United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
September 18, 2007
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 05-20710
WILLIAM T. NORRIS, EDWARD ROSSI, STEVE HALPERN, JIMMY O.
PAYNE, SUE PACKWOOD, AND THOMAS STOVALL,
Plaintiffs-Appellants,
versus
THE HEARST TRUST, THE HEARST CORPORATION, AND HEARST
NEWSPAPERS PARTNERSHIP, L.P.,
Defendants-Appellees.
Appeals from the United States District Court
for the Southern District of Texas
Before GARWOOD, DENNIS, and OWEN, Circuit Judges.
GARWOOD, Circuit Judge:
Plaintiffs appeal the district court’s order dismissing their
suit under Rule 12(b)(6). Plaintiffs, six former distributors of
the Houston Chronicle, a newspaper owned by defendants (Hearst),
brought this suit against Hearst alleging breach of contract,
wrongful termination under Sabine Pilot Service Inc. v. Hauck, 687
S.W.2d 733 (Tex. 1985),1 and antitrust claims. Five of the six
plaintiffs (all except for Stovall) had previously sued Hearst on
some similar state law claims in Texas state court. They argue
that they had nonsuited the presently relevant claims prior to the
final judgment dismissing that state court suit. Hearst moved to
dismiss the instant complaint under Rule 12(b)(6) on two grounds:
(1) plaintiffs’ claims were barred by res judicata and collateral
estoppel and (2) plaintiffs had not alleged antitrust injury and
lacked antitrust standing. On September 29, 2004, the district
court granted Hearst’s motion, dismissing the antitrust claims of
the five original plaintiffs on those latter grounds and also
dismissing all of their claims on res judicata grounds. Stoval’s
antitrust claims were then dismissed on the same antitrust grounds
applicable to the original plaintiffs. Subsequently, on Stoval’s
motion, his state law claims (other than antitrust) were dismissed
without prejudice. All six plaintiffs have timely appealed. We
affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiffs are six former distributors of the Houston
Chronicle, a Houston, Texas, daily newspaper published by Hearst.
On June 28, 2002, plaintiffs Payne, Norris, Rossi, Halpern, and
Packwood (collectively, the original plaintiffs) filed a suit
1
Sabine Pilot grants a cause of action for at-will employees terminated
solely because they refuse to commit a crime. Id. at 735.
2
asserting state law claims against Hearst in the 127th District
Court of Harris County, Texas (the state court). In their original
petition or first amended original petition in state court, the
original plaintiffs claimed that Hearst wrongfully cancelled their
distributor contracts in retaliation for “blowing the whistle” on,
or complaining about, Hearst’s alleged coercion of its distributors
to produce fraudulent Houston Chronicle circulation reports. The
state court sustained a special exception to the whistle-blower
claim, leading the original plaintiffs to file a second amended
original petition alleging breach of contract and wrongful
termination under Sabine Pilot.2
Hearst moved for summary judgment on all claims and a hearing
was held on November 7, 2003, in state court where the court orally
granted defendants’ summary judgment motion and specifically stated
that the Sabine Pilot cause of action could not stand because the
original plaintiffs were independent contractors, not employees,
and therefore were outside the scope of Sabine Pilot.
It is undisputed that the defendants’ state court summary
judgment motion covered all claims alleged in the second amended
original petition and this was specifically stated at oral argument
2
The asserted criminal activity consists of Hearst’s alleged effort to
force distributors to fraudulently increase their circulation numbers in their
report to Hearst, ostensibly so that Hearst could pass on the falsely augmented
numbers to the Audit Bureau of Circulation (ABC) which in turn furnished them to
advertisers, whose rates are affected or influenced by them.
The state court second amended original petition also arguably included a
separate claim for fraud. However, no such claim is included in the federal
complaint which includes only antitrust, Sabine Pilot and breach of contract
claims.
3
on the motion.3 Although the parties and the court focused on the
Sabine Pilot claim, the court also plainly indicated its
determination that no other cause of action had been adequately
alleged.4 The court went on to state that it did “grant the
defendant’s summary judgment that there is no standing by these
plaintiffs to raise a Sabine Pilot cause of action” and then stated
that “I think the law requires that I grant the plaintiffs an
opportunity to plead any other causes of action you may have . . .
and I will do so, and give you until December the 8th. . . . If you
have any other causes of action to plead for breach of contract,
you should make those pleadings. Otherwise, I will dismiss the
case and enter a judgment on the summary judgment dismissing the
case.” (emphasis added).5 The court concluded the November 7, 2003
hearing by stating: “I grant the summary judgment for the Sabine
3
The motion was supported by excerpts from some 10 depositions in the case
and by affidavits.
4
The court observed, inter alia: “Let’s assume high-handed tactics with
regard to contracting with independent contractors, what is your cause of action
there;” “The question we have here is what is the remedy under the law, if any,
with the circumstances you described;” “you can’t sue for tortious interference
with regards to people within a corporation;” “you seek here to recover damages
not to avoid the contract;” “the law does not recognize contorts or whatever they
are called, contractual torts in this instance.” The court further expressed the
view that to the extent it were to grant summary judgment on a pleading basis
which could have been reached by a failure to state a claim special exception,
it would have to grant leave to amend before dismissing the case on that basis.
Defendants also argued, inter alia, that the distributorship contracts had
expired by their terms and/or renewal had been tendered and refused (and, in one
case of early termination, liquidated damages, presumably those called for by the
contract, had been tendered and refused).
5
The court also stated “And so on December the 8th plead a breach of
contract case with damages that are sustainable . . . And so I give you that 30
days . . . it’s to plead a valid cause of action with a measure of damages that
is recognized by the law that you have, or I’ll dismiss it.”
