Bales v. Kansas City Star Company

• Decision Date: 10 September 1964
• Docket Number: No. 17084,17085.,17084
• Citation: 336 F.2d 439
• Parties: Albert A. BALES et al., Appellants, v. The KANSAS CITY STAR COMPANY et al., Appellees. Gustav H. HAUSER, Appellant, v. The KANSAS CITY STAR COMPANY et al., Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

336 F.2d 439 (1964)

Albert A. BALES et al., Appellants, v. The KANSAS CITY STAR COMPANY et al., Appellees.

Gustav H. HAUSER, Appellant, v. The KANSAS CITY STAR COMPANY et al., Appellees.

Nos. 17084, 17085.

United States Court of Appeals Eighth Circuit.

September 10, 1964.

Carrol C. Kennnett and Ray D. Jones, Jr., of Jones & Kennett, Kansas City, Mo., made argument for appellants and filed brief.

Carl E. Enggas, of Watson, Ess, Marshall & Enggas, Kansas City, Mo., made argument for appellees and filed brief with Colvin A. Peterson, Jr., and Clayton R. Smalley and Watson, Ess, Marshall & Enggas, Kansas City, Mo.

Before JOHNSEN, Chief Judge, MATTHES, Circuit Judge, and HARPER, District Judge.

JOHNSEN, Chief Judge.

These appeals are from dismissals of the complaints in two actions against The Kansas City Star Company and three of its officials for treble damages and injunctive relief on alleged violations of the antitrust laws.¹ The dismissals were made upon the ground that the complaints failed to state claims on which relief could be granted. The court's opinion in relation to the dismissals is reported in Davidson v. Kansas City Star Co., D.C.Mo., 202 F.Supp. 613.

Each action was by a group of plaintiffs joining in assertion of their several claims under Rule 23(a) (3), Fed.Rules of Civ.Procedure, 28 U.S.C.A., on the basis of common questions of law and fact. The complaints were identical except in the plaintiffs and the damage-demands involved. There was a total of 60 plaintiffs in the suits, but only seven of them have appealed.

The Kansas City Star Company is publisher of a daily newspaper in Kansas City, Missouri, the morning edition of which is known as The Kansas City Times and the evening and Sunday editions as The Kansas City Star. Distribution of the paper is made in commerce as well as locally. It is the contracts underlying the distribution system for "Metropolitan Kansas City", an area partially located in Missouri and partially in Kansas, at which the actions are directed.

The system has a structure of approximately 215 individual "motorized home delivery distributors", of which each of the plaintiffs is one. A distributor is required to enter into a written contract with the publisher by which he is allotted a certain territory or district in Metropolitan Kansas City in which to make sale and distribution of the newspaper to home subscribers.² On the provisions of the contract, the distributor is an independent contractor, buying newspapers from the publisher and selling them to home subscribers in his territory on a delivered basis. Thus the subscribers are customers of the distributor and not of the publisher.

The paper is sold by the distributor to a subscriber on a weekly-rate basis for the morning, evening and Sunday editions in combination. The price which the distributor must charge for such a purchase is fixed by the publisher in the distributor's contract, and this price is uniform for the Metropolitan Kansas City area. The publisher agrees to sell and deliver to the distributor the number of papers needed by him to supply his regular subscribers. The distributor agrees "to receive said newspapers and deliver them regularly and promptly each day to all subscribers at their respective addresses * * *", and by express language he "recognizes that one of the most important duties under this contract is the delivery of the papers every morning and evening * * *". The price which is to be paid by the distributor to the publisher for a paper in all its home editions per week is specified in the contract.³

The attack which the plaintiffs make against their distributors' contracts is centered on a provision which binds the distributor not to "sell or circulate any other newspaper, except by the written consent of (the Star), during the existence of the contract". This provision is claimed to violate § 1 (making a contract in restraint of trade) and § 2 (attempting to monopolize and monopolizing a part of trade or commerce) of the Sherman Act, 15 U.S.C.A. §§ 1 and 2, and § 3 (requiring a purchaser not to deal in the commodity of a competitor when the effect may be to substantially lessen competition or tend to create a monopoly) of the Clayton Act, 15 U.S.C.A. § 14.

What the plaintiffs are desirous of accomplishing is to be able to sell and distribute other newspapers in Metropolitan Kansas City, and also to engage in distributing circulars and other advertising matter, without losing their distributorships for the Star. They say that they have been offered contracts and opportunities to make such other distributions, but that the Star will not permit them to do so and retain their Star distributorships.

The effect of their allegations is that their newspaper distributorships represent individual enterprises, involving ownership of equipment and other investment of capital by them in caring for their customers and routes; that it is economically impossible for anyone to engage in or carry on such a distribution business in Metropolitan Kansas City without having a distributorship for the Star, since its circulation constitutes more than ninety percent of that of all the daily newspapers published in or reaching into the area; that plaintiffs are in a position to handle the other distributions which have been offered them without in any manner affecting the nature or efficiency of their service in making sales and deliveries of The Kansas City Star; that in refusing to permit them to do so, the Star is not only denying to other publishers "access to the only efficient and cheap home distribution system available in Metropolitan Kansas City", but is also preventing the public in the area from having the benefit or a choice of other daily newspapers; that this constitutes in the circumstances an improper restraint of trade or commerce and hence the deprival of customers and revenue to which they are thus being subjected represents an unlawful injury to their businesses; that the more so is this true because what the Star is doing has been for the purpose and with the intent of "maintaining its monopolistic position in the dissemination of news and advertising in Metropolitan Kansas City"; and that it is only because of the monopoly power and hold which the Star has and is exercising that it has been able to insist upon and compel acceptance by the distributors of the provision in the contract barring them from selling or circulating other newspapers.

As to these aspects, the District Court in dismissing the complaints held that the contract provision could not constitute a restraint of trade within the meaning of § 1 of the Sherman Act, supra, since only a restraint against the distributors and as to their "home delivery market" was involved; that beyond this, if any restraint of trade could be "inherent in the contract", the plaintiffs were not in a position to complain thereof or seek relief therefrom because as a party to the contract they would be in pari delicto with the defendants; that in further aspect no monopolizing of trade or commerce, as a violation of § 2 of the Sherman Act, supra, could be contended to exist, since all that the defendants had monopolized was the delivery of their own paper which was "a basic factor in the continued successful operation of their newspaper", and which did not preclude other newspaper publishers from engaging in a similar or other form of distribution, except that they would not be entitled to use the plaintiffs' facilities and services; and that finally, as to the violation claimed of § 3 (requiring a purchaser not to deal in the commodity of a competitor) of the Clayton Act, supra, it was unnecessary to determine whether the effect of the contract provision could be to lessen competition, since only competitors of the Star, which the plaintiffs were not, or the Government in the public interest, would have a right to make attack and seek relief on this basis.

Passing for the moment the question of pari delicto, the effect of the summary disposition made was to view as not entitled to antitrust consideration, because of the Star's legitimate interest in insuring that efficient and satisfying delivery would occur to home subscribers, the charge of the complaints that the Star's exclusive-dealer system had been set up for the purpose of enabling it to have, and was being maintained with the intent of preserving for it, a monopoly in the dissemination of news and advertising in the Metropolitan Kansas City area.

On this concept of absoluteness as to delivery interest, the court also regarded as without any antitrust relevance the further allegations of the complaints that the contract restriction was not necessary to insure and maintain the kind and quality of delivery service about which, as such, the publisher could have legitimate...