EAGLE LION STUDIOS v. LOEW'S
Legal provision: N/A
The judgment was affirmed by an equally divided Court.
Argument of William L. Mcgovern
Chief Justice Earl Warren: Number 17, Eagle Lions -- Eagle Lion Studios Incorporated, et al. versus Loew's Incorporated et al.
Mr. McGovern, you may proceed.
Mr. William L. Mcgovern: Thank you, Your Honor.
May it please the Court.
This is an antitrust suit for damages against the RKO and Loew Motion Pictures theatre circuits in New York City, arising out of the monopolization in that city of the first neighborhood run by those two circuits.
The petitioners here are four associated companies formally engaged in the independent distribution and production of motion pictures.
They produced those pictures during most of the period of time involved here under the name Eagle Lion and I shall refer them hereafter as Eagle Lion.
The damage period involved are the -- is the four playing seasons 46 to 47 through 49 to 50.
In the District Court, the petitioners relied primarily upon the case of the United States v. Paramount Pictures, et al. to establish a prima facie case of conspiracy on behalf of the RKO and Loew's circuits to exclude independent distributors like ourselves of access -- competitive access to the first neighborhood run market in New York.
We were, of course, relying upon Section 5 of the Clayton Act which makes a prior judgment on behalf of the United States admissible as prima facie evidence in behalf of a private claimant as to those matters as to which there is an estoppel between the Government and the defendants in the prior case.
Justice John M. Harlan: What case (Inaudible)
Mr. William L. Mcgovern: No, Your Honor, the case was tried in the District Court without a jury.
Justice John M. Harlan: Both side with an evidence?
Mr. William L. Mcgovern: Both side with an evidence as the full record here.
Both lower courts held that the Paramount judgment was no evidence in this case of any conspiracy against independent distributors.
Both courts below held that if the Paramount case was evidence of any conspiracy at all, it was evidence only of a conspiracy against independent exhibitors as distinct from independent distributors and that therefore it established no conspiracy at all as to ourselves, independent distributors.
I should like just for a moment before coming to the Paramount judgment itself point out to the Court that the market that we're talking about here, the first neighborhood run market in New York is the most important single market for motion pictures in the world.
From this tremendous concentration of population located on Manhattan Island in the Metropolitan area generally, a motion picture distributor will ordinarily derive from 9% to 11% of its total national domestic gross and a percentage that large is more often than not the margin between successful and unsuccessful distribution of a motion picture.
Curiously enough, the New York -- the entire New York market is a market of very strange contrasts.
As the members of the Court may know, there are concentrated up on Broadway in midtown Manhattan, all substantially fall of the so-called first run New York houses.
The showcases on Broadway while the -- the major defendants in the Paramount case had some affiliated theatres on Broadway.
By and large, they were 35 to 40 independently operated theatres on Broadway.
And the plaintiffs here were able to get competitive access to that first New York run in Broadway without difficulty.
The record shows that insofar as we have comparable classes of pictures getting access to first run in New York that our pictures outgrew theirs slightly.
We took -- as I recall, we took .028 of our national gross out of that first New York run on Broadway as against .025 for the major distributors affiliated with the defendants in the Paramount case.
But as you came off, first New York run on Broadway and began to approach the circuits where the great mass of the consuming public in New York in this industry are located, you ran into this blockade by these two circuits, the RKO and Loew's circuits.
These two circuits together comprise approximately 100 theatres and these were not only the theatres that enjoyed the first and second neighborhood run clearance.
But they were also the most strategically located theatres in terms of the population that they served.
Access to those two circuits was critically important to a distributor in the New York area for another reason, because of the fact that they have control of the first and second neighborhood runs, all of the subsequent runs in New York played off the two preceding circuit runs, second and first, on the RKO and Loew circuits.
And the result of that was that all of the subsequent run house is getting on down to the third, fourth of the tag-ins down below.
All had developed the pattern, the industry pattern of taking their bills off the prior weekly bills on the RKO and Loew circuits.
The result of that, if the Court please, was that in New York where you have in the entire neighborhood run area, everything at the first Broadway, you have about 600 theatre availabilities all told of which only 100 are concentrated in the two circuits.
The result of this playoff system was that unless you've got in up on top in either the RKO or the Loew circuit, you are blocked out not only from the 100 theatres comprising the two circuits but you were indeed blocked out from all of the subsequent run theatres in New York.
In short, if you get in the circuits, you were to sent blocked in the 600 houses right down the line.
If you are excluded from the circuits, you were out of about 600 houses.
The result was -- is -- is apparent in the record that the two circuits constituted a very serious bottleneck confronting any distributor who came in New York, instead of having 600 available buyers that only might go for the competitive selection of these pictures on a give-and-take basis based upon quality and play date and so forth.
Where an independent like ourself came to New York, we had two choices.
We could go to the RKO booking office and try to book the RKO circuit in which case would made RKO and all the theatres following thereafter or we could go to the Loew booking office and try to book the Loew circuit.
And if we got in, good, and if we didn't, we were out.
In short, what you had here was really two buyers and this critically important neighborhood run market in New York.
Now, it wasn't recognition of that kind of circuit buying power and the power of the circuit to exclude independents, both distributors and exhibitors that the three-judge court in the Paramount case found that the conspiracy that was castigated there operated both on independent distributors and independent exhibitors.
Those findings of the Court with respect to the independent distributors as well as the exhibitors are set forth in our brief at pages 9 and 10.
And I will not go into them in detail here.
Suffice it to say that on the basis of those findings, the three-judge court in the Paramount case concluded the -- in conclusion number nine which is set forth in the record at 643, concluded as follows and I quote, “The exhibitor-defendant Loew's Inc., Warner Brothers Pictures, Warner Brothers Circuit Management Corporation, Twentieth Century-Fox et al, all of the majors, have unreasonably restrained trade and commerce in the distribution and exhibition of motion pictures.”
And I emphasize, Your Honor, merely because of the nature of the decisions below, “restrained trading commerce in the distribution and exhibition of motion pictures”.
Justice William O. Douglas: (Inaudible)
Mr. William L. Mcgovern: That appears Judge -- Justice Douglas at 643.
That's conclusion number 9.
I might say in passing that the findings and conclusions in the Paramount case were never --
Justice William O. Douglas: A three-judge court?
Mr. William L. Mcgovern: Right, sir.
Justice William O. Douglas: (Inaudible)
Mr. William L. Mcgovern: Yes.
The three -- you're talking about Paramount court?
Justice William O. Douglas: Yes.
Mr. William L. Mcgovern: Yes.
Justice William O. Douglas: That's Paramount.
Mr. William L. Mcgovern: Yes.
I might just stop a moment to trace the history there.
You had a three-judge expediting court convened by the -- by the Government to try the case to begin with.
That court first handed out its decision in 1946.
That decision was reversed in part, affirmed in part by this Court reversed particularly with those aspects looking toward the (Inaudible) relief.
The case then went back.
There were hearings on remand in New York by the three-judge court in 1948 and the final decision came out in October of 1949 and the final judgment which we -- which is now before us, we printed it up in the record.
The final judgment appeared in February of 1950.
Now, the defendants make a -- still make a half-hearted contention in this Court, I believe, that the Paramount case is applicable only to exhibitors and does not affect distributors.
I suggest however that we have reached this point here thoroughly.
I merely wish to emphasize before I leave it that the Paramount case in so many words, we needn't argue implicitly, explicitly on the face of the judgment repeatedly.
The three-judge court in Paramount found a discrimination and a monopolization against independent distributors as well as independent exhibitors.
And I should like also, Your Honors, to emphasize this point, that when the Court in Paramount is referring to the operation of the conspiracy there upon independent distributors, they are referring to the petitioners here among others because at the time of the trial of that case, they were only three independent distributors in the country, Eagle Lion, Monogram and Republic.
And we appeared in both the original case and on the hearings on remand in 1948, Eagle Lion appeared as a witness for the Government and gave testimony in behalf of the Government.
There are findings of fact in that judgment referring to the revenues received by Eagle Lion as well as the other independent distributors.
And so I emphasize that not only do you have in the Paramount case findings referring to independent distributors as a group but you have findings that, I think, at all experience, must be construed as referring to these petitioners here to Eagle Lion because we were one of the parties before the Court in that case.
So much for the national conspiracy and the findings relating to it found in the Paramount case.
Coming down to this very market here this New York subsequent run market, the Court in Paramount in its final judgment in 1950 made this finding, Finding 154 (d) which I think is critical to the disposition of this case.
That appears on the record at pages 636 to 637.
Finding 154 (d) reads, “In New York City, Loew and RKO divided the neighborhood prior run product of the various dependent distributors under a continuing arrangement so that there was no competition between them in obtaining pictures.
On one occasion where Paramount was having a long dispute with Loew's as to rental terms for Paramount Films to be shown in Loew's New York neighborhood circuit of theatres, no attempt was made by Paramount to lease its films to RKO for exhibition in the latter circuit nor was any effort made by RKO to procure Paramount Films as they both evidently preferred to adhere to the existing arrangement under which Loew's circuit consistently exhibited the films of itself, Paramount, United Artist, Columbia and half of Universal while RKO exhibited the films of itself, Fox, Warner and one half of Universal.
In other words, they carry the split to the point where they took the Universal product and cut it in half and each of them took half of it.
And on the basis of that finding, the Court in Paramount made this conclusion, Conclusion 16 which appears in the record of page 644.
“Loew's Incorporated has violated the Sherman Act by conspiring with RKO to monopolize and monopolizing the first neighborhood run in New York City and by the dividing of that market between itself and RKO.
Now, I point out to the Court that there are two findings which have particular focus on the very market we're dealing with in this lawsuit, the first neighborhood run in New York.
You have a finding that the defendants have so organized that market by controlling the theatres and the division of the product of the other major distributors, that there is no competition between them in procuring films.
We have a conclusion that they have violated the Sherman Act by monopolizing that market and by dividing the market between them.
Now, I wish to point out again, if the Court please, that those two findings appeared for the first time in the judgment in February 1950.
In other words, they were based partially upon the hearings on remand in 1948.
They did not appear in the original judgment in 1946.
The judgment entered in 1950, however, pointed out that it was made as of 1945 because that was the time most of the testimony in the record had been received.
However, Finding 158 in the 1950 judgment contains this finding.
Evidence submitted since the remand of this case has been considered by this Court.
Such evidence has been used by the Court in making its findings as to the situation in 1945.
The change in status and practices since 1945 revealed by this evidence has been insufficient to warrant a change in the findings and judgment entered herein.
