Seven Gables Corp. v. MGM/UA Entertainment Co.

• Citation: 721 P.2d 1,106 Wn.2d 1
• Decision Date: 05 June 1986
• Docket Number: No. 51795-9,51795-9
• Parties: SEVEN GABLES CORPORATION, a Washington corporation, Respondent, v. MGM/UA ENTERTAINMENT CO., a foreign corporation, Appellant.
• Court: United States State Supreme Court of Washington

Page 1

106 Wn.2d 1

721 P.2d 1

SEVEN GABLES CORPORATION, a Washington corporation, Respondent, v. MGM/UA ENTERTAINMENT CO., a foreign corporation, Appellant.

No. 51795-9.

Supreme Court of Washington,

En Banc.

June 5, 1986.

[721 P.2d 2]

Culp, Dwyer, Guterson & Grader, Richard Yarmuth and Michele Coad, Seattle, for appellant

William Bishin, Seattle, for respondent.

DOLLIVER, Chief Justice.

Defendant MGM/UA Entertainment Co. (MGM/UA) is a distributor of motion pictures. Plaintiff Seven Gables Corporation (Seven Gables) is a theater owner and exhibitor of motion pictures. Seven Gables sued MGM/UA under RCW 19.58.050, for a statutory decree enjoining further violations of the Washington motion picture fair competition act, RCW 19.58.

The trial court granted plaintiff's motion for summary judgment and denied defendant's cross motion for summary

judgment. It also entered a decree enjoining violations of RCW 19.58. The decree permitted defendant to engage in competitive or any other kind of negotiation if it solicited bids and received none. The trial court further awarded plaintiff attorney fees and costs. Defendant appeals claiming the trial court improperly interpreted RCW 19.58 as including film licensing by negotiation within the regulating procedures of RCW 19.58.040. It challenges the act as being both unconstitutionally vague and violative of the defendant's constitutional rights. Defendant also appeals from the award of attorney fees and costs

We accepted certification from the Court of Appeals, and affirm the trial court, except for two provisos set forth in the injunctive decree. As this case comes to us on appeal from a summary judgment, all facts will be presented in a light most favorable to the nonmoving party. Ryan v. Zornes, 34 Wash.App. 63, 658 P.2d 1281 (1983).

Motion pictures are copyrighted works which are not sold outright by distributors to theater owners but are licensed to theaters for exhibition. They generally are licensed to exhibitors on a percentage rental basis, which provides for a division of the gross receipts on an agreed-upon basis. The revenue available to the distributor is dependent on the number of people who come to the theater to see the particular film.

Exhibitors obtain films to play in their theaters by entering into contracts with distributors for the right to show those films. Distributors usually initiate the licensing process for a particular film by notifying local exhibitors and requesting them to submit proposals or offers for that film. Each motion picture requires an individual distribution plan. Licensing the film to a particular theater is only one of many factors in a distributor's procedure for releasing a film. While the motion picture industry is national in scope, film licensing is a local process.

Defendant MGM/UA (along with Paramount, Warner Brothers, Columbia, Twentieth Century Fox, and Universal) is one of the six major national distributors of motion

picture films who together account for well over 80 percent of the annual gross revenue of all motion pictures in the United States. The eight highest grossing distributors account for well over 90 percent of total national gross

There are two critical dates in the distribution of a film--the date of the licensing and the date of release (when the film is made available to the theater owner for exhibition). MGM/UA has license agreements with exhibitors either by bidding or negotiation. When using written bids, MGM/UA opens all written bids in the open bidding process mandated by RCW 19.58.040. Using the negotiation process, MGM/UA provides the same information to exhibitors as required under the act; but, based on the terms offered by the exhibitor, MGM/UA then negotiates the terms of the license without following the procedures of RCW 19.58.040. The current procedure of MGM/UA is to license films by formal bidding.

[721 P.2d 3] Time is of the essence in the showing of films. A large percentage of films are released to take advantage of a national marketing campaign. The release date for a picture is determined by many factors, but an alteration of a release date increases a distributor's already great financial risk.

