And, Action! – Film Clearance Licenses, Antitrust, and the Burden of Proof
AMC Entertainment Holdings, Inc. v. iPic-Gold Class Entertainment, LLC, _ S.W.3d _ (Tex. Jan. 14, 2022) [20-0014]
Facts: This case illustrates the complexities of an antitrust claim within the film-industry practice of film distributors’ granting “clearance” licenses to theaters (also known as film exhibitors), being a license to exclusively show a particular film in a particular geographic area for a particular time. The case involves two of the largest movie-theater chains in the U.S. and their alleged conspiracy to unreasonably restrain trade or business of iPic, the owner of a chain of boutique theaters. In the case, iPic alleged that AMC conspired with Regal Entertainment Group (“Regal”) and others (jointly, the “AMC Parties”), to “crush iPic” and put it out of business by obtaining clearances against iPic’s two new theater locations in Frisco and Houston, Texas.
In November 2015, iPic filed suit, alleging that the AMC Parties conspired to restrain trade in iPic’s theater markets in violation of section 15.05(a) of the Texas Business & Commerce Code, the Texas Free Enterprise and Antitrust Act (“Act”).
The AMC Parties moved for summary judgment on all claims, asserting that, among other things, there was insufficient evidence of an agreement or conspiracy to restrain trade under the Act. The trial court granted the AMC Parties’ motion, and iPic appealed one claim based on a horizonal conspiracy to restrain trade under the Act. The court of appeals reversed and remanded the case for trial on that issue. The supreme court granted the AMC Parties’ petition for review.
Issue: Under the Act and the summary judgment standard applicable to an antitrust claim, did iPic produce sufficient evidence to show that an agreement existed between the AMC Parties to unreasonably restrain trade through movie-theater clearance license business practices?
Short Answer: No.
Held: The alleged conspiracy was implausible. iPic’s claim was based on parallel conduct of the actors involved and mere suspicion of an agreement to unlawfully restrain trade. iPic’s evidence did not tend to exclude the possibility that the AMC Parties acted independently, and thus, summary judgment in favor of the AMC Parties was proper.
Discussion: “Every contract, combination, or conspiracy in restraint of trade or commerce is unlawful.” Tex. Bus. & Com. Code § 15.05(a); see also 15 U.S.C. § 1 (Sherman Antitrust Act, federal). To be unlawful, however, the restraint of trade must be “unreasonable.” A violation of the Section 15.05(a) of the Act, as well as Section 1 of the Sherman Antitrust Act, requires an agreement or meeting of the minds of the purported conspirators to unreasonably restrain trade, which may be shown by direct or circumstantial evidence.
In most antitrust cases that involve an alleged conspiracy among competitors, there is usually a dispute about whether alleged unlawful conduct falls within a per se violation, or within a “rule of reason” violation.
(1) Per Se – conspiracies or agreements that are per se (i.e., in itself) illegal. E.g., horizontal agreements to fix prices, or agreements among competitors to boycott others in business.
(2) Rule of Reason – case-by-case analysis to determine whether a particular restraint is unreasonable. Requires an examination of purpose for the restraint, the effect of the restraint on competition, and other relevant factors.
See AMC, No. 20-0014, slip op. at 11-12 (Tex. Jan. 14, 2022).
In finding that iPic did not submit sufficient evidence to establish a meeting of the minds for antitrust violation, the Texas Supreme Court offered no ruling as to whether the particular antitrust claim based on clearance license activity fell within the per se analysis or the “rule of reason” analysis.
Instead, the court focused on the first element of an antitrust cause of action, that is, whether iPic presented sufficient evidence of a meeting of the minds among the alleged conspirators to restrain iPic’s business. Id. at 14-15. Because the Act is, by legislative directive, guided by federal law, the court analyzed United States Supreme Court opinions on the subject and essentially concluded that, in order to overcome a motion for summary judgment on the issue of the existence of an unlawful conspiracy:
(1) the conspiracy allegation must be plausible.Evidence of ambiguous conduct among alleged conspirators is insufficient.
(2) When an alleged conspiracy is implausible, more persuasive evidence is required to survive summary judgment; and
(3) The evidence must tend to rule out the possibility that the alleged co-conspirators were acting independently.
Id. at 22-23.
In AMC, the Texas Supreme Court found that iPic failed to meet its burden of proof at the summary judgment level. “The conspiracy that iPic has alleged is implausible, and its case rests on parallel conduct and suspicion.” Id. at 34. The court evaluated mounds of evidence that was presented at the trial court, including testimony about the history of clearance licenses in the film industry (dating back to the 1980s) as well as evidence of the AMC Parties’ business practices and written communications to film distributors dating years before the lawsuit was filed.
The court emphasized that “the timeline of events makes the existence of an AMC-Regal agreement to target iPic seem farfetched.” Id. at 26. The court noted that iPic failed to show any plausible motive for the AMC Parties to conspire as alleged. The court also addressed iPic’s evidence of internal analyses of the AMC Parties’ business, deposition testimony, revenue data, communications between the AMC Parties, and other. Ultimately, the court found that, under the burden of proof standard applicable to the antitrust claim, iPic did not raise a genuine issue of material fact that a conspiracy ever existed between the alleged conspirators.
Closing: The AMC Parties and iPic endured over five years – so far – litigating these complex antitrust issues, leading outside viewers to believe that both sides of the docket felt strongly that they were “in the right” on the law. Based on the lengthy evaluation of evidence shown in this opinion, the parties undoubtedly expended hundreds of thousands of dollars in discovery and fact-development, not to mention the expense incurred in presenting these complex legal issues to the trial court, the court of appeals, and the Texas Supreme Court. Whether the legal analysis on the front end, or through the development of the case, hit the mark is unknown to this writer. Presumably, there will be some “Monday Morning Quarterbacking,” thus emphasizing the need to expend time and finances, at all stages of litigation, in evaluating whether a case such as this or otherwise should be pursued.