Syufy Enterprises v. American Multicinema, Inc.

• Decision Date: 25 February 1986
• Docket Number: 84-1728.,No. 83-2725,83-2725
• Citation: 793 F.2d 990
• Parties: SYUFY ENTERPRISES, Plaintiff-Appellant/Cross-Appellee, v. AMERICAN MULTICINEMA, INC., AMC Film Management Inc., and Durwood, Inc., Defendants-Appellees/Cross-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

793 F.2d 990

SYUFY ENTERPRISES, Plaintiff-Appellant/Cross-Appellee, v. AMERICAN MULTICINEMA, INC., AMC Film Management Inc., and Durwood, Inc., Defendants-Appellees/Cross-Appellants.

Nos. 83-2725, 84-1728.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 13, 1984.

Decided February 25, 1986.

As Amended on Denial of Rehearing and Rehearing July 14, 1986.

COPYRIGHT MATERIAL OMITTED

Joel Linzner, Michael N. Khourie, Khourie & Crew, Joseph Alioto, Alioto & Alioto, San Francisco, Cal., for plaintiff-appellant/cross-appellee.

Robert C. Hackett, Mohr, Hackett & Pederson, Phoenix, Ariz., for defendants-appellees/cross-appellants.

Before CANBY and NORRIS, Circuit Judges, and STEPHENS,^* Senior District Judge.

As Amended on Denial of Rehearing and Rehearing En Banc July 14, 1986.

NORRIS, Circuit Judge:

In this antitrust case involving the exhibition of major feature films in the San Jose area, a jury returned a general verdict in favor of appellees American Multicinema, Inc. (AMC)¹ on its counterclaim against appellant, Syufy Enterprises. The jury awarded AMC damages totaling $1,006,421. Judgment was entered for that amount trebled and for attorney's fees.²

The case went to the jury on AMC's claims that Syufy monopolized, attempted to monopolize and conspired to monopolize in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2 (1982). Syufy's principal arguments on appeal relate to the sufficiency of the evidence to support the general verdict in favor of AMC.³ Syufy also challenges the admission of certain evidence.

Syufy contends that the district court erred in failing to grant a judgment non obstante veredicto. The standard for determining the propriety of a judgment n.o.v. is the same for district and appellate courts. California Computer Products v. International Business Machines, Inc., 613 F.2d 727, 734 (9th Cir.1979). It is also the same as the standard for determining the propriety of a directed verdict: whether, "viewing the evidence as a whole, there is substantial evidence present that could support a finding ... for the nonmoving party." Id. (quoting Chisholm Brothers Farm Equipment Co. v. International Harvester Co., 498 F.2d 1137, 1140 (9th Cir.), cert. denied, 419 U.S. 1023, 95 S.Ct. 500, 42 L.Ed.2d 298 (1974)). Substantial evidence is "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Washington v. United States, 214 F.2d 33, 41 (9th Cir.), cert. denied, 348 U.S. 862, 75 S.Ct. 86, 99 L.Ed. 679 (1954).

Four distinct theories of Section 2 violations by Syufy were submitted to the jury. We hold that the evidence was sufficient to support a jury finding that Syufy violated Section 2 with respect to two of the theories: that Syufy monopolized and attempted to monopolize the San Jose hardtop major film exhibition market. We further hold that the evidence was inadequate to support a verdict for AMC with respect to the remaining two theories: that Syufy violated Section 2 by leveraging its monopoly power in the San Jose drive-in theater market and that Syufy conspired to monopolize the major film hard-top exhibition market. Finally, we reject Syufy's arguments that the district court erred in admitting certain evidence.⁴

Part I of our opinion addresses AMC's theory that Syufy monopolized the hardtop market. Part II considers AMC's theory that Syufy leveraged its monopoly power in the drive-in market to gain a competitive advantage in the hardtop market. Parts III and IV evaluate the attempt to monopolize and conspiracy to monopolize theories. In Part V, we consider whether the general verdict may be affirmed as attributable to one of AMC's two viable theories. Part VI responds to Syufy's claim that the trial court erred by admitting evidence concerning Syufy's acquisition of the Mann Theater. In Part VII we address Syufy's contention that AMC's damage estimates were flawed.

I. THE THEORY THAT SYUFY MONOPOLIZED THE MAJOR FILM HARDTOP EXHIBITION MARKET

AMC's monopolization claim stems from Syufy's extensive ownership of both drive-in and hardtop movie theaters in the San Jose area. During the relevant period, Syufy owned all four drive-in theater complexes in the San Jose market. Syufy also operated a total of fifteen screens in large domed hardtop theaters, each with a seating capacity of 680-900 people. Syufy's domed hardtop theaters were known as "event" theaters because of their wide screens, state of the art sound, high ceilings and rocking chair seats.

