United States v. Interstate Circuit, 3736 — 992.

• Decision Date: 25 September 1937
• Docket Number: No. 3736 — 992.,3736 — 992.
• Citation: 20 F. Supp. 868
• Parties: UNITED STATES v. INTERSTATE CIRCUIT, Inc., et al.
• Court: U.S. District Court — Northern District of Texas

20 F. Supp. 868

UNITED STATES v. INTERSTATE CIRCUIT, Inc., et al.

No. 3736 — 992.

District Court, N. D. Texas, Dallas Division.

September 25, 1937.

Homer Cummings, Atty. Gen., Robert H. Jackson, Asst. Atty. Gen., Berkeley W. Henderson, Paul Williams, and Wendell Berge, Sp. Assts. to Atty. Gen., and Clyde O. Eastus, U. S. Atty., and John A. Erhard, Asst. U. S. Atty., both of Dallas, Tex.

Thompson, Knight, Baker, Harris & Wright, of Dallas, Tex., for respondents.

ATWELL, District Judge.

Complainant alleges: That the Interstate Circuit, Inc., and the Texas Consolidated Theatres, Inc., are Delaware corporations, with their principal place of business in the Majestic Theatre building, Dallas, Tex. That Karl Hoblitzelle and R. J. O'Donnell are residents of the city of Dallas. That Paramount, Vitagraph, RKO, Columbia, United Artists, Universal Film Exchanges, Inc., and Twentieth Century Fox, are corporate entities existing under and by virtue of laws of states other than Texas. That Metro-Goldwyn-Mayer Distribution Corporation of Texas and Twentieth Century Fox Film Corporation of Texas are Texas corporations, having their principal places of business in Dallas.

That the Interstate Circuit operates forty-three motion picture theatres in the cities of Dallas, San Antonio, Fort Worth, Galveston, and Houston. That the Texas Consolidated Theatres operates sixty motion picture theatres in the towns of Abilene, Amarillo, Breckenridge, Brownsville, Brownwood, Corsicana, Denison, Denton, Eastland, El Paso, Harlingen, McCauley, Mercedes, Mexia, Paris, Ranger, Temple, Tyler, Vernon, Waco, and Wichita Falls, Tex., and six in Albuquerque, N. M.

That Hoblitzelle is the president of both Interstate Circuit and the Texas Consolidated Theatres, and O'Donnell general manager of each. That they are in active charge of the management and operation thereof. They and the two corporations just mentioned are called exhibitor respondents.

The other respondents are engaged in the business of distributing motion picture films in interstate commerce throughout the United States, including the states of Texas and New Mexico. In such operation they solicit from exhibitors of motion pictures in Texas and New Mexico applications for licenses to play them; forward such applications to their respective principal offices in the city of New York; grant there such of said applications as they see fit, ship the films from laboratories located in certain states outside of Texas and New Mexico to the film exchange in Texas operated by each of said distributors nearest the location of the particular exhibitor; delivery by such exchange of said films to the exhibitor for exhibition; collection by the exchange of the rental charge for such exhibition as is provided in the license therefor; repossession by the exchange of the film following the exhibition; delivery of said film to other exhibitors in the same locality, pursuant to similar licenses; and following the exhibition of the film in the territory of Texas and New Mexico, served by such exchanges, the reshipment thereof to said laboratories located outside of Texas and New Mexico.

That the respondent distributors controlled more than 80 per cent. of the highclass feature films available for exhibition within the United States that were licensed and distributed in interstate commerce, including Texas and New Mexico.

That motion picture theatres are generally classified as first run houses, meaning the theatre giving the first exhibition in the city or locality, and subsequent run houses, meaning theatres which exhibit pictures which have been previously exhibited or run, one or more times, in the same city or locality. That higher rentals are charged to exhibitors for first run pictures, and greater revenue is derived by the exhibitor for such first runs, than from second or subsequent runs, in the same locality. That the appeal to the public of second or subsequent run houses arises because of the low admission charge and because it is sometimes customary for such houses to offer at the same showing two feature films for the same price of admission.

