Aurora Enterprises, Inc. v. National Broadcasting Co., Inc.

• Decision Date: 23 September 1982
• Docket Number: 82-5001,Nos. 81-5948,s. 81-5948
• Citation: 688 F.2d 689
• Parties: 1982-2 Trade Cases 64,956, 1983 Copr.L.Dec. P 25,516 AURORA ENTERPRISES, INC., a California corporation, and Xanadu Productions, Inc., a California corporation, Plaintiffs-Appellants, v. NATIONAL BROADCASTING COMPANY, INC., a corporation; NBC International, Ltd., a corporation; National Telefilm Associates, Inc., a corporation; NTA Delaware, Inc., a corporation; NTA Films, Inc., a corporation; NTA (Canada), Ltd., a corporation; Tele-Communications, Inc., a corporation; TCI Programs, Inc., a corporation; and George C. Hatch, an individual, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 689

688 F.2d 689

1982-2 Trade Cases 64,956, 1983 Copr.L.Dec. P 25,516

AURORA ENTERPRISES, INC., a California corporation, and Xanadu Productions, Inc., a California corporation, Plaintiffs-Appellants, v. NATIONAL BROADCASTING COMPANY, INC., a corporation; NBC International, Ltd., a corporation; National Telefilm Associates, Inc., a corporation; NTA Delaware, Inc., a corporation; NTA Films, Inc., a corporation; NTA (Canada) Ltd., a corporation; Tele-Communications, Inc., a corporation; TCI Programs, Inc., a corporation; and George C. Hatch, an individual, Defendants-Appellees.

Nos. 81-5948, 82-5001.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted July 9, 1982.

Decided Sept. 23, 1982.

William E. Johnson, Los Angeles, Cal., for plaintiffs-appellants.

John J. Hanson, Los Angeles, Cal., Dennis McCarthy, Salt Lake City, Utah, argued, for defendants-appellees; Gibson, Dunn & Crutcher, Los Angeles, Cal., Richard C. Yarmuth, Seattle, Wash., Henry C. Thumann, and Gregory R. Oxford, O'Melveny & Myers, Los Angeles, Cal., Vancott, Bagley, Cornwall & McCarthy, Salt Lake City, Utah, on brief.

Appeal from the United States District Court for the Central District of California.

Before ANDERSON, FERGUSON and REINHARDT, Circuit Judges.

FERGUSON, Circuit Judge:

Plaintiffs Aurora Enterprises, Inc. ("Aurora") and Xanadu Productions, Inc. ("Xanadu") are commonly-controlled television production companies. Aurora and Xanadu played a role in developing, respectively, the television series Bonanza and The High Chaparral ("Chaparral").

Defendants are involved in the network exhibition, distribution, and syndication of television programs. Defendant NBC purchased from Aurora and Xanadu, respectively, the rights to broadcast Bonanza and Chaparral. The broadcast right allows NBC to distribute programs to NBC affiliates, a form of distribution called "networking." "Syndication" refers to another form of distribution, whereby the program producer grants a license to exhibit the program on individual television stations. Bonanza was exhibited on the NBC Television Network from 1959 through 1973, and Chaparral was exhibited from 1968 through 1971.

In 1972, the Federal Communications Commission ordered the three major networks to divest themselves of their syndication business. See 47 C.F.R. § 73.658(j) (1981). As a result, NBC sold all syndication rights it then owned to National Telefilm Associates, Inc. ("NTA"). NBC retains as a part of the sales price a share (as do plaintiffs in their programs) of the programs' profits.

Defendant NTA's parent entity is Tele-Communications, Inc. ("TCI"). Defendant George Hatch is NTA's president and chairman of the board.

Plaintiffs sued defendants for four federal antitrust violations and for various state claims. Count I (block booking) and Count II (tying of network exhibition and syndication rights) were dismissed without leave to amend. Counts III and IV were dismissed with leave to amend. Counts V through The district court also ordered that the federal antitrust claims, Counts I through IV, be dismissed as to George Hatch, for lack of personal jurisdiction and for improper venue. The state law claims were dismissed against Hatch without prejudice and without leave to amend.

XIII, state claims, were dismissed without prejudice. Aurora Enterprises v. National Broadcasting Co., 524 F.Supp. 655 (C.D. Cal. 1981). Plaintiffs did not amend Counts III and IV, and these too were finally dismissed.

Plaintiffs appeal the dismissal of their federal and state claims and the dismissal of Hatch for lack of personal jurisdiction and improper venue.

