Theatre Enterprises, Inc. v. Paramount Film Distributing Corp.

98 L. Ed. 2d 273 · Supreme Court of the United States · 1954

Facts

Theatre Enterprises, Inc. operated the Crest Theatre, a modern suburban cinema located six miles from downtown Baltimore. It repeatedly sought first-run films, initially exclusive then "day and date," from respondent motion picture producers and distributors. Respondents uniformly denied these requests, adhering to an established policy of restricting first-runs to eight downtown Baltimore theatres. They cited economic unfeasibility due to competition, lack of downtown exhibitor waiver for clearances, and the Crest's suburban location, limited drawing area, and advertising disadvantages compared to downtown venues. This uniform refusal confined the Crest to subsequent runs and unreasonable clearances.

Procedural history

Petitioner Theatre Enterprises, Inc. sued respondents for treble damages and an injunction under the Clayton Act. A jury returned a general verdict for the respondents, which the Court of Appeals for the Fourth Circuit affirmed. The Supreme Court granted certiorari to review the case.

Issue

Did the uniform refusal by film distributors to grant a suburban theater first-run films constitute an illegal conspiracy under the Sherman Act, or was it independent business judgment? Did the trial court err in its jury instructions regarding the evidentiary weight of prior antitrust decrees against the same defendants?

Holding

The Supreme Court affirmed the lower court's judgment, holding that the jury's finding of no conspiracy was supported by evidence of independent business judgment. The Court also found the trial judge's instructions on prior antitrust decrees to be adequate.

Rule

While parallel business behavior is admissible circumstantial evidence from which a jury may infer an agreement, it does not conclusively establish a Sherman Act conspiracy. Such behavior can be rebutted by evidence of independent business judgment motivated by legitimate economic factors. Prior antitrust decrees are only prima facie evidence of a conspiracy for the specific area and period covered, requiring additional proof to apply to new factual situations or different timeframes.

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