DIPSON THEATRES v. BUFFALO THEATRES No. 247, Docket 21887.
190 F.2d 951 (1951)
DIPSON THEATRES, Inc. v. BUFFALO THEATRES, Inc. et al.
United States Court of Appeals Second Circuit.
Decided July 25, 1951.
Borins & Hoffman, Buffalo, N. Y. (Robert L. Wright, Washington, D. C., Louis Borins and Dwight Campbell, Jr., Buffalo, N. Y., counsel), for appellant.
Raichle, Tucker & Moore, Buffalo, N. Y. (Frank G. Raichle, Buffalo, N. Y., C. Stanley Thompson, Louis Phillips, New York City, and James O. Moore, Jr., Buffalo, N. Y., counsel), for appellees Buffalo Theatres, Inc., Loew's Inc. and Paramount Pictures, Inc.
Sidney B. Pfeifer, Buffalo, N. Y. (John F. Caskey and Harry M. Pimstein, New York City, counsel), for defendants-appellees RKO Radio Pictures, Inc., and Twentieth Century-Fox Film Corp.
O'Brien, Driscoll, Raftery & Lawler, New York City (Edward C. Raftery and George A. Raftery, New York City, counsel), for appellee, United Artists Corp.
O'Brien, Driscoll, Raftery & Lawler, New York City (Edward C. Raftery, George A. Raftery, Robert W. Perkins and Morris Ruffman, all of New York City, counsel), for appellee Warner Bros. Pictures Distributing Corp., formerly called Vitagraph, Inc.
Brown, Kelly, Turner & Symons, Buffalo, N. Y. (J. Edmund Kelly and John E. Leach, Buffalo, N. Y., counsel), for appellee Vincent R. McFaul.
Dwight, Koegel, Harris & Caskey, New York City, for defendant-respondent Twentieth Century-Fox Film Corp.
Alfred M. Zisser, Buffalo, N. Y., and Schwartz & Frohlich, New York City, for defendant-respondent Columbia Pictures Corp.
Before SWAN, AUGUSTUS N. HAND and CLARK, Circuit Judges.
AUGUSTUS N. HAND, Circuit Judge.
This action was originally instituted in 1946 by Dipson Theatres, Inc. (hereinafter called Dipson), against eight national film distributors,
The facts are as follows: One Michael Shea was one of the first — if not the first — motion picture theatre operators in Buffalo (1914). He and his successors had always had an excellent reputation for good entertainment and for meeting their obligations to the distributors. As the demand for theatres increased, he, in 1925, sold a part interest in his theatre chain to Paramount's predecessor to obtain financing to build the Buffalo theatre, still the largest in the area. In 1926, Michael Shea acquired by lease the Kensington theatre, and in 1928 the Bailey, both in northeast Buffalo. In 1928 Loew — who operated the Century — turned it over to Michael Shea in return for a part interest in the business. Michael Shea died in 1934 and McFaul, his successor, Paramount and Loew then organized the corporate defendant Shea to continue the business. In 1939 Nikitas Dipson, who controlled or was associated with a large theatre chain, commenced operations in the Buffalo area. Among the theatres that he acquired were three formerly operated by Shea: the Century, a downtown first run theatre, the Bailey, a neighborhood theatre, and the Rivieria, a suburban theatre. Shea declined an opportunity to renew his leases and to continue operation of these properties. Dipson also acquired the Ridge, another suburban theatre which had been offered to Shea and refused.
By 1940, after Dipson had entered the area, there were 67 motion picture theatres in Buffalo with an aggregate capacity of 66,684 seats, of which 5 were first run. Shea operated 11 of these, including 3 of the first run theatres with a capacity of 9,979 seats, the remaining 8 being neighborhood theatres with a capacity of 9,040 seats. Three of these Shea neighborhood theatres, the Seneca, Kensington and Elmwood, were operated as second run theatres, that is, Shea showed pictures licensed to it at them before showing the same picture at its 5 other theatres and before the licensors released them to other theatres. Pictures not licensed to Shea for second run appeared in other theatres prior to 1939, and after that time also at the Bailey. The Dipson combine operated 10 neighborhood theatres with a capacity of 11,230 seats, and the first-run Century. There was one independent regular first run theatre, the Lafayette. Of the distributor defendants, only Paramount and Loew had any financial interest in the theatres here involved or in any theatres in the Buffalo area. Prior to Dipson's entry into Buffalo the 6 percent distributor defendants
There being admittedly no direct evidence
In 1926 Michael Shea obtained a lease on the Kensington theatre in northeast Buffalo. Two years later he similarly acquired the Bailey in the same general area but some 1.7 miles away. The Bailey was sold to the plaintiff in 1939. Plaintiff asserted that prior to 1939 it had been a second run theatre
