United States v. LOEW'S, INCORPORATED

Decision Date02 December 1960
Citation189 F. Supp. 373
PartiesUNITED STATES of America, Plaintiff, v. LOEW'S, INCORPORATED, Defendant. UNITED STATES of America, Plaintiff, v. C & C SUPER CORP., Defendant. UNITED STATES of America, Plaintiff, v. SCREEN GEMS, INC., Defendant. UNITED STATES of America, Plaintiff, v. ASSOCIATED ARTISTS PRODUCTIONS, INC., Defendant. UNITED STATES of America, Plaintiff, v. NATIONAL TELEFILM ASSOCIATES, INC., Defendant. UNITED STATES of America, Plaintiff, v. UNITED ARTISTS CORPORATION, Defendant.
CourtU.S. District Court — Southern District of New York

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Leonard R. Posner, Eugene J. Metzger, George A. Avery, Lewis A. Rivlin, Jack L. Lipson, Melvin Spaeth, Attys., Dept. of Justice, Washington, D. C., for plaintiff.

Phillips, Nizer, Benjamin, Krim & Ballon, Benjamin Melniker, New York City, Louis Nizer, Paul Martinson, Simon Rose, Gerald F. Phillips, Albert F. Smith, Donald J. Wollins, Bernard Segelin, New York City, of counsel, for defendant Loew's Inc.

Mervin C. Pollak, New York City, for defendant C & C Super Corp.

Schwartz & Frohlich, New York City, for defendant Screen Gems, Inc.; Myles J. Lane, Everett A. Frohlich, Joseph Taubman, Georgiana Koenig, New York City, of counsel.

Phillips, Nizer, Benjamin, Krim & Ballon, New York City, for defendant Associated Artists Productions, Inc. and United Artists Corp. Inc.; Louis Nizer, Paul Martinson, Simon Rose, Gerald F. Phillips, Albert F. Smith, Donald J. Wollins, New York City, of counsel.

Golenbock & Darell, New York City, for defendant National Telefilm Associates, Inc.; Justin M. Golenbock, Philip Mandel, New York City, of counsel.

DAWSON, District Judge.

General Nature of the Actions

These are six civil anti-trust actions instituted by complaints filed by the United States in March of 1957. They allege violations of §§ 1 and 3 of the Sherman Act, 15 U.S.C.A. §§ 1, 3.

The complaints allege, with respect to each defendant, that beginning in the latter part of 1956 and continuously since that time, the particular defendant has entered into, and refused to deal other than on the basis of, block-booking contracts. They define "block-booking" as the sale or licensing of feature films to television stations for exhibition on television in a block whereby the licensing of one feature film is conditioned by the licensor upon the licensing by the licensee of one or more other feature films.

The complaints seek the Court to declare the following relief:

(1) That the defendants have unlawfully contracted in restraint of interstate trade and commerce in the distribution of feature films in violation of § 1 of the Sherman Act.

(2) That defendants be enjoined from refusing to license feature films to television stations on a picture-by-picture, station-by-station basis.

(3) That the Court direct the defendants to offer to renegotiate the existing contracts for block-booking entered into between them and television stations in the United States so as to give any said station an opportunity to license defendants' feature films on a picture-by-picture, station-by-station basis.

The Parties and Jurisdiction

Defendant Loew's, Incorporated is a corporation organized under the laws of the State of Delaware and transacts business and is found within the Southern District of New York.

Defendant C & C Super Corp. is a corporation organized under the laws of the State of Delaware and transacts business and is found within the Southern District of New York.

Defendant Screen Gems, Inc. is a corporation organized and existing under the laws of the State of California and transacts business and is found within the Southern District of New York. Screen Gems is a wholly-owned subsidiary of Columbia Pictures Corporation.

Defendant Associated Artists Productions, Inc. is a corporation organized under the laws of the State of New York and transacts business and is found within the Southern District of New York.

Defendant National Telefilm Associates, Inc. is a corporation organized under the laws of the State of New York and transacts business and is found within the Southern District of New York.

Defendant United Artists Corporation is a corporation organized under the laws of the State of Delaware and transacts business and is found within the Southern District of New York.

Each defendant is engaged in interstate commerce and was, during the time covered by the complaint, engaged in the licensing of motion picture films for exhibition by television stations.

