United States v. Carrols Dev. Corp.

• Citation: 454 F. Supp. 1215
• Decision Date: 07 July 1978
• Docket Number: No. 76-CV-170.,76-CV-170.
• Parties: UNITED STATES of America, Plaintiff, v. CARROLS DEVELOPMENT CORPORATION and Triple Schuyler Rome Corporation, Defendants.
• Court: U.S. District Court — Northern District of New York

454 F. Supp. 1215

UNITED STATES of America, Plaintiff, v. CARROLS DEVELOPMENT CORPORATION and Triple Schuyler Rome Corporation, Defendants.

No. 76-CV-170.

United States District Court, N. D. New York.

July 7, 1978.

COPYRIGHT MATERIAL OMITTED

Dept. of Justice, Antitrust Division, New York City, for plaintiff; Bernard Wehrmann, Ralph Giordano, Erwin L. Atkins, New York City, of counsel.

Farber & Cohen, New York City, for defendants; Frank R. Cohen, New York City, of counsel.

Kiley, Feldmann, Whalen & Devine, Cazenovia, N.Y., for proposed intervenors, William D. Kiley, Cazenovia, N.Y., of counsel.

MEMORANDUM-DECISION AND ORDER

MUNSON, District Judge.

In this civil antitrust action, a Proposed Consent Judgment has been agreed to by the Government and defendants Carrols Development Corporation and Triple Schuyler Rome Corporation, a wholly-owned subsidiary of Carrols Development Corporation. (Both defendants are collectively referred to herein as Carrols.) The Proposed Judgment has been filed with the Court, but before it can become effective, the Court must find that entry of the Judgment is in the public interest. Kallet Realty, Inc. and Kallet Theatres, Inc. (Kallet) and three of Kallet's managers¹ have moved to intervene in this action in order to oppose the entry of the Proposed Judgment.

I.

In February, 1974, Carrols entered into a long-term lease agreement with Kallet whereby it acquired the three motion picture theatres operated by Kallet in the Greater Syracuse Area and the four motion picture theatres operated by Kallet in the Greater Utica Area. In connection with this agreement, Carrols entered into a covenant agreement with three of Kallet's managers whereby the managers, in consideration of annual payments of $25,000, $15,000, and $5,000, agreed not to engage in the motion picture theatre business in any area where Carrols operated a theatre. In March, 1974, Carrols acquired by lease the six motion picture theatres operated by Hallmark Releasing Corporation (Hallmark) in the Greater Utica Area. As a result of its acquisition of the Kallet and Hallmark theatres, Carrols controlled 72.5% of the theatres and 86% of the gross box office receipts in the Greater Syracuse Area in February, 1974 and 83.3% of the theatres and 80% of the gross box office receipts in the Greater Utica Area in March, 1974.

On April 23, 1976, the Government filed a Complaint, charging that the effect of these acquisitions was to substantially lessen competition in the purchase of licenses to exhibit feature motion pictures, in violation of § 7 of the Clayton Act. 15 U.S.C. § 18. The Complaint asked that Carrols be required to divest the Kallet and Hallmark theatres, and that it be enjoined, for a period of ten years, from acquiring any other theatres in the Greater Syracuse or Greater Utica Areas.

The Proposed Consent Judgment provides the Government with essentially all the relief it was seeking in this action. The Judgment requires Carrols to divest, by sublease or assignment, the twelve remaining Kallet and Hallmark theatres which it operates.² It specifies that, if Carrols has not divested all of these theatres with twenty-four months of the date of entry of the Final Judgment, a trustee is to be appointed by the Court for the purpose of divesting the remaining theatres during the next twelve months. The Proposed Judgment further provides that Carrols is to terminate its operation of any theatre not divested within such time periods, unless Government approval is obtained for its continued operation.

After its acquisition of the Kallet and Hallmark theatres in February and March of 1974, Carrols constructed three new theatre complexes, with a total of seven motion picture screens, in shopping malls in the Greater Syracuse Area and one new theatre complex, with three screens, in a shopping mall in the Greater Utica Area. The Government did not seek the divestiture of these theatres in the Complaint, which it filed in April, 1976, and so Carrols' continued operation of these theatres will not be affected by entry of the Proposed Consent Judgment.

At the present time, Carrols operates nineteen of the twenty-four theatres in the Greater Syracuse Area and twelve of the thirteen theatres in the Greater Utica Area. If the divestitures, required by the Proposed Consent Judgment, are accomplished, the number of theatres held by Carrols in the Greater Syracuse and Greater Utica Areas will be reduced by approximately 15% and 75% respectively, and Carrols' gross theatre receipts from the Greater Syracuse and Greater Utica Areas will be reduced by approximately 23% and 56% respectively.

