Duffy Theatres v. Griffith Consol. Theatres

• Decision Date: 12 November 1953
• Docket Number: No. 4629.,4629.
• Parties: DUFFY THEATRES, Inc. v. GRIFFITH CONSOL. THEATRES, Inc.
• Court: U.S. Court of Appeals — Tenth Circuit

208 F.2d 316 (1953)

DUFFY THEATRES, Inc. v. GRIFFITH CONSOL. THEATRES, Inc.

No. 4629.

United States Court of Appeals, Tenth Circuit.

November 12, 1953.

John Barry, LaJolla, Cal. (James E. Grigsby, Oklahoma City, Okl., on the brief), for appellant.

Richard W. Fowler, Oklahoma City, Okl. (Charles B. Cochran and Richardson, Cochran, Dudley, Fowler & Rucks, Oklahoma City, Okl., on the brief), for appellee.

Before PHILLIPS, Chief Judge, and MURRAH and PICKETT, Circuit Judges.

PHILLIPS, Chief Judge.

Duffy Theatres, Inc.,¹ an Oklahoma corporation, brought this action against Griffith Consolidated Theatres, Inc.,² a Delaware corporation, under the Clayton Act, 15 U.S.C.A. § 12 et seq., to recover damages for alleged violations by Griffith of the Sherman Anti-Trust Act, 15 U.S.C.A §§ 1 and 2. From a summary judgment in favor of Griffith, Duffy has appealed.

On April 4, 1938, Duffy and Griffith entered into a written contract for the sale by the former to the latter of all of Duffy's title and interest of every nature in the leases, leaseholds, furniture, fixtures, equipment, good will, rights, privileges, and other personal property located in or used in connection with the Temple and Rialto Theatres in Mangum, Oklahoma.

The contract provided that the execution and delivery of the various assignments, good will contracts, chattel mortgages, bills of sale, and other instruments, the payment of the purchase price, and the delivery of the possession of such leaseholds, furniture, equipment, rights, privileges and other personal property as provided in such contract "shall be held and considered by the parties as a full and complete settlement of all claims and demands of each party against the other, of every nature and character whatsoever except the liability of the third party (Griffith) for the deferred payments on the purchase price and any liability against the first and second parties (Pat Duffy and Duffy) by reason of their warranties in the assignments, good will contracts, bills of sale, etc."

Duffy commenced this action on June 25, 1951.

In its complaint Duffy alleged that the United States, on April 28, 1939, instituted an equitable action in the United States District Court for the Western District of Oklahoma, numbered 172 on the Civil docket of such court, against Griffith and others under the Sherman Anti-Trust Act, and that such action pended until December 27, 1950, when a final decree was entered therein.

The trial court, in Number 172, found there had been no violation of the Sherman Act in any of the respects charged in the complaint and dismissed the action. See U. S. v. Griffith Amusement Co., D.C., 68 F.Supp. 180. On appeal, the Supreme Court concluded that the defendants in Number 172 had combined with each other and certain distributors of motion picture films to obtain certain "monopoly rights" in violation of §§ 1 and 2 of the Sherman Act, and that such conspiracy affected interstate commerce. The Supreme Court did not undertake to determine what effect the unlawful practices had on competing exhibitors. It remanded the case, with instructions to determine what effect such practices had on competing exhibitors and to fashion a decree which would undo as near as may be the wrongs that had been done and prevent their recurrence in the future. See United States v. Griffith Amusement Co., 334 U.S. 100, 68 S.Ct. 941, 92 L.Ed. 1236.

In its complaint Duffy further alleged the findings and conclusions of the Supreme Court in its opinion in United States v. Griffith, supra, by way of recital, in substantially the language of the opinion.

In its complaint Duffy further alleged that:

"* * * by reason of its unlawful and monopolistic trade practice, as set forth in the opinion of the Supreme Court of the United States in the antitrust action against defendant, which practice was well known to plaintiff and to the theatre owners in southwestern Oklahoma generally, plaintiff could not compete with it and was forced to sell its business, equipment and good will to defendant for the sum of $12,000.00 on April 4, 1938 and deliver possession thereof on May 1, 1938," and that

"Plaintiff has been damaged in the sum of $38,000.00 as a result of the unlawful and monopolistic trade practice of defendant as condemned by the Supreme Court in the antitrust action against defendant, referred to above."

In its complaint Duffy further alleged the injunctive provisions of the final decree in Number 172.

Duffy prayed for recovery of treble damages and attorney's fees.

