150 F.2d 877 (7th Cir. 1945), 8716, Bigelow v. RKO Radio Pictures, Inc.

Docket Nº:8716.
Citation:150 F.2d 877
Party Name:BIGELOW et al. v. RKO RADIO PICTURES, Inc., et al.
Case Date:August 03, 1945
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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Page 877

150 F.2d 877 (7th Cir. 1945)

BIGELOW et al.

v.

RKO RADIO PICTURES, Inc., et al.

No. 8716.

United States Circuit Court of Appeals, Seventh Circuit.

August 3, 1945

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[Copyrighted Material Omitted]

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Carl V. Meyer, Miles G. Seeley, Vincent O'Brien, John M. Baker, Edmund D. Adcock, and Edward R. Johnston, all of Chicago, Ill., for appellants.

Poppenhusen, Johnston, Thompson & Raymond and Adcock Fink & Day, all of Chicago, Ill., for Balaban & Katz Corporation and Paramount Pictures, Inc.

Mayer, Meyer, Austrian & Platt, of Chicago, Ill., for RKO Radio Pictures, Inc., Twentieth Century-Fox Film Corporation and Loew's Incorporated.

Defrees, Fiske, O'Brien & Thomson, of Chicago, Ill., for Warner Bros. Pictures, Inc., Warner Bros. Theatres, Inc., Warner Bros. Circuit Management Corporation and Vitagraph, Inc.

Thomas C. McConnell, of Chicago, Ill. (Jubert VanHook, of Chicago, Ill., of counsel), for appellees.

Before SPARKS, MAJOR and MINTON, Circuit Judges.

SPARKS, Circuit Judge.

This action was brought under Sections 1, 2, and 7 of the Sherman Act, 15 U.S.C.A. §§ 1, 2, 15 note, and Section 4 of the Clayton Act, 15 U.S.C.A. § 15, to recover threefold the damages allegedly sustained by plaintiffs by reason of alleged violation by defendants of Section 1 and 2 of the Sherman Act, during the five years immediately preceding July 28, 1942.

The jury returned a general verdict for the plaintiffs, and judgment was rendered for threefold the amount of the verdict, and for costs, including attorneys' fees. The appeal is from that judgment.

The alleged errors relied on arose out of the trial court's failure to grant defendants' motion for a directed verdict and for judgment non obstante veredicto, or in the alternative, for a new trial. A new trial was asked because the jury during their deliverations, had before them an exhibit, alleged to have been prejudicial to defendants, to which defendants' objections had been sustained when offered in evidence by plaintiffs.

The issues involve certain producers, distributors, and exhibitors of moving picture films. The territory involved is the Loop District in Chicago, and a district approximately eight to ten miles south and a little east of the Loop, in or near the neighborhood of Jackson Park. Plaintiffs are exhibitors. On November 1, 1936, they became the owners and operators of Jackson Park Theater, at Stony Island and 67th Streets, at the southwest corner of Jackson Park, since which time they have there continued to exhibit moving picture films. The theater was part of a large building which also contained 16 stores, 13 apartments, a 40-room hotel, 8 offices and lofts. Plaintiffs' parents had owned the building and operated this movie theater since some time in 1916.

The defendants, RKO Radio Pictures, Inc., Loew's Inc., both of Delaware, and Twentieth Century-Fox Film Corporation, Paramount Pictures, Inc., and Vitagraph,

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Inc., of New York, are all distributors of motion picture films. Paramount Pictures, Inc., is also a producer.

Balaban and Katz Corporation, of Delaware, a subsidiary of Paramount, is an exhibitor which operates about fifty theaters in Chicago and its suburbs, including the Tivoli, Tower and Maryland located in or near the Jackson Park District.

Warner Bros. Circuit Management Corporation is an exhibitor which operates about twenty theaters in Chicago, including the Avalon, Jeffrey, Grove, Shore and Hamilton located in or near the Jackson Park District. This corporation and Vitagraph, Inc., are subsidiaries of Warner Bros. Pictures, Inc., a producer, which in turn is affiliated with Warner Bros. Theaters, Inc., which merely holds title to certain of the Warner Theaters.

Feature films, the distribution and exhibiting of which are here involved, are photoplays recorded on from 4,000 to 12,000 feet of film, and comprise the principal item of entertainment in the usual motion picture program. These films are first photographed on film negatives, from which are made positive prints to be projected onto the screens of the theaters. The cost of producing the negative of such film ranges from about two hundred thousand to several million dollars. The cost of each positive print is from $150 to $900, depending upon its length and whether it is black and white or in technicolor.