4
Pilot cause of action as plaintiffs are independent contractors,
not employees at will. Plaintiff granted leave to amend by
December 8 as to any breach-of-contract theory. Otherwise, the
case will be dismissed.”
The next state court hearing was December 8, 2003, at which
time the state court plaintiffs presented and tendered for filing
their Third Amended Original Petition. This again asserted breach
of contract and Sabine Pilot claims – substantially the same as in
the Second Amended Original Petition – and, for the first time in
the lawsuit, also asserted claims under the Texas and Federal
antitrust laws. Having reviewed the proposed Third Amended
Original Petition, the state court denied leave to amend, the
defense then inquired “would the Court intend to enter a final
appealable order at this time,” and the court responded, “Just did.
The Clerk will give everybody a copy.”
The order in question, which was signed and filed by the judge
on December 8, 2003, recites that the case came on to be heard on
the defendant’s motion for summary judgment, that the court had
previously sustained that motion and granted plaintiffs leave to
amend by December 8, that the court, after review of plaintiffs’
Third Amended Original Petition, would not grant leave to file it,
5
and that “it is therefore ORDERED, ADJUDGED and DECREED that this
case is DISMISSED” and “Costs are taxed to Plaintiffs.”6
On December 11, 2003, defendants wrote the court and requested
certain clarifying formal changes in the December 8 judgment
(enclosing a suggested form of judgment) and a hearing was held
thereon on December 19, 2003. At the beginning of the December 19
hearing, plaintiffs’ counsel announced that plaintiffs were taking
a non-suit “as to everything,” “all causes of action,” and advised
that the day before he had filed the instant suit in federal court.
Defendants objected on the basis that the court had already
disposed of the case by its December 8 order. The court then
signed the defendants’ suggested corrected final judgment form,
stating that it was doing so because “I believe this corrected
final judgment clearly sets out the Court’s prior rulings.” The
court stated that it added the time of signing (9:45 a.m.) to the
corrected final judgment so it would be clear that this was after
the plaintiffs’ non-suit earlier that same day. The December 19
“Corrected Final Judgment” concludes by stating that it is:
6
The entire text is as follows:
“CAME ON TO BE HEARD Defendant’s Summary Judgment in the above
styled and numbered cause, wherein WILLIAM T. NORRIS, ET AL. are
Plaintiffs and HOUSTON CHRONICLE PUBLISHING COMPANY is Defendant.
The Court, having previously sustained Defendant’s Special
Exceptions and Summary Judgment and having granted Plaintiffs leave
to amend, set December 8, 2003 as the deadline for the Plaintiffs to
replead. After review of Plaintiffs’ Third Amended Petition, the
Court will not grant leave to amend to add a new cause of action and
dismisses this claim. It is therefore
ORDERED, ADJUDGED, and DECREED that this case is DISMISSED.
Costs are taxed to Plaintiffs.
SIGNED this 8th day of December, 2003.”
6
“ORDERED, ADJUDGED AND DECREED that this case be and is
hereby FINALLY DISMISSED with prejudice to the refiling
of same. All relief not expressly granted in denied.
The Court’s previous orders of November 7 and December 8
are brought forward, merged herein and made final. THIS
IS A FINAL JUDGMENT, which disposes of all claims and all
parties before the Court.”7
7
The judgment is entitled “Corrected Final Judgment” and its full text is
as follows:
“CAME ON TO BE HEARD in regular order the motion of Defendant
Houston Chronicle Publishing Company for summary judgment on all
claims, pursuant to TEX. R. CIV. P. 166a [sic]. Due notice having
been given, the Court on November 7, 2003, considered the motion,
the response, all exhibits and affidavits filed in connection
therewith, the pleadings and argument of counsel, and all other
matters properly before it. After due consideration, the Court is
of the opinion and finds that Defendant’s Motion for Summary
Judgment is well taken and should be granted, that there is no
genuine issue as to any material fact, and that Defendant Houston
Chronicle Publishing Company is entitled to judgment as a matter of
law. It is accordingly
ORDERED, ADJUDGED AND DECREED that Defendant’s Motion for
Summary Judgment be and is hereby GRANTED in all respects. It is
further
ORDERED, ADJUDGED AND DECREED that Plaintiffs take nothing of
and from Defendant, and that Defendant is entitled to recover all
costs taxed herein, for which let execution issue if not timely
paid.
After hearing on the Motion for Summary Judgment on November
7, 2003, the Court entertained Plaintiffs’ request for leave to
amend their petition, and set a subsequent hearing for December 8,
2003. All parties appeared in court on December 8, and Plaintiffs
presented their proposed third amended petition, which the Court
construed as a motion by Plaintiffs for leave to amend and replead.
After due consideration of same, the Court DENIES leave to amend the
petition to add new causes of action, and orders that this case be
and is hereby finally DISMISSED WITH PREJUDICE. It is accordingly
ORDERED, ADJUDGED AND DECREED that this case be and is hereby
FINALLY DISMISSED with prejudice to the refiling of same. All
relief not expressly granted is denied. The Court’s previous orders
of November 7 and December 8 are brought forward, merged herein and
made final. THIS IS A FINAL JUDGMENT, which disposes of all claims
and all parties before the Court.
SIGNED at Houston, Texas this 19th day of December, 2003. at
9:45.”
7
The state district court’s orders of December 8 and December
19, 2003, have never been set aside, by appeal, mandamus, bill of
review, or otherwise.8
Meanwhile, on December 18, 2003, the original plaintiffs
joined by Stovall, a distributor in the same position and with the
same claims as the original plaintiffs, filed the instant case in
federal district court below, the case that is now before us on
this appeal. The claims in the complaint here are essentially the
same as those filed in the state court case, with the addition of
essentially the same state and federal antitrust claims as those
the original plaintiffs attempted to add in their third amended
state court petition.
