United States v. Columbia Pictures Corporation

• Decision Date: 29 June 1960
• Parties: UNITED STATES of America, Plaintiff, v. COLUMBIA PICTURES CORPORATION, Screen Gems, Incorporated and Universal Pictures Company, Incorporated, Defendants.
• Court: U.S. District Court — Southern District of New York

189 F. Supp. 153

UNITED STATES of America, Plaintiff, v. COLUMBIA PICTURES CORPORATION, Screen Gems, Incorporated and Universal Pictures Company, Incorporated, Defendants.

United States District Court S. D. New York.

June 29, 1960.

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John Sirignano, Jr., Edward J. Harrison, and John M. O'Donnell, Attys., Dept. of Justice, Washington, D. C., for plaintiff.

Schwartz & Frohlich, Arthur H. Schwartz, Irving Moross, and Stuart G. Schwartz, Davis, Polk, Wardwell, Sunderland & Kiendl, Theodore Kiendl, Taggart Whipple, Henry L. King, Richard H. Pershan, and Roland W. Donnem, New York City, for defendants Columbia Pictures Corp. and Screen Gems, Inc.

Daniel Glass, New York City, Gen. Counsel, for Screen Gems, Inc.

Adolph Schimel and Harold Lasser, New York City, for Universal Pictures Co., Inc.

HERLANDS, District Judge.

General Nature of the Action

This is a civil antitrust action instituted by a complaint filed by the United States on April 10, 1958, under Section 4 of the Sherman Act (15 U.S.C.A. § 4) and Section 15 of the Clayton Act (15 U.S.C.A. § 25). It alleges violations of Section 1 of the Sherman Act (15 U.S.C.A. § 1) and Section 7 of the Clayton Act (15 U.S.C.A. § 18). The three defendants are Columbia Pictures Corporation ("Columbia"), Screen Gems, Inc. ("Screen Gems"), and Universal Pictures Company, Inc. ("Universal").

The complaint alleges that the violations arise from the execution and subsequent performance of two interrelated agreements: an agreement entered into August 2, 1957, under which Screen Gems, a wholly-owned subsidiary of Columbia, was granted for approximately fourteen years by Universal the exclusive license to distribute for television exhibition approximately six hundred Universal feature films originally produced prior to August 1, 1948 for theatrical, exhibition; and an agreement, executed concurrently by the three defendants, under which Columbia guaranteed performance by Screen Gems of all its obligations under the distribution agreement, and that Screen Gems would continue to be the exclusive licensee for television exhibition of substantially all Columbia pre-August 1, 1948 feature films.

Under the distribution agreement, Screen Gems undertook television distribution of the Universal feature films. Screen Gems was to receive certain specified percentages of the total income from such distribution, and guaranteed payment to Universal of annual minimums totaling $20,000,000 during the first seven years.

The Government alleges that the agreements themselves are agreements to fix prices, illegal per se under Section 1 of the Sherman Act. It also alleges that, in the distribution since August 2, 1957 of the Universal and Columbia feature films by Screen Gems, prices were fixed and competition eliminated between Universal and Columbia per se in violation of Section 1 of the Sherman Act.

The Government further alleges that the exclusive distribution rights received by Screen Gems constituted the acquisition of an asset within the meaning of Section 7 of the Clayton Act, the effect of which may be substantially to lessen competition in the distribution of feature films for television exhibition in New York City and the contiguous area known as Metropolitan New York.

The Parties—Defendant and Jurisdiction

Defendant Columbia is a corporation organized and existing under the laws of the State of New York, and transacts business and is found within the Southern District of New York. Columbia is in the business of producing motion pictures for theatrical exhibition which are distributed for such exhibition throughout the United States by subsidiaries and licensees.

Defendant Screen Gems is a corporation organized and existing under the laws of the State of California, and transacts business and is found within the Southern District of New York. Screen Gems is a wholly-owned subsidiary of Columbia, and is in the business of producing and distributing films for television exhibition. Many of the films which it distributes for television exhibition were produced by other companies; and some of these films produced by other firms were produced originally for exhibition in motion pictures theatres.

