C. E. Stevens Co. v. Foster & Kleiser Co.

WILBUR, Circuit Judge.

This is an appeal from an order of the District Court sustaining appellees’ demurrer to appellants’ complaint without leave to amend on the ground that no cause of action was alleged. The action was filed under Section 7 of the Sherman Anti-Trust Act (Act of July 2, 1890, Chap. 647, 26 Stat. 209, as superseded by Act of Oct. 15, 1914, Chap. 323, § 4, 38 Stat. 731, 15 U.S.C.A. § 15).1 Both parties are engaged in advertising by means of billboards.

The ruling of the District Court was based on the decision of this court in Foster & Kleiser Co. v. Special Site Sign Co., 9 Cir., 85 F.2d 742, an action against the same defendant by another competitor. In that case plaintiff sought damages under Section 7 of the Sherman Anti-Trust Act based upon similar activities by the defendant therein as are alleged in the case at bar. In the Special Site Sign Company case, supra, the plaintiff, in an effort to support federal jurisdiction under the Sherman Anti-Trust Act, 15 U.S.C.A. §§ 1-7, 15, alleged such interstate activities by the defendant as the shipping by it of designs, posters, lithographs, stencils and paints from one state to another. It also.alleged the'effect of outdoor advertising in -stimulating interstate trade. It alleged that the defendant attempted to monopolize the outdoor advertising business by acquiring control of numerous outdoor advertising companies by leasing of outdoor advertising sites at rentals in excess of their true worth, by leasing more sites than were intended to be used in the business, by fraudulent activities leading to the cancellation of leases of advertising sites obtained by plaintiffs, and by other unfair business practices designed to squeeze out competitors. See Foster & Kleiser Co. v. Special Site Sign Co., 9 Cir., 85 F.2d 742, 753, supra. This court held that the complaint did not state a cause of action. It was held that the outdoor advertising business, as a whole, could not be viewed as interstate commerce merely because there was incidentally involved therein the shipment of posters, lithographs, etc., in interstate commerce. It was held that no acts were alleged which directly affected the interstate trade in posters or lithographs and that the acts of the alleged conspirators in *765inflicting the damage in no way related to the allegations of a conspiracy to restrict interstate 'commerce in posters and lithographs, etc. It was pointed out in that decision that all the acts alleged as means for carrying out the conspiracy were adopted to the injury or destruction of the plaintiff’s business in its intrastate aspects.

In the case at bar, complaint sets out the general methods of business of companies involved in the outdoor advertising business. It is alleged that the advertiser generally contracts with a lithographer for posters to be used in the advertising campaign. Advertising agencies solicit contracts of advertisers for the placing ‘of the posters upon billboards. These advertising agencies are organized into the National Outdoor Advertising Bureau, Inc. This bureau contracts with bill posting companies called “plant owners” which control sites for billboards for the execution of the contracts secured by the agencies. Since 1927 bill posting companies have been organized into the Outdoor Advertising Association of America, Inc., a consolidation of the Associated Bill Posters and Distributors of the United States and Canada and the Outdoor Advertising Association of America. These associations grant a “franchise” in each community where a billboard advertising is done, Foster & Kleiser controls 600 franchises and the General Outdoor Advertising Company, Inc., an association of bill posters, organized in 1924, controls 1000 franchises. It is alleged that the Outdoor Advertising Association, Inc., is dominated and controlled by the General Outdoor Advertising Company and by Foster & Kleiser Company. The appellants are “independent” operators and do not belong to the Outdoor Advertising Association of America, Inc. The National Outdoor Advertising Bureau (association of advertising agencies) executes all advertising contracts secured by it through the General Outdoor Advertising Company which company assigns all contracts calling for posting or painting in the Pacific Coast area to Foster & Kleiser Company for execution. That the activities of these different companies frequently overlap is shown by the allegations of the complaint that contracts for outdoor advertising are made not only by agencies but by bill posting companies. It should be noted that the General Outdoor Advertising Company is not made a party to this action.

