Lawsuit in St. Louis

The U. S. Government has long suspected the U. S. cinema industry of breaking or trying to break the Sherman Anti-Trust law. The U. S. cinema industry has long either controlled its desires or gratified them too adroitly to expose itself to punishment. Last week, in St. Louis, there began what may be the case which the Government has been looking for and the cinema industry avoiding. Warner Brothers, Paramount and RKO, seven of their subsidiaries and five major executives, were haled into court before Federal Judge George Moore, charged with violating the Sherman Anti-Trust Law. Maximum penalty is $5,000 and one year imprisonment. If defendants are guilty, the whole mechanism by which the industry has disposed of its wares will be suspect.

When Paramount went bankrupt in 1933, a minor consequence appeared to be the fate of three St. Louis cinemansions-the Ambassador, Missouri and New Grand Central-which Paramount and Warner Brothers had jointly operated. Warner took over the theatres and for a time ran them alone. When the theatres failed to make money, mortgages were foreclosed. Warner put in a bid which was rejected. The theatres went to a local company which leased operating rights to the theatrical firm of Fanchon & Marco.

First requisite of a cinema theatre is the cinema. Warner Brothers, Paramount and RKO make 48% of the 300 important features manufactured in the U. S. each year. When Fanchon & Marco tried to get Warner Brothers, Paramount or RKO pictures to show in their three new theatres, they found they could get none. Warner had leased two other theatres in St. Louis. In these, St. Louis cinemaddicts could see all the Warner, Paramount and RKO films they wanted.

Fanchon & Marco thereupon complained to the Department of Justice that, by withholding their films, Warner, Paramount and RKO were violating the Sherman Law. A Federal Grand Jury indicted the three companies. To cinemanufacturers, the St. Louis case last week looked like the spearhead of a Government attack on their film-selling system.

In a musty, grey, inadequate courtroom on the fourth floor of the Federal Building, packed, even without spectators, by lawyers of whom the defendants had 20 present, headed by onetime Senator James A. Reed, the trial, delayed all summer by the defense because one of the defendants, Warner Executive Abel Gary Thomas, was ill, finally began with the selection of a jury. To decide a problem whose ramifications have taxed the best brains of the cinema industry and the U. S. Government for the last 15 years, prosecution and defense agreed upon a dozen sleepy-looking Missouri citizens who included a garage proprietor, a retired traveling salesman, a farmer and a Negro waiter named George W. Fullerton. Among the defendants, the jurors observed President Ned Depinet of RKO Distributing Corp., President George Schaefer of Paramount Pictures Distributing Co. and Warner Brothers' sleek little President Harry Warner who found it hard to conceal his chagrin when excited Lawyer Reed mistook his hat, which had fallen on the floor, for a spittoon, used it accordingly.

Assistant U. S. Attorney General Russell Hardy opened with a blast that the $660,000,000 assets of the defendants had been "maliciously and unconscionably used" to "crush" Fanchon & Marco, who had "suffered losses to date exceeding $200,000." Said he: "The conduct of the defendants in this case has put a stain on a great industry.

" After reproving his opponent for trying to inflame the jury, Lawyer Reed opened his case with a dexterous attempt to show that Fanchon & Marco had really been the bullies, not only of his clients but of the U. S. Government as well. Said he: "This is a battle between two groups of moving picture operators in St. Louis and the Government has seen fit to join with one group against another. As a matter of fact, the only ones engaged in a conspiracy are the ones the Government represents."

First of a string of witnesses whose testimony should last at least six weeks was Fanchon & Marco's President Harry C. Arthur who said that Warner Brothers had "declared war" on Fanchon & Marco on March 6, 1934.

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