Paramount Pictures v. Langer, 882

• Citation: 23 F. Supp. 890
• Decision Date: 14 July 1938
• Docket Number: 907.,No. 882,882
• Parties: PARAMOUNT PICTURES, Inc., et al. v. LANGER et al. SAME v. STRUTZ.
• Court: U.S. District Court — District of North Dakota

23 F. Supp. 890

PARAMOUNT PICTURES, Inc., et al. v. LANGER et al.

SAME v. STRUTZ.

Nos. 882, 907.

District Court, D. North Dakota, S. D.

July 14, 1938.

COPYRIGHT MATERIAL OMITTED

Thomas D. Thacher, of New York City, George W. Thorp, of Fargo, N. D., Joseph W. Finley, of St. Paul, Minn., and A. C. Bickford and Louis P. Phillips, both of New York City, for plaintiffs.

Abram F. Myers, of Washington, D. C., John P. Devaney and Louis B. Schwartz, both of Minneapolis, Minn., Francis Murphy, of Fargo, N. D., and Alvin C. Strutz, Atty. Gen., of North Dakota, for defendants.

Before SANBORN and THOMAS, Circuit Judges, and SULLIVAN, District Judge.

PER CURIAM.

Chapter 165, Laws of North Dakota of 1937, the validity of which is challenged, is entitled, "An Act to prohibit the operation of motion picture theaters which are owned, controlled, managed, or operated, in whole or in part, by producers or distributors of motion picture films, or in which such producers or distributors have any interest." The full text of the Act will be found in the footnote.¹ The purpose and effect of the Act are exactly as stated in its title. It became effective March 15, 1938.

At the time of the approval of the Act (March 15, 1937) there were, and there are now, 10 motion picture theatres (of a total of approximately 168) in the State of North Dakota affected by it — 3 in Fargo, 2 in Jamestown, 3 in Minot, and 2 in Grand Forks. Those in Minot and Grand Forks are operated by plaintiff Minnesota Amusement Company (hereinafter referred to as "Minnesota"), a Delaware corporation which is a wholly owned subsidiary of plaintiff Paramount Pictures, Inc. (hereinafter referred to as "Paramount"), a New York corporation. Those in Fargo and Jamestown are operated by plaintiff American Amusement Company (hereinafter referred to as "American"), a Minnesota corporation, and a wholly owned subsidiary of the plaintiff Minnesota. Plaintiff Paramount, a producer and distributor of motion pictures, is, by reason of its ownership of the capital stock of plaintiff Minnesota, interested in the theatres owned or leased and operated by Minnesota and American. Therefore, the operation in North Dakota of these 10 theatres since March 15, 1938, has been in violation of the provisions of Chapter 165. The operation of the theatres has been, and, if permitted to continue, will be profitable to the plaintiffs. Large sums of money have been invested by them in these theatres. The buildings in which the theatres are located are specially adapted for use as theatres. If the plaintiffs are prevented from operating their theatres, they will suffer a substantial loss. Were it not for the Act complained of, the operation of these theatres in North Dakota would be legal. If the Act is invalid, its invalidity should be declared and its enforcement enjoined. If it is not invalid, these suits should be dismissed.

Stated briefly, the contentions of the plaintiffs are:

1. The Act arbitrarily deprives the plaintiffs of their property and property rights without due process of law, and denies to them the equal protection of the laws, in violation of the due process and equal protection clauses of the Fourteenth Amendment to the Constitution of the United States.

2. If the Act is interpreted as having the purpose and effect of regulating the licensing and distribution of motion pictures in North Dakota, the Act imposes direct burdens on interstate commerce (Constitution, Section 8, Article 1 U.S.C.A.Const. art. 1, § 8) and impairs rights protected by the Federal Copyright Law (U.S.C. Tit. 17, 17 U.S.C.A. § 1 et seq.).

The plaintiffs' arguments supporting these contentions are, in brief, as follows:

First. The Act, upon its face, goes far beyond the reasonable necessity of legislative regulation in that it is designed to prevent the operation of a theatre in which a producer or distributor has an interest, however small that interest may be, and requires the disposition by the producer of existing interests presently owned, regardless of their character and regardless of their relation to the actual control and operation of the theatre.

