Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.

Lawlor v. National Screen Service Corp.


October 24, 1956


Author: Kalodner

Before GOODRICH, KALODNER and HASTIE, Circuit Judges.

Opinion of the Court

By KALODNER, Circuit Judge:

Was there, in the cases involved in these appeals, a genuine issue as to a material fact which, under well-settled principles, precluded the entry of summary judgments adjudicating the defendant-appellant, National Screen Service Corporation ("National") to be an unlawful monopoly?

That is the critical issue presented by these appeals from decrees of the District Court for the Eastern District of Pennsylvania granting sweeping injunctive relief against National pursuant to the entries of summary judgments against it.*fn1

It may be stated preliminarily that involved are private anti-trust suits for treble damages and injunctive relief premised on alleged violation of the Sherman Anti-Trust Act.*fn2 All the plaintiffs and National are in the business of servicing motion picture theatres ("exhibitors") with advertising matter generally referred to as "standard accessories" which consist principally of lithographed posters, photographs of scenes from motion pictures described as "stills," and other articles designed for display in and about theatre lobbies in order to promote attendance at current or future exhibition of a particular picture.

Originally each motion picture producer created and prepared its own standard accessories for each of its feature motion pictures for distribution through its own exchanges, throughout the country, where they were leased to exhibitors. Local service concerns were later formed to acquire quantities of the posters of all the major companies which were supplied to exhibitors on a rental basis. The poster-renters were able to offer the exhibitor an opportunity to obtain all of his poster requirements from a single source instead of having to deal with eight different companies.*fn3

National was incorporated sometime in the early 1920's. Originally its business was limited to servicing exhibitors with supplies of trailers or "prevues" which are short advertising films shown on the theatre screen. In the 1930's it also began distributing a special kind of poster, more elaborate and more costly than the standard posters, known as specialty accessories. By 1940 National had contracts with six of the eight major film companies giving it the exclusive right to distribute trailers throughout the nation, and contracts with four of the eight majors giving it the exclusive right to distribute specialty accessories in the same territory. In order to carry on its trailer and specialty accessory business, National maintained eight branch offices, or exchanges.

At the end of 1939 and early in 1940, Paramount Pictures, Inc. and RKO Radio Pictures, Inc. entered into separate agreements with National, each granting to National an exclusive license to manufacture and distribute standard accessories on a nation-wide scale. Both contracts were effective February 1, 1940, for five-year terms.A third exclusive contract was obtained by National from Loew's Incorporated on February 6, 1942.

In April, 1942, twelve poster-renters*fn4 instituted an action under the anti-trust laws against National and the three contracting film companies.*fn5 In April, 1943, the litigation was settled by an agreement whereby the then plaintiffs consented to a dismissal of their respective causes of action with prejudice, and National granted to each of them a sub-license wherein National agreed to supply the then plaintiffs with all of their respective requirements of standard accessories which National was then manufacturing under exclusive agreements and might subsequently manufacture under future exclusive licenses with other producers. The sub-license agreements were for a term of three years from May 1, 1943. They were renewed in 1946 for a five-year term to April 30, 1951. Similar agreements were effected with poster-renters who had not been parties to the 1942 litigation.

During the four-year period following the 1942 settlement, the five remaining major motion picture producers granted National exclusive right over their copyrighted standard accessories similar to the agreements with the other three majors. National also was given exclusive specialty accessory privileges between 1942 and 1946 by the four companies with whom no such contracts had previously existed.

All of National's exclusive standard accessory contracts with the major producers, excepting only RKO and Loew's Incorporated, expired December 31, 1949. The RKO contract expired a month later, January 31, 1950 and the Loew contract some two years later, February 28, 1952.

Four of the major producers, RKO, Columbia Pictures Corporation, Twentieth Century Fox Film Corporation and Universal Pictures Company entered into new agreements with National early in 1950.These contracts were in terms non-exclusive in that licenses to produce and distribute standard accessories would be granted to anyone who undertook to deal on a nation-wide basis in standard accessories, specialty accessories and trailers. On February 16, 1950, the relationship between National and Warner Bros. Distributing Corporation was extended for an indefinite period pending negotiations. This was done by letter agreement which did not cover the detailed questions dealt with in the former contract and said nothing about exclusivity. Apparently none of the other companies entered into any written agreement with National after 1949. The Fox, RKO, Columbia and Universal contracts expired at the end of 1954. However, it appears that the standard accessories of all the producer-distributor-defendants continued to be produced substantially in conformity with the expired agreements.