In addition to introducing the judgment itself, we also undertook by independent evidence before the judgment to bring the judgment and ascend down to date ourselves and this we did by proving that the same monopolization of theatres in terms of numbers and locations of theatres and runs continued right down from 1946 down through 1950.
And we also show that the split of the majors' product even down to the split of Universal right in half also continued down from 1945 right through 1950.
I think therefore, if the Court please, that this is one of the few cases where there's no argument that the Paramount judgment blankets the case.
If it is inapplicable to this case, then it was never applicable at any case.
Justice Charles E. Whittaker: You say there's no argument?
Mr. William L. Mcgovern: I don't think there is, Your Honor.
Justice Charles E. Whittaker: You were (Voice Overlap) --
Mr. William L. Mcgovern: Mr. Justice Whittaker, I don't think they make any point about that.
I just -- I don't think they do.
Justice Charles E. Whittaker: I see.
Mr. William L. Mcgovern: But I want to be prepared, I'm not sure.
Justice John M. Harlan: (Inaudible)
Mr. William L. Mcgovern: Not on this point I think, Mr. Justice Harlan.
The Court of Appeals, I don't think either the lower courts took the position of the Paramount judgement.
It was not applicable at the point of time.
Justice John M. Harlan: (Inaudible)
Mr. William L. Mcgovern: You see, point of time.
That's what I'm trying to point out here.
And I have this problem that the 1950 judgment does recite the fact, that is, as of 1945 although the rehearings on remand in 1948 and this -- these findings I'm relying on here, Finding 154 and Conclusion 16 appeared for the first time in the 1950 judgement.
They were not in the earlier judgment.
Justice Charles E. Whittaker: Well, then that -- well, I -- I misunderstood you I think.
I understood you to say that there's no argument that the Paramount decree blankets this case.
Mr. William L. Mcgovern: I should limit that, Mr. Justice Whittaker, to say, there was no argument, I think, that is blank but at least temporarily if it's applicable at all.
Justice Charles E. Whittaker: Well, it covers if it covers them (Voice Overlap) --
Mr. William L. Mcgovern: Right.
Now, let us come back, if we may, just briefly, to what the Court found in Finding 154 (d).
The Court there found, “In New York City, Loew and RKO divided the neighborhood run product of the various defendant distributors under a continuing arrangement so that there was no competition between them in obtaining pictures.”
Justice Charles E. Whittaker: (Inaudible)
Mr. William L. Mcgovern: I think it relates to their status as to the exhibitor quite clearly, Mr. Justice Whittaker, because the RKO and Loew circuit are theatre circuits.
Justice Charles E. Whittaker: You were a distributor?
Mr. William L. Mcgovern: I was a distributor.
I came into New York.
I tried to distribute my pictures in open competition with the product of the major distributors.
I found these two circuits set right at fort.
The whole New York neighborhood run market and because of their monopolization of that market and the division of the major distributors product between them, the Court here finds that there was no competition between the RKO and Loew's circuit in obtaining pictures for the theatres.
And I said there can be nothing except that there was no competition available to me at the market when I came into town as an independent trying to sell pictures in those very theatres.
Justice Tom C. Clark: When did you come to town?
Mr. William L. Mcgovern: Various entire periods, Mr. Justice Clark.
We started distributing in 1943, the period involved here is 1946 to 1950.
Justice John M. Harlan: Your -- your basic point, if I understand it, is that this alleged conspiracy was not a conspiracy to the total exclusion of the market but a conspiracy to exclude you from having your films compete on equal terms with those of other companies, other distributors, isn't that (Voice Overlap) --
Mr. William L. Mcgovern: Precisely, Mr. Justice Harlan.
In the one or two moments that remain, just let me point this out.
Both lower courts point out that the pretrial order in this case had one critical issue whether or not Eagle Lion had been denied competitive access to the RKO and Loew's circuit in consequent of the neighborhood runs in New York whether we have been denied competitive access.
Now, keep in mind, Conclusion number 16 of the Court said that Loew's Incorporated has violated the Sherman Act by conspiring with RKO to monopolize and by monopolizing the first neighborhood run in New York City.
In our judgment, a monopolization of the market we are seeking to enter is utterly inconsistent with a finding that we were not denied competitive access to that market.
Justice John M. Harlan: Could I ask you one -- this is taking a big jump.
Supposing the Paramount decree in this case Section 5, supposing Section 5 of the Clayton Act for one reason or another, is not available to you, have you got enough evidence in this case to hold -- to make a case or is it all stand -- stand or fall on the Section 5?
Mr. William L. Mcgovern: Certainly -- certainly our evidence was -- I -- I just don't really know the answer.
I never have tried to evaluate the record in that way, Mr. Justice Harlan.
Certainly, all of our evidence was key to the assumption of the Paramount judge and was of course admissible at least as prima facie evidence.
Justice John M. Harlan: Yes.
Mr. William L. Mcgovern: Whether or not, as I pointed it out to you, our own independent evidence bringing it down from the period 1945 through 1950, withstanding alone, authorized the kind of complex findings that were made in the 1950 judgment.
I just don't know.
If you'll recall, the Government carried that case on for a period of close to 10 years before they succeeded in proving it.
And I'm not sure that we could discharge that kind of a burden if it were imposed upon us.
Now, the District Court escaped or sought to escape, but, I think, it's the clear impact of Finding 154 (d) which Your Honors will recall held that there was no competition between them, in other words, between RKO and Loew in obtaining pictures.
The District Court escaped the impact of that by adding two, by amending that finding of the District Court and make it read, “No competition between them in obtaining pictures from the defendant distributors.”
Chief Justice Earl Warren: (Inaudible)
Mr. William L. Mcgovern: Well, I say, Your Honor, that the basic -- I'd like to leave with the Court and to remind over and I -- is simply that I myself do not see how you can consistently with a finding of monopolization of a market hold that we were not at least denied competitive access to that market.
The two of them were inconsistent.
Chief Justice Earl Warren: Well recess now.
Argument of William L. Mcgovern
Chief Justice Earl Warren: -- Incorporated, et al., Petitioners, versus Loew's -- Mr. McGovern, you may continue your argument.
Mr. William L. Mcgovern: Mr. Chief Justice and members of the Court.
At the close of the argument on Monday, we had observed that the three-judge court in the Paramount case had found that RKO and Loew's circuits in New York had monopolized the first neighborhood run in that city and had divided that market so that there was no competition between them in obtaining pictures for their theaters.
We had also noted that that finding as to New York was not made in installation but rather in the context of the findings as to the overall nationwide monopolization found in the Paramount case.
In other words, the Court in the Paramount case found an interdependency between the respective defendants.
So that you had in a sense a back-scratching situation created.
In other words, RKO and Loew happen to have the theater monopolization in New York.
But Paramount had it in Chicago and Fox had it on the West Coast.
And quite clearly, if RKO and Loew wished to get reciprocal preferential treatment in Chicago and in Los Angeles, they had an obligation in New York where they control the circuit theaters to take care of their co-conspirator defendants.
We had concluded on Monday as the Court may recall by noting that the main issue or one of the main issues in this case was as the Court of Appeals pointed out in the record at page 692, one of the issues set up in the pretrial order was, "Did the defendants combine and conspire in violation of the antitrust laws of the United States to exclude the plaintiffs from the opportunity of licensing on a competitive basis their feature motion pictures to Loew and RKO theaters which exhibit feature motion pictures in the New York Metropolitan area on runs subsequent to first Broadway?"
In other words, the primary and first issue in the case was whether or not the two defendants here had conspired to deny independent distributors like Eagle Lion the opportunity of licensing on a competitive basis their feature motion pictures.
And we ended on Monday by noting as far as the petitions are concerned that in our judgment, there's a fundamental inconsistency between a finding such as you have in the Paramount case that RKO and Loew monopolized the first neighborhood run in New York and a finding that the independent such as ourselves were still free to license our product to those two circuits on a competitive basis.
Now, we suggest further, if the Court please, that any possible doubt about the invidious impact of that kind of a monopolization upon an independent like ourselves is resolved when we stop to consider the manner in which the two monopolist undertook to implement their monopoly power.
In other words, when we stop to consider the mechanics whereby they operated these two circuits.
The fact is that during the four years involved here, the two circuits pursue a playing policy in the administration of their monopoly power that necessarily had the effect of curtailing that market, that tremendously important first neighborhood market in New York.
So that it not only could not accommodate pictures by independents like ourselves, but there wasn't even enough preferential playing time to accommodate the pictures of their own assigned co-conspirators.
Now, that situation resulted from the fact that the two circuits had broken the week down into an arbitrary long half composed of five or six days as they saw fit and a so-called short half composed of one or two days.
The long half, as the Court will appreciate, was really the line share of the long half, five or six days.
They played a double bill on both half, the long half and the short half.
But only the so-called top feature picture on the long half of the week was allowed to earn a percentage of gross rental.
And this was really the only desirable rental position on the entire circuit play.
That top feature on the long half was granted a percentage of gross as its rental.
The second feature on the long half and these two features over on the short half were all paid an arbitrary flat rental which was much less desirable as both courts below found.
So that, you had a situation, if the Court please, where the 100 or more theaters comprising the two circuits plus the 600 theaters in the subsequent runs have played off these two circuits.
All of those theaters were confined to utilizing only 52 pictures in each circuit in that top feature position, on the preferential rental term, only 52 feature pictures per year.
In other words, the two circuits taken together could only consume a 104 pictures per year.
And this during a period of time when their own assigned co-conspiring distributors were producing 250 pictures per year.
Even if you took both of these positions on the -- on the long half, the top feature and the second feature, the flat rental picture, you still only had a 104 pictures there, a 104 pictures on the other circuit, 208 is the total.
And again, during a period of time when the co-conspiring distributors were themselves producing 250 pictures per year.
Now, we suggest that -- that sort of a playing policy tends to make graphically explicit, what we think is perfectly explicit on the face of the Paramount judgement anyway and that is that the circuits did not have enough time to accommodate properly their own codefendants much less have anytime left over for independence like ourselves.
At best, it seems to us perfectly obvious that the most that remain for an independent distributor like Eagle Lion was the marginable playing time if any that worked out in the course of the year.
In other words, we got the crumbs that fell from the board if any there were and we didn't get many crumbs.
Indeed, in the four years involved here, we succeeded in placing only eight of our -- 196 pictures in either one of those top feature positions on either the Loew or the RKO circuit.
