Associated Press v. Taft-Ingalls Corporation

• Decision Date: 18 January 1965
• Docket Number: No. 15514.,15514.
• Parties: The ASSOCIATED PRESS, Plaintiff-Appellee, v. TAFT-INGALLS CORPORATION, formerly known as The Cincinnati Times-Star Company, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

340 F.2d 753 (1965)

The ASSOCIATED PRESS, Plaintiff-Appellee, v. TAFT-INGALLS CORPORATION, formerly known as The Cincinnati Times-Star Company, Defendant-Appellant.

No. 15514.

United States Court of Appeals Sixth Circuit.

January 18, 1965.

COPYRIGHT MATERIAL OMITTED

Robert T. Keeler, Cincinnati, Ohio (Taft, Stettinius & Hollister, Robert T. Keeler, Robert G. Stachler, Cincinnati, Ohio, on the brief), for appellant.

Timothy S. Hogan, Cincinnati, Ohio (Cohen, Baron, Druffel & Hogan, Timothy S. Hogan, Cincinnati, Ohio, on the brief), for appellee.

Before O'SULLIVAN, PHILLIPS and EDWARDS, Circuit Judges.

PHILLIPS, Circuit Judge.

Three principal daily newspapers were published in Cincinnati, Ohio, prior to 1958: (1) An afternoon newspaper owned by appellant, known as The Cincinnati Times-Star, (2) The Cincinnati Post, also an afternoon paper, which was a part of the Scripps-Howard system; and (3) The Cincinnati Enquirer, a morning paper. As of July 19, 1958, publication of The Times-Star was discontinued and the paper was sold to the owner of its afternoon competitor, the E. W. Scripps Company, and the combined afternoon newspaper thereafter has been published under the name of The Cincinnati Post and Times-Star.

Appellee, the Associated Press, filed a breach of contract action against appellant for failure to pay assessments for the AP's news services for two years following discontinuance of publication. Jurisdiction is based upon diversity of citizenship. The district judge, sitting without a jury, rendered judgment against appellant in favor of the Associated Press for $158,703.43, plus interest and costs, and dismissed a counterclaim. This appeal is from the judgment of the district court.¹

A motion to dismiss the appeal was denied. Associated Press v. Taft-Ingalls Corporation, 323 F.2d 114 (C.A.6).

The Associated Press is a non-profit corporation organized in 1900 under the Membership Corporation Law of New York. It is engaged in gathering, obtaining and procuring any and all kinds of news, which it furnishes to its members for publication. The membership of AP consists of owners of newspapers and radio and television stations. There are two types of membership, regular and associate. The costs of its operations are prorated among the members under a formula of assessments adopted by the Board of Directors, acting under the authority of its By-laws.

At the time of the incorporation of AP in 1900, a representative of Times-Star applied for and was admitted to AP membership. Times-Star subscribed to and used AP wire services as a regular member continuously from that time until discontinuance of publication 58 years later.

1) The Contract Between The Parties

This controversy arose out of a contract between the parties, entered into August 4, 1948, which provided that: "It shall continue * * * until terminated by the Member upon two years' notice, in writing, by registered mail * * *"; and further provided that: "Upon the sale or transfer of the business of the Member to which this agreement relates, the Member shall cause the Member's successor to agree in writing to fulfill the terms and conditions of this agreement during the term thereof and to apply for membership in The Associated Press in the same class as the Member."

When appellant stopped publication of Times-Star on July 19, 1958, AP was informed by telegram of the sale to Scripps and the following directions were given: "Accordingly please cancel all services * * * immediately under our contract with you." No back assessments were owing by appellant when publication of Times-Star ceased. The weekly assessment of appellant was paid through June 26, 1958, one week after publication of Times-Star had been discontinued. Thereafter no services were furnished by AP to appellant and no further payments were made. The only assessments at issue in this case are those for the two-year period after termination of publication and after delivery of the AP news wire services to appellant had been discontinued.

The district judge held that appellant was liable to AP for weekly assessments for its wire news service for the two succeeding years because appellant had not notified AP two years in advance of its termination of the news services,² and since Scripps did not become a member of AP and did not subscribe to the AP wire services previously furnished to appellant. The judgment is based upon the assessment of $1583.81 per week which was in effect on the date of termination of publication, less a saving to AP of $43 per week representing the cost of the wire and mechanical facilities, or net damages to AP of $1540.81 per week for 103 weeks.

