US v. Loew's Inc.

• Decision Date: 27 February 1992
• Docket Number: No. 89 Civ. 6159 (WCC).,89 Civ. 6159 (WCC).
• Citation: 783 F. Supp. 211
• Parties: UNITED STATES of America, Plaintiff, v. LOEW'S INCORPORATED, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

783 F. Supp. 211

UNITED STATES of America, Plaintiff, v. LOEW'S INCORPORATED, et al., Defendants.

No. 89 Civ. 6159 (WCC).

United States District Court, S.D. New York.

February 7, 1992.

As Amended February 27, 1992.

Bernard M. Hollander, Antitrust Div., U.S. Dept. of Justice, Washington, D.C., for U.S.

Fried, Frank, Harris, Shriver & Jacobson (A Partnership Including Professional Corporations), New York City, for defendants; Allen Kezsbom, Ira S. Sacks, Alan V. Goldman, Seymour H. Smith, Loews Theatre Management Corp., Secaucus, N.J., and Surie Rudoff, New York City, of counsel.

OPINION AND ORDER

WILLIAM C. CONNER, District Judge.

Loews Theatre Management Corp., LTM Holdings, Inc. ("Loews") and Sony Pictures Entertainment Inc. ("SPE" or "Tri-Star") move this Court to terminate insofar as they apply to Loews or Tri-Star: (1) the Consent Judgment entered against Loew's Incorporated on February 7, 1952 (the "1952 Loews Judgment" or the "Judgment");¹ (2) the Order entered on February 27, 1980, which, inter alia, modified and applied to Loews the so-called distributor conduct restrictions of the 1952 Loews Judgment to Loews (the "1980 Loews Order"); and (3) the Order entered on June 18, 1987 pertaining to Tri-Star's acquisition of Loews (the "1987 Tri-Star Order"), which, inter alia, requires Loews and Tri-Star, solely in their dealings with each other, to observe the distributor conduct restrictions set forth in Section V(2)-(9) of the 1980 Loews Order. (The 1952 Loews Judgment, the 1980 Loews Order, and the 1987 Tri-Star Order are sometimes hereinafter referred to in the aggregate as the "Loews Consent Judgment").

The United States has consented to the entry of an order terminating the Loews Consent Judgment and has submitted a legal memorandum in support of that result. For the reasons outlined below, the motion is granted.

BACKGROUND

In 1938, the Department of Justice brought an antitrust action against the five vertically-integrated firms that dominated production, distribution, and exhibition in the motion picture industry (the "majors") and the three firms engaged only in production and/or distribution (the "minors").² The proof at trial established that the five majors had, inter alia, engaged in a "horizontal" conspiracy to monopolize the exhibition business by foreclosing independent exhibitors from access to first-run films, and the minors acquiesced in that scheme. United States v. Paramount Pictures, Inc., 66 F.Supp. 323 (S.D.N.Y.1946).

To remedy the adverse consequences of this conspiracy, the Supreme Court in United States v. Paramount Pictures Inc., 334 U.S. 131, 68 S.Ct. 915, 92 L.Ed. 1260 (1948), endorsed a host of distributor restrictions and, in addition, divestiture of the majors' theatre exhibition circuits. The Court concluded that the conspiracy among the majors "had monopoly in exhibition for one of its goals" and that the majors had colluded to grant favored access to each other's theatres for each other's films. 334 U.S. at 170-71, 68 S.Ct. at 935.

On remand, the Department of Justice and the defendants ultimately negotiated the consent judgments which, inter alia: (1) resulted in the ordered divestiture of the Loew's theatre circuit from Loew's Incorporated, the distributor, through the formation of an independent New Theatre Company, and imposed certain conduct and other operating restrictions on New Theatre Company's exhibition activities (1952 Loews Judgment, Sections III and VI), and (2) as to the distributor, Loew's Incorporated, enjoined it from certain enumerated distribution practices. (1952 Loews Judgment, Section II, 1-8). The New Theatre Company became known as Loews Theatres, Inc. ("LTI"). Loew's Incorporated changed its name to Metro-Goldwyn-Mayer, Inc. ("MGM"), and continued as a producer and distributor, but not exhibitor, of motion pictures.

In 1980, as a condition for being permitted to enter into motion picture distribution, Loews was required, inter alia, to accept the distributor conduct restrictions to which Loew's Incorporated (MGM) was subject. (1980 Loews Order, Section V).

In 1987, as a condition for being permitted to acquire the Loews theatre circuit, Tri-Star, then a recent entrant into production and distribution of motion pictures, was required in its dealings with Loews to abide by the conduct restrictions imposed on the Paramount defendants. (1987 Tri-Star Order, Section III).

DISCUSSION

This Court has jurisdiction to modify or terminate the 1952 Loew's Judgment pursuant to Section X of that Judgment, Rules 60(b)(5) and (6) of the Federal Rules of Civil Procedure, and "principles inherent in the jurisdiction of the chancery." United States v. Swift & Co., 286 U.S. 106, 114, 52 S.Ct. 460, 462, 76 L.Ed. 999 (1932).

Where, as here, the United States consents to the proposed termination of the judgment in a Government antitrust case, the issue before the Court is whether termination of the judgment is "in the public interest." United States v. Swift & Co., 1975-1 Trade Cas. ¶ 60,201, at 65,702 (N.D.Ill.1975); see also United States v. General Motors Corp., 1983-2 Trade Cas. ¶ 65,614 (N.D.Ill. Aug. 15, 1983). This is the same standard that a district court applies in deciding whether to enter an initial consent decree submitted by the Government in an antitrust proceeding. See 15 U.S.C. § 16(e); United States v. AT & T, 552 F.Supp. 131, 147 n. 67 (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001, 103 S.Ct. 1240, 75 L.Ed.2d 472 (1983).

The Supreme Court has held that where the words "public interest" appear in federal statutes designed to regulate public sector behavior, they "take meaning from the purposes of the regulatory legislation." NAACP v. FPC, 425 U.S. 662, 669, 96 S.Ct. 1806, 1811, 48 L.Ed.2d 284 (1976); see also System Federation No. 91 v. Wright, 364 U.S. 642, 651, 81 S.Ct. 368, 373, 5 L.Ed.2d 349 (1961). The purpose of the antitrust laws, the "regulatory legislation" involved here, is to protect competition. See, e.g., United States v. Penn-Olin Chemical Co., 378 U.S. 158, 170, 84 S.Ct. 1710, 1716-17, 12 L.Ed.2d 775 (1964).

Thus, the ultimate question before the Court at this time is whether termination of the Loews Consent Judgment would serve the public interest in "free and unfettered competition as the rule of trade." Northern Pacific Railway v. United States, 356 U.S. 1, 4, 78 S.Ct. 514, 517, 2 L.Ed.2d 545 (1958).

In the instant case, the government argues that in the intervening four decades since the Loew's Judgment was entered the motion picture exhibition business has undergone great changes, with the result that Loews is one of only two of the many large exhibition circuits that remain subject to the Paramount decrees. Defendants note other significant changes in the motion picture business since 1952, including the use of wide release patterns and the development of multiplexes and new forms of post-theatrical exhibition, such as videocassettes and cable television. While questioning whether such developments necessarily render anticompetitive conduct by exhibitors less likely, the government acknowledges that they do make the specific restrictions imposed upon Loews in the Judgment less relevant to today's market.

And, significantly, the government notes that the motion...