Farnell v. Albuquerque Pub. Co., 78-1181

• Citation: 589 F.2d 497
• Decision Date: 28 December 1978
• Docket Number: No. 78-1181,78-1181
• Parties: 1978-2 Trade Cases 62,396, 4 Media L. Rep. 2276 George FARNELL, Plaintiff-Appellant, v. ALBUQUERQUE PUBLISHING COMPANY, Tom Lang, and J. L. Dixon, Jr., Journal Publishing Company, and New Mexico State Tribune Company, Inc., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 497

589 F.2d 497

1978-2 Trade Cases 62,396, 4 Media L. Rep. 2276

George FARNELL, Plaintiff-Appellant, v. ALBUQUERQUE PUBLISHING COMPANY, Tom Lang, and J. L. Dixon Jr., Journal Publishing Company, and New Mexico State Tribune Company, Inc., Defendants-Appellees.

No. 78-1181.

United States Court of Appeals Tenth Circuit.

Argued Oct. 24, 1978.

Decided Dec. 28, 1978.

Kent Winchester, Albuquerque, N. M., for plaintiff-appellant.

Eric D. Lanphere of Johnson & Lanphere, Albuquerque, N. M., for defendant-appellee, Albuquerque Pub. Co.

John B. Tittman, Albuquerque, N. M., for defendant-appellee, New Mexico State Tribune Co., Inc.

Before SETH, Chief Judge, and BARRETT and DOYLE, Circuit Judges.

BARRETT, Circuit Judge.

George Farnell (Farnell) has appealed an adverse judgment in an action wherein he alleged violations of §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2, and § 3 of the Clayton Act, 15 U.S.C. § 14.

The Albuquerque Publishing Company, owned equally by the Journal Publishing Company (Journal) and The New Mexico State Tribune Company, Inc. (Tribune), publishes and distributes the only Albuquerque daily newspapers. Defendant Tom Lang is the president of both the Albuquerque Publishing Company and the Journal Publishing Company. Defendant Jess Dixon was the circulation director of the Albuquerque Publishing Company from 1974 until early, 1978. The Journal Publishing Company edits the Albuquerque Journal. The New Mexico State Tribune Company, Inc. edits the Albuquerque Tribune.

Farnell was employed by the Albuquerque Publishing Company as a Journal district manager on June 6, 1963, and continued in that position until his termination on December 5, 1975. During that period of time, Farnell was a full-time salaried employee working a 40 hour week. His initial starting salary was $65.00 per week. He received numerous salary increases and, on the date of his termination, was making approximately $1,006.56 per month. Appropriate deductions for social security, federal and state income taxes were withheld by the publishing company from his salary.

As a district manager, Farnell was required to: recruit carriers to service routes located within his assigned district; deliver the Journal to designated "drop points" where the carriers would obtain the newspapers for home distribution; collect from the carriers the wholesale price charged them by the company; handle all home subscriber complaints received by the company, such as the failure of any carrier to deliver a paper to a subscriber; and actually deliver papers on any route temporarily without a carrier.

The carriers, on the other hand, were responsible for the actual delivery of the Journal to home subscribers. These carriers purchased newspapers wholesale from the company and sold them retail to the home subscriber. They were required to pay the company for all papers they ordered, whether or not they received payment from their home subscribers. They were also required to collect from their customers the retail price of the paper. The difference between this price and the amount charged them by the Journal was the amount earned by each carrier.

This "home carrier" distribution system accounted for most of the Journal's sales in the Albuquerque area. However, both the Journal and Tribune were distributed in a "single-copy sales market" through coin operated paper racks, street sales and over the counter sales at various retail outlets.

During the April through June billing quarter of 1973, Farnell raised the price charged to subscribers serviced by his carriers above the price suggested by the Journal. The rate set and published by the Albuquerque Publishing Company was $7.15. Farnell charged $7.75. Upon learning of the increase, Farnell was immediately advised to roll back his price increase or be terminated. Farnell acceded and since has not charged a home delivery rate different than that set by the company. Reportedly, this episode received great notoriety amongst the carriers and, according to Farnell, deterred them from exercising their pricing freedom.