So, we contend that quite apart from the Paramount case itself that the playing policy pursued by these two circuits to implement the monopoly power that is implicit on the face of the Paramount decision necessarily resulted in such as a narrowly, a severely narrowed market for independents like ourselves that you have not only liability on the antitrust laws but you have clearly the fact of injury to ourselves because we have compelled to sell not only in a noncompetitive market, but we were compelled to sell in a market that was deliberately and so arbitrarily narrowed that from the operation of the conspiracy itself.
It was clear that there was little of any playing time for the independents.
Now, that being the case, if the Court please, we come to the question of how appropriately to measure the impact on us, an independent distributor of that conspiracy.
In the Bigelow case, Bigelow versus RKO, 327 U.S., this Court many years ago restated the wrongdoer rule.
That is the principle that once an antitrust violation is established, the risk and the jeopardy of determining with certainty or uncertainty as the case maybe the impact of that conspiracy upon the victim of the conspiracy, the risk in jeopardy of trying to evaluate that impact is cast not upon the victim, but upon the wrongdoer.
This Court speaking to Mr. Chief Justice Stone who wrote the majority opinion there said, and I quote from page 265, “The wrongdoer may not object to the plaintiff's reasonable estimate of the cause of injury and of its amount because it's not based on more accurate data which the wrongdoer's misconduct has rendered unavailable”.
Of course, it is perfectly obvious I think to all of us that after a monopolization, it is never possible to go back and attempt to recreate what competitive conditions might have produced in terms of the victims performance.
All you can do is, I think, do what the Chief -- the former Chief Justice of this Court indicated in the Bigelow case and that is, undertake in the area of the violation in the market allegedly monopolized, undertake to compare the performance of your product with the performance of the conspirator's product and the difference, if any there be, is the measure of your damage.
Justice Felix Frankfurter: Well, the Bigelow case really doesn't touch this problem whatever the word "cause" maybe.
That was merely a question of how you can prove the resulting damage from the conceded violation.
Mr. William L. Mcgovern: Yes.
Justice Felix Frankfurter: I know you submitted in that case, though such this case.
Mr. William L. Mcgovern: Well, Mr. Justice Frankfurter, I think it is applicable because I think that we find ourselves standing before the Court today precisely the same posture as the petitioner in the Bigelow case.
The Bigelow case, it is true, was a jury verdict in the District Court reversed by the Court of Appeals.
But we have, I think, the right under Section 5 of the Clayton Act to claim the benefit here of the same kind of a finding.
We have a finding by the three-judge court in Paramount of a conspiracy to monopolize this market.
Justice Felix Frankfurter: I'm not touching the merits of this question by my remark, but the Bigelow -- in the Bigelow case, there was no controversy as to the law.
The question was, how speculative and they maybe the determination of the damages.
And that case merely says the burden formed on the fellow, on the wrongdoer and they don't have to be very particular in figuring out the dollars and cents of it.
That's all the Bigelow case is to me.
I know all the cases which is cited there so far.
Mr. William L. Mcgovern: I know, but I'm talking about Bigelow --
Justice Felix Frankfurter: You can't speculate of the starting point.
You can't speculate about the starting point --
Mr. William L. Mcgovern: But Mr. Justice --
Justice Felix Frankfurter: -- which is wrong.
Mr. William L. Mcgovern: Mr. Justice Frankfurter, the point I think of the Bigelow case was this, that the Court of Appeals had reversed there on the ground that it was not sufficient to prove its certainty the unlawful conspiracy to injure, that that was not sufficient that you could not go directly from that over to an estimate of your damage, but you must go through a third step in the middle.
You must prove the impact of the injury on you with certainty.
And this I think, Mr. Justice -- Chief Justice Stone answered by saying that when you prove a conspiracy to injure you or people of your class, you may then make a reasonable estimate of the impact on you and of the amount of the impact.
Justice Felix Frankfurter: Well, but -- you can't make a reasonable estimate that there was -- that there was a wrong.I know the record of that but I didn't want --
Mr. William L. Mcgovern: Yes.
I'm sure you -- I'm sure you do.
Justice Felix Frankfurter: -- to mingle with that decision.
Mr. William L. Mcgovern: I'm sure you do, sir.
Justice Felix Frankfurter: I know its limit.
And I don't think it ought to be made to go beyond the scope of that decision.
It has nothing to do whether you're right or wrong in your contention that I always (Inaudible) cases go beyond where they go.
Mr. William L. Mcgovern: I quite agree with you and I don't believe in all fairness that I am trying to make a case go beyond what it does.
I think, Mr. Justice Frankfurter, that you are articulating here the views you set forth in the dissent in that case.
Justice Felix Frankfurter: Well, I didn't disagree on the main question.
I didn't -- there's no controversy between us.
Mr. William L. Mcgovern: No controversy as --
Justice Felix Frankfurter: As wrong in that case.
The question was, why do you ask a claim of damages?
Is that the only different problem?
Mr. William L. Mcgovern: Well, but isn't --
Justice Felix Frankfurter: I don't want to take your time.
Mr. William L. Mcgovern: I'm -- I'm sorry, sir.
I say as I (Voice Overlap) -- I am -- I think we do.
Justice Felix Frankfurter: All right.
Mr. William L. Mcgovern: I -- I say that under the yardstick approved by the majority in the Bigelow case, we were entitled to --
Justice Felix Frankfurter: It's binding on me.
Don't get any wrong impression.
Mr. William L. Mcgovern: Yes, and Mr. -- Mr. Justice Frankfurter --
Justice Felix Frankfurter: That's binding on me.
Mr. William L. Mcgovern: It's binding on me too, the --
Justice Felix Frankfurter: It's binding on me.
Mr. William L. Mcgovern: As a counsel of this --
Justice Felix Frankfurter: I think you don't want to --
Mr. William L. Mcgovern: -- this bar.
Justice Felix Frankfurter: The words taken out of a decision blown up beyond the scope that the record indicates.
Mr. William L. Mcgovern: I appreciate your position.
Justice Felix Frankfurter: I don't think that's (Voice Overlap)
Mr. William L. Mcgovern: We suggest that the yardstick approved by the majority view in the Bigelow case undertakes to state that when you have shown a conspiracy, when you have proven the violation of the law, you may then proceed to compare the performance of your product in the monopolized or wronged marketplace with the performance of the conspirator or monopolist's product and that the result is the best available estimate of what the damage to you has been.
It might well be that taking that yardstick from Bigelow and applying it to our circumstances here, we could have taken just a straight absolute comparison of our own performance in New York and undertake to compare it with their performance in New York.
This is the yardstick that was approved for Mrs. Bigelow's theater in the Bigelow case.
However, we were aware of the fact that because we were comparative newcomers to this industry, we haven't started to distribute until 1943 that there was a significant difference in the size and the established character of their business and ours.
And we tried to make a fair and I think generous allowance for that fact.
In the measure of damage that we put forth in the Court's below, instead of undertaking to make an absolute comparison between our respective gross rentals out of the New York area, we undertook to strike a relative comparison between our performance in New York in terms of our own national gross rentals and their performance in New York in terms of their national gross rentals.
In other words, we produced a ratio in which we took the national gross rentals of ourselves and of the defendant and co-conspiring defendants.
We took our own performance in New York and related it to our own national gross.
We took their performance in New York and related it to their national gross.
We did not relate our performance in New York to their national gross, we related it to our own.
And I suggest that that kind of a ratio have the effect of discounting at the outset whatever substantial differences there might have been in our business -- our overall business and theirs because of the older and better-established character of their business.
The result of that kind of a comparison was that the record shows, and I think at least as to the accuracy of the data, there is not much argument.
The record shows that we took 6.4% of our national gross out of New York whereas the majors took 8.9% of their national gross out of New York.
In other words, from that comparison, it appeared that Eagle Lion have received approximately 40% less of our national gross in the New York market then had the defendants.
The difference when applied to our own national gross produced a figure in terms of net loss rentals to ourselves of $417,000.
Justice John M. Harlan: Isn't your statistical approach however, undermined seriously by the District Court's findings as to the quality of your pictures?
Mr. William L. Mcgovern: I don't think so --
Justice John M. Harlan: Why not?
Mr. William L. Mcgovern: -- Mr. Justice Harlan.
Well, the District Court, we think, made no findings at all as to the quality of our pictures if you will give any reasonable interpretation of the Paramount decision.
You see, the District Court's finding at the end, if that's what Your Honor has referenced to, starts out with the proposition assuming such a conspiracy.
Now, our position here quite simply is this, that if you assume a conspiracy to monopolize the first neighborhood run in New York, then by definition, you are assuming a conspiracy to deny us all competitive access to that market.
And I say from that assumption, if that was the assumption the District Court was genuinely making, I think quite clearly, it was not.
But from that assumption, if you make it, necessarily flows injury to us.
I see no way of avoiding this.
And I'm saying that if that assumption is made, in other words, if we are given the benefit of all reasonable inferences in the Paramount judgment under Section 5 of the Clayton Act, then I suggest, Mr. Justice Harlan that the Bigelow rule takes up precisely where the Paramount judgment leaves off.
And the Bigelow rule commands us to compare our performance in that monopolized market with their performance.
And I don't think the result of the defendants or indeed the District Court or the Circuit Court to say, “Well, but it's true there was a monopoly, we assume that, but we do not know whether you would have been better or worse off if you had a competition.”
That is precisely the kind of an irrational test that was rejected by the majority of this Court in the Bigelow case in our judgment.
So I say that from the comparative performance data which we put on the record, it appears that there was a difference in our net rentals taken out of New York, a relative difference.
Not absolute, a relative difference in our net rentals of $417,000.
We finally gave up the struggle in 1950 and sold Eagle Lion to United Artists which is the -- one of the defendants in the Paramount case and is one of the co-conspirators here.
I think again, there was no argument that on that sale to United Artists, we suffered a loss, it's a sheer out-of-pocket liquidating loss, quite apart from loss of profits, just an out-of-pocket liquidating loss and cancellation of leases, on regional officers and so forth of $146,000.
Now, it is perfectly true as it's been suggested from the bench that the District Court engaged in some speculation as to whether or not we -- we're not trying to sell Buicks or cheap purse in what it please to style the Cadillac in Mink market in New York.
We think that to indulge in that kind of speculation is to do the very thing that I understand at least the majority of this Court in Bigelow said you were protected from by the wrongdoer rule.
In other words, the jeopardy and the risk of that kind of a speculation is cast upon the wrongdoer, not upon the victim.
But in any case, if the Court please, the record here shows pretty conclusively that we weren't selling Buicks in the Cadillac market any more than they were selling Buicks in the Cadillac market.
The truth of the matter of course is that we both had Cadillacs, we both had Buicks.
