Flagship Theatres of Palm Desert, LLC v. Century Theatres, Inc.

Filed 10/2/20 (on rehearing)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
FLAGSHIP THEATRES OF B292609
PALM DESERT, LLC,
(Los Angeles County
Plaintiff and Respondent, Super. Ct. No. SC090481)
v.
CENTURY THEATRES, INC., et al.,
Defendants and Appellants.
B299014
FLAGSHIP THEATRES OF
PALM DESERT, LLC, (Los Angeles County
Super. Ct. No. SC090481)
Plaintiff and Appellant,
v.
CENTURY THEATRES, INC., et al.,
Defendants and Respondents.
APPEAL from a judgment and orders of the Superior Court of
Los Angeles County, Lisa Hart Cole, Judge. Reversed (B292609).
Dismissed (B299014).
Norton Rose Fulbright, Peter H. Mason, Joshua D. Lichtman
Lesley Holmes, Michael A. Swartzendruber and Barton W. Cox
for Defendants and Appellants (B292609) and Defendants and
Respondents (B299014).
Perkins Coie, Thomas L. Boeder, Elvira Castillo, Donald J.
Kula, Sunita Bali and Alisha C. Burgin for Plaintiff and Appellant
(B299014) and Perkins Coie, Thomas L. Boeder, Elvira Castillo and
Donald J. Kula for Plaintiff and Respondent (B292609).
_________________________________
This appeal arises from an antitrust dispute involving the
licensing of motion pictures to movie theaters for public exhibition.
Plaintiff Flagship Theatres of Palm Desert, LLC (Flagship), which
previously owned the movie theater Palme d’Or in the Coachella
Valley, obtained a jury verdict against defendants Century
Theatres, Inc. and Cinemark USA, Inc. (collectively, Century),1
which owned The River, a theater located two miles away from
Palme d’Or. Century owns a circuit of theaters throughout the
country as well. The jury found true Flagship’s allegations that
Century had engaged in a practice known as “circuit dealing”
by entering into licensing agreements with film distributors that
covered licenses to play films not just at The River, but at multiple
other Century-owned theaters as well, and using these agreements
to pressure distributors into refusing to license films to Palme d’Or.
1 Cinemark acquired Century in October 2006. We use
the term “Century” to refer to both parties. When referring
individually to either, we use the terms “Cinemark USA” and
“Century Theatres,” respectively.
2
In reaching this verdict, the jury made several more specific
findings regarding the competitive effects of the agreements,
including that the agreements harmed competition in the relevant
market. On appeal (case No. 292609), Century argues substantial
evidence does not support these findings, that there can be no
antitrust liability without such evidence, and that the judgment in
Flagship’s favor should therefore be reversed. In the alternative,
Century argues that the court committed reversible error by
admitting into evidence certain testimony and emails Century
argues are inadmissible prejudicial hearsay, and that the jury’s
verdict is an impermissible “compromise verdict.”
We agree with Century that Flagship did not present
substantial evidence of anticompetitive effects in the relevant
market. We further agree with Century that this failure of proof
warrants reversal, as circuit dealing based on multi-theater
licensing agreements is not per se illegal under the Cartwright Act.
We therefore reverse the judgment and need not reach Century’s
remaining arguments on appeal. Nor need we address Flagship’s
appeal (case No. B299014)2 from the court’s postjudgment order
awarding Flagship attorney fees in an amount lower than Flagship
had requested.
2 Thiscourt granted the parties’ joint motion to consolidate
oral argument in Century’s appeal (case No. B292609) and
Flagship’s appeal (case No. B299014) in October 2019. On its
own motion, the court hereby consolidates the two appeals for all
purposes.
3
FACTUAL AND PROCEDURAL BACKGROUND
A. Film Industry Background
In the motion picture industry, film studios, also known
as distributors, own the copyrights to films, and grant licenses to
theaters, also known as exhibitors, to play those films to the general
public.
A group of film distributors, referred to as the “major” and
“mini-major”3 film studios, collectively distribute the majority of
“first-run commercial films in the United States.” First-run films
are “new films that exhibitors play immediately following the
release date.” A “commercial film” is one that has high “grossing
ability” because it will appeal to a large audience. “[O]n the other
end of the spectrum” from “commercial films” are the “more artistic
class movies,” “class title[s] that might come out on a more limited
release basis.”
Distributors usually license first-run films on a “day and
date” basis, meaning they grant licenses to a theater regardless
of whether nearby theaters are also licensing the film at the same
time. When two or more theaters are located very close to each
other, however, distributors license a film to only one of those
theaters for a period immediately following a film’s initial release.
This is referred to as a “clearance” situation, or a “competitive
zone.” A clearance is “an exclusive right that a film distributor
grants to a theater in connection with the licensing of a film” that
3 Specifically,seven distributors known as the “majors”—
Universal, Fox, Paramount, Sony, Disney, Warner Bros., and
Lionsgate— together with a few “mini-majors,” “account for
95 percent of the industry.”
4
“prohibits the distributor from licensing the film for exhibition
at certain other theaters . . . while the film is being shown at the
theater that obtained the clearance.” (Flagship Theatres of Palm
Desert, LLC v. Century Theatres, Inc. (2011) 198 Cal. App. 4th 1366,
1375 (Flagship I).)
After the initial period of time covered by a clearance, a
distributor may choose to license the film to the other theater or
theaters in the clearance zone. At that point, however, the film is
no longer a first-run film, but a less lucrative “moveover.”
Although a clearance by definition means only one theater
in the zone may exhibit a given film during the clearance period,
distributors do not necessarily grant clearances to all their films
to the same theater. Instead, a distributor may choose to allocate
films between theaters in the zone, granting one theater clearances
to some films, and the other theater (or theaters) in the zone
clearances to other films.
During the relevant time period for this case (2003–2016),
clearances were common throughout the country.4 A particular
clearance may violate antitrust laws if it is shown to cause actual
harm to competition that outweighs any procompetitive benefits of
the clearance. (Orson, Inc. v. Miramax Film Corp. (3d Cir. 1996)
79 F.3d 1358, 1372 (Orson).) But clearances have withstood
antitrust scrutiny on several occasions because they can and often
do generate a net benefit to consumers by increasing the selection
of films that theaters offer and stimulating competition on bases
other than film selection. (See, e.g., ibid.; Three Movies of Tarzana
v. Pacific Theatres, Inc. (9th Cir. 1987) 828 F.2d 1395, 1399
4In 2016, distributors shifted away from granting clearances
in competitive zones. Paramount is a notable exception, having
stopped honoring clearances in 2009.
5
(Tarzana); Soffer v. Nat’l Amusements Inc. (D.Conn. Jan. 10, 1996,
No. CIV 3:91CV472(AVC)) 1996 WL 194947 *6 (Soffer) [clearances
“increased the overall choice of films to customers” in that market].)
B. The River and Palme d’Or Theaters
Century Theaters was an exhibitor that owned 80 theaters,
including a theater called The River in Rancho Mirage, California.
In 2006, another exhibitor, Cinemark USA, acquired Century
Theatres. Following this acquisition, the combined entity (Century)
operated approximately 300 theaters throughout the country,
including The River.
Flagship owned and operated a single theater in Palm Desert,
Palme d’Or (the Palme), from 2003 until mid-2016. Flagship’s
investors (and thus, the Palme’s owners) include the actor, Bryan
Cranston.
Both The River and the Palme were located in the
Coachella Valley, a collection of towns largely populated by an
older, more affluent demographic. State Route 111 (Route 111) is
the valley’s main thoroughfare, facilitating travel between these
towns, which include Palm Springs, Cathedral City, Palm Desert,
Rancho Mirage, Indian Wells, and La Quinta. The River and
the Palme are approximately two miles apart from each other on
Route 111.
The Coachella Valley has “a lot of theatres,” most of which
are located on or minutes off of Route 111. Multiple theaters are
located “not all that far from” The River and the Palme in terms
of both drive time and distance. At trial, Flagship witnesses
testified that the Palme competed for patrons with these theaters,
including The River, the Mary Pickford 14 in Cathedral City, the
Regal Rancho 16 in Rancho Mirage, the Regal in Palm Springs,
the Regal Metro 8 in Indio, and the La Quinta in La Quinta.
6
Although the specific driving distances between the Westfield Mall
in Palm Desert (where the Palme was located) and these other
theaters are not included in the record on appeal, on the court’s
own motion, we take judicial notice of these distances as being
approximately 2 miles, 6 miles, 6 miles, 12.5 miles, 10 miles, and
6.5 miles, respectively.5
Differences in what The River and the Palme offered their
patrons are central to the parties’ arguments on appeal. The River
has 15 screens and is located in an outdoor shopping area. The
River is a typical commercial movie theater with stadium seating
and a typical movie theater concession area. It caters to adult, teen,
and family audiences.
The Palme had 10 screens and was located in an indoor
mall. The Palme is an “art house theater” with a stated mission
of offering a wide selection of independent, foreign, and other
artistic class films that otherwise would not be seen in the
Coachella Valley. Accordingly, the films the Palme exhibited
5 Evidence Code section 452, subdivision (h) permits
judicial notice of “[f]acts . . . that are not reasonably subject
to dispute and are capable of immediate and accurate
determination by resort to sources of reasonably indisputable
accuracy.” (Evid. Code, § 452, subd. (h).) Such facts include
locations and distances between locations. (See People v. Traugott
(2010) 184 Cal. App. 4th 492, 497, fn. 4 [taking judicial notice of
distance between locations under Evid. Code, § 452, subd. (h)];
In re Nicole H. (2016) 244 Cal. App. 4th 1150, 1153 [same];
see also People v. Posey (2004) 32 Cal. 4th 193, 215, fn. 9 [taking
judicial notice of the location of a city under Evid. Code, § 452,
subd. (h)].)
7
excluded “very commercial titles,”6 although the Palme did seek
to show some “high-end adult commercial” pictures.7 This mix
of offerings was designed to appeal to “sophisticated, discerning
film fans” seeking “upscale, adult programming.” The theater
“[did] not have a youth audience, at all,” and instead “focus[ed]”
on “a cultured adult audience and seniors.”
When the Palme opened, it made its desired mix of films
known to distributors. It explained to distributor Sony, for
example, that the Palme “will not be asking for, nor expecting,
most Sony product, as this is not a typical mainstream venue.
Please continue to sell . . . [T]he River all the very commercial
titles.” Universal similarly understood that the Palme “[was] only
interested in certain films. They didn’t really care about a lot of
them.”
The Palme’s decor and amenities were designed to create an
upscale art house theater experience as well. Flagship redecorated
the building’s interior, creating an “elegant” lobby of granite,
slate, and hand-painted decorations. It had a café that offered
“gourmet” food and “bistro fare” such as espresso drinks, smoothies
and “premium desserts.” The theater also had sloped floors to
accommodate patrons with canes and walkers.
6 Examplesof “very commercial” films include the franchises
Star Wars, X-Men, and Mission: Impossible, as well as Pixar films.
7 The Palme’s business plan therefore called for “a collection
of main titles” that were “supplement[ed] in the other screens . . .
with titles that people weren’t very familiar with,” including
independent and foreign films. “[D]uring the trailers” for first-run
commercial movies, the Palme “would show all the other films [it
was] screening at the theatre.”
8
The Palme pledged to offer “the best selection of art,
independent, foreign, documentary, experimental, and classic films”
along with the “best service, the best ambiance, the best café
menu, the best technical presentation, and the very best overall
movie-going experience in the desert.”
The Palme also hosted “special events” at which artists
from around the country— including Oscar-winning actors and
directors—would participate in question and answer sessions
following the screening of a film. These events sold out and allowed
patrons to talk directly to well-known actors, directors and writers,
whom co-owner Cranston knew from his work in the film industry.
These events, however, began at the Palme before Cranston became
an investor in the theater.
C. The Palme and Its Predecessor’s Difficulty
Obtaining Licenses to First-Run Films
The space Flagship operated as the Palme had been in a
clearance situation with The River for years before the Palme
opened, and Flagship was aware of this before it chose the space.
The Palme’s predecessor, The Town theater, obtained some
first-run film licenses from the major distributors. There is
conflicting evidence in the record as to how evenly the distributors
allocated clearances between The River and The Town.
When the Palme opened in 2003, it was not “awarded a
high end commercial film for an entire year.” The River routinely
requested and received clearances over the Palme for such films.
The Palme continued to have difficulties licensing first-run
films from the major distributors in the years that followed.
