Official Publications, Inc. v. Kable News Co., Inc.

• Decision Date: 04 August 1988
• Docket Number: No. 85 Civ. 1464 (DNE).,85 Civ. 1464 (DNE).
• Citation: 692 F. Supp. 239
• Parties: OFFICIAL PUBLICATIONS, INC., Plaintiff, v. KABLE NEWS COMPANY, INC., Daniel Friedman, and Alfred W. Holpp, Jr., Defendants.
• Court: U.S. District Court — Southern District of New York

692 F. Supp. 239

OFFICIAL PUBLICATIONS, INC., Plaintiff, v. KABLE NEWS COMPANY, INC., Daniel Friedman, and Alfred W. Holpp, Jr., Defendants.

No. 85 Civ. 1464 (DNE).

United States District Court, S.D. New York.

August 4, 1988.

Certilman Haft Lebow Balin Buckley & Kremer, Barry I. Fredericks and Penny P. Domow, New York City, of counsel, for plaintiff.

Jacobs Persinger & Parker, I. Michael Bayda and William W. Lasher, New York City, of counsel, for defendants.

OPINION AND ORDER

EDELSTEIN, District Judge:

Defendants, Kable News Company, Inc. ("Kable"), Daniel Friedman and Alfred W. Holpp, Jr., have moved this court, pursuant to Federal Rules of Civil Procedure 12(c) and 56(b), for summary judgment on the grounds that: (1) the Court lacks jurisdiction over the subject matter of this action; (2) the First, Second, Third, Fifth, Eighth, Ninth, Tenth, Eleventh, Twelfth and Thirteenth Causes of Action in the amended complaint fail to state claims upon which relief can be granted; (3) plaintiff lacks standing to assert the fifth cause of action; (4) the claims alleged are barred, in part, by the applicable statutes of limitation; (5) the First, Second, Third and Fourth causes of action are barred by the principle of account stated; and (6) there is no genuine issue as to any material facts and defendants are entitled to a judgment as a matter of law. Defendants also move, pursuant to Federal Rule of Civil Procedure 11, for plaintiff to reimburse defendants for the expenses and reasonable attorneys' fees incurred in defending this action, on the grounds that the action is not well grounded in fact or warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law.

Whereas the court lacks subject matter jurisdiction over this controversy, the remaining motions need not be considered.

Background

Plaintiff, Official Publications, Inc. ("Official"), publishes various magazines for distribution and sale in the United States and abroad. Defendant Kable distributes magazines and books to foreign and domestic wholesalers. Defendants Daniel Friedman and Alfred W. Holpp, Jr., are Kable's principal officers.

From June, 1961 through July, 1980, Official and Kable entered a series of distribution agreements, pursuant to which Kable bought magazines from Official. Kable then sold these magazines to wholesalers at a specified discount below the retail price of each magazine. The distribution agreements entitled certain wholesalers to greater discounts than others because the high price of labor in their region increased their business costs. Each month, Kable sent to Official a settlement statement listing the total amount of all discounts that Kable granted to wholesalers.

Official alleges that from 1973 through 1983, Kable violated the distribution agreements by granting excess discounts to certain wholesalers. Official further alleges that Kable charged such discounts to Official's account, thereby reducing Official's profits. Official claims it first became aware of these excess discounts in 1983 after Kable voluntarily changed the format of its settlement statements to itemize the discounts granted to each wholesaler.

The amended complaint alleges claims under breach of contract, common law fraud, the Robinson-Patman Act, 15 U.S.C. § 13(a), (d), the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., the Mail Fraud Act, 18 U.S.C. § 1341, and the Wire Fraud Act, 18 U.S.C. § 1343. Official bases jurisdiction on diversity of citizenship, 28 U.S.C. § 1332, and federal question jurisdiction, 28 U.S.C. § 1331. Defendants' motion to dismiss for lack of subject matter jurisdiction claims that: (1) diversity jurisdiction does not exist; and (2) Official has not stated a viable cause of action pursuant to any of the four federal statutes listed above, thereby defeating federal question jurisdiction. Accordingly, defendants seek an order dismissing the amended complaint.

For the following reasons, defendants' motions to dismiss and for Rule 11 sanctions are granted.

I. Diversity

28 U.S.C. § 1332(a) states, in relevant part:

The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the value of $10,000, exclusive of costs and interests, and is between —

(1) Citizens of different states.

Official claims that this court has jurisdiction over the instant action pursuant to 28 U.S.C. § 1332, because the controversy is between citizens of different states and the amount in controversy exceeds $10,000.

