Petition — Hayes v. Solomon

In the

Supreme Court of the United States

October Term, 1979

oes 9-931 ©

Lioyp L. Hayes, Hayes, INc.,

ParK PLAZA TWIN THEATRES, INC.

AND Mip-CouNTY ENTERPRISES, INC.,

Petitioners,

Vv.

T. G. SoLoMoN, GuLF STATES THEATRES, INC.,

GuLF STATES THEATRES OF TEXAS, INC.

AND Fuqua INDUSTRIES, INC.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

EDWIN 'TOBOLOWSKY

1900 Southland Center

Dallas, Texas 75201

(214) 742-9205

Attorney for Petitioners

OF COUNSEL:

Lino A. Graglia

3505 Taylor’s Drive

Austin, Texas 78703

Re @O noes

4 Supreme Court, U. &

| FILED

?

DEC 17 4979

aint, 2, CLERR

are

TABLE OF CONTENTS

Table of Authorities 0.0002...

Ri tact calessssancsvecss.

Jurisdiction ....................

Questions Presented . A) Se

Statutory and Constitutional Provisions Involved

Statement of the Case | Ree Ais al

The shopping center-theatre claim

The Mid-County Drive-in claim ..............

The Park Plaza claim ........... ee ;

Reasons for Granting Writ |. ose

I.

Il.

This Court’s decision in Brunswick v. Pueblo

Bowl-O-Mat does not bar an antitrust plain-

tiff from recovering damages for injury to its

business or property caused by violations of

the antitrust laws committed by defendants

for the purpose and with the effect of pre-

—s or limiting competition by the plain-

This Court’s declsiees that the Seventh

Amendment prohibits federal courts from re-

versing jury verdicts supported by probative

facts and reasonable inferences are as fully

applicable to actions under the antitrust laws

as to actions under the Federal —

Liability Act. |

Nene casey seconds

Appendix

Opinion of the Court of Appeals

Opinion of the Court of Appeals on Petition for

Rehearing and Petition for Rehearing

eS Ue

Judgment of the Court of Appeals. ......

Page

Owns nd NY —& EF

11

14

14

15

TABLE OF AUTHORITIES

Cases

Page

American Tobacco Co. v. United States, 147 F.2d 93

(6th Cir. 1944), affm’d., 328 U.S. 781 (1946) ............... 27

Atlantic & Gulf Stevedores, Inc. v. Ellerman Lines,

Be I I oo cies sic civ cose sctssadsnieiesseencs ces a

Beacon Theatres v. Westover, 359 U.S. 500

Rn ath ree ge aa ee aed Os os os dvnaass 24, 25

Boeing Co. v. Shipman, 411 F.2d 369 (5th Cir.

RARER gl oe cas Si err . 4, 21, 22, 23, 24, 25, 27, 28

Brown Shoe Co. v. United States, 370 U.S. 294

RAEI BIR eee ae re ORONO Crd Nester eR ve ae

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.,

Ftd t,t ; ; GRnnen ine Somme e 4, 14, 17, 18, 19, 20

Cahill v. New York, New Haven & Hartford R.R. Co.,

294 F.2d 637 (2nd Cir. 1955) oeeeeccccccccccccce ene 23°

Conference of Studio Unions v. Loew’s, Inc.,

193 F.2d 51 (9th Cir. 1951), cert. denied,

a esc Lepiaihicpabessanivosavvnpenens: 19

Continental Can Co. v. Horton, 250 F.2d 637

I 02 irc gee tesre te iv cke th ashi taken ae, 24

Continental Ore Co. v. Union Carbide & Carbon Corp.,

Be nN 5 ino ok cra plaenenakeripercencenenecs 26, 27

Dehydrating Process Co. v. A. O. Smith Corp., 292 F.2d

653, cert. denied, 368 U.S. 931 (1961) ............... ee, 23

Dick v. New York Life Ins. Co., 359 U.S. 437

(RFT 1 I Uno cepa oe ore ae ETS 26

Donovan Construction Co. v. Florida Telephone Corp.

564 F.2d 1191 (5th Cir. 1977), cert. denied,

GE I I I ie secrocescaessecccstsensvende oscicr ase csie 19

Galloway v. United States, 319 U.S. 372 (1948) .............. 21

Table of Authorities — (Continued)

Page

Gibson v. Elgin, Joliet & Eastern Railway Company,

246 F.2d 834 (7th Cir.) , cert denied, 355 U.S. 897

ST lines vaccthainicrta ch Oren Carne caw. 3 23

Gibson v. Phillips Petroleum Co., 352 U.S. 874

RSE ESOS SN a Rc ae ONS | ie ae

Lavender v. Kurn, 327 U.S. 645 (1947) 000000, 25

Lones v. Detroit, Toledo and Ironton Railway Company,

398 F.2d 914 (6th Cir. 1968) , cert. denied,

OP BUI PI OI os oo soasicccsiscciairscccssccccsveevess | 24

Missouri-Kansas-Texas Railway Company v. Hearson,

422 F.2d 1037 (10th Cir. 1970) 0.0.0.0... a

Montague & Co. v. Lowry, 193 U.S. 38 (1904) ........ an ae

Planter’s Manufacturing Co. v. Protection Mutual

Ins. Co., 380 F.2d 869 (5th Cir.), cert. denied,

389 U. S. RI AE ica ea EI, eS iter nae ano ree 22

Swafford v. Atlantic Coast Line R. Co., 350 U.S. 807

ERECT SIS Ce TEASE, 26

Tennant v. Peoria & P.U.R. Co., 321 U.S. 29, 33

ROT e PEER tee enn 21, 26, 27

Union Trust Co. v. Eastern Airlines, Inc., 350 U.S. 907

SANSA Sas rine Seen er 1 Re PoaR FeO .. 26

United States v. Patten, 226 U.S. 525 (1913) .............. 27

Williams v. Carolina Life Ins. Co., 348 U.S. 802

REE NCARA sir oR 2 te fe Roel”, ST SSO aceite on 26

Wratchford v. S. J. Groves & Sons, 405 F.2d 1061

RCE, SOE. cdipuiac ieketeinitascases: ee

Wyandotte Co. v. United States, 389 U.S. 191

Ep PR lee tig ya Ste aan Ro RM Et AY Sa a re 17

Zenith Radio Corp. v. Hazeltine Research, 395 U.S. 100

RRR RRR Rp eiey renin MR acl, ves nd GPT ote A eter uer 18

Table of Authorities — (Continued)

Page

Statutory and Constitutional Provisions

) Lit 7 + 5 Rieeeomecmesnnts tls cash iT iar. ac! Res

Be ovidecs cece ao | 3

) be | RAR emcee. uD a

Bie UI BO ance cee 17

S Ue Bees cs eee Ree

USS. SER eee. «......e. 2, 4, 14, 22

6 URC. $60 5.05... eee eee 2, 4, 14, 22

U.S. Const. amend. VII RTE: Dred ie: I hoa 2

Miscellaneous

Bagalay, Directed Verdicts and the Right to Trial by

Jury in Federal Courts, 42 Tex.L. Rev. 1053

(OND ksi : 26

Green Protection of Jury Trial in Diversity Cases

Against State Invasions, 35 Tex.L.Rev. 768

CTY nic ceccniestinsicstinssnjcont etna aa ) —

Wright & Miller, Federal Practice & Procedure: Civil

SR: Bench et .. 15, 23, 28

In the

Supreme Court of the United States

October Term, 1979

No.

Luoyp L. Hayss, Hayes, INc.,

Park PLaza Twin THEATRES, INC.

AND Mip-County ENTERPRISES, INC.,

Petitioners,

v.

T. G. Sotomon, Gur States THEATRES, INC.,

GuLr States THEATRES OF Texas, INc.

AND Fuqua INbusTrIES, INC.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Petitioners respectfully pray that a writ of certiorari issue

from this Court to review the judgment and opinion of the

United States Court of Appeals for the Fifth Circuit in this

case.

Opinion Below

The opinion of the Court of Appeals for the Fifth Circuit

is reported at 597 F. 2d 958. It is reproduced in the Appendix

hereto. No opinion was rendered by the District Court for

the Eastern District of Texas.

2

Jurisdiction

The judgment of the Court of Appeals was entered on

June 29, 1979. A timely petition for rehearing or rehearing

en banc was denied on September 24, 1979, and this petition

was filed within 90 days of that date. The jurisdiction of

this Court is invoked pursuant to 28 U.S.C. § 1254(1).

Questions Presented

1. Whether the Court of Appeals erred in holding that

injuries to the business and property of an antitrust plaintiff

caused by a competitor’s antitrust violations specifically

directed to eliminating or limiting the competition of the

plaintiff may, nonetheless, be found by a court not to be

“antitrust injuries” for which treble damages are recoverable.

2. Whether the Court of Appeals erred in holding that this

Court’s decisions in actions under the Federal Employers’

Liability Act (45 U.S.C. §51 et seq.) and the Jones Act

(46 U.S.C. § 688) on the meaning of the Seventh Amend-

ment right to a jury trial are inapplicable to actions under

the antitrust laws.

Statutory and Constitutional Provisions Involved

Title 15, United States Code, Section 15:

That any person who shall be injured in his business or

property by reason of anything forbidden in the anti-

trust laws may sue therefor in any district court of the

United States in the district in which the defendant re-

sides or is found or has an agent, without respect to

the amount in controversy, and shall recover threefold

the damages by him sustained, and the cost of suit, in-

cluding a reasonable attorney’s fee.

United States Constitution, Seventh Amendment:

In Suits at common law, where the value in controversy

shall exceed twenty dollars, the right of trial by jury

shall be preserved, and no fact tried by a jury, shall be

otherwise re-examined in any Court of the United

States, than according to the rules of the common law.

3

Statement of the Case

This litigation began as a private antitrust action, filed

in the United States District Court for the Eastern District

of Texas, charging violations of Sections 1 and 2 of the

Sherman Act (15 U.S.C. §§ 1 and 2) by defendants in con-

nection with the acquisition, construction, and operation of

motion picture theaters in greater Port Arthur, Texas, and

seeking treble damages and other relief under Section 4 of

the Clayton Act (15 U.S.C. § 15).

Petitioners (plaintiffs below) are Lloyd L. Hayes, an

entrepreneur with motion picture theater interests in Port

Arthur, elsewhere in the “Golden Triangle” area of Texas

(Beaumont, Port Arthur, and Orange), and elsewhere in

the South; Hayes, Inc., a Texas corporation the stock of

which is owned by the Hayes family; Park Plaza Twin

Theaters, Inc., a Texas corporation that owns the Park

Plaza Twin Theater in Port Arthur and the stock of which

is 50 percent owned by Hayes, Inc.; and Mid-County Enter-

prises, Inc., a Texas corporation mostly owned by the Hayes

family and formed for the purpose of building and operating

a drive-in motion picture theater in the greater Port Arthur

area.

Respondents (defendants below) are T. G. Solomon, an

entrepreneur who owned interests in some 150 motion

picture theaters (screens) in the Golden Triangle area and

elsewhere in the South until August 31, 1972; Fuqua In-

dustries, Inc., a publicly owned Delaware corporation that

owns the stock of many subsidiary corporations engaged in

a variety of businesses, including transportation, recreation,

a chain of more than 200 theaters in the South, and housing;

Gulf States Theaters, Inc. (Gulf States) (later Coastal

Theaters, Inc.) and Gulf States Theaters of Texas, Inc.

(Gulf States Texas) (later Martin Theaters of Texas, Inc.),

4

Delaware corporations wholly owned by Fuqua Industries

and formed to acquire Solomon’s theater interests on

August 31, 1972.

After a nine day trial before a jury, during which 283

exhibits were introduced and twenty-four witnesses testi-

fied, producing a record of over 4,000 pages (App.-1),

the jury reached a verdict in favor of petitioners in all re-

spects. The jury found that respondents violated both Sec-

tion 1 and Section 2 of the Sherman Act by unjustifiably

preventing petitioners from constructing in Port Arthur a

shopping center and theater that would have competed

with respondents’ Port Arthur theaters (the “shopping

ter-theater claim”), by preventing petitioners from con-

structing in the greater Port Arthur area a drive-in theater

that also would have competed with respondents’ theaters

(the “Mid-County claim”), and by destroying or lessening

the competitive potential of a theater owned by petitioners

in Port Arthur (the “Park Plaza claim”). The jury awarded

petitioners damages totalling $3,483,000 plus attorneys’ fees.

The District Court entered judgment accordingly, after the

mandatory trebling of the jury’s damage award.

The United States Court of Appeals for the Fifth Circuit

reversed the District Court’s judgment. The Court of Ap-

peals held that the injuries suffered by petitioners were not

“antitrust injuries” within the meaning of this Court’s de-

cision in Brunswick, Corp. v. Pueblo Bowl-O Mat, Inc., 429

U.S. 477 (1977). (App. - 28). Applying the Fifth Circuit’s

rule of Boeing Co. v. Shipman, 411 F. 2d 369 (5th Cir. 1969)

that this Court’s decisions on sufficiency oi the evidence to

support a jury verdict in Federal Employers’ Liability Act

(45 U.S.C. § 51 et seq.) and Jones Act (46 U.S.C. § 688)

cases are not applicable to other cases, the court also held

that there was not sufficient evidence to support the verdict.

5

The court ordered that the shopping center-theater and Mid-

County claims be dismissed, and remanded the Park Plaza

claim for a new trial.

Evidence was introduced at the trial tending to show —

at least when viewed, as it should have been but was not

by the Court of Appeals, in the light most favorable to

petitioners — the following. In 1967 petitioner Park Plaza

Twin Theaters, Inc. owned the Park Plaza Twin Theater, a

deluxe, two-auditorium, first-run theater “soon to become

acknowledged as the finest such facility in the area.” (App.

- 5). In January 1968 respondent Solomon — whose theater

interests at the time included ownership of a theater in

nearby Beaumont (PX 15, p. 3, PX 115) — acquired ex-

clusive control of the Park Plaza Twin Theater by entering

into a contract with Park Plaza Twin Theaters, Inc. making

him the sole operator for a period of fifteen years. (PX 115).

In March 1968 Solomon, Hayes, and another individual,

Bonner Phares, formed a corporation, Golden Triangle

Theaters, Inc., in which Solomon owned 50 percent of the

stock and Hayes and Phares owned 25 percent each. In

July 1968 Golden Triangle Theaters acquired a chain of

theaters constituting all of the remaining theaters in the

greater Port Arthur area. (R. 433-434, PX 129, p. 37; PX 129,

pp. 7-14, 17). Solomon obtained the sole right to operate

these theaters as well as the Park Plaza Twin Theater (PX

129, pp. 17-18), thereby acquiring a complete monoply of

motion picture theaters, both indoor and outdoor, in the

greater Port Arthur area.

Having thus acquired monopoly control of motion picture

exhibition in greater Port Arthur, Solomon undertook a

course of action, individually and with others, the effect of

which was to maintain and preserve this ccztrol by pre-

venting or restricting competitinn which petitioners at-

tempted to offer by means of three separate enterprises.

y 6

The shopping center-theater claim

The first of these enterprises was a project to develop a

shopping center containing a theater on a tract of land

owned by Hayes and Hayes, Inc. in Port Arthur and

uniquely well-suited for such a project. (R. 106-109, PX 6,

6A, 17, 18, 203). In November 1970 Solomon and one Wilbur

Marvin, a business associate experienced in shopping center

development, purchased an undivided one-half interest in

the shopping center tract. By the terms of a Development

Agreement entered into at that time by Solomon, Marvin,

Hayes and Hayes, Inc., Solomon was to provide capital as

the development progressed and Marvin was to use his

best efforts to expedite development. (PX 10, pp. 8-9, 11-12).

In a separate document executed at the same time, Solomon

and Marvin obtained the agreement of Hayes, Inc. not to

develop for the same purpose any other property within a

two-mile radius of the development project. (PX 12).

Marvin thereafter elicited substantial interest in the

project from prospective tenants, including, for example,

J.C. Penney Co. and White House Dry Goods, Co., depart-

ment store operators. (PX 21, 23, 166, 203). In March 1971

Marvin began negotiating with a Dallas-based architectural

firm, Architectonics, to draw a master plot plan, necessary

for rental purposes, for the development. (PX 19, 20). Ata

meeting in May 1971 all parties voted to hire Architectonics.

(R. 162, 179). In June 1971 Architectonics submitted a pro-

posal for master planning services. (PX 24). Hayes and

Hayes, Inc. agreed to accept the proposal, and Marvin trans-

mitted it to Solomon for his approval and signature. Solo-

mon, however, refused to give his approval, and Marvin

refused to proceed further without Solomon’s approval.

(R. 169-171, 632-634, 1779-1781, PX 25, 26). Because tenants

could not be obtained without preparation of an architect-

ural lease and site plan, the result was to bring the project

to a halt.

7

In July 1970, Hayes, upon the death of Bonner Phares,

acquired Phares’ 25 percent stock interest in Golden Triangle

Theaters pursuant to a prior written agreement between

them. Hayes thus acquired an equal ownership interest with

Solomon. Solomon, however, thereupon demanded that

Hayes convey this 25 percent stock interest to the corpo-

ration, the effect of which would have been to give Solomon

a 6624 percent share. (R. 153-157, 590, PX 15, 16; R. 2099,

PX 29). Solomon had his attorney prepare an agreement

to this effect in November 1970, but did not present it to

Hayes until May 1971, some five months after the execution

of the Development Agreement. (R. 179-181, 2099, PX 29).

Upon Hayes’ refusal to agree to transfer the Golden Triangle

Theaters stock, Solomon refused to approve the Architecton-

ics proposal. (R. 169-171, 632-634, 1779-1781, 2040-2041). Un-

der the terms of the Development Agreement, the assent of

only three of the four principals was necessary to permit the

project to proceed, but, as shown by a document from

Marvin’s files, Solomon requested Marvin to “go along

[with Solomon] as a matter of cooperation,” in return for

which Solomon promised to “make Marvin whole” by re-

funding his investment ($150,000) in the project. (R. 177,

1782-1783, PX 10, pp. 15-16, PX 27). Marvin then refused to

give hi. assent, stating, as Hayes testified, “But, Lloyd, I

have got, as you know I have got theater interests and

shopping center interests with Mr. Solomon and I am just

not going to get caught in between, I have got to go along

with what he says,” (R. 171).

