Judge and Jury:
I Fought the Exchange and the Exchange Won

Seattle’s Film Row was where most business got done in the Washington state movie industry. It’s where film prints arrived, and where they were inspected, repaired and sent on their way to movie houses large or small, urban or rural. The most important cog in that machine, the exchanges, supplied the film prints that kept movie projectors running – almost every picture in every town originated from somewhere along Film Row. It’s where film deals were consummated, and it’s where exhibitors turned to when they needed product or equipment.

Exhibitors from all around the state made regular treks to Film Row to negotiate contracts with their chosen exchange(s). Deals were being signed all the time, but the heaviest period for contracts was typically June through September, when the studios began rolling out their film programs for the upcoming year. New pictures were released on a weekly basis, but the season tended to kick off in the fall and wrap by summer, when the next season of bookings would be made available to exhibitors.

For a typical contract negotiation in the 1920s, an exhibitor perused a sales catalogue put together by the studio that previewed their upcoming attractions. This catalogue, along with associated sales materials, outlined the producer’s scheduled releases for the year, which ranged from films that were already complete to productions that were months away from principal photography. The information on these pictures could vary, but included production details (including a cast list, writer and director credits), plus a basic plotline. Films that were done or near completion offered more in the way of detail, while pictures farther out on the schedule sometimes had little more than a title and tentative cast list, with personnel and story elements that might shift over time. Exhibitors selecting films with little or no production information were engaging in a practice known as “blind bidding,” given that they were selecting a picture that might change (sometimes substantially) by the time it actually arrived at the theatre.

Using this material from the exchange, the exhibitor reviewed upcoming films and made purchasing decisions based on a variety of factors. First-run theatres in larger cities typically showed new releases first, and because they also had larger film budgets, they had the ability to negotiate for a variety of big-name releases. Second-run urban venues also selected their own films, but some of those features wouldn’t become available for weeks or months after their initial release, until they had played out of Washington’s larger theatres. Rural exhibitors had the toughest job of all. They were last in line when it came to new film releases, which might not become available for nine months or more after they initially debuted. They also had smaller budgets, so angling for one big-name release might put a significant dent in their ability to get other quality films. On top of this, many rural houses had more bookings to schedule. Over the course of a year, a neighborhood theatre in Seattle changing bills once a week would need to book 52 features. But a rural exhibitor with a full-time house might not have the audience base to support weeklong bills, and instead had to show two different features each week.^[1] That doubled the number of required bookings, and with limited resources, it helped push rural exhibitors into deals that sometimes emphasized quantity over quality. The hardest work fell to exhibitors in Washington’s most rural areas, where the local movie house only ran one or two nights a week – these houses had almost no leverage when it came to negotiating with an exchange. They picked from the leftovers of the leftovers, often showing low-budget films or titles that were woefully out of date – basically, their booking decisions were almost always based on what their budgets would allow. And because many of these small-town exhibitors were located far from Film Row, they were somewhat incentivized to sign longer-term contracts, if only to cut down on the time and expense of traveling to Seattle to negotiate new deals.

Through World War I most exchanges used contracts developed in-house, so the format and terms differed from firm to firm. But by the 1920s, the newly-formed Motion Picture Producers and Distributors of America (MPPDA) adopted a “standard” film contract that provided the players with a basic format and language. In addition, a Board of Arbitration was created in July 1922 that allowed exhibitors and exchanges to mediate contract disputes. This body stemmed from an arbitration clause in the standard contract that bound both parties to the process, allowing them to settle disputes outside the court system. The U.S. film market was divided up into 32 territories, each with a separate Board of Arbitration, and cases were heard by volunteers that were equally divided between exhibitors and exchanges. These Boards were designed to bring order and consistency to the resolution of contract issues, while reducing costs for the parties involved. But, like the industry’s response to censorship in 1908, they were also “a conciliary gesture [keeping] the government antitrust watchdogs at bay,” noted J.A. Aberdeen.^[2] All told, more than 50,000 film disputes nationwide were settled through the arbitration process by 1928.

The standard film contract put all parties on the same playing field, but was often a jumping off point for side negotiations. An exhibitor who knew his patrons liked Hoot Gibson westerns might negotiate for two of the actor’s films over the course of a contract, without specifying (or even knowing) the actual titles. This type of blind bidding could also be done for a specific director, writer or genre of film – whatever feature the exhibitor felt was important for his business. Another common stipulation was to specify a “run zone” clearance as part of the contact. Run zone clearance, a common feature in urban areas, ensured that the exhibitor’s pictures wouldn’t be shown again inside a particular zone for a specific amount of time, so he needn’t worry about being undercut by a competitor. This territorial behavior was taken quite seriously. In 1922 the Greater Theatres Company was the largest player in the Portland film market, their downtown theatres almost always securing first-run rights for every film they booked. However, once those contracts were signed the Portland exchanges began negotiating with the area’s second run theatres, sometimes locking up the next engagement before the picture even opened downtown. Some of Portland’s second-run houses signed deals so quickly, in fact, that they began advertising to patrons the fact that if they just waited a few weeks, they could see the same downtown picture shows at greatly reduced prices. Greater Theatres, of course, was infuriated by this tactic and began negotiating longer clearance periods into their contracts, sometimes up to six months. But that wasn’t fair to the city’s second-run theatres, so eventually the Northwest Film Board of Trade had to step in and stipulate that the maximum clearance period for any film, in any area, would be 60 days.^[3]

Sometimes individual film releases carried their own set of contract stipulations. The exhibitor selecting a big first-run release, for example, might be required to play that film at his theatre for a full week (and sometimes two) at advanced ticket prices. The studio (through the exchange) could also stipulate that certain pictures were booked only into theatres of a certain size or stature, lending prestige to the film while denying smaller venues the ability to show it during its original run. Some films were also held off to the side as special releases, so they weren’t available under the terms of a regular contract. Landing one of these pictures meant the exhibitor had to enter into a separate negotiation, then pay an inflated price on top of whatever additional stipulations may have been required by the studio.

