89 Opinion of the Court. 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. 53. One provision of that decree defined a "franchise" to be a licensing agreement “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." Id., at 73, Decree, § II, 5. 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 theatre 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 theatre. 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, and a declaratory judgment that the lease had been properly terminated. 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 Opinion of the Court. 347 U.S. imposition of excessive terms and conditions on Partmar by the lease and franchise agreement.* By order dated April 26, 1948, the District Court, upon Paramount's motion, ordered Paramount's causes of ac + Petitioner's first counterclaim alleged: "27. Paramount Pictures Theatres Corporation, Paramount Pictures, Inc., Paramount Film Distributing Corporation, . . . and the defendants in United States of America v. Paramount Pictures, Inc., et al., 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., et al., Equity No. 87-273, was instituted. "33. As part of the aforesaid conspiracy, the plaintiff and the thirdparty defendants arranged and agreed among themselves, to require Partmar Corporation to license for exhibition at the Paramount Theatre 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 Theatre. 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 Theatre, 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 per cent of the net receipts of Partmar Corporation at the Paramount Theatre." The other counterclaim is not in the record but the briefs indicate that it contained substantially the same allegation as numbers one and two. 89 Opinion of the Court. tion 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. S. 131. We held inter alia that "we cannot say on this record that franchises are illegal per se when extended to any theatre or circuit no matter how small" and set aside the District Court's findings relative to such franchises. Id., at 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 case, supra; whether the lease and contract were illegal contracts under the federal antitrust statutes justifying repossession of the theatre 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 preIsented was whether the franchise was violative of the Opinion of the Court. 347 U.S. Sherman Act, wholly apart from any judgment or the decisions of the District and Supreme Courts." Partmar vigorously contended in brief and in argument that the lease of the theatre 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. 552, 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 terminat 89 Opinion of the Court. ing 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 franchise agreement," 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, infra, 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 firstrun 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 agreement, combina |