It is well-settled that diversity jurisdiction exists only when there is complete diversity, i.e., all plaintiffs have their domiciles in different states than all defendants. Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806). A corporation is a citizen of its state of incorporation and the state in which it operates its principal place of business. 28 U.S.C. § 1332(c). Official alleges that New York is both its state of incorporation and principal place of business. Amended Complaint, ¶ 1. Clearly, Official is a New York citizen.

Official contends that complete diversity exists because Kable "is a corporation organized and existing under the laws of the State of Delaware with its principal place of business located at Mount Morris, Illinois...." Amended Complaint, ¶ 2. Kable, however, contends that it was incorporated under the laws of Illinois, Holpp Affidavit, ¶ 2, and that its principal place of business is in New York. If Kable's principal place of business is New York, complete diversity would not exist.

This court, however, need not address the issue of Kable's citizenship. Defendant Friedman avers he is a New York domiciliary. Affidavit of Daniel Friedman, ¶ 1. None of Official's motion papers challenge the assertion that Friedman is a New York domiciliary. Thus, plaintiff and at least one defendant are a New York domiciliary, regardless of the location of Kable's principal place of business. Accordingly, complete diversity is destroyed and this court has no jurisdiction pursuant to 28 U.S.C. § 1332.

II. Federal Question

Because diversity jurisdiction does not exist, this court can only hear the instant action if it arises "under the Constitution laws or treaties of the United States."¹ 28 U.S.C. § 1331. Official contends that four of its claims arise under federal law: (1) The Mail Fraud Act; (2) the Wire Fraud Act; (3) the Robinson-Patman Act; and (4) RICO. Each of these claims is considered below.

a. Mail Fraud Act and Wire Fraud Act

Official contends that this court has federal question jurisdiction pursuant to the Mail Fraud Act, 18 U.S.C. § 1341, and the Wire Fraud Act, 18 U.S.C. § 1343. The district courts have original jurisdiction over both federal criminal prosecutions, 18 U.S.C. § 3231, and civil actions brought under statutes that specifically confer jurisdiction upon the district courts. While RICO, 18 U.S.C. § 1964(c), allows a private plaintiff to seek civil remedies in the district courts, the Mail Fraud and Wire Fraud Acts do not. Napper v. Anderson, Henley, Shields, Bradford & Pritchard, 500 F.2d 634, 636 (5th Cir.1974), cert. denied, 423 U.S. 837, 96 S.Ct. 65, 46 L.Ed.2d 56 (1975); Milburn v. Blackfrica Promotions, 392 F.Supp. 434, 435 (S.D.N.Y. 1974). This court, therefore, may not hear this case pursuant to the Mail Fraud Act or the Wire Fraud Act.

b. Robinson-Patman Act

The fifth claim in the amended complaint alleges that Kable violated the Robinson-Patman Act, 15 U.S.C. § 13(a) and (d). The Robinson-Patman Act, which amended § 4 of the Clayton Act, deals with the problem of price discrimination between customers of the same seller. H.R.Rep. No. 2287, Pt. 1, 74th Cong., 2d Sess. 7 (1936). Official alleges Kable discriminated among the wholesalers that purchased Official's magazines from Kable by granting certain wholesalers greater discounts than those allowed by the distribution agreements. Further, Official alleges that it received lower profits on magazine sales to Kable in the amount of such excess discounts. Defendants argue, however, that the fifth cause of action must be dismissed because, inter alia, Official has not sustained an antitrust injury.

1. Standing to Sue and Antitrust Injury

In Associated General Contractors of California, Inc. v. California State Council of Carpenters, et al., 459 U.S. 519, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983), the Supreme Court addressed the issue of standing to sue under § 4 of the Clayton Act. The plaintiff Union and defendant Associated General, a multiemployer association of contractors, had entered into a series of collective bargaining agreements governing employment conditions. The Union represented the employees of Associated General in construction-related industries in California. The Union alleged that Associated General, in violation of the antitrust laws, coerced certain third parties and some of its own members to enter into business relationships with non-Union contractors and subcontractors. This activity allegedly restricted the trade of certain unionized firms and restrained the Union's business activities.

The Court concluded that the Union had not been injured by a violation of the antitrust laws. Justice Stevens, writing for the Court, stated that there was no clear-cut test available to determine what constitutes an antitrust injury: "The infinite variety of claims that may arise make it virtually impossible to announce a black-letter rule that will dictate the result in every case." Associated General, supra, 459 U.S. at 536, 103 S.Ct. at 908; see, Crimpers Promotions, Inc. v. Home Box Office, Inc., 724 F.2d 290, 295-96 (2d Cir.1983), cert. denied, 467 U.S. 1252, 104 S.Ct. 3536, 82 L.Ed.2d 841 (1984). The Court then identified the factors used to determine whether an injury is compensable under the antitrust laws.

The first factor is "the nature of the alleged injury."...