In the 1920s contracting for films wasn’t a free-for-all, even for the largest theatres. Most exhibitors didn’t have the money to hand-select every one of their pictures, and that was true even for first-run venues in Seattle. The studio’s catalogue included many big-name stars and productions, but it included others featuring mid-level talent, all the way down to pictures with little-known performers and miniscule budgets. These program films were typically not the kind an exhibitor with a free hand would pick, so the exchanges created a market for low-budget releases by packaging them in “blocks,” then tying those blocks to the studio’s other releases. In other words, to get the latest Norma Talmadge picture, the exhibitor sometimes had to also take on a slate of other films as well, often selecting from a specific list of titles. This practice was known as “block booking.” An exchange would argue that block booking was an efficient way to build out a film schedule, particularly for rural exhibitors who didn’t have the time or money to negotiate for individual titles. But most exhibitors hated the practice. To book a handful of desired films they got stuck with a basket of others which, to them, were of indifferent value. Large urban theatres were insulated, to a degree, from the full impact of block booking, but they too sometimes had to follow a blockbuster engagement with a bill anchored by a mediocre feature, then promote it as if the second film was of equal merit.

For rural exhibitors, block booking allowed a theatre to build their screening schedule quickly and efficiently, trading away some of their booking flexibility for the consistency of getting newer films over an extended period. Some were okay with that setup, but others resented the loss of negotiation leverage, the exchanges forcing them to buy many (if not all) of their pictures via block booking. The practice was a boon for the exchanges, of course, guaranteeing a market for the studio’s cheaply made program features. But it was also true that the exchanges could get away with extended block-booking deals because they had many small exhibitors, particularly rural ones, over a barrel.

Regardless of the exchange, the approval process for a new film contract was generally the same. Once negotiated and signed by an exhibitor, with a start date in the future, the deal was tentative until approved by the exchange manager. That approval process might involve additional negotiations and changes, but usually the exhibitor’s signature signified a document that was approaching the finish line. Once the exchange manager reviewed and approved the contract, a fully-executed copy would be sent to the exhibitor via registered mail – this was his official notification that that the contract had been accepted. Upon receipt, there was a 30-day window in which the contract could be cancelled by either party for any reason. But, if the 30 days passed without further action, the contract was deemed final and enforceable.

Settling disputes through arbitration was an important part of the contact process. Members serving on the Board of Arbitration were elected for three-month terms, and there was a large pool of exhibitors and exchange men available to serve.  The pool had to be big – participation was time consuming, and members frequently had to recuse themselves from cases because they had existing business relationships with one or more of the parties involved. Each arbitration case was heard by six Board members, three exhibitors and three exchange men. Meetings occurred roughly twice a month, and followed an agenda showing which cases would be heard and in which order. The group met at a room in the Securities Building in downtown Seattle, but later, in 1928, the Board moved into a space provided by the B.F. Shearer Company on Seattle’s “new” Film Row in the Belltown neighborhood.  Hearings were always held in Seattle, which was convenient for the exchanges as well as Puget Sound exhibitors, but burdensome for those located in elsewhere in Washington, who had to take on the extra time and expense of attending hearings.  Parties waiting for their case to be heard were seated in a hallway outside the meeting room.  While some disputes proved contentious, it also wasn’t uncommon for the parties to negotiate a settlement in the hallway before their hearing was scheduled to begin.

Arbitration cases could be filed by either an exhibitor or an exchange.  Once a case had been filed the parties were notified of the action via registered mail, which included the date and time that their matter was scheduled to be heard.  Exchange managers typically argued their side of the case, while exhibitors could choose to represent themselves or to hand things over to James Hone, secretary of the Motion Picture Theatre Owners (MPTO) chapter in Washington state.  Requests to postpone a hearing could be made by either party, and were usually granted with just cause. This was particularly true when an out-of-town exhibitor couldn’t make the trip to Seattle for his appointed hearing.

Once in session, hearing participants entered the room and laid out their arguments for the Board.  But the parties in these disputes weren’t necessarily equal, despite the split in exhibitor/exchange representation.  For one, the standard film contract forced the parties to participate in arbitration whether they wanted to or not.  For some exhibitors this wasn’t an issue, but some didn’t like being forced into a quasi-legal proceeding when the better option for them, depending on the situation, was to take the matter directly to court.  It didn’t help that arbitration was a tool used primarily by the exchanges – they filed most of the cases and won most of the decisions.  In 1925, for example, the Seattle Board of Arbitration heard 74 cases for the year ending October 31^st, 58 filed by exchanges and 16 by exhibitors.  Of that amount, 42 were decided in favor of the exchange, 22 for the exhibitor, and 10 were settled before the hearing took place.^[4]

Part of the reason exchanges fared better in arbitration was because most disputes involved contracts that weren’t fulfilled, which put the burden of proof on the exhibitor to demonstrate why that couldn’t be done.  The Board of Arbitration’s general rule, drawn from language in the standard film contract, was the concept of “play or pay.”  When an exhibitor signed a contract with an exchange, he was required to fulfill the entire contract.  That didn’t necessarily mean he had to play every film he signed for, but the exchange was entitled to compensation for all the pictures in the contract.  While there were legitimate situations where a signed contract might need to be modified or voided, those were never as numerous as exhibitors wanted them to be.