In November 1971 Solomon told Hayes that he, Solomon,

would delay the development project indefinitely unless

Hayes agreed to sell Solomon all of his Golden Triangle

Theaters stock, give Solomon options to lease the Park Plaza

Twin Theater for up to thirty years at rental terms favorable

to Solomon, and cancel the Development Agreement and

repurchase the ownership interest of Solomon and Marvin.

(R. 182-186, PX 204). Hayes, faced with pressure from lend-

ers on the development project tract and from prospective

tenants and with the necessity of avoiding protracted litiga-

tion, acquiesced in each of Solomon’s demands. (R. 183-189,

206, 285). In December 1971 two documents were ex-

ecuted by Solomon and Hayes, a Memorandum of Under-

standing, concerning the development project (PX 31),

and a Memorandum of Agreement, concerning the other

theater matters. (PX 32). Under the latter agreement,

Hayes was to convey all his stock in Golden Triangle Thea-

ters to Solomon and sever all connection with that corpora-

tion except that he would be retained as a consultant at a

fee of $500 a month for five years, By the terms of the

Memorandum of Understanding, Solomon was to obtain

Marvin's consent to the transfer of their undivided one-half

ownership interest in the development project to Hayes and

Hayes, Inc. by January 12, 1972. Solomon, however, failed

to do this by that date. (R. 190-192). Hayes nonetheless

agreed with Solomon’s attorney to close the Golden Triangle

Theaters stock transaction on condition that the Memo-

randum of Understanding would become self-operative on

March 1, 1972, and a document to this effect was executed

on January 12, 1972. (R. 191-193, PX 33). Assuming that he

would now be able to proceed with the development theater

project, Hayes met with Architectonics in February 1972

to negotiate an agreement for the preparation of a master

plan. (R. 206, 876-878, PX 40). By March 1, 1972, however,

Solomon had again failed to transfer the Solomon-Marvin

undivided interest in the tract, thereby continuing to fore-

stall development. (R. 673-674, 1785-1786, 1926, PX 38,

39, 81, 83, 84, 85).

In August 1972 Solomon sold his theater interests to

respondent Fuqua Industries, Inc., including the Golden

9

Triangle Theaters chain and some 110 other theater screens

throughout the South. Solomon was also employed by Fuqua

Industries as Chairman of the Board and Chief Executive

Officer of two wholly owned subsidiaries, respondents Gulf

States Theaters, Inc. and Gulf States Theaters of Texas,

Inc., which were formed to operate the theaters. (R. 153,

608, 685-693, 1946-1952, PX 121, 122, 142, 146, 147, 148, 153).

Fuqua Industries thus acquired Solomon’s monopoly posi-

tion in Port Arthur. Hayes, who had recently participated in

the construction of motion picture theaters in Jackson,

Mississippi and Orange, Texas in competition with Solomon

(R. 194) and who was openly moving to construct a multi-

screen theater as part of the development project, was the

preeminent threat to this position. Solomon, acting now

as an agent of Fuqua Industries, took a series of actions that

had the effect of minimizing this threat.

As of August 1, 1972 Solomon ceased paying to Hayes the

$500 per month fee he was to receive as a consultant to

Golden Triangle Theaters pursuant to the December 1971

agreement whereby Solomon acquired all of the Golden

Triangle Theaters stock. Solomon asserted that a conflict

of interest had arisen by reason of Hayes’ participation in

a theater in Orange, Texas, although nothing in the De-

cember 1971 agreement precluded such participation. (R.

118, 208, PX 31, p. 3). In meetings and telephone conversa-

tions with Hayes in late 1972 and early 1973, Solomon took

the position that he was not obligated to sell back to Hayes

the undivided one-half interest he held with Marvin in the

development project. (R. 207, 679, 2050-2051). In effectua-

tion of this position, Solomon had an agent of Gulf States

Theaters and Gulf States Theaters of Texas attempt to pay

taxes on the development project tract in direct contraven-

tion of the terms of the December 1971 Memorandum of

Understanding that all taxes were thereafter to be paid by

10

Hayes. (R. 679-681, PX 31, 41, 43). In June 1973 Solomon

again took the position, in response to an inquiry by Hayes’

attorney, that he was not legally obligated to reconvey

the Solomon-Marvin interest in the tract. (R. 218, 219,

PX 64).

The effect of these actions by Solomon, individually and

in con-7rt with others, was completely to preclude pro-

gress on the shopping center-theater project. Lenders,

developers, and prospective tenants would not proceed

unless and until Hayes could obtain clear title to the land.

In 1973, in an effort to break Solomon’s stranglehold over

the project, Hayes and Hayes, Inc. filed suit in a Texas

state court for declaratory judgment confirming their right

to repurchase the Solomon-Marvin interest. Although he

was duly served with process, Solomon failed to respond,

and a default judgment was finally entered in January,

1974 upholding the Hayes position. (R. 206, 285, 914, 923;

R. 220, PX 46, DX 28). Solomon nonetheless, continued to

assert title to the land by causing checks to be tendered

in payment of taxes on a one-half interest in the land. (R.

230-237, PX 50, 51, 52, 53, 54, 55). At a closing finally set for

January 28, 1975, Hayes tendered full payment for the Solo-

mon-Marvin interest, in accordance with the terms of the

Memorandum of Understanding, but Solomon now refused

to close unless a deed of trust, not called for by the agree-

ment, was also tendered. (R. 190-192, 241-246, PX 56, 57,

58, 59, 60). Hayes and Hayes, Inc. were therefore required to

return to the state court for an order requiring specific per-

formance of the agreement by Solomon. After more than a

year of additional delay, a consent judgment was entered

pursuant to which Solomon agreed to abide by the terms

of the December 1970 agreement. (R. 252-253, 1909-1910,

PX 69). On the new date set for closing, April 15, 1976, how-

ever, Solomon again refused to close, this time demanding

payment of $90,000 in interest, despite the fact that such

11

payment had previously been waived in writing. (R. 253-

254, 1911, PX 37, 72, pp. 11-12). On the further command of

the state court, Solomon finally conveyed the undivided

one-half interest to Hayes and Hayes, Inc. on April 30,

1976, (PX 72, pp. 12-13). By this series of actions, respon-

dents delayed the construction of the shopping center and

competing theater for almost five years, during which period

the cost of construction increased by more than seven million

dollars. (PX 77, 78). :

The Mid-County drive-in claim

In a further and separate effort to meet the need for

additional motion picture theaters in greater Port Arthur,

Hayes obtained the interest of a group of investors in con-

struction of a drive-in theater in the area. They organized

Mid-County Enterprises, Inc. in June 1972 and obtained a

lease on a suitable tract of land located along a major high-

way. (R. 298-299, PX 87, 91). During this period, Hayes and

this same group of investors were also in the process of con-

structing a drive-in theater in Jackson, Mississippi, another

city in which respondents owned the only other drive-in

theater. (R. 299, PX 142, 151). Mid-County obtained a

$50,000 loan, made a $20,000 prepayment of rent on a fifteen-

year lease, and purchased a $6,000 screen tower and $2,000

sign. (R. 300-301, 305-309, PX 91, 112).

Before Mid-County could begin construction, however,

respondents learned of the project and ordered the head of

their real estate department to locate a site close to the

Mid-County site on which they could build or threaten to

build a predatory competing theater (R. 808-819), as they

had in fact already done in Jackson. (R. 110, 210, 227, 319,

1391-1397, 1413). After a site was located, Solomon visited

Hayes in Port Arthur in the Spring of 1973 and, with an-

other Mid-County investor present, warned them that un-

12

less they “stop[ped] building the drive-in in Mid-County”

(R. 1402) he would build a competing theater nearby, pre-

vent them from obtaining films, build a theater near Hayes’

theater in Orange, Texas, and continue to block the shop-

ping center-theater project. (R. 209-212, 1402-1404). Ac-

cording to a witness for petitioners, Solomon stated: “[I]t is

not Teddy Solomon anymore, it is Fuqua. And I sold these

theaters for a hell of a price to Fuqua, and I have to keep

these towns closed and you all are fooling around with

these towns.” (R. 1403). Solomon’s own testimony as to this

matter was as follows:

“Q. Did you ever tell Mr. DeNeve not to build in Mid-

County area?

“A. I don’t know that I told Mr. DeNeve. I will say

this: that I did all I could to discourage him to build

the theater, I didn’t think it was a practical and neces-

sary — and I would rather him not have built the

theatre.

“Q. You did all you could to discourage him?

“A. Well, within reason, [ didn’t put a gun on him or

anything and say they couldn’t build it, I tried to talk

Mr. DeNeve and Mr. Hayes out of it, not building the

theatre.” (R. 616).

This was consistent with the general policy of respondents

concerning competition, which Solomon stated at the trial

as follows:

“Our main concern in motion picture exhibitions today

is to keep a town properly staffed with a number of

deluxe theatres in order to keep competition from other

theatres out of the city.

* * *€

“Our company has taken the position that rather than

have outsiders come in, even though they have a right,

we could profit more and handle film better by having

enough screens ourselves to discourage outsiders from

coming in” (R. 659-660).

13

Despite respondents’ initial threats, Mid-County borrowed

an additional $300,000 in July 1973, began construction in

November 1973, and retained a motion picture booking agent

in January 1974 who notified all motion picture distributors

of the planned opening. (R. 333-335, 1253-1255, PX 88, 93,

94, 95; R. 330-333, PX 103). Respondents, however, intensi-

fied their predatory activities— such as steps to prevent

Hayes from obtaining needed films—in Jackson and

Orange, with the result that Hayes’ Jackson and Orange

theaters became unprofitable. (R. 1396, 1419, 1427-1428).

In June 1974 Hayes met with Solomon at the offices of Gulf

States Theaters in New Orleans, and Solomon handed him

a hand-written note that ended with the warning in bold

letters “DO NOT BUILD AGAINST GULF STATES.”

(R. 225-226, 229, 337-338, PX 49).

Believing that respondents had already spent approxi-

mately one million dollars on two drive-in theaters in Jack-

son, which Solomon admitted would not have been built

except to deter competition by Hayes (R. 2094, PX 217, pp.

5, 6), that respondents stood ready to make good Solomon’s

threat to build a new drive-in theater close to the Mid-

County site and to double the size of their existing Port

Arthur drive-in theater (by expanding from two screens to

four), to build a new theater in Orange in order to injure

Hayes’ theater there, and to continue to block the shopping

center-theater project (R. 318-321, 809-814, 1396-1398, 1401-

1404, PX 136, 215), Hayes concluded that he did not have

the means for a struggle of this magnitude. (R. 1166-1167,

1415-1416). Respondents’ policy regarding competition was

successfully implemented in Port Arthur; a Mid-County

drive-in theater that would have broken respondents’ drive-

in (and indoor) theater monopoly in the area was never

built.

14

The Park Plaza claim

The essence of the Park Plaza Twin Theater claim is that

respondents, as part of their acts and conspiracies of monop-

olization and restraint of trade, acted to diminish or destroy

the long-term competitive ability of the Park Plaza Twin

Theater by denying it “best box office” films — in breach

of a lease agreement, as was found by a state court — by

acting to injure its reputation, and by an expansion of com-

petitive motion picture facilities in Port Arthur not justified

by legitimate business considerations. (R. 364-365, PX 116).

The Court of Appeals did not order that this claim be dis-

missed, apparently finding that it alone constitutes a valid

antitrust claim and may be supported by evidence sufficient

to sustain the jury verdict. Instead, the court remanded this

claim for a new trial disentangled from the other claims.

(App. - 53). Because the validity of this action by the court

depends on the validity of its dismissal of the other claims,

further separate discussion of the Park Plaza claim is not

now required.

Reasons for Granting the Writ

This case presents two issues of public importance. The

first is whether this Court’s holding in Brunswick Corp. v.

Pueblo Bowl-O Mat, Inc., 429 U.S. 477 (1977), that an anti-

trust plaintiff can only recover for an antitrust injury, an

“injury of the type the antitrust laws were intended to

prevent,” was correctly interpreted by the Court of Appeals

as precluding a plaintiff’s antitrust recovery for injuries

caused by a competitor’s antitrust violations committed for

the specific purpose and with the effect of precluding or

limiting competition by the plaintiff. It would seem that

there can be no doubt that the Court of Appeals’ interpre-

tation of Brunswick is not correct. If allowed to stand and

followed by other courts, that interpretation would seriously

undermine enforcement of the antitrust laws by private

Re nrmne ene owner st etetes

een se es

15

treble damage actions; it would, at the very least, contribute

an element of enormous confusion and uncertainty to such

actions. |

The second issue of general importance presented by the

Court of Appeals’ decision is, stated most simply, whether

the Seventh Amendment’s guarantee of a jury trial in fed-

eral courts means one thing in one class of cases and some-

thing else in all others. More specifically, the issue is whether

this Court’s interpretation of the Seventh Amendment as

precluding federal courts from reversing jury verdicts sup-

ported by probative facts and reasonable inferences is ap-

plicable, as the Fifth Circuit holds, only to actions brought

under the Federal Employers’ Liability Act (45 U.S.C.

§ 51 et seq.) or the Jones Act (46 U.S.C. § 688) and not

to actions brought under the antitrust laws. This holding,

too, would seem to be clearly incorrect. Further, it is an issue

as to which there is a nationwide conflict among the deci-

sions of the courts of appeals. As leading authorities on the

federal courts have stated, it is “extremely important” that

this Court settle this issue and provide “helpful guidance to

the lower federal courts.” Wright & Miller, Federal Practice

and Procedure: Civil § 2526, pp. 556-59 (1971).

Grant of this petition for certiorari is, therefore, strongly

supported by the considerations referred to in Rule 19 of

the Rules of this Court.

I. This Court’s Decision in Brunswick v. Pueblo Bowl-O-

Mat Does Not Bar an Antitrust Plaintiff from Recovering

Damages for Injury to Its Business or Property Caused by

Violations of the Antitrust Laws Committed by Defendants

for the Purpose and With the Effect of Preventing or

Limiting Competition by the Plaintiff.

The Court of Appeals panel below apparently approached

this case with a view of private treble damage actions under

16

the antitrust laws indicating extreme disfavor, if not scorn.

The first sentence of the court’s opinion states that this

case is “typical of quests for the golden fleece of treble

damages” (App. - 1). Later in its opinion, it again so charac-

terizes private treble damage actions by deprecating peti-

tioner Hayes as having “himself acknowledged the lure of

the golden fleece of treble damages” (App. -20, n4), de

spite the fact that the allegations of the complaint, if found

to be true, as they were by the jury, undoubtedly establish

antitrust violations directed against and injuring Hayes

as a competitor. It would seem appropriate for this court

to grant this petition — even if for no other reason — to

make clear to the court below and other courts that disfavor

approaching hostility is not the proper judicial attitude to-

ward the private treble damage actions provided for by

Congress as an essential means of enforcing the antitrust

laws.

The court below was undoubtedly correct that “The anti-

trust laws were never meant as a panacea for all wrongs”

(App. - 27). It is equally clear, however, that the court was

incorrect in proceeding to the conclusion that those laws

do not provide a remedy for the wrongs suffered by peti-

tioners here. The court held that the injuries suffered by pe-

titioners are “not the type of injury that the federal anti-

trust laws were intended to forestall’ and that “the injuries

for which damages were awarded were not antitrust in-

juries” (App. - 28). The injuries suffered by petitioners, how-

ever, are competitive injuries caused by acts of respondents

in violation of the antitrust laws and that are violations

for the very reason that they necessarily and unjustifiably

cause such injuries, and the damages awarded to petitioners

were awarded for these injuries. Petitioners’ injuries, there-

17

fore, are the paradigm of “the type of injury that the federal

antitrust laws were intended to forestall,” the clearest pos-

sible example of “antitrust injuries.”

The Court of Appeals’ error on this issue derives from a

complete misunderstanding of this Court’s decision in Bruns-

wick Corp. v. Pueblo Bowl-O Mat, Inc., 429 U.S. 477 (1977).

In Brunswick, operators of bowling centers alleged that

Brunswick, one of the nation’s two largest manufacturers

of bowling equipment, violated Section 7 of the Clayton

Act (15 U.S.C. § 18) by acquiring and operating bowling

centers that competed with plaintiffs’ centers and that would

otherwise have been unable to continue in business because

of an inability to pay their debts. The basis for the alleged

antitrust violation was that the acquisitions by defendant

introduced a large firm with very substantial resources into

markets of small firms with very limited resources. The in-

jury complained of by plaintiffs, however, was in no way

dependent on this alleged ground of antitrust illegality, but

was simply a claim for loss of the profits plaintiffs would

have made had the competing bowling centers been allowed

to fail. As this Court put it (429 U.S. 487-89) :

If the acquisitions here were unlawful, it is because

they brought a “deep pocket” parent into a market of

“pygmies.” Yet respondents’ injury — the loss of in-

come that would have accrued had the acquired centers

gone bankrupt — bears no relationship to the size

of either the acquiring company or its competitors. Re-

spondents would have suffered the identical “loss” —

but no compensable injury — had the acquired centers

instead obtained refinancing or been purchased by

“shallow pocket” parents, .. .. Thus, respondents’

injury was not of “the type that the statute was in-

tended to forestall,” Wyandotte Co. v. United States,

389 U.S. 191, 202 (1967).

18

To allow recovery for the injury complained of in

Brunswick would be to “divorce antitrust recovery frum the

purposes of the antitrust laws,” to “make § 4 recovery en-

tirely fortuitous,” and to “authorize damages for losses which

are of no concern to the antitrust laws.” 429 U.S. 487. Indeed,

this Court stated (429 U.S. 488) :

But the antitrust laws are not merely indifferent to

the injury claimed here. At base, respondents complain

that by acquiring the failing centers petitioner pre-

served competition, thereby depriving respondents of

the benefits of increased concentration. The damages

respondents obtained are designed to provide them

with the profits they would have realized had competi-

tion been reduced. The antitrust laws, however, were

enacted for “the protection of competition, not com-

petitors,” Brown Shoe Co. v. United States, 370 U.S.,

at 320. It is inimical to the purposes of these laws to

award damages for the type of injury claimed here.

