Lawlor v. National Screen Service Corporation

• Decision Date: 24 October 1956
• Docket Number: No. 11818-11831.,11818-11831.
• Citation: 238 F.2d 59
• Parties: Charles LAWLOR et al., Appellants, v. NATIONAL SCREEN SERVICE CORPORATION. Morris J. LIPP, etc., Appellant, v. NATIONAL SCREEN SERVICE CORPORATION. Benjamin SIEGEL, etc., Appellant, v. NATIONAL SCREEN SERVICE CORPORATION. Jay SCHRADER, etc., Appellant, v. NATIONAL SCREEN SERVICE CORPORATION. Dave MITCHEL, etc., Appellant, v. NATIONAL SCREEN SERVICE CORPORATION. Jacob RIFF, Appellant, v. NATIONAL SCREEN SERVICE CORPORATION. Harry VOGELSTEIN, etc., Appellant, v. NATIONAL SCREEN SERVICE CORPORATION. Charles LAWLOR et al., v. NATIONAL SCREEN SERVICE CORPORATION, Appellant. Morris J. LIPP, etc., v. NATIONAL SCREEN SERVICE CORPORATION, Appellant. Benjamin SIEGEL, etc., v. NATIONAL SCREEN SERVICE CORPORATION, Appellant. Jay SCHRADER, etc., v. NATIONAL SCREEN SERVICE CORPORATION, Appellant. Dave MITCHEL v. NATIONAL SCREEN SERVICE CORPORATION, Appellant. Jacob RIFF v. NATIONAL SCREEN SERVICE CORPORATION, Appellant. Harry VOGELSTEIN v. NATIONAL SCREEN SERVICE CORPORATION, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

238 F.2d 59 (1956)

Charles LAWLOR et al., Appellants, v. NATIONAL SCREEN SERVICE CORPORATION.

Morris J. LIPP, etc., Appellant, v. NATIONAL SCREEN SERVICE CORPORATION.

Benjamin SIEGEL, etc., Appellant, v. NATIONAL SCREEN SERVICE CORPORATION.

Jay SCHRADER, etc., Appellant, v. NATIONAL SCREEN SERVICE CORPORATION.

Dave MITCHEL, etc., Appellant, v. NATIONAL SCREEN SERVICE CORPORATION.

Jacob RIFF, Appellant, v. NATIONAL SCREEN SERVICE CORPORATION.

Harry VOGELSTEIN, etc., Appellant, v. NATIONAL SCREEN SERVICE CORPORATION.

Charles LAWLOR et al., v. NATIONAL SCREEN SERVICE CORPORATION, Appellant.

Morris J. LIPP, etc., v. NATIONAL SCREEN SERVICE CORPORATION, Appellant.

Benjamin SIEGEL, etc., v. NATIONAL SCREEN SERVICE CORPORATION, Appellant.

Jay SCHRADER, etc., v. NATIONAL SCREEN SERVICE CORPORATION, Appellant.

Dave MITCHEL v. NATIONAL SCREEN SERVICE CORPORATION, Appellant.

Jacob RIFF v. NATIONAL SCREEN SERVICE CORPORATION, Appellant.

Harry VOGELSTEIN v. NATIONAL SCREEN SERVICE CORPORATION, Appellant.

Nos. 11818-11831.

United States Court of Appeals Third Circuit.

Argued June 8, 1956.

Decided October 24, 1956.

Certiorari Granted, Judgment Vacated February 25, 1957.

Francis T. Anderson, Philadelphia, Pa. (Gray, Anderson & Schaffer, Philadelphia, Pa., on the brief), for plaintiffs-appellants.

Louis Nizer, New York City (Phillips, Nizer, Benjamin & Krim, New York City, Walter S. Beck, Seymour Shainswit, New York City, on the brief), for Nat. Screen Service Corp.

Before GOODRICH, KALODNER and HASTIE, Circuit Judges.

Certiorari Granted, Judgment Vacated February 25, 1957. See 77 S.Ct. 526.

KALODNER, Circuit Judge.

Was there, in the cases involved in these appeals, a genuine issue as to a material fact which, under well-settled principles, precluded the entry of summary judgments adjudicating the defendant-appellant, National Screen Service Corporation ("National") to be an unlawful monopoly?

That is the critical issue presented by these appeals from decrees of the District Court for the Eastern District of Pennsylvania granting sweeping injunctive relief against National pursuant to the entries of summary judgments against it.¹

It may be stated preliminarily that involved are private anti-trust suits for treble damages and injunctive relief premised on alleged violation of the Sherman Anti-Trust Act.² All the plaintiffs and National are in the business of servicing motion picture theatres ("exhibitors") with advertising matter generally referred to as "standard accessories" which consist principally of lithographed posters, photographs of scenes from motion pictures described as "stills", and other articles designed for display in and about theatre lobbies in order to promote attendance at current or future exhibition of a particular picture.

