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Cinetopia LLC v. AMC Entertainment Holdings, Inc.

United States District Court, D. Kansas

December 27, 2018

CINETOPIA, LLC, Plaintiff,
v.
AMC ENTERTAINMENT HOLDINGS, INC. and AMERICAN MULTI-CINEMA, INC., Defendants.

          MEMORANDUM AND ORDER

          CARLOS MURGUIA UNITED STATES DISTRICT JUDGE

         This case involves movie theaters, the films they show, and when the theaters are able to get access to those films. Plaintiff Cinetopia, LLC operates a movie theater in Overland Park, Kansas, in the Prairiefire development. Roughly three miles away, defendants AMC Entertainment Holding, Inc. and American Multi-Cinema, Inc. (collectively, “AMC”) operate an AMC theater called the AMC Town Center 20. According to Cinetopia, AMC is the largest movie theater circuit in the United States. Cinteopia claims that AMC has used its dominant market position to force movie distributors to grant AMC exclusive licenses to play movies, which stifles competition and unfairly harms theaters like Cinteopia. Cinetopia claims that AMC's practices violate federal antitrust laws. Cinetopia also brings state law claims for tortious interference and estoppel. AMC filed a motion to dismiss (doc. 27) all of Cinetopia's claims. For the following reasons, the court denies AMC's motion.

         I. Factual Background

         The following facts are taken from Cinteopia's complaint and are viewed in the light most favorable to Cinetopia.

         Cinetopia opened its Prairiefire movie theater (“Cinetopia Overland Park 18”) in May 2014. Cinetopia Overland Park 18 is a unique, cutting-edge theater. For example, it operates a restaurant on the premises; offers restaurant and bar menus for some of its screens designed for the exhibition of blockbusters; has ten “Living Room Theaters” with full restaurant and bar service; includes a movie Parlor; and offers other luxury accommodations. When Cinetopia Overland Park 18 opened, AMC was already operating AMC Town Center 20. AMC Town Center 20 does not offer a restaurant menu or in-theater waiter and staff service, and has received a number of negative online reviews.

         Cinetopia alleges that in 2010, AMC implemented a National Clearance Position. Under that national policy, AMC told movie distributors (like Disney, Paramount, and Universal) that it wanted exclusive access to movies over any new theater in close proximity to an existing AMC theater. These “clearances” meant that AMC would refuse to play any film a distributor licensed to play for the competing theater. As one example of the execution of AMC's policy, in 2010, AMC sent a letter to the major film distributors indicating that it would “not play day-and-date” with a new movie theater in Georgia that was within three miles of two AMC theaters. Playing day-and-date means to simultaneously exhibit a particular movie. (See Doc. 28, at 9; Doc. 29, at 24.) In the same letter, AMC reminded the distributors that AMC had “played 100% of [their] wide commercial releases and look[ed] forward to continuing that arrangement going forward.” (Doc. 17, at 17.) And when the new theater opened in Georgia, AMC's CEO told the owner that AMC would use its “full weight and power” to “prevent them from building new theaters near AMC [t]heaters.” (Id.)

         The Cinetopia Overland Park 18 and AMC Town Center 20 are within the same “film licensing zone.” A film licensing zone is a geographic area established or recognized by distributors in which prints of films are generally made available to play when released. Cinetopia uses the term “clearance” or “blanket clearance” throughout its complaint to mean an exclusivity agreement between a distributor and an exhibitor licensed to play a film (i.e., a distributor like Paramount and an exhibitor like AMC) that applies “to all films licensed in a competitive film licensing zone and is accompanied by a similarly blanket refusal to play day-and-date any film licensed to a competing theater.” (Id. at 8.)

         Before Cinetopia opened its theater at Prairiefire, AMC offered to “buy” the facility. Initially, AMC suggested some “very attractive prices.” (Id. at 17.) But in the end, AMC's offer was for a purchase price of zero dollars. Cinetopia declined. AMC responded, “Okay, then I guess we will see what happens next summer when you try to open.” (Id. at 18.) Beginning when Cinetopia opened, AMC's actions resulted in Cinetopia being denied access to a number of desirable movies, including Godzilla, Captain America: Winter Soldier, Guardians of the Galaxy, Teenage Mutant Ninja Turtles, The Amazing Spider-Man 2, The Hunger Games: Mockingjay Part 2, Divergent Series: The Insurgent, Jurassic World, and Pitch Perfect 2, among many others. According to Cinetopia, “AMC's exclusionary demands, backed by AMC's circuit and monopoly power, were the reason distributors denied Cinetopia fair competitive access to high grossing, wide release, commercial films. These denials were not based on the distributors' fair and independent assessment of the quality and customer-drawing capacity of Cinetopia Overland Park, which was vastly superior to that of the competing AMC Theater.” (Id. at 20.)

