Amc Entm't Holdings, Inc. v. Ipic-Gold Class Entm't, LLC
| Decision Date | 14 January 2022 |
| Docket Number | No. 20-0014,20-0014 |
| Citation | 638 S.W.3d 198 |
| Parties | AMC ENTERTAINMENT HOLDINGS, INC., AMC Entertainment, Inc., and American Multi-Cinema, Inc., Petitioners, v. IPIC-GOLD CLASS ENTERTAINMENT, LLC and iPic Texas, LLC, Respondents |
| Court | Texas Supreme Court |
Michael A. Swartzendruber, Michael A. Swartzendruber, Dallas, Constance H. Pfeiffer, Bryce L. Callahan, R. Paul Yetter, Houston, Barton Wayne Cox, Reagan W. Simpson, R. Paul Yetter, Bryce L. Callahan, Houston, Michael A. Swartzendruber, Dallas, Reagan W. Simpson, Houston, Constance H. Pfeiffer, April Lynn Farris, Houston, Harris County, Barton Wayne Cox, for Respondents iPic-Gold Class Entertainment, LLC, iPic Texas, LLC.
Michael A. Swartzendruber, Dallas, Darryl Wade Anderson, Layne E. Kruse, Houston, Barton Wayne Cox, Warren Szutse Huang, Samuel W. Cooper, Houston, for Petitioners Regal Entertainment Group, AMC Entertainment, Inc., AMC Entertainment Holdings, Inc., American Multi-Cinema, Inc.
Respondents allege that petitioners conspired to restrain trade in the movie-theater market in violation of Section 15.05(a) of the Texas Free Enterprise and Antitrust Act ("Texas Antitrust Act").1 The Act provides that it "shall be construed in harmony with federal judicial interpretations of comparable federal antitrust statutes".2 "Section 15.05(a) is comparable to, and indeed taken from, section 1 of the Sherman Antitrust Act".3 The United States Supreme Court has held that "[t]o survive a motion for summary judgment ..., a plaintiff seeking damages for a violation of § 1 must present evidence ‘that tends to exclude the possibility’ that the alleged conspirators acted independently."4 The parties agree that this requirement governs in cases brought under the Texas Act; they disagree on its application in this case. The court of appeals held that respondents satisfied this requirement and reversed the trial court's summary judgment for petitioners.5 We disagree and thus reverse and render judgment for petitioners.
AMC6 and its competitor Regal7 own the two largest movie-theater chains in North America, with hundreds of theaters each.8 Both chains specialize in megaplexes—large theaters with 20 or more screens and traditional amenities such as popcorn, soft drinks, and candy.
iPic9 owns a chain of boutique theaters in the United States. iPic's theaters—there were 13 at the time of the trial court proceedings, and around 15 today—offer an upscale experience with reclining seats situated in pods, full-service waitstaff, chef-prepared meals, and specialty cocktails. A "premium plus" ticket at an iPic theater costs more than twice the typical ticket at an AMC or Regal megaplex.
iPic alleges that starting in early 2013, AMC and Regal conspired to eliminate iPic from the markets in Houston and Frisco, just north of Dallas, by "clearing" a proposed iPic theater near Regal Greenway in central Houston and another near AMC Stonebriar in Frisco. iPic's allegations require an understanding of the film industry.
AMC, Regal, and iPic are movie exhibitors. Historically, exhibitors licensed movies from third-party distributors , which acted as liaisons between exhibitors and the production studios. Today, the six largest production studios—Walt Disney Studios, Warner Brothers Entertainment, 20th Century Fox, Paramount Pictures, Sony Pictures, and Universal Studios—act as their own distributors. But there remain independent distributors too, such as Lionsgate, Focus, the Weinstein Company, Bleeker Street, Broad Green, and Open Road Films.
Open Road is an independent distributor formed in 2011 as a joint venture between AMC and Regal. Open Road has since been sold, but at all times relevant to this lawsuit, it was owned by AMC and Regal, and executives of both companies sat on its board.
When theaters in close proximity show the same first-run (new release) film, they are playing the film day-and-date. To prevent playing day-and-date with a competitor, a theater can request that a film's distributor grant it a clearance —an exclusive license to show the film for a period of time. Clearance practices are traceable to the earliest days of the film industry. Because theaters had only a handful of screens, they could not play every first-run film available. Theaters nearby one another thus bid against each other to secure the exclusive license to play a particular film. In exchange for that exclusive license, a theater would pay the distributor a guaranteed sum and take responsibility for advertising and promoting the film in the area.
