Orson, Inc. v. Miramax Film, Corp.

Citations: 983 F. Supp. 624; 1997 U.S. Dist. LEXIS 17494; 1997 WL 693582Docket: No. CIV. A. 93-4145

Court: District Court, E.D. Pennsylvania; November 2, 1997; Federal District Court

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Miramax Film Corporation's post-trial motion for Judgment as a Matter of Law under Federal Rule of Civil Procedure 50, or alternatively for a New Trial under Rule 59, is before the court. The action, initiated by Orson, Inc. on August 2, 1993, includes three counts: Count I alleges a violation of the Sherman Act; Count II claims a violation of Pennsylvania’s common law against unreasonable restraint of trade; and Count III cites a breach of the Pennsylvania Feature Motion Picture Fair Business Practices Law. The court previously granted summary judgment for Miramax on Counts I and II and partial summary judgment on Count III, which was later affirmed by the Third Circuit, except for Count III that was vacated and remanded. 

At trial, the court ruled in favor of Miramax regarding claims under sections 203-4 and 203-8 of the Pennsylvania Act, while a jury found Miramax liable for violating section 203-7 concerning seventeen films, awarding $159,780 in damages to Orson. The court explains the relevant statutory provisions, particularly section 203-7, which prohibits exclusive licensing agreements longer than 42 days without allowing for subsequent runs in the same geographical area. The Third Circuit clarified that "geographical area" requires expansion to subsequent run theaters, countering the court's previous interpretation. Section 203-10 allows exhibitors to sue for damages resulting from willful violations of the Act. Miramax's motion for post-trial relief has been denied.

Miramax is seeking a judgment as a matter of law or a new trial, asserting multiple constitutional violations concerning the Pennsylvania Act. They argue the Act is unconstitutional under the Supremacy Clause due to preemption by the Copyright Act and under the Commerce Clause for imposing an undue burden on interstate commerce. Miramax contends there is insufficient evidence to establish that its conduct caused any injury to Orson, that the plaintiff's damages expert lacked a sufficient evidentiary basis for calculations, and that the jury had inadequate grounds to determine Miramax acted willfully or intentionally as required by section 203-10 of the Act.

Additionally, Miramax claims entitlement to a new trial based on errors made by the court, including the admission of evidence regarding a violation of section 203-4, which was no longer relevant at trial, incorrect jury instructions regarding the legislative purposes of the Act, and failure to provide necessary legal standards for finding a violation of section 203-7. The motion for judgment will be denied.

The legal standards for these motions require that a renewed motion for judgment be granted only when evidence is insufficient for a reasonable jury to find liability, without weighing the evidence or credibility of witnesses. For a new trial, there must be a verdict contrary to the great weight of evidence or errors that lead to an unjust result.

Miramax's argument regarding the Supremacy Clause is centered on section 203-7 of the Pennsylvania Act, claiming it infringes on rights granted by the Copyright Act, thereby being preempted. They assert the jury's verdict necessitates terminating runs at certain theaters and licensing films to subsequent run theaters without requests, characterizing this as a compulsory license dictated by the Commonwealth rather than Miramax. The plaintiff argues that a prior Third Circuit decision precludes Miramax's position.

The Copyright Act of 1976 grants copyright owners exclusive rights, including reproduction, preparation of derivative works, distribution, public performance, and public display of their works, as outlined in 17 U.S.C.A. 106. Furthermore, 17 U.S.C.A. 301 establishes preemption, stating that from January 1, 1978, no individual may claim rights equivalent to copyright under state law. Miramax argues that this preemption applies in their case against a jury finding that infringes on their distribution rights.

The Third Circuit has previously addressed the issue of whether Pennsylvania's law (73 P.S. 203-7) is preempted by the Copyright Act in two cases: Associated Film Distribution Corporation v. Thornburgh (1982 and 1986). In these instances, the Third Circuit concluded that the 42-day provision of the Pennsylvania law is not preempted by the Copyright Act and does not infringe upon the exclusive rights of copyright holders. The court found that the law does not deprive copyright owners of their rights to reproduce, prepare derivative works, distribute, or license performances of their films.