And furthermore, and this is an important point that I wish to emphasize.
The conspiracy here was never conceived to operate and didn't really operate upon the Cadillacs.
The Cadillacs, the mink coats, these will sell themselves in any market.
Our Red Shoes, for example, found access to the circuits without much difficulty just like The Best Years of Our Lives distributed by the defendants did.
It was when we came to the mediocre pictures, the run-of-the-mill pictures, the typical product of Hollywood, that -- that captive market of the defendants really paid off handsome dividends because it's on these run-of-the-mill mediocre pictures that they undertook to give their own product and that is, they're assigning co-conspirators the full circuit treatment right through and they undertook to tell us, “Go away, we don't wish your pictures.”
Now, we think that nothing in the record here demonstrates what happened to us in New York more rapidly than a chart that appears in the record at page 702 in the Court of Appeals opinion.
And with the Court's indulgence, I should like to turn just briefly to that chart.
At page 702 of the record, Your Honors will note that the Court has broken out in three categories the way the pictures play on the two circuits, the RKO and Loew's circuits.
Your Honors will note that on that long half of the week that I referred to a moment ago, where in the top feature alone you could hope to earn yourself a desirable percentage of gross rent -- gross box office receipts as a rental that our pictures were paid -- on that position, were paid an average of $55,200.
Their pictures in that same category were paid $97,500.
And please bear in mind, if the Court please, that these categories are not our categories.
We didn't manufacture them.
These are the defendant's own categories.
And the fact that they put eight of our pictures in there, presumably reflects the fact that in their arbitrary judgment for whatever it was worth, our pictures merited that playing position.
And yet you will note, that we get 50% less as a rental on the average than do the product of the majors.
Let me emphasize also that only eight Eagle Lion pictures out of 196 ever got admitted to that top desirable rental position.
When you come down to the next category, and that's the long half second position, paying a flat rental, they got an average of $15,300, we got an average of $15,200.
And on the face of it, that would appear to indicate that we did incredibly as well as they did in terms of the rentals we got from the circuits.
They make quite a point of that by pointing out that on the whole New York situation in that second -- in that long half second category, we really did a little better than they did.
The truth of the matter though is that the reason why our figures appear to be roughly equal in that long half second category is the fact that they took many of our pictures that in our judgment were entitled to top feature position.
And they told us in effect that, “Look, if you wish that picture played at all, you're going to play it as a second feature in the long half of the week.”
Justice John M. Harlan: Is there evidence to that effect?
Mr. William L. Mcgovern: There is evidence to that effect, Your Honor.
There is one beautiful example of it in a case with a picture called, "The Noose Hangs High," starring Abbott and Costello.
Abbott and Costello pictures are pretty much run-of-the-mill pictures, but customarily by producing in New York, they had always played the top feature position.
Indeed, the year before we came by with one same feature, same star, same producer, the year before we came by, Universal brought them through New York and, of course, we've got the top feature long half performance treatment.
It was paid $78,000.
And that, despite the fact it did have no Broadway first run at all, we come by a year later with an Abbot and Costello after having had a satisfactory first run on Broadway and earning a rental.
And they say to us, “You know, the public is sick and tired of Abbott and Costello, so you go second feature.”
Now, where normally they would have paid us -- paid us 12 -- $7,000 to $12,000 second feature.
I think they gave us in this case what I would call "conscience money".
They said, “Look, your second feature, flat rental, but we'll give you $22,500.”
Still $56,000 less than they paid Universal, one of the assigned coconspi -- co-conspiring distributors for the same type of picture just a few months earlier.
So I'm saying that the reason why this apparent parity exist in this long half second position is the fact that we have many pictures in there, that in our judgment, in a competitive market, would have played top feature and that entitled to earn a percentage of the box office receipts, whatever they were justified in terms of the competitor drawing power to New York audiences.
But as Your Honors will note, the short half which is where much of the damage to us was really done.
This is where you'll get down to the run-of-the-mill pictures, the mediocre pictures and we had them and they had them, we had reissues and they had reissues, we had westerns and they had westerns.
If we had a picture called “Up in Gertie's Room” to which the District Court referred, they had a picture called Boston Blackie over in New York.
We were typically buried in that respect.
And yet you will note on those pictures in which category incidentally played 53 of the Eagle Lion pictures.
In other words, the vast majority of our pictures that they played at all, they played down here on the short half.
And Your Honors will note from this chart in the Court of Appeals' opinion, that they gave us on the average $5,000 less rental per picture.
Now, that chart accounts only for 85 of our 196 pictures.
In other words, 111 pictures that we distributed were totally excluded from the circuits completely.
We earned no revenue whatsoever from the circuits.
We were compelled with regard to those pictures to go to the marginal, the fringe, the scrap of the theater exhibition market in New York, if you like, to go to what Mr. Raftery refers to this day, really arch houses and see what we could do there.
Now, to the rather stark discrimination which I think that table reflects, in terms of our comparative performance data and the comparative rentals paid us by -- on pictures of the same class which they themselves classed the same because they put them in those playing positions.
They have two stocking answer that they like to make.
The first is that on Eagle Lion's high-grade pictures, the ones where we got approximately half as much as they did on rental on the top feature, they say, “Well, those pictures just didn't have any appeal for New York audiences.”
On the pictures down the short half where quite clearly there was discrimination practice upon us and neither the two lower courts really glanced to that fact, they admitted there was discrimination there.
The defendant's answer to the discrimination down that short half, and the answer that was incredibly accepted by both of the lower courts in the face of the record here, was that even though they had discriminated against us on those mediocre pictures, and even though they had excluded the vast majority of them from accessing to the -- to the circuits at all, that we didn't suffer any injury on those pictures because, said, they've taken another category of data on all of your pictures grossing under $500,000 nationally.
You did better in New York than we did.
You took relatively more out of New York in terms of your national gross than we did.
And the answer to that, if the Court please, is that we did take more out of New York on those low-grossing pictures.
But the reason why we did, as we pointed out to the Court of Appeals, the reason why we did is because in those low-grossing pictures, we had 41 foreign-made pictures, pictures made abroad and sent over here for distribution by Eagle Lion.
Wonderful pictures in my judgment, some of them at least, Winslow Boy, Quartet, Red Shoes itself, for example, was a foreign-made picture.
But the circuits aside from Red Shoes where they made an exception, the circuits refused absolutely to play any of those foreign-made pictures.
And playing those pictures around the circuit wherever -- around New York, wherever we could find a house to which we could get in and it was not easy.
We nonetheless managed to take out of New York 13.5% of our national gross on those foreign-made pictures.
This was a larger take from New York relatively speaking than any group of pictures that either they or we have.
Now, I suggest that if you're going to use this under-$500,000 category to deny us any damage on the ground we weren't hurt even in the face of outright stark discrimination with regard to the pictures that got in, that in all fairness on that kind of a calculation you exclude the foreign-made pictures because they didn't get in at all.
And if you do exclude them, then the record shows that of course on those short half pictures grossing under $500,000, we took 20% less out of New York than they did.
Now, we think under the yardstick that was approved by the Bigelow case for showing their damage in this type of situation, that all of the product should be compared by whatever comparative performance data is available.
And quite clearly, we have tried to do that.
We have taken all of our product.
We have taken all of the sample pictures they made available to us for comparison.
And clearly, if you take that kind of an overall picture, you'll get I think the clearest and the most honest demonstration of what happened to our overall business.
And also, equally, obviously, that if you start to eliminate categories here, they are the top someplace else, you automatically impair the validity of your overall comparison by taking out separate categories of cases.
We think that the Bigelow case justifies the view that should take an overall comparison of your performance, your entire performance in the monopolized market, and the difference between that on your own behalf and that of the defendants is your measure of damage.
If we do that here as I point out to the Court, we show that on our overall business during these four years involved, we got 40% less of our own national grosses.
And again, I want to emphasize we are talking about our own national gross, we are not trying to get a percentage of their national gross, of our own, 40% less of ours out of New York than they got of their national gross during the same period of time.
We suggest that the record will reflect that the only real offense you have here is the opinion of the monopolist when all was said and done, if they had given us as much access to this market as we were entitled to.
Indeed, you will find some suggestions in the record that maybe they were very benevolent and gave us more than we might have gotten if competition had been the law of trade.
Our view is of course that the wrongdoer rule in Bigelow was fashioned to protect a victim from precisely that kind of a defense.
That under the wrongdoer rule, a monopolist who has denied us the opportunity for a competitive test to the quality of our product in the market cannot be heard to come forward at the end and say, “Look, I gave you all you were entitled to.
Indeed, I may have given you a little bit more.”
We're persuaded, if the Court please, that if we -- are to have the benefit under Section 5 of the Clayton Act, of all the reasonable inferences to which we think we are entitled from the Paramount judgment.
And again in that connection, let me emphasize that we appeared as witnesses on behalf of the Government during the Paramount case, we may whatever small contribution we could to the effective results achieved by that case.
But we say that if we are to have the benefit of all reasonable inferences of the Paramount case and if we are to have any proper application of the wrongdoer rule as enunciated by this Court in Bigelow that then we are entitled to a judgment here.
I should like to reserve the rest of my time, Mr. Chief Justice.
Chief Justice Earl Warren: Mr. Raftery.
Argument of Edward C. Raftery
Mr. Edward C. Raftery: Mr. Chief Justice, members of the Court, I'm going to try to comply in my time to 25 minutes so as to leave the bulk to Mr. Gillespie.
And I'll try to talk primarily on the facts leaving the lower points, if there are any, and I don't know of any, to Mr. Gillespie.
What is Eagle Lion?
A company called PRC, Producers Releasing Corporation, was formed in 1943.
By 1946, the record shows it was hopelessly broke, and owed a lot of money to a company controlled by a Robert Young, Pathé Laboratories for unpaid print bills, that's the negatives and the prints.
The company made very cheap pictures.
They never saw the light of day in any first class house as far as the record is concerned -- concerned.
Pathé Industries took over PRC for that.
PRC was the great foundation upon which Eagle Lion was built.
Eagle Lion was, as you can tell from the name, was a British-American idea.
Mr. Rank in London would produce for Lion films.
The Eagles would fly here in this country.
Now a contract was signed, that's in evidence, between the Rank company and this new Eagle Lion company here which had taken over PRC.
The witness said he didn't know of it by merger or how -- where Eagle Lion was going to make a number of pictures.
That is, Lion would make them in England and Eagle would make them over here.
That also had another hedge to it.
The hedge was -- was that the good pictures, if there were any good ones made in England would go to Universal for distribution.
