Score One For An Exhibition David In Antitrust Suit Against Goliath Cinemark

The owners of a small Rancho Mirage movie theater have won an appeal allowing their antitrust claim against Cinemark USA to go forward. Their suit alleges that the larger competitor has been using its marketplace muscle to prevent their theater from obtaining the best films. The suit by Flagship Theatres of Palm Desert, owners of the 10-screen Palme D’or theater, was reinstated last week against Century Theatres, its parent Cinemark USA and two distributors. Flagship’s single theater is owned by Breaking Bad star Bryan Cranston, film producer Alise Benjamin-Mauritzson (Ray), longtime theater operator Brian Tabor and ESPN radio talk show host Steve Mason.  In their suit, they allege that Cinemark engaged in “circuit dealing,” a practice in which the owner of multiple theaters uses that combined purchasing power in bidding for films, rather than bidding competitively on a theater-by-theater basis. Specifically, the suit claims, Century is able to obtain higher-quality films for its Century 15 at the River theater, located in Rancho Mirage less than two miles from Palme D’Or, at less cost because of its size. The plaintiff presented evidence that as of 2006, the year Cinemark acquired Century and the year the litigation started, Century operated 1,000 screens at 80 locations in 12 states. “We think this is a significant case for independent theater owners,” Mason told Deadline this afternoon. “In towns all over America, indie theaters are getting squeezed, in many cases by Cinemark. Hopefully, indie owners can point to us, say ‘As in the Flagship case …’ and get some relief.”

Los Angeles Superior Court Judge Linda Lefkowitz granted Cinemark’s motion for summary judgment in 2008, holding that Flagship failed to show it had suffered antitrust injury and failed to rebut the defendants’ contention that the relevant market for antitrust purposes was the entire Coachella Valley. But Justice Frances Rothschild, writing for the Court of Appeal, said the trial judge relied on a “legally erroneous conception of the antitrust injury requirement.” Rothschild also said that the trial judge erred in limiting discovery to the Coachella Valley, wrongly curtailing Flagship’s ability to gain evidence of circuit dealing. “Flagship cannot gather evidence in support of that claim if it is limited to collecting evidence within the Palme/River market,” the justice wrote. Flagship’s Mason said that he believes discovery will be a crucial phase of the case going forward and that he expected Flagship to seek testimony from “some very big names” in the film distribution business. The basis of the case is rooted in the 1948 Supreme Court ruling against Paramount, he said, which decreed that studios could not own theater chains. ”It’s all about allowing independent theaters into the marketplace, which means more movies, and more diverse movies, get shown,” he said.