United States v. Schine

• Decision Date: 20 October 1958
• Docket Number: Docket 24722.,No. 234,234
• Citation: 260 F.2d 552
• Parties: UNITED STATES of America, Petitioner-Appellee, v. J. Myer SCHINE et al., Respondents-Appellants.
• Court: U.S. Court of Appeals — Second Circuit

260 F.2d 552 (1958)

UNITED STATES of America, Petitioner-Appellee, v. J. Myer SCHINE et al., Respondents-Appellants.

No. 234, Docket 24722.

United States Court of Appeals Second Circuit.

Argued June 4, 1958.

Decided October 20, 1958.

Certiorari Denied January 12, 1959.

COPYRIGHT MATERIAL OMITTED

Henry Geller, Atty., Dept. of Justice, Washington, D. C. (Victor R. Hansen, Asst. Atty. Gen., and Daniel M. Friedman and Lewis Bernstein, Attys., Dept. of Justice, Washington, D. C., and John O. Henderson, U. S. Atty., W.D.N.Y., Buffalo, N. Y., on the brief), for petitioner-appellee.

Frank G. Raichle, of Raichle, Tucker & Moore, Buffalo, N. Y. (James O. Moore, Jr., of Raichle, Tucker & Moore, Buffalo, N. Y., on the brief), for respondents-appellants.

Before CLARK, Chief Judge, and PICKETT and MOORE, Circuit Judges.

Certiorari Denied January 12, 1959. See 79 S.Ct. 318.

CLARK, Chief Judge.

This is an appeal from judgments of conviction of criminal contempt of the provisions of a consent decree entered in the court below on June 24, 1949, after a lengthy antitrust proceeding involving the Schine Circuit motion picture theatres. Appellant Schine Chain Theatres, Inc., its subsidiaries Schine Theatrical Co., Inc., Schine Lexington Corporation, Schine Enterprises Corporation, Schine Circuit, Inc., and Chesapeake Theatres Corporation (together known as Schine Circuit), and its principal officers J. Myer Schine and John A. May were all parties to the allegedly contemned decree. The remaining appellants, Hildemart Corporation, Darnell Theatres, Inc., Elmart Theatres, Inc., Howard M. Antevil (head of Schine Circuit's legal department), and Donald G. Schine (president of Darnell Theatres, Inc., vice-president and a director of Hildemart Corporation, and an employee of Schine Chain Theatres, Inc.) were not parties to the decree, but are alleged to have joined with the first named appellants in continuing the conspiracy there prohibited.

The original antitrust proceedings against Schine Circuit were commenced with a complaint filed August 7, 1939, charging violations of §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. Judge Knight tried the case and found violations. United States v. Schine Chain Theatres, D.C.W.D.N.Y., 63 F.Supp. 229. The Supreme Court affirmed most of the findings, but reversed in part and remanded for further findings with respect to the district court's order for the divestiture of a large number of theatres. Schine Chain Theatres v. United States, 334 U.S. 110, 68 S.Ct. 947, 92 L.Ed. 1245. The proceedings eventually culminated in the consent decree of 1949 which ordered the defendants to dispose of all their interests in 39 specified theatre properties and enjoined them in certain other respects. The decree directed that not less than one-third of the required divestitures be accomplished by June 24, 1950, and not less than two-thirds by June 24, 1951. These requirements were extended by various consent orders and by a court order on January 22, 1952, nunc pro tunc December 17, 1951, which gave the defendants until June 24, 1953, to complete divestiture. The latter order provided that at least one-third of the remaining theatres be disposed of by June 24, 1952, and at least two-thirds by December 24, 1952.

The United States instituted the present proceedings in 1954 by filing a petition for an order under 18 U.S.C. § 401 directing the respondents to show cause why they should not be held in criminal contempt for willfully violating the decree. On March 10, 1954, the district court issued an order to show cause. Trial was had before Judge Knight, who, however, died after the case was submitted to him, but before decision. The parties then stipulated that Judge Burke should hear the case on the evidence already submitted and upon additional evidence for the respondents and rebuttal evidence by the Government. This was done, and on December 27, 1956, the court filed its Findings of Fact and Conclusions of Law holding that the respondents had willfully violated the decree. On March 19, 1957, the court entered its judgment of conviction, and on March 26, 1957, it imposed fines totaling $73,000. These appeals followed.

