Calderone Enter. Corp. v. United Artists Theatre Circuit

• Decision Date: 28 December 1971
• Docket Number: No. 293,Docket 71-1713.,293
• Citation: 454 F.2d 1292
• Parties: CALDERONE ENTERPRISES CORPORATION, Plaintiff-Appellant, v. UNITED ARTISTS THEATRE CIRCUIT, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

454 F.2d 1292 (1971)

CALDERONE ENTERPRISES CORPORATION, Plaintiff-Appellant, v. UNITED ARTISTS THEATRE CIRCUIT, INC., et al., Defendants-Appellees.

No. 293, Docket 71-1713.

United States Court of Appeals, Second Circuit.

Argued November 11, 1971.

Decided December 28, 1971.

David B. Bernfeld, New York City (Herbert Schrank, Goldstein & Schrank, New York City, on the brief), for plaintiff-appellant.

John L. Amabile, New York City (Schwartz, Mermelstein, Burns, Lesser & Jacoby, New York City, for appellee Columbia Pictures Industries, Inc.; Phillips, Nizer, Benjamin, Krim & Ballon, New York City (George Berger, New York City, of counsel), for appellee United Artists Corp.; Stroock & Stroock & Lavan, New York City (Laurence Greenwald, Bernard R. Sorkin, New York City, of counsel), for appellee Warner Bros., Inc., sued herein as Warner Bros.-Seven Arts, Inc.; Royall, Koegel & Wells, New York City (Herbert C. Earnshaw, New York City, of counsel), for appellee Twentieth Century-Fox Film Corp.; Booth, Lipton & Lipton, New York City (Donald S. Engel, New York City, of counsel), for appellee National General Pictures Corp.; E. Compton Timberlake, New York City (Walter J. Josiah, Jr., New York City, of counsel), for appellee Paramount Pictures Corp.; Davis Polk & Wardwell, New York City (Henry L. King, William H. Levit, Jr., New York City, of counsel), for appellee Metro-Goldwyn-Mayer, Inc.), for distributors-appellees.

Bernard W. Nussbaum, New York City (Wachtell, Lipton, Rosen & Katz, New York City, for appellees United Artists Theatre Circuit, Inc., Metropolitan Playhouses, Inc. and United Artists Eastern Theatres, Inc.), for exhibitors-appellees.

Before KAUFMAN and MANSFIELD, Circuit Judges, and LEVET, District Judge.^*

MANSFIELD, Circuit Judge:

This appeal raises once again the question whether one who is not a "target" of an alleged antitrust conspiracy has standing under § 4 of the Clayton Act, 15 U.S.C. § 15, to sue for treble the amount of damages suffered by it incidentally. In this case, suit is brought by a non-operating landlord of theatres allegedly used by its tenant and various motion picture distributors and exhibitors in furtherance of an antitrust conspiracy to restrain the trade of competing distributors and exhibitors. We adhere to our prior decisions on the issue, see Fields Productions, Inc. v. United Artists Corp., 432 F.2d 1010 (2d Cir. 1970), affirming, 318 F.Supp. 87 (S.D.N.Y.1969), cert. denied, 401 U.S. 949, 91 S.Ct. 932, 28 L.Ed.2d 232 (1971); Billy Baxter, Inc. v. Coca-Cola Company, 431 F.2d 183 (2d Cir. 1970), cert. denied, 401 U.S. 923, 91 S.Ct. 877, 27 L.Ed.2d 877, rehearing denied, 401 U.S. 1014, 91 S.Ct. 1250, 28 L.Ed.2d 553 (1971); S.C.M. Corp. v. Radio Corp. of America, 407 F.2d 166 (2d Cir.), cert. denied, 395 U.S. 943, 89 S.Ct. 2014, 23 L.Ed.2d 461, rehearing denied, 396 U.S. 869, 90 S.Ct. 38, 24 L.Ed. 2d 125 (1969); Productive Inventions, Inc. v. Trico Products Corp., 224 F.2d 678 (2d Cir. 1955), cert. denied, 350 U.S. 936, 76 S.Ct. 301, 100 L.Ed. 818 (1956), and affirm the district court's dismissal of the complaint.

The action arises out of plaintiff's lease of three theatres located in Nassau County, New York (the Calderone, Rivoli and Cove) to defendant Metropolitan Playhouses, Inc., which, along with defendant United Artists Eastern Theatres, Inc., is a subsidiary of defendant United Artists Theatre Circuit, Inc. (all three of which are referred to collectively as UATC), for operation as motion picture theatres by UATC. The remaining defendants are engaged in the distribution of motion pictures to theatres throughout the United States, including those operated by UATC.

