Viking Theatre Corp. v. Paramount Film Distributing Corp.

• Decision Date: 21 June 1963
• Docket Number: No. 13756.,13756.
• Citation: 320 F.2d 285
• Parties: VIKING THEATRE CORPORATION, Appellant, v. PARAMOUNT FILM DISTRIBUTING CORPORATION et al., Appellees.
• Court: U.S. Court of Appeals — Third Circuit

320 F.2d 285 (1963)

VIKING THEATRE CORPORATION, Appellant, v. PARAMOUNT FILM DISTRIBUTING CORPORATION et al., Appellees.

No. 13756.

United States Court of Appeals Third Circuit.

Submitted July 24, 1963.

Decided June 21, 1963.

Edward Bennett Williams, Washington, D. C. (Williams & Stein, Washington, D. C., Drinker Biddle & Reath, Philadelphia, Pa., Harold Ungar, Washington, D. C., Henry W. Sawyer, III, R. Philip Steinberg, David W. Maxey, Philadelphia, Pa., on the brief), for appellant Viking Theatre Corp.

Morris Wolf, Philadelphia, Pa. (Franklin Poul, Philadelphia, Pa., on the brief), for appellees Stanley-Warner Management Corp. and Stanley Co. of America.

Louis J. Goffman, Philadelphia, Pa., Wolf, Block, Schorr & Solis-Cohen, Philadelphia, Pa., on the brief, for Warner Bros. Dist. Corp.

Louis Nizer, Phillips, Nizer, Benjamin, Krim & Ballon, New York City, for appellee Loew's Inc.

Louis Nizer, Phillips, Nizer, Benjamin, Krim & Ballon, New York City, W. Bradley Ward, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa. (Gerald F. Phillips, Albert F. Smith, New York City, Wm. A. Schnader, Arlin M. Adams, Bancroft D. Haviland, Shirley S. Bitterman, Philadelphia, Pa., on the brief), for appellees Metro-Goldwyn-Mayer, Inc., Columbia Pictures Corp., United Artists Corp., Universal Film Exchanges, Inc., and Paramount Film Distributing Corp.

Edwin P. Rome, Blank, Rudenko, Klaus & Rome, Philadelphia, Pa. (Morris L. Weisberg, Philadelphia, Pa., on the brief), for defendant-appellee William Goldman Theatres, Inc.

Charles F. Young, Royall, Koegel Rogers, New York City (Ralph Earle II, Arthur Littleton, Morgan, Lewis & Bockius, Philadelphia, Pa., Royall, Koegel & Rogers, New York City, on the brief), for appellees Twentieth Century-Fox Film Corp. and Fox Philadelphia Building, Inc.

Before BIGGS, Chief Judge, and GANEY and SMITH, Circuit Judges.

WILLIAM F. SMITH, Circuit Judge.

This is an action under the antitrust laws, and particularly under Sections 4 and 16 of the Clayton Act, 15 U.S.C.A., 15 and 26. The plaintiff is the owner and operator of a first-run motion picture theatre¹ located in downtown Philadelphia. The defendants are three exhibitors,² whose theatres are in competition with that of the plaintiff, and six major distributors³ of motion pictures. The complaint alleges generally that during the period here in question the defendants were engaged in a conspiracy to restrain trade in violation of Section 1 of the Sherman Act, 15 U.S.C.A. 1; the allegation is denied in the answers.

The plaintiff charges specifically that the defendants entered into or consciously adhered to certain agreements, the objects of which were to maintain an equal division of product among the defendant exhibitors and to eliminate the plaintiff from the competitive market. It is argued that each of the defendant distributors, in furtherance of the objects of the said agreements, engaged in conduct from which it may be inferred that an illegal conspiracy existed. This conduct is said to have consisted of:

(1) the routine rejection of "superior" bids or offers submitted by VIKING, and the allocation of films to the defendant exhibitors pursuant to the said agreements;

(2) the requirement that VIKING offer "excessive" rentals as a prerequisite to its right to license film;

(3) the adjustment of film rentals and playing time for the defendant exhibitors and the denial of similar adjustments to VIKING;

(4) the requirement that VIKING, but not the defendant exhibitors, submit written bids;

(5) the imposition of discriminatory advertising conditions on VIKING (6) the requirement that VIKING make extensive commitments as to playing time in order to license film;

(7) the institution of discriminatory law suits against VIKING; and

(8) the requirement that VIKING license unwanted pictures in order to obtain those it desired.

A full and detailed discussion of these charges will follow.

