Hayes v. Solomon

Decision Date29 June 1979
Docket NumberNo. 77-1062,77-1062
Citation597 F.2d 958
Parties1979-2 Trade Cases 62,731 Lloyd L. HAYES, Hayes, Inc., et al., Plaintiffs-Appellees, v. T. G. SOLOMON, Gulf States Theatres, Inc., et al., Defendants-Appellants.
CourtU.S. Court of Appeals — Fifth Circuit

D. L. Case, Jack Pew, Jr., Dallas, Tex., O. J. Weber, Beaumont, Tex., John R. Vaughan, William T. Lifland, Marshall H. Cox, Jr., Robert T. Quinn, New York City, Hopkins P. Breazeale, Jr., Baton Rouge, La., for defendants-appellants.

James A. Chesnutt, II, John G. Tucker, Beaumont, Tex., Edwin Tobolowski, Neal E. Young, David L. White, Dallas, Tex., for plaintiffs-appellees.

Appeal from the United States District Court for the Eastern District of Texas.

Before THORNBERRY, RONEY and HILL, Circuit Judges.

JAMES C. HILL, Circuit Judge:

Although this appeal presents a Brobdingnagian record which is typical of quests for the golden fleece of treble damages, this is not a typical antitrust case. Indeed, this is not even an atypical antitrust case; for, despite plaintiffs' herculean efforts, we conclude that this is not an antitrust case at all. 1 We write at some length to explain why we conclude that the evidence was Insufficient to support the judgment, entered on the jury's verdict, of $10,449,900 and the attorney's fees award of $625,000 after considering: 2449 pages of trial transcript; 1911 pages of record on appeal; several cartons of depositions; scores of charts, photographs and exhibits; 201 pages of briefs; and extensive oral argument. Though there is an abundance of evidence, there is simply not enough evidence of an antitrust violation. 2 We reverse and remand.

I. PROCEDURAL BACKGROUND

This is an appeal from a judgment rendered on a jury verdict in a private antitrust action charging violations of both Section 1 and Section 2 of the Sherman Act, 15 U.S.C.A. §§ 1 and 2, with respect to alleged restraints upon the motion picture exhibition business in Port Arthur, Texas. The action was instituted by three separate groups of plaintiffs against each of several defendants, seeking treble damages under Section 4 of the Clayton Act, 15 U.S.C.A. § 15. The case was tried before a jury in the United States District Court for the Eastern District of Texas. Although brought as a single action, this case resulted in three separate damage awards by the jury, each in favor of a different plaintiff or plaintiffs.

A. The Parties

Though brought as a single action, this case involves several actors.

Plaintiff Lloyd L. Hayes (Hayes), an ex-mayor of Port Arthur, is a former employee, business associate and family friend of defendant T. G. Solomon (Solomon), an entrepreneur who had theatre interests in that area of Texas up to August 31, 1972, and later became an officer in the corporations which purchased such interests. This case revolves around Hayes and Solomon.

Plaintiff Hayes, Inc. is a Texas corporation, all the stock of which was owned at the time of trial by Hayes and his family. Plaintiff Park Plaza Twin Theatres, Inc. is a Texas corporation which owns the Park Plaza Twin Theatre in Port Arthur and whose stock at the time of trial was owned by Hayes, Inc. and by a trustee for the widow of Hayes's former partner. Plaintiff Mid-County Enterprises, Inc. is a Texas corporation wholly owned at the time of the trial by Hayes, Hayes's father, and Gillis Jim deNeve, another former employee of Solomon who subsequently went into business with Hayes.

Defendant Fuqua Industries, Inc., is a publicly held Delaware corporation engaged in various businesses involving recreation, transportation, and shelter. Defendant Gulf State Theatres, Inc. is a Delaware corporation wholly owned at the time of trial by Fuqua Industries, Inc.; subsequent to the institution of this action, its name was changed to Coastal Theatres, Inc. Defendant Gulf States Theatres of Texas, Inc. is a Delaware corporation whose stock at the time of trial was wholly owned by Fuqua Industries, Inc.; subsequent to the institution of this action its name was changed to Martin Theatres of Texas, Inc. Both Gulf States Theatres, Inc. and Gulf States Theatres of Texas, Inc. were formed to acquire Solomon's theatre interests on August 31, 1972.

B. The Claims

Following a nine day trial in September of 1976, during which 283 exhibits were introduced and 24 witnesses testified, the jury found that the defendants had entered into an illegal contract, combination or conspiracy to unreasonably restrain the trade or commerce of motion picture exhibition in the greater Port Arthur, Texas area. The jury further found that the defendants had monopolized, attempted to monopolize or conspired to monopolize the motion picture exhibition business in the greater Port Arthur, Texas area. The various legal relationships among these actors resulted in three separate damage awards by the jury.

