Ambook Enterprises v. Time Inc.

• Decision Date: 29 October 1979
• Docket Number: D,No. 1105,1105
• Citation: 612 F.2d 604
• Parties: 1979-2 Trade Cases 62,979, 5 Media L. Rep. 1989 AMBOOK ENTERPRISES, a/k/a American Book Club, on behalf of itself and all others similarly situated, Plaintiff-Appellant, v. TIME INCORPORATED, New York Times Company, J. Walter Thompson Co., Young & Rubicam International, Inc., Batten, Barton, Durstine & Osborn, Inc., American Association of Advertising Agencies, Inc., Defendants-Appellees. ocket 79-7184.
• Court: U.S. Court of Appeals — Second Circuit

Page 604

612 F.2d 604

1979-2 Trade Cases 62,979, 5 Media L. Rep. 1989

AMBOOK ENTERPRISES, a/k/a American Book Club, on behalf of itself and all others similarly situated Plaintiff-Appellant, v. TIME INCORPORATED, New York Times Company, J. Walter Thompson Co., Young & Rubicam International, Inc., Batten Barton, Durstine & Osborn, Inc., American Association of Advertising Agencies, Inc., Defendants-Appellees.

No. 1105, Docket 79-7184.

United States Court of Appeals Second Circuit.

Argued May 31, 1979.

Decided Oct. 29, 1979.

Daniel J. Kornstein, New York City (Cletus P. Lyman, and Richard A. Ash, Lyman & Ash, Philadelphia, Pa., of counsel), for plaintiff-appellant, Ambook Enterprises.

Floyd Abrams, New York City (Cahill, Gordon & Reindel, New York City, P. Kevin Castel, New York City, of counsel), for defendant-appellee The New York Times Company.

Paul, Weiss, Rifkind, Wharton & Garrison, New York City (Sidney S. Rosdeitcher, and Jack A. Horn, New York City, of counsel), for defendant-appellee Young & Rubicam, Inc.

Cravath, Swaine & Moore, New York City (Frederick A. O. Schwarz, Jr., Richard M. Hirsch, and Ronald P. Mysliwiec, New York City, of counsel), for defendant-appellee Time Incorporated.

Breed, Abbott & Morgan, New York City (David S. Patterson, Donald B. Da Parma, New York City, of counsel), for defendant-appellee J. Walter Thompson Company.

Lunney & Crocco, New York City (J. Robert Lunney, Michael J. McAllister, and Luigi P. De Maio, New York City, of counsel), for defendant-appellee Batten, Barton, Durstine & Osborn, Inc.

Donovan, Leisure, Newton & Irvine, New York City (Thomas R. Trowridge III, and John K. Hendricks, New York City, of counsel), for defendant-appellee American Association of Advertising Agencies, Inc.

Before MOORE, FRIENDLY and FEINBERG, Circuit Judges.

FRIENDLY, Circuit Judge:

I.

This private antitrust action was commenced on June 1, 1972, in the District Court for the Eastern District of Pennsylvania. Plaintiff Ambook Enterprises a/k/a American Book Club (Ambook) is a Pennsylvania partnership which was organized to engage in the retail and wholesale selling of books and records in interstate commerce. The partners were two corporations, L-Club Corporation and American Book Club. L-Club Corporation is owned by eight persons connected with a highly regarded New York investment firm; an affidavit filed on its behalf states that this action has not been authorized by it. ¹ American Book Club is owned by three individuals, one of them Cletus P. Lyman, a Philadelphia attorney, whose firm, Lyman & Ash, was counsel of record when the action was brought and has participated in its prosecution, although New York counsel has now been substituted. Ambook, which began operations in January, 1968 and conducted them as a partnership since December, 1969, discontinued these in mid-1972, shortly after this action was brought.

The defendants are Time Incorporated (Time), publisher of the well-known weekly magazine of that name; the New York Times Co. (N.Y. Times), publisher of the nation's foremost newspaper; four of the country's largest advertising agencies, J. Walter Thompson Co. (JWT); Young & Rubicam International, Inc. (Y & R); Batten, Barton, Durstine & Osborn, Inc. (BBD&O); and Ted Bates & Company, Inc. (Bates); ² and American Association of Advertising Agencies (4As), a trade association engaged in formulating policies for and promoting its members including the above-named agency defendants. Ambook placed advertisements with Time and N.Y. Times, and 43 other non-defendant publications, but had no dealings with JWT, Y&R, BBD&O or Bates. It placed its ads at various times through three interrelated agencies, Newmark, Posner & Mitchell, Inc., Victor Schiff & Co. (a "division" of the Kaplan Agency), and Schiff/Brown & Co. (hereafter collectively referred to as Schiff-Brown), ³ none of which was named as a defendant.

