AG claims theater owner violated antitrust law

ROCKLAND – The state attorney general has sued the owners of a midcoast theater complex, saying they stifled competition by buying a downtown movie house two years ago.

The Attorney General’s Office filed its lawsuit against Flagship Cinemas Management Inc., Strand Theatre LLC and two officers, claiming violations of Maine’s antitrust law.

Flagship’s principal offices are in Everett, Mass. It owns a 12-screen complex on Route 1 near the Thomaston-Rockland line.

“Flagship bought out a competitor,” Assistant Attorney General Francis Ackerman said Friday. “The purpose of this lawsuit is to restore competition in the Rockland and Knox County cinemas market to the level that prevailed before Flagship acquired the Strand.”

The lawsuit seeks to force the sale of the Strand on Main Street within three months to a buyer who would operate the business as a cinema. It also seeks costs for the state’s investigation, lawsuit and attorney fees. The complaint says there will be no minimum price for the sale of the real estate.

The lawsuit, filed Thursday in Knox County Superior Court, names Flagship, Strand LLC, John J. Crowley Jr. and Daniel J. Flynn as defendants.

For decades, the downtown Strand was owned and operated by Meredith Dondis, who sold it on July 13, 2000, to Peter and Denise Vivian for $165,000, according to city Assessor Marian Robinson.

On Dec. 5, 2001, the Vivians sold the property to Strand Theatre LLC for $265,000, Robinson said. Strand Theatre LLC is a Maine limited liability company affiliated with Flagship Cinemas.

Crowley acts as chief executive officer of both the limited liability company and Flagship, according to the state’s lawsuit.

Flynn is also affiliated with the limited liability company and is a principal of Flagship, according to the complaint.

Neither of the men could be reached Friday for comment.

Around Jan. 25, 2002, when the Attorney General’s Office learned of the purchase of the Strand by the limited liability company, it began an investigation to determine whether the acquisition violated antitrust law. The office concluded that it did.

Three days later, the Strand owner agreed to lease the cinema to Robert MacPherson with an option to buy. The deal presented to the Attorney General’s Office was that the old theater would be renovated by MacPherson and operated as an independent cinema. Therefore, the state decided to delay any antitrust remedy. The state believes that the lease and option to buy agreement has since been terminated.

Later, Strand owners agreed to lease the building to Triton Entertainment and its principal, Paul Wenger, who had similar plans to renovate and operate the building as a cinema. The Attorney General’s Office said it discovered that Crowley and Wenger did not disclose they are business partners or associates and together operate at least one cinema in Maryland.

After that finding, the Attorney General’s Office reopened its antitrust investigation, according to the lawsuit, and Triton and Wenger terminated the lease.

Since 2002, the state has attempted to negotiate with the limited liability company and Crowley to bring about a lease or divestiture of the Strand to an unaffiliated, independent entity that has the capacity and intention to run it as a cinema.

When asked Friday if the theater could be sold for another use, Ackerman said, “The state is trying to bring restoration of competition to a cinema market.” He did not rule out another use, but said, “Our goal and expectation is that it be used for a cinema.”

The lawsuit says that “as a result of the closure of the Vivian cinema business … Flagship’s ability to profit by charging high prices to the cinema-going public at its Rockland complex was enhanced and the choices available to the cinema-going public were reduced.” Ackerman did not know if Flagship actually increased its ticket prices after buying the Strand.

The lawsuit seeks the sale of the property with no minimum price restriction. Offers must be sent to the Attorney General’s Office, which must approve the buyer. The building must be restored to its condition when purchased by Strand LLC, and the owners must replace equipment removed since that date.

“I would be surprised if there’s not more than one offer,” Ackerman said.