And the codes, ultimately would come to Eagle Lion, so the second part of the foundation on British pictures on top of the PRC.
So they formed another company called Eagle Lion Studios and they purchased an old studio out in California.
They put a man named Foy at the head of it.
Now, according to the witness examined by Judge Dawson, the man who was vice-president in charge of all exploitation at Eagle Lion, Mr. Foy was a very competent producer of B-pictures but it never had any experience in producing good pictures.
He referred to it in answer to the Court's question that Eagle Lion was more or less an amalgam of impossibles.
That is he said, “Taken the company from the drags of the American industry adding to it an untried British product and putting a man with B-studio experience in charge of production.”
Now, that is the -- briefly the -- the genesis and origin of Eagle Lion.
When that started functioning in 1946 and the first group of pictures that -- that distribute did according to one of the charts prepared and offered in evidence, I think it's Exhibit 11, and I must confess, my friends didn't print it in the record.
So I'm going to use my analysis of it which is in evidence and which we have submitted to Your Honors in protostat form.
Those are the RKO exhibits, I think there are five or six of it.
Now, the first year, the top grossing pictures they had for 1946, 1947 are reissues, and I don't know -- know whether Your Honors are familiar with the way and some answer to Justice Harlan's question on the reissues.
This is the finding of fact, I think that Judge Harlan was referring to, Page 578 of the record.
Although practically all the films distributed by the plaintiffs were inferior in quality and drawing part to those -- those distributed by the major distributors, the difference in that returns only became markedly apparent in those films which gross nationally more than 500,000.
This is evident when we see that 97 of that 195 pictures distributed by plaintiffs had national rentals of less than a $100,000.
Indeed, and those pictures were reissue pictures of an antiquity which makes them almost part of the folklore of the cinema.
And then the footnote, such as the following pictures which in the four years involved in this action had the following gross national revenue, Getting Gertie's Garter, $17,400.
That means from the full distribution in the whole country.
Up In Mabel's Room, $17,000, Twin Beds, 15,000 plus, Tillies Romance, $13,400.
Included in the list were also such pictures as Capital Queen, which had a national gross in this period of $2800 and Weaker Sex which had a national gross of $7300.
In other words, the findings in the trial Court after a trial on the merits -- now, if you're remembering the dissenting opinion of -- I don't want to confuse the two Judge Clarks so when I refer to Judge Clark here, I'll take the liberty of saying Judge Tom Clark but I'm referring to Judge Clark in the Circuit Court in New York.
In his dissenting opinion when you read it, I can understand the -- one of the questions asked of my adversary yesterday, "Was this a trial on the merits or was it on summary judgment?"
Because the way you read Judge Clark's dissenting opinion, you'd imagine that it was either on a motion for summary judgment or at the close of plaintiff's case that the -- the trial Court had dismissed.
Justice Felix Frankfurter: By the way, may I ask you whether this case is reargued after Judge Frank says that --
Mr. Edward C. Raftery: No.
Let me tell you about in very few words.
And no doubt you refer to the punitive sentence at the end of the opinion out of Judge Clark -- Frank had lived that he would have gone along, decided the case with Judge Clark.
We argued the case in November.
Judge Frank died in December.
1st of February, we got a letter from Judge Clark, and in the letter he said -- well -- well the effect of it was Judge Hincks and I are not agreeing so we've appointed Judge Waterman to take Judge Frank's position, "There will be no need for any further argument."
Now, that's the story on the -- on the -- that case.
And anyhow --
Justice John M. Harlan: And he decide to ask (Inaudible)
Mr. Edward C. Raftery: Neither, neither side.
They're on a such preemptory shaft in the letter from Chief Judge Clark that I don't think either of us dared to ask for it or argued.
Justice Felix Frankfurter: And -- and there was no suggestion asking counsel -- assuming that counsel would have no objection to that stuff.
Is that added in the letter?
Mr. Edward C. Raftery: No, no, no, no.
The -- the last sentence I quoted verbatim on that my memory is clear, "There will be no need for any further argument, period."
Justice John M. Harlan: Was the letter corrected?
Mr. Edward C. Raftery: No, I don't believe so.
Justice John M. Harlan: As I understand neither of your making any point about that proceeding.
Mr. Edward C. Raftery: No, no, no.
Justice Felix Frankfurter: My question didn't imply any of this point?
I'm just as curious to know.
Mr. Edward C. Raftery: Yes.
Well, I hope I answered your curiosity.
Justice Felix Frankfurter: Our Court was constituted as to one member to whom it is argued died.
Mr. Edward C. Raftery: Well, both of us went along with the direction of the Chief Judge and then waited about, I don't know, eight or nine months before we got a decision.
Now, if you recall in his opinion, he more or less -- I mean you could read it but there was a summary judgment application or dismissal at the close of plaintiff's case.
As a matter of fact, the reason I say there are no issues of law here.
Judge Dawson decided this case on the facts.
And if you read his opinion, you'll see he not only analyzed the proof but he analyzed the failure of proof, which I am going to come to right now on what is really completely wrong with plaintiff's position factually in this situation.
Eagle Lion called as a two principal witnesses, a man named MacMillan.
MacMillan had been a lawyer in Troy, New York until he went into the World War II.
When he got out of World War II, he went to work for Robert T. Young as editor or publisher of -- I -- I forget the name of the publication but the purpose of it is how to run a railroad.
And this young man, MacMillan, worked on that Railroad Magazine until the middle of 1948.
Now, mind you, here's the Eagle-Lion coming along in 1946.
In 1948, he went in as vice-president, and then that was in June.
He testified, "I know nothing about the quality of pictures.
I know nothing about the distribution of pictures.
I have never sold a picture or tried to sell a picture.
What I did was in 1950, after the Paramount decree which is in this case, I went over to the vice-president of RKO, a man named -- was it Kingsberg -- Malcolm Kingsberg, and I told Mr. Kingsberg I didn't think we were getting a fair shake on the RKO Circuit, and if you don't treat us better, we're going to sue you."
That's MacMillan number 1.
MacMillan number 2 said, "I did the same thing to Moskowitz, the vice-president of Loew."
Now, this was 1950 just before they went out of business, merely to let the RKO Circuit and the other circuit know that they were going to be sued.
Now, that's MacMillan.
The other principal witness -- now, there are two others -- Gross.
He was a -- a statistician who went to work for Eagle Lion late in 1951 after the lawsuit was started, and his job was to construct figures upon which they would base their damage claims in the lawsuit.
Now here's Witness number 2.
Witness number 3 was a lawyer from California who was attorney for Eagle Lion out there, and he was allowed to testify.
Judge Dawson gave him the greatest latitude to every conversation with every punitive producer of a motion picture on his efforts to get production to release through Eagle Lion.
We objected to those, hearsay, we couldn't examine any of these alleged producers.
And that is set out in Mr. McGovern's brief as great length as their efforts to get production for release.
And when I read the brief, I took it for granted that Mr. McGovern was quoting from witnesses who actually testified.
Not one of them testified.
Now, we come to the second question and this is the most important thing in the lawsuit, from filure of proof.
When Eagle Lion started, a lawyer named Arthur Krim was the president.
That was in 1946.
A -- a man named Al Schwalberg was vice-president in charge of sales and distribution.
He was succeeded by William Heineman in 1947 late as vice-president in charge of sales and distribution.
MacMillan's other big testimonies that these two men were in charge of the sales and distribution but he never mixed into it and they were in full charge of it.
Now, on the time of the trial, Schwalberg, Heineman, Krim, Benjamin -- Benjamin was a member of their Board, Chairman of the Board at one time I believe but he's a member of the Board.
Every one of them were in New York City, has offices in New York City, and Judge Dawson asked them.
“Why have -- or who was in charge of these negotiations trying to sell pictures to leave the Loew's or RKO?”
Answer, “Heineman and Schwalberg.”
"Well, why then -- why aren't they being called?
Why aren't they witnesses here?
Why don't they come and tell the Court what efforts, if any, were ever made to sell a picture to either Loew Circuit or the RKO Circuit?"
The answer given by Mr. McGovern, "Oh, we can't call Mr. Heineman."
This is the questions put to him by Judge Dawson, "Well, why can't you call them?"
"Oh, he works for United Artist."
Well he's available.
"Do you mean to tell the Court that if he's called he won't tell the truth?"
Mr. McGovern's, "Oh no, he'll tell the truth."
Yet he never called Heineman.
He never called Schwalberg.
And as far as this record is concerned, there isn't one word of proof that Eagle Lion ever tried to license a single picture to either RKO or Loew's wherever turned down on a license.
And then you have the full admission by MacMillan, the president, "We do not claim," and I'll quote the answer.
Question, “And you so testified on your deposition, you are making no complaint against RKO or Loew's based upon discrimination against any individual picture released by you?”
Answer, "That is correct."
Unknown Speaker: (Inaudible)
Mr. Edward C. Raftery: I beg your pardon?
Unknown Speaker: What page are you reading?
Mr. Edward C. Raftery: Oh, that -- that's on page 124 of the record.
And Judge Whitaker, go one step further, you go to the next page of the record, 125 and an answer to Mr. Gillespie's questions he makes the same identical answer, "We are not claiming any discrimination on a single picture."
Now, Your Honors heard Mr. McGovern yesterday say they are making no claim against the treatment they received on their pictures first run in New York City.
Out of a hundred and -- they say a 196 -- there are a 195 pictures in reality but Red Shoes which I say is the only really great picture they had even though it was a foreign-made picture.
It wasn't treated as a foreign-made picture in this country.
In fact, they took the picture, rented the Visual theater in New York, a legitimate theater sold what's known in the trade is five tickets in reserve seats, showed it twice a day, rented two years and never let one of us get a look at it.
I mean for -- for our theaters until that full two years have expired (Inaudible).
Then we were shown first run at the Victoria Theater on Broadway just around the corner from where they played on the road show, played there a short engagement then we took it, played it across the circuit, RKO.
Everyone of our theaters gave him extended playing time, paid him 60 odd thousand dollars.
And I think one of the exhibit shows on the full engagement we made about $5000 profit, but they did it all right.
That picture is in twice sold a 196 pictures.
Now, out of 196 -- if you look at defendant RKO's Exhibit A and all these are taken from records, fairness does by the statistician Gross.
And Gross by the way I forgot to tell Your Honors, he testified and know nothing about the pictures were sold.
I don't know the quality if any -- all I can (Inaudible) to see the figures.
That's his testimony.
Now, out of the 196, 24 pictures received a first run in New York City.
