Lead Opinion
This action was commenced in the District Court as a private antitrust suit under Sections 4 and 16 of the Clayton Act, 15 U.S.C.A. §§ 15, 26, to recover treble damages for injuries alleged to have been sustained by reason of defendants’ violation of the Sherman and Clayton Acts, 15 U.S.C.A. §§ 1-7, 15 note, 12 et seq., and for injunctive relief. The District Court granted defendants’ motion for summary judgment on the ground that plaintiff is not a person injured in its business or px*operty within the meaning of Section 4 of the Clayton Act and, therefore, is not entitled to maintain this action. (Reported in CCH Trade Cas. Par. 68,513 (1956).)
Plaintiff is the non-operating owner-lessor of a motion picture theater property located in Chicago, Illinois. The theater is leased to defendant Balaban & Katz (B & K) which controls the operation of the theater. Under the terms of the lease plaintiff is entitled to a fixed minimum rental plus a percentage of the lessee’s gross receipts. The lessee has at all times paid the minimum rental, but, as alleged by plaintiff, the receipts, and thus the amounts payable by the lessee under the percentage clause, have been kept down due to the illegal trade practices of the defendant-lessee B & K, certain motion picture distributors and certain affiliated exhibitors in the City of Chicago. Plaintiff alleged that the defendants, including the defendant-lessee, engaged in a conspiracy to monopolize first and first subsequent run exhibition of motion pictures in the City of Chicago and to restx’ain trade and commerce in the licensing of motion pictures for exhibition by suppressing the competition of independent exhibitors, by the establishment of a uniform system of minimum theater admission prices to be charged by exhibitox-s, uniform playing positions for theaters and a uniform system for releasing motion pictures for exhibition. Plaintiff further alleged that the effect of these illegal trade practices was to relegate its theater to an inferior exhibiting position thereby depriving plaintiff of rentals under the percentage clause that it otherwise would have received.
The question of whether a non-operating lessor may maintain a treble damage action has been infrequently litigated and such decisions as there are ax*e difficult to reconcile. In East Orange Amusement Co. v. Vitagraph, Inc., D.C.N.J., CCH Trade Cas. Par. 52,965 (1943), the lessor claimed that antitrust violations had caused his lessee to default in the payment of rent and that this default, in turn, resulted in the lessor’s loss of his real estate to a mortgagee. And in Camrel Co. v. Paramount Film Distributing Corp., D.C.S.D.N.Y., CCH Trade Cas.Par. 57,233 (1944), the lessor claimed, as a result of alleged antitrust violations, injury to the rental and
This problem was also before the court in Westmoreland Asbestos Co. v. Johns-Manville Corp., D.C.S.D.N.Y.,
Harrison v. Paramount Pictures, Inc., D.C.E.D.Pa.,
The problem was next considered in Steiner v. 20th Century-Fox Film Corp., 9 Cir.,
“Here the complaint affirmatively alleges direct injury to the [lessor], not the lessee. It is said the appellees’ wrongful acts operated directly upon the [lessor]. This is sufficient for the [lessor] to become a proper party to complain of the conspiracy alleged.”232 F.2d at page 193 .
The court distinguished the Harrison case as follows:
“The cases cited by the appellees are not factually similar to the case at bar. In Harrison v. Paramount Pictures [citation] there were no direct dealings between the plaintiff and defendant. Here the [lessor] asserts the appellees conspired with the prime lessee to force [lessor] to receive less than a reasonable rent.”232 F.2d at page 193 .
The court’s treatment of the Harrison case is confusing. If, when the court said, “there were no direct dealings between the plaintiff and defendant” in Harrison, it meant that the lessee was not alleged to be one of the co-conspir
The problem was again considered by the Third Circuit in Melrose Realty Co. v. Loew’s, Inc.,
The rationale of Harrison was approve ed by the Second Circuit in Productive Inventions, Inc., v. Trico Products Corp.,
The Harrison rationale has been also cited with approval in Miley v. John Hancock Mutual Life Insurance Co., D.C. Mass.,
The situation in the Northern District "of Illinois, Eastern Division, only adds to the confusion. In two recent decisions, in cases virtually indistinguishable factually from the instant case, that court has held that a non-operating theater owner is entitled to maintain a treble damage action. Tower Building Corp. v. Loew’s Inc., CCH Trade Cas.Par. 68,537 (1956); and 1617 Belmont Co. v. Columbia Pictures Corp., No. 52-C-251 (unreported).
