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Crimpers Promotions v. Home Box Office Inc.

decided: December 12, 1983.

CRIMPERS PROMOTIONS INC., PLAINTIFF-APPELLEE,
v.
HOME BOX OFFICE, INC. AND SHOWTIME ENTERTAINMENT CORPORATION, DEFENDANT-APPELLANTS



Appeal by defendants in an action under § 4 of the Clayton Act, by permission under 28 U.S.C. § 1292(b), from so much of an order of the District Court for the Southern District of New York, Leonard B. Sand, Judge, 554 F. Supp. 838 (1982), as denied defendants' motion to dismiss counts charging violations of §§ 1 and 2 of the Sherman Act on the ground that plaintiff lacked standing.

Feinberg, Chief Judge, Friendly and Pratt, Circuit Judges.

Author: Friendly

FRIENDLY, Circuit Judge:

The question on this appeal is whether a company organized to hold a trade show to facilitate contacts between producers of cable television programming and local cable television stations has standing to prosecute an action under § 4 of the Clayton Act against two companies which are alleged to dominate the business of purchasing and assembling programming from producers and selling it to the stations. Plaintiff claims that the defendants conspired to cause a boycott of its trade show and to have used their monopoly power to assure the show's failure, in violation of §§ 1 and 2 of the Sherman Act. Judge Sand, in the District Court for the Southern District of New York, answered the question in the affirmative in a well-considered opinion, 554 F. Supp. 838 (1982), but certified his ruling for interlocutory appeal under 28 U.S.C. § 1292(b). We unhesitatingly affirm.

The Proceedings in the District Court

The principal allegations of the complaint here relevant are as follows:

Plaintiff Crimpers Promotions Inc. (Crimpers) was formed in 1980 for the initial purpose of producing a cable television trade show known as CATEL-EXPO-PROGRAMMING SOURCES '81 (CATEL) in Las Vegas during September, 1981. CATEL was to be "the first all programming, conference and exposition in the Cable Television Industry and was formed and produced in order to develop a national and international market place [sic] for Cable Television programming of all types and kinds." The show contained space for 350 booths and it was expected that 5000 or more persons would attend.

Defendant Home Box Office, Inc. (HBO) is the most widely available pay-television satellite network in the United States with approximately 8 million subscribers. It purchases programs from independent producers and also creates its own. It sends programs through a satellite to some 3,000 cable system operators affiliated with HBO, who in turn send them to the homes of various subscribers. In addition HBO provides direct services to subscribers in certain areas. Defendant Showtime Entertainment Corporation (Showtime) operates similarly, with some 2.5 million subscribers and 1,300 operators or affiliates.

The complaint goes on to allege that the defendants have become the dominant force in the cable pay-television industry and have unlawfully monopolized the market for programming to the industry.*fn1 Defendants have been able to offer the cable operators a "bundle" of programs which defendants have acquired from the producers and, being "the most powerful and influential sources through which programming may be sold" in the cable industry, have offered extremely low and unfair prices for programming to them. The purpose of CATEL is to bring together in one trade show all suppliers of cable programming, both the independents and the networks, for "a truly comprehensive exposition and conference," with the further goal of creating "a diversity of information sources and access so that Cable System Operators would not be dependent upon the defendants whose vast Satellite Network Services dominate the Pay-TV business in Cable Television."

The complaint further alleges that defendants sent letters and made phone calls to independent programming and system operators to inform them that they shold not appear at CATEL. It quoted a representative of defendant Showtime as having told a person who he thought was an independent producer that Showtime would not participate in the show because the company believed it to be a "rip-off"; this was because Showtime considered Crimpers to be an "opportunist" and because Showtime's policy was that it would not sell a particular piece of programming but only programming on a 24-hour a day basis. Defendants had informed independent programming suppliers and system operators that CATEL was a "rip-off" or scam and was a fraud on the public, and that none of the exhibitors would attend. Defendants also threatened that they would no longer purchase programming from those suppliers who attended the show. As a result only 55 companies were exhibitors, only 97 booths were occupied and less than 200 people appeared, in contrast to the 250, 350 and 5,000 that had been expected. As a result defendants had accomplished "their means of driving competitors from the market and of not permitting independent suppliers of stand-alone programming to be solidified into a unit which would attempt to challenge the monopoly created by the defendants. " Defendants' illegal acts also forced Crimpers to cease business. The complaint proceeded to make further allegations in support of the claim of monopolization and sought treble damages and injunctive relief. Defendants moved under Fed. R. Civ. P. 12(b)(6) to dismiss the complaint, which also contained counts making a tying claim under § 1 of the Sherman Act and § 3 of the Clayton Act, and various state law claims. The judge denied the motion except for the tying claim and some of the state law claims.