In some years during the relevant period, one or more major
distributors did not license a single film to the Palme. For example,
between 2002 and 2005, Paramount did not license any films to the
9
Palme, and in 2003, 2006, and 2014, Universal did not license
any films to the Palme. On several occasions, the Palme offered to
license a distributor’s first-run film on terms particularly attractive
to the distributor—for example, by offering more screens, longer
runs and a larger film rental payment than did The River, as well
as a guaranteed minimum film rental—but these offers were
unsuccessful. Uncontradicted expert testimony based on “Rentrak”
data reflects, however, that in terms of first-run films overall—
that is, not just the high grossing films or films from major
distributors—“the Palme actually had . . . slightly more first[-]run
films [from November 2003 to June 2016] than [T]he River.” “[O]f
those 1414 first[-]run films [shown at the Palme], more than half ”—
55 percent—“were shown no place else in the entire Coachella
Valley.”
D. Flagship Attributes Its Difficulty Obtaining
Licenses to Century’s “Circuit Dealing” and
Sues Century
Flagship sued Century in 2007, alleging that the manner
in which Century licensed films caused distributors to deny the
Palme licenses to the most lucrative first-run commercial films,
and that these film license agreements violated the Cartwright Act,
California’s antitrust law. (See Bus. & Prof. Code, § 16720 et seq.)
Specifically, Flagship alleged that Century’s film licensing
agreements, including agreements with the major and mini-major
film studios, reflected a practice referred to as “circuit dealing”—
“ ‘the pooling of the purchasing power of an entire [theater] circuit
in bidding for films,’ which undermines the competitive process of
bidding for film licenses ‘theatre by theatre.’ ” (Flagship I, supra,
198 Cal.App.4th at p. 1375, quoting United States v. Paramount
Pictures (1948) 334 U.S. 131, 154 (Paramount Pictures).) The
10
United States Supreme Court has recognized two distinct forms of
circuit dealing. The first “is a form of monopoly leveraging, that is,
‘a monopolist’s use of power in one market to gain an advantage in
a related market.’ (Sullivan & Grimes, The Law of Antitrust: An
Integrated Handbook (2000) § 3.4b1, p. 106.) For example, one of
the United States Supreme Court cases concerning circuit dealing
addressed certain ‘master agreements’ between distributors
and movie theater circuits that ‘lumped together towns in which
the [circuits] had no competition and towns in which there were
competing theaters.’ (United States v. Griffith (1948) 334 U.S.
100, 102–103 . . . .)” (Flagship I, supra, 198 Cal.App.4th at p. 1375.)
The other type of circuit dealing occurs where a theater circuit
owner does not necessarily have or leverage monopoly power in
any region, but its “agreements cover[ ] multiple theaters within
a particular circuit” and “ ‘eliminate the possibility of bidding
for films theatre by theatre. In that way they eliminate the
opportunity for the small competitor to obtain the choice
first[-]runs, and put a premium on the size of the circuit. They
are, therefore, devices for stifling competition and diverting the
cream of the business to the large operators.’ ” (Id. at p. 1376,
quoting Paramount Pictures, supra, 334 U.S. at p. 154.)
For ease of reference, we refer to these two types of
circuit-dealing claims as “monopoly circuit-dealing claims” and
“non-monopoly circuit-dealing claims,” respectively.
Flagship alleged Century engaged in both types of circuit
dealing. Namely, it alleged that (1) Century leveraged its power as
the owner of numerous theaters across the country—some in areas
with little or no competition—to pressure distributors into granting
The River clearances over the Palme, and (2) Century’s practice of
negotiating multi-theater licensing agreements exerted pressure on
11
distributors to shun the Palme or risk losing business from Century
outside the Coachella Valley. The complaint also alleged that
Century exerted further pressure on distributors to grant The River
clearances over the Palme by licensing multiple films from a
distributor at once—that is, Century would agree to play an entire
slate of a distributor’s current films, even the less desirable ones.8
Flagship’s lawsuit did not allege that the clearances
between the two theaters violated the antitrust laws—that is,
that the clearances were themselves agreements prohibited
by the Cartwright Act. Rather, Flagship alleged The River’s
clearances over the Palme were the fruits of Century’s challenged
circuit-dealing agreements, and thus a product of—but not
themselves—an antitrust violation. (Flagship I, supra, 198
Cal.App.4th at pp. 1381–1382.)
E. The Palme Closes and the Tristone Palme 10
Opens in Its Place
In 2016, the mall where the Palme was located elected not to
renew Flagship’s lease. Specifically, while Flagship was negotiating
for a permanent lease of the space, the mall informed Flagship that
it wanted to lease to a different theater operator, and indicated to
Flagship that the other exhibitor was willing to pay more. Flagship
witnesses testified that Flagship had a limited ability to bid for
the lease due to a lack of “fair access to product” resulting from
Century’s challenged circuit dealing.
8 Flagship does not argue that such multi-film licensing
agreements (as opposed to multi-theater agreements) constitute a
form of circuit dealing, nor would such an argument find support in
the current law.
12
The Palme closed on June 30, 2016, and the Tristone
Palme 10 (the Tristone) opened a “[m]atter of days” thereafter
in the same space. The theater was not renovated prior to the
Tristone opening, and the new management continued to play
independent and unique films. Specifically, expert testimony
reflects that 37 percent of the films shown at the Tristone in its
first 15 months of business (from July 2016 to September 2017)
were not offered elsewhere in the Coachella Valley. Nothing in
the record suggests that the Tristone has since closed.
F. The Jury Verdict9
At trial, Flagship pursued both its monopoly circuit-dealing
claim, based on Century’s alleged leveraging of monopoly power
in markets outside the Coachella Valley, and its non-monopoly
circuit-dealing claim, based on Century’s licensing agreements
that covered multiple theaters. In its closing argument, Flagship
reiterated to the jury that it was not challenging the clearances as
such: “[Flagship did] not contend that clearances in the absence
of circuit dealing are unlawful. They’re not. Clearances always
existed in this zone. Clearances don’t play a role in this case.”
The parties disputed which antitrust analytical framework
applied to Flagship’s circuit-dealing claims—specifically, whether
9 This case came before this court on two occasions before
proceeding to trial. First, in 2011, we reversed the trial court’s
initial summary judgment ruling in Century’s favor based on the
sufficiency of the evidence to establish antitrust injury. We further
held that “the court [had] abused its discretion by making discovery
rulings that impermissibly curtailed Flagship’s efforts to gather
evidence of circuit dealing” outside the Coachella Valley, and
reversed the summary judgment ruling on this basis as well.
(Flagship I, supra, 198 Cal.App.4th at p. 1383.) After further
13
either or both claims were subject to the antitrust “rule of reason,”
as opposed to a per se rule. As we discuss in more detail below,
if a per se framework applies, an antitrust plaintiff need only
prove the act of circuit dealing and is not required to show that the
conduct resulted in harm to competition. (See In re Cipro Cases I
& II (2015) 61 Cal. 4th 116, 146.) Under the rule of reason, by
contrast, the plaintiff must prove that the defendant’s conduct
harmed competition in the relevant market and that any
procompetitive justifications for the conduct did not outweigh
that harm. (See, e.g., ibid.; Exxon Corp. v. Superior Court (1997)
51 Cal. App. 4th 1672, 1680–1681 (Exxon).)
The court ultimately concluded that monopoly circuit dealing
is per se illegal under the Cartwright Act, such that Flagship did
not need to prove actual harm to competition in order to prevail.
As to Flagship’s non-monopoly circuit-dealing claim, however,
the trial court concluded that the rule of reason applied. Thus,
the court instructed the jury that, in order for Flagship to prove
its non-monopoly circuit-dealing claim, Flagship had to prove both
the elements of that claim10 and that the multi-theater licensing
discovery, the case was dismissed in 2014 on the eve of trial based
on a spoliation issue. In 2016, we reversed that ruling (see Flagship
Theatres of Palm Desert, LLC v. Century Theatres, Inc. (May 24,
2016, B257148) [nonpub. opn.]), and the case ultimately proceeded
to trial in 2018.
10 The court identified as the elements of a non-monopoly
circuit-dealing claim that: (1) Century “was a dominant theatre
circuit”; (2) Century “pooled its purchasing power to enter into
licensing agreements for specific films that included multiple
theatres, including, at least, [T]he River and one or more other
theatres”; (3) “by entering into such multiple theatre licensing
agreements, the film distributors were precluded from determining
14
agreements underlying the claim caused an “anticompetitive effect”
that “outweighed any beneficial effect on competition.”11
The jury ultimately found that Century had not “engage[d]
in the monopoly leveraging form of circuit dealing in violation of
the California antitrust laws,”12 but that Flagship had proven
its non-monopoly circuit-dealing claim. In reaching this verdict,
the jury made several more specific findings, corresponding to the
components of a rule of reason analysis. Namely, the jury found
that Century’s multi-theater agreements “cause[d] harm to
competition in the relevant geographic and product market[ ]
on a theatre-by-theatre basis which theatres would be licensed
for a particular film, thereby eliminating the opportunity for the
small competitor to obtain the choice first[-]runs”; (4) “[p]laintiff
was in fact precluded from competing for first[-]run films as a result
of [Century] entering into multiple theatre licensing agreements”;
and (5) plaintiff suffered damages as a result.
11 Although the latter additional instruction did not
specifically state that the harm must occur in a defined relevant
market, the special verdict form required a finding to this effect.
12 The jury was instructed that the elements of such a
claim were that: (1) Century “possessed sufficient market power
outside the market where the Palme and [T]he River competed”;
(2) Century “used its market power by communicating to a film
distributor that [Century] will not exhibit the distributor’s films
in [Century] theatres outside the market where the Palme and
[T]he River competed in order to coerce the distributor to allocate
films exclusively to [T]he River rather than the Palme”; (3) this
“use of its market power caused a film distributor to agree to
license first[-]run films exclusively to [T]he River, rather than to
the Palme, in a manner contrary to the film distributor’s own best
interest and that prevents the licensing of films theatre by theatre”;
and (4) plaintiff suffered damages as a result.
15
in the form of . . . decreased output of film,”13 and that “the
anticompetitive effects of [defendants’] conduct in entering into
licensing agreements covering multiple theaters outweigh[ed] the
procompetitive benefits of such conduct in the relevant geographic
and product markets.” The jury was not asked to make an express
finding regarding the definition of the relevant market in which
these anticompetitive effects occurred, but the court instructed
the jury as to the parties’ competing proposed definitions of the
relevant market in this case. With respect to the geographic
scope of the relevant market, the court had instructed that, “[i]n
connection with your evaluation of [Flagship’s] claim that [Century]
entered into film licensing agreements covering multiple theatres,
[Flagship] claims that one relevant geographic market for antitrust
purposes contains only the Palme and [T]he River. [Century]
claims that one relevant geographic market for antitrust purposes
is broader than [T]he River and the Palme, and includes other
theaters in the greater Coachella Valley.”
The jury awarded Flagship $1.25 million in damages, which
was automatically trebled to $3.75 million, pursuant to provisions
of the Cartwright Act applicable to all successful private antitrust
suits. (See Bus. & Prof. Code, § 16750, subd. (a) [“Any person who
is injured in his or her business or property by reason of anything
forbidden or declared unlawful by this chapter, may sue therefor
13 The jury verdict form references harm to competition in
the form of either increased prices or reduced output, and does not
require the jury to indicate which it found to be true. All parties
acknowledge, however, that Flagship has never argued a price
effect, and that no evidence regarding pricing was presented at
trial. We therefore focus solely on the output restriction language
in the jury’s finding.
16
in any court having jurisdiction . . . [and] recover three times the
damages sustained by him or her.”].)
G. Posttrial Motions and Appeals
Century moved for judgment notwithstanding the verdict
or, in the alternative, a new trial based on several arguments,
including those raised in the instant appeal. The court denied the
motion, noting that as a result of Century’s multi-theater licensing
practices, “the Palme was unable to show first[-]run films[,] and
consumers were denied a choice of theaters,” which the court
deemed to be an anticompetitive effect in the relevant market.
Finally, the trial court rejected Century’s new trial arguments
regarding statements Century challenged as hearsay and the jury
having reached an improper “compromise verdict.” Century timely
appealed the judgment following the jury’s verdict and the court’s
order denying Century’s motion for judgment notwithstanding the
verdict and for a new trial.
As required by the Cartwright Act, the trial court awarded
Flagship attorney fees, although not in the amount Flagship
had requested. (Bus. & Prof. Code, § 16750, subd. (a) [“Any person
who is injured in his or her business or property by reason of
anything forbidden or declared unlawful by this chapter, may sue
therefor . . . shall be awarded a reasonable attorneys’ fee together
with the costs of the suit.”].) Flagship timely appealed the court’s
postjudgment order regarding attorney fees.
