Theatre Enterprises v. Paramount Film Distrib. Corp.

• Decision Date: 05 January 1953
• Docket Number: No. 6512.,6512.
• Citation: 201 F.2d 306
• Parties: THEATRE ENTERPRISES, Inc. v. PARAMOUNT FILM DISTRIBUTING CORP. et al.
• Court: U.S. Court of Appeals — Fourth Circuit

201 F.2d 306 (1953)

THEATRE ENTERPRISES, Inc. v. PARAMOUNT FILM DISTRIBUTING CORP. et al.

No. 6512.

United States Court of Appeals, Fourth Circuit.

Argued November 21, 1952.

Decided January 5, 1953.

Edwin P. Rome, Philadelphia, Pa. (Sol C. Berenholtz, Baltimore, Md., and Gray, Anderson, Schaffer & Rome, Philadelphia, Pa., on brief), for appellant.

J. Cookman Boyd, Jr., and R. Dorsey Watkins, Baltimore, Md. (Edward C. Raftery, New York City, and E. Compton Timberlake, Denver, Colo., on brief), for appellees.

Before PARKER, Chief Judge, and SOPER and DOBIE, Circuit Judges.

SOPER, Circuit Judge.

This action was brought under the antitrust laws¹ by Theatre Enterprises, Inc., a Maryland corporation, against the eight largest motion picture producing and distributing companies in the United States. The plaintiff sought injunctive relief as well as monetary damages for loss suffered as a result of the defendants' refusal to supply first-run motion pictures to the plaintiff's theater in the City of Baltimore pursuant to an alleged conspiracy during the period from February, 1949 to March, 1950. The suit was originally instituted in the District Court for the Eastern District of Pennsylvania but on motion of the defendants, under § 1404(a) of the Judicial Code, 28 U.S.C.A., the case was transferred to the District of Maryland. The case came on for trial before a jury in the latter District and resulted in a verdict for all of the defendants; and the plaintiff appealed contending that the trial judge erred in denying plaintiff's motion for a directed verdict in its favor and in giving certain instructions to the jury.

At the conclusion of all of the evidence the plaintiff prayed the court to instruct the jury that they must return a verdict for the plaintiff in such an amount as they estimated the plaintiff's loss to have been. In other words, the court was asked to instruct the jury that the plaintiff had proved its case against the defendants and that the only question for their decision was the amount of the damages which the plaintiff had suffered. In order to pass on the refusal of this instruction the evidence submitted to the court must be summarized. The task is the easier because the facts presented by Harry D. Myerberg, the president of the plaintiff corporation and its only witness, and by the witnesses for the defendants are largely undisputed, and the decision turns on the question whether the only reasonable inference from the facts is that the defendants, in violation of the law, conspired to deny the plaintiff the rights to which it was entitled in the operation of its business.

The testimony on behalf of the plaintiff was to the following effect: For many years the showing in Baltimore of first-run motion pictures produced by the defendant companies had been confined to eight theaters located in the downtown section of Baltimore as follows: The Century and the Valencia, with seating capacity of 3,000 and 1600-1800 respectively, are both owned by Loew's. They have exhibited all of Loew's product, half of Universal's and some of United Artists'. The Stanley, seating 3,200, is owned by Warner's Circuit Management Corporation and exhibits all of Warner's films and one-half of Paramount's. In the 1920s Warner exhibited first-run exclusively at the Metropolitan, two and a half miles from downtown. Keith's, an independent, has played half of Universal's output, half of Paramount's, and "whatever else is available." Seating capacity is 2200-2400. The New, seating 1300, is another independent and exhibits Fox films exclusively. The Hippodrome, seating 1800-2000, was also independently owned and exhibited RKO and Columbia films. The Town was opened in 1949 by the owner of the Hippodrome and split RKO and Columbia films with the Hippodrome. The Mayfair, independent, seating 1800, is situated next to the Stanley, but unable to obtain a continuous flow of films from defendant companies, getting "slough" and films of the smaller companies.

The Crest Theatre was built at a cost of $460,000 by Theatre Enterprises, Inc., a corporation whose entire stock is owned by Myerberg and his brothers. It was completed in February, 1949. It is equipped with the most modern improvements and with 1600 seats, and is physically suitable to play first-run pictures, and if located downtown, probably would have been acceptable for the preferred showings. It is situated in a shopping center at Reisterstown Road and Rogers Avenue, six miles from the nearest downtown theater, in the midst of a population center estimated at about 105,000 people.