Originally each motion picture producer created and prepared its own standard accessories for each of its feature motion pictures for distribution through its own exchanges, throughout the country, where they were leased to exhibitors. Local service concerns were later formed to acquire quantities of the posters of all the major companies which were supplied to exhibitors on a rental basis. The poster-renters were able to offer the exhibitor an opportunity to obtain all of his poster requirements from a single source instead of having to deal with eight different companies.³

National was incorporated sometime in the early 1920's. Originally its business was limited to servicing exhibitors with supplies of trailers or "prevues" which are short advertising films shown on the theatre screen. In the 1930's it also began distributing a special kind of poster, more elaborate and more costly than the standard posters, known as specialty accessories. By 1940 National had contracts with six of the eight major film companies giving it the exclusive right to distribute trailers throughout the nation, and contracts with four of the eight majors giving it the exclusive right to distribute specialty accessories in the same territory. In order to carry on its trailer and specialty accessory business, National maintained eight branch offices, or exchanges.

At the end of 1939 and early in 1940, Paramount Pictures, Inc. and RKO Radio Pictures, Inc. entered into separate agreements with National, each granting to National an exclusive license to manufacture and distribute standard accessories on a nation-wide scale. Both contracts were effective February 1, 1940, for five-years terms. A third exclusive contract was obtained by National from Loew's Incorporated on February 6, 1942.

In April, 1942, twelve poster-renters⁴ instituted an action under the anti-trust laws against National and the three contracting film companies.⁵ In April, 1943, the litigation was settled by an agreement whereby the then plaintiffs consented to a dismissal of their respective causes of action with prejudice, and National granted to each of them a sublicense wherein National agreed to supply the then plaintiffs with all of their respective requirements of standard accessories which National was then manufacturing under exclusive agreements and might subsequently manufacture under future exclusive licenses with other producers. The sub-license agreements were for a term of three yars from May 1, 1943. They were renewed in 1946 for a five-year term to April 30, 1951. Similar agreements were effected with poster-renters who had not been parties to the 1942 litigation.

During the four-year period following the 1942 settlement, the five remaining major motion picture producers granted National exclusive right over their copy-righted standard accessories similar to the agreements with the other three majors. National also was given exclusive specialty accessory privileges between 1942 and 1946 by the four companies with whom no such contracts had previously existed.

All of National's exclusive standard accessory contracts with the major producers, excepting only RKO and Loew's Incorporated, expired December 31, 1949. The RKO contract expired a month later, January 31, 1950 and the Loew contract some two years later, February 28, 1952.

Four of the major producers, RKO, Columbia Pictures Corporation, Twentieth Century Fox Film Corporation and Universal Pictures Company entered into new agreements with National early in 1950. These contracts were in terms non-exclusive in that licenses to produce and distribute standard accessories would be granted to anyone who undertook to deal on a nation-wide basis in standard accessories, specialty accessories and trailers. On February 16, 1950, the relationship between National and Warner Bros. Distributing Corporation was extended for an indefinite period pending negotiations. This was done by letter agreement which did not cover the detailed questions dealt with in the former contract and said nothing about exclusivity. Apparently none of the other companies entered into any written agreement with National after 1949. The Fox, RKO, Columbia and Universal contracts expired at the end of 1954. However, it appears that the standard accessories of all the producer-distributor-defendants continued to be produced substantially in conformity with the expired agreements.

All the sub-licenses which National had granted to plaintiffs, or renewals thereof, expired in March or April, 1951. National, however, continued (and still continues) to make supplies available to plaintiffs.

Coming now to the tangled skein of litigation which preceded the granting of the summary judgments and entries of decrees here involved:

The history of this litigation began on August 18, 1949, when the Lawlor action against National and the so-called "big eight" producer-distributor motion picture companies was instituted. It was followed in quick succession by the Lipp, Siegel and Schrader suits. In October, 1950 all four plaintiffs moved for summary judgment. The motions were argued and considered as a unit by District Judge McGranery. On July 25, 1951, Judge McGranery filed an opinion, reported at D.C.E.D.Pa.1951, 99 F.Supp. 180 granting summary judgment for the injunctive relief requested by the plaintiffs against National but denying summary judgment against the producer-distributor-defendants on the ground that, (page 187.) "The affidavits submitted by the defendants clearly indicate that each producer-distributor entered into its agreement with National Screen independently, for legitimate business reasons related to its own enterprise * * *", and "a disputed question of fact appears, precluding summary judgment."

Judge McGranery's opinion makes it clear that it was premised on his view that National's exclusive contracts with the producer-distributors were, per se, as a matter of law, an illegal monopoly under the Sherman Anti-Trust Act.

That is demonstrated by these quotations from his opinion:

At page 185: "By virtue of its exclusive contracts with the eight other defendants (or their affiliates), National Screen has the power to remove plaintiffs from competition * * *. No specific intent to monopolize is necessary; the only relevant intent is the intent to enter into the business arrangements which give rise to the power. By entering into exclusive agreements with the eight producer-distributor defendants (or their affiliates), National Screen has acquired the power to exclude competition and demonstrated its intent to exercise that power. Hence, it would appear that National Screen is in violation of Section 2 of the Sherman Act." (Emphasis supplied.)

Again, at page 187: "* * * the acquisition by National Screen of exclusive license agreements for the distribution of standard accessories of the `big eight\' forecloses competition from a substantial market, a course of conduct unreasonable per se." (Emphasis supplied.)

It is pertinent to observe that Judge McGranery was of the view, (page 186) "It is entirely irrelevant that there may have been no resort to unfair competitive practices"...