Auburn News Co., Inc. v. Providence Journal Co., Civ. A. No. 80-0446.

CourtU.S. District Court — District of Rhode Island
Writing for the CourtFRANCIS J. BOYLE
Citation504 F. Supp. 292
PartiesAUBURN NEWS COMPANY, INC. et al. v. PROVIDENCE JOURNAL COMPANY et al.
Docket NumberCiv. A. No. 80-0446.
Decision Date14 November 1980

504 F. Supp. 292

AUBURN NEWS COMPANY, INC. et al.
v.
PROVIDENCE JOURNAL COMPANY et al.

Civ. A. No. 80-0446.

United States District Court, D. Rhode Island.

November 14, 1980.


504 F. Supp. 293
COPYRIGHT MATERIAL OMITTED
504 F. Supp. 294
Frank Licht, Richard A. Licht, Letts, Quinn & Licht, and Leonard DeCof, Providence, R.I., for the plaintiffs

Edward F. Hindle, Joseph Cavanagh, Jr., Edwards & Angell, Providence, R.I., Daniel C. Kaufman, King & Ballow, Nashville, Tenn., for defendants.

OPINION

FRANCIS J. BOYLE, District Judge.

This action concerns alleged violation of Sections One and Two of the Sherman Antitrust Act, 15 U.S.C. §§ 1, 2 (1976), alleged violation of the analogous Rhode Island Antitrust statutes, R.I. Gen. Laws § 6-36-1, et seq. (Supp.1980), as well as an alleged breach of the common law duty not to wrongfully interfere with contractual relationships. The Plaintiffs seek a Preliminary Injunction pursuant to Rule 65(a) of the Federal Rules of Civil Procedure.

504 F. Supp. 295

THE PARTIES

Plaintiffs are eighteen independent distributors who purchase at wholesale Defendants' newspapers and a much smaller number of out-of-town newspapers and distribute those newspapers by direct sale or through home delivery carriers in precisely delineated areas whose boundaries are strictly observed. Defendant, The Providence Journal Company (hereinafter, the Journal), is the publisher of The Providence Journal, The Evening Bulletin, The Providence Journal-Bulletin, and The Providence Sunday Journal. These newspapers circulate throughout Rhode Island and in parts of Southeastern Massachusetts. The Providence Journal is the only morning newspaper published and sold in Rhode Island. The Providence Journal-Bulletin is the only Saturday morning newspaper published and sold in Rhode Island. The Providence Sunday Journal is the only Sunday morning newspaper published and sold in Rhode Island. Only The Evening Bulletin is subject to direct competition from other Rhode Island local newspapers.

FACTUAL BACKGROUND

For many years the Journal distributed its newspapers by selling to distributors who in turn sold to stores and home delivery carriers. Through the years the boundaries of each distribution area crystalized. In essence, the market for sale of the Journal's papers was divided into distributorships. There is testimony to indicate the territorial division was maintained not by any coercion of the Plaintiffs or Defendants, but by a mutual understanding that it was the most efficient and effective way to conduct business.

In 1973 the Journal decided to attempt to acquire some of these independent distributorships and distribute its newspapers itself. In furtherance of this goal Southern New England News Distributors, Inc. (hereinafter Southern New England) was formed. Southern New England was a wholly owned subsidiary of the Journal.

In March, 1973, a meeting of independent distributors was called by Mr. Koehler, the Journal's circulation director. Mr. Koehler and the independent distributors met at a country club for breakfast. The purpose of the meeting was to announce a change in the Journal's policy. From that point on, the Journal would not recognize distributorships sold to anyone other than Southern New England. The Journal would buy the distributorships at "fantastic" prices, starting at a 100% increase over the cost and going "all the way to 800-900% and/or over." In effect, the Journal would not sell its product to any new distributors. When one of the distributors asked if he would be permitted to sell his business to a son or daughter, the Journal spokesman stated that a sale to a member of a distributor's immediate family would be proper.

The apparent rigidity of the Journal's new policy was not always followed. Following the breakfast meeting, some distributorships were sold to persons who were not members of the immediate family of a distributor.

Sometime in late 1979 or early 1980, the Journal decided to step up its plan for in-house distribution of its newspapers. There is evidence that the Journal's decision was based on a number of business reasons including: the ability to control price; the ability to obtain detailed information on subscribers and nonsubscribers; direct access to the carrier or store owner; and the ability to improve market penetration. Further, the Journal had outside management consultants' advice.

