Associated Film Distribution Corp. v. Thornburgh
| Decision Date | 24 August 1981 |
| Docket Number | Civ. A. No. 80-1179. |
| Citation | 520 F. Supp. 971 |
| Parties | ASSOCIATED FILM DISTRIBUTION CORPORATION, et al. v. The Honorable Dick THORNBURGH, et al. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
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George P. Williams, III, Philadelphia, Pa., for plaintiffs.
Allen C. Warshaw, Deputy Atty. Gen., Com. of Pa., Harrisburg, Pa., for Thornburgh and Biester.
Peter M. Fishbein, New York City, Richard M. Squire, Philadelphia, Pa., for Fox Theatre.
H. Donald Busch, Philadelphia, Pa., for Budco.
The Pennsylvania Feature Motion Picture Fair Business Practices Law, Act No. 1980-14, 73 P.S. § 203-1 et seq. ("the Act"), was approved by Governor Thornburgh on February 29, 1980, and became effective on April 29, 1980. The Act comprehensively regulates the licensing of motion pictures for exhibition within the Commonwealth of Pennsylvania.
A number of other states have adopted legislation regulating certain aspects of motion picture licensing.1 Most of the statutes that have been enacted in states other than Pennsylvania go no further than prohibiting the licensing of motion pictures without an advance trade screening (thereby prohibiting a practice referred to in the Act as "blind bidding").2 A few, such as Sections 1333.05 through 1333.07 of the Revised Code of Ohio, effective October 23, 1978 ("the Ohio statute"), regulate other licensing practices such as "guarantees," "advances," and bidding procedures.3 The Pennsylvania Act contains additional provisions, such as Section 7, 73 P.S. § 203-7, regulating "exclusive first runs,"4 and is more far-reaching than even the Ohio statute.
On March 24, 1980, plaintiffs, who include many of the major distributors and producers of motion pictures, initiated the present action. They ask that the Act be declared unconstitutional and that its enforcement be permanently enjoined. In their complaint, plaintiffs assert that the Act violates the Supremacy Clause, Article VI, cl. 2, the Commerce Clause, Article I, § 8, cl. 3, and the First, Fifth and Fourteenth Amendments to the United States Constitution, as well as Article I, § 7 and Article III, § 32 of the Constitution of the Commonwealth of Pennsylvania. Named as defendants are the Governor and Attorney General of the Commonwealth of Pennsylvania (who, by virtue of their offices, are charged with the execution and the enforcement of the laws of the Commonwealth), and two "exhibitors" as defined in § 3 of the Act, 73 P.S. § 203-3, Budco Quality Theatres, Inc. ("Budco") and Fox Theatres Management Corporation ("Fox").5 The exhibitor defendants operate two of the major theatre circuits or chains in this region.6 All defendants filed answers to the complaint.7
On July 15, 1980 plaintiffs filed the present motion for summary judgment, accompanied by affidavits, asking that the Act be declared unconstitutional on its face.8 Defendants' responsive memoranda are also supported by affidavits.9 Oral argument was heard on March 27, 1981, and the motion is ripe for decision.
Stripped to the essentials, the issues before this Court are, first, whether the Act's regulation of the licensing process through which copyrighted motion pictures are made available to the theatre-going public violates the First Amendment and the Supremacy Clause; and, second, whether any material fact issues exist that would bar that determination on motion for summary judgment.10 Careful review of the pleadings, the affidavits, and the extensive and thorough briefs submitted by the parties demonstrates that plaintiffs' First Amendment and Supremacy Clause claims may be decided on this motion and that the Act conflicts on its face with rights protected by those constitutional provisions.
THE PROVISIONS OF THE ACT.
The Act directly regulates the licensing process through which copyrighted motion pictures, and the ideas they express, are made available to theatre audiences, prohibits certain terms in license agreements between distributors of motion pictures and exhibitors, and requires that certain procedures be followed.11 There exist both obvious similarities to and differences from the provisions of the Ohio statute.
Section 2 of the Act sets forth the sole legislative finding, namely, that "the licensing and distribution of feature motion pictures to theatres in this Commonwealth, including the rights and obligations of distributors and exhibitors, vitally affects the general economy as well as the access of the public to works of artistic expression and opinion...." and asserts that regulation of licensing and relationships between motion picture distributors and exhibitors is a valid exercise of the police power. Ten purposes purportedly served by the Act are also listed in that section.12 The Ohio statute contains no statement of any finding or purposes.
