Poster Exchange, Inc. v. National Screen Service Corp.

• Decision Date: 24 August 1970
• Docket Number: No. 27902.,27902.
• Citation: 431 F.2d 334
• Parties: The POSTER EXCHANGE, INC., Plaintiff-Appellee-Cross Appellant, v. NATIONAL SCREEN SERVICE CORPORATION, Defendant-Appellant-Cross Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

431 F.2d 334 (1970)

The POSTER EXCHANGE, INC., Plaintiff-Appellee-Cross Appellant, v. NATIONAL SCREEN SERVICE CORPORATION, Defendant-Appellant-Cross Appellee.

No. 27902.

United States Court of Appeals, Fifth Circuit.

August 24, 1970.

Charles A. Moye, Jr., E. Smythe Gambrell, Atlanta, Ga., Walter S. Beck, New York City, for appellant.

Glenn B. Hester, Carl E. Sanders, Augusta, Ga., Francis T. Anderson, Yeadon, Pa., C. Ellis Henican, Jr., New Orleans, La., for appellee.

Before JOHN R. BROWN, Chief Judge, AINSWORTH and GODBOLD, Circuit Judges.

JOHN R. BROWN, Chief Judge:

Here we write again in this seemingly ceaseless saga of antitrust litigation¹ between the local distributors of motion picture advertising accessories² and the vertically integrated single producer and national distributor of the accessories, National Screen Service Corporation. This chapter, the Atlanta phase, has ben elaborated by three previous opinions of this Court.³

The plot of this chapter revolves around monopoly — § 2 of the Sherman Act.⁴ Poster claimed that National Screen used its position as the only producer and supplier of standard accessories for motion pictures to "monopolize" the Atlanta area market for the distribution of the accessories to movie exhibitors. Poster alleges two separate acts of monopolization. First, it claims that as far back as the statute of limitations can reach, here it is assumed that that is July, 1957, National Screen refused to provide Poster with an adequate supply of accessories, refused to grant Poster a sublicense, and priced the accessories that were provided at the same price that National Screen distributed material to the exhibitors — the "over-the-counter" price. The second claim was that in 1961 National Screen completely refused to continue supplying any accessories to Poster.

The case was tried without a jury and the District Court found that there had been monopolization and assessed damages of $150,000, tripled pursuant to 15 U.S.C.A. § 15⁵ to $450,000. It also awarded attorney's fees of $50,000 to Poster Exchange. National Screen attacks the District Court's finding of liability, finding as to the amount of damages, and the amount of attorney fees awarded. Poster Exchange contends that the amount of attorney's fees awarded was inadequate. We, however, reject all of these contentions. But we remand for additional consideration of the amount of attorney's fees.

I.

The history of this industry-wide dispute has been set out several times by many Courts, including this one, and need not be restated here. (See note 1, supra).

National Screen is the sole holder of a license to produce and to distribute standard accessories for the large domestic movie producing companies.⁶ It obtained this position after a substantial number of firms were already in the business of marketing the accessories to motion picture exhibitors. Poster is a local distributor-jobber in the Atlanta area.

Without specifics and details reflected in the numerous prior opinions, the claim made here took this shape. Prior to 1940 the major domestic motion picture producers produced and distributed standard accessories through local distributor-jobbers in major cities. Between 1940 and 1947 National Screen was licensed⁷ by the producing companies to be the exclusive producer-distributor of standard accessories and to distribute them on a nationwide basis.

Armed with the exclusive licenses National Screen in 1943 bought out 28 of the local distributor-jobbers. In 1943 Philadelphia area jobber-distributors brought an antitrust action — the "Allied Suit". Shortly thereafter it was settled and National Screen agreed to sublicense the plaintiffs in that action and did grant them and some others sublicenses. But even though Poster began making requests for such a sublicense as early as 1943 and made this request repeatedly, National Screen refused to grant it a sublicense. Meanwhile National Screen had entered the Atlantic Exchange Market. During this period National Screen did, however, supply Poster with accessories, but only in limited quantities, not enough for Poster to supply its customers. The prices charged were substantially higher than those paid by other sublicenses. In fact the prices were the same that National charged the other exhibitors — the over-the-counter prices.

About 1950, when the original exclusive licenses from the producers had expired, National Screen entered into nominally nonexclusive agreements with all of the producers. These agreements, however, contained a type of "Most Favored Nation Clause" that prohibited the producer from granting other licenses unless the prospective licensee agreed to establish a nationwide distribution system like that of National Screen and agreed to a full line production of accessories.

