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January 17, 1940


The opinion of the court was delivered by: KNIGHT

KNIGHT, District Judge.

The government has instituted this suit in equity under the Sherman Anti-Trust Act (15 U.S.C.A. § 1 et seq.) against certain individuals and corporations, against Schine Chain Theatres, Inc., certain of its officers and certain of its subsidiary corporations, and also against eight leading distributors of motion picture films. The so-called Schine defendants operate upwards of 150 motion picture theatres in the states of New York, Ohio, Delaware, Maryland and Kentucky. The eight major distributors are Loew's, Inc., Warner Bros. Pictures, Inc., Vitagraph, Inc., Paramount Pictures, Inc., Paramount Film Distributing Corp., United Artists Corp., Columbia Pictures Corp., and Twentieth Century Fox Film Corp.

Upon its verified complaint and certain affidavits, the government moves for a preliminary injunction restraining the so-called Schine defendants from acquiring or operating additional theatres and from opening their closed theatres during the pendency of this suit. The motion is made under Section 4 of the Act of Congress of July 2, 1890 (26 Stat. 209; 15 U.S.C.A. § 4), commonly called the Sherman Anti-Trust Act. The complaint charges that the Schine defendants have combined and conspired with each other and with the distributor defendants to restrain interstate trade and commerce. It also charges that through their circuit buying power and other means the Schine defendants have effectuated a monopoly of exhibition picture films. The charges made by the government are categorically denied by the defendants. In answer to the eighteen affidavits submitted by the government in support of the motion, fifty-nine counter-affidavits have been submitted by the defendants in opposition.

 It is the claim of the defendants that the plaintiff's right of recovery in this suit is doubtful, and that temporary injunction should not be granted, unless the court is convinced with reasonable certainty that the government will prevail. The government urges that the test under the Sherman Anti-Trust Act is not the rigid rule advanced by the defendants, but that the government is required to make only a prima facie showing of the violation of such Act. In suits in equity not involving the Sherman Act, the court, before granting temporary injunction, must be convinced with reasonable certainty that the complainant must succeed. This rule is clearly stated in Hall Signal Co. v. General R. Signal Co., 2 Cir., 153 F. 907, 908, wherein the court said: "It is a cardinal principle of equity jurisprudence that a preliminary injunction shall not issue in a doubtful case." Decorative Stone Co. v. Building Trades Council, 2 Cir., 13 F.2d 123; Union Switch & Signal Co. v. Philadelphia & R.R. Co., C.C., 75 F. 1004; High on Injunctions, Sec. 8, are to the same effect. Broadway Theatre, Inc. v. Vitagraph, Inc., 5 Cir., 92 F.2d 445; United States v. Jellico Mountain Coal & Coke Co., C.C., 43 F. 898; and United States v. United Shoe Machinery Co., D.C., 227 F. 507, each of which arose under comparable statutes, lend some support in certain expression to defendants' contention, but present facts different as a basis. This is illustrated in the language of the opinion in United States v. Jellico Mountain Coal & Coke Co., supra, wherein the District Judge pointed out that the statements in the bill were general in their character and quite too barren of any averments of specific facts and further that the granting of the injunction would impose greater injury upon the defendants than upon the public.

