Shubert Theatrical Co. v. Rath
1921 U.S. App. LEXIS 1875, 20 A.L.R. 846, 271 F. 827 (1921)
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Rule of Law:
A court of equity may issue an injunction to enforce a negative covenant in a personal services contract, preventing an employee from working for a competitor, where the employee's services are unique and extraordinary and damages would be an inadequate remedy.
Facts:
- On July 8, 1919, Shubert Theatrical Company entered into a written contract with acrobats Geo. & Dick Rath for their exclusive services for one year, beginning September 1, 1919.
- The contract contained a negative covenant stipulating that the Raths would not perform for any other management without Shubert's written consent.
- The agreement also specified that the Raths' services were 'extraordinary and unique' and that they could not be replaced.
- Expert testimony confirmed that the Raths' acrobatic act was 'absolutely unique and extraordinary' and 'impossible' to replace, with one feat being described as 'the most marvelous thing that has ever been before'.
- The contract granted Shubert an option to renew for a second year by giving notice before July 1, 1920.
- On June 7, 1920, Shubert mailed a letter to the Raths, who were performing in Detroit, to exercise this renewal option.
- After Shubert exercised the option, the Raths informed Shubert that they would refuse to perform under the renewed contract.
- The Raths then entered into a contract to appear in a production for a rival manager in a rival theater.
Procedural Posture:
- Shubert Theatrical Company filed a suit against Geo. & Dick Rath in the trial court, seeking an injunction to prevent them from performing for another manager.
- The trial court granted the injunction in favor of Shubert Theatrical Company.
- Geo. & Dick Rath, as appellants, appealed the trial court's decision to the United States Circuit Court of Appeals for the Second Circuit; Shubert Theatrical Company is the appellee.
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Issue:
Does a negative covenant in a personal services contract, which prohibits performers with unique and extraordinary skills from working for a competitor, permit a court of equity to issue an injunction to restrain the breach of that covenant?
Opinions:
Majority - Rogers, Circuit Judge.
Yes. A court of equity may issue an injunction to restrain the breach of a negative covenant where services are unique and extraordinary. The court distinguished between specific performance of an affirmative covenant (compelling performance), which courts will not do for personal services, and enforcing a negative covenant (prohibiting performance for others), which is permissible. Citing the foundational case of Lumley v. Wagner, the court reasoned that when services are special, unique, and irreplaceable, a breach causes irreparable injury because damages cannot be accurately calculated, nor can the same services be purchased elsewhere. The court found ample evidence that the Raths' acrobatic feats were indeed unique. The court also dismissed the defendants' other arguments, holding that: 1) under the 'mailbox rule,' the option was validly exercised when the acceptance letter was mailed, regardless of receipt; 2) a minor error in the date on the renewal letter was a 'palpable slip' that did not vitiate the notice; and 3) the contract was not illegal, as it only required Sunday performances in states where they were legally permitted.
Analysis:
This case is a classic American application of the English doctrine from Lumley v. Wagner, cementing the principle that negative covenants in personal services contracts are enforceable by injunction for performers with unique talents. The decision reinforces the critical distinction between a court's refusal to grant specific performance for personal services and its willingness to grant a negative injunction. By preventing the artist from working for a competitor, the court indirectly encourages performance of the original contract without directly compelling it. This ruling has become a cornerstone of entertainment and sports law, shaping how contracts for uniquely skilled individuals are written and enforced.