“Play or pay” automatically tipped the scales in favor of the exchange.  It didn’t help that some exhibitors engaged in sloppy business practices at best, and shady ones at worst.  According to Motion Picture Record (a Seattle-based trade paper that began life in October 1924 as Northwest Film Journal), “[this paper] always has championed the exhibitor’s cause in these columns, realizing full well that the exchange can take care of its own, while the average exhibitor handles his business in such a slip-shod manner that he loses many cases before Arbitration Boards merely because he doesn’t keep a copy of the record in the deal involved.”^[5]  Arbitration case records no longer exist, but the Record routinely covered arbitration hearings until 1929, when they had a change in ownership.  This included highlighting the Board’s decisions, big and small, and documenting various business issues within the local film community.

The arbitration clause was a critical element in the standard film contract, and the cases that came before Washington’s Board of Arbitration in the 1920s offer a window into how the movie business worked behind the scenes.  Or didn’t work, as the case may be.

By Eric L. Flom – November 2025

Notes:

[1] See Robert J. Sklar, from the introduction to Michael Putnam, Silent Screens: The Decline and Transformation of the American Movie Theatre (Baltimore, MD: The Johns Hopkins University Press – 2000), Page 8.
[2] See J.A. Aberdeen, Hollywood Renegades: The Society of Independent Motion Picture Producers (Los Angeles: Cobblestone Entertainment – 2000), Pages 52-53.
[3] “Jensen-Von Herberg Lighten Portland, Ore., Restrictions,” Moving Picture World, 25 November 1922, Page 320.
[4] “Washington State M.P.T.O. Elects Drinkwine President; Roster Grows,” Moving Picture World, 21 November 1925, Page 214.
[5] “Editorial Paragraphs,” Motion Picture Record, 10 December 1927 (Vol. 4, No. 50), Page 3.

Some arbitration disputes were more common than others – changes in theatre ownership, for one. To give a simplified example, Exhibitor A signs a contract with the Paramount exchange, but later sells his house to Exhibitor B. While the transaction was executed with a bill of sale, that document didn’t include a provision stating what would happen with the existing Paramount contract. Without a formal agreement in place, Exhibitor B took over the venue and signed his own service contract with a different exchange. And because Paramount still had a valid contract with Exhibitor A, Exhibitor A was on the hook for fulfilling its terms. In this situation, the Paramount exchange would bring an action against Exhibitor A, and he would typically lose. It was incumbent upon him to address any contractual issues as part of the sales agreement, and under “play or pay” he was obligated to pay Paramount for the remaining pictures on the contract, even if he no longer owned a venue in which to show them. When H.M. Johnson of the Lois Theatre in Toppenish, for example, sold out to Yakima’s Fred Mercy in 1927, it was his “belief” that Mercy was taking both the theatre and its existing contracts. But that was never written into their agreement, so despite the fact that Johnson disposed of his one and only house, the Board of Arbitration ruled that he had to pay the FBO exchange $468 for films he had no ability to show.^[1]

There were endless iterations on this concept. Say Exhibitor A owned three movie theatres in neighboring cities and signed a contract with the Paramount exchange allowing him show pictures at each house in rapid succession. But then Exhibitor A sells one of those theatres and makes no contractual terms obligating Exhibitor B to take over a portion of the Paramount contract. In this case Exhibitor A still wants his regular Paramount service, but for two engagements rather than three. But because the sales agreement made no provision binding Exhibitor B to the existing contract, the “play or pay” rule dictated that Exhibitor A had to pay Paramount for all three bookings, even though the pictures were only being shown in two houses. Variations on this issue came up so often, and in so many forms, that it’s a wonder that the MPTO didn’t provide some sort of guidance on how exhibitors could stay out of trouble whenever venues changed hands.

Another common arbitration case involved the final steps of the contract process. For example, some exhibitors didn’t receive (or claimed not to receive) a copy of the executed document via registered mail. Then, assuming their offer had been rejected, they then went out and negotiated a new contract with a different exchange for the same time period. It would be up to the Board to determine whether the first contract was enforceable. This was the claim of W.P. Armour, who ran houses in Montesano and Elma, for a case in 1927 – assuming his original deal was dead, he went out and signed a new one. At the arbitration hearing, however, postal records showed that Armour was actually sent the executed contract, he just failed to sign for the registered letter when it arrived.^[2] Instead, Armour seems to have negotiated what he felt was a better deal, then tried to get out of the first one by claiming he never received the proper notification. Armour, of course, lost this case. But the situation sometimes went the other direction, with the exhibitor maintaining that they provided a notice of cancellation to the exchange within the required 30-day window, only to discover that it was the exchange, this time, who claimed not to have received the notice.

A huge problem for the businesses on Film Row was the late return of prints, which most often happened with movie theatres located far from the Seattle exchange. There were a variety of reasons for this, including inclement weather, transportation issues or human error. Sometimes, however, late or missing film prints resulted in an action before the Board of Arbitration. In November 1928 a print of Douglas Fairbanks’ The Gaucho failed to arrive for its scheduled opening at the Coliseum Theatre in Tillamook, Oregon. It’s not clear where the breakdown occurred, but the exhibitor showing the film immediately before that engagement was supposed to seal it up and send it directly to Tillamook. But, instead, The Gaucho turned up at the United Artists exchange in Seattle on the very morning it was supposed to open down in Oregon. Panic ensued when the error was discovered, and assistant manager Harold Harden placed an urgent call assuring the Coliseum that a print would arrive in time for their evening screenings. Harden then jumped in his car and sped out of Seattle, personally driving all the way down to Tillamook for delivery. Hours later, after battling miserable road conditions and at least one blown tire, Harden arrived at the Coliseum at 7:45 p.m. But the evening screening was supposed to begin 15 minutes earlier, and not knowing where his print was, manager L.E. Partridge cancelled the show. The Coliseum lost an entire day of screenings due to the error.

