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WOODBURY DAILY TIMES CO. v. LOS ANGELES TIMES-WASH

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY


August 16, 1985

WOODBURY DAILY TIMES CO., INC., A New Jersey Corporation t/a The Gloucester County Times, Plaintiff,
v.
LOS ANGELES TIMES-WASHINGTON POST NEWS SERVICE, DOUGLAS A. GRIPP, individually and jointly, Defendants

Brotman, District Judge.

The opinion of the court was delivered by: BROTMAN

BROTMAN, District Judge

This is an action brought under the Sherman Antitrust Act, 15 U.S.C. § 1 et seq., for injunctive relief and money damages. Plaintiff, publisher of the Gloucester County Times, a Gloucester County, New Jersey newspaper, alleges that the exclusive territorial subscription granted to the Philadelphia Inquirer by defendant, the Los Angeles Times-Washington Post News Service, constitutes an unreasonable restraint of trade in violation of the Sherman Act. Defendants move to dismiss this complaint for failure to state a claim, or in the alternative, for summary judgment. For the reasons provided below, the court will grant defendants' motion for summary judgment.

 FACTUAL HISTORY

 Plaintiff, Woodbury Daily Times Co., Inc., ("Woodbury"), is the publisher of the Gloucester County Times, (" Times "), an afternoon weekday and Sunday newspaper with primary circulation in Gloucester County, New Jersey. The principal defendant is the Los Angeles Times-Washington Post News Service, ("LAT-WP"), which provides two supplemental news services by wire to domestic newspaper subscribers. LAT-WP's general news service, intended to supplement basic newswire coverage, consists of copyrighted articles written primarily by the staffs of the newspapers owned by the Times Mirror Company and the Washington Post Company. LAT-WP's ALL-SPORTS! service provides sports news only, drawn from the same two sources. The cost of each service varies and is based primarily on the circulation of the subscribing newspaper. Douglas A. Gripp, a vice-president of LAT-WP who handled the contact with the Times, has also been named as a defendant. Although not a party to the suit, the Philadelphia Inquirer, (" Inquirer "), is central to the dispute. The Inquirer is a morning newspaper published seven days a week, serving the Philadelphia metropolitan area. The Inquirer has been a subscriber to LAT-WP's general news service since 1962, and has exclusive rights to this service in the Philadelphia metropolitan area. According to the agreement between the Inquirer and LAT-WP, the general news service cannot be sold to any other newspaper published within the defined metropolitan region. In October 1984, the Inquirer began subscribing to the ALL-SPORTS! service, under the same condition of exclusivity.

 On May 6, 1984, David C. Fiedler, Editor of the Times, called Douglas Gripp to inquire about subscribing to LAT-WP. The following day, Gripp wrote Fiedler about the two services and offered the Times a subscription to either or both services. After sending the letter, Gripp discovered that the Times was published within the area in which the Inquirer has an exclusive subscription. On May 8, 1984, Gripp telephoned Fiedler to explain that LAT-WP could not provide its service to the Times because of the exclusivity provision in the Inquirer's subscription contract. In a May 10, 1984 letter, Gripp confirmed the telephone conversation of May 8th, and stated that LAT-WP would ask the Inquirer to waive exclusivity in Gloucester County in order to permit the Times's subscription to the service. In a May 15, 1984 letter to Gripp, Fiedler reiterated the Times's desire to subscribe to the news service along with the sports service, to which the Inquirer had not at that time subscribed. In a June 15, 1984 letter, Gripp informed Fiedler that the Inquirer refused to waive exclusivity with regard to the general news service. Gripp also reported that LAT-WP was not willing to offer the Times ALL-SPORTS! because the Inquirer was considering subscribing to it and because LAT-WP was developing the new sports service to be marketed as a supplement to the general service, and not as a distinctly separate service. On October 1, 1984, plaintiff instituted this lawsuit.

  SUMMARY

 Plaintiff alleges that defendants' exclusive contracts violate the Sherman Act, 15 U.S.C. § 1 et seq. Defendants argue that the Copyright Act, 17 U.S.C. § 101 et seq. permits the exclusive arrangement with the Inquirer, and that even if grants to use copyrighted materials on an exclusive basis are subject to antitrust restrictions, the degree of exclusivity granted in this case is reasonable.

 The relationship between the exclusivity provisions sanctioned under copyright law and the monopolies banned under antitrust law has not been fully defined and delineated in case law. No bright line distinguishes the permissible from the impermissible when considering territorially exclusive, and hence, monopolistic licenses of copyrighted materials. However, the disposition of this case does not depend on a solution to this complex problem. A monopolistic grant to use copyrighted materials that the Sherman Act forbids but the Copyright Act allows may one day squarely confront the courts and force judicial consideration of this conflict. However, because the court determines that defendants' conduct does not violate the Sherman Act, it need not address the copyright defense raised by LAT-WP.

 DISCUSSION

 Summary judgment shall be granted when "there is no genuine issue as to any material fact" and "the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party has the burden of proof, and all doubts must be resolved in favor of the nonmoving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 26 L. Ed. 2d 142, 90 S. Ct. 1598 (1970); Tomalewski v. State Farm Life Insurance Co., 494 F.2d 882 (3rd Cir. 1974); Smith v. Pittsburgh Gage and Supply Co., 464 F.2d 870, 874 (3rd Cir. 1972). While summary judgment is to be used sparingly in those complex antitrust cases "where motive and intent play leading roles," and "the proof is largely in the hands of the alleged conspirators," Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 7 L. Ed. 2d 458, 82 S. Ct. 486 (1962), summary judgment is appropriate in those antitrust cases where "a trial would serve no useful purpose." Lupia v. Stella D'Oro Biscuit Co., Inc., 586 F.2d 1163, 1167 (7th Cir. 1978), cert. denied, 440 U.S. 982, 60 L. Ed. 2d 242, 99 S. Ct. 1791 (1979). Such are the circumstances of this case.