17
DISCUSSION
On appeal, Century argues that: (1) substantial evidence
does not support the relevant geographic market definition Flagship
identified at trial; (2) substantial evidence does not support the
jury’s finding that Century’s multi-theater licensing agreements
harmed competition in that or any other market; (3) the court
committed reversible error by permitting into evidence certain
testimony and emails Century argues constitute prejudicial,
inadmissible hearsay; and (4) the jury’s verdict is an impermissible
“compromise verdict.”
We need only address Century’s arguments regarding the
sufficiency of the evidence, as these are dispositive of both appeals.
I. APPROPRIATE ANTITRUST ANALYTICAL FRAMEWORK
Flagship first responds to Century’s arguments regarding
the sufficiency of the evidence by contending that Century’s
multi-theater licensing agreements are per se illegal under the
Cartwright Act, rather than subject to the rule of reason, and thus
that Flagship was not required to prove anticompetitive harm in
a properly defined market in order to prevail.14 Thus, we must
first decide whether the rule of reason is in fact the appropriate
analytical framework for Flagship’s non-monopoly circuit-dealing
claim. (See Even Zohar Construction & Remodeling, Inc. v. Bellaire
Townhouses, LLC (2015) 61 Cal. 4th 830, 837 [“[w]e answer . . .
questions [of law] through de novo review”].) As discussed below,
we conclude that it is.
14 Flagship also argues that, even if the rule of reason applies,
substantial evidence supports the jury’s findings under the rule
of reason as well. We address these arguments in the Discussion
post, part II.
18
A. The Rule of Reason and Per Se Illegality
Generally
The distinction between per se and rule of reason analysis
stems from the fact that the Cartwright Act, like its federal
counterpart the Sherman Act, prohibits not all agreements
restraining trade, but rather agreements that unreasonably
restrain trade. (See Business Electronics v. Sharp Electronics
(1988) 485 U.S. 717, 723 (Business Electronics) [Sherman Act];
Marin County Bd. of Realtors, Inc. v. Palsson (1976) 16 Cal. 3d 920,
930–931 (Palsson) [“In general, only unreasonable restraints of
trade are prohibited [by the Cartwright Act].”].)
The Cartwright Act states that “[e]xcept as provided in
this chapter, every trust is unlawful, against public policy and
void.” (Bus. & Prof. Code, § 16726.) Section 16720 defines the
term “trust” as “a combination of capital, skill or acts by two or
more persons” for certain enumerated anticompetitive purposes,
including “[t]o create or carry out restrictions in trade or
commerce.” (Id., § 16720, subd. (a).) That prohibition is analogous
to the catchall language of section 1 of the Sherman Act, which
prohibits “[e]very contract, combination . . . , or conspiracy, in
restraint of trade or commerce.” (15 U.S.C. § 1; see Aguilar v.
Atlantic Richfield Co. (2001) 25 Cal. 4th 826, 838.)
“The term ‘restraint of trade’ . . . refers not to a particular list
of agreements, but to a particular economic consequence, which
may be produced by quite different sorts of agreements in varying
times and circumstances.” (Business Electronics, supra, 485 U.S.
at p. 731.) Nevertheless, “there are certain agreements or practices
which because of their pernicious effect on competition and lack of
any redeeming virtue are conclusively presumed to be unreasonable
and therefore illegal without elaborate inquiry as to the precise
19
harm they have caused or the business excuse for their use.”
(Northern Pac. R. Co. v. United States (1958) 356 U.S. 1, 5; NYNEX
Corp. v. Discon, Inc. (1998) 525 U.S. 128, 133 (NYNEX) [certain
practices “so often prove so harmful to competition and so rarely
prove justified that the antitrust laws do not require proof that
an agreement of that kind is, in fact, anticompetitive in the
particular circumstances”].) These “manifestly anticompetitive”
practices constitute unreasonable restraints of trade under any
circumstances, and are thus per se violations of antitrust law.
(Chavez v. Whirlpool Corp. (2001) 93 Cal. App. 4th 363, 369
(Chavez); see Northern Pac. R. Co. v. United States, supra, at p. 5.)
Modern United States Supreme Court cases caution, however, that
these types of practices are few, and the Court has “been slow . . .
to extend per se analysis to restraints imposed in the context
of business relationships where the economic impact of certain
practices is not immediately obvious.” (FTC v. Indiana Federation
of Dentists (1986) 476 U.S. 447, 458–459, italics omitted.)
When a challenged practice does not fall into such a per se
category, a court determines whether the practice unreasonably
restrains trade by assessing its actual competitive effects under
the rule of reason. (See Leegin Creative Leather Products, Inc. v.
PSKS, Inc. (2007) 551 U.S. 877, 886–887 (Leegin).) The rule of
reason weighs the anticompetitive effects of the conduct in the
relevant market against its procompetitive effects, and determines
whether, on balance, the practice harms competition. (See, e.g.,
ibid.; Exxon, supra, 51 Cal.App.4th at pp. 1680–1681.) In engaging
in this balancing, “a court may consider ‘the facts peculiar to
the business in which the restraint is applied, the nature of the
restraint and its effects, and the history of the restraint and the
reasons for its adoption.’ ” (In re Cipro Cases I & II (2015) 61
20
Cal. 4th 116, 146, quoting United States v. Topco Associates,
Inc. (1972) 405 U.S. 596, 607 (Topco).)
Subjecting conduct to rule of reason scrutiny thus does not
reflect a conclusion that the conduct is somehow innocuous or
likely to be legal. Practices scrutinized under the rule of reason
may hold tremendous potential to harm competition and violate
the antitrust laws. (See, e.g., Leegin supra, 551 U.S. at p. 894
[acknowledging several “risks of unlawful conduct” resulting
from certain restraints reviewed under the rule of reason].)
Rather, the defining feature of conduct evaluated under the rule
of reason, as opposed to conduct deemed per se illegal, is that,
“[n]otwithstanding” those risks, it “cannot be stated with any
degree of confidence that [the conduct] ‘always or almost always
tend[s] to restrict competition and decrease output,’ ” because
the practice “can have either procompetitive or anticompetitive
effects, depending upon the circumstances.” (Ibid.) Thus, further
evidentiary investigation into those specific circumstances and
relevant market characteristics is necessary in order to determine
its competitive effects. Rule of reason balancing serves this
purpose.
B. Paramount Pictures Is Not Dispositive
With this general understanding of the rule of reason and
per se antitrust analytical frameworks in mind, we turn to the more
specific issue of which should apply to Flagship’s non-monopoly
circuit-dealing claim.
Our discussion of this issue must begin with Paramount
Pictures, supra, 334 U.S. 131, the United States Supreme Court’s
last word on circuit dealing. Although the Court analyzed
these claims under the Sherman Act, “federal cases interpreting
the Sherman Act are applicable to problems arising under the
21
Cartwright Act.” (Palsson, supra, 16 Cal.3d at p. 925; see also State
of California ex rel. Van de Kamp v. Texaco, Inc. (1988) 46 Cal. 3d
1147, 1168 [“Nor can we agree that the Cartwright Act is somehow
broader than the Sherman Act and the common law.”], superseded
by statute on other grounds as stated in Stop Youth Addiction, Inc.
v. Lucky Stores, Inc. (1998) 17 Cal. 4th 553, 570.)
Paramount Pictures is a 1948 decision arising from the
Department of Justice’s (DOJ) federal antitrust prosecution of
numerous film industry participants, including several movie
studios that owned production, distribution, and exhibition
(i.e., theater) facilities. (Paramount Pictures, supra, 334 U.S.
at pp. 140-141.) The action sought to enjoin a long list of the
distributors’ practices. These practices included certain clearances
(id. at pp. 145–146), block booking (id. at pp. 156–157), franchising
agreements (id. at p. 155), and, most notably for our purposes,
certain types of film licensing agreements between distributors and
exhibitors that reflected circuit dealing (id. at pp. 153–155). The
DOJ’s complaint also alleged horizontal and vertical price-fixing
conspiracies, through which the defendants set minimum theater
admission prices. (Id. at p. 142.) The district court concluded that,
through these and other practices and agreements, the defendants
monopolized and restrained trade in the distribution and exhibition
of films nationwide. (Id. at pp. 141, 154.)
The Supreme Court affirmed the district court’s conclusion
that these practices constituted federal antitrust violations.
(Paramount Pictures, supra, 334 U.S. at pp. 174–175.) With respect
to circuit dealing, the Supreme Court explained that the challenged
film licensing agreements with theaters were “unlawful restraints
of trade in two respects. In the first place, they eliminate the
possibility of bidding for films theatre by theatre. In that way they
22
eliminate the opportunity for the small competitor to obtain the
choice first[-]runs, and put a premium on the size of the circuit.
They are, therefore, devices for stifling competition and diverting
the cream of the business to the large operators.” (Id. at p. 154.)
Second, “the pooling of the purchasing power of an entire circuit
in bidding for films is a misuse of monopoly power insofar as it
combines the theatres in closed towns with competitive situations.”
(Id. at pp. 154–155.) These two explanations correspond to the two
variants of circuit-dealing claims discussed above: non-monopoly
circuit-dealing claims and monopoly circuit-dealing claims,
respectively. The Supreme Court treated all the film licensing
agreements in Paramount Pictures as per se illegal under the
federal antitrust laws. (See ibid.; see also United States v. Griffith,
supra, 334 U.S. at pp. 108–109 [companion case to Paramount
Pictures addressing monopoly circuit dealing only].)
Paramount Pictures ultimately resulted in a series of consent
decrees that effected “a fundamental restructuring of the industry.”
(Redwood Theatres, Inc. v. Festival Enterprises, Inc. (1988)
200 Cal. App. 3d 687, 694 (Redwood); see Paramount Pictures, supra,
334 U.S. at p. 179 (dis. opn. of Frankfurter, J.) [“terms of the decree
in this litigation amount, in effect, to the formulation of a regime for
the future conduct of the movie industry”].) These decrees required,
inter alia, that the studios divest themselves of their interests in
certain downstream distribution and exhibition operations, and
that they license films for exhibition on a “theater by theater”
basis, “solely upon the merits and without discrimination in favor
of affiliates, old customers, or others.” (Paramount Pictures, supra,
at p. 164, fn. 17.)
In the over 70 years since Paramount Pictures, the United
States Supreme Court has not revisited the issue of circuit dealing.
23
The California Supreme Court has never addressed the issue.
Although Paramount Pictures provides crucial guidance on
circuit-dealing claims, it is not dispositive here. This is because
Paramount Pictures addresses circuit dealing in the context of a
unique and distinguishable set of market conditions: vertically
integrated film distributors who employed a broad range of
anticompetitive practices, including horizontal coordination, to
maintain their monopoly power over an entire industry. No such
broad network of restrictions, nor any horizontal coordination, was
even alleged here,15 and the jury rejected the idea that Century had
market power. Nor are modern film studios vertically integrated
in any way with the theaters that exhibit their films to the public.
“Formerly, the distributors controlled circuits of theatres, and
commonly attempted to lessen competition at the exhibitor level by
using their vertical leverage through such devices as block booking,
direct discrimination against independent exhibitors, joint
operation of theatres, and conspiracy to fix prices and establish
uniform clearances. The charge of circuit dealing [in Paramount
Pictures] was colored by this evidence of conspiracy and vertical
leverage; not only were some of the circuits controlled by affiliates,
but in many instances there was ‘cooperation among the major
defendants in their respective capacities as distributors and
exhibitors.’ ” (Redwood, supra, 200 Cal.App.3d at p. 697, quoting
15 Flagship neither alleged, nor offered any evidence
suggesting, that there was a broader hub-and-spoke conspiracy
between and among the distributors, or that any of the distributors
was vertically integrated with any exhibitor entity. Rather,
Flagship’s theory involved multiple agreements, each between one
distributor and Century, which is neither owned nor controlled by
any distributor.
24
United States v. Paramount Pictures (S.D.N.Y. 1946) 66 F. Supp.
323, 346.)
This unique constellation of market conditions and practices
presented in Paramount Pictures was key to the district court’s
decision—which, as to the substance of the alleged Sherman Act
violations, the high court upheld without caveat. For example,
the district court noted that its assessment of the film licensing
agreements should be considered “in view of the history and
relation to the moving picture business of the various parties
to this action.” (United States v. Paramount Pictures, supra,
66 F.Supp. at p. 346.) And on remand from the Supreme Court’s
seminal decision, the district court pointed more specifically to
the relationship between the defendants, noting that the studio
defendants “must be viewed collectively rather than independently
as to the power which they exercised . . . over the market by
their theater holdings.” (United States v. Paramount Pictures
(S.D.N.Y. 1949) 85 F. Supp. 881, 894, italics added.) In this context,
the holding in Paramount Pictures served a unique purpose:
“unravel[ing] the effects of the [film] distributors’ past domination
of film exhibition.” (Redwood, supra, 200 Cal.App.3d at p. 697.)
