Milgram v. Loew's, Inc.

Decision Date31 October 1951
Docket NumberNo. 10441.,10440,No. 10439,10439,10441.
Citation192 F.2d 579
PartiesMILGRAM et al. v. LOEW'S, Inc. et al. (Hamilton Street Realty Company, Intervenors).
CourtU.S. Court of Appeals — Third Circuit

COPYRIGHT MATERIAL OMITTED

Bernard G. Segal and Morris Wolf, Philadelphia, Pa. (Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., Wm. A. Schnader, J. Pennington Straus, Philadelphia, Pa., Wolf, Block, Schorr & Solis-Cohen, Philadelphia, Pa., Abraham L. Freedman, Philadelphia, Pa., Milton Handler, New York City, on the brief), for Loew's, Inc., and others.

William A. Gray, Philadelphia, Pa. (Gray, Anderson, Schaffer & Rome, Philadelphia, Pa., on the brief), for Hamilton St. Ry. Co., and others.

Albert M. Cohen, Philadelphia, Pa. (Cohen & Cohen, and Sylvan M. Cohen, Irving I. Specter, on the brief), Philadelphia, Pa., on the brief), for Milgram and others.

Before BIGGS, Chief Judge, and STALEY and HASTIE, Circuit Judges.

STALEY, Circuit Judge.

Plaintiff, a partnership, owns and operates a newly constructed drive-in theater in Allentown, Pennsylvania. It commenced this action against the eight major distributors1 of feature motion pictures, alleging that they had conspired to refuse to license features on the first run to plaintiff's drive-in. The case was tried to the court. The district judge found that the uniform refusal of all eight distributors to license first run films to plaintiff was the result of concerted action. This was held to be an unreasonable restraint of trade in violation of the anti-trust laws, whereupon a decree was entered requiring the distributor-defendants to give plaintiff an equal opportunity with the operators of conventional theaters to bid for pictures on first run. From that decree the distributors have appealed. Several exhibitors who operate first run theaters in downtown Allentown and Bethlehem were allowed to intervene; they too have appealed from the decree entered below. Plaintiff has moved to dismiss the appeal of these intervening defendants, and this motion is also before us. The district court refused to enter an order allowing plaintiff an attorney's fee as a part of its costs, and plaintiff has taken an appeal.

The salient facts found by the district court are as follows: Plaintiff's theater, known as the Boulevard Drive-In, is located on a major highway leading from the center of Allentown to Bethlehem. It is within the city limits of Allentown — 2.4 miles from the business center of that city, 1.7 miles from the common boundary between Allentown and Bethlehem, and less than five miles from the business center of Bethlehem. The Boulevard was constructed in 1949 at a total land and building cost of nearly $260,000. It accommodates over 900 cars, with an estimated capacity of 2500 adult patrons. The opinion of the trial judge was that in equipment, appointments and conveniences, Boulevard Drive-In is one of the finest drive-in theaters in the country and that if any drive-in be suitable for the showing of first run features, certainly this one is. David Milgram, the managing partner and an experienced operator, has been conducting the theater "along lines consistent with the highest grade of moving picture entertainment."

Plaintiff opened Boulevard Drive-In on October 19, 1949. It was operated for about five weeks as a "dress rehearsal," during which time it showed only old pictures. Plaintiff planned, however, that when the Boulevard reopened the following spring, it would be with first run films. During the fall of 1949, David Milgram spoke with the salesmen and district managers of many of the defendants, requesting features on first run when Boulevard Drive-In reopened in the spring. In November, 1949, plaintiff's attorney sent registered letters to each of the distributor-defendants, wherein he formally requested features on first run for plaintiff's theater. Some of the distributors failed to reply; others replied with inconclusive answers. There is no doubt, however, that each distributor decided not to license features on first run to the Boulevard. Moreover, six of the distributors (the Big Five and Universal) have now offered plaintiff a run 28 days after first run. The district managers of each of the distributors testified that their companies would not license first run features to the Boulevard even should plaintiff offer to pay a rental in excess of that offered by one of the downtown Allentown theaters. Each asserted that his company had arrived at this decision independently and had made no agreement with any other distributor. In fact, each stated he had no knowledge that any other distributor had refused to license first runs to the Boulevard.

