Southway Theatres, Inc. v. Georgia Theatre Co.
| Decision Date | 05 April 1982 |
| Docket Number | No. 80-7672,80-7672 |
| Parties | 1982-1 Trade Cases 64,658 SOUTHWAY THEATRES, INC., Plaintiff-Appellant, v. GEORGIA THEATRE COMPANY, et al., Defendants-Appellees. . Unit B * |
| Court | U.S. Court of Appeals — Fifth Circuit |
Schreader, Wheeler & Flint, Warren O. Wheeler, David H. Flint, Mary Jo Workman, Atlanta, Ga., for plaintiff-appellant.
Troutman, Sanders, Lockerman & Ashmore, June Ann Kirkland, Tench C. Coxe, Atlanta, Ga., for Paramount Pictures Corp.
Jones, Bird & Howell, Kevin E. Grady, Atlanta, Ga., for Storey Theatres, Inc.
Hansell, Post, Bandon & Dorsey, Lee Trammell Newton, Jr., Atlanta, Ga., for Georgia Theatre.
Donovan, Leisure, Newton & Irvine, A. Vernon Carnahan, New York City, and King & Spalding, Joseph B. Haynes, Atlanta, Ga., for Buena Vista Distribution Co., Inc.
Appeal from the United States District Court for the Northern District of Georgia.
Before GEWIN, ** HILL and HATCHETT, Circuit Judges.
The appellant, Southway Theatres, is the owner of the Jonesboro Twin Movie Theatre, which is located in the southern part of the metropolitan Atlanta area. In a private antitrust action brought under sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2, and section 4 of the Clayton Act, 15 U.S.C. § 15, Southway alleged that the appellees- 1competing Atlanta theatre chains and national film distributors-conspired to deprive Southway of the opportunity to license first run films and sought to eliminate it from competition in the licensing and exhibition of those films. The district court entered summary judgment for the defendants. We reverse based on the district court's use of a standard which overstated the burden which Southway must meet in order to survive a motion for summary judgment, and we remand for the application of the proper standard.
The parties form part of a tripartite system of film production and marketing in the United States. At the originating level, production companies are responsible for the financing and creation-at least economically-of Southway has sued the seven major distribution companies operating in the United States. It states that these defendants handle films accounting for over 85% of total national box office revenue each year. Each distributor defendant operates nationwide and maintains branch offices in approximately thirty "key" cities. Atlanta is a key city and the distributors' offices in Atlanta do business in Georgia and portions of Tennessee and Alabama.
motion pictures. They market the films to exhibitors through distribution companies, which they control. Each distributor defendant in the lawsuit is affiliated with a producer and distributes the producer's films. Although the motion picture industry was once vertically integrated, court decrees have forced distributors and producers to divest themselves of ownership in theatres. See M. Conant, Antitrust in the Motion Picture Industry, 88-112 (1960).
The distributors market motion pictures to theatre owners, who are known as exhibitors. Southway distinguishes between two kinds of exhibitors, the "circuits" and the "independents." Circuits are chains of theatres under common ownership, while independent theatres are individuals unaffiliated with any circuit. Under Southway's view of the case, the circuits wear black hats and the independents wear white hats: Southway accuses the circuits, who allegedly have greater bargaining power, of inducing distributors not to provide the independents with desirable films. The exhibitor defendants-Georgia Theatres Company, Storey Theatres, Inc., and Weis-Theatres, Inc.-own most of the theatres in the Atlanta region.
Motion picture distributors market their films by licensing the right to exhibit them for a specified amount of time. The exhibitor rents a print of the film along with a copyright license of limited duration. Licensing agreements generally provide for payment to the distributor of a percentage of the gross box office profits earned by each exhibitor, and often also include a guaranteed minimum to be paid regardless of the success of a film. Under this system the distributors retain a direct interest in the profitability of each picture, and they carefully control the availability and distribution patterns of films so as to maximize return.
