Antitrust Law Daily Wrap Up, ANTITRUST—C.D. Cal.: Theatre chain avoids antitrust claims over exclusivity pacts with movie studios, (Oct 24, 2014)

By Linda O’Brien, J.D., LL.M.

An independent theatre chain could not maintain state antitrust claims against a large entertainment chain over allegedly engaging in a conspiracy with film distributors and movie studios to establish exclusivity on first-run films in certain geographic areas, the federal district court in Los Angeles has ruled (Starlight Cinemas v. Regal Entertainment Group, October 23, 2014, Real, M.).

Starlight Cinemas owns several independent movie theatres in California. Starlight filed suit against Regal Entertainment Group, the operator of a chain of multiplex theatres across the United States. Starlight alleged that Regal used its dominant market position to coerce film distributors and movie studios into entering into exclusivity agreements for first-run films, in violation of California’s Cartwright Act and Unfair Competition Law (UCL). As a result of these agreements, Starlight was unable to obtain licenses from these distributors and studios. Regal moved for dismissal.

Cartwright Act. The court found that Starlight failed to sufficiently plead a Cartwright Act violation. To state a claim under the Cartwright Act, the complaint must allege the formation and operation of a conspiracy, a wrongful act done pursuant to the conspiracy, and damage resulting from those wrongful acts. The plaintiff’s allegations – that the defendant demanded distributors agree to exclusivity provisions – were mere legal conclusions and were insufficient to show the formation and operation of a conspiracy. Moreover, the plaintiff failed to allege any harm to competition and its assertions that moviegoers were harmed without any supporting facts was insufficient to state a claim, according to the court.

UCL. Finally, the UCL broadly prohibits unlawful, unfair, and fraudulent business acts. Since the plaintiff failed to plead a Cartwright Act claim, Starlight also failed to allege any unlawful or unfair business acts for purposes of the UCL, the court concluded.

The case is No. 2:14-cv-05463-R-AS.

Attorneys: Howard K. Alperin (Blecher Collins Pepperman & Joye PC) for Starlight Cinemas, Inc. Eric J. Mahr (Wilmer Cutler Pickering Hale and Dorr LLP) for Regal Entertainment Group.

Companies: Starlight Cinemas, Inc.; Regal Entertainment Group

Cases: Antitrust CaliforniaNews