In the present case, the district court below on September 29,
2004, granted Hearst’s Rule 12(b)(6) motion to dismiss. The
district court determined that all claims of the original
plaintiffs were barred by res judicata and collateral estoppel due
to the previous state court judgment. The district court also
dismissed the antitrust claims of all six plaintiffs on the grounds
that they failed to allege antitrust injury and lacked antitrust
standing. The September 29, 2004 memorandum opinion essentially
disposed of all claims and parties except for Stoval’s state law
8
The state court plaintiffs on January 16, 2004, filed a motion for new
trial in the state suit, requesting that, in light of the federal suit and to
avoid unnecessary duplication, a new trial be granted conditional on “plaintiffs’
non-suit[ing] the balance of their case within 30 days of the granting of the new
trial.” The state court denied the motion March 1, 2004. The state court
plaintiffs gave notice of appeal to the state Fourteenth Court of Appeals, but
that Court ultimately dismissed the appeal as untimely on June 10, 2004.
8
claims which were subsequently dismissed without prejudice on his
motion.
II. DISCUSSION
On appeal, the original plaintiffs argue that the district
court erroneously concluded that res judicata and collateral
estoppel barred all the claims of the original plaintiffs because
they effectively nonsuited all their claims in state court. They
assert that Texas law provides that a nonsuit prior to final
judgment relieves the state court of jurisdiction over any causes
of action, pleaded or not, and thereby prevents application of res
judicata or collateral estoppel in this case. They do not,
however, challenge the res judicata dismissal of their Sabine Pilot
claim. Plaintiffs further argue that the allegations set forth in
the complaint are sufficient to allege antitrust violations,
damages and standing.
Hearst argues that all claims of the original plaintiffs are
barred by res judicata and collateral estoppel. Hearst further
contends that the original plaintiffs’ effort to nonsuit the non-
antitrust claims in state court cannot avoid the preclusive effects
of the state court suit since the purported nonsuit came after the
state court had heard and granted Hearst’s summary judgment motion
and dismissed the suit. Hearst also claims that the original
plaintiffs could not have nonsuited their antitrust claims because
those claims were never actually filed in state court. Therefore,
9
according to Hearst, the original plaintiffs’ antitrust claims are
precluded because they are based on the same subject matter and
could have been litigated in the prior case.
Hearst also argues that all the plaintiffs lack standing to
bring the antitrust claims. Hearst claims that the alleged conduct
does not amount to anticompetitive behavior and the plaintiffs are
neither consumers nor competitors in a relevant market.
Furthermore, Hearst contends the distributors can neither plead nor
prove any direct causal link between the claimed injuries and the
alleged wrongful antitrust act, and that the alleged injuries are
of a personal nature rather than anti-competitive, and are not the
type of injuries the antitrust laws were designed to remedy.
Because the anti-trust claims of Stovall (who was not a party to
the state court suit and is not subject to res judicata) and those
of the original plaintiffs are identical, and we conclude that the
district court properly dismissed all those antitrust claims on the
above stated grounds, we do not address whether the antitrust
claims of the original plaintiffs are also barred by res judicata
or collateral estoppel.
A. Res judicata dismissal of state law contract and Sabine
Pilot claims.
As the parties and the district court have recognized, the
preclusive effect of prior state court proceedings on federal
proceedings is determined by the treatment those state court
proceedings would receive in the courts of the state – here, Texas
10
– in which those prior proceedings were held. Production Supply
Co., Inc. v. Fry Steel Inc., 74 F.3d 76, 78 (5th Cir. 1996). We
understand the Texas rule on res judicata to be that stated in
Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996), as
follows:
“Res judicata precludes relitigation of claims that have
been finally adjudicated, or that arise out of the same
subject matter and that could have been litigated in the
prior action. . . . It requires proof of the following
elements: (1) a prior final judgment on the merits by a
court of competent jurisdiction; (2) identity of parties
or those in privity with them; and (3) a second action
based on the same claims as were raised or could have
been raised in the first action.”
The original plaintiffs do not contend on appeal that, at least
respecting their state law contract and Sabine Pilot claims, the
above identified second and third res judicata elements are
unsatisfied. Rather, they contend that they took a nonsuit in the
state court case on December 19, 2003, before the judgment of that
date (see note 7 supra) was pronounced or entered, and that hence
the state court proceedings do not give rise to res judicata or
collateral estoppel.9
9
That is appellants’ sole argument in this connection. They make no
contention (and apparently did not contend below) that a Rule 12(b)(6) motion is
an improper vehicle to support a res judicata (or collateral estoppel) dismissal.
While we have said that “generally a res judicata contention cannot be brought
in a motion to dismiss,” we have likewise held that any such contention is waived
by failure to properly raise it on appeal. See Test Masters Educational
Services, Inc. v. Singh, 428 F.3d 559, 570 n.2 (5th Cir. 2005). See also Moch
v. East Baton Rouge Parish School, 548 F.2d 594, 596 n.3 (5th Cir. 1977). But
see Wright & Miller, Federal Practice and Procedure: Civil 3rd § 1357 at 721, 728
(“. . . affirmative defenses that have been considered on a motion to dismiss
under Rule 12(b)(6) include . . . the barring effect of res judicata and related
preclusion principles”, citing numerous decisions). And, it is clearly proper
in deciding a 12(b)(6) motion to take judicial notice of matters of public
record. See Cinel v. Connick, 15 F.3d 1338, 1343 n.6 (5th Cir. 1994).