During the same period, AMC owned and operated four theater complexes in the San Jose area. Each complex housed six auditoriums with seating capacities of approximately 250 people. AMC's theaters were generally located within shopping malls and lacked many of the amenities found in Syufy's hardtop theaters. But AMC's theaters were conveniently located and offered greater selection of movies than Syufy's theaters. They also charged, on average, a lower admission price.

AMC claims that Syufy used its dominant position in the ownership of both hardtop and drive-in theaters to monopolize the exhibition of major films in the San Jose area. AMC advanced two discrete theories in support of this claim. AMC's first monopolization theory is that Syufy effectively deprived AMC of any chance to compete for major motion pictures in the San Jose area by using its dominant position in the market to license such pictures on an exclusive basis.

To establish monopolization under Section 2 of the Sherman Act, "a plaintiff must prove: (1) possession of monopoly power in the relevant market; (2) willful acquisition or maintenance of that power; and (3) causal `antitrust' injury." Transamerica Computer Co., Inc. v. International Business Machines Corp., 698 F.2d 1377, 1382 (9th Cir.), cert denied, 464 U.S. 955, 104 S.Ct. 370, 78 L.Ed.2d 329 (1983); see also California Computer Products, Inc. v. International Business Machines Corp., 613 F.2d 727, 735 (9th Cir.1979). Thus, we must decide whether AMC presented substantial evidence with respect to each of the three elements of a monopolization claim.

A. Monopoly power.

Monopoly power — the first element of monopolization — is the power to control prices or exclude competition. United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391, 76 S.Ct. 994, 1005, 100 L.Ed. 1264 (1956). We begin our analysis of the issue of market power with a discussion of market definition and then turn to the question whether there is substantial evidence that Syufy had monopoly power within the relevant market.⁵

1. Market definition.

We begin by considering the definition of the relevant market within which Syufy allegedly possessed monopoly power. See United States v. Aluminum Co. of America, 148 F.2d 416 (2d Cir.1945) ("Alcoa"). Relevant market is a factual issue which is decided by the jury; the court is not permitted to account for witness credibility, weigh the evidence, or reach a different result it finds more reasonable as long as, viewing the evidence in a light most favorable to the nonmoving party, the jury's verdict is supported by substantial evidence. Los Angeles Memorial Coliseum Comm'n v. N.F.L., 726 F.2d 1381, 1392 (9th Cir.), cert. denied, ___ U.S. ___, 105 S.Ct. 397, 83 L.Ed.2d 331 (1984).

AMC defined the relevant market as the market for exhibition of industry anticipated top-grossing motion pictures in the San Jose area. Syufy does not dispute the geographic component of this definition — the San Jose area. Nor does it dispute limiting the product market definition to hardtop theaters. The only aspect of AMC's market definition that Syufy disputes is the limitation of the relevant product market to the exhibition of major films, more specifically to industry-anticipated top-grossing films. Syufy argues that this market definition is ex post facto and ad hoc, and that all first run films are in substantial competition with each other.

In evaluating Syufy's challenge, we begin with the principle that assessment of a product market definition must take into account whether products excluded from the definition are "interchangeable in use" with those included in the market and whether there is "cross-elasticity of demand" between excluded and included products. United States v. E.I. duPont de Nemours & Co., 351 U.S. 377, 394-95, 76 S.Ct. 994, 1006-07, 100 L.Ed. 1264 (1956). In economic terms, we might recharacterize Syufy's argument as follows: all first run films are interchangeable in use and the price and availability of any one film will affect the demand for all other films. Top-grossing films, Syufy argues, are simply those films that prove to be highly successful in the market place, but they possess no special characteristics that differentiate them from less successful films from an ex ante perspective. Syufy also argues that limiting the product definition to top-grossing films has the effect of irrationally and unfairly penalizing the exhibitor with the prescience to book films that later prove to be big hits with the movie-going public.

AMC's rejoinder is that Syufy's argument mischaracterizes the product market definition. AMC points out that it did not define the market as simply top-grossing films, but as industry anticipated top-grossing films. AMC argues that these films can be differentiated from other first run films from an ex ante perspective because they have larger budgets, "name" stars and directors, larger advertising budgets, command large guarantees, and possess other distinctive characteristics which can be identified before the film is released. In economic terms, the viability of AMC's product market definition depends on the proposition that anticipated top-grossing films are not interchangeable with other films in the eyes of consumers and that price increases or supply constrictions for such films do not result in a shift in consumption patterns to other films. In legal terms, the question is...