533 F.2d 1081 (9th Cir. 1975), 72-2021, Noble v. McClatchy Newspapers

Docket Nº:72-2021, 72-2042.
Citation:533 F.2d 1081
Party Name:Willard M. NOBLE and Etta M. Noble, Plaintiffs-Appellees, v. McCLATCHY NEWSPAPERS, a corporation, et al., Defendants-Appellants. Willard M. NOBLE and Etta M. Noble, Plaintiffs-Appellants, v. McCLATCHY NEWSPAPERS, a corporation, et al., Defendants-Appellees.
Case Date:November 14, 1975
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 1081

533 F.2d 1081 (9th Cir. 1975)

Willard M. NOBLE and Etta M. Noble, Plaintiffs-Appellees,

v.

McCLATCHY NEWSPAPERS, a corporation, et al., Defendants-Appellants.

Willard M. NOBLE and Etta M. Noble, Plaintiffs-Appellants,

v.

McCLATCHY NEWSPAPERS, a corporation, et al., Defendants-Appellees.

Nos. 72-2021, 72-2042.

United States Court of Appeals, Ninth Circuit

November 14, 1975

Rehearing Denied May 20, 1976.

Page 1082

Richard Haas (argued), Brobeck, Phleger & Harrison, San Francisco, Cal., for defendants-appellants in 72-2021, for defendants-appellees in 72-2042.

Timothy H. Fine (argued), of the Law Offices of G. Joseph Bertain, Jr., San Francisco, Cal., for plaintiffs-appellees in 72-2021, for plaintiffs-appellants in 72-2042.

OPINION

Before BROWNING and TRASK, Circuit Judges, and GRAY, [*] District Judge.

BROWNING, Circuit Judge:

Willard Noble and his wife, Etta, were distributors of the Sacramento Bee newspaper. Their distributorship was cancelled. They brought this private antitrust action against McClatchy Newspapers, publisher of the Bee, and seven individuals. 1

Three claims are at issue on these appeals: First, that defendants violated section 1 of the Sherman Act to plaintiffs' injury by terminating plaintiffs' distributorship; second, assuming the lawfulness of the termination of plaintiffs' distributorship that defendants violated section 1 of the Sherman Act to plaintiffs' injury by preventing plaintiffs from selling their distributorship after termination; and third, that defendants violated section 2 of the Sherman Act to plaintiffs' injury by monopolizing the publication of daily newspapers of general circulation in the relevant market.

The case was tried to a jury. The jury returned a verdict for defendants on claim one (the termination claim) and three (the monopolization claim), and for plaintiffs on claim two (the sale-of-business claim). Judgment was entered in favor of plaintiffs on the sale-of-business claim in the amount of $63,333.04 $15,000 in damages, trebled, costs and attorneys' fees of $18,333.04.

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Defendants appeal the denial of their motion for judgment n. o. v. or a new trial on the sale-of-business claim. Plaintiffs appeal the denial of injunctive relief with respect to this claim. They also urge that errors in jury instructions and rulings on evidence infect the judgment as to the termination and monopolization claims, and seek a new trial on these claims if defendants succeed in their appeal of the judgment as to the sale-of-business claim.

BACKGROUND FACTS

Willard Noble was an independent city newsstand distributor for the Sacramento Bee from October 1, 1960, to July 1, 1969, under three contracts with McClatchy Newspapers. Etta Noble was a party to the third of these contracts, entered on April 18, 1969.

Under the distributorship contracts, plaintiffs were responsible for sale and distribution of the Bee in an area referred to as "Newsstand # 5," encompassing a portion of the City of Sacramento and its suburbs. Plaintiffs purchased daily and Sunday copies of the Bee from McClatchy Newspapers at wholesale and resold them from newspaper vending racks and to retail outlets. Unsold papers could be returned at cost, but plaintiffs assumed full responsibility for copies lost through theft or other causes.

Paragraph nine of the distributorship contracts provided that if plaintiffs decided to transfer their route they would give McClatchy Newspapers sixty days' notice, that McClatchy had "the right to determine the qualifications of the proposed new distributor," and that McClatchy's consent to transfer "shall be required, and will not be unreasonably withheld." 2 Paragraph eleven provided that the contract "may be cancelled by either party at any time upon thirty days prior written notice to the other party."

