Paschall v. Kansas City Star Co., 79-1128

CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)
Citation605 F.2d 403
Docket NumberNo. 79-1128,79-1128
Parties1979-2 Trade Cases 62,822, 5 Media L. Rep. 1712 Gweldon Lee PASCHALL et al., Appellees, v. KANSAS CITY STAR CO., Appellant.
Decision Date04 September 1979

John T. Martin, Shook, Hardy & Bacon, Kansas City, Mo., for appellant; Sam L. Colville and Gary L. Whittier, Kansas City, Mo., and Robert L. Ballow and Daniel C. Kaufman, King & Ballow, Nashville, Tenn., on briefs.

Sheridan Morgan, Morris, Larson, King, Stamper & Bold, Kansas City, Mo., for appellees; Harry A. Morris, Donald H. Loudon, David M. Rhodus, and William M. Modrcin, Kansas City, Mo., on brief.

Before ROSS, STEPHENSON and HENLEY, Circuit Judges.

STEPHENSON, Circuit Judge.

This private antitrust case is before us under 28 U.S.C. § 1292(b). The specific question, certified by the district court, 1 and accepted for appeal by this court, as a controlling question of law as to which there is a substantial ground for difference of opinion, is whether certain proposed actions of appellant-defendant Kansas City Star Co. would constitute a violation of section 2 of the Sherman Act, 15 U.S.C. § 2.

We have carefully considered the arguments of the Kansas City Star and appellee-plaintiff, Gweldon Lee Paschall, 2 and have determined that the Star's application for leave to take interlocutory appeal was improvidently granted. We thus remand this case to the district court for proceedings not inconsistent with this opinion.

I. Facts

The plaintiffs in this case initially filed suit against the Star on January 13, 1975, alleging, Inter alia, violations of sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2, and section 3 of the Clayton Act, 15 U.S.C. § 14.

The plaintiffs, Paschall and over 200 other persons, are independent contract carriers who currently purchase newspapers from the Star and, in turn, sell and deliver them to their subscribers. This system of delivery has been used by the Star for many years.

In September 1977, the Star publically announced a changeover in its system of distribution. The Star stated that it would terminate all existing contracts with individual carriers; that it would no longer sell papers to the plaintiffs for retail distribution; and that it would thereafter deliver and sell the papers to the subscribers directly. The district court noted in its opinion that each individual contract carrier was offered an opportunity to negotiate one of the new delivery agent contracts with the Star; that the new contracts provided that the carriers would make approximately the same income as each did under the old individual contract carrier contracts; and that "(n)othing in the delivery agent contracts would prevent or discourage delivery agents from delivering other companies' publications * * *, * * * and the evidence does not indicate that The Kansas City Star * * * would discourage such deliveries." 3

On September 30, plaintiffs requested a temporary restraining order and preliminary injunctive relief to prevent the Star from terminating the contracts with the independent contract carriers; on October 27, 1977, the district court 4 granted the preliminary injunction. Paschall v. Kansas City Star Co., 441 F.Supp. 349 (W.D.Mo.1977).

Pursuant to a pre-trial order filed October 19, 1978 and Fed.R.Civ.P. 20, trial began on October 26, 1978, to litigate two issues only:

A. Does the defendant, the Kansas City Star Company, have monopoly power in a relevant product market in a relevant geographical market?

B. If so, has the defendant used monopoly power to foreclose competition, gain a competitive advantage, or destroy competitors? ( 5

On November 10, 1978, the trial court, in its memorandum of decision, limited the decision to the finding of facts and conclusions of law on the "single issue" of whether implementation of the Star's new distribution proposal would violate section 2 of the Sherman Act, 15 U.S.C. § 2.

