A Chicago film studio that alleges the state of Illinois steered business and incentives to a competitor does not have a case under antitrust laws, a federal appeals court held.
The 7th U.S. Circuit Court of Appeals last week declined to revive a lawsuit Chicago Studio Rental Inc. and Chicago Studio City Real Estate Holdings LLC filed against defendants responsible for promoting the state’s film industry.
The court held the companies — referred to collectively as Chicago Studio — failed to state a claim under the Sherman Act.
“The complaint merely alleges injuries to Chicago Studio, not to competition,” Judge Amy St. Eve wrote for a panel of the 7th Circuit.
The panel upheld U.S. District Judge Sara L. Ellis’ decision to dismiss Chicago Studio’s antitrust claim.
Since 1979, Chicago Studio has operated a film and television production studio with four stages that measure 62,000 square feet.
Chicago Film Studio Holdings LLC and Chicago Film Studio Industrial Real Estate Holdings LLC — referred to collectively as Cinespace — opened its own studio in 2010.
By January 2015, Cinescope had 30 stages and 1.5 million square feet of floor space.
Chicago Studio filed its suit in May 2015 alleging two state agencies and a state official conspired with Cinescope to cut Chicago Studio out of the film production market.
The defendants in an amended suit included the Illinois Department of Commerce and Economic Opportunity, which is charged with keeping and attracting businesses to the state.
Also named as defendants were the Illinois Film Office, a part of the department established to support the state’s film industry, and Betsy Steinberg, who served as the office’s managing director during Gov. Patrick J. Quinn’s administration.
Cinescope was not a defendant in the suit.
Chicago Studio alleged the defendants as part of the purported conspiracy administered 30% tax credits to producers and issued $27.3 million in state grants to Cinescope. Cinescope returned $10 million to the state because of a change in administration.
Chicago Studio also alleged the defendants excluded it from business meetings, did not let it bid on production jobs and encouraged producers to use Cinescope. And Chicago Studio said it applied for two grants but did not receive them.
The amended suit included a claim for violation of the equal protection clause against Steinberg and a claim for violations of the Sherman Act against all defendants.
Ellis dismissed the Sherman Act count and granted summary judgment in favor of the defendants on the equal protection clause.
The 7th Circuit panel upheld those rulings in its opinion last Wednesday.
Citing Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328 (1990), St. Eve wrote a plaintiff can recover for an alleged antitrust injury only if an aspect or effect of the defendant’s conduct reduced competition.
“Plaintiff must assert an injury not only to itself, but to the relevant market,” St. Eve wrote, citing Agnew v. National Collegiate Athletic Association, 683 F.3d 328 (7th Cir. 2012). “The alleged injury must either reduce output or raise prices to consumers.”
Two injuries Chicago Studio allegedly sustained — a decrease in its share of the market for film production and an inability to compete in the market — “are harms to Chicago Studio and are not proper antitrust injuries,” St. Eve wrote.
She acknowledged the other purported injuries cited by Chicago Studio — a decrease in competition and an increase in the cost of transactions — “could be anticompetitive injuries.”
But Chicago Studio failed to plausibly allege either injury, St. Eve wrote.
She wrote competition in the market for film production increased after Cinescope came on the scene, bringing more production space.
And the Illinois film industry earned about $350 million in gross revenues in 2013, up from about $104 million in 2009, St. Eve wrote.
Also, she wrote, Chicago Studio did not contend it was completely excluded from the market.
In upholding Ellis’ grant of summary judgment on the equal protection claim, the 7th Circuit panel held Chicago Studio had not shown it was treated differently from similarly situated competitors.
Chicago Studio and Cinescope are not similarly situated, St. Eve wrote, because Cinescope’s facilities are much larger and offer more amenities.
And there were rational bases for the differing treatment, St. Eve wrote.
She wrote Cinescope consistently approached the film office and Steinberg for help with marketing and getting business. On the other hand, Chicago Studio seldom asked for assistance, St. Eve wrote.
Also, she wrote, “it was rational for Steinberg to promote the studios based on production needs.”
Chicago Studio did not have enough space to accommodate such large productions as the television series “Empire,” St. Eve wrote.
Joining the opinion were Judges Ilana Diamond Rovner and Michael Y. Scudder Jr. Chicago Studio Rental Inc., et al. v. Illinois Department of Commerce and Economic Opportunity, et al., No. 18-3134.
Frank J. Del Medico of Frank J. Del Medico Ltd. in North Riverside argued the case before the 7th Circuit on behalf of Chicago Studio. He could not be reached for comment.
Illinois Assistant Attorney General Benjamin Jacobson argued the case on behalf of the defendants.
Spokeswoman Annie Thompson said the Illinois Attorney General’s Office is pleased with the ruling.