Kolling v. Dow Jones & Co.

• Decision Date: 24 November 1982
• Citation: 187 Cal.Rptr. 797,137 Cal.App.3d 709
• Court: California Court of Appeals Court of Appeals
• Parties: , 1982-83 Trade Cases P 65,113 Walter D. KOLLING et al., Plaintiffs and Respondents, v. DOW JONES & COMPANY, INC., et al., Defendants and Appellants. Civ. 45495.

Page 797

187 Cal.Rptr. 797

137 Cal.App.3d 709, 1982-83 Trade Cases P 65,113

Walter D. KOLLING et al., Plaintiffs and Respondents, v. DOW JONES & COMPANY, INC., et al., Defendants and Appellants.

Civ. 45495.

Court of Appeal, First District, Division 1, California.

Nov. 24, 1982.

Rehearing Denied Dec. 24, 1982.

Hearing Denied March 2, 1983.

G. Joseph Bertain, Jr., Timothy H. Fine Patrick J. Carter, San Francisco, for plaintiffs and respondents.

Cooper, White & Cooper, William J. Dowling III, John D. Mahoney, John M. Ross, San Francisco, Robert D. Sack, Patterson, Belknap, Webb & Tyler, New York City, for defendants and appellants.

NEWSOM, Associate Justice.

Respondents brought an action against appellants for 1) "Interference with Advantageous Business and Contractual Relations," and 2) violations of the Cartwright Act (Bus. & Prof.Code, § 16700 et seq.). The tort action was abandoned after the trial court's ruling that the damages sought by it were de minimus. The Cartwright Act antitrust case proceeded to jury trial, after which a verdict and judgment in favor of respondents Kolling and Fisher in the amounts of $102,915.23 and $62,471.89, respectively, were entered.

Two separate claims comprise the antitrust action which is the subject of the appeal. The primary theory of recovery is the "business claim," the essence of which is that appellants terminated respondent Kolling's newspaper distributorship, refused to recognize and honor an agreement by which the distributorship was transferred to respondent Fisher, and failed to hire Fisher as a replacement distributor, for reasons which amounted to a conspiracy to restrain trade. The secondary action is brought by Kolling alone, and is designated the "territorial restriction claim." In it, Kolling argues that respondents reduced the territory of his distributorship in 1973 in violation of the Cartwright Act.

In salient part the factual background is as follows.

Respondent Walter Kolling, a newspaper distributor since 1947, entered into an oral agreement with Dow Jones & Company (hereafter Dow Jones), publisher of, inter alia, the Wall Street Journal (hereafter WSJ) and Barron's National Business and Financial Weekly (hereafter Barron's), to distribute its publications in the San Francisco Bay Area. Kolling did not pay Dow Jones for his appointment as an exclusive distributor. The agreement between Kolling and Dow Jones called for the former to purchase publications from the latter and resell them through vending machines, retail outlets, and home and office delivery to subscribers.

During the 1960's, Kolling expanded his area of sales as far south as San Jose. Gradually, however, Dow Jones deleted certain areas from the territory served by Kolling; first Palo Alto, then the East Bay from Richmond to the Oakland Airport, then San Jose. By 1967, Kolling's service area was confined to the area from Millbrae north to San Francisco. Kolling protested each "realignment" in his territory to no avail.

The record shows that during the 1960's and early 1970's Dow Jones sales representatives requested on several occasions that Kolling attempt to convince uncooperative retailers of the WSJ to sell the newspapers at the retail price suggested by Dow Jones. ¹ Kolling was apparently only successful at persuading the Palace Hotel in San Francisco to roll back its price of the WSJ to the suggested figure.

Dow Jones also practiced a policy of seeking to enforce price schedules among its distributors, as the following evidence reveals.

In 1971, appellant Paul Smith was hired by Dow Jones as a field service representative, and in that capacity worked with Dow Jones distributors in the San Francisco Bay Area. He reported to the Dow Jones Western Regional Manager, a position held by appellant Jeff Williams beginning in mid-1972.

When he was hired, Smith received a copy of the Dow Jones Retail Sales Manual, which explained the procedure to be employed upon a change of distributorships. The manual recommended that a new distributor be informed by letter of the following: "(1) The distributorship is terminable at will by either party at any time for any reason up to 30 days prior written notice ..."; and (2) "In accordance with our historical policy, Dow Jones further reserves the right to refuse to deal with any distributor who will not abide by our suggested retail price schedules as issued from time to time by the Company." (Emphasis added.) According to testimony offered by Dow Jones, the form letter stating the company's "historical policy" on overpricing was removed from the retail sales manual on October 7, 1974, by a written directive which mentioned a request by the Dow Jones Legal Department to "refrain from using the confirmation of appointment letter...."

