United States v. Paramount Famous Lasky Corporation

• Decision Date: 15 October 1929
• Parties: UNITED STATES v. PARAMOUNT FAMOUS LASKY CORPORATION et al.
• Court: U.S. District Court — Southern District of New York

34 F.2d 984 (1929)

UNITED STATES v. PARAMOUNT FAMOUS LASKY CORPORATION et al.

District Court, S. D. New York.

October 15, 1929.

Charles H. Tuttle, U. S. Atty., of New York City (C. Stanley Thompson and Ralstone R. Irvine, Sp. Assts. to Atty. Gen., of counsel), for petitioner.

Cadwalader, Wickershan & Taft, of New York City (Edwin P. Grosvenor, Arthur L. Fisk, Jr., and Gabriel L. Hess, all of New York City, of counsel), for defendants.

THACHER, District Judge (after stating the facts as above).

This suit, although tried separately, is a companion case to United States of America v. First National Pictures, Inc., et al. (E. 45-99 D. C.) 34 F. (2d) 815, decided September 25, 1929, and reference may be had to the opinion in that case for a general description of the motion picture industry. The defendants named are 10 corporations engaged in the distribution of motion picture films to theater owners throughout the United States, the Motion Picture Producers & Distributors of America, Inc., a New York membership corporation having a "Class B" membership composed of the defendant distributors, and 32 film boards of trade maintained by the defendant distributors and other distributors of motion picture films in 32 principal cities of the United States. These boards of trade, whether incorporated or unincorporated, have a membership composed of the local exchange managers of the defendant distributors and of all, or practically all, other distributors of motion picture films in the territory in which the particular film board of trade conducts its operations.

The defendant distributors distribute, through their exchanges, approximately 60 per cent. of the motion picture films distributed annually in the United States, and the membership of each defendant film board of trade represents practically every distributor of motion picture films in the territory in which the board operates. The members of the defendant film boards of trade distribute approximately 98 per cent. of the motion picture films distributed annually in the United States, and it is impossible for any motion picture theater to secure sufficient motion picture films for its regular operation without dealing with one or more members of the particular film board of trade in the territory in which said theater is located. For many years it has been the custom for each distributor of motion picture films in the United States to announce, in the spring of each year, its program of pictures which will be available for exhibition during the year, commencing early in the following fall. Immediately thereafter contracts are solicited from the owners of upwards of 25,000 motion picture theaters throughout the United States for the exhibition of these pictures. The business of solicitation is conducted by the branch managers and their salesmen, but the contracts are subject to approval and acceptance at the home office. As a rule the exhibitor contracts with the distributor for a group of pictures, varying in number from 20 to 60, to be made available for exhibition at regular intervals throughout the year. The contract is usually negotiated and concluded before most of the pictures have been produced, and long before they have been made available for distribution, and it is therefore necessary to make provision in the contract for the selection and designation of play dates as the films become available in the exchanges for distribution and exhibition. Since the agreement merely grants a license to exhibit, there are many other details which must be covered by the written agreement. The average theater exhibits less than 200 feature pictures during the course of the year, and 350 short subjects. No single distributor releases more than 75 feature pictures, while some release only 12 annually. It follows that the average exhibitor contracts in the course of the year with from 5 to 15 distributors, who actively compete for this business. While the average exhibitor signs from 25 to 50 contracts, many exhibitors sign more than 50 contracts in the course of a year.

Prior to 1922 the contracts of the various distributors contained many widely differing provisions, and much confusion resulted, particularly in connection with the selection of play dates under varying contracts with different distributors. There was much dissatisfaction both among the distributors and among the exhibitors. Shortly after the organization of the Motion Picture Producers & Distributors of America, Inc., which included in its membership all of the defendant distributors, negotiations were instituted between the defendant distributors and various exhibitors in an effort to agree upon a uniform exhibition contract, and since that time there has been in progress in this industry between the motion picture distributors and exhibitors a continuous process of collective bargaining with reference to the provisions of the uniform contract. The distributors, being comparatively few in number, were compactly organized and thoroughly represented in these negotiations. The thousands of individual theater owners scattered throughout the United States were not thus completely organized, and many of them were not represented in these negotiations, although it must in fairness be said that, in so far as the exhibitors were organized, they were represented through representatives selected by their organizations.

In the summer of 1922 the defendant distributors, the defendant association Motion Picture Producers & Distributors of America, Inc., and committees of representatives appointed by various exhibitor associations, appreciating the loss of time and money to the entire industry and the hardships of exhibitors resulting from the many dissimilarities in noncompetitive matters existing in the long and complicated contracts of the different distributors in the United States, and desirous of saving such loss of time and money in order to reduce the cost of distribution and exhibition of pictures in the United States, set about the preparation of a uniform or standard form of contract, the adoption of which would not in any manner diminish competition between distributors, but which would help to eliminate some of the confusion in the industry arising out of these dissimilarities in matters of detail in intricate contracts. With this purpose the defendant distributors, by committees and counsel, for many months conferred and negotiated with each other and with the committees and counsel of various exhibitors associations, national and state, and with individual exhibitors, in an effort to reach some form of contract which would be acceptable to distributors and exhibitors alike. The form of contract which is annexed to the petition as "Exhibit A" was finally arrived at as the form acceptable to more persons interested than any other form, and it was adopted and used by the defendant distributors and some other distributors, beginning with the spring of 1923.

In 1925 and early in 1926 similar conferences were had between the distributors and representatives of exhibitor organizations and individual exhibitors, which resulted in the adoption, on February 6, 1926, of the first standard exhibition contract, which is annexed to the petition and marked "Exhibit B," and in an agreement upon rules and regulations relating to arbitration, referred to in clause twentieth of said contract; these rules and regulations being annexed to the petition and marked "Exhibit E." At the same time an exhibitors' advisory committee was chosen to consult with the distributors relative to still further improvements in the contract. The members of this advisory committee were the president of the Motion Picture Theater Owners of America, the president of the Theater Owners' Chamber of Commerce, the president of the Motion Picture Theater Owners of the Northwest, and E. V. Richards, an exhibitor operating a large number of theaters in the south and not a member of any exhibitors' organization. This committee continued negotiations with the distributors, and reached an agreement in May, 1926, with reference to certain changes in the standard exhibition contract.

In September, 1927, the Federal Trade Commission invited those engaged in producing, distributing, and exhibiting motion pictures in the United States to attend a trade practice conference in New York...