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WILLIAM GOLDMAN THEATRES, INC. v. LOEW'S

April 8, 1944

WILLIAM GOLDMAN THEATRES, Inc.,
v.
LOEW'S, Inc., et al.



The opinion of the court was delivered by: KIRKPATRICK

This is a civil action for injunctive relief and damages, based upon an alleged conspiracy among the defendants to monopolize the motion picture business in Philadelphia.

Since November 9, 1940, the plaintiff, who is an experienced and successful motion picture theatre operator, has been the lessee of the Erlanger Theatre -- a large, modern theatre, handsomely appointed, located at 21st and Market Streets, in what might be called the fringe of the downtown Philadelphia theatre district, and suitable for the exhibition of first run feature pictures.

 One group of the defendants (Warner Brothers Pictures, Inc., Vitagraph Inc., Stanley Company of America, Inc., and Warner Brothers Circuit Management Corporation) are closely affiliated corporations and, for convenience in this discussion, may be treated as one, under the name of Warner. Warner is engaged in all branches of the motion picture business, production, distribution and exhibition. It operates seven of the largest, finest and best located theatres in Philadelphia. The remaining defendants (who will be referred to as the Distributors) are engaged in the business of distributing pictures throughout the United States. All not one of the Distributors are also producers and all but three are also exhibitors. Together with Warner, they control the production and distribution of more than 80 percent of the feature pictures available for exhibition in the United States, including probably a still higher percentage of feature pictures rated as grade A on the basis of merit and box office value.

 The Distributors and Warner have refused to lease grade A feature pictures to the plaintiff for first run exhibition at the Erlanger. It is a fact that, without access to the first run of the defendants' pictures, the plaintiff cannot successfully operate the Erlanger Theatre as a first run theatre. As a result of his inability to obtain the defendants' first runs he has incurred financial loss.

 Certain well-known practices of the motion picture business must be borne in mind. Motion picture films are copyrighted and are licensed, usually through distributors, to exhibitors under contracts containing clearance provisions, by which it is provided that they will not be licensed generally for exhibition until the expiration of a certain specified period after their first run. This practice applies to grade A feature films and is general in the larger cities throughout the United States. Another established practice is block booking. Ordinarily a distributor will not license any exhibitor for less than the entire number of pictures produced or controlled by it for a specified period of time, not less than a year. Clearance provisions and block booking, per se, as trade practices, have not, so far as I know, been held illegal by any court, although they may undoubtedly be used as instruments of monopoly or restraint of trade and, in fact, such restraints could hardly be accomplished in the motion picture industry without their use. At any rate, in this action they are not attacked as illegal; nor could they well be, since the very relief which this plaintiff seeks of necessity involves his being allowed to participate in the system which those practices have created.

 The plaintiff asserts that the refusal of the defendants to give him first run feature pictures is the result of a conspiracy to monopolize "the entire film industry in this District" (which, of course, means to monopolize the first run business in Philadelphia by giving it to Warner). The action is brought under Sec. 2 of the Sherman Anti-Trust Act, 15 U.S.C.A. ยง 2. Although the prayer for injunctive relief mentions restraints of interstate commerce and discriminatory prices, the acts complained of in the body of the complaint are described exclusively as conspiring to monopolize, and the result of the acts is described as "said monopoly" and "monopolistic condition." No restraints of commerce other than the alleged conspiracy to monopolize are specified.

 By separate contract with each of the Distributors, prior to November 9, 1940, all the grade A feature pictures licensed by the Distributors and Warner for first run exhibition in Philadelphia have been licensed exclusively to Warner; and it may be said at the outset that the plaintiff's evidence establishes that, as a result of substantially uniform action by each distributor with Warner, Warner has obtained, in Philadelphia, a controlling position in the exhibition of first run grade A feature pictures, which I shall assume can be properly described as a monopoly, according to the popular understanding and dictionary definitions of that term. I think that statement covers the whole of the plaintiff's case on the facts. It remains to be seen whether it is sufficient to support his cause of action.

 There is no substantial evidence on which a finding could be based, that there was any agreement of the Distributors among themselves to confer a first run monopoly upon Warner. One might suspect such agreement but I can only say that it has not been proved in this case. Uniformity of action, even in the matter of fixing prices, without more, is not evidence of agreement or conspiracy. United States v. International Harvester Company, 274 U.S. 693, 708, 47 S. Ct. 748, 71 L. Ed. 1302.

 There is no evidence that in making the contracts complained of either Warner or the Distributors departed from a normal policy or put into operation "far-reaching changes in their business methods" -- a fact which the Supreme Court in Interstate Circuit v. United States, 306 U.S. 208, 59 S. Ct. 467, 473, 83 L. Ed. 610, regarded as giving support to the inference that what was done was the result of a general agreement.

 It is the right "'long recognized,' of a trader engaged in an entirely private business, 'freely to exercise his own independent discretion as to the parties with whom he will deal.'" Federal Trade Commission v. Raymond Bros.-Clark Co., 263 U.S. 565, 573, 44 S. Ct. 162, 164, 68 L. Ed. 448, 30 A.L.R. 1114. If the reason of any one of the Distributors for preferring Warner is sound it would apply as much to the other Distributors and, therefore, such preference alone is not necessarily evidence of an agreement. The plaintiff has not shown that the Distributors' uniformity of action is reasonably explainable only on the basis of an agreement or conspiracy; hence, the innocent inference that there was no such agreement will be drawn.