On remand, the district court determined that the Pennsylvania Act’s impact on copyright was minimal, interpreting the 42-day provision as allowing distributors to enter into consecutive exclusive contracts with the same exhibitor, provided each contract does not exceed 42 days. However, the Third Circuit later rejected this interpretation, stating that the 42-day requirement implied a need to expand to different theaters rather than allowing consecutive exclusivity. The court acknowledged the potential merit of arguments that the 42-day limit might preempt copyright rights but emphasized that such preemption would need to be evident from the statute's face and could not contradict their earlier finding of the Act's facial validity. Ultimately, the court indicated adherence to its prior position.

Chief Judge Sloviter expressed that the 42-day clause is inconsistent with the Copyright Act, which grants copyright owners exclusive distribution rights for the duration they choose within the copyright term. Despite this view, he could not declare the Pennsylvania Act unconstitutional due to Internal Operating Procedure 8C, which requires adherence to prior panel opinions. The Third Circuit's ruling in Orson v. Miramax established that section 203-7 prevents a distributor from entering into exclusive first-run license agreements exceeding 42 days without provisions for expanding to additional theaters. Consequently, Miramax cannot secure an exclusive license for more than 42 days in Center City unless it allows for subsequent runs. Although the Third Circuit has not directly addressed the potential inconsistency of section 203-7 with the Copyright Act in practice, it has rejected arguments asserting that the 42-day provision violates the Supremacy Clause by limiting the copyright owner's distribution rights. The court reiterated that the statute is not facially inconsistent with the Copyright Act, thereby closing the door on as-applied challenges regarding this issue. Consequently, the court denied Miramax’s Motion for Judgment as a Matter of Law based on these grounds.

Miramax asserts that section 203-7 of the Pennsylvania Act infringes upon the Commerce Clause of the U.S. Constitution by compelling distributors to switch film exhibitions between theaters within the same zone, thereby imposing an undue burden on interstate commerce. Miramax claims that, due to the lack of simultaneous screenings in Center City Philadelphia, they would have to withdraw a film from one theater to allow another to exhibit it on the 43rd day, which they argue constitutes a violation of interstate commerce principles. The Commerce Clause restricts state powers over interstate commerce, but not all state regulations that impact commerce are invalid. Under the Pike balancing test, a state regulation can be upheld if it serves a legitimate local interest and its effects on interstate commerce are incidental, unless the burden on commerce is excessively disproportionate to local benefits. The regulation is deemed a trade barrier if it obstructs the free flow of commerce. The Third Circuit previously ruled that a 42-day provision of the Pennsylvania Act did not violate the Commerce Clause, recognizing legitimate state interests such as enhancing film access in various regions and preventing unfair practices. The court found that the burdens imposed by the statute were not excessively disproportionate to the state's legitimate interests, thereby affirming the district court's conclusion.

The district court referenced Allied Artists Corp. v. Rhodes, where an Ohio court found that the Ohio Act did not obstruct interstate commerce, asserting it had no impact on commerce passing through Ohio or on distributors' market entry. The plaintiffs argued the Act imposed an undue burden on interstate commerce by delaying film releases and hindering licensing. The Ohio court countered that the Commerce Clause protects the interstate market rather than individual firms from regulatory burdens. Consequently, the court ruled that the plaintiffs' claimed burdens were not detrimental to the interstate market.

In a similar vein, the district court in Associated Film I upheld the Pennsylvania Act, concluding that a distributor’s choice not to open in Pennsylvania due to a 42-day provision was not an adverse effect on interstate commerce but a marketing strategy. The court noted that the Commerce Clause does not safeguard retail operational methods. The Third Circuit upheld the constitutionality of the 42-day provision, deeming the burdens not excessive given state interests.

