. 20, which provides:
"Paramount, not in conjunction with any other major studio,
entered into the franchise agreement which gave to Partmar the
right to exhibit the first-run feature pictures of Paramount in the
City of Los Angeles. Neither said franchise agreement, nor said
lease, nor any amendment to either of them constituted any part of,
nor were they or any of them entered into as a result of any
Page 347 U. S. 98
or conspiracy of any kind whatsoever between Paramount and any
other person or persons, nor between Partmar and any other person
And conclusion No. 11 which provides:
"Inasmuch as the said lease and said franchise agreement and all
amendments to each of them were in all respects lawful and were not
entered into nor performed as a result of any combination or
conspiracy of any kind whatsoever on the part of either plaintiffs,
defendants, third party plaintiff or third party defendants, with
any person or persons; inasmuch as said lease, said agreement and
amendments thereto have neither the purpose or effect of
restraining or monopolizing trade or commerce among the several
states in the production, distribution, transportation, sale or
exhibition of motion pictures; and inasmuch as each was an
agreement solely between plaintiff and defendants, or defendants
and third party plaintiffs and third party defendants dealing
solely with the Paramount Theater Los Angeles alone and the
exhibition thereat; third party plaintiffs, and each of them,
cannot recover upon the first, second and fourth counterclaim, or
any of them. [Footnote 5
The court simultaneously entered an order giving judgment for
Partmar on Paramount's two counts of unlawful detainer, declaring
the rights and duties of the parties under the franchise and the
lease, and dismissing with prejudice Partmar's three treble damage
Partmar, apparently not wishing to jeopardize its valuable lease
and franchise, took no appeal from parts of
Page 347 U. S. 99
the District Court's judgment declaring the lease and franchise
to be valid and subsisting and the theater not to be unlawfully
detained. [Footnote 6
Therefore, those parts of the judgment must be accepted as valid
and binding on the parties. Partmar did, however, serve timely
notice of appeal to the Court of Appeals for the Ninth Circuit from
so much of the District Court judgment as dismissed with prejudice
the treble damage counterclaims. The Court of Appeals for the Ninth
Circuit, in a per
Page 347 U. S. 100
curiam opinion on December 16, 1952, 200 F.2d 561, noted
agreement with the opinion of the District Court and affirmed the
District Court judgment. As heretofore indicated, our consideration
is "limited to the issue of the counterclaims."
Partmar contends that the District Court erred in dismissing its
counterclaims with prejudice without a separate trial as to their
merits, which the trial court had previously ordered, and that such
dismissal deprived it of due process of law. In particular, it
argues that it was denied the valuable property right of having
admitted in evidence during a trial the judgment in the case of
United States v. Paramount Pictures, Inc., 334 U.
, which, it argues, would provide, under § 5 of
the Clayton Act, 38 Stat. 731, 15 U.S.C. § 16, prima facie
evidence of the conspiracy on which the counterclaims were based.
We think these contentions are without merit. The power remained in
the trial court until the entry of his final judgment to set aside,
for appropriate reasons, the former order for separate trial of the
Each of Partmar's counterclaims for treble damages was
predicated upon allegations that Paramount and its alleged
co-conspirators engaged in a conspiracy in restraint of trade and
commerce, and that the allegedly "excessive terms, conditions and
charges for the photo-plays made and released by them" and the
exaction of fifty percent of the net receipts, imposed by the lease
and franchise agreement, were part of such conspiracy. The District
Court found in the principal action, which decision was not
appealed and is not before us, that neither the lease nor the
franchise was the result "of any agreement, combination or
conspiracy of any kind whatsoever." Of course, if this finding were
not material to the principal action the doctrine of collateral
estoppel would not apply. But this finding was obviously
Page 347 U. S. 101
necessary to the court's judgment that the agreements were not
illegal. Partmar had ample opportunity upon trial to present
evidence and to contest the conspiracy finding, and argument was
heard prior to adoption of the findings. This finding, binding all
of the parties, determined the key ingredient of Partmar's
counterclaims contrary to its allegations, and thus precluded
recovery upon such claims. A separate trial on the counterclaims
would have been improper procedure, as the judgment entered on the
complaint was a final disposition of the determinative issue on the
counterclaims -- whether or not the terms of the lease were a
product of an illegal conspiracy. [Footnote 7
The allegations of the counterclaim charge that as a result of
"the same conspiracy stated in the complaint" in United States
v. Paramount Pictures, Inc., 334 U. S. 131
Partmar was damaged in the terms of its lease from Paramount. Yet
this very lease was sustained by the judgment in this case on the
ground that it was not violative of the Sherman Act. Partmar moved
to dismiss the complaint in this case after this Court's decision
in the Paramount Pictures
case on the ground that it "had
become moot by the demonstrated nonexistence of the basic fact,"
the illegality of the lease. In its brief in the
trial court, petitioner stated its position clearly.
"The effect of the opinion seems to be that franchises are not
unlawful per se,
that is, apart from conspiracy,
Page 347 U. S. 102
and that on the record in that case they were not shown to have
been parts of the conspiracy."