Justice Hugo L. Black: Where is that exhibit?
Mr. Edward C. Raftery: It -- well all handed out Your Honor.
I -- we have them Photostatted and a sent made for each justice.
Justice William J. Brennan: What -- what's the number?
Mr. Edward C. Raftery: A, RKO-A.
I think that looks like --
Justice William J. Brennan: Yes, I have.
Mr. Edward C. Raftery: Yes.
Now, on the second sheet --
Justice William J. Brennan: (Inaudible)
Mr. Edward C. Raftery: I think Justice Whitaker has -- I think they're in an envelope for that character.
Justice Hugo L. Black: What is that copy --
Mr. Edward C. Raftery: Well, that's Loew.
Justice William O. Douglas: Isn't that what you have?
Mr. Edward C. Raftery: No, RKO-A.
I think they're in a -- they're in there, I think that's the folder.
Justice Hugo L. Black: I think it is.
Mr. Edward C. Raftery: Yes, yes, that's it.
Now, if you look at the second page, Judge Brennan, you'll see those are the pictures that they're able to get a first run and represented in Broadway theaters and you see they amount to 24 pictures and they've been given the benefit of the doubt on this setup by running pictures that played in the Globe Theater and paid frankly no film rental as well as the ones that played in the better, that group of theaters.
Now, on frankly everyone of those pictures, they got either a long half or a short half run it on either the RKO or Loew circuit.
And the figures that are reflected in the last column are -- that's an arbitrary figure set up by taking all the theaters, that was done by -- in that -- by the -- the petitioners.
They draw a line down the middle of the Hudson River and they ex -- extended all the way up to Tarrytown, then in Tarrytown, they draw a line across the Westchester County.
And then they bring it down through Westchester and include the five bars of the city in New York then go up Long Island Sound as far as where Hicks really is.
On Long Island, they chopped it off there.
They take all the theaters in that area and they add them to the -- to the film rental, they got and they call that "New York Metro Rental".
Now, that's at the last column.
The first run rental is on the second column.
The New Yorkers changed rental is on the other column and you can see from the examination, a lien, the first run film rental was in New York City all of it which played on percentage.
In fact you have a picture like Jackie Robinson Story which was a very timely pictures when Robinson was playing second base for the Dodgers and the Dodgers were independent that year and the picture was released during the ball season.
The other played at Aster Theater, no film rental, none -- during -- none on the percentage deal, yet we paid a very substantial film rental to them because we intelligently booked it in as the evidence shows over the Labor Day just before the world series.
And we did a fine business in the RKO houses with it.
And I think the witness testified and in addition, we are blessed with rain on the holiday which kept the people in going to the theaters, so we -- it was well done.
Now, there is the situation and there is the first witness in their Senate.
They can't get their pictures played first run in the good houses.
Mr. Downing, the head of the music hall, was called as a witness by Loew's.
He said they -- Eagle Lion asked him to screen four pictures.
During the whole time, he screened the four but he didn't find anyone of the four suitable to be shown in the music hall, but their product was not music hall product.
And then if you look at the art page on the front, I -- I'm not disdainful of art theaters.
In fact, I'd personally gone on more art theaters than I do the regular theaters.
There are single bills and -- and they're generally well-made artistic pictures, and on any of the played pictures were any good at all, they did all right.
They quartet the second one.
They claimed they got 121,700 film rental on the first run for Sutton Theatre, New York.
It's a beautiful film rental.
Then they say in the New York Metro area that's that imaginary area they've set up, they got a 173,200.
And it goes down the line.
They had a market for the art pictures in the art theaters, you have art theaters here in Washington, they had them in and they do very well.
In New York, we had more of them than you have in most places.
However, the big problem is that the picture after picture release by them never saw the light of day in the first run in New York house.And those are the pictures that had the trouble everywhere.
Now, Youngstein was called -- what is that, you mean five minutes or am I through?
Chief Justice Earl Warren: (Inaudible)
Mr. Edward C. Raftery: Oh, I'm sorry.
Well, I got a lot more I'd love to say but I think the briefs cover it all.
And I'm -- think this case was decided on the facts by Judge Dawson.
He's written a beautiful opinion, an analytic opinion.
He saw the witnesses.
He saw their failure to prove they haven't tried to reach our market, and he has so referred to it in the -- out return on that note.
Chief Justice Earl Warren: Mr. Raftery, these facts it seems to me are very important.
Either you or your -- or your associate should -- should carry on with them and -- and give them to us because I -- it seems to me that they're most important.
Mr. Edward C. Raftery: Well, I'd be very happy to take off and talk right on (Inaudible)
Chief Justice Earl Warren: All right.
If you will.
Mr. Edward C. Raftery: (Inaudible)
Justice Felix Frankfurter: The oral argument is for.
Argument of S. Hazard Gillespie Jr.
Mr. S. Hazard Gillespie Jr.: Mr. Chief Justice, members of the Court.
Chief Justice Earl Warren: Proceed.
Mr. S. Hazard Gillespie Jr.: I speak for the respondent, Loew's Incorporated.
During the period involved in this suit, Loew's Incorporated was engaged not only in the production and exhibition of pictures but in the operation of theaters, a number of which where in the New York area.
Mr. Raftery, as he was concluding his argument was about to make reference to a Mr. Youngstein.
Mr. Youngstein, he mentioned, was in charge of exploitation and advertising and promotion of the Eagle Lion pictures.
He was called not by my friends but I called him.
I called him because I was tremendously interested in having someone testify as to the quality of these pictures who would know about the quality of these pictures and could inform the Court of what Mr. Raftery has been saying in general to you gentlemen here.
Mr. Youngstein testified that he was with Eagle Lion commencing in 1946, the damage period involved here and right down to almost the end of the period.
He then left Eagle Lion, but he said he was familiar as to all of these pictures.
And if Your Honors will refer to his testimony which is not very long, you will find that he testified that the pictures that he had by and large were just the drecks of the motion picture industry.
That so far as their suitability for the New York market were concerned that they were far inferior to the product of the eight major distributors, that he was had the task of trying to exploit those pictures and that he knew.
Chief Justice Earl Warren: Is there anything that contradicts that?
Mr. S. Hazard Gillespie Jr.: Not a word, Your Honor.
Not a word.
My adversaries didn't call a single person to contradict that testimony.
On top of that, I called Mr. Downing, Mr. Russel Downing, he was the head of the Radio City Music Hall in New York, absolutely independent house, no connection with any of us.
He testified to the same thing.
He said that he had shown pictures of every one of these eight distributors over this period of time and a number of many of them, he had screened as they say, the pictures of Eagle Lion but he could not find one that was satisfactory for the -- for his theater.
And he furthermore testified that that comparative suitability, the same by Mr. Youngstein, that they were vastly inferior to those of the eight mentions for the New York market.
Now, we did not stop there.
You've heard Mr. McGovern say here today and this was -- was pretty key in this situation.
He said, "All we ask is the same break that they got on their pictures."
“We had and they had” he said, “westerns.”
He kept emphasizing that we were seeking the same break.
Now, in connection with that, I think I should tell Your Honors that Mr. McGovern felt and argue to the District Court that quality of pictures is something that you cannot testify to in the abstract.
That he felt that box office rentals, once you got in the form of rental for your pictures across the country was what really control in determining whether you had quality.
And if Your Honors will permit me, I'd like to refer to that place in the record where Mr. McGovern said this to the District Court.
Excuse me just for a moment.
On page 265 of the record, Mr. McGovern stated to the District Court, “I say that the only alternative that we have is to compare a performance of our pictures in this area with the performance of their pictures in this area.
And I know of no way it can be done except relating these performances with our nationwide film rentals which is the best index of quality you have.
It isn't the question whether it play Broadway first class or second class house.
The question is what -- the question is what it did actually take into the box office in terms of film rental.”
Now, he had previously taken the position to the District Court that the quality of these pictures was to be shown that the quality of these pictures that all he was asking for was a comparison of pictures of like quality.
In other words, our pictures are of a certain quality with his pictures of a certain quality.
So when his accountant took the stand and put in this testimony that Your Honors have heard about, showing that they got 6.4% of their national rentals from the New York Metropolitan area whereas we got 8.9% of our -- or the major distributors got 8.9% of their -- of their national film rentals from the New York area, we asked that accountant on cross-examination if he could breakdown those figures on a basis of comparative film rentals.
In other words, all pictures grossing, let's say, nationally up to a $100,000.
And then all pictures grossing from a $100,000 to $200,000 and from $200,000 to $300,000 and so on to see if the pictures of comparable national film rentals which he said is the best test of quality actually performed better or worse in the New York market.
And the results of that -- of that question -- of that questioning, two years accounting expert are set forth in Loew's Exhibit B which is here in the record and I'd like to take Your Honors time for a moment to look at that.
It's at page 668 of Volume 2 of this record.
It's a table that draws out -- Mr. Justice Douglas, it's a long sheet right there.
Now, if Your Honors will look at this table, this as I say was developed completely on cross-examination of their accountant.
It is his figures and he verified them for me afterward.
You'll see in the lower left hand corner the familiar, 196 which is the number of the Eagle Lion pictures on which their claim is predicated.
You'll see over in the right hand middle of the page, the 96 so-called "median pictures" which are supposed to be representative of the eight major distributors.
And then you will see, in addition to that, the familiar 6.4 in your ratio, right opposite your 196, and you'll see the familiar 8.9 over at -- on the right hand side as the ratio of the eight distributor defendants.
Now, I asked, as I mentioned a moment ago, the accountant for Eagle -- for Eagle Lion to break these down and to tell me what the percentage would be on pictures under 100,000.
These poor-class pictures which she said he wanted to have the same treatment as our poorer-class pictures.
So those 97 pictures, we see the ratio with 6.9%.
In other words, they got 6.9 of their national film rental out of the New York market.
What did we -- what did the eight distributors get?
They had seven pictures under a 100,000 and they got 5.2.
In other words, substantially less out of the New York market than did Eagle Lion.
We then got past to the next category of 100,000 to 200,000.
They had 51 pictures, they had 5.4%.
The eight distributors had 10 pictures in that class.
They got only 4.9%.
So on in each $100,000 category, right straight through up to $500,000.
And you'll find that 177 of their pictures out of their 196 had a -- a percentage of 6.2% whereas the eight distributors had 35 pictures under $500,000 and had 5.9%.
In other words, up to $500,000 in every single category, they had a higher percentage than the eight distributors.
Justice John M. Harlan: Do this cover the whole period of the alleged conspiracy?
Mr. S. Hazard Gillespie Jr.: It does, Your Honor.