There is no issue as to jurisdiction or venue in the case.

The Commerce Involved

Feature films are copyrighted motion pictures originally produced for exhibition in motion picture theatres. During the time covered by the complaints, feature films of various different producers were licensed for exhibition by television stations throughout the United States and were telecast by those television stations. This required the preparation of positive prints of the feature films and the shipment of those positive prints across state lines to television stations in various states of the United States. It required the telecasting of such films which, in many cases, were telecast across state lines. The exhibition of such feature films on television stations involved interstate commerce of a not insubstantial amount. There were released for exhibition on television by the defendants, in the aggregate, not less than 9,000 films and, during the period covered by the complaints, the defendants, in the aggregate, received compensation for the use of such films in an amount of not less than $110,000,000.

Pre-Trial Procedures

After the cases were at issue, pre-trial procedures, both formal and informal, were conducted. The issues were explored and a pre-trial order entered defining the issues of fact to be tried. Since the Court found that all the actions involved similar and common questions of law and fact, a motion of the plaintiff for an order consolidating the six actions for trial was granted. This consolidation order provided, however, that each action should be disposed of individually, with separate opinion and separate findings of fact and conclusions of law in each action.

An application was made by certain of the defendants for an order for a separate trial of the relief demanded in the action. A hearing was held and the Court found that it would be unable to dispose of the issue of the relief demanded in the absence of proof as to the facts and therefore denied the application.

Other pre-trial hearings were held further to define and limit the issues to be tried and to identify the exhibits to be introduced at the trial and to pass upon objections with respect thereto.

The Trial

The trial, which commenced on March 7, 1960, lasted for 36 court days and resulted in a transcript of 6,619 pages. During the progress of the trial the Court kept a running summary of the evidence, segregated as to defendants and particular issues involved. Eight hundred twenty-one (821) exhibits were admitted into evidence. The Government called 45 witnesses. The defendants called 28 witnesses.

The Court reserved decision on all motions at the conclusion of the evidence and directed that the parties exchange main trial briefs and proposed findings of fact and conclusions of law. All of the briefs have been filed and the Court has given consideration thereto.

The Issues

The issues involved in the actions are essentially the same. They are twofold — (1) an issue as to whether it is a violation of the Sherman Act for a distributor of motion picture films to license such films to television stations for broadcast in groups or blocks—this is essentially an issue of law, and (2) if it is a violation of the Sherman Act to offer and license feature films in groups or blocks, whether the defendants and each of them did offer and license the films in groups or blocks in such a way as to condition the sale or license of one film upon the purchase or license of other films. This is essentially an issue of fact.

The Law

The Sherman Act prohibits, in general language, contracts in restraint of trade. Necessarily, over the years, the Supreme Court has had to delineate the types of contracts which in its opinion restrain trade. One category of such contracts is the tying contract, i. e., the conditioning of the sale of one product on the sale of another or other products. Early in the history of the anti-trust laws this practice was condemned.

Early cases involved classic examples of tie-in sales where the license of a patented product was conditioned upon the purchase or use of certain non-patented products. Morton Salt Co. v. G. S. Suppiger Co., 1942, 314 U.S. 488, 491, 62 S.Ct. 402, 86 L.Ed. 363; Ethyl Gasoline Corp. v. United States, 1940, 309 U.S. 436, 459, 60 S.Ct. 618, 84 L.Ed. 852; International Salt Co. v. United States, 1947, 332 U.S. 392, 68 S.Ct. 12, 92 L.Ed. 20.

The principle laid down in those cases was applied to the licensing of motion picture films in United States v. Paramount Pictures, 1948, 334 U.S. 131, 156, 68 S.Ct. 915, 929, 92 L.Ed. 1260. The Court said:

"Block-booking is the practice of licensing, or offering for license, one feature or group of features on condition that the exhibitor will also license another feature or group of features released by the distributors during a given period. The films are licensed in blocks before they are actually produced. All the defendants, except United Artists, have engaged in the practice. Block-booking prevents competitors from bidding for single features on their individual merits. The District Court 66 F.Supp. 349 held it illegal for that reason and for the reason that it `adds to the monopoly of a single copyrighted picture that of another copyrighted picture which must be taken and exhibited in order to secure the first.' That enlargement of the monopoly of the copyright was condemned below in reliance on the principle which
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