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UNITED STATES v. CARROLS DEV. CORP.

July 5, 1978

UNITED STATES of America, Plaintiff,
v.
CARROLS DEVELOPMENT CORPORATION and Triple Schuyler Rome Corporation, Defendants



The opinion of the court was delivered by: MUNSON

MEMORANDUM-DECISION AND ORDER

 In this civil antitrust action, a Proposed Consent Judgment has been agreed to by the Government and defendants Carrols Development Corporation and Triple Schuyler Rome Corporation, a wholly-owned subsidiary of Carrols Development Corporation. (Both defendants are collectively referred to herein as Carrols.) The Proposed Judgment has been filed with the Court, but before it can become effective, the Court must find that entry of the Judgment is in the public interest. Kallet Realty, Inc. and Kallet Theatres, Inc. (Kallet) and three of Kallet's managers *fn1" have moved to intervene in this action in order to oppose the entry of the Proposed Judgment.

 I.

 In February, 1974, Carrols entered into a long-term lease agreement with Kallet whereby it acquired the three motion picture theatres operated by Kallet in the Greater Syracuse Area and the four motion picture theatres operated by Kallet in the Greater Utica Area. In connection with this agreement, Carrols entered into a covenant agreement with three of Kallet's managers whereby the managers, in consideration of annual payments of $25,000, $15,000, and $5,000, agreed not to engage in the motion picture theatre business in any area where Carrols operated a theatre. In March, 1974, Carrols acquired by lease the six motion picture theatres operated by Hallmark Releasing Corporation (Hallmark) in the Greater Utica Area. As a result of its acquisition of the Kallet and Hallmark theatres, Carrols controlled 72.5% of the theatres and 86% of the gross box office receipts in the Greater Syracuse Area in February, 1974 and 83.3% of the theatres and 80% of the gross box office receipts in the Greater Utica Area in March, 1974.

 On April 23, 1976, the Government filed a Complaint, charging that the effect of these acquisitions was to substantially lessen competition in the purchase of licenses to exhibit feature motion pictures, in violation of § 7 of the Clayton Act. 15 U.S.C. § 18. The Complaint asked that Carrols be required to divest the Kallet and Hallmark theatres, and that it be enjoined, for a period of ten years, from acquiring any other theatres in the Greater Syracuse or Greater Utica Areas.

 The Proposed Consent Judgment provides the Government with essentially all the relief it was seeking in this action. The Judgment requires Carrols to divest, by sublease or assignment, the twelve remaining Kallet and Hallmark theatres which it operates. *fn2" It specifies that, if Carrols has not divested all of these theatres within twenty-four months of the date of entry of the Final Judgment, a trustee is to be appointed by the Court for the purpose of divesting the remaining theatres during the next twelve months. The Proposed Judgment further provides that Carrols is to terminate its operation of any theatre not divested within such time periods, unless Government approval is obtained for its continued operation.

 After its acquisition of the Kallet and Hallmark theatres in February and March of 1974, Carrols constructed three new theatre complexes, with a total of seven motion picture screens, in shopping malls in the Greater Syracuse Area and one new theatre complex, with three screens, in a shopping mall in the Greater Utica Area. The Government did not seek the divestiture of these theatres in the Complaint, which it filed in April, 1976, and so Carrols' continued operation of these theatres will not be affected by entry of the Proposed Consent Judgment.

 At the present time, Carrols operates nineteen of the twenty-four theatres in the Greater Syracuse Area and twelve of the thirteen theatres in the Greater Utica Area. If the divestitures, required by the Proposed Consent Judgment, are accomplished, the number of theatres held by Carrols in the Greater Syracuse and Greater Utica Areas will be reduced by approximately 15% and 75% respectively, and Carrols' gross theatre receipts from the Greater Syracuse and Greater Utica Areas will be reduced by approximately 23% and 56% respectively.

 In accordance with the requirements of the Antitrust Procedures and Penalties Act (APPA), 15 U.S.C. § 16, the Proposed Consent Judgment and a Competitive Impact Statement were published in the Federal Register, and summaries of these documents were published in The Washington Star and The Syracuse Post-Standard. On August 11, 1977, Kallet submitted written comments pursuant to section (d) of the APPA, urging that the Proposed Judgment be altered to include a provision that Carrols be required to divest some or all of its new theatre constructions, in order to insure the successful divestiture of the Kallet and Hallmark theatres. The Government prepared a response in which it stated that the additional relief sought by Kallet was inappropriate and that the Proposed Judgment was in the public interest.

 Kallet and its managers subsequently moved to intervene in this action pursuant to Fed. R. Civ. P., Rule 24(a), (b). *fn3"

 II.

 Rule 24(a), which deals with intervention as of right, provides in relevant part:

 
Upon timely application anyone shall be permitted to intervene in an action . . . . when the applicant claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that ...

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