 Plaintiff opposes the motion for summary judgment on the ground that material facts remain in dispute, i.e., whether the Inquirer is a substantial competitor in Gloucester County, whether the exclusivity granted to the Inquirer is broader than reasonably necessary, and ultimately, whether the Inquirer's exclusive subscription to LAT-WP represents an unreasonable restraint of trade. While it is true that these issues are at the heart of this suit, this court notes that these are not issues of fact to be determined by a factfinder at trial, but issues of ultimate fact. An ultimate fact is

 

"an outcome determinative fact, derived from historical facts by a process which 'implies the application of standards of law.' It is a mixture of fact and law ; fact because it is derived by inference or reasoning from the evidence, and law because the derivation is informed by legal principles and policies, producing a fact of independent legal significance."

 William W. Schwarzer, Summary Judgment under the Federal Rules: Defining Genuine Issues of Material Fact, 99 F.R.D. 465, 470 (1984)(emphasis added). The factual components of the issues at hand are undisputed: both plaintiff and defendants cite the same figures from the same sources with regard to circulation of the two newspapers in question. It is in the interpretation of these facts and in the application of the appropriate legal standards that the parties differ. The court may appropriately decide issues of ultimate fact on summary judgment, particularly in cases where the law content of the mixed question predominates. International Salt Co., Inc. v. United States, 332 U.S. 392, 92 L. Ed. 20, 68 S. Ct. 12 (1947); Schwarzer, supra, 99 F.R.D. at 472-75. This case, which calls for the application of antitrust law to undisputed facts, is thus properly decided on motion for summary judgment.

 Under antitrust law, it is well-established that businesses have the right to deal with whom they choose, provided of course, that their decision does not restrain trade unlawfully. The Supreme Court early on enunciated the principle that

 

in the absence of any purpose to create or maintain a monopoly, the [Sherman] Act does not restrict the long recognized right of trader or manufacturer engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal, . . .

 United States v. Colgate & Co., 250 U.S. 300, 307, 63 L. Ed. 992, 39 S. Ct. 465 (1919). This concept has been reiterated by the Court in more recent considerations of antitrust matters:

 

[A] manufacturer of a product other and equivalent brands of which are readily available in the market may select his customers, and for this purpose he may "franchise" certain dealers to whom, alone, he will sell his goods.

 United States v. Arnold, Schwinn & Co., 388 U.S. 365, 376, 18 L. Ed. 2d 1249, 87 S. Ct. 1856 (1967), rev'd on other grounds, 433 U.S. 36, 58, 53 L. Ed. 2d 568, 97 S. Ct. 2549 (1977). As a New York court stated, the cases involving exclusive territorial franchises

 

do establish a rule that an exclusive dealership is valid under the antitrust laws even though it restrains trade, provided the restraint is not unreasonable.

 United States v. Chicago Tribune-New York News Syndicate, Inc., 309 F. Supp. 1301, 1307 (S.D.N.Y. 1970). This case presents a situation of exclusive dealership. In order to determine the lawfulness of the agreement, the court must examine whether the exclusive LAT-WP subscription granted to the Inquirer unreasonably restrains trade and injures competition.

 This action concerns matters other than price, and involves a restraining agreement between two businesses on different levels of the market, that is, a vertical restraint. In judging concerted action on vertical nonprice restraints, the rule of reason standard applies, rather than a per se standard. Monsanto Co v. Spray-Rite Service Corp., 465 U.S. 752, 104 S. Ct. 1464, 79 L. Ed. 2d 775 (1984); Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 53 L. Ed. 2d 568, 97 S. Ct. 2549 (1977); Bravman v. Bassett Furniture Industries, Inc., 552 F.2d 90, 101 (3rd Cir. 1977)("Neither an exclusive dealing requirement nor a territorial sales solicitation requirement has ever been held by the Supreme Court to be a per se violation of the antitrust laws."). In order to prevail under the rule of reason standard, after showing the existence of a contract, combination or conspiracy which injures or decreases competition, plaintiff must prove that the challenged restraint is unreasonable, and therefore illegal, by showing (1) that the restraint applies to those businesses not in substantial competition with each other, or (2) that the granted exclusivity is unreasonable under the circumstances. United States v. Paramount Pictures, Inc., 334 U.S. 131, 146, 92 L. Ed. 1260, 68 S. Ct. 915 (1948); Continental T.V., Inc., supra, 433 U.S. at 49-59; Martin B. Glauser Dodge Co. v. Chrysler Corp., 570 F.2d 72, 81 (3rd Cir. 1977), cert. denied, 436 U.S. 913, 56 L. Ed. 2d 413, 98 S. Ct. 2253 (1978).

 Substantial Competition

 Plaintiff alleges that the Inquirer is not a substantial competitor in Gloucester County and that therefore the grant of the exclusive use of LAT-WP services in that county is an unreasonable trade restriction upon the flow of news.

 Both the Times and LAT-WP present circulation figures compiled by the Audit Bureau of Circulation ("ABC") to support their respective positions. The ABC defines the primary market areas for the two papers concerned and shows their circulation as follows:

  TABLE 1 * Total Average Paid Circulation in Primary Market Area (PMA) for 12 months ended March 31, 1984 Occupied Households in PMA 1984 ABC estimate Mon.-Fri. Sat. Sun. Times (PMA= Gloucester 69,800 26,694 -- ** 28,292 County, New Jersey) Inquirer (PMA= eight-county 1,636,400 475,817 414,129 875,478 area including Gloucester County) ***

19850816

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