This Court concluded its discussion of this issue in

Brunswick with the following paragraph (429 U.S. 489),

all but the first sentence of which was quoted by the court

below (App. - 28):

We therefore hold that for plaintiffs to recover treble

damages on account of § 7 violations, they must prove

more than injury causally linked to an illegal presence

in the market. Plaintiffs must prove antitrust injury,

which is to say injury of the type the antitrust laws

were intended to prevent and that flows from that

which makes defendants’ acts unlawful. The injury

should reflect the anticompetitive effect either of the

violation or of anticompetitive acts made possible by the

violation. It should, in short, be “the type of loss that

the claimed violations . . . would be likely to cause.”

Zenith Radio Corp. v. Hazeltine Research, 395 U.S.,

100, 125 (1969).

It is obvious that Brunswick’s analysis of antitrust private

treble damage recovery supports rather than, as the Court

19

of Appeals held, precludes the recovery sought and obtained

by petitioners here. Petitioners do not complain, like the

plaintiffs in Brunswick, that respondents preserved compe-

tition; petitioners complain, on the contrary, that respond-

ents undertook to prevent and destroy competition. Peti-

tioners’ complaint, therefore, is, not inimical to, but in fur-

therance of the purposes of the antitrust laws. Petitioners’ in-

juries were not caused by acts of respondents prohibited by

the antitrust laws for some reason unrelated to such injuries,

but were caused by acts prohibited by those laws for the

very reason that they unjustifiably cause such injuries. In

this Court’s words, petitioners’ injuries are not merely

“causally linked” to an antitrust violation, but are precisely

injuries “of the type the antitrust laws were intended to .

prevent and that flow from that which makes defendants’

acts unlawful.” 429 U.S. at 489.

The Court of Appeals’ confusion on this issue is further

. illustrated by its reliance (App. - 28) on Conference of Studio

Unions v. Loew’s Inc., 193 F. 2d 51 (9th Cir. 1951), cert.

denied, 342 U.S. 919 (1952) and Donovan Construction, Co.

v. Florida Telephone Corp., 564 F. 2d 1191 (5th Cir. 1977),

cert. denied, 435 U.S. 1007 (1978), neither of which is of any

relevance here. In each case recovery was denied on the

ground that the plaintiffs were simply not competitors in the

industry in which the alleged antitrust violations took place.

As the court put it in Donovan, plaintiffs were not “within

the target area,” that is, “within the sector of the economy

threatened by a break down in competitive conditions.”

564 F. 2d at 1192. In the present case petitioners were not

only competitors of respondents but were the specific victims

of respondents’ anticompetitive acts. Petitioners, that is,

were not merely within the target area, but were in fact the

target.

TE AT EET eR ER Oto NSPE eee nT ETN tear aa ere EN Sas

20

If injuries to an actual or potential competitor caused by

the acts and conspiracies of a monopolist or would-be mon-

opolist specifically directed to causing such injuries and

preventing such competition are not “antitrust injuries,”

as the Court of Appeals held, it is difficult indeed to under-

stand what an antitrust injury might be. That holding is so

clearly incorrect as to be difficult to explain except on the

basis of a deep-seated antagonism to private treble damage

antitrust actions, As this Court noted in Brunswick, however,

the very decision relied upon by the Court of Appeals,

private treble damage actions “play an important role in

penalizing wrongdoers and deterring wrongdoing.” 429 U.S.

at 485.

Unless the Court of Appeals’ misinterpretation of Bruns-

wick is corrected by this Court, the effect of its decision will

be to add an additional element of complexity, confusion,

and dispute to virtually every private antitrust action. Un-

less corrected, that decision may so increase the uncertainty,

expense, and delay of private treble damage actions as to

impede significantly attainment of the congressional ob-

jectives in creating such actions.

Il, This Court’s Decisions that the Seventh Amendment

Prohibits Federal Courts from Reversing Jury Verdicts

Supported by Probative Facts and Reasonable Inferences

are as Fully Applicable to Actions Under the Antitrust

Laws as to Actions Under the Federal Employers’ Liability

Act.

In addition to an important question of antitrust law,

this case presents an important question of constitutional

law and federal procedure, namely, the extent to which the

Seventh Amendment’s guarantee of a jury trial in civil

cases limits the power of federal judges to reject determina-

tions of issues of fact made by a jury.

21

A court of appeals, this Court has stated, cannot “rede-

termine facts found by the jury any more than the District

Court can predetermine them. For the Seventh Amend-

ment says that ‘no fact tried by a jury shall be otherwise

re-examined in any Court of the United States, than accord-

ing to the rules of the common law’.” Atlantic & Gulf Steve-

dores, Inc. v. Ellerman Lines, 369 U.S. 355, 358-59 (1962).

“[T}he essential requirement” for an irreversible jury ver-

dict “is that mere speculation be not allowed to do duty for

probative facts after making due allowance for all reason-

ably possible inferences favoring the party whose case is

attacked.” Galloway v. United States, 319 U.S. 372, 395

(1943). Once that requirement is met, “No court is then

justified in substituting its conclusions for those of the

twelve jurors.” Tennant v. Peoria & P.U.R. Co., 321 U.S.

29, 33 (1944).

That the Seventh Amendment prohibits federal judges

from overturning jury verdicts supported by probative facts

and reasonable inferences from those facts has been affirmed

and reaffirmed by this Court in many other cases. In the

view of the court below, however, this Court’s interpretation

of the Seventh Amendment in Tennant, supra, and these

other cases is inapplicable here. Although petitioners believe

that the evidence in the record of this case supports the jury

verdict in their favor regardless of the standard of review ap-

plied, they are not now asking for a review of that evidence

by this Court; the question as to which review is sought is,

instead, simply whether this Court’s consistent and repeated

interpretation of the Seventh Amendment is as fully ap-

plicable to actions brought under the antitrust laws as it is

to actions under other laws.

In Boeing Company v. Shipman, 411 F.2d 365 (1969),

the Court of Appeals for the Fifth Circuit, sitting en banc,

reached the conclusion that the Seventh Amendment’s

guarantee of a jury trial is applicable, in the full vigor and

strength given it by this Court, only to actions brought

under the Federal Employers’ Liability Act, 45 U.S.C. § 51

et seq., or the Jones Act, 46 U.S.C. § 688, and is applicable

only in a weaker or watered-down form to other civil actions

in the federal courts. The Fifth Circuit reached this con-

clusion despite the fact that this Court has never so limited

its Seventh Amendment decisions, despite the Fifth Circuit’s

own then recent contrary conclusion in Planters Manufac-

turing Co. v. Protection Mutual Ins. Co., 380 F.2d 869

(5th Cir. 1967), which it explicitly overruled, and despite

a vigorous and cogent dissenting opinion by Judge Rives

to which the majority made no attempt to respond.

As Judge Rives pointed out in his Boeing dissent, that de-

cision, despite its great importance, was as a practical matter

not subject to review by this Court because, although the

decision weakened the right of jury trial for plaintiffs gen-

erally, the court nonetheless upheld the jury verdict for the

particular plaintiff in that case (411 F.2d at 378, n.2):

Of course the appellee [plaintiff] will not seek certior-

ari in this case, for the judgment in his favor is affirmed.

It may or may not be to the financial interest of the

appellant to seek certiorari. While it loses the small

judgment, it wins the important opinion; on the other

hand, if upon certiorari it can secure approval of that

opinion by the Supreme Court, its position will be

strengthened in other circuits. Hopefully, less selfish

motives looking toward settling the jurisprudence may

actuate the appellant’s counsel and the appellant it-

self. In any event, the question is one so frequently

presented that a petition for certiorari in some case can

hardly be far distant.

In Judge Rives’ view, the Boeing majority, by rejecting

this Court’s Seventh Amendment standard, committed “an

23

error of constitutional proportions” and one, he predicted,

that “will continue to plague this Court and the district

courts of this Circuit until the Supreme Court grants cer-

tiorari in this or some future case, and corrects the error.”

411 F.2d at 378. The petition for certiorari that Judge Rives

hoped for in Boeing was, for the reasons he gave, never

filed, and because this Court “rarely has occasion to pass

on the sufficiency of the evidence to create a jury issue in

ordinary civil litigation” (Wright and Miller, Federal Prac-

tice and Procedure: Civil § 2526, p. 554 (1971)), the issue

has still not been settled. Because the present case exempli-

fies and turns upon the Fifth Circuit’s application of the

Boeing rule on review of jury verdicts, it provides an excel-

lent vehicle for the review of that rule by this Court that

Judge Rives so strongly urged.

The Courts of Appeals for the First, Seventh, and Tenth

Circuits have apparently adopted the view of the Fifth

Circuit in Boeing that this Court’s interpretation of the

Seventh Amendment as requiring a very high degree of

respect for jury verdicts is applicable only in F.E.L.A. (and

perhaps Jones Act) cases, Dehydrating Process Co. v. A.O.

Smith Corp., 292 F.2d 653, 656, n. 6, cert. denied, 368 U.S.

931 (1961) ; Gibson v. Elgin, Joliet & Eastern Railway Com-

pany, 246 F.2d 834, 840 (7th Cir.), cert. denied, 355 U.S.

897 (1957); Missouri-Kansas-Texas Railway Company uv.

Hearson, 422 F.2d 1087, 1040 (10th Cir. 1970); see also

Cahill v. New York, New Haven & Hartford R. R. Co., 224

F.2d 637, 640 (2d Cir. 1955) (dissenting opinion of Judge

Frank: “[R]ecent Supreme Court decisions make it clear

that, under that Act [F.E.L.A.], the jury’s power to draw

inferences is greater than in commonlaw actions.”) The

Courts of Appeals for the Fourth, Sixth, and Eighth Circuits,

on the other hand, apparently adhere to the view that the

24

Seventh Amendment jury trial guarantee cannot mean one

thing in one class of cases and something else in another,

Wratchford v. S. J. Gorves & Sons, 405 F.2d 1061, 1066,

n.14 (4th Cir. 1969); Lones v. Detroit, Toledo and Ironton

Railway Company, 398 F.2d 914, 919 (6th Cir. 1968), cert.

denied, 393 U.S. 1063 (1969) ; Continental Can Co. v. Horton,

250 F.2d 637, 643 (8th Cir. 1957). This very severe split

among the courts of appeals on this important constitutional

issue is of itself, of course, sufficient, indeed compelling,

reason for grant of this petition.

A further ground for granting this petition is that the

view announced by the Fifth Circuit in Boeing and actually

applied in this case to deprive petitioners of the benefit of

a jury verdict would appear to be clearly incorrect. In sup-

port of its holding that this Court’s rulings in F.i.L.A.

cases on the sufficiency of the evidence to support a jury

verdict are applicable only to F.E.L.A. cases, the majority

in Boeing noted that “FELA cases, however, are statutory

negligence actions” in which, as this Court stated in Atlan-

tic & Gulf Stevedores, Inc. v. Ellerman Lines, supra, 369

U.S. at 360, “trial by jury is part of the remedy.” This,

however, totally fails to distinguish F.E.L.A. actions from

other actions in general and, most certainly, from antitrust

actions in particular.

As Judge Rives noted in his dissenting opinion in Boeing,

the fact that an action is based on a statute does not make

the Seventh Amendment inapplicable, and although differ-

ent statutes of course create different substantive rights

and make different facts relevant, this does not change the

Seventh Amendment procedural requirement that deter-

mination of issues of fact are for the jury. Further, antitrust

actions are, no less than F.E.L.A. actions, statutory actions

in which “trial by jury is part of the remedy.” “[T]he

right to trial by jury applies to treble damage suits under

25

the antitrust laws, and is, in fact, an essential part of the

congressional plan for making competition rather than mo-

nopoly the rule of trade .. .” Beacon Theatres v. West-

over, 359 U.S. 500, 504 (1959). The fact is that the F.E.L.A.

does not contain an explicit reference to the right of jury

trial; such reference was deliberately omitted because of

Congress’ belief that it would be surplusage and that the

same Seventh Amendment right would be applicable in

F.E.L.A. actions as in other “common-law” (i.e., other than

equity or admiralty) actions in federal courts. See the full

discussion of this matter, including quotation of the rele

vant legislative materials, in Judge Rives’ dissenting opinion

in Boeing, 411 F.2d at 398-404.

The court in Boeing also attempted to support its holding

that different jury trial requirements apply in F.E.L.A.

cases than in other cases by stating, “the Seventh Amend-

ment of the United States Constitution providing for trial

by jury does not require, either expressly or impliedly,

that the test of sufficiency of evidence to create a jury

question in a non-FELA federal case be the same as in an

FELA case.” 411 F.2d at 373. The Seventh Amendment in-

deed makes no distinction between F.E.L.A. and other

cases — and it would be most peculiar if it did — but that

fact, of course, negates rather than supports the Fifth Cir-

cuit’s argument; it shows that the jury trial guarantee is

the same in F.E.L.A. as in other cases.

This Court, too, has made no distinction between F.E.L.A.

cases and other cases in this regard. It has, on the con-

trary, based its F.E.L.A. decisions regarding the sufficiency

of evidence to support a jury verdict squarely on “the jury’s

historic function,” Lavender v. Kurn, 327 U.S. 645, 652

(1947); it has cited non-F.E.L.A. cases in support of its

F.E.L.A. decisions; and it has cited F.E.L.A. decisions in

26

non-F.E.L.A. cases as simply establishing the “federal test

of sufficiency of the evidence to support a jury verdict,”

Dick v. New York Life Ins. Co., 359 U.S. 487, 445, n.8

(1959). See also Gibson v. Phillips Petroleum Co., 352 U.S.

874 (1976) ; Swafford v. Atlantic Coast Line R. Co., 350 U.S.

807 (1955); Union Trust Co. v. Eastern Airlines, Inc. 350

U.S. 907 (1955); Williams v. Carolina Life Ins. Co., 348

U.S. 802 (1954) as examples of non-F.E.L.A. cases in which

this Court has reversed, per curiam, lower court judgments

that overturned jury verdicts as insufficiently supported by

the evidence. See also Bagalay, Directed Verdicts and the

Right to Trial by Jury in Federal Courts, 42 Tex.L.Rev.

1053, 1064-71 (1964); Green Protection of Jury Trial in

Diversity Cases Against State Invasions, 35 Tex.L.Rev.

768 (1957).

That the Seventh Amendment’s limitation of federal court

power to reject jury verdicts as insufficiently supported by

evidence is no less or different in private treble damage anti-

trust cases than in F.E.L.A. cases is specifically shown by

this Court’s decision in Continental Ore Co. v. Union Car-

bide & Carbon, Corp., 370 U.S. 690 (1962). Reversing a

court of appeals decision that there was insufficient evi-

dence to support a jury verdict for the private antitrust

plaintiff, this Court stated: “The Court of Appeals was, of

course, bound to view the evidence in the light most favor-

able to [plaintiff] and to give it the benefit of all inferences

which the evidence fairly supports, even though contrary

inferences might reasonably be drawn.” 370 U.S. at 696. In

support of this proposition this Court cited, inter alia,

Tennant v. Peoria & P.U.R. Co., supra, an F.E.L.A. case.

Tennant was again cited and quoted later by this Court in

Continental Ore as follows (370 U.S. at 700-01):

Undoubtedly, all of the evidence during [the rele-

vant] period does not point in one direction and differ-

27

ent inferences might reasonably be drawn from it. There

was, however, sufficient evidence to go to the jury and

it is the jury which “weighs the contradictory evidence

and inferences” and draws “the ultimate conclusion as

to the facts.” Tennant v. Peoria & P.U.R. Co., 321

US. 29, 35.

Also directly in point here is this Court’s holding in

Continental Ore that it is improper for a court of appeals

to approach a plaintiff's various claims in an antitrust action

“As if they were . . . completely separate and unrelated

lawsuits.” 370 U.S. at 698. On the contrary, antitrust plain-

tiffs

should be given the full benefit of their proof without

tightly compartmentalizing the various factual com-

ponents and wiping the slate clean after scrutiny of

each. “. .. [T]he character and effect of a conspiracy

are not to be judged by dismembering it and viewing

its separate parts, but only by looking at it as a whole.

United States v. Patten, 226 U.S. 525, 544 ...; and in

a case like the one before us, the duty of the jury was

to look at the whole picture and not merely at the indi-

vidual figures in it.” American Tobacco Co. v. United

States, 147 F.2d 93, 106 (C. A. 6th Cir.). See Montague

& Co. v. Lowry, 193 U.S. 38, 45-46.

370 U.S. at 699. As even a cursory reading of the opinion

below will make clear, a tight compartmentalizing of peti-

tioners’ various claims was a major factor in the process by

which the court reached its conclusion that the jury’s ver-

dict for petitioners lacked sufficient evidentiary support.

As Judge Rives stated in his Boeing dissent, “It seems an

unwarranted affront to suggest that the Supreme Court,

by mere fiat, has invented for FELA cases a kind of jury

trial found neither in the Constitution nor in the Act.” 411

F.2d at 386. Further, it is at least doubtful that Congress or

this Court could constitutionally give the jury a broader or

28

different role in F.E.L.A. cases than the role guaranteed by

the Seventh Amendment. See the dissenting opinion of

Judge Rives in Boeing, 411 F.2d at 386, and Wright and

Miller, Federal Practice and Procedure: Civil § 2526, p. 559

(1971).

It seems clear, therefore, that the court below erred in

holding that the Seventh Amendment standards stated and

applied by this Court in F.E.L.A. cases are inapplicable in

this antitrust case. The effect of this holding is both sub-

stantially to infringe a basic constitutional right and to

limit the effectiveness of private antitrust actions.

Conclusion

For the reasons set forth above, this petition for a writ

of certiorari should be granted.

Respectfully submitted,

EDWIN TOBOLOWSKY

1900 Southland Center

Dallas, Texas 75201

Attorney for Petitioners

OF COUNSEL:

Lino A. Graglia

3505 Taylor’s Drive

Austin, Texas 78703

TS amg eon Case

TT eee ae

APPENDIX

App. - 1

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 77-1062.

Luioyp L. Haygs, Hayss, INC., ET AL.,

Plaintiffs-Appellees,

v.

T. G. SoLomon, GuLF STATES THEATRES, INC., ET AL.,

Defendants-A ppellants.

Appeal from the United States District Court for the

Eastern District of Texas

June 29, 1979

Before THORNBERRY, RONEY and HILL, Circuit

Judges.

