Spanish Broadcasting System v. Clear Channel

• Citation: 376 F.3d 1065
• Decision Date: 30 June 2004
• Docket Number: No. 03-14588.,03-14588.
• Parties: SPANISH BROADCASTING SYSTEM OF FLORIDA, INC., Plaintiff-Appellant, v. CLEAR CHANNEL COMMUNICATIONS, INC., Hispanic Broadcasting Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

376 F.3d 1065

SPANISH BROADCASTING SYSTEM OF FLORIDA, INC., Plaintiff-Appellant, v. CLEAR CHANNEL COMMUNICATIONS, INC., Hispanic Broadcasting Corporation, Defendants-Appellees.

No. 03-14588.

United States Court of Appeals, Eleventh Circuit.

June 30, 2004.

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Daveed Gartenstein-Ross, Robert J. Dwyer, Armonk, NY, Stephen N. Zack, Mark Jurgen Heise, Antonio C. Castro, Hanzman, Criden, Korge, Hertzberg & Chaykin, Miami, FL, David Boies, Boies, Schiller & Flexner, LLP, Washington, DC, for Plaintiff-Appellant.

Erica Worth Harris, Stephen D. Susman, Susman Godfrey, L.L.P., G. Irvin Terrell, Samuel W. Cooper, Baker Bott, LLP, Houston, TX, Michael Nachwalter, Lauren C. Ravkind, Kenny, Nachwalter, Seymour, Arnold, Critchlow & Spector, P.A., Robert C. Josefsberg, Podhurst, Orseck, Josefsberg, Eaton, Meadow, Olin & Perwin, P.A., Miami, FL, for Defendants-Appellees.

Appeal from the United States District Court for the Southern District of Florida.

Before BLACK, BARKETT and MAGILL^*, Circuit Judges.

BARKETT, Circuit Judge:

Spanish Broadcasting System ("SBS") appeals the dismissal with prejudice of its First Amended Complaint under Sections One and Two of the Sherman Act against Clear Channel ("CC") and the Hispanic Broadcasting Corporation ("HBC"). SBS and HBC are the two largest owners of Spanish-language radio stations in the United States. SBS owns fourteen stations in seven Spanish-language radio markets, including five of the top ten U.S. Spanish-language radio markets, while HBC owns fifty-five stations and operates in each of the top ten Spanish-language markets. CC owns the largest network of English-language radio stations in the United States, covering some 1200 stations in more than 300 markets. CC also owns 26% of HBC. SBS sued CC and HBC, claiming that they had attempted to limit the ability of SBS to compete in the Spanish-language radio market and sought to drive SBS out of business by engaging in numerous practices made unlawful by the Sherman Act.

Congress passed the Sherman Act, the first major piece of antitrust legislation, in 1890. Following the Civil War, rapid industrialization under relatively limited governmental regulation allowed large firms and coordinated groups in several industries to amass considerable economic power at the expense of smaller rivals. Congress sought to restore a competitive environment and limit the formation, persistence, and power of large, anticompetitive combinations. See, e.g., Apex Hosiery Co. v. Leader, 310 U.S. 469, 491-95 & n. 15, 60 S.Ct. 982, 84 L.Ed. 1311 (1940) (discussing legislative history). Section One of the Act prohibits contracts, combinations and conspiracies in restraint of trade, while Section Two prohibits monopolization, attempted monopolization and conspiracy to monopolize. 15 U.S.C. §§ 1-2. Although Congress has also barred specific practices through subsequent legislation, and although the interpretation and enforcement of these provisions has varied considerably over time, the Sherman Act remains the basic cornerstone of antitrust law.

Because the Sherman Act contains only general language, courts have played an extremely important role in shaping the reach of the Act and the requirements for stating a cause of action under each section. Critically, under both sections, an antitrust plaintiff must show harm to competition in general, rather than merely damage to an individual competitor. See Am. Key Corp. v. Cole Nat'l Corp., 762 F.2d 1569, 1579 n. 8 (11th Cir.1985) ("Harm to competition is a necessary element of all private antitrust suits under Sections 1 and 2 of the Sherman Act...."). As the Supreme Court has explained:

[T]he purpose of the [Sherman] Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market. The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself. It does so not out of solicitude for private concerns but out of concern for the public interest.

Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 459, 113 S.Ct. 884, 122 L.Ed.2d 247 (1993). This case turns in large part on whether SBS has met its obligation to allege facts that would support a showing of this harm to competition, rather than merely to itself.