In 1954 the United States filed an antitrust action in the Southern District of New York (see note 10, infra). And pursuant to a consent decree of 1957, National Screen considered itself obligated to continue to grant sublicenses.⁸ The nominally nonexclusive provision of the license from the producers was also retained. Although during these years Poster had survived without a sublicense, its market share declined drastically. In about 1942-43 it had about 60% of the market in the Atlanta area, but by 1961 its share had declined to only 24%. In these years National Screen's share, which was zero when it started, rose to over 70%. In 1961 National Screen leveled its final blow. It adopted a nationwide policy under which it refused to provide accessories to any distributor-jobber. Following this, Poster's share of the market fell to 2%. In 1957 it had 200 — 225 customers; in 1961 it had 15.⁹ The District Court found that National Screen's pre-1961 acts of refusing to provide an adequate supply of accessories and charging "top prices", as well as the 1961 complete refusal to deal, occurred and were motivated by the intention to drive Poster out of the market.

II.

National Screen presents three challenges to the District Court's findings and conclusions. In the first, a double-feature, National Screen argues that liability is prohibited by the 1957 consent decree entered in the Government antitrust suit¹⁰ and because Lawlor v. National Screen Service Corp., 3 Cir., 1959, 270 F.2d 146, cert. denied, 1960, 362 U.S. 922, 80 S.Ct. 676, 4 L.Ed.2d 742 is controlling. These contentions have, however, been presented to this Court twice and have been rejected twice, first in Judge Gewin's 1962 opinion in Poster I and again in Judge Tuttle's opinion in Poster III in 1966. (See note 3, supra). We reject them thrice.¹¹

Second, National Screen contends that Poster in pretrial response to a discovery request and in its pleadings, had made admissions that precluded imposing liability for pre 1961 acts. But we think it is plain that the District Court did not read these as reflecting a final, absolute judicial admission; nor do we. At most they related solely on the ultimate issues as just a few more pieces of evidentiary footage, which the District Court could, but was not required to credit. As a last reel, the whole trial would have been a waste. That De Mille epic would not have been carried out if anyone, including the Judge, had believed that Poster Exchange after years of protest was now telling the Judge that until 1961 everything was rosy.

National Screen's third contention, which is closely related to the second, is that the District Court's fact findings upon which the conclusion of Sherman Act liability is based are not supported. But this challenge begins with the heavy burden of F.R.Civ.P. 52(a)'s clearly erroneous standard. Lawlor v. National Screen Service Corp., 3 Cir., 1959, 270 F.2d 146, 152, cert. denied, 1960, 362 U.S. 922, 80 S.Ct. 676, 4 L.Ed.2d 742. This greatly simplifies our quest. There is direct testimony of present and former employees of Poster Exchange as well as testimony of former National Screen employees that prior to 1961 National Screen had restricted the number of accessories available to Poster and priced the accessories that were supplied at a "top price". The testimony also showed that this, as well as the 1961 complete refusal to deal, was done with the intention of driving Poster out of the market.¹² On this approach we think that there was quite enough to warrant the District Court's fact finding.

These three challenges are really previews. The main feature here is National Screen's argument that even on the facts found there can be no § 2 liability. The review of that argument starts with the central element of the plot National Screen was the only producer of standard accessories. During the period for which liability is asserted, National Screen's licenses from the producers were only nominally non-exclusive.¹³ National Screen certainly had, as the District Court found, monopoly power within all conceivable market conditions. In order for another company to have acquired a license it would have had to make a multimillion dollar investment. The producing companies required under their "Most Favored Nation" clauses required nationwide distribution facilities, full line producing and direct competition with National Screen's already established organization. Moreover, Poster was only a local distributor-jobber. And the District Court was entitled to conclude that Poster cannot be required to convert the nature of its business, make a multimillion dollar investment and become a nationwide distributor just to survive in the Atlanta area. See United States v. Aluminum Company of America, Inc., 2 Cir., 1945, 148 F.2d 416.

The District Court's fact finding, which comes under Rule 52(a)'s clearly erroneous umbrella, was that National Screen intentionally used the monopoly power it had at the manufacturing level to eliminate Poster as a competitor at the distributor-jobber level. Such conduct has long been held to violate § 2. This is just the type...