 The plaintiff's case, however, does not necessarily fall with failure to prove that the Distributors had an agreement with one another. In the Interstate case the Supreme Court not only held that there was sufficient evidence to support the District Court's finding of concert of action among the distributors in that case but it went much further. The court said that, under the circumstances of that case an agreement among the distributors was not a prerequisite to an unlawful conspiracy. "It was enough that, knowing that concerted action was contemplated and invited, the distributors gave their adherence to the scheme and participated in it."

 It the present case it can hardly be denied that Warner desired and contemplated that first runs of grade A pictures should be shown only in its theatres and, for its own protection if nothing else, that other exhibitors should be excluded from access to such films until after its clearance periods. And it is not seriously controverted that each distributor knew that every other distributor was leasing its pictures for first run to Warner to the exclusion of other exhibitors. I have not overlooked the fact that this action is based upon Sec. 2 of the Act but that fact, if anything, puts this plaintiff in a still better position so far as dispensing with proof of an agreement between distributors is concerned. Admittedly each distributor made a separate agreement with Warner and if the purpose or affect of each such agreement was illegally to monopolize interstate commerce I think the action could be supported. It is true that an indictment for a general conspiracy will not be supported by the proof of a number of smaller conspiracies even though they had the same objective as the general one charged, but the niceties of criminal pleading do not apply in a civil suit, particularly under the Rules of Civil Procedure, 28 U.S.C.A. following section 723c. If there is a technical variance, it certainly does not operate to the surprise or prejudice of these defendants in their defense. Nor do I think that there is any reason why, even though the Distributors were not included, this action might not be carried on against Warner alone, were the other elements of illegality present.

 This brings us to what appears to me to be the controlling issue and the point at which the plaintiff's case fails. I find no evidence that the defendants by the acts described above have either actually imposed or have intended to impose an unreasonable or undue restraint upon interstate commerce. This element is just as necessary to proof of a plaintiff's cause of action under Sec. 2 as under Sec. 1 of the Anti-Trust Law. Granting that the situation created by the defendants in Philadelphia is a monopoly in the popular sense, the question still remains whether their acts constitute monopolizing or attempting to monopolize interstate commerce within the meaning of Sec. 2 as that section has been interpreted by the Supreme Court.

 Ordinarily, in construing a statute the commonly understood meaning of a word in common use will be accepted. But the court may find that a special or limited meaning was intended. In Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 31 S. Ct. 502, 516, 55 L. Ed. 619, 34 L.R.A., N.S., 834, Ann.Cas.1912D, 734, the Supreme Court carefully considered the scope of Sec. 2, as well as Sec. 1 and, if any one thing is plain from the learned and comprehensive discussion in the opinion, it is that, whatever the generally accepted meaning of the words might be, the statute did not intend to include or prohibit in the second section any acts unless they either did or were intended to unreasonably restrain interstate commerce. To that extent the words have a special or limited statutory meaning.

 Discussing Sec. 2 the Court said, "Undoubtedly, the words 'to monopolize' and 'monopolize,' as used in the section, reach every act bringing about the prohibited results. The ambiguity, if any, is involved in determining what is intended by monopolize. But this ambiguity is readily dispelled in the light of the previous history of the law of restraint of trade to which we have referred and the indication which it gives of the practical evolution by which monopoly and the acts which produce the same result as monopoly, that is, an undue restraint of the course of trade, all came to be spoken of as, and to be indeed synonymous with, restraint of trade. In other words, having by the 1st section forbidden all means of monopolizing trade, that is, unduly restraining it by means of every contract, combination, etc., the 2d section seeks if possible, to make the prohibitions of the act all the more complete and perfect by embracing all attempts to reach the end prohibited by the 1st section, that is, restraints of trade, by any attempt to monopolize, or monopolization thereof, even although the acts by which such results are attempted to be brought about or are brought about be embraced within the general enumeration of the 1st section." The whole opinion should be read but the excerpts quoted are sufficient to show clearly that the court was of the opinion that the second section was not intended to expand the objectives aimed at in the first, namely, the results of the prohibited conduct, but rather intended as a catch-all to cover every possible means or device by which those results, namely unreasonable restraint of commerce, might be accomplished. Whatever expansion of Sec. 1 it did accomplish was in the field of methods. Probably it was believed that means for unreasonably restraining commerce which did not violate the letter of Sec. 1 might be evolved, as for example the purchase of controlling interests in competing businesses, or perhaps other expedients not definitely in mind. The Supreme Court said that Sec. 2 was "intended to supplement the 1st, and to make sure that by no possible guise could the public policy embodied in the 1st section be frustrated," and that whole statute was intended to protect commerce from being unduly restrained by methods "whether old or new."

 Indicative of the fact that the second section was directed to means, methods and devices rather than results in the fact that it nowhere uses the word "monopoly" but ...


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