Gary Theatre Co. v. Columbia Pictures Corporation, 7468.

Decision Date11 June 1941
Docket NumberNo. 7468.,7468.
Citation120 F.2d 891
CourtU.S. Court of Appeals — Seventh Circuit

A. W. Gavit, of Gary, Ind., and Sigmund David, of Chicago, Ill., for appellant.

Vincent O'Brien, Frederic Burnham, Herbert M. Lautman, David Levinson, and Samuel R. Rosenthal, all of Chicago, Ill., for appellee.

Before EVANS and SPARKS, Circuit Judges, and LINDLEY, District Judge.

LINDLEY, District Judge.

Plaintiff sued to enjoin defendants' practice in distributing motion picture films, charging violation of the Anti-Trust Act, 15 U.S.C.A. §§ 1-7, 15 note. Upon trial, after plaintiff had rested, the court, sustaining defendants' motion, entered judgment dismissing the complaint for want of equity. Plaintiff appeals, asserting that the only question properly before us is whether plaintiff made a prima facie case. Defendants insist that the adjudication was upon the merits and that our question is whether the evidence was sufficient to show a violation of the Act.

The procedural question, we think, is settled by Rule 41(b) of the Federal Rules of Civil Procedure, 28 U.S.C.A. following Section 723c: "Involuntary Dismissal: Effect Thereof. * * * After the plaintiff has completed the presentation of his evidence, the defendant, without waiving his right to offer evidence in the event the motion is not granted, may move for a dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief. Unless the court in its order for dismissal otherwise specifies, a dismissal under this subdivision and any dismissal not provided for in this rule, other than a dismissal for lack of jurisdiction or for improper venue, operates as an adjudication upon the merits."

The case was tried without a jury and the court entered special findings of fact as contemplated by Rule 52(a): "In all actions tried upon the facts without a jury, the court shall find the facts specially and state separately its conclusions of law thereon and direct the entry of the appropriate judgment * * *. Findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses." Under Rule 41(b) the judgment, supported by findings, was an adjudication upon the merits, inasmuch as defendants moved for dismissal upon the ground that, upon the facts and the law, plaintiff had shown no right to relief. Consequently our question is whether the findings are supported by the evidence. Under Rule 52(a) we can not set them aside unless they are clearly erroneous, and, by the same token we must give due regard to the opportunity of the trial court to judge of the credibility of the witnesses.

The alleged violation of the Congressional Act is based upon evidence substantially as follows: All defendants except two are distributors of so-called feature motion picture films. The other two, Balaban & Katz Corporation and Warner Brothers Picture Management Corporation, are exhibitors operating picture theatres in Chicago and elsewhere. Plaintiff, owner of the Palace Theatre in Gary, Indiana, and there exhibiting moving pictures, questions validity of a prevailing practice in the industry whereby copyrighted films are licensed to exhibitors under written contracts containing express provisions governing "priority of run and clearance." Films are licensed for "successive runs," each of which consists of showing at one theatre or simultaneously in two or more theatres in a given competitive area. There are some 10,000 theatres in the United States and the distributors have only from 200 to 400 prints of each film to allot to them. As a consequence, there has arisen a system of priority whereby a theatre licensed to exhibit a film earlier than others is said to have "priority of run." By virtue of the restrictive clauses of the license agreements, a specified period of time must elapse between the end of the first run and the beginning of a succeeding one, this period being known as the "clearance" which the first theatre has over the second. This practice controlling respective priorities and clearances has arisen naturally in promotion of sales and, in the words of plaintiff's representative, came about "as a natural consequence of details between distributor and exhibitor * * * is justifiable, fair and reasonable to further the industry and carry on distribution and exhibition, * * * useful and beneficial * * * both to the distributor and exhibitor." The parties agree, therefore, that the practice does not pro forma create unreasonable discrimination against unimpeded distribution in interstate commerce in violation of the Sherman Act, but they are in sad disagreement as to whether the facts here prove violation.

Plaintiff's theatre in Gary is subject to a clearance practice expressly recognized in its contract with each of defendant distributors, against which, however, it has protested, whereby the distributors license for first run certain Chicago loop theatres, then refuse to permit exhibition of the film for three weeks after conclusion of the first run and then release it to theatres in Chicago known as "A Pre-Release Houses," including some five on the south side of Chicago, all of which are affiliates of either defendant Balaban & Katz or defendant Warner Brothers. At the close of a three weeks run in the "A" theatres, plaintiff for the first time is eligible to receive the film for exhibition in Gary. At the time when plaintiff becomes entitled to show the film, a great number of "B" theatres in Chicago, under their contracts likewise become eligible to exhibit it.

Plaintiff's theatre is comparable in size, equipment and other respects to the "A" theatres. It is located just over the state line in Gary, a city of 100,000. Intervening between Gary and Chicago are Hammond and Whiting, both Indiana municipalities. The population from Gary to the center of the loop in Chicago is urban in character, one civic community extending into the other. Transportation from Gary to the south side of Chicago requires from thirty to forty-five minutes. Thus, both parties admit that, so far as priority runs are concerned, Gary is in direct competition with the "A" theatres on the south side of Chicago. Located similarly to plaintiff's theatre are houses of equal equipment and character in Hammond and Whiting, each of which is subject to the same restrictions as plaintiff and, so far as priority of run is concerned, on a par with Gary.

This system of clearance and priority abides throughout the metropolitan district. It does not extend beyond Gary where the population becomes more agrarian in character and the country more sparsely populated. As a consequence, such towns as Michigan City,...

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    ...of law which this Court must decide either now or on a motion for directed verdict. Judge Lindley said in Gary Theatre Co. v. Columbia Pictures Corp., 7 Cir., 1941, 120 F.2d 891, 894: "Whether a conspiracy exists is a question of ultimate fact but whether the facts bring defendants within t......
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