Later, once The Gaucho finished its Tillamook run and payment was due, Partridge forwarded his contracted amount to the exchange but withheld $60 dollars due to the missed screenings. Interestingly, that prompted United Artists to bring an arbitration case against Partridge. The Board of Arbitration heard the case and determined that L.E. Partridge was contractually obligated to pay all the required money, despite the mishap, after which he could file his own case against United Artists to be reimbursed for the missed screenings.^[3]

Many cases heard by the Board of Arbitration resulted from the complication of managing several contracts at once. While a large urban theatre had business staff that focused on contractual details, most Washington state theatres were mom and pop operations that did everything themselves, with predictable results. Mark Moore ran the Scenic Theatre in LaCrosse, in Whitman County, and in 1926 made the mistake of overbuying for his house, such that he couldn’t screen all the films he was contractually obligated to play. One of those contracts was with the Seattle FBO exchange, and after discussing the situation FBO amended their contract with Moore to push the start date out by six months. Ideally that would give him time to straighten out his situation, but that didn’t occur. The revised contract went into effect and Mark Moore still couldn’t honor it, so in mid-1927 FBO brought a case to the Board of Arbitration. Normally this was an open and shut case – Moore signed a valid contract, and the Board would force him to honor it. But here they showed some leniency, asking FBO to push the start date out another six months, until January 1928, giving Moore yet another opportunity to fulfill its terms.^[4]

Everyone should be so lucky. Most exhibitors didn’t get the benefit of the doubt because “play or pay” tipped the scales in favor of the exchange. Exhibitors had a steep climb to justify their actions if, in fact, the terms of a contract couldn’t be met. In the city of Starbuck, in Columbia County, exhibitor Anna Thomas had a contract in 1927 in which she was to show Cecil B. DeMille’s The Road to Yesterday. (Starbuck had less than 600 residents at the time, which helps explain why Thomas was only then showing a film that had been released two years earlier.) The contract stated that Thomas would show the film for two nights, but she didn’t do that because the box office take on opening night was a mere $37. Based on her experience, showing the film a second night would only bring in about $12 – not enough to cover her operating expenses after she paid the exchange. To her it made more sense to close the theatre, not show the film, then go back to the exchange and work out a compromise. Perhaps there were exchanges that would have worked with this situation, but that wasn’t the case here. Discussions broke down almost immediately, and the exchange filed a case against Thomas, with the Board ruling against her. Anna Thomas was free to take the movie off after one day, but she was still obligated to pay for both nights. The fact that Thomas made a sound business decision was immaterial – she chose not to play, but she still had to pay.^[5]

Even if the playing field wasn’t always level, for the most part Board of Arbitration hearings were legitimate attempts to resolve business issues outside the courtroom. But sometimes they showcased an entirely different side of the industry, one in which both exhibitors and exchange men operated in bad faith.

Some exhibitors were like W.P. Armour, and looked for ways to game the system. Many, for example, expected certain disputes to end up in arbitration – the exchange may have already made the threat. Then, since the process required the delivery of a registered letter to both parties, notifying them of the hearing date, a common stunt for the exhibitor was to avoid signing for the letter. This way he could claim he had not been properly notified, and was therefore not obligated to show up at the appointed time. This was the case in 1927 for a hearing involving S.Z. Williams of the Yesler Theatre in Seattle. But a check of postal records showed that at least six notices had been delivered to the Yesler Theatre alerting Williams that he had a registered letter to pick up, and he ignored every one of them.^[6] Postponements were another loophole that exhibitors exploited from time to time. In a 1927 case against Ed Halberg, operator of the Lincoln Theatre in Port Angeles, he asked the Board for a postponement, but this request didn’t arrive until the day of the hearing. The lateness wasn’t an issue inasmuch as Ed Halberg had a reputation for requesting 11^th-hour postponements, citing any number of reasons why he couldn’t show up for hearings. And, in this case, it didn’t work; the Port Angeles exhibitor was tried in absentia and, not surprisingly, had the judgement go against him.^[7]

Things like missed notifications and postponements were delay tactics used by exhibitors that merely kicked the can down the road – more of an annoyance than a strategy. A more serious challenge for the exchanges was the exhibitor who signed a contract and, after a period of time, began looking for ways to get out of it. In 1925 the Board of Arbitration was asked to resolve a dispute between the First National exchange and C.D. Gillespie of Brewster, in Okanogan County. The matter was filed by First National and Gillespie’s case, to the extent he had one, wasn’t very strong – it was pretty clear he wanted out of his current service contract so he could sign a new one. Both parties were heard, and unsurprisingly the Board sided with First National, determining that Gillespie failed to show cause why his contract should be terminated. Because the Board determined that Gillespie had to honor the terms of his First National contract, he had two choices: show the remaining pictures at his house in Brewster or agree to pay the exchange for pictures he didn’t want to show. But with 39 films remaining on the contract, it’s unlikely that Gillespie opted for the buyout.^[8]

