Film Production Company Can’t Sue for Lost Profit

When a film production equipment rental company in Chicago began losing business to a new competitor, it sought to blame a state economic development agency. The company sued the state agency, alleging that the agency conspired to steer state incentives to the new business in violation of the U.S. Constitution and the Sherman Antitrust Act. The appellate panel disagreed, finding that the actions of the state agency were not actionable, as the competitor had consistently reached out to the state agency for help, applied for grants and development programs that the plaintiff did not, and offered superior equipment and facilities for film production.

Since 1979, Chicago Studio has operated a film and television production studio in Chicago, Illinois. Chicago Studio has four studio stages measuring 62,000 square feet. Chicago Studio requires production companies to lease its production equipment for a 0.4% charge. The studio does not have installed air conditioning, but Chicago Studio provides industry-standard portable air conditioning units for an additional charge. Additionally, Chicago Studio does not have screen docks, which allow large trailers to unload equipment inside the studio.

Cinespace began operating a studio in Chicago around 2010. By the end of 2012, Cinespace had 600,000 square feet of floor space and 10 stages. The studio expanded to 1.5 million square feet of floor space and 30 stages by Januar 2015. Cinespace’s studio can accommodate two-story sets and includes air conditioning, inside breezeways and scene docks, concrete floors, sound-proof walls, and new offices. Cinespace permits production companies to use any equipment rentals they choose, including an unaffiliated equipment rental company called Cinelease that charges 0.2%.

Chicago Studio sought to put the blame for its failure to make a profit following Cinespace’s opening on the Illinois Department of Commerce and Economic Opportunity, Illinois Film Office, and Betsy Steinberg, a state employee responsible for promoting the Illinois film industry. Chicago Studio alleged that the defendants unlawfully steered state incentives and business to Cinespace in violation of the Sherman Act and equal protection and due process under the Fourteenth Amendment. The district court granted the defendants’ motions to dismiss the Sherman Act and due process claims. It later granted summary judgment on the equal protection claim to the defendants. Chicago Studio then appealed.

The appellate panel began by noting that Cinespace consistently reached out to Steinberg and IFO for assistance with marketing and procuring film and television production business, and it also hired a lobbyist to apply for grant money from the State of Illinois. The panel stated that Steinberg also provided help to Chicago Studio whenever it asked, though it rarely did. The panel stated that Chicago Studio had not identified a single instance where it reached out to Steinberg for help, and Steinberg refused.

The panel then noted that the Illinois film industry became more profitable over the relevant period, and that, at best, Chicago Studio had pled an injury to itself, not an anticompetitive injury to the market. Citing NYNEX Corp v. Discon, the panel stated that a decrease of Chicago Studio’s share of the film production market and its inability to compete with Cinescape were injuries to itself and thus not proper antitrust issues. The panel thus found that Chicago Studio failed to plead an antitrust injury and the district court properly dismissed its Sherman Act claim.

Next, the panel turned to the district court’s ruling on the equal protection claim. The panel noted that Chicago Studio’s claim was a class-of-one equal protection claim against Steinberg in her individual capacity. The panel stated that Chicago Studio and Cinespace were not similarly situated because the undisputed facts demonstrated that they differed in material ways. The panel stated that based on the differences in the two studios’ capacities and capabilities, no rational factfinder would consider them to be similarly situated. The panel then stated that the claim also failed because there was a rational basis for Steinberg’s conduct, namely that it was rational to offer more assistance to a studio that asked for more help. The panel, therefore, affirmed the decision of the district court.

You can read the decision here.

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