White Bear Theatre Corp. v. State Theatre Corp.

• Citation: 129 F.2d 600
• Decision Date: 13 July 1942
• Docket Number: No. 12201.,12201.
• Parties: WHITE BEAR THEATRE CORPORATION v. STATE THEATRE CORPORATION et al.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

129 F.2d 600 (1942)

WHITE BEAR THEATRE CORPORATION v. STATE THEATRE CORPORATION et al.

No. 12201.

Circuit Court of Appeals, Eighth Circuit.

July 13, 1942.

Louis B. Schwartz, of Minneapolis, Minn. (Samuel P. Halpern, of Minneapolis, Minn., on the brief), for appellant.

Stan D. Donnelly, of St. Paul, Minn. (Gordon Shepard and Oppenheimer, Hodgson, Brown, Donnelly & Baer, all of St. Paul, Minn., on the brief), for appellees.

Before GARDNER, WOODROUGH, and JOHNSEN, Circuit Judges.

JOHNSEN, Circuit Judge.

The question is whether the monopoly, which plaintiff's evidence showed that defendants had conspired and attempted to establish, was one which fell within the operation of section 2 of the Sherman Act, 26 Stat. 209, 15 U.S.C.A. § 2,¹ and which could afford the basis for an action for threefold damages under section 4 of the Clayton Act,² 38 Stat. 731, 15 U.S.C.A. § 15. The trial court held that it was not and, at the close of plaintiff's evidence, directed a verdict for defendants.

The suit was one brought by the owner of a motion picture theatre in White Bear Lake, Minnesota, under the statutes referred to,³ to recover damages against the owner and officers of the only other theatre in the town, for conspiring and attempting to obtain a monopoly upon all the feature films that could be procured for "first-run" showing in that locality, in order to drive plaintiff out of business. In directing a verdict for defendants at the close of plaintiff's evidence, the trial court declared: "It is legally quite impossible to understand how the public interest could be concerned in this individual private controversy. As I view the evidence in this case, the difficulties of the parties have had no effect on interstate commerce. * * * The flow of commerce between the states and in the motion picture industry has and will continue to flow irrespective of the activities of these competitors at White Bear Lake."

Giving plaintiff's evidence the significance and effect to which it is entitled on a directed verdict,⁴ the situation must be tested on the basis of the facts that follow, which a jury could competently have found to exist, as a matter of direct proof or of reasonable inference.

For over nineteen years, defendants' theatre had had the field to itself at White Bear Lake — a town of about 2,800 population, with a drawing territory, during the vacation season, of some 10,000 people. In May, 1939, the town council of White Bear Lake, over the protest of defendants, granted plaintiff a license to erect and operate a competing theatre. Defendant Jensen, who was the president of the defendant corporation, at that time declared: "I will tie all the pictures up and put them out of business inside of a year". Statements were made on other occasions also by defendant Jensen, to the effect that defendants would buy up all the pictures that might otherwise be available to plaintiff, so that it would not be able to operate. About the time that the foundation of plaintiff's building was being completed, defendants Jensen and Albrecht advised plaintiff that it had better sell its equity in the property to them, "right there and then", as "they had bought all the pictures in the town and, if they had not gotten them, they would get them."

At the time plaintiff had commenced the construction of its theatre building, defendants held exhibitor's contracts, for White Bear Lake, on all of the productions of four of the eight major companies in the industry, and a "selective" contract for part of the productions of a fifth company. There were thus three major producers with whom defendants then had no contracts.

The "big-eight" film companies produced all the feature films of the industry, except for a limited number of "western" or "action" films released by two independent producers. A theatre such as plaintiff's, in White Bear Lake, could not operate successfully without "first-run" rights on the output of at least three of the major producers. "Western" or "action" films could not take the place of these feature pictures, although they might be used to supplement them. The output of the three major producers, which defendants did not have under contract at the time, would have provided plaintiff with a sufficient number of feature pictures for the successful operation of its theatre.