JAMES C. HILL, Circuit Judge:

Although this appeal presents a Brobdingnagian record

which is typical of quests for the golden fleece of treble

damages, this is not a typical antitrust case. Indeed, this

is not even an atypical antitrust case; for, despite plain-

tiffs’ herculean efforts, we conclude that this is not an anti-

trust case at all. We write at some length to explain why

we conclude that the evidence was insufficient to support the

judgment, entered on the jury’s verdict, of $10,449,900 and

the attorney’s fees award of $625,000 after considering: 2449

pages of trial transcript; 1911 pages of record on appeal:

several cartons of depositions; scores of charts, photographs

and exhibits; 201 pages of briefs; and extensive oral argu-

ment. Though there is an abundance of evidence, there is

2On our own travels through the record and the applicable law,

we have been greatly aided by the efforts of counsel. '

App. - 2

simply not enough evidence of an antitrust violation.? We

reverse and remand.

I. PROCEDURAL BACKGROUND

This is an appeal from a judgment rendered on a jury

verdict in a private antitrust action charging violations of

both Section 1 and Section 2 of the Sherman Act, 15 U.S.C.A.

§§1 and 2, with respect to alleged restraints upon the

motion picture exhibition business in Port Arthur, Texas.

The action was instituted by three separate groups of plain-

tiffs against each of several defendants, seeking treble dam-

ages under Section 4 of the Clayton Act, 15 U.S.C.A. § 15.

The case was tried before a jury in the United States Dis-

trict Court for the Eastern District of Texas. Although

brought as a single action, this case resulted in three sep-

arate damage awards by the jury, each in favor of a differ-

ent plaintiff or plaintiffs.

A. The Parties

Though brought as a single action, this case involves sev-

eral actors.

Plaintiff Lloyd L. Hayes (Hayes), an ex-mayor of Port

Arthur, is a former employee, business associate and family

friend of defendant T. G. Solomon (Solomon), an entrepre-

neur who had theatre interests in that area of Texas up to

August 31, 1972, and later became an officer in the corpora-

tion which purchased such interests. This case revolves

around Hayes and Solomon.

Plaintiff Hayes, Inc. is a Texas corporation, all the stock

of which was owned at the time of trial by Hayes and his

family. Plaintiff Park Plaza Twin Theatres, Inc. is a Texas

corporation which owns the Park Plaza Twin Theatre in

Port Arthur and whose stock at the time of trial was owned

by Hayes, Inc. and by a trustee for the widow of Hayes’s

former partner. Plaintiff Mid-County Enterprises, Inc. is a

2 “Enough is abundance to the wise.” Euripides: The Phoenissae.

App. -3

Texas corporation wholly owned at the time of the trial

by Hayes, Hayes’s father, and Gillis Jim deNeve, another

former employee of Solomon who subsequently went into

business with Hayes.

Defendant Fuqua Industries, Inc., is a publicly held Dela-

ware corporation engaged in various businesses involving

recreation, transportation, and shelter. Defendant Gulf State

Theatres, Inc. is a Delaware corporation wholly owned at

the time of trial by Fuqua Industries, Inc.; subsequent to

the institution of this action, its name was changed to

Coastal Theatres, Inc. Defendant Gulf States Theatres of

Texas, Inc. is a Delaware corporation whose stock at the

time of trial was wholly owned by Fuqua Industries, Inc.;

subsequent to the institution of this action its name was

changed to Martin Theatres of Texas, Inc. Both Gulf States

Theatres, Inc. and Gulf States Theatres of Texas, Inc. were

formed to acquire Solomon’s theatre interests on August 31,

1972.

B. The Claims

Following a nine day trial in September of 1976, during

which 283 exhibits were introduced and 24 witnesses testi-

fied, the jury found that the defendants had entered into

an illegal contract, combination or conspiracy to unreason-

ably restrain the trade or commerce of motion picture exhibi-

tion in the greater Port Arthur, Texas area. The jury fur-

ther found that the defendants had monopolized, attempted

to monopolize or conspired to monopolize the motion picture

exhibition business in the greater Port Arthur, Texas area.

The various legal relationships among these actors resulted

in three separate damage awards by the jury.

Of the three awards, the largest was on a “shopping cen-

ter claim” brought by plaintiffs Hayes and Hayes, Inc. That

claim grew out of an aborted venture to develop a shopping

center in Port Arthur. The jury awarded damages of

$3,000,000, before statutory trebling, against all four de-

fendants, based on the increased costs since 1972 of con-

structing a $14,000,000 shopping center, despite the facts

App. - 4

that the only alleged antitrust violation was the prevention

of the construction of a theatre which would have been

merely one tenant of the proposed shopping center, and no

actual construction costs were ever incurred.

A second award was based on the “Mid-County claim.”

Plaintiff Mid-County Enterprises, Inc., a corporation partly

owned by Hayes, alleged that the “threats” of the defend-

ants kept that plaintiff from building and operating a

drive-in theatre in Port Arthur. The jury awarded dam-

ages of $258,300, before statutory trebling, against all four

defendants.

The remaining award related to the “Park Plaza claim.”

Plaintiff Park Plaza Twin Theatres, Inc., a corporation

partly owned by Hayes, Inc., charged that a motion picture

theatre owned by it was unfairly treated during the period

its theatre was operated, under a lease, by one of the cor-

porate defendants which renovated two other theatres it

owned in the same area and allocated some of the best

films to one of the renovated theatres. The jury awarded

damages of $225,000, before trebling, against all four

defendants.

The judgment entered on the jury verdict totaled

$10,449,900 trebled damages plus $625,000 attorneys’ fees.

II. FACTUAL BACKGROUND

On appeal, defendants raise fifteen separate issues. Be-

fore deciding those issues necessary to our result, we shall

endeavor to detail the facts.

A. Hayes and Solomon: the Initial Business Relationship

Hayes and Solomon first crossed paths in 1967. At that

time, Hayes was mayor of Port Arthur, Texas, a position

he held from May 1963 to April 1969. In 1967 Hayes and

W. Bonner Phares, a local investor, organized Park Plaza

Twin Theatres, Inc. to construct the Park Plaza Theatre in

Port Arthur. Designed as a deluxe two-auditorium first-run

App. - 5

theatre, the Park Plaza Twin Theatres were soon to be-

come acknowledged as the finest such facility in the area.

Hayes and Phares set about to find an experienced theatre

operator to assist them. They were introduced to Solomon’s

then employee, Gillis Jim deNeve. deNeve reported to Solo-

mon that Hayes and Phares had begun building the Park

Plaza Twin Theatres and were seeking connections with an

operating company; he wrote that the two “. . . have investi-

gated us fully and would like very much for us to take over

and give us the opportunity to buy in and give them the op-

portunity to buy in with us and go anywhere in Texas with

their participation.” deNeve also reported that Hayes and

Phares had already held discussions with representatives of

the Gordon family which had other theatre holdings in

the area.

Hayes, Phares and Solomon met in late 1967 and discussed

the possibility of combining their theatre interests in Port

Arthur and Beaumont and purchasing the Gordon family’s

theatre holdings, Solomon agreed with Hayes and Phares

to become the sole operator of the Park Plaza Twin The-

atres along with a theatre he owned in Beaumont. Later, the

three formed a corporation which they named after the

“Golden Triangle” (Beaumont, Orange and Port Arthur,

Texas) and which acquired the Gordon family’s theatres in

July of 1968. The stock in this corporation, Golden Triangle

Theatres, Inc., was owned 25% by Hayes, 25% by Phares

and 50% by Solomon. Solomon also undertook to operate

the theatres owned by Golden Triangle Theatres, Inc. Solo-

mon, Hayes and Phares also agreed not to sell Golden Tri-

angle Theatres, Inc. stock to outside interests without giv-

ing the corporation a right of first refusal. Upon the death

of either Hayes or Phares the survivor was to have a 30-day

right to acquire the decedent’s stock before the corporation’s

right of first refusal came into being.

During this period, the personal and business relationships

between Hayes and Solomon became extremely close. After

Hayes completed his last term as mayor of Port Arthur in

April of 1969, he left town and went to New Orleans, where

App. - 6

Solomon had established his own home office. Hayes soon

became Solomon’s assistant, with the title of vice-president

and a salary of $50,000 a year. His office was next to that of

Solomon. Solomon was grooming Hayes to succeed him and

named Hayes executor of his will and trustee of a trust for

his children. Solomon lent Hayes $60,000 and agreed to lend

him another $60,000 to assist Hayes and Hayes, Inc. in

meeting their financial obligations under bank loans obtained

to purchase land in Port Arthur.

Phares died on July 2, 1970. After some maneuvering,

Hayes purchased Phares’s stock in Golden Triangle Thea-

tres, Inc. for a $70,000 promissory note payable over 7 years.

Solomon’s belief that Hayes had deceived him in connec-

tion with this purchase eventually caused Hayes and Solo-

mon to part company in May of 1971.

Hayes knew that his opportunity to buy Phares’s’ stock |

in Golden Triangle Theatres, Inc. free of the corporation’s

first refusal right lasted only 30 days after Phares’s death.

He first broached the subject of purchasing the Phares’

stock from Mrs. Phares on the very day Phares died. At

first, Mrs. Phares was somewhat reluctant to sell. She asked |

to see the stockholders’ agreement, and, when approached

the day after her husband’s death, told Hayes that she did

not want to sell but wished to hold the stock for her chil-

dren, if it were at all possible. She also told Hayes that,

if she had to sell the stock, she would sell it to Hayes per-

sonally and not to Hayes, Inc. or Solomon. Hayes and Mrs.

Phares testified that they eventually reached an oral agree-

ment of purchase around the middle of July 1970.

Hayes did not tell Solomon of this agreement until No-

vember of 1970, however, when the agreement was embodied

in a written instrument which Hayes asked Solomon to

sign. The instrument acknowledged Hayes’s right to acquire

Phares’s stock. Solomon testified that he was not then aware

that Hayes’s right to preempt the corporation’s right of first

refusal lasted only 30 days from Phares’s death, and that

signing the instrument would waive any right to dispute

App. - 7

the timeliness of the preemption. Still, Solomon was some-

what reluctant to sign the instrument. Solomon knew that

Phares’s estate was in poor financial condition and Hayes

himself was deeply in debt and that Solomon’s own credit

had become the major financial prop for Golden Triangle

Theatres, Inc. For these reasons, Solomon thought it would

be fairer to divide the Phares stock between himself and

Hayes according to their proportionate interest in the cor-

poration; then, Solomon would hold a majority interest.

Nevertheless, after some disagreement, Solomon. eventually

signed the instrument. ©

B. The Shopping Center Venture

Before the disagreement over the Phares stock, Hayes and

Solomon had begun another business venture. This venture

ultimately gave rise to the “shopping center claim.”

While Hayes was mayor of Port Arthur, his family had

assembled a tract of land in Port Arthur of approximately

1,400 acres. The purpose of assembling the tract was to build

a large-scale residential development for some 13,000 resi-

dents with ancillary commercial facilities. Hayes started

talking with Solomon about developing the 1,400 acres in

the Spring and Summer of 1970. He showed Solomon a pro-

posed letter to potential investors extolling the quality of

the 1,400 acres for development, and Solomon expressed his

interest. The banks from which Hayes and Hayes, Inc. had

previously borrowed funds to finance the land purchase were

pressuring Hayes to return to Port Arthur and personally

tend to the development, if he could not convince Solomon

to make a heavy commitment to the project. Partly in

order to keep Hayes working for Gulf States Theatre, Inc.

in New Orleans, Solomon agreed to help Hayes try to de-

velop a regional shopping center on 90 acres of the tract.

At Solomon’s own suggestion, he and Hayes sought out

Wilbur Marvin, an experienced shopping center developer

with whom Solomon had developed other shopping centers,

to join the venture. Solomon offered his financial backing

and the expertise of Marvin as a perfect combination to

App. - 8

make the regional shopping center a success. On Septem-

ber 8, 1977, Marvin wrote Solomon that he would partici-

pate in return for a development fee of $25,000 per annum.

Later in September, however, Marvin developed some

qualms. He had found significant discrepancies between

the actual condition of the land and its description as orig-

inally provided by Hayes. Part of the incentive for Marvin

and Solomon to become involved in the deal was Hayes’s

offer to allow them to purchase an interest in the land at a

substantial discount from its true value. Marvin telegraphed.

Solomon in New York that an independent survey failed to

substantiate the $15,000 to $18,000 per acre evaluation; a

range of $7,500 to $10,000 was more accurate. He added:

Ten year Port Arthur population growth negative.

Shopping Center development at this location defi-

nitely long term and directly related to development

of large desolate looking area adjacent. Residential de-

velopment in these areas are dependent upon long range

expensive drainage, sewage and flood control programs.

Feel that we are in effect making an all cash purchase

of 90 acres at top appraised value today’s market.

Sears taking 10,000 sq. ft. in existing Nederland

Shopping Center.

This was much different than what had been represented,

especially concerning the value of the land. In concluding

his telegram to Solomon, Marvin suggested the entire deal

be shelved for six months, but added that if Solomon wished

to go forward for other reasons, Marvin would join, if he

had Solomon’s personal assurance that Solomon would “take

him out” in six months on request. Two days later, Marvin

wrote his attorney in a similar vein, adding that in response

to Marvin’s telegram Solomon had expressed the view that

“there was no deliberate overrepresentation by Hayes.”

Marvin also wrote that his “personal evaluation of the

situation at this point would be that in all probability a

deal will proceed, with the same principals, for a smaller

amount of acreage, and perhaps at an adjusted price.”

App. - 9

Marvin’s evaluation was correct. A memorandum which

he wrote for his file in November of 1970 records that the

parties agreed to reduce the size of the development from

90 to 60 acres and that the Hayes interests would receive

$300,000 from Solomon and Marvin for a half interest in

the 60 acres. The memorandum also stated that Marvin

was to have an option to terminate and be made whole after

the first year. Finally, the memorandum emphasized: “the

point was made abundantly clear that the progress of devel-

opment of this project was dependent in large measure on

the rapidity of development of the property adjacent by the

Hayes group.”

C. The Development Agreement

On November 27, 1970, Hayes, Hayes, Inc., Solomon and

Marvin executed a Development Agreement creating a joint

venture among the four to develop a regional shopping cen-

ter® on the 60-acre tract. Hayes signed as a guarantor of

the obligations of Hayes, Inc. Hayes, Inc. agreed to transfer

an individual one-quarter interest in the 60 acres to each

of the other co-venturers. Solomon and Marvin shortly

thereafter each paid $150,000 in return for deeds conveying

an undivided one-half interest in the land. Though the

Development Agreement did not assign specific responsi-

bilities to Hayes and Hayes, Inc., Marvin and Solomon were

assigned specific roles. Marvin was to use his best efforts

to develop the shopping center. Solomon was to make peri-

odic infusions of capital as the development progressed; he

agreed to use his credit to borrow $500,000 for the venture

and was to lend $100,000 for initial expenses. During 1972,

8 Expert testimony at trial defined a “regional shopping center”

as one containing two or more national retailers, i. e., anchor tenants,

each operating stores of 100,000 square feet or more and numerous

other small retail stores, which serves a community of 200,000 or

more people. Expert testimony also disclosed that of the various

types of shopping centers a regional center is the largest and most

difficult to develop and, as a rule, developing one is an onerous time-

consuming, long-range project.

App. - 10

Marvin had the option to terminate his participation in the

development and sell his interest to Solomon for $150,000.

As a further condition, Solomon and Marvin required Hayes,

Inc. to execute a written agreement prohibiting it from

developing any other property within a 2 mile radius for

a similar purpose.

D. Marvin’s Efforts

Beginning in January of 1971, Marvin set out to interest

prospective tenants in the proposed shopping center. Not-

withstanding Hayes’s own conclusional testimony that Mar-

vin’s efforts produced “a lot of results” in terms of interest

on the part of prospective tenants, the specifics of Marvin’s

testimony and the documentary evidence indicate that only

one actual expression of interest was obtained — from White

House Dry Goods Co.—and the amount of space which

was involved, 40,000 square feet, was too small for that

company to qualify as an anchor tenant.

Marvin met with a representative of the J.C. Penney

Company who furnished him with printed, standard proto-

types of a store plan and a layout. But the representative

told Marvin that his company already had a store in Port

Arthur, had no present plans to relocate or expand, would

not require further space for three or four years and even

then would require that the developers also obtain another

major tenant. As the plaintiffs themselves point out in their

brief, Marvin himself minimized the significance of this

contact, during his trial testimony. Marvin was unable to

generate any other expressions of interest of any kind.

W.T. Grant Company had already committed itself to a

nearby area, and, although Marvin thought he perceived

some interest on the part of a discount division of the Wal-

green Company, the J.C. Penney Company indicated that it

would not be interested in being a co-tenant with that

division. Marvin contacted a representative of Sears, Roe-

buck & Company who offered no encouragement at all and

pointed out that his company had recently made a commit-

ment to new space a short distance away. Marvin also con-

App. - 11

tacted Federated Department Stores and two or three other

prospective users of large space, but was unable to generate

any interest.

During the same period, Marvin made initial contacts

with a number of Dallas-based architectural firms about the

design of the proposed shopping center. One of these firms,

Architectonics, Inc., which had many years of regional shop-

ping center design experience, sent a letter in April of 1971

outlining a general approach to the project and followed up

with a general proposal, limited in extent to the develop-

ment of preliminary plans, in June. No definitive plans were

ever drawn. After Hayes and Marvin had met with a repre-

sentative of Architectonics, Inc., Marvin transmitted the

general proposal to Solomon for his consideration. Solomon

never approved the proposal, and Marvin would not proceed

without it. Marvin’s efforts at development had reached an

impasse because of a falling-out between Hayes and Solomon.

E. Hayes and Solomon: the Falling-out

During the period of Marvin’s preliminary development

efforts, differences between Solomon and Hayes over Hayes’s

acquisition of the Phares stock, already discussed above, be-

came greatly intensified. In May of 1971, Solomon proposed

that the Phares stock be transferred to Golden Triangle

Theatres, Inc. and that the corporation assume Hayes’s lia-

bility to the Phares Estate. This proposed reconveyance

would have given Solomon 66%4% ownership of Golden Tri-

angle Theatres, Inc. Hayes refused and Solomon became con-

vinced that he had been deceived by Hayes concerning the

Phares stock. The differences between Hayes and Solomon

could not be resolved and they parted company; Hayes left

New Orleans and Solomon’s employ.

