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United States District Court, Northern District of Illinois, E.D

September 18, 1969


The opinion of the court was delivered by: Robson, District Judge.


Twentieth Century-Fox Film Corporation (Fox), a Delaware corporation with its principal place of business in New York, seeks recovery of payments allegedly due under three film rental agreements with the defendant Woods Amusement Corporation (Woods), an Illinois corporation with its principal place of business also in Illinois. The individual defendants, Edwin Silverman, Jack Silverman and Ralph Smitha, managing agents of Woods, are charged with conspiring to injure the plaintiff and with maliciously interfering with the plaintiff's business relationships. The defendants counterclaim that the licensing agreements in question were not binding contractually, that Fox made false statements and breached a number of oral agreements with Woods concerning the leasing of specific motion pictures, and that these acts constituted a common law conspiracy between Fox and its General Sales Manager Joseph Sugar, its Central Division Manager Harry S. Buxbaum, and its Chicago Exchange Manager R.R. Schmertz, all of whom have been named as counterdefendants herein. The counterclaim also alleges that this conduct was violative of federal and state antitrust and fair trade laws. After a trial on the merits, this court is of the opinion that judgment should be rendered for the plaintiff against the defendant Woods on the three exhibition agreements.


Count I of the amended complaint charges the defendant Woods with breach of a written exhibition contract and seeks recovery under the liquidated damage provision of that contract.*fn1 Fox and Woods executed the contract in question for the first-run showing of "In Like Flint" at the Woods Theatre in Chicago to open the week preceding Easter Sunday, March 26, 1967. Fox had sceduled the national release of this feature film for various days in the week preceding Easter Sunday.*fn2 Nationwide publicity was scheduled to be released on or prior to March 26, 1967. Theaters in almost all of the major cities in the United States commenced exhibition of the film prior to March 26. The contract in question provided that the film was to open "about March 22, 1967." This day fell upon the Wednesday before Easter Sunday; Wednesday was the usual day on which the Woods Theatre commenced the exhibition of new feature films. In the Chicago Exchange area,*fn3 smaller key cities such as Champaign, Danville and Decatur were scheduled to commence exhibition of the film on or after Easter Sunday in order to benefit from the Chicago newspaper publicity and word of mouth publicity from Chicago as the central city of the area.

The contract was negotiated between the parties well in advance of the anticipated first-run exhibition. The contract bears a typewritten date of November 25, 1966, and a Fox home office approval date of December 20, 1966. Fox was obligated to pay all advertising expenses for pre-opening and opening week, and thereafter to pay half of such expenses. The contract set forth stipulated rental terms based upon a schelude of percentages of gross receipts.*fn4 Fox was given discretion to terminate the indefinite run. The evidence indicates that Woods was obligated to exhibit the film for six weeks; further exhibition would be only upon agreement of the parties.

After execution of the contract, the agents of Woods did not communicate with Fox concerning "In Like Flint" until March, 1967. However, on or about January 10, 1967, the defendant Ralph Smitha, on behalf of Woods, entered a written exhibition agreement with another distributor which committed the Woods Theatre to an indefinite run of a film entitled "Blow-Up." By the terms of this agreement, Woods was to exhibit "Blow-Up" for an unlimited run to open not later than February 8, 1967, and to "continue its unlimited run" as long as the weekly gross equaled $16,000. The gross admissions of the Woods Theatre during the "Blow-Up" exhibition indicate that the holdover terms were operative until May 4, 1967.*fn5

On March 10, 1967, Fox served the defendant Smitha with a written demand that the "In Like Flint" agreement be honored, and that the exhibition commence on or about March 22, and not later than March 24. The defendants responded on March 16, 1967, by repudiating the contract. By the time Fox received this notification, it was too late to license the film with any other first-run Chicago exhibitor for Easter week. Subsequently, Fox licensed the film for exhibition at the United Artists Theatre. The picture was exhibited on a first-run basis at that theater for six weeks and five days, commencing April 7, 1967.

The defendants first contend that the exhibition agreement for "In Like Flint" was not contractually binding because the provision giving Fox discretion to terminate the indefinite run of the film lacked mutuality. However, the discretionary right granted Fox to continue or terminate the run after the March 22 opening was a valid option granted for valuable consideration. Armstrong Paint and Varnish Works v. Continental Can Co., 301 Ill. 102, 133 N.E. 711 (1922); Industrial Natural Gas Co. v. Sunflower Natural Gasoline Co., 330 Ill. App. 343, 71 N.E.2d 199 (4th Dist. 1947). A contract need not be reciprocal as to every separate obligation; a contract is sufficient if it legally obligates, both parties to abide by and perform its conditions. Hillman v. Hodag Chemical Corp., 96 Ill. App.2d 204, 238 N.E.2d 145 (1st Dist. 1968); Hall v. Gruesen, 22 Ill. App.2d 465, 161 N.E.2d 345 (1st Dist. 1959). Fox was obligated to deliver "In Like Flint" to Woods on March 22, 1967, for the first exclusive exhibition of the film in the Chicago area. Fox was restrained from licensing the film to any other Chicago exhibitor until after that run. This constituted a substantial restriction upon a major revenue-producing activity of the plaintiff.*fn6 Furthermore, Fox was also obligated to pay all of the advertising costs for the pre-opening and first week of the exhibition at the Woods Theatre, and for half of the advertising expenses thereafter. The stipulated evidence shows that this was a substantial obligation exceeding $20,000. In exchange for these benefits, Woods was obligated to commence exhibition of "In Like Flint" on March 22, 1967, and to continue exhibition thereafter until the run was terminated at the option of the distributor or six weeks had elapsed. This court therefore finds that Woods breached the exhibition contract when its agents repudiated the agreement to exhibit "In Like Flint" at the Woods Theatre commencing on or about March 22, 1967.

The defendants also challenge the validity of the liquidated damages provision of the exhibition contract. They contend that Fox did not suffer any actual damages by reason of the late opening of "In Like Flint" at another theater, and recovery under the liquidated damages provision would therefore constitute a penalty. However, this court finds the provision for liquidation damages both valid and reasonable. The difficulty in ascertaining the actual impact of the delayed first-run exhibition of the film upon hundreds of theaters in Chicago and surrounding cities affected by Chicago necessitates the application of a liquidated damages clause. A liquidated damages clause should be upheld where such a provision is reasonable at the time of contracting, even absent proof of any actual damages. Bethlehem Steel Co. v. City of Chicago, 234 F. Supp. 726 (N.D.Ill. 1964), aff'd 350 F.2d 649 (7th Cir. 1965). When parties agree to have damages ascertained on a particular basis, as the parties did here, courts will not declare such a provision void as a penalty unless there is good ground for it. Covington v. Shaffer, 80 Ill. App.2d 164, 224 N.E.2d 26 (4th Dist. 1967). Application of the liquidated damages clause*fn7 to the uncontroverted facts of this case for the six weeks that Woods was obligated to exhibit the film yields the following results:

                WEEK ON 3 PRECEDING         TERMS         DAMAGES
                FOX PICTURES

 1st week                $25,882               60%            $15,529.20
 2nd week                 17,426               50%              8,713.00
 3rd week                 18,166               40%*fn*              7,266.40
 4th week                 14,118               35%              4,941.30
 5th week                 13,863               30%              4,158.90
 6th week                 11,502               25%              2,875.50
                                                     Total    $43,484.30

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