2301 M Cinema LLC D/B/A West End Cinema v. Silver Cinemas Acquisition Co. ( 2018 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
)
2301 M CINEMA LLC, et al., )
)
Plaintiffs, )
)
v. ) Civil Action No. 17-1990 (EGS)
)
SILVER CINEMAS ACQUISITON CO., )
et al., )
)
Defendants. )
)
MEMORANDUM OPINION
I. Introduction
To show a film, a movie theater must obtain a license from
the film’s distributor. The case before the Court involves the
competitive market between theaters for exclusive licenses to
show specialty films. Plaintiffs—2301 M Cinema d/b/a West End
Cinema (“West End Cinema”), the Avalon Theatre Project, Inc.
(“the Avalon”), the Denver Film Society, and the Cinema Detroit
(collectively, “plaintiffs”)—bring this action against Silver
Cinemas Acquisition Co. d/b/a Landmark Theatres and its parent
corporation 2929 Entertainment, LP (collectively, “Landmark”).
Plaintiffs allege that Landmark violated federal antitrust law
by using its national market power to coerce film distributors
into granting Landmark exclusive licenses, preventing plaintiffs
and other independent theaters from showing specialty films.
Plaintiffs’ four-count complaint charges Landmark with: (1)
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circuit dealing in violation of Section 1 of the Sherman Act;
(2) using its monopoly power in violation of Section 2 of the
Sherman Act; (3) attempting to use its monopoly power in
violation of Section 2 of the Sherman Act; and (4) interfering
with plaintiffs’ business relations.
Pending before the Court is Landmark’s motion to dismiss
plaintiffs’ complaint. See Defs.’ Mot., ECF No. 16. After
careful consideration of the motion, the response, the reply
thereto, and the applicable law, Landmark’s motion to dismiss is
GRANTED IN PART and DENIED IN PART.
II. Background
Plaintiffs are four independent, community theaters that
primarily show specialty films. Compl., ECF No. 1 ¶¶ 14-17.
Specialty films include “independent films, art films, foreign
films, and documentaries.” Id. ¶ 24. Unlike mainstream
commercial films, specialty films are not intended to appeal to
a broad audience and are therefore released less widely than
commercial films. Id. The first plaintiff, West End Cinema,
operated in the District of Columbia from 2010 until 2015. Id. ¶
14. In 2015, West End Cinema was “forced” out of business,
allegedly by Landmark’s anticompetitive licensing practices. Id.
Landmark leased the West End Cinema’s space and has since opened
a Landmark theater in its place. Id. The Avalon is another
independent theater located in the District of Columbia. Id. ¶
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15. The Denver Film Society is a nonprofit organization located
in Denver, Colorado that provides specialty film programming via
“year-round screening, film festivals, and other special
events.” Id. ¶ 16. It operates the Sie FilmCenter, a specialty
film theater. Id. Finally, Cinema Detroit is a non-profit
specialty film theater located in Detroit, Michigan. Id. ¶ 17.
Defendant Landmark is a Delaware corporation and subsidiary
of 2929 Entertainment, LP. Id. ¶ 18. It operates fifty-one
specialty film theaters in twenty-two geographic markets
nationwide. Id. It is “the largest specialty film movie theater
chain in the country” and is purportedly opening new theaters on
a regular basis. Id.
Both plaintiffs and Landmark are “exhibitors,” the industry
term for movie theaters. Id. ¶ 21. Exhibitors must negotiate
with film distributors for licenses to exhibit films at their
theaters. See id. ¶ 22. Distributors are the entities
responsible for marketing the film; they act as a “middleman”
between the production studio and the exhibitor. Id. ¶ 5.
Generally, a distributor’s income for each film is tied to the
revenue earned by the exhibitor during its run of the film. See
id. ¶¶ 75-76. License agreements between distributors and
exhibitors specify the terms under which the exhibitor may show
a particular film. See id. ¶¶ 21-22, 25. In some instances,
license agreements may include “clearances,” or an exclusive
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right to show a film. Id. ¶ 25. In acquiescing to a clearance, a
distributor agrees not to license a film to any other exhibitor,
or to specific exhibitors, in the same geographic market. Id.
Clearances are generally negotiated either for the first few
weeks a film is shown, a “first-run” clearance, or for the
entire period a film is screened by an exhibitor, a “day and
date” clearance. See id. ¶¶ 21, 25, 28. Clearances must be
negotiated on a theater-by-theater, film-by-film basis.
Therefore, exhibitors may not engage in circuit-dealing, whereby
“a dominant movie theater chain,” known as a “circuit,” “uses
its market power to obtain preferential agreements, particularly
clearances, from distributors for the licensing of films . . .
in multiple geographic markets.” Id. ¶ 28 (citing United States
v. Paramount Pictures, 334 U.S. 131, 154-55 (1948)).
Plaintiffs allege that Landmark, as the “dominant theater
‘circuit’ for the exhibition of specialty films in the United
States,” leverages its market position to obtain clearance
agreements nationwide. Id. ¶¶ 29, 30. Rather than negotiating
clearances on an individual theater-by-theater, film-by-film
basis, plaintiffs assert that Landmark obtains “blanket
clearances” for more than one film or theater from distributors
that accede to Landmark’s demands for fear of retribution and
loss of Landmark’s business. Id. ¶ 29. Plaintiffs seek an
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injunction, treble damages, costs and fees, and actual damages.
