ALB Theatre Corporation v. Loew's Incorporated
| Decision Date | 17 January 1966 |
| Docket Number | No. 14754.,14754. |
| Citation | 355 F.2d 495 |
| Parties | The A.L.B. THEATRE CORPORATION, a corporation, Plaintiff-Appellant, v. LOEW'S INCORPORATED, a corporation, Universal Film Exchanges Inc., a corporation, Warner Bros. Pictures Distributing Corporation, a corporation, United Artists Corporation, a corporation, Columbia Pictures Corporation, a corporation, Twentieth Century-Fox Film Corporation, a corporation, Paramount Film Distributing Corporation, a corporation, and Balaban & Katz Corporation, a corporation, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Howard Hoosin, Seymour F. Simon, Morris J. Wexler, Chicago, Ill., for appellant.
Miles G. Seeley, Richard F. Hart, Chicago, Ill., for defendants-appellees, Loew's Incorporated, a corporation, Universal Film Exchanges, Inc., a corporation, Warner Bros. Pictures Distributing Corporation, a corporation, United Artists Corporation, a corporation, and Columbia Pictures Corporation, a corporation.
Samuel W. Block, Keith F. Bode, Chicago, Ill., for defendants-appellees, Paramount Film Distributing Corporation, a corporation, and Balaban & Katz Corporation, a corporation.
Robert W. Bergstrom, Charles O. Brizius, Chicago, Ill., Mayer, Friedlich, Spiess, Tierney, Brown & Platt, Raymond, Mayer, Jenner & Block, Bergstrom, Brizius & Olson, Chicago, Ill., of counsel, for defendant-appellee, Twentieth Century-Fox Film Corporation, a corporation.
Before SCHNACKENBERG and KNOCH, Circuit Judges, and MERCER, District Judge.
The genealogy of this suit must be traced from the decision in Bigelow v. RKO Radio Pictures, 7 Cir., 162 F.2d 520, cert. denied in 332 U.S. 817, 68 S. Ct. 158, 92 L.Ed. 394 in which the so-called "Chicago system of release" of motion picture films was enjoined as a violation of the anti-trust laws. Under the "Chicago system" all theatres in the City were classified under a caste system, within which no theatre could book a film except on the particular run which it was authorized under the system to play. On Chicago's north side, practically all first outlying runs of pictures, i. e., outside Chicago's Loop, were licensed to five theatres owned by the motion picture distributors and operated by Balaban & Katz Corporation, hereinafter B & K.
As a matter of industry practice, motion picture films are released for successive runs or clearances, beginning in the major metropolitan areas with a premiere exhibition in a major theatre in the downtown sector. Thereafter, the film is released on "first outlying run", or exhibition in a number of neighborhood theatres outside the central area of the city. The second outlying run, which is exhibited in a greater number of theatres than is the first, follows, etc. Eventually, the particular film is available on general release to all who desire it and who pay a flat-rate rental for exhibition. Thus, the rental value of any given film decreases in direct proportion to the extent of prior public exposure to the exhibited film, and the higher the run the more desirable the run from the exhibitor's point of view.
The Bigelow decision became effective on December 1, 1947. In January, 1948, Twentieth Century-Fox Film Corporation, hereinafter Fox, divided the City of Chicago into a number of competitive areas which it called "major key zones." After its Loop run, each film was made available for exhibition on first outlying run at one theatre in each of those major key zones. The film was rented for exhibition in each zone on the basis of sealed bids for rental thereof submitted by the theatres located within the zone.
Fox's major key zone 2 comprised that portion of the North side of Chicago north of Fullerton Avenue and east of Western Avenue, an area of about six and one-half miles from north to south and from one and one-half miles at the south end to three miles at the north end east to west.
Each of the other major distributors of motion pictures followed Fox's lead in establishing methods of competitive bidding for the first outlying run and subsequent runs of its products. Some grouped theatres in particular areas which might bid against each other for each successive run of their pictures, while others adopted geographical lines or zones, with all theatres in each such zone having an opportunity to bid against all other theatres in the zone for a license to exhibit each film on each successive outlying run. In general, the different competitive areas established by the major distributors of films followed closely the geographical location and configuration of the original Fox zones.
