Cobb Theatres Argues Jury Should Decide Antitrust Case Against AMC

AMC Theaters Exterior GETTY H 2016
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Cobb Theatres, an independent movie theater chain in the Southeast region of the U.S., told a Georgia federal judge on Friday that a jury could find AMC Entertainment engaged in illegal antitrust activity by demanding geographical exclusivity on the exhibition of blockbuster films. Having valued its claims at hundreds of millions of dollars, Cobb now wants to move forward to trial.

"This case is about AMC’s weaponization of clearances to insulate its old, worn-out theaters from competition and stifle its rivals’ efforts to introduce innovative new theater concepts to consumers," states Cobb's court brief. 

Cobb originally filed the lawsuit in January 2014. AMC couldn't dismiss at the pleading stage, and both sides engaged in ample discovery. Executives at both companies testified in depositions, as did distribution gurus at big studios including Fox, Universal, Warner Bros., Sony and Lionsgate.

The plaintiff contends that but for AMC spreading the word that it would demand "clearance" — or exclusivity — over any new theater built within three miles of an existing AMC theater, Cobb would have built eight luxury movie theaters in Georgia, Illinois and Florida. 

In late September, AMC filed a summary judgment motion with the argument that it couldn't be held liable over hypothetical theaters.

"Federal court is not the appropriate venue for parties to unearth fortunes for business ventures that were never to be," wrote AMC's lawyers. "A plaintiff like Cobb, who seeks millions for enterprises it never started, must proffer credible, admissible evidence showing the demise of actual business relationships with third parties that would have, in all likelihood, resulted in the new venture coming to fruition but for the defendant’s conduct. Claims based upon mere hoped-for results cannot suffice."

Cobb responds that whether AMC's conduct prevented it from building these eight prospective theaters is a disputed issue of fact that's best reserved for a jury.

According to the plaintiff, AMC began requesting clearances in 2010 upon the arrival of a new chief executive, Gerry Lopez. Cobb points to documents obtained in the litigation showing that year, AMC successfully set out to "bleed ... dry" a dine-in theater in Kansas City, Mo.

Cobb says that around the same time, it was considering opening a movie theater in a Chicago mall.

Bobby Cobb allegedly called Bob Lenihan, AMC president of programming, to gain assurances that the exhibition giant would not engage in clearance practices to protect an AMC theater a mile away. On a follow-up call, Lopez allegedly heard about Cobb's Cinebistro concept and how it wouldn't compete, but the AMC chief refused to give assurances.

What's more, AMC is said to have begun tracking new Cobb sites, and Lopez wrote in an internal email, "He [Bobby Cobb] called about Block 37 and clearances a few months ago. We had a nice chat — he wanted to make sure we wouldn’t clear him because he’s only doing dine-in theatres. ... Since then, rumors keep coming up about Tampa and now Atlanta. That changes things ... so, I’m sorry to say, Bobby needs to know we’ll start exerting clearances."

Cobb adds that AMC began sending letters to distributors, warning of "encroaching" competitors and demanding clearances. 

"In response to AMC’s clearance demand, film distributors began allocating films between AMC and Cobb, with AMC receiving the vast majority of several distributors’ highest-grossing first-run films," states Cobb. "Brookhaven [one of Cobb's exiting theaters in Georgia] was licensed only approximately 60% of the film product it would have been licensed absent the clearance, and suffered lost profits of [redacted]. AMC’s clearance threats and conduct also caused Cobb not to build eight new theaters across the country that it otherwise would have built."

AMC tells the judge in a summary judgment motion that "uncontroverted evidence disproves" the allegation that it coerced distributors into granting it exclusive licenses. Specifically, AMC says in its court papers that the distributors "unequivocally testified that AMC never threatened or attempted to coerce them into doing anything. To the contrary, both the distributor witnesses and AMC’s witnesses have sworn that AMC has always licensed films at these theatres on a film-by-film, theatre-by- theatre basis."

That could be subject to interpretation.

Take, for example, testimony from Redman Gautier at Fox.

At a deposition, Gautier said AMC never threatened it would only play Fox's films if a clearance was honored and recognized. Gautier also said AMC never attempted to coerce Fox or use its economic size or power.

On the other hand, if Cobb was licensed a Fox film, AMC's own nearby theater wouldn't touch it. When asked whether there were examples of certain films that Fox would have liked in both theaters, Gautier said yes, mentioning Gone Girl, Heat and Deadpool as examples.

"AMC claims that Lionsgate, Sony, Universal, and Weinstein 'acted on their own volition and in accordance with their own [independent] business judgment,'" writes Cobb's lawyers. "But each of those distributors testified that, but for AMC’s clearance, they would have licensed at least some of their films to Brookhaven as well, for day-and-date play. In fact, now that AMC is no longer refusing to play day-and-date with Brookhaven, all of these distributors except for Weinstein have started to do just that. This suggests that none of these distributors 'license[d] films pursuant to clearances in Atlanta as a result of its independent business determination.' To the contrary, they did so because AMC invoked its national circuit power."

It will be U.S. District Court Judge Eleanor Ross' job to figure out whether there are triable issues.