Turning to factually dissimilar sitúations where this general problem has been considered, we find some degree of uniformity. The courts have uniformly denied recovery to stockholders, Gerli v. Silk Ass’n of America, D.C.S.D.N.Y.,
It is not clear why the interest of a; sales agent should be considered less re-;, mote than the interest of either a stocks holder, creditor or employee. However, the diverse treatment of the stockholder-creditor cases and the sales agent cases is not without its justification. To permit individual stockholder recovery would run counter to the traditional treatment of corporate injury that the corporation is the. proper party to redress corporate wrongs. " And direct recovery by the individual creditor would give him a preference over other creditors of the insolvent ' business and such recovery may act to thwart the policy of the bankruptcy laws. Further, the number of stockholders and creditors might produce an insurmountable problem of multiplicity of suits. These problems are not present .in the sales agent situation nor are they present in the non-operating lessor situation. On the basis of this analysis, it would seem more logical that the instant ■case be aligned with the sales agent cases, rather than the stockholder-creditor cases. It is also true that considerations •such as these may be grounds for distinction in cases where the lessee is also injured as the result of antitrust violations and cases where the lessee is a party to the antitrust violations. For example, would the defendants be subject to two actions, one by the lessor and one by the lessee. Suppose the lessee sues first and recovers, should the damages be apportioned between lessor and lessee and, if so, how? Another problem is that of settlements by one of the parties without the- participation or consent of the other. See Hempstead Theatre Corp. v. Metropolitan Playhouses, Inc.,
'Section 4 of the Clayton Act provides that:
“Any person who shall be injured in his business or property by reason 'of anything forbidden in the antitrust laws may sue therefor * * * and shall recover threefold the damages by him sustained * * *.”
Notwithstanding the broad language of Section 4, which literally, at least, appears to give the plaintiff herein a cause of action, the courts have narrowed the apparent scope of this statute usually on the ground, more or less expressed, that in view of the severity of the penalty a line must be .drawn. Thus, in the Harrison case the court said:
“In determining the scope of the Act it must be remembered that the treble damage feature is an enforcement provision and superimposes a penalty upon/compensation." As such it should not be literally construed if unreasonable results would be reached by so doing. Obviously, there must be a limit somewhere.”115 F.Supp. at page 317 .
And in Snow Crest Beverages, Inc., v. Recipe Foods, Inc., D.C.Mass.,
“Without trying to spell out in detail the justification for these decisions, it may be noted that if they had gone the other way, there would as a result of the treble damage provisions of the anti-trust acts have been given in each case to the plaintiff what has sometimes been called a ‘windfall’. [Citing.] In effect, businessmen would be subjected to liabilities of indefinable scope for conduct already subject to drastic private remedies.”
Compare with these statements, however, the one made by this court in Roseland v. Phister Mfg. Co.,
- “We may not by what seems to us a strained and unjustified limitation*592 bar plaintiff from the statutory remedy. ‘Congress evidently foresaw the wholesome effect of pecuniary responsibility for injuries resulting from such forbidden combinations and the courts should not devitalize the remedy by strained interpretations calculated to encourage disregard of the law.’ ”
And as recently as this year the Supreme Court has admonished the inferior federal courts that:
“Petitioner’s claim need only be ‘tested under the Sherman Act’s general prohibition on unreasonable restraints of trade,’ [citing] and meet the requirement that petitioner has thereby suffered injury. Congress has, by legislative fiat, determined that such prohibited activities are injurious to the public and has provided sanctions allowing private enforcement of the antitrust laws by an aggrieved party. These laws protect the victims of the forbidden practices as well as the public. [ Citing.] Furthermore, Congress itself has placed the private antitrust litigant in a most favorable position through the enactment of § 5 of the Clayton Act. [Citing.] In the face |,of such a policy this Court should not (add requirements to burden the pri'yate litigant beyond what is specifibally set forth by Congress in tb ose ilaws.” Radovich v. National Football League,352 U.S. 445 , 453-454,77 S.Ct. 390 , 395,1 L.Ed.2d 456 .