See id. ¶¶ 89-90, 97-98, 102-04, 112-13.
III. Standard of Review
A motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6) tests the legal sufficiency of a complaint.
Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002). A
complaint must contain “a short and plain statement of the claim
showing that the pleader is entitled to relief, in order to give
the defendant fair notice of what the . . . claim is and the
grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007) (quotations and citations omitted).
Despite this liberal pleading standard, to survive a motion
to dismiss, a complaint “must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible
on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quotations and citations omitted). A claim is facially
plausible when the facts pled in the complaint allow the court
to “draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. The standard does not amount to
a “probability requirement,” but it does require more than a
“sheer possibility that a defendant has acted unlawfully.” Id.
“[W]hen ruling on a defendant’s motion to dismiss [pursuant
to Rule 12(b)(6)], a judge must accept as true all of the
factual allegations contained in the complaint.” Atherton v.
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D.C. Office of the Mayor, 567 F.3d 672, 681 (D.C. Cir. 2009)
(quotations and citations omitted). In addition, the court must
give the plaintiff the “benefit of all inferences that can be
derived from the facts alleged.” Kowal v. MCI Commc’ns Corp., 16
F.3d 1271, 1276 (D.C. Cir. 1994). Even so, “[t]hreadbare
recitals of the elements of a cause of action, supported by mere
conclusory statements” are not sufficient to state a claim.
Iqbal, 556 U.S. at 678.
“To survive a 12(b)(6) motion to dismiss a claim in an
antitrust case, plaintiffs must do more than simply paraphrase
the language of the antitrust laws or state in conclusory terms
that the non-movant has violated those laws.” WAKA LLC v. DC
Kickball, 517 F. Supp. 2d 245, 249 (D.D.C. 2007) (citing Dial A
Car, Inc. v. Transp., Inc., 884 F. Supp. 584, 588 (D.D.C. 1995),
aff'd 82 F.3d 484 (D.C. Cir. 1996)). “[I]f [the plaintiff]
claims an antitrust violation, but the facts he narrates do not
at least outline or adumbrate such a violation, he will get
nowhere merely by dressing them up in the language of
antitrust.” Dial A Car, 884 F. Supp. at 588 (quoting Sutliff,
Inc. v. Donovan Companies, Inc., 727 F.2d 648 (7th Cir. 1984))
(internal quotation marks omitted). That said, because “the
proof is largely in the hands of the alleged conspirators,”
dismissal procedures “should be used sparingly in complex
antitrust litigation” until the plaintiff is given ample
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opportunity for discovery. Poller v. Columbia Broad. Sys., 368
U.S. 464, 473 (1962).
IV. Analysis
Landmark moves to dismiss the plaintiffs’ complaint for
failure to state a claim pursuant to Federal Rule of Civil
Procedure 12(b)(6), putting forth several arguments. See Defs.’
Mot., ECF No. 16. First, it contends that 2929 Entertainment
should be dismissed, because the complaint does not allege that
the parent corporation was responsible for the actions of its
subsidiary. Id. at 29. 1 Second, Landmark argues that plaintiffs
fail to state a plausible circuit dealing claim (Count I)
because plaintiffs fail to allege: (1) that Landmark wielded its
circuit power to coerce distributors; (2) concerted action or
agreement; and (3) an antitrust injury. Id. at 13-25. Third,
Landmark argues that plaintiffs fail to state a plausible
monopolization or attempted monopolization claim (Counts II and
III) because plaintiffs fail to allege: (1) that Landmark
exercised leveraging conduct; and (2) that Landmark has monopoly
power. Id. at 25-28. Finally, Landmark contends that plaintiffs
fail to state a plausible tortious interference claim (Count
IV). Id. at 28-29. The Court analyzes each argument in turn.
1 When citing electronic filings throughout this opinion, the
Court cites to the ECF page number, not the page number of the
filed document.
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A. Defendant 2929 Entertainment, LP is Dismissed Without
Prejudice
Landmark argues that its parent corporation 2929
Entertainment should be dismissed because the complaint does not
allege that it was responsible for the actions of its
subsidiaries. Defs.’ Mot., ECF No. 16 at 29. Plaintiffs agree
and reserve the right to seek leave to amend the complaint and
add 2929 Entertainment as a defendant as discovery unfolds.
Pls.’ Opp’n, ECF No. 17 at 37. Therefore, the Court GRANTS
Landmark’s motion and dismisses without prejudice defendant 2929
Entertainment, LP from this action.
B. Plaintiffs Sufficiently Allege a Circuit Dealing Claim
Landmark argues that Count I must be dismissed because
plaintiffs fail to state a plausible circuit dealing claim in
violation of Section 1 of the Sherman Act. Defs.’ Mot., ECF No.
