Byars v. Bluff City News Co., Inc.

• Decision Date: 16 October 1979
• Docket Number: No. 77-1227,77-1227
• Citation: 609 F.2d 843
• Parties: 1979-2 Trade Cases 62,928 Andrew BYARS, Plaintiff-Appellant, v. BLUFF CITY NEWS COMPANY, INCORPORATED, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 843

609 F.2d 843

1979-2 Trade Cases 62,928

Andrew BYARS, Plaintiff-Appellant, v. BLUFF CITY NEWS COMPANY, INCORPORATED, Defendant-Appellee.

No. 77-1227.

United States Court of Appeals, Sixth Circuit.

Argued Nov. 30, 1978.

Decided Oct. 16, 1979.

As Amended on Denial of Rehearing Jan. 9, 1980.

Martin W. Brown, Cobb, Edwards, Hamlet, Nichol & Woodall, Michael C. Williams, Memphis, Tenn., for plaintiff-appellant.

Stephen H. Biller, Memphis, Tenn., Sam M. Phelps, Tuscaloosa, Ala., for defendant-appellee.

Before KEITH and MERRITT, Circuit Judges, and GREEN, ^* Senior District Judge.

KEITH, Circuit Judge.

This case presents intriguing questions of single firm monopoly power under section 2 of the Sherman Antitrust Act, 15 U.S.C. § 2. ¹ The principle issue presented is one of the most unsettled and vexatious in the antitrust field: under what circumstances does a monopolist have a duty to deal? ²

The plaintiff, Andrew Byars (Byars), had a long-standing business relationship with the defendant, Bluff City News Co. (Bluff City). ³ Bluff City changed ownership in 1970 and ended all of its business dealings with Byars. The plaintiff then brought this action, alleging that Bluff City was a monopolist which violated the Sherman Anti-Trust Act when it refused to do business with him. In addition, plaintiff added pendant claims of common-law unfair competition, based on an alleged campaign of "dirty tricks" waged against him by Bluff City. After a bench trial, the district court found for the defendant in all respects. Plaintiff appeals. Because we feel that additional fact-finding is needed, we remand for further proceedings.

FACTS

Background

Printed materials are published by various publishers in the United States and distributed through approximately 15 national distributors to regional wholesale distributors who, in turn, distribute the periodicals to retail outlets such as newsstands and convenience stores for resale to the general public.

Bluff City is one of a number of regional distributors of periodicals in the United States. For over thirty years, it has been a wholesale distributor of paperback books, magazines, and other periodicals to retail outlets in the Memphis-Shelby County, Tennessee, metropolitan area. As a regional wholesaler, Bluff City thus occupied a middle rung in the distribution chain. Following general industry practice, Bluff City's employees would regularly deliver magazines to the various retail outlets and pick up any unsold magazines for credit. ⁴

Early in 1957, Mr. S. I. Bernbaum, Bluff City's owner at that time, determined that a number of small outlets did not sell enough magazines to justify the cost of the regular pick up and deliveries by Bluff City's employees. Desirous of not losing their business altogether, Mr. Bernbaum arranged to have Mr. Howard Troyer service these small outlets. Pursuant to the new arrangement, Troyer would buy periodicals from Bluff City at ten per cent less than wholesale price and sell them to small retail outlets which Bernbaum preferred not to service in the regular manner.

Troyer was a friend and co-worker of the plaintiff, Andrew Byars. Later in 1957, Troyer suggested that Byars join him in distributing magazines to the small retail outlets. A year later, Byars and Troyer separated their operations geographically. Troyer would buy periodicals at ten per cent less than wholesale and sell them to small retail outlets in a certain area of the Memphis-Shelby County region; Byars would do the same for the remaining areas.

Byars and Troyer distributed periodicals part-time. Each had the right to solicit new customers, at least so long as they were small retail outlets which Bluff City would not care to service. In 1967, Troyer, desirous of giving up his part-time distribution of periodicals, sold his accounts to Byars. From then on, Andrew Byars was the only person handling the small accounts.

Byars worked diligently. He would solicit additional accounts and make separate payment agreements with his customers. He billed the customers on invoices marked "Andrew Byars News." He drove a truck with this label on the side, and employed various people to help him on a part-time basis. By 1970 the plaintiff was serving approximately 150 retail outlets and had a gross sales volume of almost $350,000.00.