Since the District Court decision in the Harrison case is the only decision to deal fully with the problems peculiar to a suit by a lessor and since defendants’ argument herein suggests no additional considerations, we shall consider in detail the rationale set forth therein. The court said,
“The plaintiff has not shown and does not allege that she has ever had any business transactions with the defendants. She is not in the business of operating a motion picture theatre.”
We do not. think it significant that the plaintiff was not in direct competition with the defendants. In Snow Crest Beverages, Inc., v. Recipe Foods, Inc., D.C.Mass.,
“Courts aware of these considerations have been reluctant to allow those who were not in direct competition with the defendant to have a private action even though as a matter of logic their losses were foreseeable. Congress has failed to amend the antitrust laws on this point in the face of repeated decisions. It seems to have been content for the judiciary to take a position narrower than that often applied in nonstatutory tort cases and in cases where plaintiffs are not allowed a multiple recovery.”
Not only is this “limitation” without support in the language of Section 4 but it appears to have been implicitly rejected by the Supreme Court. E. g., Radovich v. Nat. Football League,
As to the question of injury the court in Harrison said,
“First, she says that if the theatre had been operated by the tenant showing pictures on first-run, the receipts would have been greater ana she might have obtained a larger*593 rental, by way of percentage, than she did. The fact is that while she would have had a right to rental above the minimum, if earned, she had nothing more than a hope that it ever would be earned.”
To characterize the interest of the lessor under the percentage clause as no more than a “hope” is to subtly beg the question and ignore the fact that most economic dealings and transactions are founded on “hope”—the hope of making a profit. In any event, it would seem to be a hope which should not be impaired with impunity by violations of the law. See Vines v. General Outdoor Advertising Co., 2 Cir.,
In Harrison the court continued,
“The tenant could have operated the business, from whatever motive, so as to keep the percentage from ever exceeding the minimum, for example, by cutting admission charges, discontinuing advertising or showing nothing but foreign language or documentary films, and there would be no right which the plaintiff could have asserted against him in that respect.”
This statement ignores the fact that the lessor is not asserting mismanagement by the lessee or merely expressing disappointment in the lessee’s receipts, but rather that the lessee in conjunction with others conspired to and did violate the antitrust laws to the plaintiff’s injury. Surely the fact that the operation of the theater was entrusted to the discretion of the lessee does not give the lessee the right to flaunt the antitrust laws, nor can we see why this fact should deny plaintiff the protection of and the right to rely on statutory remedies provided by the antitrust laws.
The court continued,
“But even if it be assumed that the plaintiff had some property, some right, which was susceptible of injury, and that such injury could be traced to the acts of the defendants, the question of remoteness remains.”
If the plaintiff’s allegations are proved, we are at a loss to see how it can be said that it has not been injured. In fact, everyone seems to concede the existence of the injury, but then counter with the argument that it is too remote to be compensable. We think the alleged acts of the defendants are clearly the direct and proximate cause of the injury. What intervening factors are there to consider ? The only one that suggests itself is that if competitive conditions had prevailed would the lessee’s operation of the theater have been more profitable with resulting pecuniary benefit to the lessor under the percentage clause. This problem, however, is present when a lessee sues. See Bigelow v. R. K. O. Radio Pictures, Inc.,
In the Harrison case the court continued,
“The difficulties which would arise unless some consideration be given to the remoteness or indirectness of the injury are particularly apparent in the motion picture business, in which thousands of theatres are owned by persons who have nothing to do with the operation of them and no right to interfere.”
However, to deny recovery to the; plaintiff would “devitalize the remedy by strained interpretations calculated to encourage disregard of the law.” Roseland v. Phister Mfg. Co., 7 Cir.,
The court continued,
“In such a situation, where a tenant desires a particular kind of product,, must the distributors seek but the' owner of the building to ascertain whether they can'safely give the tenant what he wants? It.séems clear that unless a line is drawn excluding remote and indirect injuries property owners in similar cases, an almost intolerable burden would be placed upon the whole, industry.”