Miramax's argument that the 42-day provision was excessively burdensome in its case was dismissed. The court clarified that Miramax's refusal to exhibit simultaneously at multiple theaters was not a statutory requirement but a decision made by the theater owners, framing it as a marketing strategy similar to that discussed in Associated Film I.

Miramax's decision to restrict simultaneous screenings of its films does not constitute an undue burden on interstate commerce, as it does not impede interstate trade or the entry of movie distributors into Pennsylvania. The 42-day provision does not negatively impact commerce in Pennsylvania, nor does it hinder Miramax's operations as a single interstate entity. Consequently, the court finds that section 203-7, as applied to Miramax, does not violate the Commerce Clause, leading to the denial of the Defendant’s Motion for Judgment as a Matter of Law on these grounds.

In terms of causation, Miramax argues it should receive judgment due to insufficient evidence linking its actions to any injury suffered by Orson. They present three arguments: 1) no evidence shows that Miramax would have licensed films to the Roxy without compulsion; 2) for films distributed after August 1993, causation cannot be established since the Roxy was removed from service after litigation began; and 3) for the films “The Crying Game” and “The Piano,” causation is unproven as these films appealed to broader audiences than the Roxy could capture. Additionally, Miramax contends that “Like Water for Chocolate” could not demonstrate causation since it was already licensed to another theater.

However, the court finds sufficient evidence to support a causal link between Miramax's conduct and Orson's injuries. During the relevant period, the Roxy was the only subsequent run theater served by Miramax, licensing 15 films in 1992 and 4 in 1993 on that basis, while no other Center City theater showed Miramax films as second runs. This evidence allows for reasonable inferences supporting the jury's findings on causation.

Sufficient evidence supported the jury's conclusion that the Roxy was the subsequent run theater typically served by Miramax. Miramax's argument that Orson failed to establish causation due to a lack of licensing requests from the Roxy is flawed. Section 203-7 places the responsibility on the distributor, Miramax, to make films available, not on Orson. Testimony from Mr. Raab, the Roxy's owner, indicated attempts to license films, including offers to pay more than competitors and proposals for coordinated release strategies with the Ritz theater. Jeffrey Jacobs, the Roxy's buyer, confirmed efforts to obtain films from Miramax were unsuccessful. Additional testimony indicated that industry practice relied on verbal requests, negating the need for written evidence. 

Miramax's assertion that causation could not be shown for films released after the Roxy was taken off service is unsupported by the statute, which does not allow Miramax to evade obligations by removing the Roxy from service amid litigation. Evidence suggested the Roxy would have shown films like “The Crying Game” and “The Piano” if available, countering Miramax's claims regarding licensing decisions based on the films' success. Furthermore, regarding “Like Water for Chocolate,” the Rittenhouse theater did not show the film until a year after it would have been available for the Roxy, meeting statutory requirements. Consequently, there was adequate evidence for the jury to determine that Miramax caused Orson's injury as mandated by section 203-10, leading to the denial of Miramax’s Motion for Judgment as a Matter of Law.

Miramax filed a Motion for Judgment as a Matter of Law, arguing that there was insufficient evidence to establish a willful and intentional violation of section 203-10 of the statute. They contended that their interpretation of "geographical area" was to expand into suburbs rather than another theater within Center City, suggesting they believed they were compliant. Miramax also claimed that it could not be found liable for willfully violating the statute regarding ten films because the responsibility to request the films rested with the exhibitor. The court determined that the issue of Miramax’s intent is a factual question for the jury, which had enough evidence, including depositions from key executives, to find that Miramax acted willfully in not expanding films within the geographic area.

