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CINE 42ND ST. THEATER CORP. v. NEDERLANDER ORG.

April 17, 1985

CINE 42nd STREET THEATER CORPORATION, LEONARD CLARK and THE BRANDT ORGANIZATION, INC., Plaintiffs, against THE NEDERLANDER ORGANIZATION, INC., HARRIS NEDERLANDER, INC., NEW AMSTERDAM NEDERLANDER, INC., JUJAMCYN COMPANY, INC., CAMBRIDGE INVESTMENT GROUP, LTD., PARK TOWER REALTY CORP., THE NEW YORK STATE URBAN DEVELOPMENT CORPORATION, TIMES SQUARE REDEVELOPMENT CORPORATION AND THE CITY OF NEW YORK, Defendants


The opinion of the court was delivered by: CONNER

OPINION AND ORDER

CONNER, D. J.

 This suit is one of may to arise out of the recent efforts by the State and City of New York to redevelop the Times Square area of Manhattan. As part of that project, the New York State Urban Development Corporation ("the UDC") and the City of New York ("the City") decided to acquire, by negotiation or if necessary by condemnation, five movie theaters in the area and to lease them to private developers in hopes that they would be restored and operated as legitimate Broadway theaters. In anticipation of acquiring the theaters, the UDC and the City conditionally designated three Broadway theater operators, the Nederlander Organization, Inc. ("Nederlander"), Jujamcyn Company, Inc. ("Jujamcyn"), and Cambridge Investment Group, Ltd. ("Cambridge") to receive the leases and development rights to the five theaters. The UDC and the City also designated Park Tower Realty Corporation ("Park Tower") to provide the funds to acquire and restore the theaters.

 Plaintiffs, who own and operate theaters in the Times Square area, brought suit against the UDC, the City, and the conditionally designated developers, alleging that the conditional designations of those developers substantially lessen competition in the Broadway theater industry. *fn1" In particular, they contend that the designations violate Section 7 of the Clayton Act, 15 U.S.C. § 18, and § 340 et seq. of the New General Business Law, known as the Donnelly Act.

 The case is now before the Court on the motions of all defendants to dismiss plaintiffs' complaint under Rule 12(b)(6), F.R.Civ.P. *fn2" Defendants contend that plaintiffs' Clayton Act claim must be dismissed because: (1) the conditional designations are immune from federal antitrust scrutiny under the state action doctrine; (2) the effect of the designations is pro-competitive; and (3) plaintiffs have not suffered an antitrust injury. Defendants also argue that if the Clayton Act claim is dismissed, the pendent Donnelly Act claim must be dismissed as well.

 For the reasons stated below, defendants' motion is granted. I agree with defendants that plaintiffs' federal antitrust claim is barred by the state action doctrine, and that the pendent state claim must be dismissed for lack of subject matter jurisdiction. I need not and do not address defendants' other contentions.

 Background

 In 1968, the New York State legislature created the Urban Development Corporation in hopes of reversing the deterioration of many municipalities in the state. See New York Unconsolidated Laws § 6254(1)(hereinafter the "UDC Act"). The legislature declared the new entity "a corporate governmental agency of the state, constituting a political subdivision and public benefit corporation." Id.

 Among the many problems the legislature sought to remedy through the UDC was "a serious need throughout the state for educational, recreational, cultural and other community facilities, the lack of which threatens and adversely affects the health, safety, morals and welfare of the people of the state." Id. at § 6252. In this regard, the legislature declared that it is a

 
policy of the state to promote the safety, health, morals and welfare of the people of the state and to promote the sound growth and development of our municipalities through the correction of such substandard, insanitary, blighted, deteriorated or deteriorating conditions, factors and characteristics by the clearance, replanning, reconstruction, redevelopment, rehabilita- tion, restoration or conservation of such areas, and of areas reasonably accessible thereto the undertaking of public and private improvement programs related thereto, includ- ing the provision of educational, recreational and cultural facilities, and the encouragement of participation in these programs by private enterprise.

 Id.

 To enable the UDC to achieve these goals, the legislature granted the agency far-reaching powers. These include, inter alia, the broad powers enumerated in SEction 6255 of the Act:

 
(3) To make and execute contracts and all other instruments ....
 
* * *
 
(7) To acquire or contract to acquire ... by grant, purchase, condemnation or otherwise, leaseholds, real, personal or mixed property or any interest therein; to own, hold, clear, improve and rehabilitate, and sell, assign, exchange, transfer, convey, lease, mortgage, or otherwise dispose of or encumber the same.
 
(8) To create subsidiaries, ....
 
(9) To acquire, construct, reconstruct, rehabili- tate, improve, alter or repair or provide for the construction, reconstruction, improvement, ...

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