• In -the first place, the most elementary •.conceptions of justice and .public policy require that a wrongdoer shall bear -the risk of any burdens which his wrong has created. Cf. Bigelow v. R. K. O. Radio Pictures, Inc.,
Finally, we return to the argument that the lessor was not injured in “his business or property” within the meaning of Section 4 of the Clayton Act. The defendants herein contend that, “Once the lease had been executed, plaintiff’s ‘business’ of leasing ceased.” We do not think it necessary to consider this “argument,” for we think it clear that plaintiff was injured in its property. “A man is injured in his property when his property is diminished.” Chattanooga Foundry & Pipe Works v. City of Atlanta,
In summary, the injury that •plaintiff allegedly sustained is susceptible of proof, both as to the fact of injury and as to the amount of damages; ;the injury to plaintiff as a non-operat'
In the alternative the defendants insist that because the plaintiff did not demand or request of any of the defendants earlier runs for its theater plaintiff is precluded from claiming any damages. Although the parties have briefed and orally argued this point on appeal, the plaintiff proceeds on the assumption that the District Court did not reach this question. However, as we read the District Court’s memorandum opinion, it appears that the District Judge was of the opinion that demand is a condition precedent. In so holding we believe the District Judge erred. The failure of the plaintiff to demand that defendants refrain from their illegal trade practices could not legalize such trade practices nor immunize defendants against liability to those injured. Kobe, Inc. v. Dempsey Pump Co., 10 Cir.,
We must confess that there is some language in the decision by this court in Milwaukee Towne Corp. v. Loew’s, Inc., 7 Cir.,
Defendants also seek to support the judgment below on another ground not passed on by the District Court but which was argued here both orally and in the briefs, namely, that the statute of limitations had run on plaintiff’s cause of action before the complaint was filed. This action was commenced on September 1, 1950, prior to the enactment of Section 4B of the Clayton Act, 15 U.S.C.A. § 15b, and is therefore governed by Ill.Rev.Stat.1955, c. 83, § 15, which prescribes a two year limitation period. Whitsell v. Alexander, 7 Cir.,
For the reasons set forth above, the judgment of the District Court is reversed and the cause remanded for further proceedings not inconsistent with this opinion.
Lead Opinion
On Petition for Rehearing
Our holding in the instant case that a demand is not a condition precedent to the maintenance of a suit of this character and the seemingly contrary holding by this court in Milwaukee Towne Corp. v. Loew’s, Inc., 7 Cir.,
“We know of no principle of law which authorizes a person aggrieved by the deprivation of a right either statutory or constitutional to recover for such deprivation in the absence of a demand or request for its exercise. With this thought in mind, we have carefully examined all the reported eases where damages have' been sought in actions of the instant character against members of the motion picture industry and in other cases where the antitrust laws were relied upon, and in all such cases it appears that the plaintiff sought in some manner to exercise the right of which it allegedly was deprived by the alleged conspiracy.”190 F.2d at page 568 .
The holding there, however, is much narrower in application, for the court continued, recognizing the very “semantic difference” which we are accused of utilizing:
“Furthermore, the instant case was tried on the theory that it was the refusal of plaintiff’s request or demand for first run pictures which gave rise to its damages. In the complaint it was alleged that the plaintiff ‘is legally entitled to negotiate for and obtain from defendant distributors the license of pictures suitable for first run exhibition in the City of Milwaukee, but plaintiff has been and is now prevented from so negotiating or obtaining such pictures for exhibition,’ and that as a ‘direct and proximate cause of the operation of said unlawful monopoly, conspiracy and agreement against plaintiff’s business plaintiff has been subjected to loss and damage.’ We are of the*597 view that it cannot be held that defendants’ conspiracy was the direct and proximate cause of plaintiff’s damage because it was prevented from negotiating and obtaining first run pictures in the absence of a demand or request.” (Emphasis added.)190 F.2d at page 068 .