The conspiracy alleged is one to monopolize all branches of the outdoor advertising business. As in the Special Site Sign case, it is alleged that in furtherance of the conspiracy the conspirators paid for advertising sites in excess of their worth, caused the cancellation of leases of appellants and did other acts designed to secure for appellees a monopoly of advertising contracts and sites upon which to execute the same. It is also alleged that appellees conspired to place restraints upon interstate trade in posters and lithographs and that the conspirators refused to post lithographs of manufacturers who sold or furnished samples to independent poster plants.

It is claimed, and the basic assumption of the complaint is, that the bill posting business as a whole must be considered as interstate commerce and, consequently, that a monopoly of this business in any of its aspects is a violation of the Sherman AntiTrust Act. It is also claimed and alleged that appellees conspired to restrain and restrict the shipment of posters and lithographs in interstate commerce.

Insofar as the contention that appellees conspired to restrain the interstate commerce in posters and lithographs is concerned, an analysis of the complaint as a whole clearly shows that the main object of the alleged conspirators was the securing of control of the bill posting business in its intrastate aspects involving the securing pf advertising contracts and billboard sites upon which to execute the same. 2 It clearly appears from the complaint that the principal business of the appellee Foster & Kleiser Company was the operating of outdoor advertising plants and the securing of advertising contracts, not the sale of posters or lithographs. These materials are sold by lithographers who are located in states other than the Pacific Coast area, principally in Kentucky, Ohio and Illinois. In view of these allegations it can hardly be said that appellees’ primary object was to monopo*766lize the trade in posters. It is true, as we have stated, that appellants alleged that-the conspiracy in pare involved the preventing of appellants from obtaining posters and that in order to effect this result the Outdoor Advertising Association of America, Inc., refused to post lithographs if the lithographer dealt with non-association members. As to the effect of this allegation, we quote from appellees’ brief: “At this point it may be conceded that the conspiracy just described and the means by which it was to be effected would be unlawful under the Sherman Act. (Ramsay Co. v. Bill Posters Association (1923), 260 U.S. 501, 43 S.Ct. 167, 67 L.Ed. 368). However, ‘In a civil action for damages sustained because of a conspiracy in restraint of trade, the right of recovery is not based upon the conspiracy, but upon the injuries resulting therefrom’. Special Site case, supra, 85 F.2d 742, at page 750. Therefore, we must next inquire whether the second amended complaint contains sufficient allegations of fact showing that this alleged conspiracy was made effective to the injury of appellants.”

Insofar' as this conspiracy is concerned, it is not alleged that it was successful or effective to injure appellants’ business. That is, it is' not definitely and explicitly alleged that appellants were unable to secure posters necessary for fulfilling their advertising contracts. The appellants, after alleging that the action of the conspirators in refusing to post lithographs of manufacturers who dealt with independent plant owners was fob the purpose of hampering and preventing such owners, including the plaintiff, .from securing lithographs and posters, alleged : “That thereby the said independents were obstructed and hindered in their business and prevented from giving a full and adequate outdoor advertising service to their customers, competition with the association members and said conspirators was hindered and obstructed, and the free movement in interstate commerce of posters, lithographs, painted designs and contracts for outdoor advertising was monopolized, attempted to be monopolized, and was unreasonably restrained.”

This is not a definite allegation that appellants were unable to obtain posters or lithographs with which to execute their advertising contracts because of the activities of appellees or that advertisers seeking to deal with appellants were unable to secure posters for posting by appellants. If that was in fact the case, appellants should have alleged it to be so, definitely and clearly. An analysis of the complaint as a whole shows that the alleged damage to appellants flowed not from inability of appellants to obtain posters but from inability to obtain advertising contracts and billboard sites upon which to execute the same. 3

We do not hold that because the ultimate object of a conspiracy is to obtain a monopoly of intrastate business or commerce such an object can be brought about by a restraint *767of interstate commerce without violating the Sherman Anti-Trust law. This is not the law. See Bedford Cut Stone Co. v. Journeyman Stone Cutters’ Ass’n, 274 U.S. 37, 47, 47 S.Ct. 522, 71 L.Ed. 916, 54 A.L.R. 791.

