Universal Amusements Co. v. Gen. Cinema Corp.

• Decision Date: 22 November 1985
• Docket Number: Civ. A. No. H-78-192.
• Parties: UNIVERSAL AMUSEMENTS CO., INC., et al., Plaintiffs, v. GENERAL CINEMA CORP. OF TEXAS, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

635 F. Supp. 1505

UNIVERSAL AMUSEMENTS CO., INC., et al., Plaintiffs, v. GENERAL CINEMA CORP. OF TEXAS, INC., et al., Defendants.

Civ. A. No. H-78-192.

United States District Court, S.D. Texas, Houston Division.

November 22, 1985.

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Marion S. Rosen, Marion S. Rosen & Assoc., Ben H. Schleider and Paul S. Francis, Schleider & Francis, Houston, Tex., for plaintiffs.

Rufus Wallingford, Fulbright & Jaworski, Houston, Tex., for exhibitor defendants.

Ralph S. Carrigan and J. Michael Baldwin, Baker & Botts, Houston, Tex., for distributor defendants.

Stephen D. Susman and Terrell W. Oxford, Susman, Godfrey & McGowan, Houston, Tex., A. Vernon Carnahan, Donovan, Leisure, Newton & Irvine, New York City, and Paul E. Stallings, Vinson & Elkins, Houston, Tex., for all other defendants.

MEMORANDUM OPINION

SINGLETON, Chief Judge.

I. BACKGROUND

A. The Lawsuit

The Plaintiffs¹ owned and operated the Champions Village Cinema, located northwest of downtown Houston at 6550 FM 1960 W., from its opening in September 1973 until its sale to American Multi-Cinema in April 1980. During that same time period each exhibitor defendant² owned theaters in the Houston area which, like Champions, catered to the general public. The distributor defendants³ meanwhile distributed the bulk of the films these theaters played.

The distributor defendants licensed their high quality first-run films to Houston exhibitors primarily through a process of competitive negotiations and bids.⁴ They accordingly informed Champions that to continually get such first-run films, Champions would have to bid against the other exhibitors in the Houston Exchange. Champions, however, generally refused to so bid — contending that it did not compete with the Houston exhibitors and thus, like the outlying Sugarland and Baytown theaters, should be allowed to negotiate first-run films independent of the Houston exhibitors' bids. Since the distributor defendants refused to treat Champions as such an outlying theater, Champions settled for playing less profitable near-run and sub-run films.

Plaintiffs claimed that the distributor defendants' requiring Champions to bid in the Houston Exchange stemmed from a conspiracy or series of conspiracies amongst various exhibitors and distributors. As distilled and focused at trial by Plaintiffs' damage/causation expert,⁵ Plaintiffs claimed that the conspiracy's including Champions in the Houston Exchange in turn subjected Champions to the following anticompetitive practices: (1) the other exhibitors' depriving Champions of licenses by successfully allocating films amongst themselves (the split); (2) General Cinema's inducing the distributors to deny Champions a license on films awarded the Greenspoint Theatre (the clearances); (3) the distributors' limiting the number of film prints available to exhibitors in the Houston Exchange (the print limits); and (4) the distributors and exhibitors constantly abusing the hybrid bid/negotiation process for awarding film licenses (the licensing abuse). Invoking various antitrust theories such as boycott and monopolization, Plaintiffs concluded that the defendants' conduct violated Sections 1 and 2 of the Sherman Act.

Citing pendant state law grounds, Plaintiffs alternatively claimed that the defendants tortiously interfered with valuable business or contractual relationships existing between Plaintiffs and others.

Finally, Plaintiffs alleged that they incurred damages of approximately $1.5 million from the defendants' illegal conduct.

B. Procedural Posture

The trial of this case before a jury began on 4 September 1985. Plaintiffs rested on October 2, and the defendants moved for a directed verdict pursuant to Fed.R.Civ.P. 50(a). After studying the filed briefs and hearing the parties' oral arguments, this Court on October 3 granted a directed verdict in favor of each defendant. This Memorandum Opinion explains that decision.

II. DIRECTED VERDICT STANDARD

Boeing v. Shipman established the standard for assessing directed verdict motions in this Circuit:

On motions for directed verdict ... the Court should consider all of the evidence — not just that evidence which supports the non-mover's case — but in the light and with all reasonable inferences most favorable to the party opposed to the motion. If the facts and inferences point so strongly and overwhelmingly in favor of one party that the Court believes that reasonable men could not arrive at a contrary verdict, granting of the motions is proper. On the other hand, if there is substantial evidence opposed to the motions, that is, evidence of such quality and weight that reasonable and fair-minded men in the exercise of impartial judgment might reach different conclusions, the motions should be denied, and the case submitted to the jury. A mere scintilla of evidence is insufficient to present a question for the jury. The motions for directed verdict ... should not be decided by which side has the better of the case, nor should they be granted only when there is a complete absence of probative facts to support a jury verdict. There must be a conflict in substantial evidence to create a jury question. However, it is the function of the jury as the traditional finder of the facts, and not the Court, to weigh conflicting evidence and inferences, and determine the credibility of witnesses.

