Henderson Broadcasting Corp. v. Houston Sports Ass'n

• Decision Date: 24 July 1986
• Docket Number: C.A. No. H-81-558.
• Citation: 647 F. Supp. 292
• Parties: HENDERSON BROADCASTING CORPORATION, More Commonly Known as KYST-AM, Plaintiff, v. HOUSTON SPORTS ASSOCIATION, INC. and Lake Huron Broadcasting Corporation, Owner of KENR-AM Radio, Defendants.
• Court: U.S. District Court — Southern District of Texas

647 F. Supp. 292

HENDERSON BROADCASTING CORPORATION, More Commonly Known as KYST-AM, Plaintiff, v. HOUSTON SPORTS ASSOCIATION, INC. and Lake Huron Broadcasting Corporation, Owner of KENR-AM Radio, Defendants.

C.A. No. H-81-558.

United States District Court, S.D. Texas, Houston Division.

July 24, 1986.

Charles J. Brink, Houston, Tex., for plaintiff.

Mark E. Lowes, Bracewell & Patterson, Houston, Tex., for Houston Sports Assn.

Robert Dabney, Dabney, Kelly, Sheller & Wells, Houston, Tex., for Lake Huron Broadcasting Co.

ORDER

McDONALD, District Judge.

Pending before the Court is Defendants' Motion for Partial Summary Judgment. Having carefully considered the pleadings and applicable law, the Court concludes that the Motion should be GRANTED in Part and DENIED in Part.

1. KYST, a radio station which was owned by Plaintiff Henderson Broadcasting Corporation, was licensed by the FCC on June 11, 1980, and broadcasted at 920 on the AM frequency. As part of its regular business, KYST sold broadcast time to businesses on the local, regional, and national level. Such advertisements were played throughout the broadcast day. Defendant Houston Sports Association, Inc. ("HSA") is the owner of the Houston Astros, a major league baseball team. Lake Huron Broadcasting Corporation ("KENR") is the owner of a local Houston AM radio station, KENR (KENR now goes by the call letters of KRBE).

2. The primary source of income for KYST Radio, as with most other AM and FM radio stations, was the sale of advertising time. The rates for such advertisements, or "radio spots" as they are known in the trade, are dependent largely upon the size of the listening audience for a particular radio station. The larger the audience the higher the rates which can be charged and the greater the income the radio station can earn. The larger the number of listeners a station attracts translates into more money an advertiser will pay to have his product or service advertised on a particular station, because his message can reach more potential customers.

3. The size of a station's audience is measured by the "ratings." The ratings are formulated by the Arbitron Survey. If a station's ratings are high, this indicates a large audience and the station can charge more for its advertising spots. The opposite is also true, that is, if a station's ratings go down or are low, then the rates it can charge must also be lower. The fact that a station's ratings are high or low affects directly the number of potential advertisers. The higher the ratings the greater the potential number of advertisers and, likewise, the lower the ratings the lower the number of potential advertisers. Both the number of advertisers and the rates or prices charged for advertising time are critical to a station's success or failure.

4. The parties to this action were in the business of selling advertising to various concerns at the time this lawsuit was filed. Part of their business involved contracting and dealing with other companies outside the State of Texas. Based upon the above, the activities of the parties were conducted in interstate commerce.

5. To increase fan interest in the team, the Astros, like other major league baseball teams, contracted with radio and television stations to broadcast Astros' games both home and away to fans unable to attend the games. Those contracts are called station contracts.

6. One purpose for the broadcasts is to raise revenue directly for the Astros by sales of advertising time on the broadcasts. Under the station contract, the Astros control all advertising except for a selected number of spots, for instance six (6) ninety-second (90) spots, which they allow for the station broadcasting the games to use.

7. In the instant case, Defendant Houston Sports Association entered into station contracts with both Plaintiff KYST and Defendant KENR. The broadcast signals of these two stations overlapped in the Houston-Galveston area. Both KYST and KENR competed for advertising revenue from the Houston-Galveston market. Thus, they were competitors for listeners and advertising dollars.

8. On or about February 24, 1981, KYST's station contract with HSA was terminated. The uncontroverted events which preceded the termination were 1) KYST sent a letter, dated October 17, 1980, to HSA expressing its willingness to carry the Astros baseball game broadcasts in the Galveston area with some minimal daytime overlap of its broadcast in Houston; 2) HSA sent a cover letter and two copies of the station contract to KYST and the contract noted its duration from January 1, 1981, to December 31, 1981, without mention of the particular geographic area; 3) the cover letter, dated December 1, 1980, required KYST to sign and return the station contract to HSA.