The United States District Court for the Southern District
of New York recognized as much in an order, issued during
the pendency of the instant appeal, that terminates the consent
decrees resulting from Paramount Pictures. (See United States v.
Paramount Pictures, Inc. (S.D.N.Y. Aug. 7, 2020, No. MISC.
19-544 (AT)) 2020 WL 4573069 *1.) The district court did so at
the request of the DOJ’s antitrust division in connection with the
division’s “initiative to review, and where appropriate, terminate
or modify ‘legacy antitrust judgments that no longer protect
competition’ because of ‘changes in industry conditions, changes in
25
economics, changes in law, or for other reasons.’ ” (Id. at pp. *1–*2.)
In concluding that terminating the Paramount Pictures decrees
would be in the public interest, the district court described them
as addressing a horizontal cartel (id. at p. *1), and noted that “[t]he
[d]ecrees [have] put an end to [d]efendants’ collusion and cartel
and, in their absence, the market long-ago reset to competitive
conditions. Both the market structure and distribution system that
facilitated that collusion are no longer the same.” (Id. at p. *4.)
In sum, although we must and do follow the Supreme Court’s
guidance in Paramount Pictures regarding competitive concerns
associated with circuit dealing—in particular, their potential to
stunt growth of small theaters or create barriers to entry for new
entrants in the market for film exhibition—we do not read the
decision as concluding that all multi-theater license agreements,
under all circumstances, are per se illegal under federal (or
California) antitrust law. (See Redwood, supra, 200 Cal.App.3d
at p. 697 [noting Paramount Pictures “must be understood in
light of its peculiar facts and context” and that “[t]oday, the
issues surrounding circuit dealing have acquired a very different
industrial context”].)
C. Relevant Precedent and Antitrust Legal Principles
We must therefore look beyond Paramount Pictures to
determine whether and under what circumstances, if at all, per se
treatment might be appropriate for non-monopoly circuit-dealing
claims. Below, we consider two primary sources of relevant
authority in this regard: (1) general developments in federal
and California antitrust law governing vertical restraints
since Paramount Pictures, and (2) the few cases that address
circuit-dealing claims, comprised of a single California Court of
Appeal decision and a handful of federal district court decisions.
26
(See Palsson, supra, 16 Cal.3d at p. 925 [“federal cases interpreting
the Sherman Act are applicable to problems arising under the
Cartwright Act”].)
1. Developments in federal and California
antitrust law regarding vertical restraints
since Paramount Pictures
In antitrust law parlance, a film licensing agreement
is a “vertical restraint,” meaning it is an agreement between
entities at “different levels of the market structure”— a film
studio supplying film licenses (the supplier level) and a theater
exhibiting the studio’s films to the public (the retail level).
(Topco, supra, 405 U.S. at p. 608; see Tarzana, supra, 828 F.2d
at p. 1399 [concluding clearances are vertical restraints]; Redwood,
supra, 200 Cal.App.3d at pp. 703–707 [analyzing non-monopoly
circuit dealing as a vertical restraint].) Thus, general antitrust
law principles regarding vertical restraints are a logical source of
guidance on the proper analytical framework for circuit-dealing
claims under the Cartwright Act.
The United States Supreme Court’s approach to vertical
restraints has changed significantly since Paramount Pictures.
Namely, over the past several decades, the Court has repeatedly
held that vertical restraints are to be analyzed under the
rule of reason, rather than deemed per se illegal under the
Sherman Act. (See, e.g., Leegin, supra, 551 U.S. at p. 898 [resale
price maintenance]; NYNEX, supra, 525 U.S. at p. 130 [vertical
boycott agreement]; Continental T. V., Inc. v. GTE Sylvania Inc.
(1977) 433 U.S. 36, 57–58 (Sylvania) [non-price geographic
restrictions in franchising agreement].) This approach is a result
of the “substantial scholarly and judicial authority supporting [the]
economic utility” of vertical restraints in many instances, which
27
“in varying forms, are widely used in our free market economy.”
(Sylvania, supra, at pp. 57–58.) For example, although vertical
restraints plainly restrict intrabrand competition, in doing so they
can stimulate interbrand competition—“ ‘the primary concern of
antitrust law’ ” (Business Electronics, supra, 485 U.S. at p. 724;
quoting Sylvania, supra, 433 U.S. at p. 52, fn. 19)—“by allowing
the manufacturer to achieve certain efficiencies in the distribution
of [its] products.”16 (Sylvania, supra, at p. 54; Leegin, supra, at
p. 890.) Vertical restraints can also “allow[ ] the manufacturer
to achieve certain efficiencies in the distribution of his products.”
(Sylvania, supra, at p. 54 [“[t]hese ‘redeeming virtues’ are implicit
in every decision sustaining vertical restrictions under the rule
of reason”].) Based on these and other potential procompetitive
benefits, the Supreme Court has concluded that one cannot say
any particular type of vertical restraint—even vertical restraints
regarding price—“ ‘ “always or almost always tend[s] to restrict
16 “The extreme example of a deficiency of interbrand
competition is monopoly, where there is only one manufacturer.
In contrast, intrabrand competition is the competition between the
distributors—wholesale or retail—of the product of a particular
manufacturer. [¶] The degree of intrabrand competition is wholly
independent of the level of interbrand competition confronting the
manufacturer. Thus, there may be fierce intrabrand competition
among the distributors of a product produced by a monopolist
and no intrabrand competition among the distributors of a product
produced by a firm in a highly competitive industry. But when
interbrand competition exists, as it does among television
manufacturers, it provides a significant check on the exploitation
of intrabrand market power because of the ability of consumers to
substitute a different brand of the same product.” (Sylvania, supra,
433 U.S. at p. 52, fn. 19.)
28
competition and decrease output.” ’ ” (Business Electronics, supra,
at p. 723; see Leegin, supra, at p. 894.) As such, rule of reason
scrutiny is appropriate.
Cases discussing two types of vertical restraints are
particularly instructive in analyzing Flagship’s non-monopoly
circuit-dealing claims: vertical boycotts and exclusive dealing.
A “vertical boycott” occurs when “ ‘entities at different levels of
distribution combine to deny a competitor at one level the benefits
enjoyed by the members of the vertical combination.’ ” (Marsh v.
Anesthesia Services Medical Group, Inc. (2011) 200 Cal. App. 4th
480, 494 (Marsh).) Exclusive dealing occurs when there is an
“ ‘agreement between a vendor and a buyer that prevents the buyer
from purchasing a given good from any other vendor.’ ” (Aerotec
International v. Honeywell International (9th Cir. 2016) 836 F.3d
1171, 1180 (Aerotec), quoting Allied Orthopedic v. Tyco Health Care
Group (9th Cir. 2010) 592 F.3d 991, 996 & fn. 1.) These two types
of vertical restraints are at least partially analogous to Flagship’s
non-monopoly circuit-dealing claim, in that Flagship argues
Century’s multi-theater licensing agreements caused studios to
license first-run films only to Century in the relevant geographic
market as Flagship defines it (the Rancho Mirage clearance zone).
Thus, Flagship’s claim could be understood as implying several
vertical group boycotts—that is, agreements between each
studio and Century to boycott a competing theater (the Palme).
Alternatively, Flagship’s claim could be understood as implying
several exclusive dealing arrangements—that is, agreements
between each studio and Century that the studio will deal
exclusively with Century in the Rancho Mirage clearance zone.
In NYNEX, supra, 525 U.S. 128, the Supreme Court applied
the rule of reason to a vertical group boycott claim. Specifically,
29
the Court concluded that an alleged agreement between a supplier
and buyer that the buyer would boycott a competing supplier “for
an improper reason” was not per se illegal under the Sherman Act.
(Id. at p. 133.) The complaint in NYNEX alleged that the defendant
had monopoly power, that the purpose of the challenged agreement
was “to drive [the competing supplier] from the market” (id. at
p. 137), and that the defendants’ conduct increased prices to
consumers. (Id. at pp. 136–138.) The Court did not find these
allegations sufficient to warrant per se treatment, and expressly
rejected the suggestion that any “special motive” of parties to a
vertical boycott “could make a significant difference” in this regard.
(Id. at p. 138.) Rather, the Court made the broad pronouncement
that “antitrust law does not permit the application of the per se rule
in the boycott context in the absence of a horizontal agreement.”17
(Id. at p. 138.)
Sherman Act challenges to exclusive dealing arrangements
are likewise analyzed under the rule of reason. (See Jefferson
Parish Hospital Dist. No. 2 v. Hyde (1984) 466 U.S. 29; id. at
pp. 45-46 (conc. opn. of O’Connor, J.), abrogated on other grounds
in Illinois Tool Works Inc. v. Independent Ink, Inc. (2006) 547 U.S.
28, 34 [characterizing agreement the majority described as subject
to the rule of reason as an exclusive dealing arrangement subject
to the rule of reason]; Aerotec, supra, 836 F.3d at p. 1180, fn. 2
[“[b]ecause exclusive dealing arrangements provide ‘well-recognized
17 Although NYNEX acknowledged the possibility that
a vertical agreement restricting price might warrant per se
treatment, the Court has since held that vertical agreements
regarding resale prices are also subject to the rule of reason, and
for largely the same reasons that non-price vertical restraints are.
(See Leegin, supra, 551 U.S. at pp. 890–894.)
30
economic benefits . . . including the enhancement of interbrand
competition,’ we apply the rule of reason rather than a per se
analysis”]; see also, e.g., Eisai, Inc. v. Sanofi Aventis U.S., LLC
(3d Cir. 2016) 821 F.3d 394, 403 [exclusive dealing arrangements
can “offer consumers various economic benefits” and thus are
“judged under the rule of reason”].) Federal courts also apply
the rule of reason to exclusive dealing agreements in the movie
theater industry specifically—namely, to clearances. (See, e.g.,
Tarzana, supra, 828 F.2d at p. 1399 [because clearances are
vertical restraints, they “are reasonable if they are likely to
promote interbrand competition without overly restricting
intrabrand competition”]; Orson, supra, 79 F.3d at p. 1372.)
The California Supreme Court has not yet addressed the
general treatment of vertical restraints under the Cartwright Act,
nor has it considered exclusive dealing or vertical group boycott
claims more specifically. But California Courts of Appeal generally
analyze vertical restraints under the rule of reason. (See Exxon,
supra, 51 Cal.App.4th at p. 1681 [where an antitrust plaintiff
alleges vertical restraints, facts must be pleaded showing “some
anticompetitive effect in the larger, interbrand market”]; Bert G.
Gianelli Distributing Co. v. Beck & Co. (1985) 172 Cal. App. 3d
1020, 1044 (Gianelli Distributing) [same], disapproved of on
other grounds by Dore v. Arnold Worldwide, Inc. (2006) 39 Cal. 4th
384; see also Theme Promotions v. News America Marketing FSI
(9th Cir. 2008) 546 F.3d 991, 1000 [“California courts have
determined that vertical restraints of trade, including exclusive
dealing contracts, are not per se unreasonable but instead are
subject to a ‘rule of reason’ analysis”] (italics omitted).) And
our state Courts of Appeal have also more specifically held that,
absent some horizontal component or leveraging of monopoly
31
power, neither exclusive dealing arrangements nor vertical
group boycotts are per se violations of the Cartwright Act. (See
Fisherman’s Wharf Bay Cruise Corp. v. Superior Court (2003)
114 Cal. App. 4th 309, 335 (Fisherman’s Wharf) [“exclusive dealing
arrangements are not deemed illegal per se” but rather “tested
under a rule of reason”]; Marsh, supra, 200 Cal.App.4th at p. 494
[rule of reason applies to “vertical boycott[s]”]; Gianelli Distributing,
supra, 172 Cal.App.3d at pp. 1045, 1047 [applying rule of reason to
vertical agreement between manufacturer and distributor to shift
business away from competing distributer]; see also Antitrust,
UCL and Privacy Section, Cal. Lawyers Association, Cal. Antitrust
and Unfair Competition Law (rev. ed. 2019) § 2.09 [“purely
vertical group boycotts are reviewed under the rule of reason”];
id., § 3.08 [“[i]n California, as under federal law, exclusive dealing
arrangements are not deemed necessarily illegal per se; rather,
they are generally analyzed under the rule of reason”] (fn. omitted).)
