Volmar Distributors, Inc. v. New York Post Co., Inc.

• Decision Date: 22 May 1993
• Docket Number: No. 92 Civ. 2875 (WCC).,92 Civ. 2875 (WCC).
• Citation: 825 F. Supp. 1153
• Parties: VOLMAR DISTRIBUTORS, INC. and Interboro Distributors, Inc., d/b/a Media Masters Distributors, and Rez Associates, Inc., Plaintiffs, v. THE NEW YORK POST CO., INC., Maxwell Newspapers, Inc., El Diario Associates, Pelham News Co. Inc., American Periodical Distributors, Inc., Vincent Orlando, Newspaper and Mail Deliverers' Union of New York and Vicinity and Douglas La Chance, Defendants.
• Court: U.S. District Court — Southern District of New York

825 F. Supp. 1153

VOLMAR DISTRIBUTORS, INC. and Interboro Distributors, Inc., d/b/a Media Masters Distributors, and Rez Associates, Inc., Plaintiffs, v. THE NEW YORK POST CO., INC., Maxwell Newspapers, Inc., El Diario Associates, Pelham News Co. Inc., American Periodical Distributors, Inc., Vincent Orlando, Newspaper and Mail Deliverers' Union of New York and Vicinity and Douglas La Chance, Defendants.

No. 92 Civ. 2875 (WCC).

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

May 22, 1993.

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Sylvor, Schneer, Gold & Morelli (Richard L. Gold, Iris S. Richman, of counsel) New York City, for plaintiffs.

Proskauer Rose Goetz & Mendelsohn (Claire P. Gutekunst, Elise A. Yablonski, of counsel), New York City, for defendants El Diario Associates, Pelham News Co., Inc., American Periodical Distributors, Inc. and Vincent Orlando.

Stroock & Stroock & Lavan (Bruce H. Schneider, William A. Rome, Richard S. Katz, of counsel), New York City, for defendant The New York Post Co., Inc.

OPINION AND ORDER

WILLIAM C. CONNER, District Judge.

Plaintiffs Volmar Distributors, Inc. (Volmar) and Interboro Distributors, Inc. (Interboro) bring this action against The New York Post Co., Inc. (the Post), Maxwell Newspapers, Inc., publisher of The Daily News, (the News), El Diario Assoc. (El Diario), (collectively "the publisher defendants"); Pelham News Co., Inc. (Pelham), American Periodical Distributors, Inc. (American), (collectively "the distributor defendants"); Vincent Orlando (Orlando), the Newspaper and Mail Deliverer's Union (NMDU), and Douglas La Chance (La Chance) to contest plaintiffs' termination as distributors of El Diario, The Daily News and The New York Post. The complaint asserts violations of the Sherman Anti-Trust Act §§ 1 and 2, 15 U.S.C. §§ 1, 2, the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., the New York State Donnelly Act, N.Y.Gen.Bus.Law § 340, and state common law claims for unfair competition, breach of contract, and tortious interference with contractual, pre-contractual, and business relationships. The action is presently before the Court on defendants' motion to dismiss.¹

BACKGROUND

The Post, the News, and El Diario are New York-based publishers of newspapers. Plaintiffs are independent non-unionized newspaper distributors in the New York metropolitan area, and they bring this action to contest their termination as distributors of El Diario, The Daily News, and The New York Post which occurred in late 1991 and early 1992. Compl. ¶¶ 38-45, 51-53. The facts alleged in the complaint are as follows:

There are three methods by which newspapers are distributed in the New York area. First, the newspaper publishers own and run their own distribution systems staffed by unionized drivers. In addition, there are independent unionized distributors, and independent non-unionized distributors who service those parts of the market which lack sufficient volume or are too geographically remote to attract a unionized distributor. Compl. ¶¶ 34, 35. All relevant unionized newspaper distributors, both independent and owned by the publishers, have collective bargaining agreements with the NMDU. Compl. ¶ 33(a) & (b).

The distributor defendants, like plaintiffs, are non-unionized newspaper distribution firms which are owned and controlled by Orlando. Defendant La Chance also has a beneficial interest in Pelham and American. Compl. ¶¶ 15, 16, 22, 23, 54. In May, 1991, La Chance was elected president of the NMDU and soon thereafter Orlando and La Chance agreed to use La Chance's position in the union to expand the business of the distributor defendants. Compl. ¶ 46. To obtain distribution rights for the distributor defendants, La Chance offered labor concessions to induce the publisher defendants to cut off plaintiffs and give the distributorships to Pelham and American, compl. ¶ 50(b), and threatened the publisher defendants with labor strife if the transfers were not made. Compl. ¶ 112(a) & (b).

The publisher defendants transferred plaintiffs' distributorships to Pelham and American and claimed that the terminations were either mandated by their collective bargaining agreement with the NMDU, or the result of an independent business decision made for economic reasons. Compl. ¶ 110(d) (j) (k) (l). Plaintiffs bring this action to contest their termination.

