Godfrey v. Pulitzer Publishing Co.

• Decision Date: 12 November 2001
• Docket Number: No. 01-1647,01-1647
• Parties: (8th Cir. 2002) THOMAS M. GODFREY, ET AL., APPELLANT, v. PULITZER PUBLISHING CO., APPELLEE. Submitted:
• Court: U.S. Court of Appeals — Eighth Circuit

Page 405

276 F.3d 405 (8th Cir. 2002)

THOMAS M. GODFREY, ET AL., APPELLANT, v. PULITZER PUBLISHING CO., APPELLEE.

No. 01-1647

UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT

Submitted: November 12, 2001

January 9, 2002

Appeal from the United States District Court for the Eastern District of Missouri.

Alan Kimbrell, argued, St. Louis, MO (Richard C. Wetzel, Paul K. Travous, St. Louis, MO, on the brief), for appellant.

Thomas C. Walsh, argued, St. Louis, MO (Loe J. Asaro, Thmas C. Albus, on the brief), for appellee.

Before Wollman, Chief Judge, Bowman, and Stahl,¹ Circuit Judges.

Stahl, Circuit Judge

Appellants Thomas M. Godfrey, et al., brought an action against Pulitzer Publishing Co. ("Pulitzer") pursuant to the Robinson-Patman Act § 2(a), 15 U.S.C. § 13(a) (1994), claiming that appellee had engaged in anticompetitive sales of its newspaper, the St. Louis Post-Dispatch ("the Post-Dispatch"). The district court² granted summary judgment in favor of Pulitzer and the appellants brought this appeal. We affirm.

I. Background

Appellants are branch dealers, or "branchmen," who purchase copies of the Post-Dispatch from Pulitzer at a discount and resell the newspapers to retail outlets, called "subs," and to the public through vending machines. Branchmen operate in exclusive geographic service areas, stocking vending machines or selling to subs only in their own territories. Under state law the relationship between branchmen and the publisher is not merely one of contract terminable at will; rather, branchmen have a property right in their branches that allows them to convey or sell their interest.³ Miskimen v. Kansas City Star, 684 S.W.2d 394, 402 (Mo. App. 1984). Appellants are fourteen of the more than thirty branch dealers in the St. Louis area; three of them operate in Illinois and the remainder operate in Missouri.

The law suit underlying this appeal arose from an offer made by Pulitzer on May 8, 1996, to all branch dealers. At that time, branch dealers had threatened Pulitzer with litigation on a number of issues arising out of their business relationship. Pulitzer's offer, if accepted, entitled each branch dealer to lower wholesale prices and increased subsidies and allowances⁴ in return for signing a release of any possible claims against Pulitzer. A number of branch dealers accepted the original offer, a few others accepted after negotiating terms ensuring that their property rights in the branches would not be affected by the agreement (collectively, the "favored branch dealers"). Appellants rejected the offer, apparently because they believed that their potential causes of action against Pulitzer were worth more than the discounts and allowances available under the settlement⁵ and because they remained concerned that their property interest in their branches would be threatened under the terms of the agreement.

The settlement offer stated that the new rates, fees and allowances would be available to the branch dealers upon execution of the agreement, but specified that "[a]fter the third year, these rates, fees and allowances may be revised by us from time to time" (Branch Dealer General Release Agreement, May 8, 1996). Although three years have passed since the execution of the agreements with the favored branch dealers, Pulitzer has not to date chosen to exercise its option to revise the rates, fees, or allowances.

On August 9, 1996, appellants filed a complaint in the district court, alleging price discrimination in violation of section 2(a) of the Robinson-Patman Act, 15 U.S.C. § 13(a). Appellants sought an injunction against Pulitzer in an attempt to prevent appellee from selling newspapers at the more favorable rates to the branch dealers who had signed the agreement.⁶ In the proceedings that have followed, appellants have argued that the favorable rates were not and are not available to them on equal terms. They reason first that, at the time of the original offer, they would have had to give up more in rights than the favored branchmen in order to receive the enhanced rates. They argue second that, by continuing the enhanced rates after the expiration of the three year period during which the rates were guaranteed, Pulitzer has effectively given the favored branch dealers an additional benefit that was never presented to appellants on the face of the offer.

Section 2(a) states in relevant part that:

It shall be unlawful for any person engaged in commerce, in the course of such commerce... to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce,... and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them...

