Gibbs v. Buck , 59 S. Ct. 725 ( 1939 )

Mr. Justice Reed

delivered the opinion of the Court.

This is an' appeal frofn the order of a three-judge court refusing to dismiss a bill of complaint on motion for failure to set out facts sufficient to show federal or equity jurisdiction, or to constitute a cause of action, and granting an interlocutory injunction against the enforcement of a Florida statute aimed at combinations fixing the price for-the privilege of rendering privately or publicly for profit copyrighted musical compositions. § 266, Jud. Code.

The appellant, the state Attorney General and various State Attorneys, are officers of the State of Florida charged with the enforcement of the act. The appellees, complainants below, are the American Society of Composers, Authors and Publishers, an unincorporated association organized under the laws of the State of New York; Gene Buck as president of the Society; various corporations publishing musical compositions; a number of authors and composers of copyrighted music; and several next of kin of deceased , composers and authors. This suit was brought by complainants on behalf of themselves and others similarly situated, members of the Society, too numerous to make it practicable to join them as plaintiffs in a matter of common and general interest.¹

One of the rights given by the Copyright Act is the exclusive right to perform copyrighted musical compositions in public for profit.² The bill of complaint alleges that users of musical compositions had refused to recognize this statutory right and to pay royalties for public performances for profit, and that authors, composers and publishers were unable, individually, to enforce their exclusive right because of the expense of detecting and suing for infringement throughout the United States. The Society was founded in 1914' to license performance of copyrighted music for profit and otherwise protect the copyrights. The state statute was directed at organizations like the Society and became effective on June 9, 1937.³ So far as is important here, the statute makes it unlawful for owners of copyrighted musical compositions to combine into any corporation, association or other entity to fix license fees “for any use or rendition of copyrighted vocal or instrumental musical' compositions for private or public performance for profit,” when the members of the.combination constitute “a substantial number of the persons, firms or corporations within the United States” owning musical copyrights. It declares the combination an unlawful monopoly, the price-fixing in restraint of trade, and the collection of license fees and all- contracts by the combination illegal.

The bill attacked the statute as contrary to the Constitution and.laws of the United States and the constitution of Florida. More specifically, 'it urged that the law impinged upon rights given by the Copyright Act of 1909, deprived complainants of rights without due process of law and without the equal protection of the laws, impaired the obligation of contracts already executed, and operated as an ex post facto law.

There was a formal allegation that the matter in controversy exceeded $3,000, exclusive of interest and costs. In addition, the bill alleged that' the three publishers owned copyrights of a value in excess of $1,000,000 while each of the individual complainants owned copyrights worth in excess of $100,000; that it would cost each individual more than $10,000 to create an agency in Florida to protect himself against infringement by unauthorized public performances for profit, to issue licenses and to check on the accuracy of uses reported; that fees collected in 1936 in Florida amounted to $59,306.81 and that similar sums were expected in the future; and that in 1936 each of the three publishers received more than $50,000 from the Society and each individual more than $5,000.

A motion for a temporary injunction was made on February 7, 1938, the same day the bill was filed. Voluminous affidavits were presented in support of the motion. They tend to substantiate, the allegations, of the complaint on the value of the copyrights and the income from the Society. Each publisher deposed that it had received more than $50,000 from the Society in 1936, that its contract with the Society had a value in excess of $200,000, and that to fix prices on each composition for each use in Florida would require an expenditure of more than $25,000.. The affidavits of the individuals showed annual incomes to them from the Society of from $3,000 to $9,000; contracts with the Society which the affiants valued in the thousands of dollars and an expense, in one instance, as high as $5,000 to comply with the requirements of the Florida statute.

On March 3, 1938, the appellants moved to dismiss on several grounds: (1) absence of jurisdictional amount; (2) failure to state a cause of action; (3) want of equity and other objections not strongly pressed at this time.

The district court granted an interlocutory injunction and denied the motion to dismiss the bill. It thought, that great damage would result unless the injunction issued and that there was grave doubt of the constitutionality of the act. Its findings of fact and conclusions of law were filed about a month and a half after the per curiam decision. It found that “the matter in controversy exceeds $3,000 exclusive of interest and costs.”