11
It is recognized that under Texas law “[s]ubject to certain
conditions, a plaintiff who takes a nonsuit is not precluded from
filing a subsequent suit seeking the same relief,” Aetna Casualty
& Surety Co. v. Specia, 849 S.W.2d 805, 806 (Tex. 1993), and “a
nonsuit may have the effect of vitiating earlier interlocutory
orders.” Hyundai Motor Co. v. Alvarado, 892 S.W.2d 853, 854 (Tex.
1995). However, “[o]nce a judge announces a decision that
adjudicates a claim, that claim is no longer subject to the
plaintiff’s right to nonsuit,” and that applies to a judge’s
announcement of decision on a partial summary judgment motion which
seeks relief on less than all of the plaintiff’s pending claims.
Id. at 855.10
As noted, the state court on November 7 heard argument on the
defendants’ summary judgment motion, which sought judgment on all
claims alleged in the original plaintiffs’ only live pleading,
their second amended original petition. The court at that hearing
“granted summary judgment for the Sabine Pilot cause of action”
because plaintiffs were independent contractors rather than at will
10
See also, e.g., Collins v. Waldo, 291 S.W.2d 360, 361-62 (Tex. Civ. App.,
Eastland, 1956, n.w.h.) (plaintiff sued the Waldos and an insurance company; the
Waldos on June 23 filed a mtoion for summary judgment, the court had a hearing
on the motion on July 29 and took it under advisement, on August 4 the court
wrote all counsel a letter advising that the motion for summary judgment would
be granted and “requested the preparation of a form of judgment for entry,” on
August 17 plaintiff filed a motion for nonsuit without prejudice as to all
defendants and that motion was heard August 23 and it was then granted as to the
insurance company but denied as to the Waldos, as to whom the court rendered
judgment sustaining their motion for summary judgment and rendering judgment that
plaintiffs take nothing against them; on plaintiff’s appeal, the Eastland Court
of Civil Appeals held this was proper, rejecting plaintiff’s claim that she was
entitled to a nonsuit of her claims against the Waldos).
12
employees, ruled that no legally valid contract claim had been
adequately alleged, and gave the plaintiffs until December 8, 2003,
to replead, stating “if you [plaintiffs ]have any other causes of
action to plead for breach of contract, you should make those
pleadings. Otherwise, I will dismiss the case and enter a judgment
on the summary judgment dismissing the case.” At the December 8,
2003, hearing, plaintiffs tendered their third amended original
petition, which for the first time added Texas and federal
antitrust claims (and otherwise was largely the same as the second
amended original petition), and the court denied leave to file it.
The defense then asked if “the court intended to enter a final
appealable order at this time” and the court replied “Just did.
The Clerk will give everybody a copy,” referring to the order of
December 8, 2003 (see note 6 supra), signed by the judge and filed
that date. This order recites that the court had “sustained
Defendant’s Special Exceptions and Summary Judgment,” granted
plaintiffs leave to amend with a December 8, 2003 deadline,
reviewed plaintiffs’ tendered third amended petition and denied
leave to file it, and that “ it is therefore . . . ORDERED,
ADJUDGED, and DECREED that this case is DISMISSED” and “Costs are
taxed to Plaintiffs.” We hold that the state court rendered final
judgment on the merits on December 8, 2003, and hence the original
plaintiffs’ attempted nonsuit on December 19, 2003, was not
effective with respect to the claims disposed of by the December 8,
2003 order. This follows from Hyundai and Collins v. Waldo, as
13
well as other authorities. See also, e.g., Peek v. Berry, 184
S.W.2d 272, 274 (Tex. 1945) (“where the trial court sustains
exceptions which leaves no cause of action pending, and the
plaintiff refuses to amend, a final judgment of dismissal for this
reason is res adjudicata of another suit upon the same cause of
action”); Jones v. City of Uvalde, 144 S.W.2d 932 (Tex. Civ. App.
San Antonio 1940, writ ref’d) (same).11
We do not address whether res judicata bars any of appellants’
state or federal anti-trust claims. We reject appellants’
complaints as to the district court’s holding that all of their
other claims were barred by res judicata.12
11
And see, e.g., Lehmann v. Har-Con Corp., 39 S.W.3d 191, 204 (Tex. 2001)
(“granting more relief than the movant is entitled to makes the order reversible,
but not interlocutory,” citing Young v. Hodde, 682 S.W.2d 236, 237 (Tex. 1984),
205 (the finality requirement for appeal that there “be some clear indication
that the trial court intended the order to completely dispose of the entire case”
is satisfied by “[l]anguage . . . that the case is dismissed . . . if there are
no other claims by other parties”); Young, 682 S.W.2d at 237 (“erroneous
rendition of a final judgment is not fundamental error” and is not
“jurisdictional in nature”).
Moreover, the original plaintiffs do not contend that the December 19, 2003
judgment would not have been res judicata if it had been entered before – rather
than immediately after – the nonsuit had been orally requested earlier that
morning. Thus, it is significant that the state court, in open court at the
December 19, 2003, hearing, stated that she was signing the December 19, 2003
judgment because “this corrected final judgment clearly sets out the Court’s
prior rulings.” This can only mean that the state court intended and understood
its December 8, 2003 order to constitute a final judgment on the merits as to the
entire case and all claims therein.