With respect to the claims under §§ 1 and 2 of the Sherman Act, the judge began by explaining that the courts have grafted a doctrine of standing on the sweeping language of § 4 which confers a cause of action upon "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws." He noted that this circuit had adopted the so-called "target-area" test, citing Billy Baxter, Inc. v. Coca-Cola Co., 431 F.2d 183 (1970), cert. denied, 401 U.S. 923, 91 S. Ct. 877, 27 L. Ed. 2d 826 (1971), and Calderone Enterprises Corp. v. United Artists Theatre Circuit, Inc., 454 F.2d 1292 (2d Cir. 1971), cert. denied, 406 U.S. 930, 32 L. Ed. 2d 132, 92 S. Ct. 1776 (1972). He said that "under this test, the plaintiff must either be the 'direct target' of the antitrust violation or fall within the 'target area' of the alleged antitrust violation -- that sector of the economy which is endangered by a breakdown of competitive conditions in the particular industry." 554 F. Supp. at 842. He noted defendants' argument that Crimpers did not directly compete with them in buying and selling cable programming; that their activities aimed only at such competitors; and that Crimpers was only incidentally harmed. After canvassing further elaborations of these arguments, the court found the case distinguishable from Billy Baxter and Calderone because defendants "took 'direct aim' at Crimpers and its trade show." Id. at 844.

Judge Sand then stated that whatever doubts he might have had with respect to plaintiff's standing under Billy Baxter and Calderone were dispelled by the Supreme Court's decision in Blue Shield of Virginia v. McCready, 457 U.S. 465, 102 S. Ct. 2540, 73 L. Ed. 2d 149 (1982), discussed below, which he viewed as adding "significant gloss to the line of Second Circuit cases interpreting [the target area test's] application, and appears to signal a rather broader reading of the standing requirements under Section 4 of the Clayton Act." 554 F. Supp. at 845. He thought, correctly in our view, that "at a minimum, it now seems clear that, as a rule, a plaintiff need not be a direct competitor in the market in which defendants operate," id., since McCready was a consumer and the defendants were the Blue Shield of Virginia and the Neuropsychiatric Society of Virginia, Inc. Just as the Blue Cross' refusal to honor McCready's bill for treatment by a psychologist was a means to defendants' objective to drive out psychologists in favor of psychiatrists, so the destruction of Crimpers' trade show, which was designed "to keep buyers and sellers of cable programming from transacting business face-to-face," was a means to eliminate competition by producers in dealing with television stations. Id. at 846.For these and other reasons discussed in his persuasive opinion, the judge found that Crimpers had standing under § 4 of the Clayton Act to bring its conspiracy and attempted monopolization claims under §§ 1 and 2 of the Sherman Act and denied defendants' motion to dismiss these. However, on motion by the defendants, he certified, under 28 U.S.C. § 1292(b), that his decision involved a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal may materially advance the ultimate termination of this litigation, and another panel of this court granted leave to appeal.

Discussion

Subsequent to the ruling below the Supreme Court handed down another decision under § 4 of the Clayton Act, Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 103 S. Ct. 897, 74 L. Ed. 2d 723 (1983), in that instance denying standing. In their briefs to this court, defendants treat Associated General as having taken a narrower view of standing than McCready ; they also repeat the distinctions of McCready and their reliance on Billy Baxter and Calderone which they had unsuccessfully asserted in the district court. We consider that Crimpers' case, rather than being distinguishable from McCready's in a ...


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