"* * * *"
"The Supreme Court seems at least to have clearly indicated that
a franchise with one exhibitor for one theater, like that with
Partmar, was not involved in the case. It said in effect that only
franchises with defendants and franchises for theaters in a circuit
Nor would unlimited admission in evidence of the final decree in
United States v. Paramount Pictures Inc., supra,
aided Partmar. We had reversed the only finding in that case
pertaining to the illegality under the Sherman Act of franchise
agreements between exhibitors and producers, and the final consent
decree as to Paramount entered on March 4, 1949, contains no
findings on such subject. Cf. United States v. Paramount
Pictures, 85 F. Supp.
, 897. Since final judgments or decrees in Government
antitrust actions are admissible under § 5 of the Clayton Act as
evidence only of issues actually determined in
the prior adjudication, [Footnote
] the Government judgments provide no proof of the
indispensable element to Partmar's counterclaims, that the lease
Page 347 U. S. 103
franchise were part of or the result of a conspiracy. From the
decree there would have been prima facie
evidence of a
conspiracy, but no evidence that the Partmar lease was a result of
that conspiracy so as to overturn the trial court's finding in this
very proceeding that no illegality tainted the lease. Partmar
therefore was not prejudiced by the fact that the District Court
did not consider either the judgment or the decree as evidence of
the conspiracy alleged in the counterclaims. As we have pointed
out, the conclusion of the trial court went beyond the lawfulness
of the "franchise," as distinguished from the lease of which it was
a part and held that the lease was not secured by conspiracy.
p. 347 U. S. 96
This was res judicata
of that fact, if it
be considered a fact, and nonetheless res judicata
is a decision on the law, binding in another cause of action
arising from the same controversy or claim. [Footnote 9
MR. JUSTICE JACKSON and MR. JUSTICE CLARK took no part in the
consideration or decision of this case.
[For dissenting opinion of MR. CHIEF JUSTICE WARREN, joined by
MR. JUSTICE BLACK, see
p. 347 U. S.
Page 347 U. S. 104
Cromwell v. Sac County, 94 U. S.
, 94 U. S. 352
Fayerweather v. Ritch, 195 U. S. 276
195 U. S. 300
195 U. S. 308
Gunter v. Atlantic Coast Line R. Co., 200 U.
, 200 U. S. 290
Stoll v. Gottlieb, 305 U. S. 165
Cromwell v. County of Sac, supra,
at 94 U. S. 353
United States v. Moser, 266 U. S. 236
266 U. S. 241
Treinies v. Sunshine Mining Co., 308 U. S.
, 308 U. S. 74
Commissioner v. Sunnen, 333 U. S. 591
333 U. S.
-601. Cf. Federal Trade Commission v. Cement
Institute, 333 U. S. 683
333 U. S. 706
where the rule is recognized, but its application denied because
the issues differed.
Scott, Collateral Estoppel by Judgment, 56
Harv.L.Rev. 1; Note Collateral Estoppel by Judgment, 52 Col.L.Rev.
Petitioner's first counterclaim alleged:
"Paramount Pictures Theaters Corporation, Paramount Pictures,
Inc., Paramount Film Distributing Corporation, . . . and the
defendants in United States of America v. Paramount Pictures,
Equity No. 87-273, in the United States District Court
for the Southern District of New York, and other persons to the
defendants unknown, were at the time of the acts and transactions
stated in the complaint herein, and they now are, engaged in a
conspiracy in restraint of trade and commerce among the States, in
the distribution and exhibition of motion pictures, in violation of
the Act of July 2, 1890, that is to say, the same conspiracy stated
in the complaint in that case."
"* * * *"
"32. This action has been brought by the plaintiff in pursuance
of the aforesaid conspiracy, arrangements and agreements, and to
evade and defeat the purpose to end the aforesaid conspiracy and
restraint of trade for which United States of America v.
Paramount Pictures, Inc.,
Equity No. 87-273, was
"33. As part of the aforesaid conspiracy, the plaintiff and the
third-party defendants arranged and agreed among themselves, to
require Partmar Corporation to license for exhibition at the
Paramount Theater for 46 weeks of each year only photoplays made
and released by Paramount Pictures, Inc., and, for any failure upon
the part of Partmar Corporation to obey that requirement, to evict
it from Paramount Theater. The plaintiff and the third-party
defendants have been able to impose, and they have in fact imposed,
upon Partmar Corporation, excessive terms, conditions, and charges
for the photoplays made and released by them and exhibited at the
Paramount Theater, from March 2, 1933, to the present time."
In the second counterclaim, the third party plaintiffs
(petitioners) reiterated their allegations of conspiracy and based
their claim for damages on an addition to the lease that required
Partmar "to pay an additional sum, that is to say, fifty percent of
the net receipts of Partmar Corporation at the Paramount
The other counterclaim is not in the record, but the briefs
indicate that it contained substantially the same allegation as
numbers one and two.
Partmar had brought in other parties as third party defendants
under Fed.Rules Civ.Proc. 14. Their presence is not important in
this phase of the controversy.
