Admiral Theatre Corp. v. Douglas Theatre Co.

Decision Date18 October 1978
Docket NumberNo. 77-1839,77-1839
Citation585 F.2d 877
Parties1978-2 Trade Cases 62,333 ADMIRAL THEATRE CORPORATION, a Nebraska Corporation, Benson Drive-In Corp., a Nebraska Corporation, and The Chief Theatre Corp., a Nebraska Corporation, Appellants, v. The DOUGLAS THEATRE COMPANY, a corporation, Russell Brehm, an Individual, J.S.B. Amusement Corporation of Nebraska, a corporation, Sarge Dubinsky, an Individual, Irwin Dubinsky, an Individual, Mann Theatres Corporation of California, a corporation, Theodore Mann, an Individual, American Multi-Cinema, Inc., a corporation; Stanley Durwood, an Individual, Cooper Theatres, Inc., a corporation, Elwood Thompson, an Individual, Herman Hallberg, an Individual, Northwest Cinema Theatre Corporation, a corporation, Melvin Lebowitz, an Individual, Central States Theatres Corporation, a corporation, Art Stein, an Individual, Myron Blank, an Individual, Exhibitor-Appellees, and also Universal Pictures, a corporation, Paramount Pictures, a corporation, Warner Brothers Distributing Corporation, a corporation, Columbia Pictures Industries, Inc., a corporation; Allied Artists Pictures Corporation, a corporation; Twentieth Century Fox Film Corporation, a corporation; Avco Embassy Pictures Corporation, a corporation; Cinerama Releasing Corporation, a corporation, Distributor-Appellees.
CourtU.S. Court of Appeals — Eighth Circuit

Earl A. Jinkinson of Winston & Strawn, Robert G. Foster, Chicago, Ill., for appellants; Gregory S. Murray and John L. Huff, Chicago, Ill., on brief.

William E. Morrow, Jr., of Swarr, May, Smith & Andersen, Omaha, Neb., for appellees (distributor defendant) Universal Film Exchanges, Inc., et al.; Donald J. Buresh, Omaha, Neb., on brief.

Kenneth C. Stephan of Knudsen, Berkheimer, Endacott & Beam, Lincoln, Neb., for appellees, Cooper Theatres, Inc., et al.; Richard A. Knudsen, Lincoln, Neb., on brief.

Leo Eisenstatt of Eisenstatt, Higgins, Kinnamon, Okun & Stern, Omaha, Neb., for appellees, The Douglas Theatre Co., et al.; J. Patrick Green, Omaha, Neb., on brief.

David W. Belin of Herrick, Langdon, Belin, Harris, Langdon & Helmick, Des Moines, Iowa, for appellees, Central States Theatre Corp., et al.; Joel D. Novak, Curt L. Sytsma and Philip E. Stoffregen, Des Moines, Iowa, on brief.

Before BRIGHT, Circuit Judge, INGRAHAM, * Senior Circuit Judge, and STEPHENSON, Circuit Judge.

STEPHENSON, Circuit Judge.

This is an appeal by unsuccessful plaintiffs in a private civil antitrust action. The plaintiff motion picture theatre corporations sought to recover treble damages for, and injunctive relief from, alleged violations of sections 1 and 2 of the Sherman Act, 1 by defendant motion picture distributors and exhibitors. The action came to trial before the court 2 and a jury. At the close of plaintiffs' evidence and on the motion of defendants, the court directed a verdict in favor of all of the defendants except Central States Theatre Corporation and its officers, who were granted summary judgment prior to trial, See Part II, Infra. Admiral Theatre Corp. v. Douglas Theatre Co., 437 F.Supp. 1268 (D.Neb.1977). On this appeal plaintiffs argue that the evidence in the record was sufficient to warrant submission of the case to the jury. In the alternative plaintiffs claim that "erroneous exclusions" of evidence by the district court prevented them from presenting a submissible case. We affirm the district court.

The gist of plaintiffs' complaint is that between March 15, 1970, and March 15, 1974, there existed in the Omaha, Nebraska-Council Bluffs, Iowa, market a conspiratorial agreement among all distributor-defendants 3 and exhibitor-defendants, 4 which unlawfully interfered with plaintiffs' ability to obtain first-run motion pictures for their Omaha theatres resulting in substantial damages to the plaintiffs. The plaintiffs allege that the conspiracy operated by means of a split, a device by which the exhibitor-defendants agreed among themselves that only one, or certain of them, would attempt to license any particular first-run picture offered by a distributor in the Omaha-Council Bluffs market area. The plaintiff corporations, which operated three theatres in Omaha, are owned entirely by the Ralph Blank family. 5 Of the three theatres, the Chief, which closed in 1972, and the Admiral are single screen indoor theatres and the Skyview is a single screen outdoor drive-in theatre.