Defendant Universal is a corporation organized and existing under the laws of the State of Delaware, and transacts business and is found within the Southern District of New York. Universal has, since 1912, been a producer and distributor of motion pictures for theatrical exhibition throughout the United States and the world. During those forty-eight years it has produced and distributed several thousand feature films by subsidiaries and licensees. The principal business of Universal has, for more than forty years, been the production and distribution of motion pictures for theatrical exhibition.

Each defendant is engaged in interstate commerce. There is no issue as to jurisdiction and venue.

Definitions

The following definitions are based on the record:

(a) "Columbia": Columbia Pictures Corporation.

(b) "Screen Gems": Screen Gems, Inc.

(c) "Universal": Universal Pictures Company, Inc.

(d) "Distribution": Offering to grant and sublicense, and entering into contracts granting and sublicensing, the right to televise any filmed, videotaped or live programming to (1) any person operating any television station or group of television stations, for televising over such station or group, (2) any sponsor sponsoring any telecast over any television station or (3) any advertising agency, for exercise on behalf of any client sponsoring telecast over any television station.

(e) "Release": Advising or making known to prospective sublicensees that filmed, taped or live programming is in distribution.

(f) "Feature Film": A full length, copyrighted motion picture having a running time usually in excess of 60 minutes, originally produced for exhibition in motion picture theatres, including Westerns.

(g) "Package": Two or more feature films offered by a distributor for sublicensing to a sublicensee.

(h) "The Agreement": The Television License and Distribution Agreement executed by Columbia, Screen Gems and Universal on August 2, 1957, as of July 1, 1957.

(i) "Sale", "License" or "Sublicense": The transaction by which a distributor transmits to a television station the right to exhibit television programming.

(j) "D___________": Exhibit __________ submitted by defendants Columbia and Screen Gems.

(k) "G___________": Exhibit _________ submitted by plaintiff.

(l) "U___________": Exhibit _________ submitted by defendant Universal.

Prior Proceedings

The complaint was filed April 10, 1958, more than eight months after the Distribution Agreement was executed. Six months later, in October 1958, the Government moved to enjoin the continued performance by the defendants of the August 2, 1957 Agreements, and for summary judgment as to the Section 1 charge.

On November 3, 1958, defendants amended certain language of the Distribution Agreement which the Government had cited in its moving papers as proof of the per se illegality of the agreement.

On January 22, 1959, the motion for summary judgment was denied. The motion for preliminary injunction was partially granted, the defendants being enjoined from releasing more than fifty Universal feature films in any six-month period during the pendency of the litigation. United States v. Columbia Pictures Corporation, D.C.S.D.N.Y.1959, 169 F.Supp. 888.

Pretrial Proceedings

Following these motions comprehensive pretrial proceedings took place. The parties propounded interrogatories upon each other and served answers thereto. Plaintiff took the deposition of one of the officers of Screen Gems.

Formal and informal pretrial hearings were held before the Court, during which proposed exhibits and the issues and contentions of the parties were thoroughly explored among counsel and the Court. This resulted in the entry of a Pretrial Order on March 14, 1960, consented to by all parties, which embodied a number of stipulations of fact, cleared many objections to exhibits, and resulted in expediting the trial considerably.

Some Aspects of the Trial Proceedings

The trial, which commenced March 14, 1960, lasted 17 court days and covered more than 2,600 pages of transcript. Upwards of 250 exhibits were admitted into evidence. The Government called three witnesses in its case in chief and one rebuttal witness. Defendants Columbia and Screen Gems called eight witnesses. Defendant Universal called five witnesses. Of the foregoing thirteen defense witnesses, the testimony of five (Schneider, president of Columbia and Screen Gems; Rackmil, president of Universal, and Miles, Theuteberg and O'Neill of Universal) were stipulated to by the Government.

Several motions were made during the course of trial. Defendants' motion to dismiss at the end of plaintiff's case was denied.

Plaintiff's motion at the end of its case for an order extending the partial preliminary injunction against Screen Gems releasing further Universal films was also denied, as was plaintiff's renewed motion for the same relief made later during the course of trial.

The Court reserved decision on all motions at the conclusion of the evidence, and directed that the parties exchange and file proposed findings of fact and conclusions of law, and main and reply briefs.

The Statutes Involved

The statutes involved herein are, in relevant part, as follows:

Section 1 of the Sherman Act: "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal * * *." 15 U.S.C.A. § 1.

Section 7 of the Clayton Act: "No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall

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