That the Interstate Circuit, Inc., operates first run theatres in Dallas, Houston, San Antonio, Fort Worth, Austin, and Galveston, the largest cities in Texas, at which they charge, after 6 o'clock in the evening, a regular admission price of 40 cents or more per adult. That the Texas Consolidated Theatres, Inc., operate first run houses in Waco, Wichita Falls, Tyler, Amarillo, El Paso, Tex., and Albuquerque, N. M., where the regular admission price, after 6 o'clock p. m. is 40 cents or more for each adult. That the Interstate Circuit, Inc., and the Texas Consolidated Theatres, Inc., operate second and subsequent run theatres in all of the towns mentioned.

That numerous other persons, firms, and corporations also operate second and subsequent run houses in the same towns at which the regular admission price after 6 o'clock in the evening for an adult was 20 cents or less, and often exhibited two feature films at the same showing, for the single admission price. That such exhibitors were able to secure from the distributor different feature films in the ordinary and customary manner of business, without restraint or restrictions as to how they were to be exhibited or as to the prices to be charged. That the admission charged by them and the exhibition of two feature films for the same price enabled them to conduct their respective businesses with profit, and to the satisfaction of the public.

That Interstate Circuit and the Texas Consolidated Theatres, for several years, have enjoyed a virtual monopoly in the business of first run exhibition in the cities of Dallas, Houston, San Antonio, Fort Worth, Austin, Galveston, Waco, Wichita Falls, Tyler, Amarillo, El Paso, Tex., and Albuquerque, N. M., and have been in active competition in the business of second or subsequent runs with the other persons, firms, and corporations similarly engaged in the towns heretofore mentioned.

That since April, 1934, the respondents have been engaged in a combination, conspiracy, and agreement to restrain trade or commerce in motion picture films and to monopolize and attempt to monopolize their exhibition in said states of Texas and New Mexico. That the plan for effecting such combination, agreement, and conspiracy was and is that the exhibitor respondents, being the largest licensees for first run, from the distributor respondents, and knowing that no person operating a second or subsequent run house in any one of the cities where the respondents operate first run houses could conduct his business successfully without exhibiting some feature films distributed by some or all of the distributor respondents, and in order to strengthen their monopoly on first run exhibitions, in said towns, and to further their attempts to monopolize said business in second and subsequent runs, would advise the distributor respondents that, unless they would insert in all licensing agreements with those operating second or subsequent run in said cities for the season 1934-35, and for seasons subsequent thereto, provisions requiring said persons to charge for every feature film that had been exhibited first run in the same city for a night adult admission price of 40 cents or more, an admission price, after 6 o'clock in the evening, of not less than 25 cents for each adult, and to refrain from showing any of said feature films, so licensed, as a part of the double feature program for the same price of admission, and that if the distributor respondents did not agree to so contract, that the exhibitor respondents would no longer attempt to maintain a night adult admission price of 40 cents, or more, for first run feature films thereafter licensed. That this was for the purpose and with the intent of inducing the distributor respondents to join in and assist exhibitor respondents in carrying out said unlawful combination, agreement, and conspiracy. That upon receipt of such notice the distributor respondents agreed to join in the unlawful combination, agreement, and conspiracy, and to impose the restrictions requested upon persons, firms, and corporations to whom they granted licenses to operate second and subsequent runs, in said cities, and in pursuance thereof they did require all such persons who sought licenses for the exhibition of feature films for the season of 1934-35, in second or subsequent run theatres, located in said places, to agree in said licenses to charge for every feature film that had been exhibited first run, in the same city, for a night admission price of 40 cents, or more, after 6 o'clock in the evening, not less than 25 cents for each adult, and not to exhibit any of such films as a part of a double feature program, for the same price of admission. That said restrictions were imposed by the distributor respondents for the seasons 1934-35, 1935-36, 1936-37, and unless restrained will be imposed for subsequent seasons. That those who operate second or subsequent run theatres, in said cities, have been restrained and forced to agree to said restrictions and have in fact accepted licenses containing said restrictions. That the effect of such restrictions in admission price and double featuring has been to (a) drive out of business some of such operators because of the unwillingness and inability of their customers to pay such increased price, and because they can no longer offer double features; (b) to cause other persons to sustain losses or reduced revenue; (c) to interfere with the free exercise of the right of such persons, to engage in interstate trade and commerce in motion picture films; (d) to unreasonably restrain trade and commerce in motion picture films; (e) to subject the attending public to the evils incident to the restraint of competition among exhibitors of motion picture films; (f) to strengthen the monopoly of the exhibitor respondents; (g)...