Metropolitan News-Enterprise


Friday, September 2, 2011


Page 1


C.A. Revives Antitrust Suit Over Movie Theater Bookings




The owner of a movie theater has a viable antitrust claim against a larger competitor that allegedly uses its power in the marketplace to prevent the plaintiff from obtaining films, the Court of Appeal for this district has ruled.

Div. One Wednesday reinstated the suit by Flagship Theatres of Palm Desert, LLC, owner of the 10-screen Cinemas Palme D’Or, against Century Theatres, Inc.; its parent Cinemark USA, Inc.; and two distributors.

Flagship claims that Century is able to obtain higher-quality films for its Century 15 at the River theater, located in Rancho Mirage less than two miles from Palme D’Or, at less cost because of its size. The plaintiff presented evidence that as of 2006, the year Cinemark acquired Century and the year the litigation started, Century operated 1,000 screens at 80 locations in 12 states.

Big Drop

Century acquired the River from its previous owners in 2002. Before that, Flagship alleges, the two theaters were able to obtain licenses for roughly equal numbers of first-run films, whereas afterward, Palme D’Or was limited to about one-third as many films, and inferior ones at that.

The change, the plaintiff says, is a result of “circuit dealing,”  a practice which has been the subject of many lawsuits in the industry in which the owner of many theaters uses its combined purchasing power in bidding for films, rather than bidding competitively on a theater-by-theater basis.

Los Angeles Superior Court Judge Linda Lefkowitz granted the defendants’ motion for summary judgment. She held that Flagship presented inadequate evidence that it had suffered antitrust injury and failed to rebut the defendants’ showing that the relevant market for antitrust purposes was the entire Coachella Valley and that Century lacked sufficient power in that market to cause competitive harm. 

But Justice Frances Rothschild, writing for the Court of Appeal, said the trial judge relied on a “legally erroneous conception of the antitrust injury requirement.”

Cartwright Act

While plaintiffs suing under California’s Cartwright Act must show such injury, just like plaintiffs suing under federal statutes, there is no requirement that a plaintiff “show actual harm to competition,” Rothschild explained.

To show actual injury from anticompetitive conduct, the justice wrote, “the plaintiff need not show that the market has actually become less competitive than it would have been without the defendant’s conduct—if the market contains numerous participants and is consequently competitive, and the plaintiff is a relatively small player whose injury or elimination would not materially affect market conditions, then the plaintiff is not thereby foreclosed from recovery.”

Flagship, she said, can show antitrust injury by proving that it suffered loss from competition-reducing conduct by the defendant, even if it cannot show evidence—such as proof of higher prices or reduced supply—that the market has become uncompetitive or less competitive.

Discovery Limits

Rothschild went on to say that the trial judge erred in limiting discovery to the Coachella Valley, wrongly curtailing Flagship’s ability to gain evidence of circuit dealing.

“The essence of Flagship’s claim is that Century has used its power outside the Palme/River market to influence competition within the Palme/River market,” the justice wrote. “Flagship cannot gather evidence in support of that claim if it is limited to collecting evidence within the Palme/River market.”

Attorneys on appeal were Thomas L. Boeder, Jessica E. Eiting and Melora M. Garrison of Perkins Coie for Flagship and Maxwell M. Blecher, David W. Kesselman and Theo G. Arbucci of Blecher & Collins for the defendants.

The case is Flagship Theatres of Palm Desert, LLC, v. Century Theatres, Inc., B211597.


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