Times Herald Printing Co. v. A.H. Belo Corp.

• Decision Date: 27 November 1991
• Docket Number: No. A14-90-00856-CV,A14-90-00856-CV
• Citation: 820 S.W.2d 206
• Parties: 1991-2 Trade Cases P 69,680 The TIMES HERALD PRINTING COMPANY, Appellant, v. A.H. BELO CORPORATION, et al., Appellees. (14th Dist.)
• Court: Texas Court of Appeals

Page 206

820 S.W.2d 206

1991-2 Trade Cases P 69,680

The TIMES HERALD PRINTING COMPANY, Appellant, v. A.H. BELO CORPORATION, et al., Appellees.

No. A14-90-00856-CV.

Court of Appeals of Texas Houston (14th Dist.).

Nov. 27, 1991.

Roger D. Townsend, Wayne Fisher, Houston, for appellant.

Harry M. Reasoner, Houston, William D. Sims, Jr., Dallas, John L. Hill, Jr., W. James Kronzer, Houston, for appellees.

Before MURPHY, CANNON and ELLIS, JJ.

OPINION

CANNON, Justice.

The principal question posed by this appeal is whether anticompetitive conduct of a defendant who attempts to achieve monopoly power in a relevant market may be redeemed by a legitimate business purpose. When that conduct involves a nonprice vertical restraint, the answer is no. Rather, the proper approach is to apply a "rule of reason" standard, allowing the trier of facts to weigh all of the evidence to determine whether the legitimate business justifications of a defendant's conduct outweigh its threat to competition or whether the conduct unreasonably restrained trade. In the present case, the jury was incorrectly instructed that to violate antitrust laws the defendants' conduct must have no legitimate business purpose. However, we hold the error to be harmless because, in response to a separate question, in which the jury was properly instructed to employ a "rule of reason" analysis, the jury found that the defendants' conduct did not unreasonably restrain trade. We affirm.

Appellant, the Times Herald Printing Company, publisher of the Dallas Times Herald newspaper, sued its rival, the Dallas Morning News and its parent company, A.H. Belo Corporation, appellees, alleging tortious interference, civil conspiracy, and violations of the Texas Free Enterprise and Antitrust Act, TEX.BUS. & COM.CODE ANN. §§ 15.01-15.51 (Vernon 1987 & Supp.1991). The Times Herald accused the News of raiding its feature pages when the News entered into an exclusive five-year contract with Universal Press Syndicate (UPS), which had provided comics, columns and commentaries to the Times Herald for nearly twenty years. The Times Herald originally sued UPS as an additional defendant, but later non-suited it.

The trial court granted the News a directed verdict on claims of civil conspiracy and unfair competition, but submitted the remaining claims to the jury. By a 10-2 vote, the jury rendered a take-nothing verdict. In eight points of error, the Times Herald contends (1) the trial court incorrectly charged the jury on the law regarding exclusionary and restrictive conduct, (2) its cause of action for tortious interference with existing contracts should have been submitted to the jury, (3) the jury's negative answers regarding unreasonable restraint of trade and tortious interference with agreements or business relationships are against the great weight and preponderance of the evidence, and (4) the trial court erred in granting a directed verdict on the Times Herald's claim of civil conspiracy.

The largest independent syndicator of newspaper features in America, UPS represents the work of approximately 75 creators of comic strips, editorial cartoons, commentaries and columns. In 1989, UPS was selling some twenty-six of these features to the Times Herald, among them the popular advice column "Dear Abby," Erma Bombeck's humor column, and comic strips such as "Doonesbury" and "The Far Side." In most instances, the contracts renewed automatically each month unless cancelled by either UPS or the Times Herald with thirty days' notice.

In a letter dated August 3, 1989, UPS suddenly cancelled all twenty-six features with the Times Herald after signing (1) a five-year, $1 million joint venture agreement to produce and distribute television programs and promotions featuring UPS creations, and (2) an exclusive agreement with the News giving the News publication rights to current UPS features and right of first refusal on all UPS features that might become available. The News quickly commissioned an advertising campaign targeting Times Herald readers by trumpeting the transfer of features to the News. The campaign was "put on hold" after the lawsuit was filed.

In several weeks of testimony, experts told the jury that features play a vital role in shaping the identity of a newspaper and instilling loyalty in readers: in particular, UPS features, with their contemporary, satirical edge, generally attract a "hip," upscale thirtysomething type of reader, and as such could be used as tools in a circulation war to reach an important demographic group. The Times Herald contends that the transfer caused it to not only lose "tens of thousands" of readers, but also made it difficult to attract new subscribers. The appellees characterized their joint venture with UPS as a "terrific business opportunity."