Rather, a plaintiff alleging such violations must prove net harm
to competition under the rule of reason. (See Fisherman’s Wharf,
supra, 114 Cal.App.4th at p. 335; Marsh, supra, 200 Cal.App.4th
at p. 494.) These decisions apply largely the same logic as the
United States Supreme Court decisions discussed above (see, e.g.,
Dayton Time Lock Service Inc. v. Silent Watchman Corp. (1975)
52 Cal. App. 3d 1, 6 [“Exclusive-dealing contracts are not necessarily
invalid. They may provide an incentive for the marketing of new
products and a guarantee of quality-control distribution.”]; Gianelli
Distributing, supra, 172 Cal.App.3d at p. 1045, citing Sylvania,
supra, 433 U.S. at pp. 51–52, 58–59.)
32
2. California and federal cases addressing
circuit dealing since Paramount Pictures
We turn next to the modern cases that have considered
circuit-dealing claims since the Paramount Pictures decision and
the developments in antitrust jurisprudence outlined above.18
a. California circuit-dealing cases
Only two California decisions have addressed the issue:
Redwood, supra, 200 Cal. App. 3d 687, and this court’s decision in
Flagship I, supra, 198 Cal. App. 4th 1366. In Flagship I, we did not
have occasion to decide which analytical framework to apply to any
type of circuit-dealing claims.19
18 We do not discuss some of the Sherman Act cases Flagship
cites that predate the significant changes in federal antitrust law
(and, in some cases, the significant changes in the film industry)
outlined in the Discussion ante, part I.C.1, and thus are not
instructive. (See Beech Cinema v. Twentieth Century-Fox Film
(2d Cir. 1980) 622 F.2d 1106; Columbia Pictures Corp. v. Charles
Rubenstein, Inc. (8th Cir. 1961) 289 F.2d 418; Fox West Coast
Theatres Corp. v. Paradise T. Bldg. Corp. (9th Cir. 1958) 264 F.2d
602; Bordonaro Bros. Theatres v. Paramount Pictures (2d Cir. 1949)
176 F.2d 594.) Moreover, none of these cases addresses the correct
analytical framework for circuit-dealing claims, but rather various
other issues not directly relevant to this appeal, such as the
sufficiency of evidence supporting the existence of the conspiracy
alleged.
19 The parties raised this issue in Flagship I. (Flagship I,
supra, 198 Cal.App.4th at p. 1386.) At the time, however, they had
not briefed all the legal issues relevant to deciding which antitrust
analytical framework applied, and the record was insufficient
to determine the exact nature of Flagship’s circuit-dealing claims.
(Id. at pp. 1386–1387.) We noted that “[t]he type of circuit[-]dealing
33
Redwood, by contrast, provides a detailed discussion of the
issue, drawing from sources similar to those we survey above.
First, the court “acknowledged that the United States Supreme
Court held circuit dealing per se unlawful under the Sherman Act
but also recognized that both federal antitrust law and the
structure of the film industry have undergone considerable
development since the late 1940’s.” (Flagship I, supra, 198
Cal.App.4th at p. 1377, citing Redwood, supra, 200 Cal.App.3d
at pp. 697–698.) The court proceeded to survey antitrust law in
several related areas, including boycotts and vertical restraints,
as well as the significant changes in the film industry discussed
above, noting that “[t]oday, the issues surrounding circuit dealing
have acquired a very different industrial context” (Redwood,
supra, at p. 697), and that, “ ‘[w]ith the elimination of a motion
picture industry vertically integrated downward to the exhibitor
level, the significance of a distributor’s refusal to do business
with an independent shifts dramatically.’ ” (Id. at p. 698, quoting
Southway Theatres, Inc. v. Georgia Theatre Co. (5th Cir. 1982)
672 F.2d 485, 498.) In light of these changed market conditions,
the modern antitrust approach to vertical restraints, and the need
to understand Paramount Pictures “in light of its peculiar facts
and context” (Redwood, supra, at p. 697), the Redwood court
ultimately concluded that the plaintiff ’s non-monopoly circuit-
dealing claim was subject to the rule of reason analysis under the
Cartwright Act. (Id. at p. 713.)
claim at issue might influence the analysis of whether the per se
rule or the rule of reason should apply,” in that it “might make
certain authorities or analogies more relevant than others,” and
declined to decide the issue. (Ibid.)
34
b. Federal circuit-dealing cases
Finally, we consider a handful of federal district court cases
that have discussed circuit-dealing claims.
Some of these decisions note that Paramount Pictures
requires per se treatment for all forms of circuit dealing. (See
Cobb Theatres III, LLC v. AMC Entertainment Holdings (N.D.Ga.
2015) 101 F. Supp. 3d 1319, 1342 (Cobb); 2301 M Cinema LLC v.
Silver Cinemas Acquisition Co. (D.D.C. 2018) 342 F. Supp. 3d 126,
132 (Silver Cinemas); Reading International, Inc. v. Oaktree Capital
Management LLC (S.D.N.Y. Jan. 8, 2007, No. CV 03-1895 (PAC))
2007 WL 39301 *7 (Reading).)
Both Cobb and Silver Cinemas are motion to dismiss
decisions in which the relevant antitrust analytical framework
was not at issue.20 In both cases, the complaint alleged that the
defendant theater-circuit owner had leveraged its market power
to obtain clearances and that it had negotiated clearances for
multiple theaters simultaneously. (See Silver Cinemas, supra,
342 F.Supp.3d at pp. 133–135; Cobb, supra, 101 F.Supp.3d at
p. 1343.) The complaints in both cases also alleged monopoly
power. (Silver Cinemas, supra, at pp. 134–135, 137–138; Cobb,
supra, at pp. 1335, 1339–1342.) These decisions concluded that
the respective complaints had sufficiently alleged both forms of
circuit dealing to avoid dismissal.
20 In Cobb, the defendants did argue in their reply brief
that the rule of reason, rather than a per se analysis, applied to all
circuit-dealing claims, but the court did not address the argument
except to note that “[d]efendants suggest that circuit dealing
should be scrutinized under the rule of reason. Even if that were
true, the [c]ourt’s analysis here would not change.” (Cobb, supra,
101 F.Supp.3d at p. 1343.)
35
In Reading, the district court granted a summary judgment
motion in favor of the defendant on numerous causes of action,
and noted that, if the plaintiff was ever attempting to assert any
circuit-dealing claims, it had abandoned them. (Reading, supra,
2007 WL 39301 at p. *6.) The court then went on to note in dicta
that “[e]ven if the [c]ourt liberally construed [p]laintiffs’ complaint
to include a claim for circuit dealing, [p]laintiffs would not prevail,”
because “no reasonable jury could find a conspiracy between
[the defendant theater] and its distributors.” (Id. at p. *7.) In this
context, the decision notes that “[p]laintiffs are correct that circuit
dealing is per se anticompetitive,” but does not discuss or rely
further on this characterization. (Ibid., italics omitted.) The court
goes on to note, somewhat in tension with the implication that all
circuit dealing is per se illegal that “Paramount [Pictures] merely
condemned using these national relationships [between theaters
and studios] to leverage master licensing agreements nationwide.”
(Id. at p. *8.)
Still other federal district court cases have applied the rule
of reason to what appear in substance to be circuit-dealing claims,
citing the general rule that vertical restraints are no longer illegal
per se. (See Cinema Village Cinemart, Inc. v. Regal Entertainment
Group (S.D.N.Y. Sept. 29, 2016, No. CV 15-05488 (RJS)) 2016
WL 5719790 (Cinema Village), affd. (2d Cir. 2017) 708 F.Appx. 29;
Six West Retail Acquisition, Inc. v. Sony Picture Theatre
Management Corp. (S.D.N.Y. Mar. 31, 2004, No. Civ. 97-5499) 2004
WL 691680 (Six West).) For example, in Cinema Village, the court
applied the rule of reason to “claims that various film distributors
have refused to license first-run films to [plaintiff theater] as a
result of exclusive dealing agreements (‘clearances’) with [defendant
theater]” (Cinema Village, supra, 2016 WL 5719790 at p. *1), and
36
that defendant theater had “extracted these agreements from
the film distributors, against their economic interests, by using its
considerable market power as a major nationwide theater chain.”
(Ibid.) In Six West, the court cited Paramount Pictures for the
proposition that “relationships that eliminate the opportunity
for small theatres to obtain first[-]run films stifle competition and
violate [s]ection 1 [of the Sherman Act],” and applied the rule of
reason to what it termed a “relationship licensing claim,” based
on a “voluntary relationship between an exhibitor and distributor
[that] ‘hinder[s] other exhibitors’ ability to acquire quality movies.’ ”
(Six West, supra, 2004 WL 691680 at p. *8.) Neither decision
appears to view its application of the rule of reason as in tension
with Paramount Pictures.
Given the limited extent to which, if at all, these federal
district court decisions appear to analyze the question of the
appropriate analytical framework for non-monopoly circuit-dealing
claims, they do not provide much meaningful guidance, either
individually or viewed as a whole, on that issue.
D. Flagship’s Non-Monopoly Circuit-Dealing Claim
Is Subject to the Rule of Reason
Based on the foregoing survey of relevant federal and
California law and film industry developments, we conclude that
the trial court correctly required Flagship to show actual net harm
to competition under the rule of reason in order to prevail on its
non-monopoly circuit-dealing claim. We agree with Redwood’s
thoughtful analysis of the unique legal and industrial context to
which the holding in Paramount Pictures is tethered. We further
agree that the connection between the rule of reason and vertical
restraints in modern antitrust law—a connection that, since
Redwood discussed it, has graduated from a trend to a fundamental
37
tenet—is key to selecting the proper analytical framework for
non-monopoly circuit-dealing claims.
The recent federal district court decision terminating the
Paramount Pictures consent decrees (see ante, pp. 26–27), similarly
observed that both the industry and federal antitrust law have
changed since Paramount Pictures, such that many practices
deemed per se illegal in the 1940’s would not and should not be
per se illegal in the modern movie theater industry under modern
antitrust law. (See United States v. Paramount Pictures, Inc.,
supra, 2020 WL 4573069 at p. *6 [“[d]ecrees’ treatment of certain
conduct as per se illegal and subject to criminal penalties . . .
prohibits conduct that today may be deemed legal and beneficial
to competition and consumers”] (italics omitted).) The order more
specifically comments in dicta that circuit-dealing claims are today
subject to rule of reason scrutiny: “The legal framework used to
evaluate the [d]ecrees’ film licensing practices—including block
booking, circuit dealing, and resale price maintenance—has
also changed. Although per se illegal seventy years ago, today,
courts would analyze such restraints under the rule of reason—
evaluating the specific market facts to determine whether a
practice’s anticompetitive harm outweighs its procompetitive
benefits.” (Ibid, italics omitted.)
We note that Redwood cabins its holding in a manner
suggesting that the rule of reason may not always apply to
non-monopoly circuit-dealing claims. Specifically, the court noted
that there was “no evidence of predatory intent” and no evidence
that “the alleged agreements were dictated by the exhibitor,
concerned with its own position, rather than granted in the exercise
of the distributors’ independent discretion . . . reflect[ing] the
perceived business advantages to the distributors of dealing with
38
large theatre circuits.” (Redwood, supra, 200 Cal.App.3d at p. 703.)
With these caveats, the court held that the showing before it
“plainly f[ell] short of the evidentiary threshold required to sustain
a boycott theory of per se liability.” (Ibid.) This appears to leave
open the possibility that a non-monopoly circuit-dealing claim based
on film licensing agreements that have a predatory purpose, are
dictated unilaterally by the defendant theater, and/or are beneficial
to that theater and not the licensing distributor, might present
candidates for per se Cartwright Act liability. Indeed, Flagship
argues as much in its attempts to distinguish Redwood based
on Century’s “pressur[ing]” distributors to enter into licensing
agreements covering multiple theaters.
We find Flagship’s arguments in this regard unpersuasive
and, to the extent Redwood supports them, we disagree with its
holding. Redwood “explicitly based its reasoning on federal law and
precedents.” (Orchard Supply Hardware v. Home Depot USA, Inc.
(N.D.Cal. 2013) 939 F. Supp. 2d 1002, 1011.) But the United States
Supreme Court’s subsequent decision in NYNEX has since “clarified
that an unlawful group boycott claim must involve some horizontal
arrangement.” (Ibid. [rejecting, on this basis, plaintiff ’s reliance on
Redwood for the proposition that “the Cartwright Act might permit
it to allege a group boycott even in the absence of any arrangement
between horizontal competitors”]; see NYNEX, supra, 525 U.S.
at p. 138.) Indeed, the agreement at issue in NYNEX had the sole
purpose of driving a competitor out of the market, yet the Court
declined to apply a per se framework on this basis, reserving such
treatment solely for boycotts with a horizontal component.21 (Ibid.)
