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THEATRE INV. CO. v. R.K.O. RADIO PICTURES

June 19, 1947

THEATRE INV. CO. et al.
v.
R.K.O. RADIO PICTURES, Inc., et al.



The opinion of the court was delivered by: BOWEN

This action was brought, for damages and injunctive relief under the Sherman Anti-Trust Law, 15 U.S.C.A. § 1-7, 15 note, by plaintiffs Theatre Investment Company and the Venetian Theatre Company, owners respectively of the Bagdad and Venetian theatres in Seattle, Washington, against the above-named motion picture producers, distributors and exhibitors, charging an illegal monopoly of film distribution and supply in the Seattle area and conspiracy to so monopolize by a system of noncompetitive theatre classifications and film availability schedules and by means of uniform restrictive license agreements.

The action, a civil cause, came on for trial before a jury on October 8, 1946, and after some six weeks of trial was submitted to the jury on November 20, 1946. The jury was unable to agree and on November 22, 1946, was discharged.

 The case came up for re-trial on April 22, 1947, but all the parties by their respective attorneys, with the Court's approval, arranged to submit the case to the Court without a jury for the determination of all issues on the basis of the record of the previous trial, with the assistance of additional briefs and further argument of counsel which was presented beginning June 17, 1947. On June 19, 1947, at the conclusion of the arguments, the Court rendered the following oral decisions.

 The Court: * * * This case involves a number of important officials in all branches of the film industry whose activities are of great concern to the Seattle area. Some of the present national executives of the film producing and distributing industry have had a part of their business careers in the Seattle area, and some of them, as well as some outstanding theatre operators, have been intimately connected with the business operations involved in this case.

 From the evidence in this case, it obviously appears that the film industry throughout the nation is conducted, so far as distribution is concerned, upon a national basis. And that industry's activities in the several districts, divisions or areas of the industry seem to be tied in with the over-all picture, particularly in the field of management. The occasion of Mr. Newman's becoming established in the exhibitors' field in the Seattle area seems in part to have grown out of his relationship with an important executive or important executives in the national production and distribution fields. When he first came here, I believe the evidence shows, it was not without some business connection with the defendant 20th Century Fox Film Corporation. That defendant, and its affiliates, among others, the National Theatres Company, and the National Theatres Amusement Company, have had important connections with the transactions involved in this case.

 Soon after Mr. Newman arrived in the Seattle area, he embarked upon an active career in the employment of the Pacific Northwest Theatres Company which had something like forty-three or forty-four theatres in its circuit of theatre service and operation. That was in late April or early May of 1932. In December of that year that concern became bankrupt and Mr. Newman was appointed by the bankruptcy court as one of the receivers of the bankrupt estate. In an early month of the succeeding year, Mr. Newman actively participated as a competing bidder for the purchase, at a forced bankrupt sale, of some of the assets of that bankrupt estate, and as an agent or principal submitted a bid which was the successful bid for purchase of some of the theatre businesses being sold by the bankrupt estate. The prospect or realization of that acquisition by Mr. Newman for his own and associates' account inspired the organization of the Evergreen State Amusement Corporation, which occurred in 1933; and that concern obtained from the bankrupt estate, through the assistance of Mr. Newman and his associates, the right to operate at least three downtown first-run theatres.

 In the course of a reasonable time, the business of the Evergreen State Amusement Company developed under Mr. Newman's management, and within a few years -- I think by the year 1935 -- it became, in the opinion of the principals interested in that company, advisable to merge its activities with those of the so-called John Hamrick Enterprises, including the operation of the Orpheum, the Music Hall, the Music Box and one or two other downtown Seattle theatres. That merger of theatre interests was worked out during the summer of 1935, and it was accomplished through the formation of the Cascasde Theatre Company, of whose capital stock the Hamrick interests received 40 per cent and the Newman-Evergreen interests received 60 per cent.

 In connection with the growth of the Evergreen Theatres Circuit, there came within that circuit's orbit the operation of the Egyptian and Neptune theatres in the University District. Before that these theatres had been under the operation of Mr. Rosenberg and he had interested with him in that operation to a substantial degree Mr. Newman and Mr. Finke.

 Later, there developed some business rivalry between the so-called Sterling chain, of Seattle, dominated by Mr. John Danz, and the Evergreen Circuit, and so it was decided that there should be pooling or joint operating arrangements between some of the Sterling Theatres and the Evergreen, particularly the first-run theatres of the Sterling chain. The first of these pooling arrangements resulted in the joint operation by the Evergreen Theatres Company, a theatre-servicing company which was affiliated with Evergreen Theatres Amusement Company and other companies, whereby competition in the acquisition of film supply between the Orpheum Theatre and the Palomar Theatre was eliminated. The right to service film supply to those theatres was given by that pooling agreement to the Evergreen Theatres Company, the servicing company.

 As a result of these mergers and pooling arrangements, all except one of the first-run downtown Seattle theatres, so far as film supply and theatre servicing were concerned, came under the management and control of the Evergreen Theatre Company, the servicing company, which by this time had also acquired the agency for servicing all of the Evergreen group of theatres and furnishing to them their film supply. Similar arrangements had been made between the Evergreen group and National Theatres Company, an affiliate of defendant Fox. And as between the various theatres now joined in the Evergreen group, competition between the theatres themselves had been entirely displaced by the functioning of this joint operations service.

 The Liberty Theatre of the Jensen-von-herberg group remained the only first-run theatre outside of the Evergreen circuit of theatres.

 The evidence convinces the court that there was during the period of 1939-1945 a sustained uniformity in the conduct of the distributing defendants respecting distribution of their film; that from year to year it took the pattern of similar license agreements negotiated by the Evergreen Theatre Company which operated under the management of Mr. Newman. Mr. Newman, apparently early in his business career in Seattle, demonstrated an outstanding business and managerial ability in the theatre operating business, and he soon obviously became a man of wide influence in that business. Oftentimes, the record discloses that when the subject of changing the run or clearance or availability of a picture at a certain theatre came up, advice was given by those connected with the transaction that Mr. Newman should be consulted. These uniform license agreements generally followed much the same pattern as to clearance, admission price, and run of the theatre to which the license was granted, and in other details not mentioned.

 There was not proved any written contract by which alone it could be shown that an express agreement, monopolizing the trade and conspiring to do so, was entered into. But as to whether proof of such an express agreement is necessary, no better statement could be found than those statements made by the three-judge court in the case of the United States v. Paramount Pictures, D.C., 66 F.Supp.beginning at page 323, a case which respecting the issues and facts common to that case and this seems to be on all 4's with this case. Any one considering the Court's decision and the reason therefor in this case should have before him the report of that case which is sometimes referred to as the Paramount case. It ...


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