Allied Artists Pictures Corp. v. Rhodes, No. C-2-78-1031.

CourtUnited States District Courts. 6th Circuit. United States District Courts. 6th Circuit. Southern District of Ohio
Citation496 F. Supp. 408
Docket NumberNo. C-2-78-1031.
PartiesALLIED ARTISTS PICTURES CORP., Avco Embassy Pictures Corp., Buena Vista Distribution Co., Inc., Columbia Pictures Industries, Inc., Metro Goldwyn Mayer, Inc., Paramount Pictures Corp., Twentieth Century Fox Film Corp., United Artists Corp., Universal Pictures Division of Universal City Studios, Inc., Universal Film Exchanges, Inc., Warner Bros., Inc., and Warner Bros. Distributing Corp., Plaintiffs, v. James A. RHODES, Governor, State of Ohio; Ted W. Brown, Secretary of State of Ohio; Vernal G. Riffe, Jr., Speaker of House of Representatives; and Richard F. Celeste, Lt. Governor, Ohio Senate, Defendants.
Decision Date10 July 1980

496 F. Supp. 408

ALLIED ARTISTS PICTURES CORP., Avco Embassy Pictures Corp., Buena Vista Distribution Co., Inc., Columbia Pictures Industries, Inc., Metro Goldwyn Mayer, Inc., Paramount Pictures Corp., Twentieth Century Fox Film Corp., United Artists Corp., Universal Pictures Division of Universal City Studios, Inc., Universal Film Exchanges, Inc., Warner Bros., Inc., and Warner Bros. Distributing Corp., Plaintiffs,
v.
James A. RHODES, Governor, State of Ohio; Ted W. Brown, Secretary of State of Ohio; Vernal G. Riffe, Jr., Speaker of House of Representatives; and Richard F. Celeste, Lt. Governor, Ohio Senate, Defendants.

No. C-2-78-1031.

United States District Court, S. D. Ohio, E. D.

July 10, 1980.


496 F. Supp. 409
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496 F. Supp. 410
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496 F. Supp. 411
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496 F. Supp. 412
Earl F. Morris, Harry Wright, Columbus, Ohio, Alan Dershowitz, Cambridge, Mass., Louis Nizer, Barbara Scott, William Nix, New York City, for plaintiffs

Richard Firestone, Paul Eklund, Eugene McShane, Asst. Attys. Gen., State of Ohio, Columbus, Ohio, for defendants.

OPINION

DUNCAN, District Judge.

"Blind bidding" is a term used in the motion picture industry to describe the licensing of a motion picture to a theater owner without the owner's first viewing the picture. Blind bidding and other practices by which motion picture producers and distributors license their product to exhibitors

496 F. Supp. 413
have been controversial and subject to varying degrees of governmental scrutiny at least since the 1940's, when the Supreme Court was asked to review a far-reaching judicial decree regulating them. United States v. Paramount, 334 U.S. 131, 157, 68 S.Ct. 915, 929, 92 L.Ed. 1260 (1948). That decree permitted a theater owner to reject 20% of the films licensed by blind bidding. Although at that time relatively few new films were blind bid, the practice increased steadily during the ensuing decades

In 1968 a new consent decree imposed a more stringent restriction, limiting to three the number of films which could be blind bid per year. When that consent decree expired in 1975, the number of films blind bid each year increased rapidly.

These events paralleled an increasing concentration of production and distribution in a few major companies while theater ownership remained relatively less concentrated. Exhibitors, finding themselves with diminishing clout in bargaining for licenses, complained that the producers and distributors of motion pictures were unfairly using their increasing market power to exact onerous bargaining terms. It was amidst these developments that the Ohio General Assembly enacted a bill intended to answer the complaints of exhibitors by prohibiting blind bidding, restricting the use of certain other licensing practices, and setting up a procedure for the open, orderly licensing of motion pictures in Ohio.

The major producers and distributors of motion pictures joined together to bring this action against the Governor of Ohio challenging the Ohio enactment as unconstitutional. Citing the increasingly high costs of production and distribution of motion pictures together with the small cadre of extremely popular motion picture professionals, plaintiffs contend their practices are entirely reasonable and necessary to the presentation of excellent and financially successful motion pictures. They claim the Act violates the Due Process Clause of the Fourteenth Amendment, the First Amendment, the Commerce Clause, and, as implicated by federal preemption in the areas of copyright and antitrust, the Supremacy Clause of the United States Constitution. The Court holds that the Ohio Act survives constitutional attack.

Before trial, the Court denied defendant's motion to dismiss the case for lack of jurisdiction and to abstain from exercising its jurisdiction but noted that these issues would be re-examined against the clearer factual setting afforded by trial.