 It is not thought that the rigid rule of decision urged by the defendants is applicable. It is thought that a showing of a prima facie case is sufficient. There are numerous cases arising under the Sherman Anti-Trust Act in which temporary injunctions have been granted. United States v. Debs, C.C., 64 F. 724; Affirmed, 158 U.S. 564, 15 S. Ct. 900, 39 L. Ed. 1092; United States v. Workingmen's Amalgamated Council of N.O., C.C., 54 F. 994, 26 L.R.A. 158; United States v. Elliott, C.C., 62 F. 801; United States v. Ry. Employees' Dept. of A.F. of L., D.C., 283 F. 479, were cases where acts of violence had been committed and further acts were threatened. While these are not comparable upon the facts, the records disclose that the rule urged by the defendants was not followed. In Workingmen's Amalgamated v. United States, 5 Cir., 57 F. 85, 86, the court said, in part: "The summary of the proof made in the opinion of the judge of the circuit court is fairly supported by the record, and shows that there was proof tending to support the allegations of the bill." In United States v. Nome Retail Grocerymen's Ass'n., D.C.Alaska, 1905, D. & J., 83, the restraining order recites that plaintiff was entitled to enjoin the defendants upon a prima facie showing. In United States v. Fed. Salt Co., 1 D. & J., 67, a temporary injunction was granted upon the bill of complaint, petition and supporting affidavits only. It does not appear, however, that the order was opposed. In United States v. International Brotherhood of Electrical Workers, 1 D. & J., 427, an injunction was granted upon the complaint and supporting affidavits after a hearing. In Anderson v. United States, 8 Cir., 82 F. 998, as appears from the decree (1 D. & J. 45), the temporary injunction was granted upon the bill and affidavits. United States v. Coal Dealers' Ass'n of Cal., C.C., 85 F. 252, held that it was not necessary to show that irreparable injury would result if the restraining order were not granted. In United States v. Live Poultry Dealers' Ass'n, D.C., 298 F. 139, a preliminary injunction was granted where the application was heard upon the government's petition, supporting affidavits, defendants' answer and opposing affidavits. In United States v. United Shoe Machinery Co., D.C., 227 F. 507 (injunction order 1 D. & J., 593), the application was heard upon the government's petition and opposing affidavits by the defendants. United States v. Hopkins, C.C., 82 F. 529, and United States v. American Column & Lumber Co., D.C., 263 F. 147, are, also, pertinent citations. Thus we see a variety of decisions, both where the question of doubt as to the application of the law has been raised and where there is a dispute as to the material facts.

 The complaint discloses two charges: one, a charge of conspiracy involving the question of the liability of all of the defendants; the other, a charge of monopoly and involving the liability only of the Schine defendants. These will be considered separately.

 There could seem to be no doubt that the complaint states a cause of action charging a conspiracy in restraint of the trade or commerce among the several states in violation of Section 1 of the Sherman Anti-Trust Act, 15 U.S.C.A. § 1. The affidavits submitted on this motion are voluminous. They have been read with care, as have been the statements of substantial parts of these affidavits set forth in the respective briefs. It is not necessary to point out the particular portions of the affidavits purporting to support the allegations of the complaint. It is sufficient to say that it is believed that these allegations make a prima facie case. Certain acts and declarations by and between the Schine defendants and the distributor defendants therein set forth, if true, are sufficient to establish a conspiracy between them. Assuming there is no direct proof of such acts or declarations between Schine defendants and one or more of the distributor defendants, a conspiracy may be established by facts from which the reasonable inference may be drawn that a conspiracy exists. Interstate Circuit v. United States, 306 U.S. 208, 209, 59 S. Ct. 467, 476, 83 L. Ed. 610. Standing alone and irrespective of the counter affidavits, it is thought that the inferences might reasonably be drawn from the supporting affidavits that Schine defendants combined or conspired with the distributor defendants to restrain interstate trade.

 The allegations of the complaint and the proofs submitted upon his petition, if taken as true, bring the case within the rule of law laid down in Interstate Circuit v. United States, supra. There, as here, suit was brought under the Federal Anti-Trust Act against a group of distributors and a group of exhibitors. There the distributors controlled 75 percent of first class feature films. The exhibitors' group operated a large number of theatres in Texas cities, in many of which this group had a complete monopoly of first run theatres in certain ones and dominated the motion picture business in all the cities where their theatres were located. An agreement was entered into between the distributors and the aforesaid groups of exhibitors purporting to fix a minimum admission price, prevent double features under certain conditions and the distribution of films to other theatres in default of the same restrictions. The trial court found a conspiracy between the distributors and the two exhibitor groups. The Supreme Court held that the agreement among the distributors constituted a conspiracy in violation of the Sherman Act; that the restraints in the agreement were unreasonable, and "The effect was a drastic suppression of competition and an oppressive price maintenance, of benefit to Interstate and the distributors but injurious alike to Interstate's subsequent-run competitors and to the public."

