Sampliner v. Motion Picture Patents Company/Opinion of the Court

The opinion below is reported in 255 Fed. 242, 168 C. C. A. 202.

By an assignment executed in Ohio December 28, 1911, the Lake Shore Film & Supply Company, a corporation of that state, undertook to convey to plaintiff in error its claim and right of action against defendants for damages resulting from their violations of the Sherman Act (Comp. St. § 8820 et seq.). Relying upon the assignment, he brought suit for $750,000 January 16, 1917, in the United States District Court, Southern District of New York. The defendants denied liability, and set up the following as a separate and distinct defense:

'The plaintiff at the time of his alleged purchase of the     claims in controversy, set up in the complaint herein, was an      attorney and counselor at law of the state of Ohio,      practicing as such before the courts of that state. * *  *      That at the time of such alleged purchase it was, and is now,      the law of the state of Ohio that an attorney who purchased a      demand with full knowledge and notice that the same was      contested and would be litigated, and with the intent and for      the purpose of bringing an action thereon, was guilty of      maintenance and champerty and got no title to such demand by      such purchase which could be enforced either at law or in equity, and that      the same was at said time, and still is, the law of the state      of New York. * *  * That the plaintiff purchased the demand      set forth in the complaint with full knowledge and notice      that the same was contested and would be litigated and with      the intent and for the purpose of bringing action thereon.'

All parties agreeing, the court directed a separate trial before a jury upon the issues of fact and law arising under the special defense. Plaintiff in error testified in his own behalf and called two other witnesses-none were called by the defendants. The essential facts as well stated by the Circuit Court of Appeals follow:

'The assignment states that 'for value received the Lake     Shore *  *  * Company *  *  * hereby sells, assigns, and      transfers to J. H. Sampliner all of its rights and interests      in and to any and all damages which it has sustained and      suffered by reason of injury to its business, because of the      unlawful combination and monopoly in restraint of interstate      commerce, and in violation of the Sherman Anti-Trust Act,      brought about, engaged in and as a result of the unlawful      agreement by and between the Motion Picture Patents Company;      *  *  * all of said parties having conspired together for the      purpose of ruining and destroying the business of the Lake      Shore *  *  * Company, and contrary to and in violation of the      Sherman Anti-Trust Act. * *  * '

'The testimony shows that the plaintiff had rendered legal     services to the assignor as its general counsel in connection      with the difficulties in which it found itself with the      defendants, and that those services extended over a period      from July, 1910, to December, 1911. The plaintiff regarded     the reasonable value of his services as worth from $8,000 to      $10,000. On December 10, 1911, he was asked by the president     of the Lake Shore Company whether he would be willing to      bring suit against the defendants, and that he replied that he would bring the suit, being      satisfied that the company had a valid claim, and that it      would cost from $8,000 to $10,000. He was informed by the     president of the company that it had been losing money very      heavily, and it was absolutely impossible for it to undertake      any litigation of that kind. He was asked what the company     already owed him, and replied in the neighborhood of $9,000      or $10,000. He was told the company did not have the money     and could not pay him, and thereupon he said, that if the      company would pay him $5,000, in cash he would cancel the      indebtedness. After some reflection the president, Mr. Mandelbaum, told him that the corporation would transfer to     him all rights it had against the defendants, if he would be      willing to accept it as a satisfaction of the company's      indebtedness to him. The plaintiff told him that he would     think it over and give him an answer. After a few days'     reflection the plaintiff expressed a willingness to accept      the assignment, and was told that the board of directors      wanted to know whether, if they made an assignment, the      plaintiff would as a part of the consideration defend the      company and its officers in case any suit was brought against      them in matters growing out of their difficulties with the      defendants. He agreed to do this, and the assignment was     executed.

'It appears, therefore, that the assignment originated, not     with the plaintiff, but with the Lake Shore Company, and that      the consideration for the agreement involved the payment of a      past indebtedness, as well as for future services of a      professional character. It is also to be noted that the     invalidity of the assignment is set up, not by the client,      the assignor, who has at no time sought to repudiate it, but      by third parties, between whom and the plaintiff no fiduciary      relations have existed.'

At the conclusion of the evidence the defendants asked a directed verdict 'on the ground that the plaintiff has not shown title to this cause of action and it now affirmatively appears from the evidence that the agreement under which the plaintiff assumes to bring this suit is champertous and void.' Thereupon the following occurred-Mr. Rogers representing the plaintiff:

'Mr. Rogers: If your honor is going to grant the motion for a     direction of a verdict I will take a formal objection to it,      but my request is that if your honor is going to find for the      defendant, that it be a nonsuit to the plaintiff's cause of      action. I think that is as far as your honor can go.