The parties have entered into a heated dispute on the issue of whether Byars was an employee of Bluff City. Plaintiff himself characterized his position as that of a "rack jobber." The district court stated that Byars was an employee in the "common law sense" because he was subject to some degree of control by Bluff City. Our review of the record persuades us that Byars' relationship with Bluff City is a classic example of that of an independent contractor that is, someone who is paid to complete a job, but whose day-to-day activities are not subject to control by the employer. ⁵

Unlike Bluff City's regular employees, Byars was not paid a salary. Instead, Byars would turn over to Bluff City all of the money which he had collected from the retail outlets he serviced and would receive a monthly check representing his commission on sales. His commission was set at ten percent, later increased to ten and one half percent. ⁶ Bluff City News was not aware of all of Byars' accounts, and did not directly supervise the manner in which he serviced them. If Bluff City received complaints from one of Byars' retail outlets, the complaint would be referred directly to Byars himself. Similarly, Byars was furnished a federal tax form 1099 at the end of the year, while route salesmen who were Bluff City employees were furnished W-2 forms. ⁷ Further, the risk of loss from outdated returns or similar difficulties, was borne directly by Byars. ⁸ In contrast, Bluff City's employees were not held responsible for similar losses incurred on their routes. ⁹

The relationship between Byars and Bluff City operated smoothly for many years. In 1970, however, the fortunes of the business world upset the harmony of the Status quo. In May of 1970, Bluff City's owners, S. I. Bernbaum and family, sold the business to Mr. Guy Moman and family. ¹⁰ The national distributors from whom Bluff City received its publications were informed of the sale; they continued to do business with Bluff City's new owners. From June 1, 1970, until December 31, 1970, Bluff City's new owners permitted the plaintiff to continue to operate in the same manner which he had previously.

By the end of 1970, the new owners had become unhappy with the arrangement with Byars. Testimony credited by the district court revealed that, as a matter of business preference, the new owners did not want to continue the independent contractor relationship with Byars. Instead, the new owners wanted to revert to the pre-1957 manner of operation in which they directly serviced Byars' small customers themselves.

There is no dispute that a series of meetings took place between Byars and the new owners. There is considerable dispute as to what took place at these meetings. The district court credited testimony that the new owners gave Byars several months in which to convince them that the arrangement should continue. Unconvinced that Byars' route fit in with their way of doing business, Bluff City's new owners decided to terminate the arrangement. Mr. Moman testified, and the district court found, that he determined to terminate the independent "rack jobber" arrangement with Byars and instead to pay Byars a salary, employing him directly in a supervisory position. According to Moman, this arrangement was not acceptable to Byars. ¹¹

Whatever the dispute as to the circumstances leading up to Bluff City's termination of its arrangement with Byars, there is no dispute that as of January 1, 1971, Bluff City did terminate the arrangement and refused to deal with him. It then took over and serviced Byars' former accounts itself. ¹²

The Industry

The wholesale publication distribution industry recognizes two separate markets for periodicals. The "primary line" periodicals are those which are generally acceptable to the general public. "Primary line" periodicals are limited to those periodicals which are distributed by approximately 15 major national distributors. This classification does not include periodicals categorized by the industry as "secondary line periodicals"; that is, periodicals which are not as acceptable to the general public. Although the distinction between primary and secondary line periodicals is not entirely clear, it appears that the secondary periodicals are those periodicals which are of special interest to a limited public. Thus, highly specialized and/or sexually-oriented periodicals are regarded as being within the secondary line. All agree that the dispute in this case centers around the distribution of primary line periodicals in the Memphis and Shelby County, Tennessee area.

After January 1, 1971, plaintiff was unable to acquire any primary line periodicals for resale. He attempted to obtain such periodicals at wholesale prices from the national distributors who supplied these periodicals to Bluff City. In each instance, he was turned down. Cut off from his former source of supply and unable to locate a new one, plaintiff was unable to sell primary line periodicals to his customers. He struggled along, and was able to stay in business for several years by selling secondary line periodicals which he obtained from other distributors. Throughout this period, Byars tried continuously to obtain primary line periodicals from other sources and requested that Bluff City sell to him, but such requests were refused.

Beginning in October, 1973, Byars was finally able to obtain primary line periodicals from sources outside of normal distribution channels. This source of supply is subject to termination without notice, as was Byars' arrangement with Bluff City News. Although this new source of supply has enabled...