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Congress Building Corp. v. Loew's

UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT


July 29, 1957

CONGRESS BUILDING CORPORATION
v.
LOEW'S, INCORPORATED, ET AL.

Author: Swaim

Before FINNEGAN, LINDLEY and SWAIM, Circuit Judges.

On Petition for Rehearing

SWAIM, Circuit Judge:

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., 190 F.2d 561, certiorari denied 342 U.S. 909, may be a source of future confusion in this area of the law and we have thought it advisable to elaborate on this aspect of the case. We have already noted that Milwaukee Towne was tried on the theory of a refusal to deal and that the court held that without a demand or request to deal there could be no refusal to deal. The defendants insist that this is a mere exercise in semantics and that the cases are not distinguishable on that basis. They seize upon the following passage from Milwaukee Towne as supporting their position that a demand is a condition precedent to the maintenance of a private antitrust suit:

"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 cases 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 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 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." 190 F.2d, at 568.

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 "[where] the injury results directly 'by reason of' failure of the defendant to obey the law, whether it is a traffic 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, 352 U.S. 445, 453-454, is particularly appropriate here:

"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."

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 because plaintiff was not in a position to use first run pictures, and we think by the same token it was not entitled to 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 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 plaintiff'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 record 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.

FINNEGAN, Circuit Judge. I adhere to my previous concurrence in the result reached in the first opinion of this court.

19570729

© 1998 VersusLaw Inc.



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