16 at 13-25. First, Landmark argues that plaintiffs fail to
allege that Landmark wielded its national circuit power to
coerce distributors to agree to clearance agreements. Id. at 13-
19. Landmark also argues that plaintiffs do not allege that it
negotiated any unlawful blanket clearances covering more than
one theater or film. Id. Instead, it contends that plaintiffs
merely allege a series of theater-by-theater, city-by-city
negotiated clearance agreements for individual films, a lawful
industry practice. Id. at 14-18. Plaintiffs respond that they
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allege “six specific instances of Landmark’s circuit dealing at
work.” Pls.’ Opp’n, ECF No. 17 at 10. Moreover, plaintiffs argue
that they allege that Landmark coerces and penalizes
distributors, forcing them to enter into unlawful clearance
agreements to avoid retribution. Id. at 19-21.
Alternatively, Landmark argues that plaintiffs fail to
allege concerted action or agreement between Landmark and the
distributors. Defs.’ Mot., ECF No. 16 at 19-22. Instead,
Landmark contends that plaintiffs’ allegations merely “indicate
unilateral decision-making.” Id. at 21. Plaintiffs argue that
the complaint alleges that distributors agree to provide blanket
clearances for fear of retribution, even though such clearances
are against the distributors’ own economic interests. See Pls.’
Opp’n, ECF No. 17 at 24-27.
Finally, Landmark argues that plaintiffs fail to allege an
injury to competition and consumers. Defs.’ Mot., ECF No. 16 at
22-25. Landmark contends that plaintiffs merely assert
individual harm, an insufficient antitrust injury. See id.
Plaintiffs respond that the complaint alleges injury to
competition by way of decreased output and revenue for
distributors and increased prices, fewer choices, and decreased
quality for consumers. Pls.’ Opp’n, ECF No. 17 at 29.
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1. Coercive Use of National Power
Circuit dealing constitutes a per se violation of the
Sherman Act, as “[t]he inclusion of theatres of a circuit into a
single agreement gives no opportunity for other theatre owners
to bid for the feature in their respective areas and . . . is
therefore an unreasonable restraint of trade.” United States v.
Paramount Pictures, 334 U.S. 131, 154 (1948); see Cobb Theatres
III, LLC v. AMC Entm’t Holdings, Inc., 101 F. Supp. 3d 1319,
1342 (N.D. Ga. 2015)(citing Paramount, 334 U.S. at 153-55;
United States v. Griffith, 334 U.S. 100, 106-09 (1948),
disapproved on other grounds by Copperweld Corp. v. Indep. Tube
Corp, 467 U.S. 752 (1984)). Circuit dealing occurs when an
exhibitor “pools the purchasing power of an entire circuit to
‘eliminate the possibility of bidding for films [on a] theatre
by theatre [basis].’” Cobb Theatres, 101 F. Supp. 3d at 1342
(quoting Paramount, 334 U.S. at 154). An exhibitor may pool its
purchasing power by negotiating “agreements that cover
exhibition in two or more theatres in a particular circuit . . .
.” Paramount, 334 U.S. at 154 (emphasis added). Such
anticompetitive conduct “eliminate[s] the opportunity for a
small competitor to obtain the choice of first runs,” and
“put[s] a premium on the size of the circuit.” Id.
An exhibitor may also engage in circuit dealing by
“unlawful monopoly leveraging,” Cobb Theatres, 101 F. Supp. 3d
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at 1342, which occurs when an exhibitor “with a monopoly of
theatres in any one town . . . . uses that strategic position to
acquire exclusive privileges in a city where [the exhibitor] has
competitors,” Griffith, 334 U.S. at 107; see United States v.
Crescent Amusement Co., 323 U.S. 173, 181 (1944) (finding
circuit dealing when “the . . . defendants insist that a
distributor give them monopoly rights in towns where they had
competition or else defendants would not give the distributor
any business in the closed towns where they had no
competition”). Monopolistic advantage may be reflected in the
agreements obtained or the favorable terms therein. See Schine
Chain Theatres v. United States, 334 U.S. 110, 115-16 (1948),
overruled on other grounds by Copperweld Corp., 467 U.S. 752.
Plaintiffs sufficiently allege that Landmark leverages its
monopoly power by coercing film distributors to accept
clearances agreements that favor Landmark and to deny
plaintiffs’ requests to show specialty films. See, e.g., Compl.,
ECF No. 1 ¶¶ 4, 63. Rather than negotiating clearances on an
individual theater-by-theater, film-by-film basis, as Landmark
must, plaintiffs assert that Landmark wields its circuit power
to obtain exclusive clearances against independent theaters. See
id. ¶¶ 29, 64. First, plaintiffs allege that Landmark, as the
largest specialty film exhibitor in the nation, exerts
considerable influence over distributors. See id. ¶ 18. Landmark
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has fifty-one theaters in twenty-two major geographic markets
nationwide. Id. ¶ 71. Specifically, plaintiffs allege several
major markets in which Landmark occupies the majority of the
specialty film exhibitor market, including St. Louis (80%),
Houston (60%), Philadelphia (54%), Detroit (60%), Denver (73%),
and the District of Columbia (68%). Id. ¶¶ 44-62. Taking such
allegations in the light most favorable to plaintiffs, the Court
must infer that distributors may be inclined to accede to
Landmark’s demands.