 Binderup v. Pathe Exchange, Inc., 263 U.S. 291, 44 S. Ct. 96, 100, 68 L. Ed. 308. is a leading case on the sufficiency of the complaint under a comparable state of facts. Said the court, in part: "The illegality consists, not in the separate action of each, but in the conspiracy in combination of all to prevent any of them from dealing with the exhibitor. * * * The alleged purpose and direct effect of the combination and conspiracy was to put an end to these contracts and * * *, as a necessary corollary, to restrain interstate trade and commerce, in violation of the Anti-Trust Act."

 Paramount Famous Lasky Corp. v. United States, 282 U.S. 30, 51 S. Ct. 42, 75 L. Ed. 145; United States v. First National Pictures, Inc., 282 U.S. 44, 51 S. Ct. 45, 75 L. Ed. 151; present features parallel to those shown here.

 As asserted by the defendants, the buyer or the seller has the right to determine for himself from whom he will buy and to whom he will sell, without running counter to the Anti-Trust law, and no inference of violation is to be inferred by reason of the fact that through the exercise of such right the difficulties of a competitor may be increased. While recognizing these rights, as was done in Federal Trade Com'n v. Raymond Bros.-Clark Co., 263 U.S. 565, 568, 44 S. Ct. 162, 164, 68 L. Ed. 448, 30 A.L.R. 1114, cited by defendants, it is equally true, as stated in the opinion in that case: "An act lawful when done by one may become wrongful when done by many acting in concert, taking on the form of a conspiracy which may be prohibited if the result be hurtful to the public or to the individual against whom the concerted act is directed."

 The complaint and the proofs make a prima facie case on the charge of conspiracy.

 Section 2 of the Sherman Act (15 U.S.C.A. § 2) prohibits the monopoly of "any part of the trade or commerce among the several States * * *." The Schine defendants urge that, in the absence of conspiracy between them and the distributor defendants who are engaged in interstate commerce, it is at least doubtful whether there is any showing of the violation of this provision of the Sherman Act. It is argued that the exhibition of motion picture films made outside the state is intrastate and local in nature and does not violate the law, because it is not aimed directly to the interstate transportation of films. The government does not charge that the control of all theatres in a given town would be illegal. It charges that the Schine defendants having many theatres in different states are liable where they have acquired a monopoly through the granting of unfair privileges to them by the distributors and by the imposition of unreasonable restrictions against competitors through the Schine's circuit buying power. In each of these cases, cited by defendants, Federal Trade Com'n v. Curtis Publishing Co., 260 U.S. 568, 43 S. Ct. 210, 67 L. Ed. 408; Federal Trade Com'n v. Paramount Famous Lasky Corp., 2 Cir., 57 F.2d 152; Federal Trade Com'n v. Raymond Bros.-Clark Co., supra, a single party was involved who was not shown to be in a position to dominate trade in any class of commodities.Again referring to the opinion in Federal Trade Com'n v. Raymond Bros.-Clark Co., supra, we quote: "The present case discloses no elements of monopoly or oppression. So far as appears the Raymond Company has no dominant control of the grocery trade, and competition between it and the Stores Company is on equal terms."

 The test is not whether the local activities of the Schine defendants were aimed directly to the interstate transportation of films but rather whether such activities directly affect interstate commerce. It rather is whether the activities of the Schine defendants restrain interstate commerce. Local 167 of International Brotherhood of Teamsters v. United States, 291 U.S. 293, 54 S. Ct. 396, 78 L. Ed. 804; and cases cited; Eastern State Retail Lumber Dealers, Inc. v. United States, 234 U.S. 600, 34 S. Ct. 951, 58 L. Ed. 1490, L.R.A.1915A, 788. Mere local activities disassociated with any illegal combination or agreement, it is true, is not sufficient to bring these defendants within the prohibition of the Sherman Act. United Mine Workers v. Coronado Coal Co., 259 U.S. 344, 42 S. Ct. 570, 66 L. Ed. 915, 27 A.L.R. 762; Industrial Ass'n v. ...

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