In its complaint Duffy did not allege that the method of licensing pictures which had been held illegal in United States v. Griffith was used by Griffith in the licensing of pictures for exhibition in Mangum or that there was any monopolization in the licensing of pictures for exhibition in Mangum and did not allege any facts with respect to how Duffy was unable to compete with Griffith and why it was forced to sell its business to Griffith.

In the final decree in Number 172 the district court enjoined Griffith and others from engaging in certain practices,³ but in its findings in Number 172 the court found that none of such unlawful practices had been directed against Duffy and that Duffy had not been adversely affected by such practices and did not sell its theatres to Griffith because it was adversely affected by Griffith's competition, but because of operating losses resulting from other causes, principally, crop failures and a consequent economic depression in the area, and its inability to obtain a lease on the building in which one of its theatres was located.

While the findings of the court in Number 172 are perhaps not binding on Duffy, since it pleaded and relies on the injunctive provisions of the final decree in Number 172, we think those provisions should be considered here in the light of the court's findings on the final hearing in Number 172, with respect to the specific grounds for relief pleaded in the instant case, and accordingly set forth such findings in appended note.⁴

Griffith set up as a defense the release in the contract. In its reply Duffy alleged that the release was obtained by undue influence and was an integral part of the monopolistic conspiracy.

At a pre-trial hearing, counsel for Duffy made a statement of all the evidentiary facts it would endeavor to prove at the trial. The summary judgment was predicated on that statement, the allegations of the pleadings, and the deposition of Pat Duffy and the exhibits attached thereto.

The judgment recited that Duffy's counsel had stated that Duffy's evidence would show the following facts:

Duffy commenced operating a motion picture theatre in Mangum, Oklahoma, in 1927, in competition with another theatre. In 1933, Duffy acquired the other theatre, and thereafter and until November 1, 1937, operated the only two theatres in Mangum, known as the Temple Theatre and the Rialto Theatre. The former was a first-run house and the latter a second-run house. Griffith opened the Greer Theatre in Mangum in competition with Duffy on November 1, 1937. Duffy continued to operate its two theatres until April 30, 1938, when it sold them to Griffith.

From 1934 and until Duffy sold its theatres to Griffith, the latter and its associated companies, who were defendants in United States v. Griffith, used their circuit buying power to license motion pictures from the major distributors, in the towns in which they were operating, and were obtaining advantages over their competitors with respect to picture rental and the obtaining of desirable pictures for exhibition. They put their competitors out of business in many of the towns in which they operated by use of such circuit buying power.

In 1935, Griffith undertook to buy Duffy's theatres. Duffy offered to sell for $50,000. Griffith made no counteroffer. Griffith undertook to buy an interest in Duffy's theatres in 1935. Duffy refused to sell. Griffith told Duffy it needed protection. In 1936, Griffith undertook to buy 51 per cent interest in Duffy's theatres and Duffy refused to sell. Griffith told Duffy it was on the spot and was "slated to be put out of business."

Duffy operated the Temple Theatre in the Masonic Temple Building in Mangum under a year-to-year lease at a monthly rental of $150, which lease expired on August 31, 1936. H. U. Bailey, for several years prior to 1936, held a real estate mortgage on the building to secure a debt of $26,000. The mortgage became delinquent and the owner of the building turned over to Bailey the renting of that part of the building occupied by the Temple Theatre. In June, 1936, Bailey contacted Griffith and tried to lease the theatre portion of the building to Griffith. Griffith told Bailey it would not negotiate for the lease as long as it was under lease to another. In July, 1936, the owner served notice on Duffy that its lease would not be renewed at its expiration date, August 31, 1936. After August 31, 1936, Duffy continued to occupy the premises, but the owner refused to accept any rental payments.

In the latter part of 1936, Griffith offered Duffy $20,000 for its theatres and Duffy refused the offer. Griffith told Duffy if it did not sell, Griffith would put in a competing theatre and put Duffy out of business.

On January 5, 1937, Griffith offered Duffy $22,000 for its theatres. Duffy accepted the offer and a written option was entered into, giving Griffith 30 days in which to exercise the option. Griffith was unable to arrange a satisfactory lease with Bailey and for that reason refused to exercise the option.

Duffy, for the picture season of 1935-1936, had all the pictures it needed for exhibition and had licensing agreements with most of the major distributors. It had like agreements with such distributors for the 1936-1937 season.

It was able to secure such agreements for the 1937-1938 season, but the rental was higher. All of Duffy's licensing agreements for motion...