While Partmar did not appeal, it might have. The finding and
conclusion of law just quoted were essential to the determination
of Paramount's claim for possession of the theater. Paramount's
position after this Court's reversal of the franchise portion of
the New York decree was that the agreements were invalid under the
federal antitrust statutes as the product of an illegal conspiracy.
It is only when a finding of law or fact is not necessary for a
decree that the prevailing party may not appeal and the finding
does not form the basis for collateral estoppel. This is shown by
the case cited to support the statement as to appeal in
Lindheimer v. Illinois Bell Telephone Co., 292 U.
, 292 U. S. 176
See New York Telephone Co. v. Maltbie,
291 U.S. 645, and
cases cited. Electrical Fittings Corp. v. Thomas & Betts
Co., 307 U. S. 241
stated the practice negatively. "A party may not appeal . . .
findings . . . not necessary to support the decree." Professor
Scott, supra, note 3 at
concurs in this view. Restatement, Judgments, § 68,
"(1) Where a question of fact essential to the judgment is
actually litigated and determined by a valid and final judgment,
the determination is conclusive between the parties in a subsequent
action on a different cause of action, except as stated in §§ 69,
71 and 72."
Section 69(2) ("Where a party to a judgment cannot obtain the
decision of an appellate court because the matter determined
against him is immaterial or moot, the judgment is not conclusive
against him in a subsequent action on a different cause of
action.") is immaterial, because the conspiracy determination was
essential for Partmar's defense to Paramount's claim. See
Galloway v. General Motors Acceptance Corp.,
106 F.2d 466. The
paucity of cases in this field is explainable by the infrequent
happening of a need of a prevailing party to set aside a
determination necessary to a judgment in his favor.
Southern Pacific R. Co. v. United States, 168 U. S.
, 168 U. S.
"The general principle announced in numerous cases is that a
right, question, or fact distinctly put in issue, and directly
determined by a court of competent jurisdiction, as a ground of
recovery, cannot be disputed in a subsequent suit between the same
parties or their privies; and, even if the second suit is for a
different cause of action, the right, question, or fact once so
determined must, as between the same parties or their privies, be
taken as conclusively established, so long as the judgment in the
first suit remains unmodified."
Emich Motors Corp. v. General Motors Corp.,
340 U. S. 558
340 U. S.
"We think that Congress intended to confer, subject only to a
defendant's enjoyment of its day in court against a new party, as
large an advantage as the estoppel doctrine would afford had the
Government brought suit."
"The evidentiary use which may be made under § 5 of the prior
conviction of respondents is thus to be determined by reference to
the general doctrine of estoppel. . . . Accordingly, we think
plaintiffs are entitled to introduce the prior judgment to
establish prima facie
all matters of fact and law
necessarily decided by the conviction and the verdict on which it
See Theater Enterprises v. Paramount, 346 U.
; Monticello Tobacco Co., Inc. v. American
197 F.2d 629.
United States v. Moser, 266 U.
, 266 U. S.
"The contention of the government seems to be that the doctrine
of res judicata
does not apply to questions of law; and,
in a sense, that is true. It does not apply to unmixed questions of
law. Where, for example, a court in deciding a case has enunciated
a rule of law, the parties in a subsequent action upon a different
demand are not estopped from insisting that the law is otherwise,
merely because the parties are the same in both cases. But a fact,
question or right distinctly adjudged in the original action cannot
be disputed in a subsequent action, even though the determination
was reached upon an erroneous view or by an erroneous application
of the law."
Emich Motors Corp. v. General Motors Corp.,
340 U. S. 558
340 U. S. 569
cf. United States v. Stone & Downer Co., 274 U.
, 274 U. S.
MR. CHIEF JUSTICE WARREN, whom MR. JUSTICE BLACK joins,
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. [Footnote
] 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 theater. 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
Page 347 U. S. 105
Paramount, 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.
, 70 F. Supp.
. 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. 334
131, 334 U. S.
-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
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,
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 theaters. On Paramount's motion, the defense
was stricken as an improper collateral attack on the right of the
lessor to recover possession of the theater.
Page 347 U. S. 106
The 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,
and that by reason of this market control
Paramount had been able to exact from petitioner monopoly profits
in the form of overcharges for theater 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. [Footnote
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. [Footnote 2/3
] And both
Page 347 U. S. 107
times 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 Act [Footnote 2/4
] 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: [Footnote 2/5
"At the time of trial, it was agreed that action on the
counterclaims should be postponed until after the trial of the main
issue involved and no evidence was offered by either plaintiff or
defendant on the counterclaims."
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 Partmar or Paramount. .
. ." [Footnote 2/6
] The court thus
disposed of both the eviction suit and the counterclaims on the
same ground -- the absence of any evidence of conspiracy.
Page 347 U. S. 108
I 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. [Footnote 2/7
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
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.
Page 347 U. S. 109
I 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. [Footnote 2/8
Cromwell v. Sac County, 94 U. S.
, 94 U. S. 353
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,
65 Harv.L.Rev. 818, 840-841; Von
Moschzisker, Res Judicata,
38 Yale L.J. 299, 311-312;
Cleary, Res Judicata
Re-examined, 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.
See 347 U.S.
fn2/1|>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
292 U. S. 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,