Boeing v. Shipman, 411 F.2d 365, 374-75 (5th Cir.1969) (en banc); accord e.g. J.T. Gibbons Inc. v. Crawford Fitting, 704 F.2d 787, 790-91 (5th Cir.1983) (affirming directed verdict against antitrust plaintiff); Shumate & Co. v. National Assn. of Securities Dealers, 509 F.2d 147, 153 (5th Cir.) cert. denied 423 U.S. 868, 96 S.Ct. 131, 46 L.Ed.2d 97 (1975).

With that standard in mind, this Court explains its disposal of Plaintiffs' antitrust and tortious interference claims.

III. ANTITRUST CLAIMS

A. Relevant Market

To prevail on any of their antitrust claims, Plaintiffs had to establish a relevant product and geographic market. E.g., Hornsby Oil v. Champion Spark Plugs, 714 F.2d 1384, 1390-94 & n. 8 (5th Cir.1983) (defined relevant market necessary to assess § 1 unreasonable restraint of trade);⁶ Domed Stadium Hotel v. Holiday Inns, 732 F.2d 480, 487, 490 (5th Cir. 1984) (defined relevant market necessary to assess § 2 actual or attempted monopolization).⁷ The same basic principles, moreover, govern a relevant market's definition under Sections 1 and 2. Hornsby Oil, 714 F.2d at 1393 n. 9.

This case's relevant product market consisted of high quality first-run films. See e.g., Transcript of 29 August 1985 pre-trial conference, page 33, lines 3-5; page 38, lines 1-3.

As for the geographic aspect, Plaintiffs had confined their complaint to the film distribution market — i.e., the licensing of films from distributors to exhibitors. Id. at page 37, lines 20-24. The relevant geographic market therefore encompassed the geographic area in which the distributors effectively competed for licensees of their high quality first-run films. E.g., Hornsby Oil, 714 F.2d at 1393; see also Tampa Electric v. Nashville Coal, 365 U.S. 320, 330-33, 81 S.Ct. 623, 629-31, 5 L.Ed.2d 580 (1961).

Plaintiffs bore the burden of producing competent economic evidence for the jury to assess the scope of that geographic market. See e.g. U.S. v. Connecticut National Bank, 418 U.S. 656, 669-70, 94 S.Ct. 2788, 2796-97, 41 L.Ed.2d 1016 (1974) (geographic market in Clayton Act § 7 claim); Joseph Ciccone & Sons v. Eastern Industries, 559 F.Supp. 671, 674-77 (E.D.Pa.1983) (same). Although they produced some sparse evidence as to Champions' competition in the exhibition market for theater patrons, Plaintiffs produced no competent economic evidence concerning the geographic scope of the distributors' competition in the distribution market for film licensees. Thus despite Plaintiffs' frequent allusions to the "Houston market", the jury had no substantial evidence upon which to determine the relevant geographic market in this case. That failure in Plaintiffs' proof alone warranted a directed verdict on the antitrust claims.

B. § 2 Claims

Even if Plaintiffs had adduced sufficient evidence of a relevant geographic market, their § 2 claims could not survive a directed verdict motion.

1. Actual Monopolization

A distributor defendant — or group of them⁸—could conceivably have driven Champions out of business to monopolize the distribution market.⁹ A § 2 monopolization claim requires proof that the guilty distributor defendant

(1) possessed monopoly power in the relevant distribution market; and

(2) willfully acquired or maintained that power as distinguished from the power's resulting from a superior product, business acumen, or historical accident.

E.g., U.S. v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 1704, 16 L.Ed.2d 778 (1966); accord Domed Stadium, 732 F.2d at 480. "Monopoly power", moreover, is the power to control prices or exclude competition. E.g., U.S. v. E.I. duPont de Nemours, 351 U.S. 377, 391, 76 S.Ct. 994, 1005, 100 L.Ed. 1264 (1956); Domed Stadium, 732 F.2d at 487.

Yet Plaintiffs failed to substantiate that any defendant possessed monopoly power in any geographic market. The record similarly lacked substantial evidence as to the willful acquisition or maintenance of any monopoly power. Those failures mandated directing the verdict on Plaintiffs' § 2 claim concerning monopolization of the distribution market.¹⁰

2. Attempted Monopolization

Alternatively, some distributor defendants could have driven Champions out of business in an unsuccessful attempt to monopolize the distribution market.¹¹ Such a § 2 attempt claim would require proof of

(1) the guilty defendants' specific intent to bring about a monopoly; and

(2) a dangerous probability of success as to monopolizing some relevant distribution market.

E.g., Domed Stadium, 732 F.2d at 490; Aviation...