1. Loew licensed the second run to the Kensington with one week clearance over the Bailey.
2. Paramount did the same.
3. Fox, which had a three year franchise agreement with Shea, licensed second run to the Kensington with no clearance over the Bailey.
4. Warner licensed half its pictures to each for second run.
5. Universal offered to license all its pictures for second run to the Bailey. This offer was not accepted by Dipson though it is not shown why it adopted that course.
6. Columbia licensed all its pictures for second run to the Bailey.
7. RKO licensed its pictures for second run to the Kensington with one week clearance over the Bailey.
We insert here a table indicating in summary form the actions of the distributor defendants with respect to the Bailey-Kensington and other similar situations in the area:
BUFFALO LACKAWANNA TONAWANDA DowntownRiviera Bailey Kensington Century 3 Shea Ridge Lackawanna 5Distributor (Dipson) (Shea) (Dipson) Theatres (Dipson) (Shea) (Dipson) Paramount ....... 3d run 2d run 1st run 2d run 1st run 1st run 7 days clearance Loew ............ 3d run 2d run 1st run 2d run 1st run 1st run 7 days clearance RKO ............. 3d run 2d run 1st run 1st run 2d run 1st run 7 days clearance Fox ............. 3d run 2d run 1st run 1st run 2d run 1st run no clearance United .......... generally irregularly split 1st run 2d run 1st run 3d run 2d run among 8 theatres 11 day clearance Warner .......... ½ 2d run ½ 2d run ½ 1st run ½ 1st run ½ 1st run ½ 1st run 2Columbia ........ 2d run 3d run neither 3 2 2Universal ....... Offered neither 32d run 1st run 5 22d run
In summary, Paramount and Loew licensed Shea first throughout but licensed Dipson where there was no immediately competing Shea theatre; RKO preferred Shea at the Kensington, Dipson elsewhere; Fox licensed Shea first at the Kensington and downtown, Dipson elsewhere; United had no fixed policy but apparently preferred Shea at the Kensington,
Far from being circumstantial evidence of a conspiracy, the conduct of the distributors tabulated above would appear to be evidence to the contrary. With the exception of Loew and Paramount,
However, the inference of conspiracy might have been sustained if Dipson could have shown that the Bailey was, from the distributor's point of view, clearly a better customer, i. e., capable of producing more revenue, than the Kensington. This he failed to do. There was considerable conflict in the evidence as to which was the better appointed theatre. But, it was uncontroverted that the Kensington was in a growing, the Bailey in a declining, neighborhood. There was also dispute as to which theatre would ordinarily out-gross the other. There, however, is uncontroverted evidence that on the only occasion when the same show ("Pinocchio") played both theatres on the same day, the Kensington out-grossed the Bailey. Warner, which split its product between the Bailey and the Kensington in the years 1939-1943 inclusive received almost twice as much rental from the Kensington as from the Bailey. There was also evidence showing that on the average the Bailey grossed more playing after the Kensington than it did playing comparable pictures second run. This is concededly unusual and was ascribed, apparently with good reason, to Shea's prior advertising which had benefited Dipson in view of the latter's policy not to advertise the Bailey pictures. There was also convincing evidence that the Bailey's gross was being very adversely affected by the activities of the management of the Genesee theatre. The Genesee was much closer to the Bailey than the Kensington, was of comparable quality, and charged lower admissions. One Basil, who managed and had a half interest in the Bailey, owned the Genesee and in order to favor his wholly owned theatre had violated the agreed clearance and run between it and the Bailey, there being 93 instances of this practice in the year 1940 alone.