Section 3 defines the terms used in the Act. Its definitions closely resemble the definitions used in the Ohio statute.
Section 4 absolutely prohibits negotiating for, bidding for, or agreeing to a license for the exhibition of a motion picture within Pennsylvania without a prior trade screening within the Commonwealth (that is, it prohibits "blind bidding"). The Ohio statute has the identical practical effect.13 An important effect of this prohibition is that no negotiation for a license agreement between a distributor and an exhibitor may begin until the picture is in final form for exhibition. Although Section 4 requires a trade screening to take place, it does not require exhibitors to attend a trade screening. Like other sections of the Act, Section 4 may not be waived. The Ohio statute also prohibits any waiver of the comparable section.
Section 5 absolutely prohibits all guarantees of minimum film rental when a license agreement provides for payment to the distributor based in whole or in part on a percentage of attendance or box office receipts.14 No such license agreement may be conditioned upon or contain any guarantee. By contrast, the Ohio statute, § 1333.06(B), only prohibits a distributor from demanding that a license agreement contain a guarantee of a minimum payment. Although Section 5 prohibits a guarantee in the case of a percentage rental, it does not prohibit a flat rental, nor does it prohibit a guarantee with a flat rental. Section 5 also provides that provisions for any such guarantees are void and that any purported waiver of the prohibition is void.
Section 6 of the Act prohibits any and all advance payments of film rentals by an exhibitor to a distributor.15 A license agreement may not provide for any advance payment prior to exhibition of a motion picture, either as security for performance of the license agreement or as an advance on rental payments due under the agreement. The Ohio statute, § 1333.06(C) only prohibits a distributor from requiring a license that provides for an exhibitor's advancing any money for security or as an advance payment on rental due more than 14 days prior to exhibition of a motion picture. Like Section 5, Section 6 provides that any waiver is void and unenforceable (the Ohio statute also prohibits waiver).
Section 7 prohibits "exclusive first runs" or "exclusive multiple first runs" of motion pictures for more than 42 days "without provisions to expand the run to second run or subsequent run theatres within the geographical area...."16 A distributor may not agree to show a motion picture on an exclusive basis for more than 42 days. An exhibitor with theatres in prime locations may show the picture for more than 42 days, but may not longer show it "exclusively" and the film must be "made available," or rebid.17 The Ohio statute imposes no such limitation.
Section 8 establishes certain bidding procedures that closely resemble those required in Ohio. It does not make competitive bidding mandatory, but sets forth requirements that must be followed if bidding is initiated:18
Section 8(a) requires that certain information be provided to bidding exhibitors, including the identity of all bidders.
Section 8(b) requires that if the motion picture has not been trade screened, the distributor shall establish a date, time, and location of a trade screening in the bid literature.
Section 8(c) requires that all bids are to be submitted in writing and opened at the same time, in the presence of those exhibitors or their agents who submitted bids and who are present. Unlike Ohio's § 1333.07(D), it does not require any exhibitor to be present.
Section 8(d) requires that a distributor make available to an exhibitor within 60 days after bids are opened any bid made for the same run by any other exhibitor — even if all bids submitted were rejected. The distributor is also required to notify in writing each exhibitor who submitted a bid for that run of the terms accepted and the identity of the successful bidder.
Section 8(e) provides that, if all bids are rejected, a distributor, once having issued invitations to bid, may not enter into a license agreement except by means of the bidding process specified in Section 8. In other words, he may not reject all bids and then enter into negotiations, nor may he withdraw the film from the market, but instead, he must continue the bidding process.
Section 10 of the Act provides to exhibitors (but not to distributors), a private right of action. No such right is provided in Ohio. Any exhibitor may sue a distributor, or an exhibitor, or both, for violations of the Act in a Court of Common Pleas for damages or injunctive relief and is entitled to recover costs, including reasonable attorney's fees. A distributor has no comparable right of action.
Because of the similarities and because of the many significant differences between the Act and the Ohio statute, this Court will examine afresh the issues presented by plaintiff's constitutional challenge, in light of Judge Duncan's thorough and thoughtful opinion upholding the constitutionality...
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