21 For this same reason, in the wake of NYNEX, we
do not find Flagship’s citation to Movie 1 & 2 v. United Artists
39
We are thus unpersuaded by the argument that per se treatment
is appropriate where, as here, a theater-circuit owner has not
leveraged its monopoly power in obtaining film licenses, but rather,
as Flagship asserts the evidence reflects, “pressure[d]” a distributor
into a multi-film licensing agreements—even if those agreements
primarily or exclusively benefit the theater-circuit owner. The
potential procompetitive benefits of an exclusive dealing or group
boycott agreement—which California and federal courts have
repeatedly recognized—are not negated or prevented when the
parties to the vertical agreement have any particular motive.
More broadly, we see nothing categorically pernicious about
film licensing agreements that cover “two or more theatres in
a particular circuit and allow the exhibitor to allocate the film
rental paid among the theatres as it sees fit” (Paramount Pictures,
supra, 334 U.S. at p. 154), such that non-monopoly circuit-dealing
claims based thereon warrant per se treatment. Certainly, as the
Supreme Court recognized many years ago, such agreements hold
the potential to block new market entrants, or stunt the ability
of smaller theaters to serve as viable competitive threats to
their larger counterparts. (See ibid.) These consequences might
ultimately harm consumers by increasing prices, reducing product
quality, and/or reducing output to an extent that outweighs any
Communications (9th Cir. 1990) 909 F.2d 1245, to be persuasive
authority for the proposition that non-horizontal “group boycotts
that directly or indirectly cut off necessary access to customers
or suppliers” are per se Sherman Act violations. (Id. at p. 1253.)
Movie 1 & 2 is also inapposite in that it involved a boycott with
horizontal components. (Id. at p. 1248 [distributor defendants
alleged to have concertedly refused to deal with plaintiff theater
and to have assisted with a split agreement between one distributor
defendant and a theater defendant].)
40
countervailing procompetitive benefits of the agreements. But
the fact that such agreements might so harm competition does
not mean they always will. In Paramount Pictures, the certainty
of harm to competition was sealed by the vertically integrated
relationship between studios and theaters, as well as by the
host of other anticompetitive practices these entities employed.
The Supreme Court thus deemed per se treatment appropriate.
But such certainty no longer exists. Even acknowledging how
important first-run films are to theaters, it comports neither with
modern antitrust law, nor modern economic and movie theater
industry realities, to render all multi-theater licensing agreements
per se anticompetitive and illegal.
It is important to note that we are not addressing the
appropriate standard for monopoly circuit-dealing claims, which
require a showing of market power and may be more closely
analogized to tying than to exclusive dealing or vertical boycott. We
leave that question for another day, as the jury rejected Flagship’s
monopoly circuit-dealing claim, even under the per se standard the
trial court determined should apply thereto.
In sum, we conclude that a Cartwright Act plaintiff asserting
a non-monopoly circuit-dealing claim must prove not only that
a theater-circuit owner entered into film licensing agreements
covering more than one of its theaters, but that such agreements
caused net harm to competition, as determined by the balancing
of anti and procompetitive effects under the rule of reason. When
understood in context, Paramount Pictures does not require a
contrary conclusion, nor could a contrary conclusion be reconciled
with the treatment of vertical restraints—including specifically
vertical boycott agreements, exclusive dealing agreements, and
clearances—under California and federal antitrust law.
41
II. SUFFICIENCY OF THE EVIDENCE SUPPORTING JURY’S
FINDING OF COMPETITIVE HARM IN THE RELEVANT MARKET
We turn next to Century’s arguments that the evidence
presented at trial does not sufficiently support Flagship’s proposed
relevant geographic market (the Rancho Mirage clearance zone)
or the jury’s finding that the challenged agreements harmed
competition in the relevant market.
We review such issues for substantial evidence, meaning
we must resolve all conflicts in the evidence in favor of the
respondent, and “indulge in” “all legitimate and reasonable
inferences . . . to uphold the verdict if possible.” (Crawford v.
Southern Pacific Co. (1935) 3 Cal. 2d 427, 429.) Under this
standard of review, “the power of the appellate court begins and
ends with a determination . . . whether there is any substantial
evidence, contradicted or uncontradicted, which will support the
conclusion reached by the jury. When two or more inferences
can be reasonably deduced from the facts, the reviewing court is
without power to substitute its deductions for those of the trial
court.” (Ibid.; see also Estate of Teed (1952) 112 Cal. App. 2d
638, 644 [“[s]ubstantial evidence” is “ ‘such relevant evidence
as a reasonable [person] might accept as adequate to support a
conclusion’ ”].)
A. Role of Geographic Market Definition Generally
To assess “direct evidence of anticompetitive effects . . . in
the relevant market . . . we must first define the relevant market.”
(Ohio v. American Express Co. (2018) 585 U.S. __ [138 S. Ct. 2274,
2284-2285] (American Express).) Thus, under the rule of reason, an
antitrust plaintiff must establish the boundaries of the market in
which the plaintiff maintains the defendant harmed competition—
otherwise, the finder of fact will not know where to look in
42
assessing anti and procompetitive effects of a practice. (See ibid.
[“ ‘[w]ithout a definition of [the] market there is no way to measure
[the defendant’s] ability to lessen or destroy competition’ ”], quoting
Walker Inc. v. Food Machinery (1965) 382 U.S. 172, 177; see Ralph
C. Wilson Industries v. Chronicle Broadcast (9th Cir. 1986) 794 F.2d
1359, 1363 [“[t]o determine whether competition has been harmed,
the relevant market must be defined”].)
“The United States Supreme Court has declared that
the relevant market is determined by considering ‘commodities
reasonably interchangeable by consumers for the same purposes.’
(United States v. du Pont & Co. (1956) 351 U.S. 377, 395 . . . .) Or,
in other words, the relevant market is composed of products that
have reasonable interchangeability for the purpose for which they
are produced. (Id. at p. 404 . . . .)” (Exxon, supra, 51 Cal.App.4th
at p. 1682.) This concept “encompasses notions of geography as
well as product use, quality, and description. The geographic
market extends to the ‘ “area of effective competition” . . . where
buyers can turn for alternate sources of supply.’ ” (Oltz v. St. Peter’s
Community Hosp. (9th Cir. 1988) 861 F.2d 1440, 1446, quoting
Moore v. Jas. H. Matthews & Co. (9th Cir. 1977) 550 F.2d 1207,
1218.) Thus, sellers offering products consumers would consider
substitutes within the geographic area in which those buyers are
willing to travel to purchase those products comprises the relevant
market because the “groups of sellers or producers” in this area
“have actual or potential ability to deprive each other of significant
levels of business.” (Thurman Industries, Inc. v. Pay ’N Pak Stores,
Inc. (9th Cir. 1989) 875 F.2d 1369, 1374 (Thurman).)
43
B. The Jury’s Finding Involving Relevant Market
Century challenges the sufficiency of the evidence to support
a finding that the relevant geographic market was as Flagship
defined it—that is, the Rancho Mirage clearance zone. But the
jury did not make any finding as to what the relevant market
was. Although the court relayed to the jury what Century and
Flagship’s respective proposed definitions of the relevant market
were, the verdict form did not ask the jury to identify which
(if either) definition the jury accepted. Instead, the verdict form
asked the jury to determine a broader issue that involved “the
relevant market,” but without defining that term. Specifically,
the form asked whether “[the defendants’] conduct cause[d] harm
to competition in the relevant geographic and product markets in
the form of increased prices or decreased output of film.” (Italics
added.)
That the jury answered this question in the affirmative
does not necessarily imply that the jury accepted Flagship’s
definition. The jury could have accepted the definition proffered
by the defense, but nevertheless concluded the defendants had
caused anticompetitive harm in that more broadly defined market.
Therefore, in order to test the sufficiency of the evidence to support
the jury’s finding of anticompetitive effects in “the geographic and
product markets,” we must consider whether substantial evidence
supports that competition was harmed in either the relevant
geographic market posited by Flagship (Rancho Mirage) or the
relevant geographic market posited by Century (the Coachella
Valley).
44
C. Sufficiency of the Evidence to Support a Finding
of Competitive Harm in the Geographic Market
as Defined by Flagship (the Rancho Mirage
Clearance Zone)
1. Flagship’s proposed geographic market
Although Century challenges only Flagship’s geographic
market definition, not its product market definition, the former is a
function of the latter. Namely, “[Flagship] claims that the product
market is the market for licensing of first[-]run films,” a market
in which distributors sell licenses, theaters buy licenses, and
moviegoers do not participate at all.22 (Italics added.) According
to Flagship, because the Palme and The River are located in the
Rancho Mirage clearance zone, they only need licenses to play
films in that zone, so licenses for other cities would not be viable
substitute products for them. Moreover, Flagship argues, The River
and the Palme are in a clearance situation in Rancho Mirage,
meaning a distributor would only ever license any first-run film to
one or the other theater there. Flagship argues that the geographic
market is thus the “competitive zone” in which these clearances
were granted: the Rancho Mirage clearance zone.
22 The idea that licenses for first-run films are
interchangeable products—or, for that matter, that tickets
to view first-run films are interchangeable products—is
counterintuitive, given that there may be significant differences
between any given first-run film and another. In concrete terms,
it is hard to understand how the right to exhibit, or the right to
view, an R-rated action movie is interchangeable with the right
to exhibit or view a G-rated animated film. Given the role of
first-run films as a group in the economics of the movie theater
business, however, movie theater industry cases appear to have
accepted this concept, and the parties do not challenge it here.
45
To support its geographic market, Flagship points to
extensive evidence reflecting industry recognition of the Rancho
Mirage clearance zone, and testimony that The River is the only
theater with which the Palme competed to obtain film licenses
from distributors. For example, it cites testimony of exhibitors and
distributors that the Palme and The River were the only theaters
that competed in Rancho Mirage. Flagship argues evidence of such
“ ‘ “commercial realities of the industry” ’ ” supports its proposed
relevant geographic market.
Certainly, ample evidence establishes that only the Palme
and The River competed for film licenses in the Rancho Mirage
clearance zone, as they were the only two theaters in this zone.
But neither this, nor any other evidence Flagship presented at
trial suggests that consumers in the Rancho Mirage clearance zone
could not or would not travel outside of that zone to view a film—
for example, at the Regal Rancho or Mary Pickford theaters located
approximately 6 miles away from the Palme and approximately 4.5
to 5.5 miles away from The River. (See ante, fn. 5, taking judicial
notice of distances between theaters.) Indeed, none of the evidence
Flagship identifies speaks to substitutability from the perspective
of the movie-viewing consumer at all.
This is a crucial point, because the Cartwright Act’s purpose
is to “protect and promote competition for the benefit of consumers”
(Chavez, supra, 93 Cal.App.4th at p. 375, italics added), and
“[c]onsumer welfare is a principal, if not the sole, goal of antitrust
laws.” (Cianci v. Superior Court (1985) 40 Cal. 3d 903, 918–919,
citing Palsson, supra, 16 Cal.3d at p. 935.) The purpose of the
rule of reason is likewise consumer-focused. (See Leegin, supra,
551 U.S. at p. 886 [goal of rule of reason is to “distinguish[ ]
between restraints with anticompetitive effect that are harmful to
46
the consumer and restraints stimulating competition that are in
the consumer’s best interest”], italics added.) And to the extent
the antitrust laws protect competition more broadly, “[c]ompetition
is not just rivalry among sellers. It is rivalry for the custom of
buyers” (United States v. Bethlehem Steel Corporation (S.D.N.Y.
1958) 168 F. Supp. 576, 592), such that “ ‘[a]ny definition of line of
commerce which ignores the buyers and focuses on what the sellers
do, or theoretically can do, is not meaningful.’ ” (Westman Com’n
Co. v. Hobart Intern., Inc. (10th Cir. 1986) 796 F.2d 1216, 1221,
quoting United States v. Bethlehem Steel Corporation, supra, at
p. 592.) Moreover, any such focus on competition more broadly
is merely a means to protect the consumer. (See Feldman v.
Sacramento Bd. of Realtors, Inc. (1981) 119 Cal. App. 3d 739, 748
(Feldman) [“the purpose of antitrust laws is primarily to protect
the consuming public by healthy competition, and only secondarily
to protect the individual competitor”].)
