Knutson v. Daily Review, Inc.

• Decision Date: 21 March 1979
• Docket Number: No. C-73-1354-CBR.,C-73-1354-CBR.
• Citation: 468 F. Supp. 226
• Parties: Douglas K. KNUTSON, Arlen N. Benham, Geoffrey Beatty, Laura Duarte, Evan Francis Williams, Joseph W. Berthiaume, Kenneth W. Jackson, Jean E. Nyland, Daniel A. Dutra, Willard B. Kittredge, Robert A. Dutra, and Gayle C. Ely, Plaintiffs, v. The DAILY REVIEW, INC., a corporation, Bay Area Publishing Co., a corporation, Floyd L. Sparks, an Individual, William Chilcote, an Individual, Dallas Cleland, an Individual, John Clark, an Individual, Carl Felder, Individually and doing business as Felder Enterprises, Defendants.
• Court: U.S. District Court — Northern District of California

468 F. Supp. 226

Douglas K. KNUTSON, Arlen N. Benham, Geoffrey Beatty, Laura Duarte, Evan Francis Williams, Joseph W. Berthiaume, Kenneth W. Jackson, Jean E. Nyland, Daniel A. Dutra, Willard B. Kittredge, Robert A. Dutra, and Gayle C. Ely, Plaintiffs, v. The DAILY REVIEW, INC., a corporation, Bay Area Publishing Co., a corporation, Floyd L. Sparks, an Individual, William Chilcote, an Individual, Dallas Cleland, an Individual, John Clark, an Individual, Carl Felder, Individually and doing business as Felder Enterprises, Defendants.

No. C-73-1354-CBR.

United States District Court, N. D. California.

March 21, 1979.

G. Joseph Bertain, Jr., Timothy H. Fine, Patrick J. Carter, Edward Stadum, San Francisco, Cal., for plaintiffs.

Broad, Khourie & Schulz, Michael N. Khourie, Thomas Paine, San Francisco, Cal., for defendants.

MEMORANDUM OF OPINION

RENFREW, District Judge.

In August 1973 a group of independent newspaper dealers brought suit in this Court against the publishers and certain officers of the newspapers they distributed, alleging violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. After extensive discovery and a lengthy trial, this Court on September 23, 1974, rejected three of plaintiffs' claims for relief but found that the publisher's written Dealership Agreement, which prohibited the dealers from selling their papers to subscribers at a price above the publisher's suggested price, constituted a vertical price restraint that violated Section 1 of the Act. See Knutson v. Daily Review, 383 F.Supp. 1346, 1357 (N.D.Cal.1974).¹ Because plaintiffs had failed to prove either the fact or amount of their injury, however, the Court declined to award damages. 383 F.Supp. at 1384.

On appeal, the Court of Appeals for the Ninth Circuit affirmed in part and reversed in part. It agreed that plaintiffs were not entitled to recover on the three claims for relief this Court had rejected. However, it disagreed with the Court's reasons for denying plaintiffs damages for the Section 1 violation. Noting that plaintiffs need only prove some damages to establish the fact of damage, and that once the fact of damage has been shown, the amount of damage can be established according to a relaxed standard of proof, the Court of Appeals remanded for a reconsideration of the damage issue. Knutson v. Daily Review, 548 F.2d 795, 813 (9 Cir.), cert. denied, 433 U.S. 910, 97 S.Ct. 2977, 53 L.Ed.2d 1094 (1977).²

The case is now before this Court on remand. Having considered the opinion of the Court of Appeals, the arguments of counsel, and all the evidence presented, both at trial and at a post-trial remand hearing, this Court concludes that plaintiffs are entitled only to nominal damages for defendants' violation of Section 1 of the Sherman Act.

ANTITRUST DAMAGES

Before discussing the facts of this case and analyzing the Ninth Circuit's damage holding, it may be helpful to reiterate the standards applicable to the computation of antitrust damages. For it is only in the context of a long line of Supreme Court and Ninth Circuit antitrust damage opinions that the Court of Appeals' decision can properly be applied to the evidence before this Court.

Plaintiffs in an antitrust suit have the burden of proving damages. As many courts have noted, this requires them to prove both the fact of damage and the amount of damage. These are two separate proofs. See Story Parchment Co. v. Paterson Parchment Co., 282 U.S. 555, 562, 51 S.Ct. 248, 75 L.Ed. 544 (1931); Flintkote Co. v. Lysfjord, 246 F.2d 368, 392 (9 Cir.), cert. denied, 355 U.S. 835, 78 S.Ct. 54, 2 L.Ed.2d 46 (1957); Newberry v. Washington Post Co., 438 F.Supp. 470, 483 (D.D.C.1977). For the former, plaintiffs must establish with reasonable probability the existence of a causal connection between defendants' violation of the antitrust law and plaintiffs' revenue-impairing injury. See Pac. Coast Agr. Export Ass'n v. Sunkist Growers, Inc., 526 F.2d 1196, 1205-1206 (9 Cir. 1975), cert. denied, 425 U.S. 959, 96 S.Ct. 1741, 48 L.Ed.2d 204 (1976); Flintkote, supra, 246 F.2d at 392; but see Sunkist Growers v. Winckler & Smith Citrus Products Co., 284 F.2d 1, 32 (9 Cir. 1960), rev'd on other grounds, 370 U.S. 19, 82 S.Ct. 1130, 8 L.Ed.2d 305 (1962) (plaintiff must provide proof to a "reasonable certainty").³ For the latter, plaintiffs must show the extent of the financial impact of defendants' antitrust violation. Generally, this can be accomplished through proof of lost profits.