12
We merely assume, arguendo only, that the December 19, 2003 judgment
could not, of itself, support a res judicata determination since it was entered
after the nonsuit announcement earlier that day. However, we note the December
19, 2003 judgment has never been set aside, whether by appeal, mandamus, bill of
review or otherwise. In essence, the argument of the original plaintiffs
constitutes a collateral attack on the December 19, 2003 judgment, and such an
attack can succeed only if the December 19 judgment was wholly void, not merely
voidable or erroneous. See 48 Tex. Jur. 3d, Judgments § 356 (“where a judgment
is collaterally attacked, the party attacking it bears the burden of proving the
judgment void . . . It must also be proved that, for the reason claimed, the
judgment was rendered without jurisdiction.”); § 357 (such “must be established
14
B. Antitrust claims; all plaintiffs lack antitrust injury and
standing.
The complaint invokes “the Sherman Act (15 U.S.C. § 1 & § 2)
the Clayton Act (15 U.S.C. § 15(a)) and the Robinson Patman Act (15
U.S.C. § 13(a)).”13
The complaint alleges that the plaintiffs, until their here
complained of termination “in the late 1990s”, were and for many
years had been, pursuant to contracts with Hearst, distributors of
the Houston Chronicle, a daily newspaper of general circulation in
the greater Houston, metropolitan area, owned by Hearst.
Plaintiffs further alleged that in 1995 the Justice Department
with manifest certainty”). We need not decide whether the original plaintiffs
have made such a showing of voidness with respect to the December 19, 2003
judgment.
13
The Clayton Act, 15 U.S.C. § 15(a), provides a private damage action
(treble damages) for any person “injured in his business or property by reason
of anything forbidden in the antitrust laws.”
The Robinson Patman Act makes it unlawful under certain circumstances “to
discriminate in price between different purchasers of commodities of like grade
and quantity” (15 U.S.C. § 13(a)). Other provisions of the Robinson Patman Act
also in general denounce similar discrimination between purchasers of goods in
respect to commissions or allowances regarding such purchases, or in services
rendered in respect thereto, or in the payment for or furnishing of services or
facilities in respect there (15 U.S.C. §§ 13(c), (d) & (e)). No such price (or
commission or services or facilities) discrimination is alleged in the complaint
and appellants make no Robinson Patman Act argument on appeal, so we do not
further consider or address it.
The Complaint also invokes “the Texas Free Enterprise and Antitrust Act of
1983 (15 Tex. Bus. & Comm. Code § 15.01, § 15.05(a), (b)).” As stated in Scott
v. Galusha, 890 S.W.2d 945, 950 (Tex. App. Ft. Worth 1994, writ denied), Texas
courts construe this act “in harmony with federal judicial interpretations of
comparable federal antitrust statutes”, citing Tex. Bus. & Comm. Code § 15.04,
which in part provides that “. . . this Act . . . shall be construed in harmony
with federal judicial interpretations of comparable federal antitrust statutes.
. . .” This includes following federal judicial interpretations requiring and
identifying antitrust injury and antitrust standing. Scott at 950. Nor do
appellants urge on appeal any particular Texas law rule distinct or departing
from federal judicial interpretations of federal antitrust statutes.
Accordingly, we do not further notice the Texas law in this respect.
15
approved Hearst’s acquisition of the Houston Post, the only
competitor daily newspaper in the greater Houston metropolitan
area, and that – at least after Hearst subsequently closed the Post
– the Chronicle became a monopoly in the “relevant market,” namely
“the greater Houston metropolitan area.” Though the relevant
product is not expressly identified as such, it is obviously the
Chronicle and only the Chronicle. The only consumers or users of
that product identifiable from the Complaint are the Chronicle’s
subscribers (or readers) and those who advertise in it. There is
no allegation of any harm – or increased price or cost to –
subscribers (or readers).
The only harm or injury to plaintiffs alleged in the complaint
is that Hearst terminated them as distributors of the Chronicle
because they refused (or complained of) its requests that they
certify to the Audit Bureau of Circulations falsely inflated
numbers of “Home Delivery Subscribers,” it being alleged that this
was desired by Hearst to increase the Chronicle’s advertising sales
and revenue in that “Advertisers rely on Defendant’s claims of paid
subscribers in deciding whether to buy space in Defendant’s
newspapers.”14
14
Plaintiffs also allege a confused melange of actions on the part of
Hearst which appear to have no relationship whatever to plaintiffs or their
claimed injury or the relevant market (alleged to be metropolitan Houston), such
as circa 1970 “arm-twisting” by Hearst of President Nixon to support the
“Newspaper Preservation Act” which passed in that year, or activities by Hearst
in Seattle or San Francisco or other places clearly well removed from the alleged
relevant market here, in none of which other areas is it alleged that any
plaintiff ever had any actual, potential, attempted or intended relationship.
16
Our review of the district court’s determination of a Rule
12(b)(6) motion is de novo. For purposes of ruling on such a
motion, the court “must assume that the . . [plaintiff] can prove
the facts alleged in its . . . complaint. It is not, however,
proper to assume that the . . . [plaintiff] can prove facts that it
has not alleged or that the defendants have violated the antitrust
laws in ways that have not been alleged.” Assoc. Gen. Contractors
of Cal. v. Cal. St. Council, 103 S.Ct. 897, 902 (1983). And, on
such a motion, courts “are not bound to accept as true a legal
conclusion couched as a factual allegation,” Papasan v. Allain, 106
S.Ct. 2932, 2944 (1986). A naked allegation of conspiracy or
agreement, without more specific factual allegations, is not to be
accepted as sufficient to state a claim under Section 1 of the
Sherman Act. Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1966
(2007). To withstand a Rule 12(b)(6) motion, the complaint must
allege “more than labels and conclusions,” “a formulaic recitation
of the elements of a cause of action will not do” and “[F]actual
allegations must be enough to raise a right to relief above the
speculative level . . .” Id. at 1965.15
15
Appellants’ brief appears to assume that they may expand their complaint
on appeal because the district court denied them leave to amend. However,
appellants’ brief has no point of error complaining of the denial of leave to
amend, it contains no argument that the trial court erred in denying leave to
amend, and it does not reference the content of any proposed amended pleading.