9. On May 12, 1981, KENR and HSA executed a three year contract for KENR to become the Astros' flagship station in Houston. The flagship station originates the broadcasts of the Astro's games and distributes them to the network. The flagship station also promotes and broadcasts in the key hometown market—Houston. KENR was granted the three year exclusive flagship rights to broadcast the Astros' games in Houston.

10. The facts are uncontroverted, that KYST and KENR competed for advertising revenue and listeners. They also competed with all other radio stations in the Houston-Galveston area for advertising revenue and listeners.

11. At the time this lawsuit was filed there were over forty radio stations in the Houston-Galveston area. All the radio stations competed through broadcast programming, promotions, and other product differentiation. The goal of programing is to develop a unique format which attracts an audience and with them advertisers. The overall radio advertising market was highly competitive.

12. HSA controlled 100% of the broadcast and advertising of all Astros' games.

KYST filed its complaint against HSA and KENR for 1) unlawful combination and conspiracy in unreasonable restraint of interstate trade in violation of Section One of the Sherman Act; 2) unlawful monopolization, attempted monopolization, and conspiracy to monopolize in violation of Section Two of the Sherman Act; 3) violation of the Texas Business and Commerce Code; 4) breach of contract against HSA, solely; and 5) tortious inference with business interest against KENR, solely.

On the other hand, HSA and KENR move for Partial Summary Judgment on the basis that 1) the rule of reason governs the case; 2) HSA's territorial restraints are not unreasonable restraints of trade; 3) HSA's termination of KYST did not injure competition; 4) HSA and KENR have insufficient market power to monopolize the relevant market; and 5) KENR did not tortiously interfere with KYST's business relations.

While "summary judgment is an excellent device by which district courts may make expedited disposition of those cases in which a trial would be fruitless," Gordon v. Watson, 622 F.2d 120, 123 (5th Cir.1980), the district court may grant it "only when the moving party has established his right to judgment with clarity that the nonmoving party cannot recover ... under any discernable circumstance." Everhart v. Drake Management, Inc., 627 F.2d 686, 690 (5th Cir.1980). The district court, when deciding whether to grant a motion for summary judgment, must view the evidence in the light most favorable to the party resisting the motion. Joplin v. Bias, 631 F.2d 1235, 1237 (5th Cir.1980). Pursuant to Fed.R.Civ.P. 56, summary judgment may be granted only where the entire record, i.e., pleadings, depositions, interrogatories, etc., shows that no genuine issue of material fact exists. Erco Industries, Ltd. v. Seaboard Coast Line Roalroad Co., 644 F.2d 424, 428 (5th Cir.1981). The mover must bear the burden of proof, and "all reasonable doubts as to the existence of the genuine issue of material fact" have to be resolved against him. Id. The fact that it appears that the nonmover is unlikely to prevail at trial or that the mover's facts appear more plausible are not reasons to grant summary judgment. Hayden v. First National Bank, 595 F.2d 994, 997 (5th Cir.1979). The trial court has no duty to decide factual issues, only whether there is an issue of fact to be tried. Foster v. Swift & Co., 615 F.2d 701, 702 (5th Cir.1980).

Jones v. Western Geophysical Co., 669 F.2d 280 (5th Cir.1982).

Section One

In a capsule, Plaintiff claims that HSA and KENR conspired to restrict the broadcast of Houston Astros baseball games by eliminating KYST from the market of selling advertising time during Houston Astros baseball game broadcasts. At the outset, Plaintiff contends that the Defendants' conduct was a per se violation of Section One of the Sherman Act. 15 U.S.C. § 1 (1982). The elements of a Section One violation are 1) a conspiracy exists between two or more competitors; 2) the conduct of the conspirators amounts to an unreasonable restraint of trade or competition; 3) the conspiracy was entered into to effect an illegal objective (e.g. price fixing); and 4) the Plaintiff must suffer injury as a result of the acts of the conspirators.

A per se violation of the antitrust laws occurs where the effect or the natural tendency of the competitor's conduct is so pernicious that it is lacking in any redeeming value. Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 47, 97 S.Ct. 2549, 2556, 53 L.Ed.2d 568 (1976); Northern Pacific R. Co. v. United States, 356 U.S. 1, 5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958). In the present case, the owner of a baseball team and one of its advertising stations is accused of conspiracy to remove Plaintiff from the market of broadcasting Astros Baseball Games for advertising revenues. The alleged conduct relates to "non-price" restrictions on intrabrand competition.¹ The main dispute between the parties concerns the Defendants reluctance to have KYST and KENR share broadcasting markets and does not concern pricing practices as...