DISCUSSION

On a motion to dismiss we accept all allegations in the complaint as true, and dismiss only if it is clear from the face of the complaint that plaintiff is not entitled to relief. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957); Anderson v. Coughlin, 700 F.2d 37, 40 (2d Cir.1983). For the reasons discussed below, we dismiss plaintiffs' federal and state antitrust claims and the common law claim for tortious interference with pre-contractual relationships. However, defendants' motion as to the remainder of the claims is denied.

I. The Antitrust Claims

The complaint states claims for monopolization and attempted monopolization under § 2 of the Sherman Act, and for conspiracy in restraint of trade under § 1 of the Sherman Act against all defendants. 15 U.S.C. §§ 1, 2. Pursuant to each claim plaintiffs request treble damages and injunctive relief under §§ 4 and 16 of the Clayton Act. 15 U.S.C. §§ 15, 26. To recover under § 4 of the Clayton Act, a private plaintiff must allege an "antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful."² Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1977) (emphasis in original); Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 110 S.Ct. 1884, 109 L.Ed.2d 333 (1990). Since the antitrust laws are intended to protect competition and not individual competitors, Brunswick 429 U.S. at 488, 97 S.Ct. at 697 to recover under the Clayton Act private plaintiffs must demonstrate that the injuries they suffered were caused by acts that had a competition-reducing effect. Stamatakis Indus., Inc. v. King, 965 F.2d 469, 471 (7th Cir.1992) (J. Easterbrook) (citing Atlantic Richfield); Chicago Professional Sports Ltd. Partnership v. NBA, 961 F.2d 667, 670 (7th Cir.1992) (J. Easterbrook) (same). The fact that defendants' behavior is alleged to be illegal per se under § 1 of the Sherman Act does not in any way diminish the requirement that plaintiffs show an anti-trust injury.

Conduct in violation of the antitrust laws may have three effects, often interwoven: In some respects the conduct may reduce competition, in other respects effects may increase competition, and in still other respects effects may be neutral as to competition. The antitrust injury requirement ensures that a plaintiff can recover only if the loss stems from a competition-reducing aspect or effect of defendant's behavior. The need for this showing is at least as great under the per se rule as under the rule of reason.

Atlantic Richfield, 495 U.S. at 344, 110 S.Ct. at 1893 (emphasis in original).

In Atlantic Richfield the defendant-manufacturer vertically fixed a price ceiling among its distributors which the court assumed, for the purposes of its decision, to be illegal per se under § 1 of the Sherman Act. Id. at 335 n. 5. The plaintiff, a competing distributor who had lost sales due to the price ceiling, sued for treble damages under § 4 of the Clayton Act. However, since defendants had not lowered prices to a "predatory" level, the plaintiff failed to establish that its losses sprung from some "competition-reducing aspect or effect" of defendants' behavior and, thus, failed to state an antitrust injury.

The complaint at issue states that defendants' conduct was designed to drive plaintiffs out of the relevant market. Compl. ¶ 50. However, these allegations describe the challenged conduct's effect only on plaintiffs, who are defendants' competitors, not its effect on the competitive structure of the market. The complaint makes the naked assertion that consumers and retailers of newspapers have been and will be deprived of the benefits of competition by defendants' actions. Compl. ¶ 57. However, this allegation fails to state adequately an antitrust injury because it is wholly conclusory and is unsupported by any of the facts alleged. Jarmatt Truck Leasing Corp. v. Brooklyn Pie Co., Inc., 525 F.Supp. 749, 750 (E.D.N.Y. 1981) ("beyond its bald conclusion as to restraint of trade, the complaint fails to allege facts which show injury to competition, as distinct from injury to a competitor"); Bustop Shelters, Inc. v. Convenience & Safety Corp., 521 F.Supp. 989, 997 (S.D.N.Y.1981) (injury to plaintiff insufficient to show antitrust injury, no description of competitive structure and how defendant affected that competition; consequentially complaint dismissed).

Plaintiffs attempt to distinguish Atlantic Richfield by arguing that the challenged behavior in that case was non-predatory while defendants' conduct in the instant case was intended to drive plaintiffs from the market. When used in the antitrust context, "predatory" behavior is a market concept and can not be inferred solely from one firm's exit from the industry. For example, predatory pricing occurs when a firm sets prices below its marginal costs thereby taking losses in the short run. The predatory firm hopes that similar losses will be experienced by its competitors prompting them to exit the industry. The ultimate goal of the predatory firm is to recoup its losses by raising prices after competition is diminished. See generally, Kelco Disposal, Inc. v. Browning-Ferris Indus., Inc., 845 F.2d 404, 407-09 (2d Cir.1988), aff'd, 492 U.S. 257, 109 S.Ct. 2909, 106 L.Ed.2d 219 (1989). Therefore, to state a claim for predatory pricing, plaintiffs must include allegations of the...