Accordingly, all antitrust movie theater industry cases of
which this court is aware have defined the relevant geographic
market based on the area in which consumers—that is,
moviegoers—are willing to travel to see movies. (See, e.g., Orson,
supra, 79 F.3d at p. 1372 [summary judgment for defendant
inappropriate where evidence potentially supported that challenged
clearances caused anticompetitive effects in a market defined by
the choices available to “art film consumers in Center City”]; Cobb,
supra, 101 F.Supp.3d at p. 1336 [relevant geographic market for
circuit-dealing claims sufficiently alleged as clearance zone based
on moviegoers “not [being] willing to travel outside of the area to
watch movies because of significant population density and heavy
traffic congestion”]; Reading, supra, 2007 WL 39301 at p. *11
[relevant geographic market defined as “the ‘ “area of effective
47
competition . . . to which the purchaser [here, moviegoers] can
practicably turn for supplies” ’ ”], quoting United States v. Eastman
Kodak Co. (2d Cir. 1995) 63 F.3d 95, 104.)
“[I]f the purchaser, i.e., the moviegoer, can go beyond
the defined market for supplies, i.e., movies, then the geographic
market is too narrowly defined.” (Reading, supra, 2007 WL 39301,
at p. *11, italics omitted.) This focus makes sense when one
considers that, whatever is occurring in the distributor-facing
portion of the market—that is, the portion in which exhibitors
license films from distributors—consumers’ choices about
where they will go to see a movie are what ultimately determine
competing theaters’ “actual or potential ability to deprive each
other of significant levels of business.” (Thurman, supra, 875 F.2d
at p. 1374.) Thus, “[f]or antitrust purposes, the proper inquiry is
how consumers, not suppliers, view the market” and “the fact that
industry professionals consider [Rancho Mirage] a separate zone for
licensing purposes . . . has little relevance in the antitrust context.”
(Reading, supra, 2009 WL 39301 at p. *12.)
Therefore, although there may well be a market for film
licenses in the Rancho Mirage clearance zone, it is a market
of questionable, if any, significance under the antitrust laws.
This is particularly true in this case, given that much of the
anticompetitive harm Flagship alleges occurred in the relevant
market were suffered by movie-going consumers, whose choices
and preferences played no role in how Flagship defines the
geographic boundaries of its proposed relevant market.
2. Anticompetitive effects in Flagship’s
proposed geographic market
Even assuming, arguendo, that Rancho Mirage could serve as
a proper antitrust relevant geographic market in this case, Flagship
48
failed to offer substantial evidence of anticompetitive effects in that
market. In arguing to the contrary, Flagship identifies three types
of harm in the Rancho Mirage market for film licenses. We address
each in turn below.
a. Reduction in the output of film licenses in
the Rancho Mirage clearance zone
Flagship first argues that the challenged agreements reduced
the output of film licenses in the Rancho Mirage clearance zone.
Reduction in output is a form of competitive harm recognized by
the antitrust laws. (See American Express, supra, 585 U.S. at p. __
[138 S.Ct. at p. 2284] [“direct evidence of anticompetitive effects
would be ‘ “proof of actual detrimental effects [on competition],” ’ ”
“such as reduced output, increased prices, or decreased quality
in the relevant market”], quoting FTC v. Indiana Federation of
Dentists, supra, 476 U.S. at p. 460.) Here, however, substantial
evidence does not support a finding of reduced output. As discussed
above, a clearance zone is a geographic area in which, by definition,
a distributor will grant only one license to exhibit each first-run
film. Thus, in a clearance zone like Rancho Mirage, there will
always be only as many film licenses issued as there are first-run
films to license. The challenged agreements affect not how many
licenses each distributor issues, but how (if at all) the distributor
will divide up a static number of licenses between the theaters in
the zone.
Flagship did not argue below and does not argue on appeal
that the general practice of granting clearances in Rancho Mirage
harmed competition.23 Rather, under Flagship’s theory of the case,
23
Nor do the antitrust laws view this as inherently
anticompetitive—rather, in order for a clearance to violate
49
Century used circuit dealing to assure that distributors granted all
clearance licenses or at least the most lucrative clearance licenses
to The River, rather than, as is the case in many other clearance
zones, allocating licenses between the theaters in the zone. As a
result, Flagship argues, “distributors decreased their output of film
with respect to the Palme, denying it access to the vast majority
of profitable, first-run, commercial films.” (Italics added.) Thus,
Flagship’s argument identifies a reduction not in the total number
of film licenses granted in Rancho Mirage (which is necessarily
capped in a clearance situation), but rather a reduction in the
percentage of such licenses allocated to the Palme. This is not
the antitrust laws, a plaintiff must show something beyond
the inherent limitations a clearance places on the number of film
licenses granted for a particular film in a particular area. “[T]he
reasonableness of a clearance under section 1 of the Sherman Act
depends on the competitive stance of the theaters involved and
the clearance’s effect on competition, especially the interbrand
competition.” (Orson, supra, 79 F.3d at p. 1372; see Tarzana,
supra, 828 F.2d at p. 1399 [clearances “are reasonable if they are
likely to promote interbrand competition without overly restricting
intrabrand competition”].) The Ninth Circuit has identified the
following factors for the purposes of analyzing the competitive
effects of a clearance beyond the inherent limitation on the number
of licenses awarded in the clearance zone: (1) “the proximity of
the theaters”; (2) “the location of theaters with respect to major
thoroughfares”; (3) “whether transportation barriers exist between
the theaters”; (4) “whether the plaintiff theater bid on the
clearances”; (5) “whether the plaintiff acknowledged that his
theater was substantially competitive with the defendant”;
(6) “whether the theaters drew customers from the same
geographical area”; and (7) “whether the theaters advertised
throughout the same geographical area.” (Soffer, supra, 1996
WL 194947 at p. *4, citing Tarzana, supra, 828 F.2d at p. 1399.)
50
a reduction in overall output that harms competition, but rather
a reduction in what one competitor received that harms a single
competitor, and does not satisfy a plaintiff ’s burden under the
antitrust rule of reason to show an “actual adverse effect on
competition as a whole in the relevant market[.] [T]o prove it has
been harmed as an individual competitor will not suffice.” (Capital
Imaging v. Mohawk Valley Medical Assoc. (2d Cir. 1993) 996 F.2d
537, 543 [“Insisting on proof of harm to the whole market fulfills
the broad purpose of the antitrust law that was enacted to ensure
competition in general, not narrowly focused to protect individual
competitors. Were the law construed otherwise, routine disputes
between business competitors would be elevated to the status of an
antitrust action, thereby trivializing the [Sherman] Act because of
its too ready availability.”]; see also Southern California Institute
of Law v. TCS Educ. System (C.D.Cal. Apr. 5, 2011, Civ. No.
10-8026 (JAK)) 2011 WL 1296602 *10 [“[s]ection one claimants
must plead and prove a reduction of competition in the market in
general and not mere injury to their own positions as competitors in
the market”]; see also RLH Industries, Inc. v. SBC Communications,
Inc. (2005) 133 Cal. App. 4th 1277, 1285–1286 [explaining that
“the antitrust law is ‘concern[ed] with the protection of competition,
not competitors’ ”], quoting Brown Shoe Co. v. United States (1962)
370 U.S. 294, 320.)
Thus, substantial evidence does not support a finding of
competitive harm based on a reduction in output in Flagship’s
proposed relevant market, even if we were to recognize that market
for antitrust purposes.
51
b. Reduction in consumer choice of theaters
in the Rancho Mirage clearance zone
Flagship next argues that the agreements harmed
competition in Rancho Mirage by causing moviegoers there to
have fewer theaters from which to choose when they want to
view first-run films. But Flagship offered no evidence suggesting
consumers cannot or will not travel outside the Rancho Mirage
clearance zone to see a movie. As noted above, Flagship defined
that area as the relevant market based on where exhibitors buy
licenses—not where consumers buy movie tickets. Flagship offered
no evidence on the latter point. Thus, no evidence supports this
type of harm to consumers in the Rancho Mirage zone. (See
Marsh, supra, 200 Cal.App.4th at p. 495 [“ ‘it is plaintiff ’s burden
to make the required showing of a “ ‘substantially adverse effect
on competition in the relevant market’ ” ’ ”], quoting Exxon, supra,
51 Cal.App.4th at p. 1681.)
Nor would antitrust law necessarily view such an effect
as competitive harm, even if substantial evidence did support it.
First, the idea that removing one theater from a list of potential
options for viewing a film constitutes competitive harm is
inconsistent with the approach federal appellate courts take to
analyzing clearances. Clearances necessarily deprive consumers
of at least one theater choice in which to view a film, yet courts
require an antitrust plaintiff challenging a clearance to prove
some harm to competition beyond that in order for the clearance
to violate the antitrust laws. (See ante, fn. 23.) Second, at least
one court has concluded in the specific context of circuit dealing
that “the mere possibility that a consumer might have to see his or
her first choice movie at his or her second choice theatre or his or
her second choice movie at his or her first choice theatre[ ] is not an
52
actionable restraint of trade.” (Six West, supra, 2004 WL 691680
at p. *10; see also Reading, supra, 2007 WL 39301 at pp. *13–*14
[same]; Cinema Village, supra, 2016 WL 5719790 at p. *5 [finding
that facts asserted “merely establishe[d] that . . . consumers must
watch first-run films at one theater rather than at another” but
“[w]ithout more, that state of affairs does not constitute actionable
harm”] (italics added).) Finally, antitrust law generally does not
view the elimination of a particular competitor—without more—
as harm to competition. (See Austin v. McNamara (9th Cir. 1992)
979 F.2d 728, 738–739 [The plaintiff “was required to show
not merely injury to himself as a competitor, but rather injury
to competition. Even ‘the elimination of a single competitor,
standing alone, does not prove anticompetitive effect.’ ”]; Kaplan v.
Burroughs Corp. (1979) 611 F.2d 286, 291 [“[e]ven if sufficient proof
of intent and causation are introduced, the elimination of a single
competitor, standing alone, does not prove anticompetitive effect”].)
Although many first-run films were not available at the Palme,
they were “still . . . available, presumably in whatever number is
demanded by consumers,” such that the reduction in the number
shown at the Palme reflects, “at most, a slight reduction in
competition between [the Palme and The River] regarding
the [exhibition] of [first-run films].” (ECC v. Toshiba America
Consumer Products, Inc. (2d Cir. 1997) 129 F.3d 240, 245.) “It is
settled, however, that to sustain a[n antitrust] claim, a plaintiff
‘must . . . show more than just an adverse effect on competition
among different sellers of the same product’ ” (ibid.), and instead
demonstrate harm to competition in a manner that negatively
affects “the consuming public.” (See, e.g., Feldman, supra,
119 Cal.App.3d at p. 748.)
53
Of course, to the extent the elimination of a competitor or
harm to a single competitor also harms consumers—that is, where
the challenged practice has a “deleterious effect both on competitors
and consumers”—such an effect constitutes competitive harm.
(Palsson, supra, 16 Cal.3d at p. 937, italics added.) Such was the
case, for example, in Palsson, which reviewed a county board of
realtors’ rule excluding part-time real estate salespeople from its
membership. (Id. at pp. 924–925.) Membership in the board—
composed of 75 percent of the active real estate brokers in the
county—was the only way to gain access to the multiple listing
service (MLS), which was a “practical economic necessity” for
real estate salespeople there. (Id. at pp. 938 & 924–925.) The
challenged board membership rule was a horizontal agreement,
but Palsson applied the rule of reason in large part because
the defendant was a voluntary professional association. (Id. at
pp. 931–933.) The Court concluded that, by denying the plaintiff
(a part-time real estate salesman) MLS access, the defendant
board harmed not only the plaintiff (and other part-time brokers
likewise excluded), but consumers as well. Namely, by “making
it difficult for nonmembers [like plaintiff] to compete effectively
with members [c]onsumer choice is thereby narrowed. A person
wishing to sell or buy a home may believe that a particular
nonmember is more competent than available members. But if
the consumer wishes to have ready access to a large market in a
short period of time, he may be forced to deal with a less desirable
member broker or salesman. [¶] . . . In short, the regulations
imposed by the board have a deleterious effect both on competitors
and consumers.” (Id. at p. 937, italics added; see id. at p. 936
[“[t]he buyer or seller of a home also suffers by the board’s
practices”].) Under such circumstances, protecting consumers
54
and the “preservation of competition” in the broader sense also
benefited the “scrupulous trader by insuring him a fair opportunity
to compete on the market.” (Id. at p. 935.) The Court went on to
recognize that even the elimination of even a small competitor may
harm consumers in this manner: “[a]n anticompetitive practice”—
that is, one that harms competition and consumers—“ ‘is not to
be tolerated merely because the victim is just one merchant whose
business is so small that his destruction makes little difference to
the economy.’ ” (Ibid., quoting Klor’s, Inc. v. Broadway-Hale Stores,
Inc. (1959) 359 U.S. 207, 213 (Klor’s).)
