CE Stevens Co. v. Foster & Kleiser Co.

• Decision Date: 19 February 1940
• Docket Number: No. 9215.,9215.
• Parties: C. E. STEVENS CO. et al. v. FOSTER & KLEISER CO. et al.
• Court: U.S. Court of Appeals — Ninth Circuit

109 F.2d 764 (1940)

C. E. STEVENS CO. et al. v. FOSTER & KLEISER CO. et al.

No. 9215.

Circuit Court of Appeals, Ninth Circuit.

February 19, 1940.

Roy E. Jackson, Jones & Bronson, H. B. Jones, and Robert E. Bronson, all of Seattle, Wash., for appellants.

Morrison, Hohfeld, Foerster, Shuman & Clark and Herbert W. Clark, all of San Francisco, Cal., and Kerr, McCord & Carey, and Stephen V. Carey, all of Seattle, Wash. (J. Hart Clinton, of San Francisco, Cal., of counsel), for appellees.

Before WILBUR, HANEY, and HEALY, Circuit Judges.

WILBUR, Circuit Judge.

This is an appeal from an order of the District Court sustaining appellees' demurrer to appellants' complaint without leave to amend on the ground that no cause of action was alleged. The action was filed under Section 7 of the Sherman Anti-Trust Act (Act of July 2, 1890, Chap. 647, 26 Stat. 209, as superseded by Act of Oct. 15, 1914, Chap. 323, § 4, 38 Stat. 731, 15 U.S. C.A. § 15).¹ Both parties are engaged in advertising by means of billboards.

The ruling of the District Court was based on the decision of this court in Foster & Kleiser Co. v. Special Site Sign Co., 9 Cir., 85 F.2d 742, an action against the same defendant by another competitor. In that case plaintiff sought damages under Section 7 of the Sherman Anti-Trust Act based upon similar activities by the defendant therein as are alleged in the case at bar. In the Special Site Sign Company case, supra, the plaintiff, in an effort to support federal jurisdiction under the Sherman Anti-Trust Act, 15 U.S.C.A. §§ 1-7, 15, alleged such interstate activities by the defendant as the shipping by it of designs, posters, lithographs, stencils and paints from one state to another. It also alleged the effect of outdoor advertising in stimulating interstate trade. It alleged that the defendant attempted to monopolize the outdoor advertising business by acquiring control of numerous outdoor advertising companies by leasing of outdoor advertising sites at rentals in excess of their true worth, by leasing more sites than were intended to be used in the business, by fraudulent activities leading to the cancellation of leases of advertising sites obtained by plaintiffs, and by other unfair business practices designed to squeeze out competitors. See Foster & Kleiser Co. v. Special Site Sign Co., 9 Cir., 85 F.2d 742, 753, supra. This court held that the complaint did not state a cause of action. It was held that the outdoor advertising business, as a whole, could not be viewed as interstate commerce merely because there was incidentally involved therein the shipment of posters, lithographs, etc., in interstate commerce. It was held that no acts were alleged which directly affected the interstate trade in posters or lithographs and that the acts of the alleged conspirators in inflicting the damage in no way related to the allegations of a conspiracy to restrict interstate commerce in posters and lithographs, etc. It was pointed out in that decision that all the acts alleged as means for carrying out the conspiracy were adopted to the injury or destruction of the plaintiff's business in its intrastate aspects.

In the case at bar, complaint sets out the general methods of business of companies involved in the outdoor advertising business. It is alleged that the advertiser generally contracts with a lithographer for posters to be used in the advertising campaign. Advertising agencies solicit contracts of advertisers for the placing of the posters upon billboards. These advertising agencies are organized into the National Outdoor Advertising Bureau, Inc. This bureau contracts with bill posting companies called "plant owners" which control sites for billboards for the execution of the contracts secured by the agencies. Since 1927 bill posting companies have been organized into the Outdoor Advertising Association of America, Inc., a consolidation of the Associated Bill Posters and Distributors of the United States and Canada and the Outdoor Advertising Association of America. These associations grant a "franchise" in each community where a billboard advertising is done. Foster & Kleiser controls 600 franchises and the General Outdoor Advertising Company, Inc., an association of bill posters, organized in 1924, controls 1000 franchises. It is alleged that the Outdoor Advertising Association, Inc., is dominated and controlled by the General Outdoor Advertising Company and by Foster & Kleiser Company. The appellants are "independent" operators and do not belong to the Outdoor Advertising Association of America, Inc. The National Outdoor Advertising Bureau (association of advertising agencies) executes all advertising contracts secured by it through the General Outdoor Advertising Company which company assigns all contracts calling for posting or painting in the Pacific Coast area to Foster & Kleiser Company for execution. That the activities of these different companies frequently overlap is shown by the allegations of the complaint that contracts for outdoor advertising are made not only by agencies but by bill posting companies. It should be noted that the General Outdoor Advertising Company is not made a party to this action.

