CINE 42ND ST. THEATER v. Nederlander Org.

• Decision Date: 17 April 1985
• Docket Number: No. 84 Civ. 7595 (WCC).,84 Civ. 7595 (WCC).
• Citation: 609 F. Supp. 113
• Parties: CINE 42ND STREET THEATER CORPORATION, Leonard Clark and the Brandt Organization, Inc., Plaintiffs, v. The NEDERLANDER ORGANIZATION, INC., Harris Nederlander, Inc., New Amsterdam Nederlander, Inc., Jujamcyn Company, Inc., Cambridge Investment Group, Ltd., Park Tower Realty Corp., the New York State Urban Development Corporation, Times Square Redevelopment Corporation and the City of New York, Defendants.
• Court: U.S. District Court — Southern District of New York

609 F. Supp. 113

CINE 42ND STREET THEATER CORPORATION, Leonard Clark and the Brandt Organization, Inc., Plaintiffs, v. The NEDERLANDER ORGANIZATION, INC., Harris Nederlander, Inc., New Amsterdam Nederlander, Inc., Jujamcyn Company, Inc., Cambridge Investment Group, Ltd., Park Tower Realty Corp., the New York State Urban Development Corporation, Times Square Redevelopment Corporation and the City of New York, Defendants.

No. 84 Civ. 7595 (WCC).

United States District Court, S.D. New York.

April 17, 1985.

Warshaw, Burstein, Cohen, Schlesinger & Kuh, New York City, for plaintiffs Cine 42nd St. Theater Corp. and Leonard Clark; James E. Daniels, New York City, of counsel.

Rubin, Baum, Levin, Constant & Friedman, New York City, for plaintiff The Brandt Organization, Inc.; Martin J. Schwartz, New York City, of counsel.

Leahey & Johnson, P.C., Susan M. Heilbron, Vice President, Legal Dept. N.Y. State Urban Development Corp. and Times Square Redevelopment Corp., New York City, for defendants N.Y. State Urban Development Corp. and Times Square Redevelopment Corp.; Peter J. Johnson, New York City, of counsel.

Weil, Gotshal & Manges, New York City, for defendants The Nederlander Organization, Inc., Harris Nederlander, Inc., and New Amsterdam Nederlander, Inc.; Irving Scher, New York City, of counsel.

Frederick A.O. Schwarz, Jr., Corp. Counsel of the City of New York, New York City, for defendant The City of New York; Jeffrey Schanback, New York City, of counsel.

Kaye, Scholer, Fierman, Hays & Handler, New York City, for defendant Park Tower Realty; Gerald Gobel, New York City, of counsel.

Breed, Abbott & Morgan, New York City, for defendants Jujamcyn Co., Inc. and Cambridge Inv. Group, Ltd.; Robert A. Bicks, New York City, of counsel.

Schapiro, Wisan & Krassner, New York City, for defendant Jujamcyn Co., Inc.; Seth L. Schapiro, New York City, of counsel.

Craig L. Tessler, Gen. Counsel, New York City, for Cambridge Investment Group, Ltd.

OPINION AND ORDER

WILLIAM C. CONNER, District Judge.

This suit is one of many to arise out of the recent efforts by the State and City of New York to redevelop the Times Square area of Manhattan. As part of that project, the New York State Urban Development Corporation ("the UDC") and the City of New York ("the City") decided to acquire, by negotiation or if necessary by condemnation, five movie theaters in the area and to lease them to private developers in hopes that they would be restored and operated as legitimate Broadway theaters. In anticipation of acquiring the theaters, the UDC and the City conditionally designated three Broadway theater operators, the Nederlander Organization, Inc. ("Nederlander"), Jujamcyn Company, Inc. ("Jujamcyn"), and Cambridge Investment Group, Ltd. ("Cambridge") to receive the leases and development rights to the five theaters. The UDC and the City also designated Park Tower Realty Corporation ("Park Tower") to provide the funds to acquire and restore the theaters.

Plaintiffs, who own and operate theaters in the Times Square area, brought suit against the UDC, the City, and the conditionally designated developers, alleging that the conditional designations of those developers substantially lessen competition in the Broadway theater industry.¹ In particular, they contend that the designations violate Section 7 of the Clayton Act, 15 U.S.C. § 18, and § 340 et seq. of the New General Business Law, known as the Donnelly Act.

The case is now before the Court on the motions of all defendants to dismiss plaintiffs' complaint under Rule 12(b)(6), F.R. Civ.P.² Defendants contend that plaintiffs' Clayton Act claim must be dismissed because: (1) the conditional designations are immune from federal antitrust scrutiny under the state action doctrine; (2) the effect of the designations is pro-competitive; and (3) plaintiffs have not suffered an antitrust injury. Defendants also argue that if the Clayton Act claim is dismissed, the pendent Donnelly Act claim must be dismissed as well.