The district court first made a finding as to the relevant product, "metropolitan daily newspapers in general circulation throughout the metropolitan area of Kansas City," and the relevant geographical area, the seven-county area in Missouri and Kansas around Kansas City, Missouri. The court concluded that the Star had a publication monopoly of the relevant product in the relevant geographical area. The court found that the Star did not, however, possess a monopoly of the distribution of metropolitan daily newspapers. The district court further found that, although negligible, some sales and distribution efforts had been made by the Star. Finally, the court found that the Star was at all times a "potential or probable competitor" of the independent contract carriers. Where a carrier failed to perform, whether for justifiable business reasons or for nonjustifiable personal reasons, the Star would step in and take over. In only one instance, however, did the Star compete in the sense of making the deliveries on a carrier's route when the carrier preferred to make the deliveries. This occurred when some of the customers on that route complained that the carrier had raised prices. 6 Thus, although it was admittedly De minimus, there was some competition at the distribution level between the Star and the independent distributors. The district court stated:

By contract right, by act, and by word the company made known its hovering presence at the fringe of the market. There is testimony that that presence tended to have a retardent effect on retail prices to the subscriber, and common sense confirms the reasonableness of that conclusion.

The company's refusal to sell to the carriers necessarily means that the retardent effect of the potential competition is eliminated and the company's monopoly extended into the sales and distribution arena.

Paschall v. Kansas City Star Co., No. 75-CV-36-W-4, slip op. at 6 (W.D.Mo. Nov. 10, 1978). The district court made no finding as to whether there was competition between the distributors.

The district court also found that the Star had legitimate business reasons for changing to a delivery-agent system; 7 that the new delivery system would not "destroy the carriers as an effective delivery system" and that the carriers would be in just as good a position to "remain a viable delivery system" under the delivery-agent contract as under the independent contract carrier contract; and that the actions of the Star did not create "barriers to the entering into the market by future competitors."

The court, in its Memorandum and Order on Motion to Amend memorandum of decision, stated:

Once the defendant refuses to sell to the plaintiffs, sells to the customers itself, and uses delivery agents for distribution, the competitive tension will be gone. Whereas there has been a retardant effect on retail prices until now, there will no longer be, because the cause will have disappeared. That is an anti-competitive result. It is a spreading of the defendant's monopoly. It is an act of monopolization * * *. ( 8

Thus, primarily upon this basis, the district court determined that the proposed delivery system would violate section 2 of the Sherman Act.

The district court, 9 in its certification under section 1292(b), stated "(i)t is this Court's further opinion that the remedy stage of these proceedings will be complex as well as lengthy and, therefore, immediate appellate review of (the findings made by the district court) may materially advance the ultimate termination of this entire litigation."

The above fully represents the record we have before us on this section 1292(b) appeal.

II. 28 U.S.C. § 1292(b)

The general purpose of section 1292(b) is to provide interlocutory appeal in exceptional cases in order to avoid protracted and expensive litigation. 10 C. Wright, Law of Federal Courts § 102 at 518 (3d ed. 1976). In order to satisfy section 1292(b) requirements, a case must involve an issue that concerns:

(1) a controlling question of law as to which there is

(2) a substantial ground for difference of opinion and upon which

(3) a decision will materially advance the ultimate outcome of the litigation.

Inherent in these requirements is the concept of ripeness. See Control Data Corp. v. IBM Corp., 421 F.2d 323 (8th Cir. 1970). While it might be conceivable that an issue includes a controlling question of law, and while it might be seemingly apparent that it is a difficult question as to which there is a substantial ground for difference of opinion, and while a decision thereon might materially advance the ultimate outcome, the case must be of sufficient ripeness so that this can be determined from the record. The purpose of section 1292(b) is not to offer advisory opinions "rendered on hypotheses which (evaporate) in the light of full factual development." Minnesota v. United States Steel Corp., 438 F.2d 1380, 1384 (8th Cir. 1971). Consideration of the factual basis must be such that a sound premise exists upon which the legal issues can be determined with precision. Id. 11

In practice, the easier it is to ascertain whether or not the prerequisites for section 1292(b) certification are satisfied, the easier it is to identify whether or not the issue is one suited for section 1292(b) review. When it is particularly difficult to determine whether those three general requirements have been satisfied, then by the nature of the strain in reaching that conclusion, it becomes apparent that section 1292(b) certification is not appropriate.

This is the situation in which we find the Sherman section 2 issue. For even if the Sherman section 2 issue is the determinative one in this lawsuit, the issue is such that the record must be more fully developed so that we can make a precise decision upon a precise record not an abstract answer to an abstract question. See Slade v. Shearson, Hammill & Co., 517 F.2d 398, 400 (2d Cir. 1974). A more complete factual and legal development in the district...

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