On the other hand, there is evidence of a different scenario. Plaintiffs point to evidence which indicates the studies and reports of the Journal succeeded the decision to distribute directly, that the studies and reports were generated thereafter only to provide a basis for arguing the decision to go in-house was founded on sound business reasons and not anti-competitive intent.

In a letter dated August 11, 1980, the Journal informed all distributors that as of September 6, 1980, the Journal would no longer sell its newspapers at wholesale rates to independent distributors. The letter

504 F. Supp. 296
went on to invite the distributors to discuss a price for their distributorship with the Journal. Of the thirty-two independent distributors at the time of the August 11 letter, fourteen sold to the Journal. Plaintiffs are those distributors who did not sell. The Journal also published in its newspapers advertisements notifying home delivery carriers, including those who purchased from Plaintiffs, that they "must" contact the Journal if they wished to continue delivering the Journal's papers

On September 5, 1980, this Court issued a Temporary Restraining Order, pursuant to Fed.R.Civ.P. 65(b), in effect compelling the Journal to continue to sell to the Plaintiffs. On September 24, 1980, a hearing began on the issue of whether a preliminary injunction should issue. Seven days of testimony followed and the issues were extensively briefed.

PRELIMINARY INJUNCTION

The decision to issue a preliminary injunction traditionally rests upon an examination of four factors: 1) the likelihood Plaintiffs will suffer irreparable harm; 2) the balance of this harm with the harm Defendants will suffer if they are enjoined; 3) the probability Plaintiffs will succeed on the merits; and 4) the public's interest in issuing an injunction. See Wright & Miller, Federal Practice & Procedure: Civil § 2948 (1973).

IRREPARABLE HARM

Plaintiffs claim they will suffer irreparable harm if the Journal is permitted to refuse to deal with them in that they will be forced out of business. The Journal argues that even if wrongdoing is ultimately found, money damages, easily determined, with a provision for treble damages in an antitrust action, provide an adequate remedy at law, removing the need for, and indeed requiring the denial of any interlocutory relief.

Distribution of Journal newspapers is the life blood of these Plaintiffs.1 The uncontradicted testimony is that the Plaintiffs' businesses will fold without the opportunity to distribute the Journal's papers. Indeed, the evidence is that the Journal required the independent distributors to devote full time to their businesses. Defendants themselves recognized the significance of the Journal's papers to Plaintiffs: distribution of the Journal's papers was a full time job.

Defendants argue, however, that there is an adequate remedy at law, namely money damages. Defendants point to the sale price of the distributorships as the easily determined measure of damages and argue that three times that amount is clearly an adequate remedy. The argument proves too much.

Theoretically, this argument has an apparent validity. Should Plaintiffs recover upon their theory for violation of the Sherman Act, they would be entitled not only to recover actual damages but three times their actual damage. 15 U.S.C. § 15 (1976). There are a number of real impediments to a translation of this theory into fact. Since Defendants intend to assume Plaintiffs' businesses of newspaper distribution, the real result would be that Defendants have purchased Plaintiffs' businesses, at a price determined by the Court. This result would have the effect of converting this action into a kind of private eminent domain proceeding not sanctioned by either constitutional or statutory authority.

There is also an effect upon others who are not parties to this action. At the present time Plaintiffs supply those large numbers of newspaper carriers and stores who sell Defendants' goods directly to the consumer. Although there are no written contracts with Plaintiffs, there is a natural reliance by those newspaper carriers and stores who distribute Defendant Journal's newspapers to the ultimate consumer upon the ability of the Plaintiffs to provide them with newspapers for sale. Plaintiffs have

504 F. Supp. 297
acquired or created and maintain a system of distribution involving hundreds of people, including many enterprising and hard working entrepreneurs between the ages of twelve and seventeen. Any disruption of supply would effectively terminate those businesses as effectively as it will terminate Plaintiffs' businesses. Any expectation that those relationships could be successfully resumed, after a hiatus, is not within the realm of reality. Defendants have actively solicited Plaintiffs' carriers to form a direct relationship with Defendants. An attempt to resuscitate these independent distributor-carrier business relationships while Defendant Journal is the sole source of supply would be a hope doomed to fail

There is a further factor. Although compensation for damages to parties injured by a violation of the Sherman Act may provide a substitute for the interest of those parties, damages cannot restore competition, and, in a sense, damages merely serve to thwart the lofty purpose of the Sherman Act. This is not to say that every alleged violation of the Sherman Act necessarily requires equitable relief, but preserving the existence of competitive forces it is a fact which, in...