All the sub-licenses which National had granted to plaintiffs, or renewals thereof, expired in March or April, 1951. National, however, continued (and still continues) to make supplies available to plaintiffs.

Coming now to the tangled skein of litigation which preceded the granting of the summary judgments and entries of decrees here involved:

The history of this litigation began on august 18, 1949, when the Lawlor action against National and the so-called "big eight" producer-distributor motion picture companies was instituted. It was followed in quick succession by the Lipp, Siegel and Schrader suits. In October, 1950 all four plaintiffs moved for summary judgment. The motions were argued and considered as a unit by District Judge McGranery.On July 25, 1951, Judge McGranery filed an opinion, reported at 99 F.Supp. 180 (E.D. Pa. 1951) granting summary judgment for the injunctive relief requested by the plaintiffs against National but denying summary judgment against the producer-distributor-defendants on the ground that (p. 187) "The affidavits submitted by the defendants clearly indicate that each producer-distributor entered into its agreement with National Screen independently for legitimate business reasons related to its own enterprise ...", and "a disputed question of fact appears, precluding summary judgment."

Judge McGranery's opinion makes it clear that it was premised on his view that National's exclusive contracts with the producer-distributors were, per se, as a matter of law, an illegal monopoly under the Sherman Anti-Trust Act.

That is demonstrated by these quotations from his opinion:

At pages 185: "By virtue of its exclusive contracts with the eight other defendants (or their affiliates), National Screen has the power to remove plaintiffs from competition ...No specific intent to monopolize is necessary; the only relevant intent is the intent to enter into the business arrangements which give rise to the power.

By entering into exclusive agreements with the eight producer-distributor defendants (or their affiliates), National Screen has acquired the power to exclude competition and demonstrated its intent to exercise that power. Hence, it would appear that National Screen is in violation of Section 2 of

Again, at page 187: "... the acquisition

Again, at page 187; "... the acquisition by National Screen of exclusive license agreements for the distribution of standard accessories of the 'big eight' forecloses competition from a substantial market, a course of conduct unreasonable per se."

It is relevant to observe that Judge McGranery was of the view (p. 186) "It is entirely irrelevant that there may have been no resort to unfair competitive practices" and that as earlier stated he had found no evidence of any conspiracy between National Screen and the producer-distributors in the negotiation of the exclusive contracts.

For reasons not here pertinent the plaintiffs failed to submit to Judge McGranery a decree of injunction against National although he suggested in his opinion that they do so.*fn6 It was not until mid-year, 1955 that the plaintiffs moved for summary judgment before Chief Judge Kirkpatrick, Judge McGranery having resigned in the meantime.

Chief Judge Kirkpatrick in an unreported opinion filed August 8, 1955 granting summary judgment for injunctive relief against National Screen stated that "Not being persuaded that Judge McGranery's opinion was erroneous I shall follow it." On December 15, 1955, pursuant to the opinion noted, there issued the decrees under review.

It must be observed that in his opinion Chief Judge Kirkpatrick noted that the exclusive contracts on which Judge McGranery had premised his disposition had long expired and that National Screen had "... produced affidavits which have not been contradicted showing that, since the decision in the Lawlor case, it has either eliminated or offered to eliminate all the features of its agreements with the producer-distributors which the Court found objectionable, especially the exclusive character of the licenses granted." As to the latter Chief Judge Kirkpatrick said:

"I am not called upon to decide whether, if these actions had been commenced after these changes in the contracts were made, the plaintiffs would be entitled to a judgment against National Screen. I am dealing with the situation existing when these actions were commenced ..."

Further, it may be noted parenthetically that at the hearing on the settlement of the decrees (September 14, 1955) National offered to put the plaintiffs "... in exactly the same position as National Screen is today in every particular," but the offer was rejected.

Again, it may be noted that at this same hearing plaintiffs' counsel admitted that the exclusive contracts did not, as a matter of law, per se constitute a violation of the Sherman Anti-Trust Act, going so far as to state "Exclusivity has nothing to do with it."*fn7 And at the time of oral argument plaintiffs' counsel conceded that exclusive agreements are not illegal per se.

