Opinion ID: 360361
Heading Depth: 1
Heading Rank: 1

Heading: Distributor-defendants

Text: 15 To establish the first element of their case against the distributor-defendants, the plaintiffs had to show with at least circumstantial evidence that the distributor-defendants knowingly participated in the split with the intent to deprive plaintiffs of their fair share of quality first-run films. Assuming that the exhibitor split constituted an illegal combination or conspiracy under section 1 of the Sherman Act, the district court found that the evidence presented at trial was insufficient to support any reasonable inference of the distributor-defendants' participation in implementing or promoting the split of first-run films in the Omaha-Council Bluffs market area. 16 The plaintiffs were not required to directly prove the fact of an agreement among the distributor-defendants or between the distributor-defendants and the exhibitor-defendants. Evidence from which an agreement could be inferred is sufficient. American Tobacco Co. v. United States, 328 U.S. 781, 809-10, 66 S.Ct. 1125, 90 L.Ed. 1575 (1946); Loew's, Inc. v. Cinema Amusements, Inc., 210 F.2d 86, 93 (10th Cir.), Cert. denied, 347 U.S. 976, 74 S.Ct. 787, 98 L.Ed. 1115 (1954). However, to avoid a directed verdict the facts and circumstances relied upon must attain the dignity of substantial evidence and not be such as merely to create a suspicion. Johnson v. J.H. Yost Lumber Co., 117 F.2d 53, 61 (8th Cir. 1941); See Twin City Plaza, Inc. v. Central Sur. & Ins. Corp., supra, 409 F.2d at 1202-03 n. 8; Michelman v. Clark-Schwebel Fiber Glass Corp., 534 F.2d 1036, 1042 (2d Cir.), Cert. denied, 429 U.S. 885, 97 S.Ct. 236, 50 L.Ed.2d 166 (1976); Venzie Corp. v. United States Mineral Prods. Co., 521 F.2d 1309, 1314 (3d Cir. 1975). Furthermore, an inference which a jury is entitled to draw must be based upon proven facts and not upon other inferences. Wesson v. United States, 172 F.2d 931, 936 (8th Cir. 1949); Brown v. Maryland Cas. Co.,55 F.2d 159, 161 (8th Cir. 1932). 17 The plaintiffs correctly note that similar practices by competitors, I. e., conscious parallelism, will sometimes support an inference of an agreement. However, as the Supreme Court stated in Theatre Enterprises, Inc. v. Paramount Film Distrib. Corp., 346 U.S. 537, 541, 74 S.Ct. 257, 259, 98 L.Ed. 273 (1954),  'conscious parallelism' has not yet read conspiracy out of the Sherman Act entirely. An inference of conspiracy is not warranted where the conduct is at least as consistent with legitimate business decisions by the distributor as with the planned exclusion of the plaintiffs. Id. at 540-42, 74 S.Ct. 257; Dahl, Inc. v. Roy Cooper Co., 448 F.2d 17, 19-20 (9th Cir. 1971); Brown v. Western Mass. Theatres, Inc., 288 F.2d 302, 305-06 (1st Cir. 1961). Section 1 of the Sherman Act does not prohibit independent business actions and decisions. Only where the pattern of action undertaken is inconsistent with the self-interest of the individual actors, were they acting alone, may an agreement be inferred solely from such parallel action. First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 279-80, 287, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968); Aviation Specialties, Inc. v. United Technologies Corp., 568 F.2d 1186, 1192 (5th Cir. 1978); Michelman v. Clark-Schwebel Fiber Glass Corp., supra, 534 F.2d at 1047; Venzie Corp. v. United States Mineral Prods. Co., supra, 521 F.2d at 1314-15; Viking Theatre Corp. v. Paramount Film Distrib. Corp., supra, 320 F.2d at 299; Turner, The Definition of Agreement Under the Sherman Act: Conscious Parallelism and Refusals to Deal, 75 Harv.L.Rev. 655, 657-59, 681 (1962). 18 The plaintiffs claim that the distributor-defendants joined in the implementation of the conspiracy by engaging in such practices as (1) providing the split with advance release information not available to the plaintiffs; (2) rejecting plaintiffs' bids and accepting inferior bids by split members; (3) according irregular and preferential treatment to split members in the form of moveovers, shortened runs, acceptance of late bids, adjustments of bids and film rentals, advanced licensing, and cancellation of licensed films; and (4) acquiescing to the splitting of their product. 