Furthermore, Miramax argued that the damages awarded by the jury were not supported by sufficient evidence from the plaintiff's expert, Mr. LaRosa, whose assumptions were deemed unfounded. Specifically, Miramax asserted that LaRosa incorrectly assumed that films would have the same duration at the Roxy as they did at the Ritz and that all patrons from the Ritz would have gone to the Roxy. The court noted that the assessment of damages is a factual matter for the jury, which is not obligated to accept expert testimony uncritically. The credibility of expert opinions, based on their factual basis, is subject to cross-examination, but expert testimony cannot be purely speculative or unsupported.

LaRosa’s testimony is deemed sufficiently supported by evidence to assist the jury, particularly his numerical calculations regarding film viewership at the Roxy theater. Key supporting evidence includes testimonies indicating that Philadelphia art film viewers would frequent any theater showing the film, and that the Roxy and the Ritz shared the same consumer base as the only two art film theaters in Center City. Consequently, the jury found that LaRosa's opinion that the film would have similar viewership at both theaters was credible, although they awarded a lesser amount than his calculations suggested based on their own findings.

Miramax's Motion for Judgment as a Matter of Law or a New Trial regarding LaRosa’s testimony is denied, as the court found sufficient basis for his opinion. Additionally, Miramax contends that the court erred in admitting evidence of its violation of section 203-4 of the Pennsylvania Act, arguing that since a prior motion regarding this section was granted, related evidence should not have been allowed. However, under Federal Rules of Evidence 404(b) and 403, the court determined that the probative value of the evidence regarding intent and state of mind outweighed any prejudicial impact, thus affirming its admissibility. Miramax's request for a new trial on these grounds is also denied. Finally, the defendant claims entitlement to a new trial due to jury instructions on legislative purposes under the Pennsylvania Act, which remains part of the court's considerations.

Miramax argues that the jury should have based its decision solely on the language of section 203-7 of the statute, contending that considering the legislative purposes misled the jury. However, the trial transcript reveals that the court thoroughly explained the requirements of section 203-7 to the jury, detailing each element to prevent confusion regarding its application. Miramax further claims that the court failed to clarify that Orson needed to demonstrate that it requested films after 42 days and that Miramax entered an exclusive agreement for over 42 days, asserting this warranted a new trial. The court finds these claims unsubstantiated, noting that the statute does not require Orson to prove specific requests for films, placing the responsibility on the distributor to provide films to subsequent theaters. The court also confirms that it did instruct the jury regarding the need for evidence of an exclusive agreement exceeding 42 days. Consequently, Miramax's motion for a new trial is denied. The court's order reflects this conclusion, citing a procedural history and referencing a related case that supports the interpretation of the Pennsylvania Act, particularly concerning the 42-day provision. The court dismisses Miramax's assertion regarding the necessity of terminating movies at their selected theater to comply with the statute.

Miramax is permitted to continue screenings of its film at both theaters despite Mr. Posel, the Ritz owner, choosing not to exhibit films "day and date" with other Center City theaters, a decision not mandated by statute. The term "day and date" refers to the practice of multiple theaters showing the same film on the same day. Associated Film II contested the district court's conclusion that the statute was valid as applied, rejecting the premise behind that finding. The court upheld that the statute does not violate the Commerce Clause on its face but analyzed the 42-day provision using a balancing test from Pike to assess its application. Testimony indicated that the policy of not allowing simultaneous showings was attributed to Mr. Posel rather than Miramax's policy, which ultimately respected the Ritz's decision. Miramax argued that the Roxy did not seek licenses for the films in question, and while an employee suggested placing films in other theaters, no evidence supported that this was Miramax's policy at the relevant time. Miramax also contended that a broad interpretation of the statute could infringe the Supremacy Clause and Copyright Act, but this argument was dismissed based on Third Circuit precedent. The Roxy's estimated losses were $519,362, with a jury awarding $159,780. Section 203-4 of the statute governs trade screenings, and the sufficiency of evidence regarding causation under the statute was addressed, confirming that Orson sought the films for which liability was established.