Plaintiff had had some preliminary negotiations with the three producers referred to, before it commenced the construction of its building. While these negotiations were pending, defendants stepped in and purchased, from under plaintiff, the exhibitor's rights, for White Bear Lake, on the productions of two of these companies. They paid a higher price to one of the companies than that at which it had offered to contract its productions to plaintiff. In addition, defendants took occasion to buy up a substantial portion of the preceding season's productions of these two companies, thus making these films also unavailable to plaintiff for its early operations. Plaintiff thus succeeded in getting a contract signed with only one of the "big-eight" producers, and, even after this had been done, defendants attempted to make a "deal" with this company also. Plaintiff had to rely for the balance of its feature pictures upon the "western" films of the two independent producers and such incidental, individual film "pickups" as it might be able to make from time to time. In order to operate successfully, it was necessary, in a community the size of White Bear Lake, to change the programs at least three times a week.

The contracts which defendants had made for the film-year before plaintiff attempted to enter the field, covering the period from September 1, 1938, to September 1, 1939, made available to them, for exhibition, 184 films, of which they used 171. They thus had, under their 1938-1939 contracts, sufficient pictures to change their programs three times a week, and to run as many holiday bills and special midnight shows as they apparently desired. The contracts which they made for the 1939-1940 season made available to them about 300 pictures, of which they managed to exhibit 216. While they thus undertook to exhibit 45 more pictures than they had done or found necessary during the 1938-1939 season, there were still 84 pictures for which they had no possible use in their 1939-1940 operations. While some few of these films were apparently cancelled or rejected, the vast majority of them were simply paid for and not used. By paying for the films, defendants were allowed to retain their "first-run" rights on these unexhibited pictures until the close of the contract season, and thus, even though defendants did not desire to use the films, they were able to keep them from becoming available for current exhibition by plaintiff as a competitor.

All of defendants' contracts, in accordance with the universal practice in the motion picture industry, had to be approved at the home offices of the producers in New York, after their execution by defendants, before they were binding on the companies. After such approval, copies of the signed contracts, for defendants, were returned to Minnesota from New York. The contracts covered the pictures which the companies were to produce during the film year and which they would thus make available to defendants for exhibition. The films were produced either in California or in New York, and prints, made from the original negatives there, were then forwarded to the various distributing offices of the companies throughout the country, for transmittal to the contracting exhibitors as the pictures were to be shown at their respective theatres. The distributing offices, through which White Bear Lake received its pictures, were located at Minneapolis, Minnesota, and these offices served all contracting theatres in the four states of Minnesota, Wisconsin, North Dakota and South Dakota. The films, of course, were not sold to the exhibitors, but their use was simply licensed, so that the several prints moved back and forth in the four-state area, through the distributing offices at Minneapolis, as they were to be shown by the individual exhibitors. The films which defendants paid for but did not intend to exhibit were not sent out from the distributing offices at Minneapolis to White Bear Lake. As the films became unfit for further showing, or after all exhibitor's contracts had been fulfilled in the distributing area, the films were returned from Minneapolis to the offices of the companies in New York or California.

On the facts thus shown by plaintiff's evidence, the making of the licensing agreements between the producers and the exhibitors and the supplying of the films pursuant thereto were clearly a part of interstate commerce.⁵ The distribution of the films through the Minneapolis offices of the producers, as well as the other necessary incidents involved, by which alone "first-run" films could become or were made available for use by any of the local exhibitors under their previously existing contracts, including those of defendants at White Bear Lake, were component processes in that commerce, because of their necessary contribution to the whole.⁶ In fact, in so far as the films were sent from New York or California, to the distributing offices of the producers in Minnesota, to fulfill previous contracts with exhibitors in that area, and with the intention and practice of returning them immediately thereafter to the home offices of the companies, the whole thing was in reality a mere cycle of interstate commerce. But without pausing to consider this broader concept here, it is sufficient to repeat that the processes upon which an exhibitor had to rely in obtaining "first-run" films for a theatre at White Bear Lake, or to which a producer had to resort in undertaking to supply them to him, manifestly constituted interstate commerce.

Since, under the evidence here, the market for the purchase of "first-run" film...