19 It appears from the record that the exhibitor-defendants did receive advance release information concerning release dates, stars, and Motion Picture Association of America ratings from at least some of the distributor-defendants. It is not surprising that a distributor would provide information concerning forthcoming films to any interested exhibitor. It is certainly not inconsistent with the distributor's self-interest to attempt to generate interest in its films. Furthermore, as the district court stated: Even assuming that this advance information was unavailable to plaintiffs through the various trade journals, it is clear that plaintiffs neither requested nor were designedly refused the information that their competitors had acquired. Admiral Theatre Corp. v. Douglas Theatre Co., supra, 437 F.Supp. at 1288. 20 Contrary to the plaintiffs' assertions, the record fails to reveal any systematic rejection of plaintiffs' offers for films in favor of inferior offers from the exhibitor-defendants. As noted earlier in this opinion the plaintiffs were able to license approximately 60% of the films upon which they made an offer. The plaintiffs contend that they were particularly unsuccessful in licensing high grossing first-run films. However, this claim was belied by the fact that of the 19 films upon which plaintiffs made specific offers of terms and which were allocated to the split, 9 were licensed to the plaintiffs. There can be no reasonable inference from such figures that plaintiffs' specific term bids were ignored. 21 The evaluation of competing bids is necessarily somewhat subjective. The most important factor in licensing a film is the grossing potential of a theatre. A theatre's location, quality of furnishings, demonstrated ability to attract patrons, and the type of films previously shown are considered by a distributor in determining a theatre's grossing potential. These factors were generally ignored by Robert Blank in his testimony for the plaintiffs. Blank claimed that the plaintiffs' bids were superior primarily on the basis of larger seating capacity. Larger seating capacity is relevant, however, only if the larger theatre can outdraw the smaller. No such evidence was presented in this case. Conversely, in the movie industry in general, and in the Omaha-Council Bluffs market area in particular, the trend has been away from large single-screen theatres to theatres with smaller auditoriums and multiple screens. 22 It would unduly prolong this opinion to compare in detail plaintiffs' bids with those of their competitors in every instance where a distributor accepted a bid other than the plaintiffs'. See Admiral Theatre Corp. v. Douglas Theatre Co., supra, 437 F.Supp. at 1282-84, 1289-90. It is sufficient to state that in no case was a bid by one of the plaintiffs demonstrably superior to that of the competitor who licensed the film. Furthermore, no pattern of similar conduct appears from the distributors' consideration of plaintiffs' offers. See Michelman v. Clark-Schwebel Fiber Glass Corp., Supra, 534 F.2d at 1043; Brown v. Western Mass. Theatres, Inc., supra, 288 F.2d at 305. Contrary to what would be expected if a conspiracy among the distributors existed, the plaintiffs had varying success with different distributors, ranging from a high of 100% acceptance from Twentieth Century Fox to a low of 25% acceptance from Paramount. Admiral Theatre Corp. v. Douglas Theatre Co., supra, 437 F.Supp. at 1282-84. 23 Plaintiffs introduced considerable testimony concerning instances where distributor-defendants accepted late bids from exhibitor-defendants, allowed exhibitor-defendants to alter bids, granted moveovers (playing the film on a different screen than originally designated) to exhibitor-defendants, and allowed film runs to be shortened without penalty. The record discloses that on occasion after a film had been licensed by competitive bidding or negotiation, the distributor would request adjustment to contract terms from the exhibitor or grant an adjustment to the exhibitor. During the relevant time period some of the distributors permitted moveovers by the exhibitors to compensate for bidding errors of overestimating or underestimating patronage of a film by placing it in a correspondingly smaller or larger auditorium. 