Next, plaintiffs allege that Landmark uses its considerable
market power to deny smaller competitors, like plaintiffs,
access to the market. See id. ¶ 71 (“Landmark’s message to the
distributors is clear: if you license a specialty film to any
one of the plaintiffs when Landmark intends to exhibit that
film, Landmark can and will use its national circuit power to
retaliate against you by refusing to play that film or other
films at various, if not all, of the 51 Landmark theaters in 22
major geographic markets throughout the country.”). Despite
Landmark’s arguments to the contrary, plaintiffs allege that
distributors must agree to Landmark’s clearance demands or risk
damaging their relationship with the largest specialty film
exhibitor. For example, “distributors have informed plaintiffs
that the only reason they were refusing to license a particular
specialty film was because of clearances demanded by Landmark,
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and not because they desired to restrict the number of theaters
playing the film.” Id. ¶ 75 (emphasis added); see Cobb Theatres,
101 F. Supp. 3d at 1327 (denying motion to dismiss circuit
dealing claim when defendant’s conduct “operated as a demand . .
. that distributors refuse to license certain films to the
[plaintiff] or, alternatively, risk damaging their relationships
with one of the nation’s largest film exhibitors”). Such
anticompetitive conduct may also be inferred by the distributors
assent to Landmark’s demands. See id. (denying motion to dismiss
in part because “several major distributors began to honor
[defendant’s] demand for preferential treatment”). Here,
plaintiffs allege that distributors frequently booked specialty
film showings with plaintiffs and later cancelled the bookings,
often at the last minute, “due to Landmark’s clearance demands.”
Compl., ECF No. 1 ¶ 67, see also id. ¶ 66. Landmark’s plausibly
coercive conduct is also reflected in the favorable clearances
and the advantageous terms that Landmark allegedly obtained from
distributors across the three markets at issue. See id. ¶ 29
(“[D]istributors have denied access to virtually every specialty
film for which Landmark has demanded a clearance . . . .”); see
also id. ¶¶ 63-72.
Landmark contends that plaintiffs do not allege facts to
suggest that Landmark actually threatened distributors. Defs.’
Reply, ECF No. 18 at 12. But plaintiffs need not specifically
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allege any threats made by Landmark to state a plausible claim.
See Griffith, 334 U.S. at 107-08 (finding that an exhibitor
“need not be as crass” as to explicitly threaten a distributor
“in order to make [its] monopoly power effective in []
competitive situations”). Indeed, reading the complaint in the
light most favorable to plaintiffs, the Court may infer that the
favorable agreements and reduced market access are plausibly
attributed to Landmark’s allegedly anticompetitive, coercive
conduct. See Compl., ECF No. 1 ¶ 75; see also Cobb Theatres, 101
F. Supp. 3d at 1343 (“[An exhibitor] is guilty of circuit
dealing . . . . even when the exhibitor does not expressly
threaten distributors that it will withhold business of its
closed or monopoly markets unless it is given preferential
treatment”). That said, plaintiffs indeed allege that Landmark
dropped a film at a Landmark theater as retribution against a
distributor that failed to prevent plaintiff Avalon from showing
the film at the same time. Compl., ECF No. 1 ¶ 70.
In sum, such alleged conduct may plausibly “eliminate the
opportunity for the small competitor to obtain the choice first
runs, and put a premium on the size of the circuit.” Paramount,
334 U.S. at 154; see Griffith, 334 U.S. at 108 (holding that
defendants may not use monopoly “to stifle competition by
denying competitors less favorably situated access to the
market”); see also Cobb Theatres, 101 F. Supp. 3d at 1343
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(finding that plaintiffs stated a “monopoly leveraging” circuit
dealing claim because the complaint “accuses AMC of using or
attempting to use its circuit power and its monopoly power in a
substantial number of non-competitive [closed] zones to drive
high-quality theatres out of markets in which they compete with
AMC,” even though the complaint did not identify coercive
threats, specific agreements, or specific closed markets).
Plaintiffs also allege that Landmark plausibly engaged in
circuit dealing by negotiating blanket clearance agreements that
unlawfully “cover exhibition in two or more theatres in a
particular circuit.” Paramount, 334 U.S. at 154. Such conduct
allows “the exhibitor to allocate the film rental paid among
theaters as it sees fit.” Id. In Cobb Theatres, the district
court denied defendant AMC’s motion to dismiss, finding that the
plaintiff had alleged an unlawful circuit dealing arrangement in
part because AMC “simultaneously negotiated clearances for both
of its Buckhead theatres.” 101 F. Supp. 3d at 1343. So here too.
Plaintiffs allege that Landmark negotiated a clearance for
multiple theaters in the Denver market when it moved a film
clearance from one theater to another, plausibly preventing
plaintiff Sie FilmCenter from competing on a theater-by-theater
basis. Compl., ECF No. 1 ¶ 65.
As such, the Court finds that plaintiffs allege sufficient
facts to state a plausible circuit dealing claim. The Court is
15
not persuaded by Landmark’s arguments to the contrary, all of
which rely on cases resolved with the benefit of discovery. See
Defs.’ Mot., ECF No. 16 at 17-19 (citing Orbo Theatre Corp. v.
Loew’s Inc., 156 F. Supp. 770 (D.D.C. 1957)(post-trial); Houser
v. Fox Theatres Mgmt. Corp., 845 F.2d 1225 (3d Cir. 1988)(motion
for summary judgment); Reading Int’l, Inc. v. Oaktree Capital
Mgmt. LLC, No. 03 Civ. 1895(PAC), 2007 WL 39301 (S.D.N.Y. Jan.