In a file memorandum dated June 4, 1971, Marvin referred

to the “very strong falling-out” which had occurred between

Solomon and Hayes over the Phares stock. The memoran-

dum noted that Solomon had informed Marvin that he

“wanted out” of the shopping center project, but was agree-

App. - 12

able to Marvin’s continuing in the project with Hayes. At

this juncture, Solomon withheld his own further support

for the development. Consistent with his desire to take

himself out of the deal, Solomon did not approve the com-

mitment to Architectonics, Inc. Hayes himself confirmed to

Marvin that the falling-out had occurred and indicated he

wanted to continue with the project.

Marvin was still hopeful in August of 1971 that the Solo-

mon-Hayes dispute would be resolved, but his enthusiasm

for the shopping center venture was diminished by the lack

of any real interest on the part of the prospective tenants

and the failure of Hayes to move forward with the residen-

tial development of the remainder of the 1,400-acre tract. As

has already been discussed, Marvin had some fruitless dis-

cussions with prospective tenants which had been initiated

earlier, but undertook no further work on the project after

September of 1971. During September, Marvin heard that

Hayes was making an effort to buy Solomon out and he

asked if Hayes still wished him to continue. Hayes made

no response. In November, Marvin asked Solomon to take

him out of the joint venture in accordance with the Develop-

ment Agreement.

As we shall detail later, in the last part of 1971 and in

the early part of 1972, Solomon, Hayes and Hayes, Inc.

were unraveling their respective obligations and responsibili-

ties under the Development Agreement. By February of

1972, Hayes and Hayes, Inc. were the only parties still

interested in the shopping center development, and nothing

in the record suggests that Solomon or any of the other

defendants had any knowledge of their plans. During that

same month, Hayes attended a shopping center convention

where he spoke with a friend-advisor, Bob Ort, about going

ahead with a shopping center. Ort advised Hayes that he

should have a plan to present to prospective tenants, as

Marvin had suggested one year before. Architectonics, Inc.

was then asked to submit another proposal for Hayes and

Hayes, Inc. similar to the one submitted to Marvin, Solo-

mon, Hayes and Hayes, Inc. when the development Agree-

_

App. - 13

ment was still in effect. The March 23, 1972, proposal of

Architectonics, Inc. followed; it was virtually word-for-word

the same proposal that had been sent to Marvin on June 23,

1971. The second proposal was never acted upon.

There is some testimony that Hayes looked for another

partner to replace Solomon in the shopping center venture,

but there is no evidence that one was ever found. There is

no evidence that he ever located any prospective major

tenants, although their participation was essential to a suc-

cessful shopping center. Nor was there any evidence that he

ever arranged financing for a shopping center — which would

hardly have been forthcoming without such prospective

tenants.

Hayes apparently put the shopping center venture to one

side while he pursued other business ventures. These ven-

tures included his large scale residential development, com-

plete with a shopping center, for which he had been seeking

federal financing for several years without success. The pro-

posed regional shopping center, however, was never built.

The property looked substantially the same at the time of

trial as it did in 1970. The adjacent desolate 1,400-acre area,

the development of which Marvin deemed essential prepara-

tion for getting the shopping center out of the ground, re-

mained mostly undeveloped at the time of trial. Neverthe-

less, plaintiffs introduced evidence of what the 60-acre tract

might have been like if Hayes and Hayes, Inc. had built a

shopping center in 1972. This evidence included plans, a table

model of a complete shopping center and a hypothetical

list of tenants, all prepared in 1975 and 1976 for use at

trial.

F. Hayes and Solomon: Efforts at Disentanglement

In order to understand fully the three claims made by

plaintiffs, it is necessary to review briefly the parties’ efforts

to unravel their various business arrangements.

After the 1971 break-up with Hayes, Solomon negotiated

to sell his theatre properties to the Holiday Inn Corporation.

App. - 14

Solomon was informed that he had too many partners in his

various theatre projects, but prospects for their purchase

would be improved if he converted his theatre interests into

wholly owned interests by buying out his partners or, if

necessary, selling out his interests. Solomon then began to

restructure and consolidate his interests, including the out-

standing business arrangements with Hayes. These efforts

were joined in by Hayes, who also wanted to dissolve their

various business arrangements. In particular, Hayes became

very dissatisfied with the Golden Triangle Theatres, Inc.

arrangement, since Solomon exercised complete control de-

spite Hayes 50% interest. Further, he was anxious to resolve

the impasse reached on the shopping center development. A

meeting was held on November 29, 1971. According to

Hayes’s own testimony, Solomon told him that he wanted

to buy out Hayes’s interests but not for personal reasons.

Solomon told him that he was treating Hayes like the

rest of his partners; he just needed to consolidate his theatre

ownership to make the sale. Regarding their falling-out over

the Phares stock, Solomon said he was sorry it had hap-

pended and admitted that it was as much his fault as .

anyone else’s.

After considerable hard negotiations, Solomon and Hayes

reached some accord, though later Hayes would claim that

the leverage Solomon exerted violated the antitrust laws. On

December 10, 1971, the parties entered into two agreements

to separate their business arrangements. The first was en-

titled “Memorandum of Agreement”; the second was en-

titled “Memorandum of Understanding.”

The Memorandurn of Agreement dealt with matters other

than the shopping center venture. In January of 1972, to

implement this Memorandum: (1) Hayes was paid $750,000

for his 50% interest in Golden Triangle Theatres, Inc. which

included the 25% that Hayes had bought for $70,000 from

Phares’s widow the year before; (2) the balance of the

$175,000 Hayes and Phares had loaned Golden Triangle

Theatres, Inc. was paid, and Solomon indemnified Hayes

against any liability as coguarantor of the corporation’s

App. - 15

$1,000,000 in notes; (3) Park Plaza Twin Theatres, Inc.

leased its theatre to Golden Triangle Theatres, Inc. for a

renewable 10-year term on a percentage lease with a $72,000

annual minimum; (4) the joint operating arrangement cov-

ering the Park Plaza Twin Theatres, Inc. and Solomon’s

Beaumont Theatres, Inc. was ended; (5) Solomon agreed

to pay Hayes $500 per month for five years to serve Golden

i Theatres, Inc. as a consultant and representative

who would “not be required to render any specific duties,

but recommend action beneficial to said theatres.”

The Memorandum of Understanding dealt with the

shopping center venture. It was executed by Solomon, act-

ing for himself and for Marvin, and by Hayes, acting for

himself and for Hayes, Inc. Their expressed intent was to

cancel the Development Agreement, “releasing each other

from all the terms and conditions and holding each other free

and harmless in connection therewith.” Solomon gave Hayes

and Hayes, Inc. the right to repurchase at the original

purchase price, $300,000, the undivided one-half interest

in the 60 acres which Solomon and Marvin had acquired

pursuant to the Development Agreement. Hayes and Hayes,

Inc. undertook to make such purchase within three years.

The $300,000 purchase price could be paid either in cash

at purchase or $100,000 down and $200,000 in interest-bear-

ing notes payable over four years.

On January 13, 1972, the parties entered into three other

agreements to implement the Memorandum of Understand-

ing: (1) “Amendment to Memorandum of Understanding”;

(2) “Agreement of Cancellation”; (3) “Option and Agree-

ment to Purchase.” The Amendment to Memorandum of

Understanding declared that the Memorandum of Under-

standing would become effective and self-operating on

March 1, 1972. The Agreement of Cancellation provided that

the Development Agreement was “cancelled and annulled

and of no further force and effect and that each of the

parties hereto hereby are released from all the terms and

conditions of said Contract.” The Option and Agreement to

Purchase obligated Solomon to sell his and Marvin’s undi-

App. - 16

vided one-half interest in the 60 acres to Hayes and Hayes,

Inc. and required them to buy within three years.

These agreements were designed to make it possible for

Hayes and Hayes. Inc. to proceed on their own in the de-

velopment of the proposed shopping center. As it turned out,

a dispute arose over the effect of this second series of three

agreements, due, in large part, to Solomon’s failure to obtain

Marvin’s prompt concurrence with the arrangements. Hayes

and his lawyer, however, had no doubt about what they had

accomplished, i.e., that the Amendment to Memorandum

of Understanding, setting the effective date on March 1,

1972, bound Solomon to the three-year option himself

whether or not Marvin ever signed the Agreement of Can-

cellation or the Option and Agreement to Purchase.

G. The Shopping Center Claim

In their complaint, plaintiffs alleged that, but for de-

fendants’ conduct, Hayes and Hayes, Inc. “would have suc-

ceeded in developing a substantial regional shopping center”

which would have included a “deluxe first-run motion picture

theatre.” As provided in the District Court’s special inter-

rogatory to the jury, the claim was that defendants entered

into an illegal contract, combination or conspiracy to mo-

nopolize or unreasonably restrain trade or commerce “by

preventing the entry of a competitive theatre in the pro-

posed shopping center.” The means allegedly used to pre-

vent the entry of this theatre was to delay reconveyance

of the undivided one-half interest in the 60 acres purchased

by Solomon and Marvin at the outset of the venture. Hayes

testified that the property was tied-up from November of

1970 until April of 1976. These contentions require a review

of Solomon’s efforts to take-out Marvin, as he had agreed.

1. Marvin's role

Before Solomon entered the Memorandum of Understand-

ing and agreed to acquire Marvin’s interest and convey it to

Hayes and Hayes, Inc., Marvin wrote Solomon a letter

confirming a November 24, 1971 meeting during which

App. - 17

Solomon agreed to honor Marvin’s request to take him out

of the Port Arthur shopping center transaction in January

of 1972, in accordance with the Development Agreement. By

December 30, 1971, Marvin apparently was having some

second thoughts. In a memorandum for his own files de-

scribing a meeting with Solomon the day before, he wrote:

The thought occurs, if there is any problems in con-

nection with the transaction, Marvin could take the

position that he is entitled to participate on a con-

tinuing basis and thereby acquire a 50% interest in

the overall settlement from the theatres, and ride with

that particularly in connection with any transaction

made on those theatres with the Holiday Inn people.

As the extensive correspondence between Marvin and

Solomon and their lawyers reflects, the two men were then

engaged in a series of business ventures which Marvin

wished to end. Marvin used his power to withhold con-

veyance of his interest in the 60 acres to Solomon as an

effective instrument to obtain a resolution satisfactory to

him of all other issues involved in severing their business

relations, much like Solomon later used his interest in the

shopping center development as leverage in dealing with

Hayes. The negotiations were heated and intense. A long

series of letters passed between counsel for Solomon and

Marvin referring to meetings, requests for meetings, requests

for information, and submissions of information, which were

seasoned with mentions of confrontations at bargaining

sessions. The evidence of these negotiations directly refutes

plaintiffs’ characterization of Marvin as a coconspirator who

was acting jointly with Solomon to delay Hayes’s develop-

ment. Marvin was concerned with advancing his own inter-

ests. In December of 1972, when the matters between Mar-

vin and Solomon unrelated to the shopping center were

ultimately resolved to Marvin’s satisfaction, he conveyed to

Solomon his interest in the 60 acres.

During the negotiations between Solomon and Marvin,

the dealings between Solomon and Hayes became confused.

App. - 18

Pending the ultimate resolution of the matters unrelated

to the shopping center venture, Marvin did not sign the

Agreement of Cancellation and by letter dated March 7,

1972, Hayes’s attorney declared both the Agreement of

Cancellation and the Option and Agreement to Purchase

“of no further force and binding effect.” From this reaction

Solomon’s attorney concluded that plaintiffs no longer

wished to be obliged to purchase the Solomon-Marvin un-

divided one-half interest in the 60 acres and had given up

any right to purchase it ,and so advised Solomon. Solomon’s

attorney acknowledged the March 7, 1972, letter stating that

nothing could be effectuated until Solomon and Marvin

settled “all their co-matters.” Following his attorney’s ad-

vice, Solomon would later assert that he was free to retain

his property interest. Hayes and his attorney responded that

the March 7, 1972, letter related only to the Agreement of

Cancellation and the Option and Agreement to Purchase,

which were specifically mentioned, and did not affect the

Memorandum of Understanding and the Amendment to

Memorandum of Understanding, which became effective on

March 1, 1972, and imposed an absolute obligation on Solo-

mon to transfer the property interest on demand. Plaintiffs

considered the effect of this obligation was to absolutely

bind Solomon to obtain Marvin’s interest for reconveyance

along with his own.

2. Litigation

Sometime in late 1972 or early 1973, Hayes and Solomon

met at the Plimsoll Club in New Orleans, Solomon told

Hayes what Solomon’s attorney had said about the letter of

March 7, 1972, and suggested that, if Hayes had some differ-

ent view, he should get his attorney together with Solomon’s

attorney “to get it straight.” No such meeting was ever

arranged.

On March 11, 1973, Solomon met with Hayes and deNeve

at Hayes’s home to discuss matters unrelated to the property

interest. During that meeting, the property interest came

up, and, according to Hayes, tempers flared: “On the land,

—

App. - 19

we went into—our voices—he and I got hot at each other,

and he said that he did not have to sell me the land, his

attorney had so advised him...” The breakdown in relations

was virtually complete. As of August 1, 1972, Solomon ceased

making the $500 per month payments due Hayes under the

Memorandum of Agreement because Hayes was “competing”

with Golden Triangle Theatres, Inc. as one of the owners of

a theatre then under construction in Orange, Texas, even

though there was not an anti-competition clause in any of

the agreements. Solomon attempted to pay the shopping

center tract property taxes for 1971, and to have all further

assessments on his undivided one-fourth interest in the tract

billed directly to him. This was directly contrary to the

Memorandum of Agreement which required Hayes to pay

all taxes. Hayes interpreted this as a further manifestation

by Solomon of his intention not to abide their agreement.

Hayes contacted Solomon about Hayes’s option to repur-

chase the Marvin-Solomon undivided one-half interest and

Solomon responded that the courts would have to settle the

matter.

In November of 1973, Hayes and Hayes, Inc. filed a

declaratory judgment action in state court about the land

issue. Solomon sent the summons to his lawyer who testified

at this trial concerning some confusion surrounding a request

for an extension in the state court proceedings. In January

of 1974, plaintiffs took a default judgment which declared:

the Memorandum of Understanding was in full force and

effect; the Development Agreement was null and void and

of no effect; the option of Hayes and Hayes, Inc. to repur-

chase the outstanding, undivided one-half interest in the

60-acre tract was viable for three years from March 1, 1972.

There was no motion to set the default judgment aside, and

no appeal was taken.

Hayes and Hayes, Inc., however, were not yet ready to

exercise the option. On October 1, 1974, Hayes wrote his

atiorney to ask when exercise was required. Almost four

months later, more than a year after the judgment, Hayes

notified Solomon that the option would be exercised on

App. - 20

February 28, 1975, just before expiration. At the closing,

Selomon’s attorney had instructions to deliver Solomon’s

deed on receipt of a check for $100,000, a promissory note for

$200,000, and a deed of trust executed by Hayes and Hayes,

Inc. to secure the promissory note. However, no deed of

trust was tendered, and the transaction did not close, though

the Memorandum of Understanding did not address the

question of security for the promissory note, a plaintiffs’

witness opined that a deed of trust would be customary in

such circumstances.

When the transaction did not close, Hayes and Hayes,

Inc. filed a second law suit in state court, seeking specific

performance of the option and damages of $500,000 for Sol-

omon’s alleged failure to perform under the Development

Agreement, damages of $400,000 for Solomon’s alleged fail-

ure to secure Marvin’s signature on the Agreement of Can-

cellation and his failure to deliver the deed at the March 15,

1975, closing, and punitive damages of $1,000,000. Shortly

thereafter, in August of 1975, plaintiffs went into federal

court and filed the action appealed here, seeking treble dam- -

ages for the same alleged wrongs. After defendants moved in

this action for dismissal of the shopping center claim on the |

ground the state court pleadings showed it to be a simple

breach of contract action, plaintiffs dismissed their damage

claims in the state court action in early April of 1976. When

the damage claims were dismissed, a consent decree was en-

tered in the second state court action under which Solomon

was to convey his undivided one-half interest on or before

April 15, 1976. Solomon thereupon tendered the deed with a

letter stating his position that Hayes and Hayes, Inc. were

obligated to pay interest expressly due him under the Memo-

randum of Understanding. Plaintiffs refused to pay and

accept the deed with the letter and moved again in the state

court for execution. The state court ordered Solomon to

* Hayes himself acknowledged the lure of the golden fleece of

treble damages; “I dismissed it because I was advised that the dam-

ages were more —- would be better in Federal Court,”

ee eee eee

App. - 21

convey the property without ruling on his claims for interest,

and he did so on that same day. The interest was still unpaid

at the time of this trial. The net result at that point was

that Hayes and Hayes, Inc. had obtained, for $100,000 in

cash and an unsecured $200,000 note, the undivided one-half

interest which they had sold in 1970 for $300,000 cash. They

had the interest-free use of the $300,000 for almost six years,

and had established the right to a $200,000 unsecured loan

for four years.

Although plaintiffs then had clear title to the 60 acres,

they still did not commence construction of the hypothetical

shopping center. Instead, the 60-acre tract was promptly

mortgaged to obtain money for a venture not related to the

theatre business. Basically, plaintiffs claim here that the de-

fendants managed to delay the shopping center for almost

five years. During this time, the cost to construct the shop-

ping center with its theatre greatly increased. At trial, plain-

tiffs successfully argued that having “burned down the barn

to kill the horse,” defendants were liable to pay for the in-

creased costs which would have been incurred were the barn

built later. The jury awarded damages of $3,000,000 before

statutory trebling, against all four defendants based on the

increased costs since 1972 of constructing a $14,000,000 shop-

ping center.

H. Role of the Corporate Defendants

The three corporate defendants have been mentioned only

briefly in the foregoing recital, despite its length, because

none of them played any role in the proposed shopping

center development or in the dispute over the 60-acre tract.

They became embroiled in this litigation as a result of their

acquisition of Solomon’s theatre interests, on August 31,

1972, after Solomon’s negotiations with Holiday Inn proved

unfruitful.

For the purpose of acquiring Solomon’s theatre interests,

Fuqua Industries, Inc. created two wholly owned subsidi-

aries: Gulf States Theatres, Inc. and Gulf States Theatres

of Texas, Inc. On August 31, 1972, Golden Triangle Theatres,

App. - 22

Inc., which was by then wholly owned by Solomon, was

merged into Gulf States Theatres of Texas, Inc.; Solomon

received Fuqua Industries, Inc. stock in exchange for his

stock in Golden Triangle Theatres, Inc. Also on August 31,

1972, Solomon’s stock in various other corporations owning

and operating theatres elsewhere was acquired by Gulf

States Theatres, Inc. in exchange for cash and notes. As part

of these transactions, Solomon sold all his theatre interests

in Texas and became president and chairman of the board of

both subsidiaries. Fuqua Industries, Inc. does not provide

management for any of its subsidiaries, and for this reason

could not otherwise have purchased Solomon’s companies.