For the reasons stated below, defendants' motion is granted. I agree with defendants that plaintiffs' federal antitrust claim is barred by the state action doctrine, and that the pendent state claim must be dismissed for lack of subject matter jurisdiction. I need not and do not address defendants' other contentions.

Background

In 1968, the New York State legislature created the Urban Development Corporation in hopes of reversing the deterioration of many municipalities in the state. See New York Unconsolidated Laws § 6254(1) (hereinafter the "UDC Act"). The legislature declared the new entity "a corporate governmental agency of the state, constituting a political subdivision and public benefit corporation." Id.

Among the many problems the legislature sought to remedy through the UDC was "a serious need throughout the state for educational, recreational, cultural and other community facilities, the lack of which threatens and adversely affects the health, safety, morals and welfare of the people of the state." Id. at § 6252. In this regard, the legislature declared that it is a

policy of the state to promote the safety, health, morals and welfare of the people of the state and to promote the sound growth and development of our municipalities through the correction of such substandard, insanitary, blighted, deteriorated or deteriorating conditions, factors and characteristics by the clearance, replanning, reconstruction, redevelopment, rehabilitation, restoration or conservation of such areas, and of areas reasonably accessible thereto the undertaking of public and private improvement programs related thereto, including the provision of educational, recreational and cultural facilities, and the encouragement of participation in these programs by private enterprise.

Id.

To enable the UDC to achieve these goals, the legislature granted the agency far-reaching powers. These include, inter alia, the broad powers enumerated in Section 6255 of the Act:

(3) To make and execute contracts and all other instruments....

* * * * * *

(7) To acquire or contract to acquire ... by grant, purchase, condemnation or otherwise, leaseholds, real, personal or mixed property or any interest therein; to own, hold, clear, improve and rehabilitate, and sell, assign, exchange, transfer, convey, lease, mortgage, or otherwise dispose of or encumber the same.

(8) To create subsidiaries, ....

(9) To acquire, construct, reconstruct, rehabilitate, improve, alter or repair or provide for the construction, reconstruction, improvement, alteration or repair of any project.

* * * * * *

(11) To sell, lease, assign, transfer, convey, exchange, mortgage, or otherwise ... dispose of or encumber any project, ....

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(14) To manage any project, whether then owned or leased by the corporation, and to enter into agreements ... for the purpose of causing any project to be managed.

* * * * * *

(24) To engage the services of consultants ... for rendering professional and technical assistance and advice.

* * * * * *

(29) ... to enter into agreements to pay annual sums in lieu of taxes to any municipality or political subdivision of the state, in respect of any real property which is owned by the corporation or any subsidiary thereof and is located in such municipality or political subdivision.

See also UDC Act § 6263.

In addition to these general powers, the legislature granted the UDC specific powers in connection with "land use improvement projects"³ such as the Times Square project at issue here. The powers allow the UDC to

sell or lease for a term not exceeding ninety-nine years all or any portion of the real or personal property constituting a land use improvement project to any person, firm, partnership or corporation, either public or private, upon such terms and conditions as may be approved by the corporation, whenever the corporation shall find that such sale or lease is in conformity with a plan or undertaking for the clearance, replanning, reconstruction or rehabilitation of sub-standard and insanitary areas in the municipality in which the project is located. Such sale or lease may be made:

* * * * * *

(c) to any other person, firm, partnership or corporation, without public bidding or public sale....

UDC Act § 6256(1)(emphasis added).

The legislature made clear that both the general and specific powers it granted to the UDC should be broadly construed. For example, in Section 6255(26), the legislature authorized the UDC "to do any and all things necessary or convenient to carry out its purposes and exercise the powers given and granted in the UDC Act." In addition, Section 6283 declares that whenever the provisions of the UDC Act "are inconsistent with the provisions of any other law, general, special or local, the provisions of this act shall be controlling." Finally, Section 6284 provides that the Act "should be liberally construed so as to effectuate its purposes."

The legislature gave similarly broad powers to municipalities, with which the UDC is to work closely in formulating and executing redevelopment projects. See UDC Act § 6266(1). The UDC Act provides:

In carrying out any project, the corporation and its subsidiaries shall be empowered to enter into contractual agreements with municipalities and public corporations with respect to the furnishing of any community, municipal or public facilities or services necessary or desirable for such project, and any municipality or public corporation is hereby authorized and empowered, notwithstanding any other law, to enter into such contractual agreements with the corporation and its subsidiaries and to do all things necessary to carry out its obligations under the same.

UDC Act § 6266(6) (emphasis added).

Pursuant to the powers granted to them, in June 1980 the UDC and the City of New York undertook to rehabilitate the blighted Times Square area of midtown Manhattan. The collaborative effort was named the 42nd Street Redevelopment...