TV Communications Network, Inc. v. Turner Network Television, Inc.

• Decision Date: 19 May 1992
• Docket Number: No. 91-1176,91-1176
• Citation: 964 F.2d 1022
• Parties: 1992-1 Trade Cases P 69,825 TV COMMUNICATIONS NETWORK, INC., Plaintiff-Appellant, v. TURNER NETWORK TELEVISION, INC., a/k/a TNT, a Georgia corporation, Defendant-Appellee, Entertainment and Sports Programming Network, Inc., a/k/a ESPN, Inc., a/k/a Entertainment Acquisition Ltd., a Delaware corporation; Capital Cities/ABC, Inc., d/b/a ABC Television Network, a/k/a ABC, a New York corporation; Tele-Communications, Inc., a/k/a TCI, a Delaware corporation; United Artists Entertainment Company, a/k/a UAE, a Delaware corporation; American Television and Communications Corp., a/k/a ATC, a Delaware corporation; Scripps Howard Cable Company, and Scripps Howard Communications ("SCRIPPS"), an Ohio corporation; Mile Hi Cable Company, d/b/a Mile Hi Cablevision, a/k/a Mile Hi, a Colorado corporation, Defendants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1022

964 F.2d 1022

1992-1 Trade Cases P 69,825

TV COMMUNICATIONS NETWORK, INC., Plaintiff-Appellant, v. TURNER NETWORK TELEVISION, INC., a/k/a TNT, a Georgia corporation, Defendant-Appellee Entertainment and Sports Programming Network, Inc., a/k/a ESPN, Inc., a/k/a Entertainment Acquisition Ltd., a Delaware corporation; Capital Cities/ABC, Inc., d/b/a ABC Television Network, a/k/a ABC, a New York corporation Tele-Communications, Inc., a/k/a TCI, a Delaware corporation; United Artists Entertainment Company, a/k/a UAE, a Delaware corporation; American Television and Communications Corp., a/k/a ATC, a Delaware corporation Scripps Howard Cable Company, and Scripps Howard Communications ("SCRIPPS"), an Ohio corporation; Mile Hi Cable Company, d/b/a Mile Hi Cablevision, a/k/a Mile Hi, a Colorado corporation, Defendants.

No. 91-1176.

United States Court of Appeals Tenth Circuit.

May 19, 1992.

Irvin M. Kent, Aurora, Colo. (Daniel L. Brotzman, Englewood, Colo., with him on the brief), for plaintiff-appellant.

Alan P. Shor of Troutman, Sanders, Lockerman & Ashmore, Atlanta, Ga. (John J. Dalton, P.C. and June Ann Sanders of Troutman, Sanders, Lockerman & Ashmore, Atlanta, Ga., Miles C. Cortez, Jr., and Stephen J. Hensen of Cortez Friedman & Coombe, Denver, Colo., with him on the brief), for defendant-appellee.

Before MOORE and BRORBY, Circuit Judges, and HUNTER, ^* Senior District Judge.

BRORBY, Circuit Judge.

TV Communications Network, Inc. (TVCN) appeals the district court's dismissal of its antitrust complaint for failure to state a claim upon which relief can be granted. 767 F.Supp. 1062. See Fed.R.Civ.P. 12(b)(6). TVCN further alleges the district court abused its discretion by denying TVCN leave to file a second amended complaint. We affirm.

I. BACKGROUND

TVCN's amended complaint alleges the following facts which we assume are true for the purposes of our review. TVCN is in the business of providing cable television for a fee to subscribers in Metropolitan Denver. While most subscription television operators distribute programming through coaxial cable, TVCN is a wireless cable operator which utilizes new microwave transmission technology.

Turner Network Television (TNT), the only remaining defendant, ¹ is in the business of manufacturing, producing and supplying video programming, especially National Premium Sports Programming. Turner Broadcasting Systems, Inc. (TBS) is the alter ego of TNT and is owned largely by other cable operators such as American Television and Communications Corp., Tele-Communications, Inc., United Artists Entertainment Co. and Scripps Howard Cable Company (former defendants).

Three distinct links create the chain of distribution for subscription television programming: programmers, operators and subscribers. Programmers are the manufacturers and wholesale distributors of subscription programming who create their own shows or obtain rights to other events. Operators are the retailers at the local level who distribute shows from the programmers. Subscribers are the ultimate consumers who pay the operators a monthly fee to receive the programmers' events. TNT is a programmer, and TVCN is an operator.

Since 1988, TNT has refused to allow TVCN to receive its programming in order for TVCN to offer it to its subscribers. When surveying potential subscribers in Metropolitan Denver, TVCN discovered many would not subscribe until such a time that the TNT channel is available. Existing subscribers threatened to terminate their subscription if the TNT channel is not made available. Consequently, TVCN filed this lawsuit to force TNT to make its programming available to TVCN.

The district court dismissed TVCN's amended complaint for failure to state a claim upon which relief could be granted pursuant to Fed.R.Civ.P. 12(b)(6). The district court also denied TVCN's request for leave to file a second amended complaint finding "[a]ny further amendments would serve no useful purpose."