Solomon’s employment agreements with Gulf States The-

atres, Inc. and Gulf States Theatres of Texas, Inc. charged

him with general supervision of their business, but permitted

him to devote time to “his personal business activities, in-

vestments, development of real estate and other interests.”

None of the corporate defendants engages in shopping

center development. When Gulf States Theatres of Texas,

Inc. and Gulf States Theatres, Inc. acquired Solomon’s the-

atre interests, they acquired no interest in his land dealings

with Hayes. C. L. Patrick, who as president of Fuqua Indus-

tries, Inc. negotiated the deals, had no knowledge at that

time of the 1970 Development Agreement or its termination.

Indeed, he did not become aware of the land dealings until

early in 1976, when Hayes told him about them.

I. The Mid-County Claim

By January of 1972, deNeve, like Hayes, was no longer

working for Solomon. Hayes and deNeve then joined to-

gether to engage in other theatre operations with Hayes’

father, their lawyer and Leroy Mitchell, a Texas film exhibi-

tor. In June of 1972, Hayes, deNeve and their three partners

formed Mid-County Enterprises, Inc. for the avowed pur-

pose of building a triple-screen first-run drive-in theatre in

Port Arthur, just south of the airport.

Mid-County Enterprises, Inc. never built the drive-in, and

it successfully contended at trial that threats of defendants

ot Nt

ODO AS Ae has DAI aN OM

App. - 23

kept it from doing so. Hayes and deNeve testified that Solo-

mon made these threats to them in March of 1973. Solomon

dispatched an agent to locate a site near the proposed site

for the Mid-County Theatres, Inc. theatre. He also threat-

ened Hayes that, if the proposed Port Arthur theatre was

built, Solomon would build against Hayes at another loca-

tion and would delay the shopping center venture. At a

meeting on June 1, 1974, Solomon handed Hayes a hand-

written demand, which read in block letters: DO NOT

BUILD AGAINST GULF STATES. The jury was autho-

rized to have found that Solomon made the threats. How-

ever, from the evidence it appears that it was not the threats

that prevented Mid-County Enterprises, Inc. from proceed-

ing with construction.

Plaintiffs pleadings alleged that the threats were made

after extensive site work had begun, equipment had been

ordered, and monies had been expended on the drive-in. As

we shall detail below, the corporation’s own financial records

indicate that after the meeting at which the threats were

made, it spent $94,987.10 in connection with building the

drive-in and borrowed considerably more.

deNeve, who was president of Mid-County Enterprises,

Inc., admitted on cross-examination that the alleged threats

by Solomon really did not stop the corporation from pro-

ceeding with the drive-in project. After deNeve was con-

fronted with the figures showing that most of the corpora-

tion’s spending in connection with the theatre occurred after

the March 1973 meeting with Solomon, he then testified:

Q. If you spent that kind of money after March 11,

1973, when there has been testimony about a meeting

at Mr. Hayes’s house, whatever was said at that

meeting —

A. Yes, sir.

Q. — didn’t keep you folks from going on with your

efforts to building the drive-in, did it?

A. No, sir, it wouldn’t.

App. - 24

Leroy Mitchell, a shareholder who testified by deposition,

admitted that the drive-in construction was abandoned be-

cause of a lack of funds.°

Nonetheless, Mid-County Enterprises, Inc. successfully

contended at trial that it the requisite intent and

preparedness to construct the threatre but was prevented

from doing so by the defendants’ illegal threats and conduct.

The jury awarded Mid-County Enterprises, Inc. $258,300

damages, before statutory trebling, against the four de-

fendants on the claim that the construction and operation

of the drive-in were blocked as a result of Solomon’s threats.

J. The Park Plaza Claim

The facts involved in the claim of plaintiff Park Plaza

Twin Theatres, Inc. are relatively simple. As already stated.

Hayes and Solomon decided in December of 1971 to separate

their business interests but agreed that Solomon would con-

tinue to operate the Park Plaza Theatre. For this purpose,

the theatre was leased to Golden Triangle Theatres, Inc. on

January 19, 1972.

The Park Plaza Theatre was a modern twin-screen theatre,

and at that time Golden Triangle Theatres, Inc. owned two

other older single-screen theatres in Port Arthur. When

Golden Triangle Theatres, Inc. was merged into Gulf States

Theatres of Texas, Inc. in August of 1972, the lease and

operation of the Park Plaza Theatre were taken over. There-

after, Gulf States Theatres of Texas, Inc., following the

prevailing trend among motion picture exhibitors, renovated

* When confronted with the deposition statement by Leroy

Mitchell admitting that the drive-in was not built because of a lack

of funds, deNeve hedged somewhat and said the lack of funds was

“not altogether” the reason.

Over defendants’ hearsay objection, deNeve. was permitted to

testify at trial that Mitchell had informed him of a line of $1,000,000

for their corporation to furnish the theatre.

App. - 25

its other two older theatres by converting each to a triple-

screen theatre.’

In August of 1973, unhappy with the improvements of the

other two theatres and with the type of films being shown

at the Park Plaza Theatre, Hayes and Park Plaza Twin

Theatres, Inc. sued Gulf States Theatres of Texas, Inc.

and Solomon in state court, charging a breach of contract in

that the defendants had wrongfully increased the number of

screens in their own theatres and had not played all the best

films at the Park Plaza Theatre, as required by the lease.

Plaintiffs contended that the defendants set about to en-

hance their wholly owned theatres at the expense of the

leased theatre. A state court judgment against Gulf States

Theatres, Inc., voiding the lease was entered on June 30,

1975. The state court found that exhibition of X-rated films

at the Park Plaza Twin Theatres had “cheapenec\ its repu-

tation and damaged its good will and standing in the com-

munity and reduced its value” in addition to several con-

tinuous and intentional violations of various lease provisions.

Park Plaza Twin Theatres, Inc. was awarded $2,150 “which

represent(ed]| damages for exhibiting the best motion pic-

tures available for licensing in... Port Arthur... [at its

own theatres] instead of the Park Plaza Twin Theatre.”

The judgment imposed no liability on Solomon. Apparently,

no claim for separate damages for injury to good will was

raised. See Gulf States Theatres of Texas v. Hayes, 534

S.W. 2d 406, 407-08 (Tex. Civ. App. 1976) (writ refused

n.r.e.). Park Plaza Twin Theatres, Inc. seemingly now seeks

to remedy its omission in the state court by claiming

such damages under the guise of antitrust relief. The jury

assessed damages of $225,000, before statutory trebling.

* Solomon explained that his policy was to keep a town properly

staffed with a number of deluxe theatres “in order to keep compe-

tition from other theatres out of the city . . .. Our company has taken

the position that rather than have outsiders come in, even though

they have a right, we could profit and handle film better having

enough screens ourselves to discourage outsiders from coming in.”

App. - 26

As necessary, we will develop the facts more fully when

discussing particular issues.

III. DISCUSSION

Defendants present fifteen separate issues dealing primar-

ily with factual matters. As a preface to our discussion of

the contentions we found controlling, we emphasize the

narrow confines of our reviewing authority when dealing,

as we are here, with an appeal from a jury verdict.

A jury trial is an integral part of the federal antitrust

statutory scheme. This Court said as much in Cherokee

Laboratories, Inc. v. Rotary Drilling Services, Inc., 383 F.2d

97, 103 (5th Cir. 1967). cert. denied, 390 U.S. 904, 88 S.Ct.

816. 19 L. Ed. 2d 870 (1968), quoting Beacon Theatres v.

Westover, 359 U.S. 500, 504, 79 S.Ct. 948, 953, 3 L. Ed. 2d

988 (1959):

The right to trial by jury applies to treble damage

suits under the antitrust laws, and is, in fact, an es-

sential part of the congressional plan for making com-

petition rather than monopoly the rule of trade.

See also Fleitmann v. Walsbach Street Lighting Co., 240 U.S.

27, 29, 36 S. Ct. 233, 60 L.Ed. 505 (1915). This Court

established the standard of review which is applicable to the

present case in Boeing Co. v. Shipman, 411 F.2d 365, 374-75

(5th Cir. 1969) (en banc) (note omitted) :

On motions for directed verdict and for judgment not-

withstanding the verdict the Court should consider all

of the evidence — not just that evidence which sup-

ports the nonmover’s case — but in the light and with

all reasonable inferences most favorable to the party

opposed to the motion. If the facts and inferences

point so strongly and overwhelming in favor of one

party that the Court believes that reasonable men could

not arrive at a contrary verdict, granting of the mo-

tions is proper. On the other hand, if there is sub-

stantial evidence opposed to the motions, that is, evi-

dence of such quality and weight that reasonable and

Drweten: | + hewiies Rowan de

App. - 27

fair-minded men in the exercise of impartial judgment

might reach different conclusions, the motions should

be denied, and the case submitted to the jury. A mere

scintilla of evidence is insufficient to present a question

for the jury. The motions for directed verdict and

judgment n.o.v. should not be decided by which side

has the better of the case, nor should they be granted

only when there is complete absence of probative facts

to support a jury verdict. There must be a conflict in

substantial evidence to create a jury question. How-

ever, it is the function of the jury as the traditional

finder of the facts, and not the Court, to weigh con-

flicting evidence and inferences, and determine the

credibility of witnesses.

See Kestenbaum v. Falstaff Brewing Corp., 575 F.2d 564

(5th Cir. 1978) ; Spectrofuge Corp. v. Beckman Instruments,

Inc., 575 F.2d 256 (5th Cir. 1978). Applying this standard

to the evidence here, we reverse the judgment entered on

the jury’s verdict.

A. Shopping Center Claim

[1] Plaintiff's Hayes and Hayes, Inc.’s shopping center

claim is something of a Procrustean effort to apply the

rubric of antitrust laws to an acrimonious falling-out be-

tween two close business associates. As such, plaintiff’s re-

covery on the shopping center claim is beyond the stretch

of the antitrust laws. “The antitrust laws were never meant

as a panacea for all wrongs.” Parmelee Transportation Co. v.

Keeshin, 292 F.2d 794, 804 (7th Cir.) cert. denied, 368

U.S. 944, 82 S.Ct. 376, 7 L.Ed.2d 340 (1961), cited in,

Harrison v. Prather, 435 F.2d 1168, 1176 (5th Cir. 1970),

cert. denied, 404 U.S. 829, 92 S.Ct. 67, 30 L.Ed.2d 58 (1971).

This case “concerns nothing more than a state law con-

struction contract dispute over which the federal court

had no jurisdiction.” Morgan v. Odem, 552 F.2d 147, 148

(5th Cir. 1977); Harrison v. Prather, 435 F.2d at 1176-77.

We do not mean to suggest that a state contract law dis-

pute cannot also give rise to a federal antitrust claim. See

Mulvey v. Samuel Goldwyn Productions, 433 F.2d 1073,

App. - 28

1075 (9th Cir. 1970), cert. denied, 402 U.S. 923, 91 S.Ct.

1377, 28 L.Ed.2d 662 (1971). We simply conclude that the

underlying claim which plaintiffs established is not the

type of injury that the federal antitrust laws were intended

to forestall. See Brunswick Corp. v. Pueblo Bowl-O-Mat,

Inc., 429 U.S. 477, 487-88, 97 S.Ct. 690, 50 L.Ed.2d 701

(1977); Conference of Studio Unions v. Loew’s Inc., 193

F.2d 51, 54 (9th Cir. 1951), cert. denied, 342 U.S. 919, 72

S.Ct. 367, 96 L.Ed. 687 (1952). The basic reason for which

the shopping center claim fails as an antitrust claim is that

the injuries for which damages were awarded were not

antitrust injuries. In Brunswick Corp. v. Pueblo Bowl-O-

Mat, Inc. 429 U.S. at 489, 97 S.Ct. at 697 (citation and note

omitted), the Supreme Court emphasized:

Plaintiffs must prove antitrust injury, which is to say

injury of the type the antitrust laws were intended

to prevent and that flows from that which makes de-

fendants’ acts unlawful. The injury should reflect the

anticompetitive effect of either the violation or of anti- ~

competitive acts made possible by the violation. It

should, in short, be “the type of loss that the claimed

violations . . . would be likely to cause.”

Cf. Donovan Construction Company v. Florida Telephone

Corp., 564 F.2d 1191 (5th Cir. 1977), cert. denied, 435 U.S.

1007, 98 S.Ct. 1878, 56 L.Ed.2d 389 (1978).

[2-4] Of course, one need not have an actual going busi-

ness to establish a private antitrust injury under 15 U.S.

C.A. § 15. Recovery can be had for a wrongfully frustrated

attempt to enter a business. This was plaintiff’s theory of

the case: defendants wrongfully prevented plaintiffs’ entry

into the motion picture exhibition business by sabotaging

the shopping center which would have had a theatre tenant.

There are “two significant requirements” for establishing

such an entitlement to recovery: (1) an intention to enter

the business, and (2) a showing of preparedness to enter

the business. Martin v. Phillips Petroleum Company, 365

F.2d 629 (5th Cir.) , cert. denied, 385 U.S. 991, 87 S.Ct. 600,

awa tien de saiiralil alla

Se ea a

App. - 29

17 L.Ed.2d 451 (1966); North Texas Producers Association

v. Young, 308 F.2d 235 (5th Cir. 1962), cert. denied, 372

U.S. 929, 83 S.Ct. 874, 9 L.Ed.2d 733 (1963). We believe

that the plaintiffs failed to establish sufficient preparedness

to enter the business of motion picture exhibition.

In Martin v. Phillips Petroleum Company, 365 F.2d at

633-34, this Court listed four elements of preparedness: (1)

“the ability of plaintiff to finance the business and to pur-

chase the necessary facilities and equipment”;. (2) “the

consummation of contracts by the plaintiff”; (3) “affirmative

action by plaintiff to enter the business”; (4) “the back-

ground and experience of plaintiff in the prospective busi-

ness.” See also Zenith Radio Corp. v. Hazeltine Research,

Inc., 395 U.S. 100, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969);

Heatransfer Corp. v. Volkswagenwerk, A. G., 553 F.2d 964

(5th Cir. 1977); Buckley Towers Condominium v. Buch-

wald, 533 F.2d 934 (5th Cir. 1976), cert. denied, 429 US.

1121, 97 S.Ct. 1157, 51 L.Ed.2d 571 (1977); E. A. McQuade

Tours, Inc. v. Consolidated Air Tour Manual Committee,

467 F.2d 178 (5th Cir. 1972), cert. denied, 409 U.S. 1109,

93 S.Ct. 912, 34 L.Ed.2d 690 (1973); Woods Exploration &

Packing Co., Inc. v. Aluminum Company of America, 438

F.2d 1286 (5th Cir. 1971), cert. denied, 404 U.S. 1047, 92

S.Ct. 701, 30 L.Ed.2d 736 (1972). See generally Note, Pri-

vate Treble Damages Antitrust Suits: Measure of Damages

of All or Part of a Business 80 Harv.L.Rev. 1566 (1967).

Plaintiffs’ damage theory is based on the premise that

they were prevented from starting construction of a shop-

ping center in September of 1972. This beginning point is

critical. Plaintiffs seemingly have tried to bolster their case

by implying that the failure of the joint venture in July

of 1971 was itself an antitrust violation and not mere back-

ground. We focus only on the question of plaintiffs’ own

preparedness to construct a shopping center however, be-

cause they sought damages not for the failure of the joint

venture but only for their own failure to proceed in Sep-

tember of 1972.’ At plaintiffs request, the District Court

App. - 30

charged the jury that it was to calculate any damages for

the shopping center claim as follows:

Now in regard to the damage issue on the shopping

center, the Court would instruct you in determining

the damages, if any, to the business and property of

the plaintiffs, Hayes and Hayes, Incorporated, you

should take into consideration the increased cost of

constructing a regional shopping center beginning at

the present time over the cost of constructing the same

center if constructed —if construction had begun in

September, 1972.

The parties are agreed that development of a regional

shopping center is a very difficult undertaking. It involves,

among a myriad of lesser undertakings, procuring tenants,

arranging financing, and hiring an architect and a con-

struction engineer. The lead time for such a project is

measured in years, not in weeks or months.’ After the shop-

ping center joint venture fell apart in 1971, plaintiffs made

no significant effort to develop a shopping center on their

own. In February of 1972, Hayes solicited a proposal from

Architectonics, Inc. and received virtually the same initial

proposal the firm had provided the joint venture. The initial

proposal went unanswered for several years. Plaintiffs did

not order plans drawn up until, months after instituting

this action, they retained the architectural firm to draw

the plans for use at trial which might have been drawn for

use in construction. From these drawings, an experienced

" Apart from Hayes’s own testimonial concession that plaintiffs

sought no damages for failure of the joint venture, the fact is that

any antitrust claim for failure of the joint venture would likely be

barred by the four year statute of limitations and was subject to

the release, together with all other claims growing out of the failed

venture, by the provisions of the Memorandum of Understanding.

Our written attention is intentionally narrowed to plaintiffs’ pre-

paredness. Since the shopping center claim must fail on that ques-

tion, we need not discuss in detail the other thrusts and parries of

the parties surrounding that claim. :

* See note 3, supra.

ee -

mee ee ee >

App. - 31

shopping center contractor provided plaintiffs with con-

struction costs figures for use in their case.

Neither in 1972 nor at any other time did plaintiffs have

commitments from prospective tenants, although tenant

commitments were essential if any shopping center was ever

to be built. Plaintiffs offered no evidence, except for Mar-

vin’s unsuccessful nascient efforts during the joint venture,

that they or anyone on their behalf ever contacted poten-

tial shopping center tenants before trial. Plaintiffs. did noth-

ing to borrow shopping center construction funds and cer-

tainly expended none.