7 24 The district court observed that plaintiffs' testimony on this issue was exclusively by Robert Blank, whose conclusions were based upon his examination of defendants' documents produced during discovery. The court permitted the opinion testimony to be admitted temporarily and preliminarily. In its published opinion the court stated that it 25 recognized then and recognizes now that this particular testimony raises serious foundational problems. In the first instance, the documents upon which Blank based his opinion had themselves been only temporarily admitted into evidence and were not without serious foundational infirmities. See N.R.L.B. v. Sharples Chemicals, 209 F.2d 645 (6th Cir. 1954); Standard Oil Co. v. Moore, 251 F.2d 188 (9th Cir. 1957), Cert. denied, 356 U.S. 975, 78 S.Ct. 1139, 2 L.Ed.2d 1148 (1958); Fed.R.Evid. 803(6). Blank's opinion testimony, moreover, is based upon inferences drawn from his interpretation of the documents, and it is upon this testimony that distributor-defendants' participation in an illegal scheme is inferred. Such testimony is in clear disregard for the rule against pyramiding inferences, which has heretofore been discussed. See Twin City Plaza, supra. Finally, although claiming that the irregular conduct of distributor-defendants deviated from accepted practice or standards of the industry, plaintiffs have failed to offer any evidence other than Blank's opinion testimony as to the nature of those practices and standards. 26 Admiral Theatre Corp. v. Douglas Theatre Co., supra, 437 F.Supp. at 1290. 27 Even if Blank's testimony is accepted and considered in the light most favorable to the plaintiffs, it does not support an inference of distributor participation in the split for two reasons. First, none of the actions of the distributors are even intimated to be adverse to the distributors' self-interests. See First Nat'l Bank v. Cities Serv. Co., Supra, 391 U.S. at 279-80, 287, 88 S.Ct. 1575, 20 L.Ed.2d 569; Aviation Specialties, Inc. v. United Technologies Corp., supra, 568 F.2d at 1192; Michelman v. Clark-Schwebel Fiber Glass Corp., supra, 534 F.2d at 1047; Venzie Corp. v. United States Mineral Prods. Co., supra, 521 F.2d at 1314-15; Viking Theatre Corp. v. Paramount Film Distrib. Corp., supra, 320 F.2d at 299. Bid cutoff dates are adopted by distributors for their own benefit and may be waived when it is to their advantage to do so. In no instance was there a showing that the bid accepted was inferior to a timely bid of the plaintiffs. Similarly, in nearly all instances where bid alterations were made they were to make the terms more favorable to the distributors. There is no evidence that the exhibitor-defendants received contract alterations below contract terms offered by the plaintiffs. The instances of bid alterations are not evidence of distributor favoritism to the split, but of distributor pursuit of self-interest. Even on those occasions where adjustments were made to shorten a film's run without penalty the distributors were acting in their own self-interest. By allowing an adjustment when a picture's performance was way under expectations the distributor encouraged higher bids from the exhibitors over the long run. Furthermore, in those situations where the revenue flow was exceedingly small, the exhibitor's economic interest in discontinuing the showing of a film was usually not contrary to the distributor's economic interest. Moreover, the plaintiffs' evidence failed to show any pattern of similar conduct by the distributors in the grant or denial of particular irregularities to exhibitor-defendants. Admiral Theatre Corp. v. Douglas Theatre Co., supra, 437 F.Supp. at 1281; See Michelman v. Clark-Schwebel Fiber Glass Co., supra, 534 F.2d at 1043; Brown v. Western Mass. Theatres, Inc., supra, 288 F.2d at 305. The only consistency apparent from the record is that the distributor- defendants accepted late bids, altered bids, or granted moveovers when it was to their advantage to do so. The evidence further shows that contract adjustments were granted after a picture began to run only when such adjustments were requested on pictures that experienced unusually low grosses. 