By letter dated May 27, 1969, McClatchy Newspapers cancelled plaintiffs' distributorship effective July 1, 1969. The reason for this action was disputed. Plaintiffs contended their refusal to agree to split their distributorship territory "was a substantial factor in causing (McClatchy) to terminate them." Defendants contended that the distributorship was terminated because of Willard Noble's "continued stream of complaints" regarding such matters as late delivery of papers and McClatchy's refusal to compensate distributors for theft losses." 3

According to defendants, the difficulties with Noble came to a head during a telephone conversation between Noble and defendant Carlo Bua, assistant circulation manager. Bua testified that the conversation "started as a griping session" during which Noble complained "about the thefts of his papers, the late papers, he couldn't get qualified help, and so forth and so on." Noble questioned whether the Bee was properly accounting for theft losses in reporting its circulation to the Audit Bureau of Circulation, an independent organization whose audits of publishers' circulation statements are heavily relied upon by advertisers. Noble also said he believed the distributorship contract was illegal insofar as it forbade bulk sales of unsold copies of

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editions that contained advertising discount coupons. 4 Bua "mentioned" that the solution to Noble's problems would be to split his distributorship. Noble replied that "under no circumstances would he want to split his distributorship." 5 Bua reported the substance of the conversation to defendant Byron Conklin, the circulation manager.

Conklin testified that Noble's complaints were "the straw that broke the camel's back"; his "patience was exhausted." He consulted his supervisor, O. J. Brightwell, business manager of the Bee, explaining that "his department was no longer able to get along with Mr. Noble," and recommending that he be terminated. Brightwell agreed. The cancellation letter was sent the following day.

A few days later Conklin told Bua, "now is the best time to split Newsstand 5." He instructed Bua "to find a satisfactory boundary line." Noble asked for reinstatement. Conklin refused. Noble asked if he could sell his distributorship. Conklin said "he had nothing to sell," and in any event McClatchy had plans to split the distributorship. Noble asked that he be allowed to "retain a portion of (his) dealership if it was split." Conklin refused.

Bua decided on a two-part division of Newsstand 5. Conklin initiated discussions with defendant Gary Downing, an employee of the Bee's circulation department, about becoming a distributor in a portion of Newsstand 5. Defendant James Gallagher, the Bee distributor for Newsstand 2, requested that he be considered for the remaining portion. Downing and Gallagher entered into distributorship contracts for the divided portions of Newsstand 5, effective July 1, 1969. With the permission of McClatchy, Gallagher sold his business in Newsstand 2 for $6,000.

DEFENDANTS' APPEAL

The sole issue on defendants' appeal is whether the district court erred in denying their motion for judgment n. o. v. or new trial on plaintiffs' sale-of-business claim. 6 We agree with defendants that the motion should have been granted.

Instructions given by the district court on the sale-of-business claim are reproduced in the margin. 7 According to these instructions

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the claim rested entirely upon the unlawfulness of defendants' refusal to authorize plaintiffs to sell Newsstand 5. For the purpose of this claim, lawfulness of the termination was to be treated as irrelevant. The jury was instructed to consider the sale-of-business claim separate and apart from the termination, and "irrespective of whether or not the termination of the contract was lawful." 8 It follows that plaintiffs' recovery under the sale-of-business claim may be sustained only if there was evidence from which the jury could conclude that after termination plaintiffs owned a valuable asset. Such proof was lacking. 9

Upon receipt of the letter of termination, as defendants accurately put it, "plaintiffs owned nothing but a contractual right to distribute the Bee for thirty-odd days." The witnesses who testified regarding the value of this right agreed that it was worthless. 10 Nothing in the distributorship contract purported to give plaintiff a right to sell, after termination, as if termination had not occurred. 11 There was no

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evidence of a trade practice to this effect. 12 The only reasonable conclusion the jury could draw from the record was that no damage had been shown under the sale-of-business claim. See Chisholm Bros. Farm Equip. Co. v. International Harvester Co., 498 F.2d 1137, 1139-40 & n. 5 (9th Cir. 1974). The insufficiency could not be cured by retrial; accordingly, the district court erred in refusing to grant the defendants' motion for judgment n. o. v. 13

PLAINTIFFS' CROSS-APPEAL

Because plaintiffs' judgment on the sale-of-business claim must be reversed, we consider plaintiffs' contention that they are entitled to a new trial on the termination and monopolization claims because of alleged errors in the jury instructions and in the admission and exclusion of evidence. We conclude that a new trial is required on the termination claim.

Plaintiffs alleged that their distributorship was terminated in substantial part because they refused to accede to defendants' request that they give up a part of the territory covered by the distributorship. The district court instructed the jury as follows:

If you should find from the evidence that defendants or some of them wished plaintiffs to agree to confine their sales of the Sacramento Bee to a particular part of Newsstand No. 5, that the plaintiffs refused to agree to this, and that their alleged refusal was a substantial factor in the termination of...

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