Flagship appears to argue that because, under the facts in
Palsson, the elimination of a single such merchant also harmed
consumers, elimination of a single competitor will always harm
consumers and constitute competitive harm under the rule of
reason. But neither Palsson, nor any other Cartwright Act case
stands for this proposition. Moreover, such an argument ignores
the language immediately preceding the portions of Palsson
Flagship selectively quotes, which recognizes the well-established
and fundamental principle that “[a]ntitrust laws are designed
primarily to aid the consumer.” (Palsson, supra, 16 Cal.3d
at p. 935.) Indeed, the language in Palsson on which Flagship
relies for the proposition that the Cartwright Act is unlike the
Sherman Act in this regard—Palsson’s reference to destruction
of a competitor that “ ‘makes little difference to the economy’ ”—is
quoted from a Sherman Act decision. (Palsson, supra, 16 Cal.3d
at p. 935, quoting Klor’s, supra, 359 U.S. at p. 213; see Klor’s, supra,
at p. 213 [per se analysis of Sherman Act monopoly claim noting
that horizontal group boycott at issue “clearly has, by its ‘nature’
and ‘character,’ a ‘monopolistic tendency’ ” and “[a]s such it is not to
be tolerated merely because the victim is just one merchant whose
55
business is so small that his destruction makes little difference
to the economy”]; see also Palsson, supra, at pp. 933–934
[distinguishing Klor’s in determining rule of reason, not per se
analysis, should apply to challenge in Palsson].)
c. Barriers to entry in the Rancho Mirage
clearance zone
Flagship further implies that the challenged agreements
caused harm to competition in that they created barriers for
theaters trying to enter or expand operations in the Rancho
Mirage clearance zone. Specifically, citing Redwood, Flagship
argues that Century’s multi-theater licensing agreements
“entrench the position of established motion picture exhibitors
and pose formidable barriers to entrepreneurs seeking to enter
(or expand operations) in the theatre business” (Redwood, supra,
200 Cal.App.3d at p. 708), “a competitive harm the antitrust laws
seek to prevent.”
We do not disagree that such barriers may well result from
certain multi-film licensing agreements. But no evidence in the
record supports that this happened here with Century’s licensing
agreements. To the contrary, the evidence shows that the Tristone
entered the market immediately following the Palme’s closure,
apparently unaffected by the theoretical barriers Flagship posits.
Nor is there any evidence in the record suggesting that the Tristone
has been unable to expand because of barriers created by Century’s
licensing agreements.
In the absence of evidence suggesting Century’s agreements
created barriers to entry, Flagship quotes Redwood for the
proposition that an exhibitor “may be placed at a grave competitive
disadvantage” and that circuit-dealing agreements “may present
serious antitrust questions.” (Redwood, supra, 200 Cal.App.3d at
56
p. 707, italics added.) Such a theoretical possibility—even one
recognized in appellate authority—is not a substitute for evidence
of anticompetitive harm. “[T]here is really only one way to prove
an adverse effect on competition under the rule of reason: by
showing actual harm to consumers in the relevant market.”
(See MacDermid Printing Solutions LLC v. Cortron Corp. (2d Cir.
2016) 833 F.3d 172, 182.) Accepting the mere potential for
anticompetitive harm as actual harm effectively resurrects the
per se standard we rejected above. (See NYNEX, supra, 525 U.S.
at p. 133 [practices deemed per se illegal “do not require proof
that an agreement . . . is, in fact, anticompetitive in the particular
circumstances”].) Because non-monopoly circuit dealing is not
per se illegal, the mere possibility that restricting access to a
unique product may, under certain circumstances, have the
economic effects Flagship identifies does not, without more, provide
substantial evidence to support its non-monopoly circuit-dealing
claim.
D. Sufficiency of Evidence to Establish Competitive
Harm in the Broader Market as Defined by
Century (the Coachella Valley)
1. Century’s proposed geographic market
Century “contends that the relevant product market
is the exhibition to consumers of first[-]run films,” a market
in which exhibitors are the suppliers, and moviegoers are the
purchasers. (Italics added.) In defining the geographic bounds
of this market, Century therefore focuses on the ability and
willingness of moviegoers to travel to theaters in nearby cities
in order to see first-run films. Based on this analysis, Century
defined the relevant geographic market as the Coachella Valley.
57
Substantial evidence supports this definition. Numerous
percipient witnesses, including the film buyer for the Palme,
acknowledged that the Palme and The River competed for
customers with at least five theaters in the Coachella Valley.
For example, one of the Palme’s co-owners testified that, before
the La Quinta was built, the Palme “compete[d] for patrons” with
five other theaters, and that “the market for patrons in that area
consisted” of the Mary Pickford, the Regal Rancho, the Regal
in Palm Springs, and the Regal Metro 8 in Indio. Distributors
likewise testified that The River and the Palme competed with
other theaters for patrons. Uncontested expert testimony also
supports such a geographic market. Namely, Century’s economic
expert testified that it was “reasonable to . . . conclude that all
[Coachella Valley theaters] are part of the relevant geographic
market,” based on the relatively short distances and drive times
between The River and other theaters in the Coachella Valley,
as well as customer survey responses indicating that 75 percent
or more of moviegoers surveyed in each Coachella Valley city
considered The River their favorite theater. The Coachella Valley
theaters identified above are between approximately 6–10 miles
away from the Palme.
Moreover, unlike the market suggested by Flagship, the
geographic (and product) market Century proposed to the jury is
consistent with the approach to relevant market definition in all
other movie theater industry and circuit-dealing cases of which this
court is aware. (See ante, pp. 49–50.)
2. Anticompetitive effects in Century’s
proposed geographic market
Flagship argues that even if the Coachella Valley constitutes
the relevant geographic market, substantial evidence still supports
58
that the challenged multi-theater licensing agreements harmed
competition in that broader market. Specifically, Flagship
identifies two types of anticompetitive harm in the Coachella Valley
market. We address each in turn below, and conclude that neither
can support the jury’s finding.
a. Reduction in output of unique films in
the Coachella Valley
First, Flagship points to evidence that the Palme exhibited
independent and artistic films not exhibited at any other Coachella
Valley theater, and that the Palme’s closure, which Flagship
attributes to Century’s licensing practices, thus reduced the output
of such unique films. Flagship argues that the Palme’s closure
likewise reduced any competitive pressure to play such films that
other theaters may have felt as a result of the Palme playing them.
Even assuming the evidence supports that the Palme closed
as a result of the challenged agreements—and we are far from
convinced that it does—we are not aware of any evidence speaking
to the total number of unique and/or independent films exhibited
in the Coachella Valley after the Palme’s closure. There is
thus nothing from which a jury could reasonably infer that the
total number of unique or independent films exhibited in the
Coachella Valley dropped following the Palme’s closure. When
asked to identify such evidence during the hearing before this court,
Flagship suggested that the record contains testimony establishing
that over 700 unique films would not be shown in the Coachella
Valley as a result of the Palme’s closure. This misconstrues the
testimony. Century’s expert did opine that, during the 13 years
the Palme was in business, the Palme exhibited approximately
700 films not exhibited elsewhere in the Coachella Valley. But
he offered no opinion—nor does the record contain any evidence
59
suggesting—that such films did not or could not find a home after
the Palme’s closure.
Indeed, the evidence in the record regarding other theaters’
exhibition of independent or unique films supports an opposite
conclusion. Namely, there was evidence that at least one theater
competed with the Palme for licenses to independent films, as
well as evidence that the Tristone, which began showing films
immediately after the Palme’s closure, played unique and
independent films. Specifically, Century’s expert economist
calculated that more than 37 percent of the first-run films shown
at the Tristone in its first 15 months were not exhibited at any
other Coachella Valley theater. Although this represents a drop
from the 55 percent he calculated for the Palme over the course
of its approximately 13-year existence, this does not provide a
basis from which the jury could reasonably infer that the overall
number of unique or independent films at all Coachella Valley
theaters dropped as a result of the Palme’s closure. This is
because the record does not provide a basis on which the jury
could determine the number of unique and/or independent films
playing at Coachella Valley theaters other than the Tristone,
and, more specifically, whether any Coachella Valley theaters
increased the number of unique and/or independent films they
offered after the Palme closed. Without such evidence, the jury
could not reasonably infer an overall reduction in the output of
first-run films or even independent first-run films.
b. Loss of unique art house theater in
the Coachella Valley
Flagship next argues that the challenged agreements
caused a reduction in output of a unique and valuable type
of theater. Specifically, it argues the Palme’s closure denied
60
consumers a “specialty theater with one-of-a-kind features”
that offered a “singular combination of upscale amenities and
senior-friendly design.” Flagship further contends that part of
the “special movie-going experience” the Palme offered its patrons
were periodic events “convening artists from around the country—
including Oscar-winning actors and directors—for Q&A sessions.”
Like Flagship’s argument regarding a posited reduction in unique
films following the Palme’s closure, this argument fails because,
even assuming there is substantial evidence to support an inference
that the Palme closed as a result of the challenged agreements,
there is no evidence in the record regarding the types of amenities
and special events other Coachella Valley theaters offered patrons
after the Palme’s closure.
Flagship argues that “the standard is whether there was
substantial evidence for the jury to conclude that the Palme was
a unique art[ ]house theatre in the Coachella Valley.” This is
incorrect. In order to affirm a finding of competitive harm on this
theory, the record must contain substantial evidence that the Palme
offered a unique movie-going experience that, after the Palme
closed, was no longer available elsewhere in the Coachella Valley.
But the record does not contain evidence regarding the amenities
and/or experience offered at the other theaters in the Coachella
Valley after the Palme’s closure.
This distinguishes the case at bar from Cobb, supra,
101 F. Supp. 3d 1319, on which Flagship relies for this point.
In Cobb, a federal district court concluded that a complaint
challenging the use of clearances to prevent movie theaters
offering a unique “CinéBistro” experience from entering or
effectively competing in the relevant market sufficiently alleged
harm to competition, because these effects diminished the quality
61
of theaters offered to consumers. (Id. at pp. 1326, 1335.)
Specifically, “the [c]omplaint allege[d] in detail . . . the various
amenities that [plaintiff ’s CinéBistro theater] and [the other
theaters in the alleged market] respectively offer consumers,
often drawing stark differences . . . [and] alleged more than a
mere substitution of competitors” (id. at p. 1335), rather, that
“consumers are being forced to purchase a product that is less
desirable and of inferior quality.” (Ibid.) Here, nothing suggests
that the Tristone offers—or other Coachella Valley theaters offer—
an overall theater experience that is different from, let alone
inferior to, that which the Palme had offered in the exact same
space as the Tristone just days earlier.
Flagship bore the burden of establishing harm to competition,
so to the extent it now argues a reduction in the overall output
of independent art house films, or the loss of a unique art house
theater reflects such harm, Flagship must identify evidence of those
overall losses. Evidence that the Palme was a unique art house
theater that offered special events and played many unique films,
and that it is now closed, does not satisfy that burden. The jury
needed to know what was left after the Palme’s closure in order to
make the inference Flagship’s theory of competitive harm requires.
We therefore conclude that substantial evidence does not
support the jury’s finding of anticompetitive effects in the relevant
market, whether that market is defined as the Rancho Mirage
clearance zone or the Coachella Valley. Because, as discussed
in detail in the Discussion ante, part I, Flagship’s non-monopoly
circuit-dealing claim was subject to the rule of reason, the lack
of substantial evidence to support a finding of anticompetitive
harm mandates reversal of the judgment. Because we reverse the
62
judgment on this basis, we need not reach Century’s third and
fourth arguments regarding a new trial.
We likewise need not address Flagship’s separate appeal
challenging the amount of attorney fees awarded below, as Flagship
is no longer the prevailing party and thus not entitled to attorney
fees.
DISPOSITION
As to Century Theatres, Inc. and Cinemark USA, Inc.’s
appeal (B292609), the judgment in favor of Flagship Theatres
of Palm Desert is reversed. Accordingly, the postjudgment
order granting Flagship Theatres of Palm Desert’s attorney
fees is likewise reversed. Century Theatres, Inc. and Cinemark
USA, Inc. are entitled to recover their costs on appeal in case
No. B292609.
As to Flagship Theatres of Palm Desert’s appeal (case
No. B299014), the appeal is dismissed as moot. The parties
shall bear their own costs on appeal in case No. B299014.
CERTIFIED FOR PUBLICATION.
ROTHSCHILD, P. J.
We concur:
BENDIX, J. SINANIAN, J.*
*Judge of the Los Angeles Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.
63