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Marie Belloc Lowndes's novel was inspired by an actual trial that took place in Glasgow, Scotland in 1857. The twenty-one-year-old defendant, Miss Madeleine Smith, was accused of poisoning her lover, Pierre Emile L'Angelier. Smith's explicit love letters to L'Angelier were produced during the trial, but she was acquitted of the crime, due to insufficient evidence. Descriptions of the Smith trial have been included in several books on famous British court cases, as well as in a Vanity Fair article in August 1926. The conclusion of that article, and the books, was that Smith was guilty of poisoning her lover because she was tired of him.
According to information contained in the file on the film in the MPAA/PCA Collection in the AMPAS Library, M-G-M production and clippings files at the USC Cinema Library, and contemporary news items, M-G-M bought the rights to Lowndes' novel in December 1931 after the Hays Office refused to approve production of a film version of the Edward Sheldon and Margaret Ayer Barnes play Dishonored Lady (New York, 4 February 1930). That play, like the Lowndes novel, was inspired by the Smith case. In early 1931, M-G-M agreed to buy the rights to the Sheldon-Barnes play for $30,000 if it could be approved for production by the MPAA. The office would not approve the play, and M-G-M bought the rights to Letty Lynton.
MPAA records prior to the film's production include a detailed comparative analysis of Dishonored Lady and the Letty Lynton script, which was also called Redeemed and Promiscuous. In the analysis, which Col. Jason S. Joy and Lamar Trotti of the MPAA office in Hollywood thought necessary to dispell any hint of plagiarism, six major points of similarity were illuminated: in both stories, the female protagonist has affairs "because of the sex urge, not love"; the murder is similar in execution in both instances; the man is Argentine in both cases [the exact nationality of the character Emile Renaul is left vague in the final version of the film]; in the play the girl's mother has run off, but in the script her father has been unfaithful; in the play a friend provides an alibi, while in the film, the fianc does; and in the play the father perjures himself, while the mother does in the film.
According to letters from Joy and Trotti to M-G-M production head Irving Thalberg and producer Hunt Stromberg, the "happy ending" of the script was a major difference in tone from the "punishment" that the play's character received at the end. The conclusion was that the Lowndes novel could be filmed, but that critical exception might be raised after the film's release, due to its similarities to the play. Letty Lynton was approved for production and release by the MPAA, but, a few states and the countries of Switzerland and Italy either rejected the picture for distribution or accepted it only after deletions.
Shortly after the film's release, depositions were filed against M-G-M by Sheldon and Barnes charging copyright infringement of their play Dishonored Lady. Though a preliminary hearing in July 1932 in a New York Federal District Court "exonerated" M-G-M of the charge, a formal suit was filed a short time later. Over the course of the next eight years, the case moved from court to court in both California and New York. The case was dismissed in one court in 1934, then a decision was made for the plaintiff in another court in August 1936, which M-G-M appealed. During the course of the suit, several news items in trade publications pointed out that the case was causing other studios to worry about plagiarism cases that might be directed at them, and that the outcome of the case would have a bearing on the entire motion picture industry.
The U. S. Supreme Court refused to hear the case, and hearings on the appeal continued until May 1938, when Special Master Gordon Auchincloss of the U. S. District Court fixed damages for copyright infringement against all of the defendants, Metro-Goldwyn-Mayer Pictures Corp., Metro-Goldwyn-Mayer Distributing Corp., parent company Loew's, Inc., and foreign distributor Culver Export, Inc. The damages collectively equalled $587,604, the amount of the film's net profits, plus various legal fees and court costs. M-G-M appealed the size of the award, but it was only reduced to $532,153 in January 1939 by Federal Judge Vincent L. Leibell, who denied M-G-M principal attorney John W. Davis' claim that the judgment was too harsh. In his judgment, Leibell stated, "In my opinion it is punitive and unjust to award all the net profits of the motion picture Letty Lynton to the complainants in this case. Yet under the wording of the Copyright Act as interpreted by the decisions of the appellate courts, I can do nothing less."
The case eventually went to the Supreme Court, not to consider a reversal of the decision, but to determine whether or not the plaintiffs were entitled to all or part of the profits from the film. In March 1940, the decision was handed down by Chief Justice Charles Evans Hughes that the authors were only entitled to $167,528, one-fifth of the profits of the picture, because movie stars, not authors, were the chief drawing cards for motion pictures. An May 18, 1940 news item in Hollywood Reporter reported that "a satisfaction of judgment of $4,723 against the Moredall Realty Co." by Sheldon and Barnes for showings of Letty Lynton at the Capital Theatre in New York had been filed the previous day. No additional information on the Capital Theatre judgement has been located.
According to a pre-production news item, Robert Young was initially considered for the part of Jerry Darrow, and E. B. Derr was originally set to produce the picture. Hunt Stromberg, who became the film's producer, produced another screen adaptation of the Sheldon and Barnes play, Dishonored Lady, in 1947, directed by Robert Stephenson, and starring Hedy Lamarr and Dennis O'Keefe. A British film inspired by the Madeleine Smith trial was directed by David Lean under the title Madeleine in 1949, starring Ann Todd and Leslie Banks.