Original emphasis on the exclusive nature of the agreements between National and the producer-distributor-defendants has been shifted by plaintiffs to a theory which appears to declare that while all exclusive agreements are not illegal per se, these particular exclusive agreements are illegal per se and any arrangement, even absent the written agreements, which gives National exclusive rights of manufacture and distribution is violative of the anti-trust laws. Plaintiffs have not met, head-on, National's contentions contenting themselves with characterizing them as "plain drivel."*fn8

The highlights of National's contentions may be stated as follows: (1) Judge McGranery erred in ruling that the exclusive agreements were a per se violation of the anti-trust laws and Chief Judge Kirkpatrick erred in following that ruling and using it as the premise for the disposition of these cases. On this score National points to the fact, as stated above, that plaintiffs no longer view the anti-trust laws as a flat prohibition against all exclusive agreements; (2) this being so, the judgments should be reversed since there was a dispute as to numerous material issues of fact (subsequently stated) which under the law precluded entry of summary judgment; (3) and, further, permanent injunctions may not be granted as a matter of law without proof of threatened injury to plaintiffs' business,*fn9 by reason of exclusive agreements which, in any event, had not been in effect for years prior to the entry of the decrees of injunction.

With respect to National's first contention. exclusive agreements are not per se violation of the anti-trust laws and are permitted in circumstances where the facts disclose a course of conduct and reasonableness of action not prohibited by the anti-trust laws. See United States v. Bausch & Lomb Optical Co., 45 F.Supp. 387 (S.D.N.Y. 1942), affirmed, 321 U.S. 707 (1944); United States v. Columbia Steel Co., 334 U.S. 495, 522-523 (1948); United States v. Imperial Chemical Industries, Ltd., 105 F.Supp. 215, 244-245 (S.D.N.Y. 1952). In our opinion Judge Kirkpatrick and Judge McGranery erred in premising their decisions upon the per se invalidity of exclusive agreements.

National next urges that the existence of disputed issues of fact here precluded the granting of summary judgment. It is wellsettled that summary judgment may be granted only if the pleadings, depositions, admissions and affidavits "... show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); see F.A.R. Liquidating Corp. v. Brownell, 209 F.2d 375 (3rd Cir. 1954). Any doubt as to the existence of a genuine issue of fact is to be resolved against the moving party. Sarnoff v. Ciaglia, 165 F.2d 167, 168 (3rd Cir. 1947). Further, documents filed in support of a motion for summary judgment are to be used for determining whether issues of fact exist and not to decide the fact issues themselves.Frederick Hart & Co. v. Recordgraph Corp., 169 F.2d 580 (3rd Cir. 1948).

So viewing our function, we must determine whether there is any material fact, bearing on the proof of a monopoly genuinely in issue.

The power to control prices or exclude competition is the essential element of monopoly. Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1911). The actual raising of prices or exclusion of competition is not a requirement to meet this essential element. American Tobacco Co. v. United States, 328 U.S. 781 (1946). Promotion of competition in open markets, the overall purpose of the anti-trust law, requires measurement of the power in terms of an "area of effective competition" in order to determine its illegality. Standard Oil Co. of California v. United States, 337 U.S. 293, 299 n. 5 (1949); see United States v. duPont & Co., 351 U.S. 377 (1956). With respect to the effectiveness of a defendant's power in a particular market, United States v. duPont & Co., 118 F.Supp. 41 (1953), affirmed 351 U.S. 377 (1956), is illuminating. There the District Court said at page 197:

"'Market control' or lack of 'market control' are ultimate facts. They are determined by fact-finding processes, and on the basis of knowledge and analysis of all competitive factors which bear on a seller's power to raise prices, or to exclude competition. Existence of monopoly powers is not made on the basis of assumption as to competitive markets.If the price, quantity of production and sale, and the quality of a seller's product are determined by pressures exerted on him by buyers and sellers of another's product, the products and the sellers must, for purposes of any realistic analysis, be in the same 'market' and must be in competition with each other."

Definition of the "market" requires a consideration of substitutes, the significance of which was explained in Times-Picayune Publishing Company v. United States, 345 U.S. 594, 612 n. 31 (1953), as follows:

"For every product, substitutes exist. But a relevant market cannot meaningfully encompass that infinite range. The circle must be drawn narrowly to exclude any other product to which, within reasonable variations in price, only a limited number of buyers will turn; in technical terms, products whose 'cross-elasticities of demand' are small."