The key charge in the Government's petition was that the first named group of respondents willfully disobeyed the divestiture provisions of the decree. The district court found that these respondents resisted the divestiture provisions by omitting certain theatres from their published advertisements and offers to sell, by ignoring and discouraging inquiries from brokers and prospective purchasers, and by refusing to provide prospective purchasers with theatre operating figures. All of these findings are amply supported by the evidence. While some of this evidence concerned the respondents' activities prior to the three-year period of the statute of limitations, it was properly admitted as relevant to the intent of the respondents concerning their then and later purported attempts to sell. Kansas City Star Co. v. United States, 8 Cir., 240 F.2d 643, certiorari denied 354 U.S. 923, 77 S.Ct. 1381, 1 L. Ed.2d 1438; 2 Wigmore on Evidence § 302 (3d Ed. 1940).

The chief defense urged at the trial to this charge was that during the three-year period immediately preceding the issuance of the order to show cause the movie industry so declined in profitable operations that no market existed for the sale of the theatres in question. The court found, however, that, although the market was depressed, it still existed; and this finding is supported by the Government's evidence of sales of similar theatres by other exhibitors during this same period. Respondents urge that the trial judge committed reversible error on this issue by refusing to allow their witness Berk, who was employed as their broker in the sale of these theatres, to testify in response to the question, "Was there a market for the sale or disposition of said theatres?" The error, if any, in excluding Berk's statement was harmless, for the statement called for was only conclusory and the witness had testified fully to the facts from which the conclusion could have been inferred.

In addition to disobeying the divestiture requirements, the court found the same respondents in contempt of specific injunctive provisions in (1) continuing illegal pooling arrangements in Fostoria, Ohio, (2) buying and booking pictures for theatres in which they had no financial interest, (3) acquiring interests in various theatres without court approval, (4) knowingly receiving discriminatory licensing conditions, and (5) continuing the original conspiracy in concert with the remaining respondents. Respondents attack the findings as to (1), (2), and (3) on the grounds that corporations independent of Schine Circuit carried out these activities and that they all occurred prior to the statutory period. But the evidence overwhelmingly supports the conclusion that the so-called independent corporations (Hildemart, Darnell, and Elmart) were actually owned and controlled by respondents and that, although the initial acts in contempt of the decree occurred prior to the statutory period, the "illegal" conditions which they created continued up to the date of the order to show cause and resulted in what might be called "continuing contempts." Here, unlike Gompers v. United States, 233 U. S. 604, 610, 34 S.Ct. 693, 58 L.Ed. 1115, where specific acts of misconduct were charged as contempts, or Pendergast v. United States, 317 U.S. 412, 419-420, 63 S.Ct. 268, 87 L.Ed. 368, where only such a charge was authorized by the applicable statute, it is the maintenance of conditions in violation of the decree which is the charge against the respondents. Cf. Bramblett v. United States, 97 U.S.App.D.C. 330, 231 F.2d 489, 493, certiorari denied 350 U.S. 1015, 76 S.Ct. 658, 100 L.Ed. 874; McGregor v. United States, 4 Cir., 206 F.2d 583, 584; United States v. Franklin, 7 Cir., 188 F.2d 182, 187; United States v. Guertler, 2 Cir., 147 F.2d 796, 797, certiorari denied 325 U.S. 879, 65 S.Ct. 1553, 89 L.Ed. 1995.

Respondents contend that, while the consent decree enjoined them from directly buying and booking pictures for theatres in which they had no financial interest, it did not prevent them from using Darnell and Elmart to accomplish the same result. The bald statement of this contention is its own refutation. Respondents' suggested construction of the decree totally ignores its intent and purpose.

The district court appears to us to have erred in its ruling on charge (4) noted above. The charge is, however, of only minor importance, and the error does not justify upsetting the fines entered against the respondents. The lower court found that the respondents violated the injunction against knowingly receiving, in the licensing of films, discriminatory conditions not available to competitors in three respects: (a) by having a first opportunity to negotiate for all top pictures offered by every major distributor; (b) by licensing pictures under alternative licenses which were not available to all of Schine Circuit's competitors; and (c) by licensing pictures on a "test" or "terms later" basis which were not available on an equal basis to Schine Circuit's competitors. While respondents' conduct in (a) may violate the spirit of the decree, it seems to have been the only practicable way for them to insure their compliance with another section of the decree, the so-called Product Limitation Provision, which prohibited them from licensing for first-run exhibition more than specified percentages of major distributors' feature films. Since there is no evidence that respondents actively sought or insisted on the exclusive privilege of first negotiation as to the totality of any distributor's feature films, it follows that this particular competitive advantage did not violate the decree. Similarly evidence is lacking on key aspects of (b) and (c). There is no showing that Schine Circuit...