Exhibitors' Service, Inc. v. American Multi-Cinema, Inc.

• Decision Date: 25 April 1986
• Docket Number: 84-5704,Nos. 84-5530,INC,MULTI-CINEM,s. 84-5530
• Citation: 788 F.2d 574
• Parties: , 1986-1 Trade Cases 67,067 EXHIBITORS' SERVICE, INC., Plaintiff/Appellee, v. AMERICAN, and AMC Film Marketing, Inc., formerly known as AMC Film Management, Inc., Missouri Corporations, Defendants/Appellants, American Multi-Cinema, Inc., AMC Film Management, Inc., AMC Film Marketing, Inc., AMC Film Exhibition, Inc., and Durwood, Inc., Defendants. EXHIBITORS' SERVICE, INC., Plaintiff/Appellant, v. AMERICAN, and AMC Field Marketing, Inc., Defendants/Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 574

788 F.2d 574

54 USLW 2610, 1986-1 Trade Cases 67,067

EXHIBITORS' SERVICE, INC., Plaintiff/Appellee, v. AMERICAN MULTI-CINEMA, INC., and AMC Film Marketing, Inc., formerly known as AMC Film Management, Inc., Missouri Corporations, Defendants/Appellants,

American Multi-Cinema, Inc., AMC Film Management, Inc., AMC

Film Marketing, Inc., AMC Film Exhibition, Inc.,

and Durwood, Inc., Defendants.

EXHIBITORS' SERVICE, INC., Plaintiff/Appellant, v. AMERICAN MULTI-CINEMA, INC., and AMC Field Marketing, Inc.,

Defendants/Appellees.

Nos. 84-5530, 84-5704.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Sept. 5, 1985.

Decided April 25, 1986.

Maxwell Blecher, Blecher, Collins, & Weinstein, Los Angeles, Cal., for plaintiff/appellee.

Robert C. Hackett, Mohr, Hackett, Pederson, & Blakeley, P.C., Phoenix, Ariz., for defendants/appellants.

Appeal from the United States District Court for the Central District of California.

Before CANBY, BEEZER and HALL, Circuit Judges.

CANBY, Circuit Judge:

In this case, the controlling issue is whether plaintiff is the proper party, ¹ under Section Four of the Clayton Act, 15 U.S.C. Sec. 15 (1982), to bring this antitrust action for treble damages under Section One of the Sherman Antitrust Act, 15 U.S.C. Sec. 1 (1982). Defendants American Multi-Cinema, Inc. (AMC), and its subsidiary AMC Film Marketing, Inc. (Film Marketing) appeal from a jury verdict and judgment in favor of plaintiff Exhibitors' Service, Inc. (ESI). The district court denied defendants' pretrial motion to dismiss ESI's antitrust claim for lack of standing. On appeal, AMC contests this ruling. We have jurisdiction under 28 U.S.C. Sec. 1291, and we reverse.

BACKGROUND

This case arises out of a dispute involving the licensing, distribution and exhibition of feature motion pictures. The motion picture industry is divided into at least three groups engaged in separate and distinct businesses: (1) motion picture distributors, (2) motion picture exhibitors and (3) licensing agents. Distributors, who own the copyrights for films they produce, license the pictures for exhibition in theaters operated by exhibitors. Licensing agents represent exhibitors in negotiations with distributors to acquire these licenses.

ESI, a California corporation, acts as a licensing agent for independent motion picture exhibitors in the southwestern United States. From 1973 through December 1980, ESI was the licensing agent for Blair and Reid, Inc. (B & R), a motion picture exhibitor operating eight screens in the MetroCenter Shopping Center in Phoenix, Arizona. The agreement between ESI and B & R was terminable at will by either party.

AMC, a Missouri corporation, is a motion picture exhibitor operating 725 theaters in 26 states, including six screens in MetroCenter. Its subsidiary Film Marketing, like ESI, is a licensing agent.

ESI alleged, and the jury apparently found, that following AMC's move into MetroCenter, intense and costly competition for films resulted between AMC and B & R. Essentially AMC and B & R became engaged in a bidding war for rights from distributors to first-run films for their respective MetroCenter screens. In order to reduce or eliminate the competition between them, AMC and B & R entered into a so-called "splitting" arrangement under which the two firms equitably allocated films between themselves. The result was to lower the cost of films for both exhibitors. As part of this AMC-B & R agreement, B & R exercised its right under its contract with ESI to terminate ESI as its licensing agent. Both B & R and AMC now employ Film Marketing as their exclusive licensing agent.