In accordance with the requirements of the Antitrust Procedures and Penalties Act (APPA), 15 U.S.C. § 16, the Proposed Consent Judgment and a Competitive Impact Statement were published in the Federal Register, and summaries of these documents were published in The Washington Star and The Syracuse Post-Standard. On August 11, 1977, Kallet submitted written comments pursuant to section (d) of the APPA, urging that the Proposed Judgment be altered to include a provision that Carrols be required to divest some or all of its new theatre constructions, in order to insure the successful divestiture of the Kallet and Hallmark theatres. The Government prepared a response in which it stated that the additional relief sought by Kallet was inappropriate and that the Proposed Judgment was in the public interest.

Kallet and its managers subsequently moved to intervene in this action pursuant to Fed. R. Civ. P., Rule 24(a), (b).³

II.

Rule 24(a), which deals with intervention as of right, provides in relevant part:

Upon timely application anyone shall be permitted to intervene in an action . . when the applicant claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that interest, unless the applicant's interest is adequately represented by existing parties.

A.

While the nature of an "interest" sufficient to support intervention as of right has not been precisely defined, Blake v. Pallan, 554 F.2d 947, 952 (9th Cir. 1977), it is clear that such an interest must be direct, substantial, and significantly protectable. Donaldson v. United States, 400 U.S. 517, 531, 91 S.Ct. 534, 27 L.Ed.2d 580 (1971); United States v. Perry County Board of Education, 567 F.2d 277, 279 (5th Cir. 1978); Rios v. Enterprise Association Steamfitters Local Union # 638 of U.A., 520 F.2d 352, 357 (2d Cir. 1975); In re Penn Central Commercial Paper Litigation, 62 F.R.D. 341, 346 (S.D.N.Y.1974), aff'd sub nom. Shulman v. Goldman, Sachs, & Co., 515 F.2d 505 (2d Cir. 1975). An interest which is remote or contingent is insufficient. Air Lines Stewards & Stewardesses Association, Local 550 v. American Airlines, Inc., 455 F.2d 101, 105 (7th Cir. 1972); Vazman, S.A. v. Fidelity International Bank, 418 F.Supp. 1084, 1085-86 (S.D.N.Y.1976); United States v. Atlantic Richfield Company, 50 F.R.D. 369, 372 (S.D.N.Y.1970), aff'd sub nom. Bartlett v. United States, 401 U.S. 986, 91 S.Ct. 1233, 28 L.Ed.2d 527 (1971).

Kallet claims an interest in this action on the basis that it is the lessor in the lease agreement under which Carrols acquired seven motion picture theatres in the Greater Syracuse and Greater Utica Areas in February, 1974. Kallet apparently fears that Carrols may attempt to use the Proposed Consent Judgment to avoid its rent obligations under the lease. Kallet believes that the divestiture procedures set forth in the Proposed Judgment are impractical and unrealistic and that divestiture to a third party will not be successfully achieved. Kallet, therefore, speculates that Carrols may be required to terminate operation of some of the Kallet theatres, and in such event, may default on its rent payments. Kallet's interest in continued rental payments in such circumstances can properly be characterized as a remote or contingent interest. This purported interest is contingent upon the inability of Carrols and the trustee to divest the six Kallet theatres within three years of the date of entry of the Final Judgment. Moreover, the claimed interest is based upon the assumption that the Government will not exercise its right under the Consent Judgment to permit Carrols to continue to operate any theatres which Carrols and the trustee have been unable to divest. Thus, Kallet's interest in continued rent payments in the circumstances that may arise with implementation of the Consent Judgment is not a sufficiently direct and substantial interest to warrant intervention as of right in this lawsuit.

Kallet's managers claim a related interest in this action in that they fear that, if Carrols is forced to terminate operation of a theatre, Carrols may attempt to invoke a provision of the covenant agreement between Carrols and Kallet's managers excusing Carrols from its obligation to make payments to Kallet's managers in the event that it is dispossessed from the premises. As with regard to Kallet's interest in continued rental payments, this interest is contingent upon unsuccessful divestiture and the refusal of the Government to permit Carrols to continue to operate any remaining theatres. Therefore, this interest is not sufficient to support intervention as of right.⁴

Kallet also claims an interest in the subject of the action as a potential competitor of Carrols for the purchase of feature motion picture exhibition licenses. Kallet speculates that if divestiture is unsuccessful and if Carrols is required to terminate its operation of the theatres, Kallet may be forced to operate the theatres again. This interest is contingent upon the occurrence of the events previously considered, and so is not a sufficiently direct and substantial interest to satisfy Rule 24(a)(2). Even if Kallet were presently a competitor of Carrols, it...