Invoking federal jurisdiction pursuant to the federal antitrust laws, plaintiff on April 16, 1970, filed its complaint containing six claims, the first three of which seek more than $7 million treble damages from all defendants, based upon their participation in an alleged antitrust conspiracy to restrain trade in the distribution and exhibition of motion pictures. The last three claims, predicated on pendent jurisdiction, seek $2,350,815 damages against UATC for breach of its lease of the three theatres. Each of the first three claims of the complaint alleges that plaintiff's predecessor leased one of the three theatres (the Calderone, Rivoli, or Cove), a high quality, first-class house, to UATC for an annual fixed minimum rental, plus an additional rental based upon a percentage of gross receipts realized annually from exhibition of motion pictures, the term of the lease being later extended to May 7, 1971. Plaintiff, as the landlord of the three theatres, did not reserve any right to participate in the operations or management of them. It alleges that the defendant-distributors, pursuant to a conspiracy with UATC and other motion picture theatre operators in violation of the federal antitrust laws, established a system of distributing motion pictures in the New York Metropolitan area called "Showcase." Under "Showcase" UATC and other exhibitors did not compete against one another for licenses from distributors to exhibit motion pictures on a first neighborhood run basis. Instead they divided all theatres suitable for such runs into groups known as "tracks" and allocated motion pictures for first neighborhood runs among the different "tracks." In the absence of such an arrangement, plaintiff alleges, better quality theatres such as the three leased by plaintiff to UATC would on a competitive basis exhibit pictures having the greatest box office appeal, thus realizing higher gross receipts than from less popular pictures. Under "Showcase," however, it is alleged that each of the three theatres was obligated to exhibit all features assigned to that theatre's "track," including inferior pictures that would not have been exhibited under normal competitive conditions, with the result that plaintiff's percentage of rental income was substantially less than it otherwise would have been and the market value of its fee interest in the theatres has been impaired. Plaintiff seeks treble the amount of the alleged loss in income and in value of the theatres.

The last three claims of the complaint seek single damages against the UATC defendants based on the charge that their exhibition of pictures in the three theatres pursuant to "Showcase" constituted a breach of their duty under the leases to refrain from willful acts which would have the effect of reducing gross receipts and percentage rentals of the three theatres.

The district court granted defendants' motion, pursuant to Rule 12(b) (6), F.R.Civ.P., to dismiss the first three counts on the ground that as a non-operating landlord of a motion picture theatre, plaintiff did not have standing under § 4 of the Clayton Act to recover damages allegedly caused by a combination of motion picture distributors and theatre operators to restrain trade in the exhibition of motion pictures in violation of the federal antitrust laws. Accordingly the three pendent state claims were also dismissed pursuant to the teaching of United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966); see also O'Neill v. Maytag, 339 F.2d 764, 766 n. 3 (2d Cir. 1964).

In a series of decisions over the last 15 years, in all of which certiorari was denied by the Supreme Court, this court has committed itself to the principle that in order to have "standing" to sue for treble damages under § 4 of the Clayton Act, a person must be within the "target area" of the alleged antitrust conspiracy, i. e., a person against whom the conspiracy was aimed, such as a competitor of the persons sued. Accordingly we have drawn a line excluding those who have suffered economic damage by virtue of their relationships with "targets" or with participants in an alleged antitrust conspiracy, rather than by being "targets" themselves. For example, standing has been denied to a patent owner claiming derivative harm as the result of a conspiracy directed against its licensees, Productive Inventions, Inc. v. Trico Products Corp., supra; S.C.M. Corp. v. Radio Corp. of America, supra, a franchisor complaining of an antitrust combination directed at its franchisee, Billy Baxter, Inc. v. Coca-Cola Company, supra, and a motion picture producer seeking damages from its television distributor based upon the latter's distribution of films by "block booking" the films with a view to restraining the trade of television stations and other distributors but not producers, Fields Productions, Inc. v. United Artists Corp., supra.

The rationale behind the foregoing demarcation is simple, fair and reasonable. It respects the purpose of § 4 of the Clayton Act, which is to provide a private enforcement weapon that will deter violation of the federal antitrust laws by permitting any person injured in his business by reason of an antitrust violation to recover treble the damages actually suffered. It acknowledges that while many remotely situated persons may suffer damage in some degree as the result of an antitrust violation, their damage is usually much more speculative and difficult to prove than that of a competitor who is an immediate victim of the violation. Furthermore if the flood-gates were opened to permit treble damage suits by every creditor, stockholder, employee, subcontractor, or supplier of goods and services that might be affected, the lure of a treble recovery, implemented by the availability of the class suit as facilitated by the amendment of Rule 23 F.R.C.P., would result in an over-kill, due to an enlargement of the private weapon to a caliber far exceeding that contemplated by Congress. If the antitrust laws were precise and crystallized something might be said in favor of such an enormous expansion of potential treble damage liability, speculative as the damages might be. But the fact remains that because there are few "bright lines" in the area, even experts who have devoted their...