Texas Court Of Appeals Gives Plaintiff Second Take In Conspiracy Suit Against Major Movie Theater Chain
12/19/2019On December 5, 2019, the Court of Appeals for the First District of Texas held that a movie theater chain presented sufficient evidence suggesting two national competitors conspired to prevent the chain’s entry to withstand summary judgment. This ruling reversed the trial court’s decision, which granted summary judgment to the remaining defendant and dismissed antitrust restraint-of-trade claims. iPic-Gold Class Entm’t LLC, et al. v. AMC Entm’t Holdings Inc., et al., No. 01-17-00805-CV (Tex. App. Dec. 5, 2019). Justice Peter Kelly, writing for a unanimous panel, ruled that evidence of parallel actions by the two competitors and communication lines between them raised genuine issues of material fact as to the existence of a conspiracy in violation of The Texas Free Enterprise and Antitrust Act (“TFEAA”).
Plaintiff, iPic, is a “premium” movie theater chain that operates theaters in Houston and Frisco, Texas. Defendant, AMC, is the largest theater chain in the United States, and also operates theaters in the same geographic region. AMC’s alleged co-conspirator, Regal Entertainment Group, is the second largest theater chain in the United States. Regal settled with iPic prior to the lower court’s summary judgment ruling in favor of AMC.
In its complaint, iPic asserted that AMC and Regal colluded to influence film distributors to issue “clearances”—exclusive licenses preventing other nearby theaters from playing the same movies at the same times—of iPic’s Houston and Frisco theaters. Additionally, iPic alleged AMC and Regal coordinated attempts to pressure distributors by refusing to screen movies that were also licensed to plaintiff’s Texas theaters. AMC moved for summary judgment arguing that the evidence, largely consisting of testimony by AMC and Regal representatives, conclusively disproved the existence of a conspiracy. The trial court granted AMC’s motion.
On appeal, the Court concluded that although iPic presented only circumstantial evidence of conspiracy on summary judgment, that is enough to survive summary judgment when certain “plus factors serve as proxies for direct evidence of an agreement.” The Court specifically pointed to evidence that AMC and Regal requested clearances from distributors on iPic’s Houston and Frisco theaters in July 2014, before either iPic location opened. AMC and Regal also informed major distributors at similar times that they would not purchase licenses for movies that were licensed to iPic’s theaters. Evidence also showed that the clearances were not necessarily profitable, but could assist the alleged conspirators to minimize long-term losses stemming from business lost to iPic’s theaters. Accordingly, AMC acted against its short-term economic interest and was jointly motivated with Regal to prevent plaintiff’s entry in the market.
Notably, the Court also found there was opportunity to conspire through established channels of communication via a film distribution joint venture that AMC and Regal operated together. Notably, when AMC presented a new clearance policy to this joint venture in late 2012, Regal adopted the same policy shortly thereafter, and the two firms used the joint venture to monitor each other’s clearance activity. Additionally, it was established that an AMC employee emailed executives regarding plans to request clearances against iPic’s Frisco location in June 2014, and a recipient of that email met with a Regal executive the next day. A few weeks later, AMC requested these clearances on the same day that Regal requested clearances of iPic’s Houston location.
Although defendant’s summary judgment evidence consisted of deposition testimony from numerous employees of both chains denying communications between the companies regarding plaintiff or clearances, this testimony was unsupported by independently ascertainable facts. Accordingly, the Court determined that such evidence depended on the credibility of interested deponents and was inappropriate grounds for summary judgment.
This opinion serves as a useful reminder that even lawful collaborations with competitors, such as joint ventures, can be construed by antitrust plaintiffs as opportunities for collusion. Great care should be taken to limit the information shared with competitors through these collaborations to only that information that is necessary. Further, antitrust guidance should be provided to any executives that participate in the management of the collaboration. These kinds of precautions can demonstrate the care taken to avoid anticompetitive behavior.