15 U.S.C. § 13(a). Thus, in order to establish a violation of the Act, appellants must show (1) that Pulitzer discriminated in price between appellants and the favored branch dealers; (2) that this price discrimination substantially affected competition between the appellants and the favored branch dealers;⁷ (3) that the newspaper sales occurred in interstate commerce;⁸ and (4) that the newspapers sold were of like grade and quality. Id. While there is no dispute that the fourth requirement is met here, the parties disagree as to whether appellants have shown the first three.

The district court initially dismissed appellants' case for lack of subject matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1). Specifically, the court reasoned that appellants had satisfied the interstate commerce requirement of Section 2(a), but that jurisdiction was nevertheless improper because appellants had been unable to show that there was a competitive relationship between them and the favored branch dealers, given that the branchmen operated in exclusive territories. On appeal, we affirmed the district court's holding as to the interstate commerce requirement, but reversed on the issue of the competitive relationship between appellants and the favored branch dealers, holding that the effect on competition was not a jurisdictional requirement but rather an element of appellants' prima facie case. Godfrey v. Pulitzer Publ'g Co., 161 F.3d 1137 (8th Cir. 1998) (hereinafter "Godfrey I"). We stated that "[i]t may be that appellants will be unable to prove any competitive relationship, and consequently, no competitive harm," but "[t]hose shortcomings of proof... do not deprive the district court of jurisdiction -- that is its power -- to hear the case." Id. at 1142.

On remand, the district court granted Pulitzer's motion for summary judgment under Fed. R. Civ. P. 56(c). The court decided the case primarily on prong 1, holding that appellants had not shown that Pulitzer had discriminated in price between them and the favored branch dealers and that the offer in fact had been made to all branchmen on equal terms and had contemplated that the agreement would extend beyond three years. The court alternatively held that, because the branch dealers limited their sales to non-overlapping territories, any price discrimination could not affect competition between the appellants and the favored branch dealers.⁹

Appellants filed motions to alter or amend the judgment under Fed. R. Civ. P. 59(e), or, in the alternative, for relief from judgment pursuant to Fed. R. Civ. P. 60(b). The district court denied these motions. This appeal followed.

We review de novo the district court's decision granting summary judgment. See Bathke v. Casey's Gen. Stores, Inc., 64 F.3d 340, 343 (8th Cir. 1995). We review the record in the light most favorable to the non-moving party, see id., and determine whether the movant demonstrated that there are no outstanding issues of material fact and that it is entitled to judgment as a matter of law, id.; Fed. R. Civ. P. 56(c).

We may affirm the district court's judgment on any grounds supported by the record. See DeBruce Grain, Inc. v Union Pac. R. Co., 149 F.3d 787, 790 (8th Cir. 1998). In this case, we find that the district court's holding as to prong 2, that appellants failed to show that the price discrimination had injured competition, is dispositive and we affirm on that ground. We accordingly do not reach the question of whether the favorable prices were equally available to appellants.

II. The Effect on Competition

In keeping with the language of section 2(a) -- a violation occurs "where the effect of [price] discrimination may be substantially to lessen competition... or to injure, destroy, or prevent competition," 15 U.S.C. § 13(a) (emphasis added), -- the Supreme Court has repeatedly held that section 2(a) does not "require that the discriminations must in fact have harmed competition, but only that there is a reasonable possibility that they 'may' have such an effect." Corn Products Refining Co. v. FTC, 324 U.S. 726, 742 (1945). See Falls City Indus., Inc. v. Vanco Beverage, Inc., 460 U.S. 428, 434-35 (1983); J. Truett Payne Co., Inc. v. Chrysler Motors Corp., 451 U.S. 557, 561-62 (1981); FTC v. Morton Salt Co., 334 U.S. 37, 46 (1948). The Supreme Court has further held that "for the purposes of § 2(a), injury to competition is established prima facie by proof of a substantial price discrimination between competing purchasers over time." Falls City Indus., 460 U.S. at 435 (citing Morton Salt, 334 U.S. at 46, 50-51.). See also White Indus., Inc. v. Cessna Aircraft Co., 845 F.2d 1497, 1501 (8th Cir. 1988).

This generous standard for inferring injury to competition, however, is logically limited by the necessity that the purchasers be competitors in the first place. See Ag-Chem Equip. Co., Inc. v. Hahn, Inc., 480 F.2d 482, 490 (8th Cir. 1973) ("As readily appears from a reading of ...