It covers the entire period that -- for which damage is claimed.
That is from 1946 to 1950.
Now, there are 19 States as I say --
Justice William O. Douglas: I suppose if -- if we had agreed with the late Judge Clark with -- with his impression of term office would be (Inaudible) of the jury, the trial --
Mr. S. Hazard Gillespie Jr.: Well, I would think this was a question for the trial of the case and it was before Judge Dawson.
And of course, he came to his findings that show up, Your Honors may not be familiar with.
And that is at the close of his opinion, he said, “Plaintiffs had failed to prove that any losses which they may have sustained were approximately caused by any combination or conspiracy on the part of the defendants to deprive the plaintiffs of such -- such opportunity to license their pictures on a competitive basis.”
Justice William O. Douglas: Where is that and what page?
Mr. S. Hazard Gillespie Jr.: Page 581 of the record, Mr. Justice Douglas.
Justice William O. Douglas: That was (Inaudible)
Mr. S. Hazard Gillespie Jr.: Yes, they did, Your Honor and I was -- actually that was two minutes of the opening of my argument but I did want to follow forward with what the Chief Justice had in mind.
Justice Felix Frankfurter: Mr. Gillespie --
Mr. S. Hazard Gillespie Jr.: They --
Justice Felix Frankfurter: -- in view of Justice Douglas' question--
Mr. S. Hazard Gillespie Jr.: Yes.
Justice Felix Frankfurter: -- I hope -- I'd like to say, I hope you leave yourself time to deal explicit with the claims, with the contention of the amicus brief.
Mr. S. Hazard Gillespie Jr.: Your Honor, I will try to do that.
I would -- I would do my best to do that.
I'll watch the clock halfway.
Mr. Justice Douglas, to answer --
Justice Felix Frankfurter: But I think, they're got to cross under this.
Mr. S. Hazard Gillespie Jr.: It -- it may, it may, I -- I'm going to get to the -- the law in a -- just a few moments.
Justice Felix Frankfurter: It's particularly that.
Mr. S. Hazard Gillespie Jr.: Mr. Justice Douglas, to answer your question as to Judge Waterman.
If Your Honor will look at page 692 of the record, you'll see that Judge Waterman set out the two questions which were framed by the pre-trial order there.
One was, "Did Paramount establish this conspiracy?"
And two, "If so, did that -- was it that conspiracy which was the proximate cause for the losses suffered by Eagle Lion?"
And then Judge Waterman went on and said, "The trial Court answered both questions in the negative and dismissing the complaint, end of judgment for the defendants."
On appeal, we affirmed that judgment since we discerned no error of law in the proceedings below and we do not believe that the trial Court's findings of fact were clearly erroneous citing Rule 52 (a).
And they considered themselves bound by the finding made by Judge Dawson to the effect that the petitioner's loses were not proximately caused by any conspiracy or combination on the part of the respondents.
Justice William O. Douglas: (Inaudible)
Mr. S. Hazard Gillespie Jr.: I do, Your Honor, I do.
Now, if I might just go back for a moment to that Loew's Exhibit B where we saw that 177 of these pictures, that is 90% of the petitioner's pictures on their own figures, did better in the New York market than those of the eight distributors.
That leaves 19 pictures out of their 196 in which on their figures, they did not do as well.
So what did we do about that?
I have an exhibit made up.
We looked into every one of those -- those pictures, and if Your Honor just turn a few pages beyond Loew's Exhibit B to Loew's Exhibit F which is printed in the same volume, just a few -- pages 672, a -- as to everyone of those 19 pictures where they didn't do as well as our pictures or as these eight distributors' pictures, as to every single one of those pictures, they got a complete showing on the entire Loew's or RKO circuit and that is shown on this exhibit.
You'll see, for example, (Inaudible) as the first one that's listed there.
It's showed in 60 Loew's theaters.
And then Out of the Blue, on the same show, also showed in 60 Loew's theaters.
We -- not only were those pictures got a complete showing on the Loew's and the RKO circuit but of that number, 17 of these pictures had what is called the preferred playing time, that is the long half of the week.
And of that number --
Chief Justice Earl Warren: Now during of their top billings?
Mr. S. Hazard Gillespie Jr.: Six of them, Your Honor --
Chief Justice Earl Warren: Six.
Mr. S. Hazard Gillespie Jr.: -- had top billing.
Now, on additional reason that I call Mr. Youngstein here in charge of promotion and exploitation is I wanted to find out if those pictures have had the treatment that he thought they were entitled to.
And he testified unequivocally that viewing the product that was available at that time, in that situation, he said, “I regarded those pictures, every one of them had the playing position to which they were entitled.”
Now, that testimony stands absolutely uncontradicted, there's no evidence in this record that cuts across it in any way whatsoever.
So here, you have a picture that on 177, 90% of their pictures, they did better than we did.
On the remaining pictures where they didn't do quite as well, their own man in charge of exploitation and promotion said that they got the playing position to which they were entitled.
Now, if I may refer back once more to Mr. McGovern's statements at the opening.
And I say the opening of the trial of this case because that's before we cross-examined their accountant and brought out these categories of equal quality as they say.
In his opening, Mr. McGovern stated to the Court -- excuse me just a moment.
I'm reading Your Honor from page 31 of the record.
This was Mr. McGovern's opening referring to these percentages that they were going to rely on this case.
And I'm not starting at the beginning of this sentence, I want to say that to the Court because I don't think the opening part of it bears on what I have to say, it's a long sentence.
And it's the following paragraph that I want to bring particularly to Your Honors' attention.
It's page 31, I'm reading opposite Folio 25.
“We will undertake to show that during this period of time, we derived from this New York metropolitan first-run area about 6.-- 6.4% of our total national gross absent the New York -- New York metropolitan area whereas the defendants during the same period of time were taking out of New York on the average, 8.9% of that total national gross.
Now, this is what is important.
It is our contention that this is the only fair and valid measure we can use as a yardstick to determine what the impact of the conspiracy upon us was.”
In other words, at the time of his opening, these figures were offered as the only fair proof of impact upon him.
Well now, Your Honors, you can see what has happened when those statistics are really taken apart as they were by his own accountant.
We submit that there was just no proof of impact as far as this is concerned.
Now, if I may now turn for a few moments from the facts and go back to -- go back to the subject of the law, turning to the two questions which the District Court had before it and as we understand it, the two questions which the Court of Appeals had before it and as we believe, the two questions before Your Honors have before you.
That is whether Paramount, the first 20 years, whether Paramount established a conspiracy in combination on the part of RKO and Loew's to deprive the petitioners of the opportunity of licensing their pictures competitively to the Loew's and RKO circuits.
Second -- and of course, is whether assuming such a combination or conspiracy, there was proof of impact of that combination or conspiracy upon the petitioners here.
I'm addressing myself to the first of these two questions now.
Preliminary, let me make it absolutely clear, the District Court admitted not only the decree in United States against Paramount, but admitted the findings and the conclusions and he spent days pouring over the record in United States against Paramount, which as Your Honors know was a very lengthy one.
Furthermore, the Court of Appeals did not confine its consideration of the decree and the findings and conclusions solely to this controversial finding, 154 (d) which I'll refer to and talk with you about in a moment, and conclusion of law 16, which is the petitioners and I believe the amicus brief would have you understand.
At the time that the decree and findings and record were offered in evidence in the District Court, Judge Dawson said that under the Emich decision of this Court, and I quote from page 52 of the record.
“The Court may look at any of the papers or record or any other papers," and I end the quote.
Similarly, Judge Waterman, after he had finished discussing this subject and particularly discussing 154 (d) and conclusion of law 16, went on and said and I quote from Judge Waterman, “In addition to finding number 154 (d) and conclusion number 16, the appellants call our attention to findings 84, 99, 100, 127, 147 (c), 156 (b) and 158 and conclusions number 7 and 12 of the final decree in the Paramount.
We have examined these findings and conclusions as well as the many other findings and conclusions embodied in that decree.
We conclude that their relevance of the issues here in suit is even less than that of finding number 154 (d) and conclusion 16 which are discussed in detail in our opinion.”
Now, I have emphasized the scope of the consideration given by the District Court and the Court of Appeals here.
Because while the petitioners may differ with those Courts on the question of whether or not the Paramount findings and decree can be interpreted as establishing the conspiracy which they claimed to exist here.
I don't think that they can claim successfully that the Emich decision was now in any way -- or that the application of prior decrees under Section 5 of the Clayton Act has been limited.
I think they can disagree and undoubtedly do whether -- or entitled in this world to disagree with the proposition of the interpretation of that decree.
But I don't think Judge Dawson or the Court of Appeals narrowed the rules at all.
They looked at it and they came -- just came to a different interpretation.
Now, I would like to refer just one moment to this 154 (d) and 16 which are the ones where I think they're key as far as the conclusion which was reached by the lower court -- that the lower courts, that to this -- that the decree in the Paramount case did not establish the conspiracy claim to exist here.
Now, the key words of 154 (d) which are set out at page 636 of the record are as follows, and I think Your Honors will be familiar with them.
In New -- they will be familiar to you.
In New York City, Loew and RKO divided the neighborhood prior run product of the various defendant distributors.
I emphasize those words, "of the various defendant distributors," under a continuing arrangement so that there was no competition between them in obtaining pictures.
Petitioners urge below as they do here that this was the finding, that there was no competition between Loew's and RKO not only in obtaining the pictures of the defendant distributors referred to in the finding but any pictures.
Now, we strenuously disagree with this.
We recognize that 154 (d) is a finding that there was not competition between Loew's and RKO for the product of the eight distributor defendants.
But we insist that it does not follow from that, that there was not competition between these same Loew's and RKO for the product of other distributors.
And with that, the District Court agree and also the Court of Appeals.
Justice Felix Frankfurter: Mr. Gillespie, the -- the burden of the Government's position as I understand it, usually a figure of speech which I suppose is that the decree was a fagot.
Mr. S. Hazard Gillespie Jr.: A -- a fagot?
Justice Felix Frankfurter: A fagot.
Mr. S. Hazard Gillespie Jr.: Yes.
Justice Felix Frankfurter: They have to go through the state.
In other words, the decree began to take a particular, 154 and so on.
But -- but they're interrelated and that each affects the other (Inaudible) and you can't take it apart.
What do you say to that?
Mr. S. Hazard Gillespie Jr.: Well, Your Honor --
Justice Felix Frankfurter: And from that, and -- and your -- and the conclusive -- and from that, there emerged condemnations beyond what is found in specific viewers.