One major exception to the geographic zone concept was a plan devised by RKO Theatres under which RKO would license a film for first outlying run to any theatre submitting a bid for a particular picture above a stated minimum, except that when two qualified bids were received from theatres located within one and one-half miles of each other only the highest bid would be accepted.
As originally conceived, the Fox major key zone 2 included some 43 theatres, including the Uptown, Belmont, Century and Covent Theatres, all of which were at that time operated by B & K, plus a number of independent theatres. Until May, 1949, only one first outlying run license was issued for each film for the whole area by the major distributors. At that time the Ridge Theatre, an independent theatre located near the north end of the zone, requested of all major distributors that it be placed in a smaller bidding area where it would not have to compete against the Uptown Theatre for first outlying run pictures. In response to that demand, each of the major distributors created a new bidding area comprised of approximately the northern one-third of the previously established zone. At about the same time B & K requested all distributors to divide the north side zone so that its Uptown Theatre and its Century Theatre could compete in separate zones for the first outlying run of films. In response to that request, during the month of June and July, 1949, the major distributors, except Loew's, divided the southern twothirds of the original north-side zone thus creating two zones or competitive bidding areas. Though the definitive changes effected differed from distributor to distributor, in each case the Uptown, Vogue, and North Center Theatres were placed in one bidding zone, while the Belmont, Century and Covent were placed in a separate zone. In 1952, Loew's revised its competitive bidding structure on the north side to parallel that of the other major distributors in the area which formerly comprised the Fox major key zone 2.
In the period from 1948 to 1955, the releasing situation of the major distributors was in a state of considerable flux. At the outset, only some twelve theatres in the City of Chicago could play any picture simultaneously on the first outlying run. Subsequently the bidding areas were revised to such extent that each picture was made available to some sixty-five theatres simultaneously for first outlying run.
Until October 31, 1955, B & K operated the Belmont Theatre and the Century Theatre which were located slightly more than one and one-half miles apart. Prior to 1949, when both of these theatres were competing against the B & K Uptown for first outlying runs, B & K exhibited motion pictures at each of those theatres only on second outlying run. After June, 1949, B & K exhibited pictures on a first outlying run basis at both the Belmont and the Century, but never the same picture at the same time.
In 1955, plaintiff corporation was created after which it entered into negotiations to lease the Belmont Theatre on the expiration of the lease of B & K. On October 31, 1955, plaintiff signed a lease for the theatre for an annual rental of $50,400.00, plus 5% of the annual concession income. The plaintiff corporation was capitalized at $25,000.00. It borrowed an additional $25,000.00 from the operator of the concessions in the theatre, which was placed on deposit with the landlord of the theatre to be used by him to remodel and improve the theatre.
On October 31, 1955, an attorney for plaintiff wrote to all major distributors demanding immediate and independent access to the Belmont for all first-run pictures. That letter was followed by a series of written demands to the distributors that they refrain from granting to other theatres any clearance or other priority with respect to any film which would prevent the simultaneous showing of that film at the Belmont. When its demands were refused by each of the several distributors, plaintiff submitted bids on first outlying run films which it desired to show with the statement, in effect, that if the plaintiff's bids were accepted, it would not demand any clearance over any other theatre or object to the simultaneous showing of such film in any other theatre in the City of Chicago.
The response of the several distributor defendants to the demands of the plaintiff differed, but all, in effect, advised the plaintiff, that it could submit bids against the Century, Covent and other theatres in the established competitive area upon any motion picture offered by each such distributor and on any run which plaintiff desired for such film.
Plaintiff operated the Belmont until January 31, 1957. At that time plaintiff was insolvent and was evicted from the theatre for non-payment of rent.
Thereafter this suit for treble damages was filed. Defendants are Loew's Incorporated, Universal Film Exchanges, Inc., Warner Bros. Pictures Distributing Corporation, United Artists Corporation, Columbia Pictures Corporation, Twentieth Century-Fox Film Corporation, Paramount Film Distributing Corporation and Balaban & Katz Corporation. Hereinafter, for convenience the defendants are referred to as Loew's, Universal, Warner, U.A., Columbia, Fox, Paramount and B & K, respectively.
The theory of plaintiff's complaint was that the 7 distributor defendants,...
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