Of the three awards, the largest was on a "shopping center claim" brought by plaintiffs Hayes and Hayes, Inc. That claim grew out of an aborted venture to develop a shopping center in Port Arthur. The jury awarded damages of $3,000,000, before statutory trebling, against all four defendants, based on the increased costs since 1972 of constructing a $14,000,000 shopping center, despite the facts that the only alleged antitrust violation was the prevention of the construction of a theatre which would have been merely one tenant of the proposed shopping center, and no actual construction costs were ever incurred.

A second award was based on the "Mid-County claim." Plaintiff Mid-County Enterprises, Inc., a corporation partly owned by Hayes, alleged that the "threats" of the defendants kept that plaintiff from building and operating a drive-in theatre in Port Arthur. The jury awarded damages of $258,300, before statutory trebling, against all four defendants.

The remaining award related to the "Park Plaza claim." Plaintiff Park Plaza Twin Theatres, Inc., a corporation partly owned by Hayes, Inc., charged that a motion picture theatre owned by it was unfairly treated during the period its theatre was operated, under a lease, by one of the corporate defendants which renovated two other theatres it owned in the same area and allocated some of the best films to one of the renovated theatres. The jury awarded damages of $225,000, before statutory trebling, against all four defendants.

The judgment entered on the jury verdict totaled $10,449,900 trebled damages plus $625,000 attorneys' fees.

II. FACTUAL BACKGROUND

On appeal, defendants raise fifteen separate issues. Before deciding those issues necessary to our result, we shall endeavor to detail the facts.

A. Hayes and Solomon: the Initial Business Relationship

Hayes and Solomon first crossed paths in 1967. At that time, Hayes was mayor of Port Arthur, Texas, a position he held from May 1963 to April 1969. In 1967 Hayes and W. Bonner Phares, a local investor, organized Park Plaza Twin Theatres, Inc. to construct the Park Plaza Theatre in Port Arthur. Designed as a deluxe two-auditorium first-run theatre, the Park Plaza Twin Theatres were soon to become acknowledged as the finest such facility in the area.

Hayes and Phares set about to find an experienced theatre operator to assist them. They were introduced to Solomon's then employee, Gillis Jim deNeve. deNeve reported to Solomon that Hayes and Phares had begun building the Park Plaza Twin Theatres and were seeking connections with an operating company; he wrote that the two ". . . have investigated us fully and would like very much for us to take over and give us the opportunity to buy in and give them the opportunity to buy in with us and go anywhere in Texas with their participation." deNeve also reported that Hayes and Phares had already held discussions with representatives of the Gordon family which had other theatre holdings in the area.

Hayes, Phares and Solomon met in late 1967 and discussed the possibility of combining their theatre interests in Port Arthur and Beaumont and purchasing the Gordon family's theatre holdings. Solomon agreed with Hayes and Phares to become the sole operator of the Park Plaza Twin Theatres along with a theatre he owned in Beaumont. Later, the three formed a corporation which they named after the "Golden Triangle" (Beaumont, Orange and Port Arthur, Texas) and which acquired the Gordon family's theatres in July of 1968. The stock in this corporation, Golden Triangle Theatres, Inc., was owned 25% By Hayes, 25% By Phares and 50% By Solomon. Solomon also undertook to operate the theatres owned by Golden Triangle Theatres, Inc. Solomon, Hayes and Phares also agreed not to sell Golden Triangle Theatres, Inc. stock to outside interests without giving the corporation a right of first refusal. Upon the death of either Hayes or Phares the survivor was to have a 30-day right to acquire the decedent's stock before the corporation's right of first refusal came into being.

During this period, the personal and business relationships between Hayes and Solomon became extremely close. After Hayes completed his last term as mayor of Port Arthur in April of 1969, he left town and went to New Orleans, where Solomon had established his own home office. Hayes soon became Solomon's assistant, with the title of vice-president and a salary of $50,000 a year. His office was next to that of Solomon. Solomon was grooming Hayes to succeed him and named Hayes executor of his will and trustee of a trust for his children. Solomon lent Hayes $60,000 and agreed to lend him another $60,000 to assist Hayes and Hayes, Inc. in meeting their financial obligations under bank loans obtained to purchase land in Port Arthur.

Phares died on July 2, 1970. After some maneuvering, Hayes purchased Phares's stock in Golden Triangle Theatres, Inc. for a $70,000 promissory note payable over 7 years. Solomon's belief that Hayes had deceived him in connection with this purchase eventually caused Hayes and Solomon to part company in May of 197...

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