Defendant argues forced compliance with the open bidding procedures of RCW 19.58.040 for negotiation of film licenses is not consistent with the statutory scheme. Defendant also alleges RCW 19.58 has had a negative financial impact on distribution companies and that it has been substantially burdened by the trade screening requirements and the bidding procedures of the state. MGM/UA presents affidavits from its employees and others alleging the potential harmful effects to its business interests by the application of RCW 19.58 as interpreted by the trial court's injunction. However, the Motion Picture Exhibitors of Washington, Alaska and Northern Idaho (MPEX) (a subsidiary of the National Association of Theater Owners (NATO)) expressed the opinion that the injunction, if upheld, would be advantageous to the movie industry as a whole. Neither

Seven Gables nor MGM/UA is aware of any instance in which a film was delayed in Washington because of the statutory requirements

I

The two major issues covered by the Washington motion picture fair competition act, RCW 19.58, are (1) the prohibition of blind bidding, i.e., the practice of distributors forcing exhibitors to negotiate or bid on a motion picture prior to its being screened for the exhibitor (RCW 19.58.030(1)); and (2) the requirement that all bids be submitted in writing (RCW 19.58.040(2)). Since the act went into effect September 1, 1979 (see Laws of 1979, 1st Ex.Sess., ch. 29, § 3, p. 1103), every major distributor doing business in Washington, including MGM/UA, has complied with RCW 19.58.030 and screened its films for exhibitors prior to soliciting offers or initiating negotiations for licenses. In addition, since the enactment of RCW 19.58, two of the major distributors, Paramount and Warner Brothers, have licensed their films solely by the open bidding procedures of RCW 19.58.040, except for an occasional failure to follow the rebidding requirement.

Defendant does not challenge RCW 19.58.030. It claims, however, that RCW 19.58.040 regulates only licensing by bidding and does not regulate licensing by negotiation. Plaintiff contends, and the trial court agreed, that both licensing by negotiation and by bidding are regulated. We agree with plaintiff.

RCW 19.58.040 states:

If bids are solicited from exhibitors for the licensing of a feature motion picture within the state, then:

(1) The invitation to bid shall specify: (a) Whether the run for which the bid is being solicited is a first, second, or subsequent run; whether the run is an exclusive or nonexclusive run; and, the geographic area for the run; (b) the names of all exhibitors who are being solicited; (c) the date and hour the invitation to bid expires; and (d) the time, date, and location, including the address, where the bids will be opened, which shall be within the state.

(2) All bids shall be submitted in writing and shall be

opened at the same time and in the presence of those exhibitors, or their agents, who submitted bids and who attend the bid opening

(3) Immediately upon being opened, the bids shall be subject to examination by the exhibitors, or their agents, who submitted bids, and who are present at the opening. Within ten business days after the bids are opened, the distributor shall notify each exhibitor who submitted a bid either the name of the winning bidder or the fact that none of the bids were acceptable.

(4) Once bids are solicited, the distributor shall license the feature motion picture only by bidding and may solicit rebids if none of the submitted bids are acceptable.

[721 P.2d 4] In construing statutes, the goal is to carry out the intent of the Legislature. Bellevue Fire Fighters Local 1604 v. Bellevue, 100 Wash.2d 748, 751, 675 P.2d 592 (1984). In doing so, it is the duty of the court in interpreting a statute to make the statute purposeful and effective. Washington Water Power Co. v. State Human Rights Comm'n, 91 Wash.2d 62, 66, 586 P.2d 1149 (1978). Any statutory interpretation which would render an unreasonable and illogical consequence should be avoided. Puyallup v. Pacific Northwest Bell Tel. Co., 98 Wash.2d 443, 450, 656 P.2d 1035 (1982). Thus, in attempting to effect the intent of the Legislature, an act must be construed as a whole, harmonizing all provisions to ensure proper construction. In re Piercy, 101 Wash.2d 490, 492, 681 P.2d 223 (1984).

The purpose of the Washington motion picture fair competition act is:

[T]o establish fair and open procedures for bidding and negotiation for the right to exhibit motion pictures in the state in order to prevent unfair and deceptive acts or practices and unreasonable restraints of trade in the business of motion picture distribution and exhibition within the state; to promote fair and effective competition in that business; and to insure that exhibitors have the opportunity to view a motion picture and know its contents before committing themselves to exhibiting the motion picture in their communities.

RCW 19.58.010. In construing the statute, the definitions become integral to the statutory scheme. State v. Taylor, 30 Wash.App. 89, 95, 632 P.2d 892 (1981). The Legislature defines bid as meaning "a written or oral offer or proposal to buy made by an exhibitor to a distributor in response to an invitation to bid for the license or right to exhibit a motion picture, the license stating the terms under which the exhibitor agrees to exhibit the motion picture." (Italics ours.) RCW 19.58.020(1). Thus, a bid as defined by the Legislature is (1) an "offer or proposal" (2) either "written or oral" (3) which responds "to an invitation to bid".

Most of the other state statutes include in their definition of a "bid" the terms under which the exhibitor agrees to exhibit the...