On Appeal from the United States District Court for the Eastern District of Pennsylvania [D.C. Civil No. 80-1179]
Before: SLOVITER and STAPLETON, Circuit Judges, and MENCER,*fn* District Judge
This is the second time that this challenge to the Pennsylvania Feature Motion Picture Fair Business Practice Law, 73 P.S. §§ 203-11 (the Act), has been before this court.
The Act has five substantive provisions. First, it prohibits distributors from licensing films through "blind bidding", by requiring the distributors to hold a trade screening of any film in Pennsylvania before entering into a licensing agreement with an exhibitor. Id. § 203-4.
Second, the Act provides that a film licensing agreement that bases payment to the distributor on attendance or box office receipts may not also require a minimum payment or guarantee. Id. § 203-5. The overwhelming majority of licensing agreements are on such a percentage basis.
Third, the Act prohibits a film licensing agreement from requiring the exhibitor to advance any funds prior to the exhibition of the film. Id. § 203-6.
Next, the Act prohibits distributors from granting exclusive licenses for any film for more than 42 days. Id. § 203-7. As interpreted by the district court, this provision does not preclude negotiation of additional exclusive licenses thereafter.
Finally, the Act regulates the bidding process between exhibitors and distributors by giving all exhibitors who have submitted a bid a right to be present when bids are opened; by giving exhibitors 60 days to examine all bids if they have all been rejected; by requiring distributors to notify all bidding exhibitors of the terms of the successful bids; and by requiring distributors who have rejected all bids to inform all bidders and hold new bidding. Id. § 203-8(a)-(e).
Earlier, a panel of this court reversed the district court's order granting summary judgment for plaintiffs. We rejected the claim of plaintiffs, who are out-of-state film distributors and producers who distribute most of the films released in the United States (the distributors), that the act violated plaintiffs' First Amendment freedoms or was preempted by the Copyright Act on its face. See Associated Film Distribution Corp. v. Thornburgh, 683 F.2d 808 (3d Cir. 1982). However, because we held that on summary judgment, the trial court "could not evaluate the actual impact of the Act (if any) on First Amendment values; could not assess the nature and weight of the state concerns which led to the Act's enactment' and could not balance the state concerns against the threat (if any) to the First Amendment." id. at 813-14 (footnotes omitted), we remanded the case to the district court. We directed it to decide, with respect to the First Amendment claim, "whether the Act in fact creates any material risk of delay in exhibition or in fact threatens to inhibit the production of motion pictures by changing the financial structure of the industry." Id. at 812 (emphasis in original).
With respect to the claim of federal preemption by the Copyright Act, we held that, "whether the prohibitions contained in the Pennsylvania Act in fact 'stand as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress' was in dispute." Id. at 816 (emphasis in original). We ruled that the trial court should decide "whether and to what extent the Pennsylvania Act interferes with attaining the 'purposes and objectives of Congress.'" Id.
On remand, the district court conducted a six-week bench trial to determine the effect of the provisions of the Act that the distributors challenged. The district court then issued an extensive opinion in which it upheld the Act against each of the distributors' challenges. 614 F. Supp. 1100 (E.D. Pa. 1985).
The distributors argue that the facts as found by the district court support their argument, renewed in this appeal, that the Pennsylvania Act unconstitutionally burdens First Amendment rights and is preempted by the Copyright Act. Much of their argument is foreclosed by our earlier decision in this case, although we must consider the effect on the First Amendment analysis of the intervening decision in Minneapolis Star & Tribune Co. v. Minnesota Commissioner of Revenue, 460 U.S. 575, 75 L. Ed. 2d 295, 103 S. Ct. 1365 (1983). In addition, we must consider the distributors' argument that the Act violates the Commerce Clause, which was not at issue in the prior panel decision. We turn to that argument first.
The distributors argued to the district court that the Act violated the Commerce Clause both because it discriminated against interstate commerce in favor of in-state commerce and because it unduly burdened interstate commerce. See 614 F. Supp. at 1114. The district court rejected both of these contentions. On appeal, the distributors appear to be focusing primarily on the latter argument, claiming that the Act unconstitutionally burdens interstate commerce because it seeks to promote an illegitimate objective, and because the means chose to remedy the problem are not those with the least impact on interstate commerce.*fn1
All parties agree that the applicable test is set forth in the Supreme Court' decision in Pike v. Bruce Church Inc., 397 U.S. 137, 25 ...