Respondent Fisher testified that during one of his first meetings with a Dow Jones representative in 1971--to discuss Fisher's interest in distributing the WSJ in the East Bay--he was told, in a "threatening" tone, that Dow Jones "strongly urged" its distributors to adhere to the cover price for rack sales.

Other distributors encountered difficulties with Dow Jones for selling publications at prices greater than the suggested retail price.

In 1971, and again in May or June of 1974, distributor Herman Overdevest exceeded the cover price for Dow Jones publications in his territory and was asked to comply with suggested rate structure by Dow Jones representatives. On the latter occasion, appellant Smith warned Overdevest to roll back his prices; feeling intimidated, Overderest reluctantly complied. In a subsequent letter to Williams, Smith noted his meeting with Overdevest and the distributor's promise to adhere to the rate structure, and explained that he would "be checking to be sure [Overdevest] follows up on his promise." On later occasions, Overdevest again raised his rates above the suggested price with Dow Jones' knowledge, without response from the publisher.

In April 1974, Dow Jones discovered that one of its Sacramento distributors, Ralph Marston, was engaged in "overpricing." Dow Jones immediately contacted Marston and asked to meet with him to discuss his "plans for pricing on our publications as it relates to our proposed expansion/promotional efforts in Sacramento." When, after a meeting on April 8, Marston failed to assure Dow Jones that he would comply with the suggested price schedule, appellant Williams advised his superiors that Marston should be terminated. Marston was terminated by letter dated May 30, 1974. Internal Dow Jones memoranda strongly suggest that the unannounced reason for Marston's termination was his overpricing. ² Dow Jones thereafter reconsidered the legality of its action, rescinded its notice of termination, and re-employed Marston.

In 1973, John Wilhalm, the Dow Jones distributor in San Mateo County, and Kolling's successor in that territory, sold the WSJ to a large airport newsstand at prices higher than suggested by Dow Jones (and higher than the rate previously charged by Kolling). The newsstand complained to Dow Jones, and Wilhalm was told that he should roll back his prices to avoid loss of the account. He reluctantly complied.

Several instances of territorial restrictions imposed by Dow Jones upon distributors were also established at trial, as follows.

First, respondents introduced into evidence a letter written by respondent Smith to a WSJ customer which explained that Dow Jones distributors sell publications within "specific areas" assigned in accordance with written agreements which "are binding in the sense that we cannot allow retail, vending machines or home delivery distribution of our papers by anyone other than our authorized distributors in any area where such an agreement has been made."

Respondent Kolling was also involved in several disputes over his distributorship territory, which was reduced in size gradually during the 1960's and early 1970's against Kolling's wishes.

Then, between 1972 and 1975, Smith and Williams became dissatisfied with Kolling's performance as a distributor. According to their testimony, Kolling's deficiencies included the following: vending machines left in poor condition, and without state-required labels; late deliveries; customer complaints; unavailability for weekly contacts with sales representatives and general uncooperativeness; and failure to purchase and install racks at suggested locations. (Kolling offered his own testimony in rebuttal, in which he explained the reasons for his delivery times and rack locations, and complained of the inexperience of Smith and Williams in the San Francisco market.)

In response to its dissatisfaction with Kolling, Dow Jones notified him by letter from Williams dated March 20, 1973, that San Mateo County would be eliminated from his distributorship territory, leaving only San Francisco as his area of responsibility. According to Dow Jones, the reduction in Kolling's service area was effectuated to give him a more manageable distribution territory. Kolling again objected to the territorial split, but the letter from Williams warned: "It is expected that you will honor this territorial realignment."

Kolling did not completely abide by the territorial split. But, when he continued to serve his airline accounts at San Francisco International Airport, Williams warned that Dow Jones would either cut his draw--the number of papers sold to Kolling each day for distribution--or further reduce his territory.

Dow Jones apparently felt that Kolling's performance had not improved despite the reduction in his service area, and so began the search for a replacement. Respondent Fisher, a San Francisco Chronicle distributor in the East Bay, was one of the potential replacements interviewed by Smith. In response to Smith's inquiries, Fisher mentioned that he would be willing to divest himself of his Chronicle distributorship "if the situation dictated."

Meanwhile, Kolling had...