Motion Picture Herald (Nov-Dec 1948)

TRUST TRIAL ON AGAIN, OFF AGAIN; STILL FIGHT DIVORCE Lawyers for Majors Argue Changes in Sales Have Ended Monopoly by RAY LANNING The Paramount anti-trust suit played a. three-day return engagement in New York District Court this week, opening Monday and abruptly closing Wednesday when Judge Augustus N. Hand ordered a postponement of further hearings until November 29. On Monday, Paramount, Loew's, Warner Brothers and Twentieth Century-Fox had started all over again their theatreby-theatre fight with the Government to retain their holdings. By Tuesday afternoon, the three judges hearing the case had indicated from their high-backed chairs that the four companies would be allowed to keep at least a portion of their theatres — that while the Supreme Court decision of May 4 had indicated divorcement as a remedy for the alleged monopoly, it did not, in their opinion, spell out complete divorcement. The Drama of the Legal Whereases was almost a reissue of the earlier drama of the whereases unreeled on October 8, 1945, when the case first went to trial before the special statutory court of the U. S. for the Southern District of New York. It had the same title: United States of America vs. Paramount Pictures, Inc., et al, defendants. Equity No. 87-237. The same locale : the austere marble and panelled chambers of the District Court House, Foley Square, New York. Almost the same cast of lawyers and judges. And there was practically the same dialogue. Robert Wright, attorney for the U. S.: "We are here to persuade the court on divorcement and. a partial ban on cross-licensing pending such divorcement." Former Judge Joseph Proskauer, attorney for Warner Brothers: "The only precedent for this action (divorcement) is the trial scene in 'Alice in Wonderland' when the queen says 'Off with his head'." Senior Judge Augustus N. Hand.: "I do believe that the opinion of the Supreme Court spelled divorcement, but not complete divorcement." With the RKO consent decree, in Judge Hand's words, "read, partially understood, and signed," the remaining theatre-owning defendants quickly showed what line their defense would take. They pleaded that the remedies of divestiture and divorcement were not necessary, that their observance of the curbs and restrictions on sales methods handed down in MPAA THEATRE LISTS USED AS EVIDENCE The bound volumes of the Motion Picture Association Theatre Directory, bought and paid for by the industry, were used Monday by the Department of Justice to bolster its claim that a lot of those theatres listed should be taken from the defendants in the Paramount anti-trust suit. Robert L, Wright, Justice Department attorney, submitted the volumes in evidence at the "most recent and reliable" listing of ownerships. The Department, according to Mr. Wright, used the MPAA record for its listing and corrections on theatre ownerships. Attorneys for the defense demanded to see the volumes, leafed through them with some surprise, and then asked: "Who's directory?" Mr. Wright solemnly read off the titles of one volume and told the defense that the MPAA was operated in part by the defendants. the December 31, 1946, decree of the District Court had destroyed whatever monopoly had been found to exist previously. They believed that an arbitration system should be established — that such a system "would relieve this industry of many of its tensions." Suggest Possibility of Voluntary Bidding System They were of the opinion that some form of competitive bidding might be continued. The Supreme Court, they realized, ruled out compulsory competitve bidding, as ordered by the District Court, but what, they asked, of the possibility of voluntary competitive bidding? Such a method of selling, they indicated, might be linked up with a new arbitration system. Considerable testimony was introduced by the defendants to prove that their initiation of competitive bidding had so changed the distribution picture that there was now no need for further court action. Unwilling to give up more than a fractional interest in their holdings, the four defendants began a lengthy theatre-by-theatre, city-by-city defense of their houses, insisting that none had been acquired by monopoly, and that no monopoly could be proved to force them to give them up. Going a step further, counsel for Warner Brothers presented testimony by which he attempted to prove that the position of his company's theatres was rarely better and usually worse than at the time the majority of them were acquired. Competition was springing up all around him, Judge Proskauer insisted. In city after city, the independents were moving in. The opening arguments at the resumption of the trial — a resumption ordered by the Supreme Court so that the problems of monopoly and divestiture might be reconsidered— were long legalisms, with pound after pound of documentary evidence being submitted. Even that well-known and well-wot'n character of most lawsuits — the helpless widow — was offered in evidence. In defending defendant-independent joint ownerships, John F. Caskey, 20th-Fo.v counsel, wanted it known that one of his company's partners was a widow. Mr. Wright opened the hearings Monday with the submission of the RKO consent decree. With this duly signed and RKO out of the suit, Mr. Wright then got down to cases by informing the court that "we are trying to plug the holes left by the Supreme's Court elimination of competitive bidding and its withholding of the divestiture part of the decree." The plugs he had in mind were divorcement and a cross-licensing ban. Urges Separation by Theatre Stock Sales These remedies, he said, require the changing of existing corporate structures — these "must first be terminated, for taking theatres away (from the companies) doesn't terminate those relationships." In other words, Mr. Wright would separate the production-distribution business from the exhibition business by sales of stock — not theatre sales — something along the pattern set in the RKO consent decree. The difference between selling stock and selling theatres can only be fully appreciated by lawyers. Mr. Proskauer then took the floor to give as his opinion that the Supreme Court did not hold vertical integration to be illegal per se. Admitting, in a round about way, that Warners was vertically integrated, Mr. Proskauer stated that Warners intended to show that all of its theatres were acquired to meet the needs of the new markets which arose during the development of talking pictures. Judge Hand interrupted : "I don't think that the Supreme Court called for additional testimony. It called for amended findings and new remedies." And then, addressing himself to Mr. Proskauer, Judge Hand asked : "What remedy do you suggest ? We've been told to give a remedy, but we've been told our {Continued on page 16) MOTION PICTURE HERALD, NOVEMBER 13, 1948 13