In the light of the foregoing a conspiracy was not established because some of the distributors, when forced to choose between the Bailey and the Kensington, decided that they would gross more at once and in the long run by showing all their pictures at the Kensington first, thus continuing the established trend toward that theatre. In addition, various of the distributor defendants had additional reasons for their choice. Thus Loew, in addition to having an interest in the Kensington, had had unfortunate financial dealings with Dipson in the past. RKO and Fox had had similar experiences, and Warner's experience with Dipson at the Century was not satisfactory. The fact that Dipson, although an experienced exhibitor, was also far more of a dealer in theatres than Shea, was a further factor in the decisions of some distributors to prefer the Kensington.
The century was one of five first run theatres in Buffalo. One of the remaining four
From the above it can be seen that there is no evidence that the distributor defendants combined to deny Dipson access to first run films at the Century. It got some of the product of Warner and United, and all of RKO. Columbia and Universal had never licensed the Century before or after its acquisition by Dipson. Any substantially different pattern of distribution in Dipson's favor would have been an unfair discrimination against Shea or the independent first run exhibitor.
Shea entered into no tie in arrangements, i. e., agreeing to show film first run only if favored in the second, or vice versa, nor did it ever preempt the supply of films by contracting for more films than it could exhibit.
After the above facts had been brought out at the trial, Knight, J., who had had extensive experience in motion picture antitrust cases, decided that no conspiracy had been shown and that the distributor defendants had merely exercised their independent and individual right to select their own customers.
"It is of the essence of plaintiffs' argument that `but for the fact that a Jury had to pass upon the question of damages,' a directed verdict would have been required. This contention, which we must reject, is the basis for their objections to the charge and the refusals to charge. Obviously what the plaintiffs are doing is to confuse evidence of conspiracy, to
"Likewise, the joint operation of the Brown Theatre by one independent exhibitor and a subsidiary of one of the defendants (Loew's) was a type of activity which would not be unlawful unless a conspiracy to monopolize or restrain commerce by means of that activity was found by the jury to exist as to some of the defendants in the present action. The condemnation of joint interests in the decision in United States v. Paramount Pictures, Inc., D.C.S.D.N.Y., 70 F.Supp. 53, is not to be regarded as a declaration that joint ownership as such is illegal. It was made in a suit between the United States and various distributors and exhibitors on the basis of the particular facts of that case, and the presence of some of the defendants in the two actions did not relieve the plaintiffs in the present action from the necessity of satisfying the jury that a conspiracy existed. Of course, no one could reasonably contend that every joint ownership of a theatre, irrespective of all surrounding circumstances, is a violation of the Sherman Antitrust Act; and no such decision has ever been made. * * *"
Also the expediting court in the Paramount case specifically held, contrary to Dipson's position, that "The decision of such controversies as may arise over clearances should be left to local suits in the area concerned". U. S. v. Paramount Pictures, D.C., 66 F.Supp. 323,342. The fact that plaintiff now concedes that Columbia and Universal were not parties to the present conspiracy and concededly Shea and McFaul were not parties to the original Paramount action also indicates that that case is not controlling here. There is also no showing that evidence of the Buffalo situation was introduced or relied upon by the government in proving the conspiracy in the Paramount case. Therefore we must look to the record in this case to see if Dipson has shown that the general conspiracy found to exist in the Paramount case, or some other conspiracy, had as one of its objects or effects the monopolization of the first and second run exhibition of pictures in the Buffalo area and that he suffered injury as a result. Of course, the activities revealed in the Paramount case lead us to scrutinize with great care the activities of the same defendants here for where one has violated the Sherman Act in one situation, it might be expected that the same parties would be willing and able to do so elsewhere.
It will simplify matters if the defendants are split into four groups: one, the distributors RKO, United and Warner, who neither owned theatres in Buffalo nor had franchise agreements with Shea; two, Fox, who had a first and second run franchise agreement with Shea; three, Loew and Paramount who not only between them controlled Shea but up to 1944 had a first run franchise agreement with Shea; four, Shea and McFaul, the exhibitor defendants.
In considering evidence of a conspiracy it should be kept in mind that there are a limited number of pictures available for exhibition so that what one exhibitor gets for a given run is necessarily not available to his competitor.
