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GASPERI v. CINEMETTE CORP. OF AMERICA

March 20, 1975

Paul L. Gasperi, t/d/b/a Parkway Theatre and Edmund and Erma Abel t/d/b/a New Crafton Theatre
v.
Cinemette Corp. of America, Cinemette-Associated Theatres, Inc., United Artists Corp., Warner Brothers Distributing Corp., National General Pictures Corp., Buena Vista Distributing Co., Inc., Universal Film Exchange, Inc., American International Pictures, Columbia Pictures Corp., Paramount Pictures Corp., Twentieth Century Fox Film Corp., Cinerama Releasing Corp., Avco Embassy Pictures Corp., Metro-Goldwyn-Mayer, Inc., Crown International Pictures, Inc., and Demension


Snyder, D.J.


The opinion of the court was delivered by: SNYDER

SNYDER, D.J.

 Defendants Cinemette Corporation of America and Cinemette-Associated Theatres, Inc. (Cinemette) filed a Motion to Dismiss Count III of the Amended Complaint "for lack of jurisdiction over the subject matter of Count III", which this Court treats as a Motion to Dismiss under Rule 12(b)(1) and Rule 12(h)(3) of the Federal Rules of Civil Procedure. *fn1" For the reasons which follow, this Motion will be denied.

 Defendant Crown International Pictures, Inc. (Crown) has moved the Court for Summary Judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. This Motion was argued in conjunction with Cinemette's Motion, and this Motion will be granted.

 The Complaint

 Plaintiffs Paul L. Gaspari, owner of the Parkway Theatre, and Edmund and Erma Abel, owners of the New Crafton Theatre, brought an Anti-trust action against two categories of Defendants: One group is composed of Cinemette Corporation of America and its subsidiary, Cinemette-Associated Theatres, Inc., both of which, like the Plaintiffs, are motion picture exhibitors and owners of theatres in the Greater Pittsburgh area, as well as in other geographic areas. The other Defendants comprise a group of motion picture distributors to which Crown International Pictures allegedly belonged.

 In Count One, the Plaintiffs set forth a charge that the Defendants have engaged in a conspiracy in restraint of trade in violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, by way of collectively refusing to make available to Plaintiffs picture films of equal quality and at reasonable exhibition dates with the plaintiff's competitors, including Cinemette. It was alleged that Defendants imposed unreasonable bidding requirements, unreasonable priority and clearance times, manipulated the length of runs and the commencement of sub-runs, *fn2" participated in controlling the number of prints which will be made available at any given time, so that exclusive or near exclusive rights were first given to Cinemette Theatres. Discrimination is also alleged with respect to special attraction films, such as those for children and Wild Life films, and in tie-in arrangements which resulted in Cinemette obtaining priority on top quality films, agreements as to the method of payment by Cinemette to the Defendant Distributors, including the amount of said payments in order to make it look as if Plaintiffs were not competitive with Cinemette Theatres, as well as advertising and other financial tie-ins with Cinemette Theatres, all of which, it is contended, lessened and/or eliminated competition in the exhibition of motion picture films and resulted in the creation of a monopoly by Cinemette in the business of the exhibition of quality motion picture films.

 Count Two of the Complaint charged that in January of 1974, Cinemette Corporation purchased the entire ninety individually owned theatres which operated under the name of "Associated Theatres". At the time of said acquisition Cinemette Corporation owned one hundred and six theatres, and as a result of this acquisition, Cinemette-Associated "owns 85% of all theatres that obtain first run films in the Greater Pittsburgh area and owns approximately 70% of all theatres in the Greater Pittsburgh area", resulting in a monopoly on exhibition of films in the Greater Pittsburgh area in violation of Section 2 of the Sherman Antitrust Act. Plaintiffs charge that Cinemette and Cinemette-Associated have attempted to monopolize the exhibition of quality motion pictures in other geographical areas [they own theatres in other parts of Western Pennsylvania, Ohio, West Virginia, Tennessee, New York and New England], in violation of Section 2 of the Sherman Antitrust Act. Plaintiffs contend that this monopolization, or conspiracy to monopolize, will lessen or eliminate competition in this area, and has caused the Plaintiffs to cease doing business because of their inability to obtain quality motion picture films.