The parties disagree about what role clearances have played in the industry in more recent history. At a pretrial hearing in the trial court, iPic presented witness testimony that clearances began phasing out in the 1980s when distributors moved to an allocation system. Later, when megaplexes began sprouting up in the mid-1990s, allocating films was no longer necessary because a megaplex can play every first-run movie available.
Regal is no longer a party to this case, but its historical clearance practices are central to iPic's conspiracy allegations against AMC. Regal CEO Amy Miles testified that when she joined the company in 1999, Regal already had a general policy of seeking clearances against theaters in proximity to a Regal theater. Miles explained that Regal recognizes 70 clearance zones across the country in which Regal seeks clearances against any class of theater within three miles, and distributors therefore allocate first-run films between Regal and the theater nearby. In Houston, for example, Regal Greenway sought clearances against the River Oaks Theatre beginning in 1999 when the Greenway opened.10
In 17 of Regal's clearance zones, Regal clears a theater owned by AMC. In 15, one Regal theater clears another Regal theater. One example is a clearance zone in northern Virginia, where a 20-screen Regal theater clears one of Regal's smaller theaters that offers luxury amenities similar to those offered by iPic. Another example occurs in northwest Austin, where Regal's Gateway 16 does not play day-and-date with its Arbor 8 theater.
Miles testified that Regal believes clearances are beneficial to the entire film-industry ecosystem, including theaters and customers, because clearances ultimately facilitate more films being shown in a geographic area and for longer. Miles projected that without clearance zones, theaters would devote most of their screens to blockbusters, which would play through the theaters faster, resulting in less choice for consumers and less revenue for distributors and theaters.
Miles acknowledged, however, that Regal has made some exceptions to its three-mile policy over the years. Regal usually does not seek clearances in densely populated areas such as Manhattan, where a three-driving-miles rule of thumb does not make sense. Regal's clearance practices have also varied when it has acquired an existing theater. "[I]f we acquire a theater that didn't assert a clearance prior to the acquisition, we don't go back and try to change that, post-acquisition", Miles explained.
In 2008, Regal declined to clear a dine-in theater within its Redmond, Washington clearance zone that later became an iPic. In 2010, Regal declined to clear the iPic Austin, which opened less than three miles from Regal's Gateway 16 and Arbor 8 theaters. Miles testified that these exceptions to Regal's three-mile policy were tests conducted at the request of distributors to determine whether luxury theaters—then a new and innovative concept—would truly compete with traditional ones. There is conflicting evidence on what the data from the Redmond and Austin tests show, but Miles testified that once luxury theaters took off, Regal came around to viewing them as competitors to Regal's more traditional theaters.
Before 2012, AMC had never requested clearances against competing theaters. But that year it adopted its own corporate policy of requesting clearances against theaters within roughly three miles of an AMC theater. An internal report prepared by AMC in November 2012 reflects AMC's determination that asserting clearances could help fend off "competitive encroachment".
In December 2012, AMC made a presentation on the new policy to various studios and to Open Road personnel. Written materials from that presentation project that without a change in clearance policy, new competition would negatively affect AMC's revenue. The materials reflect that AMC had considered the matter "carefully" and would "stand behind" the decision to start asserting clearances "for the long-term health of [its] ... business".
In January 2013, Regal's president and COO, Greg Dunn, who also sat on the board of Open Road, directed Regal's head film buyer, Ted Cooper, to clear all luxury or dine-in theaters within three miles of a Regal theater. Around the same time, Regal learned that iPic planned to build a theater in Houston within three miles of Regal Greenway. In April 2013, Regal's Ted Cooper told iPic executive Clark Woods at an industry conference that Regal planned to clear iPic's new Houston theater. A few days later, iPic's CEO, Hamid Hashemi, emailed a colleague that "Regal ... just told us they are clearing us in Houston", characterizing Regal's decision as "[n]o biggie". Also in April 2013, iPic opened a new theater in Los Angeles within three miles of an AMC theater. Despite its new policy, AMC declined to clear iPic Los Angeles, and the two theaters play day-and-date. It was not until several months later, around December 2013, that iPic began making plans for a Frisco theater.
In April 2014, AMC learned that iPic was in the process of negotiating a lease for a space in Frisco located within three miles of AMC Stonebriar. An internal AMC email characterized the forthcoming iPic as "[a]n obvious clearance situation" and expressed AMC's intention to "move quickly" to communicate its clearance request...
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