Ambook sought in an amended complaint to bring the action "individually and in a representative capacity on behalf of the class of all similarly situated advertisers, namely, producers, wholesalers and retailers of goods and services in interstate commerce in the United States who advertise in publications." The gravamen of the complaint was that by agreement between the two named publishers and countless others, the 4As, the named agencies and countless others, plaintiff and the class it wished to represent had been forced to utilize the services of advertising agencies, since the publishers granted the agencies a uniform discount of 15%, whereas any advertiser who wished to place an advertisement directly with the publisher was forced to pay the charges set in rate cards, which were 17.6% ⁴ above the rates charged the agencies and, in addition, pay the costs of various services many of which were furnished by the agencies and paid for by them out of the 15% Discount. The complaint alleged that as a result of this conspiracy Ambook had paid the two publisher defendants $4,000 and other "conspirator publications" $20,000 more than if it had been able to receive the 15% Discount and pay its own expenses for doing what Schiff/Brown did. The corresponding figures for the class were estimated as at least $30 million for Time and the N.Y. Times and $300 million for unnamed "conspirator publications". Damages were sought against all defendants in an amount in excess of $500,000 for Ambook and in excess of $1 billion for members of the class. Injunctive relief was also requested. The District Court for the Eastern District of Pennsylvania transferred the action, pursuant to 28 U.S.C. § 1404, to the District Court for the Southern District of New York where it was assigned to Judge Griesa.

In February, 1973, Time moved for a determination that the action could not be maintained as a class action. Ambook cross-moved for an order which, Inter alia, would allow the filing of a second amended complaint and would determine that the action should proceed as a class action. One count in the proposed second amended complaint was based on the Robinson-Patman Act, 15 U.S.C. § 13. As a result of a hearing, Ambook submitted a revised definition of classes. This narrowed the field to three damage subclasses and one injunctive class. The damage subclasses were all advertisers in Time from January 1, 1968, all advertisers in the N.Y. Times excluding classified and retail advertisers from the same date, and all motion picture advertisers in the N.Y. Times from the same date; ⁵ the injunctive class consisted of "(a)ll persons and entities who have advertised or who are likely to advertise in the future in the publications" of Time and the N.Y. Times.

In a considered opinion, 60 F.R.D. 476 (S.D.N.Y.1973), Judge Griesa held that the action could not be maintained as a class action. Agreeing with that determination, we see no need to discuss all the reasons the judge gave for it. It suffices that Ambook was out of business and that there was no assurance that it was "in a position to carry on class litigation in this Court in a responsible and vigorous manner", 60 F.R.D. at 487; that Ambook had no dealings with the four agency defendants whom it had named and thus might stand differently from advertisers who had; and that, as subsequent discussion will reveal, much may hang on the ability of a particular advertiser to have established an "in house" advertising organization which the publishing defendants might have recognized or to perform equivalent services. The judge denied the motion to file the proposed second amended complaint without prejudice to a motion to file a further pleading devoid of class action allegations. An appeal to this court was dismissed for want of appellate jurisdiction, even under the "death-knell" doctrine then prevailing in this circuit but subsequently rejected by the Supreme Court in Coopers & Lybrand v. Livesay, 437 U.S. 463, 98 S.Ct. 2454, 57 L.Ed.2d 351 (1978).

Plaintiff thereupon moved for leave to file a second amended complaint without class action allegations. The court granted this, with two exceptions. It struck a claim of discrimination under the Robinson-Patman Act on the ground that that statute deals only with the sale of commodities, and prayers for injunctive relief under 15 U.S.C. § 25, since § 25 refers only to suits by the United States, and 15 U.S.C. § 26, authorizing injunctive relief for private parties "against threatened loss or damage by a violation of the antitrust laws", since Ambook had been out of business since mid-1972 and was in the process of liquidation.

Although the quondam action for a billion dollars in damages and a sweeping injunction had thus dwindled to a relatively small damage suit on its own behalf, Ambook continued to pursue it with considerable vigor. After extensive pretrial proceedings, defendants moved for summary judgment in June, 1976, which was denied a year later, primarily on the ground of lack of sufficient evidence concerning the relationship between Ambook and Schiff-Brown, 464 F.Supp. at 1129-30. After further discussion of the issues, Ambook designated the witnesses it would call on that issue at a trial of the action. These were Victor Schiff and Stephen Brown, the principals of the three advertising agencies Ambook had used; K. Elia Georgiades, a former Vice President of Ambook; and Milton Pierce, a person in the advertising business who had introduced Ambook to Schiff. Their depositions were taken and plaintiff accepted their testimony as true except as noted in a letter of plaintiff's attorney dated March 24, 1978, which also indicated that Ambook might call an economist to testify what fees might be paid to advertising agencies in a free market environment.

On May 1, 1978, defendants renewed their motion for summary judgment. The court granted this on January 11, 1979, in a lengthy and reasoned opinion, 464 F.Supp. 1127. Plaintiff has appealed.

II.

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