Chi. Studio Rental, Inc. v. Ill. Dep't of Commerce

• Citation: 940 F.3d 971
• Decision Date: 16 October 2019
• Docket Number: No. 18-3134,18-3134
• Parties: CHICAGO STUDIO RENTAL, INCORPORATED, Chicago Studio City Real Estate Holdings, LLC, Plaintiffs-Appellants, v. ILLINOIS DEPARTMENT OF COMMERCE and Economic Opportunity, Illinois Film Office, Betsy Steinberg, in both her official and individual capacity, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

940 F.3d 971

CHICAGO STUDIO RENTAL, INCORPORATED, Chicago Studio City Real Estate Holdings, LLC, Plaintiffs-Appellants,

v.ILLINOIS DEPARTMENT OF COMMERCE and Economic Opportunity, Illinois Film Office, Betsy Steinberg, in both her official and individual capacity, Defendants-Appellees.

No. 18-3134

United States Court of Appeals, Seventh Circuit.

Argued September 4, 2019

Decided October 16, 2019

Frank J. Del Medico, Attorney, FRANK J. DEL MEDICO, LTD., North Riverside, IL, for Plaintiffs-Appellants.

Benjamin Feldman Jacobson, Attorney, OFFICE OF THE ATTORNEY GENERAL, Civil Appeals Division, Chicago, IL, for Defendants-Appellees.

Before Rovner, Scudder, and St. Eve, Circuit Judges.

St. Eve, Circuit Judge.

For nearly 30 years, Chicago Studio Rental, Incorporated and Chicago Studio City Real Estate Holdings, LLC (collectively, "Chicago Studio") operated the only film studio in Chicago, Illinois. That changed around 2010 when Chicago Film Studio Holdings, LLC and Chicago Film Studio Industrial Real Estate Holdings, LLC (collectively, "Cinespace") opened a new studio. Within a handful of years, Cinespace rapidly expanded its studio to include 26 more stages and 24 times more floor space than Chicago Studio’s facility. Chicago Studio could not keep up, failed to attract production business, and ultimately stopped making a profit.

Chicago Studio sought to blame others for its demise and filed this action against the Illinois Department of Commerce and Economic Opportunity, Illinois Film Office, and Betsy Steinberg—three Illinois state actors responsible for promoting the Illinois film industry. Chicago Studio alleged that Defendants unlawfully steered state incentives and business to Cinespace in violation of the Sherman Act and equal protection and due process under the Fourteenth Amendment. The district court granted Defendants’ motion to dismiss the Sherman Act and due process claims. It later granted summary judgment on the equal protection claim. Chicago Studio now appeals these decisions on the Sherman Act and equal protection claims.

We affirm. The district court properly dismissed the Sherman Act claim because Chicago Studio failed to adequately plead an antitrust injury. The complaint merely alleges injuries to Chicago Studio, not to competition. We also conclude that the district court properly granted summary judgment on the equal protection claim. Chicago Studio and Cinespace are not similarly situated, and there was a rational basis for Steinberg’s conduct. We further find that the district court did not abuse its discretion in striking Chicago Studio’s additional statement of facts for noncompliance.

I. Background

Since 1979, Chicago Studio has operated a film and television production studio in Chicago, Illinois. Chicago Studio has four studio stages measuring 62,000 square feet. It requires production companies to lease its production equipment for a .4% charge. The studio does not have installed air conditioning, but Chicago Studio can provide industry standard portable air conditioning units for an additional charge. It does not have scene docks, which would allow large trailers to unload equipment inside the studio. During the relevant time period, Chicago Studio could accommodate one large or two average projects at a given time.

Cinespace began operating a studio in Chicago around 2010. Cinespace is not a party to this action, but it is Chicago Studio’s only competitor in the Chicago area. By the end of 2012, Cinespace had 600,000 square feet of floor space and 10 stages. The studio expanded to 1.5 million square feet of floor space and 30 stages by January 2015. Cinespace’s studio can accommodate two-story sets and includes air conditioning, inside breezeways and scene docks, concrete floors, soundproof walls, and new offices. Cinespace permits production companies to use any equipment rentals they choose including an unaffiliated equipment rental company called Cinelease that charges .2%.

All three Defendants are Illinois state actors. The Illinois Department of Commerce and Economic Opportunity ("IDCEO") is a division of Illinois government tasked with promoting Illinois’s profile as a leading business destination. To promote the Illinois film industry, IDCEO administers grant programs to film studios and tax credits to film producers. See 35 ILCS 16/10 ; Ill. Admin. Code tit. 14, § 528.70 (2013). The Illinois Film Office ("IFO") is part of IDCEO, and Betsy Steinberg served as the IFO Managing Director during Governor Patrick Quinn’s administration. The IFO’s principal purpose is to support the Illinois film industry. See 35 ILCS 16/5 ("Illinois must move aggressively with new business development investment tools so that Illinois is more competitive in site location decision-making for film productions.... It is the purpose of this Act to preserve and expand the existing human infrastructure for the motion picture industry in Illinois.")

