Mission Theatres v. Twentieth Century-Fox Film Corp., 4729.

• Decision Date: 04 January 1950
• Docket Number: No. 4729.,4729.
• Citation: 88 F. Supp. 681
• Parties: MISSION THEATRES, Inc. et al. v. TWENTIETH CENTURY-FOX FILM CORPORATION et al.
• Court: U.S. District Court — Western District of Missouri

88 F. Supp. 681

MISSION THEATRES, Inc. et al. v. TWENTIETH CENTURY-FOX FILM CORPORATION et al.

No. 4729.

United States District Court W. D. Missouri, W. D.

January 4, 1950.

Louis B. Schwartz, Minneapolis, Minn., Duvaul P. Strother, Kansas City, Mo., for plaintiffs.

Cooper, Neel, Sutherland & Rogers, Spencer & Britt, Kemp, Koontz, Clagett & Norquist, Kansas City, Mo., for defendants.

RIDGE, District Judge.

After the expiration of the "Consent Decree" entered in United States v. Paramount Pictures et al., the District Court, Southern District of New York, held "everything relating to rights under and remedies for violation of the Sherman Act (was) open for consideration" of the Court in that case. 66 F.Supp. 323, 333. The Court specifically stated, "we do not deem ourselves bound by any provision of the consent decree, if we now find that it violates the Sherman Act." 66 F.Supp. at page 342. As revealed by the findings of fact and final decrees subsequently entered in that case, when the Court came to consider the issues of "clearances and runs" there submitted, it found many matters in the historical development thereof as evolved by distributor-defendants and exhibitor-defendants in that action that were held to be in violation of the Sherman Act, 15 U.S.C.A. § 1 et seq., and enjoined said defendants accordingly. For instance, as the Supreme Court said, 334 U.S. 131, 146, 68 S.Ct. 915, 924, 92 L.Ed. 1260, the District Court found, and the evidence at the trial of that action amply showed: "that many clearances had no relation to the competitive factors which alone could justify them. The clearances which were in vogue had, indeed, acquired a fixed and uniform character and were made applicable to situations without regard to the special circumstances which are necessary to sustain them as reasonable restraints of trade. The evidence (the Court said was) ample to support the finding of the District Court that the defendants either participated in evolving this uniform system of clearances or acquiesced in it and so furthered its existence. That (such) evidence * * * (was) adequate to support the finding of a conspiracy to restrain trade by imposing unreasonable clearances."

Notwithstanding the finding of fact made and the final decrees entered by the District Court in the aforesaid proceedings, all defendants in this private Sherman Act case now proffer amendments to their respective answers, setting forth the defense, that because Dickinson, Inc. (one of the plaintiffs here), filed a "Demand for Arbitration" and submitted to the Motion Picture Arbitration Tribunal set up under Section VIII of the consent decree, the proposition that the maximum clearance which the Dickinson Theatre, Mission, Kansas, then had was unreasonable and should be fixed at not to exceed 14 days after first run in Kansas City, Missouri; and, the Motion Picture Arbitration Tribunal in that proceeding determined and entered an award, the effect of which was, that it had no power to fix or determine the availability of pictures to Dickinson after first run in Kansas City, Missouri; that the then existing clearance the Plaza Theatre (a Fox affiliate) had over the Dickinson could not be the subject of arbitration in that proceeding, so far as Twentieth Century-Fox and its affiliates were involved; but that so far as the remaining four consenting defendants (Paramount, Loew's, RKO and Vitagraph) were there concerned, the maximum clearance which they could thereafter grant in license of pictures to the Plaza, should be 14 days over the Dickinson; that said award constitutes a judicial determination that the clearance granted to first run theatres in Kansas City, Missouri, over the Dickinson Theatre, is proper and lawful; that the reasonableness or lawfulness of the clearance of the Plaza over the Dickinson, has been adjudicated by said award; and, that all of the plaintiffs, whether parties to that arbitration proceeding or not, have suffered no actionable damages since the effective date of said award; and, that said award is as to all plaintiffs res adjudicata of the issues of clearance in this case. That the matters so proffered by defendants do not have the legal effect defendants claim for them and are not res judicata of any issue raised by plaintiffs in the instant action is clearly evident when the following is considered.

Tersely stated, the issues presented in the instant complaint (to which the plea of res judicata is addressed) are that the defendants combined and conspired with each other to adopt, and maintained a system of "clearances" between runs which operated especially in favor of theatres owned or controlled by, or affiliated with, one of the producing defendants, to the prejudice of unaffiliated, independent theatres, such as the Dickinson, as a result of which plaintiffs claim damages of defendant under Section 4 of the Clayton Act, Title 15, U.S.C.A. § 15. The acts which plaintiffs here allege defendants committed in consummation of that conspiracy are similar to those acts respecting clearances and runs, that were found to exist by the District Court and made the subject of its final decrees in the Paramount case, supra. Such issues were not submitted to the Arbitration Tribunal set up under Section VIII of the consent decree, and that tribunal had no jurisdiction to entertain or adjudicate any such issues.

When the five consenting defendants in the Paramount case agreed to the entry of the consent decree, that was only to be binding on them for a period of three years, they merely agreed that a "rule of thumb" be set up in Section VIII of the consent decree by which an Arbitration Tribunal would determine whether a given clearance was reasonable or unreasonable under the standards there fixed in said Section VIII. An examination of the factors which an arbitrator was bound to consider in determining the reasonableness of a clearance under Section VIII of the consent decree and the law as finally declared by the District Court after trial of the issues in the Paramount case, and affirmed on appeal by the Supreme Court, clearly reveals that such "rule of thumb" does not establish a standard for determining the reasonableness of clearances the same as does the law when tested by Sherman Act standards. By the "rule of thumb" set forth in Section VIII of the consent decree, the Arbitration Tribunal was required to take into consideration, among other things, the factor of the historical development of clearances in a particular area. That factor, when considered with the provisions of Section XVII of the consent decree, had the practical effect of keeping alive during the period of the consent decree "clearances" particularly, as between a distributor-defendant and its affiliates the same as they existed at the time the complaint in the Paramount case was first lodged with the District Court. In light of that one limitation so placed on the Arbitration Tribunal by Section VIII of the consent decree, it is manifest that that tribunal had no power or jurisdiction to consider or determine whether clearances in a particular area were evolved out of trade practices between the distributor-defendant and its affiliates, the result of which was to restrain trade, or were the result of a combination or conspiracy between the defendants in that action which would make a given clearance, not only unreasonable, but unlawful under Sherman Act standards. It is clear from the opinions and final...