Mr. S. Hazard Gillespie Jr.: Well, Your Honor, if I can continue the figure of speech.
I would say here that I'm dealing with the burning end of the fagot at this point because this is the thing that they drive home on us all of the time.
And I think this is the only finding and conclusion which specifically refer to this New York area.
And while I think they do like to think in terms of trying to bring in as much of the other findings, they honestly -- I can't go take the time now to go through every one of them with Your Honor, but I think when Your Honor does look at them, you will see that Judge Waterman is correct.
There is less relevance to this than these specific findings and conclusion which do point admittedly right at the New York area.
Justice Felix Frankfurter: They say that the provision that Paramount decree established, found and decreed of the venues of the third.
What you're saying is, no matter how (Inaudible).
Mr. S. Hazard Gillespie Jr.: Quite right, Your Honor.
It must be aimed at the particular local area if you're going to use it as prima facie proof of a situation in a local area as they have done here.
Now, I would -- we -- in saying that this finding, number 154 (d), does not mean that there was no competition between us for other pictures.
We don't just rely on the language of that finding at all.
But we do rely upon the fundamental theory of the Paramount case.
Justice John M. Harlan: Did the Government file an amicus brief in the Court of Appeals?
Mr. S. Hazard Gillespie Jr.: They did not, Your Honor, they did not.
Your Honors will recall that in your opinion in United States against Paramount, it was said that the chief argument at the bar is placed in terms of monopoly of exhibition.
And then further on in the same opinion, the central problem presented by these cases is, which exhibitors get the highly profitable first-run business.
In other words, you have a picture here in Paramount where exhibitors, theater operators was scrambling for the early showing in their area, in their neighborhood of the best possible pictures and at the earliest possible time.
Now, in view of that we say, if Loew's and RKO were doing the same thing and they're accused of having -- doing the same thing and taking up too much as between themselves, they were doing the same thing with respect to pictures which were not part of this conspiracy.
And therefore, we feel that under those circumstances, that no inference can be drawn, that there was no competition between Loew's and RKO with respect to other pictures.
And I submit the evidence bears this out completely.
We offered proof that during the period from 1946 to 1950, the Loew's theaters showed no less than 89 of the 196 pictures of Eagle Lion, and RKO showed even more over a hundred.
And on top of that, we offered proof that we showed the product of 38 other independent distributors during that time.
And I say in light of that, you cannot draft on to Section -- to finding 154 (d) any idea that there wasn't competition between us for the product of other distributors.
For now, we believe that the District Court and the Court of Appeals were correct not only in their conclusion with regard to United States against Paramount but we think perhaps even more important because if Your Honors concur in this view, it is not necessary to go on to the question of the application of U.S. against Paramount, that assuming any combination or conspiracy that there was not established in any way with respect to this second question that there was any impact of this conspiracy as against the petitioner's pictures.
And we submit that the judgment below should be reversed.
Justice John M. Harlan: Could I ask you one --
Mr. S. Hazard Gillespie Jr.: Yes, certainly.
Justice John M. Harlan: -- before you sit down, Mr. Gillespie.
The last sentence of Judge Waterman's opinion -- sorry to hold you up.
Mr. S. Hazard Gillespie Jr.: That's all right, I think maybe I can find it for you, 705 of the record, I got it.
Justice John M. Harlan: 705, thank you very much.
He says, ”Since the conspiracy was not proven, we do not examine the questions plaintiff raises -- raised relating to the elements of the alleged damage they claim they have suffered with respect to which much of their expert testimony is directed.
I take it that you interpret that as referring not to impact but to monetary damage, is that it?
Mr. S. Hazard Gillespie Jr.: Exactly, Your Honor.
Furthermore, I think if Your Honor will turn back --
Justice John M. Harlan: I know the earlier part (Voice Overlap) --
Mr. S. Hazard Gillespie Jr.: To the earlier part, that's what leads us to believe that --
Justice John M. Harlan: And so comes my question.
Mr. S. Hazard Gillespie Jr.: Correct.
Justice John M. Harlan: I thought it was not (Voice Overlap) --
Mr. S. Hazard Gillespie Jr.: Well, we think he was talking in terms of amount -- the third item, amount of damages.
Justice John M. Harlan: (Inaudible)
Mr. S. Hazard Gillespie Jr.: (Inaudible) Mr. Gillespie told you in part (Inaudible) bought pictures from 38 different distributors during the (Inaudible).
We have to go into 31 different (Inaudible)
Chief Justice Earl Warren: Mr. McGovern.
Rebuttal of William L. Mcgovern
Mr. William L. Mcgovern: If the Court please.
Coming to this last point that Mr. Gillespie was dealing with as to the treatment of District Court, the Court of the Paramount case, I should like to simply point the Court's attention of the fact that the District Court said at the conclusion of the discussions of Paramount case.
The Paramount case did not involve the issue as to whether the plaintiffs were prevented from licensing their pictures on an equal competitive basis to the defendants.
That decision was not put in that case.
The decree in that case does not constitute prima facie evidence of any such ultimate fact because I'll repeat in the next paragraph.
“In the absence of actual combination or conspiracy deprived the plaintiffs of an equal competitive opportunity.”
Now, I pointed out in my argument -- my main argument.
I simply reiterated that I do not know how you monopolize a market, at the same time allow independence, they have competitive access to that market.
It seems to me that these are mutually exclusive.
And if the Paramount judgment is given the benefit for which we claim, and if accordingly, it is found that RKO and Loew monopolized the first neighborhood run in New York, then manifestly, we were denied competitive access to that market.
Of course we weren't entirely excluded, there's no argument about that, but I'm saying that clearly that all that was left for us was whatever marginal means these two theater circuits might have after they took care of their assigned co-conspirating distribute -- co-conspirator distributors.
Now, both lower courts refused to take much stock in the notion that because the product of the eight measures was split right down the middle as I explained on Monday.
Indeed, because they split the universal power right in half, both lower courts refused to believe that that meant that RKO and Loew have some sort of an obligation to take care of their assigned co-conspirators.
This is the reason why the other findings in the Paramount case are important.
This is the reason why the Government agreed, I assume, addresses the Court's attention to that fact.
Finding 147 for example, set forth in the record at 629 reads as follows, this is a finding by the three-judge court in Paramount.
“The interdependency of defendants to obtain pictures for their theaters on the one hand and on the other hand will obtained theater outlets for their pictures.”
In other words, both ways.
To get pictures for the theaters, theaters for the pictures has lessened competition among defendants and between them in independence."
Down in Finding 84, the Court found both independent distributors such as ourselves, both independent distributors and exhibitors when attempting to bargain with the defendants, had been met by a fixed scale of clearance runs and admission prices to which they -- to which they have been obliged to conform if they wish to get their picture shown upon satisfactory terms.
And in Finding 148 (f), the three-judge court again held, "This power, that is the monopoly power they have just described resulting from this circuit tie-in, “this power might be exercised either against non-affiliated exhibitors or distributors for the ownership of what was generally the best first run theaters coupled with the possession by the defendants of the best pictures, enable them substantially to control the market in first run pictures”.
Now, our position on that is quite simply that if you place Findings 154 (d) and conclusion 16 with regard to the local market in New York, if you place it properly in the context of the overall Paramount findings, you can't escape the conclusion that in New York, RKO and Loew monopolized the theaters and split the product of their assigned co-distributors.
And then of course, in order to be taken care of in the West Coast by Fox and Chicago by Paramount in New York and -- or in New England and other places by Warner, in order to be taken care of their -- reciprocally, they had to take care of the distributors in New York, in the market which they controlled.
And I'm saying that that being the case, having found monopolization, if we are given the benefit of that decision, then it's impossible to find that we were granted competitive access and the truth of course is we were not.
Now, Mr. Raftery speaks of failure of proof.
He extols two men, Mr. Heineman and Mr. Krim here today.
We didn't call Mr. Heineman though we believe that he was a first rate motion picture distributor.
He was vice-president of our company during the critical period.
We didn't call him because at the time of trial, he was working for the United Artist Company, one of the co-conspirators here, one of the defendants in the Paramount case.
We didn't call Mr. Krim.
He was also working for United Artist at the time but let me point out to the Court that we didn't have to call Mr. Krim at the time of trial to see whether he had any ex post facto rationalizations for what happened to us here because we had evidence from Mr. Krim in the record as to what was happening at the time.
And I address the Court's attention to a letter that appears in the record at page 650, “Well, Mr. Krim who at that time was president of Eagle Lion, he has since become a great statesman according to them but at the time, he was distributing and producing for Eagle Lion, you would suppose he was nothing.”
But in 1948, he wrote to Mr. Vogel of the Loew's circuit and said, “Joe, this is a really pathetic situation.
Before I took on my present responsibility, I naturally knew what the New York problem through my activity as counsel for the distributors.”
In other words, Mr. Krim have been on the inside, he was no neophyte here.
“But I never realized the true impact until it was this opportunity to see working first hand.
We have put money, time and energy of I don't know how many people in the task of building our company.
We have labored night and day for the past two years.
I have tried to demonstrate the vigor and the initiative to take on obstacles as they come along and lick them but nobody has come up with any answer in New York.
There is no doubt the solution must be found, no company operating on a scale such as power has confined permanent stability about having a fair chance of getting on the screen in New York City.”
He then raised four questions.
He says, “We've been doing well throughout the country but in practically, every other situation that we have broken down by shear force yet in New York, we are still limping along.”
He said, “Frankly, I find it impossible to explain this bottleneck to a Mr. Young and the other people who have poured so much money into our operation.”
Now, he says, “Apart from everything else, we have two programs that without any doubt, are entitled to go down the line.
One, Noose Hangs High and Raw Deal, the second, Canon City and Mickey.”
Let's just take those four.
The reply back from Mr. Vogel is, “Dear Arthur, I love you very much and we're doing the best we can to get you in but frankly, as of those four pictures of yours," and on page 652 of the record, Mr. Vogel speaks, “Presently, we entertain a difference” he says, “of opinion as to Noose Hangs High and Raw Deal as a double feature show.
We think it would be a great mistake to book those two films together.
Mr. Picker notified Jack Schlaver (ph), one of our employees, that we would be willing to take a chance and play Canon City and Noose Hangs High together on one bill.
We disagree also on Mickey.
We think this is a small picture and could only be used on the short half.
Raw Deal could be used as a second feature on the long half.”
Now, I'm saying that those are the words of the monopolist explaining to us why his arbitrary noncompetitive judgment is what it is.
I suggest under the anti-trust laws, we were entitled a competitive judgment and that's what we're asking for.