Experts also testified that a newspaper whose shares of circulation and advertising revenue fall below 40 percent will "run [a] substantial risk of failure," as the newspaper faces the danger of falling into an irreversible "downward spiral" as circulation and advertising losses feed each other's decline. In head-to-head competition with the Times Herald, the News dominated with approximately 60 percent of daily circulation and approximately 70 percent of advertising. An economics professor and provost of Stanford University explained that a newspaper with such a substantial share of the market possesses "monopoly power," and that its aggressive pursuit of a competitor's resources, while "perfectly normal in an ordinary context," would pose a threat to competition where substantial monopoly power exists.

In points of error one through four, the Times Herald complains that the trial court's definitions and instructions regarding exclusionary or restrictive conduct incorrectly stated the law, and that such errors were "reasonably calculated to cause and probably did cause rendition of an improper judgment in the case...." TEX.R.APP.P. 81(b)(1). The Times Herald contends that, under the court's charge, unless a defendant acts solely by a desire to prevent competition, it cannot violate antitrust safeguards. Judge Learned Hand rejected such an all-or-nothing test nearly half a century ago:

Only in case we interpret "exclusion" as limited to manoeuvres [sic] not honestly industrial, but actuated solely by a desire to prevent competition, can such a course, indefatigably pursued, be deemed not "exclusionary." So to limit it would in our judgment emasculate the [Antitrust] Act[.]"

United States v. Aluminum Co. of America, 148 F.2d 416, 431 (2d Cir.1945) (emphasis added). In Question No. 1, the jury was asked, "Did A.H. Belo Corporation or The Dallas Morning News Company willfully attempt to achieve monopoly power in a relevant market or markets?" Among the accompanying instructions was one that explained:

An "attempt to achieve monopoly power" occurs when a party has a specific intent to achieve monopoly power in a relevant market or markets; it engages in exclusionary or restrictive conduct in furtherance of its specific intent; and there is a dangerous probability that it will achieve monopoly power in the relevant market.

The jury was further instructed:

"Willfully" ... means to attempt to acquire, to acquire or to maintain monopoly power by exclusionary or restrictive conduct, as distinguished from attempting to acquire, acquiring or maintaining monopoly power by having a superior product or by superior business skill, or as a result of historical accident.

Conduct is exclusionary or restrictive when its benefits depend on eliminating or crippling competition so as to enable the actor to reap the benefits of monopoly power in the aftermath. Exclusionary or restrictive conduct is conduct without legitimate business purpose that makes sense only because it eliminates or cripples competition.

First, we address the appellees' contention that any alleged error in the charge was waived, invited, and harmless. They assert that the Times Herald (1) failed to properly object to the alleged error, (2) invited error by offering the trial court a definition that was substantially the same, and (3) cannot demonstrate that a different verdict would have resulted from a different charge.

A party objecting to a charge must point out distinctly the error and grounds for the complaint. TEX.R.CIV.P. 274; Castleberry v. Branscum, 721 S.W.2d 270, 276 (Tex.1986). According to the appellees, the Times Herald failed to properly object when it merely challenged use of the word "only" in the second sentence of the definition of exclusionary or restrictive conduct as "more restrictive than the legal requirements for exclusionary or restrictive conduct." They reason that simply deleting the word "only" would, at best, leave only a "shade or phase" of the trial court's actual instructions, therefore there was no error. TEX.R.CIV.P. 278; Prudential Ins. Co. v. Tate, 162 Tex. 369, 347 S.W.2d 556, 559 (1961); Versailles, Inc. v. Quadrant, Inc., 715 S.W.2d 161, 166 (Tex.App.--Houston [14th Dist.] 1986, no writ). However, by complaining of the "only" restriction, and by advocating that the proper instruction of exclusionary conduct is conduct that unnecessarily excludes or handicaps competitors, the Times Herald demonstrated to the judge that it objected to the heavy burden of disproving the possibility of any business reason the appellees might have had other than to eliminate or cripple competition. This objection was consistent with the Times Herald's position throughout the case that even conduct having a legitimate business purpose can run afoul of antitrust laws. Further, in compliance with Rule 278 of the Texas Rules of Civil Procedure, which requires the party complaining of an omitted question, definition, or instruction to request a substantially correct alternative, the Times Herald tendered its Requested Jury Instruction No. 2:

"Exclusionary or restrictive" conduct is defined as unreasonable acts...