'The Court: You may be right, but the defendant has rested     and moves for the direction of a verdict, and I am going to      pass on that motion.

'Mr. Rogers: But, your honor, I submit there aren't any     questions of fact on which to go to the jury; I submit the      matter is purely a matter of law for your honor to determine;      and I think the question whether the agreement is or is not      champertous is one of law for the court.

'The Court: Well, Mr. Rogers, you may either rest on the     motion of the defense and take an exception to such ruling as      I make, if it should be adverse, or you can ask to go to the      jury. That is entirely for you to determine.

'Mr. Rogers: Well, if there are any questions of fact to be     disposed of, your honor, I ask to go to the jury upon the      questions of fact.

'Mr. Seabury: I think he should specify, and not put a     hypothetical motion.

'The Colurt: I cannot have any 'ifs.' If you think, under     section 973 of the Code, the court has no right to make a      direction, and you are right about it, you will have a good      exception; if, on the other hand, the court is right, your      exception will be addressed, not to the question of practice, but to the substantive questions in      the case.

'Mr. Rogers: Then, your honor, may I state my position on the     record?

'The Court: Yes, certainly.

'Mr. Rogers: The defendant having moved for a direction in     order to preserve the plaintiff's rights, I beg leave to      state my position on the record with the permission of the      court.

'Mr understanding is that the question is one of law to be     passed upon by the court from the facts adduced. If, however,     it is necessary in order to preserve the plaintiff's rights      that I make a request to go to the jury, I ask to go to the      jury upon the question as to whether or not the plaintiff      took an assignment of the cause of action for the intent and      purpose to begin an action thereon, and whether the      assignment to him was bona fide for an antecedent      indebtedness.

'The Court: The court cannot take conditional offers. Counsel     is at liberty, if so advised, to request to go to the jury      and the court will rule.

'Mr. Rogers: Then I move for a direction, your honor, for the     plaintiff, upon the issue framed under your honor's order on      the ground the defendant has failed to make out the defense      set up in the answer, to wit, that the plaintiff purchased      this cause of action-that is the defense that is set up-and I      desire to call you honor's attention particularly to the form      of the defense as pleaded. The defense that this plaintiff's     title is void because he purchased this cause of action with      the intent to sue thereon. It now appears uncontradicted,     from the evidence, that instead of having purchased this      cause of action, it was assigned to him under a bona fide      assignment for an antecedent indebtedness owing to him for      services which he had performed for the corporation.

'The Court: Both sides having moved for a direction of a verdict, I find as a fact that the plaintiff purchased     this cause of action with intent to sue thereon.

'I find, as a fact, also, that the so-called assignment,     Plaintiff's Exhibit No. 1, was executed by the Lake Shore      Company, through its officers, pursuant to action at a      special meeting of the board of directors.'

A verdict for the defendants was directed and judgment entered thereon. The Circuit Court of Appeals declared itself concluded by the trial court's finding 'that the plaintiff purchased this cause of action with intent to sue thereon,' and held:

'We must dispose of this case upon the theory that the     plaintiff did not in fact take this assignment to extinguish      a precedent debt but that he purchased it for the purpose of      suing upon it; that he, an attorney at law, purchased from      his client for $5,000 a cause of action which he values at      $750,000. The question we must answer therefore is whether     the law sanctions such a transaction between parties standing      in the confidential relation of attorney and client. We are     satisfied that the common law does not sanction it.'

Among other things counsel for plaintiff in error now insist that—

'If there were any questions of fact to be decided or     divergent inferences of fact to be made the District Court      erred in not submitting them to the jury.'

The point is well taken.

Statements by plaintiff's counsel made it sufficiently plain that while he sought an instructed verdict he also requested to go to the jury if the court held a contrary view concerning the evidence. In the circumstances disclosed we think the request was adequate and timely under former opinions of this court. Empire State Cattle Co. v. Atchison, Topeka & Santa Fe Ry. Co., 210 U.S. 1, 8, 28 Sup. Ct. 607, 52 L. Ed. 931, 15 Ann. Cas. 70; Sena v. American Turquois Co., 220 U.S. 497, 501, 31 Sup. Ct. 488, 55 L. Ed. 559; Schmidt v. Bank of Commerce, 234 U.S. 64, 66, 34 Sup. Ct. 730, 58 L. Ed. 1214; Williams v. Vreeland, 250 U.S. 295, 298, 39 Sup. Ct. 438, 63 L. Ed. 989, 3 A. L. R. 1038. It should have been granted. Clearly some substantial evidence strongly tended to show that the assignment was taken in extinguishment of an existing indebtedness and not for mere speculation upon the outcome of intended litigation.

The judgment below must be reversed and the cause remanded to the District Court for further proceedings in conformity with this opinion.