8, 2007)(motion for summary judgment)). Paramount cites Reading
International, Inc. v. Oaktree Capital Management, LLC as a case
in which the circuit dealing claim was dismissed. Defs.’ Mot.,
ECF No. 16 at 18. However, such reliance is inapposite, as the
district court did not reach the merits of the plaintiffs’
circuit dealing claim. Instead, it dismissed the claim because
“plaintiffs raise the allegation of circuit dealing for the
first time in their opposition papers.” 317 F. Supp. 2d 301, 318
n.9 (S.D.N.Y. 2003).
Indeed, plaintiffs’ allegations are not unlike those made
by Landmark in its 2016 complaint charging Regal Entertainment
Group (“Regal”) with anticompetitive conduct and circuit
dealing. See Landmark Theatres v. Regal Entm’t Grp., Civ. No.
16-123-CRC. 2 In opposing Regal’s motion to dismiss, Landmark
2 Landmark’s case against Regal was settled before the district
court resolved Regal’s motion to dismiss. See Stipulation, ECF
No. 19 (Civ. No. 16-123).
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argued that it had adequately alleged a circuit dealing claim
because: (1) “it alleges that Regal derives substantial power
over distributors from its status as the largest exhibitor
circuit in the United States”; (2) it “alleges that Regal
demanded” that distributors deny Landmark access to the market
and “eliminate the opportunity for the small competitor
[Landmark] to obtain the choice first runs”; and (3) this demand
“deprive[s] Landmark of the inputs it needs to compete with the
threat that Regal could and would disadvantage distributors’
films across Regal’s circuit.” Landmark’s Opp’n, ECF No. 17 at
19-20 (Civ. No. 16-123)(citations and quotations omitted). When
confronted with a similar argument that Landmark had not alleged
specific facts regarding Regal’s allegedly coercive demands,
Landmark noted that it could not have “possibly” alleged
additional facts “[w]ithout the benefit of discovery.” Id. at
21. So here too.
2. Concerted Action
Landmark also argues that plaintiffs do not allege a viable
circuit dealing claim because plaintiffs do not allege facts
permitting a plausible inference of concerted action or
agreement between Landmark and the distributors. Defs.’ Mot.,
ECF No. 16 at 19-22. Instead, Landmark contends that plaintiffs’
allegations “at best . . . indicate unilateral decision-making”
in that Landmark prefers to not show the same films at the same
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time as plaintiffs and that distributors prefer to honor
Landmark’s preferences. Id. at 21-22.
Under Section 1 of the Sherman Antitrust Act, “[e]very
contract, combination in the form of trust or otherwise, or
conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be illegal.”
15 U.S.C. § 1. Therefore, “[t]o state a claim based on a Section
1 violation, a plaintiff must allege that ‘defendants entered
into some contract, combination, conspiracy, or other concerted
activity that unreasonably restricts trade in the relevant
market.’” WAKA LLC v. DC Kickball, 517 F. Supp. 2d 245, 250
(D.D.C. 2007)(quoting Dial A Car, Inc. v. Transp., Inc., 884 F.
Supp. 584, 591 (D.D.C. 1995)). To that end, “Section 1 does not
prohibit unilateral or independent conduct by one organization,
no matter how anticompetitive it might be.” Id. (quotations and
citations omitted). To plead concerted action, “antitrust
plaintiffs may (and often must) prove conspiracies by
‘circumstantial evidence and the reasonable inferences drawn
from such evidence,’ rather than through direct evidence.”
Reading Int’l, Inc. v. Oaktree Capital Mgmt. LLC, Civ. No. 03-
1895, 2007 WL 39301 at *7 (S.D.N.Y. Jan. 8, 2007)
(quoting Petruzzi's IGA Supermarkets, Inc. v. Darling–Del.
Co., 998 F.2d 1224, 1230 (3d Cir. 1993)).
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Plaintiffs allege “enough factual matter (taken as true) to
suggest that an agreement was made.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 556 (2007). As previously discussed,
plaintiffs allege that distributors and Landmark entered into
anticompetitive clearance agreements, whereby “Landmark
require[s] the distributor to agree that it will not license
specified specialty films that the distributor would otherwise
license to plaintiffs.” Compl., ECF No. 1 ¶ 6 (emphasis added);
see also id. ¶ 30 (“Distributors agree to Landmark’s clearance
demands because licenses with Landmark are essential to the
commercial success of most of the specialty films they
distribute.”). Moreover, plaintiffs allege that distributors
“refus[ed] to license” films to plaintiffs, id. ¶ 75, because
they could not “break precedent” from their prior agreements
with Landmark, id. ¶ 65. Plaintiffs place their allegations of
Landmark’s and the distributors’ parallel conduct “in a context
that raises a suggestion of a preceding agreement, not merely
parallel conduct that could just as well be independent action.”
Twombly, 550 U.S. at 557. As such, plaintiffs’ allegations
sufficiently “raise a reasonable expectation that discovery will
reveal evidence of illegal agreement.” Id. at 556.