The desire to terminate existing film contracts led some exhibitors to exploit the process when they could. Joseph Danz of the Embassy Theatre in Seattle signed a contract with the Educational exchange in September 1927, but during the approval process the exchange discovered an error mistakenly stating that the contract started in January of that year, which had already passed. This was such a minor thing that Educational simply changed the start date from 1927 to 1928, then sent a corrected, fully-executed copy to Danz, who filed it away. But later, when Educational made its first delivery, the exhibitor sent the films back and asked for his contract to be voided, prompting Education to bring a case. Joseph Danz contended that the contract had been changed after the fact, which was true, but that the actual start date was supposed to be January 1929, so even the corrected document was incorrect. This was a bit of a stretch, to sign a contract 15 months in advance, but Danz was willing to stand before the Board of Arbitration and claim that this was his intention. The more likely scenario was that he wanted to use the clerical error to nullify his contract, but it didn’t work; the Board ruled that his contract was valid, despite the date change.^[9] A similar outcome befell exhibitor R.K. Dunham of the Mission Theatre in Mount Vernon. In this case, Dunham signed a contract with the Seattle Paramount exchange for short comedies, but the exchange neglected to send him a copy of the signed contract via registered mail. The films arrived as scheduled and Dunham played the first two shipments, then rejected the third, arguing that he had no enforceable contract with Paramount. Technically that was true, but the Board still sided with the exchange because Dunham played the first two films he received, demonstrating that he understood the contract to be in force.^[10] This seems to have been a common ploy – exhibitors kept their eyes peeled for typos, process issues, delivery screw-ups and other issues that could be leveraged down the line to get out of a contract they no longer wanted to honor.

If there was a prize for audacity, however, that would go to manager Don Demick, who in 1927 found himself on the wrong end of a case brought by the Universal exchange. Months earlier, Demick contacted Universal notifying them that he intended to close his Gem Theatre for an unspecified period. This kind of request wasn’t unheard of – the exchanges were used to working with movie houses that had to close temporarily or operate on reduced schedules due to poor economic conditions in the surrounding area. When this occurred, it was often easier for the exchange to rework the terms of the contract than force these houses to pay out, since many were already operating on thin margins. So after talking the matter over, Universal agreed to pause film shipments until the Gem reopened. But several weeks later, a salesman from the Universal office was making house calls in the area when he noticed the Gem wasn’t closed – in fact, it was going full tilt. And when confronted, manager Demick didn’t have a good explanation as to why he hadn’t notified Universal that the Gem was back online. There was even a question as to whether he closed the theatre at all.

Now, if the Gem Theatre was tucked away in some small, rural enclave where film salesmen rarely traveled, this ruse possibly could have worked. But the Gem was located in Tacoma, the state’s third largest film market, so there were a lot of exchange men prowling the area – word would have gotten back to Universal sooner or later. The exchange brought an action against Don Demick, but he didn’t bother coming up to Seattle to plead his case. Instead, he sent a letter to the Board of Arbitration claiming that the theatre had been closed for a time, but later reopened on a reduced schedule. That still didn’t explain why he hadn’t notified Universal, but Demick offered to show half of the films he originally contracted for, claiming that other exchanges had agreed to do something similar. But he probably didn’t help his cause by also alleging, in the same letter, that Universal was trying to put the Gem out of business, and that he would rather close down altogether than satisfy the terms of his original contract. So pity Don Demick’s employment status, because he lost this arbitration case; the Board found the Universal contract to be valid, so the “play or pay” clause was enforceable.^[11]

It wasn’t always the exhibitors who failed to play nice. At a hearing in 1925 the Seattle First National exchange had to defend themselves against an exhibitor who objected to the fact that they raised rental prices in the middle of a contract. This was a situation where you might expect the Board to side with the exhibitor, since they tended to fixate on contract terms which, in this case, were changed mid-stream. But you’d be wrong, because the Board instead ruled that they had no jurisdiction over rental prices, so the matter either needed to be negotiated by both parties or proceed to a court of law.^[12]

Later, in the fall of 1927, Greater Features brought a complaint against I.L. Morrell of the Royal Theatre in Seattle whom, they contended, owed the exchange $110.60 for a single contracted feature that he never played. In this case, Morrell refused shipment of the last picture on his contract because the exchange sent it to him on an arbitrary date – he had no idea it was coming and couldn’t show it because he already had another film lined up. The Board reviewed the contract and discovered that it deviated from the standard format, which was part of the confusion. (The clause covering arbitration, for example, was almost completely obscured by an inked stamp that had been applied to the document.) But while the Board had issues with the physical contract, they nonetheless ordered Morrell to pay the exchange.^[13] He had to do this even though the picture turned up out of the blue, with no advance notice. Unfair as that sounds, shipping films on arbitrary dates was a hardball tactic employed from time-to-time by the exchanges. Normally an exhibitor worked with booking agents to determine when films would play so the contract could be fulfilled. When time became tight, the exchange could usually find a solution, which should have been the case with I.L. Morrell, since the problem was limited to a single film. But difficult or unresponsive exhibitors (it’s not clear whether Morrell fell into this category) wouldn’t necessarily get that kind of cooperation, so instead the exchange chose to force their hand. With the contract end date closing in, they might send pictures to the theatre with no notice and without regard to whether there was a slot on the bill. It forced the exhibitor to reject the delivery, a trigger that allowed the exchange to bring an action with the Board of Arbitration.

Sometimes it’s hard to know which side was more at fault, as in a 1928 case that pitted the FBO exchange against Mrs. E.J. Hatcher of the Liberty Theatre in Twisp. While booking shows for the 1927-28 season, Mrs. Hatcher either could not or would not travel to Film Row to conduct business, so an FBO salesman came out to Twisp and met with her personally. According to Mrs. Hatcher, they went through the sales materials and selected certain pictures at certain prices, but the salesman wasn’t able to finalize the agreement on the spot. Regardless, Mrs. Hatcher signed a blank contract, instructing the FBO salesman to use his notes to fill in the details upon returning to the office. Weeks later, after a signed and approved contract arrived via registered mail, Mrs. Hatcher noticed it contained many more films than she agreed to take on. She then contacted FBO to cancel the contract, but instead the exchange filed an arbitration case against her.