The district managers testified with respect to the business reasons which prompted their companies to adopt this policy. Aside from minor variations, these reasons are essentially the same. They fall into two categories. First, the distributors declared that the drawing power of a conventional downtown theater is superior to that of a drive-in. The importance of the "drop-in" trade in the down-town area was stressed. The conventional theater has afternoon and early evening performances, whereas the drive-in is naturally limited to hours of darkness. Emphasis was placed on Saturday matinees for children. In this area a drive-in is a seasonal enterprise limited to seven or eight months, only several of which are so-called peak months. The distributors agreed that drive-in theaters are more susceptible to the whims of the weather. And it can hardly be denied that the drive-in's appeal is limited to those who have the use of an automobile.

Secondly, the distributors testified that the showing of a feature on first run at a drive-in would reduce the income derived from subsequent runs. They asserted that first run showings are, in a sense, show cases for subsequent runs, in that the first run showing at a downtown theater gives a picture prestige which is important in "establishing" it in the neighboring area. Further, they emphasized the advertising value of a central city marquee.

The trial judge found that the Boulevard was in substantial competition with theatres in both Allentown and Bethlehem. In downtown Allentown, first run features are shown in seven theaters,2 one of which also plays features on a subsequent run. First run features are shown in four theaters in Bethlehem.

It should be noted that none of the distributor-defendants has a financial interest in any of the first run theaters in Allentown or Bethlehem.3 Three of these Allentown theaters are operated by intervening defendant Hamilton Street Realty Company. Hamilton is affiliated with the Fabian interests, which operate a total of sixty theaters in the eastern part of the United States.

The trial court found that each distributor adopted and adhered to the uniform course of excluding plaintiff from competing for first runs and that each acted with knowledge that all the others were so doing. Testimony to the effect that each proceeded in ignorance of the others was termed by the district judge incredible. Weighing this evidence of consciously parallel practices on the part of the distributors in the factual context of this case, the trial court concluded that a finding of a conspiracy in violation of Section 1 of the Sherman Act, 15 U.S.C.A. § 1, was warranted.

The distributor-defendants argue on appeal that the evidence is insufficient to justify an inference of agreement among them. But in this modern era of increasing subtleties, it is rare indeed for a conspiracy to be proved by direct evidence.4 There is no dispute over the proposition that circumstantial evidence will sustain a finding of conspiracy. An experienced trial judge has heard the evidence and passed upon the credibility of the witnesses in this case; his conclusion is that an inference of joint action on the part of the distributors is warranted. The sole question now before us on this appeal is whether the trial judge's findings of fact are clearly erroneous. See Rule 52 of the Federal Rules of Civil Procedure, 28 U.S.C.

Our starting point in analyzing the evidence is the complete unanimity with which all the distributors refused to license features on first run to plaintiff and the substantial unanimity with which they gave the Boulevard a 28 day status. Further, each distributor acted with knowledge of the policies of his competitors. It is clear that the reasons advanced by the distributors were not reasons peculiarly applicable to the Boulevard Drive-In or to Allentown, but were, with a few exceptions,5 applicable to all drive-in theaters. The district court properly concluded that the district managers were putting into effect in Allentown a general program adopted and adhered to by the directing heads of each distributor to relegate drive-ins to second run status. This uniformity in policy forms the basis of an inference of joint action. This does not mean, however, that in every case mere consciously parallel business practices are sufficient evidence, in themselves, from which a court may infer concerted action. Here we add that each distributor refuses to license features on first run to a drive-in even if a higher rental is offered. Each distributor has thus acted in apparent contradiction to its own self-interest. This strengthens considerably the inference of conspiracy, for the conduct of the distributors is, in the absence of a valid explanation, inconsistent with decisions independently arrived at.

We think the evidence in this case can be profitably viewed against the background of United States v. Paramount Pictures, D.C.N.Y.1946, 66 F.Supp. 323. The evidence the government relied on there to prove a conspiracy to fix minimum admission prices and establish uniform clearances and runs was essentially consciously parallel business practices. The district court, 66 F.Supp. 341-346,...

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