Moreover, examination of the record reveals that over a month after appellants
had filed their response to appellees’ motion to dismiss, appellants filed a
motion to add an additional party plaintiff (another former Chronicle
distributor, stated to be similarly situated to the other six) and a proposed
amended complaint which was no different than the existing complaint except only
for the addition of the name of the proposed new plaintiff. Appellees opposed
17
The Supreme Court has long held that suits under section 4 of
the Clayton Action (15 U.S.C. § 15(a)) for violation of either
Section 1 or Section 2 of the Sherman Act require not only injury
to the plaintiff’s business or property resulting from the alleged
violation, but also a showing of antitrust injury and standing.16
Thus, in Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 97 S.Ct. 690,
697 (1977), the Court, observing that “[t]he antitrust laws . . .
were enacted for ‘the protection of competition not competitors’”,
went on to state that a plaintiff “must prove more than injury
causally linked to” an antitrust violation, namely:
“Plaintiffs must prove 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. The injury should reflect the
anticompetitive effect either of the violation or of
the motion to add the additional party plaintiff, and the district court denied
it. This proposed amendment makes no changes in any allegations except party
names. On September 29, 2004, the district court filed its opinion and entered
its Rule 54(b) judgment dismissing all claims of the original plaintiffs; on
October 12, 2004, appellants (other than Stoval) filed their motion for new trial
(which states no grounds); on December 21, 2004, appellants moved for leave to
file an amended complaint but neither tendered any such complaint nor stated
anything about what sort of new allegations were contemplated beyond saying they
would “plead with more specificity as to facts and explanation of their
components and theories relating to monopoly and antitrust claim;” requesting 45
days after the court’s ruling on the motion for new trial in which to do so.
Appellees opposed the motion for new trial and the motion to file an amended
complaint. The district court ultimately denied both motions in July 2005. No
proposed amended complaint has ever been tendered. In these circumstances, there
is no basis for us to treat appellants any differently than if they had never
sought to amend the complaint.
16
See, e.g., Atlantic Richfield Co. v. USA Petroleum Co., 110 S.Ct. 1884,
1893 (1990) (antitrust injury requirement applicable where underlying violation
is per se violation of Section 1 of the Sherman Act); Doctor’s Hosp. of Jefferson
v. S.E. Med. Alliance, 123 F.3d 301, 305 (5th Cir. 1997) (“Antitrust injury must
be established for the plaintiff to have standing under section 1 or section 2
of the Sherman Act.”); Walker v. U-Haul Co. of Mississippi, 747 F.2d 1011, 1014-
15 (5th Cir. 1984); Bayou Bottling, Inc. v. Dr. Pepper Co., 725 F.2d 300, 303
(5th Cir. 1984).
18
anticompetitive acts made possible by the violation.”
Id. at 697.
Brunswick also observed that although the plaintiffs’ “loss
occurred ‘by reason of’ the unlawful acquisition, it did not occur
‘by reason of’ that which made the acquisition unlawful” and hence
did not constitute antitrust injury. Id. And, in Assoc. Gen.
Contractors the court reaffirmed Brunswick, in holding that union’s
antitrust complaint was properly dismissed under Rule 12(b)(6) for
lack of antitrust injury, despite adequate allegation of “a causal
connection between an antitrust violation and harm to the Union and
. . . that the defendants intended to cause that harm.” Id., 103
S.Ct. at 908. The Court also observed that “the Union was neither
a consumer nor a competitor in the market in which trade was
restrained,” id. at 909, and that the existence of businesses
directly injured by the same alleged antitrust violations “whose
self-interest would normally motivate them to vindicate the public
interest in antitrust enforcement” weighed against the Union’s
antitrust standing. Id. at 909. As we summarized in McCormack v.
National Collegiate Athletic Ass’n, 845 F.2d 1338, 1341 (5th Cir.
1988):
“Even a plaintiff injured in his business or property
must, in order to sue for damages, show ‘antitrust
injury,’ that is, ‘injury of the type the antitrust laws
were designed to prevent and that flows from that which
makes defendants’ acts unlawful.’ Finally, even if the
plaintiff meets these requirements, the court must
consider whether he is a ‘proper plaintiff’ to sue for
damages, examining such facts as (1) whether the
plaintiff’s injuries or their causal link to the
19
defendant are speculative, (2) whether other parties have
been more directly harmed, and (3) whether allowing this
plaintiff to sue would risk multiple lawsuits,
duplicative recoveries, or complex damage apportionment.”
(footnotes omitted)
See also Atlantic Richfield Co., 110 S.Ct. at 1892 (“Antitrust
injury does not arise for purposes of § 4 of the Clayton Act . . .
until a private party is adversely affected by an anticompetitive
aspect of the defendant’s conduct”); Hughes v. Tobacco Institute
Inc., 278 F.3d 417, 423 (5th Cir. 2001) (“Parties whose injuries,
though flowing from that which makes the defendant’s conduct
unlawful, are experienced in another market do not suffer antitrust
injury.”)