TVCN appeals and asserts the district court erred by dismissing its complaint for failure to state a claim where the amended complaint alleged sufficient facts to support an antitrust cause of action and provided adequate notice of those claims. TVCN also claims the district court abused its discretion by refusing leave to file a second amended complaint which would cure any alleged deficiencies in TVCN's first amended complaint.

II. FAILURE TO STATE A CLAIM

Upon review of a dismissal under Rule 12(b)(6), we must assume the facts which TVCN has alleged in its amended complaint are true. Associated Gen. Contractors, Inc. v. California State Council of Carpenters, 459 U.S. 519, 526, 103 S.Ct. 897, 902, 74 L.Ed.2d 723 (1983); Monument Builders of Greater Kansas City, Inc. v. American Cemetery Ass'n, 891 F.2d 1473, 1476 (10th Cir.1989), cert. denied, 495 U.S. 930, 110 S.Ct. 2168, 109 L.Ed.2d 498 (1990). We review de novo the sufficiency of a complaint, and will dismiss only if it appears the plaintiff can prove no set of facts which entitle him to relief on his claim. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957); Cayman Exploration Corp. v. United Gas Pipe Line Co., 873 F.2d 1357, 1359 (10th Cir.1989). "[I]f as a matter of law 'it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations' a claim must be dismissed." Neitzke v. Williams, 490 U.S. 319, 327, 109 S.Ct. 1827, 1832, 104 L.Ed.2d 338 (1989) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232-33, 81 L.Ed.2d 59 (1984)).

Although the modern pleading requirements are quite liberal, a plaintiff must do more than cite relevant antitrust language to state a claim for relief. See Mountain View Pharmacy v. Abbott Labs., 630 F.2d 1383, 1387 (10th Cir.1980). A plaintiff must allege sufficient facts to support a cause of action under the antitrust laws. Conclusory allegations that the defendant violated those laws are insufficient. Id. (citing Klebanow v. New York Produce Exch., 344 F.2d 294, 299 (2d Cir.1965)).

Our review of TVCN's amended complaint reveals the allegations contained therein fail to state any claim for relief against TNT. Accordingly, we affirm the district court's order dismissing the amended complaint against TNT.

A. Section 2 of the Sherman Act

Section 2 of the Sherman Act prohibits monopolies in interstate trade or commerce. ² Conduct violates this section where an entity acquires or maintains monopoly power in such a way as to preclude other entities from engaging in fair competition. United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 389-90, 76 S.Ct. 994, 1003-04, 100 L.Ed. 1264 (1956); Instructional Sys. Dev. Corp. v. Aetna Cas. & Sur. Co., 817 F.2d 639, 649 (10th Cir.1987).

1. Monopolization

The two elements required to maintain a section 2 monopoly claim are: "(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 1703-04, 16 L.Ed.2d 778 (1966); Reazin v. Blue Cross & Blue Shield of Kansas, Inc., 899 F.2d 951, 973 (10th Cir.), cert. denied, --- U.S. ----, 110 S.Ct. 3241, 111 L.Ed.2d 752 (1990). As discussed, TVCN must plead facts sufficient to support these elements to survive a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6).

TVCN's amended complaint alleges TNT monopolized the market for the TNT channel in Metropolitan Denver. TVCN claims TNT has complete control of the TNT channel market with a 100% market share. Furthermore, TVCN alleges TNT has misused its monopoly power to gain competitive advantage and has restrained trade unreasonably. Finally, TVCN charges TNT has engaged in illegal territorial allocations, refusing access to essential facilities, and in anticompetitive, exclusionary, boycott, price-fixing and unfair acts. TVCN concludes TNT's actions are unreasonable and against their own individual interest.

TVCN fails to allege a relevant market which it is capable of monopolizing. TVCN's amended complaint specifically names the TNT channel as the relevant product market monopolized by TNT. However, a company does not violate the Sherman Act by virtue of the natural monopoly it holds over its own product. See E.I. du Pont de Nemours, 351 U.S. at 393, 76 S.Ct. at 1006; Key Fin. Planning Corp. v. ITT Life Ins. Corp., 828 F.2d 635, 643 (10th Cir.1987). Consequently, TVCN has not alleged a relevant market which TNT is capable of monopolizing in violation of the antitrust laws.

Contrary to the allegations in its amended complaint, TVCN asserts on appeal that the market for the TNT channel is not the relevant market to consider. TVCN now alleges the relevant product market is subscription television programming or sports programming. This new definition of the relevant market is futile as it mischaracterizes the allegations in the amended complaint. The amended complaint must stand or fall on its own. We hold the relevant market as defined in the amended complaint is defective as a matter of law. Because we conclude TVCN failed to allege the first monopolization element--monopoly power in the relevant market, we need not consider the second element--TNT's unlawful acquisition or maintenance of monopoly power. We conclude TVCN has failed to state a monopolization claim against TNT. We therefore affirm the district court's dismissal of TVCN's monopolization claim against TNT pursuant to Fed.R.Civ.P. 12(b)(6).

2. Attempt to Monopolize

The four elements necessary to establish an attempt to monopolize claim are: "(1) relevant market (including geographic market and relevant product market); (2) dangerous probability of success in monopolizing the relevant market; (3) specific intent to monopolize; and (4) conduct in furtherance of such...