         After Cinetopia opened, AMC again expressed interest in buying Cinetopia's facilities at attractive prices. But at the same time, AMC was trying to acquire another large national theater circuit, Carmike Cinemas. The size of the Carmike deal required AMC to report the deal to the United States Department of Justice (“DOJ”), who would review the deal for potential anticompetitive effects. Cinetopia claims that AMC renewed its (pretended) interest in buying Cinetopia Overland Park 18 so that Cinetopia would not bring legal action for anticompetitive conduct while the DOJ was reviewing the Carmike deal. According to Cinetopia, AMC delivered an indication of interest including a proposed purchase price in February 2016, but advised that the proposed deal would be delayed because of the Carmike acquisition. After the DOJ approved the Carmike acquisition, AMC offered another price-substantially lower than the previous offer. Eventually, AMC offered even worse terms and a condition that Cinetopia release all of its legal claims against AMC.

         II. Standards of Review

         The court will grant a 12(b)(6) motion to dismiss only when the factual allegations fail to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Although the factual allegations need not be detailed, the claims must set forth entitlement to relief “through more than labels, conclusions and a formulaic recitation of the elements of a cause of action.” In re Motor Fuel Temperature Sales Practices Litig., 534 F.Supp.2d 1214, 1216 (D. Kan. 2008). The allegations must contain facts sufficient to state a claim that is plausible, rather than merely conceivable. Id. “All well-pleaded facts, as distinguished from conclusory allegations, must be taken as true.” Swanson v. Bixler, 750 F.2d 810, 813 (10th Cir. 1984); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The court construes any reasonable inferences from these facts in favor of the plaintiff. Tal v. Hogan, 453 F.3d 1244, 1252 (10th Cir. 2006).

         Discovery in antitrust cases can be expensive. Twombly, 550 U.S. at 558 (applying the plausibility standard to Sherman Act antitrust claims). But while this potential expense may require some specificity in pleading, antitrust cases do not require heightened fact pleading. Id. at 570. Rather, an antitrust complaint is subject to the same standards identified above. Id.; see also In re Urethane Antitrust Litig., 663 F.Supp.2d 1067, 1074 (D. Kan. 2009).

         III. Analysis

         A. Count I - Circuit Dealing

         The court first addresses Cinetopia's claim for circuit dealing. Defendant argues that this claim fails because it is not a per se violation of the antitrust laws (so plaintiff must plead a relevant market, but hasn't done so) and, even if it is a per se violation, plaintiff has not provided adequate allegations to state a claim under either United States v. Griffith, 334 U.S. 100 (1948), overruled on other grounds by Copperweld Corp. v. Indep. Tube Corp., 467 U.S. 752, 771-72 (1984), or United States v. Paramount Pictures, Inc., 334 U.S. 131 (1948).

         Griffith and Paramount identify two forms of circuit dealing. The first involves the use of circuit buying power and is described in Griffith as follows:

A man with a monopoly of theatres in any one town commands the entrance for all films into that area. If he uses that strategic position to acquire exclusive privileges in a city where he has competitors, he is employing his monopoly power as a trade weapon against his competitors. It may be a feeble, ineffective weapon where he has only one closed or monopoly town. But as those towns increase in number throughout a region, his monopoly power in them may be used with crushing effect on competitors in other places.

334 U.S. at 107. The second type of circuit dealing, identified in Paramount, is the elimination, by contracts or otherwise, of competitive bidding on a film-by-film and theater-by-theater basis. 334 U.S. at 154-55.

         Cinetopia alleges that AMC has engaged in both types of circuit dealing, and that such actions are per se unlawful. Specifically, Cinetopia alleges that AMC has monopoly power in many markets where AMC is the only theater operating. AMC is therefore able to use its position of power in those markets to receive beneficial treatment in markets where it is not the only theater. And Cinetopia further alleges that AMC has ...


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