Paschall v. Kansas City Star Co.
| Decision Date | 27 October 1977 |
| Docket Number | No. 75CV36-W-4.,75CV36-W-4. |
| Citation | 441 F. Supp. 349 |
| Parties | Gweldon PASCHALL, Plaintiff, and all Intervenors v. The KANSAS CITY STAR COMPANY, Defendant. |
| Court | U.S. District Court — Western District of Missouri |
Sheridan Morgan, Donald Loudon, David Rhodus, Morris, Mitchell, Larson, King, Stamper & Bold, Kansas City, Mo., for plaintiff.
John T. Martin, Sam Colville, Everett Olson, Gary Whittier, Shook, Hardy & Bacon, Kansas City, Mo., for defendant.
This action now pends before the Court on plaintiffs' motion for a preliminary injunction.
Plaintiffs, independent contract carriers who have contracted with defendant newspaper company, The Kansas City Star Company (The Star), to deliver The Star's newspapers and advertising materials to the public, attack as illegal certain portions of The Star's plan to alter its method of product distribution. This plan, publicly announced by The Star in The Kansas City Star newspaper of September 26, 1977, consists of three parts: First, The Star would terminate all existing contracts with its independent contract carriers as of December 1, 1977. Second, The Star would thereafter deliver and sell its newspapers directly to subscribers. Third, The Star would no longer supply its product to persons, such as plaintiffs, who desire to conduct a business consisting of the retail distribution of defendant's product to the public.1
Plaintiffs do not contest the Star's proposal insofar as it contemplates direct retailing by The Star of its product to consumers. Plaintiffs concede The Star has this right. Plaintiffs do, however, contest The Star's right to accompany its proposed retail distribution scheme with its plan to terminate its existing relationship with plaintiffs. Plaintiffs, in oral argument at the full evidentiary hearing on the preliminary injunction issue, summarized their position thus: The Star must continue to sell its newspapers to the independent carriers at present contract prices, and the independent carriers may sell and deliver these papers in competition with The Star.
The Star publishes, prints, and distributes its newspapers from its offices at 1729 Grand Avenue, Kansas City, Missouri thirteen times per week. Since approximately 1880, The Star has contracted with various independent parties for delivery of its newspapers and advertising materials to the public. Plaintiffs (contract carriers) are presently parties to such contracts with The Star; however, The Star also has over 500 contracts for home newspaper delivery service with persons not parties to this action. The present distribution system has the following characteristics:
a) Title to The Star's product passes twice: first, when The Star delivers its paper to the contract carrier and, second, when the contract carrier delivers the paper to the consumer.
b) Each contract carrier sets his own retail price to newspaper subscribers and other customers, subject to the effect of the wholesale percentage pricing.
c) The contract carriers are permitted to, and do in fact, charge subscribers and other customers different rates.
d) The contract carriers may impose additional charges for special types of delivery.
e) The contract carriers assume the risk of noncollection of charges to home delivery subscribers.
f) The contract carriers normally assume the risk of damaged or nondelivered newspapers.
g) The Star may not legally control the rates or prices charged by the contract carriers to home delivery subscribers.2
h) The contract carriers are not required to, nor do many of them in fact, physically deliver newspapers but, instead, employ or contract with a third party to make such deliveries.
The distribution method proposed by The Star to be implemented effective December 1, 1977 has the following characteristics:
a) The Star will sell its newspapers directly to subscribers and other customers.
b) The Star will have the responsibility for all subscriber and customer solicitation.
c) The Star will assume all risk of loss of newspapers and credit risks respecting customers. However, to the extent that 100% of collections are not made, The Star's agent will not receive his portion of the uncollected amounts.
d) The Star will bear all risk of damaged or nondelivered newspapers.
e) Title to the newspaper will pass but once (from The Star to the consumer), passage of title to occur upon delivery to the subscriber.3
f) The Star will receive all subscriber and customer complaints and is to be responsible for service of all subscriber and customer requests.
g) The Star will be able to set uniform prices charged to home delivery subscribers.
Under the proposed distribution system, The Star states that it will have more control over the quality of newspaper delivery service to subscribers and other customers. However, while subscription rates are expected to be the same or lower in some instances under the proposed system, in most instances, rates will be higher.
Perhaps a more thorough understanding of the distinctions between the present and proposed system will result from an examination of certain statements made by the Star itself. With regard to the present distribution system, The Star, in a statement published in 1947, said:
There are 208 contract carriers of The Star in Greater Kansas City. These men own their own routes and have in many instances large investments in them. They buy their papers from The Star wholesale at specified rates. They either deliver these papers themselves or employ assistants or helpers to deliver them. They own their own equipment which they use to transport the papers for delivery. They handle their own collections and operate as independent merchants or contractors, each with an individual contract which defines specifically his relationship to The Star.4
By letter dated May 24, 1974 from The Star's circulation manager to all independent contract carriers, The Star stated:
The Star enters into a personal service contract with an independent contractor to sell newspapers at wholesale for the independent contractor's resale and delivery as provided in the contract. The carrier is not an employee of the Star but rather is an independent contractor who undertakes to resell and deliver the newspapers purchased by him in a prompt and satisfactory manner.5
The existing contract between defendant and its carriers provides:
It is agreed by and between the parties that first party the contract carrier, his agents and employees, in delivering and selling the newspapers herein mentioned, is acting as principal, on his own responsibility, and in no particular is he acting for, or in behalf of, or as agent of second party the Star, and said first party shall have no right, power or authority to bind second party by any act or deed on his part or on the part of any of his agents, servants or employees, and first party agrees to indemnify and hold harmless second party from any loss of liability of whatsoever kind and character, arising out of or in any manner connected with the execution of this contract.6
By letter dated September 24, 1977 from The Star's Chairman of its Board of Directors to all independent contract carriers, The Star stated:
The contract presently in effect between the independent contract carriers and The Star provides the following formula for computation of the compensation to be received by the Star and the carriers:
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