The plaintiff in the instant case is not proceeding on this theory and under the facts of this case it obviously could not do so. By the terms of its leasing arrangement with the defendant B & K the plaintiff entrusted the operation of its theater to the discretion of the lessee. Plaintiff is therefore not in a position to assert and does not assert that it “is legally entitled to negotiate for and obtain from defendant distributors the license of pictures suitable for first run exhibition in the City of [Chicago].” If the plaintiff tried to assert or exercise such a right it would probably be in breach of the terms of the lease. The plaintiff does complain however that it was injured in its property by reason of activities forbidden by the antitrust laws and the defendants concede that “[w]here the injury results directly ‘by reason of’ failure of the defendant to obey the law, whether it is a traific law or an antitrust law, a demand or request that the defendant ‘obey the law’ is obviously not a prerequisite to a cause of action.” Under the admitted allegations of the complaint the defendants conspired to monopolize film exhibition in the City of Chicago and to divert patronage from the plaintiff’s theater. The antitrust laws protect the plaintiff from such activities in much the same manner that the law protects its property from intentional physical damage. In neither instance must the plaintiff assert its right prior to suit by demand as the law makes the demand of the wrongdoer.
Although the Supreme Court has not had occasion to pass on this question, the following excerpt from Radovich v. National Football League,
“Congress has, by legislative fiat, determined that such prohibited activities are injurious to the public and has provided sanctions allowing private enforcement of the antitrust laws by an aggrieved party. These laws protect the victims of the forbidden practices as well as the public. * * * In the face of such a policy this Court should not add requirements to burden the private litigant beyond what is specifically set forth by Congress in those laws.” (Emphasis added.)
Furthermore, the issue of demand in Milwaukee Towne had an additional significance not present here. The plaintiff’s theater had been exhibiting second run motion pictures and the plaintiff claimed that it was entitled to a first run exhibiting position. The question arose as to whether its theater was suitable as a first run house. Along with other evidence the absence of a demand for the “first damage period” was considered indicative of the fact that the plaintiff’s theater was not suitable for that purpose. The court therefore concluded that even if competitive conditions had prevailed the plaintiff’s theater would have still been a second run house, with the result that the plaintiff was not damaged by the trade practices complained of. In other words, the plaintiff failed to demand or request first run pictures because it recognized that its theater was not suitable for their exhibition, and even if a demand or request had been made the unsuitability of the plaintiff’s theater would have precluded it from recovering damages. The significance of demand in this context related to the proof of damages upon the trial, and not to the prerequisites to a cause of action under the antitrust laws. Thus, the court said:
“Obviously, no damages were claimed for that period [the period when the plaintiff’s theater was closed for remodeling] because plaintiff was not in a position to use first run pictures, and we think by the same token it was not entitled to*598 recover damages for the preceding period because not only did it fail to make a demand or request for first run pictures but recognized that its theatre was not suitable for that purpose.” 190 F.2d at pages 568-569.
The defendants contend that the effect of our decision will cause every film distributor to deal with the theater operator at its peril unless each film contract is countersigned by the lessor. And protesting their innocence, the distributor defendants insist that they relied and had a right to rely upon the requests for pictures received from the pla:.ntiff’s tenant. Throughout this matter the defendants have found it convenient to ignore the allegations of the complaint which for present purposes are admitted as true. The complaint alleges that the distributor defendants and others conspired with the lessee to divert patronage from the plaintiff’s theater. We do not have a situation where the film distributors merely supplied the plaintiff’s theater with the run of pictures requested by the lessee; we have a situation where the run of pictures was determined by the dictates of a conspiracy between the lessee and the film distributors. The only peril to which our decision will expose the film distributors is the peril to which they have been subjected by Congress, and this is a peril which they can avoid by the simple expedient of refraining from activities forbidden by the antitrust laws.
Defendants concede that they had a duty to refrain from illegal trade practices, but complain that they had no way of knowing that the plaintiff considered their acts injurious in the absence of a demand or request. It is of note that the defendants do not assert that they did not know their acts to be injurious, but rather that they did not know whether the plaintiff would complain about them. But the plaintiff has complained and any lack of diligence in this regard will be penalized by the statute of limitations.
We adhere to the views previously expressed on the other issues presented by this appeal and accordingly the petition for rehearing is denied.
Concurrence Opinion
I adhere to my previous concurrence in the result reached in the first opinion of this court.