In January, 1948, before construction of the Crest had begun, Myerberg applied for exclusive first-run privileges at the offices of the defendant distributors in Washington, D. C. He was told by all of them that no consideration could be given to his request until the theater was near completion. When the theater was under roof in October, 1948, Myerberg renewed his request and was told that the matter had to be decided by the New York home offices of defendants, and that he should set forth his requests by letter, which would then be referred to New York for decision. He wrote substantially identical letters requesting first-run to each defendant, except perhaps Columbia, which was approached subsequently.

Warner and Loew's advised Myerberg that each of them operated a first-run house in Baltimore, and that he should not anticipate receiving their product. The branch managers of all of the companies expressed surprise that Myerberg sought first-run outside the downtown area, contrary to the general practice of the industry. Myerberg engaged in further correspondence with defendants from October, 1948 until the theatre opened on February 26, 1949, and was "stalled" by one company and two others did not reply. He was able to see top officials of only three of defendants, and all of his efforts resulted in rejection of his request for first-run.

During the negotiations plaintiff made specific offers to various defendants for particular first-runs, and in all but one case the offer included a substantial guarantee of film rental and a percentage of the gross receipts, and plaintiff offered to post certified checks. None of the offers was accepted and in some instances plaintiff received no reply.

Plaintiff persisted in its efforts to induce defendants to grant it first-run after the Crest opened, and when this proved fruitless, plaintiff engaged present counsel who entered into six more months' futile correspondence and then brought this suit.

Plaintiff at first urged that it was not in substantial competition with the downtown theaters, and therefore was willing to take first-run on a day and date basis, that is, simultaneous showing with downtown and other non-competing suburban houses. Defendants contended that the Crest was in substantial competition with the downtown theaters, and plaintiff therefore expressed willingness to bid competitively for exclusive first-runs. Plaintiff denied claiming any superior rights over other comparable neighborhood theaters sufficiently far from downtown Baltimore and from each other as not to be in substantial competition with either downtown or each other, and was willing to play with them first-run day and date. Plaintiff pointed to the Northwood, Boulevard, Senator and Edmondson Village as theaters entering into such a scheme.

Defendants uniformly denied plaintiff first-run and uniformly granted it first-subsequent-run. They each gave the same basic reasons for their action, principally that each had a policy which limited showing of first-run films throughout the country to theaters in the downtown areas of large cities, and theaters outside those sections were therefore precluded from the preferred run.

Defendants' executives testified that the movie business has developed in such a manner as the result of heavier downtown traffic and more numerous downtown attractions to draw greater crowds, particularly for matinees. The defendants were primarily interested in obtaining the largest revenue possible from the exhibition of their pictures, and they said that downtown showings have greater exploitation and advertising value and that the downtown theaters may be properly called "show-case" theaters. In addition downtown theaters have been satisfactory customers of long standing.

Defendants further claimed that if they gave first-run to the Crest, they would lose their downtown customers as well as other subsequent-run customers. They declared that the Crest could not be successful with first-run and that they would not experiment with it. They further stated that the Crest could not be preferred to other similar neighborhood houses and if they should all be granted multiple first-runs the downtown theaters would be eliminated.

The unsuccessful efforts of the plaintiff to secure first-run pictures for its theater and the testimony of the defendants' witnesses indicate clearly in the plaintiff's opinion the existence of a nationwide policy, to which each defendant company adheres, that first-run pictures should be shown only in theaters in downtown sections of cities. Thereby the pictures are exploited and later they are made available to all sections of the city and all classes of people by the reduction of admission prices at later showings.

In six instances set out in the testimony exceptions to this policy have been allowed. Thus in Washington, D. C., and in Wichita, Kansas, an exhibitor which had been giving a first-run privilege to its own theater remote from the center of the city thereafter granted a similar privilege to an independent theater to avoid the charge of discrimination; and in Kansas City, Denver, Boston and Los Angeles exceptions have been made by exhibitors to their own theaters distant from the center of the city. These exceptions have not been attended by the disastrous result envisaged by those who established the...