28 Second, there is no evidence that plaintiffs attempted, and were not permitted during the relevant time period, to engage in moveovers, shorten runs without penalties, submit late bids, receive adjustments on pictures licensed by a competitive bid or negotiation, or have availability dates moved up. 8 The district court correctly recognized that under the law of this circuit, where charges of irregular or preferential treatment are made, there can be no conclusion drawn unless plaintiffs requested and were denied similar treatment. Admiral Theatre Corp. v. Douglas Theatre Co., supra, 437 F.Supp. at 1291; See Columbia Pictures Corp. v. Charles Rubenstein, Inc., 289 F.2d 418, 421 (8th Cir. 1961). 29 Finally, plaintiffs argue that the distributor-defendants acquiesced in the operation of the split and that this was sufficient proof of their participation to subject them to liability under the antitrust laws. United States v. Paramount Pictures, Inc., 334 U.S. 131, 161, 68 S.Ct. 915, 92 L.Ed. 1260 (1948). 30 Direct evidence was presented that some of the distributors knew of the Omaha split and the record would support an inference that the other distributors were also aware of the split. On the other hand, the record is devoid of evidence which demonstrates that the distributor-defendants ever attended a split meeting or otherwise participated in the split arrangement. Indeed, the record affirmatively shows that on several occasions the distributor-defendants refused to license a film to the exhibitor-defendant selected by the split. It is quite apparent that profits were the dominant motive in licensing a particular film. The uncontroverted testimony of defendant Sarge Dubinsky was that the first Omaha split was terminated because split member AMC noted that the Douglas theatre, which was not a member of the first split, had been securing too many films over split members to make membership in the split worthwhile. 31 Throughout the entire time period, whenever a first-run film was being distributed in the Omaha-Council Bluffs market area, plaintiffs received bid notices and advance screening notices. It is true that if the distributors received the results of split meetings they might deal with the exhibitor to whom the picture was split, but it was on the distributor's terms. If an agreement was not reached the bids of other exhibitors were solicited. On two such occasions the record indicates that a bid from the plaintiffs was personally solicited by officers of the distributor-defendants. Furthermore, the plaintiffs' track record in their direct confrontation with split members on films allocated by the split negates any inference that the distributor-defendants acquiesced in the split, thereby making the bidding process a sham. In sum, the record clearly shows that when a non-member of the split aggressively sought to license first-run films, it could be quite successful in obtaining such films. 32 In essence plaintiffs' complaint is that they did not obtain all the quality first-run films they desired to run in their theatres. Such a showing does not make a submissible case of an antitrust violation. (A) distributor has the right to license or refuse to license his film to any exhibitor, pursuant to his own reasoning, so long as he acts independently. Paramount Film Distrib. Corp. v. Applebaum, 217 F.2d 101, 124 (5th Cir. 1954), Cert. denied, 349 U.S. 961, 75 S.Ct. 892, 99 L.Ed. 1284 (1955). It is undisputed that during the relevant time period all theatres in the Omaha-Council Bluffs market area, and particularly those in the downtown area, 9 had difficulty securing quality first-run pictures. While we must give the plaintiffs the benefit of every reasonable inference, the plaintiffs' claim of conspiracy by the distributor-defendants leaps from inference into unbounded speculation. Not only did the policies of each distributor differ substantially, additionally there is no evidence indicating that they were mutually formulated or invoked, or that the distributors at any time acted upon the basis of anything other than their own independent business judgment in quest of maximum rental for their films. We have carefully reviewed all of the evidence advanced at trial in support of the conspiracy claim and find it cannot fairly be viewed as raising a reasonable inference of the distributor-defendants' participation in a conspiracy among themselves or with the exhibitor-defendants.