The conspiracy alleged is one to monopolize all branches of the outdoor advertising business. As in the Special Site Sign case, it is alleged that in furtherance of the conspiracy the conspirators paid for advertising sites in excess of their worth, caused the cancellation of leases of appellants and did other acts designed to secure for appellees a monopoly of advertising contracts and sites upon which to execute the same. It is also alleged that appellees conspired to place restraints upon interstate trade in posters and lithographs and that the conspirators refused to post lithographs of manufacturers who sold or furnished samples to independent poster plants.

It is claimed, and the basic assumption of the complaint is, that the bill posting business as a whole must be considered as interstate commerce and, consequently, that a monopoly of this business in any of its aspects is a violation of the Sherman Anti-Trust Act. It is also claimed and alleged that appellees conspired to restrain and restrict the shipment of posters and lithographs in interstate commerce.

Insofar as the contention that appellees conspired to restrain the interstate commerce in posters and lithographs is concerned, an analysis of the complaint as a whole clearly shows that the main object of the alleged conspirators was the securing of control of the bill posting business in its intrastate aspects involving the securing of advertising contracts and billboard sites upon which to execute the same.² It clearly appears from the complaint that the principal business of the appellee Foster & Kleiser Company was the operating of outdoor advertising plants and the securing of advertising contracts, not the sale of posters or lithographs. These materials are sold by lithographers who are located in states other than the Pacific Coast area, principally in Kentucky, Ohio and Illinois. In view of these allegations it can hardly be said that appellees' primary object was to monopolize the trade in posters. It is true, as we have stated, that appellants alleged that the conspiracy in part involved the preventing of appellants from obtaining posters and that in order to effect this result the Outdoor Advertising Association of America, Inc., refused to post lithographs if the lithographer dealt with non-association members. As to the effect of this allegation, we quote from appellees' brief: "At this point it may be conceded that the conspiracy just described and the means by which it was to be effected would be unlawful under the Sherman Act. (Ramsay Co. v. Bill Posters Association (1923), 260 U.S. 501, 43 S.Ct. 167, 67 L.Ed. 368). However, `In a civil action for damages sustained because of a conspiracy in restraint of trade, the right of recovery is not based upon the conspiracy, but upon the injuries resulting therefrom'. Special Site case, supra, 85 F.2d 742, at page 750. Therefore, we must next inquire whether the second amended complaint contains sufficient allegations of fact showing that this alleged conspiracy was made effective to the injury of appellants."

Insofar as this conspiracy is concerned, it is not alleged that it was successful or effective to injure appellants' business. That is, it is not definitely and explicitly alleged that appellants were unable to secure posters necessary for fulfilling their advertising contracts. The appellants, after alleging that the action of the conspirators in refusing to post lithographs of manufacturers who dealt with independent plant owners was for the purpose of hampering and preventing such owners, including the plaintiff, from securing lithographs and posters, alleged: "That thereby the said independents were obstructed and hindered in their business and prevented from giving a full and adequate outdoor advertising service to their customers, competition with the association members and said conspirators was hindered and obstructed, and the free movement in interstate commerce of posters, lithographs, painted designs and contracts for outdoor advertising was monopolized, attempted to be monopolized, and was unreasonably restrained."

This is not a definite allegation that appellants were unable to obtain posters or lithographs with which to execute their advertising contracts because of the activities of appellees or that advertisers seeking to deal with appellants were unable to secure posters for posting by appellants. If that was in fact the case, appellants should have alleged it to be so, definitely and clearly. An analysis of the complaint as a whole shows that the alleged damage to appellants flowed not from inability of appellants to obtain posters but from inability to obtain advertising contracts and billboard sites upon which to execute the same.³

We do...