 Count Three then charges that the 1974 acquisition of the Associated Theatres by Cinemette Corporation will have the effect of substantially lessening competition in the business of exhibiting motion picture films and will tend to create a monopoly in violation of Section 7 of the Clayton Antitrust Act, 15 U.S.C. § 18. Further, that the acquisition had the effect of giving Cinemette a monopoly in the other geographical areas where it owns theatres outside of the Greater Pittsburgh area, also in violation of Section 7 of the Clayton Act.

 Cinemette's Motion to Dismiss Count III of the Amended Complaint

 Cinemette's Motion to Dismiss Count III of the Amended Complaint for lack of jurisdiction over the subject matter is based upon the most recent interpretation by United States Supreme Court that actions under Section 7 of the Clayton Act must allege the acquisition was "in commerce", and that the proper interpretation includes only persons or activities within the flow of interstate commerce -- "the practical, economic continuity in the generation of goods and services for interstate markets and their transport and distribution to the consumer". Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 42 L. Ed. 2d 378, 95 S. Ct. 392 (1975).

 We find the Gulf case to be inapposite. In that case, Copp Paving, a producer of asphaltic concrete, brought suit in the District Court in California, alleging inter alia that Gulf Oil had violated Section 7 of the Clayton Act. Copp asserted that Gulf Oil's acquisition of Industrial Asphalt, Inc. and Union Oil's acquisition of Sully-Miller Contracting Company resulted in a lessening of competition in the Los Angeles asphaltic concrete market, to the damage and injury of the Plaintiff. The District Court ordered full Discovery as to jurisdiction over Copp's asphaltic concrete claims. At the conclusion of Discovery, the Court dismissed the claims against Sully-Miller and the claims against the other defendants involving the marketing of asphaltic concrete finding that asphaltic concrete was made wholly from components produced and purchased intrastate and that the product market was exclusively and necessarily local. From these factors, the Court concluded that the alleged restraints of trade in asphaltic concrete could not be deemed within the flow of interstate commerce even though the products were being used on the streets and roads in the Los Angeles area that were segments of the Federal Interstate Highway System. The Court further found that Copp had failed to show that the alleged restraints as to asphaltic concrete would affect any interstate market or would have a necessary or probable adverse consequence as to the construction of interstate highways, and hence to the flow of commerce. The Court then held that it lacked jurisdiction under either the Sherman Act or the Robinson-Patman and Clayton Acts. The Ninth Circuit reversed, holding that the production of asphalt "for use in interstate highways rendered the producers 'instrumentalities' of interstate commerce and placed them 'in' that commerce as a matter of law." Copp Paving Company v. Gulf OiL Co., 487 F.2d 202, 204. It then concluded that jurisdiction properly attached to Copp's Clayton and Robinson-Patman claims as well, since these Acts were intended to supplement the purposes and effect of the Sherman Act.

 The Supreme Court granted certiorari limited to the questions arising under the Clayton and Robinson-Patman Acts and concluded that although sales of asphaltic concrete were made for use in construction of interstate highways, such sales, by a firm engaged entirely in intrastate sales of asphaltic concrete which could be marketed only locally, were not "in commerce" within the jurisdictional ambit of either the Robinson-Patman or Clayton Acts. Mr. Justice Powell in delivering the Opinion for the majority stated, as here particularly applicable, the following (419 U.S. at 201):

 
"With respect to §§ 3 and 7 of the Clayton Act, the situation is not so clear. Both provisions were intended to complement the Sherman Act and to facilitate achievement of its purposes by reaching, in their incipiency, acts and practices that promise, in their full growth, to impair competition in interstate commerce. E.g., United States v. E.I. du Pont de Nemours & Co., 353 U.S. 586, 589, 1 L. Ed. 2d 1057, 77 S. Ct. 872 (1957); Standard Fashion Co. v. Magrane-Houston Co., 258 U.S. 346, 66 L. Ed. 653, 42 S. Ct. 360 (1922). The United States argues in its amicus brief that, given this purpose, the 'in commerce' language of §§ 3 and 7 should be seen as no more than an historical anomaly. When these sections were originally enacted, it was thought that Congress' Commerce Clause power reached only those subjects within the flow of commerce, then defined rather narrowly by the Court. Thus, it is argued, the 'in commerce' language was thought to be coextensive with the reach of the Commerce Clause and to bring within the ambit of the Act all activities over which Congress could exercise its constitutional authority. Since passage of the Act, this Court's decisions have read Congress' power under the Commerce Clause more expansively, extending it beyond the flow of commerce to all activities having a substantial effect on interstate commerce. See Mandeville Island Farms, Inc., supra, 334 U.S. ...

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