Berlyn, Inc. v. Gazette Newspapers, Inc.
| Decision Date | 16 August 2002 |
| Docket Number | No. 01-CV-606.,01-CV-606. |
| Citation | 223 F.Supp.2d 718 |
| Parties | BERLYN, INC., et al., Plaintiffs, v. The GAZETTE NEWSPAPERS, et al., Defendants. |
| Court | U.S. District Court — District of Maryland |
George W. Liebmann, Law Office, Melvin J. Sykes, Law Office of Melvin J. Sykes, Baltimore, MD, for Plaintiffs.
Charles O. Monk, II, Daniel R. Chemers, Gretchen L. Klebasko, Saul Ewing LLP, Baltimore, MD, William J. Kolasky, Alice M. Stoeppelwerth, Fiona W. Huang, Kykle M. DeYoung, Washington, DC, David P. Donovan, Wilmer Cutler and Pickering, Tysons Corner, VA, for Defendants.
The plaintiffs in this case filed a nine-count complaint, alleging violations of the Sherman Act, the Clayton Act, the Copyright Act, and the Maryland Antitrust Act, and state law claims for unfair competition, breach of contract, and tortious interference with contract. The case is now before the Court on three separate motions. The defendants have moved to exclude the testimony of James B. Shaffer, arguing that he is not qualified to offer opinion testimony relevant to this case. That motion has been dealt with in a separate Memorandum Opinion and Order dated August 13, 2002, which excludes Shaffer's opinions as to relevant market and market power. The defendants also have moved for summary judgment on all of the remaining counts of the complaint.1 The plaintiffs have opposed that motion, and they have moved for preliminary injunctive relief. All issues have been fully briefed, and no oral hearing is necessary. Local Rule 105.6 (D.Md.2002). For the reasons set forth below, by separate order, the Court will GRANT the defendants' motion for summary judgment, and DENY AS MOOT the plaintiffs' motion for preliminary injunctive relief.
The plaintiffs in this case are Berlyn, Inc. (Berlyn), Montgomery Sentinel Publishing, Inc. (Sentinel), and Kenneth C. Rossignol (Rossignol). Berlyn is wholly owned by Lynn Kapiloff (Kapiloff) and her husband. Kapiloff also has served as the CEO and primary manager of Sentinel's newspapers in Montgomery and Prince George's Counties (the Montgomery County Sentinel and the Prince George's Sentinel) since December, 1987. Rossignol publishes St. Mary's Today, a weekly paid newspaper published in Lexington Park Maryland, which has a circulation of approximately 5,000, with most subscribers and advertisers located in St. Mary's County, Maryland.
The Washington Post Company (the Post) is a publicly-held Delaware corporation. One of its operating units publishes the Washington Post newspaper. The Post owns all the stock of The Gazette Newspapers, Inc. ("Gazette"), but requires that Gazette operate as an independent concern.2 Gazette is a Maryland corporation that publishes approximately 44 newspapers in Montgomery, Frederick, Prince George's, Calvert, Charles, and St. Mary's counties.
Baltimore Suburban Press Network, Inc. (Press Network or the Network), is a Delaware corporation, fifty percent of which is owned by Gazette. Press Network offers regional and national advertisers a "one contact/one bill" method of placing advertising in multiple newspapers around Washington, D.C.
Berlyn began publishing the Montgomery County and Prince George's Sentinels in the late 1980s, at which time both were small, paid-circulation papers. By 1992, Kapiloff had added free, county-wide papers in both counties based upon the advice of her advertising director, who believed advertisers would be attracted to the larger circulation of the free editions.
In 1992, Gaynelle Nuttall (Nuttall) was in the process of organizing Press Network. Nuttall invited several newspapers, including the Prince George's Sentinel, to become members of Press Network. She also sought to include strong community newspapers in the Washington suburbs, including Montgomery County, where she invited Gazette to become a member. At this time, Nuttall believed that the Prince George's Sentinel did not have the same level of circulation, penetration, and editorial quality as other Network members, but she hoped the paper would improve over time. According to the plaintiffs, Press Network contacted Kapiloff and invited the Sentinel to become a member of the Network. The plaintiffs allege that Nuttall represented that Sentinel would be Press Network's only representative paper in Prince George's County and that she reiterated this assurance in November 1997 and April 1998. According to the plaintiffs, Press Network forbade Sentinel from directly dealing with advertisers procured by Press Network or advertisers Sentinel had served before joining Press Network. There was no written contract to this effect. The plaintiffs allege that their "agreement" prevented Berlyn from sustaining contracts with major accounts like Fashion Bug and Kay Bee Toys and caused the resignation of Sentinel sales representatives.