Chicago Studio claims that IDCEO, IFO, and Steinberg conspired with Cinespace to boycott Chicago Studio and to steer business towards Cinespace. They did so by administering 30% film tax credits to producers and issuing five state grants totaling $27.3 million to Cinespace. Due to a change in administration, Cinespace returned $10 million to Illinois. Chicago Studio also alleges that Defendants failed to mention Chicago Studio to producers, encouraged producers to use Cinespace, excluded Chicago Studio from business meetings, and did not allow Chicago Studio to bid on production opportunities. Chicago Studio states that it applied for two grants, but it did not receive either.

Cinespace consistently reached out to Steinberg and IFO for assistance with marketing and procuring film and television production business. It also hired a lobbyist to apply for grant money from the State of Illinois. Steinberg provided help to Chicago Studio whenever it asked, but it rarely did. Chicago Studio did not ask Steinberg to contact Hollywood film producers on its behalf because it had done business with them for years. Chicago Studio does not identify a single instance where it reached out to Steinberg for help, and Steinberg refused.

The Illinois film industry became more profitable over the relevant time period. In 2009, the Illinois film industry earned approximately $104 million in gross revenue. In 2012 and 2013, it made approximately $184 million and $350 million in gross revenue, respectively. The industry also created new jobs, approximately 7,082 in 2009 to 15,627 in 2013.

By steering business towards Cinespace, Chicago Studio asserts that IDCEO, IFO, and Steinberg became active market participants in the "Chicago Film Production Market," which it defines as entities providing production facilities in Chicago. Defendants’ conduct resulted in the following alleged injuries: (1) a decrease in Chicago Studio’s market share from 100% to 10%, (2) Chicago Studio’s inability to compete in the market, (3) a reduction in competition, and (4) an increase in transactional costs to produce film and television in Chicago to consumers of those services.

Chicago Studio filed suit asserting violations of equal protection under the Fourteenth Amendment against Steinberg in her individual capacity (Count I), Sections 1 and 2 of the Sherman Act against IDCEO and Steinberg in her official capacity (Count II), and due process under the Fourteenth Amendment against Steinberg in her individual capacity (Count III). Defendants moved to dismiss the action under Federal Rule of Civil Procedure 12(b)(6), which the district court granted in part. Chicago Studio subsequently filed an amended complaint and added IFO as a defendant. Defendants again moved to dismiss the Sherman Act and due process claims for failure to state a claim. The district court granted the motion. Steinberg later moved for summary judgment on the equal protection claim. The district court granted Steinberg’s motion for summary judgment and struck Chicago Studio’s statement of additional facts for noncompliance. Chicago Studio now appeals both the district court’s dismissal of the Sherman Act claim and the summary judgment ruling.

II. Discussion

A. The Sherman Act

We review the district court’s motion to dismiss ruling de novo, assume all well-pleaded allegations are true, and construe reasonable inferences in plaintiff’s favor. Kemper v. Deutsche Bank AG , 911 F.3d 383, 389 (7th Cir. 2018). To survive a motion to dismiss under Rule 12(b)(6), a plaintiff must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

The district court dismissed Chicago Studio’s antitrust claim with prejudice. In doing so, it relied upon Czajkowski v. Illinois , 460 F. Supp. 1265 (N.D. Ill. 1977) and held that IDCEO, IFO, and Steinberg in their official capacities are immune from antitrust liability under the Eleventh Amendment. It also found that Chicago Studio had failed to allege an antitrust injury.

The Supreme Court has held that the Sherman Act does not prohibit anticompetitive state action. Parker v. Brown, 317 U.S. 341, 350–51, 63 S.Ct. 307, 87 L.Ed. 315 (1943) ("The Sherman Act ... gives no hint that it was intended to restrain state action or official action directed by a state."). Since then, the Supreme Court has devised three types of antitrust immunity: (1) ipso facto immunity, (2) Hallie immunity, and (3) Midcal immunity. See N.C. State Bd. of Dental Exam’rs v. FTC, 574 U.S. 494, 135 S.Ct. 1101, 1110–13, 191 L.Ed.2d 35 (2015) ; Town of Hallie v. City of Eau Claire, 471 U.S. 34, 38–40, 42, 105 S.Ct. 1713, 85 L.Ed.2d 24 (1985) ; Hoover v. Ronwin, 466 U.S. 558, 567–69, 104...