Plaintiffs were not consumers of the Chronicle or its
advertising services, and they were not producers or sellers of
competing publications or media. Hearst’s conduct in causing, or
attempting to cause, falsely enhanced Chronicle subscriber numbers
to be furnished to the Audit Bureau in order to increase sales of,
and/or rates charged for, advertising in the Chronicle, to the
extent violative of Section 117 and/or Section 2 of the Sherman Act,
would be so because such conduct would tend to cause injury either
17
We note that the complaint does not appear to allege a conspiracy and may
well be insufficient in that respect to state a Section 1 claim. See, e.g.,
Johnson v. Hospital Corporation of America, 95 F.3d 383, 392 (5th Cir. 1995)
(“Section one applies only to concerted action. . .”); Dillard v. Merrill Lylnch,
Pierce, Fenner Inc., 961 F.2d 1148, 1158 (5th Cir. 1992) (“In order to state a
claim for a violation of Section 1, a plaintiff must allege (1) the existence of
a conspiracy . . .”). A manufacturer’s unilateral termination of a distributor
does not violate Section 1. Doctor’s Hosp. of Jefferson at 307. However, we
assume, arguendo, that the complaint adequately alleges a Sherman Act violation
in this respect.
20
to those desiring to use the Chronicle to advertise in, the
consumers (of the paper’s advertising services) – or to other media
selling advertising, the paper’s competitors (in the sale of
advertising). Moreover, unlike plaintiffs, such parties are the
only ones directly injured by the harm to competition caused or
posed by the asserted antitrust violations and they are hence the
appropriate parties to sue for any such violation. Plaintiffs are
neither consumers (buyers of advertising, or users of advertising
such as subscribers) nor competitors (sellers of advertising) in
the relevant market. Plaintiffs have not suffered antitrust
injury. See also, e.g., Mathias v. Daily News, LP, 152 F.Supp. 2d
465, 479 (S.D.N.Y. 2001); Volmar Distrib. v. New York Post Co., 825
F.Supp. 1153,1158 (S.D.N.Y. 1993).
Plaintiffs contend that they have sustained antitrust injury
because they were terminated due to their refusal to participate in
the antitrust violations. We have rejected that approach. See,
e.g., Feeney v. Chamberlain Mfg. Co., 831 F.2d 93 (5th Cir. 1987)
(commission salesman terminated by defendant for protesting
defendant’s giving one large customer, whom plaintiff did not
service, greater discounts than other of its customers, including
those serviced by plaintiff, in violation of the Robinson Patman
Act, 15 U.S.C. § 13(a), has not suffered antitrust injury, even
though the result of the conduct was fewer sales to customers
plaintiff serviced and hence fewer commissions to him). Other
21
courts are in accord. See, e.g., Gregory Marketing Corp. v.
Wakefern Food Corp., 787 F.3d 92 (3d Cir. 1986) (plaintiff,
distributor for defendant manufacturer, terminated by defendant for
protesting and refusing to fabricate explanation for, special
discounts given by manufacturer to one large customer in violation
of the Robinson Patman Act; complaint properly dismissed on Rule
12(b)(6) motion for lack of antitrust injury); In re Industrial Gas
Antitrust Litigation, 681 F.2d 514 (7th Cir. 1982).
Plaintiffs’ reliance on Blue Shield of Virginia v. McCready,
102 S.Ct. 2540 (1982), is plainly misplaced. There McCready, who
subscribed to her employer’s Blue Shield of Virginia prepaid group
health plan, was treated by a psychologist but Blue Shield declined
to pay any of the costs thereof (and so McCready had to pay)
because its plan reimbursed subscribers only for psychotherapy
services provided by psychiatrists but not for those provided by
psychologists. McCready sued Blue Shield under Section 4 of the
Clayton Act alleging that the Blue Shield plan’s provision in
question was the result of a conspiracy and agreement between Blue
Shield and the Neuropsychiatric Society of Virginia (psychiatrists)
contrary to Section 1 of the Sherman Act. The Court held that the
district court erred in dismissing McCready’s suit for lack of
antitrust injury. The Court noted that McCready was an appropriate
plaintiff:
“McCready has paid her psychologist’s bills; her injury
consists of Blue Shield’s failure to pay her. Her
psychologist can link no claim of injury to himself
22
arising from his treatment of McCready; he has been fully
paid for his service and has not been injured by Blue
Shield’s refusal to reimburse her for the cost of his
services. And whatever the adverse effect of Blue
Shield’s action on McCready’s employer, who purchased the
plan, it is not the employer as purchaser, but its
employees as subscribers, who are out of pocket as a
consequence of the plan’s failure to pay benefits.” Id.
at 2548.
It went on to hold that:
“As a consumer of psychotherapy services entitled to
financial benefits under the Blue Shield plan, we think
it clear that McCready was ‘within that area of the
economy . . . endangered by [that] breakdown of
competitive conditions’ resulting from Blue Shield’s
selective refusal to reimburse.” Id. at 2549. (citation
omitted).
This, we believe, is the key to McCready. In Assoc. Gen.