The testimony of plaintiffs’ own witnesses shows how

far the proposed shopping center was from realization. The

representative of Architectronics, Inc. testified that the joint

venture was in a “very preliminary state” in 1971 and that

his firm could not have guaranteed anything would actually

be built. A retired vice-president of Homart Development

Company, a shopping center development subsidiary of

Sears, Roebuck & Company, testified that, although “people

do a lot of talking,” “only one out of twenty” contemplated

shopping centers are ever built. He also testified that, to

start construction in 1972, it would have been necessary to

sign up tenants in 1970 and 1971. The representative from

Architectonics, Inc. provided one reason for the high mort-

ality rate of shopping center projects when he testified, “you

can’t build these without the department stores, they are

very strong in their opinions.” The Homart Development

Company vice-president also stated that in 1972 “depart-

ment stores started to pull in their horns” because of the

poor economy. When asked whether new environmental re-

quirements also had an adverse impact on shopping center

development, plaintiffs’ own construction expert testified

that “everything slowed up here a couple of years ago.” The

elder Hayes also conceded that Hayes, Inc. had never sub-

mitted a shopping center site plan to the Port Arthur City

Council despite a city ordinance and zoning change adopted

in 1973.

App. - 32

Hayes and Hayes, Inc. failed also to offer substantial

evidence that they were capable of securing the money that

would have been needed to build a shopping center, a sum

their own experts said would exceed $14,000,000. Without

commitments from 70% of the needed tenants — including

at least two anchor tenants — loans would not have been

available for a shopping center, even to a credit-worthy

borrower. Hayes and Hayes, Inc. made no showing of their

credit-worthiness, though Hayes testified that he increased

his obligations from $3,000,000 in 1969 to approximately

$7,000,000 in 1973. Plaintiffs simply failed to prove their

capacity to raise the amount of money a shopping center

would have cost or the additional, presumably greater, sum

required to develop the adjacent land and make the pro-

posed shopping center viable.

Plaintiffs depend on the testimony of the Homart De-

velopment Corporation retired vice-president: As to financ-

ing, [he] testified that there were two prime sources

available, [two insurance companies] Connecticut General

or Teachers, who would have loaned up to 100% of the

construction cost eliminating any equity capital require-

ments other than the valuable land.” Brief of Appellees at

36 (emphasis added). Putting aside the facts that there

is no evidence that either Hayes or anyone else acting on be-

half of the plaintiffs ever even spoke to either insurance

company or any other possible lender and that Hayes and

Hayes, Inc. already had substantial obligations, the vice-

president’s testimony does not support plaintiffs’ assertions:

Q. [I]n arranging the financing for the center, where

would Mr. Hayes look to obtain him financing?

A. Probably Connecticut General or Teachers — two of

the largest shopping center lenders.

Through he did opine that one might be able to obtain 100%

financing, he expressly restricted that possibility to the

situation in which a borrower had obtained leases from all

the anchor tenants and 70% of the smaller tenants. As we

have already noted, except for Marvin’s preliminary over-

App. - 33

tures during the joint venture, Hayes and Hayes, Inc. them-

selves never sought out any tenants and of course had not

signed leases. The mere possibility of financing being avail-

able in the abstract is not enough. Showing that someone

somehow could possibly obtain financing is not the same

as ~~ that plaintiffs themselves were able and prepared

to do so.

The evidence on which plaintiffs rely could not conceivably

show preparedness in 1972. Their references to what was

done by Architectonics, Inc. and by their construction en-

gineers are to what the firms did in 1976 to help prepare for

the presentation of this case.

As part of their discussion of the appropriateness of the

damage award,’ plaintiffs elaborate on their preparedness

claim, but it is no better the second time around. Their

listing of what they claim to have done to pursue their in-

terest in developing the 60-acre tract relates mostly to their

trial preparation and activities long after September of 1972,

when construction would have had to have begun to conform

to the plaintiffs’ damage theory. Too little was too early;

too much was too late.

Plaintiffs represent that: (1) they hired Architectonics,

Inc. to prepare a master lease and site plan — but the rec-

ord discloses the actual hiring of the firm in December of

1975, four months after the present action was filed, to

work with plaintiffs’ counsel and prepare plans and draw-

ings for use at trial; (2) they retained the retired vice-

president of Homart Development Company to direct

leasing and planning — but the record discloses that Hayes

worked with him during 1976 in preparing for trial; (3)

they had contracts and had obtained strong expressions

of interest from a major tenant— but the record shows

that the possible tenant sent Hayes a telegram during the

first week of trial which was noncommittal and which of-

* Given our result, we need not reach the other issues raised sur-

rounding the damage award. See note 7 supra. Cf, Terrell v. House-

hold Goods Carriers Bureau, 494 F.2d 16 (5th Cir.), cert. dismissed,

419 U.S. 987, 95 S.Ct. 246, 42 L.Ed.2d 260 (1974).

App. - 34

fered no suggestion of becoming a major tenant; (4) they

had their construction engineering firm bid out the con

struction — but the witness from that firm testified that

the plans could not be put out for bids until they were

much more detailed and that plaintiffs had never con-

tracted with his company for any construction; (5) they

obtained a financing commitment on the theatre portion

— but the record discloses an oral request by Hayes in

November of 1974 for a $350,000 loan for preliminary

financing to build a free-standing theatre, not a shopping

center, and the “commitment” was not evidenced by a

bank writing and the bank officer testified that the loan

would have had to have been fully secured “if we would loan

him the money,” and that, in any event, “ [we] didn’t get

that far”; (6) they had a preliminary engineering study

done — but the record discloses only a May 1969 engineer-

ing report which concluded that $12,780,400 in recommended

improvements like drainage and sewer facilities, streets and

water systems were needed if Hayes, Inc.’s 1 ,400-acre

tract were ever to be developed; (7) they obtained

an approved environmental impact statement —but the

record discloses only a December 1975 document dealing

not with a shopping center but with government financing

for housing under Title X of the National Housing Act;

(8) they had the tract zoned as a regional shopping center

under the Port Arthur Master Plan — but what the Port

Arthur City Council did in July of 1973 had little

significance, because the 60-acre tract of land had long been

commercially zoned and plaintiffs never submitted the site

plan required by the ordinance. In a further attempt to

show their own preparedness, plaintiffs point to Marvin’s

efforts, his correspondence and his records exhibiting a pro-

fessional enthusiasm for the joint venture. But his enthusi-

asm evinced no preparedness; there is nothing in the record

even approaching a commitment by a prospective tenant

to the joint venture. In any event, the bright prospects of

the joint venture before they so dramatically dimmed shed

no light on the plaintiffs’ own preparedness. Finally, in their

effort to preserve their verdict, plaintiffs point to the jury

instructions on preparedness, which defendants requested

ee ee

Pe et a OR Bee « 2

App. - 35

and which defendants do not challenge.’® A correct jury in-

struction, however, cannot entitle plaintiffs to a verdict

which is not supported by substantial evidence of their

; eee to construct a shopping center in September

of 1972.

Plaintiffs cannot recover antitrust damages for the frustra-

tion of so ethereal a project." As we have already noted,

before an antitrust claimant can recover for a frustrated

attempt to enter a business, there must be a showing of pre-

paredness to enter. Plaintiffs failed to introduce substantial

evidence of their preparedness to construct the regional

1° The District Court instructed on preparedness:

Now, actual money damage cannot exist unless there is some

business or property to be damaged.

In the anti-trust laws, the actual money damage must be

directed at a plaintiff’s business or property. Therefore if you

find that any plaintiff did not have the kind of business or

property which is protected by the Sherman Act — Sherman

Anti-Trust Act— you must find for each defendant against

the plaintiff — you must find for each defendant against the

plaintiffs.

In order for a plaintiff to have business or property within

the meaning of the anti-trust law, he must have more than

merely an intent or idea to enter the relevant market, although

it is not necessary for it to have an actual going business. The

plaintiff has the burden by a preponderance of the credible

evidence both the intent and the preparedness to enter the busi-

ness and the plaintiff must also show due diligence on its part

to prepare and operate any business it maintains it would have

entered.

In considering whether each plaintiff has met the assigned

burden of showing preparedness for its own business or proper-

ty, you may consider, for example, the ability or inability of

the plaintiffs to finance the business and to purchase and oper-

ate the necessary facilities and equipment.

In other words, the feasibility and its probability of success

from the standpoint of earning a profit, affirmative actions, if

any, the plaintiff has taken toward entering the business or its

failure to affirmatively move forward, the background and ex-

perience of each plaintiff in the prospective business.

11 Given our result, we need not reach defendants’ other varied

challenges to plaintiffs’ conspiracy theory and proof. See note 7,

supra.

App. - 36

shopping center in September of 1972. It almost goes with-

out saying that, if plaintiffs did not prove preparedness to

construct the proposed shopping center, they did not prove

preparedness to construct a theatre in that shopping center.

See generally Zenith Radio Corp. v. Hazeltine Research,

Inc., 395 U.S. 100, 126-28, 89 S.Ct. 1562, 23 L.Ed.2d 129

(1969) ; Martin v. Phillips Petroleum Co., 365 F.2d 629 (5th

Cir.), cert. denied, 385 U.S. 991, 87 S.Ct. 600, 17 L.Ed.2d

451 (1966); Volasco Products Co. v. Lloyd A. Fry Roofing

Co., 308 F.2d 383, 395-96 (6th Cir. 1962), cert. denied, 372

U.S. 907, 83 S.Ct. 721, 9 L.Ed.2d 717 (1963) ; Duff v. Kansas

City Star Co., 299 F.2d.320 (8th Cir. 1962); Peller v. Inter-

national Boxing Club, Inc., 227 F.2d 593 (7th Cir. 1955);

Triange Conduit & Cable Co. v. National Electric Products

Corp., 152 F.2d 398, 399 (3d Cir. 1945). We reverse the judg-

ment and remand to the District Court with instructions

to dismiss the shopping center claim. The antitrust laws

were not designed to protect such shopping centers in the

air which are so easily built.?*

B. Mid-County Enterprises, Inc. Claim

Plaintiff Mid-County Enterprises, Inc., claimed that Solo-

mon kept it from building a drive-in theatre in Port Arthur

by his threats to compete vigorously with the proposed drive-

in and to try to drive it out of business, if it were ever built.

On the basis of evidence which we shall detail, the jury

concluded that the alleged conduct amounted to an antitrust

violation by all the defendants and awarded Mid-County

Enterprises, Inc. damages of $258,300 before statutory treb-

ling. We once again voice our general reluctance to undo a

jury verdict, but we cannot find substantial evidence in this

record that the alleged conduct was a material and proximate

cause of the abandonment of the drive-in.

[5, 6] Of course, we must assume that threats were in fact

made by Solomon in an effort to discourage the drive-in

proposal, despite his own denials of any threats." A state-

12 “Castles in the air — they are so easy to take refuge in. And

so easy to build, too.” Henrick Ibsen: The Master Builder III.

Princes OMe Ske

App. - 37

ment of intent to compete, however, even if perceived as a

threat, is not unlawful. Such a manifestation of intent to

triumph in the competitive market, in the absence of unfair,

anti-competitive or predatory conduct, is not enough to es-

tablish an antitrust violation.‘ Dahl, Inc. v. Roy Cooper Co.,

448 F.2d 17, 19 (9th Cir. 1971). See also Panotex Pipe Line

Co. v. Phillips Petroleum Co., 457 F.2d 1279, 1288-89 (5th

Cir.), cert. denied, 409 U.S. 845, 93 S.Ct. 48, 34 L.Ed.2d 86

(1972); Pacific Engineering & Production Company of Ne-

vada v. Kerr-McGee Corp., 551 F.2d 790, 795 (10th Cir.),

cert. denied, 434 U.S. 879, 98 S.Ct. 234, 54 L.Ed.2d 160

(1977); Purex Corp. v. Proctor & Gamble Co., 419 F.Supp.

931, 942 (S.D.Cal.1976). Before Mid-County Enterprises,

Inc. could recover any antitrust damages for not building a

drive-in theatre, it had to show by probative and substantial

evidence that it had the intention, preparedness and capa-

bility to go forward with the project and that the abandon-

ment of the project was proximately and materially caused

by the acts of the defendants. Causation must be proved

18 Though he denied making “threats,” Solomon did admit that

he went to great lengths to discourage the proposal.

Q. Did you ever tell Mr. deNeve not to build in Mid-County

area?

A. I don’t know that I told Mr. deNeve. I will say this: that

I did all I could to discourage him to build the theatre. I didn’t

think it was a practical and necessary —I would rather him

not have built the theatre.

Q. You did all you could to discourage him?

A. Well, within reason, I didn’t put a gun on him or any-

thing and say they couldn’t build it, I tried to talk Mr. deNeve

and Mr. Hayes out of it, not building the theater.

Later during a confrontation meeting concerning the recission of

the joint venture on June 1, 1974, Solomon handed Hayes a hand-

written note, listing his general terms, which stated in bold letters

“DO NOT BUILD AGAINST GULF STATES.”

14 Defendants rather convincingly argue that the District Court

committed reversible error in its failure to give their requested

charge, that statements of intent to triumph in a competitive market

do not necessarily violate the antitrust laws. We think the Mid-

County Enterprise, Inc. claim more vulnerable on another attack,

however, and need not reach the issue.

App. - 38

“as a matter of fact and with a fair degree of certainty.”

Terrell v. Household Goods Carriers Bureau, 494 F.2d 16,

20 (5th Cir.), cert. denied 419 U.S. 987, 95 S.Ct. 246, 42

L.Ed.2d 260 (1974). See also Yoder Bros. Inc. v. California-

Florida Plant Corp., 537 F.2d 1347, 1371 n.25 (5th Cir.

1976), cert. denied, 429 U.S. 1094, 97 S.Ct. 1108, 51 L.Ed.2d

540 (1977). Comfort Trane Air Conditioning Company v.

Trane Company, 592 F.2d 1373 (5th Cir. 1979); Response

of Carolina, Inc. v. Leasco Response, Inc., 537 F.2d 1307,

1323 (5th Cir. 1976); Cinema-Tex Enterprises, Inc. v. San-

tikos Theaters, Inc., 5385 F.2d 932 (5th Cir. 1976); Inter-

national Rys. of Central America v. United Brands Co., 532

F.2d 231 (2d Cir.), cert. denied, 429 U.S. 835, 97 S.Ct. 101,

50 L.Ed.2d 100 (1976); M. C. Mfg. Co. v. Texas Foundaries,

Inc., 517 F.2d 1059, 1064 (5th Cir. 1975), cert. denied, 424

U.S. 968, 96 S.Ct. 1466, 47 L.Ed.2d 736 (1976) ; Kestenbaum

v. Falstaff Brewing Corp., 514 F.2d 690, 695 (5th Cir. 1975),

cert. denied, 424 U.S. 943, 96 S.Ct. 1412, 47 L.Ed.2d 349

(1976) ; Shumate & Co. v. NASD, Inc., 509 F.2d 147, 153

(5th Cir.), cert. denied, 423 U.S. 868, 96 S.Ct. 131, 46

L.Ed.2d 97 (1975); Johnson v. American Federation of

Musicians, 101 U.S.App.D.C. 193, 247 F.2d 599 (1957).

[7] We have no quarrel with the general rule that “[t]he

* willful acquisition or maintenance of the monopoly power

can be demonstrated by conduct designed to barricade ac-

cess to markets or inhibit production .. .’” Heatransfer

Corp. v. Volkswagen Werks, A. G., 553 F.2d 964, 981, (5th

Cir. 1977), citing Woods Exploration & Production Com-

pany, Inc. v. Aluminum Company of America, 438 F.2d

1286, 1307 (5th Cir. 1971), cert. denied, 404 U.S. 1047, 92

S.Ct. 701, 30 L.Ed.2d 736 (1972). Likewise, our concern is

not with the proof of the amount of antitrust damages but

with fact of antitrust damage. In Terrell v. Household Goods

Carriers’ Bureau, 494 F.2d 16, 20 (5th Cir.), cert. dismissed,

419 U.S. 987, 95 S.Ct. 246, 42 L.Ed.2d 260 (1974) (note

omitted), this Court explained the difference between the

two and set out the standard we must apply:

The distinction between the fact of damage and the

amount of damage is especially important in a case

ca le

Pisa Re ale 0X DE

App. - 39

such as the one sub judice in which the injury to plain-

tiff may. have been attributable to several factors, not

all of which can be the basis for liability on the part of

the defendant. In such a case the plaintiff need not

prove that the defendant’s wrongful actions were the

sole proximate cause of the injuries suffered. He must

show only, as a matter of fact and with a fair degree

of certainty, that defendant’s illegal conduct materially

contributed to the injury. Once the important casual

link between the actions of the defendant and the in-

jury to the plaintiff has been established, the plaintiff

may enter the more uncertain realm of evaluating the

portion of the injury that may be attributed to the

defendant’s wrongful conduct.

[8] We hold that plaintiff Mid-County Enterprises, Inc.,

did not prove by substantial evidence that the defendants’

alleged antitrust misconduct materially contributed to

abandonment of the proposed drive-in theatre. The evi-

dence permits but two conclusions about the proposed drive-

in theatre: first, the threats from Solomon did not in fact

materially contribute to the decision not to go forward

with the proposal, and second, by July of 1974, when Mid-

County Enterprises, Inc. claimed to have been forced to

abandon the project by Solomon, it had devoted most of

the funds borrowed for construction to other unrelated

pursuits. Under these circumstances, defendants’ acts were

not a material proximate cause of the proposal’s failure,

and judgment must be for defendants.”

15 There is no evidence in the record that Fuqua Industries, Inc.

or Gulf States Theatres, Inc. had any connection with making the

threats. If, as we assume, Solomon did make the threats, then he

did so as an officer of Gulf States Theatres of Texas, Inc. Viewed

isolated from the shopping center claim and the Park Plaza Twin

Theatres, Inc. claim, we have been directed to no evidence from

which any unlawful conspiracy could have been inferred by a pro-

perly instructed jury. However, we do not base our holding on the

lack of evidence of conspiracy. Our focus is on the causal nexus

betweeen the threats and the abandonment of the project, instead.

See Shumate & Co. v. NASD, Inc., 509 F.2d 147, 153 (5th Cir.),

cert. denied, 423 U.S. 868, 96 S.Ct. 131, 46 L.Ed.2d 97 (1975).

App. - 40

The chronological relationship between Solomon’s threats,

which were assertedly made in March of 1973, and the evi-

dence of Mid-County Enterprises, Inc. concerning its pre-

paredness to build a drive-in theatre belies the contention

that the threats discouraged the construction.