Below are the facts as found after trial, the Court's re-examination of the questions concerning jurisdiction and abstention, and the Court's conclusions of law on each of the constitutional challenges.

I. Findings of Fact

A. The Parties

The plaintiffs in this action create, produce, and/or distribute motion pictures and own copyrights or copyright licenses giving them the right to license their films for exhibition within the State of Ohio and throughout the United States.

Plaintiffs Avco Embassy Pictures Corp. and Twentieth-Century Fox are corporations organized and existing under the laws of the State of Delaware with their principal places of business in the State of California. Plaintiff Buena Vista Distribution Co., Inc., the exclusive distributor for Walt Disney Productions, is a corporation organized and existing under the laws of the State of California with its principal place of business in the State of California. Plaintiffs Columbia Pictures, Inc., United Artists Corporation and Paramount Pictures Corporation are corporations organized and existing under the laws of the State of Delaware with their principal places of business in the State of New York. Plaintiff Metro-Goldwyn-Mayer, Inc. is a corporation organized and existing under the laws of the State of Delaware with its principal place of business in the State of California. Plaintiff Universal Pictures division of Universal City Studios, Inc. and Universal Film Exchanges, Inc. are corporations organized and existing under the laws of the State of Delaware with their principal places of business in the States of California

496 F. Supp. 414
and New York, respectively. Plaintiff Warner Brothers, Inc. and Warner Brothers Distributing Corporation are corporations organized and existing under the laws of the States of Delaware and New York, respectively, with their principal places of business in the State of California.1

The defendant is James A. Rhodes, Governor of the State of Ohio.2

B. The Case

On June 22, 1978, the Ohio General Assembly enacted Amended Substitute House Bill 806 and on July 23, 1978, defendant Governor James A. Rhodes signed the bill into law. A.S.H.B. 806 added §§ 1333.05, 1333.06 and 1333.07 (hereafter referred to as "the Act") to the Revised Code of Ohio, to become effective on October 23, 1978. The Act is intended to regulate the manner in which motion pictures are distributed for exhibition by motion picture theaters in the State of Ohio.

Plaintiffs ask the Court to declare the Act unconstitutional and to enjoin its enforcement.

C. The Motion Picture Industry

The plaintiffs' several challenges to the Act's constitutionality require the Court to make findings of fact concerning the Act's impact on the motion picture industry. In order to understand the law's impact, it is first necessary to understand the nature of the industry. The Court's findings in this regard are set forth below.

The motion picture industry is a relatively young industry with its origin in the 1920's. Since that time it has developed a fairly unique structure. The production and distribution arm of the film industry has become increasingly concentrated in a small number of major companies.

Plaintiff MGM withdrew from the distribution of motion pictures in the early or mid-1970's. The remaining plaintiffs produce and distribute a substantial majority of all films in the domestic market. In 1978 the plaintiffs garnered 94.4% of industry revenues. The remainder of films in the industry are produced and/or distributed by foreign companies or by small companies known in the trade as "independents."

Prior to 1948, the major distributors also owned many of the nation's leading theaters. After United States v. Paramount Pictures, Inc., 334 U.S. 131, 68 S.Ct. 915, 92 L.Ed. 1260 (1948), distributors were required to divest themselves of their theaters, United States v. Paramount Pictures, Inc., 85 F.Supp. 881 (S.D.N.Y.1949), and hence the exhibition arm of the industry has remained in other hands. Currently, none of the plaintiffs owns or operates theaters for the commercial exhibition of motion pictures in Ohio.

The exhibition arm is considerably less concentrated. Theaters are owned individually or in regional or national chains. Plaintiffs' pictures are not sold. Rather, producer-distributors enter into licensing arrangements with theater owners in order to have their works exhibited to the public.

Stemming from the bifurcation of the industry affected by the Paramount consent decrees is an unusually mutually-dependent relationship between producer-distributors and exhibitors. The plaintiffs create a product that depends on the exhibitors for its outlet: theater owners — the exhibitors of motion pictures — control the only available access that plaintiffs have to theater audiences. Conversely, producer-distributors control the quantity and quality of the product available to exhibitors, who consequently depend heavily on the plaintiffs for production of films to show in their theaters. As with many symbiotic relationships,

496 F. Supp. 415
the parties to it find their interests at once coincide and conflict. Without the cooperation of the exhibitors, producer-distributors would be without the major market for their goods. Without the cooperation of the producer-distributors, exhibitors would be haunted by the spectre of the "dark screen." Thus, they depend upon one another for the benefit of all in turning a profit

At the same time, the two arms of the industry are at odds when it comes time to divide up the returns from the exhibition of a motion picture. That is done by bargaining for terms of a licensing agreement.