Contractors, the Court distinguished McCready, noting that “the
Sherman Act was enacted to assure customers the benefits of price
competition” and that “McCready . . . was a consumer of
psychotherapeutic services . . . injured by defendants’ conspiracy
to restrain competition in the market for such services,” id., 103
S.Ct. at 908, while “[in] this case, however, the [plaintiff] Union
was neither a consumer nor a competitor in the market in which
trade was restrained.” Id., 103 S.Ct. at 909. That is likewise
the present situation as plaintiffs here are neither consumers nor
competitors in the market attempted to be restrained. Other courts
have similarly construed McCready.18
18
See, e.g., SAS of Puerto Rico v. Puerto Rico Telephone Co., 48 F.3d 39,
48 (1st Cir. 1995), reading McCready “as a case in which the plaintiff was a
purchaser in the very market distorted by the antitrust violation.” With respect
to the “inextricably intertwined” language in McCready, the SAS Court noted that:
23
Finally, antitrust standing is not achieved by the bare
allegation, untied to anything else, that Hearst “has integrated
vertically into the distribution of its paper in the relevant
market” and “has become a competitor of its distributors.” There
is no allegation suggesting that this had anything to do with, or
even came about before, plaintiffs were, as alleged in the
complaint, “either terminated or resigned because Plaintiffs either
refused to participate in or complained about” the demanded false
overstating of paid subscribers in their reports to the Audit
Bureau. As previously observed, no facts are alleged tending to
indicate any Robinson Patman Act violation and no such violation
has been argued on appeal (see note 13 supra). Nor – apart from
the mentioned allegations concerning falsely inflating the number
of paid subscribers in order to enhance advertising revenue (which
“. . . such a test would certainly be very hard to square with the
longstanding limitations on claims by stockholders, employees and
even indirect purchasers. Nothing in McCready suggests that it
intended to overrule those limitations even though it would be very
easy to describe such injuries as inextricably intertwined in the
ordinary suggestive sense of the phrase.
In all events, the Supreme Court simply reinterpreted the
phrase as a legal conclusion in Associated General Contractors,
saying (after a reference to the phrase): ‘In this case [Associated
General Contractors] however, the Union was neither a consumer nor
a competitor in the [restrained] market. . . .’ 459 U.S. at 539,
103 S.Ct. at 909. It did the same thing more recently in Atlantic
Richfield v. USA Petroleum Co., 495 U.S. 328, 345, 110 S.Ct. 1884,
1895, 109 L.Ed.2d 333 (1990) (injury not ‘inextricably intertwined’
because competitor not injured by ‘the anticompetitive effects’ of
the challenged conduct). We do not think that anything more need be
said about the matter.” Id.
See also Serpa Corp. v. McWane, Inc., 199 F.3d 6, 13 (1st Cir. 1999) (“. . . we
decline to interpret McCready broadly,” noting that there “the plaintiff was a
consumer in the market directly affected by the antitrust violation” and that the
Supreme Court had applied McCready’s “inextricably intertwined” language “as a
legal conclusion” applicable “to the consumers and competitors”).
24
we have already addressed) – is there any allegation that the
termination of the plaintiffs had any adverse effect on anyone
else, either by increasing the price or decreasing the availability
of the Chronicle to its subscribers or other readers or by damaging
competitors or otherwise. As alleged, the Chronicle has a monopoly
of the product in question, being the only daily newspaper of
general circulation throughout the greater Houston area. For the
Chronicle to terminate a distributor and itself take over the
Chronicle distribution previously performed by the terminated
distributor is not in these circumstances some separate antitrust
violation on account of which the terminated distributor has
antitrust injury and antitrust standing. See G.K.A. Beverage Corp.
v. Honickman, 55 F.3d 762, 767 (2d Cir. 1995).19 See also, e.g.,
19
In G.K.A. Beverage, the court affirmed a Rule 12(b)(6) dismissal of the
plaintiffs’ distributors’ antitrust claims, approving an earlier decision (A.G.S.
Electronics v. B.S.R., 460 F.Supp. 707, 710 (S.D.N.Y.), aff’d, 591 F.2d 1329 (2d
Cir. 1978) (table), holding that where the defendant manufacturer of record
players acquired another manufacturer thereof thus monopolizing record player
manufacturing, and the defendant acquiring manufacturer then terminated the
distributorship the plaintiff had had with the acquired manufacturer, the
plaintiff “lacked standing to assert an antitrust claim” because its injuries all
flowed from the termination of its distributorship “‘rather than any
anticompetitive effects of the defendant’s acquisition of’ [the acquired
manufacturer].” C.K.A. Beverage goes on to note that in the case before it the
plaintiffs were distributors of bottled soft drinks and defendant Honickman was
a bottler distributing its own product, and plaintiffs complained, inter alia,
that Honickman wrongfully achieved a bottling monopoly and “they suffered
antitrust injury in the elimination of competition in retail distribution between
themselves and Honickman.” The Second Circuit concluded this did not amount to
antitrust injury, stating:
“However, the so-called ‘distribution monopoly’ is derived entirely
from Honickman’s share of the bottling market. Honickman’s
‘distribution monopoly’ thus involves only his product. Moreover,
a vertically structured monopoly can take only one monopoly profit.
. . . If, as alleged, appellees successfully conspired to monopolize
soft drink bottling in the New York area, they could reap no
additional gain from monopolizing the retail distribution of soft
drinks. . . . Once having achieved the alleged bottling monopoly,
25
RSA Media Inc. v. AK Media Group, Inc., 260 F.3d 10, 14 (1st Cir.
2001) (“distributor lacks antitrust standing because it cannot have
suffered antitrust injury”); Serpa, 199 F.3d at 14 (same).20
We hold that the district court properly dismissed the
antitrust claims for lack of antitrust injury and antitrust
standing.
III. CONCLUSION
The judgment of the district court is
AFFIRMED.
therefore, appellees’ sole incentive is to select the cheapest
method of distribution.”
20
We further note the Supreme Court’s frequent reminders that “the primary
purpose of the antitrust laws is to protect interbrand competition.” State Oil
Co. v. Khan, 118 S.Ct. 275, 282 (1997). Essentially the same statements appear
in Leegin Creative Leather Products v. PSKS, Inc., 127 S.Ct. 2705, 2715 (2007);
Business Electronics Corp. v. Sharp Electronics, 108 S.Ct. 1515, 1521 (1988); and
Continental TV Inc. v. GTE Sylvania Inc., 97 S.Ct. 2548, 2558 n.19 (1977).
26