In the case at bar, as we have pointed out, although a conspiracy to control interstate trade in posters is alleged as one of the means of acquiring monopoly in the bill-posting business, it was not alleged that such a conspiracy to restrain the interstate movement of posters was effective and that appellants were damaged thereby. By the device of alleging a conspiracy to restrain interstate trade in posters and lithographs without alleging that this conspiracy was effective and worked to the damage of-appellants, they cannot recover damages arising from the alleged conspiracy to prevent the acquisition and use of billboards and to obtain a monopoly of advertising contracts, activities intrastate in character, when it is clear that the purpose of the conspiracy as a whole is a monopoly of intrastate business.

In Ramsay Co. v. Associated Bill Posters, 260 U.S. 501, 43 S.Ct. 167, 67 L.Ed. 368, principally relied upon by appellants, the conspiracy charged was not only one to monopolize the bill posting business in United States and Canada, but also one to “dominate and control all trade and commerce in posters within such limits.” And the manufacturers of posters had “By threats of withdrawal of patronage * * * been prevented from furnishing posters to independent billposters or to advertisers desiring to do business with independents except upon prohibitive terms.” Advertisers were not permitted to purchase “stock” posters unless willing to have them displayed upon boards of members and independent billposters could not purchase such matter at all. Thus, there was present in that case the essential element absent in the case at bar, that is, an effective control of the interstate trade in posters. There would be, of course, some incidental effect on the interstate trade in posters and lithographs by the monopoly of the intrastate aspects of the outside advertising business. But the primary object of the conspiracy as alleged herein was the control of the intrastate business and such activities were outside the scope of the Sherman Anti-Trust law, supra. In Ramsay Co. v. Associated Bill Posters, supra, it was stated: “The purpose of the combination here challenged is to destroy competition and secure a monopoly by limiting and restricting commerce in posters to channels dictated by the confederates, to exclude from such trade the undesired, including the plaintiffs, and to enrich the members by demanding noncompetitive prices.”

In Bedford Cut Stone Co. v. Journeyman Stone Cutters’ Ass’n, 274 U.S. 37, 47 S.Ct. 522, 524, 71 L.Ed. 916, 54 A.L.R. 791, supra, it was stated: “The product against which the strikes were directed, it is true, had come to rest in the respective localities to which it had been shipped, so that it had ceased to be a subject of interstate commerce * * * and interferences for a purely local object with its use, with no intention, express or implied, to restrain interstate commerce, it may be assumed, would not have been a violation of the Anti-Trust Act ( * * * ; United Mine Workers v. Coronado Coal Co.,. 259 U.S. 344, 410, 411, 42 S.Ct. 570, 66 L.Ed. 975, 27 A.L.R. 762). But these interferences were not thus in pursuit of a local motive —they had for their primary aim restraint of the interstate sale and shipment of the commodity. Interstate commerce was the direct object of attack, ‘for the sake of which the several specific acts and courses of conduct (were) done and adopted.’ ”

In Coronado Coal Company v. United Mine Workers of America, 268 U.S. 295, 310, 45 S.Ct. 551, 556, 69 L.Ed. 963, the Supreme Court said: “The mere reduction in the supply of an article to be shipped in. interstate commerce by the illegal or tortious prevention of its manufacture or production is ordinarily an indirect and remote obstruction to that commerce. But when the intent of those unlawfully preventing the manufacture or production is shown to be to restrain or control the supply entering and moving in interstate commerce, or the price of ft in interstate markets, their action is a direct violation of the Anti-Trust Act.”'

See, also, Local 167, etc., v. United States, 291 U.S. 293, 297, 54 S.Ct. 396, 78 L.Ed. 804. In all these cases it is held that when acts intrastate in character are relied upon tO' bring a case within the scope of the Sherman-Anti-Trust Act, supra, such acts must be done with the primary intention of monopolizing or burdening the free movement of goods in interstate commerce. As we have stated, it is clear from a reading of the complaint as a whole that the purpose of the conspiracy alleged was not a monopoly of the outdoor advertising business in its interstate aspects, that is, the control of poster or lithograph trade but, rather, the control of the local business of securing advertising contracts and billposting.