There were complicating factors to this story. One was the fact that FBO brought the case against Mrs. Hatcher and the Liberty, but she didn’t actually own the theatre. Instead, it was owned by a local fraternal organization who contracted with Hatcher to run their film program, so any judgement against “the exhibitor” was a question of who was actually responsible and to what degree. Furthermore, while Hatcher received a fully-executed contract via registered mail, she didn’t reach out to FBO immediately to report the problem. Instead, she waited three whole months after it went into effect, then suddenly walked into the FBO offices in Seattle, accompanied by James Hone of the MPTO, demanding (and getting) a compromise agreement. It was only after this compromise agreement fell apart that Mrs. Hatcher announced her intention to cancel the entire FBO contract. Those details turned the tide for the Board of Arbitration. While it may have been true that the FBO salesman incorrectly drafted Mrs. Hatcher’s original contract, she blew it by not addressing the issue within the 30-day cancelation window. The fact that she allowed the original contract to go forward, then later negotiated (and then rejected) a compromise agreement only made things worse, so the Board ruled in favor of FBO.^[14]

The worst kind of arbitration hearings were the ones where honest mistakes ended up being costly. That was the case in 1928 when the Universal exchange was assessed a $40 penalty because a clerk forgot to ship a feature to F.C. Weskil at the Rose Theatre in Colfax, causing the venue to go dark for a day.^[15] Then there was the case of exhibitor Walter Graham of Shelton, who in 1927 was found guilty of “bicycling” films. Bicycling was a trick used by showmen as far back as the nickelodeon days. It involved an exhibitor who contracted to show a certain film at a certain theatre, then shuttled the print to a second location where it could also be shown. An exhibitor engaged in bicycling thus paid one rental fee, but got the benefit of showing the picture(s) in two different houses. Yet another way to bicycle was to rent a film title and then “sublet” it to another house. Under that arrangement, the first manager could screen the film while making cash under the table by renting it to a second manager, the two houses coordinating schedules so their screenings didn’t overlap.

Walter Graham, however, was a longtime exhibitor with a good reputation – the kind of guy who didn’t engage in deceptive business practices. He and his brother not only operated a theatre in Shelton but were about to open a new venue in Elma; they also showed pictures from time-to-time at “Camp 2,” a remote logging operation in the Olympic mountains.

In 1927 Walter Graham had a contract with the Fox exchange that included the right to show one of the studio’s biggest releases, What Price Glory? That picture, however, came with certain stipulations, including one that prohibited it from screening at Camp 2. But while Walter Graham was out of town, tending to his new theatre in Elma, his brother took What Price Glory? up to Camp 2 and played the film, like he had done with so many other pictures at the end of their Shelton run. Fox learned of the screening and immediately brought a case against Walter Graham, who argued that it was simply a mistake because his brother was unaware of the contract stipulation. Graham argued that the case should be dismissed for that reason alone, but he was also a little peeved that the Fox exchange filed an arbitration case without contacting him directly to resolve the matter amicably.

The Board may have been sympathetic to that argument, but the What Price Glory? incident was the second time that the Graham brothers had been accused of bicycling pictures up to Camp 2 over a nine-month period. Walter Graham never intended to deceive, but it was his second offense so the Board ruled against him – he was ordered to pay the Fox exchange $250, the minimum penalty they could assessed for such a violation.^[16] Mistake or not, however, Motion Picture Record was so fed up with bicycling incidents in the Northwest that they printed not one, but two articles on the subject in their next issue. Both warned exhibitors against the practice, and furthermore urged them to take greater care in learning the terms of their film contracts so mistakes like Graham’s could be avoided.^[17]

By Eric L. Flom – November 2025

Notes:

[1] “Seattle,” Motion Picture Record, 29 October 1927, Page 25.
[2] “Seattle,” Motion Picture Record, 15 August 1927, Page 12.
[3] “Seattle,” Motion Picture Record, 10 November 1928, Page 3.
[4] “Seattle,” Motion Picture Record, 15 August 1927, Page 12.
[5] “Seattle,” Motion Picture Record, 15 August 1927, Page 12.
[6] “Williams Walks Out in Huff When Arbitrators Refused to Again Postpone His Case,” Motion Picture Record, 9 April 1927, Page 11.
[7] “Seattle,” Motion Picture Record, 29 October 1927, Page 25.
[8] “Seattle,” Motion Picture News,” 31 October 1925, Page 2071.
[9] “Seattle,” Motion Picture Record, 25 August 1928, Page 3.
[10] “Seattle,” Motion Picture Record, 21 April 1928, Page 5.
[11] “Seattle,” Motion Picture Record, 10 December 1927, Page 7.
[12] “Seattle,” Motion Picture News, 31 October 1925, Page 2071.
[13] “Seattle,” Motion Picture Record, 29 October 1927, Page 26.
[14] “Seattle,” Motion Picture Record, 3 March 1928, Page 9.
[15] “Seattle,” Motion Picture Record, 23 June 1928, Page 23.
[16] See “Seattle,” Motion Picture Record, 14 January 1928, Page 10; and “Editorial Paragraphs,” Motion Picture Record, 21 January 1928, Page 3.
[17] See “Editorial Paragraphs,” Motion Picture Record, 21 January 1928, Page 3; and “Copy Rights and Bicycling of Film,” Motion Picture Record, 21 January 1928, Page 4.