Having established a defendant's dominance in a relevant market, the "monopoly in the concrete," early discussed in Standard Oil Co. of New Jersey v. United States, supra at page 62, the Sherman Act Section 2 prohibition further requires a monopoly consciousness, an attainment of dominance by anti-competitive activities. Alone, a dominant market position and the monopolistic attributes of such a position does not entail illegality.Mr. Justice Frankfurter, concurring in United States v. duPont & Co., supra at page 413, said:

"The boundary between the course of events by which a business may reach a powerful position in an industry without offending the outlawry of 'monopolizing' under § 2 of the Sherman Act and the course of events which brings the attainment of that result within the condemnation of that section, cannot be established by general phrases. It must be determined with reference to specific facts upon considerations analogous to those by which § 1 of the Sherman Act is applied."

These "considerations" were succinctly stated by Mr. Justice Brandeis in Board of Trade of the City of Chicago v. United States, 246 U.S. 231, 238 (1918):

"The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition, or whether it is such as may suppress or even destroy competition. To determine that question the court must ordinarily consider the facts peculiar to the business to which the restraint is applied; its condition before and after the restraint was imposed; the nature of the restraint, and its effect, actual or probable. The history of the restraint, the evil believed to exist, the reason for adopting the particular remedy, the purpose or end sought to be attained, are all relevant facts. This is not because a good intention will save an otherwise objectionable regulation, or the reverse; but because knowledge of intent may help the court to interpret facts and to predict consequences."

If National's dominant position was the result of natural business growth, of development consistent with the intent of the anti-trust laws, it cannot now be condemned. "The successful competitor, having been urged to compete, must not be turned upon when he wins." United States v. Aluminum Co. of America, 148 F.2d 416, 430 (2d Cir. 1945); see United States v. United Shoe Machinery Corp., 110 F.Supp. 295, 341-342 (D. Mass. 1953), aff'd per curiam 347 U.S. 521 (1954).

National, say the plaintiffs, as a result of its exclusive dealing with the producer-distributor-defendants, has, with reference to standard accessories containing copyrighted materials supplied by the producer-distributor-defendants, the power to raise prices or exclude any and all competition within the market area of those particular accessories. However, National contends that its effectiveness in the market is limited by other forms of advertising such as newspapers, magazines, radio, television, mail and handbills; and further, that the standard accessories which it manufactures and leases are not essential to the exhibitor since equally effective articles are available to the exhibitor from other sources such as signpainters, printers, and other poster-renters.*fn10

Whether the standard accessories produced and distributed by National are in the same "area of effective competition" as other media of movie advertising, and whether there are equally effective substitutes for the accessories produced and distributed by National are factual issues, not capable of resolution on pleadings and affidavits. Such issues require determination by the trier of facts only after trial.

National contends that the legality of its dominant position is determinable only after a finding and analysis of the facts peculiar to the business involved. On this score National points out, inter alia, that the exclusive agreements between National and the distributor-defendants were motivated by "legitimate business reasons,"*fn11 that competition has not been restricted, and that plaintiffs have complete access to the standard accessories produced by National. Generally, says National, it has in its pleadings and affidavits shown its development to be consistent with the intent of the anti-trust laws.*fn12

Plaintiffs charge National with these anti-competitive acts: increasing of prices to plaintiffs forcing them to lease material at a loss in order to compete with prices charged the exhibitors by National; refusing to make available to plaintiffs standard accessories which National had in its local exchange where plaintiffs' customers were forced to go; reducing rental prices to exhibitors including plaintiffs' customers if they agreed to buy all advertising material from National; using tie-in sales requiring exhibitors to buy standard accessories from it if they also wanted the specialty accessories and trailers.

All of these alleged acts are denied by National.

Trial of the disputed factual issues is required to arrive at the ultimate fact-finding as to whether the exclusive agreements between National and the producer-distributor-defendants formed part of a deliberately acquired monopoly, or whether they were part of the natural business growth of National, reasonably necessary to protect the lawful business interests of National and the producer-distributor-defendants.

In view of the above it is unnecessary for us to resolve National's contention that the injunctive relief granted was inappropriate in these cases.The District Court will, of course, give consideration to the elements required by Section 16 of the Clayton Act as a basis for any injunctive relief that may be required as disclosed on a trial of the issues.

For the reasons stated the summary judgments and injunctive decrees entered by the District Court will be reversed and the causes remanded with directions to proceed in accordance with this opinion.

Since the plaintiffs have withdrawn their appeals 11,818 to 11,824 inclusive, they will be dismissed.

Judge HASTIE concurs in the result.

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.