*768The other contention of appellants, that the outdoor advertising business as a whole must be considered as interstate commerce per se, was dealt with in our decision in Foster & Kleiser Co. v. Special Site Sign Co., supra. We found no merit in it. It is now contended, however, that under the “expanded concept of interstate commerce” as announced in recent decisions of the Supreme Court arising under the National Labor Relations Act (Act of July 5, 1935, 49 Stat. 449, 29 U.S.C.A. § 151 et seq.; N.L.R.B. v. Jones & Laughlin S. Corp., 301 U.S. 1, 57 S.Ct. 615, 81 L.Ed. 893, 108 A.L.R. 1352; N. L. R. B. v. Fruehauf Trailer Co., 301 U.S. 49, 57 S.Ct. 630, 642, 81 L.Ed. 918, 108 A.L.R. 1352; N. L. R. B. v. Friedman-Harry Marks Clothing Co., 301 U.S. 58, 57 S.Ct. 630, 645, 81 L.Ed. 921, 108 A.L.R. 1352; Santa Cruz Fruit Packing Co. v. N. L. R. B., 303 U.S. 453, 58 S.Ct. 656, 82 L.Ed. 954; N. L. R. B. v. Fainblatt, 306 U.S. 601, 59 S.Ct. 668, 83 L.Ed. 1014), a cause of action was stated under the Sherman AntiTrust Act, supra.

Under the National Labor Relations Act, supra, the National Labor Relations Board is empowered to prevent certain described unfair labor practices affecting commerce. § 10(a) of the Act, 29 U.S.C.A. § 160(a). The term “affecting commerce” is defined in the National Labor Relations Act as meaning “in commerce or, burdening or obstructing commerce or the free flow of commerce, or having led or tending to lead to a labor dispute burdening or obstructing commerce or the free flow of commerce.” § 2(7) of the Act, 29 U.S.C.A. § 152(7). The questions discussed in the cases cited by appellants arising under the National Labor Relations Act have to do with the power of Congress to exercise control over activities which separately considered are intrastate but which, because of their close and substantial relation to interstate commerce, have an injurious effect upon it. The right of Congress to deal with these activities is based upon its power to protect interstate commerce when injuriously affected by acts which are local in character. This is ^.n entirely different question than presented here. The question in the case at bar is not the extent of the power of Congress over intrastate activities affecting interstate commerce, but whether or not the conduct complained of is within the scppe of the Sherman Anti-Trust Law. The question is what Congress has declared to be illegal under the Sherman Anti-Trust Law. 4 As we have stated, the Supreme Court, in determining what Congress intended to forbid by the enactment of the anti-trust laws, has held that activities, intrastate in character, not motivated by the primary purpose of monopolizing or restraining commerce among the several states, are not covered by such laws although such activities might incidentally affect interstate commerce. United Mine Workers v. Coronado Coal Co., 259 U.S. 344, 42 S.Ct. 570, 66 L.Ed. 975, 27 A.L.R. 762, supra; Coronado Coal Co. v. United Mine Workers of America, 268 U.S. 295, 45 S.Ct. 551, 69 L.Ed. 963; Bedford Cut Stone Co. v. Journeyman Stone Cutters’ Ass’n., 274 U.S. 37, 47 S.Ct. 522, 71 L.Ed. 916, 54 A.L.R. 791, supra; Local 167 v. United States, 291 U.S. 293, 54 S.Ct. 396, 78 L.Ed. 804, supra; Apex Hosiery Co. v. Leader, 3 Cir., 90 F.2d 155.

The decisions of the Supreme Court in United States v. Rock Royal Co-Operative, Inc., 307 U.S. 533, 59 S.Ct. 993, 995, 83 L.Ed. 1446, and Currin v. Wallace, 306 U.S. 1, 59 S.Ct. 379, 83 L.Ed. 441, cited by appellants, have to do with the validity, of the Agricultural Marketing Agreement Act of June 3, 1937, 50 Stat. 246, 7 U.S.C.A. § 601 et seq., and the Tobacco Inspection Act of August 23, 1935, 49 Stat. 731, 7 U.S.C.A. §§ 511 to 511q, respectively, and have no bearing on the case at bar.