Most cases before the Board of Arbitration were everyday issues – important to the parties involved, but otherwise part of doing business. Rarely did a case have greater implications, even locally; rarer still was the case that had the potential to impact the entire industry. And yet, that’s what occurred on December 6, 1927, when the Board of Arbitration took up the case of Warner Bros. vs. Waldo Ives, a decision that threw the exhibitor/exchange relationship into utter turmoil.

Waldo Ives was a home-grown wunderkind of movie exhibition. Born in Connecticut in 1901, the family was living in Seattle by 1910, where Ives graduated from Broadway High School before earning a journalism degree from the University of Washington. After graduating in 1924, he joined the Famous Players-Lasky exchange in Seattle as their assistant advertising manager. He excelled out of the gate, producing a report for the exchange that demonstrated, among other things, that Seattle picture venues spent an average of 7% of their average film budget on promotions. But when houses exceeded that threshold (Ives singled out the local engagement of The Covered Wagon as an example), they saw a greater return versus the dollars spent, bolstering the case for increased advertising. George Endert, manager of the Famous Players-Lasky exchange, was so impressed with Waldo Ives’ work that he created an entirely new position at the company allowing him to focus on similar research projects that might bolster sales.^[1]

Waldo Ives didn’t stick around long enough to make that position his own. After nine months with Famous Players-Lasky he jumped ship, buying the Empire Theatre in Anacortes in a move that made him the youngest theatre owner in Washington state.^[2] But his ambition wasn’t quenched by owning just one theatre. Less than six months after taking over the Empire, Ives bought out the business partner of Oscar O. Ruth, which gave him part ownership in the Rex and Mission Theatres in Mount Vernon. The pair’s only competition there came from the Lincoln Theatre, which opened the prior year, but in early 1927 Ives and Ruth picked up that property as well, briefly giving them control over the Mount Vernon film market.^[3]

The Ives/Ruth partnership didn’t last long. They jointly closed the Mission in March 1927, but opted to go their separate ways later that fall – Ruth taking over the Rex in Mount Vernon while Ives kept the Lincoln as well as the Empire in Anacortes.^[4] Ives continued to be a prominent exhibitor in the Skagit County region into the 1930s, before eventually relocating to Los Angeles, where he passed away in 1949.

During contract negotiations in the summer of 1926, however, Waldo Ives signed on with Warner Bros. to show several of the studio’s upcoming releases, including the pictures Simple Sis, Bitter Apples, What Happened to Father, The Gay Old Bird and Dearie. In this case Ives was blind bidding on each of these films, since they weren’t yet in production, making his decision based on materials in the Warner Bros. campaign book, which included tentative plots and creative details. But, over the succeeding months, well before these pictures could be delivered, all five underwent changes. According to the campaign book Simple Sis and What Happened to Father would be directed by Lewis Milestone, but were instead helmed by different men. Bitter Apples also had a change in the director’s chair. And both Dearie and The Gay Old Bird were supposed to feature Willard Louis as the male lead, but his death in July 1926 forced the studio to recast both pictures.

Based on these changes, coming after Waldo Ives signed his contract with the Warner Bros. exchange, he refused to accept the first two films delivered to him and asked the exchange to renegotiate. Ives made purchasing decisions based on one set of expectations, he contented, but would be receiving something different altogether. Willard Louis, for example, was a local favorite in Anacortes, so the pictures made with a replacement actor didn’t have the same marquee value. The same thing applied to Lewis Milestone. For Ives, Milestone delivered pictures of a certain style and quality; with a lesser-known director at the helm, he couldn’t be assured of what he was getting.

The Warner Bros. exchange refused to negotiate a new agreement and instead brought an arbitration case against Waldo Ives. At the Board hearing, held on December 6, 1927, James Hone of the MPTO, arguing Ives’ case, pointed to the so-called “Act of God” clause in the standard film contract which, he contended, allowed the exhibitor to renegotiate with Warner Bros. for the pictures in question.^[5]

This wasn’t an argument that hadn’t been made before. A few years earlier, Everett exhibitor Charles Swanson brought a similar case against the MGM exchange based, in part, on special contract language he negotiated giving him the right to show two Lillian Gish/Henry King films during the 1924-1925 season. One of those films had already been delivered, while the second, Romola, was due to be released. However, without warning the exchange notified Swanson that they would be unable to meet the two-film Gish quota because MGM decided to treat Romola as a special attraction, putting it outside the normal contractual terms.

This was exactly the kind of practice that irked exhibitors across the country. In this case MGM promoted a full slate of upcoming films, and contracts were signed based on the strength of those programs. Swanson made purchasing decisions based on his ability to show two Gish/King films during the year, but had the carpet yanked out from under him well after the contract was signed. MGM, for their part, claimed that they always considered Ramola to be a special feature, subject to different negotiation terms, and that they simply didn’t have enough time to produce another Gish/King picture. Once the studio realized this, they had their exchanges notify affected exhibitors and offer a menu of comparable films from which a replacement feature could be selected.

Swanson and the Star Amusement Company brought a complaint against MGM to the Board of Arbitration, arguing that the Seattle exchange was obligated to send him Romola under the terms of his contract. The Board felt differently; the exchange had properly notified Swanson, in advance, that the Gish/King quota wouldn’t be met, and instead offered a range of substitute productions. MGM had every right to maximize the box-office value of their picture, and so long as Swanson and any other impacted exhibitors were provided a choice of comparable features, the exchange met their contractual obligations.^[6] Most arbitration disputes were purely local issues, but the Swanson case was being closely watched around the country, since it had the potential to impact future contract negotiations in the Northwest and elsewhere. When he lost it was a blow for exhibitors, reinforcing the status quo for the studios and their exchanges.