The action came to trial before the Court and a jury. At the close of the plaintiff's evidence and on the motion of the defendants, the Court directed a verdict in favor of the defendants on the ground that the evidence was legally insufficient to sustain either the charge of conspiracy or the claim that the plaintiff had been injured in its business. This appeal is from the judgment entered on the said verdict. The plaintiff challenges as erroneous the said ruling of the Court, and in addition thereto, several rulings which resulted in the exclusion of certain evidence.

The plaintiff argues that notwithstanding "the erroneous exclusions" of certain evidence, the evidence in the record was sufficient as a matter of law to support the charge of conspiracy and to warrant the submission of the case to the jury. The determination of the legal issue raised by this argument requires consideration of the evidence in its entirety, and as it relates to each of the defendants. The evidence, including the inferences of which it is reasonably susceptible, must be viewed in the light most favorable to the plaintiff. Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 696, 697, 82 S.Ct. 1404, 8 L.Ed. 2d 777 (1962); Delaware Valley Marine Sup. Co. v. American Tobacco Co., 297 F. 2d 199 (3rd Cir.1961), cert. den. 369 U.S. 839, 82 S.Ct. 867, 7 L.Ed.2d 843 (1962). The question is whether the evidence thus viewed was legally sufficient to warrant submission of the case to the jury.

DISTRIBUTION OF MOTION PICTURES

The distribution of films constitutes the wholesaling sector of the motion picture industry. Because of the cost of reproducing a film print from the master negative, only a limited number of prints of each picture are available for distribution. The distributors procure the prints from producers and license them to exhibitors for a limited time on a rental basis. The pictures are distributed nation-wide, and it is through the distributors that all exhibitors must obtain prints for exhibition. It is the objective of the distributors to secure the greatest amount of film rental which can be realized from the exhibition of their films throughout the country.

This action encompasses a period of 123 weeks, between July 2, 1954, and November 13, 1956, during which the defendants distributed approximately 420 pictures for first-run exhibition. There were twelve theatres in the downtown Philadelphia area engaged in the first-run exhibition of films. The number of exhibitors competing for a particular picture depended generally upon the exhibitors' opinions of the grossing potential of the film, the availability of open playing time, and other factors hereinafter discussed. There were many times in which only one exhibitor manifested an interest in licensing particular pictures; there were other times in which several exhibitors manifested such an interest.

The nature of the charges made here requires some consideration of the quality of the films distributed by the defendants. The term "quality," in the context of this suit, is meaningful solely in the sense that it represents the earning power of a particular film. The earning power can be determined only after the film has been exhibited. There is in evidence a stipulation which shows the national film rental⁴ earned by each picture distributed by the defendants. The national film rental reflects neither the total gross achieved by a picture nor its earning power in any particular area. However, absent any other evidence, the criterion may be regarded as some indication of earning power.

The national film rental earned by pictures distributed by the defendants varied over a wide range. The stipulation reflects the film rental earned by only 405 of the pictures distributed. Of this number, 195 earned less than $1 million, and among these were 107 which earned less than $500,000. Of the 210 films earning more than $1 million, 101 earned more than $2 million, 55 earned more than $3 million, 34 earned more than $4 million, and 19 earned more than $5 million. There were only 11 pictures which earned more than $6 million.

METHODS OF DISTRIBUTION

The evidence in this case discloses that the defendant distributors in several respects followed a general pattern in the distribution of feature films for first-run exhibition. It was their usual and customary practice to give notice to the exhibitors of the expected release of films and the approximate dates of availability.⁵ The exhibitors were then afforded the opportunity to "screen"⁶ the pictures at places designated by the distributors. The films were licensed theatre by theatre and picture by picture. There was otherwise little similarity in the methods employed.

Films were usually licensed on a competitive basis but practices varied from distributor to distributor. There were instances in which the distributors solicited competitive bids, reserving the right to reject all bids and to thereafter negotiate with interested exhibitors. There were other instances in which the exhibitors were requested to submit offers which were then used as a basis for negotiation. There were still other instances in which the distributors would invite selected exhibitors either to submit bids or to negotiate for particular pictures. The method employed, and any variance therefrom, was the independent and individual choice of each distributor.

Terms and conditions of both bids and offers varied from exhibitor to exhibitor and picture by picture. Film rental was usually based on a percentage of gross receipts. There were proposals in which film rental was based on a flat percentage of weekly gross receipts less house costs for each week, the percentage remaining constant. There were others in which film rental was based on a scale of percentages adjusted downwardly week by week. There were still others in which film rental was based on a sliding scale of percentages, the proposal providing for the upward or downward adjustment of percentages within certain...