ESI filed this action in district court, claiming that the AMC-B & R arrangement was an improper restraint of trade in violation of Section One of the Sherman Act. It All parties agreed that the AMC-B & R agreement was a restraint of trade with its primary effect on film distributors because the agreement was to reduce competition between AMC and B & R for rights to certain films. Geographically, the restraint involved the relatively narrow market of motion picture theaters in and around MetroCenter in Phoenix.

                requested both injunctive relief and treble damages. 2   Before trial, AMC filed a motion for partial summary judgment on the antitrust count, contending that plaintiffs lacked standing to bring the lawsuit.  The district court, relying on the U.S. Supreme Court decisions in Associated General Contractors of California, Inc., v. California State Council of Carpenters, 459 U.S. 519, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983), and Blue Shield of Virginia v. McCready, 457 U.S. 465, 102 S.Ct. 2540, 73 L.Ed.2d 149 (1982), denied the motion.  The court held that the facts alleged by ESI were sufficient to show:  (1) that ESI was a competitor within the area of the economy that would be endangered by a breakdown in competitive conditions;  (2) that damage to ESI was the direct and foreseeable result of a price fix;  (3) that plaintiff's injury was an integral aspect of the bid-rigging conspiracy;  and (4) that plaintiff's alleged injury was "inextricably intertwined" with the injury suffered by distributors and other exhibitors as a result of the alleged illegal activity between AMC and B & R.  The court later denied AMC's request to certify an interlocutory appeal on the standing issue
                

Testimony at trial revealed that ESI had no inherent objection to the AMC-B & R arrangement. Rather, it objected to that aspect of the agreement which required termination of ESI as B & R's licensing agent. As the parties agreed, nothing in the "split" arrangement necessarily required ESI's termination; however, some testimony at trial indicated that replacement of ESI with Film Marketing was an integral part of the AMC-B & R agreement.

The jury returned a verdict in favor of ESI on its Section One claim and awarded it $70,408 in damages before trebling. The district court later awarded ESI $105,612 in attorneys' fees and $7,160.83 in costs. See Exhibitors' Service, Inc. v. American Multi-Cinema, Inc., 583 F.Supp. 1186 (C.D.Cal.1984). AMC's motion for a judgment notwithstanding the verdict was denied, and this appeal followed. ESI cross-appeals from the award of attorneys' fees. ³

ANALYSIS

The issue before us is whether ESI was a proper party to bring an antitrust action against these defendants. The class of persons who may maintain a private damages action under the antitrust laws is defined in Section Four of the Clayton Act. 15 U.S.C. Sec. 15(a) (1982). That section provides:

[A]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefore in any district court of the United States ... and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee.

Read literally, the statute could encompass any harm directly or indirectly attributable to any antitrust violation. The Supreme Court has recognized that Congress intended the protections of the antitrust laws to extend to a broad range of potential victims.

                See McCready, 457 U.S. at 472, 102 S.Ct. at 2544.  The Court has declined, however, to devise a formula to determine who may properly bring claims because the "infinite variety of claims that may arise" under the antitrust laws renders such an effort "virtually impossible."    Associated General Contractors, 459 U.S. at 536, 103 S.Ct. at 908
                

Some general principles emerge from the cases. Most important, the Supreme Court has recognized that, despite the broad wording of Section Four, "there is a point beyond which the wrongdoer should not be held liable." Illinois Brick Co. v. Illinois, 431 U.S. 720, 760, 97 S.Ct. 2061, 2082, 52 L.Ed.2d 707 (1977) (Brennan, J., dissenting). "It is reasonable to assume that Congress did not intend to allow every person tangentially affected by an antitrust violation to maintain an action to recover threefold damages for the injury to his business or property." McCready, 457 U.S. at 477, 102 S.Ct. at 2547.

In Associated General Contractors, the Court's latest pronouncement on the question, a labor union was not permitted to challenge an alleged restraint under which an association of building and construction contractors coerced landowners and others into using only nonunion contractors and subcontractors on their construction projects. The union, though clearly injured by the restraint, was held to be too remote a party to bring the suit. In its opinion, the Court recognized the "contradictory and inconsistent results" in this area due to the use of ill-defined tests for standing such as "target area," "direct injury" or "zone of interests." Associated General Contractors, 459 U.S. at 536 n. 33, 103 S.Ct. at 907 n. 33; accord Bhan v. NME Hospitals, Inc., 772 F.2d 1467, 1469-70 n. 2 (9th Cir.1985); Bubar v. Ampco Foods, Inc., 752 F.2d 445, 449 (9th Cir.), cert. denied, --- U.S. ----, 105 S.Ct. 3481, 87 L.Ed.2d 616 (1985). In place of these tests, the Court set out a series of factors to be evaluated case-by-case to determine whether a particular plaintiff should be permitted to bring an antitrust action. See 459 U.S. at 545, 103 S.Ct. at 912.

Obviously a plaintiff must allege an antitrust violation with consequential harm to him. An allegation that plaintiff's injury was intended by the defendant is also important. But allegations of violation, harm and intent are insufficient as a matter of law to establish the plaintiff as a proper party. Id. Rather, the nature of plaintiff's injury, the directness or indirectness of the asserted injury, the potential for duplicative recovery or complex apportionment of damages, the speculative nature of damages asserted, and the existence of more direct victims of the alleged violation are factors a court must consider when making the "proper party" determination. Id.; Bubar, 752 F.2d at 449.

Applying these factors to the case at bar, w...