I have disagree with that. It was against the Paramount Degree of 1948 to block book titles. As was splitting films between theatre companies. The circuit I worked for bought Midnight through blind bidding, just as we did Star Wars. They were not attached. While today there is very little teeth in that justice ruling in the 70's it was still in full force.
Legal or not, the Fox Midnight/SW story's pretty well established: I remember reading at the time about Fox taking heat for it, in a press article about the theater industry, and it's already canon among Lucas fans as part of how Fox wanted to "bury" Star Wars on Memorial Day--An exec even mentions it in the "Empire of Dreams" documentary, but if it's an urban legend, it's one that started when the movie was still in theaters.
Midnight never even became that much of a legendary 70's-potboiler-bestseller flop like The Betsy or Bloodline; nowadays, it's just remembered for its illegitimate Star Wars connection AS "the movie Fox thought would be the hit of '77".