The measure of proof needed to meet these burdens differs significantly. Plaintiffs must bear a heavier burden in proving the fact of damage than in proving the amount of damage. See Flintkote, supra, 246 F.2d at 392. Thus, although a plaintiff cannot recover damages that are uncertain in the sense that they are not the certain result of defendant's violation, once this fact of damage has been established, plaintiffs can recover all damages definitely attributable to that wrong, even if the amount of damage is uncertain or difficult to ascertain. See Story Parchment, supra, 282 U.S. at 562, 51 S.Ct. 248; Flintkote, supra, 246 F.2d at 392.⁴

In calculating damages for antitrust violations, the trier of fact can rely upon probable and inferential as well as direct and positive proof. See Story Parchment, supra, 282 U.S. at 561-564, 51 S.Ct. 248; Eastman Kodak Co. v. Southern Photo Co., 273 U.S. 359, 377-379, 47 S.Ct. 400, 71 L.Ed. 684 (1927). It is permitted to make a "just and reasonable estimate of the damage suffered by plaintiffs based on relevant data" presented, and these findings will be sustained even if the result is only approximate. See Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251, 264, 66 S.Ct. 574, 580, 90 L.Ed. 652 (1946); Story Parchment, supra, 282 U.S. at 563, 51 S.Ct. 248; Eastman Kodak Co., supra, 273 U.S. at 379, 47 S.Ct. 400; Greyhound Computer Corp., Inc. v. Int'l Bus. Mach. Corp., 559 F.2d 488, 506 (9 Cir. 1977), cert. denied, 434 U.S. 1040, 98 S.Ct. 782, 54 L.Ed.2d 790 (1978). The essential requirement is only that plaintiffs develop a reasonable theory for calculating the amount of damages and that they introduce the data necessary to make this calculation. Lehrman v. Gulf Oil Corp., 500 F.2d 659, 668 (5 Cir. 1974), rehearing denied, 503 F.2d 1403, cert. denied, 420 U.S. 929, 95 S.Ct. 1128, 43 L.Ed.2d 400 (1975); SCM Corp. v. Xerox Corp., 463 F.Supp. 983, at 1019 (D.Conn.1978); L. Sullivan, Handbook of the Law of Antitrust, § 251, at 786 (1977). However, "even where the defendant by his own wrong has prevented a more precise computation, the trier of fact may not render a verdict based on speculation or guesswork." Bigelow, supra, 327 U.S. at 264, 66 S.Ct. at 579, 580. The burden may be relaxed, but it is never eliminated.

LAW OF THE CASE

In addition to being influenced by these general standards for evaluating damage evidence, the Court must follow the more detailed instructions given it by the Court of Appeals in this case. 548 F.2d 795. First, the Court of Appeals found that the Daily Review plaintiffs had met their initial burden of proving the fact of damage.⁵ Recognizing that "different standards govern proof of the fact and proof of the amount of damages," and that to prove the fact of damage, plaintiffs need only offer "`proof of some damage flowing from the unlawful conspiracy,'" the Court of Appeals concluded that The Daily Review "plaintiffs have produced evidence that despite circulation drops their net profits would have been higher in some amount" had there been no price restraint. Knutson, supra, 548 F.2d at 811, 813. In addition, the Court of Appeals concluded that these "reduced net profits were `precisely the type of loss that the claimed violations of the antitrust laws would be likely to cause,'" and that therefore, even though there may be "some infirmities in plaintiffs' evidentiary showing," these "infirmities are not so significant as to call into question the fact of damage, but relate only to the amount of damage." Knutson, supra, 548 F.2d at 813, quoting Zenith Radio Corp., supra, 395 U.S. at 125, 89 S.Ct. 1562 (emphasis added).

This conclusion might be subject to some dispute, both on the grounds that plaintiffs' evidence of profit loss was found by this Court not to be credible,⁶ and because the alleged loss probably was not of "the type that the statute was intended to forestall."⁷See Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 487-488, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1977), quoting Wyandotte Co. v. United States, 389 U.S. 191, 202, 88 S.Ct. 379, 19 L.Ed.2d 407 (1967). However, as the law of the case, these findings must be accepted on remand, and this Court must assume the fact of damages. Therefore, all that remains for this Court to do is ascertain the amount of damages to which each Daily Review plaintiff is entitled.

THE AMOUNT OF DAMAGES

After considering all the evidence presented at trial, this Court concluded that plaintiffs had failed to meet their burden of proving either the fact or the amount of damage.⁸ The Court of Appeals disagreed, finding that this holding, by requiring proof to a reasonable probability that plaintiffs actually would have raised their prices, created "a nearly insurmountable barrier to recovery in maximum price-fixing cases." Knutson, supra, 548 F.2d at 812. As a result, and in order to ease plaintiffs' burden, the Court of Appeals established a presumption that the dealers' pricing policies would have been guided by the principle of profit-maximization. It did so in a paragraph that deserves extended scrutiny, for it is in this paragraph that the Court of Appeals sets forth the guidelines for evaluating the evidence on "amount of damages." The Court of Appeals stated:

"Rather than imposing the nearly impossible burden of proving what each dealer would have done if he had been free to make his own pricing decision, we assume that, absent evidence to the contrary, a dealer

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