HOMEFINDER'S, ETC. v. Providence Journal Co., Civ. A. No. 5133.

• Decision Date: 08 June 1979
• Docket Number: Civ. A. No. 5133.
• Citation: 471 F. Supp. 416
• Parties: HOMEFINDER'S OF AMERICA, INC. and Keith Walker, d/b/a Homefinder's, Plaintiffs, v. PROVIDENCE JOURNAL COMPANY et al., Defendants.
• Court: U.S. District Court — District of Rhode Island

471 F. Supp. 416

HOMEFINDER'S OF AMERICA, INC. and Keith Walker, d/b/a Homefinder's, Plaintiffs, v. PROVIDENCE JOURNAL COMPANY et al., Defendants.

Civ. A. No. 5133.

United States District Court, D. Rhode Island.

June 8, 1979.

COPYRIGHT MATERIAL OMITTED

Ralph J. Gonnella, Ralph J. Gonnella, Ltd., Providence, R. I., for plaintiffs.

Knight Edwards, Matthew F. Medeiros, and Joseph V. Cavanagh, Jr., Edwards & Angell, Providence, R. I., for defendants.

OPINION AND ORDER

FRANCIS J. BOYLE, District Judge.

This is an action in which Plaintiff, Home-finder's of America, Inc., seeks damages and mandatory equitable relief against Defendant Providence Journal Company, its Director of Advertising, George Bellano, and so-called nominal Defendants John Doe and Jane Roe, described as customers of Plaintiff and Defendant Providence Journal Company whose present identities are unknown. Plaintiff's Complaint is based upon Sections 1 and 2 of the Sherman Anti-Trust Act of 1890, 15 U.S.C. §§ 1 and 2. The action was heard on a second Amended Complaint on its merits following denial of a preliminary injunction. Walker v. Providence Journal Company, 493 F.2d 82 (1st Cir. 1974).¹

There is a total absence of evidence aimed at implicating the individual Defendants and in accord with Plaintiff's concession at oral argument as to the individual Defendants, judgment will enter in their favor for costs.

The basis of this action is the refusal of Defendant, Providence Journal Company, hereafter Defendant, to accept Plaintiff's advertising for publication in its newspapers concerning available rental housing vacancies, and the adoption by Defendant of a policy declining to accept any advertising for publication where a fee is required of prospective tenants in order to obtain rental information.

Plaintiff in substance contends a violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, by reason of the acquiescence of two firms, other than Plaintiff, who furnished rental information for a fee, in the policy of Defendant to refuse to publish advertisements, as a per se violation or a violation of the "rule of reason."² Additionally, Plaintiff alleges violations of Section 2 of the Sherman Act, 15 U.S.C. § 2, claiming that Defendant monopolizes and, also, attempts to monopolize the renter information service market by means of its strategic dominance over the daily newspaper market in the relevant geographic area.

In addition to testimony presented at an extended hearing, the Court has also considered as evidence testimony submitted in connection with a hearing on Plaintiff's prayer for preliminary injunction on May 10 and 11, 1973 and portions of depositions designated by counsel. The Court makes the following findings of facts and conclusions of law:

Plaintiff is a Colorado corporation created in 1971. In 1976, its name was changed to Pacific-Atlantic Development Co., Inc. Initially, it operated a rental information service at Denver, Colorado. It collected information concerning available rental properties, listed the information and sold the information to prospective tenants for a fee. Landlords were permitted to list their properties without charge. Prospective tenants purchased a contract or policy from Plaintiff—valid for a year. The information collected by Plaintiff was then made available to the prospective tenant. Plaintiff later sold its operating business and has not itself directly participated in that business since that time. Rather, Plaintiff began the business of franchising its method of doing business. It succeeded in contracting with franchisees throughout the United States, in parts of Canada, and Australia. In general, Plaintiff provided its franchisees with instructions in its method of providing renter information and provided assistance in the actual operation of the franchise, including accounting services and advertising advice for a percentage of the franchisee's gross income.

