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UNITED STATES v. CINEMETTE CORP. OF AMERICA GEORGE

April 6, 1988

UNITED STATES OF AMERICA
v.
CINEMETTE CORPORATION OF AMERICA, GEORGE STERN, LARRY COLLINS, Defendants



The opinion of the court was delivered by: BLOCH

 ALAN N. BLOCH, UNITED STATES DISTRICT JUDGE.

 The indictment in this case charges the defendants with a violation of § 1 of the Sherman Act, 15 U.S.C. § 1. The charges arise out of an alleged conspiracy to eliminate competition in the operation of motion picture theatres in the Altoona, Pennsylvania area. Pending before the Court is defendants' motion to dismiss the indictment.

 Defendants present several arguments in support of their motion. The first argument rests upon the due process clause of the Fifth Amendment; defendants contend that, as of the time of the charged offense, the decisional law interpreting § 1 of the Sherman Act did not provide fair warning that the conduct in question might expose the defendants to criminal liability. In addition, defendants claim that the government represented that it would not initiate criminal prosecutions concerning split agreements until civil cases in the area had established a framework for determining the legality of such conduct under § 1 of the Sherman Act. Related to these arguments is the defendants' contention that, due to the unresolved nature of the case law regarding the legality under § 1 of the Sherman Act of the type of agreement at issue, this prosecution constitutes an application of ex post facto law.

 Defendants also argue that the indictment should be dismissed because it fails to properly charge specific intent as an element of the offense and that, in any event, as a matter of law, they could not have possessed the required intent. Finally, defendants claim that the government has impermissibly singled them out for prosecution while failing to prosecute others who allegedly have engaged in similar conduct. Therefore, they contend, the indictment must be dismissed.

 I. Factual Background

 In ruling upon a motion to dismiss an indictment, the Court must accept the factual allegations set forth therein as true. United States v. National Dairy Products Corporation, 372 U.S. 29, 33 n. 2, 9 L. Ed. 2d 561, 83 S. Ct. 594 (1963); Boyce Motor Lines v. United States, 342 U.S. 337, 343 n. 16, 96 L. Ed. 367, 72 S. Ct. 329 (1952).

 The government alleges that during the period covered by the indictment distributors of motion pictures licensed those pictures on a picture-by-picture, theatre-by-theatre basis. Where two or more exhibitors operated theatres within a given local market, a distributor would license its films by competitive bidding or by negotiating with competing theatres. Under ordinary circumstances, the license would be awarded to the exhibitor making the best offer, after considering licensing terms offered by competing exhibitors, seating capacity, theatre location, and other factors.

 The indictment alleges that from at least early January, 1985, until approximately August, 1986, the defendants and other co-conspirators entered into a "split agreement," the purpose of which was to eliminate competition among theatres in the Altoona, Pennsylvania area in connection with the acquisition of licenses to exhibit motion pictures.

 The government describes a split agreement as an agreement among film exhibitors to allocate the films for which they otherwise would be competing and to refrain from competing for those films. Defendants contend that a split agreement is simply a non-binding allocation among film exhibitors of the first rights to negotiate with particular distributors for specific films.

 The indictment charges that the defendants and their alleged co-conspirators refrained from submitting bids for motion picture licenses, submitted offers only for the exhibition of motion pictures at theatres to which the motion pictures previously had been allocated or "split" pursuant to the agreement, refrained from dealing with distributors with respect to motion pictures split to other participants in the conspiracy, and generally refrained from competing against each other for the licensing of motion pictures.

 II. The Merits of Defendants' Claims

 A. Due Process Concerns

 1. Vagueness

 Defendants argue that at the time of the actions charged in the indictment, no court had held that split agreements amounted to criminal violations of the Sherman Act. Moreover, they argue, several courts had held that split agreements did not constitute even civil antitrust violations. In the absence of a definitive judicial interpretation holding such conduct illegal, defendants ...


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