There are about 17,000 motion picture theaters in the United States, and the superior feature films may be exhibited in as many 13,000 theaters. Approximately 75% of the theaters pay a license fee to the distributor which is less than the cost of a single positive print. For this reason it is economically impossible for a picture film to be exhibited simultaneously in all or in any large portion of the theaters desiring to exhibit it. In this case the defendants have submitted uncontroverted evidence that the distributor must limit the number of positive prints of any one picture to not more than 250, and must license the exhibition of each print successively in as many as 50 theaters in order to recover its costs and some profit.

Motion picture films are copyrighted and they are distributed by licensing their exhibition under copyright upon such terms as may be agreed upon between the exhibitor and the distributor and contained in a license agreement or film contract.

For many years the distributors of motion picture films, including those of the defendants, have used a method of releasing films for exhibition, which has come to be known as the 'Chicago system of release.' Under it films are exhibited in Chicago in a pattern of successive release weeks or 'runs,' beginning with what is called 'Loop first run' which is the period during which any film is first exhibited in the city in one of the large Loop theaters. After such run there is a waiting time of about three weeks during which the film is not exhibited anywhere in the city. Such waiting time is called 'clearance.'

Beginning with the fourth week after the Loop run it is exhibited in other theaters throughout the city in a continuous succession of release weeks. The fourth, fifth and sixth weeks are known as 'A pre-release weeks.' The seventh and eighth weeks are known as 'B pre-release weeks.' The ninth week is known as 'C pre-release week.' Then follow a succession of 'weeks of general release,' and the tenth week after the Loop run is known as the 'first week of general release.'

The license fees paid by exhibitors to distributors are either specified sums or percentages of the exhibitor's box office receipts or some times both. In Chicago such percentage applies only to the Loop 'first run theaters.' The exhibitor agrees that he will not charge less than certain admission prices specified in the license agreement during the exhibition of the licensed films at his theater, under a penalty of a forfeiture of his license. This provision is inserted in the license in order to protect the value of the pictures in both prior and subsequent runs, because a reduction of admission prices in a prior run has the effect of damaging the distributor's copyright in all subsequent runs, and is especially advantageous to the distributor in the Loop run where he receives a percentage of the box office receipts. The minimum admission prices which the licensees agreed to observe were as follows: Loop, 75 cents; A runs, 50 cents; B runs, 40 cents; C runs, 30 cents; and in the first week of general release, 25 cents. In subsequent weeks of general release, the minimum admission prices are lower.

The theory of the complaint is that the defendants had and still maintain a monopoly in the prior Loop run and A pre-release weeks by joining in a price-fixing scheme to stop the competition of the subsequent run

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theaters. The alleged motive of the defendant exhibitors was to maintain high fixed admission prices in their Loop and pre-release theaters and thereby share in the box office receipts by virtue of their percentage contracts. It is alleged that the entire system of release is part of a price-fixing scheme and therefore illegal under the Sherman Act. The complaint further alleges a subsidiary theory that, apart from the illegality of the system, defendants illegally discriminated against the plaintiffs by refusing to permit them to negotiate and purchase a higher playing position than that which they had under their contract.

The treaters here involved, outside the Loop, with their capacity, the year they began as exhibitors, their ownership and present playing position as as follows:


Theater Capacity Year began Owner Position

Tivoli .......... 3474 1921 1925 B&K, AP-R*
Tower ........... 2995 1923 1928 B&K BP-R
Avalon .......... 2385 1927 1930 Warner AP-R
Jeffrey ......... 1804 1924 1930 Warner CP-R
Grove ........... 1856 1925 1930 Warner CP-R
Maryland ........ 1499 1918 1928 B&K CP-R
Jackson Park .... 1420 1916 1936 Plffs. 1st week GR**
Shore ........... 1496 1927 1930 Warner 1st week GR
Hamilton ........ 999 1916 1930 Warner 2nd week GR

FN* Pre-release. FN** General release.

For fifteen years before this suit was brought, the respective playing positions of these theaters were substantially as shown above, and none of them was affiliated with any distributor until many years after it was licensed as an exhibitor. After acquiring these theaters none of the defendant exhibitors changed or attempted to change its playing position, except the Hamilton, whose run was temporarily advanced one week by arrangement with plaintiffs who were then seeking to advance the playing position of their Jackson...

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