Appellants contend that even if the demurrer was properly sustained the court erred in dismissing the action without leave *769to further amend. Leave was granted to amend to clarify the complaint. No other amendment was requested. The appellees contend that in the absence of a request it was not error to refuse leave to amend, citing in support of their contention, Rule 15 (a) of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, and Simpkins Federal Practice Rules of Civil Procedure, 3d Ed., p. 313, § 356. The amendment allowed to clarify certain terms used in the complaint did not substantially change the. situation of the paties. The matter of giving leave to amend is one in the sound discretion of the trial court. But leave is to be “freely given when justice so requires”. Rule 15(a), F.R.C.P., supra. The reasons given by the trial court for denying leave to amend are persuasive here that there was no abuse of discretion.5 We place our decision sustaining the trial court in refusing leave to amend upon the ground that there was no abuse of discretion in such refusal and not upon the ground that appellants failed to request leave to amend after the court had announced that the demurrer to the complaint would be sustained without leave to amend.

Affirmed.

HEALY, Circuit Judge, concurs in the result.

Section 7 of the Sherman Anti-Trust Act, reads as follows:

“Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, .and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney’s fee.” July 2, 1890, c. 647, § 7, 26 Stat. 210, as superseded by Act of Oct. 15, 1914, c. 323, § 4, 38 Stat. 731, 15 U.S.C.A. § 15.

Obviously the securing of local billboard sites and the posting of advertising matter thereon are local transactions. Nor does the fact that bill posting contracts are made between persons residing in different states transform the transaction into an interstate one. Ware & Leland v. Mobile County, 209 U.S. 405, 28 S.Ct. 526, 52 L.Ed. 855, 14 Ann.Cas. 1031; Blumenstock Bros. Adv. Agency v. Curtis Pub. Co., 252 U.S. 436, 40 S.Ct. 385, 64 L.Ed. 649; Pacific Railways Advertising Co. v. Conrad, 168 Cal. 91, 141 P. 916.

As we have stated, the alleged activities of the appellees complained of related principally to the obtaining of a monopoly of advertising sites and the securing of a monopoly of outdoor advertising contracts. As to damages, it is alleged:

“That the aforesaid acts, on the part of the defendant company and the other defendants herein named, were in unreasonable restraint of trade and commerce among the several states and did constitute a monopoly and were and are an attempt to monopolize the said trade and commerce, and did create a monopoly thereof greatly to the damage of the plaintiff company, and that the plaintiff company was unreasonably restrained in its trade and competition with defendant in the outdoor advertising business, as heretofore defined and explained, all of which was injurious to the plaintiff company and excluded the plaintiff company from fair competition in the said -trade and commerce, and because of such inability to compete in the said trade and commerce during the periods mentioned, to and including the date of the commencement of this 'action, the plaintiff company has been damaged in that its business was rendered unprofitable, and the profits of its said trade and commerce have diminished, and the plaintiff company has suffered loss and been damaged thereby, from said year 1924 to the time of filing the complaint, and furthermore, as set forth more particularly in paragraph XV hereof, the plaintiff company has suffered great loss of profits and moneys invested and damage by reason of its inability to engage in said trade and commerce in the City of San Francisco and the State of California, all in the sum of three hundred and fifty thousand dollars ($350,000.00).

“Wherefore, plaintiff, C. E. Stevens Company, demands judgment against defendants for the sum of three hundred and fifty thousand dollars ($350,000.00), and treble damages, together with reasonable counsel fees, besides the costs and disbursements of this action.”

Section 1 of the Sherman Anti-Trust Act, 15 U.S.C.A. § 1, provides: “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. * * * ”

Section 2 of the Sherman Anti-Trust Act, 15 U.S.C.A. § 2, provides: “Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commeree among the several States, or with foreign nations, shall be deemed guilty of a misdemeanor, * * *. ”

Section 1 of the Clayton Act, 38 Stat. 730, 15 U.S.C.A. § 12, provides: “ ‘Commerce,’ as used in sections 12 to 27, inclusive, of this chapter, means trade or commerce among the several states * * * ”

The Anti-Trust Act does not declare unlawful conspiracies to control local trade which may incidentally affect interstate commerce.

“This ease having on both sides and for a long time had the active attention of eminent counsel who have been advised of the progress and outcome of the similar cases herein and in the briefs cited, and plaintiffs’ complaint having been amended twice already, the demurrer to the second amended complaint will be as to all defendants sustained without leave to amend.”