Nuttall testified that by 1995 the Sentinel had not improved as she hoped, and that she had lost confidence in the paper's ability to measure up to the other publications included in the Network. Nuttall was concerned about the Sentinel's condition because she felt that a weak member could hurt the reputation of the entire Network. She came to believe that the Network would be best served by the addition of another member in Prince George's County, and she began to speak to other publishers about expanding into the County including Chuck Lyons (Lyons), president of Gazette. At that time, none of the publishers she contacted was interested.
By 1997, Gazette had performed well in Montgomery County and had reached profitability in Frederick County. Around this time, Lyons became interested in possibly expanding into Prince George's County. Gazette formed a task force to examine the potential profitability of community-specific weekly newspapers in the County. In so doing, the task force interviewed potential advertisers, reviewed the demographics of the communities in the county, compiled research and market information regarding potential competitors, and created comprehensive pro formas evaluating the financial aspects of Gazette's entry. Gazette considered potential revenues from several sources, including Press Network accounts. Gazette's pro formas focused on local advertising, which, according to Gazette, is the primary type of advertising that sustains the "community-specific" model that Gazette had used with success in Montgomery County. According to the defendants, Gazette concluded that its most direct competition for advertising in the Prince George's County would be direct mail and shoppers, and that the Prince George's Sentinel was a weak product and was not considered a competitive factor.
Following its research, Gazette decided to enter Prince George's County with one or two community-specific publications, and planned to launch additional publications only after its first two became successful. In October 1997, Gazette's made its first entry, The Greenbelt/College Park Gazette. That publication became profitable in 1998, and Gazette began additional publications in other Prince George's County communities during the following three years.
According to the defendants, Gazette's new publications in Prince George's County were fast outperforming the Prince George's Sentinel, and Nuttall knew of Gazette's reliability first-hand because Gazette had been the Network's representative in Montgomery County for years. Nuttall also testified on deposition that she believed Gazette could provide a superior product to advertisers, and therefore could generate higher revenues for Press Network. Press Network began presenting advertisers with both the Prince George's Sentinel and the Prince George's Gazette in late 1997 and included Gazette publications on its March 1, 1998 rate card. When asked to provide a recommendation, Press Network salespersons recommended Gazette's publications. According to the defendants, advertisers preferred these publications for their superior circulation, penetration, reliability, editorial quality, and overall advertising value.
The plaintiffs offer a different account of Gazette's entry into Prince George's County. The plaintiffs argue that Gazette and Press Network conspired to eliminate competition in Prince George's County, first by orchestrating Gazette's entry into the county. The plaintiffs argue that Press Network was conceived, and indeed operated, as Gazette's "corporate sales arm" to the detriment of other Network members. Plaintiffs also argue that Press Network's sales reps pressured advertisers to choose Gazette over the Sentinel, and that Press Network and Gazette conspired to give Gazette preferred treatment on the rate cards the Network provided to advertisers.
St. Mary's Today began operating in St. Mary's County in 1990. During the years 1997 through 2000, the only years for which financial data are available, the newspaper's annual profits ranged from a low of $1,157 to a high of $16,138. These profits constituted the entire compensation that Rossignol took from the business, despite working more than 80 hours per week as a copywriter, delivery person, and general "one man band."
The Post first learned in October 2000 that the Chesapeake Publishing Company (Chesapeake) was for sale. Lyons, who had been president of Chesapeake from 1993 to 1998, was informed of this development and indicated Gazette's interest in acquiring Chesapeake's Southern Maryland Division. According to the defendants, Lyons believed that Chesapeake's Southern Maryland assets would compliment Gazette's existing operations, and that those assets likely would provide a solid return on investment if they could be acquired at a reasonable price.
The Post submitted a non-binding offer of $40 million to $50 million on ...
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Maryland. Practice Text
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