Landmark argues that the plaintiffs merely allege
unilateral action, as both Landmark and the distributors are
acting independently for distinct, self-interested reasons. As
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such, it contends that its conduct can be explained by market
forces. See Defs.’ Mot., ECF No. 16 at 21-22. For example,
Landmark argues that it prefers not to show the same films at
the same times as plaintiffs. See id. It also argues that
distributors likely prefer to show their films at a national,
profitable exhibitor chain. See id. However, in so arguing,
Landmark asks the Court to make a factual determination at this
early stage of proceedings. See id. at 21. The Court may not do
so. Indeed, at this stage, the plaintiffs “need not rule out
independent action.” Oxbow Carbon & Minerals LLC v. Union Pac.
R.R. Co., 81 F. Supp. 3d 1, 13 (D.D.C. 2015). While conspiracy
allegations may fail to state a Section 1 claim if there are
“obvious alternative explanations for the facts alleged,” id.
(quotations and alterations omitted), “‘it is also clear that
allegations contextualizing agreement need not make any unlawful
agreement more likely than independent action . . . at the
motion to dismiss stage,’” id. (quoting Evergreen Partnering
Grp., Inc. v. Pactiv Corp., 720 F.3d 33, 47 (1st Cir. 2013)).
Without the benefit of discovery, it is not obvious that the
favorable clearance agreements are caused only by market forces.
The Court is not persuaded by Landmark’s reliance on Cinema
Village Cinemart, Inc. v. Regal Entertainment Group, an
unreported case from the Southern District of New York, in which
the district court judge granted Regal’s motion to dismiss, in
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part because the plaintiff failed to allege concerted action.
Defs.’ Mot., ECF No. 16 at 20-21 (discussing Civ. No. 15-5488,
2016 WL 5719790 (S.D.N.Y. Sept. 29, 2016)). Unlike plaintiffs’
complaint here, none of the plaintiff’s allegations in Cinema
Village Cinemart suggested an agreement between Regal and the
distributors. 2016 WL 5719790 at *3. Whereas the plaintiffs in
this case described in detail the various theaters and films
affected by Landmark’s allegedly unlawful agreements with
distributors, the plaintiff in Cinema Village Cinemart failed to
allege “what theaters or films [the clearances] concerned, or
the nature of the supposed threats that induced them.” Id. at
*3. In light of the significant differences between the two
cases, the Court cannot rely on the comparison.
3. Antitrust Injury
Finally, Landmark argues that the Court must dismiss the
plaintiffs’ circuit dealing claim because plaintiffs fail to
allege an antitrust injury. Defs.’ Mot., ECF No. 16 at 22-25.
Landmark argues that plaintiffs only allege that their
individual theaters have been harmed, while antitrust law
requires plaintiffs to allege that Landmark’s anticompetitive
conduct hurts competition and consumers. Id. at 22-23.
It is “clear that a plaintiff claiming federal antitrust
violations must plead and prove ‘more than injury casually
linked to an illegal presence in the market.’” WAKA, 517 F.
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Supp. 2d at 249 (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat,
Inc., 429 U.S. 477, 489 (1977)). Because the antitrust laws
“were enacted for the ‘protection of competition, not
competitors,” Brunswick, 429 U.S. at 488, a plaintiff must
allege an anticompetitive impact on the market, id. at 488-89.
Therefore, to allege an antitrust injury, a plaintiff must plead
an “[actual] injury of the type the antitrust laws were intended
to prevent and that flows from that which makes defendants' acts
unlawful.” Id. at 489. “[A]bsent injury to competition, injury
to plaintiff as a competitor will not satisfy the pleading
requirement.” Mizlou Television Network, Inc. v. Nat'l Broad.
Co., 603 F. Supp. 677, 684 (D.D.C. 1984).
Throughout the complaint, plaintiffs allege harm to
competition and consumers. “[A]ctual anticompetitive effects
include, but are not limited to, reduction of output, increase
in price, or deterioration in quality.” Cobb Theatres, 101 F.
Supp. 3d at 1335 (quotations and citations omitted). Here,
plaintiffs allege just that. The complaint attributes decreased
output and revenues for distributors to Landmark’s unlawful
clearance agreements. See, e.g., Compl., ECF No. 1 ¶¶ 8-9, 73-
82. For example, plaintiffs allege that fewer consumers view a
film when it is shown in only one location, which leads to
decreased distributor revenue. Id. ¶ 76. Indeed, distributors
allegedly agree that clearance agreements are not necessarily in
22
their economic interest; Landmark’s clearance demands were
allegedly the “only reason” that distributors refused to license
films to plaintiffs. Id. ¶¶ 75, 77.
Additionally, plaintiffs allege that consumers have fewer
exhibitor choices and endure increased movie prices and
decreased theater quality as a result of the unlawful clearance
agreements. See, e.g., id. ¶¶ 8-9, 73-82. For example,
plaintiffs contend that consumers have fewer quality choices in
the specialty film exhibitor market; if a consumer seeks to see
a film shown by Landmark, the consumer will be unable to enjoy
the film at another theater. Id. ¶ 78. If a Landmark theater
sells out, a consumer may not be able to enjoy the film at all.