We agree with the trial judge that the first group of defendants — RKO, United and Warner — have not been shown to have been parties to a conspiracy. The mere tabulation of their diverse actions with respect to Shea and Dipson is alone enough to support the decision below since all direct evidence of a conspiracy is lacking. Dipson's allegations in its brief that the actions of these defendants were only taken after clearance with and on sufferance of Shea are entirely unsupported by the record and even had such conspiracy existed no reason for such sufferance is suggested.
Fox as we have indicated, favored Dipson except where it was bound by its first and second run franchise
After eliminating Fox, RKO, United and Warner, from the alleged conspiracy it remains to determine if there was sufficient evidence to support the decision of Knight, J., that no conspiracy existed between Loew and Paramount on the one hand and Shea and McFaul on the other that the former would exhibit their pictures first and second run solely with the latter. As sufficient to overcome Knight J's. decision, Dipson points out that Paramount and Loew each had a double connection with Shea in that each had a large financial interest in it, Paramount since 1925, Loew since 1928; that since Shea's corporate organization in 1934 both had had ten year first run franchise agreements with it (the franchises expired in 1944 and were not renewed); that although they had no second run frachise with Shea, each of them licensed Shea for second run at the Kensington, rather than Dipson at the Bailey.
As was the case with Fox, the franchises could not have been aimed at Dipson as the latter was not in Buffalo when they
Had a monopoly been obtained by Shea we might have viewed the question differently but Shea did not have a monopoly of first and second run theatres in Buffalo and Loew and Paramount did not have a monopoly of available films. Shea did not use first run buying power to get second run preference, or vice versa, nor indeed has any such abuse been claimed. Nor did it attempt to exclude Dipson by contracting for more films than it could use. Dipson could and did obtain sufficient films to exhibit at the Century and Bailey (although it did not obtain all it desired). Had a monopoly been the aim of Loew and Paramount, they would have caused Shea to retain control of the Century and Bailey. We hold that their activities did not show a joint action that should upset the finding that no conspiracy existed between them.
There is also an inherent lack of plausibility in the complaint as a whole. If the defendants were engaged in a conspiracy to monopolize first and second run exhibitions in Buffalo, why would Shea fail to retain control of the Bailey and the Century in 1939, when it appears that it was offered a chance to buy the Bailey and renew the lease on the Century? If the theatres were as profitable as Dipson would have us believe, Shea would naturally have kept them. Furthermore, the complaint was dismissed as to the defendants Universal and Columbia and in so far as it applied to the Ridge Theatre, and no appeal has been taken from the dismissal. A conspiracy among the six remaining distributor defendants aimed at only two of the plaintiff's many theatres while all but Paramount and Loew favored the plaintiff elsewhere (and even they licensed it in Tonawanda) would seem to have been futile. Such a conspiracy would be entirely different from that shown in the Paramount case which apparently favored large combines such as Dipson. Also RKO, United and Warner did not regularly favor Shea even in the two theatres remaining at issue.
Dipson makes much of the fact that it was unable to get the runs it wanted on any terms, but there is no evidence that it offered the distributor defendants better terms than they were getting from Shea, in fact Dipson willingly agreed in 1943 to take all Warner's product third run at the Bailey in return for a reduction in film rental. As we have said, had Dipson's demands been acceded to by the distributors it would have secured a monopoly with far less reason to support it than Shea has ever had. There is evidence that Dipson wanted all or nothing from each distributor and testimony from its own witness that its aim was a monopoly.
In summary, the plaintiff only alleges
In view of the foregoing we find that Judge Knight's conclusion as to the lack of any conspiracy affecting the Bailey and Century was supported by the evidence and must be sustained. As we affirm the decision below on the ground that no illegal conspiracy is shown, it is unnecessary to discuss so much of that opinion as held that conspiracy or not, plaintiff had suffered no damages. Suffice it to say that it appears from the record that there were many reasons given by the appellees which would explain Dipson's lack of financial success even in the absence of conspiracy and would negative any inference of conspiracy that might arise from the existence of unexplained damages or losses. The losses at the Century seem to have been the result of bad management, and at the Bailey seem in a large part due to bad management, unfair competition by the Genesee and a general decline in the neighborhood.
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