I. THE DISTRICT COURT ERRED IN HOLDING THAT APPELLANTS LACK STANDING TO SUE FOR BLOCK BOOKING.

Whether plaintiffs have standing to sue for block booking depends upon a proper construction of the "by reason of" provision of § 4 of the Clayton Act. Section 4 provides in pertinent part: "Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor ... and shall recover threefold the damages by him sustained...." (emphasis added). That language was construed in Mulvey v. Samuel Goldwyn Prod., 433 F.2d 1073 (9th Cir. 1970), cert. denied, 402 U.S. 923, 91 S.Ct. 1377, 28 L.Ed.2d 662 (1971). That case continues to be cited by this circuit as authority on standing to sue for antitrust violations. California State Council v. Associated General, 648 F.2d 527, 537 & 537 n. 15 (9th Cir. 1980); Blankenship v. Hearst Corp., 519 F.2d 418, 426 (9th Cir. 1975); De Voto v. Pacific Fidelity Life Insurance Co., 516 F.2d 1, 3 & 3 n. 5 (9th Cir. 1975). The district court recognized that Mulvey is controlling authority, unless it has been overruled by Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977).

In Mulvey, supra, the owner of a motion picture sold his entire interest to Samuel Goldwyn Productions in return for a down payment and a share of the receipts. The owner charged that his receipts were diminished by a block-booking scheme. The court held that plaintiff had standing to sue because he was within the "target area":

Goldwyn directed his activities at the means of distributing films in order to affect their individual revenue-producing potentials-the target area. Mulvey's films are within this target area. Consequently, it is entirely foreseeable that Goldwyn's block booking could impair the profit potential of Mulvey's films, thus depreciating the value of Mulvey's contractual interest in the films' revenue.

433 F.2d at 1076.

The district court held that Mulvey had been effectively overruled by Brunswick, supra. In Brunswick, the major producer of bowling alleys repossessed numerous bowling alleys during a slump in bowling business; as a result, Brunswick Corporation was put in the position of both operating and producing bowling alleys. The Supreme Court refused to confer standing on plaintiffs, bowling alley operators, who sued Brunswick Corporation for antitrust violations. The Court held that plaintiffs failed to prove "antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants acts unlawful." Brunswick, supra, 429 U.S. 477, 489, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1977) (emphasis in original).

The district court interpreted Brunswick's holding to mean that plaintiffs in the instant case lacked antitrust injury and therefore lacked standing to sue: "Those who may suffer antitrust injury from this restraint of trade (tying) are competitors of the tied product and, conceivably, purchasers in the market for the tied and tying products." 524 F.Supp. at 659. Plaintiffs, as producers of the tying product, were held to lack standing to pursue an antitrust claim.

The narrow view that standing exists only for competitors of the product that is marketed has been rejected in Blue Shield McCready, supra, explains why plaintiffs suffered no antitrust injury in Brunswick: "(R)espondents (in Brunswick ) sought in damages 'the profits they would have realized had competition been reduced.' 429 U.S. at 488, 97 S.Ct. at 697 (emphasis added)." McCready, supra, --- U.S. at ----, 102 S.Ct. at 2550. Competition was increased by defendants' actions in Brunswick; therefore, plaintiffs suffered no antitrust injury. In contrast, the alleged tying arrangement in the present case is a per se violation of the antitrust laws.

of Virginia v. McCready, --- U.S. ----, 102 S.Ct. 2540, 73 L.Ed.2d 149 (1982) (conferring standing on a patient-consumer of medical services); and Ostrofe v. H.S. Crocker Co., Inc., 670 F.2d 1378 (9th Cir. 1982) (conferring standing on an employee who was fired for refusing to participate in employer's price fixing scheme).

We hold that plaintiffs have standing to sue for antitrust violations under Mulvey, supra, which has never been overruled and remains the law of this circuit.

II. PLAINTIFF XANADU'S CLAIM IS BARRED BY THE STATUTE OF LIMITATIONS AND LACHES.

The second claim alleges that as a condition to purchasing Xanadu's network exhibition rights to Chaparral in 1966, NBC also insisted on purchasing Xanadu's syndication rights to Chaparral. Xanadu alleges that the tying of network exhibition rights to syndication rights unreasonably restrains trade. Xanadu claims that it has been damaged by enforcement of the "tying agreement" by being deprived of revenues that it would have earned had it not been forced to part with syndication rights.

The district court dismissed this claim on the ground, inter alia, that the claim was barred by the four-year statute of limitations, 15 U.S.C. § 15(b), which applies to actions brought under the Sherman Act. Xanadu's claim arises from a sale of syndication rights that occurred more than four years before it brought its complaint. Thus, unless Xanadu can invoke an exception to the statute of limitations, its claim must be barred. The district court considered and rejected the applicability of four exceptions, which we now review: (1) tolling, (2) fraudulently concealed facts concerning the claims, (3) continuous antitrust violations, and (4) speculative damages.

First, we agree with the district court that the statute has not been tolled until the date of this complaint by the pendency of United States v. National Broadcasting Co., Inc., 449 F.Supp. 1127, 1130 (C.D. Cal. 1978), a civil antitrust action. That action, settled more than a year before the commencement of the present suit, has ceased to toll the statute. 15 U.S.C. § 16(i). Nor does the pendency of separate and distinct actions that the government filed against other networks that were never alleged to be a part of a conspiracy toll the statute in the instant case.

Second, the fraudulent concealment alleged in this case does not give rise to an exception to the statute. In 1966, plaintiff Xanadu knew that it was giving up its...