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IPIC-GOLD Class Entertainment, LLC v. AMC Entertainment Holdings, Inc.

Court of Appeals of Texas, First District

December 5, 2019

IPIC-GOLD CLASS ENTERTAINMENT, LLC AND IPIC TEXAS, LLC, Appellants
v.
AMC ENTERTAINMENT HOLDINGS, INC., AMC ENTERTAINMENT, INC., AND AMERICAN MULTI-CINEMA, INC., Appellees

          On Appeal from the 234th District Court Harris County, Texas Trial Court Case No. 2015-68745

          Panel consists of Justices Lloyd, Kelly, and Hightower.

          OPINION

          Peter Kelly Justice.

         This is an appeal from a summary judgment in an antitrust case. See Tex. Bus. & Com. Code § 15.05. In the underlying suit, iPic alleged that AMC and Regal[1] conspired with each other and with third parties to exclude them from exhibiting popular films at two locations in Texas-Houston and Frisco. The trial court granted a temporary restraining order in iPic's favor, which this court affirmed. See Regal Entm't Grp. v. iPic-Gold Class Entm't, LLC, 507 S.W.3d 337, 356 (Tex. App.-Houston [1st Dist.] 2016, no pet.) (iPic I). Regal settled with iPic, leaving only AMC as a defendant.

         AMC moved for summary judgment on no-evidence and traditional grounds. AMC argued that its evidence conclusively disproved both the existence of a conspiracy and damages caused by AMC's actions. Without specifying the grounds, the trial court granted final summary judgment in favor of AMC, and iPic appealed.

         On appeal, iPic asserts that: (1) the trial court erred by granting summary judgment for AMC on iPic's restraint of trade claim; (2) as a coconspirator, AMC is jointly and severally liable for damages sustained by iPic Houston; (3) it presented more than a scintilla of evidence that AMC and Regal engaged in an illegal horizontal conspiracy; and (4) AMC did not conclusively prove the absence of conspiracy, and, alternatively, its responsive summary-judgment evidence raised a genuine issue of material fact as to the existence of a conspiracy.

         We reverse the trial court's judgment, and we remand the case to the trial court for further proceedings.

         INTRODUCTION: THE FILM INDUSTRY AND ANTITRUST LAW

         The film industry is comprised of three segments: producers, who make the movies; distributors, who license them to movie theaters; and exhibitors, who play the movies at theaters for movie-going audiences. AMC, Regal, and iPic are movie exhibitors. AMC and Regal largely provide a traditional theater experience, and iPic provides a premium experience that includes larger seating, as well as enhanced food and beverage service.

         Exhibitors do not purchase the films they show; rather, they license the right to show them by competitive bidding or negotiation. See generally U.S. v. Paramount Pictures, 334 U.S. 131, 154-55 (1948) (discussing bidding and licensing); Note, Blind Bidding and the Motion Picture Industry, 92 Harv. L. Rev. 1128 (1979) (explaining business practices in the film industry). Exhibitors have obtained exclusive or semi-exclusive licenses called "clearances." See Paramount Pictures, 334 U.S. at 145 & n.5. These exclusive licenses prevented other theaters from playing the same movies at the same time, a practice called "day-and-date" exhibition.[2] See Theatre Enters., Inc. v. Paramount Film Distrib. Corp., 346 U.S. 537, 539 n.7 (1954).

         Film industry licensing practices have given rise to numerous antitrust lawsuits. E.g., Theatre Enters., 346 U.S. at 539; Paramount Pictures, 334 U.S. at 131; Regal Entm't Grp. v. iPic-Gold Class Entm't, LLC, 507 S.W.3d 337, 342 (Tex. App.-Houston [1st Dist.] 2016, no pet.); Cobb Theatres III, LLC v. AMC Entm't Holdings, Inc., 101 F.Supp.3d 1319, 1330 (N.D.Ga. 2015); Theee Movies of Tarzana v. Pac. Theatres, Inc., 828 F.2d 1395, 1398 (9th Cir. 1987); Paramount Film Distrib. Corp. v. Applebaum, 217 F.2d 101, 124 (5th Cir. 1954).

         Some cases challenge vertical restraints of trade like clearances, as when an exhibitor plaintiff sues one or more distributors and one or more exhibitors.[3] E.g., Orson, Inc. v. Miramax Film Corp., 79 F.3d 1358, 1366-68 (3d Cir. 1996); Theee Movies, 828 F.2d at 1397. Like other vertical restraints of trade, clearances are evaluated under the rule of reason, which requires the court to determine the reasonableness of the restraint by balancing the restraint's positive and negative effects on competition. See Paramount Pictures, 334 U.S. at 145-46 (listing competitive factors that could justify clearances as reasonable, and therefore legal, restraints of trade); Theee Movies, 828 F.2d at 1397. "Clearances that are 'unduly extended as to area or duration,' or granted over theatres 'not in substantial competition,' may be unreasonable under section 1" of the Sherman Act. Harkins Amusement Enters., Inc. v. Gen. Cinema Corp., 850 F.2d 477, 486 (9th Cir. 1988) (quoting Paramount Pictures, 334 U.S. at 145-46).