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4 practice notes
  • McMorris v. Williamsport Hosp., Civ. No. 79-0438.
    • United States
    • United States District Courts. 3th Circuit. United States District Court of Middle District of Pennsylvania
    • September 25, 1984
    ...that a decision to sell only to a subsidiary is permissible in the usual case). But see Auburn News Co., Inc. v. Providence Journal Co., 504 F.Supp. 292, 299 & n. 2 (D.R.I.1980) (distinguishing Lamarca and Millcarek because they involved employees; holding that concerted action can be found......
  • UXB Sand & Gravel, Inc. v. Rosenfeld Concrete Corp.
    • United States
    • United States State Supreme Court of Rhode Island
    • November 19, 1991
    ...are balanced so that procompetitive effects are compared with anticompetitive effects. & Auburn News Co. v. Providence Journal Co., 504 F.Supp. 292, 300 (D.R.I.1980), rev'd on other grounds, 659 F.2d 273 (1st Cir.1981), cert. denied, 455 U.S. 921, 102 S.Ct. 1277, 71 L.Ed.2d 461 (1982). In a......
  • Leone v. Town of New Shoreham, No. 86-274-A
    • United States
    • United States State Supreme Court of Rhode Island
    • December 18, 1987
    ...quo. See Calenda v. Rhode Island Board of Medical Review, 565 F.Supp. 816, 818 (D.R.I.1983); Auburn News Co. v. Providence Journal Co., 504 F.Supp. 292, 296 (D.R.I.1980), rev'd on other grounds, 659 F.2d 273 (1st Cir.1981); see also 11 C. Wright & A. Miller, Federal Practice & Procedure: Ci......
  • Bolton v. Secretary of Health & Human Services, No. 79 C 1742.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • November 14, 1980
    ...of a claimant's subjective complaints of pain clearly must be examined in relation to all the other evidence of record in order 504 F. Supp. 292 to determine whether the degree of pain could be so severe and so continuous as to render a claimant incapable of carrying on any occupation suita......
4 cases
  • McMorris v. Williamsport Hosp., Civ. No. 79-0438.
    • United States
    • United States District Courts. 3th Circuit. United States District Court of Middle District of Pennsylvania
    • September 25, 1984
    ...that a decision to sell only to a subsidiary is permissible in the usual case). But see Auburn News Co., Inc. v. Providence Journal Co., 504 F.Supp. 292, 299 & n. 2 (D.R.I.1980) (distinguishing Lamarca and Millcarek because they involved employees; holding that concerted action can be found......
  • UXB Sand & Gravel, Inc. v. Rosenfeld Concrete Corp.
    • United States
    • United States State Supreme Court of Rhode Island
    • November 19, 1991
    ...are balanced so that procompetitive effects are compared with anticompetitive effects. & Auburn News Co. v. Providence Journal Co., 504 F.Supp. 292, 300 (D.R.I.1980), rev'd on other grounds, 659 F.2d 273 (1st Cir.1981), cert. denied, 455 U.S. 921, 102 S.Ct. 1277, 71 L.Ed.2d 461 (1982). In a......
  • Leone v. Town of New Shoreham, No. 86-274-A
    • United States
    • United States State Supreme Court of Rhode Island
    • December 18, 1987
    ...quo. See Calenda v. Rhode Island Board of Medical Review, 565 F.Supp. 816, 818 (D.R.I.1983); Auburn News Co. v. Providence Journal Co., 504 F.Supp. 292, 296 (D.R.I.1980), rev'd on other grounds, 659 F.2d 273 (1st Cir.1981); see also 11 C. Wright & A. Miller, Federal Practice & Procedure: Ci......
  • Bolton v. Secretary of Health & Human Services, No. 79 C 1742.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • November 14, 1980
    ...of a claimant's subjective complaints of pain clearly must be examined in relation to all the other evidence of record in order 504 F. Supp. 292 to determine whether the degree of pain could be so severe and so continuous as to render a claimant incapable of carrying on any occupation suita......

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