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Royster Drive-In Theatres Inc. v. American Broadcasting-Paramount Theatres Inc.

decided: June 8, 1959.

ROYSTER DRIVE-IN THEATRES, INC.
v.
AMERICAN BROADCASTING-PARAMOUNT THEATRES, INC., ET AL.



Before: Washington,*fn* Waterman and Moore, Circuit Judges.

Author: Washington

WASHINGTON, Circuit Judge: This is an action brought under Sections 1 and 2 of the Sherman Antitrust Act, 26 Stat. 209 (1890), as amended, 15 U.S.C. ยงยง 1, 2 (1952). Plaintiff-appellant sought treble damages and an injunction under Sections 4 and 16 of the Clayton Act, 38 Stat. 731, 737 (1914), 15 U.S.C. 15, 26 (1952).

Plaintiff-appellant is the operator of a motion picture theatre in Peekskill, New York, known as the Peekskill. Defendants-appellees are (1) American Broadcasting-Paramount Theatres, Inc. (AB-PT), the operator of the Paramount motion picture theatre in Peekskill and a competitor of the plaintiff, and (2) seven major motion picture distributors - Paramount, Warner Brothers, Fox, Loew's, RKO, Columbia, and United Artists. Plaintiff alleged that defendants had conspired to monopolize and in fact had actually monopolized the motion picture exhibition business in Peekskill by having wrongfully withheld from plaintiff and having awarded to plaintiff's competitor the great bulk of the more desirable motion pictures.

The case was tried before the court without a jury. At the close of plaintiff's case, defendants moved for a dismissal of the complaint and entry of judgment for defendants under Fed. R. Civ. P. 41(b). The judge made findings of facts and conclusions of law and entered a formal order dismissing the complaint and entering judgment for the defendants. This appeal followed.

Briefly, the basic findings of the trial court were as follows:

April 1950-September 30, 1950: On April 5, 1950, AB-PT, pursuant to the divestment decree in a civil antitrust action involving Paramount Pictures,*fn1 sold the Peekskill Theatre. Plaintiff was the purchaser. Previously, AB-PT had owned both the Paramount and Peekskill Theatres in Peekskill.The Paramount Theatre had always been a top-class theatre and had always shown top quality films. Prior to April 6, the Peekskill had been in a state of disrepair and had generally exhibited slough pictures, reissues, repeats, and C-grade films. Following the purchase of the Peekskill, plaintiff began to repair and renovate it.

The trial court found that from April 17, 1950, until May 15, 1950, the defendants-appellees "agreed and conspired with each other to withhold from plaintiff's Peekskill Theatre a fair and reasonable supply of pictures," the purpose and effect of the conspiracy being "to prevent plaintiff's theatre from competing effectively with the Paramount Theatre * * * during such period." It may be noted parenthetically, however, that plaintiff seeks damages only for a later period, namely, from September 30, 1950, to August 4, 1954, the date this suit was commenced.

On May 15, 1950, plaintiff retained an agent to license and book its motion pictures. The agent booked various pictures for the plaintiff during the summer of 1950. A few days prior to September 15, 1950, plaintiff and its agent advised AB-PT that it wanted a share of "A" films, and that if it did not get an "A" product it was going to ask the distributors for competitive bidding. On September 15, 1950, the agent wrote letters to several of the distributor defendants requesting either a split of product or competitive bidding. The distributors thereupon inaugurated competitive bidding and offers were solicited from plaintiff and AB-PT on some pictures. On September 30, 1950, plaintiff finally completed renovating the Peekskill.

October 1, 1950-December 1951: In October 1950, the plaintiff and its agent met with AB-PT and agreed that the Peekskill Theatre would try out an arrangement to split the film product, under which the plaintiff would negotiate for the pictures which had played or would play at the Stratford Theatre (owned by AB-PT) in Poughkeepsie. Because of this arrangement, plaintiff shortly thereafter withdrew its requests to the distributors for competitive bidding. For the next six months, plaintiff was quite happy with the film-split arrangement. It requested no different product for the Peekskill Theatre.

In April 1951, AB-PT advised plaintiff that the Paramount Theatre in Peekskill needed more pictures and would start taking some from the Stratford product. The arrangement was therefore terminated.*fn2

December 1951-October 1952: In December 1951 and January 1952, plaintiff again wrote to the various distributor-defendants requesting competitive bidding. Each distributor afforded plaintiff an opportunity to bid competitively for each picture for first-run exhibition in Peekskill. For several months the bidding continued. There was no evidence that AB-PT ever overbid for any picture.

In April 1952, plaintiff again approached AB-PT in order to work out some "split" arrangement whereby competitive bidding would once more be eliminated.AB-PT and plaintiff again agreed to a split of product, and shortly thereafter plaintiff notified the distributor defendants that it wished to terminate competitive bidding. By this time plaintiff's economic position had become extremely difficult, partly because of the increase of television sets in the Peekskill area during the period of plaintiff's operation, partly because of a number of changes in the competitive situation in Peekskill such as the opening of new drive-in theatres, and partly because of the increase of plaintiff's expenses after the renovation of the Peekskill during a period of declining grosses.Finally, on October 11, 1952, plaintiff closed the Peekskill Theatre and has never operated it since that time.

From the facts adduced, the court made four basic findings:

(1) There was no evidence of any vertical or horizontal conspiracy in violation of the Sherman ...


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