2) The AP Wire Services

Appellant alleges and appellee admits that AP has an established practice of requiring a member newspaper in the metropolitan cities of this geographical area of the United States to receive and pay for all three of its basic news wire services to such city, and, in addition, in Cincinnati, required appellant to receive and pay for the Kentucky wire as a part of the basic service. This practice, appellant contends, constitutes an unlawful tying arrangement in violation of Section 1 of the Sherman Act,³ and renders the contract void and unenforceable.

This AP policy and practice of "tying" four wire services together in a single "package" and requiring that appellant take and pay for four wire services in order to receive any one of them is the principal issue on this appeal.

The wire⁴ services provided by AP under its contract with appellant were described in a letter from AP's Chief of Bureau at Columbus, Ohio, to the editor of Post and Times-Star dated August 1, 1958, as follows:

"Pursuant to our telephone conversation I am listing below the basic news service that was delivered to the Cincinnati Times-Star and is proposed to be delivered to the Post and Times-Star;

"`A\' trunk circuit. This is a general news wire carrying stories of top general interest.

"`D\' trunk circuit. This circuit carries financial stories, commodity quotations and other business news.

"Ohio Big Cities Circuit. This circuit carries Ohio, regional and general news copy.

"Kentucky regional. Two circuits, one operating in TTS style, one in all-caps, deliver Kentucky state news.

"Wirephotos. Full service on this facility consists of the delivery of glossyprints from day and night operation.

"The assessment for the basic minimum news service outlined above is $1,558.05 weekly.

"The assessment for Wirephoto service is $279.80 weekly.

"In addition, the Times-Star received various optional services * * *"

A stipulation of facts entered into between the parties describes the basic AP wire services furnished to Times-Star as follows:

"The leased wire news service referred to in the above contract between the AP and the Times-Star consisted of general news and stories of general interest carried and transmitted over the "A" trunk circuit; the financial stories, commodity quotations and business news carried and transmitted over the "D" trunk circuit; and the Ohio regional news and general news copy carried and transmitted over the Ohio Big Cities circuit."

3) Times-Star's Efforts to Reduce Costs

Faced with an operating deficit, appellant undertook, beginning in 1957, a stringent cost reduction program in an effort to make it possible for Times-Star to survive. A survey was made of AP, UP and INS wire costs. A substantial item of expenditure was the AP assessment, which at that time was $1452.25 per week. Appellant determined that it did not need all of AP's basic news services. On August 14, 1957, appellant wrote a letter to AP, the text of which is printed in the margin.⁵ A meeting was held in Cincinnati between representatives of AP and appellant on September 10, 1957, for the purpose of discussing a reduction in the basic news services. During this meeting appellant requested AP to furnish to it only the Ohio Big Cities circuit, which was considered the "most necessary" to appellant of the AP news services. This request would have eliminated the "A," "D" and Kentucky wires, and, if granted, would have effected a substantial reduction in appellant's operating costs. AP declined this request, stating that it was the practice of AP to require all members at Ohio trunk points to receive and pay for the "A," "D" and the Ohio Big Cities news wires, and that appellant must continue to pay the unit price for all these wires in order to receive any of them.

Previously appellant had requested information of AP as to how much was being paid for the Kentucky State wire. AP replied that:

"The Kentucky state service, subject of your October 25 inquiry, is part of the basic Associated Press service in Cincinnati, and provision of this service is an integral part of the basic service covered by your Agreement.

"There is a payment of $10.00 weekly toward maintenance of The Associated Press bureau in Lexington, but there is no separate charge for the Kentucky state wire other than that included in the contract figure. This wire is not one of the various optional services not covered by the contract figure."

Its request having been turned down, appellant continued to receive and pay for all of said basic services until continued operating losses of Times-Star compelled discontinuance of publication on July 19, 1958.

Immediately thereafter Scripps proposed to subscribe to the AP "A" wire trunk circuit service and to become an associate member of AP for that purpose. AP declined to provide "A" wire service to Scripps unless Scripps also would agree to subscribe to the "D" wire and the Ohio Big Cities wire (also known as the "S" wire). This policy of treating these three wire services as one inseparable "economic package" has been applied consistently by AP to metropolitan newspapers in this area of the United States, consisting generally of the area north of the Mason-Dixon line and east of Kansas City, Missouri.⁶

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