See id. ¶ 79. Moreover, plaintiffs allege that the decreased
competition causes higher ticket and concession prices. Id. ¶
79. Finally, as a result of Landmark’s alleged anticompetitive
conduct, consumers may have to travel further to see a film. See
id.; see also id. ¶ 65 (alleging that patrons in metropolitan
Denver must travel an additional 6.5 miles to see a film at a
Landmark theater). As Landmark stated in its opposition to
Regal’s motion to dismiss, it is “bedrock antitrust law that
forcing consumers to travel well outside their market—at
considerable inconvenience and expense—to get access to the
product they desire does harm their welfare.” Landmark’s Opp’n,
ECF No. 17 at 43 (Civ. No. 16-123). In sum, the plaintiffs
23
sufficiently state an antitrust injury by “point[ing] to the
specific damage done to consumers in the market.” Cobb Theatres,
101 F. Supp. 3d at 1335 (citations and quotations omitted).
Finally, Landmark disputes the accuracy of plaintiffs’
allegations, arguing that plaintiffs misunderstand the relevant
economic consequences of the clearance agreements. Defs.’ Mot.,
ECF No. 16 at 22-25. For example, Landmark contends that the
number of films available to the public increased as a result of
“interbrand competition.” Defs’ Mot., ECF No. 16 at 23. In so
arguing, however, Landmark again relies on summary judgment
cases in asking the Court to make factual determinations
regarding actual economic effects at the motion to dismiss
stage. Again, the Court may not do so.
The Court therefore DENIES Landmark’s motion to dismiss
Count I of the complaint.
C. Plaintiffs Sufficiently Allege Monopolization
Landmark also argues that plaintiffs fail to state
monopolization (Count II) or attempted monopolization (Count
III) claims pursuant to Section 2 of the Sherman Act. Defs.’
Mot., ECF No. 16 at 25-28. Landmark argues that plaintiffs do
not allege two necessary elements of a Section 2 claim:
(1) leveraging conduct; and (2) monopoly power. Id.
“[T]he use of monopoly power, however lawfully acquired, to
foreclose competition, to gain a competitive advantage, or to
24
destroy a competitor, is unlawful.” Griffith, 334 U.S. at 107.
“To plead a claim for actual monopolization, a plaintiff must
allege: ‘(1) the possession of monopoly power in the relevant
market and (2) the willful acquisition or maintenance of that
power as distinguished from growth or development as a
consequence of a superior product, business acumen, or
historical accident.’” WAKA LLC, 517 F. Supp. 2d at 250 (quoting
City of Moundridge v. Exxon Mobil Corp., 471 F. Supp. 2d 20, 41
(D.D.C. 2007) and citing United States v. Grinnell Corp., 384
U.S. 563, 570-71 (1966)). “To state a claim for attempted
monopolization, a plaintiff must provide facts showing: ‘(1) a
specific intent to destroy competition or control competition in
the relevant market, and (2) a dangerous probability of success
in actually monopolizing the relevant market.’” Id. at 252
(quoting Dial A Car, Inc., 884 F. Supp. at 589-90). “The key
inquiry involves the power of the defendant in the market in
which it competes.” Id. (citations and quotations omitted).
1. Leveraging Conduct
Landmark argues that plaintiffs do not state that Landmark
leveraged any monopoly power because the complaint does not
allege that it combined its open and closed towns when
negotiating with distributors. Defs.’ Mot., ECF No. 16 at 26-27.
“When the buying power of the entire circuit is used to
negotiate films for [an exhibitor’s] competitive as well as
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[its] closed [or non-competitive] towns, [the exhibitor] is
using monopoly power to expand [its] empire.” Griffith, 334 U.S.
at 108. The consequence of this conduct is “that films are
licensed on a non-competitive basis in what would otherwise be
competitive situations.” Id.
Plaintiffs’ Section 2 claims rely on the same allegations
of anticompetitive behavior as their Section 1 claim. Compare
Compl., ECF No. 1 ¶¶ 83-90 with id. ¶¶ 92-104. To that end,
Landmark essentially repeats its argument that plaintiffs do not
allege that Landmark leverages its monopoly power in non-
competitive markets to negotiate favorable clearance agreements
in competitive markets. Defs.’ Mot., ECF No. 16 at 26-27. As
thoroughly discussed, however, supra Sec. B.1, the Court finds
that plaintiffs allege sufficient facts to infer that Landmark
engaged in monopoly leveraging conduct. Indeed, at this stage of
the proceedings, the Court cannot agree with Landmark that
“there are no allegations that Landmark took advantage of its
position in closed geographic markets to strengthen its hand in
negotiations with distributors.” Id. at 27. As discussed,
plaintiffs allege that Landmark is the dominant specialty film
exhibitor and that it wields its considerable market power to
obtain favorable clearance agreements in competitive markets
nationwide. See, e.g., Compl., ECF No. 1 ¶¶ 18, 70-72, 75.
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Nevertheless, Landmark argues that plaintiffs’ Section 2
claims must fail because the complaint “does not identify
Landmark’s closed [or non-competitive] towns, if any” and
because plaintiffs “say nothing about the competitive makeup of
the other 15 markets where Landmark exhibits specialty films.”