Farnell also supplemented his employee income through the single-copy sales market. At the time of his termination, Farnell had eleven single-copy sales outlets located within his district. The majority of these outlets were in apartment houses.

In mid 1975, the company raised the purchase price for daily newspapers from 10 cents to 15 cents. The new price was mandatory at company-owned outlets and was a suggested retail price for independent contractors.

At approximately the same time, the company converted its independent contractor single-copy sales distribution system to an in-house, employee-staffed single-copy sales department. This single-copy sales department was created by the publishing company which bought out the six known and authorized single-copy independent sales dealers in the Albuquerque area. The publishing company's stated reasons for converting its single-copy sales distribution system from independent contractor basis to an in-house operation were, among other things, to: eliminate inefficiencies inherent in the independent contractor system resulting from their failure to properly service racks throughout the day, which in turn caused some racks to be sold out while other racks were full and unsold; allow the company to charge uniform prices through direct employee sale of newspapers in the single-copy market; avoid anti-trust problems of customer restraints, territorial restrictions and pricing; and generally realize higher revenue by increasing efficiency and lowering prices charged to home subscribers.

Although district managers of the Journal were not authorized to engage in single-copy sales, it was suspected that some district managers were engaging in this activity without company knowledge. Accordingly, on June 25, 1975, the company distributed a written notice to all Journal district managers, including Farnell, which informed them of the conversion and directed them to report the number and location of any racks they might be servicing. A dispute exists as to whether or not Farnell responded to this notice. Nevertheless, it is clear that in late September or early October of 1975, the company learned that Farnell was making single-copy sales to Winchell's donut shop in Albuquerque.

On October 24, 1975, the company mailed a letter to Farnell, advising him of its policy barring employees from engaging in single-copy sales and warning him that he would be terminated should he continue to engage in such activity. Notwithstanding the written notice, Farnell continued to engage in single-copy sales. When the company learned of Farnell's continuing violations of its company rules, he was requested to remove his single copy sales racks. Farnell refused. He was terminated for his failure to do so, as well as for various other acts of insubordination. The company thereafter refused to deal with Farnell under any circumstances.

On May 5, 1976, Farnell filed the instant suit seeking treble damages and issuance of an injunction for violations of §§ 1 and 2 of the Sherman Act and § 3 of the Clayton Act.

Jurisdiction vested in the District Court pursuant to §§ 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26, and 28 U.S.C. § 1337. Farnell no longer seeks injunctive relief under § 16 of the Clayton Act.

In his second amended complaint, Farnell alleges, in essence, that the defendants conspired to force Farnell and other independent wholesale distributors of the Journal and Tribune to charge their customers a retail rate established by the defendants and, as a result of Farnell's refusal to comply with the defendants' pricing policies, he was terminated from his employment, forced out of business and precluded from engaging in single-copy sales. He also alleges various anti-trust violations arising out of the defendants' conversion of their single-copy distribution system; monopolization of the relevant market; and their refusal to deal with Farnell and other independent contractors after their termination. Farnell seeks compensatory damages in the amount of $600,000.00 and treble damages in the amount of $1,800,000.00.

After extensive discovery and various pre-trial skirmishes, the defendants moved for summary judgment. On November 15, 1976, an order was entered dismissing the action on the grounds that Farnell's termination did not result from anti-trust violations, but rather from his failure to adhere to the Journal's rules and regulations and insubordination.

Various issues are raised on appeal, but our determination that Farnell lacks standing to sue under the anti-trust laws is dispositive.

I.

Farnell grounds his claims for treble damages on § 4 of the Clayton Act, 15 U.S.C. § 15, which reads:

Any person who shall be injured in his business or property By reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the...