entity. For example, Orson asserted in its motion for partial summary judgment that Ramon L. Posel is the principal and president and of both companies, that he books all of the films exhibited at both theaters, and he "runs both theaters as a single facility." Plaintiff's Memorandum in Support of its Motion for Partial Summary Judgment at 4. Later, at page 18, Orson conceded that both Ritz facilities are embodied in one person: "Ramon Posel, who is the Ritz." Despite Orson's artful argument, it is clear that no Sherman Act conspiracy can result from the doings of a single man.
In Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 81 L. Ed. 2d 628, 104 S. Ct. 2731 (1984), the Supreme Court held that a parent and its wholly owned subsidiary must be considered as a single enterprise for section one purposes. Id. at 771. Although the Court limited its holding to the situation involving a parent and its wholly-owned subsidiary, the principles that guided the Copperweld decision are even more compelling here: "A parent and its wholly owned subsidiary have a complete unity of interest. Their objectives are common; their general corporate actions are guided or determined not by two separate corporate consciousnesses, but one." Id. Because the Ritz theaters share common owners and leadership and operate as a single entity, we hold that there can be no Sherman Act conspiracy between them.
Orson's final argument for a favorable resolution at the summary judgment stage is found in Third Circuit precedent suggesting that a per se rule applies to vertical restraints that adversely impact competition at the horizontal level. In Cernuto, Inc. v. United Cabinet Corp., 595 F.2d 164 (3d Cir. 1979), the Third Circuit held that a manufacturer's refusal to deal with a distributor who resold the product for a price less than the price offered by other distributors may constitute a per se violation of section one. Id. at 170. The court's holding was based on both the price-fixing element of the restraint and the restraint's horizontal impact. Id. In Sharp, however, the Supreme Court sharply curtailed the breadth of the Cernuto decision, holding that a vertical restraint would be subject to per se disposition only if it entailed an express or implied agreement to set resale prices. Sharp, 485 U.S. at 735-36. The Sharp Court expressly noted that the agreement, and not its effects, is the determining factor in deciding whether a restraint is properly characterized as horizontal: "a restraint is horizontal not because it has horizontal effects, but because it is the product of a horizontal agreement." Sharp, 485 U.S. at 730 n.4.
Although the restraint at issue may have some effect on a horizontal level, it is clearly a vertical agreement between a distributor and an exhibitor, and therefore the holding in Sharp precludes the Court from applying the rule in Klor's as to the illegality of a horizontally-imposed boycott. Further, the facts here do not fit into the narrow class of cases imposing per se liability on vertical restraints that concern resale price terms. Accordingly, we hold that the agreement between Miramax and the Ritz does not violate the Sherman Act per se.
2. The Reasonableness of the Restraint
Having rejected Orson's bid for summary judgment under the Sherman Act, the Court now turns to Miramax's motion for summary judgment and asks whether, after an analysis of the facts on the record under the rule of reason, Miramax must prevail as a matter of law. Thus, the issue here concerns the reasonableness of the Miramax-Ritz agreement, by which Miramax grants exclusive licenses to the Ritz for the exhibition of its art films. Miramax argues that the exclusive licenses are reasonable, and therefore lawful. Orson counters that the agreement is illogical from a business perspective, and as such, it reveals Miramax's true intention in entering into the agreement: to harm the Roxy's competitive position.
The United States Court of Appeals for the Ninth Circuit addressed the antitrust implications of an exclusive license in Three Movies of Tarzana v. Pacific Theatres, 828 F.2d 1395 (9th Cir. 1987), cert. denied, 484 U.S. 1066, 98 L. Ed. 2d 992, 108 S. Ct. 1028 (1988). In that case, the owner of a movie theater brought suit against a competing film exhibitor and various film distributors, alleging that the distributors and the rival theater collaborated to provide the rival theater with "clearance"
over the plaintiff's theater. The plaintiff alleged, as Orson does here, that the granting of exclusive licenses eliminated competition in the relevant market and caused harm to the plaintiff. Id. at 1397. The Ninth Circuit concluded, as this Court has today, that movie clearances are vertical non-price restraints subject to a rule of reason analysis. Id. at 1398.
In determining the reasonableness of a vertical non-price restraint of trade, the Ninth Circuit and other courts have undertaken an analysis that is mindful of the Supreme Court's admonition that interbrand competition is "the primary concern of antitrust law," GTE Sylvania, 433 U.S. at 52 n.19. Thus, the courts have concluded that vertical non-price restraints are more likely to be lawful if they promote interbrand competition without unduly restricting intrabrand competition. See Sharp, 485 U.S. at 724; Trans Sport, Inc. v. Starter Sportswear, Inc., 964 F.2d 186, 190 (2d Cir. 1992); Three Movies, 828 F.2d at 1399. Further, with respect to the specific issue of clearances, the courts have noted that clearances are reasonable vertical restraints of trade in circumstances where "the theaters are in substantial competition, and the clearances are used to assure the exhibitor that the distributor will not license a competitor to show the movie at the same time or so soon thereafter that the exhibitor's expected income will be greatly diminished." Three Movies, 828 F.2d at 1399 (citing United States v. Paramount Pictures, 334 U.S. 131, 145-46, 92 L. Ed. 1260, 68 S. Ct. 915 (1948)).
Applying these principles to the challenged restraint, this Court holds that the clearances at issue here are reasonable. First while the clearances stifle intrabrand competition to a small degree--no Miramax art film playing at the Ritz can play contemporaneously at the Roxy, the clearances serve to stimulate competition between art films distributed by Miramax and art films originating with other distributors. As a result, art film-goers in Center City Philadelphia are offered a wider array of selections from which to choose. Further, it is apparent that the Ritz and the Roxy are in substantial competition. By Orson's own admission, the Ritz and the Roxy are the only two art houses in Center City Philadelphia. Thus, if the Ritz and the Roxy were to exhibit the same film on the same dates, not only would the overall degree of choice be reduced, but the Ritz would assuredly lose income as a result. At its core, Orson's complaint asks the Court to compel Miramax to lease its films to Orson for exhibition at the Roxy. The antitrust laws were not enacted to achieve such ends. Accordingly, the Court grants Miramax's motion for summary judgment on Counts I and II of Orson's complaint.
C. Claims under the Pennsylvania Act
1. Section 207-1
Orson alleges in its amended complaint that Miramax has operated in violation of section 207-1 of the Pennsylvania Act, which provides as follows:
No license agreement shall be entered into between distributor and exhibitor to grant an exclusive first run or an exclusive multiple first run for more than 42 days without provision to expand the run to second run or subsequent run theaters within the geographical area and license agreements and prints of said feature motion picture shall be made available by the distributor to those subsequent run theaters that would normally be served on subsequent run availability.