Defs.’ Mot., ECF No. 16 at 27. However, plaintiffs are not
required to plead such specific facts at this early stage of the
litigation. In Cobb Theatres, the district court denied the
defendant’s motion to dismiss even though the plaintiffs had not
specifically identified non-competitive markets. 101 F. Supp. 3d
at 1343. “Identifying specific closed markets used for
leveraging” was “unnecessary” because plaintiffs alleged that
the defendant exhibitor was “using the power of its entire
nationwide circuit . . . to acquire exclusive privileges in
markets where it had competitors.” Id. So here too. Not only do
plaintiffs allege that Landmark “leveraged its dominant position
nationwide” by coercing distributors to enter into favorable
clearance agreements, see, e.g., Compl., ECF No. 1 ¶ 30, but
plaintiffs also allege that distributors agree that Landmark’s
demands are the “only reason” distributors enter into such
agreements, id. ¶ 75. 3
3 Moreover, the Court is not persuaded by Landmark’s misplaced
reliance on Six West Retail Acquisition, Inc. v. Sony Theatre
Management Corp. See Defs.’ Mot., ECF No. 16 at 27 (citing Civ.
No. 97-5499, 2004 WL 691680 at *11 (S.D.N.Y. Mar. 31, 2004)).
27
2. Monopoly Power
Finally, Landmark argues that plaintiffs’ Section 2 claims
must fail because the complaint does not adequately allege that
Landmark possessed, or had a dangerous possibility of
possessing, monopoly power. Defs.’ Mot., ECF No. 16 at 27-28.
Monopoly power is the “existence of power to exclude competition
when it is desired to do so.” Griffith, 334 U.S. at 107
(quotations and citations omitted). It “may be inferred from a
firm’s possession of a dominant share of a relevant market that
is protected by entry barriers.” United States v. Microsoft
Corp., 253 F.3d 34, 51 (D.C. Cir. 2001)(citations omitted).
The Court disagrees that plaintiffs do not allege facts
regarding Landmark’s monopoly power. As the Court has discussed,
plaintiffs allege that Landmark is the largest specialty film
exhibitor in the nation. See Compl., ECF No. 1 ¶ 18. Landmark
does not dispute that allegation; it agrees that it has fifty-
one theaters in twenty-two major geographic markets nationwide.
See Defs.’ Mot., ECF No. 16 at 10; see also Compl., ECF No. 1 ¶
71. Moreover, plaintiffs describe several markets in which
Landmark occupies the majority of the specialty film exhibitor
Landmark states that the plaintiff’s attempted monopolization
claim in that case was “dismiss[ed],” id., but Six West was
actually resolved “after years of discovery,” 2004 WL 691680 at
*3-4, 7.
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market. See Compl., ECF No. 1 ¶¶ 44-62. Such allegations are
sufficient at this early stage of the proceedings. For example,
in Cobb Theatres, the district court denied the defendant’s
motion to dismiss in part because the plaintiff alleged that the
defendant had “69% share of [the] market,” an amount sufficient
to infer monopoly power. 101 F. Supp. 3d at 1340 (“in some
circumstances, ‘over two-thirds of the market is a
monopoly’”)(quoting Eastman Kodak Co. v. Image Tech. Servs.,
Inc., 504 U.S. 451, 480 (1992)). In this case, plaintiffs allege
several markets in which Landmark has close to 69% of the
market, if not more. See Compl., ECF No. 1 ¶¶ 44-62 (discussing
St. Louis (80%), Houston (60%), Philadelphia (54%), Detroit
(60%), Denver (73%), and the District of Columbia (68%)).
Not only do plaintiffs allege that Landmark possesses a
“dominant share” of the national market, but plaintiffs also
allege that high entry barriers protect Landmark’s monopoly and
prevent access the market. See Microsoft, 253 F.3d at 51; see
also Cobb Theatres, 101 F. Supp. 3d at 1340 (noting that “high
entry barriers to the market make it reasonable to presume [the
defendant] has monopoly power”). Here, plaintiffs allege that
high entry barriers, such as limited urban real estate and
difficulty in obtaining financing, reinforce and protect
Landmark’s monopoly. Compl, ECF No. 1 ¶ 36.
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The Court therefore DENIES Landmark’s motion to dismiss Counts
II and III of the complaint.
D. Plaintiffs Sufficiently Allege Tortious Interference
Both parties agree that plaintiffs’ tortious interference
claim “rises and falls” with plaintiffs’ Sherman Act claims.
Defs.’ Mot., ECF No. 16 at 28 (one paragraph argument relying on
its previous arguments); see Pls.’ Opp’n, ECF No. 17 at 36-37
(“Landmark’s only argument for dismissing plaintiffs’ tortious
interference claim is derivative of its earlier arguments”).
Because the Court concludes that plaintiffs state claims
under the Sherman Act, the Court DENIES Landmark’s motion to
dismiss Count IV of the complaint.
V. Conclusion
For the foregoing reasons, the Court GRANTS IN PART and
DENIES IN PART Landmark’s motion to dismiss. The Court GRANTS
Landmark’s motion to dismiss, in so far as defendant 2929
Entertainment, LP is dismissed from the action without
prejudice. The Court DENIES Landmark’s motion to dismiss Counts
I, II, III, and IV of the plaintiffs’ complaint. An appropriate
Order accompanies this Memorandum Opinion.
SO ORDERED.
Signed: Emmet G. Sullivan
United States District Judge
September 28, 2018
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