Federal Jurisdiction. — The issue was raised in the lower court by a motion to dismiss on the ground that it affirmatively appears “from the allegations of the bill . . . that the jurisdictional amount of $3,000.00 ... is not involved ... in that it appears that the suit is brought for the benefit of the members of' the American Society of Composers, Authors and Publishers . . . and it does not affirmatively appear that the loss of any member of said society due to the enforcement of [the challenged act] would amount to the . . . necessary jurisdictional amount.” Other jurisdictional averments of the motion state that the Society cannot suffer any loss from the legislation because it affirmatively appears that the Society divides all its proceeds from licensing between its members and affiliates and “therefore, the loss, if any, sustained due to the enforcement of said Florida laws would fall on the members of the Society, and not on the Society itself.” Finally the motion sets out the lack of jurisdiction because it affirmatively appears from the allegations of the bill that the jurisdictional amount is not involved “because the' plaintiffs have not shown the extent of loss or damage they would suffer by réason of the enforcement of said State law, as compared with the amount of profit they would make by the non-enforcement of said law.” As the form of the motion on the jurisdiction admitted the bill’s statements, it was submitted on the allegations without the production of any evidence.

This method of testing the jurisdiction properly raises the question. No issue is made as to the standing of the Society or its members to sue. The basis of the attack is that there is a lack of the essential allegations as ■to the value of the matter in controversy. , As there is no statutory direction for procedure upon an issue of jurisdiction, the mode of its determination is left to the trial court.⁴ Both complainants and defendants were content to rest upon the bill and motion.

The bill alleges that the value of the matter in dispute exceeds the jurisdictional amount. Such a general allegation when not traversed is sufficient, unless it is qualified by others which so detract from it that the court must dismiss sua sponte or on defendants’ motion.⁵ In this instance, the allegation is, in effect, traversed by the language of the motion which asserts that no plaintiff has shown loss from enforcement equal to the jurisdictional amount. No other allegations are denied. By this method of. attack the facts set out in the bill are left unchallenged for the court to aceept as true without further proof. The burden of showing by the admitted facts that the federal court has jurisdiction rests upon the complainants. If there were any doubt of the good faith of the allegations, the court might have called for their justification by evidence.⁶ In view of the unchallenged facts, federal jurisdiction will be adequately established, if it appears that for any member, who is a party, the matter in controversy is of the value of the jurisdictional amount,⁷ or, if to the aggregate of all the members in this representative suit, the matter in controversy is of that value.

This Society, an unincorporated association with a membership of more than a- thousand of the leading authors, composers and publishers of music, has received by assignment and possesses, for a five-year period which covers the time here involved, the “exclusive right to publicly perform for profit” musical compositions owned by its members. Licenses are issued by the Society to users in Florida “for the public performance for profit” of these compositions. After payment of expenses and royalties for similar rights to foreign associates, and retention of certain reserves, the receipts from licenses are divided among the members in amounts and by classifications fixed by the articles of association and the Board of Directors. The Society undertakes to protect itself and its members from piracies of the rights assigned to it. The Society, has, in the absence of the challenged legislation and without now giving consideration to other objections as to the legality of its organization, a right to license which may be injuriously affected by the florida statute. Whether this right to license flows from its limited ownership of the copyrights or by authority of its members is immaterial here. We find it unnecessary to decide whether this unincorporated association has standing to sue and confine our decision to the amount in controversy between the member's of the Society and the defendants. Members, both corporate copyright owners and individual composers of music and lyrics, are plaintiffs. Théy represent all other members. As the members own the copyrights, less the limited assignment to the Society of the right of public performance for profit, and share in the earnings through mandatory distribution under the articles of association and not by way of dividends, they are proper parties to the action.⁸ These members are real parties in interest. Because of the interposition of the statute they cannot in combination license production and collect fees in Florida. Unless the relief sought, the invalidation of the statute, is obtained, the members cannot conduct their business through the medium of the Society. They have a common and undivided interest in the matter in controversy in this class suit.⁹

The essential matter in controversy here is the right of the members, in association through the Society, to conduct the business of licensing the public performance for profit of their copyrights. This method of combining for contracts is interdicted by the Florida statute. It is not a question of taxation or regulation but prohibition. Under such circumstances, the issue on jurisdiction is the value of this right to conduct the business free of the prohibition of the statute.¹⁰ To determine the value of this right the District Court had the admitted facts that more than three hundred contracts expiring in 1940 were in existence between the Society and the Florida users; that in 1936 alone almost sixty thousand dollars was collected from the users, and that similar sums were expected for the remainder of the term. While the net profit of the business in Florida is not shown, the" business of the Society, as a whole, is profitable.- The three publisher parties receive more than"$150,000 yearly and individuals more than $5,000 per year each. The cost of compliance with its requirements is evidence also of the value of the right of freedom from the act.¹¹ The complainants, other than the Society, allege without traverse that the cost to each one of providing individually in Florida the services now provided by the Society for each member would exceed $10,000. Whether this is annually, for the length of the agreement or¹ for some other term is not shown. From these facts, the finding of the District Court that the matter in controversy — the value of the aggregate rights of all members to conduct their business through the Society — exceeds $3,000 in value is fully supported.