The exhibitor-defendants are competitors of the plaintiffs who owned, operated, or managed approximately 15 first-run movie theatres with 28 screens in the Omaha-Council Bluffs market area between March 15, 1970, and March 15, 1974. 6 The distributor-defendants are in the business of distributing copyrighted first-run motion picture films to exhibitors in the Omaha-Council Bluffs market area as well as throughout the country.

We will not attempt to restate the exhaustive evidence produced in the court below and thoroughly discussed by the district court in its published memorandum opinion. Admiral Theatre Corp. v. Douglas Theatre Co., supra. We will merely summarize the evidence sufficiently to support our conclusion that the plaintiffs have failed to establish a submissible case against any of the defendants.

The record discloses that in Omaha the distributor-defendants licensed first-run pictures on a system of competitive bidding and negotiation. Under this system bid invitations were sent at the same time to all Omaha exhibitors from the branch offices of the distributors. Bid invitation letters specifically reserved to the distributors the right to reject all bids, even bids that met the minimum suggested terms. Exhibitors responded to bid invitations by submitting written offers of terms or oral notification that they were not submitting a bid but would be willing to negotiate if no bids were accepted. If all bids were rejected, the branch offices of the distributors were instructed either to solicit rebids on the picture or to enter into negotiations to secure the best licensing agreement possible. Final acceptance of an offer by either bid or negotiation was followed by a written license agreement specifying "the theatre and screen at which the picture would be shown, the opening date, the length of the engagement, the terms, if any, on which the exhibitor would hold over the picture after the initial term, whether the exhibitor had a right to an exclusive exhibition or whether it would play the picture simultaneously (day and date) with other theatres, the time, if any, which had to elapse after the end of the run before the picture would be available for a subsequent run ('clearance'), and most importantly, the method by which film rental would be computed and paid." Id. at 1278. The method for determining film rental varied but it usually involved a percentage of gross box office receipts.

The objective of the distributors was to obtain the greatest amount of film rental they could from the first exhibition of a picture, as first-run gross receipts are the highest. In evaluating exhibitor offers, the distributors had to make a judgment as to which theatre offered the greatest revenue-producing possibilities. The distributors weighed not only the contract terms offered by an exhibitor, but also the "grossing potential" of the theatres. "Grossing potential" is the demonstrated ability of the theatre to attract patrons, which is largely a matter of physical quality and location.

It is undisputed that in the Omaha-Council Bluffs market area during the period from March 15, 1970, to March 15, 1974, quality first-run films were in short supply. In response to this shortage, which had created a sellers' market highly favorable to the distributors, a group of exhibitors entered into a split of product arrangement. Under this arrangement the exhibitors split available first-run motion pictures from all the distributors and they agreed not to bid or negotiate for a film split to another exhibitor, without that exhibitor's consent, in the hope of lowering the film rentals paid to distributors. During the relevant time period there were two separate split arrangements. The first split operated between March 15, 1970, and February 29, 1972, and the second split operated from November 29, 1972, until March 15, 1974. The split was subject to changing membership throughout the entire period. Plaintiffs were at no time members of either split. Both splits involved periodic meetings during which the participants, on a predetermined rotational basis, selected pictures from lists of upcoming releases prepared by one of the participants. Once having selected a picture on the split, the exhibitor still had to bid or negotiate with the distributor. In some instances the exhibitor was unable to come to terms with the distributor.

It is plaintiffs' contention that as a result of the split they were successful in licensing only the lower quality first-run films. However, the record reveals that during the period between March 15, 1970, and March 15, 1974, plaintiffs were successful in obtaining approximately 60% of the films upon which they made an offer of specific terms. Nineteen of the pictures upon which plaintiffs had made an offer of specific terms had been allocated by the split. Of the 19, 9 were licensed to plaintiffs (including one day and date with the split member), 9 were licensed to the split members to whom they were allocated (including one which played day and date with plaintiffs), and 2 were licensed to a split member other than the one to whom it was allocated. Admiral Theatre Corp. v. Douglas Theatre Co., supra, 437 F.Supp. at 1282-84.

Based on a comparable theatre theory of damages the plaintiffs' expert testified that the defendants' activities during the relevant period caused damages of $151,085 to the Admiral Theatre. No damage evidence was admitted with respect to the Chief Theatre or the Skyview drive-in theatre.

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