Berlyn, Inc. v. The Gazette Newspapers, Inc.

Citation157 F.Supp.2d 609
Decision Date09 August 2001
Docket NumberNo. CIV. A. S01-606.,CIV. A. S01-606.
PartiesBERLYN, INC., et al., Plaintiffs, v. THE GAZETTE NEWSPAPERS, INC., et al., Defendants
CourtU.S. District Court — District of Maryland

George W. Liebmann, Law Office, Melvin J. Sykes, Law Office of Melvin J. Sykes, Baltimore, MD, for Berlyn, Inc., a Maryland Corporation, Kenneth C. Rossignol, Sherrill Murray, plaintiffs.

Charles O. Monk, II, Daniel R. Chemers, Saul Ewing, LLP, Baltimore, MD, William J. Kolasky, Alice M. Stoeppelwerth, Fiona W. Huang, Wilmer, Cutler and Pickering, Washington, DC, for the Gazette Newspapers, Inc., a Maryland Corporation, the Washington Post Company, a Body Corporate of the State of Delaware, Washington and Baltimore Suburban Press Network, Inc., a Body Corporate of the State of Delaware, defendants.


SMALKIN, District Judge.

The plaintiffs, Berlyn, Inc., Kenneth Rossignol, and Sherrill Murray filed this nine-count complaint against the defendants, The Gazette Newspapers, Inc. ("Gazette"), The Washington Post Company ("Post"), and the Washington and Baltimore Suburban Press Network, Inc. ("Press Network"), alleging violations of the Sherman Act, the Clayton Act, the Copyright Act, the Maryland Antitrust Act, and state law claims for unfair competition, breach of contract, and tortious interference with contract. Specifically, the plaintiffs allege that the Gazette, the Post, and the Press Network have conspired to restrain trade, attempted to monopolize, discriminated in pricing, participated in acquisitions in violation of federal law, infringed federal copyrights, and committed various state law torts in connection with the sale of newspapers and newspaper advertising.

The case is before the Court on defendants' motions to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). The Court has considered the pleadings submitted by the parties, and no oral hearing is necessary. Local Rule 105.6 (D.Md.).


The plaintiff Berlyn, Inc. is a Maryland corporation that publishes two weekly community newspapers—The Prince George's Sentinel and The Montgomery County Sentinel. The plaintiff Kenneth Rossignol is the owner, editor, and publisher of St. Mary's Today, a weekly community newspaper in St. Mary's County, Maryland. Plaintiff Sherrill Murray is a resident of Prince George's County and a former member of the College Park City Council. Defendant Gazette has been a wholly owned subsidiary of the Washington Post since 1992. By September 1999, as a result of numerous acquisitions, the Gazette operated 31 papers in the D.C. metropolitan area and its suburbs, including papers in Montgomery and Prince George's counties. According to the complaint, the Gazette's website maintains that it reaches "`more than 95 percent coverage of single-family homes and 84 percent readership according to Verified Audit Circulation (`VAC').'" Compl. at ¶ 10. Defendant Washington Post is a daily newspaper with wide circulation in Washington D.C. and its surrounding suburbs, including Prince George's and Montgomery counties. Defendant Press Network was formed in 1992 for the purpose of assisting community newspapers with the sale of advertising. The Gazette owns a half-interest in Press Network. According to the complaint, the Press Network's Maryland offices are located at the offices of the Gazette in Gaithersburg, Maryland.

The complaint alleges, among other things, that: the Gazette cut the cost of advertising below the marginal costs of its newspapers, and in some cases provided free advertising, in order to drive existing community newspapers out of business; the Post reduced its rates on legal and auction advertising, charging rates below those charged by the Montgomery County Sentinel, and in some cases providing free advertising; Press Network, acting at the behest of Gazette and Post, "revised its rate cards so as to group all the Gazette newspapers together and quote a combined rate for them, thus encouraging advertisers to seek blanket coverage in the entire Gazette network and discouraging advertisers from advertising in the Sentinel newspapers, which are listed after the Gazette newspapers and thus appear to duplicate the Gazette newspapers' coverage." Compl. at ¶ 23(d). The complaint alleges that the Gazette employed these practices with respect to other local community papers as well. According to the complaint, advertising allocated to the Sentinel papers by the Press Network fell from 65.72% of the Sentinel's advertising in 1997 to 17.66% in 2000. See Compl. at ¶ 23(e). The complaint also alleges that the Gazette continued to acquire and expand its ownership of community newspapers in the D.C. metropolitan area, that it hired Sentinel employee Bruce Branch, and in late 1999, hired the whole Sentinel newsroom, and that it infringed Berlyn's copyright by republishing stories that were originally written by Bruce Branch for the Prince George's Sentinel. Finally, the plaintiffs challenge the Gazette's acquisition of its half-interest in Press Network, as well as its acquisition of the assets of Chesapeake Publishing Company, which includes papers in Southern Maryland and Prince George's County, the effect of which will be the Gazette's capturing of "some 95% of the newspaper advertising market." Compl. at ¶ 25.