McNutt v. General Motors Acceptance Corp.¹² differs. There the State of Indiana had passed an act regulating, not prohibiting, the business of the Acceptance Corporation. The right for which protection was sought was the right to be free of regulation. It was to. be measured by the loss, if any, following enforcement of regulation. This was not alleged or proved. In RVOS, Inc. v. Associated Press,¹³ relief was sought to enjoin alleged pirating, by radio, of news furnished by the Associated Press to its members. The right for which protection was sought was “the right to conduct those enterprises free of” interference. On the issue of the value of this right, it was deposed only that the Associated Press received more than $8,000 per month for news in the territory served by. the broadcasting station and was in danger of losing the payments. The Associated • Press was a nonprofit corporation, operated without the purpose of profiting from its services to members and equitably dividing the expenses among them. The damage in the Associated Preps case was to its members and this was not shown. Neither was it alleged or proved that any member threatened to withdraw or to reduce its payments.

Failure to State a Cause of Action. — The motion to dismiss also presents generally the issue whether the bill states facts sufficient to constitute a cause of action. By the submission of the motion this issue was left to the Court on the facts alleged in the bill. The elaboration of these facts, contained in the affidavits supporting and objecting to the motion for temporary injunction, is not available for consideration, as these affidavits are a part of the record only for the purpose of determining the propriety of a temporary injunction.¹⁴ Whether to grant or refuse a motion to dismiss before answer, is largely a matter of discretion for the court below.¹⁵ Where the bill makes an attack upon the constitutionality of a state statute, supported by factual allegations sufficiently strong, as here, to raise “grave doubts of the constitutionality of the Act” in the mind of the trial court, the motion to dismiss for failure to state a cause of action should be denied. This bill sets out that the exercise of ■rights granted by the Federal Copyright Act to control the performance of compositions for profit is prohibited by the statute; that existing contracts are impaired; property taken without compensation; recovery on extra state contracts denied and the equal protection and due process clauses of the 14th Amendment violated in manners, specifically pleaded. Drastic penalties for violation of the act are provided.¹⁶ The manner in and extent to which the challenged statute offends or complies with the applicable provisions of the Constitution will be clearer after final hearing and findings.¹⁷ . The findings here were on the motion for interlocutory injunction and on the issue of jurisdiction.

Other Assignments. — The other material assignmerts of error to the interlocutory order specified on the appeal are addressed (1) to the lack of equity in the bill, (2) to the exercise of discretion in ordering a temporary injunction, (3) to the lack of findings before the order of temporary injunction and (4) to the failure to strike from the bill allegations as to certain sections which deal with contract relations between the Society and users of the musical compositions because these sections are not enforced by the state officers. We treat of them briefly: (1) It is clear that there is equitable jurisdiction to prevent irreparable injury, if the sections of the state statute outlawing the Society raise issues of constitutionality. The heavy penalties for violation and the prohibition of the issue of licenses or collection of fees show the need to protect complainants.¹⁸ (2) Upon the conclusion that the motion to dismiss should be overruled, there was no ¿buse of discretion in granting an interlocutory injunction.¹⁹ The damage before final judgment from the enforcement of the act as shown by the affidavits would be. irreparable. The allegations in the bill of threats of enforcement and the declaration in the affidavit of the Attorney General of the State, the officer charged with supervision of enforcement,²⁰ of readiness and willingness “to prosecute any violations of said act,” sufficiently establish the immediate danger from enforcement.²¹ No objection appears as to the adequacy of the bond or the other terms of the injunction. These remain under the control of the lower court. Ordinarily it would be expected that where a temporary injunction is considered necessary to protect the rights of complainants against the allegedly unconstitutional action of state officers, under a statute, a final order would follow with all convenient speed. (3) The order of the trial court was entered April 5, 1938. The findings of fact and conclusions of law were not filed until May 17, 1938, after the first assignment of errors had pointed out the omission and after the appeal was allowed. The original assignment of error, which had relied upon the failure to comply with Equity Rule 70Yz was amended to show subsequent compliance but no assignment of error was made on account of the fact that the findings were out of time. The objection was taken in the statement of points to be relied upon on the appeal and in appellants’ brief in the specification of errors to be urged. Better practice dictates the filing of the finding of facts and conclusions of law before or' contemporaneously with the order or decree. It would be useless, however, to reverse the order granting the temporary injunction and remand the cause. The temporary injunction would now be in order. (4) In answer to the fourth objection it may be said that the issue like that of constitutionality can be more satisfactorily disposed of upon final hearing.