The complaint¹ contained claims against both CC and HBC as follows: (1) CC and HBC have conspired to adversely affect SBS's stock price by pressuring analysts not to cover SBS stock, by leaking confidential information about an attempted acquisition of SBS, and by encouraging investors to sell SBS stock; (2) CC and HBC have conspired to make it more difficult for SBS to acquire new radio stations by bidding up prices and by wrongfully appropriating business opportunities created by SBS; and (3) CC and HBC have induced various SBS employees to breach their contracts and join HBC. In addition, the complaint contained specific claims against CC alone: (4) CC hindered SBS's ability to raise capital by spreading rumors about an SBS executive and by threatening to withdraw CC's own business from an underwriting firm if it worked with SBS; and (5) CC leveraged its ownership of both concert venues and a Hispanic entertainment company in order to discourage advertisers from purchasing time on SBS.

SBS alleged that these practices constituted an agreement between CC and HBC to restrain trade in violation of Section One of the Sherman Act as well as attempted monopolization by both CC and HBC of the major Spanish-language radio markets in violation of Section Two of the Act. In addition to federal antitrust violations, SBS claimed causes of action under Florida and California statutes and under various common law theories.

The district court dismissed SBS's complaint with prejudice, pursuant to Federal Rule of Civil Procedure 12(b)(6), after concluding that SBS could not meet the requirements necessary to maintain a Sherman antitrust suit. On appeal, SBS argues that the district court erred as a matter of law in dismissing the complaint, abused its discretion in failing to grant leave to amend the complaint, and erred in dismissing the complaint with prejudice.

We review de novo a district court decision to dismiss an antitrust complaint under Rule 12(b)(6) for failure to state a claim. Lowell v. Am. Cyanamid Co., 177 F.3d 1228, 1229 (11th Cir.1999). We accept the factual allegations in the complaint as true and make all reasonable inferences in favor of the non-moving party. The threshold of sufficiency that a complaint must meet to survive a motion to dismiss is exceedingly low, and Rule 12(b)(6) dismissals are particularly disfavored in fact-intensive antitrust cases. Quality Foods de Centro America, S.A. v. Latin American Agribusiness Dev. Corp., S.A., 711 F.2d 989, 994-95 (11th Cir.1983). The complaint should only be dismissed with prejudice if it appears beyond doubt that SBS can prove no set of facts which would entitle it to relief. St. Joseph's Hosp., Inc. v. Hosp. Corp. of Am., 795 F.2d 948, 953 (11th Cir.1986).

In this case, neither the complaint nor the appellate briefs are models of clarity in defining the precise claims brought under the antitrust laws or describing how the factual allegations in the complaint satisfy the necessary elements of each specific claim. Nonetheless, we will attempt to categorize the claims in terms of existing antitrust case law.

I. Sherman Act Section One

Section One of the Sherman Act provides:

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States or with foreign nations, is declared to be illegal.

15 U.S.C. § 1. Thus, Section One prohibits combinations and conspiracies that restrain interstate or foreign trade. This provision applies both to agreements between companies that directly compete with one another, called "horizontal" agreements, and to agreements between businesses operating at different levels of the same product's production chain or distribution chain, known as "vertical" agreements. In addition, although some restraints on trade remain illegal per se, such as certain agreements to fix prices, most asserted antitrust violations now require "the finder of fact [to] decide whether the questioned practice imposes an unreasonable restraint on competition, taking into account a variety of factors, including specific information about the relevant business, its condition before and after the restraint was imposed, and the restraint's history, nature, and effect." State Oil Co. v. Khan, 522 U.S. 3, 10, 118 S.Ct. 275, 139 L.Ed.2d 199 (1997) (emphasis added). Section One claims that do not allege per se antitrust violations are analyzed under this "rule of reason," and the claims fail if the restraint on trade is reasonable. Both parties accept that the rule of reason applies to the Section One claims raised by SBS in this case.

Section One applies only to agreements between two or more businesses; it does not cover unilateral conduct. Fisher v. City of Berkeley, 475 U.S. 260, 266, 106 S.Ct. 1045, 89 L.Ed.2d 206 (1986) ("Even where a single firm's restraints directly affect prices and have the same economic effect as concerted action might have, there can be no liability under § 1 in the absence of agreement."). Thus, for the purposes of our Section One analysis, we only consider the alleged conspiracy between CC and HBC. Unfortunately, SBS does not specify the precise nature of the agreement alleged in its complaint or connect it to any particular anti-trust theory identified in the case law. Even if we were to assume that CC and HBC acted in concert for purposes of Section One, however, we would still affirm here, given that SBS failed to allege sufficient anticompetitive effect, a critical component of any antitrust claim.

Under Eleventh Circuit case law, alleged S...