         Another type of antitrust claim involving the film industry alleges a group boycott. E.g., Southway Theatres, Inc. v. Georgia Theatre Co., 672 F.2d 485, 487 (5th Cir. 1982) ("Southway alleged that the appellees-competing Atlanta theatre chains and national film distributors-conspired to deprive Southway of the opportunity to license first run films and sought to eliminate it from competition in the licensing and exhibition of those films."). A group boycott involves "concerted action among other firms aimed at keeping the victim firms from competing." Id. at 492 n.6 (quoting L. Sullivan, Handbook of the Law of Antitrust 231 (1977)). "'Group boycotts' are often listed among the classes of economic activity that merit per se invalidation under § 1" of the Sherman Act. Nw. Wholesale Stationers, Inc. v. Pac. Stationery & Printing Co., 472 U.S. 284, 293 (1985). Although "not all group boycotts are predominantly anticompetitive," when "firms with market power boycott suppliers or customers for the purpose of discouraging them from doing business with a competitor," courts apply a rule of per se illegality under antitrust laws. Marlin v. Robertson, 307 S.W.3d 418, 428 (Tex. App.-San Antonio 2009, no pet.) (citing Nw. Wholesale Stationers, 472 U.S. at 293, then F.T.C. v. Ind. Fed'n of Dentists, 476 U.S. 447, 458 (1986)).

         Still other antitrust claims arising from the film industry involve allegations of "a practice known as 'circuit dealing, '" which "occurs when a defendant pools the purchasing power of an entire circuit" to prevent small exhibitors from bidding for film licenses on a theater-by-theater basis. Cobb Theatres, 101 F.Supp.3d at 1342; see also Cinetopia, LLC v. AMC Entm't Holdings, Inc., 18-2222-CM-KGG, 2018 WL 6804776, at *1 (D. Kan. Dec. 27, 2018) (denying motion to dismiss movie theater's case that alleged AMC used dominant market position to obtain exclusive licenses in violation of federal antitrust law). This practice has been found unlawful as a misuse of monopoly power. Cobb Theatres, 101 F.Supp.3d at 1342.

         iPic's case involves elements of each of the aforementioned types of antitrust cases. iPic's allegations submit that two major exhibitors, Regal and AMC, used their combined dominant market positions-along with their simultaneous communication of refusals to deal-to influence distributors to grant clearances in their favor, thus restricting the licensing of movies to two startup iPic locations in Texas. This case comes to us as an appeal from a final take-nothing summary judgment. Because of this procedural posture, we express no opinion on the merits of using this type of theory to allege antitrust violations in the film industry. Our task here is limited by the motions filed in the trial court and limited to determining whether the summary-judgment evidence raised a triable issue of fact on the challenged elements of iPic's claims.

         FACTUAL BACKGROUND

         Regal operated a theater in Houston (Regal Greenway), and AMC operated a theater in Frisco (AMC Stonebriar). Regal and AMC learned that iPic planned to build theaters in Houston and Frisco within about three miles of each exhibitor's existing theater. In July 2014, before either iPic Houston or iPic Frisco opened, both Regal and AMC requested clearances of the proposed nearby iPic theaters. Both Regal and AMC informed the major distributors that they would not license first-run movies that were also licensed to the nearby iPic theaters.

         In November 2015, iPic opened a theater in Houston within three miles of Regal Greenway theater.[4] Several distributors declined Regal's request for clearances, but they allocated movies between Regal Greenway and iPic Houston. From November 2015 through January 2016, iPic Houston was limited in its ability to license films to show at its theater. iPic contends that it lost money due to this lost opportunity during the first few months of its operation in Houston.

         In January 2016, iPic brought the underlying antitrust suit against Regal and AMC. iPic alleged that Regal and AMC had worked together to exclude it from the market in Houston and Frisco. iPic relied on the nearly simultaneous timing of the statements from representatives of both Regal and AMC informing distributors that they would not show movies that were also licensed to the nearby iPic theaters. Notably, these communications occurred long before either iPic theater had opened.

         After Regal settled with iPic, AMC sought summary judgment on iPic's claims on no-evidence and traditional grounds. AMC challenged the evidence to support the existence of a conspiracy and its causation of damages alleged by iPic. AMC contended that it acted independently of Regal, and it could not be held liable for monetary damages sought by iPic Houston because it only sought clearances in Frisco. AMC's summary-judgment evidence included deposition transcripts from employees and officers of both AMC and Regal, all of whom denied having conspired with or coordinated efforts regarding clearances of iPic theaters. AMC also provided deposition transcripts from several distributors denying that either request influenced any clearance decision as to the other city.

         In response, iPic presented circumstantial evidence that AMC and Regal engaged in parallel behavior and had the motive and opportunity to conspire, including their involvement in "Open Road," a joint-venture film distribution company. iPic's evidence included business documents, emails, and transcripts of testimony from depositions and ...


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