Norris v. Hearst Trust

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