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Paramount Pictures Inc. v. United Motion Picture Theatre Owners of Eastern Pennsylvania

December 13, 1937


Appeal from the District Court of the United States for the Eastern District of Pennsylvania; Oliver B. Dickinson, Judge.

Author: Buffington

Before BUFFINGTON, DAVIS, and BIGGS, Circuit Judges.

BUFFINGTON, Circuit Judge.

This is an appeal from a decree of the District Court dismissing the appellant's bill of complaint for lack of jurisdiction.

The appellant, a manufacturer and distributor of motion picture films, is a corporation of New York. The appellees are corporations and individuals who own and operate moving picture houses in Eastern Pennsylvania, Southern New Jersey and Delaware. The appellant filed a bill of complaint against the appellees for an injunction charging them with having formed an illegal combination and conspiracy in restraint of trade or commerce among the several states in violation of section 1 of the Sherman Anti-Trust Act, 15 U.S.C.A. § 1, which provides that:

Section 1 of the Sherman Act: "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any such contract or engage in any such combination or conspiracy, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding $5,000, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court."

Section 16 of the Clayton Act, 15 U.S.C.A. § 26, provides that: "Any person, firm, corporation, or association shall be entitled to sue for and have injunctive relief, in any court of the United States having jurisdiction over the parties, against threatened loss or damage by a violation of the anti-trust laws."

Admittedly, what the appellees set out originally to do was a violation of the Sherman Anti-Trust Act, 15 U.S.C.A. § 1 et seq. As appears by the untraversed bill and by affidavits, they combined and conspired: (1) To prevent by coercive means the making of contracts for future distribution of the films produced by the appellant in interstate commerce until it offered better prices and terms; (2) to prevent the exhibiting of the producer's films and their transportation in interstate commerce to fulfill existing contracts until the appellant complied with the demands of the conspirators.

In order to carry out their purpose, the appellees planned to boycott all Paramount pictures as long as might be necessary to compel it to offer better terms for its license agreements for 1937-1938.

On June 25, 1937, one of the appellees, United Motion Picture Theatre Owners of Eastern Pennsylvania, Southern New Jersey and Delaware, Inc., hereinafter called "United," called a meeting at Philadelphia at which it voted to boycott the Paramount Company or to bring about a so-called "strike" against the use of its films. A "War Board" was appointed and a "War Chest" authorized. Eastern Pennsylvania, Southern New Jersey, and Delaware were divided into zones and a zone captain was appointed in each zone whose duty it was to ascertain who in his zone was violating the boycott and report the same to the "strike" headquarters.

The boycott in the territory of the three states mentioned was part of a proposed nation-wide boycott against the Paramount Company. A meeting was held on June 29, 1937, at Washington, D.C., which three individual defendants representing "United" attended. Representatives of exhibitor associations from many parts of the United States were at the meeting. The chairman read a speech charging the Paramount Company with "unfair, indecent and unethical business practices."

He then discussed the question of punishment and said: "There is only one way in which Paramount can be punished -- viz. through its pocketbook. * * *" "If the owners of four thousand theatres, who bought 1936-37 Paramount program, should decide not to buy 1937-38 program it would cause Paramount a loss in revenue of between eight and ten million dollars. Thus, a 'sit-down strike' by four thousand theatres with respect to the 1937-38 Paramount program would deprive that company of its anticipated profits for the current year. * * *" "But the real value of such concerted action on the part of the number of exhibitors would be the effect it would have upon the other major distributors."

He then asked: "Have you, the owners of four thousand theatres, the courage -- the guts -- to take the action -- a 'sit-down strike' against Paramount * * *?"

The meeting then "was of the unanimous opinion that this campaign against Paramount shall be declared a 'Buyers' Strike', or a 'Sit-Down Strike' of exhibitors against Paramount." Thereupon the exhibitors throughout the country were called upon to carry out the plan "as adopted by the present Conference."

The plan in part consisted of the refusal of all exhibitors throughout the United States to show Paramount pictures or to enter into 1937-38 contracts with Paramount during the period of the "strike" unless Paramount's terms were modified.

Mr. J. P. Wood of Columbus, Ohio, was then elected "as the clearing agency of this National Campaign, to whom all exhibitor organizations are to send full data as to the steps they adopt and the procedure which they take during the progress of this 'Strike'."

On July 2, 1937, George P. Aarons, one of the defendants, and secretary of "United," who is a lawyer and who it appears was an active agent, sent out a letter to every exhibitor, sales manager, and officer of producing companies and to the trade papers in Eastern Pennsylvania, New Jersey, and Delaware, in which, after denouncing Paramount and calling a mass meeting of exhibitors at the Broadwood Hotel on July 8, 1937, among other things, said: "Your organization has declared a strike against Paramount's 37-38 terms and urges you to delay buying or negotiating until we have obtained a revision of these terms Your organization has voted to lawfully picket any theatre in the zone that buys Paramount pictures, features, shorts and newsreels, on and after August 1st This strike is a part of the national strike! Don't fail us!" This letter and much other material, if not all, that "United" put out, were sent to other exhibitor organizations "all over the United States" and "also to Canada."

During July, 1937, Aarons continued to send out pamphlets, post cards, and letters not only to exhibitors and exhibitor organizations in New Jersey, Pennsylvania, and Delaware -- who were the plaintiff's only possible buyers of its product -- but all over the entire United States and "to certain public officials, members of Congress, members of legislatures, to members of the judiciary," persuading exhibitors not to deal with the Paramount Company and threatening them if they did so. Such statements as the following were sent out:

"Any exhibitor who signs a contract in violation of the buying strike should be picketed, as well as any one who, without proper dispensation of the War Board, does not join in the August date strike."

"The UMPTO (United Motion Picture Theatre Owners) organization says be a man not a mouse. Fight this along the lines of campaign adopted by the elected War Board. Stick to your guns! Hold yourself in readiness for the date strike, the mass protest (if you want to stay in business) when advised by your organization."

"All Exhibitors Violating the Strike Will be Picketed."

"Attendance at This Meeting (August 21, 1937) is Compulsory."

"On August 2nd, the elaborate picketing campaign ...

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