Kerasotes Michigan Theatres, Inc. v. National Amusements, Inc., 87-1887

• Decision Date: 12 August 1988
• Docket Number: No. 87-1887,87-1887
• Citation: 854 F.2d 135
• Parties: 1988-2 Trade Cases 68,179, 11 Fed.R.Serv.3d 1545 KERASOTES MICHIGAN THEATRES, INC., Plaintiffs, Counter Defendants-Appellees, v. NATIONAL AMUSEMENTS, INC., Defendant, Counter Plaintiff-Appellant, George G. Kerasotes, Anthony A. Kerasotes, Marjorie Kerasotes, Louis G. Kerasotes, John G. Kerasotes, Robert A. Kerasotes, Dennis Kerasotes, Dan Stone, Kerasotes Indiana Theatres, Inc., Kerasotes Administration Company, Kerasotes Illinois Theatres, Inc., Kerasotes Missouri Theatres, Inc., Kerasotes Iowa Theatres, Inc., Louis Kerasotes Corporation and George G. Kerasotes Corporation, Counter Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 135

854 F.2d 135

1988-2 Trade Cases 68,179, 11 Fed.R.Serv.3d 1545

KERASOTES MICHIGAN THEATRES, INC., Plaintiffs, Counter Defendants-Appellees, v. NATIONAL AMUSEMENTS, INC., Defendant, Counter Plaintiff-Appellant George G. Kerasotes, Anthony A. Kerasotes, Marjorie Kerasotes, Louis G. Kerasotes, John G. Kerasotes, Robert A Kerasotes, Dennis Kerasotes, Dan Stone, Kerasotes Indiana Theatres, Inc., Kerasotes Administration Company, Kerasotes Illinois Theatres, Inc., Kerasotes Missouri Theatres, Inc. Kerasotes Iowa Theatres, Inc., Louis Kerasotes Corporation and George G. Kerasotes Corporation, Counter Defendants-Appellees.

No. 87-1887.

United States Court of Appeals Sixth Circuit.

Aug. 12, 1988.

Rehearing and Rehearing En Banc Denied Oct. 3, 1988.

Eugene Driker (argued), Elaine Fieldman, Ellen M. Nerring, Barris, Sott, Denn & Driker, Detroit, Mich., for defendant, counter plaintiff-appellant.

H.C. Goplerud, David A. Ettinger (argued), Honigman, Miller, Schwartz & Cohn, John T. Walton, Jr., Detroit, Mich., Joseph Giffin, Chadwell & Kayser, Ltd., Chicago, Ill., for plaintiffs, counter defendants-appellees.

Before MARTIN and WELLFORD, Circuit Judges, and GIBBONS, District Judge. ^*

BOYCE F. MARTIN, Jr., Circuit Judge.

National Amusements, Inc., appeals from the Rule 12(b)(6) dismissal of its antitrust counterclaim brought against Kerasotes Michigan Theatres, Inc. Because we believe National's claim was improvidently dismissed, we reverse.

National and Kerasotes are the sole motion picture exhibitors in the Flint, Michigan area. Each owns a significant number of theatres in other cities. Litigation between these parties commenced when Kerasotes filed suit alleging that National had used its economic leverage in areas other than Flint to obtain exclusive exhibition rights to films in Flint. In response to this claim, which suit is still in the pre-trial stages, National asserted a counterclaim that Kerasotes had used its monopoly and market position in other geographical regions to coerce distributors into providing them first run films in the Flint area. The district court dismissed National's counterclaim, however, under F.R.Civ.P. 12(b)(6). 658 F.Supp. 1514. This was done before any discovery was taken on the counterclaim.

Kerasotes began competing in the Flint area in late 1984 when it purchased four indoor movie theatres. The four theatres have eleven screens. At the time, National owned and operated two indoor theatres having a total of ten screens. According to the counterclaim, which in an appeal from a dismissal under Rule 12(b)(6) must be accepted as true, Kerasotes' theatres are old and poorly run whereas National's theatres are among the most luxurious in the country. National alleges that after Kerasotes purchased these theatres, Kerasotes sought to avoid competing with National by trying to arrange a "split" with National for the showing of certain films. After failing in this effort, National alleges, Kerasotes began to use its monopoly position in other geographical markets to obtain films in the Flint market, films Kerasotes would not have otherwise been able to obtain. National alleges in its counterclaim that Karasotes' behavior violated Sections 1 and 2 of the Sherman Act as well as Michigan antitrust statutes.

The district court dismissed these claims, holding that because Kerasotes did not possess a dominant position in the Flint market where it competed with National, Kerasotes' behavior could not have been injurious to competition. Thus, Kerasotes was insulated from antitrust liability. On appeal, National argues only that the district court erred in dismissing its claim that Kerasotes had attempted to leverage its monopoly position in violation of section 2 of the Sherman Act.

Motions made pursuant to Rule 12(b)(6) test whether a cognizable claim has been adequately alleged in a complaint. Rule 8(a) sets out the requirement that pleadings must contain "a short and plain statement of the claim showing that the pleader is entitled to relief...." Thus, when reviewing a Rule 12(b)(6) motion, we must accept as true all factual allegations in the complaint. Windsor v. The Tennessean, 719 F.2d 155, 158 (6th Cir.1983), cert. denied, 469 U.S. 826, 105 S.Ct. 105, 83 L.Ed.2d 50 (1984). As we stated in Nishiyama v. Dickson County, Tenn., 814 F.2d 277, 279 (6th Cir.1987), a "court must deny the motion to dismiss unless it can be established beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." In an antitrust action, moreover, "the complaint need only allege sufficient facts from which the court can discern the elements of an injury resulting from an act forbidden by the antitrust laws." Newman v. Universal Pictures, 813 F.2d 1519, 1522 (9th Cir.1987).

We believe National has adequately alleged a viable antitrust cause of action sufficient at least to defeat a Rule 12(b)(6) dismissal. Kerasotes' alleged behavior, using its dominant market position in non-Flint areas to obtain first run films in Flint, which they would not have been able to obtain in a competitive process, does indeed constitute "leveraging," which is forbidden by the antitrust laws. In White and White, Inc. v. American Hospital Supply Corp., 723 F.2d 495, 506 (6th Cir.1983), we defined leveraging as "the use of monopoly power in one market to amplify or 'leverage,' a position in another competitive market." To run afoul of the antitrust laws, it is not necessary that the party attempting to leverage its monopoly power from a given market into a second market possess monopoly power or dominant market position in that second market. As the Second Circuit stated:

[A] firm violates section 2 by using its monopoly power in one market to gain a competitive advantage in another, albeit without an attempt to monopolize the second market.... there is no reason to allow the exercise of such power to the detriment of competition, in either the controlled market or any other. That the competition in theleveraged market may not be destroyed but merely distorted does not make it any more palatable. Social and economic effects of an extension of monopoly power militate against such...