Under Federal Rule of Civil Procedure 12(b)(6), dismissal of a complaint for failure to state a claim is not appropriate "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). When ruling on a motion to dismiss under Rule 12(b)(6), a court must accept the allegations contained in the complaint as true. See DeBauche v. Trani, 191 F.3d 499, 505 (4th Cir.1999). The court is not, however, "bound by the plaintiff's legal conclusions, since the purpose of Rule 12(b)(6) is to test the legal sufficiency of the complaint." Randall v. United States, 30 F.3d 518, 522 (4th Cir.1994). The motion to dismiss standard has been applied "rigorously in anti-trust cases," and "`dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly.'" Sun Dun, Inc. of Washington v. Coca-Cola Co., 740 F.Supp. 381, 385 (D.Md.1990) (quoting Hospital Building Co. v. Trustees of Rex Hosp., 425 U.S. 738, 746, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976)); see also Virginia Vermiculite, Ltd. v. W.R. Grace & Co., 156 F.3d 535, 539 (4th Cir. 1998).

Statute of Limitations

As an initial matter, the motion for dismissal of all claims relating to the 1992 acquisition of the Gazette by the Washington Post is rendered moot, as the plaintiffs have stated that they do not seek to recover for the 1992 acquisition. See Pl's Opp'n to Post and Gazette's Mot. to Dismiss at 7. Because a four-year statute of limitations applies to private civil antitrust actions, pursuant to the Clayton Act, 15 U.S.C. § 15b, plaintiffs claims remain viable only to the extent that they allege causes of action that have accrued within the limitations period.

Count I—Section 1 of the Sherman Act

In Count I, the plaintiffs allege that the defendants, along with other co-conspirators, including advertisers and officers/employees of Gazette and Press Network, engaged in a combination and conspiracy in unreasonable restraint of interstate trade and commerce in newspapers, newspaper editorial content, and newspaper advertising in violation of the Sherman Act, 15 U.S.C. § 1. Section 1 of the Sherman Act provides that "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal." 15 U.S.C. § 1. To state a claim under Section 1, the plaintiffs must establish that "at least two persons [are] acting in concert, and ... the restraint complained of must constitute an unreasonable restraint on interstate trade or commerce." Estate Constr. Co. v. Miller & Smith Holding Co., Inc., 14 F.3d 213, 220 (4th Cir.1994).


As stated above, to state a claim under Section 1, plaintiffs must establish the existence of "a relationship between at least two legally distinct persons or entities." Oksanen v. Page Mem'l Hosp., 945 F.2d 696, 702 (4th Cir.1991). This requirement is grounded in the intracorporate immunity doctrine set forth in Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984). In Copperweld, the United States Supreme Court concluded that a parent corporation and its wholly owned subsidiary were not legally capable of conspiring in restraint of trade in violation of Section 1 of the Sherman Act. See id. at 777, 104 S.Ct. 2731. The Court specifically declined to consider the related issue of whether "a parent may be liable for conspiring with an affiliated corporation it does not completely own." Id. at 767, 104 S.Ct. 2731. In this case, defendants Post and Gazette (Gazette is wholly-owned by the Post) are alleged to have conspired with the Press Network (which is half-owned by the Gazette), as well as employees of these corporations, and unnamed advertisers. The Copperweld doctrine makes clear that Post and Gazette are incapable of conspiring under this statute. While the Supreme Court declined to consider the application of intracorporate immunity to situations in which one of the parties, like Press Network, was not wholly-owned, the Fourth Circuit has applied the principles set forth in Copperweld in holding that related entities with a "similar unity of interest" may be found incapable of conspiring in restraint of trade. Oksanen, 945 F.2d at 703. In Oksanen, the Fourth Circuit held that a hospital and employees on its medical staff "lacked the capacity" to conspire in restraint of trade. Id...

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