On August 1, 1972, Plaintiff entered into a franchise agreement with one Keith Walker, who was then an employee of another franchisee, whereby Walker was granted an exclusive license to offer listings of available real estate limited to Providence and Kent Counties in the State of Rhode Island. The agreement was terminable by either party upon 30 days written notice and upon termination the franchisee was required to immediately transfer to Plaintiff all outstanding and current listings, customer records, documents, books of account and all other records relating to the operation of the franchise, and all mail. Upon termination, the franchisee was required to furnish services to customers for a period of one year. Upon the franchisee's failure to continue to provide services for a period of one year, the Plaintiff was authorized to expend a reserve account of up to $20,000 to honor franchisee's commitments. The reserve account was created by a charge of 5% on gross sales until the reserve account, retained by Plaintiff, amounted to $20,000.

Plaintiff at the time of trial was not engaged in any rental information service anywhere. It now operates a check cashing service in Denver, Colorado. The reason assigned for its withdrawal from the rental information business was a Federal Trade Commission Consent Order which Plaintiff found difficult to supervise and which, it was testified, could have subjected Plaintiff and its officers to personal liability. In the Matter of Rentex, Inc. T/A Homefinders of America, etc., et al., 87 F.T.C. 1340 (May 25, 1976).

Although Plaintiff now asserts that, if it is successful, it will revive its business at Providence, Rhode Island, this assertion is contrary to Plaintiff's explanation of the purpose of this litigation stated in its weekly newsletter to dealers published shortly after this litigation was commenced. It stated:

THE LAWSUIT IN PROVIDENCE:

The situation in Providence is as follows. First of all, our attorney, Mr. Tony Pennacchia, has suggested that since Mr. Walker has left we should not reopen the Providence office and that we should not service the accounts in the Providence area. I am sure this seems a great deviation from our normal policy; however, Mr. Pennacchia's reasoning is that there will be a certain amount of consumer protest due to the fact that no dealer is in Providence to service the local accounts. Our firm in the lawsuit and litigation against the Providence Journal will seize upon this situation to blame the newspapers for, in fact, our inability to service these accounts. In other words, we are alleging in our lawsuit that not only has the company suffered irreparable harm by the newspaper's actions and not only has Mr. Walker suffered irreparable harm from the newspaper, i. e. he went out of business, but also the consumers in the Providence area who have contracted with us for our services are also individually and collectively suffering damages which will be laid to blame directly upon the action of the newspaper's refusing to run our advertising. We feel that by blaming the newspaper for this action this tends to strengthen our position that the newspaper is a monopoly and a defacto public utility who can create great harm and damage upon not only a firm and its employees per se, but also a community at large. Consequently, at this time we will not replace the dealer in Providence and the Providence accounts will go unserviced. This should not cause great hearm (sic) to our reputation since, as you know, each of you will soon be changing to the use of Rentex and whereas it is contrary to our normal code of ethics of operation, I believe Mr. Pennacchia's point is well taken and this action could ultimately serve to benefit the company and possibly the consumer.

The Court cannot accept as fact Plaintiff's assertion that, if successful in this action, it will revive its renter information service in the Providence area. In addition to the fact that the F.T.C. order of May 25, 1976 will severely curtail Plaintiff's modus operandi, it appears that it is now engaged in only two businesses, check cashing and this litigation. Its representations concerning future operation are not credible.

Plaintiff seeks damages for Defendant's past refusal to accept its advertising and seeks to compel Defendant to accept its advertising in the future. Plaintiff cloaks its demands under the provisions of an Act of Congress adopted in 1890, which sought to prevent combinations or intentional action designed to eliminate or limit freedom of economic opportunity. This legislation recognized the need to insure conditions of free competition in a society constitutionally endowed with a considerable degree of opportunity of choice. It is Plaintiff's argument that while it may advertise as it chooses, Defendant lacks the choice of declining to print that which Plaintiff wishes to publish. Plaintiff would have this Court ignore the probable effect of Defendant's publication of Plaintiff's advertisements. In mildest terms, the nature of Plaintiff's advertising is misleading. It sought to notify the public, not of the qualities and virtues of its service, but of the alleged availability of particular properties. At first blush, this seems to be inconsistent with Plaintiff's own interest, since the commodity which it had for sale was information concerning the availability of certain properties which would be disclosed only upon the payment to Plaintiff of its fee. In fact, the purpose of this advertising eminently served Plaintiff's purpose. It inserted advertisements which were calculated to attract an unusual degree of attention, indicating that properties were available for rent under circumstances that were, to say the least, unusual. For example, its advertisements stated that children and pets were welcome, utilities were paid and automobile parking was available. Complaints concerning this type of advertising establish without doubt that it is what has been called "bait" adverti...