Second. The Act cannot be sustained as an anti-monopoly or unfair trade statute because: (1) its prohibition is not confined to acts intended to destroy or injure competition or to unfair trade practices; (2) there is no evidence to justify a finding that there is a monopoly, or a reasonable anticipation of monopoly, in the production, distribution or exhibition of motion pictures, or any agreements, combinations or conspiracies among producers or distributors to restrain trade or competition with respect to the production, distribution or exhibition of motion pictures, or any policy adopted by them to favor affiliated theatres (those in which a producer or distributor has a financial interest) as against unaffiliated or independent theatres; (3) it drives out of the field of exhibition the affiliated exhibitor, and leaves the field to competitors, against the public interest and for the sole interest of a class seeking to exclude a powerful competitor; (4) the exclusion from trade and from any interest whatsoever, whether controlling or not, in a lawful and profitable theatre business has no relation to the prevention or correction of any evils which might reasonably be believed to exist therein, and is unreasonable, arbitrary, capricious and unjust in its drastic and unnecessary deprivation of property rights; (5) the means provided by the Act to accomplish the policy declared by it have no reasonable relation to any proper public purpose with which the Legislature was competent to deal, and are unnecessarily harsh and oppressive.

Third. The Act cannot be justified as a reasonable regulation of motion picture theatres in the interest of the public health, safety or morals, because, (1) the contention that it has any relation thereto is purely fanciful; and (2) the State has complete authority to enact laws which will fully protect the health, safety and morals of the theatre-going public without prohibiting the operation of the theatres belonging to any class of exhibitors.

Fourth. The practices of producer-exhibitors which are complained of and which the Act is intended to prevent, prohibit or correct, relate to competition in the distribution and licensing of films protected by copyright and shipped in interstate commerce, and are therefore subject to regulation only by Federal authority.

The defendants contend that the Act is a valid statute constituting a proper exercise of the police power of the State of North Dakota (1) to regulate and prevent the growth and development of monopolies or restraints of trade in the business of public exhibition of motion pictures in the State; (2) to protect independent exhibitors (those unaffiliated with a producer or distributor of films) against the unfair competition and unfair trade practices of those occupying the dual position of producers and exhibitors of motion pictures; (3) to eradicate the evils of competition between small independent theatres or groups of theatres and chains of affiliated theatres grown so large as to constitute a menace to the general public welfare; (4) to protect the independent exhibitors of the State against the unfair advantages of large chains of affiliated theatres, due to their superior buying and bargaining power, wealth and organization; (5) to prevent present abuses or those which are to be reasonably anticipated as resulting from or inherent in the operation in North Dakota of theatres in which producers or distributors are interested (affiliated theatres); and (6) to promote the public health, welfare and morals by rendering all theatres in North Dakota subject to community or local influence with respect to their operating policies and selection of films.

Some of the issues presented for determination can be eliminated without lengthy discussion.

The Act, by its terms, relates only to the operation of motion picture theatres within the confines of the State. It does not purport to relate, and could not be construed as relating, to the distribution or licensing of films. It seems clear to us that any remote effect that the Act might have upon the distribution of films in interstate commerce or upon the rights of producers or distributors under the Copyright Law could not sustain a conclusion that the Legislature of North Dakota had invaded a field exclusively reserved to the Congress of the United States. As to interstate commerce, see Bayside Fish Flour Co. v. Gentry, 297 U.S. 422, 426, 56 S.Ct. 513, 515, 80 L.Ed. 772; Crescent Cotton Oil Co. v. Mississippi, 257 U.S. 129, 135, 136, 42 S.Ct. 42, 43, 66 L.Ed. 166. As to copyright interference, see Straus and Straus v. American Publishers' Ass'n, 231 U.S. 222, 34 S.Ct. 84, 58 L.Ed. 192, L.R.A.1915A, 1099, Ann.Cas.1915A, 369; Standard Sanitary Mfg. Co. v. United States, 226 U.S. 20, 33 S.Ct. 9, 57 L.Ed. 107.

We see no merit in the contention that the Act can be justified as a measure intended to safeguard the public health, safety or morals, because (1) there is no basis for believing that the operation of affiliated theatres in the State has, or will have, any reasonable relation thereto, and (2) any indirect effect which the presence of these 10 affiliated theatres in the State might possibly be conceived to have on the health, safety and morals of their patrons would not warrant excluding them from the State.

So far as the equal protection clause of the Fourteenth Amendment, U.S.C.A. Const. Amend. 14, is concerned, it is readily apparent that there are distinctions between the two sorts of exhibitors — affiliated and independent — which might well justify a difference of treatment, if the Legislature had the power to enact this legislation. Compare American Sugar Refining Co. v. Louisiana, 179 U.S. 89, 21 S.Ct. 43, 45 L.Ed. 102; Brown-Forman Co. v. Kentucky, 217 U.S. 563, 30 S.Ct. 578, 54 L.Ed....