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VIACOM INTL. INC. v. TIME INC.

February 3, 1992

VIACOM INTERNATIONAL INC. and SHOWTIME NETWORKS INC., Plaintiffs, against TIME INCORPORATED, HOME BOX OFFICE, INC., AMERICAN TELEVISION & COMMUNICATIONS CORPORATION, and MANHATTAN CABLE TELEVISION, INC., Defendants, TIME WARNER INC., HOME BOX OFFICE, INC., AMERICAN TELEVISION & COMMUNICATIONS CORPORATION, and MANHATTAN CABLE TELEVISION, INC., Counterclaim-plaintiffs, -against- VIACOM INC., VIACOM INTERNATIONAL INC., SHOWTIME NETWORKS INC., and MCTV NETWORKS, INC., Counterclaim-defendants.

McKENNA


The opinion of the court was delivered by: LAWRENCE M. MCKENNA

MEMORANDUM AND ORDER

McKENNA, D.J.

 Plaintiffs Viacom International Inc. ("Viacom") and Showtime Networks Inc. ("SNI") commenced this action in the spring of 1989. The Complaint alleges anticompetitive and monopolistic activities by Defendants Time Inc. ("Time"), Home Box office, Inc. ("HBO, Inc."), American Television & Communications Corporation ("ATC") and Manhattan Cable Television, Inc. ("MCTV") in violation of the federal antitrust laws *fn1" and certain common law duties. Defendants move pursuant to Rule 12(c) of the Federal Rules of Civil Procedure for partial judgment on the pleadings or, in the alternative, pursuant to Rule 56(c) for partial summary judgment. *fn2" Defendants seek dismissal of Plaintiffs' Fourth Claim for Relief, which alleges "monopolization of certain local markets for cable television in the United States . . . and an abuse and misuse of monopoly power in those markets to gain a competitive advantage and restrain trade unreasonably in the market for pay television programming services in the United States, all in violation of Section 2 of the Sherman Antitrust Act, 15 U.S.C. § 2." (Compl. P 133.) Defendants also seek dismissal of those portions of the Fifth and Seventh Claims (alleging, respectively, unreasonable restraint of trade in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, and unfair competition in violation of certain state law duties) insofar as they are pleaded against Defendants ATC and MCTV.

 Parties3

 Plaintiff Viacom, an entertainment and communications company, is an Ohio corporation with its principal executive offices located in New York City. Plaintiff SNI is a subsidiary of Viacom and operates two pay television programming services, *fn4" Showtime and The Movie Channel.

 Defendant HBO, Inc. is a wholly-owned subsidiary of Time Warner with its principal place of business in New York City. *fn5" According to the allegations of the Complaint, HBO, Inc., through its two pay programming services, HBO and Cinemax, "dominates the pay television programming services business in the United States," with approximately 23 million subscribers comprising approximately 65 percent of all pay television subscribers nation-wide. (Compl. P 8.) Defendants generally deny this allegation but admit that approximately 17 million people subscribe to the HBO programming service and approximately 6 million subscribe to Cinemax. (Answer P 8.)

 Defendant ATC, an operator of cable systems, is a subsidiary of Time Warner *fn6" with its principal executive offices in Stamford, Connecticut. Although the precise scope of ATC's operations is disputed, the parties agree that ATC is the second largest cable operator in the United States, (Compl. P 9; Answer P 9), functioning as of December 31, 1988, under 767 franchises throughout the country (Pls.' Local Rule 3(g) statement P 4; Defs.' Local Rule 3(g) Statement P 15). *fn7"

 Defendant MCTV is a wholly-owned subsidiary of ATC. The parties agree that as of the time that the Complaint and Answer were filed, MCTV was the only cable television system operator holding a franchise to provide cable service below 79th street on the West Side of Manhattan and below 86th Street on the East Side. The Complaint alleges that MCTV has 245,000 basic cable subscribers and 201,000 pay television subscribers and controls the only cable access to 370,000 homes in the area of Manhattan in which it is franchised. (Compl. P 10.) The Answer alleges that MCTV has approximately 232,000 basic cable subscribers and approximately 102,000 pay television service subscribers, and that the area of Manhattan in which MCTV is franchised to offer cable television services comprises approximately 430,000 homes. (Answer P 10.)

 Defendants' Motion

 The Alternative Designation Under Rules 12 and 56

 Defendants' motion, denominated in the alternative as a motion for judgment on the pleadings, pursuant to Rule 12(c), or as a motion for partial summary judgment, pursuant to Rule 56, *fn8" is primarily addressed to the Fourth Claim for Relief set forth in the Complaint at Paragraphs 132-135. *fn9" Defendants' argument turns, in the main, on the contention that Plaintiffs' failure to allege that ATC and MCTV possess market power in the national market for pay television programming services is fatal to their claim of monopolization in violation of Section Two of the Sherman Act; despite its alternative designation as one for partial summary judgment, Defendants' motion with respect to the Fourth Claim highlights, principally, alleged deficiencies in the pleadings, and it is supported by skeletal affidavit testimony concerning the structure of the markets relevant to the motion and the extent of Defendants ATC and MCTV's percentage share of those markets. *fn10"

 As the appearance and content of Defendants' moving papers and supporting documents make clear, that portion of the instant motion alternatively designated as one for partial summary judgment is atypical of motions brought pursuant to Fed. R. Civ. P. 56, and particularly atypical of motions for summary judgment interposed at or near the end of discovery. In the place of extensive affidavits, deposition testimony, and similar documentation purporting to demonstrate the absence of material factual issues for trial, Defendants rely almost exclusively on a brief affidavit (the "Gerken Affidavit"), including cable industry statistics, purporting to demonstrate the deficiency of Plaintiffs' pleadings and the insurmountability of Plaintiffs' alleged failure adequately to set forth certain essential elements of a cause of action under the antitrust laws. The Gerken Affidavit, however, contains nothing necessary to the disposition of the motion before the Court; rather, it elaborates what is apparent on the face of the Complaint--i.e. that Plaintiffs do not allege, and presumably could not hope to prove, that ATC and MCTV possess any significant percentage share of the total number, nation-wide, of homes passed by basic cable, or of the total number, nation-wide, of basic or pay cable subscriptions.

 In these circumstances, and at this early stage in the proceedings, Defendants' motion is most appropriately considered in its entirety--including those portions that seek dismissal of the Fourth Claim for Relief--as a motion on the pleadings pursuant to Rule 12(c). Accordingly, the Court relies in this Memorandum and Order on nothing submitted by either party, by affidavit or otherwise, outside of the Complaint and Answer. *fn11"

 Plaintiffs' Fourth Claim for Relief, captioned "Sherman Act § 2: Monopolization By All Defendants Of Certain Local Markets For Cable Television Systems," alleges that particular conduct of Defendants Time, HBO, Inc., ATC and MCTV set forth in previous allegations of the Complaint

 constitutes monopolization of certain local markets for cable television in the United States . . . and an abuse and misuse of monopoly power in those markets to gain a competitive advantage and restrain trade unreasonably in the market for pay television programming services in the United States, all in violation of Section 2 of the Sherman Antitrust Act, 15 U.S.C. § 2.

 (Compl. § 133.) The Fourth Claim alleges further that

 Defendants Time, HBO, Inc., ATC and MCTV possess monopoly power in certain of the local markets for cable television systems, and have willfully obtained and maintained and exercised monopoly power, and have further used, abused and misused monopoly power in certain of the local markets for cable television to obtain a competitive advantage, restrain trade, and monopolize, conspire to monopolize, ...


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