Affirmed.

Me. Justice Frankfurter took no part in the consideration or decision of this case.

1 Equity Rule 38.

2 Act of March 4, 1909, § 1 (e), c. 320, 35 Stat. 1075, 17 U. S. C. § 1 (e).

3 Fla. Gen. Laws 1937, Yol. I, c. 17807.

4 Wetmore v. Rymer, 169 U. S. 115, 120, 121; McNutt v. General Motors Acceptance Corp., 298 U. S. 178, 184; KVOS, Inc. v. Associated Press, 299 U. S. 269, 278.

5 KVOS, Inc. v. Associated Press, 299 U. S. 269, 277; McNutt v. General Motors Acceptance Corp., 298 U. S. 178, 189.

6 McNutt v. General Motors Acceptance Corp., 298 U. S. 178, 189.

7 Grosjean v. American Press Co., 297 U. S. 233, 241—242. Clark v. Paul Gray, Inc., 306 U. S. 583.

8 Article XV, § 1, of the articles-of association, reads as follows: “Apportionment of Royalties — ■

“Section 1. All royalties and license fees collected by the Society shall be from time to time-as ordered by the Board of Directors distributed among its members, provided, however:

' “ (a) • That all expenses of operation of the Society and sums payable to foreign affiliated Societies shall be deducted therefrom and duly paid; and

“(b) That the Board of Directors, by two-thirds vote of those present at any regular meeting may -add to the Reserve Fund any portion not exceeding 10% of the total amount available for distribution; and

' “(e) That the net amount remaining after such deduction for distribution shall be apportioned as follows: one-half (%) thereof to be distributed among the 'Music Publisher’ members, and one-half (%) among the 'Composer and Author’ members respectively.”

9 Cf. Troy Bank v. Whitehead & Co., 222 U. S. 39; Shields v. Thomas, 17 How. 3.

10 Scott v. Donald, 165 U. S. 107, 114; cf. Hunt v. New York Cotton Exchange, 205 U. S. 322, 334; McNeil v. Southern Ry. Co., 202 U. S. 543; Bitterman v. Louisville & N. R. Co., 207 U. S. 205; Packard v. Banton, 264 U. S. 140.

11 Packard v. Banton, 264 U. S. 140; Petroleum Exploration, Inc. v. Public Service Comm’n, 304 U. S. 209, 215; Healy v. Ratta, 292 U. S. 263; Buck v. Gallagher, post p. 95.

12 298 U. S. 178.

13 299 U. S. 269.

14 Polk Company v. Glover, 305 U. S. 5, 9.

15 O’Keefe v. New Orleans, 273 F. 560; Wright v. Barnard, 233 F. 329; Doherty v. McDowell, 276 F. 728; Ralston Steel Car Co. v. National Dump Car Co., 222 F. 590, 592. Compare Kansas v. Colorado, 185 U. S. 125, 144-145; Wisconsin v. Illinois, 270 U. S. 634. Wilshire Oil Co. v. United States, 295 U. S. 100, 102-103.

16 Fine $50 to $5,000 and. imprisonment one to ten years or either, § 8, Fla. Gen. Laws, 1937, c. 17807.

17 Borden’s Farm Products Co. v. Baldwin, 293 U. S. 194, 211-213. Polk Co. v. Glover, 305 U. S. 5.

18 Ex parte Young, 209 U. S. 123, 165; Terrace v. Thompson, 263 U. S. 197, 215.

19 Alabama v. United States, 279 U. S. 229, 231; Ohio Oil Co. v. Conway, 279 U. S. 813.

20 § 10, Fla. Gen. Laws, 1937, c. 17807.

21 Terrace v. Thompson, 263 U. S. 197, 214-16; Cline v. Frink Dairy Co., 274 U. S. 445, 451-52.

1 Cf. Borden’s Co. v. Baldwin, 293 U. S. 194, 203; Aetna Ins. Co. v. Hyde, 275 U. S. 440, 447; Public Service Comm’n v. Great Northern Utilities Co., 289 U. S. 130, 136, 137.