Competition within the industry is complicated by this relationship. As would be expected, producer-distributors compete among themselves for the best theaters and exhibitors compete among themselves for the best films. In addition to that, those in the industry speak of a further wrinkle of "competition"...

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38 practice notes
  • United States v. Microsoft Corporation, Civil Action No. 98-1232 (TPJ) (D. D.C. 9/14/1998), Civil Action No. 98-1232 (TPJ).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • September 14, 1998
    ...the exercise of specific rights conveyed by the copyright laws would be invalid. See, e.g., Allied Artists Pictures Corp. v. Rhodes, 496 F. Supp. 408, 445 n. 19 (S.D.Ohio 1980); Remick Music Corp. v. Interstate Hotel Co., 58 F. Supp. 523, 544-45 (D.Neb. 1944) (invalidating state statute tha......
  • NAACP v. State of Cal., Civ.No. S-79-857 MLS.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
    • April 3, 1981
    ...in Gras v. Stevens, supra. In Allied Artists Pictures Corporation v. Rhodes, 473 F.Supp. 560 (S.D. Ohio 1979) ("Allied Artists I"), 496 F.Supp. 408 (S.D.Ohio 1980) ("Allied Artists II"), plaintiffs challenged state legislation restricting the rights of motion picture distributors to contrac......
  • Storer Cable Com. v. City of Montgomery, Ala., Civ. A. No. 90-T-958-N.
    • United States
    • United States District Courts. 11th Circuit. Middle District of Alabama
    • October 9, 1992
    ...1224, 1225 (11th Cir.1983), cert. denied, 469 U.S. 819, 105 S.Ct. 89, 83 L.Ed.2d 35 (1984); Allied Artists Pictures Corp. v. Rhodes, 496 F.Supp. 408, 443 (S.D.Ohio 1980), aff'd in part, rem'd in part, 679 F.2d 656 (6th Cir.1982); 1 Nimmer on Copyright § 1.01B at 1-10 (1990). The rights prov......
  • Baltimore Orioles, Inc. v. Major League Baseball Players Ass'n, No. 85-2020
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • October 29, 1986
    ...in Sec. 106. 25 See Allied Artists Pictures Corp. Page 677 v. Rhodes, 679 F.2d 656, 662-63 (6th Cir.1982), aff'g in pertinent part, 496 F.Supp. 408, 443-44 (S.D.Ohio 1980) (right is equivalent if it creates or destroys right contained in copyright). That section grants the owner of a copyri......
  • Request a trial to view additional results
38 cases
  • United States v. Microsoft Corporation, Civil Action No. 98-1232 (TPJ) (D. D.C. 9/14/1998), Civil Action No. 98-1232 (TPJ).
    • United States
    • United States District Courts. United States District Court (Columbia)
    • September 14, 1998
    ...the exercise of specific rights conveyed by the copyright laws would be invalid. See, e.g., Allied Artists Pictures Corp. v. Rhodes, 496 F. Supp. 408, 445 n. 19 (S.D.Ohio 1980); Remick Music Corp. v. Interstate Hotel Co., 58 F. Supp. 523, 544-45 (D.Neb. 1944) (invalidating state statute tha......
  • NAACP v. State of Cal., Civ.No. S-79-857 MLS.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
    • April 3, 1981
    ...in Gras v. Stevens, supra. In Allied Artists Pictures Corporation v. Rhodes, 473 F.Supp. 560 (S.D. Ohio 1979) ("Allied Artists I"), 496 F.Supp. 408 (S.D.Ohio 1980) ("Allied Artists II"), plaintiffs challenged state legislation restricting the rights of motion picture distributors to contrac......
  • Storer Cable Com. v. City of Montgomery, Ala., Civ. A. No. 90-T-958-N.
    • United States
    • United States District Courts. 11th Circuit. Middle District of Alabama
    • October 9, 1992
    ...1224, 1225 (11th Cir.1983), cert. denied, 469 U.S. 819, 105 S.Ct. 89, 83 L.Ed.2d 35 (1984); Allied Artists Pictures Corp. v. Rhodes, 496 F.Supp. 408, 443 (S.D.Ohio 1980), aff'd in part, rem'd in part, 679 F.2d 656 (6th Cir.1982); 1 Nimmer on Copyright § 1.01B at 1-10 (1990). The rights prov......
  • Baltimore Orioles, Inc. v. Major League Baseball Players Ass'n, No. 85-2020
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • October 29, 1986
    ...in Sec. 106. 25 See Allied Artists Pictures Corp. Page 677 v. Rhodes, 679 F.2d 656, 662-63 (6th Cir.1982), aff'g in pertinent part, 496 F.Supp. 408, 443-44 (S.D.Ohio 1980) (right is equivalent if it creates or destroys right contained in copyright). That section grants the owner of a copyri......
  • Request a trial to view additional results

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