Opinion ID: 764884
Heading Depth: 4
Heading Rank: 6

Heading: Newark Star-Ledger and Birmingham News

Text: 95 Advance Publications, Inc. owns, through subsidiaries, Newark Morning Ledger Co., which publishes the Newark Star-Ledger, and Birmingham News Company, which publishes the Birmingham News. AD/SAT's attempt to implicate these three companies -- which are part of the Newhouse group -- is also unsuccessful. 96 The Star-Ledger became AD/SAT's first affiliate in 1986. The paper is published in Newark, New Jersey, within close proximity of New York City's strong advertising base. Thus, although receiving some ads from overnight couriers and electronic delivery systems, the Star-Ledger also receives many of its ads via messenger services. While the prices paid for these services vary, all are substantially less expensive for the paper than receiving ads over AD/SAT's network. After receiving an invoice for the $7,500 annual affiliation fee in January 1993, Mark Herrick, the Star-Ledger's director of marketing and advertising, decided not to pay the fee. In his deposition, Herrick stated that he felt the fee was too expensive and wanted to renegotiate with AD/SAT. In a meeting with AD/SAT representatives in August 1993, Herrick stated that he believed the service was too expensive, and asked that the affiliation agreement be renegotiated and the unpaid 1993 fee waived. In response, AD/SAT's then-president Atkins stated that AD/SAT intended to increase the Star-Ledger's annual affiliation fee to $12,500. 97 At the same meeting, however, Atkins proposed a group discount for all the Newhouse newspapers. Herrick stated that he did not have the authority to consider such proposals but that he would pass the proposal on to his superiors. The proposal was ultimately rejected by the Newhouse group. 98 No further discussions took place until the summer of 1994, when Hilton and the new owners of AD/SAT realized that the Star-Ledger had not paid its 1993 or 1994 affiliation fees. After an exchange of letters, Herrick submitted proposed amendments to the affiliation agreement to Hilton on August 19, 1994. Herrick proposed that the unpaid fees be forgiven, future affiliation fees be eliminated, and the notice period for termination be reduced from nine months to seven days. On December 28, 1994, after this lawsuit was filed, AD/SAT rejected the proposal and demanded that the outstanding fees be paid, but also promised to provide a new proposal to the paper in the near future. At the time the Star-Ledger filed its motion for summary judgment, no proposal had been made. The Star-Ledger eventually paid the outstanding fees and remained an AD/SAT affiliate until AD/SAT ceased operations. 99 The only evidence AD/SAT offers to support its claim that the Star-Ledger was a member of the alleged conspiracy is that Newhouse, the president of the company that indirectly owns the Star-Ledger, knew about the AP's plan to enter the ad delivery business several months before Herrick's August 1993 meeting with AD/SAT representatives. AD/SAT contends that this fact explains why the Star-Ledger refused to deal with AD/SAT and why its group discount offer to the Newhouse papers was rejected. 100 This evidence does not give rise to an inference of a concerted refusal to deal on the part of the Star-Ledger. To the contrary, the evidence shows that the Star-Ledger sought not to terminate its relationship with AD/SAT, but rather to renegotiate the terms of that relationship. Although Herrick's refusal to pay the affiliation fees owed under the contract may have been an unreasonable negotiating tactic, it is not evidence of a conscious commitment to an unlawful scheme in restraint of trade. Moreover, even if the actions taken by Herrick had constituted a refusal to deal with AD/SAT, the paper had valid business reasons for ending its relationship with AD/SAT because of the availability of other, more cost-effective means of receiving ads. The fact that Newhouse knew about the AP's plans to develop AdSEND before the August 1993 meeting does not tend to exclude the possibility that Herrick's decision on behalf of the Star-Ledger was an independent one. Indeed, AD/SAT has submitted no evidence tending to show that Herrick discussed his actions with Newhouse. 101 Nor can a concerted refusal to deal be inferred from the Newhouse papers' rejection of AD/SAT's group proposal; AD/SAT has not contradicted the evidence indicating that the Newhouse papers do not enter into such group arrangements. Furthermore, the allegation of a group boycott by the Newhouse papers is undermined by the fact that other Newhouse papers continued to use AD/SAT. Conspiracy claims cannot be based on speculation. The District Court properly granted summary judgment in favor of the Newark Morning Ledger Company. 102 Likewise, the evidence pertaining to the Birmingham News Company, which publishes the Birmingham News, does not support the inference that this paper joined in an unlawful conspiracy in violation of the Sherman Act. In 1990, the Birmingham News entered into a five-year AD/SAT affiliation agreement. On April 11, 1994, AD/SAT sent the paper an invoice for its annual $10,000 affiliation fee. In the third or fourth week of May, Tom Lager, the director of sales and marketing at the Birmingham News, reviewed this invoice. Lager had joined the paper in January 1994 and was responsible for approving expenditures such as the affiliation fee. 103 Lager was familiar with AD/SAT because his former employer, the Omaha World Herald, had been affiliated with AD/SAT until Lager made the decision not to renew that paper's affiliation at the end of 1991. That decision was made after Lager and others at the World Herald reviewed the paper's level of usage in relation to the cost of the service and after Office Depot, the primary user of AD/SAT's delivery service, agreed to shift its deliveries to the World Herald to other carriers such as Federal Express. From his earlier experience, Lager thought to check whether the Birmingham News's use of AD/SAT justified its cost. A review of the log of ads received over AD/SAT revealed that the volume of ads delivered by AD/SAT was low and that most of the ads received via AD/SAT were from Office Depot. Concluding that the paper's continued affiliation with AD/SAT was not financially prudent, Lager consulted with his supervisor, Victor Hanson, who accepted Lager's recommendation not to renew the contract. On June 6, 1994, Lager sent a letter notifying AD/SAT that the Birmingham News would not be renewing its AD/SAT contract. Lager concedes that he had seen documents discussing AdSEND before he sent the termination letter. 104 In its appellate brief, AD/SAT asserts that Donald Newhouse's ownership of the paper and the paper's termination of its affiliation after the announcement of AdSEND give rise to the inference that the Birmingham News participated in the alleged conspiracies. As discussed above, the fact that Newhouse owned the newspaper, in the absence of any evidence tending to show that he was involved in its decision to terminate its AD/SAT affiliation, does not support an inference of conspiracy. Likewise, the fact that the paper terminated its relationship after the introduction of AdSEND does not give rise to an inference of concerted action. Rather, it shows, at best, parallel conduct following an invitation to conspire. Since the Birmingham News's conduct was at least as -- if not more -- consistent with legitimate business concerns as with unlawful conspiracy, AD/SAT was required to submit evidence tending to exclude the possibility that the Birmingham News acted independently. Because it failed to do so, summary judgment was appropriate. 4