Films are ordinarily released in three runs, known as first run, intermediate run, and wide break. A first run will produce greater box office profits than subsequent runs and is therefore the most desirable run for an exhibitor. The distributor is in turn able to exact proportionately higher license terms for a first run film. First runs are often accompanied by major publicity campaigns financed solely by the distributor or collectively by the distributor and one or more licensed exhibitors. First run films are often limited to centrally located, well-known theatres. A particularly desirable film may be given an exclusive first run, which is limited to a single theatre. In a restricted first run, the film is licensed to several theatres. In a multiple first run, a still larger number of theatres will exhibit a film. A distributor will usually license a film to a smaller number of exhibitors on first run than on intermediate run; distribution is, in turn, more limited on intermediate run than on wide break.
Motion picture distributors frequently license films by competitive bidding. Under this system, exhibitors in a marketing area defined by the distributor are asked to submit bids stating the percentages and guarantees each exhibitor will pay for the film being offered. The distributor selects the most lucrative combination of bids. If it is unsatisfied with some or all of the bids it has received, it may enter into negotiations with individual exhibitors in the hopes of receiving a more profitable agreement. Defendant Buena Vista Distribution Company, which distributes Walt Disney films, has described in some detail the procedure it follows during the bidding process. We will describe these procedures below because they are typical of the practice followed by all of the distributor defendants.
After an availability date has been determined for first or intermediate run of a picture in greater Atlanta, Buena Vista's Southeastern District Manager mails out "Requests for Offer" to all exhibitors on the company's current first or intermediate run bid list for the region. Each Request for Offer advises the exhibitor of the availability date of the picture and may suggest minimum terms for a bid. It also states that the bid must be sent by the exhibitor directly to Buena Vista's Home Office in Burbank, California, by a certain date. Buena Vista furnishes special pre-addressed envelopes for the exhibitors to use in sending in their bids. If a bid is received in Buena Vista's Atlanta office, it is not forwarded, but is returned to the exhibitor with a reminder that all bids must be submitted directly to the Home Office.
Once they arrive at Buena Vista's Home Office, envelopes containing bids are stamped with the date and time of receipt and are retained unopened by Buena Vista's Legal Department until the scheduled moment for the opening of all bids. At that time, any bidding exhibitor may be present and may inspect all of the bids submitted. An unsuccessful bidder may later inspect all of the winning bids for 14 days after the date of its rejection letter.
The decision as to which bids, if any, Buena Vista will accept, is made by the General Sales Manager. He often contacts local managers, who receive copies of bids, for recommendations and advice concerning local exhibitors. According to Buena Vista, the General Sales Manager will consider, among other factors, "the theatre's past grossing history; the theatre's size, location, appointments for the comfort of its patrons, and suitability for the exhibition of ... motion pictures such as those distributed by Buena Vista; and the percentage film rental terms offered and guarantee offered, if any."
Buena Vista, as all of the distributor defendants, maintains that it awards licenses to the theatre or combination of theatres which, in its judgment, will return the greatest film rental. Buena Vista claims to make its licensing decisions unilaterally, without consulting any other distributor or any exhibitor. Each license is supposedly awarded on an "individual picture-by-picture and theatre-by-theatre basis." Buena Vista denies giving preference to any theatre because it is part of a circuit.
If Buena Vista is unsatisfied with the results of competitive bidding it will usually attempt to license films through direct negotiations with exhibitors. Bidding and negotiation are not mutually exclusive practices: the distributor may accept several bids but wish to license more theatres in the Atlanta area. It will then contact the unsuccessful bidders 3 and attempt to negotiate directly with each for rental terms superior to what was offered in the bidding.
Negotiations are conducted locally by Buena Vista's Southeastern District Manager or Atlanta Branch Manager. They will solicit new, hopefully higher, bids from the exhibitors and will pass the bids on to the home office. The negotiations are conducted orally, although an exhibitor's offer is memorialized in a signed "Confirmation of Negotiated Bid Offer." Buena Vista claims that it negotiates individually with each exhibitor without disclosing the terms of any other exhibitor's negotiated offer. Again, it also claims that each negotiated offer is evaluated separately so as to produce the highest revenue for each film and without consultation between Buena Vista and any other distributor or exhibitor.
Because its return from each theatre ordinarily derives from a percentage of the theatre's revenue, Buena Vista has a direct interest in the box office success of the films it...
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