On July 6, 1973, four months after the Solomon threats,

Mid-County Enterprises, Inc. gave a Port Arthur bank a

note for $300,000 for funds to construct the proposed drive-

in theatre. On this same day the corporation acquired the

land on which, it is claimed, the proposed drive-in theatre

was to be located; it leased a 20-acre tract owned by Hayes

and his father, for a rental of $300,000 payable in fifteen

annual installments of $20,000. In January of 1974, Mid-

County Enterprises, Inc. wrote letters to distributors ask-

ing for the opportunity to bid for films for the proposed

theatre and announcing an opening date, May 30, 1974.

Then, between February and July of 1974, according to

the corporation’s own evidence, a contractor was employed

on the premises who was ultimately paid some $28,897 for

work performed under deNeve’s supervision, for which Mid-

County Enterprises, Inc. paid an additional $7,650. Plain-

tiffs also represented that Mid-County Enterprises, Inc.

bought some $61,250 worth of dirt fill from Hayes and his

father. Accepting the figures of Mid-County Enterprises,

Inc., by July 19, 1974, when the decision to abandon the

drive-in theatre project was made, it had spent $111,790.84

on the project — $16,803.74 before and $94,987.10 after tho

March threats. These figures corroborate the admission of

deNeve, president of Mid-County Enterprises, Inc., that

whatever Solomon said would not keep the project from

going forward.

Although it is not necessary, in order to overturn this

verdict, for us to determine why the drive-in theatre pro-

posal was abandoned, plaintiffs evidence makes it appear

clear that the funds borrowed for the project were dissi-

pated for other purposes. One such purpose was to provide

loans to its stockholders and its affiliates. By year’s end

1975, Mid-County Enterprises, Inc. had loaned $9,000 to

Hayes, $5,000 to Hayes’ father, $50,645.83 to shareholder

meat belted sat: vin ing kb

SPR OR ee ew ewe A el a oe

App. - 41

Mitchell, $22,523.98 to one affiliated corporation owned by

its stockholders, and $5,000 to another similarly owned

affiliate. During 1974, Mid-County Enterprises, Inc.’s loans

to these two affiliates increased and by year end totaled

some $130,252.15 including unpaid interest. The president

of the Port Arthur bank which made the $300,000 construc-

tion loan testified that he was not fully aware of these loans

by the corporation and added that he would have been

alarmed had he known the use to which Mid-County Enter-

prises, Inc. was putting the loan proceeds it had: borrowed

as construction funds.

Obviously, these diversions could not continue indefi-

nitely, and there came a time when the money simply ran

out. Leroy Mitchell, who was a former shareholder and

loan recipient of Mid-County Enterprises, Inc. and no

longer an interested party, testified on his deposition which

was introduced at trial by defendants:

Q. Do you know why you abandoned construction in

that drive-in theatre in Mid-County Enterprises?

A. It was because of lack of funds.

After Mid-County Enterprises Inc. ran out of funds, its

shareholders apparently decided to create a record that

Solomon, rather than they, bore responsibility for aban-

donment of the project. Minutes of a Mid-County Enter-

prises, Inc. Board of Directors, ostensibly reporting a meet-

ing held on July 19, 1974, read as follows:

The Chairman [deNeve] stated that the corporation

had entered into a Lease with Roy Hayes and Lloyd

Hayes in July of 1973 with the intent of constructing a

triple screen drive-in theatre on the leased premises

which are situated in Jefferson County, Texas. The

Chairman then stated that he regretted [sic] to advise

the Shareholders and Directors that the project would

have to be abandoned because some of the officers of

the corporation had received threats from competing

theatres in the area, acting through T. G. Solomon

[sic], to the effect that if the corporation built the pro-

App. - 42

posed drive-in theatre at the above described location,

they would put Midcounty Enterprises, Inc. out of busi-

ness, as they did in Jackson, Mississippi. The Chairman

then stated that even though the corporation had in-

vested $104,289.83 in the project and had paid $20,000

in prepaid rents to the Landlords of the leased premises,

the corporation did not have the financial resources

to withstand the threatened actions of Mr. Solomon

[sic] and the competing theatres. Accordingly, the

Chairman recommended that the above described drive-

in theatre project be abandoned.

Defendants convincingly assert that these minutes were

not prepared on or about July 19, 1974, and that the state-

ments reported could not have been made on or about that

date. The amount of the investment stated, $104,289.83,

was not ascertainable at that time because $2,200 of that

amount was not reflected in Mid-County Enterprises, Inc.

records until August and October of 1975. Plaintiff’s ac-

countant was asked about the discrepancy between the

records and the minutes:

Q. Now my question is: how did the chairman know

— of Mid-County — know on July 19, 1974, that he

was going to incur a debt of $2,200 in October 1975?

A. You might ask the Chairman that question, not

me, because they are the figures I have here.

These minutes, although dated before litigation, were ap-

parently prepared just before the lawsuit was filed in Au-

gust of 1975 and entered nunc pro tunc. The corporation’s

lawyer, when submitting statements for services, described

with specificity any minutes he prepared. The minutes of

the meeting on July 19, 1974, are not referred to in any

contemporaneous billing. Mid-County Enterprises, Inc. has

never disputed defendants’ charge that these minutes were

part of the preparation of plaintiffs’ lawsuit for use at trial.

For these reasons, we cannot give the minutes substantial

credence.

POO A a ke See ee eee ree

App. - 43

Mid-County Enterprises, Inc. in response, attempts to

point out other evidence that funds were available in the

event they were needed. It points to deNeve’s claim that

Mitchell could obtain $1,000,000 for the corporation from

the same Port Arthur bank which had provided the $300,000

construction loan. deNeve was permitted to testify, over

objection, that Mitchell had once mentioned that he had

an open line of credit of $1,000,000 from that bank which

he would make available to Mid-County Enterprises, Inc.

Plaintiffs did not call Mitchell at trial and his purported

statement that he had a line of credit which would be avail-

able to the corporation is inconsistent with his deposition

testimony, quoted above, that a lack of funds stopped the

project. The president of the bank, who testified before

deNeve, did not refer to any $1,000,000 line of credit at the

disposal of Mid-County Enterprises, Inc., and indeed, re-

called meeting Mitchell only once. deNeve himself con-

ceded that, by July of 1974, Mitchell was anxious to end

his participation because he did not want to incur any ad-

ditional liability to finance the corporation.**

After reading the record, we hold that plaintiffs did not

prove by substantial evidence that any act on the part of

the defendants materially contributed to the decision to

abandon the drive-in theatre project. Therefore, we reverse

and remand with instructions to the District Court to dis-

miss the Mid-County Enterprises, Inc. claim.

C. Park Plaza Twin Theatres, Inc. Claim

The salvo defendants aim at the claim of Park Plaza Twin

Theatres, Inc. is a mixture of purely legal points, complaints

about the jury charge, challenges to several of District

Court’s evidentiary rulings and claimed insufficiencies in

16 We need not determine whether deNeve’s testimony about

Mitchell’s credit was hearsay or, if it was hearsay, whether admit-

ting it was reversible error. See Gibson v. United States, 363 F.2d

146, 148 (5th Cir. 1966). The specific reason why the drive-in proj-

ect did not go forward is not significant once it is determined that

the alleged anticompetitive threats did not materially contribute to

the abandonment of the project.

App. - 44

the evidence. We reverse and remand Park Plaza Twin

Theatre Inc.’s claim for a new trial.

[9] Defendants initially contend that Park Plaza Twin

Theatres, Inc. was not entitled to seek antitrust damages

because it was but a landlord and was not engaged in the

film exhibition business during the alleged damage period.

They argue that it was thus outside the pertinent competi-

tive sector of the economy."’ As support for their theory,

defendants rely on Calderone Enterprises Corp. v. United

Artists Theatre Circuit, Inc., 454 F.2d 1292 (2d Cir. 1971),

cert. denied, 406 U.S. 930, 92 S.Ct. 1776, 32 L.Ed.2d 132

(1972). This reliance, we believe, is misplaced. In that case,

the United States Court of Appeals for the Second Circuit

did hold that the nonoperating landlord of a theatre, leased

to an exhibitor of motion pictures for a minimal rental plus

a specific portion of gross receipts, was outside the “target

area” of the alleged conspiracy of distributors and exhibitors

to restrain competition in the film exhibition business and

had no standing to bring suit even though the landlord’s

tenant was allegedly a party to the conspiracy. This “tar-

get area” analysis was fully explained by the Second Cir-

cuit and we need not repeat that explanation here except

to note that this Court also applies it in similar situations.

See, e. g., Jeffrey v. Southwestern Bell, 518 F.2d 1129, 1131

(5th Cir. 1975), citing with approval, Calderone Enterprises

Corp. v. United Artists Theatre Circuit, Inc., 454 F.2d

1292, 1296 (2d Cir. 1971), cert. denied, 406 U.S. 930, 92

S.Ct. 1776, 32 L.Ed.2d 132 (1972); Mendenhall v. Fleming

Co., 504 F.2d 879, 881 (5th Cir. 1974); Martens v. Barrett,

245 F.2d 844, 846 n.5 (5th Cir. 1957). But see In re Multi-

district Vehicle Air Pollution M. D. L. No. 31, 481 F.2d

122, 127 n.7 (9th Cir.), cert. denied, 414 U.S. 1045, 94 S.Ct.

551, 38 L.Ed.2d 336 (1973). The Second Circuit did limit

its holding, however:

We do not suggest that a non-operating theatre lessor

may never have standing to sue for treble damages un-

17 Plaintiffs failed to refute this contention which defendants re-

iterated in their reply brief, drawing attention to plaintiffs’ failure

to join issue.

Cr

BT erat Nan oe

2 le Ahad baer cats 0 Anelial AL ole

‘abe

App. - 45

der § 4 of the Clayton Act. If Calderone had alleged,

for example, that the defendants had aimed their con-

spiracy at it, such as by agreeing to distribute and

exhibit profitable pictures at theatres owned by the de-

fendants or with which they had flat-lease arrange-

ments, and not to distribute them to theatres with

which they had percentage leases, Caldercne would be

in a different posture..-

Calderone Enterprises Corp. v. United Artists Theatre Cir-

cuit, Inc., 454 F.2d at 1296 n.3. The example the Second

Circuit provided obtains here. Park Plaza Twin Theatres,

Inc. alleged that the conspiracy was aimed at it; it was the

alleged bull’s-eye of the target. This alleged conspiracy was

aimed at Park Plaza Twin Theatres, Inc. as an eventual,

inevitable competitor in the motion picture exhibition busi-

ness; damages to both the leasehold and the reversionary

interest were alleged. This is not a case in which the plain-

tiff is incidentally injured only as a result of a relationship

with the target of the conspiracy. Therefore, we must con-

clude that defendants’ initial effort to avoid liability misses

the mark. We hold that Park Plaza Twin Theatres, Inc.

had standing to pursue a private antitrust action under 15

U.S.C.A. § 15. Compare also Sandidge v. Rogers, 256 F.2d

269 (7th Cir. 1958); Melrose Realty Co., Inc. v. Loew’s,

Inc., 234 F.2d 518 (3d Cir. 1956), cert. denied, 352 U.S.

890, 77 S.Ct. 128, 1 L.Ed.2d 85; Steiner v. 20th Century-

Fox Film Corp., 232 F.2d 190 (9th Cir. 1956); Harrison v.

Paramount Pictures, Inc., 115 F.Supp. 312 (D.Pa.1953),

aff'd, 211 F.2d 405 (3d Cir.), cert. denied, 348 U.S. 828, 75

S.Ct. 45, 99 L.Ed. 653 (1953). See generally 27 A.L.R.Fed.

866 and cases cited.

Second, defendants urge that the claim is nothing more

than an attempt to obtain damages for loss of goodwill

and, as such, is merely an effort to remedy Park Plaza

Twin Theatres, Inc.’s omission to seek additional damages

in its prior state court breach of contract proceeding against

Gulf States Theatres of Texas, Inc. by seeking to recover

three times the amount of damages omitted from the state

App. - 46

court claim. The period within which the injury is alleged

to have occurred is the same. The alleged cause of the in-

jury is the same: the decision of Gulf States Theatres of

Texas, Inc. to add screens to its own theatres and to play

some of the best films at them rather than at the Park

Plaza Twin Theatre. Indeed, the principal evidence relied

on to show wrongdoing by the defendants was the judg-

ment entered in the Texas state court.

[10] Focusing on this sameness between the prior state

contract suit and this federal antitrust suit, defendants ar-

gue that the Texas principle which forbids the splitting of

a cause of action bars the claim of Park Plaza Twin Thea-

tres, Inc. This principle prohibiting relitigation requires

that a plaintiff bring in the first forum “every point which

properly belongs to the subject of litigation, and which the

parties, by exercising reasonable diligence, might have

brought forward at the time.” Nichols v. Dibrell, 61 Tex. 539,

541 (1884). See also Freeman v. McAninch, 87 Tex. 132, 27

S.W. 97 (1894); Jones v. Hunt Oil Co., 456 S.W.2d 506,

514 (Tex.Civ.App.1970) (writ ref. n. r. e.). While the sub-

stantive law of the state controls in determining whether a

cause of action has been improperly split in diversity cases,

we apply federal law here in this federal antitrust suit.

Aerojet-General Corp. v. Askew, 511 F.2d 710, 715, 717-18

n.9 (5th Cir. 1975). See generally Green v. American Broad-

casting Companies, Inc., 572 F.2d 628 (8th Cir. 1978),

Maher v. City of New Orleans, 516 F.2d 1051 (5th Cir.

1975); McConnel v. Travelers Indemnity Company, 346

F.2d 219 (5th Cir. 1965) cited in Wright, Law of Federal

Courts § 78 at 386 n.9 (3d ed. 1976). This may well be a

distinction without a difference, since the Texas principle

defendants invoke and the federal principle we apply are

basically the same.

We need not repeat a scholarly exegisis of the principle

prohibiting the splitting of a cause of action which may be

found in the sources we cite; Professor Moore has distilled

a definition as good as any other:

Normally, if a previous judgment is valid, final, on

the merits, and on the same cause of action, it is an

absolute bar in another action between the same parties

App. - 47

or privies ‘not only in respect of every matter which

was actually offered and received to sustain the demane

or to make out a defense, but also to every ground of

recovery or defense which might have been presented.’

This application of the doctrine of res judicata operates

to prevent the splitting of a single course of action and

the use of several grounds for recovery under the same

action as the basis for separate suits.

[I]n accordance with public policy, partially to con-

serve the courts’ time but probably in the main to pre-

vent the hardship upon defendant of unnecessary piece-

meal litigation, a single cause of action cannot be split

so as to be es made the subject of different

actions .

1B Moore’s Federal Practice {0.410 (notes omitted). See

generally Wright & Miller, Federal Practice and Procedures

Civil § 1582.

[11] Defendants’ theory is that plaintiff's Texas court

suit for breach of the lease, see Gulf States Theatres of

Texas, Inc. v. Hayes, 534 S.W.2d 406 (Tex.Civ.App.1976),

precludes this federal antitrust suit on the Park Plaza Twin

Theatres, Inc. claim. We do not agree.

Initially, this Court’s decision in Norman Tobacco &

Candy Company, Inc. v. Gillette Safety Razor Company,

295 F.2d 362 (5th Cir. 1961), affirming, 197 F.Supp. 333

(N.D.Ala.1960), seems to support defendants theory. There

the plaintiff-wholesaler brought a civil antitrust action

against the defendant-manufacturer based upon the de-

fendant-manufacturer’s alleged refusal to sell its products

to the plaintiff-wholesaler. Based on an earlier completed

breach of contract suit between the same parties in the

same postures, in which the jury returned a verdict for the

defendant-manufacturer, the district court entered a sum-

mary judgment which this Court affirmed. Because the

“same severance of relationship” was the basis of each

suit, this Court held “there was [but] one breach and one

only and [plaintiff-wholesaler] has had its day in court and

App. - 48

has lost. It cannot litigate [the] same breach again.” 295

F.2d at 363-64. See also Williamson v. Columbia Gas &

Electric Corp., 186 F.2d 464 (3d Cir. 1950); Bennett v.

Commissioner of Internal Revenue, 113 F.2d 837 (5th Cir.

1940).

This precedent has since been reaffirmed. In Household

Goods Carriers’ Bureau v. Terrell, 452 F.2d 152, 157 (5th

Cir. 1971) (en banc) this Court noted: “it is well estab-

lished that in a proper case one wrongful act may be the

subject of two or more separate and distinct causes of

action.” The res judicata prohibition on splitting a cause of

action is not violated by successive suits when “the invasion

of two separate and distinct primary rights” has resulted

from the same misconduct. In Terrell, the En Banc Court

held the “personal right not to be subject[] to libelous

statements” separate and distinct from the “business right

to enter competition freely.” The En Banc Court thus dis-

tinguished prior precedants which held that res judicata

barred plaintiffs from bringing a second suit based on the

same cause of action as an earlier suit. Jd. at 157 n.11, cit-

ing Norman Tobacco & Candy Co. v. Gillette Safety Razor

Co., 295 F.2d 362 (5th Cir. 1961).

We view the instant case as being controlled initially by

Norman Tobacco & Candy Co. Here, “the same severance

of relationship” was the basis for both the state breach of

contract suit and this federal antitrust suit: the alleged

illegal conduct by the defendants in upgrading their com-

peting theatres and downgrading the Park Plaza Twin

Theatres. The facile notion that two separate rights are

involved here, the right of a landlord to a lease without

breach and the right of a competitor to be free from anti-

trust animus, was dispelled in Norman Tobacco & Candy

Co. That case held that a breach of contract which allegedly

violated the antitrust laws could not form the basis of two

successive law suits. The En Banc Court reaffirmed this

holding in Terrell. We are satisfied that the instant case is

controlled, as we are, by these precedents. To conclude,

as we have, that Norman Tobacco & Candy Co. v. Gillette

Safety Razor Co. and Terrell are consistent, viable and here

- PED ths a Com

tase

App. - 49

applicable does not require that we hold the instant case

barred by the res judicata effect of the state breach of con-

tract suit, however.

[12] Tne prohibition against splitting a cause of action

and the rather Draconian remedy of barring the subse-

quently filed suit must be applied with discretion and flex-

ibility. In Norman Tobacco & Candy Co. the plaintiff

brought the first suit, based on a breach of contract, in the

federal court, a forum which was capable of providing the

relief sought in the second suit, based on the federal anti-

trust laws

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