The Waldo Ives case was gearing up to be a repeat. Carl Stearn, manager of the Seattle Warner Bros. exchange, argued their side of the case. He noted that three other films in the studio’s 1926-27 campaign book (Climbers, White Flannels and Irish Hearts) also had personnel substitutions, but in those cases the studio recognized that the changes were significant enough that exhibitors were given the opportunity to amend their contracts. While it was true that the five pictures identified by Waldo Ives had undergone changes, Warner Bros. didn’t consider them material – rather, they were just part of the normal filmmaking process. Because they didn’t rise to a certain level, the exchange didn’t need to make special accommodations for exhibitors booking those films.

Ives’ refusal to accept the first pictures received triggered the complaint, so although the Warner Bros. exchange was only asking for a judgement of $117.28, the case had ramifications far more significant than the dollar amount. Waldo Ives came down to Seattle for the December hearing, but let James Hone of the MPTO do most of the talking, chiming in only when asked. The Board of Arbitration heard both sides, deliberated in private for about 30 minutes, then came back with the unthinkable, handing Waldo Ives a surprise win. Not only that, the Board went as far as to order the Warner Bros. exchange to reimburse Ives for the $14 in travel expenses he spent to come down from Anacortes for the hearing.

This was a jaw-dropping decision, and a complete reversal from the Swanson case a few years earlier. And it had national ramifications – exhibitors now had a precedent for rejecting certain films that they otherwise would have been forced to play. Everyone was shell-shocked; the Ives decision came down on a Tuesday afternoon, and by the time Motion Picture Record went to press a few days later, the paper was still having difficulty processing what its impact would be. It was true, they argued, that exhibitors made purchasing decisions based on the certain stars and directors being attached to films, or based on the proposed storyline. And it was also true that a late substitution could, in some cases, impact the exhibitor’s ability to make a feature pay. But surely, the paper thought, those cases were rare – and where does one draw the line? “We do not believe that the decision in the case of Warner Bros. vs. Waldo Ives should be considered a precedent for wholesale claims of contract relief because of minor substitutions which, so far as all practical purposes are concerned, made no difference in the finished picture offered for delivery!”^[7]

Waldo Ives felt differently. In a letter to Clyde Walker, editor of Motion Picture Record, Ives called his arbitration win “a material step in the right direction” for leveling the playing field in contract negotiations. “This will benefit the exchanges as well as the exhibitor,” Ives contended. “There being less gambling, the exhibitor and salesmen will be able to reason, rather than haggle, and a fair price for the product will be reached with less difficulty and more pleasant feelings.” Had the decision gone for the exchange “[d]irectors, stories, etc., as sold would mean nothing. What if we who bought What Price Glory? had [instead] received Chambermaid’s Revenge?”^[8] While some gloated over this surprise victory, Ives did not, at least publicly, noting that he held no animosity toward Carl Stearn or the Warner Bros. exchange – he was simply asserting his rights, and nothing more.

Overnight the Ives case became a point of contention in local film circles. The exchanges, of course, were angered that years of precedent had been tossed out the window. Exhibitors, on the other hand, rejoiced at their rare victory, and wanted to use the momentum to launch test cases that might impact other aspects of how the film business had heretofore been conducted. They were critical, for example, of road showing – having the studio take a big film and play major U.S. cities at advanced prices before it was available for general circulation. Exhibitors who signed for these films in advance could do nothing but sit back and watch the studio skim the financial cream off the top before the picture was released to contract holders. A similar practice was when the studio performed a bait-and-switch. Based on the annual sales materials, an exhibitor might blind book a comedy starring Constance Talmadge, with little or no details about the story or who would co-star. But after that film was made, the studio might then decide to hold the picture out as a special feature, as MGM did with Romola, and make it available only under separate contractual terms. Yet to satisfy exhibitors expecting a Constance Talmadge film at some point, the studio would have their production team shoot a half-baked Talmadge substitute designed to satisfy contract holders. Exhibitors howled when this occurred, but they typically had no recourse – they contracted for an unnamed Talmadge comedy, and they got one. The Ives decision was a significant step that would help exhibitors fight these and other studio/exchange practices. “There has been no time before when the trade has had such an interest in arbitration,” wrote Motion Picture Record following the Ives decision. “Keen exhibitor minds, heretofore sluggish because they felt the arbitration body was mostly a tool of the distributor, are now active in ferreting out what is claimed to be flagrant contract violations.”^[9]

The Board of Arbitration’s Ives decision threw the industry into turmoil. Its subsequent actions would lead to a boiling point.

By Eric L. Flom – November 2025

Notes:

[1] See “Seattle,” Motion Picture News, 4 April 1925, Page 1525; and “Seattle,” Motion Picture News, 25 April 1925, Page 1858.
[2] “Seattle,” Motion Picture News, 18 July 1925, Page 329.
[3] See “Northwest Exhibitor Drives Through 4 Showers of Frogs,” Moving Picture World, 5 December 1925, Page 474; and “Northwest,” Moving Picture World, 9 April 1927, Page 578.
[4] See “Northwest,” Moving Picture World, 12 November 1927, Page 41; and “More Arbitration Board Notes,” Motion Picture Record, 21 April 1928, Page 14.
[5] “Seattle,” Motion Picture Record, 10 December 1927, Page 7.
[6] “M.-G.-M. Arbitration Winners,” Motion Picture News, 3 October 1925, Page 1582.
[7] “Editorial Paragraphs,” Motion Picture Record, 10 December 1927, Page 3.
[8] “Waldo Ives Lauds Washington Exhibitor Unit and Points to Fact ‘Dues are Now Due,’” Motion Picture Record, 10 December 1927, Page 4.
[9] See “Editorial Paragraphs,” Motion Picture Record, 17 December 1927, Page 3.